<PAGE>
U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(MARK ONE)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997
---------------------------------------------
[ ] TRANSITION REPORT UNDER TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE TRANSITION PERIOD FROM ____________________ TO ______________________.
COMMISSION FILE NUMBER 0-18205
-------------
EQUITY COMPRESSION SERVICES CORPORATION
- ----------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
OKLAHOMA 73-1345732
- -----------------------------------------------------------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
2501 CEDAR SPRINGS ROAD, SUITE 600, DALLAS, TEXAS 75201
- --------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
214-953-9560
- -------------------------------------------------------------------
(Issuer's telephone number)
CHECK WHETHER THE ISSUER (1) FILED ALL REPORTS REQUIRED TO BE FILED BY
SECTION 13 OR 15(d) OF THE EXCHANGE ACT DURING THE PAST 12 MONTHS (OR FOR SUCH
SHORTER PERIOD THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2)
HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS.
YES X NO
--- ---
Number of Shares of Common Stock Outstanding on August 13, 1997 - 29,892,668
Transitional Small Business Format (Check one): Yes ; No X
--- ---
1
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EQUITY COMPRESSION SERVICES CORPORATION
TABLE OF CONTENTS
PAGE
----
PART I
FINANCIAL INFORMATION:
Item 1 - Financial Statements
Consolidated Balance Sheets
June 30, 1997 and December 31, 1996. . . . . . . . . . . . . . . 3
Consolidated Statements of Operations
Three and Six Months Ended June 30, 1997 and 1996. . . . . . . . 4
Consolidated Statements of Cash Flows
Six Months Ended June 30, 1997 and 1996. . . . . . . . . . . . . 5
Notes to Consolidated Financial Statements. . . . . . . . . . . . 7
Item 2 - Management's Discussion and Analysis of the
Consolidated Financial Statements. . . . . . . . . . . . . . . . 9
PART II
OTHER INFORMATION:
Item 6 - Exhibits . . . . . . . . . . . . . . . . . . . . . . . . 11
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2
<PAGE>
EQUITY COMPRESSION SERVICES CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1997
---- ----
(In thousands)
<S> <C> <C>
Current Assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . $ 6 $ 10
Accounts receivable, less allowance for doubtful accounts
of $93 and $76 in 1997 and 1996, respectively . . . . . . . 1,282 1,220
Accounts receivable -- related party. . . . . . . . . . . . . -- 25
Notes receivable. . . . . . . . . . . . . . . . . . . . . . . 4 6
Compressors and compressor parts inventory. . . . . . . . . . 2,761 1,476
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153 46
----- -----
Total current assets. . . . . . . . . . . . . . . . . . . . 4,206 2,783
----- -----
Property and equipment, net (Note 2). . . . . . . . . . . . . . 26,149 22,280
------ ------
Goodwill and other intangibles, net of amortization of
$1,760 in 1997 and $1,742 in 1996 . . . . . . . . . . . . 754 742
Other assets, net . . . . . . . . . . . . . . . . . . . . . . . 2 5
------- -------
Total Assets. . . . . . . . . . . . . . . . . . . . . . . . . . $31,111 $25,810
------- -------
------- -------
Current Liabilities:
Current portion of long-term debt . . . . . . . . . . . . . . $ 10 $ 177
Accounts payable and accrued liabilities. . . . . . . . . . . 2,016 2,304
Income tax payable. . . . . . . . . . . . . . . . . . . . . . 100 13
------- -------
Total current liabilities . . . . . . . . . . . . . . . . . 2,126 2,494
Long-term debt. . . . . . . . . . . . . . . . . . . . . . . . . 10,549 4,864
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . 3,489 3,566
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89 89
------- -------
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . 16,253 11,013
------- -------
Commitments (Note 4)
Stockholders' Equity:
Preferred stock, $1.00 par value, 1,000,000
shares authorized, none issued. . . . . . . . . . . . . . . -- --
Common stock, $.01 par value, 40,000,000 shares
authorized, 21,071,735 and 21,049,235 shares
issued and 21,115,168 and 21,040,168 outstanding
in 1997 and 1996, respectively. . . . . . . . . . . . . . . 211 210
Additional paid-in capital. . . . . . . . . . . . . . . . . . 17,722 17,692
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . (1,626) (1,656)
Treasury stock, at cost (9,067 and 9,067 shares in
1997 and 1996, respectively). . . . . . . . . . . . . . . . (9) (9)
Deferred expense - contingent warrants. . . . . . . . . . . . (1,440) (1,440)
------- -------
Total stockholders' equity. . . . . . . . . . . . . . . . . . . 14,858 14,797
------- -------
Total Liabilities and Stockholders' Equity. . . . . . . . . . . $31,111 $25,810
------- -------
------- -------
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
3
<PAGE>
EQUITY COMPRESSION SERVICES CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
-------------- --------------
1997 1996 1997 1996
---- ---- ---- ----
(In thousands, except for per share amounts)
<S> <C> <C> <C> <C>
Revenues:
Oil & gas sales $ 574 $ 441 $1,188 $ 850
Compressor sales and re-manufacturing 239 656 528 829
Compressor rentals and service fees 1,755 1,613 3,427 3,222
Gain on sale of assets -- 54 -- 61
------- -------- ------- -------
Total revenues 2,568 2,764 5,143 4,962
------- -------- ------- -------
Expenses:
Operating costs - oil and gas 184 112 376 255
Cost of compressor sales and re-manufacturing 232 507 464 618
Operating costs - compressors 630 813 1,337 1,582
Depreciation, depletion and amortization 642 538 1,229 1,071
General and administrative 723 487 1,350 894
------- -------- ------- -------
Total expenses 2,411 2,457 4,756 4,420
------- -------- ------- -------
Income from operations 157 307 387 542
------- -------- ------- -------
Other income (expense):
Interest income and other 1 11 1 23
Interest expense (209) (236) (338) (480)
------- -------- ------- -------
(208) (225) (337) (457)
------- -------- ------- -------
Income (loss) before income taxes (51) 82 50 85
Income tax benefit (expense) 19 (40) (19) (41)
-- --- --- ---
Net income (loss) $ (32) $ 42 $ 31 $ 44
------- -------- ------- -------
------- -------- ------- -------
Income per common share $ -- $ -- $ -- $ --
------- -------- ------- -------
------- -------- ------- -------
Weighted average number of shares outstanding 21,064 13,010 21,088 13,000
------- -------- ------- -------
------- -------- ------- -------
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
4
<PAGE>
EQUITY COMPRESSION SERVICES CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
1997 1996
---- ----
(In thousands)
<S> <C> <C>
Cash flows from operating activities:
Net income. . . . . . . . . . . . . . . . . . . . . . . . $ 31 $ 44
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depletion, depreciation, and amortization . . . . . . 1,229 1,071
Deferred taxes. . . . . . . . . . . . . . . . . . . . (77) (156)
Gain (loss) on sale . . . . . . . . . . . . . . . . . -- (61)
Changes in operating assets and liabilities:
Accounts receivable and other . . . . . . . . . . . . (37) 216
Notes receivable. . . . . . . . . . . . . . . . . . . 2 158
Compressor and compressor parts inventory . . . . . . (1,285) (148)
Accounts payable and accrued liabilities. . . . . . . (201) (18)
Other . . . . . . . . . . . . . . . . . . . . . . . . (107) --
-------- --------
Net cash provided by (used in) operating activities (445) 1,106
-------- --------
Cash flows from investing activities:
Acquisitions of compressor and other equipment. . . . . . (4,463) (1,337)
Proceeds from disposition of compressor
and other equipment . . . . . . . . . . . . . . . . . . -- 498
Additions to oil and gas properties . . . . . . . . . . . (606) (75)
Proceeds of dispositions of oil and gas properties. . . . -- 174
Cash held for reinvestment in oil and gas properties. . . -- (95)
Increase in organization costs and other intangibles . . (38) (1)
-------- --------
Net cash used in investing activities . . . . . . . (5,107) (836)
-------- --------
Cash flows from financing activities:
Proceeds of long-term debt. . . . . . . . . . . . . . . . 7,527 130
Payments on long-term debt. . . . . . . . . . . . . . . . (2,009) (582)
Sale of treasury stock. . . . . . . . . . . . . . . . . . -- 21
Proceeds from stock transactions. . . . . . . . . . . . . 30 --
-------- --------
Net cash provided by (used in) financing activities . 5,548 (431)
-------- --------
Net decrease in cash
and cash equivalents. . . . . . . . . . . . . . . . . . . (4) (161)
Cash and cash equivalents,
beginning of period . . . . . . . . . . . . . . . . . . . 10 177
-------- --------
Cash and cash equivalents,
end of period . . . . . . . . . . . . . . . . . . . . . . $ 6 $ 16
-------- --------
-------- --------
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
5
<PAGE>
EQUITY COMPRESSION SERVICES CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
1997 1996
---- ----
(In thousands)
<S> <C> <C>
Supplemental disclosure of cash flow information:
Interest paid . . . . . . . . . . . . . . . . . . . . . $ 393 $ 490
------- -------
------- -------
Income taxes paid . . . . . . . . . . . . . . . . . . . $ 5 $ --
------- -------
------- -------
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
6
<PAGE>
EQUITY COMPRESSION SERVICES COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 ORGANIZATION AND BASIS OF PRESENTATION
Equity Compression Services Corporation (the "Company"), formerly Hawkins
Energy Corporation, is engaged in the leasing, re-manufacturing and direct sale
of gas compression equipment to operators of producing natural gas wells and gas
gathering systems and in the production of natural gas and oil. Its principal
geographical operating areas lie within the states of Alabama, Mississippi,
Louisiana, Oklahoma, Arkansas, Kansas and Texas.
The accompanying consolidated financial statements present the financial
position and results of operations of the Company and its wholly owned
subsidiaries, Equity Compressors, Inc. ("Equity Compressors") and SunTerra
Energy Corporation.
In the opinion of the Company, the accompanying financial statements
contain all adjustments necessary (all of which are of a normal recurring
nature) to present fairly the financial position of Equity Compression Services
Corporation and its wholly owned subsidiaries as of June 30, 1997, and the
results of its operations and cash flows for the periods ended June 30, 1997 and
1996.
The financial statements should be read in conjunction with the Company's
Form 10-KSB for the year ended December 31, 1996. The year end Consolidated
Balance Sheet data was derived from audited financial statements, but does not
include all disclosures required by generally accepted accounting principles.
NOTE 2 PROPERTY AND EQUIPMENT
JUNE 30, DECEMBER 31,
1997 1996
---- ----
(In thousands)
Land and building . . . . . . . . . . . . . . . . $ 313 $ 307
Oil and gas properties, on the full cost method . 35,708 35,102
Compressor equipment. . . . . . . . . . . . . . . 27,651 23,489
Other equipment . . . . . . . . . . . . . . . . . 775 479
-------- --------
64,447 59,377
Less accumulated depreciation, depletion and
amortization. . . . . . . . . . . . . . . . . . 38,298 37,097
-------- --------
Net property and equipment. . . . . . . . . . . . $26,149 $22,280
-------- --------
-------- --------
NOTE 3 TRANSACTIONS WITH RELATED PARTIES
Amounts paid in the six months ended June 30 by the Company to an affiliate
for general and administrative overhead including rent and production and
drilling overhead is as follows: $0 in 1997 and $53,000 in 1996.
NOTE 4 COMMITMENTS
The Company leases compressor equipment under contracts with terms ranging
from month to month to three years. The future revenues to be received under
contracts at June 30, 1997 are $751,000 and $515,000 in 1997 and 1998,
respectively.
7
<PAGE>
The Company leases facilities for its corporate and field offices with
lease terms ranging from month to month to two years. The Company has certain
other operating leases for other facilities' office equipment and automobiles.
Future minimum rental payments under these leases total $106,000, $154,000,
$103,000 and $25,000 for 1997, 1998, 1999 and 2000, respectively. The Company's
rental expense amounted to $215,000 and $209,000 for the six months ended June
30, 1997 and 1996 respectively.
NOTE 5 SALE OF COMMON STOCK AND ISSUANCE OF CONTINGENT WARRANTS
Effective December 19, 1996, the Company sold to a private investment group
(HACL) 8,000,000 shares of its common stock and warrants which, upon satisfying
certain vesting requirements, will entitle the purchase of an additional
8,000,000 shares of its common stock at a price of $.91 per share, for aggregate
consideration of $4,400,000. The Company has reported the cash consideration
received, net of related costs, of $4,400,000 as an addition to common stock and
paid-in-capital. The fair value of the contingent warrants has been estimated
by an independent valuation firm to be $1,440,000, which has been reflected as a
deferred expense and an increase in additional paid-in-capital. A committee of
the Board of Directors will determine the future vesting of these warrants.
NOTE 6 EARNINGS PER SHARE
Earnings per share is computed based on the weighted average number of
shares of common stock outstanding during the period.
NOTE 7 SUBSEQUENT EVENT
On August 6, 1997, the Company closed its previously announced acquisition
of 100% of the common stock of Ouachita Energy Corporation and the majority of
the assets of both Ouachita Compression Group, LLC and Ouachita Energy Partners,
LTD. Under the terms of the acquisition agreements that were closed effective
July 31, 1997, the Ouachita companies' shareholders received 7.6 million shares
of the Company's common stock and $24 million in a combination of debt
assumption and cash. The Company funded the cash portion of the purchase
through $20 million in proceeds from the issuance and sale to Prudential
Insurance Company of America, of $5 million of 7 year floating rate senior notes
and $15 million of 10.16% senior subordinated notes with 8-10 year maturities,
with the balance drawn under its existing $20 million Bank Credit Facility.
Prudential Insurance Company of America also received warrants to acquire 1
million shares of the company's common stock at an excise price of $2.80 per
share. The Company's borrowing base under the Bank Credit Facility was
increased from $12.7 million to $20 million upon the close of the transaction.
The principal assets acquired consisted of a compressor fleet aggregating
roughly 100,000 horsepower and a refabrication facility in West Monroe,
Louisiana.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is Management's discussion and analysis of certain
significant factors which have affected the Company's earnings and financial
condition during the periods included in the accompanying Consolidated Balance
Sheets, Statements of Operations and Cash Flows.
RESULTS OF OPERATIONS
1997 VERSUS 1996
In the three months ended June 30, 1997, the Company had a net loss of
$32,000 compared to net income of $42,000 in the three months ended June 30,
1996. For the six months ended June 30, 1997, the Company reported net income
of $31,000 compared to net income of $44,000 for the same period ended June 30,
1996, due principally to increased general and administrative expense and a
decrease in revenues from the sale of compressors and remanufacturing services.
Revenues from oil and gas sales increased 30% and 40% for the three and six
months ended June 30, 1997 when compared to the same period in 1996 due to a 22%
increase in the average price of natural gas received by the Company and a 55%
increase in the volume of BBls sold by the Company. This increase in oil volume
is the result of the successful completion of two producing oil wells and a
secondary oil recovery project located in Texas. Oil and gas operating costs
increased 64% and 47% for the three and six months ended June 30, 1997 when
compared to the same period in 1996 due to increase in production taxes related
to the increase in revenues and an increase in workover activity.
Revenues from the sale of compressors and remanufacturing services
decreased 64% and 36% in the three and six months ended June 30, 1997 when
compared to the same periods in 1996. The decrease reflects the absence of one
large job when compared to 1996 and the Company's concentration of shop labor on
the maintaining and enhancing of the rental fleet. Compressor rental revenues
increased 9% and 6% in the three and six months ended June 30, 1997 when
compared to 1996, due to the deployment of additional compression horsepower.
The average horsepower utilization rate for the six months ended June 1997
increased to 81.4% as compared to 73.1% during the same period in 1996.
The cost of compressor and remanufacturing sales decreased 54% and 25% in
the three and six months ended June 30, 1997 from the same periods in 1996,
consistent with the decrease in related sales. Compressor operating costs
incurred on rental units decreased 23% and 15% in the three and six months ended
June 30, 1997 from the same period in 1996, as a result of the Company's
continued effort to control variable expenses relating to the rental fleet.
Total depreciation, depletion and amortization increased 19% and 15% in the
three and six months ended June 30, 1997 when compared to the same periods in
1996. Depletion, depreciation and amortization of the composite cost of
evaluated oil and gas properties is computed on the units-of-production method
based on estimated proven reserves. Such expense increased 17% and 11% in the
three and six months ended June 30, 1997 when compared to the same period in
1996 due to higher volumes of oil and gas produced. Depreciation of the
compressor fleet increased 22% and 18% in the three and six months ended June
30, 1997 from the same periods in 1996 due to additions to the compressor fleet
during 1997.
General and administrative expense increased 48% and 51% in the three and
six months ended June 30, 1997 compared to the same periods in 1996, due to
costs related to the relocation of the Company's corporate office, severance
packages paid to former employees and other non-capitalized ancillary expenses
associated with the Company's latest acquisition completed in August. (See
Note 7)
Interest expense decreased by 11% and 30% in the three and six months ended
June 30, 1997 compared to the same periods in 1996 as a result of lower interest
rate structure on outstanding debt balances.
9
<PAGE>
FINANCIAL CONDITION AND LIQUIDITY
In March 1997, the Company refinanced its existing bank credit facility to
increase the amounts available for new investment and working capital. The debt
is structured as a two year revolving line of credit with a $20 million maximum
commitment (previous commitment was $12 million) and has a borrowing base of
$12.7 million effective June 1, 1997. Under the terms of the credit agreement,
the outstanding balance at the revolving period's maturity will be converted to
a term note payable over 60 months. The credit agreement contains a variety of
covenants and a material adverse change clause. The covenants require the
Company to maintain certain ratios, prohibit the payment of cash dividends and
establish maximum annual capital expenditures. The debt is collateralized by
substantially all the assets of the Company. At June 30, 1997, the Company had
utilized $10.5 million of its credit line.
As a result of the acquisition of Ouachita Energy Corporation, the
Company's borrowing base increased to $20 million. (See Note 7)
Net cash used in operating activities of $445,000 for the six months ended
June 30, 1997 represents a decrease from cash provided by operating activities
of $1,106,000 for the same period in 1996. The decrease primarily reflects
increases in compressor and compressor parts inventory and a decrease in
accounts payable. The increase of $1,284,000 in compressor and compressor parts
inventory relates to newly acquired compressors during the second quarter of
1997. Net cash used in investing activities increased to $5.1 million in 1997
from $836,000 in 1996 due to additions to the compressor rental fleet. Net cash
provided by financing activities was $5.5 million compared to $431,000 in 1996
as a result of additional borrowings from the revolving line of credit. At June
30, 1997, the Company had current assets of $4.2 million and current liabilities
of $2.1 million. The Company anticipates that 1997 cash flow from operations
and the Company's revolving credit line will be sufficient to fund the Company's
working capital and capital expenditure needs.
10
<PAGE>
PART II
OTHER INFORMATION
ITEM 6. EXHIBITS
(a) Exhibits:
Exhibit
No. DESCRIPTION
---- -----------
2.1 Agreement and Plan of Merger dated as of May 15, 1997
by and among the Company, OEC Acquisition Corporation,
Ouachita Energy Corporation, and Dennis W. Estis.
2.2 First Amendment to Agreement and Plan of Merger dated
as of July 30, 1997 by and among the Company, OEC
Acquisition Corporation, Ouachita Energy Corporation,
and Dennis Estis.
2.3 Asset Purchase and Sales Agreement dated as of May 15,
1997 by and among the Company, OEC Acquisition
Corporation, Ouachita Energy Partners, Ltd., Ouachita
Compression Group, L.L.C. and Dennis W. Estis.
2.4 First Amendment to Asset Purchase and Sales Agreement
dated as of July 30, 1997 by and among the Company, OEC
Acquisition Corporation, Ouachita Energy Partners,
Ltd., Ouachita Compression Group, L.L.C. and Dennis W.
Estis.
4.1 Note Agreement dated July 31, 1997 by and between the
Company and The Prudential Insurance Company of
America.
4.2 Subordinated Note and Warrant Purchase Agreement dated
July 31, 1997 by and between the Company and The
Prudential Insurance Company of America.
4.3 Registration Rights Agreement dated July 31, 1997 by
and between the Company and The Prudential Insurance
Company of America.
4.4 Participation Agreement dated July 31, 1997 by and
between the Company and The Prudential Insurance
Company of America and certain stockholders of the
Company.
4.5 Registration Rights Agreement dated August 6, 1997 by
and between the Company and certain stockholders named
therein.
4.6 Common Stock Purchase Warrant dated July 31, 1997
issued to The Prudential Insurance Company of America.
10.2 Fifth Amended Revolving Credit Facility dated as of
July 31, 1997 between the Company, certain of its
Subsidiaries and the Bank of Oklahoma N.A.
11
<PAGE>
10.3 Employment Agreement dated as of August 6, 1997 among
Ouachita Energy Corporation, the Company and Dennis W.
Estis.
10.4 Employment Agreement dated as of August 6, 1997 among
Ouachita Energy Corporation, the Company and Andy
Payne.
10.5 Employment Agreement dated as of August 6, 1997 among
Ouachita Energy Corporation, the Company and Dan
McCormick.
27 Financial Data Schedule
12
<PAGE>
SIGNATURES
Pursuant to the requirements of Sections 13 of 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
EQUITY COMPRESSION SERVICES CORPORATION
DATE: August 14, 1997 By:
-------------------------------
MATTHEW S. RAMSEY
President and Chief Executive Officer
DATE: August 14, 1997 By:
-------------------------------
JACK D. BRANNON
Senior Vice President and Chief
Financial Officer
13
<PAGE>
SIGNATURES
Pursuant to the requirements of Sections 13 of 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
EQUITY COMPRESSION SERVICES CORPORATION
DATE: August 14, 1997 By: /s/ Matthew S. Ramsey
---------------------------------
MATTHEW S. RAMSEY
President and Chief Executive
Officer
DATE: August 14, 1997 By: /s/ Jack D. Brannon
---------------------------------
JACK D. BRANNON
Senior Vice President and Chief
Financial Officer
14
<PAGE>
.
EXHIBIT INDEX
EXHIBIT
NO. DESCRIPTION
- ------ -----------
2.1 Agreement and Plan of Merger dated as of May
15, 1997 by and among the Company, OEC
Acquisition Corporation, Ouachita Energy
Corporation, and Dennis W. Estis.
2.2 First Amendment to Agreement and Plan of
Merger dated as of July 30, 1997 by and among
the Company, OEC Acquisition Corporation,
Ouachita Energy Corporation, and Dennis
Estis.
2.3 Asset Purchase and Sales Agreement dated as
of May 15, 1997 by and among the Company, OEC
Acquisition Corporation, Ouachita Energy
Partners, Ltd., Ouachita Compression Group,
L.L.C. and Dennis W. Estis.
2.4 First Amendment to Asset Purchase and Sales
Agreement dated as of July 30, 1997 by and
among the Company, OEC Acquisition
Corporation, Ouachita Energy Partners, Ltd.,
Ouachita Compression Group, L.L.C. and Dennis
W. Estis.
4.1 Note Agreement dated July 31, 1997 by and
between the Company and The Prudential
Insurance Company of America.
4.2 Subordinated Note and Warrant Purchase
Agreement dated July 31, 1997 by and between
the Company and The Prudential Insurance
Company of America.
4.3 Registration Rights Agreement dated July 31,
1997 by and between the Company and The
Prudential Insurance Company of America.
4.4 Participation Agreement dated July 31, 1997
by and between the Company and The Prudential
Insurance Company of America and certain
stockholders of the Company.
4.5 Registration Rights Agreement dated August 6,
1997 by and between the Company and certain
stockholders named therein.
4.6 Common Stock Purchase Warrant dated July 31,
1997 issued to The Prudential Insurance
Company of America.
10.2 Fifth Amended Revolving Credit Facility dated
as of July 31, 1997 between the Company,
certain of its Subsidiaries and the Bank of
Oklahoma N.A.
10.3 Employment Agreement dated as of August 6,
1997 among Ouachita Energy Corporation, the
Company and Dennis W. Estis.
10.4 Employment Agreement dated as of August 6,
1997 among Ouachita Energy Corporation, the
Company and Andy Payne.
10.5 Employment Agreement dated as of August 6,
1997 among Ouachita Energy Corporation, the
Company and Dan McCormick.
15
<PAGE>
27 Financial Data Schedule
16
<PAGE>
==============================================================================
AGREEMENT AND PLAN OF MERGER
between
EQUITY COMPRESSION SERVICES CORPORATION,
OEC ACQUISITION CORPORATION
OUACHITA ENERGY CORPORATION
and
DENNIS W. ESTIS
Dated as of May 15, 1997
==============================================================================
<PAGE>
TABLE OF CONTENTS
PAGE NO.
--------
ARTICLE 1............................................................. 2
1. THE MERGER................................................... 2
1.1 THE MERGER.............................................. 2
1.2 THE CLOSING............................................. 2
1.3 EFFECTIVE TIME.......................................... 2
1.4 SCHEDULES............................................... 2
1.5 DUE DILIGENCE PERIOD.................................... 3
ARTICLE 2............................................................. 3
2. CERTIFICATE OF INCORPORATION AND BYLAWS OF THE
SURVIVING CORPORATION........................................ 3
2.1 CERTIFICATE OF INCORPORATION............................ 3
2.2 BYLAWS.................................................. 3
ARTICLE 3............................................................. 3
3. DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION.......... 3
3.1 DIRECTORS............................................... 3
3.2 OFFICERS................................................ 4
ARTICLE 4............................................................. 4
4. EFFECT OF THE MERGER ON SECURITIES OF MERGER SUB AND COMPANY. 4
4.2 COMPANY SECURITIES....................................... 4
4.3 EXCHANGE OF CERTIFICATES REPRESENTING COMPANY
COMMON STOCK............................................. 5
ARTICLE 5.............................................................
5. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER............. 5
5.2 AUTHORIZATION, VALIDITY AND EFFECT OF AGREEMENTS........ 6
5.3 CAPITALIZATION.......................................... 6
5.4 OTHER INTERESTS......................................... 7
5.5 NO VIOLATION............................................ 7
5.7 FINANCIAL STATEMENTS.................................... 8
5.8 ABSENCE OF CERTAIN CHANGES.............................. 9
5.9 TAXES................................................... 10
5.10 REORGANIZATION.......................................... 11
5.11 CONTRACTS, AGREEMENTS, PLANS AND COMMITMENTS............ 12
5.12 LITIGATION.............................................. 13
5.13 TITLE TO PROPERTY; ABSENCE OF LIENS AND ENCUMBRANCES.... 14
5.14 Employee Benefit Matters................................ 15
5.15 LEASES.................................................. 16
5.16 INSURANCE............................................... 16
5.17 PATENTS, TRADEMARKS AND COPYRIGHTS...................... 17
5.18 PERMITS................................................. 17
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5.19 PERSONNEL DATA; LABOR RELATIONS......................... 17
5.20 COMPLIANCE WITH LAWS.................................... 19
5.21 INVENTORY............................................... 19
5.22 TRANSACTIONS WITH RELATED PARTIES....................... 19
5.23 ENVIRONMENTAL COMPLIANCE................................ 19
5.24 ACCOUNTS RECEIVABLES.................................... 21
5.25 CUSTOMERS AND SUPPLIERS................................. 22
5.26 IMPROPER PAYMENTS....................................... 22
5.27 NO BROKER............................................... 22
5.28 WARRANTY CLAIMS......................................... 23
5.29 INVESTMENT REPRESENTATION............................... 23
5.31 LIST OF BANK ACCOUNTS................................... 24
5.32 COMPLETENESS OF SCHEDULES AND EXHIBITS; FULL DISCLOSURE. 24
ARTICLE 6............................................................. 24
6. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB........ 24
6.1 EXISTENCE; GOOD STANDING; CORPORATE
AUTHORITY; COMPLIANCE WITH LAW.......................... 24
6.2 AUTHORIZATION, VALIDITY AND EFFECT OF AGREEMENTS........ 25
6.3 Capitalization.......................................... 25
6.4 Subsidiaries............................................ 26
6.5 Other Interests......................................... 26
6.6 NO VIOLATION............................................ 27
6.7 SEC DOCUMENTS........................................... 27
6.8 ABSENCE OF CERTAIN CHANGES.............................. 28
6.9 LITIGATION.............................................. 29
6.10 TAXES................................................... 30
6.11 COMPLIANCE WITH LAWS.................................... 30
6.12 CONTRACTS, AGREEMENTS, PLANS AND COMMITMENTS............ 30
6.13 Employee Benefit Matters................................ 31
6.14 Environmental Compliance................................ 32
6.15 INSURANCE............................................... 33
6.16 PATENTS, TRADEMARKS AND COPYRIGHTS...................... 33
6.17 PERMITS................................................. 34
6.18 PERSONNEL DATA; LABOR RELATIONS......................... 34
6.19 PARENT COMMON STOCK..................................... 35
6.20 CONVERTIBLE SECURITIES.................................. 35
6.21 NO BROKERS.............................................. 35
6.22 MERGER REPRESENTATIONS.................................. 36
6.23 Customers and Suppliers................................. 36
6.24 IMPROPER PAYMENTS....................................... 36
6.25 COMPLETENESS OF SCHEDULES AND EXHIBITS; FULL DISCLOSURE. 37
ARTICLE 7............................................................. 37
7.1 Covenants of the Company and the Shareholder............ 37
(A) CERTAIN CHANGES.................................... 37
(B) OPERATION OF BUSINESS.............................. 38
(C) ACCESS............................................. 38
(D) REASONABLE COMMERCIAL EFFORTS...................... 39
(E) PUBLIC ANNOUNCEMENTS............................... 39
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(F) NOTICE............................................. 39
(G) EXCLUSIVITY........................................ 39
(H) Reorganization..................................... 40
(I) LEASE FOR FARM PROPERTY............................ 40
(J) PARENT COMMON STOCK OWNERSHIP...................... 40
7.2 Covenants of the Merger Sub............................. 40
(A) CERTAIN CHANGES.................................... 40
(B) OPERATION OF BUSINESS.............................. 41
(C) ACCESS............................................. 42
(D) REASONABLE COMMERCIAL EFFORTS...................... 42
(E) PRESERVATION OF BOOKS AND RECORDS.................. 42
(F) PUBLIC ANNOUNCEMENTS............................... 42
(G) CONFIDENTIAL INFORMATION........................... 42
(H) CONDUCT OF BUSINESS................................ 43
(I) EMPLOYEE BENEFITS.................................. 43
(J) MERGER............................................. 43
ARTICLE 8............................................................. 44
8. CONDITIONS.............................................. 44
8.1 CONDITIONS TO THE OBLIGATIONS OF THE
MERGER SUB AND THE PARENT............................... 44
(A) COMPLIANCE......................................... 44
(B) OFFICERS' CERTIFICATE.............................. 44
(C) LEGAL OPINION...................................... 44
(D) NO ORDERS.......................................... 45
(E) SECRETARY'S CLOSING CERTIFICATE.................... 45
(F) ABSENCE OF LITIGATION.............................. 45
(G) THIRD PARTY CONSENTS............................... 45
(H) LEGISLATION........................................ 45
(I) TERMINATION OF EXISTING LEASE...................... 45
(J) EMPLOYMENT CONTRACT................................ 46
(K) OTHER EMPLOYMENT AGREEMENT......................... 46
(L) MATERIAL ADVERSE CHANGE............................ 46
(M) BANK ACCOUNTS...................................... 46
(N) ENVIRONMENTAL REVIEW REPORT........................ 46
(O) FINANCING.......................................... 46
(P) REGISTRATION RIGHTS AGREEMENT...................... 46
(R) ASSET PURCHASE AGREEMENT........................... 46
(S) INDEMNIFICATION AGREEMENT.......................... 46
(T) Shareholder Approval............................... 46
(U) Reorganization..................................... 47
8.2 Conditions to the Obligations of the Company
and the Shareholder..................................... 47
(A) COMPLIANCE......................................... 47
(B) OFFICERS' CERTIFICATE.............................. 47
(C) LEGAL OPINION...................................... 47
(D) NO ORDERS.......................................... 47
(E) ACTIONS AND PROCEDURES............................. 47
(F) THE SHAREHOLDER EMPLOYMENT AGREEMENT AND THE OTHER
EMPLOYMENT AGREEMENTS.............................. 47
(G) BOARD SEATS........................................ 48
(H) REGISTRATION RIGHTS AGREEMENT...................... 48
(I) ASSET PURCHASE AGREEMENT........................... 48
(J) The Indemnification Agreement...................... 48
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(K) SHAREHOLDER APPROVAL............................... 48
(L) ABSENCE OF LITIGATION.............................. 48
(M) THIRD PARTY CONSENTS............................... 48
(N) Reorganization..................................... 48
ARTICLE 9............................................................. 48
9. TERMINATION.................................................. 48
9.1 GROUNDS FOR TERMINATION................................. 48
9.2 EFFECT OF TERMINATION................................... 49
ARTICLE 10............................................................ 50
10.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
AGREEMENTS............................................ 50
10.2 Notices............................................... 50
10.3 Assignment, Binding Effect............................ 51
10.4 ENTIRE AGREEMENT...................................... 51
10.5 AMENDMENT............................................. 52
10.6 GOVERNING LAW......................................... 52
10.7 COUNTERPARTS.......................................... 52
10.8 HEADINGS.............................................. 52
10.9 INTERPRETATION........................................ 52
10.10 Waivers............................................... 52
10.11 GENERAL INTERPRETIVE PRINCIPLES....................... 53
10.12 Reproduction of Documents............................. 53
10.13 SEVERABILITY.......................................... 54
10.14 ENFORCEMENT OF AGREEMENT.............................. 54
10.15 SUBSIDIARIES.......................................... 54
10.16 CHANGES IN APPLICABLE LAW............................. 54
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of May 15,
1997, by and between EQUITY COMPRESSION SERVICES CORPORATION, an Oklahoma
corporation (the "Parent"), OEC ACQUISITION CORPORATION, a Delaware
corporation and a wholly owned subsidiary of Parent (the "Merger Sub"),
OUACHITA ENERGY CORPORATION, a Louisiana corporation (the "Company") and
DENNIS W. ESTIS (the "Shareholder"). The Parent, the Merger Sub, the Company
and the Shareholder are sometimes collectively referred to herein as the
"Parties" and individually as a "Party".
RECITALS
WHEREAS, the Boards of Directors of Parent and Company each have
determined that a business combination between Parent and Company is in the
best interests of their respective companies and stockholders and presents an
opportunity for their respective companies to achieve long-term strategic and
financial benefits, and accordingly, have agreed to effect the merger
provided for herein (the "Merger") upon the terms and subject to the
conditions set forth herein; and
WHEREAS, it is intended that, for federal income tax purposes, that the
Merger will qualify as a reorganization under the provisions of Sections
368(a)(1)(A) and 368(a)(2)(D) of the Internal Revenue Code of 1986, as amended
(the "Code"); and
WHEREAS, the Parent, the Merger Sub, Ouachita Energy Partners, Ltd., a
Louisiana corporation ("OEP"), Ouachita Compression Group, LLC., a Louisiana
limited liability corporation ("OEG") and the Shareholder are parties to an
Asset Purchase and Sales Agreement dated as of May 15, 1997 (the "Asset
Purchase Agreement") under which the Merger Sub will acquire all or
substantially all of the assets of and assume certain liabilities of OEP and
OEG (collectively, the "Sellers") and acquire certain assets of the
Shareholder; and
WHEREAS, the Parent is the sole stockholder of the Merger Sub; and
WHEREAS, the Shareholder is the principal shareholder/owner of each of
the Sellers and the Company (collectively referred to herein as the
"Companies"); and
WHEREAS, the Parent, the Merger Sub, the Company and the Shareholder
desire to make certain representations, warranties and agreements in
connection with the Merger.
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NOW, THEREFORE, in consideration of the premises and of the respective
representations, warranties, covenants, agreements and conditions contained
herein, and after 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:
ARTICLE 1
1. THE MERGER.
1.1 THE MERGER. Subject to the terms and conditions of this Agreement, at
the Effective Time (as hereinafter defined), the Company shall be merged with
and into the Merger Sub in accordance with this Agreement, and the separate
corporate existence of the Company shall thereupon cease (the "Merger"). The
Merger Sub shall be the surviving corporation in the Merger (sometimes
hereinafter referred to as the "Surviving Corporation"). The Merger shall have
the effects specified in the Delaware General Corporation Law (the "DGCL") and
Section 115 of the Louisiana Business Corporation Law (the "LBCL").
1.2 THE CLOSING. Subject to the terms and conditions of this Agreement,
the closing of the Merger (the "Closing") shall take place (a) at the offices of
Schlanger, Mills, Mayer & Grossberg, LLP at 10:00 a.m., local time, on the first
business day immediately following the day on which the last to be fulfilled or
waived of the conditions set forth in Article 8 shall be fulfilled or waived in
accordance herewith or (b) at such other time, date or place as Parent and
Company may agree. The date on which the Closing occurs is hereinafter referred
to as the "Closing Date."
1.3 EFFECTIVE TIME. If all the conditions to the Merger set forth in
Article 8 shall have been fulfilled or waived in accordance herewith and this
Agreement shall not have been terminated as provided in Article 9, the
parties hereto shall cause a Certificate of Merger meeting the requirements
of Section 251 of the DGCL and Section 112 of the LBCL to be properly
executed and filed in accordance with such Section on the Closing Date. The
Merger shall become effective at the time of filing of the Certificate of
Merger with the Secretaries of State of the States of Delaware and Louisiana
in accordance with the DGCL and the LBCL or at such later time which the
Parties shall have agreed upon and designated in such filing as the effective
time of the Merger (the "Effective Time").
1.4 SCHEDULES. The Parties agree that each Party shall prepare and
deliver to the other Parties the schedules called for in this Agreement as
promptly as possible following the execution of this Agreement but in all events
prior to May 30, 1997 (the "Schedule Delivery Date"). The Parties acknowledge
that, as set
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forth in the Confidentiality Agreement (as hereafter defined), the contracts
and disclosures contained therein will omit the identity of the customers of
each of the Parent and the Company, however each such Party shall disclose
such information no later than three business days prior to the Closing.
1.5 DUE DILIGENCE PERIOD. The Parties agree that the obligation of the
Parties to close the transaction evidenced by this Agreement is subject to the
satisfactory completion by each Party of its due diligence on or before June
18, 1997 (the "Due Diligence Expiration Date"). If any Party elects not to
close, then such Party may cancel this Agreement by mailing or otherwise sending
to the other Parties written notice of its intent to terminate this Agreement
within five business days following the Due Diligence Expiration Date (the
"Termination Notice"). Upon mailing or otherwise sending to other Parties the
Termination Notice, the terminating Party and its affiliate (i.e. the Sellers
and the Shareholders on one hand and the Merger Sub and the Parent on the other
hand) shall be deemed released from all of their respective 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
except for any confidentiality obligations contained herein or in the
Confidentiality Agreement (as hereinafter defined).
ARTICLE 2
2. CERTIFICATE OF INCORPORATION AND BYLAWS OF THE SURVIVING CORPORATION.
2.1 CERTIFICATE OF INCORPORATION. The Certificate of Incorporation of the
Merger Sub in effect immediately prior to the Effective Time shall be the
Certificate of Incorporation of the Surviving Corporation, until duly amended in
accordance with applicable laws; provided, however, the name of the Merger Sub
shall be changed to be the same as the Company.
2.2 BYLAWS. The Bylaws of the Merger Sub in effect immediately prior to
the Effective Time shall be the Bylaws of the Surviving Corporation, until duly
amended in accordance with applicable law.
ARTICLE 3
3. DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION.
3.1 DIRECTORS. The directors of the Merger Sub immediately prior to the
Effective Time shall be the directors of the Surviving Corporation as of the
Effective Time and until their successors are duly appointed or elected in
accordance with applicable law.
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3.2 OFFICERS. The officers of the Merger Sub immediately prior to the
Effective Time shall be the officers of the Surviving Corporation as of the
Effective Time and until their successors are duly appointed or elected in
accordance with applicable law.
ARTICLE 4
4. EFFECT OF THE MERGER ON SECURITIES OF MERGER SUB AND COMPANY.
4.1 MERGER SUB STOCK. At the Effective Time, each share of common stock,
$0.01 par value, of the Merger Sub outstanding immediately prior to the
Effective Time shall be converted into and exchanged for one validly issued,
fully paid and non-assessable share of common stock, $0.01 par value, of the
Surviving Corporation.
4.2 COMPANY SECURITIES.
(a) At the Effective Time, all of the shares of common stock $1.00 par
value per share of the Company (the "Company Common Stock") issued and
outstanding immediately prior to the Effective Time shall, by virtue of the
Merger and without any action on part of the holder thereof, be converted into
seven million six hundred thousand (7,600,000) shares (the "Merger
Consideration") of Parent Common Stock, $0.01 par value per share ("Parent
Common Stock"). Set forth on Schedule 4.2(A) attached hereto is an allocation
of the Merger Consideration among the shareholders of the Company. The
Shareholder and the other shareholders of the Company (collectively the "Company
Shareholders") will prior to the Schedule Delivery Date authorize and direct the
Merger Sub and the Parent to pay and/or deliver the Merger Consideration in
accordance with the allocation set forth on such Schedule.
(b) As a result of the Merger and without any action on the part of the
holder thereof, at the Effective Time all shares of Company Common Stock shall
cease to be outstanding and shall be cancelled and retired and shall cease to
exist, and each holder of shares of Company Common Stock shall thereafter cease
to have any rights with respect to such shares of Company Common Stock, except
the right to receive, without interest, the Parent Common Stock upon the
surrender of a certificate (a "Company Certificate") representing such shares of
Company Common Stock.
(c) Each share of Company Common Stock issued and held in Company's
treasury at the Effective Time shall, by virtue of the Merger, cease to be
outstanding and shall be cancelled and retired without payment of any
consideration therefor.
(d) All options (individually, a "Company Option" and collectively, the
"Company Options") outstanding at the Effective
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Time under any Company stock option plan (the "Company Stock Option Plans")
shall be cancelled as of the Effective Time.
4.3 EXCHANGE OF CERTIFICATES REPRESENTING COMPANY COMMON STOCK.
(a) As of the Effective Time, Parent shall issue to the Company
Shareholders certificates representing the shares of Parent Common Stock
(such certificates representing shares of Parent Common Stock in exchange for
outstanding shares of Company Common Stock as set forth on Schedule 4.2(a).
The Company Shareholders shall deliver their Company Certificates
representing all outstanding shares of Company Common Stock for cancellation
in accordance with the terms of this Agreement.
(b) At or after the Effective Time, there shall be no transfers on the
stock transfer books of Company of the shares of Company Common Stock which
were outstanding immediately prior to the Effective Time. If, after the
Effective Time, Company Certificates are presented to the Surviving
Corporation, they shall be cancelled and exchanged for certificates for
shares of Parent Common Stock deliverable in respect thereof pursuant to this
Agreement in accordance with the procedures set forth in this Article 4.
(c) In the event any Company Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person
claiming such Company Certificate to be lost, stolen or destroyed and in
which such person agrees to indemnify and hold the Surviving Corporation
harmless against any claim that may be made against it with respect to such
Company Certificate, the Surviving Corporation will issue in exchange for
such lost, stolen or destroyed Company Certificate the shares of Parent
Common Stock deliverable in respect thereof pursuant to this Agreement.
ARTICLE 5
5. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER. The Shareholder
represents and warrants to the Parent and the Merger Sub as to the following:
5.1 EXISTENCE, GOOD STANDING, CORPORATE AUTHORITY, COMPLIANCE WITH LAW.
The Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Louisiana. The Company is duly
licensed or qualified to do business as a foreign corporation and is in good
standing under the laws of any other state of the United States in which the
character of the properties owned or leased by it or in which the transaction
of its business makes such qualification necessary, except where the failure
to be so qualified or to be in good standing would not have a material
adverse effect on the business, properties, assets,
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results of operations, condition (financial or otherwise) or prospects of the
Company and the Sellers on a combined basis (a "Company Material Adverse
Effect"). The Company has all requisite corporate power and authority to
own, operate and lease its properties and carry on its business as now
conducted. The Company and the Shareholder will deliver to the Merger Sub
true, correct and complete copies of the Certificates or Articles of
Incorporation and bylaws, regulations or equivalent governing instruments,
each as amended to the date hereof, of the Company on or prior to the
Schedule Delivery Date.
5.2 AUTHORIZATION, VALIDITY AND EFFECT OF AGREEMENTS. Subject to the
approval of the Company Shareholders in accordance with applicable law, the
execution and delivery of this Agreement by the Company and the Shareholder,
the performance by the Company and the Shareholder of all the terms and
conditions hereof to be performed by the Company and the Shareholder and the
consummation of the transactions contemplated hereby have been duly
authorized and approved by all requisite action (shareholder and board
approval and otherwise) on the part of the Company. The shareholders of the
Company have approved or prior to the Schedule Delivery Date will approve the
allocation of the Merger Consideration set forth on Schedule 4.2(A). Subject
to the approval of the Company Shareholders, this Agreement constitutes the
valid and binding obligation of each of the Company and the Shareholder
enforceable against each of the Company and the Shareholder in accordance
with its terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the rights
of creditors generally and by general equitable principles (whether or not
such enforceability is considered in a proceeding at law or in equity).
5.3 CAPITALIZATION. The authorized capital stock of Company consists of
1,000,000 shares of Company Common Stock at $1.00 par value. As of the date
hereof, there were the number of shares of Company Common Stock set forth on
Schedule 5.3 issued and outstanding. The Company has no outstanding bonds,
debentures, notes or other obligations the holders of which have the right to
vote (or which are convertible into or exercisable for securities having the
right to vote) with the stockholders of the Company on any matter. All
issued and outstanding shares of Company Common Stock are duly authorized,
validly issued, fully paid, nonassessable and free of preemptive rights.
Except as set forth on Schedule 5.3 hereof, there are not, at the date of
this Agreement, any existing options, warrants, calls, subscriptions,
convertible securities, or other rights, agreements or commitments which
obligate the Company to issue, transfer or sell any
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shares of capital stock of Company. After the Effective Time, the Surviving
Corporation will have no obligation to issue, transfer or sell any shares of
capital stock of Company or the Surviving Corporation pursuant to any Company
Benefit Plan (as defined in Section 5.10). (((MARK)))
5.4 OTHER INTERESTS. The Company does not own, directly or indirectly,
any interest or investment (whether equity or debt) in any corporation,
partnership, joint venture, business, trust or entity other than investments,
in short term investment securities and corporate partnering, development,
cooperative marketing and similar undertakings entered into in the ordinary
course of business.
5.5 NO VIOLATION. Neither the execution and delivery by Company of
this Agreement nor, subject to the approval of the Company's Shareholders as
set forth herein, the consummation by Company of the transactions
contemplated hereby in accordance with the terms hereof, will: (i) conflict
with or result in a breach of any provisions of the Certificate of
Incorporation or Bylaws of the Company; (ii) result in a breach or violation
of, a default under, or the triggering of any payment or other material
obligations pursuant to, or accelerate vesting under, any of its existing
Company Stock Option Plans, or any grant or award made under any of the
foregoing; (iii) violate, conflict with, result in a breach of any provision
of, constitute a default (or an event which, with notice or lapse of time or
both, would constitute a default) under, result in the termination or in a
right of termination or cancellation of, accelerate the performance required
by, result in the triggering of any payment or other material obligations
pursuant to, result in the creation of any lien, security interest, charge or
encumbrance upon any of the material properties of Companies or any of them
under, or result in being declared void, voidable, or without further binding
effect, any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, deed of trust or any material license, franchise,
permit, lease, contract, agreement or other instrument, commitment or
obligation to which any of the Companies is a party, or by which any of the
Companies or any of their respective properties is bound or affected, except
for any of the foregoing matters which would not have a Company Material
Adverse Effect; or (iv) other than the filings provided for in Article 1
require any material consent, approval or authorization of, or declaration,
filing or registration with, any domestic governmental or regulatory
authority, the failure to obtain or make which would have a Company Material
Adverse Effect.
5.6 NO DEFAULT; COMPLIANCE WITH LAWS AND REGULATIONS. Except as set
forth on Schedule 5.6 attached hereto, neither the Shareholder (as to the
business of the Companies) nor any of the Companies are in default or in
violation of, and no condition exists that with notice or lapse of time or
both would constitute a default or violation of (i) any loan, contract, note,
instrument,
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or agreement, or (ii) law, rules or regulations applicable to any of the
Companies or the Shareholder and there are no Orders (as defined in the Asset
Agreement) by any Governmental Body (as defined in the Asset Agreement) or
rendered against affecting any of the Companies.
5.7 FINANCIAL STATEMENTS. The Company and the Shareholder heretofore
have delivered to the Merger Sub and the Parent copies of (i) the audited
combined balance sheets of the Companies as of November 30, 1996 and 1995 and
the related statements of income and cash flows for such periods (the "Annual
Financial Statements"); and (ii) the unaudited combined balance sheet of the
Companies as of March 31, 1997 (the "Balance Sheet Date") together with the
related statements of income and cash flows for the four (4) month period
then ended (the "Interim Financial Statements").
The Annual Financial Statements and the Interim Financial Statements are
collectively referred to as the "Financial Statements"). The Financial
Statements present fairly, in accordance with GAAP (as hereinafter defined),
the financial position of the Companies on a combined basis as of the dates
indicated and the results of operations and changes in financial position of
the Companies on a combined basis, for the periods reflected in the Financial
Statements, except that the Interim Financial Statements do not contain
customary footnote disclosures and are subject to normal year end
adjustments. None of the Companies have any debt or liability of any kind,
whether accrued, absolute, contingent or otherwise, including, without
limitation, any debt or liability on account of taxes or any governmental
charges or penalty, interest or fines, except as reflected in the Financial
Statements or in a schedule attached to this Agreement other than liabilities
or obligations incurred by the applicable Company in the ordinary course of
business after the period covered by such Financial Statements. All material
income of each of the Companies as reflected on the Financial Statements
consists solely of ordinary operating profits and none of such income
consists of (i) income from a source other than operations of the business of
the Companies or (ii) a transaction outside the ordinary course of business
of the Companies, (whether or not such transaction would otherwise be
considered extraordinary under GAAP). "GAAP" means generally accepted
accounting principles set forth in the Opinions of the Accounting Principles
Board of the American Institute of Certified Public Accountants and in
statements by the Financial Accounting Standards Board or in such other
statement by such other entity as may be generally recognized as the
successors for the aforementioned; and shall also mean the accounting
principles observed in a current period are comparable in all material
respects to those applied in a preceding period unless specific exemption is
noted in the financial statements where a change of accounting method,
principle or presentation has occurred.
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5.8 ABSENCE OF CERTAIN CHANGES. Except as disclosed to the Merger Sub in
this Agreement, the Financial Statements, Schedule 5.8 attached hereto, or in
any other schedule to this Agreement, since the Balance Sheet Date, there has
not been:
(i) any material adverse change in the business, properties, assets
of the Companies (or any of them) other than changes caused by general
conditions in the industry in which the Companies transact business;
(ii) any damages, destruction or loss, whether covered by insurance
or not, which has had, or might be expected to have, a Company Material
Adverse Effect;
(iii) any material change by the Companies (or any of them) in
accounting methods or principles which would be required to be disclosed
under GAAP;
(iv) any issuance by the Companies or any of them of any shares of
capital stock;
(v) any sale, lease or other disposition of properties and assets
of the Companies (or any of them), except in the ordinary course of
business;
(vi) any merger or consolidation of the Companies (or any of them)
with any other corporation, partnership, limited liability company, person
or entity or any acquisition by the Companies (or any of them) of the
stock or business of another corporation, partnership, limited liability
company or other entity;
(vii) any borrowing, or agreement to borrow funds, by the Companies
(or any of them) or any termination or material amendment of any evidence
of indebtedness, contract, agreement, deed, mortgage, lease, license or
other instrument, commitment or agreement to which the Companies (or any
of them) are bound or by which their properties are bound and is material
to the business, condition (financial or otherwise), results of operation
or prospects of the Companies (or any of them);
(viii) any declaration or payment of any dividend on, or any other
distribution with respect to, the equity securities of the Companies (or
any of them);
(ix) any material increase in the compensation payable or to become
payable by the Companies (or any of them) to the directors, officers or
employees of Companies (or any of them) or the Shareholder, or any
increase in benefits or benefit plan costs (other than costs outside of
the control of the
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Companies), or any increase in any bonus, insurance, pension, compensation
or other benefit plan made for or with or covering any directors, officers
or directors;
(x) any reclassification of any asset or liability;
(xi) any amendment, modification, or termination of any material
contract, agreement, plan or commitment;
(xii) any mortgage, pledge, grant of any lien or security interest
or other encumbrance of any asset of the Companies (or any of them);
(xiii) any waiver or release of any material right or claim of the
Companies (or any of them) that singly, or in the aggregate, is material
to the business, assets, condition (financial or otherwise), results of
operation or prospects of the Companies (or any of them);
(xiv) any significant labor trouble or any damage, destruction or
loss of property by fire or other casualty, whether or not covered by
insurance, adversely affecting the property, assets, condition (financial
or otherwise), prospects of the Companies (or any of them) or any related
property;
(xv) removal, from any building, facility or real property of any of
the assets of the Companies (or any of them);
(xvi) any transactions between or with affiliates of the Companies
(or any of them) or the Shareholder, except as set forth on Schedule
3.01(S) of the Asset Purchase Agreement; or
(xvii) any contract, understanding or commitment to do any of the
foregoing.
5.9 TAXES. Except as set forth on Schedule 5.9 attached hereto:
(i) The Companies have each timely filed or caused to be timely
filed all material federal, state and local tax returns for taxes, and
all such tax returns are proper, complete and accurate and copies of
which have been delivered to the Merger Sub.
(ii) The Companies have paid or caused to be paid all taxes which have
become due, except for taxes the failure of which to pay would not have a
Company Material Adverse Effect.
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(iii) The amounts set up as provisions for taxes on the Interim
Financial Statements (and the notes and year-end accruals attached thereto)
are sufficient for the payment of all accrued and unpaid taxes of any kind,
except for taxes the failure of which to pay would not have a Company
Material Adverse Effect.
(iv) Neither Companies (or any of them) nor the Shareholder have
received or have no knowledge of any notice of deficiency or assessment with
respect to the Companies (or any of them) or any basis for any of the
foregoing, from any taxing authorities. Neither the Companies (or any of
them) nor the Shareholder has been notified by the IRS that the IRS intends
to audit the federal income tax returns of the Companies (or any of them) or
the Shareholder.
(v) There is no litigation, governmental or other proceeding
(formal or informal), or investigation pending, or, to the Shareholder's
knowledge, threatened with respect to any such federal, state or local
income tax return. There are no tax liens upon, pending against or, to the
knowledge of the Company or the Shareholder, threatened against any property
of the Companies or any of them.
(vi) Neither the Companies (or any of them) or the Shareholder have
given or been requested to give any waiver of any statute of limitations
related to the payment of any foreign, federal, state or local tax.
(vii) The amounts withheld by each of the Companies and paid to the
appropriate Governmental Body for all periods include all amounts necessary
to fully and completely comply with all withholding provisions of applicable
law.
(viii) To the best of the Shareholder's knowledge, consummation of
the transactions contemplated by this Agreement will not result in the
imposition or creation of any tax obligation on any of the Companies.
Other than the representations and warranties set forth in Sections 5.10,
5.14 and 5.19, the representations and warranties contained in this Section 5.9
are intended to the be sole representations and warranties of the Shareholder
with respect to compliance by the Companies with tax laws.
5.10 REORGANIZATION. With respect to the qualification of the Merger as
a reorganization within the meaning of Sections 368(a)(1)(A) and 368(a)(2)(D)
of the Code: (a) to the best knowledge of Shareholder, there is no plan or
intention on the part of Company Shareholders to sell, exchange, or otherwise
dispose of a number of shares of Parent Common Stock received in the Merger
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that would reduce the Company Shareholders' ownership of Parent Common Stock
to a number of shares of Parent Common Stock having a value, as of the date
of the Merger, of less than 50 percent of the value of all of the formerly
outstanding shares of Company Common Stock as of the same date, provided,
that shares of Company Common Stock and Parent Common Stock held by holders
of Company Common Stock and otherwise sold, redeemed or disposed of prior or
subsequent to the Merger will be considered in making this representation; as
of the Effective Time and immediately following the Merger, the Company will
hold at least 90 percent of the fair market value of its net assets and at
least 70 percent of the fair market value of its gross assets held immediately
prior to the Merger, provided that all redemptions and distributions (except
for regular, normal dividends) made by the Company will be included as assets
of the Company immediately prior to the Merger; at the time of the Merger,
the Company will not have outstanding any warrants, options, convertible
securities or any other type of right pursuant to which any person could
acquire Company Stock that, if exercised or converted, would affect Parent's
acquisition or retention of control of Company, as defined in Section 368(c)
of the Code; the Company is not an investment company as defined in Sections
368(a)(2)(F)(iii) and (iv) of the Code; on the date of the Merger, the fair
market value of the assets of the Company will exceed the sum of its liabilities
plus (without duplication) the amount of liabilities, if any, to which the
assets are subject; the Company is not under the jurisdiction of a court in a
title 11 or similar case within the meaning of Section 368(a)(3)(A) of the
Code; to the best of the Shareholder's knowledge, none of the compensation
received by any shareholder-employees of the Company will be separate
consideration for, or allocable to, any of their shares of Company Stock; to
the best of the Shareholder's knowledge, none of the Parent Common Stock
received by any shareholder-employees of the Company will be separate
consideration for, or allocable to, any employment agreement; to the best of
the Shareholder's knowledge, the compensation paid to any shareholder-employees
of the Company will be for services actually rendered and will be commensurate
with amounts paid to third parties bargaining at arm's-length for similar
services; to the best of the Shareholder's knowledge, the compensation paid to
the Shareholder for the Farm Lease will be for the use of property actually
provided and will be commensurate with amounts paid to third parties bargaining
at arm's-length for the use of similar property; and no intercorporate
indebtedness between Parent and the Company or between Merger Sub and the
Company has been issued or acquired at a discount.
5.11 CONTRACTS, AGREEMENTS, PLANS AND COMMITMENTS. Schedule 5.11 attached
hereto sets forth a list or summary of all the material contracts, notes,
instruments, indentures, documents, agreements, plans and commitments, including
all amendments, modifications and supplements thereto (written or oral), to
which
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the Companies (or any of them) are a party or by which the Companies (or
any of them) or any of their assets or properties are bound as of the date
hereof, provided, however, that as set forth in the Confidentiality Agreement
dated April 28, 1997 (the "Confidentiality Agreement"), the identity of the
customers of the Companies will be not be disclosed until three business days
prior to the Closing (the "Customer Disclosure"). For the purposes of this
Section 5.11 a contract shall be considered material if such contract or any
series of related or similar contracts involving the same subject matter
involves $100,000 or more of services to be rendered or obligations in any
twelve month period. Also set forth on Schedule 5.11 is a list of all
agreements for the provision of compression services by the Companies
identifying the horsepower or type of equipment being leased, the amount of the
rental for such contract and the term of such contract, provided, however that
until the Customer Disclosure Date, such schedule will not include any
information concerning the location of such equipment or the identity of the
customer of the Companies with respect to such contract. The Companies have
each complied with the provisions of all of their respective contracts and, to
the best of the Shareholder's knowledge, no default or event of default exists
under any of such agreements and such agreements constitute valid and legally
binding obligations of each of the Companies (or any of them) and, to the best
of the Shareholder's knowledge, of each other person, corporation, partnership,
limited liability company, governmental body or other entity (collectively a
"Person") that is a party thereto enforceable against each party in accordance
with their terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the rights of
creditors generally and by general equitable principles (whether or not such
enforceability is considered in a proceeding at law or in equity). The
contracts listed on such schedule comprise all of the contracts, agreements,
plans and commitments required in order to conduct the business of the Companies
as it has been and is now conducted, and, subject to receipt of the consents
listed on Schedule 5.11, all of such Contracts are transferable and will be
transferred to Merger Sub under and in accordance with the terms of this
Agreement.
5.12 LITIGATION. Except as set forth in Schedule 5.12 attached hereto:
(i) There are no claims, proceedings or lawsuits pending or, to the
knowledge of the Shareholder, threatened against the Companies (or any of
them); and
(ii) None of the Companies are charged with a violation of, or, to
the knowledge of the Shareholder, threatened with a charge of a violation
of, any provision of any law, rule or regulation or any Order.
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5.13 TITLE TO PROPERTY; ABSENCE OF LIENS AND ENCUMBRANCES. Schedule 5.13
attached hereto contains a true, accurate and complete description of all real
property owned by the Shareholder on which the business of the Companies is
conducted. Schedule 5.13 attached hereto contains a true, accurate and complete
list and description of all leasehold improvements and equipment, and of all
other tangible personal property and assets now owned by each of the Companies.
The Companies each own and have good and marketable title to all its respective
tangible personal properties, whether or not listed in Schedule 5.13 (except to
the extent such tangible personal properties are leased) free and clear of all
liens, security, interests, charges or encumbrances, except for (i) landlord
liens, (ii) rights of the real property on which the Companies' compression
equipment is located, and (iii) liens for taxes not yet due and owing. The
Shareholder has good and indefeasible title to the Real Property in fee simple
and no improvement or structure on the Real Property encroaches on any adjacent
property. To the best of the Shareholder's knowledge, the Real Property does
not violate any provisions of any applicable building code, fire, health, or
safety regulation, or any governmental ordinance, orders or regulations. No
condition exists with respect to the Real Property which would prevent, or
require repair or modification thereof as a prerequisite to, the Merger Sub
using the Real Property for the conduct of the business of the Companies. To
the best of the Shareholder's knowledge, the zoning classification of the Real
Property is such that the Real Property may be used as currently used in the
business of the Companies. There is no pending or, to the best of the
Shareholder's knowledge, threatened condemnation or similar proceeding or
assessment affecting the Real Property, or any part thereof. The Companies each
have title policies in full force and effect for the Real Property insuring
title on such property (without title exceptions that will adversely affect
either the market value or marketable title of the Real Property) for at least
the amount reflected on the Interim Financial Statements as the book value of
such property. To the best of the Company's and the Shareholder's knowledge,
such title policies are with solvent and financially responsible title
companies. Except as shown in Schedule 5.13 attached to this Agreement, the
tangible personal property owned by each of the Companies and in use or leased
to third parties is in good condition and repair, is adequate in quantity and
quality to operate the Business as it has been and is now conducted and, to the
best of the Shareholder's knowledge, in compliance with all applicable laws,
rules and regulations (including without limitation any zoning ordinance), and
is all the property necessary to the operation of the Business as it has been
and is now being conducted and will be available for immediate use by the Merger
Sub on the Closing Date.
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5.14 EMPLOYEE BENEFIT MATTERS.
(i) Schedule 6.13 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 "Company Plan") by any of
the Companies 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 Code of which any of the Companies
is a member.
(ii) The Company has delivered to the Company current, accurate and
complete copies of each Company 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 Company Plan; (b) Form 5500; (c) attorneys' response to an
auditor's request for information for any Company 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 Company Plan.
(iii) With respect to each Company Plan: (a) each Company 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 Company 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).
(iv) None of the Companies 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 Company Plan which is an employee welfare
benefit plan (within the meaning of ERISA Section 3(1)): (a) each and every
Company 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
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requirements of Code Section 4980B; and (b) each Company Plan (including
any Company Plan covering former employees of any of the Companies) may be
amended or terminated by the Company on or at any time after the Closing
Date.
(vi) None of the Companies maintains any post-retirement health and
life insurance plans for employees and retirees.
5.15 LEASES. The Company and the Shareholder have delivered to the Merger
Sub and the Parent true and complete copies of all leases referred to in
Schedule 5.15 attached hereto (the "Leases"), which lists all agreements
pertaining to the lease of real or personal property to which each of the
Companies are a party. The Leases are in full force and effect and are
subsisting, valid and binding obligations of the applicable Company, except as
such enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the rights of creditors generally and by
general equitable principles (whether or not such enforceability is considered
in a proceeding at law or in equity). None of the Companies are in default or,
to the knowledge of the Shareholder, alleged to be in default thereunder. Except
as set forth in Schedule 5.15, the Sellers each have full legal power and
authority to assign their rights under each of the Leases and rental agreements
or arrangements applicable to such Seller, and the continuation, validity and
effectiveness thereof on its present terms will not be affected by the
occurrence of the Closing. The Companies each have good and marketable title to
all leasehold interests and improvements and enjoy peaceful and undisturbed
possession under all of the Leases and rental agreements as to which each of the
Companies are lessees. To the knowledge of the Shareholder, the present use of
real and personal property that are subject to the Leases comply with all
applicable building or zoning codes, ordinances or regulations applicable
thereto. The Company and the Shareholder have also provided to the Merger Sub
and the Parent a copy of the lease between the Company and the Shareholders (the
"Shareholder Lease") with respect to the Real Property.
5.16 INSURANCE. Schedule 5.16 attached hereto sets forth a list of all
insurance policies of each of the Companies by which the Companies or any of
their assets or properties have been covered including the Business for the
last three (3) years and those policies which are now in full force and
effect. The Company agrees to use its best efforts to maintain the existing
policies (which are presently in force) in full force and effect at all times
from the date of this Agreement until the Closing Date. The insurance
policies set forth on Schedule 5.16 attached hereto provide insurance against
the risks involved in the Business and the operation of the Business of the
Companies which are standard in the industry. None of the Companies have
received notice from any insurance carrier of the intention of such carrier
to
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discontinue any insurance coverage afforded to any of the Companies.
5.17 PATENTS, TRADEMARKS AND COPYRIGHTS. Schedule 5.17 attached hereto
includes a true and complete list and description of all Intellectual
Property applied for, issued to, or owned or used by each of the Companies or
under which any of the Companies are licensed or franchised. To the best of
the Shareholder's knowledge, each of the Companies possess full rights,
licenses or other authority to use all such Intellectual Property. To the
best of the Shareholder's knowledge, all licenses are in full force and
effect, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the rights
of creditors generally and by general equitable principles (whether or not
such enforceability is considered in a proceeding at law or in equity), and
constitute legal, valid and binding obligations of the parties thereto, and
there has not been any default or alleged default (or any event or condition
which with notice, lapse of time or both would become a default) thereunder.
To the best of the Shareholder's knowledge, provided the consents described
in Schedule 5.17 attached hereto are obtained, the occurrence of the Closing
will not affect the validity, continuation or effectiveness of any such
rights on their present terms. To the best of the Shareholder's knowledge,
each of the Companies own or hold adequate licenses or other rights to use
all Intellectual Property necessary for the conduct of their business as it
has been and is now conducted, and that use does not and will not conflict
with, infringe on or otherwise violate any rights of others. None of the
Companies (nor the Shareholder) have received notice, or have knowledge of,
any infringements or unauthorized or unlawful use of such Intellectual
Property by themselves or others or any allegation that they have infringed
similar properties of others.
5.18 PERMITS. Schedule 5.18 attached hereto includes a true and complete
list of all material Permits (as defined in the Asset Agreement). To the best
of the Shareholder's knowledge, the Permits are in full force and effect and
comprise all the governmental authorizations materially necessary or desirable
for the lawful conduct of the Business as it has been and is now conducted.
Except as noted on Schedule 5.18, each of the Permits is freely transferrable
to the Merger Sub, without consent of any Person, and none of the Permits
obligate any of the Companies or will obligate the Merger Sub upon transfer for
the payment of any further charges or assessments in order to maintain them in
full force and effect.
5.19 PERSONNEL DATA; LABOR RELATIONS.
(i) Schedule 5.19 attached hereto is a list of all employees of
the Companies, their current rates of
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compensation, their length of service with each of the Companies, and a
complete and accurate description of all practices, policies, understandings
and agreements with such persons relating to their employment. All employees
are "at will" employees except as set forth on Schedule 5.19 and all
contracts and arrangements with any employee who is a party to an employment
agreement are in full force and effect, and neither the Companies (or any of
them) nor, to the best of the Shareholder's knowledge, any other person is
in default under either of them. Each of the Companies in the conduct of
their affairs and business have each complied in all material respects with
all applicable laws and regulations relating to the employment of labor
including those related to wages, hours, discrimination, employee pension
and welfare benefit plans, collective bargaining, and the payment of Social
Security or similar taxes, and each of the Companies have withheld and paid
to the appropriate governmental authority, all amounts required by law or
agreement to be withheld from wages or salaries of such employees. All
increases in compensation during the eighteen month period prior to the
execution of this Agreement are described on Schedule 5.19.
(ii) There is no pending, or, to the Company's or the Shareholder's
knowledge, any threatened labor dispute, strike or lockout, slow-down,
stoppage, unfair labor practice complaint, grievance procedure or
arbitration proceeding relating to any of the Companies or affecting their
respective business. No representation question now exists respecting any
of the Companies and no collective bargaining agreement is currently being
negotiated. Neither the Companies (or any of them) nor the Shareholder have
received any notification of any unfair labor practices charges or
complaints pending before any agent having jurisdiction over any of the
Companies. Neither the Company nor the Shareholder are aware of any union
organizing activities or proceedings involving, or act pending petition for
the recognition of, a labor union or association as the exclusive bargaining
agent for any group or groups of employees of any of the Companies.
(iii) Attached hereto as Schedule 5.19(ii) are copies of all
Occupational Safety and Health Administration ("OSHA") reports having to do
with each of the Companies, their operations or the Business and received
by any of the Companies during the last twelve months. No other oral or
written complaints or notices have been received from OSHA, and no other
complaints, or notices have been received from other regulatory agencies
or offices having jurisdiction over any of the Companies during the last
twenty-four month period.
Other than the representations and warranties contained in Section 5.14,
the representations and warranties contained in this
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Section 5.19 are intended to the be sole representations and warranties of
the Shareholder with respect to compliance by the Companies with employment
laws.
5.20 COMPLIANCE WITH LAWS. None of the Companies are in violation in any
material respect of any laws, regulations or governmental orders (other than
with respect to laws, regulations and governmental orders pertaining to taxes,
employment and environmental matters, which are treated separately in this
Agreement) in a manner which could have a Company Material Adverse Effect and,
to the best of the Shareholder's knowledge, none of the Companies have been
charged with any such violation. There are no judgments, orders, injunctions or
decrees of any court or governmental instrumentality affecting any of the
Companies or their respective businesses, the failure to comply with which could
have a Company Material Adverse Effect.
5.21 INVENTORY. Except as set forth on Schedule 5.20 attached hereto (i)
all items of each of the Companies' inventory and related supplies reflected on
the Financial Statements or thereafter acquired (and not subsequently disposed
of in the ordinary course of business) are merchantable, for sale in the
ordinary course of business at normal mark-ups, (ii) none of such items of the
Companies' inventory is obsolete and (iii) each item of such inventory reflected
on the Financial Statements and the books and records of each of the Companies
is so reflected on the basis of a complete physical count and is valued at the
lower of cost or market in accordance with GAAP.
5.22 TRANSACTIONS WITH RELATED PARTIES. Except as disclosed in Schedule
5.33 attached hereto, there have been no payments or transactions between any of
the Companies and any Person who controls, is controlled by, or is under common
control with any of the Companies or the Shareholder or otherwise affiliated
with any of the Companies or the Shareholder. Except as disclosed in Schedule
5.33 attached hereto, no officer, director, shareholder or employee of any of
the Companies or the Shareholder, nor any spouse, children, parent of either of
them, has any direct or indirect interest in any competitor, supplier or
customer of the businesses of any of the Companies.
5.23 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
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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 Polluting Substances (hereafter defined) in effect on the
date of this Agreement and the Closing Date. For the purposes of this
Agreement, Polluting Substance means any solid or hazardous waste, hazardous
substance, pollutant, contaminant, oil, petroleum product, commercial product
or other substance (i) which is listed, regulated or designated as toxic or
hazardous (or words of similar meaning or regulatory effect) or with respect
to which remediation or cleanup obligations may be imposed under any
Environmental Law or (ii) exposure to which may pose a safety or health
hazard. Except as set forth on Schedule 5.23 attached hereto:
(i) The Companies are each in compliance in all material respects
with all applicable Environmental Laws and have obtained and are in material
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
in the manner now conducted or which would interfere in any material respect
with the Companies' compliance with Environmental Laws or constitute a
violation thereof including any prior release or discharge of any Polluting
Substance that could have a Company Material Adverse Effect.
(ii) None of the Companies have leased, operated or owned any
facilities or real property with respect to which any of the Companies are
subject to any actual or, to the knowledge of the Company and the
Shareholder, potential action, claim, investigation, review or other
proceeding before any governmental, judicial or regulatory body, under any
Environmental Law.
(iii) None of the Companies have sent Polluting Substances to any
off-site commercial waste management facilities for re-use, recycling,
reclamation, treatment, storage or disposal.
(iv) None of the Companies are subject to any actual or, to the
knowledge of the Shareholder, potential proceeding for violation of any
Environmental Law with respect to any such facility presently or previously
used by any of the Companies.
(v) There are no Polluting Substances in any inactive, closed or
abandoned storage or disposal areas or facilities or property currently or
in the past leased, operated or owned by any of the Companies.
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(vi) No property currently, or in the past, leased operated or owned
by any of the Companies is subject to actual or, to the knowledge of the
Shareholder, potential investigation by federal, state or local officials or
private litigation as a result of any previous on-site management,
treatment, storage or disposal of Polluting Substances.
(vii) There are no above ground or underground storage tanks located
on any property owned, leased or operated by any of the Companies.
(viii) Except in compliance with all Environmental Laws (including,
without limitation, the obtaining of all necessary Permits), no Polluting
Substances have been used, generated, manufactured, stored or treated, or
disposed of, landfilled or in any other way released (and no release is
threatened), on or about any property owned, operated or leased by any of
the Companies or transported to such property.
(ix) There are no obligations, undertakings, or liabilities arising
out of or relating to failure to comply with or violation of any
Environmental Laws which the Companies (or any of them) have agreed to,
assumed or retained, or indemnified a third party against, by the contract
or otherwise.
The representations and warranties contained in this Section 5.23 are
intended to be the sole representations and warranties of the Shareholder with
respect to compliance by the Companies with Environmental Laws.
5.24 ACCOUNTS RECEIVABLES. Each account receivable reflected on the
Financial Statements constitutes a bona fide receivable resulting from a bona
fide sale to a customer in the ordinary course of business, the amount of which
was actually due on the date thereof. The books and records of the Companies
state correctly the facts with respect to each account receivable of the
Companies and the balance due thereon. Each payment reflected on such books or
records as having been made to each such account receivable was made by the
respective account debtor and not directly or indirectly by any director,
officer, employee or agent of the Companies unless such person is shown on said
books and records as such account debtor and as set forth on Schedule 5.24
attached hereto. To the best of the Shareholder's knowledge, each document and
instrument evidencing, securing or relating to each account receivable, is
correct and complete in all respects, is genuine and valid and is enforceable in
accordance with its terms, and is not subject to any defense, claim of
disability, counterclaim or offset and there is no threatened, intended or
proposed defense, claim of disability, counterclaim or offset with respect
thereto. To the best of the Shareholder's knowledge, each
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account receivable and each document and instrument and each transaction
underlying or relating to it conforms in all material respects, including,
without limitation, in respect of interest rates charged, notices given and
disclosures made, to the requirements and provisions of each applicable law,
rule, regulation or order relating to credit, consumer credit, credit
practices, credit advertising, credit reporting, retail installment sales,
credit cards, collections, usury, interest rates and truth-in-lending,
including, without limitation, the Federal Truth in Lending Act, as amended
and Regulation Z issued by the Board of Governors of the Federal Reserve
System thereunder.
5.25 CUSTOMERS AND SUPPLIERS. Except for matters that would not have a
Company Material Adverse Effect, no supplier or customer of the Companies has
advised the Companies (or any of them) or the Shareholder formally or
informally, that such customer or supplier intends to terminate, discontinue or
substantially reduce its business with the Business and the occurrence of the
Closing is not expected to adversely affect such relationship.
5.26 IMPROPER PAYMENTS. Neither the Companies, the Shareholder nor any
officer, agent or employee of the Companies or the Shareholder nor any
distributor or licensee of any of the foregoing, nor any other person
(including, without limitation, the Companies or an affiliate of the Companies)
acting on behalf of the Companies, or the Shareholder, in any case for which
such action may be attributable to the Companies (or any of them) or the
Shareholder, has directly or indirectly, on behalf of or with respect to the
Companies (or any of them) or the Shareholder, except as listed on Schedule 5.26
attached hereto, (i) made any illegal or unlawful political contributions, (ii)
made any payment which was not legal to make or which the Companies or the
Shareholder should have known was not legal for the payee to receive, (iii)
received any payment which was not legal to receive or which such Seller or the
Shareholder should have known was not legal for the payor to make, (iv) had any
material transaction or payment which is not properly booked in accordance with
GAAP, (v) had any off-book bank or cash accounts or "slush funds" of which the
Companies (or any of them) or the Shareholder were the beneficial owner, or (vi)
given or agreed to give any gift or similar benefit to any customer, supplier,
government employee or other Person which (a) if not given in the past, might
have had an adverse effect on the sales, assets, properties, condition
(financial or otherwise) or prospects of the Companies (or any of them) or the
Business or (b) if not continued in the future, might adversely affect the
assets, business, sales, properties, condition (financial or otherwise) or
prospects of the Companies (or any of them) or the Business.
5.27 NO BROKER. Other than a payment to the Reed Group, all negotiations
on behalf of the Companies relating to this Agreement
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and the transactions contemplated by this Agreement have been carried on by
the Companies and their agents directly with Merger Sub without the
intervention of any other person in such manner as to give rise to any claim
against Merger Sub or its affiliates, Companies or their affiliates for a
brokerage commission, finder's fee or other like payment in connection with
the consummation of the transactions contemplated hereby.
5.28 WARRANTY CLAIMS. Neither of the Companies nor the Shareholder know or
have reason to know of any existing or threatened material claims, or any facts
upon which a claim could be based against Companies (or any of them) for any
products or materials sold by the Companies (or any of them) prior to the
Closing Date which are defective or fail to meet any service or product
warranties. The total amount of warranty claims asserted against the Companies
(or any of them) Companies during the last three (3) years prior to the date of
this Agreement is listed on Schedule 5.28 attached hereto.
5.29 INVESTMENT REPRESENTATION. The Shareholder is acquiring the Parent
Shares for its or his own account for investment purposes and not for the
purpose of effecting a distribution. Other than the Company Shareholders
listed on Schedule 5.29, the Shareholder and each other person receiving shares
of Parent Common Stock are "accredited investors" within the meaning of
Regulation D promulgated under the Securities Act of 1933, as amended (the
"Securities Act"), and have such knowledge and experience in business and
financial matters that each such person are capable of evaluating the merits and
risks of the acquisition of the Parent Shares. Each of the Companies and the
Shareholder have been provided with copies of the Parent's annual report on Form
10-KSB for the year ended December 31, 1996 and the proxy statement submitted to
the shareholders of the Parent in connection with its annual meeting of
shareholders to be held on May 21, 1997. Each of the Companies and the
Shareholder have been afforded the opportunity to review, and has in fact
reviewed, any and all information concerning the Parent that he or it has sought
to review prior to making its decision to accept the Parent Shares, and has had
the opportunity to ask questions of the Parent and the management of the Parent
concerning the Parent, its business, results of operations and financial
condition, and all such questions have been answered to the full satisfaction of
each of the Companies and the Shareholder; provided, that such investigation
shall not relieve the Parent or the Merger Sub of its obligations under this
Agreement. The certificate(s) representing the Parent Shares will be contain
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.
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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."
5.31 LIST OF BANK ACCOUNTS. Set forth on Schedule 5.31 attached hereto is
true and complete list of all depositary accounts maintained by any of the
Companies and a list of depositary institutions at which any of the Companies
maintain an account or deposit of any kind.
5.32 COMPLETENESS OF SCHEDULES AND EXHIBITS; FULL DISCLOSURE. The
schedules and exhibits attached hereto, where provided by or on behalf of the
Company or the Shareholder present in all material respects the information
required by this Agreement to be set forth therein. No representation or
warranty by the Company or the Shareholder herein and no information disclosed
in the schedules and exhibits hereto supplied by the Company or the Shareholder
contains any untrue statement of a material fact or omits to state a material
fact necessary to make the statements contained herein or therein not
misleading.
ARTICLE 6
6. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB. The Parent and
the Merger Sub, jointly and severally, represent and warrant to the Company and
the Shareholder as follows:
6.1 EXISTENCE; GOOD STANDING; CORPORATE AUTHORITY; COMPLIANCE WITH LAW.
Each of the Parent and the Merger Sub is a corporation duly incorporated,
validly existing and in good standing under the laws of its jurisdiction of
incorporation. The Parent is duly licensed or qualified to do business as a
foreign corporation and is in good standing under the laws of any other state of
the United States in which the character of the properties owned or leased by it
or in which the transaction of its business makes such qualification necessary,
except where the failure to be so qualified or to be in good standing would not
have a material adverse effect on the business, results of operations or
financial condition of Parent and its Subsidiaries taken as a whole (a "Parent
Material Adverse Effect"). Parent has all requisite corporate power and
authority to own, operate and lease its
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properties and carry on its business as now conducted. Each of Parent's
Significant Subsidiaries is a corporation or partnership duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation or organization, has the corporate or partnership power and
authority to own its properties and to carry on its business as it is now
being conducted, and is duly qualified to do business and is in good standing
in each jurisdiction in which the ownership of its property or the conduct of
its business requires such qualification, except for jurisdictions in which
such failure to be so qualified or to be in good standing would not have a
Parent Material Adverse Effect. Neither Parent nor any Parent Subsidiary is
in violation of any order of any court, governmental authority or arbitration
board or tribunal, or any law, ordinance, governmental rule or regulation to
which Parent or any of its Subsidiaries or any of their respective properties
or assets is subject, where such violation would have a Parent Material
Adverse Effect. Parent and its Subsidiaries have obtained all licenses,
permits and other authorizations and have taken all actions required by
applicable law or governmental regulations in connection with their business
as now conducted, where the failure to obtain any such item or to take any
such action would have a Parent Material Adverse Effect. The copies of
Parent's Certificate of Incorporation and Bylaws previously delivered to
Company are true and correct.
6.2 AUTHORIZATION, VALIDITY AND EFFECT OF AGREEMENTS. Each of Parent and
Merger Sub has the requisite corporate power and authority to execute and
deliver this Agreement and all agreements and documents contemplated hereby.
The consummation by Parent and Merger Sub of the transactions contemplated
hereby has been duly authorized by all requisite corporate action. This
Agreement constitutes, and all agreements and documents contemplated hereby
(when executed and delivered pursuant hereto for value received) will constitute
the valid and legally binding obligations of Parent and Merger Sub enforceable
in accordance with their respective terms, subject to applicable bankruptcy,
insolvency, moratorium or other similar laws relating to creditors' rights and
general principles of equity.
6.3 CAPITALIZATION. The authorized capital stock of Parent consists of
40,000,000 shares of Parent Common Stock, $0.01 par value, and 5,000,000 shares
of preferred stock, $0.01 par value (the "Parent Preferred Stock"). As of April
11, 1997, there were 21,040,168 shares of Parent Common Stock, and no shares of
Parent Preferred Stock, issued and outstanding. Since such date, no additional
shares of capital stock of Parent have been issued except pursuant to the
exercise of options outstanding under Parent's stock option and employee stock
purchase plans (the "Parent Stock Option Plans"). Parent has no outstanding
bonds, debentures, notes or other obligations the holders of which have the
right to vote (or which are convertible into or exercisable for
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securities having the right to vote) with the stockholders of Parent on any
matter. All such issued and outstanding shares of Parent Common Stock are
duly authorized, validly issued, fully paid, nonassessable and free of
preemptive rights. Except as contemplated by this Agreement, there are not,
at the date of this Agreement, any existing options, warrants, calls,
subscriptions, convertible securities, or other rights, agreements or
commitments which obligate Parent or any of its Subsidiaries to issue,
transfer or sell any shares of capital stock of Parent or any of its
Subsidiaries.
6.4 SUBSIDIARIES.
(a) Parent owns directly or indirectly each of the outstanding shares of
capital stock of each of Parent's Subsidiaries (or other ownership interests
having by their terms ordinary voting power to elect a majority of directors or
others performing similar functions with respect to such Parent Subsidiary).
Each of the outstanding shares of capital stock of each of Parent's Subsidiaries
is duly authorized, validly issued, fully paid and nonassessable, and is owned,
directly or indirectly, by Parent free and clear of all liens, pledges, security
interests, claims or other encumbrances other than liens imposed by local law
which are not material. The following information for each Subsidiary of Parent
has been previously provided to Company, if applicable: (i) its name and
jurisdiction of incorporation or organization; (ii) its authorized capital stock
or share capital; and (iii) the number of issued and outstanding shares of
capital stock or share capital.
(b) The authorized capital stock of Merger Sub consists of 100,000 shares
of Common Stock, $0.01 par value, 1,000 of which shares are issued and
outstanding and owned by Parent. Notwithstanding any provisions to the
contrary, Parent may, in its sole discretion, increase the number of shares of
authorized Common Stock of Merger Sub and the number of shares of Common Stock
of Merger Sub issued and outstanding owned by Parent. Merger Sub has not
engaged in any activities other than in connection with the transactions
contemplated by this Agreement.
6.5 OTHER INTERESTS. Except for interests in the Parent Subsidiaries,
neither Parent nor any Parent Subsidiary owns, directly or indirectly, any
interest or investment (whether equity or debt) in any corporation, partnership,
joint venture, business, trust or entity, other than investments in short-term
investment securities.
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6.6 NO VIOLATION. Neither the execution and delivery by Parent and Merger
Sub of this Agreement, nor the consummation by Parent and Merger Sub of the
transactions contemplated hereby in accordance with the terms hereof, will: (i)
conflict with or result in a breach of any provisions of the Certificate of
Incorporation or Bylaws of Parent or Merger Sub; (ii) result in a breach or
violation of, a default under, or the triggering of any payment or other
material obligations pursuant to, or accelerate vesting under, any of the Parent
Stock Option Plans, or any grant or award under any of the foregoing; (iii)
violate, conflict with, result in a breach, of any provision of, constitute a
default (or an event which, with notice or lapse of time or both, would
constitute a default) under, result in the termination or in a right of
termination or cancellation of, accelerate the performance required by, result
in the triggering of any payment or other material obligations pursuant to,
result in the creation of any lien, security interest, charge or encumbrance
upon any of the material properties of Parent or its Subsidiaries under, or
result in being declared void, voidable, or without further binding effect, any
of the terms, conditions or provisions of any note, bond, mortgage, indenture,
deed of trust or any material license, franchise, permit, lease, contract,
agreement or other instrument, commitment or obligation to which Parent or any
of its Subsidiaries is a party, or by which Parent or any of its Subsidiaries or
any of their respective properties is bound or affected, except for any of the
foregoing matters which would not have a Parent Material Adverse Effect; or (iv)
other than the Regulatory Filings, require any material consent, approval or
authorization of, or declaration, filing or registration with, any domestic
governmental or regulatory authority, the failure to obtain or make which would
have a Parent Material Adverse Effect.
6.7 SEC DOCUMENTS. The Parent has filed in a timely manner 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, 1995 (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 Parent 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
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as reflected in the SEC Reports, the Parent 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 Parent does not have any knowledge of any basis
for the existence of or the assertion against the Parent of any such
liability, obligation or claim as of such date. The income of the Parent
as reflected in the SEC Reports consists solely of ordinary operating profits
and none of such income consists of (i) income from a source other than
operations of the business of the Parent and its Subsidiaries or (ii) a
transaction outside the ordinary course of business of the Parent (whether or
not such transaction would otherwise be considered extraordinary under GAAP).
6.8 ABSENCE OF CERTAIN CHANGES. Except as disclosed in the SEC Reports,
since December 31, 1996, the Parent has conducted its business in the ordinary
and usual course in all material respects and there has not been any material
adverse change in the financial condition, properties, business, results of
operations or prospects of the Parent. Except as set forth on Schedule 6.8
attached hereto, since December 31, 1996, there has not been:
(i) any material adverse change in the business, properties,
assets of the Parent;
(ii) any damages, destruction or loss, whether covered by insurance
or not, which has had, or might be expected to have, a material adverse
effect on the Parent;
(iii) any material change by the Parent in accounting methods or
principles which would be required to be disclosed under GAAP;
(iv) other than in connection with the exercise of stock options,
any issuance by the Parent or any of them of any shares of capital stock;
(v) any sale, lease or other disposition of properties and assets
of the Parent, except in the ordinary course of business;
(vi) any merger or consolidation of the Parent with any other
corporation, partnership, limited liability company, person or entity or
any acquisition by the Parent of the stock or business of another
corporation, partnership, limited liability company or other entity;
(vii) any borrowing, or agreement to borrow funds, by the Parent or
any termination or material amendment of any evidence of indebtedness,
contract, agreement, deed, mortgage,
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lease, license or other instrument, commitment or agreement to which the
Parent is bound or by which its properties are bound is material to the
business, condition (financial or otherwise), results of operation or
prospects of the Parent and its Subsidiaries taken as a whole;
(viii) any declaration or payment of any dividend on, or any other
distribution with respect to, the equity securities of the Parent;
(ix) any material increase in the compensation payable or to become
payable by the Parent to the directors, officers or employees of the Parent,
or any increase in benefits or benefit plan costs (other than costs outside
of the control of the Parent), or any increase in any bonus, insurance,
pension, compensation or other benefit plan made for or with or covering any
directors, officers or directors;
(x) any reclassification of any asset or liability;
(xi) any material amendment, modification, or termination of any
contract, agreement, plan or commitment;
(xii) any mortgage, pledge, grant of any lien or security interest
or other encumbrance of any asset of the Parent;
(xiii) any waiver or release of any right or claim of the Parent
that singly, or in the aggregate, is material to the business, assets,
condition (financial or otherwise), results of operation or prospects of
the Parent and its Subsidiaries taken as a whole;
(xiv) any significant labor trouble or any damage, destruction or
loss of property by fire or other casualty, whether or not covered by
insurance, adversely affecting the property, assets, condition (financial
or otherwise), prospects of the Parent and its Subsidiaries taken as a
whole or any related property;
(xv) removal, from any building, facility or real property of any
of the assets of the Parent or its Subsidiaries; or
(xvii) any contract, understanding or commitment to do any of the
foregoing.
6.9 LITIGATION. There are no actions, suits or proceedings pending
against Parent or the Parent Subsidiaries or, to the actual knowledge of the
executive officers of Parent, threatened against Parent or the Parent
Subsidiaries, at law or in equity, or before or by any federal or state
commission, board, bureau, agency or
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instrumentality, that are reasonably likely to have a Parent Material Adverse
Effect.
6.10 TAXES. Parent and each of its Subsidiaries (i) have timely filed
all material federal, state and foreign tax returns required to be filed by
any of them for tax years ended prior to the date of this Agreement or
requests for extensions have been timely filed and any such request shall
have been granted and not expired, and all such returns are complete in all
material respects, (ii) have paid or accrued all taxes shown to be due and
payable on such returns, (iii) have properly accrued all such taxes for such
periods subsequent to the periods covered by such returns, and (iv) have
"open" years for federal income tax returns only as set forth in the Schedule
6.10 attached hereto.
6.11 COMPLIANCE WITH LAWS. The Parent 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 Parent and its Subsidiaries taken as a
whole.
6.12 CONTRACTS, AGREEMENTS, PLANS AND COMMITMENTS. Schedule 6.12 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 Parent or its Subsidiaries
are a party or by which the Parent, its Subsidiaries or any of their assets
or properties are bound as of the date hereof (the "Contracts"). For the
purposes of this Section 6.12, a contract shall be considered material if
such contract or any series of similar contracts involving the same subject
matter involves $100,000 or more in services to be rendered or obligations
during any twelve month period. Also set forth on Schedule 6.12 is a list of
all agreements for the provision of compression services by the Parent
identifying the horsepower or type of equipment being leased, the amount of
the rental for such contract and the term of such contract, provided, however
that until the Customer Disclosure Date, such schedule will not include any
information concerning the location of such equipment or the identity of the
customer of the Parent with respect to such contract. The Parent and its
Subsidiaries 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 Parent and
its Subsidiary and to best knowledge of the Parent of each other Person that
is a party thereto enforceable against each party in accordance with their
terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the rights
of creditors generally and by general equitable principles (whether or not
such enforceability is considered in a proceeding at law or in equity). To
the best of the Parent's
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knowledge, the Contracts 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 conducted.
6.13 EMPLOYEE BENEFIT MATTERS.
(i) Schedule 6.13 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 "Parent Plan") by the
Parent, 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 Code of
which the Parent or any of the Subsidiaries is a member.
(ii) The Parent has delivered to the Company current, accurate and
complete copies of each Parent 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 Parent Plan; (b) Form 5500; (c) attorneys' response to an
auditor's request for information for any Parent 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 Parent Plan.
(iii) With respect to each Parent Plan: (a) each Parent 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 Parent 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).
(iv) Neither the Parent nor any 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.
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(v) With respect to any Parent Plan which is an employee welfare
benefit plan (within the meaning of ERISA Section 3(1)): (a) each and every
Parent 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 Parent Plan (including any
Parent Plan covering former employees of the Parent) may be amended or
terminated by the Parent or any Subsidiary on or at any time after the
Closing Date.
(vi) Neither the Parent nor any Subsidiary maintains any post-
retirement health and life insurance plans for employees and retirees.
6.14 ENVIRONMENTAL COMPLIANCE. Except as set forth on Schedule 6.14
attached hereto:
(1) The Parent and each of its Subsidiaries 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 Parent or any of its Subsidiaries
in the manner now conducted or which would interfere in any material
respect with the Parent's or any of its Subsidiaries' compliance with
Environmental Laws or constitute a violation thereof.
(2) Neither the Parent nor any of its Subsidiaries has leased,
operated or owned any facilities or real property with respect to which
the Parent or such Subsidiary is subject to any actual or, to the knowledge
of the Parent, after due inquiry, potential action, claim, investigation,
review or other proceeding before any governmental, judicial or regulatory
body, under any Environmental Law.
(3) Except as discussed in Schedule 6.14, neither the Parent nor
any of its Subsidiaries has sent Hazardous Substances to any offsite
commercial waste management facilities for reuse, recycling, reclamation,
treatment, storage or disposal.
(4) Neither the Parent nor any of its Subsidiaries is subject to any
actual, or, to the knowledge of the Parent, after due inquiry, potential
proceeding under any Environmental Law with respect to any such facility
presently or previously used by the Company, or any of its Subsidiaries.
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(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 Parent or any or its
Subsidiaries.
(6) No property currently, or in the past, leased operated or owned
by the Parent or any of its Subsidiaries is subject to actual or, to the
knowledge of the Parent, 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 above-ground or underground storage tanks located
on any property owned or leased by the Parent or any Subsidiary.
6.15 INSURANCE. Schedule 6.15 attached hereto sets forth a list of all
insurance policies of the Parent by which the Parent, its Subsidiaries or any of
their assets or properties have been covered for the last three (3) years and
those policies which are now in full force and effect. The Parent agrees to use
its best efforts to maintain the existing policies (which are presently in
force) in full force and effect at all times from the date of this Agreement
until the Closing Date. The insurance policies set forth on Schedule 6.15
attached hereto provide insurance against the risks involved in the operation of
the business of the Parent and its Subsidiaries which are standard in the
industry. Neither the Parent nor any or its Subsidiaries have received notice
from any insurance carrier of the intention of such carrier to discontinue any
insurance coverage afforded to the Parent or any of its Subsidiaries.
6.16 PATENTS, TRADEMARKS AND COPYRIGHTS. Schedule 6.16 attached hereto
includes a true and complete list and description of all Intellectual Property
applied for, issued to, or owned or used by Parent or any of its Subsidiaries or
under which any of the Parent or its Subsidiaries are licensed or franchised.
Each of the Parent and its Subsidiaries possess full rights, licenses or other
authority to use all such Intellectual Property. All licenses are in full force
and effect and constitute legal, valid and binding obligations of the parties
thereto, and there has not been any default or alleged default (or any event or
condition which with notice, lapse of time or both would become a default)
thereunder. Provided the consents described in Schedule 6.16 attached hereto
are obtained, the occurrence of the Closing will not affect the validity,
continuation or effectiveness of any such rights on their present terms. Each
of the Parent and its Subsidiaries own or hold adequate licenses or other rights
to use all Intellectual Property necessary for the conduct of their business as
it has been and is now conducted, and that use does not and will not conflict
with,
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infringe on or otherwise violate any rights of others. None of the Parent or
its Subsidiaries have received notice, or have knowledge of, any
infringements or unauthorized or unlawful use of such Intellectual Property
by themselves or others or any allegation that they have infringed similar
properties of others.
6.17 PERMITS. Schedule 6.17 attached hereto includes a true and complete
list of all material Permits or the Parent and its Subsidiaries (the "Parent
Permits"). The Parent Permits are in full force and effect and comprise all the
governmental authorizations necessary or desirable for the lawful conduct of the
Business as it has been and is now conducted.
6.18 PERSONNEL DATA; LABOR RELATIONS.
(i) Schedule 6.18 attached hereto is a list of all employees of the
Parent and its Subsidiaries, their current rates of compensation, their
length of service with the Parent or the applicable Subsidiaries, and a
complete and accurate description of all practices, policies, understandings
and agreements with such persons relating to their employment. All contracts
and arrangements with employees are in full force and effect, and neither
the Parent, any Subsidiary nor any other person is in default under either
of them. Each of the Parent and its Subsidiaries in the conduct of their
affairs and business have each complied in all material respects with all
applicable laws and regulations relating to the employment of labor
including those related to wages, hours, discrimination, employee pension
and welfare benefit plans, collective bargaining, and the payment of Social
Security or similar taxes, and each of the Parent and its Subsidiaries have
withheld and paid to the appropriate governmental authority, all amounts
required by law or agreement to be withheld from wages or salaries of such
employees. All increases in compensation during the eighteen month period
prior to the execution of this Agreement are described on Schedule 6.18.
(ii) There is no pending, or, to the Parent's knowledge, any
threatened labor dispute, strike or lockout, slow-down, stoppage, unfair
labor practice complaint, grievance procedure or arbitration proceeding
relating to the Parent or any of its Subsidiaries or affecting their
respective business. No representation question now exists respecting the
Parent or any of its Subsidiaries and no collective bargaining agreement is
currently being negotiated. Neither the Parent nor any of its Subsidiaries
have received any notification of any unfair labor practices charges or
complaints pending before any agent having jurisdiction over any of the
Parent or its Subsidiaries. The Parent is not aware of any union organizing
activities or proceedings involving, or act pending petition
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for the recognition of, a labor union or association as the exclusive
bargaining agent for any group or groups of employees of the Parent or any
of its Subsidiaries.
(iii) Attached hereto as Schedule 6.18(ii) are copies of all
Occupational Safety and Health Administration ("OSHA") reports having to do
with the Parent and each of its Subsidiaries, their operations or their
business and received by the Parent or any Subsidiary during the last
twelve months. No other oral or written complaints or notices have been
received from OSHA, and no other complaints, or notices have been received
from other regulatory agencies or offices having jurisdiction over the
Parent or any or its Subsidiaries during the last twelve month period.
6.19 PARENT COMMON STOCK. The issuance and delivery by Parent of shares
of Parent Common Stock in connection with the Merger and this Agreement have
been duly and validly authorized by all necessary corporate action on the part
of Parent. The shares of Parent Common Stock to be issued in connection with
the Merger and this Agreement, when issued in accordance with the terms of this
Agreement, will be validly issued, fully paid and nonassessable.
6.20 CONVERTIBLE SECURITIES. Parent has no outstanding options, warrants
or other securities exercisable for, or convertible into, shares of Parent
Common Stock, the terms of which would require any anti-dilution adjustments by
reason of the consummation of the transactions contemplated hereby.
6.21 NO BROKERS. Parent has not entered into any contract, arrangement or
understanding with any person or firm which may result in the obligation of
Company or Parent to pay any finder's fee, brokerage or agent's commissions or
other like payments in connection with the negotiations leading to this
Agreement or the consummation of the transactions contemplated hereby. Other
than the foregoing arrangements, neither the Parent nor the Surviving
Corporation are aware of any claim for payment of any finder's fees, brokerage
or agent's commissions or other like payments in connection with the
negotiations leading to this Agreement or the consummation of the transactions
contemplated hereby.
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6.22 MERGER REPRESENTATIONS.
(a) Prior to the Closing, the Parent will be in control of the
Merger Corporation within the meaning of Section 368(c)(1) of the Code.
(b) The Parent has no plan or intention to reacquire any of its
capital stock issued in connection with the Merger.
(c) The Parent has no plan or intention to liquidate the Surviving
Corporation; to merge the Surviving Corporation with and into another
corporation; to sell or otherwise dispose of the capital stock of the
Surviving Corporation; or to cause the Surviving Corporation to sell or
otherwise dispose of any of the assets of the Company acquired in connection
with the Merger, except for dispositions made in the ordinary course of
business or transfers described in Section 368(a)(2)(C) of the Code.
(d) Neither the Parent nor the Surviving Corporation is an
investment company as defined in Section 368(a)(2)(F)(iii) and (iv) of the
Code.
6.23 CUSTOMERS AND SUPPLIERS. Except for matters that would not have a
Parent Material Adverse Effect, no supplier or customer of the Parent has
advised the Parent formally or informally, that such customer or supplier
intends to terminate, discontinue or substantially reduce its business with the
Parent and the occurrence of the Closing is not expected to adversely affect
such relationship.
6.24 IMPROPER PAYMENTS. Neither the Parent, the Merger Sub nor any
officer, agent or employee of the Parent or the Merger Sub nor any distributor
or licensee of any of the foregoing, nor any other Person (including, without
limitation, any affiliate of the Parent) acting on behalf of the Parent, in any
case for which such action may be attributable to the Parent has directly or
indirectly, on behalf of or with respect to the Parent, except as listed on
Schedule 6.24 attached hereto, (i) made any illegal or unlawful political
contributions, (ii) made any payment which was not legal to make or which the
Parent should have known was not legal for the payee to receive, (iii) received
any payment which was not legal to receive or which the Parent should have known
was not legal for the payor to make, (iv) had any material transaction or
payment which is not properly booked in accordance with GAAP, (v) had any off-
book bank or cash accounts or "slush funds" of which the Parent was the
beneficial owner, or (vi) given or agreed to give any material gift to any
customer, supplier, government employee or other Person which (a) if not given
in the past, might have had a Parent Material Adverse Effect or (b) if not
continued in the future, might adversely affect the assets, business, sales,
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properties, condition (financial or otherwise) or prospects of the Parent.
6.25 COMPLETENESS OF SCHEDULES AND EXHIBITS; FULL DISCLOSURE. The
schedules and exhibits attached hereto, where provided by or on behalf of the
Merger Sub or the Parent present in all material respects the information
required by this Agreement to be set forth therein. No representation or
warranty by the Parent or the Merger Sub herein and no information disclosed in
the schedules and exhibits hereto supplied by the Purchase or the Parent
contains any untrue statement of a material fact or omits to state a material
fact necessary to make the statements contained herein or therein not
misleading.
ARTICLE 7
7.1 COVENANTS OF THE COMPANY AND THE SHAREHOLDER. The Company and the
Shareholder, on a joint and several basis, covenant and agree with the Merger
Sub and the Parent as follows:
(A) CERTAIN CHANGES. Except as expressly may be permitted or contemplated
hereunder, or set forth in the schedules attached hereto, the Company covenants
that, from the date hereof until the Closing Date, without first obtaining the
written consent of the Merger Sub, the Company will not and the Shareholder
shall not cause the Companies to:
(i) make any material change in the conduct of its business or
operations;
(ii) engage in any activity or transaction outside the ordinary course
of business;
(iii) terminate, amend, modify or change any Scheduled Contract, Lease
or agreement required to be disclosed pursuant to Sections 5.11 or 5.15
other than in the ordinary course of business;
(iv) declare, set aside or pay any dividends, or make any
distributions, in respect to its equity securities, or repurchase, redeem or
otherwise acquire any such securities;
(v) merge into or with or consolidate with any other person or acquire
all or substantially all of the business or assets of any other Person;
(vi) make any change in its articles of incorporation or bylaws or
equivalent governing instruments;
(vii) purchase any securities of any Person;
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(viii) increase or decrease the indebtedness of the Companies (or any
of them) or their affiliates except for indebtedness incurred in the
ordinary course of business consistent with prior practices;
(ix) other than pursuant to existing contracts or commitments, sell,
lease or otherwise dispose of any of the Property, other than in the
ordinary and usual course of business;
(x) grant any increase in compensation or pay or agree to pay or
accrue any bonus or like benefit to or for the benefit of any director,
officer, employee or other Person, provided that the Company may continue
to pay its field personnel bonuses in accordance with the Company's past
practices;
(xi) file any motion, order, brief, settlement offer or other papers in
any proceedings;
(xii) enter into any single agreement or agreements of similar nature
with the same party or its affiliates other than in the ordinary course of
business or which involves capital expenditure of $200,000 for any one
transaction or $500,000 in the aggregate; or
(xiv) commit itself to do any of the foregoing.
(B) OPERATION OF BUSINESS. The Company and the Shareholder covenant and
agree with the Merger Sub and the Parent that from the date hereof until the
Closing Date, except as permitted hereunder or contemplated hereunder or as
consented to in writing by Merger Sub, the Companies shall carry on their
respective business in the usual and ordinary course and shall use reasonable
commercial efforts to preserve and maintain their business organization,
employees and advantageous business relationships.
(C) ACCESS. Subject to the terms of that certain Confidentiality
Agreement dated April 28, 1997 (the "Confidentiality Agreement"), the Company
will afford to the Merger Sub, the Parent and their authorized representatives
access from the date hereof until the Closing Date, during normal business
hours, to the Company's personnel, agents and representatives, property, books
and records and will cause the Companies to furnish to the Merger Sub and the
Parent any and all information as such Party may request. The Company will
cooperate with the Merger Sub's accountants who will be conducting and auditing
of historical financial information of the Company and the Companies. The
Merger Sub shall have the right, at its sole cost, to conduct soil borings and
tests to determine the geologic subsurface and any possible existence of toxic
and hazardous materials on, about or
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under the Real Property and, subject to the consent of the applicable
landowner, any Property leased by the Company. The Merger Sub intends to
conduct and the Company and the Shareholder shall permit the Merger Sub or
its representative to conduct a Phase I Environmental Assessment of the Real
Property and, subject to the consent of the applicable landowner, the other
property leased by the Companies on or before the Closing Date and if such
Phase I Environmental Assessment indicates any potential problems, then the
Merger Sub may conduct further tests and the Company and the Shareholders
shall permit the Merger Sub to conduct such assessments.
(D) REASONABLE COMMERCIAL EFFORTS. The Company and the Shareholder will
use reasonable commercial efforts to obtain the satisfaction of the conditions
to the Closing set forth in Section 8.1 hereof. In addition, the Shareholder
agrees (i) to use reasonable commercial efforts to cause the shareholders of the
Company to approve the transactions contemplated by this Agreement on or before
the Schedule Delivery Date and (ii) to vote in favor of the transactions
contemplated hereby. Notwithstanding anything herein to the contrary, however
nothing in this Agreement shall limit the right of the Company or the
Shareholder to terminate this Agreement in accordance with Section 1.5 or the
applicable provisions of Section 9.1.
(E) PUBLIC ANNOUNCEMENTS. Subject to applicable securities law or stock
exchange requirements, at all times until the Closing Date, the Company and the
Shareholder shall promptly advise, and obtain the approval of the Merger Sub
before issuing or permitting any of the Company's directors, officers, employees
or agents, or any of the Company's subsidiaries, to issue any press release with
respect to this Agreement or the transactions contemplated hereby.
(F) NOTICE. The Company and the Shareholder shall each give written
notice to the Merger Sub and the Parent promptly after the Company and the
Shareholder obtain knowledge of the occurrence, or promptly after receipt by the
Company, the Shareholder or any of their respective affiliates of any notice
claiming or alleging the occurrence of any event or omission which would result
in (i) any of the Company's or the Shareholder's representations or warranties
being or becoming inaccurate or misleading or (ii) any breach by the Company or
the Shareholder of this Agreement.
(G) EXCLUSIVITY. During the term of this Agreement neither the Company
nor the Shareholder shall solicit, entertain or negotiate with respect to any
offer to acquire the Company, its assets or the securities or ownership interest
of the Company from any other person. During the term of this Agreement,
neither the Company nor the Shareholder shall provide information to any other
person in connection with a possible acquisition of the Company, any asset of
the Company or the securities or ownership interest of
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the Company. Immediately upon receipt of any such unsolicited offer, the
Company and/or the Shareholder will communicate the terms of any proposal or
request for information and the identity of parties involved.
(H) REORGANIZATION. The Shareholder and the Company agree to take
positions consistent with, and report the Merger, as a tax free reorganization
pursuant to Code Sections 368(a)(1)(A) and 368(a)(2)(D) in all tax returns to
federal, state and local jurisdictions. The Shareholder further agrees not
to take any positions inconsistent with Code Sections 368(a)(1)(A) and
368(a)(2)(D) in any tax return to federal, state or local tax jurisdictions.
The Company Shareholders will not dispose of any Parent Common Stock received
in the Merger in a manner which would cause the Merger to violate the continuity
of shareholder interest requirement set forth in Treasury Regulation Section
1.368-1. The Company Shareholders will take no action which will cause the
Merger to fail to qualify as a tax-free reorganization under Code Sections
368(a)(1)(A) and 368(a)(2)(D). The Shareholder shall report all compensation
under the Shareholder Employment Contract as wages in all tax returns to
federal, state and local jurisdictions. The Shareholder shall report all
payments under the Farm Lease as rental income in all tax returns to federal,
state and local jurisdictions.
(I) LEASE FOR FARM PROPERTY. On or prior to the Closing, the Company has
or will distribute or transfer to the Shareholder the Company's interest in
approximately 1300 acres of farm land (the "Farm Property"). The Merger Sub
shall enter into a lease agreement for a the Farm Property on the terms set
forth on Exhibit H attached hereto (the "Farm Lease").
(J) PARENT COMMON STOCK OWNERSHIP. For a two year period following the
Closing Date the Shareholder shall not dispose of any shares of Parent Common
Stock received in the Merger without the prior consent of the board of directors
of the Parent.
7.2 COVENANTS OF THE MERGER SUB. The Merger Sub and the Parent, on a
joint and several basis, covenant and agree with the Companies and the
Shareholder as follows:
(A) CERTAIN CHANGES. Except as expressly may be permitted hereunder, or
set forth in the schedules attached hereto, the Company covenants that, from
the date hereof until the Closing Date, without first obtaining the written
consent of the Shareholder, the Parent will not:
(i) make any material change in the conduct of its business or
operations;
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(ii) engage in any activity or transaction outside the ordinary
course of business;
(iii) terminate, amend, modify or change any Scheduled Contract,
Lease or agreement required to be disclosed pursuant to this Agreement;
(iv) declare, set aside or pay any dividends, or make any
distributions, in respect to its equity securities, or repurchase, redeem
or otherwise acquire any such securities;
(v) merge into or with or consolidate with any other person or
acquire all or substantially all of the business or assets of any other
Person;
(vi) make any change in its articles of incorporation or bylaws or
equivalent governing instruments;
(vii) purchase any securities of any Person;
(viii) increase or decrease the indebtedness of the Parent or its
Subsidiaries except for indebtedness incurred in the ordinary course of
business consistent with prior practices;
(ix) other than pursuant to existing contracts or commitments, sell,
lease or otherwise dispose of any of the Property, other than in the
ordinary and usual course of business;
(x) grant any increase in compensation or pay or agree to pay or accrue
any bonus or like benefit to or for the benefit of any director, officer,
employee or other Person;
(xi) file any motion, order, brief, settlement offer or other papers in
any proceedings;
(xii) enter into any single agreement or agreements of similar nature
with the same party or its affiliates other than in the ordinary course of
business or which involves capital expenditure of $200,000 for any one
transaction or $500,000 in the aggregate; or
(xiv) commit itself to do any of the foregoing.
(B) OPERATION OF BUSINESS. The Parent covenants and agrees with the
Company and the Shareholder that from the date hereof until the Closing Date,
except as permitted hereunder or contemplated hereunder or as consented to in
writing by the Shareholder, the Parent and its Subsidiaries shall carry on their
respective business in the usual and ordinary course and shall use
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their best efforts to preserve and maintain their business organization,
employees and advantageous business relationships.
(C) ACCESS. Subject to the term of that certain Confidentiality
Agreement, the Parent will afford to the Company, the Shareholder and their
authorized representatives access from the date hereof until the Closing Date,
during normal business hours, to the Parent's personnel, agents and
representatives, property, books and records and will cause the Parent's
Subsidiaries to furnish to the Company and the Shareholder any and all
information as such Party may request.
(D) REASONABLE COMMERCIAL EFFORTS. The Merger Sub and the Parent will
each use reasonable commercial efforts to obtain the satisfaction of the
conditions to the Closing set forth in Section 8.2.
(E) PRESERVATION OF BOOKS AND RECORDS. For a period of five (5) years
after the Closing Date, the Merger Sub shall (1) preserve and retain the
corporate, accounting, legal, auditing and other books and records of the
Companies relating to any governmental or non-governmental actions, suits,
proceedings, or investigations arising out of the conduct of the business and
operations of the Companies prior to the Closing Date in which the Companies and
the Shareholder are a party, and (2) make such books and records available at
the then current administrative headquarters of Merger Sub to the Companies, the
Shareholder and their officers, employees and agents, upon reasonable notice and
at reasonable times, at such parties sole risk and cost. The Companies and the
Shareholder shall be entitled to make copies of any such books and records as
that shall deem necessary at their sole cost and expense. The Merger Sub agrees
to permit representatives of the Companies or the Shareholder to meet with
employees of the Merger Sub on a mutually convenient basis in order to enable
the Companies or the Shareholder to obtain additional information and
explanations of any materials provided pursuant to this Section 7.2(E). If any
such records are to be destroyed by the Purchaser or the Parent after the
aforementioned three year period, the Purchaser or the Parent, as the case may
be, shall first offer such records to the Shareholder and shall return the same
to him should he so desire.
(F) PUBLIC ANNOUNCEMENTS. Subject to applicable securities law or stock
exchange requirements, at all times until the Closing Date, the Merger Sub shall
promptly advise, and obtain the approval of the Companies before issuing, or
permitting any of the Merger Sub's directors, officers, employees or agents, or
any of the Merger Sub's subsidiaries, to issue any press release with respect to
this Agreement or the transactions contemplated hereby.
(G) CONFIDENTIAL INFORMATION. In the event that the Agreement is
terminated or, if not terminated, until the Closing
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Date, the confidentiality of any data or information received by Merger Sub
regarding the business and assets of the Companies shall be maintained by
Merger Sub and their representatives in accordance with the Confidentiality
Agreement, provided, however, that nothing in this Section 7.2(G) shall
prohibit the Merger Sub from making any press release or filings required, in
the opinion of the Merger Sub, under the securities laws with respect to the
transactions contemplated in the Agreement.
(H) CONDUCT OF BUSINESS. The Parent and the Merger Sub are currently
engaged only in the businesses disclosed in its current SEC Reports and have no
intentions to engage in any different lines. For a period ending at the earlier
of (a) four (4) years from the Closing Date, or (b) such time that the
Shareholder (including his ex-spouse and his children) owns less than fifteen
per cent (15%) of the Parent Common Stock, Parent agrees not to enter any new
line of business outside the compression services business and any business
reasonably related thereto or to expand through a substantial investment or
series of investments the domestic oil and gas exploration business of the
Parent, as described in the Parent's most recent 10-K annual report, without the
written prior approval of the Shareholder, which approval will not be
unreasonably withheld.
(I) EMPLOYEE BENEFITS. On the Closing Date, the Merger Sub shall offer
employment to each of the current employees of the Companies on the same terms
as such employees are currently being employed and as disclosed to Merger Sub
and the Parent herein, however, all such employees will remain "at will"
employees and the Merger Sub shall be under no obligation to either continue
such employment or to offer any such employees any sort of employment agreement.
The Merger Sub shall continue generally the employee benefits of such employees
for a reasonable period following the Closing. To the extent permitted by
applicable law, each employee of any of the Companies shall be given credit for
all service with any of the Companies (or service credited by any of the
Companies) under all employment benefit plans, programs, policies and
arrangements maintained by the Surviving Corporation or the Parent in which they
participate or in which they become participants for purposes of eligibility,
vesting and benefit accrual including, without limitation, for the purposes of
determining (i) short-term and long-term disability benefits, (ii) severance
benefits, (iii) vacation benefits and (iv) benefits under any retirement plan.
(J) MERGER. Following the Closing, neither the Parent nor the Surviving
Corporation shall take any action or fail to take any action if such action of
failure to take such action would result in this transaction not qualifying as a
reorganization pursuant to Section 368(a)(1)(A) or 368(a)(2)(D) of the Code.
Without limiting the generality of the foregoing, the Surviving Corporation also
covenants and agrees as follows:
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(i) Following the Closing, the Surviving Corporation will not issue
shares of its capital stock that would result in the Parent losing control
of the Surviving Corporation within the meaning of Section 368(c)(1) of
the Code;
(ii) Following the closing, the Surviving Corporation will continue the
historic business of the Company or use a significant portion of the
Company's business assets in a business; and
(iii) No stock of the Surviving Corporation will be issued to the
Company, the Company Shareholders or any affiliate of either the Company or
the Shareholder in connection with the transactions contemplated hereby.
ARTICLE 8
8. CONDITIONS.
8.1 CONDITIONS TO THE OBLIGATIONS OF THE MERGER SUB AND THE PARENT. The
obligations of the Merger Sub and the Parent to proceed with the Closing are
subject to the satisfaction on or prior to the Closing Date of all of the
following conditions, any one or more of which may be waived in writing, in
whole or in part, by the Merger Sub and the Parent; provided, however, that no
such waiver of a condition shall constitute a waiver by the Merger Sub or the
Parent of any of their other rights or remedies, at law or in equity, if the
Companies (or any of them) or the Shareholder shall be in breach or default of
any of such Party's representations, warranties or covenants under or contained
in this Agreement:
(A) COMPLIANCE. The Company and the Shareholder shall each have
performed, satisfied and complied with their respective covenants and agreements
contained herein, each of their representations and warranties contained in
Article 12 hereof shall be true on and as though made on and as of the Closing
Date, and each of the conditions specified in this Agreement has been satisfied
on or before the Closing Date.
(B) OFFICERS' CERTIFICATE. The Merger Sub and the Parent shall have
received a certificate, dated the Closing Date from the chief executive officer
of each of the Companies and the Shareholder certifying that the matters
specified in Section 8.1(A) are correct.
(C) LEGAL OPINION. Merger Sub shall have received from the Company's
special counsel, Mayor, Day, Caldwell & Keeton and the Company's Louisiana
counsel Theus, Grisham, Davis & Leigh, an opinion dated the Closing Date in form
and substance satisfactory
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to the Parent and the Merger Sub opining as to the matters set forth on
Exhibit D attached hereto.
(D) NO ORDERS. The Closing shall not violate any order or decree of any
court or governmental body having competent jurisdiction over the transactions
contemplated by this Agreement.
(E) SECRETARY'S CLOSING CERTIFICATE. The Merger Sub and the Parent shall
have received a certificate dated the Closing Date in form and substance
reasonably satisfactory to the Merger Sub from the Secretary or Assistant
Secretary of the Company, certifying that (i) attached to such certificate are
true, correct and complete copies of the resolutions duly adopted by the Board
of Directors of the Company authorizing the transactions contemplated by this
Agreement which remain in full force and effect, (ii) attached to such
certificate are true, correct and complete copies of the certificates or
articles of incorporation, bylaws, or equivalent governing instrument, each as
amended to the Closing Date, of the Company, (iii) attached to such certificate
is a true and correct copy of the shareholders resolutions of the Company
approving and consenting to the transactions contemplated by this Agreement, and
(iv) the incumbency of each officer executing this Agreement and all documents
and instruments executed in connection thereof.
(F) ABSENCE OF LITIGATION. No material proceeding pertaining to the
transactions contemplated by this Agreement or to their consummation, shall have
been instituted or threatened on or before the Closing Date.
(G) THIRD PARTY CONSENTS. All necessary agreements, consents and
approvals of any persons or entities to the consummation by the Company or the
Shareholder of the transactions contemplated by this Agreement, or otherwise
pertaining to the matters covered by this Agreement shall have been received by
the Merger Sub and the Parent and shall be in a form and substance reasonably
satisfactory to the Merger Sub and the Parent.
(H) LEGISLATION. No statute, rule, regulation or order shall have been
enacted, entered or deemed applicable by any domestic or foreign government or
governmental or administrative agency or court which would make the transactions
contemplated by this Agreement illegal or otherwise prevent the consummation
thereof.
(I) TERMINATION OF EXISTING LEASE. The existing leases for the Farm
Property and the Real Property shall have been terminated on terms reasonably
satisfactory to the Merger Sub. A new lease for the Farm Property shall have
been executed in the form of Exhibit E attached hereto.
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(J) EMPLOYMENT CONTRACT. The Shareholder shall have executed and
delivered to the Merger Sub the Employment Agreement with the Merger Sub in the
form of Exhibit "A" attached hereto (the "Shareholder Employment Agreement")
under which the Shareholder would become the chief operating officer of the
Parent as to compressor operations.
(K) OTHER EMPLOYMENT AGREEMENT. Andy Payne and Dan McCormick shall have
executed and delivered to the Merger Sub the Employment Agreements in the form
of Exhibit "B" and "C" attached hereto (the "Other Employment Agreements").
(L) MATERIAL ADVERSE CHANGE. There shall have been no material adverse
change in the property, plant, assets or prospects of the Companies (or any of
them), the Property, or the Business.
(M) BANK ACCOUNTS. At the Closing, control over all bank accounts, cash
management accounts, savings accounts or similar funds of Companies shall be
transferred to persons designated by Merger Sub in a manner satisfactory to
Merger Sub.
(N) ENVIRONMENTAL REVIEW REPORT. The Merger Sub shall have received, at
the Merger Sub's expense, an environmental review report from a Person
satisfactory to the Merger Sub as to the absence of any evidence of
noncompliance with any Environmental Laws that could materially affect the
Business or the Property.
(O) FINANCING. The Parent shall have the debt and equity necessary to
consummate the transactions contemplated by this Agreement.
(P) REGISTRATION RIGHTS AGREEMENT. The Sellers and the Shareholder and
the Shareholder shall have executed the Registrations Rights Agreement attached
hereto as Exhibit F (the "Registration Rights Agreement").
(R) ASSET PURCHASE AGREEMENT. The Asset Purchase Agreement shall not have
been terminated and all conditions to the consummation of the Asset Purchase
Agreement shall have been satisfied.
(S) INDEMNIFICATION AGREEMENT. The Shareholder, the Merger Sub and the
Parent, shall have executed the Indemnification Agreement attached hereto as
Exhibit G (the "Indemnification Agreement").
(T) SHAREHOLDER APPROVAL. The shareholders of the Company shall have
approved the Merger.
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(U) REORGANIZATION. The Merger shall qualify as a tax free reorganization
under Sections 368(a)(1)(A) or 368(a)(2)(D) of the Code.
8.2 CONDITIONS TO THE OBLIGATIONS OF THE COMPANY AND THE SHAREHOLDER. The
obligations of the Company and the Shareholder to proceed with the Closing are
subject to the satisfaction on or prior to the Closing Date of all of the
following conditions, any one or more of which may be waived in writing, in
whole or in part, by the Company and the Shareholder; provided, however, that no
such waiver of a condition shall constitute a waiver by the Company or the
Shareholder of any of their other rights or remedies, at law or in equity, if
the Merger Sub or the Parent shall be in breach or default of any of their
representations, warranties or covenants under or contained in this Agreement:
(A) COMPLIANCE. The Merger Sub and the Parent shall have each performed,
satisfied and complied their respective covenants and agreements contained
herein, their respective representations and warranties contained in Article 6
hereof shall be true on and as though made on and as of the Closing Date, and
each of the conditions specified in this Agreement has been satisfied on or
before the Closing Date.
(B) OFFICERS' CERTIFICATE. The Company shall have received a certificate,
dated the Closing Date, executed by an executive officer of each of the Parent
and the Merger Sub certifying as to the matters specified in Section 8.2(B)
hereof.
(C) LEGAL OPINION. The Company shall have received from Merger Sub's
counsel, Schlanger, Mills, Mayer & Grossberg, an opinion dated the Closing Date
in form and substance satisfactory to the Company, opining as to the matters set
forth Exhibit E attached hereto.
(D) NO ORDERS. The Closing shall not violate any order or decree of any
court or governmental body having competent jurisdiction over the transactions
contemplated by this Agreement.
(E) ACTIONS AND PROCEDURES. No meritorious actions, suit, proceeding or
investigation by or before any court, administrative agency or other
governmental authority shall have been initiated or threatened to restrain,
prohibit or invalidate any of the transactions contemplated by this Agreement.
(F) THE SHAREHOLDER EMPLOYMENT AGREEMENT AND THE OTHER EMPLOYMENT
AGREEMENTS. The Merger Sub shall have executed and delivered to the Shareholder
the Shareholder Employment Agreement and to Messrs. Payne and McCormick the
Other Employment Agreements.
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(G) BOARD SEATS. The Shareholder and Andy Payne shall have been elected
or appointed to the Board of Directors of the Parent.
(H) REGISTRATION RIGHTS AGREEMENT. The Parent shall have executed and
delivered the Registrations Rights Agreement.
(I) ASSET PURCHASE AGREEMENT. The Asset Purchase Agreement shall not have
been terminated and all conditions to the consummation of the Asset Purchase
Agreement shall have been satisfied.
(J) THE INDEMNIFICATION AGREEMENT. The Parent shall have executed and
delivered the Indemnification Agreement.
(K) SHAREHOLDER APPROVAL. The Shareholder of the Company shall have
approved the Merger.
(L) ABSENCE OF LITIGATION. No material proceeding pertaining to the
transactions contemplated by this Agreement or to their consummation, shall have
been instituted or threatened on or before the Closing Date.
(M) THIRD PARTY CONSENTS. All necessary agreements, consents and
approvals of any persons or entities to the consummation by the Sellers or the
Shareholder of the transactions contemplated by this Agreement, or otherwise
pertaining to the matters covered by this Agreement shall have been received by
the Merger Sub and the Parent and shall be in a form and substance reasonably
satisfactory to the Sellers and the Shareholder.
(N) REORGANIZATION. The Merger shall qualify as a tax free reorganization
under Sections 368(a)(1)(A) or 368(a)(2)(D) of the Code.
ARTICLE 9
9. TERMINATION.
9.1 GROUNDS FOR TERMINATION. This Agreement may be terminated at any time
prior to the Closing Date:
(A) By the mutual written agreement of the Sellers and the Merger Sub;
(B) By any Party hereto, if the Closing has not occurred prior to July
31, 1997;
(C) By any Party hereto, if the Merger Agreement shall have been
cancelled or terminated;
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(D) By any Party hereto, if all of the Exhibits to this Agreement have
not been finalized and agreed to by the Parties on or before the Schedule
Delivery Date;
(E) By the Company and the Shareholder, if the Company and the
Shareholder should be dissatisfied with any disclosures contained in the
schedules to be delivered by the Merger Sub and the Parent and the Company
or the Shareholder delivers the required notice under Section 1.5 within
five business days following the Schedule Delivery Date;
(F) By the Merger Sub and the Parent, if the Merger Sub and the Parent
should be dissatisfied with any disclosures contained in the schedules to be
delivered by the Sellers and the Shareholder and either the Parent or the
Merger Sub delivers the required notice under Section 1.5 within five
business days following the Schedule Delivery Date; or
(G) If the occurrence of the closing transactions would violate any
order, decree or judgment prohibiting the consummation of this Agreement.
9.2 EFFECT OF TERMINATION. The following provisions shall apply in the
event of a termination of this Agreement:
(A) If this Agreement is terminated by the Company or by the Merger
Sub as permitted under Section 9.1 hereof (including Sections 9.1(A), (E)
or (F)) and not as the result of the failure of any 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.
(B) If this Agreement is terminated after five business days following
the Schedule Delivery Date for any reason or reasons other than a breach by
the Company or the Shareholder of their obligations under this Agreement or
a refusal by the Merger Sub or the Parent to close by virtue of a decision
reasonably made and in good faith that some aspect of the business of the
Companies (i.e. financial, legal or business matters or the prospects of the
Companies) or related Companies or the Shareholder has led them to decide
not to proceed with the transactions contemplated hereby, then Merger Sub
and the Parent shall pay to the Companies, the Company and the Shareholder
the amount set forth in the Asset Purchase Agreement as liquidated damages
for the termination of this Agreement and the Asset Agreement. The Parties
acknowledge and agree that the amount of actual damages to be suffered by
the Companies, the Company and the Shareholder will be
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<PAGE>
difficult to estimate and that the amount set forth above is reasonable.
(C) If this Agreement is terminated as a result of the failure of the
Companies or the Shareholders to perform their obligations hereunder without
lawful justification, the Companies and the Shareholder, jointly and
severally, shall be fully liable for any and all damages sustained or
incurred by the Merger Sub or the Parent, subject to the terms of the
Indemnification Agreement.
ARTICLE 10
10. GENERAL PROVISIONS.
10.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. The
representations and warranties set forth in this Agreement other than the
representations and warranties of the Shareholder contained in Sections 5.2,
5.3, 5.4, 5.6. 5.10 and 5.23 shall survive the Closing until April 30, 1999.
The representations and warranties contained in Sections 5.2, 5.3, 5.4, 5.6.
5.10 and 5.23 shall survive the Closing until the expiration of the applicable
statute of limitations. All covenants and agreements and in any certificate or
instrument delivered in connection herewith shall survive the Closing; except
that the covenant to indemnify any Party hereunder by another Party hereunder
for a misstatement of, or omission from, any representation or warranty shall
survive until the expiration of the particular representation or warranty as to
which indemnification is claimed or sought (the "Representation Expiration
Date") and thereafter only with respect to those claims for indemnification for
a misstatement of, or omission from, any representation or warrant which are
made prior to the applicable Representation Expiration Date.
10.2 NOTICES. Any notice required to be given hereunder shall be
sufficient if in writing, and sent by facsimile transmission and by courier
service (with proof of service), hand delivery or certified or registered mail
(return receipt requested and first-class postage prepaid), addressed as
follows:
(A) If to the Parent or the Merger Sub:
Equity Compression Services Corporation
2501 Cedar Springs Road, Suite 600
Dallas, TX 75201
Attention: President
With copies to:
Ray C. Davis
Energy Transfer Company
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<PAGE>
2838 Woodside
Dallas, TX 75204
and
Schlanger, Mills, Mayer & Grossberg
5847 San Felipe, Suite 1700
Houston, Texas 77056
Attention: Kyle Longhofer
(B) If to Sellers or the Shareholder to:
Dennis W. Estis
Ouachita Energy Corp.
228 Industrial Street
West Monroe, LA 71292
With a copy to:
Mayor, Day, Caldwell & Keeton, LLP
700 Louisiana, Suite 1900
Houston, TX 77002
Attention: Ed Rogers
or to such other address as any party shall specify by written notice so given,
and such notice shall be deemed to have been delivered as of the date so
telecommunicated, personally delivered or mailed.
10.3 ASSIGNMENT, BINDING EFFECT. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties. Subject to the preceding sentence, this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and assigns. Nothing in this Agreement,
expressed or implied, is intended to confer on any person other than the parties
hereto, the shareholders of the Company, the officers, directors and employees
of the Company and other named beneficiaries of covenants or agreements in the
Agreement, or their respective heirs, successors, executors, administrators and
assigns any rights, remedies, obligations or liabilities under or by reason of
this Agreement.
10.4 ENTIRE AGREEMENT. This Agreement, the Exhibits, the Confidentiality
Agreement, the Asset Purchase Agreement, the Indemnification Agreement and any
schedules or agreements delivered in connection with this Agreement or the
consummation of the Merger constitute the entire agreement among the parties
with respect to the subject matter hereof and supersede all prior agreements and
understandings among the parties with respect thereto. No
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<PAGE>
information previously provided, addition to or modification of any provision
of this Agreement shall be binding upon any party hereto unless made in
writing and signed by all parties hereto.
10.5 AMENDMENT. This Agreement may be amended by the parties hereto, by
action taken by their respective Boards of Directors, at any time before or
after approval of matters presented in connection with the Merger by the
stockholders of Company and Parent, but after any such stockholder approval, no
amendment shall be made which by law requires the further approval of
stockholders without obtaining such further Approval. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties hereto.
10.6 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware without regard to its rules of
conflict of laws. Each of Company and Parent hereby irrevocably and
unconditionally consents to submit to the exclusive jurisdiction of the courts
of the State of Delaware and of the United States of America located in the
State of Delaware (the "Delaware Courts") for any litigation arising out of or
relating to this Agreement and the transactions contemplated hereby (and agrees
to commence any litigation relating thereto except in such courts), waive any
objection to the laying of venue of any such litigation in the Delaware Courts
and agrees not to plead or claim in any Delaware Court that such litigation
brought therein has been brought in an inconvenient forum.
10.7 COUNTERPARTS. This Agreement may be executed by the parties hereto in
separate counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute one and the same
instrument. Each counterpart may consist of a number of copies hereof each
signed by less than all, but together signed by all of the parties hereto.
10.8 HEADINGS. Headings of the Articles and Sections of this Agreement are
for the convenience of the parties only, and shall be given no substantive or
interpretive effect whatsoever.
10.9 INTERPRETATION. In this Agreement, unless the context otherwise
requires, words describing the singular number shall include the plural and vice
versa, and words denoting any gender shall include all genders and words
denoting natural persons shall include corporations and partnerships and vice
versa.
10.10 WAIVERS. Except as provided in this Agreement, no action taken
pursuant to this Agreement, including, without limitation, any investigation by
or on behalf of any Party, shall be deemed to constitute a waiver by the Party
taking such action of compliance with any representations, warranties, covenants
or
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<PAGE>
agreements contained in this Agreement. The waiver by any Party hereto of a
breach of any provision hereunder shall not operate or be construed as a waiver
of any prior or subsequent breach of the same or any other provision hereunder.
10.11 GENERAL INTERPRETIVE PRINCIPLES. For the purposes of this Agreement,
except as otherwise expressly provided or unless the context otherwise requires:
(a) the terms defined in this Agreement include the plural as well as the
singular, and the use of any gender herein shall be deemed to include
the other gender;
(b) accounting terms not otherwise defined herein shall have the meanings
assigned to them in accordance with GAAP;
(c) references herein to "Articles", "Sections", "Subsections",
"Paragraphs", and other subdivisions without reference to a document
are to be designated Sections, Subsections, Paragraphs and other
subdivisions of this Agreement;
(d) a reference to a Subsection without further reference to a Section is
a reference to such Subsection as contained in the same Section in
which the reference appears, and this rule shall also apply to
Paragraphs and other subdivisions;
(e) the words "herein", "hereof", "hereunder" and other words of similar
import refer to this Agreement as a whole and not to any particular
provision; and
(f) the term "include" or "including" shall mean without limitation by
reason of enumeration.
10.12 REPRODUCTION OF DOCUMENTS. This Agreement and all documents relating
thereto, including, without limitation, (a) consents, waivers and modifications
which may hereafter be executed, (b) documents received by any Party at the
Closing, and (c) financial statements, certificates and other information
previously or hereafter furnished, may be reproduced by any photographic,
photostatic, microfilm, micro-card, miniature photographic or other similar
process. The Parties agree that any such reproduction shall be admissible into
evidence as the original itself in any judicial or administrative proceedings
whether or not the original is in existence and whether or not such reproduction
was made by a Party in the regular course of business, and that any enlargement,
facsimile or further reproduction of such reproduction shall likewise be
admissible into evidence.
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<PAGE>
10.13 SEVERABILITY. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any Provision of
this Agreement is so broad as to be unenforceable, the provision shall be
interpreted to be only as broad as is enforceable.
10.14 ENFORCEMENT OF AGREEMENT. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement was
not performed in accordance with its specific terms or was otherwise breached.
It is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof in any Delaware Court, this being in addition to
any other remedy to which they are entitled at law or in equity.
10.15 SUBSIDIARIES. As used in this Agreement, the word "Subsidiary" when
used with respect to any Party means any corporation, partnership or other
organization, whether incorporated or unincorporated, of which such Party
directly or indirectly owns or controls at least a majority of the securities or
other interests having by their terms ordinary voting power to elect a majority
of the board of directors or others performing similar functions with respect to
such corporation or other organization, or any organization of which such Party
is a general partner. When a reference is made in this Agreement to Significant
Subsidiaries, the words "Significant Subsidiaries" shall refer to Subsidiaries
(as defined above) which constitute "significant subsidiaries" under Rule 405
promulgated by the SEC under the Securities Act.
10.16 CHANGES IN APPLICABLE LAW. Notwithstanding anything herein to the
contrary, if subsequent to the Closing, regulations are promulgated under
Section 368 of the Code such that as applicable to the Merger, continued
ownership of the Parent Common Stock issued in connection with Merger is not
required in order for the Merger to qualify as a reorganization under Section
368(a)(1)(A) and 368(a)(2)(D) of the Code, then the Parties hereby agree that
both the representations set forth in Section 5.10(a) and the covenant set forth
in the third sentence of Section 7.1(H) shall be automatically withdrawn and
shall be binding against the Shareholder. Notwithstanding anything herein to
the contrary, is subsequent to the execution of this Agreement, regulations are
promulgated under Section 368 of the Code such that as applicable to the Merger,
additional transfer of assets of the Company are permitted without causing the
Merger to fail to qualify under Section 368(a)(1)(A) and 368(a)(2)(D) of the
Code, then the Parties
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<PAGE>
hereby agree that the reference to "Section 368(a)(2)(C) of the Code" in
Section 5.22(C) shall be modified to read as "Section 368(a)(2)(C) of the
Code or Treasury Regulation Section 1.386-1(d)."
10.17 EXPENSES. Except as specifically provided herein, all legal and
other costs and expenses in connection with this Agreement and the transactions
contemplated hereby shall be paid by the Shareholder on one hand or the Parent,
as the case may be, depending upon which Party incurred such costs and expenses.
As set forth in the Asset Purchase Agreement and subject to the limitations set
forth therein, at the Closing and subject to the consummation of the
transactions contemplated by this Agreement and the Asset Purchase Agreement,
the Purchaser shall pay a portion of the Shareholder's expenses incurred in
connection with the transactions contemplated hereby and the transactions
contemplated by the Asset Purchase Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement and caused the
same to be duly delivered on their behalf on the day and year first written
above.
EQUITY COMPRESSION SERVICES CORPORATION
By:
---------------------------------
Name:
---------------------------------
Title:
---------------------------------
OEC ACQUISITION CORPORATION
By:
---------------------------------
Name:
---------------------------------
Title:
---------------------------------
OUACHITA ENERGY CORPORATION
By:
---------------------------------
Name:
---------------------------------
Title:
---------------------------------
---------------------------------------
DENNIS W ESTIS
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<PAGE>
FIRST AMENDMENT TO AGREEMENT AND PLAN OF MERGER
This FIRST AMENDMENT TO AGREEMENT AND PLAN OF MERGER (this "Amendment"),
dated as of this 30th day of July, 1997, is by and among EQUITY COMPRESSION
SERVICES CORPORATION, an Oklahoma corporation (the "Parent"), OEC ACQUISITION
CORPORATION, a Delaware corporation and a wholly owned subsidiary of Parent
(the "Merger Sub"), OUACHITA ENERGY CORPORATION, a Louisiana corporation (the
"Company") and DENNIS W. ESTIS (the "Shareholder"). The Parent, the Merger
Sub, the Company and the Shareholder are sometimes collectively referred to
herein as the "Parties" and individually as a "Party".
W I T N E S S E T H
WHEREAS, the Parties are parties to that certain Agreement and Plan of
Merger dated as of May 15, 1997 (the "Merger Agreement"); and
WHEREAS, the Parties now desire to amend the Merger Agreement as set
forth herein;
NOW, THEREFORE, in consideration of the premises and of the respective
representations, warranties, covenants, agreements and conditions contained
herein, the Parties, intending to be legally bound, hereto agree as follows:
1. DEFINED TERMS; CONTROLLING AGREEMENT.
1.01 DEFINED TERMS. Unless defined herein or unless the context clearly
indicates to the contrary, all defined or capitalized terms contained in the
Merger Agreement shall have the same meaning in this Amendment as in the
Merger Agreement.
1.02 CONTROLLING AGREEMENT. Unless specifically modified or amended
herein, the Merger Agreement shall remain in full force and effect. In the
event of any inconsistency between this Amendment and the Merger Agreement,
the terms of this Amendment shall control.
2. MODIFICATIONS TO THE MERGER AGREEMENT. The Parties agree that the
Closing Date shall be August 1, 1997 of such other date as the Parties shall
agree, and the outside date for the Closing set forth in Section 9.1(B) shall
be August 15, 1997.
3. MISCELLANEOUS.
3.01 EXCLUSIVE AGREEMENT. The Merger Agreement, as amended by this
Amendment, together with the Asset Purchase Agreement, the Exhibits, the
Confidentiality Agreement, the Indemnification Agreement and any schedules or
agreements delivered in connection with the Merger Agreement or the
consummation of the Merger supersedes all prior agreements among the Parties
(written or oral)
<PAGE>
and is intended as a complete and exclusive statement of the terms of the
agreements among the Parties.
3.02 CHOICE OF LAW; HEADING. This Amendment shall be governed by the
internal laws of the State of Texas. The captions or headings contained in
this Amendment are for reference purposes only and shall not affect in any
way the meaning and interpretation of this Amendment.
3.03 COUNTERPARTS. This Amendment may be executed in a ny number of
counterparts, each of which shall be deemed to be an original, but all of
which together shall constitute one and the same agreement.
IN WITNESS WHEREOF, the undersigned have executed this Amendment as of
the date first written above.
EQUITY COMPRESSION SERVICES CORPORATION
By: _____________________
Name: ___________________
Title: __________________
OEC ACQUISITION CORPORATION
By: _____________________
Name: ___________________
Title: __________________
OUACHITA ENERGY CORPORATION
By: _____________________
Name: ___________________
Title: __________________
__________________________
DENNIS W. ESTIS
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ASSET PURCHASE AND SALE AGREEMENT
BY AND AMONG
OUACHITA ENERGY PARTNERS, LTD.,
A LOUISIANA CORPORATION AND
OUACHITA COMPRESSION GROUP, LLC.,
A LOUISIANA LIMITED LIABILITY COMPANY
("SELLERS")
AND
DENNIS W. ESTIS (THE "SHAREHOLDER")
AND
OEC ACQUISITION CORPORATION
A DELAWARE CORPORATION
(THE "PURCHASER")
AND
EQUITY COMPRESSION SERVICES CORPORATION
AN OKLAHOMA CORPORATION
(THE "PARENT").
CONCERNING THE PURCHASE AND SALE OF CERTAIN
ASSETS AND THE ASSUMPTION AND ASSIGNMENT
OF CERTAIN LIABILITIES OF THE SELLERS AND
THE PURCHASE OF CERTAIN ASSETS OF
THE SHAREHOLDER.
MAY 15, 1997
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<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Page
----
ARTICLE I. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Transfer of Property; Limited Assumption of Liabilities. . . . . . . . . . . . 2
1.01 Transfer of Property . . . . . . . . . . . . . . . . . . . . . . . . 2
1.02 Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(A) Base Purchase Price . . . . . . . . . . . . . . . . . . . . . . 5
(B) Allocation of Purchase Price. . . . . . . . . . . . . . . . . . 6
1.03 Limited Assumption of Liabilities. . . . . . . . . . . . . . . . . . 6
1.04 Due Diligence Period . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.01 Closing Date and Effective Time. . . . . . . . . . . . . . . . . . . 8
2.02 Closing Transactions . . . . . . . . . . . . . . . . . . . . . . . . 8
2.03 Post Closing Transactions. . . . . . . . . . . . . . . . . . . . . . 8
(A) Post-Closing Adjustment In Purchase Price . . . . . . . . . . . 8
ARTICLE III. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . 10
3.01 Representations and Warranties by the Sellers and the Shareholder. . 10
(A) Organization and Good Standing. . . . . . . . . . . . . . . . . 10
(B) Corporate Authority; Authorization of Agreement . . . . . . . . 10
(C) No Violation. . . . . . . . . . . . . . . . . . . . . . . . . . 11
(D) No Default; Compliance with Laws and Regulations. . . . . . . . 11
(E) Financial Statements. . . . . . . . . . . . . . . . . . . . . . 12
(F) Absence of Certain Changes. . . . . . . . . . . . . . . . . . . 13
(G) Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(H) Contracts, Agreements, Plans and Commitments. . . . . . . . . . 15
(I) Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(J) Title to Property; Absence of Liens and Encumbrances. . . . . . 17
(K) Employee Benefit Matters. . . . . . . . . . . . . . . . . . . . 18
(L) Leases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(M) Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(N) Patents, Trademarks and Copyrights. . . . . . . . . . . . . . . 20
(O) Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(P) Personnel Data; Labor Relations . . . . . . . . . . . . . . . . 21
(Q) Compliance with Laws. . . . . . . . . . . . . . . . . . . . . . 22
(R) Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(S) Transactions with Related Parties . . . . . . . . . . . . . . . 22
(T) Environmental Compliance. . . . . . . . . . . . . . . . . . . . 23
(U) Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . 24
(V) Customers and Suppliers . . . . . . . . . . . . . . . . . . . . 25
(W) Improper Payments . . . . . . . . . . . . . . . . . . . . . . . 25
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(X) No Broker . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
(Y) Warranty Claims . . . . . . . . . . . . . . . . . . . . . . . . 26
(Z) Solvency. . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
(AA) List of Bank Accounts . . . . . . . . . . . . . . . . . . . . . 27
(AB) Completeness of Schedules and Exhibits; Full Disclosure . . . . 27
3.02 Representations and Warranties by Purchaser and the Parent . . . . . 27
(A) Organization and Existence. . . . . . . . . . . . . . . . . . . 27
(B) Authority and Approval. . . . . . . . . . . . . . . . . . . . . 28
(C) SEC Reports . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(D) Absence of Certain Changes. . . . . . . . . . . . . . . . . . . 29
(E) Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(F) Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(G) Compliance with Laws. . . . . . . . . . . . . . . . . . . . . . 31
(H) Contracts, Agreements, Plans and Commitments. . . . . . . . . . 31
(I) Employee Benefit Matters. . . . . . . . . . . . . . . . . . . . 32
(J) Environmental Compliance. . . . . . . . . . . . . . . . . . . . 33
(K) Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
(L) Patents, Trademarks and Copyrights. . . . . . . . . . . . . . . 34
(M) Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
(N) Personnel Data; Labor Relations . . . . . . . . . . . . . . . . 35
(O) Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
(P) No Violation. . . . . . . . . . . . . . . . . . . . . . . . . . 36
(Q) Improper Payments . . . . . . . . . . . . . . . . . . . . . . . 37
(R) Completeness of Schedules and Exhibits; Full Disclosure . . . . 37
ARTICLE IV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Additional Agreements and Covenants. . . . . . . . . . . . . . . . . . . . . . 37
4.01 Covenants of the Sellers . . . . . . . . . . . . . . . . . . . . . . 37
(A) Certain Changes . . . . . . . . . . . . . . . . . . . . . . . . 37
(B) Operation of Business . . . . . . . . . . . . . . . . . . . . . 39
(C) Access. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
(D) Reasonable Commercial Efforts . . . . . . . . . . . . . . . . . 39
(E) Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . 40
(F) Public Announcements. . . . . . . . . . . . . . . . . . . . . . 40
(G) Notice. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
(H) Non-Competition . . . . . . . . . . . . . . . . . . . . . . . . 40
(I) Non-Solicitation and Non-Hiring . . . . . . . . . . . . . . . . 41
(J) Reasonableness of Restrictions. . . . . . . . . . . . . . . . . 41
(K) Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . 41
(L) Exclusivity . . . . . . . . . . . . . . . . . . . . . . . . . . 42
(M) Name Change . . . . . . . . . . . . . . . . . . . . . . . . . . 42
4.02 Covenants of the Purchaser . . . . . . . . . . . . . . . . . . . . . 42
(A) Certain Changes . . . . . . . . . . . . . . . . . . . . . . . . 42
(B) Operation of Business . . . . . . . . . . . . . . . . . . . . . 43
(C) Access. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
(D) Reasonable Commercial Efforts . . . . . . . . . . . . . . . . . 44
(E) Preservation of Books and Records . . . . . . . . . . . . . . . 44
(F) Public Announcements. . . . . . . . . . . . . . . . . . . . . . 44
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(G) Confidential Information. . . . . . . . . . . . . . . . . . . . 44
(H) Conduct of Business . . . . . . . . . . . . . . . . . . . . . . 45
(I) Guarantee of Compressor Leases. . . . . . . . . . . . . . . . . 45
ARTICLE V. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Conditions to Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
5.01 Conditions to the Obligations of the Purchaser and the Parent. . . . 45
(A) Compliance. . . . . . . . . . . . . . . . . . . . . . . . . . . 45
(B) Officers' Certificate . . . . . . . . . . . . . . . . . . . . . 46
(C) Legal Opinion . . . . . . . . . . . . . . . . . . . . . . . . . 46
(D) No Orders . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
(E) Secretary's Closing Certificate . . . . . . . . . . . . . . . . 46
(F) Absence of Litigation . . . . . . . . . . . . . . . . . . . . . 46
(G) Third Party Consents. . . . . . . . . . . . . . . . . . . . . . 46
(H) Legislation . . . . . . . . . . . . . . . . . . . . . . . . . . 47
(I) Termination of Existing Lease . . . . . . . . . . . . . . . . . 47
(J) Employment Contract . . . . . . . . . . . . . . . . . . . . . . 47
(K) Other Employment Agreement. . . . . . . . . . . . . . . . . . . 47
(L) Material Adverse Change . . . . . . . . . . . . . . . . . . . . 47
(M) Bank Accounts . . . . . . . . . . . . . . . . . . . . . . . . . 47
(N) Title Insurance, Zoning and Utilities . . . . . . . . . . . . . 47
(P) Environmental Review Report . . . . . . . . . . . . . . . . . . 48
(Q) Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
(R) Registration Rights Agreement . . . . . . . . . . . . . . . . . 48
(S) Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
(T) Indemnification Agreement . . . . . . . . . . . . . . . . . . . 48
(U) Payoff Letters. . . . . . . . . . . . . . . . . . . . . . . . . 48
5.02 Conditions to the Obligations of the Sellers and the Shareholder. . 48
(A) Compliance. . . . . . . . . . . . . . . . . . . . . . . . . . . 48
(B) Officers' Certificate . . . . . . . . . . . . . . . . . . . . . 49
(C) Legal Opinion . . . . . . . . . . . . . . . . . . . . . . . . . 49
(D) No Orders . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
(E) Actions and Procedures. . . . . . . . . . . . . . . . . . . . . 49
(F) The Shareholder Employment Agreement and the Other Employment
Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . 49
(G) Board Seats . . . . . . . . . . . . . . . . . . . . . . . . . . 49
(H) Registration Rights Agreement . . . . . . . . . . . . . . . . . 49
(I) Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
(J) Indemnification Agreement . . . . . . . . . . . . . . . . . . . 49
(K) Absence of Litigation . . . . . . . . . . . . . . . . . . . . . 49
(L) Third Party Consents. . . . . . . . . . . . . . . . . . . . . . 49
ARTICLE VI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
6.01 Grounds for Termination. . . . . . . . . . . . . . . . . . . . . . . 50
6.02 Effect of Termination. . . . . . . . . . . . . . . . . . . . . . . . 50
ARTICLE VII. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
7.01 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
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7.02 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
7.03 Exclusive Agreement. . . . . . . . . . . . . . . . . . . . . . . . . 52
7.04 Choice of Law; Amendments; Headings. . . . . . . . . . . . . . . . . 53
7.05 Assignments and Third Parties. . . . . . . . . . . . . . . . . . . . 53
7.06 Subsequent Filings . . . . . . . . . . . . . . . . . . . . . . . . . 53
7.07 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
7.08 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
7.09 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . 53
7.10 Expenses of Litigation . . . . . . . . . . . . . . . . . . . . . . . 54
7.11 General Interpretative Principles. . . . . . . . . . . . . . . . . . 54
7.12 Reproduction of Documents. . . . . . . . . . . . . . . . . . . . . . 54
7.13 Schedules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
7.14 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
</TABLE>
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<PAGE>
ASSET PURCHASE AND SALE AGREEMENT
This ASSET PURCHASE AND SALE AGREEMENT (the "Agreement"), dated as of
this 15th day of May, 1997, is by and among OUACHITA ENERGY PARTNERS, LTD., a
Louisiana corporation ("Seller #1"), OUACHITA COMPRESSION GROUP, L.L.C., a
Louisiana limited liability company ("Seller #2") (Seller #1 and Seller #2
are collectively referred to herein as the "Sellers"), DENNIS W. ESTIS (the
"Shareholder"), [OEC ACQUISITION CORPORATION], a Delaware corporation (the
"Purchaser"), and EQUITY COMPRESSION SERVICES CORPORATION, an Oklahoma
corporation (the "Parent"). Seller #1, Seller #2, the Shareholder, the
Purchaser and the Parent may be referred to herein individually as a "Party"
and collectively as the "Parties."
W I T N E S S E T H:
WHEREAS, the Parent, the Purchaser, Ouachita Energy Corporation, a
Louisiana corporation ("OEC"), and the Shareholder are parties to a Agreement
and Plan of Merger dated as of May 15, 1997 (the "Merger Agreement") under
which OEC and the Purchaser will be merged together (the "Merger") with the
Purchaser being the surviving corporation of the Merger and under which the
Purchaser will succeed to all of the property and assets of OEC; and
WHEREAS, the Sellers together with OEC (collectively referred to herein
as the "Companies") are engaged in the business of rendering natural gas
compression services (the "Business"); and
WHEREAS, the Sellers desire to sell and the Purchaser desires to purchase
the Business of the Sellers and all the assets used in connection with the
Business as a going concern, including all goodwill of the Sellers and the
Business; and
WHEREAS, the Shareholder is the principal shareholder or owner of each of
the Companies; and
WHEREAS, the Shareholder owns the Real Property described herein and is
leasing such Real Property to OEC; and
WHEREAS, the Parent is the sole stockholder of the Purchaser;
NOW, THEREFORE, in consideration of the premises and of the respective
representations, warranties, covenants, agreements and conditions contained
herein, and after 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:
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ARTICLE I
TRANSFER OF PROPERTY; LIMITED ASSUMPTION OF LIABILITIES
1.01 TRANSFER OF PROPERTY. On the terms and subject to the conditions
set forth herein, on the Closing Date (as hereinafter defined), the Sellers
and the Shareholder (to the extent that the Shareholder owns any of such
property or assets) shall sell, assign, convey, deliver and transfer to the
Purchaser and the Purchaser shall purchase from the Sellers and/or the
Shareholder, free and clear of all liens, security interests, encumbrances,
claims, charges or other liabilities, except for the Assumed Liabilities (as
hereinafter defined) specifically assumed pursuant to this Agreement, all the
tangible and intangible property and assets, agreements, contracts, contract
rights, leases, licenses, business, permits, franchises, goodwill and
property (real, personal and mixed), in which the Sellers or the Shareholder
have any right, title or interest save and except the Excluded Assets (as
hereinafter defined) (the "Property"), including but not limited to the
following:
(A) All personal property, furniture and equipment including
without limitation, all of the property and equipment listed or
described in Schedule 1.01(A) attached hereto, and all additions and
replacements thereto as are made in the ordinary course of business or
are required by the provisions of this Agreement;
(B) All their interest in leased or rented property, real or
personal, including but not limited to the leased property described or
listed in Schedule 1.01(B) ("Leased Property");
(C) All leases or rental agreements or arrangements, including,
without limitation, any leases for compressor equipment;
(D) All inventories including, without limitation, all compression
equipment and spare parts regardless of where located ("Inventory");
(E) All of each of the Seller's right, title and interest in, to
and under the contracts listed or described in Schedule 1.01(E) attached
hereto (the "Scheduled Contracts") including all rights (including
rights of refund and offset), privileges, deposits, claims, causes of
actions or options pertaining to any of the Scheduled Contracts;
(F) All of each of Seller's right, title and interest in, to and
under copyrights, patents, trademarks, trade names (including, without
limitation, the right to use the names
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Ouachita, Ouachita Energy Partners, Ltd. and Ouachita Compressor Group,
LLC.), licenses, covenants not to compete, processes, trade secrets,
technical know how, drawings, blue prints, specifications or plans and
other similar property rights and interests, and any rights to acquire
any of the aforementioned items, including but not limited to those
listed and described in Schedule 1.01(F) attached hereto used in or
associated with the Business, as well as the goodwill of the Business
(the "Intellectual Property");
(G) All cash, accounts, prepaid accounts, bank accounts, security
deposits, contract rights, instruments, documents and chattel paper
arising out of the sale of goods or the rendition of services by the
Sellers ("Cash and Contract Rights");
(H) The real property, including improvements thereon, described
on Schedule 1.01(H) attached hereto (the "Real Property") together with
all estates, rights, titles and interests in and to all tenements,
hereditaments, easements, rights-of-way, rights, licenses, patents,
rights of ingress and egress, reversionary interests, privileges and
appurtenances belonging, pertaining or relating to the Real Property,
including, without limitation, the easements, rights-of-way and other
interests described in Schedule 1.01(H) attached hereto, any and all
rights to the present or future use of wastewater, wastewater capacity,
drainage, water or other utility facilities relating to the Real
Property, including, without limitation, all reservations of or
commitments or letters covering any such use in the future, whether now
owned or hereafter acquired, and the entire right, title and interest of
the Shareholder, if any, in, to and under all streets, ways, alleys,
passages, strips, gores, pipes, pipelines, sewers, sewer rights,
ditches, waters, water courses, water rights and powers, air rights,
railroad sidings, minerals, mineral rights and mineral interests
adjoining, upon, above, in, under or pertaining to the Real Property,
all options and rights, if any, to purchase or otherwise acquire real
property that is adjacent to or nearby the Real Property, and all claims
or demands whatsoever of the Sellers or the Shareholder, either in law
or in equity, with respect to the Real Property, including, without
limitation, any unpaid awards to be made relating thereto, including any
unpaid awards or damages payable by reason of damage thereto or by
reason of a widening of any adjoining streets or roads or a change of
the grade with respect to the same.
(I) All estates, rights, titles and interests in and to all
plants, factories, warehouses, storage facilities, laboratories,
buildings, works, structures, fixtures, landings, construction in
progress, improvements, betterments,
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<PAGE>
installations and additions constructed, erected or located on or attached
or affixed to the Real Property (the "Fixtures and Improvements").
(J) That certain aircraft, registration no. 831JB owned by the
Shareholder (the "Aircraft").
(K) All of Sellers' right, title, and interest, if any, in the
Sellers' unemployment insurance and workman compensation insurance
ratings and experience;
(L) All files, books, records, papers, instruments and logs,
including all of the Sellers' counterparts of all Scheduled Contracts,
the Sellers' counterparts or originals of the Intellectual Property, all
documents of title relating to the Property, blueprints, specifications,
plats, maps, surveys, accounting and financial records, maintenance and
production records, personnel and labor relations records, environmental
records and sales and property tax records related to the Business;
(M) All customer and supplier lists, sales records, and working
files of correspondence with customers and suppliers (both actual and
prospective);
(N) All transferable licenses, certificates, approvals,
registrations, variances, exemptions, rights of way, privileges,
immunities, grants, permits, franchises, consents, authorizations or
other rights of every kind and character (a) under any (1) federal,
state, local or foreign statute, ordinance or regulation, (2) any order,
writ, injunction, decree, judgment, award or determination
("collectively, an "Order") of any court or any federal, state,
municipal, or other governmental department, commission, board, bureau,
agency or instrumentality, domestic or foreign (collectively, a
"Governmental Body") or (3) any contract with a Governmental Body or (b)
granted by any Governmental Body relating to or associated with the
Business ("Permits");
(O) All stationery, purchase orders, forms, supplies, labels,
catalogs, brochures, art work, photographs, advertising material and
similar items related to the Business;
(P) All insurance proceeds and insurance claims of the Sellers or
the Shareholder relating to all or any part of the Property and, to the
extent transferable, the benefit of and the right to enforce the
covenants and warranties, if any, that the Sellers or the Shareholder
are entitled to enforce with respect to the Property against the
Sellers' or the Shareholders predecessors in title to the Property;
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<PAGE>
(Q) All right, title and interest of the Sellers in all computer
equipment and hardware, including, without limitation, all central
processing units, terminals, disk drives, tape drives, electronic memory
units, printers, keyboards, screens, peripherals (and other input/output
devices), modems and other communication controllers, and any and all
parts and appurtenances thereto, together with all Intellectual Property
used by the Sellers in the operation of such computer equipment and
hardware, including, without limitation, all software, all of the
Sellers' rights under any licenses related to the Sellers' use, at any
time, of such computer equipment, hardware or software, and all leases
pursuant to which the Sellers lease any computer equipment, hardware or
software; insofar and only insofar as any of the foregoing relates to
the Business;
(R) All right, title and interest of the Sellers or the
Shareholder in, to and under all rights, privileges, claims, causes of
action, and options relating or pertaining to the Business or the
Property; and
(S) All other or additional privileges, rights, interests, properties
and assets of the Sellers or the Shareholder of every kind and description
and wherever located that are used or intended for use in connection with,
or that are necessary to the continued conduct of, the Business as presently
being conducted.
Notwithstanding any provision of this Agreement to the contrary, the
property shall not include any of the following assets (the "Excluded
Assets"):
(1) A condominium located in Destin, Florida described on Schedule
1.01 hereof;
(2) A condominium located in Houston, Texas described on Schedule
1.01 hereof;
(3) The personal property of the Shareholder and Sellers' or OEC's
employees described on Schedule 1.01; and
(4) As provided in the Merger Agreement, a 50% interest in the
Farm Property (as defined in the Merger Agreement) owned by OEC and the
50% interest owned by the Shareholder.
1.02 PURCHASE PRICE.
(A) BASE PURCHASE PRICE. As the purchase price for the Property
(the "Purchase Price"), the Purchaser shall (a) pay to Sellers and the
Shareholder at the Closing (as hereinafter defined) the sum of (i)
Eleven Million and No/100s Dollars
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<PAGE>
($11,000,000) plus (ii) the difference between Thirteen Million and
No/100s Dollars and the Assumed Debt (as hereinafter defined) to be paid
in cash, and (b) subject to the terms and conditions set forth herein,
assume the Assumed Liabilities (including up to $13,000,000 in Assumed
Debt). The term "Assumed Debt" means the amount of the indebtedness
owed for monies borrowed from third parties by the Companies on a
combined basis existing on the Closing Date, provided however that the
total amount of the Assumed Debt shall not be in excess of Thirteen
Million Dollars ($13,000,000) in the aggregate. Set forth on Schedule
1.02(A)(i) hereof is a true and correct listing of the Assumed Debt of
the Companies on a combined basis as of the date of this Agreement. Set
forth on Schedule 1.02(A) attached hereto is an allocation of the
Purchase Price among the Sellers and the Shareholder. The Sellers and
the Shareholder hereby authorize and direct the Purchaser and the Parent
to pay and/or deliver the Purchase Price in accordance with the
allocation set forth on such Schedule.
(B) ALLOCATION OF PURCHASE PRICE. The Parties agree to
allocate the Purchase Price to the Property as specified in Schedule
1.02(B) attached hereto. Subject to the approval of the Sellers, which
approval shall not be unreasonably withheld, the Purchaser shall be
authorized to file on behalf of the Parties Form 8594 and such other
documents, certificates or schedules as may be necessary to properly
reflect such allocations with the Internal Revenue Service and any other
taxing authority.
1.03 LIMITED ASSUMPTION OF LIABILITIES. The Purchaser hereby agrees that
at the Closing it will assume and undertake to pay, satisfy or discharge such
of the remaining unfulfilled obligations of Sellers as set forth on the
Sellers' March 31, 1997 balance sheets delivered to the Purchaser plus
liabilities incurred by the Sellers in the ordinary course of business since
March 31, 1997 (including a maximum of $13,000,000 of Assumed Debt) to the
extent and only to the extent that such liability or obligation is not in
default, or been accelerated (or would be in default or accelerated with the
passage of time or the giving of notice) (the "Assumed Liabilities");
provided, however, that the Assumed Liabilities shall include the amounts set
forth in Schedule 1.03 attached hereto, and which relate to taxes assessed on
property owned by the Sellers on January 1, 1997, but not due until December
31, 1997; and provided further, that the Assumed Liabilities shall also
include up to $13,000,000 of Assumed Debt, notwithstanding the fact that the
transactions contemplated hereby could give rise to a default or acceleration
under the terms of some or all of the instruments and agreements relating to
the Assumed Debt. Except as expressly provided in this Section 1.03, the
Purchaser shall not assume any liability or obligation of the Sellers, fixed
or
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<PAGE>
contingent, disclosed or undisclosed, or any liability for any claims,
debts, defaults, duties, obligations or liabilities of the Sellers of any
kind or nature, whether known or unknown, contingent or fixed, all of which,
to the extent that they exist from and after the Closing, shall be retained
by the Sellers (the "Retained Liabilities"). In particular, the Retained
Liabilities shall include (a) all intercompany liabilities or other
obligations of the Sellers (or any of them) to Shareholder or any of his
affiliates not disclosed to the Purchaser in the Schedules to this Agreement,
(b) any liability or obligation of the Shareholder, the Sellers or any of
them for any foreign, federal, state, commonwealth, county or local taxes of
any kind or nature (including any interest or penalties thereon) applicable
to the transfer of the Property, including without limitation, sale or use
taxes due to the Closing, other than a maximum of $25,000 of tax incurred for
transfer of the title to the vehicles owned by the Sellers which shall be
assumed by the Purchaser, (c) any defects in any products manufactured, sold
or leased by either the Sellers or services performed by either of the
Sellers or any express or implied warranty relating to such products or
services, (d) any claims or conditions arising under or relating to the
Environmental Laws (as hereinafter defined) or similar legal requirement
attributed or related to the Business or to the Property, or (e) any
unlicensed or unauthorized use by the Sellers (or either of them) of any
patented or unpatented invention, trade secrets, copyright, trademark or
other Intellectual Property right. Subject to the terms and conditions set
forth in the Indemnification Agreement (as hereinafter defined), the Sellers
shall promptly pay and discharge all of the Retained Liabilities in the
ordinary course of business and shall indemnify and hold Purchaser harmless
from any claims, damages, assessments or charges (including reasonable
attorney's fees) arising out of or related to the Retained Liabilities.
1.04 DUE DILIGENCE PERIOD. The Parties agree that the obligation of the
Purchaser or the Sellers to close the transaction evidenced by this Agreement
is subject to Purchaser's and the Sellers' satisfactorily completing its due
diligence on or before June 18, 1997 (the "Due Diligence Expiration Date".
If any Party elects not to close, then such Party may cancel this Agreement
by mailing or otherwise sending to the other Parties written notice of its
intent to terminate this Agreement within five business days following the
Due Diligence Expiration Date (the "Termination Notice"). Upon mailing or
otherwise sending to other Parties the Termination Notice, the terminating
Party and its affiliate(s) (i.e., the Sellers and the Shareholder on one hand
and the Purchaser and the Parent on the other hand) shall be deemed released
from all of their respective 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
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<PAGE>
except for any confidentiality obligations contained herein or in the
Confidentiality Agreement (as hereinafter defined).
ARTICLE II
2.01 CLOSING DATE AND EFFECTIVE TIME. The closing of the purchase and
sale of the Property contemplated hereby (the "Closing") shall be held at the
offices of Messrs. Schlanger, Mills, Mayer & Grossberg, LLP, 5847 San Felipe,
Suite 1700, Houston, Texas 77057 or at such other place as the Parties
mutually agree on July 18, 1997, or such other date mutually approved of by
the Parties (the "Closing Date"). The effective time of the transfer of the
Property shall be deemed to have been the beginning of the day of the Closing.
2.02 CLOSING TRANSACTIONS. On the Closing Date:
(A) The Sellers and/or the Shareholder shall deliver to the
Purchaser all deeds, bills of sale, endorsements, assignments, documents
of title and other instruments of transfer and conveyance as the
Purchaser shall reasonably request and in form and substance reasonably
requested by the Purchaser so as to vest in the Purchaser legal and
equitable title to the Property. In particular, the Shareholder shall
deliver a special warranty deed conveying good and indefeasible title to
the Real Property to the Purchaser and a bill of sale or assignment
transferring good and marketable title to the Aircraft to the Purchaser.
(B) The Purchaser shall deliver to Sellers (i) the cash portion of
the Purchase Price (i.e. $24,000,000 less the amount of the Assumed
Debt) by wire transfer or cashiers check as set forth in Section
1.02(A), and (ii) an agreement providing for the assumption of
liabilities pursuant to Section 1.03 hereof, including the Assumed Debt.
The cash portion of the Purchase Price shall be based on payoff letters
from each of the lenders who are owed any of the Assumed Debt.
(C) In addition, each Party shall deliver or cause to be delivered
such legal opinions, certificates, assignments, consents, instruments
and other documents as may be necessary to satisfy the conditions to the
Closing set forth herein.
2.03 POST CLOSING TRANSACTIONS.
(A) POST-CLOSING ADJUSTMENT IN PURCHASE PRICE. Following the Closing,
the Purchaser shall cause its independent or internal accountants (the
"Accountants") to determine the Closing Net Working Capital of the Companies
(as hereinafter defined) and if the Closing Net Working Capital is less than
the sum of (a) a deficit of $100,000 less (b) the amount that (i) the
Companies'
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<PAGE>
capital expenditures for the months of May and June of 1996 exceed $120,000,
plus (ii) if the closing occurs after June 30, 1997, an amount equal to the
capital expenditures of the Companies from June 30, 1997, to the Closing Date
over the result of $60,000 multiplied by a fraction, the numerator of which
is the number of days between June 30, 1997 and the Closing Date and the
denominator is 31, then the Purchase Price shall be reduced by the amount of
such difference. For the purposes of this Agreement, the term "Net Working
Capital of the Companies" is set forth on Schedule 2.03(A) attached hereto.
The Purchaser shall promptly notify the Sellers of the determination of the
Closing Net Working Capital (the "CNWC Report") by the Accountants. The
determination of the actual Closing Net Working Capital of the Companies by
the Accountants shall be conclusive and binding upon the Parties unless the
Sellers shall object to the Accountants' CNWC Report within thirty (30) days
following the receipt of the Accountants' CNWC Report. The Sellers'
objection to the Accountants' CNWC Report (the "Sellers' Objection") shall
set forth in reasonable detail the Sellers' objection(s) to the Accountants'
CNWC Report and the Sellers' calculation of the Closing Net Working Capital
of the Sellers. Within fifteen (15) days after receipt of the Sellers'
Objection, the Purchaser will notify the Sellers whether it accepts the
Sellers' adjustments, which notification shall set forth in reasonable detail
the adjustments made by the Sellers which the Purchaser continues to dispute
(the "Purchaser's Response Notice"). If the Sellers do not object to the
Accountants' CNWC Report, or if the Purchaser agrees to accept the Sellers'
adjustments to the Accountants' CNWC Report, then the Purchase Price shall be
recalculated based on such adjustments and the Sellers and/or the Shareholder
shall pay such amount in immediately available funds to the Purchaser within
five (5) business days following such failure to object or such acceptance,
respectively. If the Sellers object to the Accountants' CNWC Report as set
forth above and the Purchaser does not accept the Sellers' proposed
adjustments, then an independent accounting firm mutually satisfactory to the
Sellers and the Purchaser shall be engaged to determine the amount of the
Closing Net Working Capital and the amount, if any, due to the Purchaser
shall be paid to the Purchaser in immediately available funds within five (5)
business days of the issuance by the independent accountants of a report
setting forth their determination of the actual Closing Net Working Capital.
The Parties agree to cooperate fully with such independent accountants at
their own cost and expense, including, but not limited to, providing such
independent accountants with access to, and copies of, all books and records
that such accountants shall reasonably request. The Purchaser shall bear all
of the costs and expenses of such independent accounting firm, and if the
Parties are unable to agree upon an independent accounting firm, the Parties
will request that one be designated by the President of the Houston office of
the American Arbitration Association.
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<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.01 REPRESENTATIONS AND WARRANTIES BY THE SELLERS AND THE SHAREHOLDER.
The Sellers and the Shareholder hereby, jointly and severally, represent and
warrant to the Purchaser and the Parent as follows:
(A) ORGANIZATION AND GOOD STANDING. Seller #1 is a corporation duly
organized, validly existing and in good standing under the laws of Louisiana,
and has all requisite corporate power and authority to own and lease the
property and assets it currently owns and leases (including the Property
owned by such Seller) and to carry on its portion of the Business. Seller #2
is a limited liability company duly organized, validly existing and in good
standing under the laws of Louisiana, and has all requisite power and
authority to own and lease the property and assets it currently owns and
leases (including the Property owned by such Seller) and to carry on its
portion of the Business. The Sellers and the Shareholder shall deliver to
the Purchaser on or before the Schedule Delivery Date (as hereinafter
defined) true, correct and complete copies of the Certificates or Articles of
Incorporation or Organization and bylaws, regulations or equivalent governing
instruments, each as amended to the date thereof, of the Sellers. Except as
otherwise set forth in Schedule 3.01(A) attached hereto, the Sellers are each
duly licensed or qualified to do business as foreign corporations in the
states listed on Schedule 3.01(A) attached hereto and are in good standing in
all jurisdictions in which the character of the Property now owned or leased
by such Seller or the nature of the business now conducted by such Seller
(including the Business) requires it to be so licensed or qualified, except
where the failure to be so qualified or to be in good standing would not have
a material adverse effect on the business, properties, results of operations,
condition (financial or otherwise) or prospects of the Sellers and OEC on a
combined basis (a "Company Material Adverse Effect"). The Sellers have only
conducted business in the states or jurisdictions listed on Schedule 3.01(A)
attached hereto during the last five (5) years.
(B) CORPORATE AUTHORITY; AUTHORIZATION OF AGREEMENT. The execution and
delivery of this Agreement by the Sellers and the Shareholder, subject to the
approval of the shareholders and members of the Seller #1 and Seller #2 in
accordance with applicable law, the performance by the Sellers and the
Shareholder of all the terms and conditions hereof to be performed by the
Sellers and the Shareholder and the consummation of the transactions
contemplated hereby have been duly authorized and approved by all requisite
action (shareholder, member, manager and board approval or otherwise) on the
part of each Seller. The shareholders and the members of each of the
Sellers shall approve
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the allocation of the Purchase Price set forth on Schedule 1.02(A) before the
Schedule Delivery Date. Subject to the approvals of the shareholders and
members of the Seller #1 and Seller #2 in accordance with applicable law,
this Agreement constitutes the valid and binding obligation of each of the
Sellers and the Shareholder enforceable against each of the Sellers and the
Shareholder in accordance with its terms, except as such enforceability may
be limited by bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting the rights of creditors generally and by general equitable
principles (whether or not such enforceability is considered in a proceeding
at law or in equity).
(C) NO VIOLATION. Neither the execution and delivery by the Sellers or
the Shareholder of this Agreement nor, subject to the approval of the members
and shareholders of each of the Sellers as set forth herein, the consummation
by each of the Sellers or the Shareholder of the transactions contemplated
hereby in accordance with the terms hereof, will: (i) conflict with or result
in a breach of any provisions of the Certificate of Incorporation or Bylaws
of the either Seller; (ii) result in a breach or violation of, a default
under, or the triggering of any payment or other material obligations
pursuant to, or accelerate vesting under, any of its existing stock option
plans, if any, of the Sellers, or any grant or award made under any of the
foregoing; (iii) violate, conflict with, result in a breach of any provision
of, constitute a default (or an event which, with notice or lapse of time or
both, would constitute a default) under, result in the termination or in a
right of termination or cancellation of, accelerate the performance required
by, result in the triggering of any payment or other material obligations
pursuant to, result in the creation of any lien, security interest, charge or
encumbrance upon any of the material properties of either Seller under, or
result in being declared void, voidable, or without further binding effect,
any of the terms, conditions or provisions of any material note, bond,
mortgage, indenture, deed of trust or any material license, franchise,
permit, lease, contract, agreement or other instrument, commitment or
obligation to which any Seller is a party, or by which either Seller or any
of their respective properties is bound or affected, except for any of the
foregoing matters which would not have a Company Material Adverse Effect; or
(iv) require any material consent, approval or authorization of, or
declaration, filing or registration with, any domestic governmental or
regulatory authority, the failure to obtain or make which would have a
Company Material Adverse Effect.
(D) NO DEFAULT; COMPLIANCE WITH LAWS AND REGULATIONS. Except as set
forth on Schedule 3.01(D) attached hereto, neither the Shareholder nor the
Companies (or any of them) are in default or in violation of, and no
condition exists that with notice or lapse of time or both would constitute a
default or violation of (i) any
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loan, contract, note, instrument, or agreement, or (ii) law, rules or
regulations applicable to the Companies (or any of them), the Shareholder,
the Property or the Business that could constitute a Company Material Adverse
Effect, and there are no Orders by any Governmental Body or rendered against
affecting the Companies (or any of them), the Business or the Property.
(E) FINANCIAL STATEMENTS. The Sellers and the Shareholder heretofore
have delivered to the Purchaser and the Parent copies of (i) the audited
combined balance sheets of the Companies as of November 30, 1996 and 1995 and
the related statements of income and cash flows for such periods (the "Annual
Financial Statements"); and (ii) the unaudited combined balance sheet of the
Companies as of March 31, 1997 (the "Balance Sheet Date") together with the
related statements of income and cash flows for the four month period then
ended (the "Interim Financial Statements").
The Annual Financial Statements and the Interim Financial Statements are
collectively referred to as the "Financial Statements"). The Financial
Statements present fairly, in accordance with GAAP (as hereinafter defined),
the financial position of the Companies on a combined basis as of the dates
indicated and the results of operations and changes in financial position of
the Companies on a combined basis, for the periods reflected in the Financial
Statements, except that the Interim Financial Statements do not contain
customary footnote disclosures and are subject to normal year end
adjustments. None of the Companies have any debt or liability of any kind,
whether accrued, absolute, contingent or otherwise, including, without
limitation, any debt or liability on account of taxes or any governmental
charges or penalty, interest or fines, except as reflected in the Financial
Statements or in a schedule attached to this Agreement other than liabilities
or obligations incurred by the applicable Seller in the ordinary course of
business after the period covered by such Financial Statements. The income
of each Seller as reflected on the Financial Statements consists solely of
ordinary operating profits and none of such income consists of (i) income
from a source other than operations of the Business or (ii) a transaction
outside the ordinary course of business of the Companies or the Business
(whether or not such transaction would otherwise be considered extraordinary
under GAAP). "GAAP" means generally accepted accounting principles set forth
in the Opinions of the Accounting Principles Board of the American Institute
of Certified Public Accountants and in statements by the Financial Accounting
Standards Board or in such other statement by such other entity as may be
generally recognized as the successors for the aforementioned; and shall also
mean the accounting principles observed in a current period are comparable in
all material respects to those applied in a preceding period unless specific
exemption is noted in the financial statements where a change of accounting
method, principle or presentation has occurred.
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(F) ABSENCE OF CERTAIN CHANGES. Except as disclosed to the Purchaser in
this Agreement, the Financial Statements, Schedule 3.01(F) attached hereto,
or in any other schedule to this Agreement, since the Balance Sheet Date,
there has not been:
(i) any material adverse change in the Property, the Business or
the Companies (or any of them) other than changes caused by general
conditions in the industry in which the Business is conducted;
(ii) any damages, destruction or loss, whether covered by insurance
or not, which has had, or might be expected to have, a Company Material
Adverse Effect;
(iii) any material change by the Companies (or any of them) in
accounting methods or principles which would be required to be disclosed
under GAAP;
(iv) any issuance by the Companies or any of them of any shares of
capital stock;
(v) any sale, lease or other disposition of properties and assets
of the Companies (or any of them) except in the ordinary course of
business of the Companies;
(vi) any merger or consolidation of the Companies (or any of them)
with any other corporation, partnership, limited liability company,
person or entity or any acquisition by the Companies (or any of them) of
the stock or business of another corporation, partnership, limited
liability company or other entity;
(vii) any borrowing, or agreement to borrow funds, by the Companies
(or any of them) or any termination or material amendment of any
evidence of indebtedness, contract, agreement, deed, mortgage, lease,
license or other instrument, commitment or agreement to which the
Companies (or any of them) are bound or by which their properties are
bound is material to the business, condition (financial or otherwise),
results of operation or prospects of the Companies (or any of them) or
the Business;
(viii) any declaration or payment of any dividend on, or any other
distribution with respect to, the equity securities of the Companies (or
any of them);
(ix) any material increase in the compensation payable or to become
payable by the Companies (or any of them) to the directors, officers or
employees of the Companies (or any of them), or any increase in benefits
or benefit plan costs (other than costs outside of the control of the
Companies), or
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any increase in any bonus, insurance, pension, compensation or other benefit
plan made for or with or covering any directors, officers or directors;
(x) any reclassification of any asset or liability;
(xi) any amendment, modification, or termination of any material
contract, agreement, plan or commitment;
(xii) any mortgage, pledge, grant of any lien or security interest
or other encumbrance of any asset of the Companies (or any of them);
(xiii) any waiver or release of any material right or claim of the
Companies (or any of them) that singly, or in the aggregate, is material
to the business, assets, condition (financial or otherwise), results of
operation or prospects of the Companies (or any of them), the Business
or the Property;
(xiv) any significant labor trouble or any damage, destruction or
loss of property by fire or other casualty, whether or not covered by
insurance, adversely affecting the Property, the Business or the
Companies (or any of them) or any related property;
(xv) removal, from any building, facility or real property of any
of the assets of the Companies (or any of them) or the Shareholder
related to the Business or the Real Property;
(xvi) except as set forth on Schedule 3.01(S) attached hereto, any
transactions between or with affiliates of the Companies (or any of
them) or the Shareholder relating to the Business; or
(xvii) any contract, understanding or commitment to do any of the
foregoing.
(G) TAXES. Except as set forth on Schedule 3.01(G) attached hereto:
(i) The Companies have each timely filed or caused to be timely
filed all material federal, state and local tax returns for taxes, and
all such tax returns are proper, complete and accurate and copies of
which have been delivered to Purchaser.
(ii) The Companies have paid or caused to be paid all taxes which
have become due, except for taxes the failure of which to pay would not
have a Company Material Adverse Effect.
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(iii) The amounts set up as provisions for taxes on the Interim
Financial Statements (and the notes and year-end accruals attached
thereto) are sufficient for the payment of all accrued and unpaid taxes
of any kind, except for taxes the failure of which to pay would not have
a Company Material Adverse Effect.
(iv) Neither the Companies (or any of them) nor the Shareholder
have received or have no knowledge of any notice of deficiency or
assessment with respect to Companies (or any of them), the Business or
any of the Property, or any basis for any of the foregoing, from any
taxing authorities. Neither the Companies (or any of them) nor have
the Companies or the Shareholder been notified by the IRS that the IRS
intends to audit the federal income tax returns of the Companies or the
Shareholder.
(v) There is no litigation, governmental or other proceeding
(formal or informal), or investigation pending, or to the knowledge of
the Sellers and the Shareholder, threaten with respect to any such
federal, state or local income tax return. There are no tax liens upon,
pending against or, to the knowledge of the Companies or the
Shareholder, threatened against any Property.
(vi) Neither the Companies (or any of them) or the Shareholder have
given or been requested to give any waiver of any statute of limitations
related to the payment of any foreign, federal, state or local tax.
(vii) The amounts withheld by the Companies and paid to the
appropriate Governmental Body for all periods include all amounts
necessary to fully and completely comply with all withholding provisions
of applicable law.
(viii) To the best of the Sellers' and the Shareholder's knowledge,
the consummation of the transactions contemplated by this Agreement will
not result in the imposition or creation of any tax obligation on the
Purchaser.
Other than the representations and warranties set forth in Sections
3.01(K) and (P)(i), the representations and warranties contained in this
Section 3.01(G) are intended to the be sole representations and
warranties of the Sellers and the Shareholder with respect to compliance
by the Companies with tax laws.
(H) CONTRACTS, AGREEMENTS, PLANS AND COMMITMENTS. Schedule 3.01(H)
attached hereto sets forth a list or summary of all the material
contracts, notes, instruments, indentures, documents, agreements, plans
and commitments, including all amendments, modifications and supplements
thereto (written or oral), to which
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the Companies (or any of them) are a party or by which the Companies (or
any of them) or any of their assets or properties are bound as of the
date hereof including the Scheduled Contracts; provided, however, that
as set forth in the Confidentiality Agreement dated April 28, 1997 (the
"Confidentiality Agreement"), the identity of the customers of the
Companies will be not be disclosed until three business days prior to
the Closing (the "Customer Disclosure Date). For the purposes of this
Section 3.01(H) a contract shall be considered material if such contract
or any series of related or similar contracts involving the same subject
matter involves $100,000 or more in services to be rendered or
obligations during any twelve month period. Also set forth on Schedule
3.01(H) is a list of all agreements for the provision of compression
services by the Companies identifying the horsepower or type of
equipment being leased, the amount of the rental for such contract and
the term of such contract, provided, however that until the Customer
Disclosure Date, such schedule will not include any information
concerning the location of such equipment or the identity of the
customer of the Companies with respect to such contract. The Companies
have each materially complied with the provisions of all of their
respective Scheduled Contracts and, to the best of the Sellers' and the
Shareholder's knowledge, no default or event of default exists under any
of such agreements and such agreements constitute valid and legally
binding obligations of the Companies (or any of them) and, to the best
of the Sellers' and the Shareholder's knowledge, of each other person,
corporation, partnership, limited liability company, governmental body
or other entity (collectively a "Person") that is a party thereto,
enforceable against each party in accordance with their terms, except as
such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the rights of
creditors generally and by general equitable principles (whether or not
such enforceability is considered in a proceeding at law or in equity).
The Scheduled Contracts comprise all of the contracts, agreements, plans
and commitments required in order to conduct the Business as it has been
and is now conducted, and, subject to the receipt of the consents listed
on Schedule 3.01(H), all of the Scheduled Contracts are transferable or
will be transferred to Purchaser under and in accordance with the terms
of this Agreement.
(I) LITIGATION. Except as set forth in Schedule 3.01(I) attached
hereto:
(i) There are no claims, proceedings or lawsuits pending or, to
the knowledge of the Sellers or the Shareholders, threatened against
Companies (or any of them), the Property or the Business; and
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(ii) None of the Companies are charged with a violation of, or, to
the knowledge of the Sellers or the Shareholder, threatened with a
charge of a violation of, any provision of any law, rule or regulation
or any Order.
(J) TITLE TO PROPERTY; ABSENCE OF LIENS AND ENCUMBRANCES. Schedule
1.01(H) attached hereto contains a true, accurate and complete
description of all real property owned by the Shareholder on which the
Business is conducted, including the Real Property and the Realty
Rights. Schedule 3.01(J) attached hereto contains a true, accurate and
complete list and description of all improvements and equipment, and of
all other tangible personal property and assets now owned by the
Companies (or any of them). The Companies each own and have good and
marketable title to all its respective tangible personal properties,
whether or not listed in Schedule 1.01 (H) or Schedule 3.01(J) (except
to the extent such tangible personal properties are leased) free and
clear of all liens, security, interests, charges or encumbrances, except
for (i) landlord liens, (ii) rights of the real property on which the
Companies' compression equipment is located, and (iii) liens for taxes
not yet due and owing. The Shareholder has good and indefeasible title
to the Real Property in fee simple and no improvement or structure on
the Real Property encroaches on any adjacent property. To the best of
the Sellers' and the Shareholder's knowledge, the Real Property does not
violate any provisions of any applicable building code, fire, health, or
safety regulation, or any governmental ordinance, orders or regulations.
No condition exists with respect to the Real Property which would
prevent, or require repair or modification thereof as a prerequisite to,
the Purchaser using the Real Property for the conduct of the Business.
To the best of the Sellers' and the Shareholder's knowledge, the zoning
classification of the Real Property is such that the Real Property may
be used as currently used in the Business. There is no pending or, to
the knowledge of the Sellers or the Shareholder, threatened condemnation
or similar proceeding or assessment affecting the Real Property, or any
part thereof. The Shareholder has title policies in full force and
effect for the Real Property insuring title on such property (without
title exceptions that will adversely affect either the market value or
marketable title of the Real Property) for at least the amount reflected
on the Interim Financial Statements as the book value of such property.
To the best of Sellers' and the Shareholder's knowledge, such title
policies are with solvent and financially responsible title companies.
Except as shown in Schedule 3.01(J) attached to this Agreement, the
tangible personal property owned by each of the Companies and in use or
leased to third parties is in good condition and repair, is adequate in
quantity and quality to operate the Business as it has been and is now
conducted and to the knowledge of the Sellers and the Shareholder in
compliance with all applicable laws, rules and regulations (including
without limitation any zoning ordinance),
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and is all the property necessary to the operation of the Business as it
has been and is now being conducted and will be available for immediate
use by the Purchaser on the Closing Date.
(K) EMPLOYEE BENEFIT MATTERS.
(i) Schedule 3.01(K) 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 "Company
Plan") by the Companies, 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 Code of
which the Companies or any of them is a member.
(ii) The Sellers have delivered to the Purchaser current, accurate
and complete copies of each Company 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 Company Plan; (b) Form 5500; (c)
attorneys' response to an auditor's request for information for any
Company 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
Company Plan.
(iii) With respect to each Company Plan: (a) each Company 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 Company 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).
(iv) None of the Companies 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.
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(v) With respect to any Company Plan which is an employee welfare
benefit plan (within the meaning of ERISA Section 3(1)): (a) each and
every Company 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 Company Plan
(including any Company Plan covering former employees of the Companies)
may be amended or terminated by the Company or any Subsidiary on or at
any time after the Closing Date.
(vi) Except as set forth in Schedule 3.01(K)(vi), which relates to
Lavelle Ivy, none of the Companies maintains any post-retirement health
and life insurance plans for employees and retirees.
(L) LEASES. The Companies have delivered to the Purchaser and the
Parent true and complete copies of all leases referred to in Schedule
3.01(L) attached hereto (the "Leases"), which lists all agreements
pertaining to the lease of real or personal property to which the
Companies (or any of them) are a party. The Leases are in full force
and effect and are subsisting, valid and binding obligations of the
Companies, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the
rights of creditors generally and by general equitable principles
(whether or not such enforceability is considered in a proceeding at law
or in equity). None of the Companies are in default or, to the
knowledge of the Sellers or the Shareholder, alleged to be in default
thereunder. Except as set forth in Schedule 3.01(L), the Companies each
have full legal power and authority to assign their rights under each of
the Leases and rental agreements or arrangements applicable to such
Seller, and the continuation, validity and effectiveness thereof on its
present terms will not be affected by the occurrence of the Closing.
The Companies each have good and marketable title to all leasehold
interests and improvements and enjoy peaceful and undisturbed possession
under all of the Leases and rental agreements as to which the Companies
are lessees. To the knowledge of the Sellers and the Shareholder, the
present use of real and personal property that are subject to the Leases
comply in all material respects with all applicable building or zoning
codes, ordinances or regulations applicable thereto. The Companies and
the Shareholder have also provided to the Purchaser and the Parent a
copy of the lease between OEC and the Shareholder (the "Shareholder
Lease") with respect to the Real Property.
(M) INSURANCE. Schedule 3.01(M) attached hereto sets forth a list
of all insurance policies of the Companies by which the Companies or any
of their assets or properties have been covered including the Business
for the last three (3) years and those policies which are now in full
force and effect. Sellers each agree to use their respective best
efforts to maintain the existing
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policies (which are presently in force) in full force and effect at all
times from the date of this Agreement until the Closing Date. The
insurance policies set forth on Schedule 3.01(M) attached hereto provide
insurance against the risks involved in the Business and the operation
of the Property which are standard in the industry. No Seller has
received notice from any insurance carrier of the intention of such
carrier to discontinue any insurance coverage afforded to such Seller.
(N) PATENTS, TRADEMARKS AND COPYRIGHTS. Schedule 1.01(F) attached
hereto includes a true and complete list and description of all
Intellectual Property applied for, issued to, or owned or used by the
Companies (or any of them) or under which the Companies are licensed or
franchised. To the best of the Sellers' and the Shareholder's
knowledge, the Companies each possess full rights, licenses or other
authority to use all such Intellectual Property. To the best of the
Sellers' and the Shareholder's knowledge, all licenses are in full force
and effect, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the
rights of creditors generally and by general equitable principles
(whether or not such enforceability is considered in a proceeding at law
or in equity), and constitute legal, valid and binding obligations of
the parties thereto, and there has not been any default or alleged
default (or any event or condition which with notice, lapse of time or
both would become a default) thereunder. To the best of the Sellers'
and the Shareholder's knowledge, provided the consents described in
Schedule 3.01(N) attached hereto are obtained, the occurrence of the
Closing will not affect the validity, continuation or effectiveness of
any such rights on their present terms. To the best of the Sellers' and
the Shareholder's knowledge, the Companies each own or hold adequate
licenses or other rights to use all Intellectual Property necessary for
the conduct of the Business as it has been and is now conducted, and
that use does not and will not conflict with, infringe on or otherwise
violate any rights of others. None of the Companies (nor the
Shareholder) have received notice, or have knowledge of, any
infringements or unauthorized or unlawful use of such Intellectual
Property by themselves or others or any allegation that they have
infringed similar properties of others.
(O) PERMITS. Schedule 3.01(O) attached hereto includes a true and
complete list of all material Permits. Except as set forth in Schedule
3.01(O) attached hereto, the Permits are in full force and effect and
comprise all the governmental authorizations necessary or desirable for
the lawful conduct of the Business as it has been and is now conducted.
Except as noted on Schedule 3.01(O), each of the Permits is freely
transferrable to the Purchaser, without consent of any Person, and none
of the Permits obligate the Companies (or any of them) or will obligate
the
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Purchaser upon transfer for the payment of any further charges or
assessments in order to maintain them in full force and effect.
(P) PERSONNEL DATA; LABOR RELATIONS.
(i) Schedule 3.01(P) attached hereto is a list of all employees of
the Companies, their current rates of compensation, their length of
service with each Seller, and a complete and accurate description of all
practices, policies, understandings and agreements with such persons
relating to their employment. All of the Companies' employees are "at
will" employees except as set forth on Schedule 3.01(P) and any
contracts and arrangements with employees are in full force and effect,
and neither the Companies (or any of them) nor to the best of the
Sellers' and the Shareholder's knowledge, any other person is in default
under either of them. The Companies in the conduct of their affairs and
business have each complied in all material respects with all applicable
laws and regulations relating to the employment of labor including those
related to wages, hours, discrimination, employee pension and welfare
benefit plans, collective bargaining, and the payment of Social Security
or similar taxes, and the Companies have each withheld and paid to the
appropriate governmental authority, all amounts required by law or
agreement to be withheld from wages or salaries of such employees. All
increases in compensation during the eighteen month period prior to the
execution of this Agreement are described on Schedule 3.01(P).
(ii) There is not pending, nor, to Sellers' or the Shareholder's
knowledge, any threatened labor dispute, strike or lockout, slow-down,
stoppage, unfair labor practice complaint, grievance procedure or
arbitration proceeding relating to the Companies or affecting the
Business. No representation question now exists respecting the
Companies (or any of them) and no collective bargaining agreement is
currently being negotiated. Neither the Sellers (or either of them) nor
the Shareholder have received any notification of any unfair labor
practices charges or complaints pending before any agent having
jurisdiction over Companies. Neither the Sellers nor the Shareholder
are aware of any union organizing activities or proceedings involving,
or act pending petition for the recognition of, a labor union or
association as the exclusive bargaining agent for any group or groups of
employees of the Companies (or any of them).
(iii) Attached hereto as Schedule 3.01(P) (ii) are copies of all
Occupational Safety and Health Administration ("OSHA") reports having to
do with the Companies (or any of them), their operations or the Business
and received by Companies (or any of them) during the last twelve
months. No other oral or
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written complaints or notices have been received from OSHA, and no other
complaints, or notices have been received from other regulatory agencies
or offices having jurisdiction over Companies (or any of them), the
Business or the Property during the last twenty-four month period.
Other than the representations and warranties contained in Section
3.10(K), the representations and warranties contained in this Section
3.01(P) are intended to the be sole representations and warranties of
the Sellers and the Shareholder with respect to compliance by the
Companies with employment laws.
(Q) COMPLIANCE WITH LAWS. None of the Companies are in violation
in any material respect of any laws, regulations or governmental orders
(other than with respect to laws, regulations and governmental orders
pertaining to taxes, employment and environmental matters, which are
treated separately in this Agreement) in a manner which could have a
Company Material Adverse Effect and, to the best of the Sellers' and the
Shareholder's knowledge, none of the Companies have been charged with
any such violation. There are no judgments, orders, injunctions or
decrees of any court or governmental instrumentality affecting the
Companies, the Property or the Business the failure to comply with could
have a Company Material Adverse Effect.
(R) INVENTORY. Except as set forth on Schedule 3.01(R) attached
hereto (i) all items of the Companies' Inventory and related supplies
reflected on the Financial Statements or thereafter acquired (and not
subsequently disposed of in the ordinary course of business) are
merchantable, for sale or lease in the ordinary course of business at
normal mark-ups, (ii) none of such items of the Companies' inventory is
obsolete and (iii) each item of such inventory reflected on the
Financial Statements and the books and records of each of the Companies
is so reflected on the basis of a complete physical count and is valued
at the lower of cost or market in accordance with GAAP.
(S) TRANSACTIONS WITH RELATED PARTIES. Except as disclosed in
Schedule 3.01(S) attached hereto, there have been no payments or
transactions between the Companies (or any of them) and any Person who
controls, is controlled by, or is under common control with the
Companies (or any of them) or the Shareholder or otherwise affiliated
with the Companies (or any of them) or the Shareholder. Except as
disclosed in Schedule 3.01(S) attached hereto, no officer, director,
shareholder or member of the Companies or the Shareholder, nor any
spouse, children, parent of either of them, has any direct or indirect
interest in any competitor, supplier or customer of the Business.
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(T) 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 Polluting
Substances (hereafter defined) in effect on the date of this Agreement
or the Closing Date. For the purposes of this Agreement, Polluting
Substance means any solid or hazardous waste, hazardous substance,
pollutant, contaminant, oil, petroleum product, commercial product or
other substance (i) which is listed, regulated or designated as toxic or
hazardous (or words of similar meaning or regulatory effect) or with
respect to which remediation or cleanup obligations may be imposed under
any Environmental Law or (ii) exposure to which may pose a safety or
health hazard. Except as set forth on Schedule 3.01(T) attached hereto:
(i) The Companies are each in compliance in all material respects
with all applicable Environmental Laws and have obtained and are in
material 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 in the manner now conducted or which would
interfere in any material respect with the Companies' (or any of their)
compliance with Environmental Laws or constitute a violation thereof
including any prior release or discharge of any Polluting Substance that
could have a Company Material Adverse Effect.
(ii) None of the Companies have leased, operated or owned any
facilities or real property with respect to which the Companies (or any
of them) are subject to any actual or, to the knowledge of the Companies
and the Shareholder, potential action, claim, investigation, review or
other proceeding before any governmental, judicial or regulatory body,
under any Environmental Law.
(iii) None of the Companies have sent Polluting Substances to any
off-site commercial waste management facilities for re-use, recycling,
reclamation, treatment, storage or disposal.
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(iv) None of the Companies are subject to any actual or, to the
knowledge of the Sellers and the Shareholder, potential proceeding for
violation of any Environmental Law with respect to any such facility
presently or previously used by the Companies (or any of them).
(v) There are no Polluting Substances in any inactive, closed or
abandoned storage or disposal areas or facilities or property currently
or in the past leased, operated or owned by the Companies (or any of
them).
(vi) No property currently, or in the past, leased operated or
owned by the Companies (or any of them) or their predecessors, is
subject to actual or, to the knowledge of the Sellers and the
Shareholder, potential investigation by federal, state or local
officials or private litigation as a result of any previous on-site
management, treatment, storage or disposal of Polluting Substances.
(vii) There are no above ground or underground storage tanks located
on any property owned, leased or operated by the Companies (or any of
them).
(viii) Except in compliance with all Environmental Laws (including,
without limitation, the obtaining of all necessary Permits), no
Polluting Substances have been used, generated, manufactured, stored or
treated, or disposed of, landfilled or in any other way released (and no
release is threatened), on or about any property owned, operated or
leased by the Companies or transported to such Property.
(ix) There are no obligations, undertakings, or liabilities arising
out of or relating to failure to comply with or violation of any
Environmental Laws which the Companies (or any of them) have agreed to,
assumed or retained, or indemnified a third party against, by the
contract or otherwise.
The representations and warranties contained in this Section 3.01(T)
are intended to be the sole representations and warranties of the
Sellers and the Shareholder with respect to compliance by the Companies
with Environmental Laws.
(U) ACCOUNTS RECEIVABLE. Each account receivable reflected on the
Financial Statements constitutes a bona fide receivable resulting from a
bona fide sale to a customer in the ordinary course of business, the
amount of which was actually due on the date thereof. The books and
records of the Companies state correctly the facts with respect to each
account receivable of the Companies and the balance due thereon. Each
payment reflected on such books or records as having been made to each
such account
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receivable was made by the respective account debtor and not directly or
indirectly by any director, officer, employee or agent of the Companies
unless such person is shown on said books and records as such account
debtor and as set forth on Schedule 3.01(U) attached hereto. To the
best of the Sellers' and the Shareholder's knowledge, each document and
instrument evidencing, securing or relating to each account receivable,
is correct and complete in all respects, is genuine and valid and is
enforceable in accordance with its terms, and is not subject to any
defense, claim of disability, counterclaim or offset and there is no
threatened, intended or proposed defense, claim of disability,
counterclaim or offset with respect thereto. To the best of the Sellers'
and the Shareholder's knowledge, each account receivable and each
document and instrument and each transaction underlying or relating to
it conforms in all material respects, including, without limitation, in
respect of interest rates charged, notices given and disclosures made,
to the requirements and provisions of each applicable law, rule,
regulation or order relating to credit, consumer credit, credit
practices, credit advertising, credit reporting, retail installment
sales, credit cards, collections, usury, interest rates and
truth-in-lending, including, without limitation, the Federal Truth in
Lending Act, as amended and Regulation Z issued by the Board of
Governors of the Federal Reserve System thereunder.
(V) CUSTOMERS AND SUPPLIERS. Except for matters that will not have
a Company Material Adverse Effect, no supplier or customer of the
Companies has advised the Companies (or any of them) or the Shareholder
formally or informally, that such customer or supplier intends to
terminate, discontinue or substantially reduce its business with the
Business and the occurrence of the Closing is not expected to adversely
affect such relationship.
(W) IMPROPER PAYMENTS. Neither the Companies, the Shareholder nor
any officer, agent or employee of the Companies or the Shareholder nor
any distributor or licensee of any of the foregoing, nor any other
person (including, without limitation, the Companies or an affiliate of
the Companies) acting on behalf of the Companies, or the Shareholder, in
any case for which such action may be attributable to the Companies (or
any of them) or the Shareholder, has directly or indirectly, on behalf
of or with respect to the Companies (or any of them) or the Shareholder,
except as listed on Schedule 3.01(W) attached hereto, (i) made any
illegal or unlawful political contributions, (ii) made any payment which
was not legal to make or which the Companies or the Shareholder should
have known was not legal for the payee to receive, (iii) received any
payment which was not legal to receive or which such Seller or the
Shareholder should have known was not legal for the payor to make, (iv)
had any material transaction or payment which is not properly booked in
accordance with GAAP, (v) had any off-book bank or cash accounts or
"slush funds" of which the Companies (or any of them) or the Shareholder
were the
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beneficial owner, or (vi) given or agreed to give any material gift to
any customer, supplier, government employee or other Person which (a) if
not given in the past, might have had a Company Material Adverse Effect
or (b) if not continued in the future, might materially adversely affect
the assets, business, sales, properties, condition (financial or
otherwise) or prospects of the Companies (or any of them) or the
Business.
(X) NO BROKER. Other than a payment to the Reed Group, all
negotiations on behalf of the Sellers relating to this Agreement and the
transactions contemplated by this Agreement have been carried on by the
Sellers and their agents directly with Purchaser without the
intervention of any other person in such manner as to give rise to any
claim against Purchaser or its affiliates, Sellers or their affiliates
for a brokerage commission, finder's fee or other like payment in
connection with the consummation of the transactions contemplated hereby.
(Y) WARRANTY CLAIMS. Neither of the Sellers nor the Shareholder
know or have reason to know of any existing or threatened material
claims, or any facts upon which a claim could be based against Companies
(or any of them) for any products or materials sold by the Companies (or
any of them) prior to the Closing Date which are defective or fail to
meet any service or product warranties. The total amount of warranty
claims asserted against the Companies (or any of them) Companies during
the last three (3) years prior to the date of this Agreement is listed
on Schedule 3.01(Y) attached hereto.
(Z) SOLVENCY. Neither of the Sellers are now insolvent, nor will
any of the Sellers be rendered insolvent by the occurrence of the
transactions contemplated by this Agreement. In addition, immediately
after giving effect to the consummation of the transactions contemplated
by this Agreement, (1) the Sellers each will be able to pay its debts as
they become due, (2) the property of each Seller does not and will not
constitute unreasonably small capital, and each Seller will not have
unreasonably small capital and will not have insufficient capital with
which to conduct its present or proposed business and (3) taking into
account pending and threatened litigation, final judgments against such
Seller in actions for money damages are not reasonably anticipated to be
rendered at a time when, or in amounts such that such Seller will be
unable to satisfy any such judgments promptly in accordance with their
terms (taking into account the maximum probable amount of such judgments
in any such actions and the earliest reasonable time at which such
judgments might be rendered). The cash available to each Seller, after
taking into account all other anticipated uses of the cash of the
Sellers will be sufficient to pay all such judgments promptly in
accordance with their terms. As used in this Section 3.01(Z), (x)
"insolvent" means, for any Person, that the sum of the present fair
saleable value of its assets does not
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and/or will not exceed its debts and other probable liabilities, and (y)
the term "debts" includes any legal liability, whether matured or
unmatured, liquidated or unliquidated, absolute, fixed or contingent,
disputed or undisputed or secured or unsecured.
(AA) LIST OF BANK ACCOUNTS. Set forth on Schedule 3.01(AA) attached
hereto is true and complete list of all depositary accounts maintained
by the Sellers and a list of depositary institutions at which the
Sellers (or either of them) maintain an account or deposit of any kind.
(AB) COMPLETENESS OF SCHEDULES AND EXHIBITS; FULL DISCLOSURE. The
schedules and exhibits attached hereto, where provided by or on behalf
of the Sellers or the Shareholder present in all material respects the
information required by this Agreement to be set forth therein. No
representation or warranty by the Sellers or the Shareholder herein and
no information disclosed in the schedules and exhibits hereto supplied
by the Sellers or the Shareholder contains any untrue statement of a
material fact or omits to state a material fact necessary to make the
statements contained herein or therein not misleading.
3.02 REPRESENTATIONS AND WARRANTIES BY PURCHASER AND THE PARENT.
The Purchaser and the Parent, on a joint and several basis, hereby
represent and warrant to Sellers and the Shareholder that:
(A) ORGANIZATION AND EXISTENCE. The Purchaser is a corporation
validly existing and in good standing under the laws of the State of
Delaware. The Parent is a corporation validly existing and in good
standing under the laws of the State of Oklahoma. The Parent is duly
licensed or qualified to do business as a foreign corporation and is in
good standing under the laws of any other state of the United States in
which the character of the properties owned or leased by it or in which
the transaction of its business makes such qualification necessary,
except where the failure to be so qualified or to be in good standing
would not have a material adverse effect on the business, results of
operations or financial condition of Parent and its Subsidiaries taken
as a whole (a "Parent Material Adverse Effect"). Parent has all
requisite corporate power and authority to own, operate and lease its
properties and carry on its business as now conducted. Each of Parent's
Significant Subsidiaries is a corporation or partnership duly organized,
validly existing and in good standing under the laws of its jurisdiction
of incorporation or organization, has the corporate or partnership power
and authority to own its properties and to carry on its business as it
is now being conducted, and is duly qualified to do business and is in
good standing in each jurisdiction in which the ownership of its
property or the conduct of its business requires such qualification,
except for jurisdictions in which such failure to be so qualified or to
be in
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good standing would not have a Parent Material Adverse Effect. Neither
Parent nor any Parent Subsidiary is in violation of any order of any
court, governmental authority or arbitration board or tribunal, or any
law, ordinance, governmental rule or regulation to which Parent or any
of its Subsidiaries or any of their respective properties or assets is
subject, where such violation would have a Parent Material Adverse
Effect. Parent and its Subsidiaries have obtained all licenses, permits
and other authorizations and have taken all actions required by
applicable law or governmental regulations in connection with their
business as now conducted, where the failure to obtain any such item or
to take any such action would have a Parent Material Adverse Effect.
The copies of Parent's Certificate of Incorporation and Bylaws
previously delivered to Company are true and correct.
(B) AUTHORITY AND APPROVAL. The Purchaser and the Parent each
have all requisite power and authority to execute and deliver this
Agreement, to consummate the transactions contemplated hereby and to
perform all the terms and conditions hereof to be performed by it. The
execution and delivery of this Agreement by the Purchaser and the
Parent, the performance of it of all the terms and conditions hereof to
be performed by it and the consummation of the transactions contemplated
hereby have been duly authorized and approved by all requisite action on
the part of the Purchaser and the Parent. This Agreement constitutes
the valid and binding obligation of the Purchaser and the Parent
enforceable against the Purchaser in accordance with its terms except as
such enforceability may be limited by bankruptcy, insolvency,
moratorium, reorganization or laws affecting the rights of creditors
generally or by general equitable principles (whether or not such
enforceability is considered in connection of a proceeding at law or in
equity).
(C) SEC REPORTS. The Parent has filed in a timely fashion 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, 1995 (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 Parent 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
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under the Securities Exchange Act of 1934 ("Exchange Act"). Except as
reflected in the SEC Reports, the Parent 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 Parent does not have
any knowledge of any basis for the existence of or the assertion against
the Parent of any such liability, obligation or claim as of such date.
The income of the Parent as reflected in the SEC Reports consists solely
of ordinary operating profits and none of such income consists of (i)
income from a source other than operations of the business of the Parent
and its Subsidiaries or (ii) a transaction outside the ordinary course
of business of the Parent (whether or not such transaction would
otherwise be considered extraordinary under GAAP).
(D) ABSENCE OF CERTAIN CHANGES. Except as disclosed in the SEC
Reports, since December 31, 1996, the Parent has conducted its business
in the ordinary and usual course in all material respects and there has
not been any material adverse change in the financial condition,
properties, business, results of operations or prospects of the Parent.
Except as set forth on Schedule 3.02(D) attached hereto, since December 31,
1996, there has not been:
(i) any material adverse change in the business, properties,
assets of the Parent;
(ii) any damages, destruction or loss, whether covered by insurance
or not, which has had, or might be expected to have, a material adverse
effect on the Parent;
(iii) any material change by the Parent in accounting methods or
principles which would be required to be disclosed under GAAP;
(iv) other than in connection with the exercise of stock options,
any issuance by the Parent or any of them of any shares of capital stock;
(v) any sale, lease or other disposition of properties and assets
of the Parent, except in the ordinary course of business;
(vi) any merger or consolidation of the Parent with any other
corporation, partnership, limited liability company, person or entity or
any acquisition by the Parent of the stock or business of another
corporation, partnership, limited liability company or other entity;
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(vii) any borrowing, or agreement to borrow funds, by the Parent or
any termination or material amendment of any evidence of indebtedness,
contract, agreement, deed, mortgage, lease, license or other instrument,
commitment or agreement to which the Parent is bound or by which its
properties are bound is material to the business, condition (financial
or otherwise), results of operation or prospects of the Parent and its
Subsidiaries taken as a whole;
(viii) any declaration or payment of any dividend on, or any other
distribution with respect to, the equity securities of the Parent;
(ix) any material increase in the compensation payable or to become
payable by the Parent to the directors, officers or employees of the
Parent, or any increase in benefits or benefit plan costs (other than
costs outside of the control of the Parent), or any increase in any
bonus, insurance, pension, compensation or other benefit plan made for
or with or covering any directors, officers or directors;
(x) any reclassification of any asset or liability;
(xi) any material amendment, modification, or termination of any
contract, agreement, plan or commitment;
(xii) any mortgage, pledge, grant of any lien or security interest
or other encumbrance of any asset of the Parent;
(xiii) any waiver or release of any right or claim of the Parent that
singly, or in the aggregate, is material to the business, assets,
condition (financial or otherwise), results of operation or prospects of
the Parent and its Subsidiaries taken as a whole;
(xiv) any significant labor trouble or any damage, destruction or
loss of property by fire or other casualty, whether or not covered by
insurance, adversely affecting the property, assets, condition
(financial or otherwise), prospects of the Parent and its Subsidiaries
taken as a whole or any related property;
(xv) removal, from any building, facility or real property of any
of the assets of the Parent or its Subsidiaries; or
(xvii) any contract, understanding or commitment to do any of the
foregoing.
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(E) LITIGATION. Except as disclosed in the SEC Reports, there is
no claim, suit, action or proceeding pending or, to the knowledge of the
Parent, threatened against or affecting the Purchaser or the Parent
which can reasonably be expected to affect materially and adversely the
business, properties, financial condition or prospects of the Purchaser
or the Parent. There is no outstanding order, writ, injunction or
decree or, to the knowledge of the Purchaser and the Parent, 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 Purchaser, the Parent or
their properties, assets or business, franchises, licenses or permits
under which it operates.
(F) TAXES. Parent and each of its Subsidiaries (i) have timely
filed all material federal, state and foreign tax returns required to be
filed by any of them for tax years ended prior to the date of this
Agreement or requests for extensions have been timely filed and any such
request shall have been granted and not expired, and all such returns
are complete in all material respects, (ii) have paid or accrued all
taxes shown to be due and payable on such returns, (iii) have properly
accrued all such taxes for such periods subsequent to the periods
covered by such returns, and (iv) have "open" years for federal income
tax returns only as set forth in the Schedule 3.02(F) attached hereto.
(G) COMPLIANCE WITH LAWS. The Parent 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 Parent Material Adverse Effect.
(H) CONTRACTS, AGREEMENTS, PLANS AND COMMITMENTS. Schedule 3.02(H)
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 Parent or its Subsidiaries are a party or by which the Parent,
its Subsidiaries or any of their assets or properties are bound as of
the date hereof (the "Parent Contracts"). For the purposes of this
Section 3.02(H), a contract shall be considered material if such
contract or any series of similar contracts involving the same subject
matter involves $100,000 or more in services to be rendered or
obligations during any twelve month period. Also set forth on Schedule
3.02(H) is a list of all agreements for the provision of compression
services by the Parent identifying the horsepower or type of equipment
being leased, the amount of the rental for such contract and the term of
such contract, provided, however that until the Customer Disclosure
Date, such schedule will not include any information concerning the
location of such equipment or the identity of the customer of the Parent
with respect to such contract. The Parent and its
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Subsidiaries 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
Parent and its Subsidiary and to best knowledge of the Parent of each
other Person that is a party thereto enforceable against each party in
accordance with their terms, except as such enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting the rights of creditors generally and by general
equitable principles (whether or not such enforceability is considered
in a proceeding at law or in equity). To the best of the Parent's
knowledge, the Contracts 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 conducted.
(I) EMPLOYEE BENEFIT MATTERS.
(i) Schedule 3.02(I) 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 "Parent
Plan") by the Parent, 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 Code of which the Parent or any of the Subsidiaries is a member.
(ii) The Parent has delivered to the Company current, accurate and
complete copies of each Parent 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 Parent Plan; (b) Form 5500; (c) attorneys'
response to an auditor's request for information for any Parent 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 Parent Plan.
(iii) With respect to each Parent Plan: (a) each Parent 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 Parent 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
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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).
(iv) Neither the Parent nor any 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 Parent Plan which is an employee welfare
benefit plan (within the meaning of ERISA Section 3(1)): (a) each and
every Parent 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 Parent Plan
(including any Parent Plan covering former employees of the Parent) may
be amended or terminated by the Parent or any Subsidiary on or at any
time after the Closing Date.
(vi) Neither the Parent nor any Subsidiary maintains any
post-retirement health and life insurance plans for employees and
retirees.
(J) ENVIRONMENTAL COMPLIANCE. Except as set forth on Schedule
3.02(J) attached hereto:
(1) The Parent and each of its Subsidiaries 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 Parent or any of its
Subsidiaries in the manner now conducted or which would interfere in any
material respect with the Parent's or any of its Subsidiaries'
compliance with Environmental Laws or constitute a violation thereof.
(2) Neither the Parent nor any of its Subsidiaries has leased,
operated or owned any facilities or real property with respect to which
the Parent or such Subsidiary is subject to any actual or, to the
knowledge of the Parent, after due inquiry, potential action, claim,
investigation, review or other proceeding before any governmental,
judicial or regulatory body, under any Environmental Law.
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(3) Except as discussed in Schedule 3.02(J), neither the Parent
nor any of its Subsidiaries has sent Hazardous Substances to any offsite
commercial waste management facilities for reuse, recycling,
reclamation, treatment, storage or disposal.
(4) Neither the Parent nor any of its Subsidiaries is subject to
any actual, or, to the knowledge of the Parent, after due inquiry,
potential proceeding under any Environmental Law with respect to any
such facility presently or previously used by the Company, or any of its
Subsidiaries.
(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 Parent or any or its
Subsidiaries.
(6) No property currently, or in the past, leased operated or
owned by the Parent or any of its Subsidiaries is subject to actual or,
to the knowledge of the Parent, 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 above-ground or underground storage tanks located
on any property owned or leased by the Parent or any Subsidiary.
(K) INSURANCE. Schedule 3.02(K) attached hereto sets forth a list
of all insurance policies of the Parent by which the Parent, its
Subsidiaries or any of their assets or properties have been covered for
the last three (3) years and those policies which are now in full force
and effect. The Parent agrees to use its best efforts to maintain the
existing policies (which are presently in force) in full force and
effect at all times from the date of this Agreement until the Closing
Date. The insurance policies set forth on Schedule 6.15 attached hereto
provide insurance against the risks involved in the operation of the
business of the Parent and its Subsidiaries which are standard in the
industry. Neither the Parent nor any or its Subsidiaries have received
notice from any insurance carrier of the intention of such carrier to
discontinue any insurance coverage afforded to the Parent or any of its
Subsidiaries.
(L) PATENTS, TRADEMARKS AND COPYRIGHTS. Schedule 3.02(L) attached
hereto includes a true and complete list and description of all
Intellectual Property applied for, issued to, or owned or used by Parent
or any of its Subsidiaries or under which any of the Parent or its
Subsidiaries are licensed or franchised. Each of the Parent and its
Subsidiaries possess full rights, licenses or other
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authority to use all such Intellectual Property. All licenses are in
full force and effect and constitute legal, valid and binding
obligations of the parties thereto, and there has not been any default
or alleged default (or any event or condition which with notice, lapse
of time or both would become a default) thereunder. Provided the
consents described in Schedule 6.16 attached hereto are obtained, the
occurrence of the Closing will not affect the validity, continuation or
effectiveness of any such rights on their present terms. Each of the
Parent and its Subsidiaries own or hold adequate licenses or other
rights to use all Intellectual Property necessary for the conduct of
their business as it has been and is now conducted, and that use does
not and will not conflict with, infringe on or otherwise violate any
rights of others. None of the Parent or its Subsidiaries have received
notice, or have knowledge of, any infringements or unauthorized or
unlawful use of such Intellectual Property by themselves or others or
any allegation that they have infringed similar properties of others.
(M) PERMITS. Schedule 3.02(M) attached hereto includes a true and
complete list of all material Permits or the Parent and its Subsidiaries
(the "Parent Permits"). The Parent Permits are in full force and effect
and comprise all the governmental authorizations necessary or desirable
for the lawful conduct of the Business as it has been and is now
conducted.
(N) PERSONNEL DATA; LABOR RELATIONS.
(i) Schedule 3.02(N) attached hereto is a list of all employees of
the Parent and its Subsidiaries, their current rates of compensation,
their length of service with the Parent or the applicable Subsidiaries,
and a complete and accurate description of all practices, policies,
understandings and agreements with such persons relating to their
employment. All contracts and arrangements with employees are in full
force and effect, and neither the Parent, any Subsidiary nor any other
person is in default under either of them. Each of the Parent and its
Subsidiaries in the conduct of their affairs and business have each
complied in all material respects with all applicable laws and
regulations relating to the employment of labor including those related
to wages, hours, discrimination, employee pension and welfare benefit
plans, collective bargaining, and the payment of Social Security or
similar taxes, and each of the Parent and its Subsidiaries have withheld
and paid to the appropriate governmental authority, all amounts required
by law or agreement to be withheld from wages or salaries of such
employees. All increases in compensation during the eighteen month
period prior to the execution of this Agreement are described on
Schedule 6.18.
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(ii) There is no pending, or, to the Parent's knowledge, any
threatened labor dispute, strike or lockout, slow-down, stoppage, unfair
labor practice complaint, grievance procedure or arbitration proceeding
relating to the Parent or any of its Subsidiaries or affecting their
respective business. No representation question now exists respecting
the Parent or any of its Subsidiaries and no collective bargaining
agreement is currently being negotiated. Neither the Parent nor any of
its Subsidiaries have received any notification of any unfair labor
practices charges or complaints pending before any agent having
jurisdiction over any of the Parent or its Subsidiaries. The Parent is
not aware of any union organizing activities or proceedings involving,
or act pending petition for the recognition of, a labor union or
association as the exclusive bargaining agent for any group or groups of
employees of the Parent or any of its Subsidiaries.
(iii) Attached hereto as Schedule 6.18(ii) are copies of all
Occupational Safety and Health Administration ("OSHA") reports having to
do with the Parent and each of its Subsidiaries, their operations or
their business and received by the Parent or any Subsidiary during the
last twelve months. No other oral or written complaints or notices have
been received from OSHA, and no other complaints, or notices have been
received from other regulatory agencies or offices having jurisdiction
over the Parent or any or its Subsidiaries during the last twelve month
period.
(O) BROKERS. All negotiations on behalf of the Purchaser and the Parent
relating to this Agreement and the transactions contemplated by this
Agreement have been carried on by the Parent, the Purchaser, the Companies,
the Shareholder and their agents directly with the Sellers, the Shareholder,
the Parent and the Purchaser without the intervention of any other person in
such manner as to give rise to any claim against the Sellers or the Purchaser
or their affiliates for a broker's commission, finder's fee or like payment
in connection with the consummation of the transactions contemplated herein.
(P) NO VIOLATION. Neither the execution and delivery of this Agreement
by the Parent or the Purchaser, nor the consummation by the Parent or the
Purchaser of the transactions contemplated by this Agreement shall conflict
with or result in the breach of, or constitute a default under, or result in
the creation or imposition of any lien, charge or encumbrance of any nature
upon the properties or assets of the Purchaser or the Parent under any of the
terms, conditions or provisions of its charters or bylaws or any similar
corporate documents of the Purchaser or the Parent or of any mortgage,
indenture, deed of trust, loan or credit agreement or other agreement or
instrument to which the Purchaser or the Parent are a party or by which such
person or its properties are
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bound, in each case where such would have a material adverse effect upon the
business, as currently conducted, the results of operations, condition
(financial or otherwise) or prospects of the Purchaser and the Parent taken
as a whole.
(Q) IMPROPER PAYMENTS. Neither the Parent, the Purchaser nor any
officer, agent or employee of the Parent or the Purchaser nor any distributor
or licensee of any of the foregoing, nor any other Person (including, without
limitation, any affiliate of the Parent) acting on behalf of the Parent, in
any case for which such action may be attributable to the Parent has directly
or indirectly, on behalf of or with respect to the Parent, except as listed
on Schedule 3.02(Q) attached hereto, (i) made any illegal or unlawful
political contributions, (ii) made any payment which was not legal to make or
which the Parent should have known was not legal for the payee to receive,
(iii) received any payment which was not legal to receive or which the Parent
should have known was not legal for the payor to make, (iv) had any material
transaction or payment which is not properly booked in accordance with GAAP,
(v) had any off-book bank or cash accounts or "slush funds" of which the
Parent was the beneficial owner, or (vi) given or agreed to give any material
gift to any customer, supplier, government employee or other Person which (a)
if not given in the past, might have had a Parent Material Adverse Effect or
(b) if not continued in the future, might adversely affect the assets,
business, sales, properties, condition (financial or otherwise) or prospects
of the Parent.
(R) COMPLETENESS OF SCHEDULES AND EXHIBITS; FULL DISCLOSURE. The
schedules and exhibits attached hereto, where provided by or on behalf of the
Purchaser or the Parent completely and correctly present in all material
respects the information required by this Agreement to be set forth therein.
No representation or warranty by the Parent or the Purchaser herein and no
information disclosed in the schedules and exhibits hereto supplied by the
Purchase or the Parent contains any untrue statement of a material fact or
omits to state a material fact necessary to make the statements contained
herein or therein not misleading.
ARTICLE IV
ADDITIONAL AGREEMENTS AND COVENANTS
4.01 COVENANTS OF THE SELLERS. The Sellers and the Shareholder, on a
joint and several basis, covenant and agree with the Purchaser and the Parent
as follows:
(A) CERTAIN CHANGES. Except as expressly may be permitted or
contemplated hereunder or under the Merger Agreement, or set forth in the
schedules attached hereto, the Sellers covenant that, from the date hereof
until the Closing Date, without first obtaining the
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written consent of the Purchaser, the Companies will not and the Shareholder
shall not cause the Sellers, or the Business to:
(i) make any material change in the conduct of their business or
operations;
(ii) engage in any activity or transaction outside the ordinary
course of business;
(iii) terminate, amend, modify or change any Scheduled Contract,
Lease or agreement required to be disclosed pursuant to Sections 3.01(J)
or (L) other than in the ordinary course of business;
(iv) declare, set aside or pay any dividends, or make any
distributions, in respect to its equity securities, or repurchase,
redeem or otherwise acquire any such securities;
(v) merge into or with or consolidate with any other person or
acquire all or substantially all of the business or assets of any other
Person;
(vi) make any change in its articles of incorporation or bylaws or
equivalent governing instruments;
(viii) increase or decrease the indebtedness of the Companies (or any
of them) or their affiliates except for indebtedness incurred in the
ordinary course of business consistent with prior practices;
(ix) other than pursuant to existing contracts or commitments,
sell, lease or otherwise dispose of any of the Property, other than in
the ordinary and usual course of business;
(x) grant any increase in compensation or pay or agree to pay or
accrue any bonus or like benefit to or for the benefit of any director,
officer, employee or other Person, provided that the Sellers may
continue to pay their field personnel bonuses in accordance with the
Sellers' past practices;
(xi) file any motion, order, brief, settlement offer or other
papers in any proceedings;
(xii) enter into any single agreement or agreements of similar
nature with the same party or its affiliates are outside of the ordinary
course of business or which involves
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capital expenditures of $200,000 for any single transaction or $500,000 in
the aggregate; or
(xiv) commit itself to do any of the foregoing.
(B) OPERATION OF BUSINESS. The Sellers and the Shareholder covenant and
agree with the Purchaser and the Parent that from the date hereof until the
Closing Date, except as permitted hereunder or contemplated hereunder or as
consented to in writing by Purchaser, the Companies shall carry on their
respective business in the usual and ordinary course and shall use their best
efforts to preserve and maintain their business organization, employees and
advantageous business relationships.
(C) ACCESS. Subject to the terms of the Confidentiality Agreement, the
Sellers will each afford to the Purchaser, the Parent and their authorized
representatives access from the date hereof until the Closing Date, during
normal business hours, to the Sellers' personnel, agents and representatives,
property, books and records and will cause the Companies to furnish to the
Purchaser and the Parent any and all information as such Party may request.
The Companies will cooperate with the Purchaser's accountants who will be
conducting and auditing of historical financial information of the Companies.
The Purchaser shall have the right at its sole cost to conduct soil borings
and tests to determine the geologic subsurface and any possible existence of
toxic and hazardous materials on, about or under the Real Property and,
subject to the consent of the applicable landowner, any Property leased by
the Companies. The Purchaser intends to conduct and the Companies and the
Shareholder shall permit the Purchaser or its representative to conduct a
Phase I Environmental Assessment of the Real Property and, subject to the
consent of the applicable landowner, the other property leased by the
Companies on or before the Closing Date and if such Phase I Environmental
Assessment indicates any potential problems, then the Purchaser may conduct
further tests and the Sellers and the Shareholders shall permit the Purchaser
to conduct such assessments.
(D) REASONABLE COMMERCIAL EFFORTS. The Sellers and the Shareholder will
use reasonable commercial efforts to obtain the satisfaction of the
conditions to the Closing set forth in Section 5.01 hereof and the
consummation of the Merger as set forth in the Merger Agreement. In
addition, the Shareholder agrees (i) to use reasonable commercial efforts to
cause the shareholders and members of the Sellers to approve the transactions
contemplated by this Agreement on or before the Schedule Delivery Date and
(ii) to vote in favor of the transactions contemplated hereby.
Notwithstanding anything herein to the contrary, however nothing in this
Agreement shall limit the right of any Seller to terminate this Agreement in
accordance with Section 1.04 or the applicable provisions of Section 6.01.
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(E) CONFIDENTIALITY. After the Closing Date, (except as may be required
by the terms of Andy Payne's, Dan McCormick's or the Shareholder's employment
with the Purchaser under the Shareholder Employment Agreement (as hereinafter
defined) or any other employment agreement between the Purchaser and Andy
Payne, and between the Purchaser and Dan McCormick, or as may be necessary
for the Shareholder, Andy Payne or Dan McCormick to perform his duties under
any such contract) neither the Sellers (or either of them), Andy Payne, Dan
McCormick nor the Shareholder shall, directly or indirectly, disclose or
provide to any other Person any non-public information of a confidential
nature concerning the business or operations of the Companies or the
Business, except as is required in governmental filings or judicial,
administrative or arbitration proceedings, but if the Sellers, or the
Shareholder propose to make any disclosure in reliance on the foregoing
exception, Sellers shall, at least five (5) business days prior to such
disclosure, provide to Purchaser the information proposed to be disclosed to
such other person, as well as the facts and circumstances involved and the
reason Sellers, or the Shareholder are required to make such disclosure.
(F) PUBLIC ANNOUNCEMENTS. Subject to applicable securities law or stock
exchange requirements, at all times until the Closing Date, Sellers and the
Shareholder shall promptly advise, and obtain the approval of Purchaser
before issuing or permitting any of Companies' or the Shareholder directors,
officers, employees or agents to issue any press release with respect to this
Agreement or the transactions contemplated hereby.
(G) NOTICE. The Sellers and the Shareholder shall each give written
notice to the Purchaser and the Parent promptly after the Sellers and the
Shareholder obtain knowledge of the occurrence, or promptly after receipt by
the Sellers, the Shareholder or any of their respective affiliates of any
notice claiming or alleging the occurrence of any event or omission which
would result in (i) any of Sellers' or the Shareholder's representations or
warranties being or becoming inaccurate or misleading or (ii) any breach by
Sellers (or either of them) or the Shareholder of this Agreement.
(H) NON-COMPETITION. During the five (5) year period following the
Closing Date (the "Non-Competition Period"), the Sellers and the Shareholder
each agree that such Party shall not, directly or indirectly, either as an
employee, employer, consultant, agent, lender, principal, partner,
stockholder, corporate officer, director or in any other individual or
representative capacity, engage or participate (whether directly or
indirectly) in any compression services business that is in competition in
any manner whatsoever with the Business, in the states of Texas, Arkansas,
Kansas, Oklahoma and the parishes in Louisiana listed on Schedule 4.01(H)
attached hereto; provided, however, that this Section 4.01(H) shall not
prohibit the
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Shareholder from owning 5% or less of the stock of a public company engaged
in the compression services business. Notwithstanding any provision of this
Agreement to the contrary, if the Shareholder is terminated without cause
under the Shareholder Employment Agreement, then the covenant not to compete
set forth herein shall terminate one year following such termination without
cause.
(I) NON-SOLICITATION AND NON-HIRING. During the Non-Competition Period,
the Sellers and the Shareholder each agree (i) not to, directly or
indirectly, call on or solicit, for the purposes of engaging in activity that
could be competitive with the Business on the Closing Date, any Person, firm,
corporation or other entity who or which during the last five years prior to
the action by the Sellers and the Shareholder which is in violation of this
Section 4.01(I) was or had been a customer, referral source, supplier,
distributor, of the Sellers, the Parent, the Purchaser, any of their
affiliates or the Business and (ii) not to hire or offer to hire any
employees of the Companies or the Business. Notwithstanding any provision of
this Agreement to the contrary, if the Shareholder is terminated without
cause under the Shareholder Employment Agreement, then the restriction set
forth herein shall terminate one year following such termination without
cause.
(J) REASONABLENESS OF RESTRICTIONS. The Sellers and the Shareholder
each agree that (1) the covenants contained in Sections 4.01(E), (H) and (I)
hereof are necessary (a) for the protection of the Purchaser's, the Parents
and their affiliates' business goodwill and trade secrets, and (b) for the
Purchaser to realize the benefits of this Agreement including the acquisition
of all of the goodwill of the Business and the Companies, (2) neither the
Sellers (or either of them) nor the Shareholder are, and under this
Agreement, will not be engaged in a common calling, and (3) if the scope of
any restriction contained in Sections 4.01(E), (H) and (I) hereof is too
broad to permit enforcement of such restriction to its full extent, then such
restriction shall be enforced to the maximum extent permitted by law, and the
Parties hereto hereby consent that such scope may be judicially modified
accordingly in any proceeding brought to enforce such restriction. The
existence of any claim or cause of action of any of the Sellers or the
Shareholder against the Purchaser or the Parent, whether predicated on this
Agreement or otherwise, shall not constitute a defense to the enforcement by
the Purchaser or the Parent of these covenants.
(K) ENFORCEMENT. The Sellers and the Shareholder each acknowledges that
the restrictions contained in Sections 4.01(E), (H) and (I) hereof are (1)
reasonable and necessary to protect the legitimate interests of the
Purchaser, the Parent and their affiliates, (2) that the Purchaser and the
Parent would not have entered into this Agreement in the absence of such
restrictions, (3) that such restrictions are necessary for the Purchaser and
the Parent to realize the benefits contemplated by the Purchaser and
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the Parent of the Business, including the acquisition of the goodwill of the
Business and the Companies, (4) that the Purchaser would not consummate the
purchase of the Property but for such restrictions, and (5) that any
violation of any provision of those Sections will result in irreparable
injury to the Purchaser and the Parent. The Sellers and the Shareholder each
acknowledge that the Purchaser and the Parent each shall be entitled to
preliminary and permanent injunctive relief, which right shall be cumulative
and in addition to any other rights or remedies to which the Purchaser or the
Parent may be entitled, subject to the terms of the Indemnification
Agreement.
(L) EXCLUSIVITY. During the term of this Agreement neither the Sellers
nor the Shareholder shall solicit, entertain or negotiate with respect to any
offer to acquire the Sellers, the Business, the Property or the securities or
ownership interest of the Sellers from any other person. During the term of
this Agreement, neither the Sellers nor the Shareholder shall provide
information to any other person in connection with a possible acquisition of
the Sellers, the Business, the Property or the securities or ownership
interest of the Sellers. Immediately upon receipt of any such unsolicited
offer, the Sellers and/or the Shareholder will communicate the terms of any
proposal or request for information and the identity of parties involved.
(M) NAME CHANGE. At or immediately following the Closing, the Sellers
will change their names and no longer use the name "Ouachita" in their names.
4.02 COVENANTS OF THE PURCHASER. The Purchaser and the Parent, on a
joint and several basis, covenant and agree with the Sellers and the
Shareholder as follows:
(A) CERTAIN CHANGES. Except as expressly may be permitted hereunder, or
set forth in the schedules attached hereto, the Company covenants that, from
the date hereof until the Closing Date, without first obtaining the written
consent of the Shareholder, the Parent will not:
(i) make any material change in the conduct of its business or
operations;
(ii) engage in any activity or transaction outside the ordinary
course of business;
(iii) terminate, amend, modify or change any Scheduled Contract,
Lease or agreement required to be disclosed pursuant to this Agreement;
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(iv) declare, set aside or pay any dividends, or make any
distributions, in respect to its equity securities, or repurchase,
redeem or otherwise acquire any such securities;
(v) merge into or with or consolidate with any other person or
acquire all or substantially all of the business or assets of any other
Person;
(vi) make any change in its articles of incorporation or bylaws or
equivalent governing instruments;
(vii) purchase any securities of any Person;
(viii) increase or decrease the indebtedness of the Parent or its
Subsidiaries except for indebtedness incurred in the ordinary course of
business consistent with prior practices;
(ix) other than pursuant to existing contracts or commitments,
sell, lease or otherwise dispose of any of the Property, other than in
the ordinary and usual course of business;
(x) grant any increase in compensation or pay or agree to pay or
accrue any bonus or like benefit to or for the benefit of any director,
officer, employee or other Person;
(xi) file any motion, order, brief, settlement offer or other
papers in any proceedings;
(xii) enter into any single agreement or agreements of similar
nature with the same party or its affiliates outside the ordinary course
of business or which involves capital expenditures of $200,000 for any
single transaction or $500,000 in the aggregate; or
(xiv) commit itself to do any of the foregoing.
(B) OPERATION OF BUSINESS. The Parent covenants and agrees with the
Company and the Shareholder that from the date hereof until the Closing Date,
except as permitted hereunder or contemplated hereunder or as consented to in
writing by the Shareholder, the Parent and its Subsidiaries shall carry on
their respective business in the usual and ordinary course and shall use
their best efforts to preserve and maintain their business organization,
employees and advantageous business relationships.
(C) ACCESS. Subject to the term of that certain Confidentiality
Agreement, the Parent will afford to the Company, the Shareholder and their
authorized representatives access from the date hereof until the Closing
Date, during normal business hours, to the Parent's personnel, agents and
representatives,
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property, books and records and will cause the Parent's Subsidiaries to
furnish to the Company and the Shareholder any and all information as such
Party may request.
(D) REASONABLE COMMERCIAL EFFORTS. The Purchaser and the Parent will
each use reasonable commercial efforts to obtain the satisfaction of the
conditions to the Closing set forth in Section 5.02.
(E) PRESERVATION OF BOOKS AND RECORDS. For a period of five (5) years
after the Closing Date, the Purchaser shall (1) preserve and retain the
corporate, accounting, legal, auditing and other books and records of the
Companies relating to any governmental or non-governmental actions, suits,
proceedings, or investigations arising out of the conduct of the business and
operations of the Companies prior to the Closing Date in which the Companies
and the Shareholder are a party, and (2) make such books and records
available at the then current administrative headquarters of Purchaser to the
Sellers, the Shareholder and their officers, employees and agents, upon
reasonable notice and at reasonable times, at such parties sole risk and
cost. The Sellers and the Shareholder shall be entitled to make copies of any
such books and records as that shall deem necessary at their sole cost and
expense. The Purchaser agrees to permit representatives of the Sellers or
the Shareholder to meet with employees of the Purchaser on a mutually
convenient basis in order to enable the Sellers or the Shareholder to obtain
additional information and explanations of any materials provided pursuant to
this Section 4.02(E). If any such records are to be destroyed by the
Purchaser or the Parent after the aforementioned five year period, the
Purchaser or the Parent, as the case may be, shall first offer such records
to the Shareholder and shall return the same to him should he so desire.
(F) PUBLIC ANNOUNCEMENTS. Subject to applicable securities law or stock
exchange requirements, at all times until the Closing Date, the Purchaser
shall promptly advise, and obtain the approval of the Sellers before issuing,
or permitting any of the Purchaser's directors, officers, employees or
agents, or any of the Purchaser's subsidiaries, to issue any press release
with respect to this Agreement or the transactions contemplated hereby.
(G) CONFIDENTIAL INFORMATION. In the event that the Agreement is
terminated or, if not terminated, until the Closing Date, the confidentiality
of any data or information received by Purchaser regarding the business and
assets of the Companies shall be maintained by Purchaser and their
representatives in accordance with the Confidentiality Agreement, provided,
however, that nothing in this Section 5.02(D) shall prohibit the Purchaser
from making any press release or filings required, in the opinion of the
Purchaser, under the securities laws with respect to the transactions
contemplated in the Agreement.
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(H) CONDUCT OF BUSINESS. The Parent and the Purchaser are currently
engaged only in the businesses disclosed in its current SEC Reports and have
no intentions to engage in any different lines. For a period ending at the
earlier of (a) four (4) years from the Closing Date, or (b) such time that
the Shareholder (including his ex-spouse and his children) owns less than
fifteen per cent (15%) of the Parent Common Stock, Parent agrees not to enter
any new line of business outside the compression services business and any
business reasonably related thereto or to expand through a substantial
investment or series of investments the domestic oil and gas exploration
business of the Parent, as described in the Parent's most recent 10-K annual
report, without the written prior approval of the Shareholder, which approval
will not be unreasonably withheld.
(I) GUARANTEE OF COMPRESSOR LEASES. Following the Closing, the
Purchaser will use reasonable efforts to cause the lessors on three equipment
leases described on Schedule 4.02(I) to release the guarantee of the
Shareholder and if the Purchaser is unsuccessful in obtaining such release,
then the Purchaser shall indemnify and hold the Shareholder harmless from any
liability due to such guarantees.
ARTICLE V
CONDITIONS TO CLOSING
5.01 CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER AND THE PARENT. The
obligations of the Purchaser and the Parent to proceed with the Closing are
subject to the satisfaction on or prior to the Closing Date of all of the
following conditions, any one or more of which may be waived in writing, in
whole or in part, by the Purchaser and the Parent; provided, however, that no
such waiver of a condition shall constitute a waiver by the Purchaser or the
Parent of any of their other rights or remedies, at law or in equity, if the
Sellers (or either of them) or the Shareholder shall be in breach or default
of any of such Party's representations, warranties or covenants under or
contained in this Agreement:
(A) COMPLIANCE. The Sellers and the Shareholder shall each have
performed, satisfied and complied with their respective covenants and
agreements contained herein, each of their representations and warranties
contained in Section 3.01 hereof shall be true on and as though made on and
as of the Closing Date, and each of the conditions specified in this
Agreement has been satisfied on or before the Closing Date.
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(B) OFFICERS' CERTIFICATE. The Purchaser and the Parent shall have
received a certificate, dated the Closing Date from the chief executive
officer of each of the Sellers and the Shareholder certifying that the
matters specified in Section 5.01(A) are correct.
(C) LEGAL OPINION. Purchaser shall have received from the Sellers'
special counsel, Mayor, Day, Caldwell & Keeton and/or Sellers' Louisiana
counsel, Theus, Grisham, Davis & Leigh, an opinion dated the Closing Date in
form and substance satisfactory to the Parent and the Purchaser opining as to
the matters set forth on Exhibit D attached hereto.
(D) NO ORDERS. The Closing shall not violate any order or decree of any
court or governmental body having competent jurisdiction over the
transactions contemplated by this Agreement.
(E) SECRETARY'S CLOSING CERTIFICATE. The Purchaser and the Parent shall
have received a certificate dated the Closing Date in form and substance
reasonably satisfactory to the Purchaser from the Secretaries or Assistant
Secretaries of each of the Companies, certifying that (i) attached to such
certificate are true, correct and complete copies of the resolutions duly
adopted by the Board of Directors or the Managers of the Companies
authorizing the transactions contemplated by this Agreement which remain in
full force and effect, (ii) attached to such certificate are true, correct
and complete copies of the certificates or articles of incorporation,
articles of organization, bylaws, regulations or equivalent governing
instrument, each as amended to the Closing Date, of each of the Companies,
(iii) attached to such certificate is a true and correct copy of the
shareholders or members resolutions of the Companies approving and consenting
to the transactions contemplated by this Agreement, and (iv) the incumbency
of each officer executing this Agreement and all documents and instruments
executed in connection thereof.
(F) ABSENCE OF LITIGATION. No material proceeding pertaining to the
transactions contemplated by this Agreement or to their consummation, shall
have been instituted or threatened on or before the Closing Date.
(G) THIRD PARTY CONSENTS. All necessary agreements, consents and
approvals of any persons or entities to the consummation by the Sellers or
the Shareholder of the transactions contemplated by this Agreement, or
otherwise pertaining to the matters covered by this Agreement shall have been
received by the Purchaser and the Parent and shall be in a form and substance
reasonably satisfactory to the Purchaser and the Parent.
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(H) LEGISLATION. No statute, rule, regulation or order shall have been
enacted, entered or deemed applicable by any domestic or foreign government
or governmental or administrative agency or court which would make the
transactions contemplated by this Agreement illegal or otherwise prevent the
consummation thereof.
(I) TERMINATION OF EXISTING LEASE. The existing leases for the Farm
Property and the Real Property shall have been terminated on terms
satisfactory to the Purchaser. The Farm Property shall have been
transferred from OEC to the Shareholder and a new Farm Property lease in form
of Exhibit E shall have been executed between the Purchaser and the
Shareholder.
(J) EMPLOYMENT CONTRACT. The Shareholder shall have executed and
delivered to the Purchaser the Employment Agreement with the Purchaser in the
form of Exhibit "A" attached hereto (the "Shareholder Employment Agreement")
under which the Shareholder would become the chief operating officer of the
Parent as to compressor operations.
(K) OTHER EMPLOYMENT AGREEMENT. Andy Payne and Dan McCormick shall have
executed and delivered to the Purchaser the Employment Agreements in the form
of Exhibit "B" and "C" attached hereto (the "Other Employment Agreements").
Mr Payne shall have continued to act as Executive Vice President of OEC and
Mr. McCormick shall have continued as the Vice President of Sales of OEC.
(L) MATERIAL ADVERSE CHANGE. There shall have been no material adverse
change in the property, plant, assets or prospects of the Companies (or any
of them), the Property, or the Business.
(M) BANK ACCOUNTS. Control over all bank accounts, cash management
accounts, savings accounts or similar funds of Companies shall have been
transferred to persons designated by Purchaser in a manner satisfactory to
Purchaser.
(N) TITLE INSURANCE, ZONING AND UTILITIES. The Purchaser shall receive
at the Closing in ALTA extended coverage form of owner's title insurance
policy dated, or updated to, the Closing Date, issued by a title insurance
company acceptable to the Purchaser, insuring (or committing to insure), the
Purchaser as owner, with good, marketable and indefeasible fee simple title
to the Real Property. The Purchaser's title policy will be in a form
reasonably acceptable to the Purchaser and shall only contain as exceptions
to title those items listed on Schedule 3.01(J) as permissible title
exceptions. The Sellers and the Shareholder will provide the Purchaser with
evidence satisfactory to the Purchaser that the zoning and utility
circumstances are as represented in Section 3.01(J). The Sellers and the
Shareholder will also provide to the Purchaser a survey of the Real Property
sufficient for the boundary exception to the title policy to be deleted in
form and
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substance satisfactory to the Purchaser. Subject to the provisions of
Section 9.01 hereof if the Closing occurs, the Purchaser shall pay for the
cost of such survey and title policy.
(P) ENVIRONMENTAL REVIEW REPORT. The Purchaser shall have received, at
the Purchaser's expense, an environmental review report from a Person
satisfactory to the Purchaser as to the absence of any evidence of
noncompliance with any Environmental Laws that could materially affect the
Business or the Property.
(Q) FINANCING. The Parent shall have the debt and equity necessary to
consummate the transactions contemplated by this Agreement.
(R) REGISTRATION RIGHTS AGREEMENT. The Sellers and the Shareholder and
the Shareholder shall have executed the Registrations Rights Agreement
attached hereto as Exhibit F (the "Registration Rights Agreement").
(S) MERGER. The Merger Agreement shall not have been terminated and all
conditions to the consummation of the Merger Agreement shall have been
satisfied.
(T) INDEMNIFICATION AGREEMENT. The Shareholder, the Sellers, the
Purchaser and the Parent shall have executed the Indemnification Agreement
attached hereto as Exhibit G.
(U) PAYOFF LETTERS. The Purchaser shall have received from each of the
lenders owed the Assumed Debt letters dated within three (3) business days
prior to the Closing Date indicating the amount of the Assumed Debt owed to
such Lender, the per diem interest on such debt and than on payment, such
lender will release all collateral securing such Assumed Debt.
5.02 CONDITIONS TO THE OBLIGATIONS OF THE SELLERS AND THE SHAREHOLDER.
The obligations of the Sellers and the Shareholder to proceed with the
Closing are subject to the satisfaction on or prior to the Closing Date of
all of the following conditions, any one or more of which may be waived in
writing, in whole or in part, by the Sellers and the Shareholder; provided,
however, that no such waiver of a condition shall constitute a waiver by the
Sellers or the Shareholder of any of their other rights or remedies, at law
or in equity, if the Purchaser or the Parent shall be in breach or default of
any of their representations, warranties or covenants under or contained in
this Agreement:
(A) COMPLIANCE. The Purchaser and the Parent shall have each performed,
satisfied and complied their respective covenants and agreements contained
herein, their respective representations and warranties contained in Section
3.02 hereof shall be true on and as though made on and as of the Closing
Date, and each of the
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conditions specified in this Agreement has been satisfied on or before the
Closing Date.
(B) OFFICERS' CERTIFICATE. The Sellers shall have received a
certificate, dated the Closing Date, executed by an executive officer of each
of the Parent and the Purchaser certifying as to the matters specified in
Section 6.02(A) hereof.
(C) LEGAL OPINION. The Sellers shall have received from Purchaser's
counsel, Schlanger, Mills, Mayer & Grossberg, an opinion dated the Closing
Date in form and substance satisfactory to Sellers, opining as to the matters
set forth in Exhibit H attached hereto.
(D) NO ORDERS. The Closing shall not violate any order or decree of any
court or governmental body having competent jurisdiction over the
transactions contemplated by this Agreement.
(E) ACTIONS AND PROCEDURES. No meritorious actions, suit, proceeding or
investigation by or before any court, administrative agency or other
governmental authority shall have been initiated or threatened to restrain,
prohibit or invalidate any of the transactions contemplated by this Agreement.
(F) THE SHAREHOLDER EMPLOYMENT AGREEMENT AND THE OTHER EMPLOYMENT
AGREEMENTS. The Purchaser shall have executed and delivered to the
Shareholder the Shareholder Employment Agreement and to Mr. Payne and Mr.
McCormick the Other Employment Agreements.
(G) BOARD SEATS. The Shareholder and Andy Payne shall have been
elected or appointed to the Board of Directors of the Parent.
(H) REGISTRATION RIGHTS AGREEMENT. The Parent shall have executed and
delivered the Registrations Rights Agreement.
(I) MERGER. The Merger Agreement shall not have been terminated and all
conditions to the consummation of the Merger Agreement shall have been
satisfied.
(J) INDEMNIFICATION AGREEMENT. The Parent shall have executed and
delivered the Indemnification Agreement.
(K) ABSENCE OF LITIGATION. No material proceeding pertaining to the
transactions contemplated by this Agreement or to their consummation, shall
have been instituted or threatened on or before the Closing Date.
(L) THIRD PARTY CONSENTS. All necessary agreements, consents and
approvals of any persons or entities to the consummation by the Sellers or
the Shareholder of the transactions contemplated by this Agreement, or
otherwise pertaining to the matters covered by this
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Agreement shall have been received by the Purchaser and the Parent and shall
be in a form and substance reasonably satisfactory to the Sellers and the
Shareholder.
ARTICLE VI
TERMINATION
6.01 GROUNDS FOR TERMINATION. This Agreement may be terminated at any
time prior to the Closing Date:
(A) By the mutual written agreement of the Sellers and the
Purchaser;
(B) By any Party hereto, if the Closing has not occurred prior to
July 31, 1997;
(C) By any Party hereto, if the Merger Agreement shall have been
cancelled or terminated;
(D) By any Party hereto, if all of the Exhibits to this Agreement
have not been finalized and agreed to by the Parties on or before the
Schedule Delivery Date;
(E) By the Sellers and the Shareholder, if the Sellers and the
Shareholder should be dissatisfied with any disclosures contained in the
schedules to be delivered by the Purchaser and the Parent and the
Sellers or the Shareholder delivers the required notice under Section
7.14 within five business days following the Schedule Delivery Date;
(F) By the Purchaser and the Parent, if the Purchaser and the
Parent should be dissatisfied with any disclosures contained in the
schedules to be delivered by the Sellers and the Shareholder and the
Purchaser or the Parent delivers the required notice under Section 7.14
within five business days following the Schedule Delivery Date;
(G) By the Purchaser and the Parent, if the shareholders and
members of the Sellers shall have not approved the transactions
contemplated by this Agreement and delivered the required notice under
Section 7.14 within five business days following the Schedule Delivery
Date; or
(H) If the occurrence of the closing transactions would violate
any order, decree or judgment prohibiting the consummation of this
Agreement.
6.02 EFFECT OF TERMINATION. The following provisions shall apply in the
event of a termination of this Agreement:
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(A) If this Agreement is terminated by the Sellers or by the
Purchaser as permitted under Section 6.01 hereof (including Sections
6.01(A), (E) or (F) and not as the result of the failure of any Party to
perform its obligations hereunder, such termination shall be without
liability to any Party to this Agreement or any stockholder, director,
officer, employee, agent or representative of such Party.
(B) If this Agreement is terminated for any reason or reasons
other than a breach by the Sellers or the Shareholder of their
obligations under this Agreement or a refusal by Purchaser or Parent to
close by virtue of a decision, reasonably made and in good faith, that
some aspect of the Business (e.g., financial, legal, business matters or
the prospects of the Business) or related to Sellers or Shareholder has
led them to decide not to proceed with the transactions contemplated
hereby, then the Purchaser and the Parent shall pay to the Sellers and
the Shareholder the sum of $125,000 as liquidated damages for the
termination of this Agreement and the Merger Agreement. The Parties
acknowledge and agree that the amount of actual damages to be suffered
by the Sellers, OEC and the Shareholder will be difficult to estimate
and that the amount set forth above is reasonable.
(C) If this Agreement is terminated as a result of the failure of
the Sellers or the Shareholders to perform their obligations hereunder
without lawful justification, the Sellers and the Shareholder, jointly
and severally, shall, subject to the terms of the Indemnification
Agreement, be fully liable for any and all damages sustained or incurred
by the Purchaser or the Parent.
ARTICLE VII
MISCELLANEOUS
7.01 EXPENSES. Except as specifically provided herein, all legal and
other costs and expenses in connection with this Agreement and the
transactions contemplated hereby shall be paid by the Sellers or Purchaser,
as the case may be, depending upon which Party incurred such costs and
expenses. At the Closing and subject to the consummation of the transactions
contemplated by this Agreement and the Merger Agreement, the Purchaser shall
pay the Sellers' and the Shareholder's expenses incurred in connection with
the transactions contemplated hereby and the transactions contemplated by the
Merger Agreement; provided, however that in no event shall the Purchaser
reimburse or pay more than $100,000 as the expenses of the Sellers, OEC and
the Shareholder and any amounts in excess of such sum shall be paid by the
Companies, OEC and the Shareholder.
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7.02 NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed given when delivered personally or when received
if sent by registered or certified mail, return receipt requested, or by
reputable overnight delivery service, to the Parties at the following
addresses (or at such other address as Party may specify by like notice);
(A) If to the Parent or the Purchaser:
Equity Compression Services Corporation
2501 Cedar Springs Road, Suite 600
Dallas, TX 75201
Attention: President
With copies to:
Ray C. Davis
Energy Transfer Company
2838 Woodside
Dallas, TX 75204
and
Schlanger, Mills, Mayer & Grossberg, LLP
5847 San Felipe, Suite 1700
Houston, Texas 77056
Attention: Kyle Longhofer
(B) If to Sellers or the Shareholder to:
Dennis W. Estis
Ouachita Energy Corp.
228 Industrial Street
West Monroe, LA 71292
With a copy to:
Mayor, Day, Caldwell & Keeton, LLP
700 Louisiana, Suite 1900
Houston, TX 77002
Attention: Ed Rogers
7.03 EXCLUSIVE AGREEMENT. This Agreement together with the Merger
Agreement, the Indemnification Agreement and the Confidentiality Agreement
supersedes all prior agreements between the Parties (written or oral) and is
intended as a complete and exclusive statement of the terms of the agreement
between the Parties.
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7.04 CHOICE OF LAW; AMENDMENTS; HEADINGS. This Agreement shall be
governed by the internal laws of the State of Texas. This Agreement may not
be amended or modified orally. The headings and table of contents contained
in this Agreement are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement.
7.05 ASSIGNMENTS AND THIRD PARTIES. No Party hereby shall assign this
Agreement or any part hereof without the prior written consent of the other
Parties; provided, however, that Purchaser shall be permitted to assign the
rights and benefits of this Agreement to a subsidiary of the Parent. Except
as otherwise provided herein, this Agreement shall be binding upon and inure
to the benefit of the Parties hereto and their respective successors and
assigns. No assignment of this Agreement shall release the assigning party
of any of its obligations under the Agreement. Nothing in this Agreement
shall entitle any person other than Sellers or Purchaser, or their respective
successors and assigns permitted hereby, to any claim, cause of action,
remedy or right of any kind.
7.06 SUBSEQUENT FILINGS. Effective at the Closing Date, Sellers shall
file with all applicable regulatory agencies or authorities any such notices
or certificates as are necessary to reflect the sale to Purchaser.
7.07 SEVERABILITY. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any
adverse manner to either Party. Upon such determination that any term or
other provision is invalid, illegal or incapable of being enforced, the
Parties hereto shall negotiate in good faith to modify this Agreement so as
to effect the original intent of the Parties as closely as possible in an
acceptable manner to the end that the transactions contemplated hereby are
fulfilled to the extent possible.
7.08 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of
which together shall constitute one and the same Agreement.
7.09 FURTHER ASSURANCES. The Sellers and the Purchaser agree to deliver
or cause to be delivered to each other on the Closing Date and at such other
times thereafter as shall be reasonably agreed any such additional instrument
as either of them may reasonably request for the purpose of carrying out
transactions contemplated by this Agreement. Sellers and the Shareholder
shall
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cooperate and use their best efforts to have the officers, directors and
employees of the Sellers to cooperate with the Purchaser (on or after the
Closing Date, in furnishing information, evidence, testimony and other
assistance in connection with any actions, proceedings, arrangements or
disputes of any nature with respect to matters occurring prior to the Closing
Date.
7.10 EXPENSES OF LITIGATION. If any proceeding is brought by any Party
or its successors or assigns for the enforcement of this Agreement, or as a
result of any alleged dispute, breach, default or misrepresentation by any
Party of any of the provisions of this Agreement, the successful or
prevailing Party shall be entitled to recover its reasonable attorneys' fees
and other costs incurred in pursuing such proceeding, in addition to such
other relief to which it may be entitled, together with interest thereon at a
rate of 10% per annum.
7.11 GENERAL INTERPRETATIVE PRINCIPLES. For the purposes of this
Agreement, except as otherwise expressly provided or unless the context
otherwise requires:
(a) the terms defined in this Agreement include the plural as well as the
singular, and the use of any gender herein shall be deemed to include
the other gender;
(b) accounting terms not otherwise defined herein shall have the meanings
assigned to them in accordance with GAAP;
(c) references herein to "Articles", "Sections", "Subsections",
"Paragraphs", and other subdivisions without reference to a document
are to be designated Sections, Subsections, Paragraphs and other
subdivisions of this Agreement;
(d) a reference to a Subsection without further reference to a
Section is a reference to such Subsection as contained in the same
Section in which the reference appears, and this rule shall also apply
to Paragraphs and other subdivisions;
(e) the words "herein", "hereof", "hereunder" and other words of
similar import refer to this Agreement as a whole and not to any
particular provision; and
(f) the term "include" or "including" shall mean without limitation by
reason of enumeration.
7.12 REPRODUCTION OF DOCUMENTS. This Agreement and all documents
relating thereto, including, without limitation, (a) consents, waivers and
modifications which may hereafter be executed, (b) documents received by any
Party at the Closing, and
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(c) financial statements, certificates and other information previously or
hereafter furnished, may be reproduced by any photographic, photostatic,
microfilm, micro-card, miniature photographic or other similar process. The
Parties agree that any such reproduction shall be admissible into evidence as
the original itself in any judicial or administrative proceedings whether or
not the original is in existence and whether or not such reproduction was
made by a Party in the regular course of business, and that any enlargement,
facsimile or further reproduction of such reproduction shall likewise be
admissible into evidence.
7.13 SCHEDULES. The Sellers and the Shareholder agree to deliver the
schedules required by this Agreement to the Purchaser and the Parent on or
before May 30, 1997. The Purchaser and the Parent shall have five business
days to review such schedules and if they are not satisfied with any matters
disclosed on such schedules, then the Parent and the Purchaser may terminate
this Agreement by written notice to the Sellers within ten business days
following receipt of such schedules.
7.14 SURVIVAL. The representations and warranties set forth in this
Agreement other than the representations and warranties of the Seller
contained in Sections 3.01 (B), (C), (G), (I) and (T) shall survive the
Closing until April 30, 1999. The representations and warranties contained
in 3.01(B), (C), (G), (I) and (T) shall survive the Closing until the
expiration of the applicable statute of limitations. All covenants and
agreements and in any certificate or instrument delivered in connection
herewith shall survive the Closing; except that the covenant to indemnify any
Party hereunder by another Party hereunder for a misstatement of, or omission
from, any representation or warranty shall survive until the expiration of
the particular representation or warranty as to which indemnification is
claimed or sought (the "Representation Expiration Date") and thereafter only
with respect to those claims for indemnification for a misstatement of, or
omission from, any representation or warrant which are made prior to the
applicable Representation Expiration Date.
IN AGREEMENT WHEREOF, the undersigned have executed this Agreement as of
the date first written above.
PARENT
EQUITY COMPRESSION SERVICES CORPORATION
By:________________________________
Title:_____________________________
PURCHASER
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OEC ACQUISITION CORPORATION
By:________________________________
Title:_____________________________
SELLERS
OUACHITA ENERGY PARTNERS, LTD.
By:________________________________
Its:_______________________________
OUACHITA COMPRESSION GROUP, LLC.
By:________________________________
Its:_______________________________
SHAREHOLDER:
________________________________
Dennis W. Estis
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FIRST AMENDMENT TO ASSET PURCHASE AND SALES AGREEMENT
This FIRST AMENDMENT TO ASSET PURCHASE AND SALES AGREEMENT (this
"Amendment"), dated as of this 30th day of July, 1997, is by and among
OUACHITA ENERGY PARTNERS, LTD., a Louisiana corporation ("Seller #1"),
OUACHITA COMPRESSION GROUP, L.L.C., a Louisiana limited liability company
("Seller #2") (Seller #1 and Seller #2 are collectively referred to herein as
the "Sellers"), DENNIS W. ESTIS (the "Shareholder"), OEC ACQUISITION
CORPORATION, a Delaware corporation (the "Purchaser"), and EQUITY COMPRESSION
SERVICES CORPORATION, an Oklahoma corporation (the "Parent"). Seller #1,
Seller #2, the Shareholder, the Purchaser and the Parent may be referred to
herein individually as a "Party" and collectively as the "Parties."
W I T N E S S E T H:
WHEREAS, the Sellers, the Shareholder and the Purchaser are parties to
that certain Asset Purchase and Sales Agreement dated as of May 15, 1997 (the
"Purchase Agreement"); and
WHEREAS, the Parties desire to amend the Purchase Agreement as set forth
herein;
NOW, THEREFORE, in consideration of the premises and of the respective
representations, warranties, covenants, agreements and conditions contained
herein, the Parties, intending to be legally bound, hereto agree as follows:
1. DEFINED TERMS; CONTROLLING AGREEMENT.
1.01 DEFINED TERMS. Unless defined herein or unless the context clearly
indicates to the contrary, all defined or capitalized terms contained in the
Purchase Agreement shall have the same meaning in this Amendment as in the
Purchase Agreement.
1.02 CONTROLLING AGREEMENT. Unless specifically modified or amended
herein, the Purchase Agreement shall remain in full force and effect. In the
event of any inconsistency between this Amendment and the Purchase Agreement,
the terms of this Amendment shall control.
2. MODIFICATIONS TO THE PURCHASE AGREEMENT. The Parties agree that (i) the
Assumed Liabilities shall include $183,870 owed by the Shareholder to Robert E.
Creighton as of August 5, 1997, and (ii) the Closing Date shall be August 1,
1997 of such other date as the Parties shall agree, and the outside date
for the Closing set forth in Section 6.01(B) shall be August 15, 1997.
3. MISCELLANEOUS.
3.01 EXCLUSIVE AGREEMENT. The Purchase Agreement, as amended by this
Amendment, together with the Merger Agreement, the Indemnification Agreement
and the Confidentiality Agreement supersedes all prior agreements among the
Parties (written or oral) and is intended as a complete and exclusive
statement of the terms of the agreements among the Parties.
3.02 CHOICE OF LAW; HEADING. This Amendment shall be governed by the
internal laws of the State of Texas. The captions or headings contained in
this Amendment are for reference purposes only and shall not affect in any
way the meaning and interpretation of this Amendment.
3.03 COUNTERPARTS. This Amendment may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of
which together shall constitute one and the same agreement.
IN WITNESS WHEREOF, the undersigned have executed this Amendment as of
the date first written above.
PARENT
EQUITY COMPRESSION SERVICES
CORPORATION
By: _____________________
Title: __________________
PURCHASER
OEC ACQUISITION CORPORATION
By: _____________________
Title: __________________
SELLERS
OUACHITA ENERGY PARTNERS, LTD.
By: _____________________
Its: _____________________
OUACHITA COMPRESSION GROUP, LLC.
By: _____________________
Its: _____________________
SHAREHOLDER:
__________________________
Dennis W. Estis
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EQUITY COMPRESSION SERVICES CORPORATION
$5,000,000
SENIOR FLOATING RATE SECURED TERM NOTES DUE JULY 31, 2004
---------------
NOTE AGREEMENT
---------------
DATED AS OF JULY 31, 1997
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NOTE: This Agreement contains restrictions upon transfer (paragraph 11G) and
confidentiality obligations (paragraph 11H)
<PAGE>
TABLE OF CONTENTS
(Not Part of Agreement)
PAGE
1. Authorization of Issue of Notes. . . . . . . . . . . . . . . . . . . 1
2. Purchase and Sale of Notes; Floating Rate Provisions Applicable to
Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2A. Purchase and Sale of Notes. . . . . . . . . . . . . . . . . . . 2
2B. Floating Rate Provisions Applicable to Notes. . . . . . . . . . 2
3. Conditions to Closing. . . . . . . . . . . . . . . . . . . . . . . . 6
3A. Certain Documents . . . . . . . . . . . . . . . . . . . . . . . 6
3B. Representations and Warranties; No Default; No Material
Adverse Change. . . . . . . . . . . . . . . . . . . . . . . . . 8
3C. Purchase Permitted By Applicable Laws . . . . . . . . . . . . . 8
3D. Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3E. Related Proceedings . . . . . . . . . . . . . . . . . . . . . . 9
3F. Consummation of Acquisition . . . . . . . . . . . . . . . . . . 9
3G. Private Placement Number. . . . . . . . . . . . . . . . . . . . 9
3H. Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3I. Parity With Bank Credit Facility. . . . . . . . . . . . . . . . 9
3J. Amendment of Bank Agreement . . . . . . . . . . . . . . . . . . 9
4. Prepayments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4A. Optional Prepayments. . . . . . . . . . . . . . . . . . . . . . 9
4B. Offer to Prepay Notes in the Event of a Debt Prepayment
Application. . . . . . . . . . . . . . . . . . . . . . . . . . 10
4C. Offer to Prepay Notes in the Event of a Change in Control . . .11
4D. Partial Payments Pro Rata . . . . . . . . . . . . . . . . . . .12
4E. Retirement of Notes . . . . . . . . . . . . . . . . . . . . . .12
5. Affirmative Covenants. . . . . . . . . . . . . . . . . . . . . . . .13
5A. Financial Statements. . . . . . . . . . . . . . . . . . . . . .13
5B. Information Required by Rule 144A . . . . . . . . . . . . . . .15
5C. Inspection of Property. . . . . . . . . . . . . . . . . . . . .16
5D. Covenant to Secure Notes Equally. . . . . . . . . . . . . . . .16
5E. Parity With Bank Credit Facility. . . . . . . . . . . . . . . .16
<PAGE>
5F. Corporate Existence, Licenses and Permits; Maintenance of
Properties. . . . . . . . . . . . . . . . . . . . . . . . . . .16
5G. Maintenance of Insurance. . . . . . . . . . . . . . . . . . . .17
5H. Payment of Taxes and Other Claims . . . . . . . . . . . . . . .17
5I. ERISA Compliance. . . . . . . . . . . . . . . . . . . . . . . .17
5J. Compliance with Laws. . . . . . . . . . . . . . . . . . . . . .17
5K. Maintenance of Committed Credit Facility. . . . . . . . . . . .18
5L. Environmental Covenants . . . . . . . . . . . . . . . . . . . .18
5M. Environmental Indemnities . . . . . . . . . . . . . . . . . . .18
5N. Collateral; New Subsidiaries. . . . . . . . . . . . . . . . . .19
5O. Enforcement of Acquisition Documents. . . . . . . . . . . . . .19
5P. Lockbox Account . . . . . . . . . . . . . . . . . . . . . . . .19
5Q. Borrowing Base Provisions . . . . . . . . . . . . . . . . . . .20
6. Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . .21
6A. Financial Covenants . . . . . . . . . . . . . . . . . . . . . .22
6B. Limitation on Restricted Payments . . . . . . . . . . . . . . .23
6C. Liens, Indebtedness, and Other Restrictions . . . . . . . . . .23
6D. Change of Fiscal Year . . . . . . . . . . . . . . . . . . . . .27
6E. Change of Business. . . . . . . . . . . . . . . . . . . . . . .27
6F. Certificates of Incorporation; Bylaws; Trade Names. . . . . . .27
6G. Other Agreements, Amendments. . . . . . . . . . . . . . . . . .27
6H. Limitation on Certain Restrictive Agreements. . . . . . . . . .27
6I. Most Favored Lender Status. . . . . . . . . . . . . . . . . . .28
6J. Change in Control . . . . . . . . . . . . . . . . . . . . . . .28
7. Events of Default. . . . . . . . . . . . . . . . . . . . . . . . . .28
7A. Acceleration. . . . . . . . . . . . . . . . . . . . . . . . . .28
7B. Rescission of Acceleration. . . . . . . . . . . . . . . . . . .31
7C. Notice of Acceleration or Rescission. . . . . . . . . . . . . .32
7D. Other Remedies. . . . . . . . . . . . . . . . . . . . . . . . .32
8. Representations, Covenants and Warranties. . . . . . . . . . . . . .32
8A. Organization and Qualification. . . . . . . . . . . . . . . . .32
8B. Financial Statements. . . . . . . . . . . . . . . . . . . . . .32
8C. Actions Pending . . . . . . . . . . . . . . . . . . . . . . . .33
8D. Outstanding Indebtedness. . . . . . . . . . . . . . . . . . . .33
8E. Title to Properties . . . . . . . . . . . . . . . . . . . . . .33
8F. Possession of Franchises, Licenses. . . . . . . . . . . . . . .34
8G. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34
<PAGE>
8H. Conflicting Agreements and Other Matters. . . . . . . . . . . .34
8I. Offering of Notes . . . . . . . . . . . . . . . . . . . . . . .34
8J. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . .35
8K. ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35
8L. Governmental Consent. . . . . . . . . . . . . . . . . . . . . .35
8M. Environmental Compliance. . . . . . . . . . . . . . . . . . . .36
8N. Oil and Gas Contracts . . . . . . . . . . . . . . . . . . . . .36
8O. Natural Gas Policy Act and Natural Gas Act Compliance . . . . .37
8P. Take or Pay Obligations, Prepayments, BTU Adjustments and
Balancing Problems. . . . . . . . . . . . . . . . . . . . . . .37
8Q. Gas Purchase Obligations in Excess of Gas Sales Rights. . . . .37
8R. Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . .37
8S. Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . .38
8T. Investment Company Act. . . . . . . . . . . . . . . . . . . . .38
8U. Public Utility Holding Company Act; Federal Power Act;
Interstate Commerce Act; Other Regulation. . . . . . . . . . . 38
8V. Acquisition Representations and Warranties. . . . . . . . . . .38
9. Representations of the Purchaser . . . . . . . . . . . . . . . . . .38
9A. Nature of Purchase. . . . . . . . . . . . . . . . . . . . . . .38
9B. Source of Funds . . . . . . . . . . . . . . . . . . . . . . . .39
10. Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . .39
10A. Other Terms . . . . . . . . . . . . . . . . . . . . . . . . . .39
10B. Accounting Principles, Terms and Determinations . . . . . . . .54
11. Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . .54
11A. Note Payments . . . . . . . . . . . . . . . . . . . . . . . . .54
11B. Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . .55
11C. Consent to Amendments . . . . . . . . . . . . . . . . . . . . .55
11D. Form, Registration, Transfer and Exchange of Notes; Lost Notes.55
11E. Persons Deemed Owners; Participations . . . . . . . . . . . . .56
11F. Survival of Representations and Warranties; Entire Agreement. .56
11G. Successors and Assigns. . . . . . . . . . . . . . . . . . . . .56
11H. Disclosure to Other Persons . . . . . . . . . . . . . . . . . .57
11I. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . .57
11J. Payments Due on Non-Business Days . . . . . . . . . . . . . . .58
11K. Satisfaction Requirement. . . . . . . . . . . . . . . . . . . .58
11L. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . .58
11M. Waiver of Jury Trial; Consent to Jurisdiction; Limitation of
Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . .58
<PAGE>
11N. Severability. . . . . . . . . . . . . . . . . . . . . . . . . .59
11O. Descriptive Headings. . . . . . . . . . . . . . . . . . . . . .59
11P. Maximum Interest Payable. . . . . . . . . . . . . . . . . . . .59
11Q. Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . .60
<PAGE>
PURCHASER SCHEDULE
SCHEDULE 8A -- CONTROLLING STOCKHOLDERS
SCHEDULE 8D -- EXISTING DEBT AND LIENS
SCHEDULE 8H -- LIST OF AGREEMENTS RESTRICTING DEBT
EXHIBIT A -- FORM OF NOTE
EXHIBIT B -- FORM OF OPINION OF COMPANY'S COUNSEL
EXHIBIT C -- FORM OF GUARANTY AGREEMENT
EXHIBIT D -- FORM OF INTERCREDITOR AGREEMENT
EXHIBIT E -- FORM OF MORTGAGE
EXHIBIT F -- FORM OF SECURITY AGREEMENT
EXHIBIT G -- FORM OF AIRCRAFT CHATTEL MORTGAGE
<PAGE>
EQUITY COMPRESSION SERVICES CORPORATION
2501 CEDAR SPRINGS ROAD, SUITE 600
DALLAS, TEXAS 75201
As of July 31, 1997
The Prudential Insurance Company of America
c/o Prudential Capital Group
Four Gateway Center
100 Mulberry Street
Newark, New Jersey 07102
$5,000,000 SENIOR FLOATING RATE SECURED TERM NOTES DUE 2004
Ladies and Gentlemen:
The undersigned, Equity Compression Services Corporation, an Oklahoma
corporation (the "COMPANY"), hereby agrees with you as follows:
PARAGRAPH 1. AUTHORIZATION OF ISSUE OF NOTES.
1. AUTHORIZATION OF ISSUE OF NOTES. The Company will authorize the
issue of its senior floating rate secured term promissory notes in the aggregate
principal amount of $5,000,000, to be dated the date of issue thereof, to mature
July 31, 2004, to bear interest on the unpaid balance thereof from the date
thereof until the principal thereof shall have become due and payable at a rate
per annum equal to (a) the LIBO Rate plus the Applicable Margin, with respect to
LIBOR Loans, (b) the Prime Rate, with respect to Prime Loans, and (c) the rate
specified therein, with respect to overdue payments; such senior floating rate
secured term promissory notes shall be substantially in the form of EXHIBIT A
attached hereto. The term "NOTES" as used herein shall include each such senior
floating rate secured term promissory note delivered pursuant to any provision
of this Agreement and each such senior floating rate secured term promissory
note delivered in substitution or exchange for any other Note pursuant to any
such provision. CAPITALIZED TERMS USED HEREIN HAVE THE MEANINGS SPECIFIED IN
PARAGRAPH 10.
<PAGE>
PARAGRAPH 2. PURCHASE AND SALE OF NOTES; FLOATING RATE PROVISIONS
APPLICABLE TO NOTES.
2A. PURCHASE AND SALE OF NOTES. The Company hereby agrees to sell to
you and, subject to the terms and conditions herein set forth, you agree to
purchase from the Company, Notes in the aggregate principal amount of $5,000,000
at 100% of such aggregate principal amount. The Company will deliver to you, at
the offices of Baker & Botts, L.L.P. at 2001 Ross Avenue, Dallas, Texas 75201,
one or more Notes registered in your name, evidencing the aggregate principal
amount of Notes to be purchased by you and in the denomination or denominations
specified in the Purchaser Schedule attached hereto, against payment of the
purchase price thereof by transfer of immediately available funds for credit to
the Company's account no. 100968827 at Bank of Oklahoma, National Association,
Tulsa, Oklahoma, ABA No. 103 900 036, on the date of closing, which shall be
August 5, 1997 or any other date on or before August 5, 1997 upon which the
Company and you may mutually agree (the "CLOSING" or the "DATE OF CLOSING").
2B. FLOATING RATE PROVISIONS APPLICABLE TO NOTES.
2B(1). FLOATING RATE LOAN PROCEDURES; INTEREST ON NOTES.
(i) In an irrevocable telephonic notice (confirmed by
written notice received within one day after such telephonic
notice) to each holder of Notes no later than 11:00 A.M. New York
City time on (a) the third Business Day prior to the first day of
an Interest Period with respect to LIBOR Loans or (b) the second
Business Day prior to the first day of an Interest Period with
respect to Prime Loans, the Company shall elect (x) whether the
Loans are to be LIBOR Loans or Prime Loans and (y) if the Loans
are to be LIBOR Loans, the applicable Interest Period or Interest
Periods; PROVIDED, that (I) the Loans shall at any time all be
either LIBOR Loans or Prime Loans, (II) no more than two Interest
Periods may be in effect at any time with respect to the LIBOR
Loans, (III) if the Company has elected two Interest Periods
with respect to the LIBOR Loans, the Company must allocate the
aggregate principal amount of LIBOR Loans between each of the two
Interest Periods in integral multiples of $500,000, and (IV) in
no event shall the aggregate principal amount of LIBOR Loans for
any Interest Period be less than $1,000,000.
(ii) If the Company has failed to elect a new Loan Type
and Interest Period or Interest Periods for the Loans in a
timely manner, the Company shall be deemed to have elected
(a) to continue LIBOR Loans as LIBOR Loans having an Interest
Period or Interest Periods equal to that of the Interest
Period or Interest Periods immediately preceding such new
Interest Period or Interest Periods, and (b) to continue
Prime Loans as Prime Loans. All Interest Periods for the
Loans shall be deemed to end on the earlier of July 31, 2004
or the date the Loans become due and payable pursuant to
paragraph 7A.
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(iii) Notwithstanding any of the foregoing, (a) if a
Default or Event of Default (other than a Default or an Event of
Default under clause (i), (ii) (viii), (ix) or (x) of paragraph
7A) has occurred or is continuing as of the end of any Interest
Period, then the Company shall be deemed to have elected (x) to
continue LIBOR Loans as LIBOR Loans having an Interest Period
equal to one month and (y) Prime Loans as Prime Loans; and (b) if
a Default or an Event of Default under clause (i), (ii), (viii),
(ix) or (x) of paragraph 7A has occurred or is continuing as of
the last day of any Interest Period, then the Notes shall accrue
interest during the new Interest Period at the rate specified in
the Notes with respect to overdue payments.
(iv) Interest on the Notes shall (a) be payable (w) on the
last day of each Interest Period (PROVIDED that in the case of an
Interest Period in excess of three months, interest shall also be
payable on the day which occurs three months after the first day
of such Interest Period), (x) on the date of any prepayment (on
the amount prepaid), (y) at maturity (whether by acceleration or
otherwise) and, (z) after such maturity, on demand; and (b) shall
be computed on the actual number of days elapsed over, in the
case of any LIBOR Loan, a year of 360 days and, in the case of
any Prime Loan, a year of 365 or 366 days, as the case may be.
2B(2). BREAKAGE COST INDEMNITY.
(i) The Company agrees to indemnify each holder of Notes
for, and to pay promptly to such holder upon written request, any
amounts required to compensate such holder for any losses, costs
or expenses sustained or incurred by such holder (including,
without limitation, any loss (including loss of anticipated
profits), cost or expense sustained or incurred by reason of the
liquidation or reemployment of deposits or other funds acquired
to fund or maintain any Loan) as a consequence of (a) any event
(including any acceleration of Notes in accordance with paragraph
7A) which results in (x) such holder receiving any amount on
account of the principal of any Loan prior to the end of the
Interest Period in effect therefor or (y) the conversion of a
LIBOR Loan to a Prime Loan, or the conversion of the Interest
Period with respect to any LIBOR Loan, in each case, other than
on the first day of the Interest Period in effect therefor; or
(b) any default in the making of any payment or prepayment
required to be made in respect of the Notes.
(ii) A certificate of any holder of Notes setting forth
any amount or amounts which such holder is entitled to
receive pursuant to this paragraph 2B(2), together with
calculations in reasonable detail reflecting the basis for
such amount or amounts, shall be delivered to the Company and
shall be conclusive absent manifest error. The Company
agrees to pay such holder the amount shown as due on any such
certificate within ten days after its receipt of the same.
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<PAGE>
(iv) The provisions of this paragraph 2B(2) shall remain
operative and in full force and effect regardless of the
expiration of the term of this Agreement, the consummation of
the transactions contemplated hereby, the repayment of any of
the Loans, the invalidity or unenforceability of any term or
provision of this Agreement or any Note, or any investigation
made by or on behalf of any holder of Notes.
2B(3). RESERVE REQUIREMENTS; CHANGE IN CIRCUMSTANCE.
(i) Notwithstanding any other provision of this Agreement,
if after the date of this Agreement any change in applicable law
or regulation or in the interpretation or administration thereof
by any governmental authority charged with the interpretation or
administration thereof (whether or not having the force of law)
shall impose, modify or deem applicable any reserve, special
deposit or similar requirement against assets of, deposits with
or for the account of or credit extended by any holder of Notes
or shall impose on such holder or the London interbank market any
other condition affecting this Agreement or LIBOR Loans made by
such holder and the result of any of the foregoing shall be to
increase the cost to such holder of making or maintaining any
LIBOR Loan or to reduce the amount of any payment received or
receivable by such holder hereunder or under any of the Notes
(whether of principal, interest or otherwise) by an amount
reasonably deemed by such holder to be material, then the Company
will pay to such holder upon demand such additional amount or
amounts as will compensate such holder for such additional costs
incurred or reduction suffered.
(ii) If any holder of a Note shall have reasonably
determined that the adoption after the date hereof of any
law, rule, regulation, agreement or guideline regarding
capital adequacy, or any change after the date hereof in any
such law, rule, regulation, agreement or guideline (whether
such law, rule, regulation, agreement or guideline has been
adopted before or after the date hereof) or in the
interpretation or administration thereof by any governmental
authority charged with the interpretation or administration
thereof, or compliance by such holder with any request or
directive regarding capital adequacy (whether or not having
the force of law) of any governmental authority has or would
have the effect of reducing the rate of return on such
holder's capital as a consequence of Loans made pursuant
hereto to a level below that which such holder could have
achieved but for such applicability, adoption, change or
compliance (taking into consideration such holder's policies
with respect to capital adequacy) by an amount deemed by such
holder to be material, then from time to time the Company
agrees to pay to such holder such additional amount or
amounts as will compensate such holder for any such reduction
suffered.
(iii) A certificate of any holder of Notes setting forth
the amount or amounts necessary to compensate such holder as
specified in clause (i) or (ii) above shall be delivered to the
Company and shall be conclusive absent manifest error. The
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<PAGE>
Company agrees to pay such holder the amount shown as due on any
such certificate within ten days after its receipt of the same.
(iv) Failure or delay on the part of any holder of Notes to
demand compensation for any increased costs or reduction in
amounts received or receivable or reduction in return on capital
shall not constitute a waiver of such holder's right to demand
such compensation with respect to such period or any other
period. The protection of this paragraph shall be available to
any such holder regardless of any possible contention of the
invalidity or inapplicability of the law, rule, regulation,
agreement, guideline or other change or condition that shall have
occurred or been imposed.
2B(4). ILLEGALITY.
(i) Notwithstanding any other provision of this
Agreement, if, after the date hereof, any change in any law or
regulation or in the interpretation thereof by any
governmental authority charged with the administration or
interpretation thereof shall make it unlawful for any holder
of Notes to make or maintain any LIBOR Loan or to give effect
to its obligations as contemplated hereby with respect to any
LIBOR Loan, then (a) such holder shall promptly notify the
Company in writing of such circumstances (which notice shall
be withdrawn when such holder determines that such
circumstances no longer exist), (b) the obligation of such
holder to make LIBOR Loans, to continue LIBOR Loans as LIBOR
Loans and to convert a Prime Loan to a LIBOR Loan shall
forthwith be canceled and, until such time as it shall no
longer be unlawful for such holder to make or maintain LIBOR
Loans, such holder shall then be obligated only to make Prime
Loans and (c) such holder may require that all LIBOR Loans
made by it be converted to Prime Loans, in which event all
such LIBOR Loans shall be automatically converted to Prime
Loans as of the effective date of such notice as provided in
clause (ii) below.
(ii) For purposes of this paragraph 2B(4), a notice to the
Company by any holder of Notes shall be effective as to LIBOR
Loans made by such holder, if lawful, on the last day of the
Interest Period or Interest Periods currently applicable to such
LIBOR Loans; in all other cases such notice shall be effective on
the date of receipt by the Company. If any such conversion of a
LIBOR Loan occurs on a day which is not the last day of the then
current Interest Period with respect thereto, the Company shall
pay to such holder such amounts, if any, as may be required
pursuant to paragraph 2B(2).
2B(5). INABILITY TO DETERMINE INTEREST RATE. If prior to
the first day of any Interest Period, any holder of Notes shall
have determined (which determination shall be conclusive and
binding upon the Company) that, by reason of circumstances
affecting the London interbank market, adequate and reasonable
means do not exist
-5-
<PAGE>
for ascertaining the LIBO Rate for such Interest Period, such
holder shall give notice thereof to the Company as soon as
practicable thereafter. If such notice is given, (i) any
LIBOR Loans requested to be made on the first day of such
Interest Period shall be made as Prime Loans, (ii) any Loans
that were to have been converted on the first day of such
Interest Period to or continued as LIBOR Loans shall be
converted to or continued as Prime Loans and (iii) any
outstanding LIBOR Loans shall be converted, at the end of the
then applicable Interest Period, to Prime Loans. Until such
notice has been withdrawn by such holder, no further LIBOR
Loans shall be made or continued as such, nor shall the
Company have the right to convert Prime Loans to LIBOR Loans.
PARAGRAPH 3. CONDITIONS PRECEDENT.
3. CONDITIONS TO CLOSING. Your obligation to purchase and pay for
the Notes to be purchased by you hereunder is subject to the satisfaction, on or
before the Date of Closing, of the following conditions:
3A. CERTAIN DOCUMENTS. You shall have received the following,
each dated the Date of Closing (unless a different date is indicated below), and
each in form, scope and substance satisfactory to you:
(i) the Notes to be purchased by you;
(ii) certified copies of the resolutions of the Board of
Directors of each of the Transaction Parties approving each of
the Senior Note Documents to which each is a party, and certified
copies of all documents evidencing other necessary corporate action
and governmental approvals, if any, with respect to each of the
Senior Note Documents to which each is a party;
(iii) a certificate of the Secretary or an Assistant
Secretary of each of the Transaction Parties certifying the names
and true signatures of the officers of such Transaction Party
authorized to sign the Senior Note Documents to which it is a
party and the other documents to be delivered hereunder by such
Transaction Party;
(iv) certified copies of the Certificate of Incorporation
(certified by the Oklahoma or Delaware Secretary of State, as
applicable, within 10 Business Days of the Date of Closing)
and bylaws, each as amended to date, of each of the
Transaction Parties;
(v) a favorable opinion of Schlanger, Mills, Mayer & Grossberg,
L.L.P., counsel to the Transaction Parties, substantially in the form
of EXHIBIT B attached hereto;
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<PAGE>
(vi) a favorable opinion of Conner & Winters, A Professional
Corporation, special Oklahoma counsel to the Transaction Parties in
connection with this transaction, as to such matters incident to the
matters herein contemplated as you may reasonably request;
(vii) a favorable opinion of Lemle & Kelleher, L.L.P.,
special Louisiana counsel to the Transaction Parties in connection
with this transaction, as to such matters incident to the matters
herein contemplated as you may reasonably request;
(viii) a favorable opinion of Baker & Botts, L.L.P., who are
acting as special counsel for you in connection with this transaction,
as to such matters incident to the matters herein contemplated as you
may reasonably request;
(ix) reliance letters in respect of any other legal opinions
delivered in connection with the Senior Note Documents, the
Acquisition Documents and the transactions contemplated thereby;
(x) certified copies of Requests for Information or Copies (Form
UCC-11) or equivalent reports, dated within 30 days of the Date of
Closing, listing all effective financing statements which name any of
the Transaction Parties or Acquired Companies (under any of their
present names and any previous names) as debtor and which are filed in
all jurisdictions in which any of the Transaction Parties or Acquired
Companies own property or conduct business, together with copies of
such financing statements;
(xi) certified copies of each of the Acquisition Documents, the
terms and conditions of which shall be in full force and effect and
shall not have been amended, modified or waived except with your prior
consent;
(xii) copies of (a) a pro forma consolidated balance sheet
for the Transaction Parties as at the Closing Date, reflecting the
issuance of the Notes hereunder, the issuance of the Subordinated
Notes under the Subordinated Note Agreement and the consummation of
the Acquisition, certified by an authorized financial officer of the
Company and (b) good-faith management projections and pro forma
financial statements for the Transaction Parties for fiscal years 1997
through 2001;
(xiii) the Intercreditor Agreement, duly executed and
delivered by you, the Bank (both in its individual capacity
and in its capacity as Agent) and each of the Transaction
Parties;
(xiv) Guaranty Agreements, duly executed and delivered by
ECI, Sunterra and OEC;
(xv) the Security Documents, duly executed and delivered by each
of the Company and the other Transaction Parties parties thereto;
-7-
<PAGE>
(xvi) all Uniform Commercial Code financing
statements deemed necessary or appropriate by you to perfect
the Liens in favor of the Agent arising under the Security
Documents, duly executed and delivered by the appropriate
Transaction Parties, to be recorded with the appropriate
filing offices;
(xvii) evidence satisfactory to you and your special counsel
that the Company or one of its Subsidiaries has good and marketable
title to the real property encumbered by the Mortgages and that the
Agent possesses valid first mortgage liens with respect to such real
property, which evidence may include, without limitation, mortgagee
policies of title insurance, title reports, title opinions and
division orders;
(xviii) certificates of insurance naming the Agent as loss
payee and the Agent and all holders of Notes as additional insureds,
as required by paragraph 5G; and
(xix) written instructions from a Responsible Officer of the
Company, set forth on the Company's letterhead, authorizing and
directing you to pay the purchase price of the Notes by transfer of
immediately available funds for credit to the Company's bank account
identified in paragraph 2A.
3B. REPRESENTATIONS AND WARRANTIES; NO DEFAULT; NO MATERIAL
ADVERSE CHANGE. The representations and warranties of the Company and each of
the other Transaction Parties contained in this Agreement, the other Senior Note
Documents and in the Acquisition Documents shall be true on and as of the Date
of Closing, except to the extent of changes caused by the transactions herein
contemplated; there shall exist on the Date of Closing no Event of Default or
Default; there shall exist or have occurred no condition, event or act which
could have a material adverse effect on the business, condition (financial or
other), assets, properties, operations or prospects of the Company and its
Subsidiaries and the Company and each of the other Transaction Parties shall
have delivered to you an Officer's Certificate, dated the Date of Closing, to
both such effects.
3C. PURCHASE PERMITTED BY APPLICABLE LAWS. The offer by the
Company of, and the purchase of and payment for the Notes, to be purchased by
you on the Date of Closing on the terms and conditions herein provided
(including the use of the proceeds of such Notes by the Company) shall not
violate any applicable law or governmental regulation (including, without
limitation, section 5 of the Securities Act or Regulation G or X of the Board
of Governors of the Federal Reserve System) and shall not subject you to any
tax, penalty, liability or other onerous condition under or pursuant to any
applicable law or governmental regulation, and you shall have received such
certificates or other evidence as you may request to establish compliance
with this condition.
3D. PROCEEDINGS. All corporate and other proceedings taken or
to be taken in connection with the transactions contemplated hereby and all
documents incident thereto shall be satisfactory in substance and form to you,
and you shall have received all such counterpart originals or certified or other
copies of such documents as you may reasonably request.
-8-
<PAGE>
3E. RELATED PROCEEDINGS. All corporate and other proceedings taken
or to be taken in connection with (i) the Acquisition, (ii) the Company's
execution, delivery, issuance and sale to you of the Subordinated Notes and the
Warrants pursuant to the Subordinated Note Agreement and (iii) the other
transactions contemplated thereby, and all documents incident thereto, shall be
satisfactory in substance and form to you, and you shall have received all such
counterpart originals or certified or other copies of such documents as you may
reasonably request.
3F. CONSUMMATION OF ACQUISITION. You shall have received
satisfactory evidence that the Acquisition has been consummated prior to or
concurrently with issuance of the Notes and the Subordinated Notes, pursuant
to and in accordance with the terms and conditions of the Acquisition
Documents (no material terms thereof having been amended, supplemented,
waived or otherwise modified without your prior written consent).
3G. PRIVATE PLACEMENT NUMBER. A Private Placement number issued by
Standard & Poor's CUSIP Service Bureau (in cooperation with the Securities
Valuation Office of the National Association of Insurance Commissioners) shall
have been obtained for the Notes.
3H. FEES. (i) You shall have received (a) the $225,000 unpaid
portion of the structuring fee to be paid to you by the Company and (b) all
other fees which are due and payable on or before the Closing Date pursuant to
any written agreement between the Company and you, and (ii) without limiting the
provisions of paragraph 11B, your special counsel shall have received its fees,
charges and disbursements to the extent reflected in a statement of such special
counsel rendered to the Company at least one Business Day prior to the Closing.
3I. PARITY WITH BANK CREDIT FACILITY. You shall have been furnished
documentation satisfactory in form and substance to you demonstrating that the
requirements of paragraph 5E have been satisfied in the case of the Bank Credit
Facility.
3J. AMENDMENT OF BANK AGREEMENT. The Bank Agreement shall have
been amended to permit the transactions contemplated hereby and to permit
implementation and enforcement of the provisions hereof.
PARAGRAPH 4. PREPAYMENTS.
4. PREPAYMENTS. The Notes shall be subject to prepayment only with
respect to the prepayments specified in paragraphs 4A, 4B and 4C.
4A. OPTIONAL PREPAYMENTS.
(i) The Notes shall be subject to prepayment in whole at any
time or from time to time in part (in integral multiples of
$1,000,000), at the option of the Company, at 100% of the principal
amount so prepaid plus interest thereon to the prepayment date;
PROVIDED,
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that with respect to LIBOR Loans, the Notes may be prepaid pursuant
to this paragraph 4A only on the last day of the Interest Periods of
the LIBOR Loans being prepaid.
(ii) The Company shall give the holder of each Note
irrevocable written notice of any prepayment pursuant to this
paragraph 4A not less than three Business Days prior to the
prepayment date, specifying such prepayment date and the principal
amount of the Notes, and of the Notes held by such holder, to be
prepaid on such date and stating that such prepayment is to be
made pursuant to this paragraph 4A and that, with respect to LIBOR
Loans, the Interest Periods of the LIBOR Loans being prepaid end
on such prepayment date. Notice of prepayment having been given
as aforesaid, the principal amount of the Notes specified in such
notice, together with interest thereon to the prepayment date,
shall become due and payable on such prepayment date. The Company
shall, on or before the day on which it gives written notice of
any prepayment pursuant to this paragraph 4A, give telephonic
notice of the principal amount of the Notes to be prepaid and the
prepayment date to each holder which shall have designated a
recipient of such notices in the Purchaser Schedule attached
hereto or by notice in writing to the Company.
4B. OFFER TO PREPAY NOTES IN THE EVENT OF A DEBT PREPAYMENT
APPLICATION.
(i) NOTICE OF DEBT PREPAYMENT APPLICATION. In the event a
Debt Prepayment Application is required (a) at any time as a result of
a Borrowing Base Deficiency or (b) after the Conversion Date as a
result of an Asset Disposition pursuant to paragraph 6C(5), the
Company shall offer to prepay, in accordance with and subject to the
definition of "Debt Prepayment Application," the Ratable Portion of
each Note held by each holder on the date specified in such offer (the
"PROPOSED PREPAYMENT DATE"). The Proposed Prepayment Date shall be
not less than 30 days and not more than 60 days after the date of such
offer (if the Proposed Prepayment Date shall not be specified in such
offer, the Proposed Prepayment Date shall be the 30th day after the
date of such offer); PROVIDED that, subject to clause (iii) below, if
any amounts outstanding under the Notes are LIBOR Loans with an
Interest Period (or Interest Periods) ending on or before the sixtieth
day after the date of such offer, the Proposed Prepayment Date shall
be the last day of the Interest Period (or, if more than one Interest
Period is in effect, the last day of the Interest Period last ending).
(ii) ACCEPTANCE; REJECTION. A holder of Notes may accept an
offer to prepay made pursuant to clause (i) by causing an irrevocable
notice of such acceptance to be delivered to the Company at least five
days prior to the Proposed Prepayment Date. A failure by a holder of
Notes to respond to an offer to prepay made pursuant to this paragraph
4B shall be deemed to constitute an acceptance of such offer by such
holder.
(iii) PREPAYMENT. Prepayment of the Notes to be prepaid
pursuant to this paragraph 4B shall be at 100% of the principal amount
of such Notes, together with interest on such Notes accrued to the
date of prepayment. The prepayment shall be made on the Proposed
Prepayment Date; PROVIDED that, with respect to any Borrowing Base
Deficiency,
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<PAGE>
if the Company has elected to prepay the ratable portion of amounts
outstanding under the Bank Credit Facility in six consecutive monthly
installments, as provided in Section 4.2 of the Bank Agreement (which
election, for purposes of this clause (iii), shall be irrevocable),
prepayment of the Notes pursuant to this paragraph 4B shall also be
made in six consecutive monthly installments, on the same dates as
the prepayments of the ratable portion of amounts outstanding under
the Bank Credit Facility.
(iv) OFFICER'S CERTIFICATE. Each offer to prepay the Notes
pursuant to this paragraph 4B shall be accompanied by an Officer's
Certificate of the Company, dated the date of such offer and
specifying: (i) the Proposed Prepayment Date; (ii) that such offer
is made pursuant to this paragraph 4B; (iii) the aggregate
principal amount of all Notes, and the principal amount of each
Note, offered to be prepaid; (iv) the interest that would be due
on each Note offered to be prepaid, accrued to the Proposed
Prepayment Date; (v) that the conditions of this paragraph 4B have
been fulfilled; and (vi) in reasonable detail, the respective
natures, dates and amounts involved in the Asset Disposition
and/or Borrowing Base Deficiency giving rise to such offer of
prepayment.
4C. OFFER TO PREPAY NOTES IN THE EVENT OF A CHANGE IN CONTROL.
(i) NOTICE OF IMPENDING CHANGE IN CONTROL. The Company will not
take any action that consummates or finalizes a Change in Control
unless at least 30 days prior to such action it shall have given to
each holder of Notes written notice of such impending Change in
Control.
(ii) NOTICE OF OCCURRENCE OF CHANGE IN CONTROL. The Company
will, within five Business Days after any Responsible Officer has
knowledge of the occurrence of any Change in Control, give written
notice of such Change in Control to each holder of Notes. If a
Change in Control has occurred, such notice shall contain and
constitute an offer to prepay the Notes as described in clause
(iii) of this paragraph 4C and shall be accompanied by the
certificate described in clause (vi) hereof.
(iii) OFFER TO PREPAY NOTES. The offer to prepay Notes
contemplated by the foregoing clause (ii) shall be an offer to prepay,
in accordance with and subject to this paragraph 4C, all, but not less
than all, the Notes held by each holder (in this case only, "holder"
in respect of any Note registered in the name of a nominee for a
disclosed beneficial owner shall mean such beneficial owner) on a date
specified in such offer (the "PROPOSED PREPAYMENT DATE"). Such
Proposed Prepayment Date shall be not less than 30 days and not more
than 60 days after the date of such offer (if the Proposed Prepayment
Date shall not be specified in such offer, the Proposed Prepayment
Date shall be the 30th day after the date of such offer); provided
that if any amounts outstanding under the Notes are LIBOR Loans with
an Interest Period (or Interest Periods) ending on or before the
sixtieth day after the date of such offer, the Proposed Prepayment
Date shall be the last day of the Interest Period (or, 12 if more than
one Interest Period is in effect, the last day of the Interest Period
last ending).
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(iv) REJECTION; ACCEPTANCE. A holder of Notes may accept the
offer to prepay made pursuant to this paragraph 4C by causing a notice
of such acceptance to be delivered to the Company at least five days
prior to the Proposed Prepayment Date. A failure by a holder of Notes
to respond to an offer to prepay made pursuant to this paragraph 4C
shall be deemed to constitute an acceptance of such offer by such
holder.
(v) PREPAYMENT. Prepayment of the Notes to be prepaid pursuant
to this paragraph 4C shall be at 100% of the principal amount of such
Notes, together with interest on such Notes accrued to the date of
prepayment. The prepayment shall be made on the Proposed Prepayment
Date.
(vi) OFFICER'S CERTIFICATE. Each offer to prepay the Notes
pursuant to this paragraph 4C shall be accompanied by a certificate,
executed by a Responsible Officer of the Company and dated the date of
such offer, specifying: (a) the Proposed Prepayment Date; (b) that
such offer is made pursuant to this paragraph 4C; (c) the principal
amount of each Note offered to be prepaid; (d) the interest that
would be due on each Note offered to be prepaid, accrued to the
Proposed Prepayment Date; (e) that the conditions of this paragraph 4C
have been fulfilled; and (f) in reasonable detail, the nature and date
of the Change in Control.
4D. PARTIAL PAYMENTS PRO RATA. Upon any partial prepayment of Notes
pursuant to paragraph 4A, the principal amount so prepaid shall be allocated to
all Notes at the time outstanding in proportion to the respective outstanding
principal amounts thereof. Upon any partial prepayment of Notes pursuant to
paragraph 4B or 4C, the principal amount so prepaid shall be allocated to all
Notes at the time outstanding and held by holders who have accepted the
Company's offer of prepayment made pursuant to paragraph 4B or 4C in proportion
to the respective outstanding principal amounts thereof.
4E. RETIREMENT OF NOTES. The Company shall not, and shall not permit
any of its Subsidiaries or Affiliates to, prepay or otherwise retire in whole or
in part prior to their stated final maturity (other than by prepayment pursuant
to paragraph 4A, 4B or 4C or upon acceleration of such final maturity pursuant
to paragraph 7A), or purchase or otherwise acquire, directly or indirectly,
Notes held by any holder unless the Company or such Subsidiary or Affiliate
shall have offered to prepay or otherwise retire or purchase or otherwise
acquire, as the case may be, the same proportion of the aggregate principal
amount of Notes held by each other holder of Notes at the time outstanding upon
the same terms and conditions. Any Notes so prepaid or otherwise retired or
purchased or otherwise acquired by the Company or any of its Subsidiaries or
Affiliates shall not be deemed to be outstanding for any purpose under this
Agreement, except as provided in paragraph 4D.
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PARAGRAPH 5. AFFIRMATIVE COVENANTS.
5. AFFIRMATIVE COVENANTS.
So long as any Note shall remain unpaid or you shall have any
commitment hereunder, the Company covenants that
5A. FINANCIAL STATEMENTS. The Company will deliver to each holder in
duplicate:
(i) as soon as practicable and in any event within 45 days after
the end of each quarterly period (other than the last quarterly
period) in each fiscal year, consolidating and consolidated statements
of income, stockholders' equity and cash flows of the Company and its
Subsidiaries for the period from the beginning of the current fiscal
year to the end of such quarterly period, and a consolidating and
consolidated balance sheet of the Company and its Subsidiaries as at
the end of such quarterly period, setting forth in each case in
comparative form figures for the corresponding period in the preceding
fiscal year, all in reasonable detail and satisfactory in form to the
Required Holder(s) and certified by an authorized financial officer of
the Company, subject to changes resulting from year-end adjustment;
PROVIDED, that delivery pursuant to clause (iii) below of copies of
the Quarterly Report on Form 10Q or 10-QSB, as the case may be, of the
Company for such quarterly period filed with the Securities and
Exchange Commission shall be deemed to satisfy the requirements of
this clause (i) with respect to consolidated financial statements if
such financial statements are included in such report;
(ii) as soon as practicable and in any event within 90 days after
the end of each fiscal year, consolidating and consolidated statements
of income and cash flows and a consolidated statement of stockholders'
equity of the Company and its Subsidiaries for such year, and a
consolidating and consolidated balance sheet of the Company and its
Subsidiaries as at the end of such year, setting forth in each case in
comparative form corresponding consolidated figures from the preceding
annual audit, all in reasonable detail and satisfactory in form to the
Required Holder(s) and, as to the consolidated statements, reported on
by independent public accountants of recognized national standing
selected by the Company whose report shall be without limitation as to
the scope of the audit and satisfactory in substance to the Required
Holder(s) and, as to the consolidating statements, certified by an
authorized financial officer of the Company; PROVIDED, that delivery
pursuant to clause (iii) below of copies of the Annual Report on Form
10K or 10-KSB, as the case may be, of the Company for such fiscal year
filed with the Securities and Exchange Commission shall be deemed to
satisfy the requirements of this clause (ii) with respect to
consolidated financial statements if such financial statements are
included in such report;
(iii) promptly upon transmission thereof, copies of all such
financial statements, proxy statements, notices and reports as it
shall send to its public stockholders and copies of all registration
statements (without exhibits) and all reports which it files with the
Securities
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and Exchange Commission (or any governmental body or agency
succeeding to the functions of the Securities and Exchange
Commission);
(iv) promptly upon receipt thereof, a copy of each other
report submitted to the Company or any Subsidiary by independent
accountants in connection with any annual, interim or special audit
made by them of the books of the Company or any Subsidiary; and
(v) as soon as practicable and in any event within five days
after any officer of the Company obtaining knowledge (a) of any
condition or event which, in the opinion of management of the
Company, would have a material adverse effect on the business,
condition (financial or other), assets, properties, operations or
prospects of the Company and its Subsidiaries, (b) that any Person
has given any notice from any Person to the Company or any of its
Subsidiaries or taken any other action with respect to a claimed
default or event or condition of the type referred to in clause
(iii) of paragraph 7A, (c) of the institution of any litigation
involving claims against the Company or any of its Subsidiaries
equal to or greater than $100,000 with respect to any single cause
of action or of any adverse determination in any court proceeding
in any litigation involving a potential liability to the Company
or any of its Subsidiaries equal to or greater than $100,000 with
respect to any single cause of action which makes the likelihood
of an adverse determination in such litigation against the Company
or such Subsidiary substantially more probable, (d) of any
regulatory proceeding which may have a material adverse effect on
the Company or any of its Subsidiaries, an Officer's Certificate
specifying the nature and period of existence of any such
condition or event, or specifying the notice given or action taken
by such Person and the nature of any such claimed default, event
or condition, or specifying the details of such proceeding,
litigation or dispute and what action the Company or any of its
Subsidiaries has taken, is taking or proposes to take with respect
thereto;
(vi) promptly after the filing or receiving thereof, copies of
all reports and notices which the Company or any Subsidiary files
under ERISA with the Internal Revenue Service or the PBGC or the U.S.
Department of Labor or which the Company or any Subsidiary receives
from such corporation;
(vii) promptly upon delivery thereof to the Banks, copies
of all such notices, reports and other materials which the Company
or any Subsidiary is required under the Bank Agreement to deliver
to the Banks, including, without limitation, (a) engineering data
and information with respect to the Oil and Gas Properties, (b)
production and expense reports with respect to the Oil and Gas
Properties, (c) appraisals of compressor unit fleets and (d)
borrowing base certificates and related documentation;
(viii) promptly upon receipt thereof from the Banks, copies of
all engineering reports and borrowing base determinations prepared by
or on behalf of the Banks with respect to the Oil and Gas Properties;
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(ix) promptly upon completion thereof on an annual basis within
60 days following each fiscal year end, a copy of each operating
budget and projection of financial performance prepared by or for the
Company and its Subsidiaries;
(x) within five days after any change in executive management of
the Company or any of its Subsidiaries, including any officers of the
Company or any of its Subsidiaries holding the office of President,
Chairman of the Board or Chief Financial Officer thereof, or the
occurrence of a Change in Control, written notice thereof, together
with a description of the reasons for such change; and
(xi) with reasonable promptness, such other information
respecting the condition or operations, financial or otherwise, of the
Company or any of its Subsidiaries as such holder may reasonably
request.
Together with each delivery of financial statements required by clauses (i)
and (ii) above, the Company will deliver to each Significant Holder an
Officer's Certificate demonstrating (with computations in reasonable detail)
compliance by the Company and its Subsidiaries with the provisions of
paragraphs 6A(1) through 6A(6), 6C(2), 6C(3) and 6C(5) and stating that
there exists no Event of Default or Default, or, if any Event of Default or
Default exists, specifying the nature and period of existence thereof and
what action the Company proposes to take with respect thereto. Together with
each delivery of financial statements required by clause (ii) above, the
Company will deliver to each Significant Holder a certificate of such
accountants stating that, in making the audit necessary for their report on
such financial statements, they have obtained no knowledge of any Event of
Default or Default, or, if they have obtained knowledge of any Event of
Default or Default, specifying the nature and period of existence thereof.
Such accountants, however, shall not be liable to anyone by reason of their
failure to obtain knowledge of any Event of Default or Default which would
not be disclosed in the course of an audit conducted in accordance with
generally accepted auditing standards.
The Company also covenants that immediately after any Responsible
Officer obtains knowledge of an Event of Default or Default, it will deliver to
each Significant Holder an Officer's Certificate specifying the nature and
period of existence thereof and what action the Company proposes to take with
respect thereto.
5B. INFORMATION REQUIRED BY RULE 144A. The Company will, upon the
request of the holder of any Note, provide such holder, and any qualified
institutional buyer designated by such holder, such financial and other
information as such holder may reasonably determine to be necessary in order
to permit compliance with the information requirements of Rule 144A under the
Securities Act in connection with the resale of Notes, except at such times
as the Company is subject to the reporting requirements of section 13 or
15(d) of the Exchange Act. For the purpose of this paragraph 5B, the term
"qualified institutional buyer" shall have the meaning specified in Rule 144A
under the Securities Act.
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<PAGE>
5C. INSPECTION OF PROPERTY. The Company will permit any Person
designated by any holder (other than a Competitor or an Affiliate, agent or
employee of a Competitor) in writing, at the Company's expense during the
continuance of a Default or Event of Default and otherwise at such holder's
expense, to visit and inspect any of the properties of the Company and its
Subsidiaries, to examine the corporate books and financial records of the
Company and its Subsidiaries and make copies thereof or extracts therefrom and
to discuss the affairs, finances and accounts of any of such corporations with
the principal officers of the Company and its independent public accountants,
all at such reasonable times and as often as such holder may reasonably request.
Each holder desiring to perform any such inspection or examination shall provide
the Company with reasonable prior notice thereof, which notice shall include the
identity of the Person who is to perform such inspection or examination.
5D. COVENANT TO SECURE NOTES EQUALLY. The Company will, if it or any
Subsidiary shall create or assume any Lien upon any of its property or assets,
whether now owned or hereafter acquired, other than Liens permitted by the
provisions of paragraph 6C(1) (unless prior written consent to the creation or
assumption thereof shall have been obtained pursuant to paragraph 11C), make or
cause to be made effective provision whereby the Notes will be secured by such
Lien equally and ratably with any and all other Indebtedness thereby secured so
long as any such other Indebtedness shall be so secured pursuant to such
agreements and instruments as shall be approved by the Required Holder(s), and
the Company will cause to be delivered to the holder of each Note an opinion of
independent counsel to the effect that such agreements and instruments are
enforceable in accordance with their terms and that the Notes are equally and
ratably secured with such other Indebtedness.
5E. PARITY WITH BANK CREDIT FACILITY. The Company will, and will
cause its Subsidiaries to, execute all such documents and to take such other
actions as the Required Holder(s) may reasonably request in order to assure that
at all times the Notes shall rank pari passu in right of payment with, the Bank
Credit Facility.
5F. CORPORATE EXISTENCE, LICENSES AND PERMITS; MAINTENANCE OF
PROPERTIES. The Company will at all times do or cause to be done all things
necessary to maintain, preserve and renew its existence as a corporation
organized under the laws of a state of the United States of America, will
preserve and keep in force and effect, and cause each of its Subsidiaries to
preserve and keep in force and effect, all licenses and permits necessary to
the conduct of its and their respective businesses and will maintain and
keep, and will cause each of its Subsidiaries to maintain and keep, its and
their respective properties in good repair, working order and condition, and
from time to time make all necessary and proper repairs, renewals and
replacements, so that the business carried on in connection therewith may be
properly and advantageously conducted at all times in the normal course of
business as conducted prior to the date of repair; PROVIDED, HOWEVER, that
nothing contained in this paragraph 5F shall prevent the Company or any
Subsidiary from ceasing or omitting to exercise any right, license or permit
or to make any repair, renewal or replacement that (i) in the reasonable
judgment of the Company or such Subsidiary is no longer in the best interests
of the Company or such Subsidiary and (ii) such cessation or omission could
not result in a material
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adverse effect on the business, condition (financial or other), assets,
properties, operations or prospects of the Company and its Subsidiaries taken
as a whole.
5G. MAINTENANCE OF INSURANCE. The Company will carry and
maintain, and cause each Subsidiary to carry and maintain, insurance (subject
to customary deductibles and retentions) in at least such amounts and against
such liabilities and hazards and by such methods as customarily maintained by
other companies operating similar businesses. The Agent and all holders of
Notes shall be named as additional insureds, and the Agent shall be named as
loss payee, on each insurance policy obtained or maintained by the Company
and its Subsidiaries with respect to their properties and businesses.
5H. PAYMENT OF TAXES AND OTHER CLAIMS. The Company will and will
cause each of its Subsidiaries to file all income tax or similar tax returns
required to be filed in any jurisdiction and to pay and discharge all taxes
shown to be due and payable on such returns and all other taxes, assessments,
governmental charges, levies, trade accounts payable and claims for work, labor
or materials (all the foregoing being referred to collectively as "CLAIMS")
payable by any of them, to the extent such Claims have become due and payable
and before they have become delinquent; PROVIDED that neither the Company nor
any Subsidiary need pay any Claim if (i) the amount, applicability or validity
thereof is contested by the Company or such Subsidiary on a timely basis in good
faith and in appropriate proceedings, and the Company or a Subsidiary has
established adequate reserves therefor in accordance with GAAP on the books of
the Company or such Subsidiary or (ii) the nonpayment of all such Claims in the
aggregate could not result in a material adverse change in the business,
condition (financial or other), assets, properties, operations or prospects of
the Company and its Subsidiaries taken as a whole.
5I. ERISA COMPLIANCE. The Company will, and will cause each ERISA
Affiliate to, at all times:
(i) with respect to each Plan, make timely payments of
contributions required to meet the minimum funding standard set
forth in ERISA or the Code with respect thereto and, with respect
to any Multiemployer Plan, make timely payment of contributions
required to be paid thereto as provided by Section 515 of ERISA,
and
(ii) comply with all other provisions of ERISA,
except for such failures to make contributions and failures to comply as could
not have a material adverse effect on the business, condition (financial or
other), assets, properties, operations or prospects of the Company and its
Subsidiaries taken as a whole.
5J. COMPLIANCE WITH LAWS. The Company will comply, and will cause
each of its Subsidiaries to comply, with all applicable laws, rules, regulations
and orders (including those relating to protection of the environment) except,
in any such case, where failure to comply could
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not have a material adverse effect on the business, condition (financial or
otherwise), operations or prospects of the Company and its Subsidiaries taken
as a whole.
5K. MAINTENANCE OF COMMITTED CREDIT FACILITY. The Company will at
all times maintain a committed revolving credit facility of not less than
$5,000,000, and will maintain its ability to satisfy all conditions precedent to
its ability to obtain advances thereunder, and the remaining commitment period
with respect to such facility shall at all times be at least 12 months.
5L. ENVIRONMENTAL COVENANTS. The Company will immediately notify
each holder of Notes of and provide such holder with copies of any
notifications of discharges or releases or threatened releases or discharges
of a Polluting Substance on, upon, into or from the Collateral which are
given or required to be given by or on behalf of the Company or any of its
Subsidiaries to any federal, state or local Tribunal if any of the foregoing
may materially and adversely affect the Company, any of its Subsidiaries or
any part of the Collateral, and such copies of notifications shall be
delivered to the holders at the same time as they are delivered to the
Tribunal. The Company further agrees promptly to undertake and diligently
pursue to completion, or to cause its Subsidiaries to undertake and
diligently pursue to completion, any appropriate and legally required or
authorized remedial containment and cleanup action in the event of any
release or discharge or threatened release or discharge of a Polluting
Substance on, upon, into or from the Collateral. At all times while owning
and operating the Collateral, the Company will maintain and retain, or cause
its Subsidiaries to maintain and retain, complete and accurate records of all
releases, discharges or other disposal of Polluting Substances on, onto, into
or from the Collateral, including, without limitation, records of the
quantity and type of any Polluting Substances disposed of on or off the
Collateral.
5M. ENVIRONMENTAL INDEMNITIES. The Company hereby agrees to
indemnify, defend and hold harmless each holder of Notes, the Agent and each
of their respective officers, directors, employees, agents, consultants,
attorneys, contractors, affiliates, successors, assigns or transferees from
and against, and reimburse said Persons in full with respect to, any and all
loss, liability, damage, fines, penalties, costs and expenses, of every kind
and character, including reasonable attorneys' fees and court costs, known or
unknown, fixed or contingent, occasioned by or associated with any claims,
demands, causes of action, suits and/or enforcement actions, including any
administrative or judicial proceedings, and any remedial, removal or response
actions ever asserted, threatened, instituted or requested by any Persons,
including any Tribunal, arising out of or related to: (i) the breach of any
representation or warranty of the Company contained in paragraph 8M set forth
herein; (ii) the failure of the Company to perform, or to cause its
Subsidiaries to perform, any of the covenants contained in paragraph 5L;
(iii) the ownership, construction, occupancy, operation, use of the
Collateral prior to the earlier of the date on which (a) the Notes have been
paid in full and the Security Documents have been released, or (b) the
Collateral has been sold by the Agent pursuant to foreclosure of the Liens
granted under the Security Documents, deed in lieu of such foreclosure or
otherwise (all of the foregoing, collectively, the "INDEMNIFIED
LIABILITIES"); PROVIDED, HOWEVER, the foregoing indemnity shall not apply
with respect to matters caused solely by or arising solely from the Agent's
activities during any period of time the Agent acquires ownership of the
Collateral. THE FOREGOING INDEMNITY OBLIGATIONS OF THE COMPANY SHALL EXTEND
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TO ALL INDEMNIFIED LIABILITIES, INCLUDING, WITHOUT LIMITATION, ANY
INDEMNIFIED LIABILITIES ARISING FROM OR ATTRIBUTED TO THE NEGLIGENCE OF ANY
INDEMNIFIED PARTY.
5N. COLLATERAL; NEW SUBSIDIARIES. The Company shall execute, and
shall cause its Subsidiaries to execute, any and all documents, financing
statements, agreements and instruments, and take all action (including filing
Uniform Commercial Code and other financing statements, mortgages and deeds
of trust), that may be required under applicable law, or which the Required
Holder(s) or the Agent may reasonably request in order to effectuate the
transactions contemplated by the Senior Note Documents and in order to grant,
preserve, protect and perfect the validity and first priority of the security
interests and Liens created or purported to be created by the Security
Documents. In addition, at the cost and expense of the Company, the Company
will (i) cause each subsequently acquired or organized Subsidiary
(contemporaneously with such acquisition or organization) to execute and
deliver a Guaranty Agreement in favor of the holders of Notes and (ii) cause
such Subsidiary to secure payment of the Notes and performance and observance
of all other obligations of the Company and its Subsidiaries under the Senior
Note Documents by pledging or creating, or causing to be pledged or created,
first priority perfected security interests and Liens with respect to such of
its assets and properties as the Required Holder(s) shall designate (it being
understood that it is the intent of the parties that such obligations shall
be secured by, among other things, substantially all the property and assets
of the Company and its Subsidiaries (now or hereafter acquired or created),
including, without limitation, real and other properties acquired subsequent
to the Date of Closing). Such security interests and Liens will be created
under the Security Documents and other security agreements, mortgages, deeds
of trust and other instruments and documents in form, scope and substance
satisfactory to the Required Holder(s) and the Agent, and the Company will
deliver or cause to be delivered to the Agent, all such instruments and
documents (including, without limitation, legal opinions, title insurance
policies, surveys and lien searches) as the Required Holder(s) or the Agent
shall request to evidence compliance with this paragraph 5N. The Company
agrees to provide from time to time such evidence as the Required Holder(s)
or the Agent shall request as to the perfection and priority status of each
such security interest and Lien.
5O. ENFORCEMENT OF ACQUISITION DOCUMENTS. The Company will
enforce, and will cause each of its Subsidiaries parties thereto to enforce,
all covenants, agreements and other obligations contained in the Acquisition
Documents which are binding upon the other parties thereto and which survive
the consummation of the Acquisition, including, without limitation, all
indemnification obligations.
5P. LOCKBOX ACCOUNT. The Company and each of its Subsidiaries shall
establish and maintain a joint lockbox account with the Agent (the "LOCKBOX
ACCOUNT") pursuant to the Lockbox Agreement.
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5Q. BORROWING BASE PROVISIONS.
(i) INITIAL BORROWING BASE. During the period from the date
hereof through November 30, 1997, the effective date of the first
redetermination of the Borrowing Base pursuant to the provisions of
this paragraph 5Q, the amount of the Borrowing Base shall be
$27,300,000.
(ii) ADJUSTMENTS TO BORROWING BASE.
(a) The Borrowing Base shall be redetermined (w) initially as of
November 30, 1997, (x) as of any subsequent quarterly redetermination
date (each February 28 or 29, May 31, August 31 and November 30), (y)
as of the effective date of any Asset Disposition pursuant to clause
(i) or (ii) of paragraph 6C(5) and (z) upon a Mid-Period Adjustment
made pursuant to clause (e) below.
(b) Promptly upon each redetermination of the "Oil and
Gas Collateral Borrowing Base" under and as that term is defined
in the Bank Agreement (hereinafter the "BANK OIL AND GAS BORROWING
BASE"), but in any event no later than fifteen days prior to the
applicable May 31 or November 30 redetermination date under the
Bank Agreement, the Company shall furnish to each holder of Notes
written notice of the amount of the redetermined Bank Oil and Gas
Borrowing Base, which notice shall be accompanied by all
documents, calculations and other materials furnished by the
Company and its Subsidiaries to the Banks or prepared by or on
behalf of the Banks in connection with such redetermination of the
Bank Oil and Gas Borrowing Base, including, without limitation,
all borrowing base certificates, reports and engineering
certificates furnished to the Banks. After review of the
redetermined Bank Oil and Gas Borrowing Base and all supporting
information, the Required Holder(s) shall reach their own
determination of the value of the Oil and Gas Properties. If such
determination by the Required Holder(s) differs from the Banks'
determination and the Banks and the Required Holder(s) are unable
to reach an agreement concerning the value of the Oil and Gas
Properties by the then applicable May 31 or November 30
redetermination date, the lower of the two valuation amounts for
the Oil and Gas Properties shall be deemed to be the redetermined
amount of the evaluated Oil and Gas Properties (the "OIL AND GAS
BORROWING BASE") for purposes of this Agreement and shall remain
in effect until any subsequent redetermination pursuant to this
paragraph 5Q. The determination of the Oil and Gas Borrowing Base
shall be made in good faith by the Required Holder(s), in the
exercise of their sole discretion and in accordance with their
respective customary practices and standards for similar debt
investments as they exist at the time of such determination of the
Oil and Gas Borrowing Base, which may vary from holder to holder.
The Oil and Gas Borrowing Base, as so redetermined semiannually,
shall be added to the other components of the Borrowing Base, and
such Borrowing Base shall be adjusted quarterly, all as provided
in clause (a) above and in the definition of "Borrowing Base" set
forth in paragraph 10B.
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(c) The combined aggregate principal amount permitted to be
outstanding under the Note Agreement and the Bank Agreement
(including, without limitation, the unfunded portion of outstanding
letters of credit issued by any of the Banks) shall not exceed the
Borrowing Base from time to time in effect hereunder.
(d) Any Asset Disposition permitted under clause (i) or (ii) of
paragraph 6C(5) shall, concurrently with the consummation of such
Asset Disposition, effect an automatic reduction in the Borrowing Base
then in effect.
(e) The Company and its Subsidiaries may from time to time
ask the Banks to undertake a review and possible adjustment of the
"Revolving Credit Borrowing Base" under and as such term is
defined in the Bank Agreement (the "BANK BORROWING BASE") other
than at one of the regularly scheduled quarterly redetermination
dates, in order to adjust the Bank Borrowing Base as a result of a
completed acquisition, a prospective acquisition, or otherwise.
Upon delivery of written notice to the holders of Notes that such
a redetermination of the Bank Borrowing Base has been agreed to
and effected by the Banks and the Company's receipt of written
consent from the Required Holder(s), and provided, in the case of
a Mid-Period Adjustment requested in order to include in the
Borrowing Base prior to the consummation of an acquisition the
value of assets to be acquired in such acquisition, that (v) no
Change of Control has occurred or will result from the
contemplated acquisition, (w) the Required Holder(s)' review and
approval of the assets being acquired (in accordance with the
Borrowing Base formula then in effect), (x) such acquisition is
permitted under the terms of this Agreement, (y) no Default or
Event of Default has occurred or would occur, both before and
after giving effect to such acquisition, and (z) the Company,
contemporaneously with the consummation of such acquisition,
complies in all respects with paragraph 5N of this Agreement, the
Borrowing Base then in effect shall also be redetermined to
include the value of the assets being acquired (each such
redetermination, a "MID-PERIOD ADJUSTMENT").
(iii) PROCEDURES IF BORROWING BASE DEFICIENCY OCCURS. Each time
the combined aggregate principal amount outstanding under the Note Agreement and
the Bank Agreement (including, without limitation, the unfunded portion of
outstanding letters of credit issued by any of the Banks) (the "OUTSTANDING
SENIOR INDEBTEDNESS") exceeds the Borrowing Base (each, a "BORROWING BASE
DEFICIENCY"), the Company shall promptly notify all holders of Notes of such
occurrence and the amount of the Borrowing Base Deficiency on such date, and
shall promptly thereafter offer to prepay the Notes as and to the extent
required under paragraph 4B.
PARAGRAPH 6. NEGATIVE COVENANTS.
6. NEGATIVE COVENANTS. So long as any Note shall remain unpaid or
you shall have any commitment hereunder, the Company covenants that:
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6A. FINANCIAL COVENANTS.
6A(1). TOTAL LENDER/CAPITALIZED LEASE OBLIGATIONS TO TANGIBLE
NET WORTH RATIO. The Company will not permit, at any time during any
fiscal year period set forth below, the ratio of Consolidated Total
Lender/Capitalized Lease Obligations to Consolidated Tangible Net
Worth to be greater than the ratio set forth opposite such fiscal year
period below:
Fiscal Year(s) Maximum Ratio
fiscal years 1997 and 1998 1.60 to 1.00
fiscal years 1999 through 2004 1.40 to 1.00
6A(2). MINIMUM CURRENT RATIO. The Company will not permit, at
any time during any fiscal year period set forth below, the Current
Ratio to be less than the Current Ratio set forth opposite fiscal year
period below:
Fiscal Year(s) Minimum Current Ratio
fiscal year 1997 1.20 to 1.00
fiscal years 1998 through 2004 0.60 to 1.00
6A(3). MINIMUM DEBT SERVICE COVERAGE RATIO. The Company will
not permit the ratio of (i) EBITDA for the most recently ended two
fiscal quarters to (ii) Debt Service for such two fiscal quarters to
be less than (i) 2.25 to 1.00 from the Date of Closing until the
Conversion Date or (ii) 1.50 to 1.00 from and after the Conversion
Date.
6A(4). CAPITAL EXPENDITURES. The Company will not (i)
permit capital expenditures for the Company and its Subsidiaries
in any fiscal year subsequent to the fiscal year ended December
31, 1999 for the acquisition, construction, expansion or
improvement of capital assets (whether owned or leased or
otherwise) to exceed an aggregate total of $3,000,000 for the
Company and its Subsidiaries for such fiscal year or (ii) commit,
or permit any of its Subsidiaries to commit, for any such capital
expenditure which, if made in the applicable fiscal year period
for delivery and payment for such applicable period, would result
in gross capital expenditures in excess of the $3,000,000
aggregate limitation herein set forth.
6A(5). MAXIMUM SGA TO TOTAL REVENUES RATIO. The Company will
not permit the ratio of (i) Consolidated SGA Expenses for the most
recently ended two fiscal quarters to (ii) Consolidated Total Revenues
for such two fiscal quarters, expressed as a percentage, to exceed (a)
22% through the fiscal quarter ending December 31, 1997, and (b) 19%
during and after the fiscal quarter ending March 31, 1997.
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6A(6). MAXIMUM PARTS INVENTORY. The Company will not permit
the aggregate compressor parts inventories for the Company and its
Subsidiaries to exceed $5,000,000 book value at any time, calculated
pursuant to GAAP (lower of cost or market).
6B. LIMITATION ON RESTRICTED PAYMENTS. The Company will not, and
will not permit any Subsidiary to, directly or indirectly declare, order, pay,
make or set apart any sum for any Restricted Payment.
6C. LIENS, INDEBTEDNESS, AND OTHER RESTRICTIONS. The Company will
not and will not permit any Subsidiary to:
6C(1). LIENS. Create, assume or suffer to exist any Lien upon
any of its properties or assets, whether now owned or hereafter
acquired (whether or not provision is made for the equal and ratable
securing of the Notes in accordance with the provisions of paragraph
5D), EXCEPT:
(i) Liens in favor of the Agent securing the Notes and the
payment, performance and observance of the other obligations
under this Agreement and the other Senior Note Documents;
(ii) Liens in favor of the Agent securing Indebtedness of
the Company and its Subsidiaries to the Banks under the Bank
Agreement and other Loan Documents (as such term is defined in
the Bank Agreement);
(iii) Liens in favor of the Agent securing the
Subordinated Notes and the payment, performance and observance
of the other obligations under the Subordinated Note Agreement
and the other Subordinated Note Documents;
(iv) Liens on property of the Company and its Subsidiaries
outstanding on the Date of Closing, described in SCHEDULE 8D
attached hereto and securing Indebtedness permitted by paragraph
6C(2);
(v) statutory Liens incidental to the conduct of
business or the ownership of properties of the Company and
its Subsidiaries (including Liens in connection with worker's
compensation, unemployment insurance and other like laws
(other than ERISA Liens), warehousemen's and mechanic's liens
and statutory landlord's liens) and Liens to secure the
performance of bids, tenders or purchase, construction or
sales contracts, or to secure statutory obligations, property
taxes and assessments or governmental charges, surety or
appeal bonds or other Liens of like general nature which in
each case are incurred in the ordinary course of business and
not in connection with the borrowing of money, the obtaining
of advances or credit or the payment of the deferred purchase
price of property and which do not in any event materially
impair the value or use of the property encumbered thereby in
the
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operation of the business of the Company and its Subsidiaries;
PROVIDED in each case, that the obligation secured is not
overdue; and
(vi) any Lien created to secure all or any part of the
purchase price, or to secure Indebtedness incurred or assumed to
pay all or any part of the purchase price, of property acquired
by the Company or its Subsidiaries after the Date of Closing,
PROVIDED, that any such Lien shall be confined solely to the item
or items of property so acquired and, if required by the terms of
the instrument originally creating such Lien, other property
which is an improvement to or is acquired for specific use in
connection with such acquired property.
6C(2). LIMITATION ON INDEBTEDNESS. Create, incur, assume or
permit to exist any Indebtedness other than:
(i) Indebtedness incurred pursuant to this Agreement, as
evidenced by the Notes, and the guaranty obligations of the
Company's Subsidiaries with respect thereto;
(ii) Indebtedness incurred pursuant to the Subordinated Note
Agreement, as evidenced by the Subordinated Notes, and the
guaranty obligations of the Company's Subsidiaries with respect
thereto;
(iii) Indebtedness incurred pursuant to the Bank
Agreement, so long as (a) the Intercreditor Agreement shall
remain in effect and (b) the maximum aggregate outstanding
loans or commitments (and other extensions of credit) of all
lenders from time to time parties thereto does not exceed
$40,000,000;
(iv) trade payables and current Indebtedness (other
than for borrowed money) incurred in, and deposits and advances
accepted in, the ordinary course of business; and
(v) Indebtedness secured by the Liens permitted pursuant to
clause (vi) of paragraph 6C(1); PROVIDED, that such Indebtedness
shall not exceed $500,000 in the aggregate incurred during any
fiscal year and $750,000 in the aggregate outstanding at any
time.
6C(3). LOANS, ADVANCES, INVESTMENTS AND CONTINGENT
LIABILITIES. Make or permit to remain outstanding any loan or
advance to, or extend credit (other than trade credit extended in
the normal course of business to any Person that is not a
Subsidiary of the Company) to, or make or permit to remain
outstanding any Guarantee in connection with the obligations,
stock or dividends of, or own, purchase or acquire any stock,
obligations or securities of, or any other interest in, or make
any capital contribution to, or acquire all or
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substantially all of the assets of, any Person (any of the foregoing,
an "INVESTMENT"), EXCEPT that the Company or any Subsidiary may:
(i) endorse negotiable instruments for collection in the
ordinary course of business;
(ii) provide Guarantees with respect to the Indebtedness and
other obligations of the Company and its Subsidiaries under the
Senior Note Documents and the Subordinated Note Documents;
(iii) own, purchase or acquire stock or other equity
interests of a Wholly Owned Subsidiary or, if permitted under
clause (vii) of this paragraph 6C(3), of a Person which
immediately after such purchase or acquisition will be a
Wholly Owned Subsidiary;
(iv) own, purchase or acquire (a) certificates of
deposit of commercial banks organized under the laws of the
United States or any state thereof (having capital resources
in excess of $100,000,000) and commercial paper rated A-1 by
Standard and Poor's Ratings Group or P-1 by Moody's Investors
Service, Inc., in each case due within one year from the date
of purchase and payable in the United States in United States
dollars, (b) obligations of the United States Government or
any agency thereof, and obligations guaranteed by the United
States Government, in any case maturing within one year after
the acquisition thereof, and (c) money market mutual funds
that are classified as current assets in accordance with GAAP
and that invest solely in investments described in clauses
(a) and (b) maturing not more than one year after the
acquisition thereof, which funds are managed by Persons
having capital and surplus in excess of $100,000,000;
(v) make or permit to remain outstanding other loans,
advances and Guarantees, PROVIDED that the aggregate amount of
other loans, advances and Guarantees permitted pursuant to this
clause (v) shall not exceed $200,000 during any fiscal year
period;
(vi) acquire limited partnership or limited liability
company member interests in up to three compressor leasing
limited partnerships or limited liability companies with BOK
Capital Services, Inc. ("BCS"), each of which shall be subject to
the following limitations: (a) the total capital contribution of
the Company or its applicable Subsidiary shall not exceed $1,000;
(b) BCS will provide not more than $6,000,000, in the form of
either a capital contribution or a loan, to each such entity; (c)
neither the Company nor any of its Subsidiaries nor any of their
respective properties shall be liable with respect to any
Indebtedness or other obligations of such entity; (d) and all
organizational, operating and other documents executed in
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connection with the formation and operation of each such entity
shall be substantially similar to those previously provided to
and approved by you; and
(vii) acquire all of the capital stock or other equity
interests of a Person, or acquire all or substantially all of the
assets of a Person; PROVIDED, that the prior written consent of
the Required Holder(s) (which may be granted or withheld in their
sole discretion) shall be required with respect to any such
acquisition for consideration that includes the payment of cash
by the Company or any of its Subsidiaries, at the time of the
acquisition or within twelve months thereafter, in an amount in
excess of $5,000,000.
6C(4). CONSOLIDATION, MERGER OR TRANSFER OF ASSETS. (i) Merge
or consolidate with or into any Person (except that any Subsidiary may
merge or consolidate with or into any other Subsidiary), (ii) convey,
transfer, lease or otherwise dispose of all or substantially all of
its assets to any Person or (iii) adopt or effect any plan of
reorganization, recapitalization, liquidation or dissolution.
6C(5). LIMITATION ON ASSET DISPOSITIONS. Except as permitted
under paragraph 6C(4), make or permit to be made any Asset
Disposition, other than the following:
(i) any Asset Disposition involving any of the
compressor units of the Company or any of its Subsidiaries,
PROVIDED that (a) the aggregate Fair Market Value of all such
Asset Dispositions may not exceed $1,000,000 in any
consecutive twelve-month period without the prior written
consent of the Required Holder(s) and (b) the Company has
offered to prepay Notes if and to the extent required under
paragraph 4B; and
(ii) any Asset Disposition involving an undivided interest
in any of the Oil and Gas Properties, PROVIDED that (a) the
aggregate Fair Market Value of all such Asset Dispositions may
not exceed $250,000 in any consecutive twelve-month period
without the prior written consent of the Required Holder(s) and
(b) the Company has offered to prepay Notes if and to the extent
required under paragraph 4B; and
(iii) any other Asset Disposition for Fair Market Value
of assets (other than and expressly excluding (a) compressors,
(b) oil and gas leasehold, mining or other mineral interests
wherever located and (c) capital stock or other equity interests
in Subsidiaries), PROVIDED that the aggregate Fair Market Value
of all such Asset Dispositions in any fiscal year may not exceed
$100,000.
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6C(6). SALE OR DISCOUNT OF RECEIVABLES. Sell with recourse,
discount (other than to the extent of finance and interest charges
included therein) or otherwise sell for less than face value thereof,
any of its notes or accounts receivable, except notes or accounts
receivable the collection of which is doubtful in accordance with
general accepted accounting principles.
6C(7). TRANSACTIONS WITH AFFILIATES. Directly or indirectly,
purchase, acquire or lease any property from, or sell, transfer or
lease any property to, or otherwise deal with, in the ordinary course
of business or otherwise (i) any Affiliate, (ii) any Person owning,
beneficially or of record, directly or indirectly, either individually
or together with all other Persons to whom such Person is related by
blood, adoption or marriage, stock of the Company (of any class having
ordinary voting power for the election of directors) aggregating 5% or
more of such voting power or (iii) any Person related by blood,
adoption or marriage to any Person described or coming within the
provisions of clause (i) or (ii) of this paragraph 6C(7), except in
the ordinary course and pursuant to the reasonable requirements of the
Company's or such Subsidiary's business and upon fair and reasonable
terms no less favorable to the Company or such Subsidiary than would
be obtainable in a comparable arm's-length transaction with a Person
not an Affiliate.
6D. CHANGE OF FISCAL YEAR. The Company will not and will not permit
any Subsidiary to change its fiscal year from its present fiscal year (fiscal
year end of December 31).
6E. CHANGE OF BUSINESS. The Company will not and will not permit any
Subsidiary to engage in any business activity or operation substantially
different than or unrelated to its current business activities or operations.
6F. CERTIFICATES OF INCORPORATION; BYLAWS; TRADE NAMES. The Company
will not and will not permit any Subsidiary to amend, alter, modify or restate
its Certificate of Incorporation or bylaws in any way which would (i) change its
corporate name or adopt a trade name, or (ii) in any manner adversely affect the
obligations or covenants of the Company and its Subsidiaries hereunder or under
any of the other Senior Note Documents.
6G. OTHER AGREEMENTS, AMENDMENTS. The Company will not and will
not permit any of its Subsidiaries to (i) enter into or permit to exist any
agreement (a) which would cause a Default or Event of Default hereunder or
(b) which contains any provision which would be violated or breached by the
performance of the obligations of the Company and its Subsidiaries hereunder
or under any of the other Senior Note Documents or (ii) amend or modify or
permit the amendment or modification of the Bank Agreement or any other "Loan
Document," as such term is defined in the Bank Agreement as in effect on the
date hereof.
6H. LIMITATION ON CERTAIN RESTRICTIVE AGREEMENTS. The Company will
not, and will not permit any of its Subsidiaries to, enter into or suffer to
exist any contractual obligation, other than the Bank Agreement, the Senior Note
Documents and the Subordinated Note Documents,
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which in any way restricts the ability of the Company or any of its
Subsidiaries to (i) create, incur, assume or suffer to exist any Lien upon
any of its property, assets or revenues, (ii) make any prepayments or
purchases of the Notes required under this Agreement, (iii) make any
dividends or distributions, or any payments required under this Agreement or
any other Senior Note Document or (iv) transfer any of its property or assets
to the Company or a Wholly Owned Subsidiary of the Company.
6I. MOST FAVORED LENDER STATUS. The Company will not and will not
permit any Subsidiary to enter into, assume or otherwise be bound or obligated
under any agreement creating or evidencing Indebtedness in excess of $500,000 or
any agreement executed and delivered in connection with any Indebtedness in
excess of $500,000 containing one or more Additional Covenants or Additional
Defaults, unless prior written consent to such agreement shall have been
obtained pursuant to paragraph 11C; PROVIDED, HOWEVER, in the event the Company
or any Subsidiary shall enter into, assume or otherwise become bound by or
obligated under any such agreement without the prior written consent of the
holders of the Notes, the terms of this Agreement shall, without any further
action on the part of the Company or any of the holders of the Notes, be deemed
to be amended automatically to include each Additional Covenant and each
Additional Default contained in such agreement, but only for so long as such
Additional Covenants and Additional Defaults remain in effect with respect to
such other agreement. The Company further covenants to promptly execute and
deliver at its expense (including, without limitation, the fees and expenses of
counsel for the holders of the Notes) an amendment to this Agreement in form and
substance satisfactory to the Required Holder(s) evidencing the amendment of
this Agreement to include such Additional Covenants and Additional Defaults,
provided that the execution and delivery of such amendment shall not be a
precondition to the effectiveness of such amendment as provided for in this
paragraph 6I, but shall merely be for the convenience of the parties hereto.
6J. CHANGE IN CONTROL. No Change in Control shall occur.
PARAGRAPH 7. EVENTS OF DEFAULT.
7. EVENTS OF DEFAULT.
7A. ACCELERATION. If any of the following events shall occur and be
continuing for any reason whatsoever (and whether such occurrence shall be
voluntary or involuntary or come about or be effected by operation of law or
otherwise):
(i) the Company defaults in the payment or prepayment of any
principal of any Note when the same shall become due, either by the
terms thereof or otherwise as herein provided; or
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(ii) the Company defaults in the payment of any interest on any
Note for more than five days after the date due, or the Company or any
Subsidiary fails to pay any other amounts owed under this Agreement or
any other Senior Note Document within ten days after the date due; or
(iii) the Company or any Subsidiary (a) defaults (whether
as primary obligor or as guarantor or other surety) in any payment
of principal of or interest on any other obligation for money
borrowed (or any Capitalized Lease Obligation, any obligation
under a conditional sale or other title retention agreement, any
obligation issued or assumed as full or partial payment for
property whether or not secured by a purchase money mortgage or
any obligation under notes payable or drafts accepted representing
extensions of credit) in excess of $100,000 beyond any period of
grace provided with respect thereto, or (b) fails to perform or
observe any other agreement, term or condition contained in any
agreement under which any such obligation is created (or if any
other event thereunder or under any such agreement shall occur and
be continuing) and the effect of such failure or other event is to
cause such obligation to become due (or to be repurchased by the
Company or any Subsidiary) prior to any stated maturity; or
(iv) any representation or warranty made by the Company or any of
its Subsidiaries herein or in any of the other Senior Note Documents,
or by the Company or any of its officers in any writing furnished in
connection with or pursuant to this Agreement shall be false in any
material respect on the date as of which made; or
(v) the Company fails to perform or observe any term, covenant
or agreement contained in paragraphs 5K or 6; or
(vi) the Company or any Subsidiary fails to perform or observe
any other agreement, covenant, term or condition contained herein or
in any of the other Senior Note Documents and such failure shall not
be remedied within the earlier of (a) 30 days after the Company or
any Subsidiary obtains (or should have obtained) knowledge thereof or
(b) 20 days following receipt of notice thereof from any holder; or
(vii) the Company or any Subsidiary makes an assignment for
the benefit of creditors or is generally not paying its debts as such
debts become due; or
(viii) any decree or order for relief in respect of the
Company or any Subsidiary is entered under any bankruptcy,
reorganization, compromise, arrangement, insolvency, readjustment of
debt, dissolution or liquidation or similar law, whether now or
hereafter in effect (the "BANKRUPTCY LAW"), of any jurisdiction; or
(ix) the Company or any Subsidiary petitions or applies to any
Tribunal for, or consents to, the appointment of, or taking possession
by, a trustee, receiver, custodian, liquidator or similar official of
the Company or any Subsidiary, or of any substantial part of
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the assets of the Company or any Subsidiary, or commences a
voluntary case under the Bankruptcy Law of the United States or
any proceedings (other than proceedings for the voluntary
liquidation and dissolution of a Subsidiary) relating to the
Company or any Subsidiary under the Bankruptcy Law of any other
jurisdiction; or
(x) any such petition or application is filed, or any such
proceedings are commenced, against the Company or any Subsidiary and
the Company or such Subsidiary by any act indicates its approval
thereof, consent thereto or acquiescence therein, or an order,
judgment or decree is entered appointing any such trustee, receiver,
custodian, liquidator or similar official, or approving the petition
in any such proceedings, and such order, judgment or decree remains
unstayed and in effect for more than 60 days; or
(xi) any order, judgment or decree is entered in any proceedings
against the Company decreeing the dissolution of the Company and such
order, judgment or decree remains unstayed and in effect for more than
60 days; or
(xii) any order, judgment or decree is entered in any
proceedings against the Company or any Subsidiary decreeing a
split-up of the Company or such Subsidiary which requires the
divestiture of assets representing a substantial part, or the
divestiture of the stock of a Subsidiary whose assets represent a
substantial part, of the consolidated assets of the Company and
its Subsidiaries (determined in accordance with generally accepted
accounting principles) or which requires the divestiture of
assets, or stock of a Subsidiary, which shall have contributed a
substantial part of the consolidated net income of the Company and
its Subsidiaries (determined in accordance with generally accepted
accounting principles) for any of the three fiscal years then most
recently ended, and such order, judgment or decree remains
unstayed and in effect for more than 60 days; or
(xiii) the Company or any Subsidiary fails to make timely
payment or deposit of any amount of tax required under the Code to be
withheld by the Company or any Subsidiary and paid to or deposited to
or to the credit of the United States of America in respect of any and
all wages and salaries paid to employees of any one or more or all of
the Company or any of its Subsidiaries for a tax deposit amount in
excess of $10,000; or
(xiv) any judgment or order, or series of judgments or
orders, in an amount in excess of $250,000, is rendered against the
Company or any Subsidiary and either (i) enforcement proceedings have
been commenced by any creditor upon such judgment or order or (ii)
within 30 days after entry thereof, such judgment is not discharged or
execution thereof stayed pending appeal, or within 30 days after the
expiration of any such stay, such judgment is not discharged; or
(xv) any Termination Event with respect to a Plan shall have
occurred and, within 30 days after the occurrence thereof, (a) such
Termination Event (if correctable) shall not have been corrected and
(b) the then present value of such Plan's vested benefits exceeds the
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then current value of assets accumulated in such Plan by more than the
amount of $250,000 (or in the case of a Termination Event involving
the withdrawal of a "substantial employer" (as defined in Section
4001(a) (2) of ERISA), the withdrawing employer's proportionate share
of such excess shall exceed such amount); or
(xvi) the Company or any of its ERISA Affiliates as employer
under a Multiemployer Plan shall have made a complete or partial
withdrawal from such Multiemployer Plan and the plan sponsor of such
Multiemployer Plan shall have notified such withdrawing employer that
such employer has incurred a withdrawal liability in an aggregate
amount exceeding $250,000; or
(xvii) Any "Event of Default" under and as that term is
defined in the Bank Agreement or any of the other "Loan Documents" (as
defined in the Bank Agreement) occurs, and any applicable grace or
curative period has expired;
then (a) if such event is an Event of Default specified in clause (i) or (ii) of
this paragraph 7A, the holder of any Note (other than the Company or any of its
Subsidiaries or Affiliates) may at its option, by notice in writing to the
Company, declare such Note to be, and such Note shall thereupon be and become,
immediately due and payable at par together with interest accrued thereon,
without presentment, demand, protest or other notice of any kind, all of which
are hereby waived by the Company, (b) if such event is an Event of Default
specified in clause (viii), (ix) or (x) of this paragraph 7A, all of the Notes
at the time outstanding shall automatically become immediately due and payable
together with interest accrued thereon, without presentment, demand, protest or
notice of any kind, all of which are hereby waived by the Company, and (c) if
such event is not an Event of Default specified in clause (viii), (ix) or (x) of
this paragraph 7A, the Required Holder(s) may at its or their option, by notice
in writing to the Company, declare all of the Notes to be, and all of the Notes
shall thereupon be and become, immediately due and payable together with
interest accrued thereon, without presentment, demand, protest or other notice
of any kind, all of which are hereby waived by the Company.
7B. RESCISSION OF ACCELERATION. At any time after any or all of
the Notes shall have been declared immediately due and payable pursuant to
paragraph 7A, the Required Holder(s) may, by notice in writing to the
Company, rescind and annul such declaration and its consequences if (i) the
Company shall have paid all overdue interest on the Notes, the principal of
the Notes which has become due otherwise than by reason of such declaration,
and interest on such overdue interest and overdue principal at the rate
specified in the Notes, (ii) the Company shall not have paid any amounts
which have become due solely by reason of such declaration, (iii) all Events
of Default and Defaults, other than non-payment of amounts which have become
due solely by reason of such declaration, shall have been cured or waived
pursuant to paragraph 11C, and (iv) no judgment or decree shall have been
entered for the payment of any amounts due pursuant to the Notes or this
Agreement. No such rescission or annulment shall extend to or affect any
subsequent Event of Default or Default or impair any right arising therefrom.
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7C. NOTICE OF ACCELERATION OR RESCISSION. Whenever any Note shall be
declared immediately due and payable pursuant to paragraph 7A or any such
declaration shall be rescinded and annulled pursuant to paragraph 7B, the
Company shall forthwith give written notice thereof to the holder of each Note
at the time outstanding.
7D. OTHER REMEDIES. If any Event of Default or Default shall
occur and be continuing, (i) the holder of any Note may proceed to protect
and enforce its rights under this Agreement, such Note and the other Senior
Note Documents by exercising such remedies as are available to such holder in
respect thereof under applicable law, either by suit in equity or by action
at law, or both, whether for specific performance of any covenant or other
agreement contained in this Agreement or the other Senior Note Documents or
in aid of the exercise of any power granted in this Agreement or the other
Senior Note Documents, and (ii) both the Agent and the holders of the Notes
may exercise any rights or remedies in their respective capacities under the
Security Documents in accordance with the provisions thereof. No remedy
conferred in this Agreement or the other Senior Note Documents upon the
holder of any Note or the Agent is intended to be exclusive of any other
remedy, and each and every such remedy shall be cumulative and shall be in
addition to every other remedy conferred herein or now or hereafter existing
at law or in equity or by statute or otherwise.
PARAGRAPH 8. REPRESENTATIONS, COVENANTS AND WARRANTIES.
8. REPRESENTATIONS, COVENANTS AND WARRANTIES. The Company
represents, covenants and warrants as follows:
8A. ORGANIZATION AND QUALIFICATION. Each of the Transaction
Parties is a corporation duly organized and validly existing in good standing
under the laws of its state of incorporation, and is duly licensed and in
good standing as a foreign corporation in each jurisdiction in which the
nature of the business transacted or the property owned is such as to require
licensing or qualification as a foreign corporation. The Company has no
Subsidiaries other than ECI, ELC, Sunterra and OEC, and ECI, ELC, Sunterra
and OEC are each Wholly Owned Subsidiaries of the Company. The execution,
delivery and performance by the Company of the Notes, this Agreement, the
other Senior Note Documents and the Acquisition Documents to which it is a
party, and the execution, delivery and performance by each of the other
Transaction Parties of the Senior Note Documents and Acquisition Documents to
which it is a party, are within the Company's and the other Transaction
Parties' respective corporate powers and have been duly authorized by all
necessary corporate action. All record or beneficial stockholders of the
Company comprising the Control Group are listed on SCHEDULE 8A attached
hereto.
8B. FINANCIAL STATEMENTS. The Company has furnished you with the
following financial statements, identified by a principal financial officer
of the Company: (i) a consolidated balance sheet of the Company and its
Subsidiaries as at December 31 in each of the years 1994 to 1996, inclusive,
and consolidated statements of income, stockholders' equity and cash flows
of the Company and its Subsidiaries for each such year, all reported on by
Coopers & Lybrand L.L.P.; and (ii) a consolidated balance sheet of the
Company and its Subsidiaries as at March 31 in each of the
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years 1996 and 1997 and consolidated statements of income, stockholders'
equity and cash flows for the three-month period ended on each such date,
prepared by the Company. Such financial statements (including any related
schedules and/or notes) are true and correct in all material respects
(subject, as to interim statements, to changes resulting from audits and
year-end adjustments), have been prepared in accordance with generally
accepted accounting principles consistently followed throughout the periods
involved and show all liabilities, direct and contingent, of the Company and
its Subsidiaries required to be shown in accordance with such principles.
The balance sheets fairly present the condition of the Company and its
Subsidiaries as at the dates thereof, and the statements of income,
stockholders' equity and cash flows fairly present the results of the
operations of the Company and its Subsidiaries and their cash flows for the
periods indicated. There has been no material adverse change in the
business, condition (financial or otherwise), prospects or operations of the
Company and its Subsidiaries taken as a whole since December 31, 1996.
8C. ACTIONS PENDING. There is no action, suit, investigation or
proceeding pending or, to the knowledge of the Company, threatened against the
Company or any of its Subsidiaries, or any properties or rights of the Company
or any of its Subsidiaries, by or before any court, arbitrator or administrative
or governmental body which, if adversely determined, might result in a liability
of greater than $100,000 or might otherwise result in any material adverse
change in the business, condition (financial or otherwise), prospects or
operations of the Company and its Subsidiaries taken as a whole. There is no
action, suit, investigation or proceeding pending or threatened against the
Company or any of its Subsidiaries which purports to affect the validity or
enforceability of this Agreement, any Note, any of the other Senior Note
Documents or any of the Acquisition Documents.
8D. OUTSTANDING INDEBTEDNESS. Neither the Company nor any of its
Subsidiaries has outstanding any Indebtedness except as permitted by paragraphs
6A(1), 6A(3) and 6C(2) and all of which is described in SCHEDULE 8D attached
hereto. There exists no default under (and no waiver of default is currently in
effect with respect to) the provisions of any instrument evidencing such
Indebtedness or of any agreement relating thereto, and no event or condition
exists with respect to any Indebtedness of the Company or any Subsidiary that
would permit (or that with notice or the lapse of time, or both, would permit)
one or more Persons to cause such Indebtedness to become due and payable before
its stated maturity or before its regularly scheduled dates of payment.
8E. TITLE TO PROPERTIES. The Company has and each of its
Subsidiaries has good and marketable title to its respective real properties
(other than properties which it leases) and good title to all of its other
respective properties and assets, including the properties and assets
reflected in the balance sheet as at December 31, 1996 referred to in
paragraph 8B (other than properties and assets disposed of in the ordinary
course of business), subject to no Lien of any kind except Liens permitted by
paragraph 6C(1). All leases necessary in any material respect for the
conduct of the respective businesses of the Company and its Subsidiaries are
valid and subsisting and are in full force and effect. The two schedules of
natural gas compressor units and related leases, dated June 30, 1997 (as to
OEC) and July 21, 1997 and August 4, 1997 (as to ECS), previously furnished
to you by the Company contain a true, correct and complete list of all
natural gas compressor units owned or leased (as lessee) by the Company or
any of its Subsidiaries and the material terms of the respective
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lease agreements pursuant to which the Company or any of its Subsidiaries is
leasing such compressor units to its customers.
8F. POSSESSION OF FRANCHISES, LICENSES. The Company and each of
its Subsidiaries possesses all franchises, certificates, licenses, permits
and other authorizations from governmental political subdivisions or
regulatory authorities, free from burdensome restrictions, that are necessary
in any material respect for the ownership, maintenance and operation of its
respective properties and assets, and none of the Company or any of its
Subsidiaries is in violation of any thereof in any material respect.
8G. TAXES. The Company has and each of its Subsidiaries has filed
all federal, state and other income tax returns which, to the knowledge of the
officers of the Company, are required to be filed, and each has paid all taxes
as shown on such returns and on all assessments received by it to the extent
that such taxes have become due, except such taxes as are being contested in
good faith by appropriate proceedings and for which adequate reserves have been
established in accordance with generally accepted accounting principles.
8H. CONFLICTING AGREEMENTS AND OTHER MATTERS. Neither the Company
nor any of its Subsidiaries is a party to any contract or agreement or subject
to any charter or other corporate restriction which materially and adversely
affects its business, property or assets, prospects or financial condition.
Neither the execution nor delivery of this Agreement, the Notes, the other
Senior Note Documents or the Acquisition Documents, nor the offering, issuance
and sale of the Notes, nor fulfillment of nor compliance with the terms and
provisions of this Agreement, the Notes, the other Senior Note Documents or the
Acquisition Documents will conflict with, or result in a breach of the terms,
conditions or provisions of, or constitute a default under, or result in any
violation of, or result in the creation of any Lien (except Liens created under
the Security Documents) upon any of the properties or assets of the Company or
any of its Subsidiaries pursuant to, the charter or bylaws of the Company or any
of its Subsidiaries, any award of any arbitrator or any agreement (including any
agreement with stockholders), instrument, order, judgment, decree, statute, law,
rule or regulation to which the Company or any of its Subsidiaries is subject.
Neither the Company nor any of its Subsidiaries is a party to, or otherwise
subject to any provision contained in, any instrument evidencing Indebtedness of
the Company or such Subsidiary, any agreement relating thereto or any other
contract or agreement (including its charter) which limits the amount of, or
otherwise imposes restrictions on the incurring of, Indebtedness of the Company
of the type to be evidenced by the Notes except as set forth in the agreements
listed in SCHEDULE 8H attached hereto.
8I. OFFERING OF NOTES. Neither the Company nor any agent acting
on its behalf has, directly or indirectly, offered the Notes or any similar
security of the Company for sale to, or solicited any offers to buy the Notes
or any similar security of the Company from, or otherwise approached or
negotiated with respect thereto with, any Person other than institutional
investors, and neither the Company nor any agent acting on its behalf has
taken or will take any action which would subject the issuance or sale of the
Notes to the provisions of section 5 of the Securities Act or to the
provisions of any securities or Blue Sky law of any applicable jurisdiction.
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8J. USE OF PROCEEDS. Neither the Company nor any Subsidiary owns
or has any present intention of acquiring any "margin stock" as defined in
Regulation G (12 CFR Part 207) of the Board of Governors of the Federal
Reserve System ("MARGIN STOCK"). The proceeds of sale of the Notes will be
used to refinance existing Indebtedness of the Company and its Subsidiaries
to the Bank. None of such proceeds will be used, directly or indirectly, for
the purpose, whether immediate, incidental or ultimate, of purchasing or
carrying any margin stock or for the purpose of maintaining, reducing or
retiring any Indebtedness which was originally incurred to purchase or carry
any stock that is currently a margin stock or for any other purpose which
might constitute this transaction a "purpose credit" within the meaning of
such Regulation G. Neither the Company nor any agent acting on its behalf
has taken or will take any action which might cause this Agreement or the
Notes to violate Regulation G or any other regulation of the Board of
Governors of the Federal Reserve System or to violate the Exchange Act, in
each case as in effect now or as the same may hereafter be in effect.
8K. ERISA. No accumulated funding deficiency (as defined in
section 302 of ERISA and section 412 of the Code), whether or not waived,
exists with respect to any Plan (other than a Multiemployer Plan). No
liability to the PBGC has been or is expected by the Company or any ERISA
Affiliate to be incurred with respect to any Plan (other than a Multiemployer
Plan) by the Company, any Subsidiary or any ERISA Affiliate which is or would
be materially adverse to the business, condition (financial or otherwise),
prospects or operations of the Company and its Subsidiaries taken as a whole.
Neither the Company, any Subsidiary nor any ERISA Affiliate has incurred or
presently expects to incur any withdrawal liability under Title IV of ERISA
with respect to any Multiemployer Plan which is or would be materially
adverse to the business, condition (financial or otherwise), prospects or
operations of the Company and its Subsidiaries taken as a whole. The
execution and delivery of this Agreement and the issuance and sale of the
Notes will be exempt from, or will not involve any transaction which is
subject to, the prohibitions of section 406 of ERISA and will not involve any
transaction in connection with which a penalty could be imposed under section
502(i) of ERISA or a tax could be imposed pursuant to section 4975 of the
Code. The representation by the Company in the next preceding sentence is
made in reliance upon and subject to the accuracy of your representation in
paragraph 9B.
8L. GOVERNMENTAL CONSENT. Neither the nature of the Company or of
any Subsidiary, nor any of their respective businesses or properties, nor any
relationship between the Company or any Subsidiary and any other Person, nor any
circumstance in connection with the offering, issuance, sale or delivery of the
Notes is such as to require any authorization, consent, approval, exemption or
other action by or notice to or filing with any court or administrative or
governmental or regulatory body (other than routine filings after the Date of
Closing with the Securities and Exchange Commission and/or state Blue Sky
authorities) in connection with the execution and delivery of this Agreement,
the other Senior Note Documents or the Acquisition Documents and the offering,
issuance, sale or delivery of the Notes or fulfillment of or compliance with the
terms and provisions hereof or thereof.
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8M. ENVIRONMENTAL COMPLIANCE.
(i) The Company and its Subsidiaries and all of their respective
properties and facilities have complied at all times and in all
respects with all federal, state, local and regional statutes, laws,
ordinances and judicial or administrative orders, judgments, rulings
and regulations relating to protection of the environment except, in
any such case, where failure to comply would not result in a material
adverse effect on the business, condition (financial or otherwise),
prospects or operations of the Company and its Subsidiaries taken as a
whole;
(ii) Neither the Company nor any of its Subsidiaries is subject
to any liability or obligation relating to (a) the environmental
conditions on, under or about the Collateral, including, without
limitation, the soil and ground water conditions at the location of
any of the properties of the Company or its Subsidiaries, or (b) the
use, management, handling, transport, treatment, generation, storage,
disposal, release or discharge of any Polluting Substance;
(iii) The Company and its Subsidiaries have not obtained and
are not required to obtain or make application for any permits,
licenses or similar authorizations to construct, occupy, operate or
use any buildings, improvements, facilities, fixtures and equipment
forming a part of the Collateral by reason of any Environmental Laws;
(iv) The Company and its Subsidiaries have taken all steps
necessary to determine and has determined that no Polluting Substances
have been disposed of or otherwise released on, onto, into, or from
the Collateral (the term "release," "disposal" or "disposed" shall
have the respective meanings specified in applicable Environmental
Laws);
(v) There are no polychlorinated biphenyls ("PCB's") or
asbestos-containing materials, whether in the nature of thermal
insulation products such as pipe boiler or breech coverings, wraps or
blankets or sprayed-on or troweled-on products in, on or upon the
Collateral; and
(vi) There is no urea formaldehyde foam insulation ("UFFI") in,
on or upon the Collateral.
8N. OIL AND GAS CONTRACTS. All contracts, agreements and leases
related to any of the oil and gas mining, mineral or leasehold properties and
all contracts, agreements, instruments and leases to which the Company or any
of its Subsidiaries is a party, are valid and effective in accordance with
their respective terms, and all agreements included in the oil and gas
mining, mineral or leasehold properties in the nature of oil and/or gas
purchase agreements, and oil and/or gas sale agreements are in full force and
effect and are valid and legally binding obligations of the parties thereto
and all payments due thereunder have been made, except for those suspended
for reasonable cause in the ordinary course of business; and, there is not
under any such contract,
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agreement or lease any existing default by any party thereto or any event
which, with notice or lapse of time, or both, would constitute such default,
other than minor defaults which, in the aggregate, would result in losses or
damages of more than $100,000 to the Company or any of its Subsidiaries.
8O. NATURAL GAS POLICY ACT AND NATURAL GAS ACT COMPLIANCE. To the
Company's knowledge, all material filings and approvals under the Natural Gas
Policy Act of 1978, as amended, and the Natural Gas Act, as amended, or with the
Federal Energy Regulatory Commission (the "FERC") or required under any rules or
regulations adopted by the FERC which are necessary for the operation of the
respective businesses of the Company and its Subsidiaries or the Collateral in
the manner in which they are presently being operated have been made and the
terms of the agreements and contractual rights included in such businesses or
the Collateral do not conflict with or contravene any such Law, rule or
regulation.
8P. TAKE OR PAY OBLIGATIONS, PREPAYMENTS, BTU ADJUSTMENTS AND
BALANCING PROBLEMS. To the Company's knowledge, after diligent inquiry,
there is no take or pay obligation under any gas purchase agreement
comprising a portion of the Collateral which is not matched by a commensurate
and corresponding pay or take obligation binding upon the purchaser under a
corresponding gas sales agreement such that with respect to the ownership and
operation of the businesses of the Company or any of its Subsidiaries or the
Collateral, any such obligation in favor of any seller under any gas purchase
agreement to which the Company or any of its Subsidiaries is a "buyer" is
matched by a corresponding obligation on the part of "purchasers" under
corresponding gas sales agreements pursuant to which the Company or any of
its Subsidiaries is the "seller". None of the Company and its Subsidiaries
nor the Collateral is subject to requirements to make BTU adjustments or
effect gas balancing in favor of third parties which would result in the
Company or any of its Subsidiaries being required to (i) deliver gas at a
price below that established in applicable gas sales agreements or on behalf
of and for the benefit of third parties in exchange or to otherwise
compensate for prior above market or above contract purchases of gas from the
Company or any of its Subsidiaries or any of their predecessors in interest,
or (ii) balance in kind by allowing other owners in the Collateral to make up
the past imbalances in gas sales, or (iii) balance in cash by paying other
owners of the Collateral for the past gas imbalances.
8Q. GAS PURCHASE OBLIGATIONS IN EXCESS OF GAS SALES RIGHTS. The
ownership and operation of the business operations of the Company and its
Subsidiaries or the Collateral have not resulted and will not result in the
existence of minimum purchase obligations under any gas purchase agreement
(relating to the volume of gas to be taken thereunder or the price to be paid
with respect thereto for the duration of any such gas purchase agreement) which
are not matched by corresponding and commensurate rights to sell all such gas
under applicable gas sales agreements at prices in excess of the amount to be
paid therefor under gas purchase agreements (without regard to costs associated
with transporting any such gas and risks of volume "shrinkage" occurring in the
transportation process).
8R. FISCAL YEAR. The fiscal year of the Company and each of its
Subsidiaries ends as of December 31 of each year.
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8S. DISCLOSURE. Neither this Agreement, the other Senior Note
Documents nor any other document, certificate or statement furnished to you
by or on behalf of the Company in connection herewith contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements contained herein and therein not misleading.
There is no fact peculiar to the Company or any of its Subsidiaries which
materially adversely affects or in the future may (so far as the Company can
now foresee) materially adversely affect the business, property or assets, or
financial condition of the Company or any of its Subsidiaries and which has
not been set forth in this Agreement, the other Senior Note Documents or in
the other documents, certificates and statements furnished to you by or on
behalf of the Company prior to the date hereof in connection with the
transactions contemplated hereby. The pro forma financial projections dated
as of July 31, 1997 and previously delivered to you by the Company are
reasonable based on the assumptions stated therein and the best information
available to the officers of the Company.
8T. INVESTMENT COMPANY ACT. Neither the Company, any of its
Subsidiaries nor any Person controlling the Company or any of its
Subsidiaries is an "investment company," or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of
1940, as amended.
8U. PUBLIC UTILITY HOLDING COMPANY ACT; FEDERAL POWER ACT; INTERSTATE
COMMERCE ACT; OTHER REGULATION. Neither the Company, any of its Subsidiaries
nor any Person controlling the Company or any of its Subsidiaries is subject to
regulation under the Public Utilities Holding Company Act of 1935, as amended,
the Federal Power Act, as amended, the Interstate Commerce Act, as amended, any
state public utilities code, as amended from time to time, or any other federal
or state statute or regulation, as amended from time to time, which limits the
ability of (i) the Company to issue the Notes or (ii) the Company or any of its
Subsidiaries to perform its respective obligations under this Agreement, the
other Senior Note Documents or the Acquisition Documents.
8V. ACQUISITION REPRESENTATIONS AND WARRANTIES. To induce you to
enter into this Agreement and to purchase the Notes, the Company agrees that you
shall be entitled to rely upon each of the representations and warranties of the
Company or any of its Subsidiaries set forth in any of the Acquisition Documents
as fully as if set forth in this Agreement.
PARAGRAPH 9. REPRESENTATIONS OF THE PURCHASER.
9. REPRESENTATIONS OF THE PURCHASER. You represent as follows:
9A. NATURE OF PURCHASE. You are not acquiring the Notes to be
purchased by you hereunder with a view to or for sale in connection with any
distribution thereof within the meaning of the Securities Act, provided that the
disposition of your property shall at all times be and remain within your
control.
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9B. SOURCE OF FUNDS. No part of the funds being used by you to pay
the purchase price of the Notes being purchased by you hereunder constitutes
assets allocated to any separate account maintained by you in which any employee
benefit plan, other than employee benefit plans identified on a list which has
been furnished by you to the Company, participates to the extent of 10% or more.
For the purpose of this paragraph 9B, the terms "separate account" and "employee
benefit plan" shall have the respective meanings specified in section 3 of
ERISA.
PARAGRAPH 10. DEFINITIONS.
10. DEFINITIONS. For the purpose of this Agreement, the terms
defined in the introductory sentence and in paragraphs 1 and 2 shall have the
respective meanings specified therein, and the following terms shall have the
meanings specified with respect thereto below (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
10A. OTHER TERMS.
"ACQUIRED COMPANIES" shall mean Ouachita Energy Corporation, a
Louisiana corporation, Ouachita Energy Partners, Ltd., a Louisiana corporation,
and Ouachita Compression Group, LLC, a Louisiana limited liability company.
"ACQUISITION" shall mean, collectively, (i) the merger of
Ouachita Energy Corporation, a Louisiana corporation, with and into OEC and
(ii) the acquisition by OEC of all or substantially all of the assets of
Ouachita Energy Partners, Ltd., a Louisiana corporation, and Ouachita
Compression Group, LLC, a Louisiana limited liability company, pursuant to the
Acquisition Documents.
"ACQUISITION AGREEMENTS" shall mean (i) the Agreement and Plan of
Merger dated as of May 15, 1997 among the Company, OEC, Ouachita Energy
Corporation, a Louisiana corporation, and Dennis W. Estis, and (ii) the Asset
Purchase Agreement dated as of May 15, 1997 among the Company, OEC, Ouachita
Energy Partners, Ltd., a Louisiana corporation, Ouachita Compression Group, LLC,
a Louisiana limited liability company, and Dennis W. Estis.
"ACQUISITION DOCUMENTS" shall mean the Acquisition Agreements and
all other written agreements, documents, instruments and certificates now or
hereafter executed and delivered by any Person which are required by the terms
of the Acquisition Agreements to be delivered to consummate the Acquisition, and
any and all amendments, supplements and other modifications thereof and all
renewals, extensions, restatement or substitutions from time to time of all or
any of the foregoing.
"ADDITIONAL COVENANT" shall mean any affirmative or negative
covenant or similar restriction applicable to the Company or any Subsidiary
(regardless of whether such provision is labeled or otherwise characterized as a
covenant) the subject matter of which either (i) is similar to that of the
covenants in paragraphs 5 and 6 of this Agreement, or related definitions in
paragraph 10
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of this Agreement, but contains one or more percentages, amounts or formulas
that is more restrictive than those set forth herein or more beneficial to
the holder or holders of the Indebtedness created or evidenced by the
document in which such covenant or similar restriction is contained (and such
covenant or similar restriction shall be deemed an "Additional Covenant" only
to the extent that it is more restrictive or more beneficial) or (ii) is
different from the subject matter of the covenants in paragraphs 5 and 6 of
this Agreement, or related definitions in paragraph 10 of this Agreement.
"ADDITIONAL DEFAULT" shall mean any provision contained in any
document or instrument creating or evidencing Indebtedness of the Company which
permits the holder or holders of Indebtedness to accelerate (with the passage of
time or giving of notice or both) the maturity thereof or otherwise requires the
Company or any Subsidiary to purchase such Indebtedness prior to the stated
maturity thereof and which either (i) is similar to the Defaults and Events of
Default contained in paragraph 7 of this Agreement, or related definitions in
paragraph 10 of this Agreement, but contains one or more percentages, amounts or
formulas that is more restrictive or has a shorter grace period than those set
forth herein or is more beneficial to the holder or holders of such other
Indebtedness (and such provision shall be deemed an "Additional Default" only to
the extent that it is more restrictive, has a shorter grace period or is more
beneficial) or (ii) is different from the subject matter of the Defaults and
Events of Default contained in paragraph 7 of this Agreement, or related
definitions in paragraph 10 of this Agreement.
"AFFILIATE" shall mean any Person directly or indirectly
controlling, controlled by, or under direct or indirect common control with,
another Person (except, with respect to the Company, a Subsidiary). A Person
shall be deemed to control a corporation if such Person possesses, directly
or indirectly, the power to direct or cause the direction of the management
and policies of such corporation, whether through the ownership of voting
securities, by contract or otherwise.
"AGENT" shall mean Bank of Oklahoma, National Association, in its
capacity as Agent for the Banks, the holders of Notes and the holders of
Subordinated Notes, as provided under the Intercreditor Agreement, and its
successors and assigns as such Agent.
"AIRCRAFT CHATTEL MORTGAGE" shall mean that certain Security
Agreement (Aircraft Chattel Mortgage), dated as of August 5, 1997 and made by
the Company or one of its Subsidiaries in favor of the Agent for the ratable
benefit of the Banks, the holders of the Notes and, on a junior and subordinated
basis, the holders of the Subordinated Notes, granting the Agent a first
priority chattel mortgage lien and security interest in that certain 58 Baron
Turbocharge aircraft, Federal Aviation Administration registration number
N831JB, in substantially the form of EXHIBIT G attached hereto
"APPLICABLE MARGIN" shall mean 2.25% per annum.
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"ASSET DISPOSITION" shall mean, with respect to the Company or
any Subsidiary, any transaction or series of related transactions in which such
Person sells, conveys, transfers or leases (as lessor) or parts with control of
(collectively, for purposes of this definition, a "TRANSFER"), directly or
indirectly, any of its property or assets, including, without limitation, any
Indebtedness of any Subsidiary or capital stock of or other equity interests in
any Subsidiary (including the issuance of such stock or other equity interests
by such Subsidiary), other than transfers of cash or cash equivalents.
"BANK" shall initially mean only Bank of Oklahoma, National
Association, a national banking association, and "BANKS" shall mean Bank of
Oklahoma, National Association, its successors and assigns with respect to the
Bank Agreement, and any other lenders from time to time parties to the Bank
Agreement.
"BANK AGREEMENT" shall mean the Fifth Amended and Restated
Revolving Credit and Term Loan Agreement dated as of even date herewith among
the Transaction Parties and the Bank, as amended, supplemented and otherwise
modified from time to time.
"BANK BORROWING BASE" shall have the meaning specified in clause
(ii) of paragraph 5Q.
"BANK CREDIT FACILITY" shall mean the credit facility made
available to the Company and the other Transaction Parties pursuant to the Bank
Agreement, under which the maximum aggregate outstanding loans (and other
extensions of credit) or commitments of all lenders from time to time parties
thereto shall in no event exceed $40,000,000.
"BANKRUPTCY LAW" shall have the meaning specified in clause
(viii) of paragraph 7A.
"BORROWING BASE" shall mean, at any time with respect to the
Company and its Subsidiaries, an amount equal to the sum of (i) the LESSER of
(a) fifty percent (50%) of the aggregate sum of the most recent compressor parts
inventory book value determined pursuant to GAAP (lower of cost or market value)
and (b) $1,000,000; PLUS (ii) a multiple equal to five times the aggregate sum
of the most recent six-month trailing Compressor Operating Income (per GAAP),
adjusted quarterly effective as of the first day of each March, June, September
and December, commencing as of December 1, 1997, based on the last day of each
calendar quarter (initially the calendar quarter ending September 30, 1997), all
pursuant to the provisions hereof but, at the sole discretion of the Required
Holder(s), future fleet acquisitions by the Company or any of its Subsidiaries
may be included in the Borrowing Base following review by the Required Holder(s)
of the data submitted by the Company and its Subsidiaries in support thereof;
PLUS (iii) the Oil and Gas Borrowing Base (as redetermined semiannually in
accordance with paragraph 5Q) as rolled forward to the next Oil and Gas
Borrowing Base redetermination date (either May 31 or November 30, as the
case may be).
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"BORROWING BASE DEFICIENCY" shall have the meaning specified in
clause (iii) of paragraph 5Q.
"BANK OIL AND GAS BORROWING BASE" shall have the meaning
specified in clause (ii) of paragraph 5Q.
"BUSINESS DAY" shall mean any day on which banks are open for
business in New York City (other than a Saturday, a Sunday or a legal holiday in
the States of New York or New Jersey); PROVIDED, that, when used in connection
with a LIBOR Loan, the term "BUSINESS DAY" shall also exclude any day on which
banks are not open for dealings in dollar deposits in the London interbank
market.
"CAPITALIZED LEASE OBLIGATION" shall mean any rental obligation
which, under generally accepted accounting principles, would be required to be
capitalized on the books of the Company or any Subsidiary, taken at the amount
thereof accounted for as indebtedness (net of interest expense) in accordance
with such principles.
"CHANGE IN CONTROL" shall mean the failure of the members of the
Control Group to own, on a fully diluted basis, at least 41% of the combined
voting power of all then issued and outstanding Voting Stock of the Company,
together with any one or more of the following: (i) the failure of the members
of the Board of Directors of the Company as of the Date of Closing to constitute
a majority of the members of the Board of Directors at any time in the future,
OR (ii) the failure of the members of the Control Group to own, on a fully
diluted basis, the largest voting block of the outstanding Voting Stock of the
Company, OR (iii) the failure of either or both of the Persons holding the
offices of President and Chief Financial Officer of the Company as of the Date
of Closing to continue to hold such offices.
"CLOSING" or "DATE OF CLOSING" shall have the meaning specified
in paragraph 2.
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
"COLLATERAL" shall mean the collateral described in the Security
Documents which secures payment of the Notes and payment, performance and
observance of the obligations of the Company and its Subsidiaries under this
Agreement and the other Senior Note Documents.
"COMPETITOR" shall mean any Person which has a material presence
in the natural gas compression industry.
"COMPRESSOR OPERATING INCOME" shall mean, with respect to the
Company and its Subsidiaries, the sum of all compressor rental and maintenance
fees and revenues, less the sum of direct compressor rental and operating
expenses, per GAAP.
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"CONFIDENTIAL INFORMATION" shall mean any material non-public
information regarding the Company that is provided to any holder of any Note,
any Person that purchases a participation in a Note and any offeree of a Note or
a participation therein pursuant to this Agreement other than information (i)
which was publicly known or otherwise known to such holder, such Person or such
offeree at the time of disclosure, (ii) which subsequently becomes publicly
known through no act or omission of such holder, such Person or such offeree or
(iii) which otherwise becomes known to such holder, such Person or such offeree
other than through disclosure by the Company or any Subsidiary.
"CONSOLIDATED INTEREST EXPENSE" shall mean, with respect to
any period, the sum (without duplication) of the following (in each case,
eliminating all offsetting debits and credits between the Company and its
Subsidiaries and all other items required to be eliminated in the course of
the preparation of consolidated financial statements of the Company and its
Subsidiaries and all imputed interest expense for the Warrants in accordance
with GAAP): (i) all interest and prepayment charges in respect of
Indebtedness of the Company and its Subsidiaries (including imputed interest
in respect of Capitalized Lease Obligations and net costs of Swaps) deducted
in determining consolidated net income for such period, together with (ii)
all interest capitalized or deferred during such period and not deducted in
determining consolidated net income for such period.
"CONSOLIDATED NET WORTH" shall mean, on any date as of which the
amount thereof is to be determined, the sum of the following for the Company and
its Subsidiaries, determined on a consolidated basis in accordance with GAAP:
(i) the amount of stated capital (less cost of treasury shares), PLUS (ii) the
amount of surplus and retained earnings (or, in the case of a surplus or
retained earnings deficit, MINUS the amount of such deficit).
"CONSOLIDATED SGA EXPENSES" shall mean, with respect to any
period, all selling, general and administrative expenses of the Company and its
Subsidiaries, determined on a consolidated basis in accordance with GAAP.
"CONSOLIDATED TANGIBLE NET WORTH" shall mean, on any date as of
which the amount thereof is to be determined, Consolidated Net Worth MINUS all
assets which would be classified as intangible assets under GAAP, including,
without limitation, good will, patents, franchises, organization costs, research
and development costs, covenants not to compete and other deferred charges.
"CONSOLIDATED TOTAL LENDER/CAPITALIZED LEASE OBLIGATIONS"
shall mean, with respect to the Company and its Subsidiaries on any date as
of which the amount thereof is to be determined, (i) the amount of all long
term debt liabilities established pursuant to this Agreement, the Bank
Agreement and the Subordinated Note Agreement, (ii) all current maturities of
long term Indebtedness, and (iii) all Capitalized Lease Obligations, all
determined on a consolidated basis in accordance with GAAP.
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"CONSOLIDATED TOTAL REVENUES" shall mean, with respect to any
period, the total gross revenues of the Company and its Subsidiaries, determined
on a consolidated basis in accordance with GAAP.
"CONTROL GROUP" shall mean those record or beneficial
stockholders of the Company listed on SCHEDULE 8A attached hereto.
"CONVERSION DATE" shall have the meaning set forth in the Bank
Agreement.
"CURRENT ASSETS" shall mean, as of any date of determination
thereof, the value of the current assets of the Company and its Subsidiaries,
determined on a consolidated basis in accordance with GAAP.
"CURRENT LIABILITIES" shall mean, as of any date of
determination thereof, the value of the current liabilities of the Company
and its Subsidiaries, determined on a consolidated basis in accordance with
GAAP.
"CURRENT RATIO" shall mean, as of any date of determination
thereof, the ratio of Current Assets to Current Liabilities.
"DEBT PREPAYMENT APPLICATION" shall have the following meanings:
(i) With respect to any Borrowing Base Deficiency at any time,
including, without limitation, any Borrowing Base Deficiency arising
as a result of an Asset Disposition, "DEBT PREPAYMENT APPLICATION"
shall mean the application by the Company or its Subsidiaries of cash
in an amount equal to the amount of the Borrowing Base Deficiency to
prepay Senior Indebtedness; PROVIDED that, in the course of making
such application the Company shall offer to prepay each outstanding
Note in accordance with paragraph 4B in a principal amount which
equals the Ratable Portion for such Note. If any holder of a Note
fails to accept such offer of prepayment, then, for purposes of the
preceding sentence only, the Company nevertheless will be deemed to
have paid Senior Indebtedness in an amount equal to the Ratable
Portion for such Note. With respect to any Borrowing Base Deficiency,
"RATABLE PORTION" for any Note means an amount equal to the
product of (a) the Borrowing Base Deficiency being so applied to the
payment of Senior Indebtedness MULTIPLIED by (b) a fraction the
numerator of which is the outstanding principal amount of such Note
and the denominator of which is the Outstanding Senior Indebtedness.
(ii) With respect to any Asset Disposition occurring after the
Conversion Date, "DEBT PREPAYMENT APPLICATION" shall mean the
application by the Company or its Subsidiaries of cash in an amount
equal to the Specified Sales Proceeds with respect to such Asset
Disposition to pay Senior Indebtedness; PROVIDED that, in the course
of making such application the Company shall offer to prepay each
outstanding Note in accordance with paragraph 4B in a principal amount
which equals the Ratable Portion for such Note. If any
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holder of a Note fails to accept such offer of prepayment, then,
for purposes of the preceding sentence only, the Company
nevertheless will be deemed to have paid Senior Indebtedness in an
amount equal to the Ratable Portion for such Note. With respect to
any Asset Disposition occurring after the Conversion Date, "RATABLE
PORTION" for any Note means an amount equal to the product of (a)
the Specified Sales Proceeds being so applied to the payment of
Senior Indebtedness MULTIPLIED by (b) a fraction the numerator of
which is the outstanding principal amount of such Note and the
denominator of which is the Outstanding Senior Indebtedness.
"DEBT SERVICE" shall mean, with respect to any period, the sum
of the following for the Company and its Subsidiaries, determined on a
consolidated basis in accordance with GAAP: (i) Consolidated Interest
Expense for such period and (ii) all payments of principal in respect of
Indebtedness (including the principal component of any payments in respect of
Capitalized Lease Obligations), but excluding voluntary principal prepayments
under the Bank Credit Facility prior to the Conversion Date.
"EBITDA" shall mean, for any period, the sum of (i) net income
for the Company and its Subsidiaries, determined on a consolidated basis in
accordance with GAAP, PLUS (ii) to the extent deducted in the determination of
consolidated net income, (a) all provisions for federal, state and other income
tax, (b) Consolidated Interest Expense and (c) provisions for depreciation and
amortization, LESS extraordinary items, gains on sales of assets and income from
discontinued operations, which in the aggregate will be deducted only to the
extent they are positive.
"ECI" shall mean Equity Compressors, Inc., an Oklahoma
corporation and Wholly Owned Subsidiary of the Company.
"ELC" shall mean Equity Leasing Corporation, an Oklahoma
corporation and Wholly Owned Subsidiary of the Company.
"ENVIRONMENTAL LAWS" shall mean applicable federal, state, local
and foreign laws, rules or regulations relating to emissions, discharges,
releases or threatened releases of Polluting Substances into the environment
(including, without limitation, airs, surface water, ground, water or land), or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Polluting Substances.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"ERISA AFFILIATE" shall mean any corporation which is a member of
the same controlled group of corporations as the Company within the meaning of
section 414(b) of the Code, or any trade or business which is under common
control with the Company within the meaning of section 414(c) of the Code.
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"EVENT OF DEFAULT" shall mean any of the events specified in
paragraph 7A, provided that there has been satisfied any requirement in
connection with such event for the giving of notice, or the lapse of time, or
the happening of any further condition, event or act, and "DEFAULT" shall
mean any of such events, whether or not any such requirement has been
satisfied.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
"FAIR MARKET VALUE" shall mean, at any time and with respect to
any property, the sale value of such property that would be realized in an
arm's-length sale at such time between an informed and willing buyer and an
informed and willing seller (neither being under a compulsion to buy or sell).
"GAAP" shall have the meaning specified in paragraph 10B.
"GUARANTEE" shall mean, with respect to any Person, any direct
or indirect liability, contingent or otherwise, of such Person with respect
to any indebtedness, lease, dividend or other obligation of another,
including, without limitation, any such obligation directly or indirectly
guaranteed, endorsed (otherwise than for collection or deposit in the
ordinary course of business) or discounted or sold with recourse by such
Person, or in respect of which such Person is otherwise directly or
indirectly liable, including, without limitation, any such obligation in
effect guaranteed by such Person through any agreement (contingent or
otherwise) to purchase, repurchase or otherwise acquire such obligation or
any security therefor, or to provide funds for the payment or discharge of
such obligation (whether in the form of loans, advances, stock purchases,
capital contributions or otherwise), or to maintain the solvency or any
balance sheet or other financial condition of the obligor of such
obligation, or to make payment for any products, materials or supplies or
for any transportation or services regardless of the non-delivery or
non-furnishing thereof, in any such case if the purpose or intent of such
agreement is to provide assurance that such obligation will be paid or
discharged, or that any agreements relating thereto will be complied with, or
that the holders of such obligation will be protected against loss in respect
thereof. The amount of any Guarantee shall be equal to the outstanding
principal amount of the obligation guaranteed or such lesser amount to which
the maximum exposure of the guarantor shall have been specifically limited.
"GUARANTY AGREEMENTS" shall mean Guaranty Agreements, dated as of
the Date of Closing, made by each of ECI, Sunterra and OEC, each in favor of you
and all subsequent holders of the Notes, substantially in the form of EXHIBIT C,
and all Guaranty Agreements hereafter executed by any Subsidiary as contemplated
under paragraph 5N, as each may be amended, supplemented and otherwise modified
from time to time.
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"INDEBTEDNESS" shall mean, with respect to any Person or
consolidated group of Persons, without duplication, (i) all items (excluding
items of contingency reserves or of reserves for deferred income taxes) which
in accordance with GAAP would be included in determining total liabilities
as shown on the liability side of a balance sheet of such Person or
consolidated group of Persons as of the date on which Indebtedness is to be
determined; (ii) all indebtedness secured by any Lien on, or payable out of
the proceeds of production from, any property or asset owned or held by such
Person subject thereto, whether or not the indebtedness secured thereby shall
have been assumed; (iii) redemption obligations in respect of mandatorily
redeemable preferred stock; (iv) Swaps; (v) unfunded pension liabilities;
(vi) contingent obligations as an account party in respect of letters of
credit; and (vii) Guarantees of Indebtedness of other Persons of the types
described in the foregoing clauses (i) through (vi).
"INTERCREDITOR AGREEMENT" shall mean an Intercreditor Agreement,
dated as of August 5, 1997, among you, as the initial holder of the Notes and
the Subordinated Notes, the Bank (in both its individual capacity and its
capacity as Agent) and the Transaction Parties, substantially in the form of
EXHIBIT D, as the same may be amended, supplemented and otherwise modified from
time to time.
"INTEREST PERIOD" shall mean: (i) as to any LIBOR Loan, the
period commencing on the date of such LIBOR Loan or on the last day of the
immediately preceding Interest Period applicable thereto, as the case may be,
and ending on the numerically corresponding day (or, if there is no numerically
corresponding day, on the last day) in the calendar month that is one, three or
six months thereafter, in each case as the Company may specify or be deemed to
specify; and (ii) as to any Prime Loan, the period commencing on the date of
such Prime Loan or on the last day of the immediately preceding Interest Period
applicable thereto, as the case may be, and ending 30 days thereafter; PROVIDED,
HOWEVER, that (a) if any Interest Period pertaining to a LIBOR Loan would end on
a day other than a Business Day, such Interest Period shall be extended to the
next succeeding Business Day unless such next succeeding Business Day would fall
in the next calendar month, in which case such Interest Period shall end on the
next preceding Business Day, and (b) if any Interest Period pertaining to a
Prime Loan would end on a day other than a Business Day, such Interest Period
shall be extended to the next succeeding Business Day. Interest shall accrue
from and including the first day of an Interest Period to but excluding the
earlier of (x) the last day of such Interest Period and (y) the day on which the
applicable Loan is repaid or prepaid in full.
"INVESTMENT" shall have the meaning specified in paragraph 6C(3).
"LIBO RATE" shall mean for each Interest Period for any LIBOR
Loan: (i) the interest rate per annum for deposits in dollars with a maturity
most nearly comparable to the applicable Interest Period which appears on
Telerate Page 3750 as of 11:00 A.M. (London time), two Business Days prior to
the commencement of such Interest Period, or (ii) if such rate ceases to be
reported in accordance with the above definition on Telerate Page 3750, the
arithmetic mean of the rates per annum at which deposits in U.S. dollars are
offered by the principal London offices of the Reference Banks at approximately
11:00 A.M. (London time), on the day that is two Business Days
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before the first day of such Interest Period to prime banks in the London
interbank market for a period equal to such Interest Period, commencing on
the first day of such Interest Period, and in an amount comparable to such
LIBOR Loan. This arithmetic mean shall be determined on the basis of the
quotations of the applicable rate requested of each of the Reference Banks
by, and furnished to, you, PROVIDED, that if fewer than two quotations are
provided as requested, the rate per annum shall equal the arithmetic mean of
the rates quoted by major banks in New York City, selected by you, at
approximately 11:00 A.M. (New York City time) on the first day of the
Interest Period for loans in U.S. dollars to leading European banks for a
period equal to such Interest Period, commencing on the first day of such
Interest Period, and in an amount comparable to such LIBOR Loan.
"LIBOR LOAN" shall mean an amount outstanding from time to time
under any Note that bears interest at the LIBOR Rate.
"LIEN" shall mean any mortgage, pledge, priority, security
interest, encumbrance, contractual deposit arrangement, lien (statutory or
otherwise) or charge of any kind (including any agreement to give any of the
foregoing, any conditional sale or other title retention agreement, any
production payment, any lease in the nature thereof, and the filing of or
agreement to give any financing statement under the Uniform Commercial Code
of any jurisdiction) or any other type of preferential arrangement for the
purpose, or having the effect, of protecting a creditor against loss or
securing the payment or performance of an obligation.
"LOAN" shall mean a LIBOR Loan or a Prime Loan under a Note.
"LOAN TYPE" shall mean, as to any Loan, its character as a LIBOR
Loan or a Prime Loan.
"LOCKBOX ACCOUNT" shall have the meaning specified in paragraph
5P.
"LOCKBOX AGREEMENT" shall mean an agreement or agreements by and
among the Bank, the Company and its Subsidiaries, providing for the collection
by the Bank of substantially all operating revenues of the Company and its
Subsidiaries, and the deposit of such operating revenues into the Lockbox
Account.
"MID-PERIOD ADJUSTMENT" shall have the meaning specified in
clause (ii) of paragraph 5Q.
"MORTGAGES" shall mean the mortgages, deeds of trust or other
real estate security documents executed, acknowledged and delivered by the
Company or one or more of its Subsidiaries, whether (i) prior to the Date of
Closing and amended and supplemented on or about the Date of Closing by a
supplemental document executed, acknowledged and delivered as of the Date of
Closing and in form, scope and substance satisfactory to you, (ii) on or about
the Date of Closing and substantially in the form of EXHIBIT E attached hereto,
or (iii) after the Date of Closing
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as contemplated under paragraph 5N and substantially in the form of EXHIBIT E
attached hereto, pursuant to which mortgage liens in and to the Collateral
described therein shall be provided in favor of the Agent for the ratable
benefit of the Banks, the holders of the Notes and, on a junior and
subordinated basis, the holders of the Subordinated Notes, and any and all
amendments, supplements and other modifications to any of the foregoing.
"MULTIEMPLOYER PLAN" shall mean any Plan which is a
"multiemployer plan" (as such term is defined in section 4001(a)(3) of
ERISA).
"NOTES" shall have the meaning specified in paragraph 1.
"OEC" shall mean Ouachita Energy Corporation, a Delaware
corporation and Wholly Owned Subsidiary of the Company, formerly known as OEC
Acquisition Corporation.
"OFFICER'S CERTIFICATE" shall mean a certificate signed in the
name of a Transaction Party by its President, one of its Vice Presidents or its
Treasurer.
"OIL AND GAS BORROWING BASE" shall have the meaning specified in
clause (ii) of paragraph 5Q.
"OIL AND GAS PROPERTIES" shall mean the producing oil, gas and
other leasehold and mineral interests of Sunterra situated in Oklahoma, Texas
and Kansas, which interests are more particularly described in and encumbered by
the Mortgage executed, acknowledged and delivered by Sunterra as of the Date of
Closing.
"OUTSTANDING SENIOR INDEBTEDNESS" shall have the meaning
specified in clause (iii) of paragraph 5Q.
"PARTICIPATION RIGHTS AGREEMENT" shall mean the Participation
Rights Agreement, dated of even date herewith, by and among you, the Company and
certain holders of the Company's common stock.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
successor entity.
"PERSON" shall mean and include an individual, a partnership,
a joint venture, a corporation, a trust, a limited liability company, an
unincorporated organization and a government or any department or agency
thereof.
"PLAN" shall mean any "employee pension benefit plan" (as such
term is defined in section 3 of ERISA) which is or has been established or
maintained, or to which contributions are or have been made, by the Company or
any ERISA Affiliate.
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"POLLUTING SUBSTANCES" shall mean all pollutants,
contaminants, chemicals or industrial, toxic or hazardous substances or
wastes and shall include, without limitation, any flammable explosives,
radioactive materials, oil, hazardous materials, hazardous or solid wastes,
hazardous or toxic substances or related materials defined in applicable
federal Environmental Laws; PROVIDED, that in the event any applicable
federal Environmental Law is amended so as to broaden the meaning of any term
defined thereby, such broader meaning shall apply subsequent to the effective
date of such amendment and, PROVIDED FURTHER, to the extent that the
Environmental Laws of any State or other Tribunal establish a meaning for
"hazardous substance," "hazardous waste," "hazardous material," "solid waste"
or "toxic substance" which is broader than that specified in any applicable
Federal law, such broader meaning shall apply.
"PRIME LOAN" shall mean an amount outstanding from time to time
under any Note that bears interest at the Prime Rate.
"PRIME RATE" shall mean, with respect to any Prime Loan, a
fluctuating rate per annum (based on a year of 365 or 366 days, as the case may
be, and actual days elapsed) equal on any given day to the rate of interest most
recently announced in New York, New York by The Bank of New York as its U.S.
dollar prime commercial lending rate (the "REFERENCE RATE"); the Prime Rate
shall automatically fluctuate, without special notice to the Company or any
other person, upward and downward as and in the amount by which the Reference
Rate shall fluctuate. The Reference Rate is set by The Bank of New York as a
general reference rate of interest, taking into account such factors as The Bank
of New York may deem appropriate. The Reference Rate is not necessarily the
lowest or best rate actually charged to any customer, and such rate may not
correspond with future increases or decreases in interest rates charged by other
lenders or market rates in general. The Bank of New York and Prudential may
make various business or other loans at rates of interest having no relationship
to the Reference Rate. Without notice to the Company or any other person, the
Reference Rate shall change automatically from time to time, as determined by
The Bank of New York.
"PROPOSED PREPAYMENT DATE" shall have the meaning specified in
clause (i) of paragraph 4B or clause (iii) of paragraph 4C, as applicable.
"QUALIFIED INSTITUTIONAL BUYER" shall mean a "qualified
institutional buyer" as such term is defined in Rule 144A under the
Securities Act.
"REDETERMINATION DATE" shall have the meaning specified in clause
(ii) of paragraph 5Q.
"REFERENCE BANKS" shall mean four major banks in the London
interbank market selected by the Required Holder(s).
"REFERENCE RATE" shall have the meaning set forth in the
definition of "Prime Rate."
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"REGISTRATION RIGHTS AGREEMENT" shall mean the Registration
Rights Agreement, dated of even date herewith, by and between you and the
Company.
"REQUIRED HOLDER(S)" shall mean the holder or holders of at least
66 2/3% of the aggregate principal amount of the Notes from time to time
outstanding.
"RESPONSIBLE OFFICER" shall mean the chief executive officer,
chief operating officer, chief financial officer or chief accounting officer of
a Transaction Party or any other officer of such Transaction Party involved
principally in its financial administration or its controllership function.
"RESTRICTED PAYMENT" shall mean (i) the declaration of any
dividend on, or the incurrence of any liability to make any other payment or
distribution in respect of any capital stock or equity equivalent (except, in
the case of a Subsidiary, dividends or other payments or distributions in
respect of its capital stock to the Company or a Wholly Owned Subsidiary) or
(ii) the distribution on account of the purchase, redemption or other retirement
of any such capital stock (except, in the case of a Subsidiary, purchases,
redemptions or other retirements of its capital stock from the Company or a
Wholly Owned Subsidiary).
"SECURITIES ACT" shall mean the Securities Act of 1933, as
amended.
"SECURITY AGREEMENTS" shall mean the Fifth Amended and Restated
Security Agreement and Assignment, dated as of August 5, 1997 and executed and
delivered by each of the Transaction Parties in favor of the Agent for the
ratable benefit of the Banks, the holders of the Notes and, on a junior and
subordinated basis, the holders of the Subordinated Notes, substantially in the
form of EXHIBIT F attached hereto, and all Security Agreements hereafter
executed by any Subsidiary as contemplated under paragraph 5N, as each may be
amended, supplemented and otherwise modified from time to time.
"SECURITY DOCUMENTS" shall mean the Aircraft Chattel Mortgage,
the Security Agreements, the Mortgages and all financing statements,
assignments, pledges, lien entry forms, documents and other writings executed
and delivered from time to time in favor of the Agent for the ratable benefit
of the Banks, the holders of the Notes and, on a junior and subordinated
basis, the holders of the Subordinated Notes, in order to secure the
obligations of the Company and its Subsidiaries under and in respect of the
Bank Agreement and other Loan Documents (as defined in the Bank Agreement),
the Senior Note Documents and on a junior and subordinated basis the
Subordinated Note Documents, and any and all amendments, supplements and
other modifications thereto.
"SENIOR INDEBTEDNESS" shall mean all (i) Indebtedness of the
Company evidenced by the Notes or (ii) Indebtedness of the Company or any of its
Subsidiaries incurred under the Bank Credit Facility.
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"SENIOR NOTE DOCUMENTS" shall mean this Agreement, the Notes,
the Guaranty Agreements, the Security Documents, the Intercreditor Agreement
and all other instruments, certificates, documents and other writings now or
hereafter executed and delivered by the Company, any Subsidiary or any other
Person pursuant to or in connection with any of the foregoing or any of the
transactions contemplated thereby, and any and all amendments, supplements
and other modifications to any of the foregoing.
"SIGNIFICANT HOLDER" shall mean (i) you, so long as you shall
hold (or be committed under this Agreement to purchase) any Note, or (ii) any
other holder of at least 5% of the aggregate principal amount of the Notes from
time to time outstanding.
"SPECIFIED SALES PROCEEDS" shall mean the following:
(i) with respect to any Asset Disposition permitted under clause
(i) of paragraph 6C(5) and occurring after the Conversion Date, the
greater of (a) 65% of the sales price of the assets involved and (b)
65% of the market value of such assets, as stated in the most recent
compressor appraisal reports provided pursuant to clause (vii) of
paragraph 5A; and
(ii) with respect to any Asset Disposition permitted under clause
(ii) of paragraph 6C(5) and occurring after the Conversion Date, the
greater of (a) 65% of the sales price of the assets involved and (b)
65% of the discounted present worth of such assets, as evaluated and
determined by the most recent semiannual engineering report provided
pursuant to clause (vii) of paragraph 5A (PROVIDED, that if such
assets were not individually evaluated in the most recent engineering
reports, 65% of the sales proceeds thereof shall be deemed the
Specified Sales Proceeds).
"SUBORDINATED GUARANTY AGREEMENTS" shall mean the Subordinated
Guaranty Agreements, dated as of the Date of Closing, made by each of ECI,
Sunterra and OEC, each in favor of the holders of the Subordinated Notes.
"SUBORDINATED NOTE AGREEMENT" shall mean the Subordinated Note
and Warrant Purchase Agreement, dated of even date herewith, by and between
you and the Company, providing for the issuance, sale and purchase of the
Subordinated Notes and the Warrants.
"SUBORDINATED NOTE DOCUMENTS" shall mean the Subordinated Note
Agreement, the Subordinated Notes, the Warrants, the Participation Rights
Agreement, the Registration Rights Agreement, the Subordinated Guaranty
Agreements, the Security Documents and all other instruments, certificates,
documents and other writings now or hereafter executed and delivered by any
Transaction Party or any other Person pursuant to or in connection with any
of the foregoing or any of the transactions contemplated thereby, and any and
all amendments, supplements and other modifications to any of the foregoing.
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"SUBORDINATED NOTES" shall mean the 10.15% Senior Subordinated
Secured Notes due 2007 of the Company, dated of even date with the Notes, issued
and sold to you on the Date of Closing pursuant to the Subordinated Note
Agreement.
"SUBSIDIARY" shall mean (i) any corporation, at least 50% of the
total combined voting power of all classes of Voting Stock of which shall, at
the time as of which any determination is being made, be owned by the Company,
either directly or through Subsidiaries, and (ii) any partnership, joint venture
or similar entity if at least a 50% interest in the profits or capital thereof
is owned by the Company, either directly or through Subsidiaries (unless such
entity can and does ordinarily take major business actions without the prior
approval, direct or indirect, of the Company).
"SUNTERRA" shall mean Sunterra Energy Corporation, an Oklahoma
corporation and Wholly Owned Subsidiary of the Company.
"SWAPS" shall mean with respect to any Person, payment
obligations with respect to interest rate swaps, currency swaps and similar
obligations obligating such Person to make payments, whether periodically or
upon the happening of a contingency. For the purposes of this Agreement, the
amount of the obligation under any Swap shall be the amount determined in
respect thereof as of the end of the then most recently ended fiscal quarter
of such Person, based on the assumption that such Swap had terminated at the
end of such fiscal quarter, and in making such determination, if any
agreement relating to such Swap provides for the netting of amounts payable
by and to such Person thereunder or if any such agreement provides for the
simultaneous payment of amounts by and to such Person, then in each such
case, the amount of such obligation shall be the net amount so determined.
"TELERATE PAGE 3750" shall mean Page 3750 of the Dow Jones
Telerate Service (or such other page as may replace that page on that service)
or such other service as may be nominated as the information vendor for the
purpose of displaying rates or prices comparable thereto.
"TERMINATION EVENT" shall mean (i) a Reportable Event described
in Section 4043 of ERISA and the regulations issued thereunder (other than a
Reportable Event not subject to the provision for 30-day notice to the PBGC
under such regulations), or (ii) the withdrawal of the Company or any of its
ERISA Affiliates from a Plan during a plan year in which it was a "substantial
employer" as defined in Section 4001(a)(2) of ERISA, or (iii) the filing of a
notice of intent to terminate a Plan or the treatment of a Plan amendment as a
termination under Section 4041 of ERISA, or (iv) the institution of proceedings
to terminate a Plan by the PBGC, or (v) any other event or condition that might
constitute grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Plan.
"TRANSACTION PARTIES" shall mean the Company, ECI, Sunterra and
OEC.
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"TRANSFEREE" shall mean any direct or indirect transferee of all
or any part of any Note purchased by you under this Agreement.
"TRIBUNAL" shall mean any municipal, state, commonwealth,
federal, foreign, territorial or other sovereign, governmental entity,
governmental department, court, commission, board, bureau, agency or
instrumentality.
"VOTING STOCK" shall mean, with respect to any corporation,
any shares of stock of such corporation whose holders are entitled under
ordinary circumstances to vote for the election of directors of such
corporation (irrespective of whether at the time stock of any other class or
classes shall have or might have voting power by reason of the happening of
any contingency).
"WARRANTS" shall mean the Common Stock Purchase Warrants
issued and sold to you by the Company on the Date of Closing pursuant to the
Subordinated Note Agreement.
"WHOLLY OWNED SUBSIDIARY" shall mean any Subsidiary, at least 98%
(by vote or value) of the outstanding equity interests (except directors'
qualifying shares) of all classes, taken together as a whole, of which are at
the time owned, directly or indirectly, by the Company or other Wholly Owned
Subsidiaries; PROVIDED, that no Person other than the Company may own any
preferred stock issued by such Subsidiary.
10B. ACCOUNTING PRINCIPLES, TERMS AND DETERMINATIONS. All references
in this Agreement to "GAAP" shall be deemed to refer to generally accepted
accounting principles in effect in the United States at the time of application
thereof. Unless otherwise specified herein, all accounting terms used herein
shall be interpreted, all determinations with respect to accounting matters
hereunder shall be made, and all unaudited financial statements and certificates
and reports as to financial matters required to be furnished hereunder shall be
prepared, in accordance with generally accepted accounting principles, applied
on a basis consistent with the most recent audited consolidated financial
statements of the Company and its Subsidiaries delivered pursuant to clause (ii)
of paragraph 5A or, if no such statements have been so delivered, the most
recent audited financial statements referred to in clause (i) of paragraph 8B.
PARAGRAPH 11. MISCELLANEOUS.
11. MISCELLANEOUS.
11A. NOTE PAYMENTS. So long as you shall hold any Note, the Company
will make payments of principal of and interest on such Note, which comply with
the terms of this Agreement, by wire transfer of immediately available funds for
credit (not later than 12:00 noon, New York City time, on the date due) to your
account or accounts as specified in the Purchaser Schedule attached hereto, or
such other account or accounts in the United States as you may designate in
writing, notwithstanding any contrary provision herein or in any Note with
respect to the place of payment. You agree that, before disposing of any Note,
you will make a notation thereon (or on a schedule
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<PAGE>
attached thereto) of all principal payments previously made thereon and of
the date to which interest thereon has been paid. The Company agrees to
afford the benefits of this paragraph 11A to any Transferee which shall have
made the same agreement as you have made in this paragraph 11A.
11B. EXPENSES. The Company agrees, whether or not the transactions
contemplated hereby shall be consummated, to pay, and save you, any
Transferee and the Agent harmless against liability for the payment of, all
out-of-pocket expenses arising in connection with such transactions,
including (i) all document production and duplication charges and the fees
and expenses of any special counsel engaged by you, such Transferee or the
Agent in connection with this Agreement, the transactions contemplated hereby
and any subsequent proposed modification of, or proposed consent under, this
Agreement or the other Senior Note Documents, whether or not such proposed
modification shall be effected or proposed consent granted, and (ii) the
costs and expenses, including attorneys' fees, incurred by you, such
Transferee or the Agent in enforcing (or determining whether or how to
enforce) any rights under this Agreement, the Notes or the other Senior Note
Documents or in responding to any subpoena or other legal process or informal
investigative demand issued in connection with this Agreement, the other
Senior Note Documents or the transactions contemplated hereby or thereby, or
by reason of your or such Transferee's having acquired any Note, including
without limitation costs and expenses incurred in any bankruptcy case. The
obligations of the Company under this paragraph 11B shall survive the
transfer of any Note or portion thereof or interest therein by you or any
Transferee, the payment of any Note, the enforcement, amendment or waiver of
any provision of this Agreement or the other Senior Note Documents, and the
termination of this Agreement or any of the other Senior Note Documents.
11C. CONSENT TO AMENDMENTS. This Agreement and any of the other
Senior Note Documents may be amended, and the Company may take any action
herein prohibited, or omit to perform any act herein required to be performed
by it, if the Company shall obtain the written consent to such amendment,
action or omission to act, of the Required Holder(s) except that, without the
written consent of the holder or holders of all Notes at the time
outstanding, no amendment to this Agreement shall change the maturity of any
Note, or change the principal of, or the rate or time of payment of interest
on any Note, or affect the time, amount or allocation of any prepayments, or
change the proportion of the principal amount of the Notes required with
respect to any consent, amendment, waiver or declaration. Each holder of any
Note at the time or thereafter outstanding shall be bound by any consent
authorized by this paragraph 11C, whether or not such Note shall have been
marked to indicate such consent, but any Notes issued thereafter may bear a
notation referring to any such consent. No course of dealing between the
Company and the holder of any Note nor any delay in exercising any rights
hereunder or under any Note shall operate as a waiver of any rights of any
holder of such Note. As used herein and in the Notes, the term "THIS
AGREEMENT" and references thereto shall mean this Agreement as it may from
time to time be amended or supplemented.
11D. FORM, REGISTRATION, TRANSFER AND EXCHANGE OF NOTES; LOST NOTES.
The Notes are issuable as registered notes without coupons in denominations of
at least $100,000, except as may be necessary to reflect any principal amount
not evenly divisible by $100,000. The Company shall
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<PAGE>
keep at its principal office a register in which the Company shall provide
for the registration of Notes and of transfers of Notes. Upon surrender for
registration of transfer of any Note at the principal office of the Company,
the Company shall, at its expense, execute and deliver one or more new Notes
of like tenor and of a like aggregate principal amount, registered in the
name of such transferee or transferees. At the option of the holder of any
Note, such Note may be exchanged for other Notes of like tenor and of any
authorized denominations, of a like aggregate principal amount, upon
surrender of the Note to be exchanged at the principal office of the Company.
Whenever any Notes are so surrendered for exchange, the Company shall, at
its expense, execute and deliver the Notes which the holder making the
exchange is entitled to receive. Every Note surrendered for registration of
transfer or exchange shall be duly endorsed, or be accompanied by a written
instrument of transfer duly executed, by the holder of such Note or such
holder's attorney duly authorized in writing. Any Note or Notes issued in
exchange for any Note or upon transfer thereof shall carry the rights to
unpaid interest and interest to accrue which were carried by the Note so
exchanged or transferred, so that neither gain nor loss of interest shall
result from any such transfer or exchange. Upon receipt of written notice
from the holder of any Note of the loss, theft, destruction or mutilation of
such Note and, in the case of any such loss, theft or destruction, upon
receipt of such holder's unsecured indemnity agreement, or in the case of any
such mutilation upon surrender and cancellation of such Note, the Company
will make and deliver a new Note, of like tenor, in lieu of the lost, stolen,
destroyed or mutilated Note.
11E. PERSONS DEEMED OWNERS; PARTICIPATIONS. Prior to due
presentment for registration of transfer, the Company may treat the Person in
whose name any Note is registered as the owner and holder of such Note for
the purpose of receiving payment of principal of and interest on such Note
and for all other purposes whatsoever, whether or not such Note shall be
overdue, and the Company shall not be affected by notice to the contrary.
Subject to the preceding sentence, the holder of any Note may from time to
time grant participations in such Note to any Person on such terms and
conditions as may be determined by such holder in its sole and absolute
discretion, provided that any such participation shall be in a principal
amount of at least $100,000.
11F. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.
All representations and warranties contained herein or in the other Senior
Note Documents or otherwise made in writing by or on behalf of the Company
and the other Transaction Parties in connection herewith and therewith shall
survive the execution and delivery of this Agreement, the Notes and the other
Senior Note Documents, the transfer by you of any Note or portion thereof or
interest therein and the payment of any Note, and may be relied upon by any
Transferee, regardless of any investigation made at any time by or on behalf
of you or any Transferee. Subject to the preceding sentence, this Agreement,
the Notes and the other Senior Note Documents embody the entire agreement and
understanding between you and the Company and supersede all prior agreements
and understandings relating to the subject matter hereof.
11G. SUCCESSORS AND ASSIGNS. All covenants and other agreements in
this Agreement contained by or on behalf of either of the parties hereto shall
bind and inure to the benefit of the respective successors and assigns of the
parties hereto (including, without limitation, any Transferee)
-56-
<PAGE>
whether so expressed or not; PROVIDED, HOWEVER, that each holder of a Note
hereby agrees that, so long as no Event of Default shall have occurred and be
continuing, it will transfer its Notes only to Qualified Institutional Buyers
or, if not to Qualified Institutional Buyers, to such other Persons which are
believed by such holder, after reasonable inquiry, not to be Competitors.
11H. DISCLOSURE TO OTHER PERSONS. Except as provided in this
paragraph 11H, each holder and each Person that purchases a participation in
a Note or any part thereof agrees that it will use its best efforts to hold
in confidence and not to disclose the Confidential Information; PROVIDED
that such holder or Person will be free, after notice to the Company, to
correct any false or misleading information which may become public
concerning the relationship of such holder or Person to the Company. The
Company acknowledges that the holder of any Note may deliver copies of any
financial statements and other documents or materials delivered to such
holder, and disclose any other information disclosed to such holder, and
disclose any other information disclosed to such holder, by or on behalf of
the Company or any Subsidiary in connection with or pursuant to this
Agreement to (i) such holder's directors, officers, employees, agents and
professional consultants, (ii) any other holder of any Note, (iii) any Person
to which such holder offers to sell such Note or any part thereof and to
which such holder could then transfer such Note pursuant to paragraph 11G,
(iv) any Person to which such holder sells or offers to sell a participation
in all or any part of such Note and to which such holder could then transfer
such Note pursuant to paragraph 11G, (v) any Person from which such holder
offers to purchase any security of the Company and to which such holder could
then transfer such Note pursuant to paragraph 11G, (vi) any federal or state
regulatory authority having jurisdiction over such holder, (vii) the
National Association of Insurance Commissioners or any similar organization
or (viii) any other Person to which such delivery or disclosure may be
necessary or appropriate (a) in compliance with any law, rule, regulation or
order applicable to such holder, (b) in response to any subpoena or other
legal process or informal investigative demand or (c) in connection with any
litigation to which such holder is a party.
11I. NOTICES. All notices or other communications provided for
hereunder (except for the telephonic notice required by paragraph 4A) shall
be in writing and sent by first class mail or nationwide overnight delivery
service (with charges prepaid) and (i) if to you, addressed to you at the
address specified for such communications in the Purchaser Schedule attached
hereto, or at such other address as you shall have specified to the Company
in writing, (ii) if to any other holder of any Note, addressed to such other
holder at such address as such other holder shall have specified to the
Company in writing or, if any such other holder shall not have so specified
an address to the Company, then addressed to such other holder in care of the
last holder of such Note which shall have so specified an address to the
Company, and (iii) if to the Company, addressed to it at 2501 Cedar Springs
Road, Suite 600, Dallas, Texas 75201, Attention: Chief Financial Officer,
with a courtesy copy (which shall not constitute notice) to Schlanger, Mills,
Mayer & Grossberg, L.L.P., 5847 San Felipe, Suite 1700, Houston, Texas 77057,
Attention: Kyle Longhofer, or at such other address as the Company shall have
specified to the holder of each Note in writing; provided, however, that any
such communication to the Company may also, at the option of the holder of
any Note, be delivered by any other means either to the Company at its
address specified above or to any officer of the Company.
-57-
<PAGE>
11J. PAYMENTS DUE ON NON-BUSINESS DAYS. Anything in this Agreement or
the Notes to the contrary notwithstanding, any payment of principal of or
interest on any Note that is due on a date other than a Business Day shall be
made on the next succeeding Business Day (or the immediately preceding Business
Day, with respect to certain LIBOR Loans, as more fully described in the
definition of "Interest Period"). If the date for any payment is extended to
the next succeeding Business Day by reason of the preceding sentence, the period
of such extension shall be included in the computation of the interest payable
on such Business Day.
11K. SATISFACTION REQUIREMENT. If any agreement, certificate or
other writing, or any action taken or to be taken, is by the terms of this
Agreement required to be satisfactory to you or to the Required Holder(s),
the determination of such satisfaction shall be made by you or the Required
Holder(s), as the case may be, in the sole and exclusive judgment (exercised
in good faith) of the Person or Persons making such determination.
11L. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF
THE STATE OF NEW YORK. This Agreement may not be changed orally, but (subject
to the provisions of paragraph 11C) only by an agreement in writing signed by
the party against whom enforcement of any waiver, change, modification or
discharge is sought.
11M. WAIVER OF JURY TRIAL; CONSENT TO JURISDICTION; LIMITATION OF
REMEDIES.
(i) THE COMPANY AND EACH HOLDER OF NOTES HEREBY KNOWINGLY,
VOLUNTARILY, AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A
TRIAL BY JURY IN ANY LITIGATION OF ANY CLAIM WHICH IS BASED HEREON, OR
ARISES OUT OF, UNDER, OR IN CONNECTION WITH THIS AGREEMENT, THE NOTES
OR THE OTHER SENIOR NOTE DOCUMENTS, OR ANY TRANSACTIONS RELATING
HERETO OR THERETO, OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENTS (WHETHER ORAL OR WRITTEN), OR ACTIONS OF THE COMPANY, THE
HOLDERS OF THE NOTES OR THE AGENT. THE COMPANY ACKNOWLEDGES THAT THIS
PROVISION IS A MATERIAL INDUCEMENT FOR YOU TO ENTER INTO THIS
AGREEMENT.
(ii) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS
AGREEMENT, THE NOTES, THE OTHER SENIOR NOTE DOCUMENTS OR ANY
TRANSACTIONS RELATING HERETO OR THERETO, OR ANY COURSE OF CONDUCT,
COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN), OR ACTIONS
OF THE COMPANY, THE HOLDERS OF NOTES OR THE AGENT MAY BE BROUGHT IN
THE COURTS OF THE STATE OF NEW YORK OR THE UNITED STATES OF AMERICA
FOR THE SOUTHERN DISTRICT OF NEW YORK, AND THE COMPANY HEREBY ACCEPTS
FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, THE
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<PAGE>
NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS. THE COMPANY
AND EACH HOLDER OF NOTES HEREBY IRREVOCABLY WAIVES ANY OBJECTIONS,
INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR
BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING IN
SUCH RESPECTIVE JURISDICTIONS.
(iii) The Company hereby agrees that process may be served on
CT Corporation System, Inc., located at 1633 Broadway, New York, New
York 10019. Any and all service of process and any other notice in
any such action, suit or proceeding shall be effective against such
parties if given by registered or certified mail, return receipt
requested, or by any other means or mail which requires a signed
receipt, postage prepaid, mailed to such parties as herein provided in
paragraph 11I. In the event CT Corporation System, Inc. shall not be
able to accept service of process as aforesaid and if the Company
shall not maintain an office in New York City, the Company shall
promptly appoint and maintain an agent qualified to act as an agent
for service of process with respect to all courts in and of New York
City, and acceptable to the Required Holder(s), as the Company's
authorized agent to accept and acknowledge on the Company's behalf
service of any and all process which may be served in any such action,
suit or proceeding.
11N. SEVERABILITY. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and
any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction.
11O. DESCRIPTIVE HEADINGS. The descriptive headings of the several
paragraphs of this Agreement are inserted for convenience only and do not
constitute a part of this Agreement.
11P. MAXIMUM INTEREST PAYABLE. The Company, you and any other holders
of the Notes specifically intend and agree to limit contractually the amount of
interest payable under this Agreement, the Notes and all other instruments and
agreements related hereto and thereto to the maximum amount of interest lawfully
permitted to be charged under applicable law. Therefore, none of the terms of
this Agreement, the Notes or any instrument pertaining to or relating to this
Agreement or the Notes shall ever be construed to create a contract to pay
interest at a rate in excess of the maximum rate permitted to be charged under
applicable law, and neither the Company, any guarantor nor any other party
liable or to become liable hereunder, under the Notes, any guaranty or under any
other instruments and agreements related hereto and thereto shall ever be liable
for interest in excess of the amount determined at such maximum rate, and the
provisions of this paragraph 11P shall control over all other provisions of this
Agreement, any Notes, any guaranty or any other instrument pertaining to or
relating to the transactions herein contemplated. If any amount of interest
taken or received by you or any holder of a Note shall be in excess of said
maximum amount of interest which, under applicable law, could lawfully have been
collected by you or such
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<PAGE>
holder incident to such transactions, then such excess shall be deemed to
have been the result of a mathematical error by all parties hereto and shall
be refunded promptly by the Person receiving such amount to the party paying
such amount, or, at the option of the recipient, credited ratably against the
unpaid principal amount of the Note or Notes held by you or such holder,
respectively. All amounts paid or agreed to be paid in connection with such
transactions which would under applicable law be deemed "interest" shall, to
the extent permitted by such applicable law, be amortized, prorated,
allocated and spread throughout the stated term of this Agreement and the
Notes. "APPLICABLE LAW" as used in this paragraph means that law in effect
from time to time which permits the charging and collection of the highest
permissible lawful, nonusurious rate of interest on the transactions herein
contemplated including laws of the State of New York and of the United States
of America, and "MAXIMUM RATE" as used in this paragraph means, with respect
to each of the Notes, the maximum lawful, nonusurious rates of interest (if
any) which under applicable law may be charged to the Company from time to
time with respect to such Notes.
11Q. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original but all of which together shall
constitute one instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; SIGNATURE PAGE FOLLOWS]
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<PAGE>
If you are in agreement with the foregoing, please sign the form of
acceptance on the enclosed counterpart of this letter and return the same to the
Company, whereupon this letter shall become a binding agreement between the
Company and you.
Very truly yours,
EQUITY COMPRESSION SERVICES CORPORATION
By:
----------------------------------
President
The foregoing Agreement is
hereby accepted as of the
date first above written.
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
By:
------------------------------------------
Vice President
<PAGE>
PURCHASER SCHEDULE
Aggregate
Principal
Amount of
Notes to be Note Denom-
Purchased ination(s)
------------ ------------
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA $5,000,000 $5,000,000
(No. R-1)
(1) All payments on account of Notes held by such
purchaser shall be made by wire transfer of
immediately available funds for credit to:
Account No. 890-0304-391
The Bank of New York
101 Barclay Street
New York, New York
(ABA No.: 021-000-018)
Each such wire transfer shall set forth the name of the Company, a
reference to "Senior Floating Rate Secured Term Notes due July 31,
2004, Security No. !INV5708!", and the due date and application (as
among principal and interest) of the payment being made.
(2) Address for all notices relating to payments:
The Prudential Insurance Company of America
c/o Prudential Capital Group
Four Gateway Center
100 Mulberry Street
Newark, New Jersey 07102
Attention: Investment Operations Group
(Attention: Manager)
(3) Address for all other communications and notices:
The Prudential Insurance Company of America
c/o Prudential Capital Group
2200 Ross Avenue, Suite 4200E
Dallas, Texas 75201
Attention: Managing Director
<PAGE>
(4) Recipient of telephonic prepayment notices:
Manager, Investment Operations Group
(201) 802-5260
(5) Recipient of telephonic notices regarding election of Loan Type and
Interest Period:
Manager, PAMG Operations
(201) 802-6660
(6) Tax Identification No.: 22-1211670
<PAGE>
SCHEDULE 8A
CONTROLLING STOCKHOLDERS
<PAGE>
SCHEDULE 8D
EXISTING DEBT AND LIENS
<PAGE>
SCHEDULE 8H
LIST OF AGREEMENTS RESTRICTING DEBT
<PAGE>
EXHIBIT A
[FORM OF NOTE]
EQUITY COMPRESSION SERVICES CORPORATION
SENIOR FLOATING RATE SECURED TERM NOTE DUE JULY 31, 2004
No.___________ [Date]
$_____________ PPN 294634 A* 1
FOR VALUE RECEIVED, the undersigned, EQUITY COMPRESSION SERVICES
CORPORATION (the "COMPANY"), a corporation organized and existing under the
laws of the State of Oklahoma, hereby promises to pay to
_________________________ ___________________________, or registered assigns,
the principal sum of ___________________________ DOLLARS ($______________) on
July 31, 2004, with interest (a) on the unpaid balance thereof (i) with
respect to Prime Loans, at the per annum rate equal to the Prime Rate
(computed on the basis of the number of actual days elapsed during a year of
365 or 366 days, as the case may be), and (ii) with respect to LIBOR Loans,
at the per annum rate equal to the LIBOR Rate PLUS the Applicable Margin
(computed on the basis of the number of actual days elapsed during a year of
360 days), in each case payable on the last day of each applicable Interest
Period, until the principal hereof shall have become due and payable, and (b)
on any overdue payment (including any overdue prepayment) of principal, any
overdue payment of interest and any overdue payment of any amounts payable
pursuant to paragraph 2B of the Agreement (as defined below), payable on the
last day of each applicable Interest Period as aforesaid (or, at the option
of the registered holder hereof, on demand), at a rate per annum from time to
time equal to the lesser of (a) the maximum rate permitted by applicable law
or (b) the greater of (i) 4.0% over the rate of interest then in effect with
respect to this Note or (ii) 4.0% over the rate of interest publicly
announced by The Bank of New York from time to time in New York City as its
Prime Rate.
Payments of principal of, interest on and any amounts payable pursuant
to paragraph 2B of the Agreement with respect to this Note are to be made at the
main office of The Bank of New York in New York City or at such other place as
the holder hereof shall designate to the Company in writing, in lawful money of
the United States of America.
This Note is one of a series of Senior Floating Rate Secured Term
Notes (the "NOTES") issued pursuant to a Note Agreement, dated as of July 31,
1997 (the "AGREEMENT"), between the Company and The Prudential Insurance Company
of America, is entitled to the benefits thereof and is guaranteed by each of the
Guaranty Agreements (as defined in the Agreement) and secured by each
<PAGE>
of the Security Documents (as defined in the Agreement) in favor of the Agent
(as defined in the Agreement) for the benefit of the holders of the Notes.
Capitalized terms used and not otherwise defined herein have the meanings
assigned to them in the Agreement.
This Note is a registered Note and, as provided in the Agreement,
upon surrender of this Note for registration of transfer, duly endorsed, or
accompanied by a written instrument of transfer duly executed, by the
registered holder hereof or such holder's attorney duly authorized in
writing, a new Note of like tenor for a like principal amount will be issued
to, and registered in the name of, the transferee. Prior to due presentment
for registration of transfer, the Company may treat the person in whose name
this Note is registered as the owner hereof for the purpose of receiving
payment and for all other purposes, and the Company shall not be affected by
any notice to the contrary.
This Note is subject to certain prepayments, as specified in the
Agreement.
If an Event of Default, as defined in the Agreement, shall occur and
be continuing, the principal of this Note may be declared or otherwise become
due and payable in the manner and with the effect provided in the Agreement.
The Company, and the purchaser and the registered holder of this Note
specifically intend and agree to limit contractually the amount of interest
payable under this Note to the maximum amount of interest lawfully permitted to
be charged under applicable law. Therefore, none of the terms of this Note
shall ever be construed to create a contract to pay interest at a rate in excess
of the maximum rate permitted to be charged under applicable law, and neither
the Company nor any other party liable or to become liable hereunder shall ever
be liable for interest in excess of the amount determined at such maximum rate,
and the provisions of paragraph 11P of the Agreement shall control over any
contrary provision of this Note.
THIS NOTE IS INTENDED TO BE PERFORMED IN THE STATE OF NEW YORK AND
SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAW OF SUCH STATE.
EQUITY COMPRESSION SERVICES CORPORATION
By:
----------------------------------
[Vice] President
A-2
<PAGE>
EXHIBIT B
[FORM OF OPINION OF COMPANY'S COUNSEL]
B-1
<PAGE>
EXHIBIT C
[FORM OF GUARANTY AGREEMENT]
C-1
<PAGE>
EXHIBIT D
[FORM OF INTERCREDITOR AGREEMENT]
D-1
<PAGE>
EXHIBIT E
[FORM OF MORTGAGE]
E-1
<PAGE>
EXHIBIT F
[FORM OF SECURITY AGREEMENT]
F-1
<PAGE>
EXHIBIT G
[FORM OF AIRCRAFT CHATTEL MORTGAGE]
G-1
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
EQUITY COMPRESSION SERVICES CORPORATION
$15,000,000
10.15% SECURED SENIOR SUBORDINATED NOTES DUE JULY 31, 2007
AND
COMMON STOCK PURCHASE WARRANTS
---------------
SUBORDINATED NOTE AND WARRANT PURCHASE AGREEMENT
---------------
DATED AS OF JULY 31, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTE: This Agreement contains restrictions upon transfer (paragraph 12G) and
confidentiality obligations (paragraph 12H)
<PAGE>
TABLE OF CONTENTS
(Not Part of Agreement)
PAGE
----
1. Authorization of Issue of Securities. . . . . . . . . . . . . . . . . 1
1A. Authorization of Issue of Notes. . . . . . . . . . . . . . . . . 1
1B. Authorization of Issue of Warrants . . . . . . . . . . . . . . . 1
2. Purchase and Sale of Securities.. . . . . . . . . . . . . . . . . . . 2
2A. Purchase and Sale of Notes . . . . . . . . . . . . . . . . . . . 2
2B. Purchase and Sale of Warrants. . . . . . . . . . . . . . . . . . 2
3. Conditions to Closing . . . . . . . . . . . . . . . . . . . . . . . . 2
3A. Certain Documents. . . . . . . . . . . . . . . . . . . . . . . . 2
3B. Representations and Warranties; No Default; No Material
Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . 5
3C. Purchase Permitted By Applicable Laws. . . . . . . . . . . . . . 5
3D. Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3E. Related Proceedings. . . . . . . . . . . . . . . . . . . . . . . 5
3F. Consummation of Acquisition. . . . . . . . . . . . . . . . . . . 5
3G. Private Placement Number . . . . . . . . . . . . . . . . . . . . 6
3H. Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3I. Amendment of Bank Agreement. . . . . . . . . . . . . . . . . . . 6
4. Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4A. Required Prepayments . . . . . . . . . . . . . . . . . . . . . . 6
4B. Optional Prepayment of Notes with Yield Maintenance Amount . . . 6
4C. Offer to Prepay Notes in the Event of a Change in Control. . . . 7
4D. Partial Payments Pro Rata. . . . . . . . . . . . . . . . . . . . 8
4E. Retirement of Notes. . . . . . . . . . . . . . . . . . . . . . . 8
5. Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . . . . 9
5A. Financial Statements . . . . . . . . . . . . . . . . . . . . . . 9
5B. Information Required by Rule 144A. . . . . . . . . . . . . . . . 11
5C. Inspection of Property . . . . . . . . . . . . . . . . . . . . . 12
5D. Covenant to Secure Notes Equally . . . . . . . . . . . . . . . . 12
ii
<PAGE>
5E. Corporate Existence, Licenses and Permits; Maintenance
of Properties. . . . . . . . . . . . . . . . . . . . . . . . . . 12
5F. Maintenance of Insurance . . . . . . . . . . . . . . . . . . . . 13
5G. Payment of Taxes and Other Claims. . . . . . . . . . . . . . . . 13
5H. ERISA Compliance . . . . . . . . . . . . . . . . . . . . . . . . 13
5I. Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . 13
5J. Maintenance of Committed Credit Facility . . . . . . . . . . . . 14
5K. Environmental Covenants. . . . . . . . . . . . . . . . . . . . . 14
5L. Environmental Indemnities. . . . . . . . . . . . . . . . . . . . 14
5M. Collateral; New Subsidiaries . . . . . . . . . . . . . . . . . . 15
5N. Enforcement of Acquisition Documents . . . . . . . . . . . . . . 15
5O. Lockbox Account. . . . . . . . . . . . . . . . . . . . . . . . . 15
6. Negative Covenants. . . . . . . . . . . . . . . . . . . . . . . . . . 16
6B. Limitation on Restricted Payments. . . . . . . . . . . . . . . . 16
6C. Liens, Indebtedness, and Other Restrictions. . . . . . . . . . . 16
6D. Change of Fiscal Year. . . . . . . . . . . . . . . . . . . . . . 20
6E. Change of Business . . . . . . . . . . . . . . . . . . . . . . . 20
6F. Certificates of Incorporation; Bylaws; Trade Names . . . . . . . 21
6G. Other Agreements, Amendments . . . . . . . . . . . . . . . . . . 21
6H. Limitation on Certain Restrictive Agreements . . . . . . . . . . 21
6I. Prohibition Against Layering . . . . . . . . . . . . . . . . . . 21
6J. Change in Control. . . . . . . . . . . . . . . . . . . . . . . . 21
7. Subordination of Notes. . . . . . . . . . . . . . . . . . . . . . . . 21
7A. Subordination. . . . . . . . . . . . . . . . . . . . . . . . . . 21
7B. Obligation of the Company Unconditional. . . . . . . . . . . . . 23
7C. Subrogation. . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7D. Rights of Holders of Senior Debt . . . . . . . . . . . . . . . . 24
7E. Subordination Definitions. . . . . . . . . . . . . . . . . . . . 24
8. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . 25
8A. Acceleration . . . . . . . . . . . . . . . . . . . . . . . . . . 25
8B. Rescission of Acceleration . . . . . . . . . . . . . . . . . . . 28
8C. Notice of Acceleration or Rescission . . . . . . . . . . . . . . 28
8D. Other Remedies . . . . . . . . . . . . . . . . . . . . . . . . . 28
9. Representations, Covenants and Warranties . . . . . . . . . . . . . . 29
9A. Organization and Qualification . . . . . . . . . . . . . . . . . 29
9B. Financial Statements . . . . . . . . . . . . . . . . . . . . . . 29
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9C. Actions Pending. . . . . . . . . . . . . . . . . . . . . . . . . 29
9D. Outstanding Indebtedness . . . . . . . . . . . . . . . . . . . . 30
9E. Title to Properties. . . . . . . . . . . . . . . . . . . . . . . 30
9F. Possession of Franchises, Licenses . . . . . . . . . . . . . . . 30
9G. Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
9H. Conflicting Agreements and Other Matters . . . . . . . . . . . . 31
9J. Offering of the Securities . . . . . . . . . . . . . . . . . . . 31
9K. Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . 32
9L. ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
9M. Governmental Consent . . . . . . . . . . . . . . . . . . . . . . 32
9N. Environmental Compliance . . . . . . . . . . . . . . . . . . . . 33
9O. Oil and Gas Contracts. . . . . . . . . . . . . . . . . . . . . . 33
9P. Natural Gas Policy Act and Natural Gas Act Compliance. . . . . . 34
9Q. Take or Pay Obligations, Prepayments, BTU Adjustments
and Balancing Problems . . . . . . . . . . . . . . . . . . . . . 34
9R. Gas Purchase Obligations in Excess of Gas Sales Rights . . . . . 34
9S. Fiscal Year. . . . . . . . . . . . . . . . . . . . . . . . . . . 35
9T. Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
9U. Investment Company Act . . . . . . . . . . . . . . . . . . . . . 35
9V. Public Utility Holding Company Act; Federal Power Act;
Interstate Commerce Act; Other Regulation. . . . . . . . . . . . 35
9W. Acquisition Representations and Warranties . . . . . . . . . . . 35
10. Representations of the Purchaser. . . . . . . . . . . . . . . . . . . 36
10A. Nature of Purchase . . . . . . . . . . . . . . . . . . . . . . . 36
10B. Source of Funds. . . . . . . . . . . . . . . . . . . . . . . . . 36
11. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
11A. Yield Maintenance Terms. . . . . . . . . . . . . . . . . . . . . 36
11B. Other Terms. . . . . . . . . . . . . . . . . . . . . . . . . . . 38
11C. Accounting Principles, Terms and Determinations. . . . . . . . . 47
12. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
12A. Note Payments. . . . . . . . . . . . . . . . . . . . . . . . . . 48
12B. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
12C. Consent to Amendments. . . . . . . . . . . . . . . . . . . . . . 48
12D. Form, Registration, Transfer and Exchange of Notes; Lost Notes . 49
12E. Persons Deemed Owners; Participations. . . . . . . . . . . . . . 49
12F. Survival of Representations and Warranties; Entire Agreement . . 50
12G. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . 50
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12H. Disclosure to Other Persons. . . . . . . . . . . . . . . . . . . 50
12I. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
12J. Payments Due on Non-Business Days. . . . . . . . . . . . . . . . 51
12K. Satisfaction Requirement . . . . . . . . . . . . . . . . . . . . 51
12L. Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . 51
12M. Waiver of Jury Trial; Consent to Jurisdiction; Limitation of
Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
12N. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . 52
12O. Descriptive Headings . . . . . . . . . . . . . . . . . . . . . . 53
12P. Maximum Interest Payable . . . . . . . . . . . . . . . . . . . . 53
12Q. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . 53
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PURCHASER SCHEDULE
SCHEDULE 9A -- CONTROLLING STOCKHOLDERS
SCHEDULE 9D -- EXISTING DEBT AND LIENS
SCHEDULE 9H -- LIST OF AGREEMENTS RESTRICTING DEBT
EXHIBIT A -- FORM OF NOTE
EXHIBIT B -- FORM OF WARRANT
EXHIBIT C -- FORM OF OPINION OF COMPANY'S COUNSEL
EXHIBIT D -- FORM OF GUARANTY AGREEMENT
EXHIBIT E -- FORM OF PARTICIPATION RIGHTS AGREEMENT
EXHIBIT F -- FORM OF REGISTRATION RIGHTS AGREEMENT
vi
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EQUITY COMPRESSION SERVICES CORPORATION
2501 CEDAR SPRINGS ROAD, SUITE 600
DALLAS, TEXAS 75201
As of July 31, 1997
The Prudential Insurance Company of America
c/o Prudential Capital Group
Four Gateway Center
100 Mulberry Street
Newark, New Jersey 07102
$15,000,000 10.15% SECURED SENIOR SUBORDINATED NOTES DUE 2007
COMMON STOCK PURCHASE WARRANTS
Ladies and Gentlemen:
The undersigned, Equity Compression Services Corporation, an Oklahoma
corporation (the "COMPANY"), hereby agrees with you as follows:
PARAGRAPH 1. AUTHORIZATION OF ISSUE OF SECURITIES.
1A. AUTHORIZATION OF ISSUE OF NOTES. The Company will authorize the issue
of its 10.15% secured senior subordinated promissory notes in the aggregate
principal amount of $15,000,000, to be dated the date of issue thereof, to
mature July 31, 2007, to bear interest on the unpaid balance thereof from the
date thereof until the principal thereof shall have become due and payable at a
rate of 10.15% per annum and on overdue payments at the rate specified therein;
such 10.15% secured senior subordinated promissory notes shall be substantially
in the form of EXHIBIT A attached hereto. The term "NOTES" as used herein shall
include each such 10.15% secured senior subordinated promissory note delivered
pursuant to any provision of this Agreement and each such 10.15% secured senior
subordinated promissory note delivered in substitution or exchange for any other
Note pursuant to any such provision. CAPITALIZED TERMS USED HEREIN HAVE THE
MEANINGS SPECIFIED IN PARAGRAPH 11.
1B. AUTHORIZATION OF ISSUE OF WARRANTS. The Company will also authorize
the issue of its Common Stock Purchase Warrants (any such Common Stock Purchase
Warrants which have been issued pursuant to this Agreement, and any such Common
Stock Purchase Warrants which may be issued in substitution or exchange
therefor, herein collectively called the "WARRANTS") evidencing rights to
purchase from the Company an aggregate of 1,000,000 shares of the Company's
common
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stock, par value $0.01 per share (the "COMMON STOCK"), at an initial exercise
price per share of $2.80, at any time or from time to time after the Date of
Closing and prior to 5:00 p.m., New York City time, on the earlier of (i) July
31, 2007 or (ii) the later of (a) the date that is six months after the Notes
are fully retired pursuant to paragraph 4B and (b) July 31, 2002, all subject to
the terms, conditions and adjustments set forth in the Warrants; such Warrants
shall be substantially in the form of EXHIBIT B attached hereto.
PARAGRAPH 2. PURCHASE AND SALE OF SECURITIES.
2A. PURCHASE AND SALE OF NOTES. The Company hereby agrees to sell to you
and, subject to the terms and conditions herein set forth, you agree to purchase
from the Company, Notes in the aggregate principal amount of $15,000,000 at 100%
of such aggregate principal amount. The Company will deliver to you, at the
offices of Baker & Botts, L.L.P. at 2001 Ross Avenue, Dallas, Texas 75201, one
or more Notes registered in your name, evidencing the aggregate principal amount
of Notes to be purchased by you and in the denomination or denominations
specified in the Purchaser Schedule attached hereto, against payment of the
purchase price thereof by transfer of immediately available funds for credit to
the Company's account no. 100968827 at Bank of Oklahoma, National Association,
Tulsa, Oklahoma, ABA No. 103 900 036, on the date of closing, which shall be
August 5, 1997 or any other date on or before August 5, 1997 upon which the
Company and you may mutually agree (the "CLOSING" or the "DATE OF CLOSING").
2B. PURCHASE AND SALE OF WARRANTS. The Company hereby agrees to sell to
you and, subject to the terms and conditions herein set forth, you agree to
purchase from the Company Warrants evidencing rights to purchase an aggregate of
1,000,000 shares of Common Stock. The aggregate purchase price for the Warrants
shall be $10.00. The Company will deliver to you, at the offices of Baker &
Botts, L.L.P. at 2001 Ross Avenue, Dallas, Texas 75201 one or more Warrants,
registered in your name, evidencing rights to purchase an aggregate of 1,000,000
shares of Common Stock, such Warrant or Warrants to evidence rights to purchase
the number of shares of Common Stock specified in the Purchaser Schedule
attached hereto, against payment of the purchase price for the Warrants by
transfer of immediately available funds for credit to the Company's account no.
100968827 at Bank of Oklahoma, National Association, Tulsa, Oklahoma, ABA No.
103 900 036, on the Date of Closing.
PARAGRAPH 3. CONDITIONS PRECEDENT.
3. CONDITIONS TO CLOSING. Your obligation to purchase and pay for the
Securities to be purchased by you hereunder is subject to the satisfaction, on
or before the Date of Closing, of the following conditions:
3A. CERTAIN DOCUMENTS. You shall have received the following, each
dated the Date of Closing (unless a different date is indicated below), and each
in form, scope and substance satisfactory to you:
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<PAGE>
(i) the Notes to be purchased by you;
(ii) the Warrants to be purchased by you;
(iii) certified copies of the resolutions of the Board of Directors
of each of the Transaction Parties approving each of the Subordinated Note
Documents to which each is a party, and certified copies of all documents
evidencing other necessary corporate action and governmental approvals, if
any, with respect to each of the Subordinated Note Documents to which each
is a party;
(iv) a certificate of the Secretary or an Assistant Secretary of
each of the Transaction Parties certifying the names and true signatures of
the officers of such Transaction Party authorized to sign the Subordinated
Note Documents to which it is a party and the other documents to be
delivered hereunder by such Transaction Party;
(v) certified copies of the Certificate of Incorporation
(certified by the Oklahoma or Delaware Secretary of State, as applicable,
within 10 Business Days of the Date of Closing) and bylaws, each as amended
to date, of each of the Transaction Parties;
(vi) a favorable opinion of Schlanger, Mills, Mayer & Grossberg,
L.L.P., counsel to the Transaction Parties, substantially in the form of
EXHIBIT C attached hereto;
(vii) a favorable opinion of Conner & Winters, A Professional
Corporation, special Oklahoma counsel to the Transaction Parties in
connection with this transaction, as to such matters incident to the
matters herein contemplated as you may reasonably request;
(viii) a favorable opinion of Lemle & Keleher, L.L.P., special
Louisiana counsel to the Transaction Parties in connection with this
transaction, as to such matters incident to the matters herein contemplated
as you may reasonably request;
(ix) a favorable opinion of Baker & Botts, L.L.P., who are acting
as special counsel for you in connection with this transaction, as to such
matters incident to the matters herein contemplated as you may reasonably
request;
(x) reliance letters in respect of any other legal opinions
delivered in connection with the Subordinated Note Documents, the
Acquisition Documents and the transactions contemplated thereby;
(xi) certified copies of Requests for Information or Copies (Form
UCC-11) or equivalent reports, dated within 30 days of the Date of Closing,
listing all effective financing statements which name any of the
Transaction Parties or Acquired Companies (under any of their present names
and any previous names) as debtor and which are filed in all jurisdictions
in which any of the Transaction Parties or Acquired Companies own property
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<PAGE>
or conduct business, together with copies of such financing statements;
(xii) the Registration Rights Agreement, duly executed and
delivered by the Company;
(xiii) the Participation Rights Agreement, duly executed and
delivered by the Company and the Company's stockholders parties
thereto;
(xiv) certified copies of each of the Acquisition Documents, the
terms and conditions of which shall be in full force and effect and shall
not have been amended, modified or waived except with your prior consent;
(xv) copies of (a) a pro forma consolidated balance sheet
for the Transaction Parties as at the Closing Date, reflecting the
issuance of the Notes hereunder, the issuance of the Senior Notes
under the Senior Note Agreement and the consummation of the
Acquisition, certified by an authorized financial officer of the
Company and (b) good-faith management projections and pro forma
financial statements for the Transaction Parties for fiscal years 1997
through 2001;
(xvi) the Intercreditor Agreement, duly executed and delivered by
you, the Bank (both in its individual capacity and in its capacity as
Agent) and each of the Transaction Parties;
(xvii) Guaranty Agreements, duly executed and delivered by ECI,
Sunterra and OEC;
(xviii) the Security Documents, duly executed and delivered by each
of the Company and the other Transaction Parties parties thereto;
(xix) all Uniform Commercial Code financing statements deemed
necessary or appropriate by you to perfect the Liens in favor of the Agent
arising under the Security Documents, duly executed and delivered by the
appropriate Transaction Parties, to be recorded with the appropriate filing
offices;
(xx) evidence satisfactory to you and your special counsel that
the Company or one of its Subsidiaries has good and marketable title to the
real property encumbered by the Mortgages and that the Agent possesses
mortgage liens with respect to such real property, which evidence may
include, without limitation, mortgagee policies of title insurance, title
reports, title opinions and division orders;
(xxi) certificates of insurance naming the Agent as loss payee and
the Agent and all holders of Notes as additional insureds, as required by
paragraph 5E; and
4
<PAGE>
(xxii) written instructions from a Responsible Officer of the
Company, set forth on the Company's letterhead, authorizing and directing
you to pay the purchase price of the Securities by transfer of immediately
available funds for credit to the bank account of the Company identified in
paragraphs 2A and 2B.
3B. REPRESENTATIONS AND WARRANTIES; NO DEFAULT; NO MATERIAL ADVERSE
CHANGE. The representations and warranties of the Company and each of the other
Transaction Parties contained in this Agreement, the other Subordinated Note
Documents and in the Acquisition Documents shall be true on and as of the Date
of Closing, except to the extent of changes caused by the transactions herein
contemplated; there shall exist on the Date of Closing no Event of Default or
Default; there shall exist or have occurred no condition, event or act which
could have a material adverse effect on the business, condition (financial or
other), assets, properties, operations or prospects of the Company and its
Subsidiaries and the Company and each of the other Transaction Parties shall
have delivered to you an Officer's Certificate, dated the Date of Closing, to
both such effects.
3C. PURCHASE PERMITTED BY APPLICABLE LAWS. The offer by the Company of,
and the purchase of and payment for the Securities, to be purchased by you on
the Date of Closing on the terms and conditions herein provided (including the
use of the proceeds of such Securities by the Company) shall not violate any
applicable law or governmental regulation (including, without limitation,
section 5 of the Securities Act or Regulation G or X of the Board of Governors
of the Federal Reserve System) and shall not subject you to any tax, penalty,
liability or other onerous condition under or pursuant to any applicable law or
governmental regulation, and you shall have received such certificates or other
evidence as you may request to establish compliance with this condition.
3D. PROCEEDINGS. All corporate and other proceedings taken or to be taken
in connection with the transactions contemplated hereby and all documents
incident thereto shall be satisfactory in substance and form to you, and you
shall have received all such counterpart originals or certified or other copies
of such documents as you may reasonably request.
3E. RELATED PROCEEDINGS. All corporate and other proceedings taken or to
be taken in connection with (i) the Acquisition, (ii) the Company's execution,
delivery, issuance and sale to you of the Senior Notes pursuant to the Senior
Note Agreement and (iii) the other transactions contemplated thereby, and all
documents incident thereto, shall be satisfactory in substance and form to you,
and you shall have received all such counterpart originals or certified or other
copies of such documents as you may reasonably request.
3F. CONSUMMATION OF ACQUISITION. You shall have received satisfactory
evidence that the Acquisition has been consummated prior to or concurrently with
issuance of the Securities and the Senior Notes, pursuant to and in accordance
with the terms and conditions of the Acquisition Documents (no material terms
thereof having been amended, supplemented, waived or otherwise modified without
your prior written consent).
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<PAGE>
3G. PRIVATE PLACEMENT NUMBER. A Private Placement number issued by
Standard & Poor's CUSIP Service Bureau (in cooperation with the Securities
Valuation Office of the National Association of Insurance Commissioners) shall
have been obtained for the Notes.
3H. FEES. (i) You shall have received all fees which are due and payable
on or before the Closing Date pursuant to any written agreement between the
Company and you, and (ii) without limiting the provisions of paragraph 12B, your
special counsel shall have received its fees, charges and disbursements to the
extent reflected in a statement of such special counsel rendered to the Company
at least one Business Day prior to the Closing.
3I. AMENDMENT OF BANK AGREEMENT. The Bank Agreement shall have been
amended to permit the transactions contemplated hereby and to permit
implementation and enforcement of the provisions hereof.
PARAGRAPH 4. PREPAYMENTS.
4. PREPAYMENTS. The Notes shall be subject to prepayment only with
respect to the prepayments specified in paragraphs 4A, 4B and 4C.
4A. REQUIRED PREPAYMENTS. Until the Notes shall be paid in full, the
Company shall apply to the prepayment of the Notes, without premium, the sum of
$5,000,000 on July 31 in each of the years 2005 and 2006, and such principal
amounts of the Notes, together with interest thereon to the prepayment dates,
shall become due on such prepayment dates. The remaining outstanding principal
amount of the Notes, together with interest accrued thereon, shall become due on
the maturity date of the Notes.
4B. OPTIONAL PREPAYMENT OF NOTES WITH YIELD MAINTENANCE AMOUNT.
(i) The Notes shall be subject to prepayment, on any Business Day
after January 31, 1999, in whole at any time or from time to time in part
(in integral multiples of $1,000,000), at the option of the Company, at
100% of the principal amount so prepaid plus interest thereon to the
prepayment date and the Yield Maintenance Amount, if any, with respect to
each Note so prepaid. Any partial prepayment of the Notes pursuant to this
paragraph 4B shall be applied in satisfaction of required payments of
principal in inverse order of their scheduled due dates.
(ii) The Company shall give the holder of each Note irrevocable
written notice of any prepayment pursuant to this paragraph 4B not less
than three Business Days prior to the prepayment date, specifying such
prepayment date and the principal amount of the Notes, and of the Notes
held by such holder, to be prepaid on such date and stating that such
prepayment is to be made pursuant to this paragraph 4B. Notice of
prepayment having been given as aforesaid, the principal amount of the
Notes specified in such notice, together with interest thereon to the
prepayment date and together with the Yield Maintenance Amount,
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<PAGE>
if any, with respect thereto, shall become due and payable on such
prepayment date. The Company shall, on or before the day on which it gives
written notice of any prepayment pursuant to this paragraph 4B, give
telephonic notice of the principal amount of the Notes to be prepaid and
the prepayment date to each holder which shall have designated a recipient
of such notices in the Purchaser Schedule attached hereto or by notice in
writing to the Company. On the Business Day preceding the date of
prepayment the Company shall deliver to each holder of Notes being prepaid
a statement showing the Yield Maintenance Amount due in connection with
such prepayment and setting forth the details of the computation of such
amount.
4C. OFFER TO PREPAY NOTES IN THE EVENT OF A CHANGE IN CONTROL.
(i) NOTICE OF IMPENDING CHANGE IN CONTROL. The Company will not
take any action that consummates or finalizes a Change in Control unless at
least 30 days prior to such action it shall have given to each holder of
Notes written notice of such impending Change in Control.
(ii) NOTICE OF OCCURRENCE OF CHANGE IN CONTROL. The Company
will, within five Business Days after any Responsible Officer has knowledge
of the occurrence of any Change in Control, give written notice of such
Change in Control to each holder of Notes. If a Change in Control has
occurred, such notice shall contain and constitute an offer to prepay the
Notes as described in clause (iii) of this paragraph 4C and shall be
accompanied by the certificate described in clause (vi) hereof.
(iii) OFFER TO PREPAY NOTES. The offer to prepay Notes
contemplated by the foregoing clause (ii) shall be an offer to prepay, in
accordance with and subject to this paragraph 4C, all, but not less than
all, the Notes held by each holder (in this case only, "holder" in respect
of any Note registered in the name of a nominee for a disclosed beneficial
owner shall mean such beneficial owner) on a date specified in such offer
(the "PROPOSED PREPAYMENT DATE"). Such Proposed Prepayment Date shall be
not less than 30 days and not more than 60 days after the date of such
offer (if the Proposed Prepayment Date shall not be specified in such
offer, the Proposed Prepayment Date shall be the 30th day after the date of
such offer).
(iv) REJECTION; ACCEPTANCE. A holder of Notes may accept the
offer to prepay made pursuant to this paragraph 4C by causing a notice of
such acceptance to be delivered to the Company at least five days prior to
the Proposed Prepayment Date. A failure by a holder of Notes to respond to
an offer to prepay made pursuant to this paragraph 4C shall be deemed to
constitute an acceptance of such offer by such holder.
(v) PREPAYMENT; REDUCTION OF REQUIRED PREPAYMENTS. Prepayment of
the Notes to be prepaid pursuant to this paragraph 4C shall be at 100% of
the principal amount of such Notes, plus the Yield Maintenance Amount
determined for the date of prepayment with
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<PAGE>
respect to such principal amount, together with interest on such Notes
accrued to the date of prepayment. On the Business Day preceding the date
of prepayment, the Company shall deliver to each holder of Notes being
prepaid a statement showing the Yield Maintenance Amount due in connection
with such prepayment and setting forth the details of the computation of
such amount. The prepayment shall be made on the Proposed Prepayment Date.
Upon any partial prepayment of Notes pursuant to this paragraph 4C, the
principal amount of the required prepayment of the Notes becoming due under
paragraph 4A on or after the date of such prepayment shall be reduced in
the same proportion as the aggregate unpaid principal amount of Notes is
reduced as a result of such prepayment.
(vi) OFFICER'S CERTIFICATE. Each offer to prepay the Notes
pursuant to this paragraph 4C shall be accompanied by a certificate,
executed by a Responsible Officer of the Company and dated the date of such
offer, specifying: (a) the Proposed Prepayment Date; (b) that such offer is
made pursuant to this paragraph 4C; (c) the principal amount of each Note
offered to be prepaid; (d) the estimated Yield Maintenance Amount due in
connection with such prepayment (calculated as if the date of such notice
were the date of the prepayment) and the details of such calculation; (e)
the interest that would be due on each Note offered to be prepaid, accrued
to the Proposed Prepayment Date; (f) that the conditions of this paragraph
4C have been fulfilled; and (g) in reasonable detail, the nature and date
of the Change in Control.
4D. PARTIAL PAYMENTS PRO RATA. Upon any partial prepayment of Notes
pursuant to paragraph 4A or 4B, the principal amount so prepaid shall be
allocated to all Notes at the time outstanding (including, for the purpose of
this paragraph 4D only, all such Notes prepaid or otherwise retired or purchased
or otherwise acquired by the Company or any of its Subsidiaries or Affiliates
other than by prepayment pursuant to paragraph 4A, 4B or 4C) in proportion to
the respective outstanding principal amounts thereof. Upon any partial
prepayment of Notes pursuant to paragraph 4C, the principal amount so prepaid
shall be allocated to all Notes at the time outstanding and held by holders who
have accepted the Company's offer of prepayment made pursuant to paragraph 4C
(including, for the purpose of this paragraph 4D only, all such Notes prepaid or
otherwise retired or purchased or otherwise acquired by the Company or any of
its Subsidiaries or Affiliates other than by prepayment pursuant to
paragraph 4A, 4B or 4C) in proportion to the respective outstanding principal
amounts thereof.
4E. RETIREMENT OF NOTES. The Company shall not, and shall not permit any
of its Subsidiaries or Affiliates to, prepay or otherwise retire in whole or in
part prior to their stated final maturity (other than by prepayment pursuant to
paragraph 4A, 4B or 4C or upon acceleration of such final maturity pursuant to
paragraph 8A), or purchase or otherwise acquire, directly or indirectly, Notes
held by any holder unless the Company or such Subsidiary or Affiliate shall have
offered to prepay or otherwise retire or purchase or otherwise acquire, as the
case may be, the same proportion of the aggregate principal amount of Notes held
by each other holder of Notes at the time outstanding upon the same terms and
conditions. Any Notes so prepaid or otherwise retired or purchased or otherwise
acquired by the Company or any of its Subsidiaries or Affiliates shall not be
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deemed to be outstanding for any purpose under this Agreement, except as
provided in paragraph 4D.
PARAGRAPH 5. AFFIRMATIVE COVENANTS.
5. AFFIRMATIVE COVENANTS.
So long as any Note shall remain unpaid or you shall have any commitment
hereunder (or, with respect to the covenants of the Company set forth in
paragraphs 5A, 5B and 5C, so long as any Note shall remain unpaid or any Warrant
shall remain outstanding) the Company covenants that
5A. FINANCIAL STATEMENTS. The Company will deliver to each holder in
duplicate:
(i) as soon as practicable and in any event within 45 days after
the end of each quarterly period (other than the last quarterly period) in
each fiscal year, consolidating and consolidated statements of income,
stockholders' equity and cash flows of the Company and its Subsidiaries for
the period from the beginning of the current fiscal year to the end of such
quarterly period, and a consolidating and consolidated balance sheet of the
Company and its Subsidiaries as at the end of such quarterly period,
setting forth in each case in comparative form figures for the
corresponding period in the preceding fiscal year, all in reasonable detail
and satisfactory in form to the Required Holder(s) and certified by an
authorized financial officer of the Company, subject to changes resulting
from year-end adjustment; PROVIDED, that delivery pursuant to clause (iii)
below of copies of the Quarterly Report on Form 10Q or 10-QSB, as the case
may be, of the Company for such quarterly period filed with the Securities
and Exchange Commission shall be deemed to satisfy the requirements of this
clause (i) with respect to consolidated financial statements if such
financial statements are included in such report;
(ii) as soon as practicable and in any event within 90 days after
the end of each fiscal year, consolidating and consolidated statements of
income and cash flows and a consolidated statement of stockholders' equity
of the Company and its Subsidiaries for such year, and a consolidating and
consolidated balance sheet of the Company and its Subsidiaries as at the
end of such year, setting forth in each case in comparative form
corresponding consolidated figures from the preceding annual audit, all in
reasonable detail and satisfactory in form to the Required Holder(s) and,
as to the consolidated statements, reported on by independent public
accountants of recognized national standing selected by the Company whose
report shall be without limitation as to the scope of the audit and
satisfactory in substance to the Required Holder(s) and, as to the
consolidating statements, certified by an authorized financial officer of
the Company; PROVIDED, that delivery pursuant to clause (iii) below of
copies of the Annual Report on Form 10K or 10-KSB, as the case may be, of
the Company for such fiscal year filed with the Securities and Exchange
Commission shall be deemed to satisfy the requirements of this clause (ii)
with respect to consolidated financial statements if such financial
statements are included in such report;
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(iii) promptly upon transmission thereof, copies of all such
financial statements, proxy statements, notices and reports as it shall
send to its public stockholders and copies of all registration statements
(without exhibits) and all reports which it files with the Securities and
Exchange Commission (or any governmental body or agency succeeding to the
functions of the Securities and Exchange Commission);
(iv) promptly upon receipt thereof, a copy of each other report
submitted to the Company or any Subsidiary by independent accountants in
connection with any annual, interim or special audit made by them of the
books of the Company or any Subsidiary; and
(v) as soon as practicable and in any event within five days
after any officer of the Company obtaining knowledge (a) of any condition
or event which, in the opinion of management of the Company, would have a
material adverse effect on the business, condition (financial or other),
assets, properties, operations or prospects of the Company and its
Subsidiaries, (b) that any Person has given any notice from any Person to
the Company or any of its Subsidiaries or taken any other action with
respect to a claimed default or event or condition of the type referred to
in clause (iii) of paragraph 8A, (c) of the institution of any litigation
involving claims against the Company or any of its Subsidiaries equal to or
greater than $100,000 with respect to any single cause of action or of any
adverse determination in any court proceeding in any litigation involving a
potential liability to the Company or any of its Subsidiaries equal to or
greater than $100,000 with respect to any single cause of action which
makes the likelihood of an adverse determination in such litigation against
the Company or such Subsidiary substantially more probable, (d) of any
regulatory proceeding which may have a material adverse effect on the
Company or any of its Subsidiaries, an Officer's Certificate specifying the
nature and period of existence of any such condition or event, or
specifying the notice given or action taken by such Person and the nature
of any such claimed default, event or condition, or specifying the details
of such proceeding, litigation or dispute and what action the Company or
any of its Subsidiaries has taken, is taking or proposes to take with
respect thereto;
(vi) promptly after the filing or receiving thereof, copies of all
reports and notices which the Company or any Subsidiary files under ERISA
with the Internal Revenue Service or the PBGC or the U.S. Department of
Labor or which the Company or any Subsidiary receives from such
corporation;
(vii) promptly upon delivery thereof to the Banks, copies of all
such notices, reports and other materials which the Company or any
Subsidiary is required under the Bank Agreement to deliver to the Banks,
including, without limitation, (a) engineering data and information with
respect to the Oil and Gas Properties, (b) production and expense reports
with respect to the Oil and Gas Properties, (c) appraisals of compressor
unit fleets and (d) borrowing base certificates and related documentation;
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(viii) promptly upon receipt thereof from the Banks, copies of all
engineering reports and borrowing base determinations prepared by or on
behalf of the Banks with respect to the Oil and Gas Properties;
(ix) promptly upon completion thereof on an annual basis within 60
days following each fiscal year end, a copy of each operating budget and
projection of financial performance prepared by or for the Company and its
Subsidiaries;
(x) within five days after any change in executive management of
the Company or any of its Subsidiaries, including any officers of the
Company or any of its Subsidiaries holding the office of President,
Chairman of the Board or Chief Financial Officer thereof, or the occurrence
of a Change in Control, written notice thereof, together with a description
of the reasons for such change; and
(xi) with reasonable promptness, such other information respecting
the condition or operations, financial or otherwise, of the Company or any
of its Subsidiaries as such holder may reasonably request.
Together with each delivery of financial statements required by clauses (i) and
(ii) above, the Company will deliver to each Significant Holder an Officer's
Certificate demonstrating (with computations in reasonable detail) compliance by
the Company and its Subsidiaries with the provisions of paragraphs 6A, 6C(2),
6C(3), 6C(5) and 6C(8) and stating that there exists no Event of Default or
Default, or, if any Event of Default or Default exists, specifying the nature
and period of existence thereof and what action the Company proposes to take
with respect thereto. Together with each delivery of financial statements
required by clause (ii) above, the Company will deliver to each Significant
Holder a certificate of such accountants stating that, in making the audit
necessary for their report on such financial statements, they have obtained no
knowledge of any Event of Default or Default, or, if they have obtained
knowledge of any Event of Default or Default, specifying the nature and period
of existence thereof. Such accountants, however, shall not be liable to anyone
by reason of their failure to obtain knowledge of any Event of Default or
Default which would not be disclosed in the course of an audit conducted in
accordance with generally accepted auditing standards.
The Company also covenants that immediately after any Responsible Officer
obtains knowledge of an Event of Default or Default, it will deliver to each
Significant Holder an Officer's Certificate specifying the nature and period of
existence thereof and what action the Company proposes to take with respect
thereto.
5B. INFORMATION REQUIRED BY RULE 144A. The Company will, upon the request
of the holder of any Note or Warrant, provide such holder, and any qualified
institutional buyer designated by such holder, such financial and other
information as such holder may reasonably determine to be necessary in order to
permit compliance with the information requirements of Rule 144A under the
Securities Act in connection with the resale of Notes or Warrants, except at
such times as the
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Company is subject to the reporting requirements of section 13 or 15(d) of the
Exchange Act. For the purpose of this paragraph 5B, the term "qualified
institutional buyer" shall have the meaning specified in Rule 144A under the
Securities Act.
5C. INSPECTION OF PROPERTY. The Company will permit any Person designated
by any holder (other than a Competitor or an Affiliate, agent or employee of a
Competitor) in writing, at the Company's expense during the continuance of a
Default or Event of Default and otherwise at such holder's expense, to visit and
inspect any of the properties of the Company and its Subsidiaries, to examine
the corporate books and financial records of the Company and its Subsidiaries
and make copies thereof or extracts therefrom and to discuss the affairs,
finances and accounts of any of such corporations with the principal officers of
the Company and its independent public accountants, all at such reasonable times
and as often as such holder may reasonably request. Each holder desiring to
perform any such inspection or examination shall provide the Company with
reasonable prior notice thereof, which notice shall include the identity of the
Person who is to perform such inspection or examination.
5D. COVENANT TO SECURE NOTES EQUALLY. The Company will, if it or any
Subsidiary shall create or assume any Lien upon any of its property or assets,
whether now owned or hereafter acquired, other than Liens permitted by the
provisions of paragraph 6C(1) (unless prior written consent to the creation or
assumption thereof shall have been obtained pursuant to paragraph 12C), make or
cause to be made effective provision whereby the Notes will be secured by such
Lien equally and ratably with any and all other Indebtedness thereby secured so
long as any such other Indebtedness shall be so secured pursuant to such
agreements and instruments as shall be approved by the Required Holder(s), and
the Company will cause to be delivered to the holder of each Note an opinion of
independent counsel to the effect that such agreements and instruments are
enforceable in accordance with their terms and that the Notes are equally and
ratably secured with such other Indebtedness.
5E. CORPORATE EXISTENCE, LICENSES AND PERMITS; MAINTENANCE OF PROPERTIES.
The Company will at all times do or cause to be done all things necessary to
maintain, preserve and renew its existence as a corporation organized under the
laws of a state of the United States of America, will preserve and keep in force
and effect, and cause each of its Subsidiaries to preserve and keep in force and
effect, all licenses and permits necessary to the conduct of its and their
respective businesses and will maintain and keep, and will cause each of its
Subsidiaries to maintain and keep, its and their respective properties in good
repair, working order and condition, and from time to time make all necessary
and proper repairs, renewals and replacements, so that the business carried on
in connection therewith may be properly and advantageously conducted at all
times in the normal course of business as conducted prior to the date of repair;
PROVIDED, HOWEVER, that nothing contained in this paragraph 5D shall prevent the
Company or any Subsidiary from ceasing or omitting to exercise any right,
license or permit or to make any repair, renewal or replacement that (i) in the
reasonable judgment of the Company or such Subsidiary is no longer in the best
interests of the Company or such Subsidiary and (ii) such cessation or omission
could not result in a material
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adverse effect on the business, condition (financial or other), assets,
properties, operations or prospects of the Company and its Subsidiaries taken as
a whole.
5F. MAINTENANCE OF INSURANCE. The Company will carry and maintain, and
cause each Subsidiary to carry and maintain, insurance (subject to customary
deductibles and retentions) in at least such amounts and against such
liabilities and hazards and by such methods as customarily maintained by other
companies operating similar businesses. The Agent and all holders of Securities
shall be named as additional insureds, and the Agent shall be named as loss
payee, on each insurance policy obtained or maintained by the Company and its
Subsidiaries with respect to their properties and businesses.
5G. PAYMENT OF TAXES AND OTHER CLAIMS. The Company will and will cause
each of its Subsidiaries to file all income tax or similar tax returns required
to be filed in any jurisdiction and to pay and discharge all taxes shown to be
due and payable on such returns and all other taxes, assessments, governmental
charges, levies, trade accounts payable and claims for work, labor or materials
(all the foregoing being referred to collectively as "CLAIMS") payable by any of
them, to the extent such Claims have become due and payable and before they have
become delinquent; PROVIDED that neither the Company nor any Subsidiary need pay
any Claim if (i) the amount, applicability or validity thereof is contested by
the Company or such Subsidiary on a timely basis in good faith and in
appropriate proceedings, and the Company or a Subsidiary has established
adequate reserves therefor in accordance with GAAP on the books of the Company
or such Subsidiary or (ii) the nonpayment of all such Claims in the aggregate
could not result in a material adverse change in the business, condition
(financial or other), assets, properties, operations or prospects of the Company
and its Subsidiaries taken as a whole.
5H. ERISA COMPLIANCE. The Company will, and will cause each ERISA
Affiliate to, at all times:
(i) with respect to each Plan, make timely payments of
contributions required to meet the minimum funding standard set forth in
ERISA or the Code with respect thereto and, with respect to any
Multiemployer Plan, make timely payment of contributions required to be
paid thereto as provided by Section 515 of ERISA, and
(ii) comply with all other provisions of ERISA,
except for such failures to make contributions and failures to comply as could
not have a material adverse effect on the business, condition (financial or
other), assets, properties, operations or prospects of the Company and its
Subsidiaries taken as a whole.
5I. COMPLIANCE WITH LAWS. The Company will comply, and will cause each of
its Subsidiaries to comply, with all applicable laws, rules, regulations and
orders (including those relating to protection of the environment) except, in
any such case, where failure to comply could
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not have a material adverse effect on the business, condition (financial or
otherwise), operations or prospects of the Company and its Subsidiaries taken as
a whole.
5J. MAINTENANCE OF COMMITTED CREDIT FACILITY. The Company will at all
times maintain a committed revolving credit facility of not less than
$5,000,000, and will maintain its ability to satisfy all conditions precedent to
its ability to obtain advances thereunder, and the remaining commitment period
with respect to such facility shall at all times be at least 12 months.
5K. ENVIRONMENTAL COVENANTS. The Company will immediately notify each
holder of Securities of and provide such holder with copies of any notifications
of discharges or releases or threatened releases or discharges of a Polluting
Substance on, upon, into or from the Collateral which are given or required to
be given by or on behalf of the Company or any of its Subsidiaries to any
federal, state or local Tribunal if any of the foregoing may materially and
adversely affect the Company, any of its Subsidiaries or any part of the
Collateral, and such copies of notifications shall be delivered to the holders
at the same time as they are delivered to the Tribunal. The Company further
agrees promptly to undertake and diligently pursue to completion, or to cause
its Subsidiaries to undertake and diligently pursue to completion, any
appropriate and legally required or authorized remedial containment and cleanup
action in the event of any release or discharge or threatened release or
discharge of a Polluting Substance on, upon, into or from the Collateral. At
all times while owning and operating the Collateral, the Company will maintain
and retain, or cause its Subsidiaries to maintain and retain, complete and
accurate records of all releases, discharges or other disposal of Polluting
Substances on, onto, into or from the Collateral, including, without limitation,
records of the quantity and type of any Polluting Substances disposed of on or
off the Collateral.
5L. ENVIRONMENTAL INDEMNITIES. The Company hereby agrees to indemnify,
defend and hold harmless each holder of Securities, the Agent and each of their
respective officers, directors, employees, agents, consultants, attorneys,
contractors, affiliates, successors, assigns or transferees from and against,
and reimburse said Persons in full with respect to, any and all loss, liability,
damage, fines, penalties, costs and expenses, of every kind and character,
including reasonable attorneys' fees and court costs, known or unknown, fixed or
contingent, occasioned by or associated with any claims, demands, causes of
action, suits and/or enforcement actions, including any administrative or
judicial proceedings, and any remedial, removal or response actions ever
asserted, threatened, instituted or requested by any Persons, including any
Tribunal, arising out of or related to: (i) the breach of any representation or
warranty of the Company contained in paragraph 9M set forth herein; (ii) the
failure of the Company to perform, or to cause its Subsidiaries to perform, any
of the covenants contained in paragraph 5J; (iii) the ownership, construction,
occupancy, operation, use of the Collateral prior to the earlier of the date on
which (a) the Notes have been paid in full, the Warrants are no longer
outstanding and the Security Documents have been released, or (b) the Collateral
has been sold by the Agent pursuant to foreclosure of the Liens granted under
the Security Documents, deed in lieu of such foreclosure or otherwise (all of
the foregoing, collectively, the "INDEMNIFIED LIABILITIES"); provided, however,
the foregoing indemnity shall not apply with respect to matters caused solely by
or arising solely from the Agent's activities during any period of time the
Agent acquires ownership of the Collateral. THE FOREGOING INDEMNITY OBLIGATIONS
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OF THE COMPANY SHALL EXTEND TO ALL INDEMNIFIED LIABILITIES, INCLUDING, WITHOUT
LIMITATION, ANY INDEMNIFIED LIABILITIES ARISING FROM OR ATTRIBUTED TO THE
NEGLIGENCE OF ANY INDEMNIFIED PARTY.
5M. COLLATERAL; NEW SUBSIDIARIES. The Company shall execute, and shall
cause its Subsidiaries to execute, any and all documents, financing statements,
agreements and instruments, and take all action (including filing Uniform
Commercial Code and other financing statements, mortgages and deeds of trust),
that may be required under applicable law, or which the Required Holder(s) or
the Agent may reasonably request in order to effectuate the transactions
contemplated by the Subordinated Note Documents and in order to grant, preserve,
protect and perfect the validity and priority of the security interests and
Liens created or purported to be created by the Security Documents. In
addition, at the cost and expense of the Company, the Company will (i) cause
each subsequently acquired or organized Subsidiary (contemporaneously with such
acquisition or organization) to execute and deliver a Guaranty Agreement in
favor of the holders of Securities and (ii) cause such Subsidiary to secure
payment of the Securities and performance and observance of all other
obligations of the Company and its Subsidiaries under the Subordinated Note
Documents by pledging or creating, or causing to be pledged or created,
perfected security interests and Liens with respect to such of its assets and
properties as the Required Holder(s) shall designate (it being understood that
it is the intent of the parties that such obligations shall be secured by, among
other things, substantially all the property and assets of the Company and its
Subsidiaries (now or hereafter acquired or created), including, without
limitation, real and other properties acquired subsequent to the Date of
Closing). Such security interests and Liens will be created under the Security
Documents and other security agreements, mortgages, deeds of trust and other
instruments and documents in form, scope and substance satisfactory to the
Required Holder(s) and the Agent, and the Company will deliver or cause to be
delivered to the Agent, all such instruments and documents (including, without
limitation, legal opinions, title insurance policies, surveys and lien searches)
as the Required Holder(s) or the Agent shall request to evidence compliance with
this paragraph 5M. The Company agrees to provide from time to time such
evidence as the Required Holder(s) or the Agent shall request as to the
perfection and priority status of each such security interest and Lien.
5N. ENFORCEMENT OF ACQUISITION DOCUMENTS. The Company will enforce, and
will cause each of its Subsidiaries parties thereto to enforce, all covenants,
agreements and other obligations contained in the Acquisition Documents which
are binding upon the other parties thereto and which survive the consummation of
the Acquisition, including, without limitation, all indemnification obligations.
5O. LOCKBOX ACCOUNT. The Company and each of its Subsidiaries shall
establish and maintain a joint lockbox account with the Agent (the "LOCKBOX
ACCOUNT") pursuant to the Lockbox Agreement.
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PARAGRAPH 6. NEGATIVE COVENANTS.
6. NEGATIVE COVENANTS. So long as any Note shall remain unpaid or you
shall have any commitment hereunder, the Company covenants that:
6A. TOTAL INDEBTEDNESS TO EBITDA RATIO. The Company will not permit, at
any time, the ratio of Total Debt to EBITDA to exceed 5.00 to 1.00 for the four
fiscal quarters most recently ended.
6B. LIMITATION ON RESTRICTED PAYMENTS. The Company will not and will not
permit any Subsidiary to directly or indirectly declare, order, pay, make or set
apart any sum for any Restricted Payment.
6C. LIENS, INDEBTEDNESS, AND OTHER RESTRICTIONS. The Company will not and
will not permit any Subsidiary to:
6C(1). LIENS. Create, assume or suffer to exist any Lien upon any
of its properties or assets, whether now owned or hereafter acquired
(whether or not provision is made for the equal and ratable securing of the
Notes in accordance with the provisions of paragraph 5D), EXCEPT:
(i) Liens in favor of the Agent securing the Notes and the
payment, performance and observance of the other obligations under
this Agreement and the other Subordinated Note Documents;
(ii) Liens in favor of the Agent securing Senior Debt of the
Company and its Subsidiaries to the Banks under the Bank Agreement and
other Loan Documents (as such term is defined in the Bank Agreement);
(iii) Liens in favor of the Agent securing Senior Debt evidenced
by the Senior Notes and the payment, performance and observance of the
other obligations under the Senior Note Agreement and the other Senior
Note Documents;
(iv) Liens on property of the Company and its Subsidiaries
outstanding on the Date of Closing, described in SCHEDULE 9D attached
hereto and securing Indebtedness permitted by paragraph 6C(2);
(v) statutory Liens incidental to the conduct of business or the
ownership of properties of the Company and its Subsidiaries (including
Liens in connection with worker's compensation, unemployment insurance
and other like laws (other than ERISA Liens), warehousemen's and
mechanic's liens and statutory landlord's liens) and Liens to secure
the performance of bids, tenders or purchase, construction or sales
contracts, or to secure statutory obligations, property taxes and
assessments or
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governmental charges, surety or appeal bonds or other Liens of like
general nature which in each case are incurred in the ordinary course
of business and not in connection with the borrowing of money, the
obtaining of advances or credit or the payment of the deferred
purchase price of property and which do not in any event materially
impair the value or use of the property encumbered thereby in the
operation of the business of the Company and its Subsidiaries;
PROVIDED in each case, that the obligation secured is not overdue; and
(vi) any Lien created to secure all or any part of the purchase
price, or to secure Indebtedness incurred or assumed to pay all or any
part of the purchase price, of property acquired by the Company or its
Subsidiaries after the Date of Closing, PROVIDED, that any such Lien
shall be confined solely to the item or items of property so acquired
and, if required by the terms of the instrument originally creating
such Lien, other property which is an improvement to or is acquired
for specific use in connection with such acquired property.
6C(2). LIMITATION ON INDEBTEDNESS. Create, incur, assume or permit
to exist any Indebtedness other than:
(i) Indebtedness incurred pursuant to this Agreement, as
evidenced by the Notes, and the guaranty obligations of the Company's
Subsidiaries with respect thereto;
(ii) Indebtedness incurred pursuant to the Senior Note Agreement,
as evidenced by the Senior Notes, and the guaranty obligations of the
Company's Subsidiaries with respect thereto;
(iii) Indebtedness incurred pursuant to the Bank Agreement, so
long as (a) the Intercreditor Agreement shall remain in effect and (b)
the maximum aggregate outstanding loans or commitments (and other
extensions of credit) of all lenders from time to time parties thereto
does not exceed $40,000,000;
(iv) other Indebtedness of the Company to the extent permitted
under paragraph 6A, provided that such Indebtedness is unsecured and,
by its terms, is subordinated in right of payment to the Notes upon
terms satisfactory to the Required Holder(s);
(v) trade payables and current Indebtedness (other than for
borrowed money) incurred in, and deposits and advances accepted in,
the ordinary course of business; and
(vi) Indebtedness secured by the Liens permitted pursuant to
clause (vi) of paragraph 6C(1); PROVIDED, that such Indebtedness shall
not exceed $500,000 in the
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aggregate incurred during any fiscal year and $750,000 in the
aggregate outstanding at any time.
6C(3). LOANS, ADVANCES, INVESTMENTS AND CONTINGENT LIABILITIES.
Make or permit to remain outstanding any loan or advance to, or extend
credit (other than trade credit extended in the normal course of business
to any Person that is not a Subsidiary of the Company) to, or make or
permit to remain outstanding any Guarantee in connection with the
obligations, stock or dividends of, or own, purchase or acquire any stock,
obligations or securities of, or any other interest in, or make any capital
contribution to, or acquire all or substantially all of the assets of, any
Person (any of the foregoing, an "INVESTMENT"), EXCEPT that the Company or
any Subsidiary may:
(i) endorse negotiable instruments for collection in the
ordinary course of business;
(ii) provide Guarantees with respect to the Indebtedness and
other obligations of the Company and its Subsidiaries under the Senior
Note Documents and the Subordinated Note Documents;
(iii) own, purchase or acquire stock or other equity interests of
a Wholly Owned Subsidiary or, if permitted under clause (vii) of this
paragraph 6C(3), of a Person which immediately after such purchase or
acquisition will be a Wholly Owned Subsidiary;
(iv) own, purchase or acquire (a) certificates of deposit of
commercial banks organized under the laws of the United States or any
state thereof (having capital resources in excess of $100,000,000) and
commercial paper rated A-1 by Standard and Poor's Ratings Group or P-1
by Moody's Investors Service, Inc., in each case due within one year
from the date of purchase and payable in the United States in United
States dollars, (b) obligations of the United States Government or any
agency thereof, and obligations guaranteed by the United States
Government, in any case maturing within one year after the acquisition
thereof, and (c) money market mutual funds that are classified as
current assets in accordance with GAAP and that invest solely in
investments described in clauses (a) and (b) maturing not more than
one year after the acquisition thereof, which funds are managed by
Persons having capital and surplus in excess of $100,000,000; and
(v) make or permit to remain outstanding other loans, advances
and Guarantees, PROVIDED that the aggregate amount of other loans,
advances and Guarantees permitted pursuant to this clause (v) shall
not exceed $200,000 during any fiscal year period;
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(vi) acquire limited partnership or limited liability company
member interests in up to three compressor leasing limited
partnerships or limited liability companies with BOK Capital Services,
Inc. ("BCS"), each of which shall be subject to the following
limitations: (a) the total capital contribution of the Company or its
applicable Subsidiary shall not exceed $1,000; (b) BCS will provide
not more than $6,000,000, in the form of either a capital contribution
or a loan, to each such entity; (c) neither the Company nor any of its
Subsidiaries nor any of their respective properties shall be liable
with respect to any Indebtedness or other obligations of such entity;
(d) and all organizational, operating and other documents executed in
connection with the formation and operation of each such entity shall
be substantially similar to those previously provided to and approved
by you; and
(vii) acquire all of the capital stock or other equity interests of
a Person, or acquire all or substantially all of the assets of a
Person; provided, that the prior written consent of the Required
Holder(s) (which may be granted or withheld in their sold discretion)
shall be required with respect to any such acquisition for
consideration that includes the payment of cash by the Company or any
of its Subsidiaries, at the time of the acquisition or within twelve
months thereafter, in an amount in excess of $5,000,000.
6C(4). CONSOLIDATION, MERGER OR TRANSFER OF ASSETS. (i) Merge or
consolidate with or into any Person (except that any Subsidiary may merge
or consolidate with or into any other Subsidiary), (ii) convey, transfer,
lease or otherwise dispose of all or substantially all of its assets to any
Person or (iii) adopt or effect any plan of reorganization,
recapitalization, liquidation or dissolution.
6C(5). LIMITATION ON ASSET DISPOSITIONS. Except as permitted under
paragraph 6C(4), make or permit to be made any Asset Disposition, other
than the following:
(i) any Asset Disposition involving any of the compressor units
of the Company or any of its Subsidiaries, PROVIDED that (a) the
aggregate Fair Market Value of all such Asset Dispositions may not
exceed $1,000,000 in any consecutive twelve-month period without the
prior written consent of the Required Holder(s), and (b) the Company
has offered to prepay (x) Senior Notes as provided in paragraph 4B of
the Senior Note Agreement, so long as any Senior Notes remain
outstanding, and (y) at any time that no Senior Notes are outstanding,
Indebtedness incurred pursuant to the Bank Agreement if any such
Indebtedness is then outstanding;
(ii) any Asset Disposition involving an undivided interest in any
of the Oil and Gas Properties, PROVIDED that (a) the aggregate Fair
Market Value of all such Asset Dispositions may not exceed $250,000 in
any consecutive twelve-month period without the prior written consent
of the Required Holder(s), and (b) the Company has offered to prepay
(x) Senior Notes as provided in paragraph 4B of the Senior Note
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Agreement, so long as any Senior Notes remain outstanding, and (y) at
any time that no Senior Notes are outstanding, Indebtedness incurred
pursuant to the Bank Agreement if any such Indebtedness is then
outstanding; and
(iii) any other Asset Disposition for Fair Market Value of assets
(other than and expressly excluding (a) compressors, (b) oil and gas
leasehold, mining or other mineral interests wherever located, and (c)
capital stock or other equity interests in Subsidiaries), PROVIDED
that the aggregate Fair Market Value of all such Asset Dispositions in
any fiscal year may not exceed $100,000.
6C(6). SALE OR DISCOUNT OF RECEIVABLES. Sell with recourse,
discount (other than to the extent of finance and interest charges included
therein) or otherwise sell for less than face value thereof, any of its
notes or accounts receivable, except notes or accounts receivable the
collection of which is doubtful in accordance with general accepted
accounting principles.
6C(7). TRANSACTIONS WITH AFFILIATES. Directly or indirectly,
purchase, acquire or lease any property from, or sell, transfer or lease
any property to, or otherwise deal with, in the ordinary course of business
or otherwise (i) any Affiliate, (ii) any Person owning, beneficially or of
record, directly or indirectly, either individually or together with all
other Persons to whom such Person is related by blood, adoption or
marriage, stock of the Company (of any class having ordinary voting power
for the election of directors) aggregating 5% or more of such voting power
or (iii) any Person related by blood, adoption or marriage to any Person
described or coming within the provisions of clause (i) or (ii) of this
paragraph 6C(7), except in the ordinary course and pursuant to the
reasonable requirements of the Company's or such Subsidiary's business and
upon fair and reasonable terms no less favorable to the Company or such
Subsidiary than would be obtainable in a comparable arm's-length
transaction with a Person not an Affiliate.
6C(8). LIMITATION ON LEASE RENTALS. The Company will not, at any
time, permit Lease Rentals for any current or future fiscal year of the
Company to exceed $500,000; PROVIDED, HOWEVER, that with respect to rental
and other sums paid by the Company or any Subsidiary in respect of any
compressor unit leased to a customer, such sums will constitute Lease
Rentals for purposes of this paragraph 6C(8) only to the extent that they
exceed the gross rental revenue generated by such compressor unit.
6D. CHANGE OF FISCAL YEAR. The Company will not and will not permit any
Subsidiary to change its fiscal year from its present fiscal year (fiscal year
end of December 31).
6E. CHANGE OF BUSINESS. The Company will not and will not permit any
Subsidiary to engage in any business activity or operation substantially
different than or unrelated to its current business activities or operations.
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6F. CERTIFICATES OF INCORPORATION; BYLAWS; TRADE NAMES. The Company will
not and will not permit any Subsidiary to amend, alter, modify or restate its
Certificate of Incorporation or bylaws in any way which would (i) change its
corporate name or adopt a trade name, or (ii) in any manner adversely affect the
obligations or covenants of the Company and its Subsidiaries hereunder or under
any of the other Subordinated Note Documents.
6G. OTHER AGREEMENTS, AMENDMENTS. The Company will not and will not
permit any of its Subsidiaries to (i) enter into or permit to exist any
agreement (a) which would cause a Default or Event of Default hereunder or (b)
which contains any provision which would be violated or breached by the
performance of the obligations of the Company and its Subsidiaries hereunder or
under any of the other Subordinated Note Documents or (ii) amend or modify or
permit the amendment or modification of the Bank Note, the Bank Agreement or any
other "Loan Document," as such term is defined in the Bank Agreement as in
effect on the date hereof.
6H. LIMITATION ON CERTAIN RESTRICTIVE AGREEMENTS. The Company will not,
and will not permit any of its Subsidiaries to, enter into or suffer to exist
any contractual obligation, other than the Bank Agreement, the Senior Note
Documents and the Subordinated Note Documents, which in any way restricts the
ability of the Company or any of its Subsidiaries to (i) create, incur, assume
or suffer to exist any Lien upon any of its property, assets or revenues, (ii)
make any prepayments or purchases of the Notes required under this Agreement,
(iii) make any dividends or distributions, or any payments required under this
Agreement or any other Subordinated Note Document or (iv) transfer any of its
property or assets to the Company or a Wholly Owned Subsidiary of the Company.
6I. PROHIBITION AGAINST LAYERING. The Company will not and will not
permit any Subsidiary to incur, create, issue, assume, guarantee or in any other
manner become directly or indirectly liable with respect to or responsible for,
or permit to remain outstanding, any Indebtedness (including, without
limitation, Indebtedness permitted pursuant to paragraphs 6A and 6C(2)), that is
subordinate or junior in right of payment to any Senior Debt or any Guarantee in
respect thereof unless such Indebtedness is also unsecured and subordinate in
right of payment to the Notes or the Guaranty Agreements, as the case may be,
upon terms satisfactory to the Required Holder(s).
6J. CHANGE IN CONTROL. No Change in Control shall occur.
PARAGRAPH 7. SUBORDINATION OF NOTES.
7. SUBORDINATION OF NOTES.
7A. SUBORDINATION. Anything in this Agreement to the contrary
notwithstanding, the indebtedness evidenced by the Notes, including principal,
Yield Maintenance Amount, if any, and interest, shall be subordinate and junior
to the extent set forth in subparagraphs (i) to (v), inclusive, below, to all
Senior Debt.
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(i) If the Company shall default in the payment of any principal of
or interest on any Senior Debt in an amount in excess of $750,000 owing
under any single instrument when the same becomes due and payable, whether
at maturity or at a date fixed for prepayment or by declaration of
acceleration or otherwise, then, unless and until such default shall have
been remedied by payment in full or waived, no holder of the Notes shall
accept or receive any direct or indirect payment of or on account of any
indebtedness in respect of the Notes.
(ii) In the event of any insolvency, bankruptcy, liquidation,
reorganization or other similar proceedings, or any receivership
proceedings in connection therewith, relative to the Company, and in the
event of any proceedings for voluntary liquidation, dissolution or other
winding up of the Company, whether or not involving insolvency or
bankruptcy proceedings, then all Senior Debt shall first be paid in full
before any payment of or on account of principal, Yield Maintenance Amount,
if any, or interest is made by the Company upon the Notes.
(iii) In any of the proceedings referred to in subparagraph (ii)
above, any payment or distribution of any kind or characters whether in
cash, property, stock or obligations, which may be payable or deliverable
by the Company in respect of the Notes shall be paid or delivered directly
to the holders of Senior Debt (or to a banking institution selected by the
court or Person making the payment or delivery or designated by any holder
of Senior Debt) for application in payment thereof in accordance with the
priorities then existing among such holders, unless and until all Senior
Debt shall have been paid in full PROVIDED, HOWEVER, that
(a) if the payment or delivery by the Company of such cash,
property, stock or obligations to the holders of the Notes is
authorized by an order or decree giving effect, and stating in such
order or decree that effect is given, to the subordination of the
Notes to Senior Debt, and made in a reorganization proceeding under
any applicable bankruptcy or reorganization law, no payment or
delivery by the Company of such cash, property, stock or obligations
payable or deliverable with respect to the Notes shall be made to the
holders of Senior Debt; and
(b) no such delivery shall be made to holders of Senior Debt of
stock or obligations which are issued pursuant to reorganization
proceedings if such stock or obligations are subordinate and junior
(whether by law or agreement) at least to the extent provided in this
paragraph 7 to the payment of all Senior Debt then outstanding and to
the payment or any stock or obligations which are issued in exchange
or substitution for any Senior Debt then outstanding.
The consolidation of the Company with, or the merger of the Company with or
into, another corporation or the liquidation or dissolution of the Company
following the conveyance or transfer of its property as an entirety, or
substantially as an entirety, to another corporation upon the terms and
conditions consented to by the Required Holder(s) (it being understood
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that the holders of the Notes shall have no obligation whatsoever to
consent to any merger or other consolidation involving the Company) shall
not be deemed a dissolution, winding-up, liquidation or reorganization for
the purposes of this section if such other corporation shall, as a part of
such consolidation, merger, conveyance or transfer, comply with the
conditions to which any such consent of the Required Holder(s) is subject.
(iv) Upon the occurrence and during the continuance of any Default
Subordination Event (other than under circumstances when the terms of
subparagraph (ii) above are applicable), no holder of the Notes shall
accept or receive any direct or indirect payment by set-off or otherwise of
or on account of any indebtedness in respect of the Notes during the
Stand-Still Period, PROVIDED that in the case of any payment on or in
respect of any Note which would (in the absence of any such Default
Subordination Event) have been due and payable on any date during such
Stand-Still Period, the provisions of this subparagraph (iv) shall not
prevent such payment on or after the date immediately following the
termination or such Stand-Still Period.
(v) If any payment or distribution of any character, whether in
cash, securities or other property, shall be received by any holder of Note
in contravention of any of the terms of this paragraph 7 and before all the
Senior Debt shall have been paid in full, such payment or distribution
shall be received in trust for the benefit of the holders of the Senior
Debt at the time outstanding and shall forthwith be paid over or delivered
and transferred to the holders of Senior Debt.
7B. OBLIGATION OF THE COMPANY UNCONDITIONAL. The provisions of this
paragraph 7 are for the purpose for defining the relative rights of the holders
of Senior Debt on the one hand, and the holders of the Notes on the other hand,
against the Company and its property, and nothing herein shall impair, as
between the Company and the holders of the Notes, the obligation of the Company,
which is unconditional and absolute, to pay to the holders thereof the principal
thereof and Yield Maintenance Amount, if any, and interest thereon in accordance
with their terms and the provisions hereof, nor shall anything herein prevent
the holders of the Notes from exercising all remedies otherwise permitted by
applicable law or hereunder upon default hereunder or under the Notes including,
without limitation, the right to demand payment and sue for performance hereof
and of the Notes and to accelerate the maturity thereof as provided in paragraph
8A, subject to the rights, if any, under this paragraph 7 of holders of Senior
Debt to receive cash, property, stock or obligations otherwise payable or
deliverable by the Company to the holders of the Notes.
7C. SUBROGATION. Upon payment in full of Senior Debt, the holders of the
Notes shall be subrogated to the rights of the holders of the Senior Debt to
receive payments or distributions of assets of the Company made on Senior Debt
until the principal of and premium, if any, and interest on the Notes shall be
paid in full, and, for the purposes of such subrogation, no payments to the
holders of Senior Debt of any cash, property, stock or obligations to which the
holders of the Notes would be entitled except for the provisions of paragraph
7A(iii) above shall, as between the
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Company, its creditors (other than the holders of the Senior Debt) and the
holders of the Notes, be deemed to be a payment by the Company to or on account
of Senior Debt.
7D. RIGHTS OF HOLDERS OF SENIOR DEBT. The provisions of this paragraph 7
shall be deemed a continuing offer to all holders of Senior Debt to act in
reliance on such provisions (but no such reliance shall be required to be proven
to receive the benefits hereof) and may be enforced by such holders and no right
of any present or future holder of any Senior Debt to enforce subordination as
provided in this paragraph 7 shall at any time in any way be prejudiced or
impaired by any act or failure to act on the part of the Company or by any act
or failure to act by any such holder, or by any non-compliance by the Company
with the terms, provisions and covenants of this Agreement or the Notes.
Without in any way limiting the generality of the foregoing, the holders of
Senior Debt may, at any time and from time to time, without the consent of or
notice to the holders of the Notes, and without impairing or releasing the
subordination provided in this paragraph 7 or the obligations hereunder of the
holders of the Notes to the holders of Senior Debt, do any one or more of the
following: (i) change the manner, place or terms of payment or extend the time
of payment of, or renew or alter, or waive defaults under Senior Debt, or
otherwise amend or supplement in any manner Senior Debt or any instrument
evidencing the same or any agreement under which Senior Debt is outstanding;
(ii) release any Person liable in any manner for the payment or collection of
Senior Debt; and (iii) exercise or refrain from exercising any rights against
the Company and any other Person, including any guarantor or surety.
7E. SUBORDINATION DEFINITIONS.
"DEFAULT SUBORDINATION EVENT" shall mean the existence of all of the
following: (i) a Subordination Event of Default shall have occurred and be
continuing in respect of any Senior Debt, (ii) the holder or holders of the
Notes shall have received a notice from or on behalf of any holder of such
Senior Debt specifying that such Subordination Event of Default has occurred and
is continuing and that such notice constitutes a "DEFAULT SUBORDINATION NOTICE"
and (iii) no other Default Subordination Notice shall have been delivered by any
holder of Senior Debt within the 365 day period immediately preceding the giving
of such notice. The "STAND-STILL PERIOD" relating to any Default Subordination
Event shall be deemed to continue until the earlier of (x) the Subordination
Event of Default under the Senior Debt giving rise thereto shall have been cured
or waived, (y) a period of 90 days shall have elapsed from the giving of the
Default Subordination Notice relating thereto and (z) any Senior Debt shall have
been accelerated. There shall be no more than three Stand-Still Periods.
"SENIOR DEBT" shall mean all obligations (whether now outstanding or
hereafter incurred), for the payment of which the Company is responsible or
liable as obligor, guarantor or otherwise in respect of (i) all payment
obligations under the Senior Notes or the Senior Note Agreement in respect of
principal, interest and fees, whether now owing or hereafter incurred, and
(ii) payment obligations under the Bank Agreement in respect of up to
$40,000,000 of principal, together with all interest on and fees with respect to
such principal, whether now owing or hereafter incurred.
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"SUBORDINATION EVENT OF DEFAULT" shall mean any event of default under
any agreement evidencing Senior Debt arising as a result of a breach of a
covenant which would entitle the holders of such Senior Debt to accelerate the
obligations under such Senior Debt.
PARAGRAPH 8. EVENTS OF DEFAULT.
8. EVENTS OF DEFAULT.
8A. ACCELERATION. If any of the following events shall occur and be
continuing for any reason whatsoever (and whether such occurrence shall be
voluntary or involuntary or come about or be effected by operation of law or
otherwise):
(i) the Company defaults in the payment or prepayment of any
principal of any Note when the same shall become due, either by the terms
thereof or otherwise as herein provided; or
(ii) the Company defaults in the payment of any interest on any
Note for more than five days after the date due, or the Company or any
Subsidiary fails to pay any other amounts owed under this Agreement or any
other Subordinated Note Document within ten days after the date due; or
(iii) the Company or any Subsidiary (a) defaults (whether as
primary obligor or as guarantor or other surety) in any payment of
principal of or interest on any other obligation for money borrowed (or any
Capitalized Lease Obligation, any obligation under a conditional sale or
other title retention agreement, any obligation issued or assumed as full
or partial payment for property whether or not secured by a purchase money
mortgage or any obligation under notes payable or drafts accepted
representing extensions of credit) beyond any period of grace provided with
respect thereto, or (b) fails to perform or observe any other agreement,
term or condition contained in any agreement under which any such
obligation is created (or if any other event thereunder or under any such
agreement shall occur and be continuing) and the effect of such failure or
other event is to cause such obligation to become due (or to be repurchased
by the Company or any Subsidiary) prior to any stated maturity; provided,
that the aggregate amount of all obligations as to which such a payment
default shall occur and be continuing or such a failure or other event
causing acceleration (or sale to the Company or any Subsidiary) shall occur
and be continuing exceeds $1,000,000; or
(iv) any representation or warranty made by the Company or any of
its Subsidiaries herein or in any of the other Subordinated Note Documents,
or by the Company or any of its officers in any writing furnished in
connection with or pursuant to this Agreement shall be false in any
material respect on the date as of which made; or
(v) the Company fails to perform or observe any term, covenant or
agreement contained in paragraphs 5I or 6; or
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(vi) the Company or any Subsidiary fails to perform or observe any
other agreement, covenant, term or condition contained herein or in any of
the other Subordinated Note Documents and such failure shall not be
remedied within the earlier of (a) 30 days after the Company or any
Subsidiary obtains (or should have obtained) knowledge thereof or (b) 20
days following receipt of notice thereof from any holder; or
(vii) the Company or any Subsidiary makes an assignment for the
benefit of creditors or is generally not paying its debts as such debts
become due; or
(viii) any decree or order for relief in respect of the Company or
any Subsidiary is entered under any bankruptcy, reorganization, compromise,
arrangement, insolvency, readjustment of debt, dissolution or liquidation
or similar law, whether now or hereafter in effect (the "BANKRUPTCY LAW"),
of any jurisdiction; or
(ix) the Company or any Subsidiary petitions or applies to any
Tribunal for, or consents to, the appointment of, or taking possession by,
a trustee, receiver, custodian, liquidator or similar official of the
Company or any Subsidiary, or of any substantial part of the assets of the
Company or any Subsidiary, or commences a voluntary case under the
Bankruptcy Law of the United States or any proceedings (other than
proceedings for the voluntary liquidation and dissolution of a Subsidiary)
relating to the Company or any Subsidiary under the Bankruptcy Law of any
other jurisdiction; or
(x) any such petition or application is filed, or any such
proceedings are commenced, against the Company or any Subsidiary and the
Company or such Subsidiary by any act indicates its approval thereof,
consent thereto or acquiescence therein, or an order, judgment or decree is
entered appointing any such trustee, receiver, custodian, liquidator or
similar official, or approving the petition in any such proceedings, and
such order, judgment or decree remains unstayed and in effect for more than
60 days; or
(xi) any order, judgment or decree is entered in any proceedings
against the Company decreeing the dissolution of the Company and such
order, judgment or decree remains unstayed and in effect for more than 60
days; or
(xii) any order, judgment or decree is entered in any proceedings
against the Company or any Subsidiary decreeing a split-up of the Company
or such Subsidiary which requires the divestiture of assets representing a
substantial part, or the divestiture of the stock of a Subsidiary whose
assets represent a substantial part, of the consolidated assets of the
Company and its Subsidiaries (determined in accordance with generally
accepted accounting principles) or which requires the divestiture of
assets, or stock of a Subsidiary, which shall have contributed a
substantial part of the consolidated net income of the Company and its
Subsidiaries (determined in accordance with generally accepted accounting
principles) for any of the three fiscal years then most recently ended, and
such order, judgment or decree remains unstayed and in effect for more than
60 days; or
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(xiii) the Company or any Subsidiary fails to make timely payment or
deposit of any amount of tax required under the Code to be withheld by the
Company or any Subsidiary and paid to or deposited to or to the credit of
the United States of America in respect of any and all wages and salaries
paid to employees of any one or more or all of the Company or any of its
Subsidiaries for a tax deposit amount in excess of $10,000; or
(xiv) any judgment or order, or series of judgments or orders, in
an amount in excess of $250,000, is rendered against the Company or any
Subsidiary and either (i) enforcement proceedings have been commenced by
any creditor upon such judgment or order or (ii) within 30 days after entry
thereof, such judgment is not discharged or execution thereof stayed
pending appeal, or within 30 days after the expiration of any such stay,
such judgment is not discharged; or
(xv) any Termination Event with respect to a Plan shall have
occurred and, within 30 days after the occurrence thereof, (a) such
Termination Event (if correctable) shall not have been corrected and (b)
the then present value of such Plan's vested benefits exceeds the then
current value of assets accumulated in such Plan by more than the amount of
$250,000 (or in the case of a Termination Event involving the withdrawal of
a "substantial employer" (as defined in Section 4001(a) (2) of ERISA), the
withdrawing employer's proportionate share of such excess shall exceed such
amount); or
(xvi) the Company or any of its ERISA Affiliates as employer under
a Multiemployer Plan shall have made a complete or partial withdrawal from
such Multiemployer Plan and the plan sponsor of such Multiemployer Plan
shall have notified such withdrawing employer that such employer has
incurred a withdrawal liability in an aggregate amount exceeding $250,000;
then (a) if such event is an Event of Default specified in clause (i) or (ii) of
this paragraph 8A, the holder of any Note (other than the Company or any of its
Subsidiaries or Affiliates) may at its option, by notice in writing to the
Company, declare such Note to be, and such Note shall thereupon be and become,
immediately due and payable at par together with interest accrued thereon,
without presentment, demand, protest or other notice of any kind, all of which
are hereby waived by the Company, (b) if such event is an Event of Default
specified in clause (viii), (ix) or (x) of this paragraph 8A, all of the Notes
at the time outstanding shall automatically become immediately due and payable
together with interest accrued thereon and together with the Yield Maintenance
Amount, if any, with respect to each Note, without presentment, demand, protest
or notice of any kind, all of which are hereby waived by the Company, and (c) if
such event is not an Event of Default specified in clause (viii), (ix) or (x) of
this paragraph 8A, the Required Holder(s) may at its or their option, by notice
in writing to the Company, declare all of the Notes to be, and all of the Notes
shall thereupon be and become, immediately due and payable together with
interest accrued thereon and together with the Yield Maintenance Amount, if any,
with respect to each Note, without presentment, demand, protest or other notice
of any kind, all of which are hereby waived by the Company.
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The Company acknowledges, and the parties hereto agree, that each holder of
a Note has the right to maintain its investment in the Notes free from repayment
by the Company (except as herein specifically provided for) and that the
provisions for payment of the Yield Maintenance Amount by the Company in the
event that the Notes are prepaid or are accelerated as a result of an Event of
Default are intended to provide compensation for the deprivation of such right
under such circumstances.
8B. RESCISSION OF ACCELERATION. At any time after any or all of the Notes
shall have been declared immediately due and payable pursuant to paragraph 8A,
the Required Holder(s) may, by notice in writing to the Company, rescind and
annul such declaration and its consequences if (i) the Company shall have paid
all overdue interest on the Notes, the principal of the Notes which has become
due otherwise than by reason of such declaration, and interest on such overdue
interest and overdue principal at the rate specified in the Notes, (ii) the
Company shall not have paid any amounts which have become due solely by reason
of such declaration, (iii) all Events of Default and Defaults, other than
non-payment of amounts which have become due solely by reason of such
declaration, shall have been cured or waived pursuant to paragraph 12C, and (iv)
no judgment or decree shall have been entered for the payment of any amounts due
pursuant to the Notes or this Agreement. No such rescission or annulment shall
extend to or affect any subsequent Event of Default or Default or impair any
right arising therefrom.
8C. NOTICE OF ACCELERATION OR RESCISSION. Whenever any Note shall be
declared immediately due and payable pursuant to paragraph 8A or any such
declaration shall be rescinded and annulled pursuant to paragraph 8B, the
Company shall forthwith give written notice thereof to the holder of each Note
at the time outstanding.
8D. OTHER REMEDIES. If any Event of Default or Default shall occur and be
continuing, (i) the holder of any Note may proceed to protect and enforce its
rights under this Agreement, such Note and the other Subordinated Note Documents
by exercising such remedies as are available to such holder in respect thereof
under applicable law, either by suit in equity or by action at law, or both,
whether for specific performance of any covenant or other agreement contained in
this Agreement or the other Subordinated Note Documents or in aid of the
exercise of any power granted in this Agreement or the other Subordinated Note
Documents, and (ii) both the Agent and the holders of the Notes may exercise any
rights or remedies in their respective capacities under the Security Documents
in accordance with the provisions thereof. No remedy conferred in this
Agreement or the other Subordinated Note Documents upon the holder of any Note
or the Agent is intended to be exclusive of any other remedy, and each and every
such remedy shall be cumulative and shall be in addition to every other remedy
conferred herein or now or hereafter existing at law or in equity or by statute
or otherwise.
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PARAGRAPH 9. REPRESENTATIONS, COVENANTS AND WARRANTIES.
9. REPRESENTATIONS, COVENANTS AND WARRANTIES. The Company represents,
covenants and warrants as follows:
9A. ORGANIZATION AND QUALIFICATION. Each of the Transaction Parties is a
corporation duly organized and validly existing in good standing under the laws
of its state of incorporation, and is duly licensed and in good standing as a
foreign corporation in each jurisdiction in which the nature of the business
transacted or the property owned is such as to require licensing or
qualification as a foreign corporation. The Company has no Subsidiaries other
than ECI, ELC, Sunterra and OEC, and ECI, ELC, Sunterra and OEC are each Wholly
Owned Subsidiaries of the Company. The execution, delivery and performance by
the Company of the Notes, this Agreement, the other Subordinated Note Documents
and the Acquisition Documents to which it is a party, and the execution,
delivery and performance by each of the other Transaction Parties of the
Subordinated Note Documents and Acquisition Documents to which it is a party,
are within the Company's and the other Transaction Parties' respective corporate
powers and have been duly authorized by all necessary corporate action. All
record or beneficial stockholders of the Company comprising the Control Group
are listed on Schedule 9A attached hereto.
9B. FINANCIAL STATEMENTS. The Company has furnished you with the
following financial statements, identified by a principal financial officer of
the Company: (i) a consolidated balance sheet of the Company and its
Subsidiaries as at December 31 in each of the years 1994 to 1996, inclusive, and
consolidated statements of income, stockholders' equity and cash flows of the
Company and its Subsidiaries for each such year, all reported on by Coopers &
Lybrand L.L.P.; and (ii) a consolidated balance sheet of the Company and its
Subsidiaries as at March 31 in each of the years 1996 and 1997 and consolidated
statements of income, stockholders' equity and cash flows for the three-month
period ended on each such date, prepared by the Company. Such financial
statements (including any related schedules and/or notes) are true and correct
in all material respects (subject, as to interim statements, to changes
resulting from audits and year-end adjustments), have been prepared in
accordance with generally accepted accounting principles consistently followed
throughout the periods involved and show all liabilities, direct and contingent,
of the Company and its Subsidiaries required to be shown in accordance with such
principles. The balance sheets fairly present the condition of the Company and
its Subsidiaries as at the dates thereof, and the statements of income,
stockholders' equity and cash flows fairly present the results of the operations
of the Company and its Subsidiaries and their cash flows for the periods
indicated. There has been no material adverse change in the business, condition
(financial or otherwise), prospects or operations of the Company and its
Subsidiaries taken as a whole since December 31, 1996.
9C. ACTIONS PENDING. There is no action, suit, investigation or
proceeding pending or, to the knowledge of the Company, threatened against the
Company or any of its Subsidiaries, or any properties or rights of the Company
or any of its Subsidiaries, by or before any court, arbitrator or administrative
or governmental body which, if adversely determined, might result in a liability
of greater than $100,000 or might otherwise result in any material adverse
change in the business,
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condition (financial or otherwise), prospects or operations of the Company and
its Subsidiaries taken as a whole. There is no action, suit, investigation or
proceeding pending or threatened against the Company or any of its Subsidiaries
which purports to affect the validity or enforceability of this Agreement, any
Note, any Warrant, any of the other Subordinated Note Documents or any of the
Acquisition Documents.
9D. OUTSTANDING INDEBTEDNESS. Neither the Company nor any of its
Subsidiaries has outstanding any Indebtedness except as permitted by paragraphs
6A and 6C(2) and all of which is described in SCHEDULE 9D attached hereto. There
exists no default under (and no waiver of default is currently in effect with
respect to) the provisions of any instrument evidencing such Indebtedness or of
any agreement relating thereto, and no event or condition exists with respect to
any Indebtedness of the Company or any Subsidiary that would permit (or that
with notice or the lapse of time, or both, would permit) one or more Persons to
cause such Indebtedness to become due and payable before its stated maturity or
before its regularly scheduled dates of payment.
9E. TITLE TO PROPERTIES. The Company has and each of its Subsidiaries has
good and marketable title to its respective real properties (other than
properties which it leases) and good title to all of its other respective
properties and assets, including the properties and assets reflected in the
balance sheet as at December 31, 1996 referred to in paragraph 9B (other than
properties and assets disposed of in the ordinary course of business), subject
to no Lien of any kind except Liens permitted by paragraph 6C(1). All leases
necessary in any material respect for the conduct of the respective businesses
of the Company and its Subsidiaries are valid and subsisting and are in full
force and effect. The two schedules of natural gas compressor units and related
leases, dated June 30, 1997 (as to OEC) and July 21, 1997 and August 4, 1997 (as
to ECS), previously furnished to you by the Company contain a true, correct and
complete list of all natural gas compressor units owned or leased (as lessee) by
the Company or any of its Subsidiaries and the material terms of the respective
lease agreements pursuant to which the Company or any of its Subsidiaries is
leasing such compressor units to its customers.
9F. POSSESSION OF FRANCHISES, LICENSES. The Company and each of its
Subsidiaries possesses all franchises, certificates, licenses, permits and other
authorizations from governmental political subdivisions or regulatory
authorities, free from burdensome restrictions, that are necessary in any
material respect for the ownership, maintenance and operation of its respective
properties and assets, and none of the Company or any of its Subsidiaries is in
violation of any thereof in any material respect.
9G. TAXES. The Company has and each of its Subsidiaries has filed all
federal, state and other income tax returns which, to the knowledge of the
officers of the Company, are required to be filed, and each has paid all taxes
as shown on such returns and on all assessments received by it to the extent
that such taxes have become due, except such taxes as are being contested in
good faith by appropriate proceedings and for which adequate reserves have been
established in accordance with generally accepted accounting principles.
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9H. CONFLICTING AGREEMENTS AND OTHER MATTERS. Neither the Company nor any
of its Subsidiaries is a party to any contract or agreement or subject to any
charter or other corporate restriction which materially and adversely affects
its business, property or assets, prospects or financial condition. Neither the
execution nor delivery of this Agreement, the Notes, the Warrants, the other
Subordinated Note Documents or the Acquisition Documents, nor the offering,
issuance and sale of the Notes and the Warrants, nor fulfillment of nor
compliance with the terms and provisions of this Agreement, the Notes, the other
Subordinated Note Documents or the Acquisition Documents will conflict with, or
result in a breach of the terms, conditions or provisions of, or constitute a
default under, or result in any violation of, or result in the creation of any
Lien (except Liens created under the Security Documents) upon any of the
properties or assets of the Company or any of its Subsidiaries pursuant to, the
charter or bylaws of the Company or any of its Subsidiaries, any award of any
arbitrator or any agreement (including any agreement with stockholders),
instrument, order, judgment, decree, statute, law, rule or regulation to which
the Company or any of its Subsidiaries is subject. Neither the Company nor any
of its Subsidiaries is a party to, or otherwise subject to any provision
contained in, any instrument evidencing Indebtedness of the Company or such
Subsidiary, any agreement relating thereto or any other contract or agreement
(including its charter) which limits the amount of, or otherwise imposes
restrictions on the incurring of, Indebtedness of the Company of the type to be
evidenced by the Notes except as set forth in the agreements listed in SCHEDULE
9H attached hereto.
9I. AUTHORIZED CAPITAL STOCK. The authorized capital stock of the Company
consists of 40,000,000 shares of Common Stock, $0.01 per share par value, and
1,000,000 shares of Preferred Sock, $1.00 per share par value. The outstanding
capital stock of the Company consists of 21,466,735 shares of Common Stock. All
of the outstanding shares of Common Stock are duly authorized, validly issued,
fully paid and nonassessable. The Company does not have outstanding any
warrants, options, convertible securities or other rights for the purchase or
acquisition of shares of its capital stock other than (a) the Warrants, (b) the
Warrant dated as of December 19, 1996 evidencing the right of HACL, Ltd., a
Texas limited partnership, to purchase up to 8,000,000 shares of Common Stock
prior to December 19, 2000 at an exercise price of $0.91 and (c) stock options
granted under the Company's employee and director stock option plans. The
Warrants and the shares of Common Stock issuable upon the exercise of the
Warrants have been duly and validly authorized, and such shares of Common Stock
have been duly reserved for issuance upon exercise of the Warrants. No
shareholder of the Company or any other Person is entitled to preemptive or
similar rights with respect to the shares of Common Stock which are issuable
upon exercise of the Warrants and, if and when issued upon exercise of the
Warrants in accordance with the provisions thereof, such shares will be validly
issued, fully paid and nonassessable shares.
9J. OFFERING OF THE SECURITIES. Neither the Company nor any agent acting
on its behalf has, directly or indirectly, offered the Securities or any similar
security of the Company for sale to, or solicited any offers to buy the
Securities or any similar security of the Company from, or otherwise approached
or negotiated with respect thereto with, any Person other than institutional
investors, and neither the Company nor any agent acting on its behalf has taken
or will take any
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action which would subject the issuance or sale of the Securities to the
provisions of section 5 of the Securities Act or to the provisions of any
securities or Blue Sky law of any applicable jurisdiction.
9K. USE OF PROCEEDS. Neither the Company nor any Subsidiary owns or has
any present intention of acquiring any "margin stock" as defined in Regulation G
(12 CFR Part 207) of the Board of Governors of the Federal Reserve System
("MARGIN STOCK"). The proceeds of sale of the Securities will be used to fund
the Acquisition. None of such proceeds will be used, directly or indirectly,
for the purpose, whether immediate, incidental or ultimate, of purchasing or
carrying any margin stock or for the purpose of maintaining, reducing or
retiring any Indebtedness which was originally incurred to purchase or carry any
stock that is currently a margin stock or for any other purpose which might
constitute this transaction a "purpose credit" within the meaning of such
Regulation G. Neither the Company nor any agent acting on its behalf has taken
or will take any action which might cause this Agreement or the Securities to
violate Regulation G or any other regulation of the Board of Governors of the
Federal Reserve System or to violate the Exchange Act, in each case as in effect
now or as the same may hereafter be in effect.
9L. ERISA. No accumulated funding deficiency (as defined in section 302
of ERISA and section 412 of the Code), whether or not waived, exists with
respect to any Plan (other than a Multiemployer Plan). No liability to the PBGC
has been or is expected by the Company or any ERISA Affiliate to be incurred
with respect to any Plan (other than a Multiemployer Plan) by the Company, any
Subsidiary or any ERISA Affiliate which is or would be materially adverse to the
business, condition (financial or otherwise), prospects or operations of the
Company and its Subsidiaries taken as a whole. Neither the Company, any
Subsidiary nor any ERISA Affiliate has incurred or presently expects to incur
any withdrawal liability under Title IV of ERISA with respect to any
Multiemployer Plan which is or would be materially adverse to the business,
condition (financial or otherwise), prospects or operations of the Company and
its Subsidiaries taken as a whole. The execution and delivery of this Agreement
and the issuance and sale of the Securities will be exempt from, or will not
involve any transaction which is subject to, the prohibitions of section 406 of
ERISA and will not involve any transaction in connection with which a penalty
could be imposed under section 502(i) of ERISA or a tax could be imposed
pursuant to section 4975 of the Code. The representation by the Company in the
next preceding sentence is made in reliance upon and subject to the accuracy of
your representation in paragraph 10B.
9M. GOVERNMENTAL CONSENT. Neither the nature of the Company or of any
Subsidiary, nor any of their respective businesses or properties, nor any
relationship between the Company or any Subsidiary and any other Person, nor any
circumstance in connection with the offering, issuance, sale or delivery of the
Securities is such as to require any authorization, consent, approval, exemption
or other action by or notice to or filing with any court or administrative or
governmental or regulatory body (other than routine filings after the Date of
Closing with the Securities and Exchange Commission and/or state Blue Sky
authorities) in connection with the execution and delivery of this Agreement,
the other Subordinated Note Documents or the Acquisition Documents and the
offering, issuance, sale or delivery of the Securities or fulfillment of or
compliance with the
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terms and provisions of this Agreement, the Registration Rights Agreement or the
Participation Rights Agreement or of the Securities.
9N. ENVIRONMENTAL COMPLIANCE.
(i) The Company and its Subsidiaries and all of their respective
properties and facilities have complied at all times and in all respects
with all federal, state, local and regional statutes, laws, ordinances and
judicial or administrative orders, judgments, rulings and regulations
relating to protection of the environment except, in any such case, where
failure to comply would not result in a material adverse effect on the
business, condition (financial or otherwise), prospects or operations of
the Company and its Subsidiaries taken as a whole;
(ii) Neither the Company nor any of its Subsidiaries is subject to
any liability or obligation relating to (a) the environmental conditions
on, under or about the Collateral, including, without limitation, the soil
and ground water conditions at the location of any of the properties of the
Company or its Subsidiaries, or (b) the use, management, handling,
transport, treatment, generation, storage, disposal, release or discharge
of any Polluting Substance;
(iii) The Company and its Subsidiaries have not obtained and are
not required to obtain or make application for any permits, licenses or
similar authorizations to construct, occupy, operate or use any buildings,
improvements, facilities, fixtures and equipment forming a part of the
Collateral by reason of any Environmental Laws;
(iv) The Company and its Subsidiaries have taken all steps
necessary to determine and has determined that no Polluting Substances have
been disposed of or otherwise released on, onto, into, or from the
Collateral (the term "release," "disposal" or "disposed" shall have the
respective meanings specified in applicable Environmental Laws);
(v) There are no polychlorinated biphenyls ("PCB'S") or
asbestos-containing materials, whether in the nature of thermal insulation
products such as pipe boiler or breech coverings, wraps or blankets or
sprayed-on or troweled-on products in, on or upon the Collateral; and
(vi) There is no urea formaldehyde foam insulation ("UFFI") in, on
or upon the Collateral.
9O. OIL AND GAS CONTRACTS. All contracts, agreements and leases related
to any of the oil and gas mining, mineral or leasehold properties and all
contracts, agreements, instruments and leases to which the Company or any of its
Subsidiaries is a party, are valid and effective in accordance with their
respective terms, and all agreements included in the oil and gas mining, mineral
or leasehold properties in the nature of oil and/or
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gas purchase agreements, and oil and/or gas sale agreements are in full force
and effect and are valid and legally binding obligations of the parties thereto
and all payments due thereunder have been made, except for those suspended for
reasonable cause in the ordinary course of business; and, there is not under any
such contract, agreement or lease any existing default by any party thereto or
any event which, with notice or lapse of time, or both, would constitute such
default, other than minor defaults which, in the aggregate, would result in
losses or damages of more than $100,000 to the Company or any of its
Subsidiaries.
9P. NATURAL GAS POLICY ACT AND NATURAL GAS ACT COMPLIANCE. To the
Company's knowledge, all material filings and approvals under the Natural Gas
Policy Act of 1978, as amended, and the Natural Gas Act, as amended, or with the
Federal Energy Regulatory Commission (the "FERC") or required under any rules or
regulations adopted by the FERC which are necessary for the operation of the
respective businesses of the Company and its Subsidiaries or the Collateral in
the manner in which they are presently being operated have been made and the
terms of the agreements and contractual rights included in such businesses or
the Collateral do not conflict with or contravene any such Law, rule or
regulation.
9Q. TAKE OR PAY OBLIGATIONS, PREPAYMENTS, BTU ADJUSTMENTS AND BALANCING
PROBLEMS. To the Company's knowledge, after diligent inquiry, there is no take
or pay obligation under any gas purchase agreement comprising a portion of the
Collateral which is not matched by a commensurate and corresponding pay or take
obligation binding upon the purchaser under a corresponding gas sales agreement
such that with respect to the ownership and operation of the businesses of the
Company or any of its Subsidiaries or the Collateral, any such obligation in
favor of any seller under any gas purchase agreement to which the Company or any
of its Subsidiaries is a "buyer" is matched by a corresponding obligation on the
part of "purchasers" under corresponding gas sales agreements pursuant to which
the Company or any of its Subsidiaries is the "seller". None of the Company and
its Subsidiaries nor the Collateral is subject to requirements to make BTU
adjustments or effect gas balancing in favor of third parties which would result
in the Company or any of its Subsidiaries being required to (i) deliver gas at a
price below that established in applicable gas sales agreements or on behalf of
and for the benefit of third parties in exchange or to otherwise compensate for
prior above market or above contract purchases of gas from the Company or any of
its Subsidiaries or any of their predecessors in interest, or (ii) balance in
kind by allowing other owners in the Collateral to make up the past imbalances
in gas sales, or (iii) balance in cash by paying other owners of the Collateral
for the past gas imbalances.
9R. GAS PURCHASE OBLIGATIONS IN EXCESS OF GAS SALES RIGHTS. The ownership
and operation of the business operations of the Company and its Subsidiaries or
the Collateral have not resulted and will not result in the existence of minimum
purchase obligations under any gas purchase agreement (relating to the volume of
gas to be taken thereunder or the price to be paid with respect thereto for the
duration of any such gas purchase agreement) which are not matched by
corresponding and commensurate rights to sell all such gas under applicable gas
sales agreements at prices in excess of the amount to be paid therefor under gas
purchase agreements (without regard to costs associated with transporting any
such gas and risks of volume "shrinkage" occurring in the transportation
process).
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9S. FISCAL YEAR. The fiscal year of the Company and each of its
Subsidiaries ends as of December 31 of each year.
9T. DISCLOSURE. Neither this Agreement, the other Subordinated Note
Documents nor any other document, certificate or statement furnished to you by
or on behalf of the Company in connection herewith contains any untrue statement
of a material fact or omits to state a material fact necessary in order to make
the statements contained herein and therein not misleading. There is no fact
peculiar to the Company or any of its Subsidiaries which materially adversely
affects or in the future may (so far as the Company can now foresee) materially
adversely affect the business, property or assets, or financial condition of the
Company or any of its Subsidiaries and which has not been set forth in this
Agreement, the other Subordinated Note Documents or in the other documents,
certificates and statements furnished to you by or on behalf of the Company
prior to the date hereof in connection with the transactions contemplated
hereby. The pro forma financial projections dated as of July 31, 1997 and
previously delivered to you by the Company are reasonable based on the
assumptions stated therein and the best information available to the officers of
the Company.
9U. INVESTMENT COMPANY ACT. Neither the Company, any of its Subsidiaries
nor any Person controlling the Company or any of its Subsidiaries is an
"investment company," or a company "controlled" by an "investment company,"
within the meaning of the Investment Company Act of 1940, as amended.
9V. PUBLIC UTILITY HOLDING COMPANY ACT; FEDERAL POWER ACT; INTERSTATE
COMMERCE ACT; OTHER REGULATION. Neither the Company, any of its Subsidiaries
nor any Person controlling the Company or any of its Subsidiaries is subject to
regulation under the Public Utilities Holding Company Act of 1935, as amended,
the Federal Power Act, as amended, the Interstate Commerce Act, as amended, any
state public utilities code, as amended from time to time, or any other federal
or state statute or regulation, as amended from time to time, which limits the
ability of (i) the Company to issue the Securities or (ii) the Company or any of
its Subsidiaries to perform its respective obligations under this Agreement, the
other Subordinated Note Documents or the Acquisition Documents.
9W. ACQUISITION REPRESENTATIONS AND WARRANTIES. To induce you to enter
into this Agreement and to purchase the Securities, the Company agrees that you
shall be entitled to rely upon each of the representations and warranties of the
Company or any of its Subsidiaries set forth in any of the Acquisition Documents
as fully as if set forth in this Agreement.
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PARAGRAPH 10. REPRESENTATIONS OF THE PURCHASER.
10. REPRESENTATIONS OF THE PURCHASER. You represent as follows:
10A. NATURE OF PURCHASE. You are not acquiring the Securities to be
purchased by you hereunder with a view to or for sale in connection with any
distribution thereof within the meaning of the Securities Act, provided that the
disposition of your property shall at all times be and remain within your
control.
10B. SOURCE OF FUNDS. No part of the funds being used by you to pay the
purchase price of the Securities being purchased by you hereunder constitutes
assets allocated to any separate account maintained by you in which any employee
benefit plan, other than employee benefit plans identified on a list which has
been furnished by you to the Company, participates to the extent of 10% or more.
For the purpose of this paragraph 10B the terms "separate account" and "employee
benefit plan" shall have the respective meanings specified in section 3 of
ERISA.
PARAGRAPH 11. DEFINITIONS.
11. DEFINITIONS. For the purpose of this Agreement, the terms defined in
the introductory sentence and in paragraphs 1 and 2 shall have the respective
meanings specified therein, and the following terms shall have the meanings
specified with respect thereto below (such meanings to be equally applicable to
both the singular and plural forms of the terms defined):
11A. YIELD MAINTENANCE TERMS.
"CALLED PRINCIPAL" shall mean, with respect to any Note, the principal
of such Note that is to be prepaid pursuant to paragraph 4B or 4C or is declared
to be immediately due and payable pursuant to paragraph 8A, as the context
requires.
"DESIGNATED SPREAD" shall mean, (i) with respect to the Called
Principal of any Note that is prepaid pursuant to paragraph 4C, 2.50%, and
(ii) in all other cases 0.00%.
"DISCOUNTED VALUE" shall mean, with respect to the Called Principal of
any Note, the amount obtained by discounting all Remaining Scheduled Payments
with respect to such Called Principal from their respective scheduled due dates
to the Settlement Date with respect to such Called Principal, in accordance with
accepted financial practice and at a discount factor (applied on the same
periodic basis as that on which interest on the Notes is payable) equal to the
Reinvestment Yield with respect to such Called Principal.
"REINVESTMENT YIELD" shall mean the Designated Spread over the yield
to maturity implied by (a) the yields reported, as of 10:00 a.m. (New York City
time) on the Business Day next preceding the Settlement Date with respect to
such Called Principal, on the display designated as "Page 678" on the Telerate
Service (or such other display as may replace Page 678 on the Telerate
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Service) for actively traded U.S. Treasury securities having a maturity equal
to the Remaining Average Life of such Called Principal as of such Settlement
Date, or if such yields shall not be reported as of such time or the yields
reported as of such time shall not be ascertainable, (b) the Treasury
Constant Maturity Series yields reported, for the latest day for which such
yields shall have been so reported as of the Business Day next preceding the
Settlement Date with respect to such Called Principal, in Federal Reserve
Statistical Release H.15 (519) (or any comparable successor publication) for
actively traded U.S. Treasury securities having a constant maturity equal to
the Remaining Average Life of such Called Principal as of such Settlement
Date. Such implied yield shall be determined, (x) if necessary, by (1)
converting U.S. Treasury bill quotations to bond-equivalent yields in
accordance with accepted financial practice and (2) interpolating linearly
between (I) the actively traded U.S. Treasury security with the maturity
closest to and greater than the Remaining Average Life and (II) the actively
traded U.S. Treasury security with the maturity closest to and less than the
Remaining Average Life and (y) by converting all such implied yields to a
quarterly payment basis in accordance with accepted financial practice.
"REMAINING AVERAGE LIFE" shall mean, with respect to the Called
Principal of any Note, the number of years (calculated to the nearest
one-twelfth year) obtained by dividing (i) such Called Principal into (ii) the
sum of the products obtained by multiplying (a) each Remaining Scheduled Payment
of such Called Principal (but not of interest thereon) by (b) the number of
years (calculated to the nearest one-twelfth year) which will elapse between the
Settlement Date with respect to such Called Principal and the scheduled due date
of such Remaining Scheduled Payment.
"REMAINING SCHEDULED PAYMENTS" shall mean, with respect to the Called
Principal of any Note, all payments of such Called Principal and interest
thereon that would be due on or after the Settlement Date with respect to such
Called Principal if no payment of such Called Principal were made prior to its
scheduled due date.
"SETTLEMENT DATE" shall mean, with respect to the Called Principal of
any Note, the date on which such Called Principal is to be prepaid pursuant to
paragraph 4B or 4C or is declared to be immediately due and payable pursuant to
paragraph 8A, as the context requires.
"YIELD MAINTENANCE AMOUNT" shall mean, with respect to any Note, an
amount equal to the excess, if any, of the Discounted Value of the Called
Principal of such Note over the sum of (i) such Called Principal plus (ii)
interest accrued thereon as of (including interest due on) the Settlement Date
with respect to such Called Principal. The Yield Maintenance Amount shall in no
event be less than zero.
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11B. OTHER TERMS.
"ACQUIRED COMPANIES" shall mean Ouachita Energy Corporation, a
Louisiana corporation, Ouachita Energy Partners, Ltd., a Louisiana corporation,
and Ouachita Compression Group, LLC, a Louisiana limited liability company.
"ACQUISITION" shall mean, collectively, (i) the merger of Ouachita
Energy Corporation, a Louisiana corporation, with and into OEC and (ii) the
acquisition by OEC of all or substantially all of the assets of Ouachita Energy
Partners, Ltd., a Louisiana corporation, and Ouachita Compression Group, LLC, a
Louisiana limited liability company, pursuant to the Acquisition Documents.
"ACQUISITION AGREEMENTS" shall mean (i) the Agreement and Plan of
Merger dated as of May 15, 1997 among the Company, OEC, Ouachita Energy
Corporation, a Louisiana corporation, and Dennis W. Estis, and (ii) the Asset
Purchase Agreement dated as of May 15, 1997 among the Company, OEC, Ouachita
Energy Partners, Ltd., a Louisiana corporation, Ouachita Compression Group, LLC,
a Louisiana limited liability company, and Dennis W. Estis.
"ACQUISITION DOCUMENTS" shall mean the Acquisition Agreements and all
other written agreements, documents, instruments and certificates now or
hereafter executed and delivered by any Person which are required by the terms
of the Acquisition Agreements to be delivered to consummate the Acquisition, and
any and all amendments, supplements and other modifications thereof and all
renewals, extensions, restatement or substitutions from time to time of all or
any of the foregoing.
"AFFILIATE" shall mean any Person directly or indirectly controlling,
controlled by, or under direct or indirect common control with, another Person
(except, with respect to the Company, a Subsidiary). A Person shall be deemed
to control a corporation if such Person possesses, directly or indirectly, the
power to direct or cause the direction of the management and policies of such
corporation, whether through the ownership of voting securities, by contract or
otherwise.
"AGENT" shall mean Bank of Oklahoma, National Association, in its
capacity as Agent for the Banks, the holders of Notes and the holders of Senior
Notes, as provided under the Intercreditor Agreement, and its successors and
assigns as such Agent.
"AIRCRAFT CHATTEL MORTGAGE" shall mean that certain Security Agreement
(Aircraft Chattel Mortgage), dated as of August 5, 1997 and made by the Company
or one of its Subsidiaries in favor of the Agent for the ratable benefit of the
Banks, the holders of the Notes and, on a junior and subordinated basis, the
holders of the Subordinated Notes, granting the Agent a first priority chattel
mortgage lien and security interest in that certain 58 Baron Turbocharge
aircraft, Federal Aviation Administration registration number N831JB, in
substantially the form of EXHIBIT G attached to the Senior Note Agreement.
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"ASSET DISPOSITION" shall mean, with respect to the Company or any
Subsidiary, any transaction or series of related transactions in which such
Person sells, conveys, transfers or leases (as lessor) or parts with control of
(collectively, for purposes of this definition, a "TRANSFER"), directly or
indirectly, any of its property or assets, including, without limitation, any
Indebtedness of any Subsidiary or capital stock of or other equity interests in
any Subsidiary (including the issuance of such stock or other equity interests
by such Subsidiary), other than transfers of cash or cash equivalents.
"BANK" shall initially mean only Bank of Oklahoma, National
Association, a national banking association, and "Banks" shall mean Bank of
Oklahoma, National Association, its successors and assigns with respect to the
Bank Agreement, and any other lenders from time to time parties to the Bank
Agreement.
"BANK AGREEMENT" shall mean the Fifth Amended and Restated Revolving
Credit and Term Loan Agreement dated as of even date herewith among the
Transaction Parties and the Bank, as amended, supplemented and otherwise
modified from time to time.
"BANKRUPTCY LAW" shall have the meaning specified in clause (viii) of
paragraph 8A.
"BUSINESS DAY" shall mean any day on which banks are open for business
in New York City (other than a Saturday, a Sunday or a legal holiday in the
States of New York or New Jersey).
"CAPITALIZED LEASE OBLIGATION" shall mean any rental obligation which,
under generally accepted accounting principles, would be required to be
capitalized on the books of the Company or any Subsidiary, taken at the amount
thereof accounted for as indebtedness (net of interest expense) in accordance
with such principles.
"CHANGE IN CONTROL" shall mean the failure of the members of the
Control Group (i) to own, on a fully diluted basis, at least 41%of the combined
voting power of all then issued and outstanding Voting Stock of the Company,
together with any one or more of the following: (i) the failure of the members
of the Board of Directors of the Company as of the Date of Closing to constitute
a majority of the members of the Board of Directors at any time in the future,
or (ii) the failure of the members of the Control Group to own, on a fully
diluted basis, the largest voting block of the outstanding Voting Stock of the
Company, or (iii) the failure of either or both of the Persons holding the
offices of President and Chief Financial Officer of the Company as of the Date
of Closing to continue to hold such offices.
"CLOSING" or "DATE OF CLOSING" shall have the meaning specified in
paragraph 2.
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
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"COLLATERAL" shall mean the collateral described in the Security
Documents which secures payment of the Notes and payment, performance and
observance of the obligations of the Company and its Subsidiaries under this
Agreement and the other Subordinated Note Documents.
"COMMON STOCK" shall have the meaning specified in paragraph 1B.
"COMPETITOR" shall mean any Person which has a material presence in
the natural gas compression industry.
"CONFIDENTIAL INFORMATION" shall mean any material non-public
information regarding the Company that is provided to any holder of any Note,
any Person that purchases a participation in a Note and any offeree of a Note or
a participation therein pursuant to this Agreement other than information (i)
which was publicly known or otherwise known to such holder, such Person or such
offeree at the time of disclosure, (ii) which subsequently becomes publicly
known through no act or omission of such holder, such Person or such offeree or
(iii) which otherwise becomes known to such holder, such Person or such offeree
other than through disclosure by the Company or any Subsidiary.
"CONTROL GROUP" shall mean those record or beneficial stockholders of
the Company listed on Schedule 9A attached hereto.
"EBITDA" shall mean, for any period, the sum of (i) net income for the
Company and its Subsidiaries, determined on a consolidated basis in accordance
with GAAP, PLUS (ii) to the extent deducted in the determination of consolidated
net income, (a) all provisions for federal, state and other income tax, (b)
Consolidated Interest Expense and (c) provisions for depreciation and
amortization, LESS extraordinary items, gains on sales of assets and income from
discontinued operations, which in the aggregate will be deducted only to the
extent they are positive.
"ECI" shall mean Equity Compressors, Inc., an Oklahoma corporation and
Wholly Owned Subsidiary of the Company.
"ELC" shall mean Equity Leasing Corporation, an Oklahoma corporation
and Wholly Owned Subsidiary of the Company.
"ENVIRONMENTAL LAWS" shall mean applicable federal, state, local and
foreign laws, rules or regulations relating to emissions, discharges, releases
or threatened releases of Polluting Substances into the environment (including,
without limitation, airs, surface water, ground, water or land), or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Polluting Substances.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
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"ERISA AFFILIATE" shall mean any corporation which is a member of the
same controlled group of corporations as the Company within the meaning of
section 414(b) of the Code, or any trade or business which is under common
control with the Company within the meaning of section 414(c) of the Code.
"EVENT OF DEFAULT" shall mean any of the events specified in paragraph
8A, provided that there has been satisfied any requirement in connection with
such event for the giving of notice, or the lapse of time, or the happening of
any further condition, event or act, and "DEFAULT" shall mean any of such
events, whether or not any such requirement has been satisfied.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
"FAIR MARKET VALUE" shall mean, at any time and with respect to any
property, the sale value of such property that would be realized in an
arm's-length sale at such time between an informed and willing buyer and an
informed and willing seller (neither being under a compulsion to buy or sell).
"GAAP" shall have the meaning specified in paragraph 11B.
"GUARANTEE" shall mean, with respect to any Person, any direct or
indirect liability, contingent or otherwise, of such Person with respect to any
indebtedness, lease, dividend or other obligation of another, including, without
limitation, any such obligation directly or indirectly guaranteed, endorsed
(otherwise than for collection or deposit in the ordinary course of business) or
discounted or sold with recourse by such Person, or in respect of which such
Person is otherwise directly or indirectly liable, including, without
limitation, any such obligation in effect guaranteed by such Person through any
agreement (contingent or otherwise) to purchase, repurchase or otherwise acquire
such obligation or any security therefor, or to provide funds for the payment or
discharge of such obligation (whether in the form of loans, advances, stock
purchases, capital contributions or otherwise), or to maintain the solvency or
any balance sheet or other financial condition of the obligor of such
obligation, or to make payment for any products, materials or supplies or for
any transportation or services regardless of the non-delivery or non-furnishing
thereof, in any such case if the purpose or intent of such agreement is to
provide assurance that such obligation will be paid or discharged, or that any
agreements relating thereto will be complied with, or that the holders of such
obligation will be protected against loss in respect thereof. The amount of any
Guarantee shall be equal to the outstanding principal amount of the obligation
guaranteed or such lesser amount to which the maximum exposure of the guarantor
shall have been specifically limited.
"GUARANTY AGREEMENTS" shall mean the Senior Subordinated Guaranty
Agreements, dated as of the Date of Closing, made by each of ECI, Sunterra and
OEC, each in favor of you and all subsequent holders of the Notes, substantially
in the form of EXHIBIT D attached hereto, and any Senior Subordinated Guaranty
Agreement hereafter executed by any Subsidiary as contemplated under paragraph
5L, as each may be amended, supplemented and otherwise modified from time to
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time.
"INDEBTEDNESS" shall mean, with respect to any Person or consolidated
group of Persons, without duplication, (i) all items (excluding items of
contingency reserves or of reserves for deferred income taxes) which in
accordance with GAAP would be included in determining total liabilities as shown
on the liability side of a balance sheet of such Person or consolidated group of
Persons as of the date on which Indebtedness is to be determined; (ii) all
indebtedness secured by any Lien on, or payable out of the proceeds of
production from, any property or asset owned or held by such Person subject
thereto, whether or not the indebtedness secured thereby shall have been
assumed; (iii) redemption obligations in respect of mandatorily redeemable
preferred stock; (iv) Swaps; (v) unfunded pension liabilities; (vi) contingent
obligations as an account party in respect of letters of credit; and (vii)
Guarantees of Indebtedness of other Persons of the types described in the
foregoing clauses (i) through (vi).
"INTERCREDITOR AGREEMENT" shall mean an Intercreditor Agreement, dated
as of August 5, 1997, among you, as the initial holder of the Notes and the
Senior Notes, the Bank (in both its individual capacity and its capacity as
Agent) and the Transaction Parties, substantially in the form of EXHIBIT D to
the Senior Note Agreement, as the same may be amended, supplemented and
otherwise modified from time to time.
"INVESTMENT" shall have the meaning specified in paragraph 6C(3).
"LEASE RENTALS" means, with respect to any period, the sum of the
rental and other obligations required to be paid during such period by the
Company or any Subsidiary as lessee under all leases of real or personal
property (other than Capitalized Lease Obligations), excluding any amount
required to be paid by the lessee (whether or not therein designated as rental
or additional rental) on account of maintenance and repairs, insurance, taxes,
assessments, water rates and similar charges, PROVIDED, that if at the date of
determination, any such rental or other obligations (or portion thereof) are
contingent or not otherwise definitely determinable by the terms of the related
lease, the amount of such obligations (or such portion thereof) (i) shall be
assumed to be equal to the amount of such obligations for the period of twelve
consecutive calendar months immediately preceding the date of determination or
(ii) if the related lease was not in effect during such preceding twelve-month
period, shall be the amount estimated by a Responsible Officer of the Company on
a reasonable basis and in good faith.
"LIEN" shall mean any mortgage, pledge, priority, security interest,
encumbrance, contractual deposit arrangement, lien (statutory or otherwise) or
charge of any kind (including any agreement to give any of the foregoing, any
conditional sale or other title retention agreement, any production payment, any
lease in the nature thereof, and the filing of or agreement to give any
financing statement under the Uniform Commercial Code of any jurisdiction) or
any other type of preferential arrangement for the purpose, or having the
effect, of protecting a creditor against loss or securing the payment or
performance of an obligation.
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"LOCKBOX ACCOUNT" shall have the meaning specified in paragraph 5N.
"LOCKBOX AGREEMENT" shall an agreement or agreements by and among the
Bank, the Company and its Subsidiaries, providing for the collection by the Bank
of substantially all operating revenues of the Company and its Subsidiaries, and
the deposit of such operating revenues into the Lockbox Account.
"MORTGAGES" shall mean the mortgages, deeds of trust or other real
estate security documents executed, acknowledged and delivered by the Company or
one or more of its Subsidiaries, whether (i) prior to the Date of Closing and
amended and supplemented on or about the Date of Closing by a supplemental
document executed, acknowledged and delivered as of the Date of Closing and in
form, scope and substance satisfactory to you, (ii) on or about the Date of
Closing and substantially in the form of EXHIBIT E attached to the Senior Note
Agreement, or (iii) after the Date of Closing as contemplated under paragraph 5L
and substantially in the form of EXHIBIT E attached to the Senior Note
Agreement, pursuant to which mortgage liens in and to the Collateral described
therein shall be provided in favor of the Agent for the ratable benefit of the
Banks, the holders of the Senior Notes and, on a junior and subordinated basis,
the holders of the Notes, and any and all amendments, supplements and other
modifications to any of the foregoing.
"MULTIEMPLOYER PLAN" shall mean any Plan which is a "multiemployer
plan" (as such term is defined in section 4001(a)(3) of ERISA).
"NOTES" shall have the meaning specified in paragraph 1A.
"OEC" shall mean Ouachita Energy Corporation, a Delaware corporation
and Wholly Owned Subsidiary of the Company, formerly known as OEC Acquisition
Corporation.
"OFFICER'S CERTIFICATE" shall mean a certificate signed in the name of
a Transaction Party by its President, one of its Vice Presidents or its
Treasurer.
"OIL AND GAS PROPERTIES" shall mean the producing oil, gas and other
leasehold and mineral interests of Sunterra situated in Oklahoma, Texas and
Kansas, which interests are more particularly described in and encumbered by the
Mortgage executed, acknowledged and delivered by Sunterra as of the Date of
Closing.
"PARTICIPATION RIGHTS AGREEMENT" shall mean the Participation Rights
Agreement, dated of even date herewith, substantially in the form of EXHIBIT E
attached hereto, by and among you, the Company and certain holders of the
Company's common stock.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
successor entity.
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"PERSON" shall mean and include an individual, a partnership, a joint
venture, a corporation, a trust, a limited liability company, an unincorporated
organization and a government or any department or agency thereof.
"PLAN" shall mean any "employee pension benefit plan" (as such term is
defined in section 3 of ERISA) which is or has been established or maintained,
or to which contributions are or have been made, by the Company or any ERISA
Affiliate.
"POLLUTING SUBSTANCES" shall mean all pollutants, contaminants,
chemicals or industrial, toxic or hazardous substances or wastes and shall
include, without limitation, any flammable explosives, radioactive materials,
oil, hazardous materials, hazardous or solid wastes, hazardous or toxic
substances or related materials defined in applicable federal Environmental
Laws; PROVIDED, that in the event any applicable federal Environmental Law is
amended so as to broaden the meaning of any term defined thereby, such broader
meaning shall apply subsequent to the effective date of such amendment and,
PROVIDED FURTHER, to the extent that the Environmental Laws of any State or
other Tribunal establish a meaning for "hazardous substance," "hazardous waste,"
"hazardous material," "solid waste" or "toxic substance" which is broader than
that specified in any applicable Federal law, such broader meaning shall apply.
"PROPOSED PREPAYMENT DATE" shall have the meaning specified in clause
(iii) of paragraph 4C.
"QUALIFIED INSTITUTIONAL BUYER" shall mean a "qualified institutional
buyer" as such term is defined in Rule 144A under the Securities Act.
"REGISTRATION RIGHTS AGREEMENT" shall mean the Registration Rights
Agreement, dated of even date herewith, substantially in the form of EXHIBIT F
attached hereto, by and between you and the Company.
"REQUIRED HOLDER(S)" shall mean the holder or holders of at least 66
2/3% of the aggregate principal amount of the Notes from time to time
outstanding.
"RESPONSIBLE OFFICER" shall mean the chief executive officer, chief
operating officer, chief financial officer or chief accounting officer of a
Transaction Party or any other officer of such Transaction Party involved
principally in its financial administration or its controllership function.
"RESTRICTED PAYMENT" shall mean (i) the declaration of any dividend
on, or the incurrence of any liability to make any other payment or distribution
in respect of any capital stock or equity equivalent (except, in the case of a
Subsidiary, dividends or other payments or distributions in respect of its
capital stock to the Company or a Wholly Owned Subsidiary) or (ii) the
distribution on account of the purchase, redemption or other retirement of any
such capital stock (except, in the case of a Subsidiary, purchases, redemptions
or other retirements of its capital stock from the Company or a Wholly Owned
Subsidiary).
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"SALE-LEASEBACK TRANSACTION" shall have the meaning specified in
paragraph 6C(8).
"SECURITIES" shall mean the Notes and the Warrants.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"SECURITY AGREEMENTS" shall mean the Fifth Amended and Restated
Security Agreement and Assignment, dated as of August 5, 1997 and executed and
delivered by each of the Transaction Parties in favor of the Agent for the
ratable benefit of the Bank, the holders of the Senior Notes and, on a junior
and subordinated basis, the holders of the Notes, substantially in the form of
EXHIBIT F attached to the Senior Note Agreement, and all Security Agreements
hereafter executed by any Subsidiary as contemplated under paragraph 5L, as each
may be amended, supplemented and otherwise modified from time to time.
"SECURITY DOCUMENTS" shall mean the Aircraft Chattel Mortgage, the
Security Agreements, the Mortgages, the Aircraft Chattel Mortgage and all
financing statements, assignments, pledges, lien entry forms, documents and
other writings executed and delivered from time to time in favor of the Agent
for the ratable benefit of the Banks, the holders of the Notes and, on a junior
and subordinated basis, the holders of the Subordinated Notes, in order to
secure the obligations of the Company and its Subsidiaries under and in respect
of the Bank Agreement and other Loan Documents (as defined in the Bank
Agreement), the Senior Note Documents and on a junior and subordinated basis the
Subordinated Note Documents, and any and all amendments, supplements and other
modifications thereto.
"SENIOR DEBT" shall having the meaning specified in paragraph 7E.
"SENIOR GUARANTY AGREEMENTS" shall mean the Senior Guaranty
Agreements, dated as of the Date of Closing, made by each of ECI, Sunterra and
OEC, each in favor of the holders of the Senior Notes.
"SENIOR NOTE AGREEMENT" shall mean the Note Agreement, dated of even
date herewith, by and between you and the Company, providing for the issuance,
sale and purchase of the Senior Notes.
"SENIOR NOTE DOCUMENTS" shall mean the Senior Note Agreement, the
Senior Notes, the Senior Guaranty Agreements, the Security Documents, the
Intercreditor Agreement and all other instruments, certificates, documents and
other writings now or hereafter executed and delivered by the Company, any
Subsidiary or any other Person pursuant to or in connection with any of the
foregoing or any of the transactions contemplated thereby, and any and all
amendments, supplements and other modifications to any of the foregoing.
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"SENIOR NOTES" shall mean the Senior Floating Rate Secured Term Notes
due July, 2004 of the Company, dated of even date with the Notes, issued and
sold to you on the Date of Closing pursuant to the Senior Note Agreement.
"SIGNIFICANT HOLDER" shall mean (i) you, so long as you shall hold (or
be committed under this Agreement to purchase) any Note, or (ii) any other
holder of at least 5% of the aggregate principal amount of the Notes from time
to time outstanding.
"SUBORDINATED NOTE DOCUMENTS" shall mean this Agreement, the Notes,
the Warrants, the Participation Rights Agreement, the Registration Rights
Agreement, the Guaranty Agreements, the Security Documents and all other
instruments, certificates, documents and other writings now or hereafter
executed and delivered by any Transaction Party or any other Person pursuant to
or in connection with any of the foregoing or any of the transactions
contemplated thereby, and any and all amendments, supplements and other
modifications to any of the foregoing.
"SUBSIDIARY" shall mean (i) any corporation, at least 50% of the total
combined voting power of all classes of Voting Stock of which shall, at the time
as of which any determination is being made, be owned by the Company, either
directly or through Subsidiaries, and (ii) any partnership, joint venture or
similar entity if at least a 50% interest in the profits or capital thereof is
owned by the Company, either directly or through Subsidiaries (unless such
entity can and does ordinarily take major business actions without the prior
approval, direct or indirect, of the Company).
"SUNTERRA" shall mean Sunterra Energy Corporation, an Oklahoma
corporation and Wholly Owned Subsidiary of the Company.
"SWAPS" shall mean with respect to any Person, payment obligations
with respect to interest rate swaps, currency swaps and similar obligations
obligating such Person to make payments, whether periodically or upon the
happening of a contingency. For the purposes of this Agreement, the amount of
the obligation under any Swap shall be the amount determined in respect thereof
as of the end of the then most recently ended fiscal quarter of such Person,
based on the assumption that such Swap had terminated at the end of such fiscal
quarter, and in making such determination, if any agreement relating to such
Swap provides for the netting of amounts payable by and to such Person
thereunder or if any such agreement provides for the simultaneous payment of
amounts by and to such Person, then in each such case, the amount of such
obligation shall be the net amount so determined.
"TERMINATION EVENT" shall mean (i) a Reportable Event described in
Section 4043 of ERISA and the regulations issued thereunder (other than a
Reportable Event not subject to the provision for 30-day notice to the PBGC
under such regulations), or (ii) the withdrawal of the Company or any of its
ERISA Affiliates from a Plan during a plan year in which it was a "substantial
employer" as defined in Section 4001(a)(2) of ERISA, or (iii) the filing of a
notice of intent to terminate a Plan or the treatment of a Plan amendment as a
termination under Section 4041 of
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ERISA, or (iv) the institution of proceedings to terminate a Plan by the PBGC,
or (v) any other event or condition that might constitute grounds under Section
4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any Plan.
"TOTAL DEBT" shall mean the total Indebtedness of the Company and its
Subsidiaries on a consolidated basis.
"TRANSACTION PARTIES" shall mean the Company, ECI, Sunterra and OEC.
"TRANSFEREE" shall mean any direct or indirect transferee of all or
any part of any Note or Warrant purchased by you under this Agreement.
"TRIBUNAL" shall mean any municipal, state, commonwealth, federal,
foreign, territorial or other sovereign, governmental entity, governmental
department, court, commission, board, bureau, agency or instrumentality.
"VOTING STOCK" shall mean, with respect to any corporation, any shares
of stock of such corporation whose holders are entitled under ordinary
circumstances to vote for the election of directors of such corporation
(irrespective of whether at the time stock of any other class or classes shall
have or might have voting power by reason of the happening of any contingency).
"WARRANTS" shall have the meaning specified in paragraph 1B.
"WHOLLY OWNED SUBSIDIARY" shall mean any Subsidiary, at least 98% (by
vote or value) of the outstanding equity interests (except directors' qualifying
shares) of all classes, taken together as a whole, of which are at the time
owned, directly or indirectly, by the Company or other Wholly Owned
Subsidiaries; provided, that no Person other than the Company may own any
preferred stock issued by such Subsidiary.
11C. ACCOUNTING PRINCIPLES, TERMS AND DETERMINATIONS. All references in
this Agreement to "GAAP" shall be deemed to refer to generally accepted
accounting principles in effect in the United States at the time of application
thereof. Unless otherwise specified herein, all accounting terms used herein
shall be interpreted, all determinations with respect to accounting matters
hereunder shall be made, and all unaudited financial statements and certificates
and reports as to financial matters required to be furnished hereunder shall be
prepared, in accordance with generally accepted accounting principles, applied
on a basis consistent with the most recent audited consolidated financial
statements of the Company and its Subsidiaries delivered pursuant to clause (ii)
of paragraph 5A or, if no such statements have been so delivered, the most
recent audited financial statements referred to in clause (i) of paragraph 9B.
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PARAGRAPH 12. MISCELLANEOUS.
12. MISCELLANEOUS.
12A. NOTE PAYMENTS. So long as you shall hold any Note, the Company will
make payments of principal of and interest on such Note, which comply with the
terms of this Agreement, by wire transfer of immediately available funds for
credit (not later than 12:00 noon, New York City time, on the date due) to your
account or accounts as specified in the Purchaser Schedule attached hereto, or
such other account or accounts in the United States as you may designate in
writing, notwithstanding any contrary provision herein or in any Note with
respect to the place of payment. You agree that, before disposing of any Note,
you will make a notation thereon (or on a schedule attached thereto) of all
principal payments previously made thereon and of the date to which interest
thereon has been paid. The Company agrees to afford the benefits of this
paragraph 12A to any Transferee which shall have made the same agreement as you
have made in this paragraph 12A.
12B. EXPENSES. The Company agrees, whether or not the transactions
contemplated hereby shall be consummated, to pay, and save you, any Transferee
and the Agent harmless against liability for the payment of, all out-of-pocket
expenses arising in connection with such transactions, including (i) all
document production and duplication charges and the fees and expenses of any
special counsel engaged by you, such Transferee or the Agent in connection with
this Agreement, the transactions contemplated hereby and any subsequent proposed
modification of, or proposed consent under, this Agreement or the other
Subordinated Note Documents, whether or not such proposed modification shall be
effected or proposed consent granted, and (ii) the costs and expenses, including
attorneys' fees, incurred by you, such Transferee or the Agent in enforcing (or
determining whether or how to enforce) any rights under this Agreement, the
Securities or the other Subordinated Note Documents or in responding to any
subpoena or other legal process or informal investigative demand issued in
connection with this Agreement, the other Subordinated Note Documents or the
transactions contemplated hereby or thereby, or by reason of your or such
Transferee's having acquired any Note or Warrant, including without limitation
costs and expenses incurred in any bankruptcy case. The obligations of the
Company under this paragraph 12B shall survive the transfer of any Note or
Warrant or portion thereof or interest therein by you or any Transferee, the
payment of any Note or Warrant, the enforcement, amendment or waiver of any
provision of this Agreement or the other Subordinated Note Documents, and the
termination of this Agreement or any of the other Subordinated Note Documents.
12C. CONSENT TO AMENDMENTS. This Agreement and any of the other
Subordinated Note Documents may be amended, and the Company may take any action
herein prohibited, or omit to perform any act herein required to be performed by
it, if the Company shall obtain the written consent to such amendment, action or
omission to act, of the Required Holder(s) except that, without the written
consent of the holder or holders of all Notes at the time outstanding, no
amendment to this Agreement shall change the maturity of any Note, or change the
principal of, or the rate or time of payment of interest on any Note, or affect
the time, amount or allocation of any prepayments, or change the proportion of
the principal amount of the Notes required with respect to any consent,
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amendment, waiver or declaration. Each holder of any Securities at the time or
thereafter outstanding shall be bound by any consent authorized by this
paragraph 12C, whether or not such Securities shall have been marked to indicate
such consent, but any Securities issued thereafter may bear a notation referring
to any such consent. No course of dealing between the Company and the holder of
any Securities nor any delay in exercising any rights hereunder or under any
Securities shall operate as a waiver of any rights of any holder of such
Securities. As used herein and in the Securities, the term "THIS AGREEMENT" and
references thereto shall mean this Agreement as it may from time to time be
amended or supplemented.
12D. FORM, REGISTRATION, TRANSFER AND EXCHANGE OF NOTES; LOST NOTES. The
Notes are issuable as registered notes without coupons in denominations of at
least $100,000, except as may be necessary to reflect any principal amount not
evenly divisible by $100,000. The Company shall keep at its principal office a
register in which the Company shall provide for the registration of Notes and of
transfers of Notes. Upon surrender for registration of transfer of any Note at
the principal office of the Company, the Company shall, at its expense, execute
and deliver one or more new Notes of like tenor and of a like aggregate
principal amount, registered in the name of such transferee or transferees. At
the option of the holder of any Note, such Note may be exchanged for other Notes
of like tenor and of any authorized denominations, of a like aggregate principal
amount, upon surrender of the Note to be exchanged at the principal office of
the Company. Whenever any Notes are so surrendered for exchange, the Company
shall, at its expense, execute and deliver the Notes which the holder making the
exchange is entitled to receive. Every Note surrendered for registration of
transfer or exchange shall be duly endorsed, or be accompanied by a written
instrument of transfer duly executed, by the holder of such Note or such
holder's attorney duly authorized in writing. Any Note or Notes issued in
exchange for any Note or upon transfer thereof shall carry the rights to unpaid
interest and interest to accrue which were carried by the Note so exchanged or
transferred, so that neither gain nor loss of interest shall result from any
such transfer or exchange. Upon receipt of written notice from the holder of
any Note of the loss, theft, destruction or mutilation of such Note and, in the
case of any such loss, theft or destruction, upon receipt of such holder's
unsecured indemnity agreement, or in the case of any such mutilation upon
surrender and cancellation of such Note, the Company will make and deliver a new
Note, of like tenor, in lieu of the lost, stolen, destroyed or mutilated Note.
12E. PERSONS DEEMED OWNERS; PARTICIPATIONS. Prior to due presentment for
registration of transfer, the Company may treat the Person in whose name any
Note is registered as the owner and holder of such Note for the purpose of
receiving payment of principal of and interest on such Note and for all other
purposes whatsoever, whether or not such Note shall be overdue, and the Company
shall not be affected by notice to the contrary. Subject to the preceding
sentence, the holder of any Note may from time to time grant participations in
such Note to any Person on such terms and conditions as may be determined by
such holder in its sole and absolute discretion, provided that any such
participation shall be in a principal amount of at least $100,000.
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12F. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT. All
representations and warranties contained herein or in the other Subordinated
Note Documents or otherwise made in writing by or on behalf of the Company and
the other Transaction Parties in connection herewith and therewith shall survive
the execution and delivery of this Agreement, the Notes, the Warrants and the
other Subordinated Note Documents, the transfer by you of any Note or Warrant or
portion thereof or interest therein and the payment of any Note, and may be
relied upon by any Transferee, regardless of any investigation made at any time
by or on behalf of you or any Transferee. Subject to the preceding sentence,
this Agreement, the Notes, the Warrants and the other Subordinated Note
Documents embody the entire agreement and understanding between you and the
Company and supersede all prior agreements and understandings relating to the
subject matter hereof.
12G. SUCCESSORS AND ASSIGNS. All covenants and other agreements in this
Agreement contained by or on behalf of either of the parties hereto shall bind
and inure to the benefit of the respective successors and assigns of the parties
hereto (including, without limitation, any Transferee) whether so expressed or
not; provided, however, that each holder of a Note hereby agrees that, so long
as no Event of Default shall have occurred and be continuing, it will transfer
its Notes only to Qualified Institutional Buyers or, if not to Qualified
Institutional Buyers, to such other Persons which are believed by such holder,
after reasonable inquiry, not to be Competitors.
12H. DISCLOSURE TO OTHER PERSONS. Except as provided in this paragraph
12H, each holder and each Person that purchases a participation in a Note or any
part thereof agrees that it will use its best efforts to hold in confidence and
not to disclose the Confidential Information; provided that such holder or
Person will be free, after notice to the Company, to correct any false or
misleading information which may become public concerning the relationship of
such holder or Person to the Company. The Company acknowledges that the holder
of any Note or Warrant may deliver copies of any financial statements and other
documents or materials delivered to such holder, and disclose any other
information disclosed to such holder, and disclose any other information
disclosed to such holder, by or on behalf of the Company or any Subsidiary in
connection with or pursuant to this Agreement and the other Subordinated Note
Documents to (i) such holder's directors, officers, employees, agents and
professional consultants, (ii) any other holder of any Note or Warrant, (iii)
any Person to which such holder offers to sell such Note or Warrant or any part
thereof and to which such holder could then transfer such Note or Warrant
pursuant to paragraph 12G, (iv) any Person to which such holder sells or offers
to sell a participation in all or any part of such Note or Warrant and to which
such holder could then transfer such Note or Warrant pursuant to paragraph 12G,
(v) any Person from which such holder offers to purchase any security of the
Company and to which such holder could then transfer such Note or Warrant
pursuant to paragraph 12G, (vi) any federal or state regulatory authority having
jurisdiction over such holder, (vii) the National Association of Insurance
Commissioners or any similar organization or (viii) any other Person to which
such delivery or disclosure may be necessary or appropriate (a) in compliance
with any law, rule, regulation or order applicable to such holder, (b) in
response to any subpoena or other legal process or informal investigative demand
or (c) in connection with any litigation to which such holder is a party.
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12I. NOTICES. All notices or other communications provided for hereunder
(except for the telephonic notice required by paragraph 4B) shall be in writing
and sent by first class mail or nationwide overnight delivery service (with
charges prepaid) and (i) if to you, addressed to you at the address specified
for such communications in the Purchaser Schedule attached hereto, or at such
other address as you shall have specified to the Company in writing, (ii) if to
any other holder of any Note or Warrant, addressed to such other holder at such
address as such other holder shall have specified to the Company in writing or,
if any such other holder shall not have so specified an address to the Company,
then addressed to such other holder in care of the last holder of such Note or
Warrant which shall have so specified an address to the Company, and (iii) if to
the Company, addressed to it at 2501 Cedar Springs Road, Suite 600, Dallas,
Texas 75201, Attention: Chief Financial Officer, with a courtesy copy (which
shall not constitute notice) to Schlanger, Mills, Mayer & Grossberg, L.L.P.,
5847 San Felipe, Suite 1700, Houston, Texas 77057, Attention: Kyle Longhofer, or
at such other address as the Company shall have specified to the holder of each
Note or Warrant in writing; provided, however, that any such communication to
the Company may also, at the option of the holder of any Note or Warrant, be
delivered by any other means either to the Company at its address specified
above or to any officer of the Company.
12J. PAYMENTS DUE ON NON-BUSINESS DAYS. Anything in this Agreement or the
Notes to the contrary notwithstanding, any payment of principal of or interest
on any Note that is due on a date other than a Business Day shall be made on the
next succeeding Business Day. If the date for any payment is extended to the
next succeeding Business Day by reason of the preceding sentence, the period of
such extension shall be included in the computation of the interest payable on
such Business Day.
12K. SATISFACTION REQUIREMENT. If any agreement, certificate or other
writing, or any action taken or to be taken, is by the terms of this Agreement
required to be satisfactory to you or to the Required Holder(s), the
determination of such satisfaction shall be made by you or the Required
Holder(s), as the case may be, in the sole and exclusive judgment (exercised in
good faith) of the Person or Persons making such determination.
12L. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF
THE STATE OF NEW YORK. This Agreement may not be changed orally, but (subject
to the provisions of paragraph 12C) only by an agreement in writing signed by
the party against whom enforcement of any waiver, change, modification or
discharge is sought.
12M. WAIVER OF JURY TRIAL; CONSENT TO JURISDICTION; LIMITATION OF REMEDIES.
(i) THE COMPANY AND EACH HOLDER OF SECURITIES HEREBY KNOWINGLY,
VOLUNTARILY, AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY
JURY IN ANY LITIGATION OF ANY CLAIM WHICH IS BASED HEREON, OR ARISES OUT
OF, UNDER, OR IN CONNECTION WITH THIS
51
<PAGE>
AGREEMENT, THE NOTES, THE WARRANTS OR THE OTHER SUBORDINATED NOTE
DOCUMENTS, OR ANY TRANSACTIONS RELATING HERETO OR THERETO, OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN), OR
ACTIONS OF THE COMPANY, THE HOLDERS OF THE SECURITIES OR THE AGENT. THE
COMPANY ACKNOWLEDGES THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR YOU
TO ENTER INTO THIS AGREEMENT.
(ii) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS
AGREEMENT, THE NOTES, THE WARRANTS, THE OTHER SUBORDINATED NOTE DOCUMENTS
OR ANY TRANSACTIONS RELATING HERETO OR THERETO, OR ANY COURSE OF CONDUCT,
COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN), OR ACTIONS OF THE
COMPANY, THE HOLDERS OF SECURITIES OR THE AGENT MAY BE BROUGHT IN THE
COURTS OF THE STATE OF NEW YORK OR THE UNITED STATES OF AMERICA FOR THE
SOUTHERN DISTRICT OF NEW YORK, AND THE COMPANY HEREBY ACCEPTS FOR ITSELF
AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE
NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS. THE COMPANY AND EACH
HOLDER OF SECURITIES HEREBY IRREVOCABLY WAIVES ANY OBJECTIONS, INCLUDING,
WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE
GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
BRINGING OF ANY SUCH ACTION OR PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS.
(iii) The Company hereby agrees that process may be served on CT
Corporation System, Inc., located at 1633 Broadway, New York, New York
10019. Any and all service of process and any other notice in any such
action, suit or proceeding shall be effective against such parties if given
by registered or certified mail, return receipt requested, or by any other
means or mail which requires a signed receipt, postage prepaid, mailed to
such parties as herein provided in paragraph 12I. In the event CT
Corporation System, Inc. shall not be able to accept service of process as
aforesaid and if the Company shall not maintain an office in New York City,
the Company shall promptly appoint and maintain an agent qualified to act
as an agent for service of process with respect to all courts in and of New
York City, and acceptable to the Required Holder(s), as the Company's
authorized agent to accept and acknowledge on the Company's behalf service
of any and all process which may be served in any such action, suit or
proceeding.
12N. SEVERABILITY. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
52
<PAGE>
12O. DESCRIPTIVE HEADINGS. The descriptive headings of the several
paragraphs of this Agreement are inserted for convenience only and do not
constitute a part of this Agreement.
12P. MAXIMUM INTEREST PAYABLE. The Company, you and any other holders of
the Notes specifically intend and agree to limit contractually the amount of
interest payable under this Agreement, the Notes and all other instruments and
agreements related hereto and thereto to the maximum amount of interest lawfully
permitted to be charged under applicable law. Therefore, none of the terms of
this Agreement, the Notes or any instrument pertaining to or relating to this
Agreement or the Notes shall ever be construed to create a contract to pay
interest at a rate in excess of the maximum rate permitted to be charged under
applicable law, and neither the Company, any guarantor nor any other party
liable or to become liable hereunder, under the Notes, any guaranty or under any
other instruments and agreements related hereto and thereto shall ever be liable
for interest in excess of the amount determined at such maximum rate, and the
provisions of this paragraph 12P shall control over all other provisions of this
Agreement, any Notes, any guaranty or any other instrument pertaining to or
relating to the transactions herein contemplated. If any amount of interest
taken or received by you or any holder of a Note shall be in excess of said
maximum amount of interest which, under applicable law, could lawfully have been
collected by you or such holder incident to such transactions, then such excess
shall be deemed to have been the result of a mathematical error by all parties
hereto and shall be refunded promptly by the Person receiving such amount to the
party paying such amount, or, at the option of the recipient, credited ratably
against the unpaid principal amount of the Note or Notes held by you or such
holder, respectively. All amounts paid or agreed to be paid in connection with
such transactions which would under applicable law be deemed "interest" shall,
to the extent permitted by such applicable law, be amortized, prorated,
allocated and spread throughout the stated term of this Agreement and the Notes.
"APPLICABLE LAW" as used in this paragraph means that law in effect from time to
time which permits the charging and collection of the highest permissible
lawful, nonusurious rate of interest on the transactions herein contemplated
including laws of the State of New York and of the United States of America, and
"MAXIMUM RATE" as used in this paragraph means, with respect to each of the
Notes, the maximum lawful, nonusurious rates of interest (if any) which under
applicable law may be charged to the Company from time to time with respect to
such Notes.
12Q. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original but all of which together shall
constitute one instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; SIGNATURE PAGE FOLLOWS]
53
<PAGE>
If you are in agreement with the foregoing, please sign the form of
acceptance on the enclosed counterpart of this letter and return the same to the
Company, whereupon this letter shall become a binding agreement between the
Company and you.
Very truly yours,
EQUITY COMPRESSION SERVICES CORPORATION
By:
----------------------------------
President
The foregoing Agreement is
hereby accepted as of the
date first above written.
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
By:
------------------------------------------
Vice President
<PAGE>
PURCHASER SCHEDULE
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
Aggregate Principal
Amount of Notes to
be Purchased Note Denomination(s)
------------ --------------------
$15,000,000 $15,000,000
(No. RS-1)
Aggregate Number
of Shares of
Common Stock for
which Warrant is
Exercisable Warrant Number
----------- --------------
1,000,000 WA-1
(1) All payments on account of Notes held by such
purchaser shall be made by wire transfer of
immediately available funds for credit to:
Account No. 890-0304-391
The Bank of New York
101 Barclay Street
New York, New York
(ABA No.: 021-000-018)
Each such wire transfer shall set forth the name
of the Company, a reference to "10.15% Secured
Senior Subordinated Notes due July 31, 2007,
Security No. !INV5707!", and the due date and
application (as among principal, interest and Yield
Maintenance Amount) of the payment being made.
(2) Address for all notices relating to payments:
The Prudential Insurance Company of America
c/o Prudential Capital Group
Four Gateway Center
100 Mulberry Street
Newark, New Jersey 07102
Attention: Investment Operations Group
(Attention: Manager)
<PAGE>
(3) Address for all other communications and notices:
The Prudential Insurance Company of America
c/o Prudential Capital Group
2200 Ross Avenue, Suite 4200E
Dallas, Texas 75201
Attention: Managing Director
(4) Recipient of telephonic prepayment notices:
Manager, Investment Operations Group
(201) 802-5260
(5) Tax Identification No.: 22-1211670
<PAGE>
SCHEDULE 9A
CONTROLLING STOCKHOLDERS
<PAGE>
SCHEDULE 9D
EXISTING DEBT AND LIENS
<PAGE>
SCHEDULE 9H
LIST OF AGREEMENTS RESTRICTING DEBT
<PAGE>
EXHIBIT A
[FORM OF NOTE]
EQUITY COMPRESSION SERVICES CORPORATION
10.15% SECURED SENIOR SUBORDINATED NOTE DUE JULY 31, 2007
No.____________ [Date]
$______________ PPN 294634 A@ 9
FOR VALUE RECEIVED, the undersigned, EQUITY COMPRESSION SERVICES
CORPORATION (the "COMPANY"), a corporation organized and existing under the laws
of the State of Oklahoma, hereby promises to pay to _________________________
___________________________, or registered assigns, the principal sum of
___________________________ DOLLARS ($______________) on July 31, 2007, with
interest (computed on the basis of a 360-day year -- 30-day month) (a) on the
unpaid balance thereof at the rate of 10.15% per annum from the date hereof,
payable quarterly on the 31st day of October, January, April and July in each
year, commencing with the January 31st, April 31st, July 31st or October 31st
next succeeding the date hereof, until the principal hereof shall have become
due and payable, and (b) on any overdue payment (including any overdue
prepayment) of principal, any overdue payment of interest and any overdue
payment of any Yield Maintenance Amount (as defined in the Note Agreement
referred to below), payable quarterly as aforesaid (or, at the option of the
registered holder hereof, on demand), at a rate per annum from time to time
equal to the lesser of (a) the maximum rate permitted by applicable law or (b)
the greater of (i) 4.0% over the rate of interest then in effect with respect to
this Note or (ii) 4.0% over the rate of interest publicly announced by The Bank
of New York from time to time in New York City as its Prime Rate.
Payments of principal of, interest on and any Yield Maintenance Amount
payable with respect to this Note are to be made at the main office of The Bank
of New York in New York City or at such other place as the holder hereof shall
designate to the Company in writing, in lawful money of the United States of
America.
This Note is one of a series of 10.15% Secured Senior Subordinated Notes
(the "NOTES") issued pursuant to a Subordinated Note and Warrant Purchase
Agreement, dated as of July 31, 1997 (the "AGREEMENT"), between the Company and
The Prudential Insurance Company of America, is entitled to the benefits thereof
and is guaranteed by each of the Guaranty Agreements (as defined in the
Agreement) and secured by each of the Security Documents (as defined in the
Agreement) in favor of the Agent (as defined in the Agreement) for the benefit
of the holders of the Notes.
<PAGE>
Capitalized terms used and not otherwise defined herein have the meanings
assigned to them in the Agreement.
This Note is a registered Note and, as provided in the Agreement, upon
surrender of this Note for registration of transfer, duly endorsed, or
accompanied by a written instrument of transfer duly executed, by the registered
holder hereof or such holder's attorney duly authorized in writing, a new Note
of like tenor for a like principal amount will be issued to, and registered in
the name of, the transferee. Prior to due presentment for registration of
transfer, the Company may treat the person in whose name this Note is registered
as the owner hereof for the purpose of receiving payment and for all other
purposes, and the Company shall not be affected by any notice to the contrary.
This Note is subject to certain prepayments, as specified in the Agreement.
If an Event of Default, as defined in the Agreement, shall occur and be
continuing, the principal of this Note may be declared or otherwise become due
and payable in the manner and with the effect provided in the Agreement.
The Company, and the purchaser and the registered holder of this Note
specifically intend and agree to limit contractually the amount of interest
payable under this Note to the maximum amount of interest lawfully permitted to
be charged under applicable law. Therefore, none of the terms of this Note
shall ever be construed to create a contract to pay interest at a rate in excess
of the maximum rate permitted to be charged under applicable law, and neither
the Company nor any other party liable or to become liable hereunder shall ever
be liable for interest in excess of the amount determined at such maximum rate,
and the provisions of paragraph 12P of the Agreement shall control over any
contrary provision of this Note.
THIS NOTE IS INTENDED TO BE PERFORMED IN THE STATE OF NEW YORK AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAW OF SUCH STATE.
EQUITY COMPRESSION SERVICES CORPORATION
By:
---------------------------------
[Vice] President
A-2
<PAGE>
EXHIBIT B
[FORM OF OPINION OF COMPANY'S COUNSEL]
B-1
<PAGE>
EXHIBIT C
[FORM OF WARRANT]
C-1
<PAGE>
EXHIBIT D
[FORM OF GUARANTY AGREEMENT]
D-1
<PAGE>
EXHIBIT E
[FORM OF PARTICIPATION RIGHTS AGREEMENT]
E-1
<PAGE>
EXHIBIT F
[FORM OF REGISTRATION RIGHTS AGREEMENT]
F-1
<PAGE>
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of July 31, 1997, between
EQUITY COMPRESSION SERVICES CORPORATION, an Oklahoma corporation (the
"COMPANY"), and THE PRUDENTIAL INSURANCE COMPANY OF AMERICA (the "PURCHASER").
1. BACKGROUND. The Company and the Purchaser have entered into that
certain Subordinated Note and Warrant Purchase Agreement (the "PURCHASE
AGREEMENT"), dated as of July 31, 1997, pursuant to which the Company has
agreed, among other things, to issue and sell its Common Stock Purchase Warrants
Expiring July 31, 2007 (the "WARRANTS"), evidencing rights to purchase an
aggregate of 1,000,000 shares (subject to adjustment as provided therein) of
the Company's Common Stock, par value $0.01 per share (the "Common Stock"). This
agreement shall become effective upon the issuance of such Warrants.
2. REGISTRATION UNDER SECURITIES ACT, ETC.
2.1. REGISTRATION ON REQUEST.
(a) REQUEST BY HOLDERS OF WARRANTS OR REGISTRABLE SECURITIES. At any
time after July 31, 1999 any holder or holders of Warrants or Registrable
Securities comprising (or evidencing the right to acquire) in the aggregate at
least 100,000 shares of Common Stock (unless all then outstanding Warrants or
Registrable Securities comprise (or evidence the right to acquire) in the
aggregate less than 100,000 shares of Common Stock, in which case the holder or
holders of all such Warrants or Registrable Securities shall be required) may
request in writing that the Company effect the registration under the Securities
Act of all or part of such holders' Registrable Securities. Such request shall
specify the intended method of disposition thereof and whether or not such
requested registration is to be an underwritten offering. Promptly after
receiving such request, the Company will give written notice of such requested
registration to all other holders of Warrants or Registrable Securities and
thereupon the Company will use its best efforts to effect the registration under
the Securities Act of:
(i) the Registrable Securities which the Company has been so
requested to register by such holders, and
(ii) all other Registrable Securities which the Company has been
requested to register by such other holders of Warrants or Registrable
Securities by written request given to the Company within 30 days after the
giving of such written notice by the Company (which request shall specify
the intended method of disposition of such Registrable
<PAGE>
Securities), all to the extent requisite to permit the disposition (in
accordance with the intended methods thereof as aforesaid) of the
Registrable Securities so to be registered.
Notwithstanding the foregoing, if at the time of any request to register
Registrable Securities pursuant to this Section 2.1(a) the Company is engaged
in, or has definitive plans to engage in, within 90 days of the time of such
request, a registered public offering, or is otherwise engaged in any other
activity which, in the good faith determination of the Board of Directors of the
Company, would be materially adversely affected by the requested registration to
the material detriment of the Company, then the Company may at its option direct
that such request be delayed for a reasonable period not in excess of (x) 120
days from the effective date or termination of such offering or (y) 80 days from
the date of completion or termination of such other material activity, as the
case may be, such right to delay a request to be exercised by the Company not
more than once in any one-year period; PROVIDED, HOWEVER, that if the Company
does not file or abandons its plan for a registered offering or material
transaction, then such request shall promptly proceed; PROVIDED, FURTHER, that
if the Company exercises its right to delay a request within the one-year period
immediately preceding the expiration date of the Warrants, the Company,
concurrently with the exercise of its right to delay such request, shall extend
such expiration date by an additional two years.
(b) REGISTRATION OF OTHER SECURITIES. Whenever the Company shall
effect a registration pursuant to this Section 2.1 in connection with an
underwritten offering by one or more holders of Registrable Securities, no
securities other than Registrable Securities shall be included among the
securities covered by such registration unless (a) the managing underwriter of
such offering shall have advised each holder of Registrable Securities to be
covered by such registration (and each holder of Warrants therefor) in writing
that the inclusion of such other securities would not adversely affect such
offering or (b) the holders of all Registrable Securities to be covered by such
registration (and the holders of all Warrants therefor) shall have consented in
writing to the inclusion of such other securities; PROVIDED, HOWEVER, that in
the event holders of Ouachita Securities request to have any of their Ouachita
Securities registered in connection with such underwritten offering in
accordance with Section 2.2(a) of that certain Registration Rights Agreement
dated as of July 31, 1997 between the Company and the current holders of
Ouachita Securities, such Ouachita Securities will be included in such offering
subject to the provisions of Section 2.1(h) hereof.
(c) REGISTRATION STATEMENT FORM. Registrations under this Section
2.1 shall be on such appropriate registration form of the Commission (i) as
shall be selected by the Company and as shall be reasonably acceptable to the
Requisite Holders and (ii) as shall permit the disposition of such Registrable
Securities in accordance with the intended method or methods of disposition
specified in their request for such registration. The Company agrees to include
in any such registration statement all information which holders of Registrable
Securities being registered (or holders of Warrants therefor) shall reasonably
request.
2
<PAGE>
(d) EXPENSES. The Company will pay all Registration Expenses in
connection with any registration requested pursuant to this Section 2.1 if such
registration has been requested in relation to at least 66 2/3% (by number of
shares) of Registrable Securities; PROVIDED, however, that the Company shall in
all events and at all times be responsible for the fees and disbursements of
counsel for the Requisite Holders in connection with the rendering of any
opinions requested by the Company or any underwriter). The Registration
Expenses (and underwriting discounts and commissions and transfer taxes, if any)
in connection with each other registration requested under this Section 2.1
shall be allocated among all Persons on whose behalf securities of the Company
are included in such registration, on the basis of the respective amounts of the
securities then being registered on their behalf.
(e) EFFECTIVE REGISTRATION STATEMENT. A registration requested
pursuant to this Section 2.1 shall not be deemed to have been effected (i)
unless a registration statement with respect thereto has become effective, (ii)
if after it has become effective, such registration is interfered with by any
stop order, injunction or other order or requirement of the Commission or other
governmental agency or court for any reason, or (iii) if the conditions to
closing specified in the purchase agreement or underwriting agreement entered
into in connection with such registration are not satisfied. Notwithstanding
the foregoing, a registration that does not become effective after the Company
has filed a registration statement with respect thereto solely by reason of the
refusal of the holders of Registrable Securities requesting such registration to
proceed (other than any refusal in good faith to proceed based upon (A) the
advice of their counsel that the registration statement, or the prospectus
contained therein, contains an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then existing,
or that such registration statement or such prospectus, or the distribution
contemplated thereby, otherwise violates or would violate any applicable state
or federal securities laws, or (B) a material adverse change in the business,
condition (financial or otherwise), prospects or operations of the Company or
any of its subsidiaries of which the Company knows or, upon exercising
reasonable diligence, should have known) shall be deemed to have been effected
by the Company at the request of such holders of Registrable Securities.
(f) SELECTION OF UNDERWRITERS. If a requested registration pursuant
to this Section 2.1 involves an underwritten offering, the underwriter or
underwriters thereof shall be selected by the Company with the reasonable
approval of the Requisite Holders.
(g) REGISTRATION RIGHTS OF OTHERS. If the Company has received a
request for registration of securities from the holders of other registration
rights prior to the date of a request made pursuant to this Section 2.1, and
such prior registration has not been completed, the registration requested
pursuant to this Section 2.1 shall not be allowed (and shall not count toward
the two requested registration limit set forth below), and the holders of such
Registrable Securities will be relegated to their incidental registration rights
described below in Section 2.2.
3
<PAGE>
(h) PRIORITY IN REQUESTED REGISTRATIONS. If a requested registration
pursuant to this Section 2.1 involves an underwritten offering, and the managing
underwriter shall advise the Company in writing (with a copy to each holder of
Warrants or Registrable Securities requesting registration) that, in its
opinion, the number of securities requested to be included in such registration
exceeds the number which can be sold in such offering within a price range
acceptable to the Requisite Holders, the Company will include in such
registration to the extent of the number which the Company is so advised can be
sold in such offering Registrable Securities requested to be included in such
registration, pro rata among the holders of Registrable Securities (or Warrants
therefor) requesting such registration on the basis of the percentage of such
Registrable Securities held by or issuable to such holders. In connection with
any registration as to which the provisions of this clause (h) apply, no
securities other than Registrable Securities shall be covered by such
registrations.
The holders of Warrants or Registrable Securities shall be entitled to
only two requested registrations pursuant to this Section 2.1.
2.2. INCIDENTAL REGISTRATION.
(a) RIGHT TO INCLUDE REGISTRABLE SECURITIES. If the Company at any
time proposes to register any of its securities under the Securities Act (other
than by a registration on Form S-4 or S-8 or any successor or similar form and
other than pursuant to Section 2.1), whether or not for sale for its own
account, it will each such time give prompt written notice to all holders of
Warrants or Registrable Securities of its intention to do so and of such
holders' rights under this Section 2.2. Upon the written request of any such
holder made within 30 days after the receipt of any such notice (which request
shall specify the Registrable Securities intended to be disposed of by such
holder and the intended method of disposition thereof), the Company will use its
best efforts to effect the registration under the Securities Act of all
Registrable Securities which the Company has been so requested to register by
the holders thereof, PROVIDED that if, at any time after giving written notice
of its intention to register any securities and prior to the effective date of
the registration statement filed in connection with such registration, the
Company shall determine for any reason not to register or to delay registration
of such securities, the Company may, at its election, give written notice of
such determination to each holder of Warrants or Registrable Securities and,
thereupon, (i) in the case of a determination not to register, shall be relieved
of its obligation to register any Registrable Securities in connection with such
registration (but not from its obligation to pay the Registration Expenses in
connection therewith), without prejudice, however, to the rights of any holder
or holders of Warrants or Registrable Securities entitled to do so to request
that such registration be effected as a registration under Section 2.1, and (ii)
in the case of a determination to delay registering, shall be permitted to delay
registering any Registrable Securities, for the same period as the delay in
registering such other securities. No registration effected under this Section
2.2 shall be deemed to have been effected pursuant to Section 2.1 or shall
relieve the Company of its obligation to effect any registration upon request
under Section 2.1. The Company will pay all Registration Expenses in connection
with each registration of Registrable Securities requested pursuant to this
Section 2.2.
4
<PAGE>
(b) PRIORITY IN INCIDENTAL REGISTRATIONS. If (i) a registration
pursuant to this Section 2.2 involves an underwritten offering of the securities
so being registered, whether or not for sale for the account of the Company or a
holder of securities of the Company pursuant to such holder's right to demand
registration of such securities, to be distributed (on a firm commitment basis)
by or through one or more underwriters of recognized standing under underwriting
terms appropriate for such a transaction, (ii) the Registrable Securities so
requested to be registered for sale are not also to be included in such
underwritten offering (because the Company has not been requested so to include
such Registrable Securities pursuant to Section 2.4 (b), or if so requested, is
not obligated to do so under Section 2.4 (b)), and (iii) the managing
underwriter of such underwritten offering shall inform the Company and the
holders of Warrants or Registrable Securities requesting such registration by
letter of its belief that the number of securities requested to be included in
such registration exceeds the number which can be sold in (or during the time
of) such offering, then the Company may include all securities proposed by the
Company to be sold for its own account and for the account of any holder of
securities of the Company exercising a right to demand registration of such
securities and may decrease the number of Registrable Securities and other
securities of the Company so proposed to be sold and so requested to be included
in such registration (pro rata among the holders thereof on the basis of the
percentage of the securities of the Company sought to be included by such
holders in such registration) to the extent necessary to reduce the number of
securities to be included in the registration to the level recommended by the
managing underwriter.
2.3. REGISTRATION PROCEDURES. If and whenever the Company is required
to use its best efforts to effect the registration of any Registrable Securities
under the Securities Act as provided in Sections 2.1 and 2.2, the Company will
as expeditiously as possible:
(i) prepare and (as soon thereafter as possible or in any event no
later than 60 days after the end of the period within which requests for
registration may be given to the Company) file with the Commission the
requisite registration statement to effect such registration and thereafter
use its best efforts to cause such registration statement to become
effective, PROVIDED that the Company may discontinue any registration of
its securities which are not Registrable Securities (and, under the
circumstances specified in Section 2.2(a), its securities which are
Registrable Securities) at any time prior to the effective date of the
registration statement relating thereto;
(ii) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective and to comply with the provisions of the Securities Act
with respect to the disposition of all securities covered by such
registration statement until such time as all of such securities have been
disposed of in accordance with the intended methods of disposition by the
seller or sellers thereof set forth in such registration statement,
PROVIDED that the Company shall in no event be required to keep such
registration statement effective for more than 270 days;
5
<PAGE>
(iii) furnish to each seller of Registrable Securities covered by
such registration statement such number of conformed copies of such
registration statement and of each such amendment and supplement thereto
(in each case including all exhibits), such number of copies of the
prospectus contained in such registration statement (including each
preliminary prospectus and any summary prospectus) and any other prospectus
filed under Rule 424 under the Securities Act, in conformity with the
requirements of the Securities Act, and such other documents, as such
seller may reasonably request;
(iv) use its best efforts to register or qualify all Registrable
Securities and other securities covered by such registration statement
under such other securities or blue sky laws of such jurisdictions as each
seller thereof shall reasonably request, to keep such registration or
qualification in effect for so long as such registration statement remains
in effect, and take any other action which may be reasonably necessary or
advisable to enable such seller to consummate the disposition in such
jurisdictions of the securities owned by such seller, except that the
Company shall not for any such purpose be required to qualify generally to
do business as a foreign corporation in any jurisdiction wherein it would
not but for the requirements of this subdivision (iv) be obligated to be so
qualified or to consent to general service of process in any such
jurisdiction;
(v) use its best efforts to cause all Registrable Securities covered
by such registration statement to be registered with or approved by such
other governmental agencies or authorities as may be necessary to enable
the seller or sellers thereof to consummate the disposition of such
Registrable Securities;
(vi) furnish to each seller of Registrable Securities and each
Requesting Holder a signed counterpart, addressed to such seller and such
Requesting Holder (and underwriters, if any) of:
(x) an opinion of counsel for the Company, dated the effective date
of such registration statement (and, if such registration includes an
underwritten public offering, dated the date of the closing under the
underwriting agreement), reasonably satisfactory in form and substance
to such seller, and
(y) a "comfort" letter, dated the effective date of such registration
statement (and, if such registration includes an underwritten public
offering, dated the date of the closing under the underwriting
agreement), signed by the independent public accountants who have
certified the Company's financial statements included in such
registration statement,
covering substantially the same matters with respect to such registration
statement (and the prospectus included therein) and, in the case of the
accountants' letter, with respect to events subsequent to the date of such
financial statements, as are customarily covered in opinions
6
<PAGE>
of issuer's counsel and in accountants' letters delivered to the
underwriters in underwritten public offerings of securities and, in the
case of the accountants' letter, such other financial matters, and, in the
case of the legal opinion, such other legal matters, as such seller or such
Requesting Holder, if any, may reasonably request;
(vii) notify each seller of Registrable Securities covered by such
registration statement and each Requesting Holder, at any time when a
prospectus relating thereto is required to be delivered under the
Securities Act, upon discovery that, or upon the happening of any event as
a result of which, the prospectus included in such registration statement,
as then in effect, includes an untrue statement of a material fact or omits
to state any material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the
circumstances under which they were made, and at the request of any such
seller or Requesting Holder promptly prepare and furnish to such seller or
Requesting Holder a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such securities, such prospectus shall not
include an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances under which they
were made;
(viii) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and make available to its security
holders, as soon as reasonably practicable, an earnings statement covering
the period of at least twelve months, but not more than eighteen months,
beginning with the first full calendar month after the effective date of
such registration statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act, and will furnish to each
such seller at least five business days prior to the filing thereof a copy
of any amendment or supplement to such registration statement or prospectus
and shall not file any thereof to which any such seller shall have
reasonably objected on the grounds that such amendment or supplement does
not comply in all material respects with the requirements of the Securities
Act or of the rules or regulations thereunder;
(ix) provide and cause to be maintained a transfer agent and registrar
for all Registrable Securities covered by such registration statement from
and after a date not later than the effective date of such registration
statement;
(x) use its best efforts to cause all Registrable Securities covered
by such registration statement to be listed on any securities exchange on
which any of the Registrable Securities are then listed or to be quoted by
the Nasdaq National Market or Nasdaq SmallCap Market (or any successor
thereto or any comparable system) on which any of the Registrable
Securities are then quoted; and
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(xi) enter into such agreements and take such other actions as the
Requisite Holders shall reasonably request in order to expedite or
facilitate the disposition of such Registrable Securities.
The Company may require each seller of Registrable Securities as to which any
registration is being effected to furnish the Company such information regarding
such seller and the distribution of such securities as the Company may from time
to time reasonably request in writing.
Each holder of Registrable Securities agrees by acquisition of such
Registrable Securities that upon receipt of any notice from the Company of the
happening of any event of the kind described in the subdivision (vii) of this
Section 2.3, such holder will forthwith discontinue such holder's disposition of
Registrable Securities pursuant to the registration statement relating to such
Registrable Securities until such holder's receipt of the copies of the
supplemented or amended prospectus contemplated by subdivision (vii) of this
Section 2.3.
2.4 UNDERWRITTEN OFFERINGS.
(a) REQUESTED UNDERWRITTEN OFFERINGS. If requested by the
underwriters for any underwritten offering of Registrable Securities pursuant to
a registration requested under Section 2.1, the Company will enter into an
underwriting agreement with such underwriters for such offering, such agreement
to be satisfactory in substance and form to each holder of such Registrable
Securities (or Warrants therefor) and the underwriters and to contain such
representations and warranties by the Company and such other terms as are
generally prevailing in agreements of this type, including, without limitation,
indemnities to the effect and to the extent provided in Section 2.7. The
holders of Registrable Securities to be distributed by such underwriters shall
be parties to such underwriting agreement and may, at their option, require that
any or all of the representations and warranties by, and the other agreements on
the part of, the Company to and for the benefit of such underwriters shall also
be made to and for the benefit of such holders of Registrable Securities and
that any or all of the conditions precedent to the obligations of such
underwriters under such underwriting agreement be conditions precedent to the
obligations of such holders of Registrable Securities. Any such holder of
Registrable Securities shall not be required to make any representations or
warranties to or agreements with the Company or the underwriters other than
representations, warranties or agreements regarding such holder, such holder's
Registrable Securities and such holder's intended method of distribution and any
other representation required by law.
(b) INCIDENTAL UNDERWRITTEN OFFERINGS. If the Company at any time
proposes to register any of its securities under the Securities Act as
contemplated by Section 2.2 and such securities are to be distributed by or
through one or more underwriters, the Company will, if requested by any holder
of Warrants or Registrable Securities as provided in Section 2.2 and subject to
the provisions of Section 2.2(b), arrange for such underwriters to include all
the Registrable Securities to be offered and sold by such holder among the
securities to be distributed by such underwriters. The holders of Registrable
Securities to be distributed by such underwriters shall be
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parties to the underwriting agreement between the Company and such underwriters
and may, at their option, require that any or all of the representations and
warranties by, and the other agreements on the part of, the Company to and for
the benefit of such underwriters shall also be made to and for the benefit of
such holders of Registrable Securities and that any or all of the conditions
precedent to the obligations of such underwriters under such underwriting
agreement be conditions precedent to the obligations of such holders of
Registrable Securities. Any such holder of Registrable Securities shall not be
required to make any representations or warranties to or agreements with the
Company or the underwriters other than representations, warranties or agreements
regarding such holder, such holder's Registrable Securities and such holder's
intended method of distribution and any other representation required by law.
2.5. PREPARATION; REASONABLE INVESTIGATION. In connection with the
preparation and filing of each registration statement under the Securities Act
pursuant to this Agreement, the Company will give the holders of Registrable
Securities registered under such registration statement (or the holders of
Warrants therefor), their underwriters, if any, and their respective counsel and
accountants, the opportunity to participate in the preparation of such
registration statement, each prospectus included therein or filed with the
Commission, and each amendment thereof or supplement thereto, and will give each
of them such access to its books and records and such opportunities to discuss
the business of the Company with its officers and the independent public
accountants who have certified its financial statements as shall be necessary,
in the opinion of such holders' and such underwriters' respective counsel, to
conduct a reasonable investigation within the meaning of the Securities Act.
2.6. RIGHTS OF REQUESTING HOLDERS. The Company will not file any
registration statement under the Securities Act, unless it shall first have
given to all holders of Warrants or Registrable Securities at least 30 days
prior written notice thereof and, if so requested by the Requisite Holders,
shall have consulted with such holders concerning the selection of underwriters,
counsel and independent accountants for the Company for such offering and
registration. If such holders shall so request within 30 days after such
notice, each of them shall be a "Requesting Holder" hereunder and shall have the
rights of a Requesting Holder provided in this section 2.6 and in sections 2.3,
2.5 and 2.7. The Company further covenants that a Requesting Holder shall have
the right (a) to participate in the preparation of any such registration or
comparable statement and to require the insertion therein of material furnished
to the Company in writing, which in such Requesting Holder's judgment should be
included, and (b) at the Company's expense, to retain counsel and/or independent
public accountants to assist such Requesting Holder in such participation. In
addition, if any such registration statement refers to any Requesting Holder by
name or otherwise as the holder of any securities of the Company, then such
Requesting Holder shall have the right to require (a) the insertion therein of
language, in form and substance satisfactory to such Requesting Holder, to the
effect that the holding by such Requesting Holder of such securities does not
necessarily make such Requesting Holder a "controlling person" of the Company
within the meaning of the Securities Act and is not to be construed as a
recommendation by such Requesting Holder of the investment quality of the
Company's debt or equity securities covered
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thereby and that such holding does not imply that such Requesting Holder will
assist in meeting any future financial requirements of the Company, or (b) in
the event that such reference to such Requesting Holder by name or otherwise is
not required by the Securities Act or any rules and regulations promulgated
thereunder, the deletion of the reference to such Requesting Holder.
2.7. INDEMNIFICATION.
(a) INDEMNIFICATION BY THE COMPANY. In the event of any registration
of any securities of the Company under the Securities Act, the Company will,
and hereby does, (i) in the case of any registration statement filed pursuant
to Section 2.1 or 2.2 indemnify and hold harmless the seller of any
Registrable Securities covered by such registration statement, its directors
and officers, each other Person who participates as an underwriter in the
offering or sale of such securities and each other Person, if any, who
controls such seller or any such underwriter within the meaning of the
Securities Act, and (ii) in the case of any registration statement of the
Company, indemnify and hold harmless any Requesting Holder, its directors and
officers and each other Person, if any, who controls such Requesting Holder
within the meaning of the Securities Act, in each case against any losses,
claims, damages or liabilities, joint or several, to which such seller or
Requesting Holder or any such director or officer or underwriter or
controlling person may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out
of or are based upon any untrue statement or alleged untrue statement of any
material fact contained in any registration statement under which such
securities were registered under the Securities Act, any preliminary
prospectus, final prospectus or summary prospectus contained therein, or any
amendment or supplement thereto, or any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, or any other noncompliance or alleged
noncompliance with the Securities Act or the applicable underwriting
agreement, and the Company will reimburse such seller, such Requesting Holder
and each such director, officer, underwriter and controlling person for any
legal or any other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, liability, action or
proceeding; PROVIDED that the Company shall not be liable in any such case to
the extent that any such loss, claim, damage, liability (or action or
proceeding in respect thereof) or expense arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in such registration statement, any such preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement in reliance upon and
in conformity with written information furnished to the Company through an
instrument duly executed by such seller or Requesting Holder, as the case may
be, specifically stating that it is for use in the preparation thereof and,
PROVIDED FURTHER that the Company shall not be liable to any Person who
participates as an underwriter, in the offering or sale of Registrable
Securities or any other Person, if any, who controls such underwriter within
the meaning of the Securities Act, in any such case to the extent that any
such loss, claim, damage, liability (or action or proceeding in respect
thereof) or expense arises out of such Person's failure to send or give a
copy of the final prospectus, as the same may be then supplemented or
amended, to the Person asserting an untrue statement or alleged untrue
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statement or omission or alleged omission at or prior to the written
confirmation of the sale of Registrable Securities to such Person if such
statement or omission was corrected in such final prospectus. Such indemnity
shall remain in full force and effect regardless of any investigation made by
or on behalf of such seller or any such director, officer, underwriter or
controlling person and shall survive the transfer of such securities by such
seller.
(b) INDEMNIFICATION BY THE SELLERS. The Company may require, as a
condition to including any Registrable Securities in any registration statement
filed pursuant to Section 2.3, that the Company shall have received an
undertaking satisfactory to it from the prospective seller of such securities,
to indemnify and hold harmless (in the same manner and to the same extent as set
forth in subdivision (a) of this Section 2.7) the Company, each director of the
Company, each officer of the Company and each other Person, if any, who controls
the Company within the meaning of the Securities Act, with respect to any
statement or alleged statement in or omission or alleged omission from such
registration statement, any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement thereto, if such
statement or alleged statement or omission or alleged omission was made in
reliance upon and in conformity with written information furnished to the
Company through an instrument duly executed by such seller specifically stating
that it is for use in the preparation of such registration statement,
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement. Such indemnity shall remain in full force and effect, regardless of
any investigation made by or on behalf of the Company or any such director,
officer or controlling Person and shall survive the transfer of such securities
by such seller.
(c) NOTICES OF CLAIMS, ETC. Promptly after receipt by an indemnified
party of notice of the commencement of any action or proceeding involving a
claim referred to in the preceding subdivisions of this Section 2.7, such
indemnified party will, if a claim in respect thereof is to be made against an
indemnifying party, give written notice to the latter of the commencement of
such action, PROVIDED that the failure of any indemnified party to give notice
as provided herein shall not relieve the indemnifying party of its obligations
under the preceding subdivisions of this Section 2.7, except to the extent that
the indemnifying party is actually prejudiced by such failure to give notice.
In case any such action is brought against an indemnified party, unless in such
indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist in respect of such claim, the
indemnifying party shall be entitled to participate in and to assume the defense
thereof, jointly with any other indemnifying party similarly notified to the
extent that it may wish, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party for any legal
or other expenses subsequently incurred by the latter in connection with the
defense thereof other than reasonable costs of investigation. No indemnifying
party shall, without the consent of the indemnified party, consent to entry of
any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect to such claim or
litigation.
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(d) OTHER INDEMNIFICATION. Indemnification similar to that specified
in the preceding subdivisions of this Section 2.7 (with appropriate
modifications) shall be given by the Company and each seller of Registrable
Securities with respect to any required registration or other qualification of
securities under any Federal or state law or regulation of any governmental
authority other than the Securities Act.
(e) INDEMNIFICATION PAYMENTS. The indemnification required by this
Section 2.7 shall be made by periodic payments of the amount thereof during the
course of the investigation or defense as and when bills are received or
expense, loss, damage or liability is incurred.
2.8. ADJUSTMENTS AFFECTING REGISTRABLE SECURITIES. The Company will
not effect or permit to occur any combination or subdivision of shares which
would adversely affect the ability of the holders of Registrable Securities or
Warrants therefor to include such Registrable Securities in any registration of
its securities contemplated by this Section 2 or the marketability of such
Registrable Securities under any such registration.
3. DEFINITIONS. As used herein, unless the context otherwise requires,
the following terms have the following respective meanings:
COMMISSION: The Securities and Exchange Commission or any other
Federal agency at the time administering the Securities Act.
COMMON STOCK: As defined in Section 1.
COMPANY: As defined in the introductory paragraph of this Agreement.
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. Reference to a
particular section of the Securities Exchange Act of 1934 shall include a
reference to the comparable section, if any, of any such similar Federal
statute.
OUACHITA SECURITIES: (a) Those certain 7,600,000 shares of Common
Stock issued by the Company pursuant to the Agreement and Plan of Merger,
dated as of May 15, 1997 and as amended by the First Amendment to Agreement
and Plan of Merger dated as of July 30, 1997, by and among the Company, OEC
Acquisition Corporation, Ouachita Energy Corporation and Dennis W. Estis,
and (b) any securities issued or issuable with respect to any such Common
Stock by way of stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization or otherwise. As to any particular Ouachita Securities,
once issued such securities shall cease to be Ouachita Securities when (a)
a registration statement with respect to the sale of such securities shall
have become effective under the Securities Act and such securities shall
have been disposed of in accordance with such registration statement, (b)
they shall have been
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distributed to the public pursuant to Rule 144 (or any successor provision)
under the Securities Act, (c) they shall have been otherwise transferred,
new certificates for them not bearing a legend restricting further transfer
shall have been delivered by the Company and subsequent disposition of them
shall not require registration or qualification of them under the
Securities Act or any similar state law then in force, or (d) they shall
have ceased to be outstanding.
PERSON: A corporation, an association, a partnership, a business, an
individual, a governmental or political subdivision thereof or a
governmental agency.
PURCHASE AGREEMENT: As defined in Section 1.
PURCHASER: As defined in the introductory paragraph of this
Agreement.
REGISTRABLE SECURITIES: (a) Any shares of Common Stock issued or
issuable upon exercise of any of the Warrants and (b) any securities issued
or issuable with respect to any such Common Stock by way of stock dividend
or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization or
otherwise. As to any particular Registrable Securities, once issued such
securities shall cease to be Registrable Securities when (a) a registration
statement with respect to the sale of such securities shall have become
effective under the Securities Act and such securities shall have been
disposed of in accordance with such registration statement, (b) they shall
have been distributed to the public pursuant to Rule 144 (or any successor
provision) under the Securities Act, (c) they shall have been otherwise
transferred, new certificates for them not bearing a legend restricting
further transfer shall have been delivered by the Company and subsequent
disposition of them shall not require registration or qualification of them
under the Securities Act or any similar state law then in force, or (d)
they shall have ceased to be outstanding.
REGISTRATION EXPENSES: All expenses incident to the Company's
performance of or compliance with Section 2, including, without limitation,
all registration, filing and National Association of Securities Dealers
fees, all fees and expenses of complying with securities or blue sky laws,
all word processing, duplicating and printing expenses, messenger and
delivery expenses, the fees and disbursements of counsel for the Company
and of its independent public accountants, including the expenses of any
special audits or "cold comfort" letters required by or incident to such
performance and compliance, the fees and disbursements incurred by the
holders of Registrable Securities to be registered and the holders of
Warrants therefor (including the fees and disbursements of any counsel and
accountants retained by the Requisite Holders), premiums and other costs of
policies of insurance against liabilities arising out of the public
offering of the Registrable Securities being registered and any fees and
disbursements of underwriters customarily paid by issuers or sellers of
securities, but excluding underwriting discounts and commissions and
transfer
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taxes, if any, PROVIDED that, in any case where Registration Expenses are
not to be borne by the Company, such expenses shall not include salaries of
Company personnel or general overhead expenses of the Company, auditing
fees, premiums or other expenses relating to liability insurance required
by underwriters of the Company or other expenses for the preparation of
financial statements or other data normally prepared by the Company in the
ordinary course of its business or which the Company would have incurred in
any event.
REQUESTING HOLDER: As defined in Section 2.6.
REQUISITE HOLDERS: With respect to any registration of Registrable
Securities by the Company pursuant to Section 2, any holder or holders of
66 2/3% (by number of shares) of the Registrable Securities to be so
registered or of Warrants for such Registrable Securities.
SECURITIES ACT: The Securities Act of 1933, or any similar Federal
statute, and the rules and regulations of the Commission thereunder, all as
of the same shall be in effect at the time. References to a particular
section of the Securities Act of 1933 shall include a reference to the
comparable section, if any, of any such similar Federal Statute.
4. RULE 144: If the Company shall have filed a registration statement
pursuant to the requirements of Section 12 of the Exchange Act or a registration
statement pursuant to the requirements of the Securities Act, the Company will
file the reports required to be filed by it under the Securities Act and the
Exchange Act and the rules and regulations adopted by the Commission thereunder
(or, if the Company is not required to file such reports, will, upon the request
of any holder of Warrants or Registrable Securities, make publicly available
other information) and will take such further action as any holder of Warrants
or Registrable Securities may reasonably request, all to the extent required
from time to time to enable such holder to sell Registrable Securities without
registration under the Securities Act within the limitation of the exemptions
provided by (a) Rule 144 under the Securities Act, as such Rule may be amended
from time to time or (b) any similar rule or regulation hereafter adopted by the
Commission. Upon the request of any holder of Warrants or Registrable
Securities, the Company will deliver to such holder a written statement as to
whether it has complied with such requirements.
5. AMENDMENTS AND WAIVERS. This Agreement may be amended and the Company
may take any action herein prohibited or omit to perform any act herein required
to be performed by it, only if the Company shall have obtained the written
consent to such amendment, action or omission to act, of the Requisite Holders.
Each holder of any Warrants or Registrable Securities at the time or thereafter
outstanding shall be bound by any consent authorized by this Section 5, whether
or not such Registrable Securities shall have been marked to indicate such
consent.
6. NOMINEES FOR BENEFICIAL OWNERS. In the event that any Registrable
Securities are held by a nominee for the beneficial owner thereof, the
beneficial owner thereof may, at its election, be treated as the holder of such
Warrants or Registrable Securities for purposes of any request or other
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action by any holder or holders of Warrants or Registrable Securities pursuant
to this Agreement or any determination of any number or percentage of shares of
Warrants or Registrable Securities held by any holder or holders of Warrants or
Registrable Securities contemplated by this Agreement. If the beneficial owner
of any Warrants or Registrable Securities so elects, the Company may require
assurances reasonably satisfactory to it of such owner's beneficial ownership of
such Warrants or Registrable Securities.
7. NOTICES. All communications provided for hereunder shall be sent by
first-class mail and (a) if addressed to a party other than the Company,
addressed to such party in the manner set forth in the Purchase Agreement, or at
such other address as such party shall have furnished to the Company in writing,
or (b) if addressed to the Company, at 2501 Cedar Springs Road, Suite 600,
Dallas, Texas 75201, Attention: Chief Financial Officer, with a courtesy copy
(which shall not constitute notice) to Schlanger, Mills, Mayer & Grossberg,
L.L.P., 5847 San Felipe, Suite 1700, Houston, Texas 77057, Attention: Kyle
Longhofer, or at such other address, or to the attention of such other officer,
as the Company shall have furnished to each holder of Warrants or Registrable
Securities at the time outstanding; provided, HOWEVER, that any such
communication to the Company may also, at the option of any of the parties
hereunder, be either delivered to the Company at its address set forth above or
to any officer of the Company.
8. ASSIGNMENT. This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the parties hereto and their respective
successors and assigns. In addition, and whether or not any express assignment
shall have been made, the provisions of this Agreement which are for the benefit
of the parties hereto other than the Company shall also be for the benefit of
and enforceable by any subsequent holder of any Warrants or Registrable
Securities, subject to the provisions respecting the minimum numbers or
percentages of shares of Warrants or Registrable Securities required in order to
be entitled to certain rights, or take certain actions contained herein.
9. DESCRIPTIVE HEADINGS. The descriptive headings of the several
sections and paragraphs of this Agreement are inserted for reference only and
shall not limit or otherwise affect the meaning hereof.
10. SPECIFIC PERFORMANCE. The parties hereto recognize and agree that
money damages may be insufficient to compensate the holders of any Warrants or
Registrable Securities for breaches by the Company of the terms hereof and,
consequently, that the equitable remedy of specific performance of the terms
hereof will be available in the event of any such breach.
11. GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the laws of
the State of New York.
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12. COUNTERPARTS. This Agreement may be executed simultaneously in any
number of counterparts, each of which shall be deemed an original, but all such
counterparts shall together constitute one and the same instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; SIGNATURE PAGE FOLLOWS.]
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their respective officers thereunto duly authorized as
of the date first above written.
EQUITY COMPRESSION SERVICES CORPORATION
By:
---------------------------------
Title:
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
By:
--------------------------------
Title:
<PAGE>
PARTICIPATION RIGHTS AGREEMENT
PARTICIPATION RIGHTS AGREEMENT, dated as of July 31, 1997, by and among
EQUITY COMPRESSION SERVICES CORPORATION, an Oklahoma corporation (the
"COMPANY"), THE PRUDENTIAL INSURANCE COMPANY OF AMERICA (the "PURCHASER") and
the holders of the Company's Common Stock, par value $0.01 per share (the
"COMMON STOCK") listed in Schedule I attached hereto (each a "STOCKHOLDER"
and collectively the "STOCKHOLDERS").
1. BACKGROUND. The Company and the Purchaser have entered into a
Subordinated Note and Warrant Purchase Agreement (the "PURCHASE AGREEMENT"),
dated as of July 31, 1997, pursuant to which the Company has agreed, among other
things, to issue and sell its Common Stock Purchase Warrants Expiring July 31,
2007 (the "WARRANTS"), evidencing rights to purchase an aggregate of 1,000,000
shares (subject to adjustment as provided therein) of Common Stock. This
agreement shall become effective upon the issuance of such Warrants.
2. TRANSFERS OF COMMON STOCK.
2.1 GENERAL. Subject to compliance with the provisions of Section
2.2 hereof, any Stockholder may transfer shares of Common Stock or Common Stock
Equivalents held by such Stockholder in accordance with applicable law so long
as either (i) such Stockholder first delivers to the Company and the Tagalong
Holders a written agreement of the proposed transferee to become a party to and
be bound by the terms and provisions of this Agreement (unless such proposed
transferee is already a party hereto) or (ii) the transfer (a) is pursuant to a
public offering registered under the Securities Act or (b) is made in accordance
with Rule 144 under the Securities Act (or any similar successor provision)
including, without limitation, a transfer made in reliance on paragraph (k) of
Rule 144 (a "RULE 144 TRANSFER").
2.2 RIGHTS OF PARTICIPATION. If a Stockholder or Affiliate thereof
proposes to sell shares of the Common Stock or Common Stock Equivalents for
value (such Stockholder or Affiliate thereof being referred to herein as a
"TRANSFEROR"), BUT EXCLUDING (i) a sale which is pursuant to a public offering
registered under the Securities Act or is a Rule 144 Transfer, (ii) a sale to an
Affiliate of such Transferor or (iii) a sale or sales which are effected by such
Transferor in a single transaction or a series of transactions and which do not
involve more than 10% of the Fully Diluted Common Stock, then such Transferor
shall offer (the "PARTICIPATION OFFER") to include in the proposed sale a number
of shares of Common Stock or Common Stock Equivalents (which securities shall be
of the same type (i.e., Common Stock or Common Stock Equivalents) as the
securities being sold by the Transferor) designated by any Tagalong Holder, not
to exceed, in respect of any such Tagalong Holder, the number of shares equal to
the product of (a) the aggregate number of shares of Common Stock or Common
Stock Equivalents to be sold by the Transferor to the proposed transferee and
(b) a fraction, the numerator of which shall be the number of shares of Fully
Diluted Common Stock
<PAGE>
held by such Tagalong Holder and the denominator of which shall be the number of
shares of Fully Diluted Common Stock held by the Transferor and all Tagalong
Holders. The Transferor shall give written notice to each Tagalong Holder of
the Participation Offer (the "PARTICIPATION OFFER NOTICE") at least 45 days
prior to the proposed sale. The Participation Offer Notice shall specify the
proposed transferee, the number of shares of Common Stock or Common Stock
Equivalents to be sold to such transferee, the amount and type of consideration
to be received therefor, and the place and date on which the sale is to be
consummated. Each Tagalong Holder who wishes to include shares of Common Stock
or Common Stock Equivalents in the proposed sale in accordance with this Section
2.2 shall so notify the Transferor not more than 15 days after the date of
receipt of the Participation Offer Notice. The Participation Offer shall be
conditioned upon the Transferor's sale of shares pursuant to the transactions
contemplated in the Participation Offer Notice with the transferee named
therein. If any other Tagalong Holders have accepted the Participation Offer,
the Transferor shall reduce to the extent necessary the number of shares it
otherwise would have sold in the proposed sale so as to permit such other
Tagalong Holders to sell the number of shares that they are entitled to sell
under this Section 2.2, and the Transferor and such other Tagalong Holders shall
sell the number of shares specified in the Participation Offer to the proposed
transferee in accordance with the terms of such sale set forth in the
Participation Offer Notice.
2.3 RESTRICTIVE LEGEND. Each certificate representing shares of
presently outstanding Common Stock held by a Stockholder shall be stamped or
otherwise imprinted with a legend (or shall be exchanged for certificates
bearing a legend), contemporaneously with the execution and delivery of this
Agreement (except for the certificate issued to Dennis W. Estis, which shall be
imprinted with a legend within ten days of the date of this Agreement), in
substantially the following form:
"The shares represented by this certificate are subject to certain
restrictions set forth in a Participation Rights Agreement dated as of
July 31, 1997 among the Corporation, The Prudential Insurance Company
of America and certain holders of the Corporation's outstanding Common
Stock parties thereto, and such shares may not be transferred except
in compliance with such restrictions. Such Participation Rights
Agreement is on file at the office of the Corporation and a copy
thereof will be furnished without charge to the holder of the shares
represented by this certificate upon written request."
Each certificate issued upon the direct or indirect transfer of any such
outstanding Common Stock held by a Stockholder shall also be stamped or
otherwise imprinted with the foregoing legend. Notwithstanding the foregoing,
any Stockholder and any transferee of any Stockholder holding outstanding shares
of Common Stock subject to the terms of this Agreement shall, in connection with
any proposed transfer of any such shares in a Rule 144 Transfer, be entitled to
receive from the Company, without expense, a new certificate or certificates
representing the shares to be transferred in such Rule 144 Transfer and not
bearing the legend set forth above in this Section 2.3. The Company shall issue
such new certificate or certificates upon five days' prior written notice of
such proposed Rule 144 Transfer, subject to the Company's determination that the
proposed Rule 144
2
<PAGE>
Transfer complies in all respects with Rule 144 under the Securities Act (or any
similar successor provision).
2.4 EFFECT OF VIOLATION. Any purported transfer of Common Stock or
Common Stock Equivalents which is not permitted by this Agreement or which is in
violation of such Agreement shall be void and of no force and effect whatsoever.
3. DEFINITIONS. As used herein, unless the context otherwise requires,
the following terms have the following respective meanings:
AFFILIATE: With respect to any Person, any other Person who, directly
or indirectly, is in control of, is controlled by, or is under common
control with, such Person. As used herein, the term "control" means
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
AGREEMENT: This Participation Rights Agreement, as the same may be
amended from time to time.
COMMON STOCK: As defined in the introductory paragraph of this
Agreement.
COMMON STOCK EQUIVALENTS: All options, rights or warrants to
purchase shares of Common Stock, all securities convertible into or
exchangeable for shares of Common Stock and all shares of Common Stock
into which shares of Common Stock of another class have been converted.
COMPANY: As defined in the introductory paragraph of this Agreement.
FULLY DILUTED COMMON STOCK: At any time, the then outstanding Common
Stock plus (without duplication) all shares of Common Stock issuable,
whether at such time or upon the passage of time or the occurrence of
future events, upon the exercise, conversion or exchange of all then
outstanding options, rights or warrants (including, without limitation, the
Warrants) or securities convertible into or exchangeable for Common Stock.
RULE 144 TRANSFER: As defined in Section 2.1.
PARTICIPATION OFFER: As defined in Section 2.2.
PARTICIPATION OFFER NOTICE: As defined in Section 2.2.
PERSON: A corporation, an association, a partnership, a limited
liability company, a business, an individual, a governmental or political
subdivision thereof or a governmental agency.
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<PAGE>
PURCHASE AGREEMENT: As defined in Section 1.
PURCHASER: As defined in the introductory paragraph of this
Agreement.
REQUIRED HOLDERS: Any holder or holders of 66% (by number of
shares of Common Stock issued or issuable) of the Warrants or of Common
Stock issued upon the exercise of Warrants.
SECURITIES ACT: The Securities Act of 1933, as amended, or any
successor statute thereto.
STOCKHOLDERS: The parties to this Agreement who are record or
beneficial owners of any shares of Common Stock.
TAGALONG HOLDER. Any holder of (i) Warrants or (ii) Common Stock
issued upon the exercise of Warrants.
TRANSFEROR: As defined in Section 2.2.
WARRANTS: As defined in Section 1.
4. AGREEMENT. A copy of this Agreement shall be filed with the permanent
records of the Company and shall be kept at all times at the principal place of
business of the Company.
5. FURTHER ASSURANCES. Each party agrees to do, or cause to be done,
such further acts and to execute and deliver, or to cause to be executed and
delivered, such further agreements, instruments, certificates and other
documents as may be necessary or appropriate to effectuate and carry out the
purposes of this Agreement.
6. AMENDMENTS AND WAIVERS. This Agreement may be amended and the
Stockholders and the Company may take any action herein prohibited or omit to
perform any act herein required to be performed, only if the prior written
consent of the Required Holders to such amendment, action or omission to act
shall have been obtained.
7. NOTICES. All communications provided for hereunder shall be sent by
first-class mail and (a) if addressed to a Tagalong Holder, addressed to such
Tagalong Holder in the manner set forth in the Purchase Agreement, or at such
other address as such Tagalong Holder shall have furnished to the other parties
hereto in writing, (b) if addressed to the Company, at 2501 Cedar Springs Road,
Suite 600, Dallas, Texas 75201, Attention: Chief Financial Officer, with a
courtesy copy to Schlanger, Mills, Mayer & Grossberg, L.L.P., 5847 San Felipe,
Suite 1700, Houston, Texas 77057, Attention: Kyle Longhofer, or at such other
address, or to the attention of such other officer, as the Company shall have
furnished to the other parties hereto in writing; PROVIDED, HOWEVER, that any
such communication to the Company may also, at the option of any of the other
parties hereto, be
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<PAGE>
either delivered to the Company at its address set forth above or to any officer
of the Company, or (c) if to any Stockholder, addressed to such Stockholder at
its address set forth in SCHEDULE I hereto, or at such other address as such
party shall have furnished to the other parties hereto in writing.
8. ASSIGNMENT. This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the parties hereto and their respective heirs,
executors, administrators, personal representatives, successors and assigns. In
addition, and whether or not any express assignment shall have been made, the
provisions of this Agreement which are for the benefit of the Purchaser shall
also be for the benefit of and enforceable by any subsequent Tagalong Holder.
9. DESCRIPTIVE HEADINGS. The descriptive headings of the several
sections and paragraphs of this Agreement are inserted for reference only and
shall not limit or otherwise affect the meaning hereof.
10. SPECIFIC PERFORMANCE. The parties hereto recognize and agree that
money damages may be insufficient to compensate the Tagalong Holders for
breaches by the Company or the Stockholders of the terms hereof and,
consequently, that the equitable remedy of specific performance of the terms
hereof will be available in the event of any such breach.
11. GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the laws of
the State of New York.
12. COUNTERPARTS. This Agreement may be executed simultaneously in any
number of counterparts, each of which shall be deemed an original, but all such
counterparts shall together constitute one and the same instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; SIGNATURE PAGES FOLLOW.]
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement, or
caused this Agreement to be executed and delivered by their respective officers
thereunto duly authorized, as of the date first above written.
EQUITY COMPRESSION SERVICES
CORPORATION
By:
-----------------------------------
Title:
THE PRUDENTIAL INSURANCE COMPANY OF
AMERICA
By:
-----------------------------------
Title: Vice President
HACL, LTD.
By: Six Dawaco, Inc.,
General Partner
By:
------------------------------
Title:
ENERGY INVESTORS JOINT VENTURE
By: HACL, Ltd.,
Managing Joint Venture Partner
By: Six Dawaco, Inc.,
General Partner
By:
-------------------------
Title:
---------------------------------------
Dennis W. Estis
<PAGE>
SCHEDULE I
STOCKHOLDERS
HACL, Ltd.
8080 N. Central Expressway
Suite 1600
Dallas, Texas 75206
Attention: Ray Davis
Energy Investors Joint Venture
c/o HACL, Ltd.
8080 N. Central Expressway
Suite 1600
Dallas, Texas 75206
Attention: Ray Davis
Dennis W. Estis
Ouachita Energy Corporation
228 Industrial Street
West Monroe, Louisiana 71292
<PAGE>
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of August 6, 1997, between
EQUITY COMPRESSION SERVICES CORPORATION, an Oklahoma corporation (the
"COMPANY"), and each of the persons that is a signatory hereto (the
"STOCKHOLDERS").
1. BACKGROUND. The Company, OEC Acquisition Corporation, a Delaware
corporation, Ouachita Energy Corporation, a Louisiana corporation, and Dennis W.
Estis have entered into that certain Agreement and Plan of Merger, dated as of
May 15, 1997 and as amended by that certain First Amendment to Agreement and
Plan of Merger dated as of July 30, 1997 (as amended, the "MERGER AGREEMENT"),
pursuant to which the Company has agreed, among other things, to issue and sell
an aggregate of 7,600,000 shares of the Company's Common Stock, par value $0.01
per share (the "COMMON STOCK") to the Stockholders.
2. REGISTRATION UNDER SECURITIES ACT, ETC.
2.1. REGISTRATION ON REQUEST.
(a) REQUEST BY HOLDERS OF REGISTRABLE SECURITIES. At any time after
August 1, 1999, the Majority Holders may request in writing that the Company
effect the registration under the Securities Act of all or part of such holders'
Registrable Securities. Such request shall specify the intended method of
disposition thereof and whether or not such requested registration is to be an
underwritten offering. Promptly after receiving such request, the Company will
give written notice of such requested registration to all other holders of
Registrable Securities and thereupon the Company will use its best efforts to
effect the registration under the Securities Act of:
(i) the Registrable Securities which the Company has been so
requested to register by such holders, and
(ii) all other Registrable Securities which the Company has been
requested to register by such other holders of Registrable Securities by
written request given to the Company within 30 days after the giving of
such written notice by the Company (which request shall specify the
intended method of disposition of such Registrable Securities), all to the
extent requisite to permit the disposition (in accordance with the intended
methods thereof as aforesaid) of the Registrable Securities so to be
registered.
Notwithstanding the foregoing, if at the time of any request to register
Registrable Securities pursuant to this Section 2.1(a) the Company is engaged
in, or has definitive plans to engage in, within 90 days of the time of such
request, a registered public offering, or is otherwise engaged
<PAGE>
in any other activity which, in the good faith determination of the Board of
Directors of the Company, would be materially adversely affected by the
requested registration to the material detriment of the Company, then the
Company may at its option direct that such request be delayed for a
reasonable period not in excess of (x) 120 days from the effective date or
termination of such offering or (y) 80 days from the date of completion or
termination of such other material activity, as the case may be, such right
to delay a request to be exercised by the Company not more than once in any
one-year period; PROVIDED, HOWEVER, that if the Company does not file or
abandons its plan for a registered offering or material transaction, then
such request shall promptly proceed.
(b) REGISTRATION OF OTHER SECURITIES. Whenever the Company shall
effect a registration pursuant to this Section 2.1 in connection with an
underwritten offering by one or more holders of Registrable Securities, no
securities other than Registrable Securities shall be included among the
securities covered by such registration unless (i) the managing underwriter of
such offering shall have advised each holder of Registrable Securities to be
covered by such registration in writing that the inclusion of such other
securities would not adversely affect such offering or (ii) the holders of all
Registrable Securities to be covered by such registration shall have consented
in writing to the inclusion of such other securities; PROVIDED, HOWEVER, that in
the event holders of Warrant Securities request to have any of their Warrant
Securities registered in connection with such underwritten offering in
accordance with Section 2.2(a) of that certain Registration Rights Agreement
dated as of ___________, 1997 between the Company and The Prudential Insurance
Company of America, such securities will be included in such offering subject to
the provisions of Section 2.1(h) hereof.
(c) REGISTRATION STATEMENT FORM. Registrations under this
Section 2.1 shall be on such appropriate registration form of the Commission
(i) as shall be selected by the Company and as shall be reasonably acceptable to
the Majority Holders and (ii) as shall permit the disposition of such
Registrable Securities in accordance with the intended method or methods of
disposition specified in their request for such registration. The Company
agrees to include in any such registration statement all information which
holders of Registrable Securities being registered shall reasonably request.
(d) EXPENSES. The Company will pay all Registration Expenses in
connection with any registration requested pursuant to this Section 2.1 if such
registration has been requested in relation to at least 10% (by number of
shares) of Registrable Securities; PROVIDED, however, that the Company shall in
all events and at all times be responsible for the fees and disbursements of
counsel for the Majority Holders in connection with the rendering of any
opinions requested by the Company or any underwriter. The Registration Expenses
(and underwriting discounts and commissions and transfer taxes, if any) in
connection with each other registration requested under this Section 2.1 shall
be allocated among all Persons on whose behalf securities of the Company are
included in such registration, on the basis of the respective amounts of the
securities then being registered on their behalf.
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<PAGE>
(e) EFFECTIVE REGISTRATION STATEMENT. A registration requested
pursuant to this Section 2.1 shall not be deemed to have been effected
(i) unless a registration statement with respect thereto has become effective,
(ii) if after it has become effective, such registration is interfered with by
any stop order, injunction or other order or requirement of the Commission or
other governmental agency or court for any reason, or (iii) if the conditions to
closing specified in the purchase agreement or underwriting agreement entered
into in connection with such registration are not satisfied. Notwithstanding
the foregoing, a registration that does not become effective after the Company
has filed a registration statement with respect thereto solely by reason of the
refusal of the holders of Registrable Securities requesting such registration to
proceed (other than any refusal in good faith to proceed based upon (A) the
advice of their counsel that the registration statement, or the prospectus
contained therein, contains an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then existing,
or that such registration statement or such prospectus, or the distribution
contemplated thereby, otherwise violates or would violate any applicable state
or federal securities laws, or (B) a material adverse change in the business,
condition (financial or otherwise), prospects or operations of the Company or
any of its subsidiaries of which the Company knows or, upon exercising
reasonable diligence, should have known) shall be deemed to have been effected
by the Company at the request of such holders of Registrable Securities.
(f) SELECTION OF UNDERWRITERS. If a requested registration pursuant
to this Section 2.1 involves an underwritten offering, the underwriter or
underwriters thereof shall be selected by the Company with the reasonable
approval of the Majority Holders.
(g) REGISTRATION RIGHTS OF OTHERS. If the Company has received a
request for registration of securities from the holders of other registration
rights prior to the date of a request made pursuant to this Section 2.1, and
such prior registration has not been completed, the registration requested
pursuant to this Section 2.1 shall not be allowed (and shall not count toward
the two requested registration limit set forth below), and the holders of such
Registrable Securities will be relegated to their incidental registration rights
described below in Section 2.2.
(h) PRIORITY IN REQUESTED REGISTRATIONS. If a requested registration
pursuant to this Section 2.1 involves an underwritten offering, and the managing
underwriter shall advise the Company in writing (with a copy to each holder of
Registrable Securities requesting registration) that, in its opinion, the number
of securities requested to be included in such registration exceeds the number
which can be sold in such offering within a price range acceptable to the
Majority Holders, the Company will include in such registration to the extent of
the number which the Company is so advised can be sold in such offering
Registrable Securities requested to be included in such registration, pro rata
among the holders of Registrable Securities requesting such registration on the
basis of the percentage of such Registrable Securities held by or issuable to
such holders. In connection with any registration as to which the provisions of
this clause (h) apply, no securities other than Registrable Securities shall be
covered by such registrations.
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<PAGE>
The holders of Registrable Securities shall be entitled to only two
requested registrations pursuant to this Section 2.1.
2.2. INCIDENTAL REGISTRATION.
(a) RIGHT TO INCLUDE REGISTRABLE SECURITIES. If the Company at any
time proposes to register any of its securities under the Securities Act (other
than by a registration on Form S-4 or S-8 or any successor or similar form and
other than pursuant to Section 2.1), whether or not for sale for its own
account, it will each such time give prompt written notice to all holders of
Registrable Securities of its intention to do so and of such holders' rights
under this Section 2.2. Upon the written request of any such holder made within
30 days after the receipt of any such notice (which request shall specify the
Registrable Securities intended to be disposed of by such holder and the
intended method of disposition thereof), the Company will use its best efforts
to effect the registration under the Securities Act of all Registrable
Securities which the Company has been so requested to register by the holders
thereof, PROVIDED that if, at any time after giving written notice of its
intention to register any securities and prior to the effective date of the
registration statement filed in connection with such registration, the Company
shall determine for any reason not to register or to delay registration of such
securities, the Company may, at its election, give written notice of such
determination to each holder of Registrable Securities and, thereupon, (i) in
the case of a determination not to register, shall be relieved of its obligation
to register any Registrable Securities in connection with such registration (but
not from its obligation to pay the Registration Expenses in connection
therewith), without prejudice, however, to the rights of any holder or holders
of Registrable Securities entitled to do so to request that such registration be
effected as a registration under Section 2.1, and (ii) in the case of a
determination to delay registering, shall be permitted to delay registering any
Registrable Securities, for the same period as the delay in registering such
other securities. No registration effected under this Section 2.2 shall be
deemed to have been effected pursuant to Section 2.1 or shall relieve the
Company of its obligation to effect any registration upon request under
Section 2.1. The Company will pay all Registration Expenses in connection with
each registration of Registrable Securities requested pursuant to this
Section 2.2.
(b) PRIORITY IN INCIDENTAL REGISTRATIONS. If (i) a registration
pursuant to this Section 2.2 involves an underwritten offering of the securities
so being registered, whether or not for sale for the account of the Company or a
holder of securities of the Company pursuant to such holder's right to demand
registration of such securities, to be distributed (on a firm commitment basis)
by or through one or more underwriters of recognized standing under underwriting
terms appropriate for such a transaction, (ii) the Registrable Securities so
requested to be registered for sale are not also to be included in such
underwritten offering (because the Company has not been requested so to include
such Registrable Securities pursuant to Section 2.4(b), or if so requested, is
not obligated to do so under Section 2.4(b)), and (iii) the managing
underwriter of such underwritten offering shall inform the Company and the
holders of Registrable Securities requesting such registration by letter of its
belief that the number of
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<PAGE>
securities requested to be included in such registration exceeds the number
which can be sold in (or during the time of) such offering, then the Company
may include all securities proposed by the Company to be sold for its own
account and for the account of any holder of securities of the Company
exercising a right to demand registration of such securities and may decrease
the number of Registrable Securities and other securities of the Company so
proposed to be sold and so requested to be included in such registration (pro
rata among the holders thereof on the basis of the percentage of the
securities of the Company sought to be included by such holders in such
registration) to the extent necessary to reduce the number of securities to
be included in the registration to the level recommended by the managing
underwriter.
2.3. REGISTRATION PROCEDURES. If and whenever the Company is required
to use its best efforts to effect the registration of any Registrable Securities
under the Securities Act as provided in Sections 2.1 and 2.2, the Company will
as expeditiously as possible:
(i) prepare and (as soon thereafter as possible or in any event no
later than 60 days after the end of the period within which requests for
registration may be given to the Company) file with the Commission the
requisite registration statement to effect such registration and thereafter
use its best efforts to cause such registration statement to become
effective, PROVIDED that the Company may discontinue any registration of
its securities which are not Registrable Securities (and, under the
circumstances specified in Section 2.2(a), its securities which are
Registrable Securities) at any time prior to the effective date of the
registration statement relating thereto;
(ii) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective and to comply with the provisions of the Securities Act
with respect to the disposition of all securities covered by such
registration statement until such time as all of such securities have been
disposed of in accordance with the intended methods of disposition by the
seller or sellers thereof set forth in such registration statement,
PROVIDED that the Company shall in no event be required to keep such
registration statement effective for more than 270 days;
(iii) furnish to each seller of Registrable Securities covered by
such registration statement such number of conformed copies of such
registration statement and of each such amendment and supplement thereto
(in each case including all exhibits), such number of copies of the
prospectus contained in such registration statement (including each
preliminary prospectus and any summary prospectus) and any other prospectus
filed under Rule 424 under the Securities Act, in conformity with the
requirements of the Securities Act, and such other documents, as such
seller may reasonably request;
(iv) use its best efforts to register or qualify all Registrable
Securities and other securities covered by such registration statement
under such other securities or blue sky laws of such jurisdictions as each
seller thereof shall reasonably request, to keep such
5
<PAGE>
registration or qualification in effect for so long as such registration
statement remains in effect, and take any other action which may be
reasonably necessary or advisable to enable such seller to consummate the
disposition in such jurisdictions of the securities owned by such seller,
except that the Company shall not for any such purpose be required to
qualify generally to do business as a foreign corporation in any
jurisdiction wherein it would not but for the requirements of this
subdivision (iv) be obligated to be so qualified or to consent to general
service of process in any such jurisdiction;
(v) use its best efforts to cause all Registrable Securities covered
by such registration statement to be registered with or approved by such
other governmental agencies or authorities as may be necessary to enable
the seller or sellers thereof to consummate the disposition of such
Registrable Securities;
(vi) furnish to each seller of Registrable Securities and each
Requesting Holder a signed counterpart, addressed to such seller and such
Requesting Holder (and underwriters, if any) of:
(x) an opinion of counsel for the Company, dated the effective date
of such registration statement (and, if such registration includes an
underwritten public offering, dated the date of the closing under the
underwriting agreement), reasonably satisfactory in form and substance
to such seller, and
(y) a "comfort" letter, dated the effective date of such registration
statement (and, if such registration includes an underwritten public
offering, dated the date of the closing under the underwriting
agreement), signed by the independent public accountants who have
certified the Company's financial statements included in such
registration statement,
covering substantially the same matters with respect to such registration
statement (and the prospectus included therein) and, in the case of the
accountants' letter, with respect to events subsequent to the date of such
financial statements, as are customarily covered in opinions of issuer's
counsel and in accountants' letters delivered to the underwriters in
underwritten public offerings of securities and, in the case of the
accountants' letter, such other financial matters, and, in the case of the
legal opinion, such other legal matters, as such seller or such Requesting
Holder, if any, may reasonably request;
(vii) notify each seller of Registrable Securities covered by such
registration statement and each Requesting Holder, at any time when a
prospectus relating thereto is required to be delivered under the
Securities Act, upon discovery that, or upon the happening of any event as
a result of which, the prospectus included in such registration statement,
as then in effect, includes an untrue statement of a material fact or omits
to state any material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the
circumstances under which they were made, and
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<PAGE>
at the request of any such seller or Requesting Holder promptly prepare and
furnish to such seller or Requesting Holder a reasonable number of copies
of a supplement to or an amendment of such prospectus as may be necessary
so that, as thereafter delivered to the purchasers of such securities,
such prospectus shall not include an untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading in the light of the
circumstances under which they were made;
(viii) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and make available to its security
holders, as soon as reasonably practicable, an earnings statement covering
the period of at least twelve months, but not more than eighteen months,
beginning with the first full calendar month after the effective date of
such registration statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act, and will furnish to each
such seller at least five business days prior to the filing thereof a copy
of any amendment or supplement to such registration statement or prospectus
and shall not file any thereof to which any such seller shall have
reasonably objected on the grounds that such amendment or supplement does
not comply in all material respects with the requirements of the Securities
Act or of the rules or regulations thereunder;
(ix) provide and cause to be maintained a transfer agent and
registrar for all Registrable Securities covered by such registration
statement from and after a date not later than the effective date of such
registration statement;
(x) use its best efforts to cause all Registrable Securities covered
by such registration statement to be listed on any securities exchange on
which any of the Registrable Securities are then listed or to be quoted by
the Nasdaq National Market or Nasdaq SmallCap Market (or any successor
thereto or any comparable system) on which any of the Registrable
Securities are then quoted; and
(xi) enter into such agreements and take such other actions as the
Majority Holders shall reasonably request in order to expedite or
facilitate the disposition of such Registrable Securities.
The Company may require each seller of Registrable Securities as to which any
registration is being effected to furnish the Company such information regarding
such seller and the distribution of such securities as the Company may from time
to time reasonably request in writing.
Each holder of Registrable Securities agrees by acquisition of such
Registrable Securities that upon receipt of any notice from the Company of the
happening of any event of the kind described in the subdivision (vii) of this
Section 2.3, such holder will forthwith discontinue such holder's disposition of
Registrable Securities pursuant to the registration statement relating to
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<PAGE>
such Registrable Securities until such holder's receipt of the copies of the
supplemented or amended prospectus contemplated by subdivision (vii) of this
Section 2.3.
2.4. UNDERWRITTEN OFFERINGS.
(a) REQUESTED UNDERWRITTEN OFFERINGS. If requested by the
underwriters for any underwritten offering of Registrable Securities pursuant to
a registration requested under Section 2.1, the Company will enter into an
underwriting agreement with such underwriters for such offering, such agreement
to be satisfactory in substance and form to each holder of such Registrable
Securities and the underwriters and to contain such representations and
warranties by the Company and such other terms as are generally prevailing in
agreements of this type, including, without limitation, indemnities to the
effect and to the extent provided in Section 2.7. The holders of Registrable
Securities to be distributed by such underwriters shall be parties to such
underwriting agreement and may, at their option, require that any or all of the
representations and warranties by, and the other agreements on the part of, the
Company to and for the benefit of such underwriters shall also be made to and
for the benefit of such holders of Registrable Securities and that any or all of
the conditions precedent to the obligations of such underwriters under such
underwriting agreement be conditions precedent to the obligations of such
holders of Registrable Securities. Any such holder of Registrable Securities
shall not be required to make any representations or warranties to or agreements
with the Company or the underwriters other than representations, warranties or
agreements regarding such holder, such holder's Registrable Securities and such
holder's intended method of distribution and any other representation required
by law.
(b) INCIDENTAL UNDERWRITTEN OFFERINGS. If the Company at any time
proposes to register any of its securities under the Securities Act as
contemplated by Section 2.2 and such securities are to be distributed by or
through one or more underwriters, the Company will, if requested by any holder
of Registrable Securities as provided in Section 2.2 and subject to the
provisions of Section 2.2(b), arrange for such underwriters to include all the
Registrable Securities to be offered and sold by such holder among the
securities to be distributed by such underwriters. The holders of Registrable
Securities to be distributed by such underwriters shall be parties to the
underwriting agreement between the Company and such underwriters and may, at
their option, require that any or all of the representations and warranties by,
and the other agreements on the part of, the Company to and for the benefit of
such underwriters shall also be made to and for the benefit of such holders of
Registrable Securities and that any or all of the conditions precedent to the
obligations of such underwriters under such underwriting agreement be conditions
precedent to the obligations of such holders of Registrable Securities. Any
such holder of Registrable Securities shall not be required to make any
representations or warranties to or agreements with the Company or the
underwriters other than representations, warranties or agreements regarding such
holder, such holder's Registrable Securities and such holder's intended method
of distribution and any other representation required by law.
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2.5. PREPARATION; REASONABLE INVESTIGATION. In connection with the
preparation and filing of each registration statement under the Securities Act
pursuant to this Agreement, the Company will give the holders of Registrable
Securities registered under such registration statement, their underwriters, if
any, and their respective counsel and accountants, the opportunity to
participate in the preparation of such registration statement, each prospectus
included therein or filed with the Commission, and each amendment thereof or
supplement thereto, and will give each of them such access to its books and
records and such opportunities to discuss the business of the Company with its
officers and the independent public accountants who have certified its financial
statements as shall be necessary, in the opinion of such holders' and such
underwriters' respective counsel, to conduct a reasonable investigation within
the meaning of the Securities Act.
2.6. RIGHTS OF REQUESTING HOLDERS. The Company will not file any
registration statement under the Securities Act, unless it shall first have
given to all holders of Registrable Securities at least 30 days prior written
notice thereof and, if so requested by the Majority Holders, shall have
consulted with such holders concerning the selection of underwriters, counsel
and independent accountants for the Company for such offering and registration.
If such holders shall so request within 30 days after such notice, each of them
shall be a "Requesting Holder" hereunder and shall have the rights of a
Requesting Holder provided in this section 2.6 and in sections 2.3, 2.5 and 2.7.
The Company further covenants that a Requesting Holder shall have the right
(a) to participate in the preparation of any such registration or comparable
statement and to require the insertion therein of material furnished to the
Company in writing, which in such Requesting Holder's judgment should be
included, and (b) at the Company's expense, to retain counsel and/or independent
public accountants to assist such Requesting Holder in such participation. In
addition, if any such registration statement refers to any Requesting Holder by
name or otherwise as the holder of any securities of the Company, then such
Requesting Holder shall have the right to require (a) the insertion therein of
language, in form and substance satisfactory to such Requesting Holder, to the
effect that the holding by such Requesting Holder of such securities does not
necessarily make such Requesting Holder a "controlling person" of the Company
within the meaning of the Securities Act and is not to be construed as a
recommendation by such Requesting Holder of the investment quality of the
Company's debt or equity securities covered thereby and that such holding does
not imply that such Requesting Holder will assist in meeting any future
financial requirements of the Company, or (b) in the event that such reference
to such Requesting Holder by name or otherwise is not required by the Securities
Act or any rules and regulations promulgated thereunder, the deletion of the
reference to such Requesting Holder.
2.7. INDEMNIFICATION.
(a) INDEMNIFICATION BY THE COMPANY. In the event of any registration
of any securities of the Company under the Securities Act, the Company will, and
hereby does, (i) in the case of any registration statement filed pursuant to
Section 2.1 or 2.2 indemnify and hold harmless the seller of any Registrable
Securities covered by such registration statement, its
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directors and officers, each other Person who participates as an underwriter
in the offering or sale of such securities and each other Person, if any, who
controls such seller or any such underwriter within the meaning of the
Securities Act, and (ii) in the case of any registration statement of the
Company, indemnify and hold harmless any Requesting Holder, its directors and
officers and each other Person, if any, who controls such Requesting Holder
within the meaning of the Securities Act, in each case against any losses,
claims, damages or liabilities, joint or several, to which such seller or
Requesting Holder or any such director or officer or underwriter or
controlling person may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out
of or are based upon any untrue statement or alleged untrue statement of any
material fact contained in any registration statement under which such
securities were registered under the Securities Act, any preliminary
prospectus, final prospectus or summary prospectus contained therein, or any
amendment or supplement thereto, or any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make
the statements therein not misleading or any other non-compliance or alleged
non-compliance with the Securities Act or the Underwriting Agreement, and the
Company will reimburse such seller, such Requesting Holder and each such
director, officer, underwriter and controlling person for any legal or any
other expenses reasonably incurred by them in connection with investigating
or defending any such loss, claim, liability, action or proceeding; PROVIDED
that the Company shall not be liable in any such case to the extent that any
such loss, claim, damage, liability (or action or proceeding in respect
thereof) or expense arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in such
registration statement, any such preliminary prospectus, final prospectus,
summary prospectus, amendment or supplement in reliance upon and in
conformity with written information furnished to the Company through an
instrument duly executed by such seller or Requesting Holder, as the case may
be, specifically stating that it is for use in the preparation thereof and,
PROVIDED FURTHER that the Company shall not be liable to any Person who
participates as an underwriter, in the offering or sale of Registrable
Securities or any other Person, if any, who controls such underwriter within
the meaning of the Securities Act, in any such case to the extent that any
such loss, claim, damage, liability (or action or proceeding in respect
thereof) or expense arises out of such Person's failure to send or give a
copy of the final prospectus, as the same may be then supplemented or amended,
to the Person asserting an untrue statement or alleged untrue statement or
omission or alleged omission at or prior to the written confirmation of the
sale of Registrable Securities to such Person if such statement or omission
was corrected in such final prospectus. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of such
seller or any such director, officer, underwriter or controlling person and
shall survive the transfer of such securities by such seller.
(b) INDEMNIFICATION BY THE SELLERS. The Company may require, as a
condition to including any Registrable Securities in any registration statement
filed pursuant to Section 2.3, that the Company shall have received an
undertaking satisfactory to it from the prospective seller of such securities,
to indemnify and hold harmless (in the same manner and to the same extent as set
forth in subdivision (a) of this Section 2.7) the Company, each director of the
Company,
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each officer of the Company and each other Person, if any, who controls the
Company within the meaning of the Securities Act, with respect to any
statement or alleged statement in or omission or alleged omission from such
registration statement, any preliminary prospectus, final prospectus or
summary prospectus contained therein, or any amendment or supplement thereto,
if such statement or alleged statement or omission or alleged omission was
made in reliance upon and in conformity with written information furnished to
the Company through an instrument duly executed by such seller specifically
stating that it is for use in the preparation of such registration statement,
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement. Such indemnity shall remain in full force and effect, regardless
of any investigation made by or on behalf of the Company or any such
director, officer or controlling Person and shall survive the transfer of
such securities by such seller.
(c) NOTICES OF CLAIMS, ETC. Promptly after receipt by an indemnified
party of notice of the commencement of any action or proceeding involving a
claim referred to in the preceding subdivisions of this Section 2.7, such
indemnified party will, if a claim in respect thereof is to be made against an
indemnifying party, give written notice to the latter of the commencement of
such action, PROVIDED that the failure of any indemnified party to give notice
as provided herein shall not relieve the indemnifying party of its obligations
under the preceding subdivisions of this Section 2.7, except to the extent that
the indemnifying party is actually prejudiced by such failure to give notice.
In case any such action is brought against an indemnified party, unless in such
indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist in respect of such claim, the
indemnifying party shall be entitled to participate in and to assume the defense
thereof, jointly with any other indemnifying party similarly notified to the
extent that it may wish, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party for any legal
or other expenses subsequently incurred by the latter in connection with the
defense thereof other than reasonable costs of investigation. No indemnifying
party shall, without the consent of the indemnified party, consent to entry of
any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect to such claim or
litigation.
(d) OTHER INDEMNIFICATION. Indemnification similar to that specified
in the preceding subdivisions of this Section 2.7 (with appropriate
modifications) shall be given by the Company and each seller of Registrable
Securities with respect to any required registration or other qualification of
securities under any Federal or state law or regulation of any governmental
authority other than the Securities Act.
(e) INDEMNIFICATION PAYMENTS. The indemnification required by this
Section 2.7 shall be made by periodic payments of the amount thereof during the
course of the investigation or defense as and when bills are received or
expense, loss, damage or liability is incurred.
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2.8. ADJUSTMENTS AFFECTING REGISTRABLE SECURITIES. The Company will
not effect or permit to occur any combination or subdivision of shares which
would adversely affect the ability of the holders of Registrable Securities to
include such Registrable Securities in any registration of its securities
contemplated by this Section 2 or the marketability of such Registrable
Securities under any such registration.
3. DEFINITIONS. As used herein, unless the context otherwise requires,
the following terms have the following respective meanings:
COMMISSION: The Securities and Exchange Commission or any other
Federal agency at the time administering the Securities Act.
COMMON STOCK: As defined in Section 1.
COMPANY: As defined in the introductory paragraph of this Agreement.
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. Reference to a
particular section of the Securities Exchange Act of 1934 shall include a
reference to the comparable section, if any, of any such similar Federal
statute.
HOLDER: Means the holder of any Registrable Securities, which
includes the original Holders and any assignee or transferee of Registrable
Securities.
MAJORITY HOLDERS: Means Holders holding in the aggregate fifty-one
percent (51%) or more of the total number of shares of Registrable
Securities at the time of such determination.
PERSON: A corporation, an association, a partnership, a business, an
individual, a governmental or political subdivision thereof or a
governmental agency.
MERGER AGREEMENT: As defined in Section 1.
REGISTRABLE SECURITIES: (a) The shares of Common Stock acquired by
the Stockholders pursuant to the Merger Agreement and (b) any securities
issued or issuable with respect to any such Common Stock by way of stock
dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization or
otherwise. As to any particular Registrable Securities, once issued such
securities shall cease to be Registrable Securities when (a) a registration
statement with respect to the sale of such securities shall have become
effective under the Securities Act and such securities shall have been
disposed of in accordance with such registration statement, (b) they shall
have been distributed to the public pursuant to Rule 144 (or any
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successor provision) under the Securities Act, (c) they shall have been
otherwise transferred, new certificates for them not bearing a legend
restricting further transfer shall have been delivered by the Company and
subsequent disposition of them shall not require registration or
qualification of them under the Securities Act or any similar state law then
in force, or (d) they shall have ceased to be outstanding.
REGISTRATION EXPENSES: All expenses incident to the Company's
performance of or compliance with Section 2, including, without limitation,
all registration, filing and National Association of Securities Dealers
fees, all fees and expenses of complying with securities or blue sky laws,
all word processing, duplicating and printing expenses, messenger and
delivery expenses, the fees and disbursements of counsel for the Company
and of its independent public accountants, including the expenses of any
special audits or "cold comfort" letters required by or incident to such
performance and compliance, the fees and disbursements incurred by the
holders of Registrable Securities to be registered (including the fees and
disbursements of any counsel and accountants retained by the Majority
Holders), premiums and other costs of policies of insurance against
liabilities arising out of the public offering of the Registrable
Securities being registered and any fees and disbursements of underwriters
customarily paid by issuers or sellers of securities, but excluding
underwriting discounts and commissions and transfer taxes, if any, PROVIDED
that, in any case where Registration Expenses are not to be borne by the
Company, such expenses shall not include salaries of Company personnel or
general overhead expenses of the Company, auditing fees, premiums or other
expenses relating to liability insurance required by underwriters of the
Company or other expenses for the preparation of financial statements or
other data normally prepared by the Company in the ordinary course of its
business or which the Company would have incurred in any event.
REQUESTING HOLDER: As defined in Section 2.6.
SECURITIES ACT: The Securities Act of 1933, or any similar Federal
statute, and the rules and regulations of the Commission thereunder, all as
of the same shall be in effect at the time. References to a particular
section of the Securities Act of 1933 shall include a reference to the
comparable section, if any, of any such similar Federal Statute.
STOCKHOLDERS: As defined in the introductory paragraph of this
Agreement.
WARRANT SECURITIES: (a) Any shares of Common Stock issued or issuable
upon exercise of any of the Common Stock Purchase Warrants Expiring
____________, 2007 issued in connection with that certain Subordinated Note
and Warrant Purchase Agreement dated as of __________, 1997 between the
Company and the Prudential Insurance Company of America and (b) any
securities issued or issuable with respect to any such Common Stock by way
of stock dividend or stock split or in connection with the combination of
shares, recapitalization, merger, consolidation or other reorganization
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<PAGE>
or otherwise. As to any particular Warrant Securities, once issued such
securities shall cease to be Warrant Securities when (a) a registration
statement with respect to the sale of such securities shall have become
effective under the Securities Act and such securities shall have been
disposed of in accordance with such registration statement, (b) they shall
have been distributed to the public pursuant to Rule 144 (or any successor
provision) under the Securities Act, (c) they shall have been otherwise
transferred, new certificates for them not bearing a legend restricting
further transfer shall have been delivered by the Company and subsequent
disposition of them shall not require registration or qualification of them
under the Securities Act or any similar state law then in force, or (d)
they shall have ceased to be outstanding.
4. RULE 144. If the Company shall have filed a registration statement
pursuant to the requirements of Section 12 of the Exchange Act or a registration
statement pursuant to the requirements of the Securities Act, the Company will
file the reports required to be filed by it under the Securities Act and the
Exchange Act and the rules and regulations adopted by the Commission thereunder
(or, if the Company is not required to file such reports, will, upon the request
of any holder of Registrable Securities, make publicly available other
information) and will take such further action as any holder of Registrable
Securities may reasonably request, all to the extent required from time to time
to enable such holder to sell Registrable Securities without registration under
the Securities Act within the limitation of the exemptions provided by
(a) Rule 144 under the Securities Act, as such Rule may be amended from time to
time or (b) any similar rule or regulation hereafter adopted by the Commission.
Upon the request of any holder of Registrable Securities, the Company will
deliver to such holder a written statement as to whether it has complied with
such requirements.
5. AMENDMENTS AND WAIVERS. This Agreement may be amended and the Company
may take any action herein prohibited or omit to perform any act herein required
to be performed by it, only if the Company shall have obtained the written
consent to such amendment, action or omission to act, of the Majority Holders.
Each holder of any Registrable Securities at the time or thereafter outstanding
shall be bound by any consent authorized by this Section 5, whether or not such
Registrable Securities shall have been marked to indicate such consent.
6. NOMINEES FOR BENEFICIAL OWNERS. In the event that any Registrable
Securities are held by a nominee for the beneficial owner thereof, the
beneficial owner thereof may, at its election, be treated as the holder of such
Registrable Securities for purposes of any request or other action by any holder
or holders of Registrable Securities pursuant to this Agreement or any
determination of any number or percentage of shares of Registrable Securities
held by any holder or holders of Registrable Securities contemplated by this
Agreement. If the beneficial owner of any Registrable Securities so elects, the
Company may require assurances reasonably satisfactory to it of such owner's
beneficial ownership of such Registrable Securities.
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7. NOTICES. All communications provided for hereunder shall be in
writing and sent by first-class mail and (a) if addressed to any Holder,
addressed to such Holder at the address of such Holder set forth on the
signature page hereof, or at such other address as such party shall have
furnished to the Company in writing, or (b) if addressed to the Company, at 2501
Cedar Springs Road, Suite 600, Dallas, Texas 75201, Attention: Chief Financial
Officer, with a courtesy copy to Schlanger, Mills, Mayer & Grossberg, L.L.P.,
5847 San Felipe, Suite 1700, Houston, Texas 77057, Attention: Kyle Longhofer,
or at such other address, or to the attention of such other officer, as the
Company shall have furnished to each holder of Registrable Securities at the
time outstanding; provided, HOWEVER, that any such communication to the Company
may also, at the option of any of the parties hereunder, be either delivered to
the Company at its address set forth above or to any officer of the Company.
8. ASSIGNMENT. This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the parties hereto and their respective
successors and assigns. In addition, and whether or not any express assignment
shall have been made, the provisions of this Agreement which are for the benefit
of the parties hereto other than the Company shall also be for the benefit of
and enforceable by any subsequent holder of any Registrable Securities, subject
to the provisions respecting the minimum numbers or percentages of shares of
Registrable Securities required in order to be entitled to certain rights, or
take certain actions contained herein.
9. DESCRIPTIVE HEADINGS. The descriptive headings of the several
sections and paragraphs of this Agreement are inserted for reference only and
shall not limit or otherwise affect the meaning hereof.
10. SPECIFIC PERFORMANCE. The parties hereto recognize and agree that
money damages may be insufficient to compensate the holders of any Registrable
Securities for breaches by the Company of the terms hereof and, consequently,
that the equitable remedy of specific performance of the terms hereof will be
available in the event of any such breach.
11. GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the laws of
the State of Texas.
12. COUNTERPARTS. This Agreement may be executed simultaneously in any
number of counterparts, each of which shall be deemed an original, but all such
counterparts shall together constitute one and the same instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; SIGNATURE PAGE FOLLOWS.]
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their respective officers thereunto duly authorized as
of the date first above written.
EQUITY COMPRESSION SERVICES CORPORATION
By:
---------------------------
Name:
Title:
STOCKHOLDERS:
/s/ DENNIS W. ESTIS /s/ LAVELLE IVY
- ---------------------------------- ----------------------------------
Dennis W. Estis Lavelle Ivy
P.O. Box 2457 P.O. Box 2457
West Monroe, LA 71294 West Monroe, LA 71294
/s/ BARBARA ESTIS /s/ TOMMY NICAR
- ---------------------------------- ----------------------------------
Barbara Estis Tommy Nicar
2705 Herbert Cole Dr. P.O. Box 2457
Monroe, LA 71201 West Monroe, LA 71294
/s/ VIRGINIA ESTIS /s/ LEONARD WOODALL
- ---------------------------------- ----------------------------------
Virginia Estis Leonard Woodall
8650 Southwestern Blvd. #2917 P.O. Box 2457
Dallas, TX 75206 West Monroe, LA 71294
/s/ BRETT ESTIS /s/ ANDY PAYNE
- ---------------------------------- ----------------------------------
Brett Estis Andy Payne
2126 Broussard P.O. Box 2457
Baton Rouge, LA 70808 West Monroe, LA 71294
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<PAGE>
THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS WARRANT
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT
BE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION
THEREFROM UNDER SUCH ACT.
EQUITY COMPRESSION SERVICES CORPORATION
COMMON STOCK PURCHASE WARRANT
NEW YORK, NEW YORK
NO. WA-1 JULY 31, 1997
EQUITY COMPRESSION SERVICES CORPORATION (the "COMPANY"), an Oklahoma
corporation, for value received, hereby certifies that THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA or its registered assigns is entitled to purchase from the
Company 1,000,000 duly authorized, validly issued, fully paid and nonassessable
shares of the Company's Common Stock, par value $0.01 per share (the "ORIGINAL
COMMON STOCK"), at an initial exercise price per share of $2.80, at any time or
from time to time after the date hereof and prior to 5:00 p.m., New York City
time, on the earlier of (i) July 31, 2007 or (ii) the later of (a) the date that
is six months after the Notes (as defined below) are prepaid in full pursuant to
paragraph 4B of the Purchase Agreement (as defined below) and (b) July 31, 2002
(the "EXPIRATION DATE"), all subject to the terms, conditions and adjustments
set forth below in this Warrant.
This Warrant is one of the Common Stock Purchase Warrants (the
"WARRANTS", such term to include all Warrants issued in substitution therefor)
originally issued in connection with the issue and sale by the Company of the
Company's 10.15% Secured Senior Subordinated Notes due July 31, 2007, in the
aggregate principal amount of $15,000,000 (the "NOTES") pursuant to that certain
Subordinated Note and Warrant Purchase Agreement dated of even date herewith
(the "PURCHASE AGREEMENT") between the Company and The Prudential Insurance
Company of America (the "PURCHASER"). The Warrants originally so issued
evidence rights to purchase an aggregate of 1,000,000 shares of Original Common
Stock, subject to adjustment as provided herein. The term "NOTES" as used
herein shall include each Note delivered pursuant to any provision of the
Purchase Agreement and each Note delivered in substitution or exchange for any
such Note pursuant to any such provision. Certain capitalized terms used in
this Warrant are defined in section 13.
<PAGE>
1. EXERCISE OF WARRANT.
1A. MANNER OF EXERCISE. This Warrant may be exercised by the holder
hereof, in whole or in part, during normal business hours on any Business Day on
or after the date hereof to and including the Expiration Date, by surrender of
this Warrant, with the form of subscription at the end hereof (or a reasonable
facsimile thereof) duly executed by such holder, to the Company at its principal
office (or, if such exercise shall be in connection with an underwritten public
offering of shares of Common Stock (or Other Securities) subject to this
Warrant, at the location at which the underwriters shall have agreed to accept
delivery thereof), 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 Original Common Stock (without giving
effect to any adjustment therein) designated in such form of subscription by (b)
$2.80. The number of duly authorized, validly issued, fully paid and
nonassessable shares of Common Stock which the holder of this Warrant shall be
entitled to receive upon each exercise hereof shall be determined by multiplying
the number of shares of Common Stock which would otherwise (but for the
provisions of section 2) be issuable upon such exercise, as designated by the
holder hereof pursuant to this section 1A, by a fraction of which (a) the
numerator is $2.80 and (b) the denominator is the Exercise Price in effect on
the date of such exercise. The "EXERCISE PRICE" shall initially be $2.80 per
share, shall be adjusted and readjusted from time to time as provided in section
2 and, as so adjusted and readjusted, shall remain in effect until a further
adjustment or readjustment thereof is required by section 2.
1B. WHEN EXERCISE EFFECTIVE. Each exercise of this Warrant shall be
deemed to have been effected and the Exercise Price shall be determined
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 1A,
and at such time the person or persons in whose name or names any certificate or
certificates for shares of Original Common Stock (or Other Securities) shall be
issuable upon such exercise as provided in section 1C shall be deemed to have
become the holder or holders of record thereof.
1C. DELIVERY OF STOCK CERTIFICATES, ETC. Promptly after the exercise
of this Warrant, in whole or in part, and in any event within five Business Days
thereafter (unless such exercise shall be in connection with an underwritten
public offering of shares of Common Stock (or Other Securities) subject to this
Warrant, in which event concurrently with such exercise), the Company at its
expense will cause to be issued in the name of and delivered to the holder
hereof or, subject to section 8, as such holder may direct,
(a) 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, and
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(b) in case such exercise is in part only, a new Warrant or
Warrants of like tenor, specifying the aggregate on the face or faces
thereof the number of shares of Common Stock equal to the number of such
shares specified on the face of this Warrant minus the number of such
shares designated by the holder upon such exercise as provided in section
1A.
1D. COMPANY TO REAFFIRM OBLIGATIONS. The Company will, at the time
of or at any time after each exercise of this Warrant, upon the request of the
holder hereof or of any shares of Common Stock (or Other Securities) issued upon
such exercise, acknowledge in writing its continuing obligation to afford to
such holder all rights to which such holder shall continue to be entitled after
such exercise in accordance with the terms of this Warrant, PROVIDED that if any
such holder shall fail to make any such request, the failure shall not affect
the continuing obligation of the Company to afford such rights to such holder.
1E. FRACTIONAL SHARES. No fractional shares shall be issued upon
exercise of this Warrant and no payment or adjustment shall be made upon any
exercise on account of any cash dividends (except as provided in section 2B) on
the Common Stock or Other Securities issued upon such conversion. If any
fractional interest in a share of Common Stock would, except for the provisions
of the first sentence of this section 1E, be deliverable upon the exercise of
this Warrant, the Company shall, in lieu of delivering the fractional share
therefor, pay to the holder exercising this Warrant an amount in cash equal to
the Market Price of such fractional interest.
1F. CASHLESS EXERCISE. As an alternative to exercise of this
Warrant by payment in cash (or by certified or official bank check), as provided
above in section 1A, the holder of this Warrant may exercise its right to
purchase some or all of the shares of Common Stock pursuant to this Warrant, on
a net basis without the exchange of any funds (a "CASHLESS EXERCISE"), such that
the holder hereof receives that number of shares of Common Stock subscribed to
pursuant to this Warrant less that number of shares of Common Stock, valued at
Market Price, at the time of exercise equal to the aggregate Exercise Price that
would otherwise have been paid by the holder of this Warrant for such shares of
Common Stock.
2. PROTECTION AGAINST DILUTION OR OTHER IMPAIRMENT OF RIGHTS; ADJUSTMENT
OF EXERCISE PRICE.
2A. ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK.
(a) In case the Company, at any time or from time to time after
July 31, 1997 (the "INITIAL DATE"), shall issue or sell Additional Shares
of Common Stock (including Additional Shares of Common Stock deemed to be
issued pursuant to section 2C or 2D) without consideration or for a
consideration per share (determined pursuant to section 2E) less than the
Market Price in effect on the date of and immediately prior to such issue
or sale, then, and in each such case (other than in a public or private
offering described in clause (b) below), subject to section 2H, the
Exercise Price shall be reduced, concurrently
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<PAGE>
with such issue or sale, to a price (calculated to the nearest .001 of a
cent) determined by multiplying such Exercise Price by a fraction,
(i) the numerator of which shall be (x) the number of
shares of Common Stock outstanding immediately prior to such
issue or sale PLUS (y) the number of shares of Common Stock which
the aggregate consideration received by the Company for the total
number of such Additional Shares of Common Stock so issued or
sold would purchase at such Market Price, and
(ii) the denominator of which shall be the number of
shares of Common Stock outstanding immediately after such issue
or sale.
(b) In case the Company, at any time or from time to time during the
twelve-month period commencing on the Initial Date, shall issue or sell
Additional Shares of Common Stock in a public or private offering for a
consideration per share (determined pursuant to section 2E) less than the
greater of the Exercise Price or the Market Price in effect, in each case,
on the date of and immediately prior to such issue or sale, then, and in
each such case, subject to section 2H, the Exercise Price shall be reduced,
concurrently with such issue or sale, to a price (calculated to the nearest
.001 of a cent) determined by multiplying such Exercise Price by a
fraction,
(i) the numerator of which shall be (x) the number of
shares of Common Stock outstanding immediately prior to such
issue or sale PLUS (y) the number of shares of Common Stock which
the aggregate consideration received by the Company for the total
number of such Additional Shares of Common Stock so issued or
sold would purchase at the greater of such Market Price or such
Exercise Price, and
(ii) the denominator of which shall be the number of
shares of Common Stock outstanding immediately after such issue
or sale,
PROVIDED that the Exercise Price shall not be reduced pursuant to this
clause (b) with respect to up to $5,000,000 of net sales proceeds received
by the Company from the issuance or sale of Additional Shares of Common
Stock issued or sold in a public or private offering prior to June 30,
1998.
(c) For purposes of this section 2A, (i) immediately after any
Additional Shares of Common Stock are deemed to have been issued pursuant
to section 2C or 2D, such Additional Shares shall be deemed to be
outstanding, and (ii) treasury shares shall not be deemed to be
outstanding.
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2B. EXTRAORDINARY DIVIDENDS AND DISTRIBUTIONS. In case the Company
at any time or from time to time after the date hereof shall declare, order, pay
or make a dividend or other distribution (including, without limitation, any
distribution of other or additional stock or other securities or property or
Options by way of dividend or spin-off, reclassification, recapitalization or
similar corporate rearrangement and any redemption or acquisition of any such
stock or Options on the Common Stock) other than (a) a dividend payable in
Additional Shares of Common Stock or in Options for Common Stock or (b) a
regular periodic dividend payable in cash and permitted to be made under the
Dividend Restrictions, then, and in each such case, the Company shall pay over
to the holder of this Warrant, on the date on which such dividend or other
distribution is paid to the holders of Common Stock, the securities and other
property (including cash) which such holder would have received if such holder
had exercised this Warrant immediately prior to the record date fixed in
connection with such dividend or other distribution.
2C. TREATMENT OF OPTIONS AND CONVERTIBLE SECURITIES. In case the
Company, at any time or from time to time after the date hereof, shall issue,
sell, grant or assume, or shall fix a record date for the determination of
holders of any class of securities entitled to receive, any Options or
Convertible Securities, whether or not such Options or the right to convert or
exchange any such Convertible Securities are immediately exercisable, then, and
in each such case, the maximum number of Additional Shares of Common Stock (as
set forth in the instrument relating thereto, without regard to any provisions
contained therein for a subsequent adjustment of such number) issuable upon the
exercise of such Options or, in the case of Convertible Securities and Options
therefor, issuable upon the conversion or exchange of such Convertible
Securities (or the exercise of such Options for Convertible Securities and
subsequent conversion or exchange of the Convertible Securities issued), shall
be deemed to be Additional Shares of Common Stock issued as of the time of such
issue, sale, grant or assumption or, in case such a record date shall have been
fixed, as of the close of business on such record date, PROVIDED, that such
Additional Shares of Common Stock shall not be deemed to have been issued unless
the consideration per share (determined pursuant to section 2E) of such shares
would be less than the Market Price in effect on the date of and immediately
prior to such issue, sale, grant or assumption or immediately prior to the close
of business on such record date or, if the Common Stock trades on an ex-dividend
basis, on the date prior to the commencement of ex-dividend trading, as the case
may be, and PROVIDED, FURTHER, that in any such case in which Additional Shares
of Common Stock are deemed to be issued,
(a) if an adjustment of the Exercise Price shall be made upon the
fixing of a record date as referred to in the first sentence of this
section 2C, no further adjustment of the Exercise Price shall be made as a
result of the subsequent issue or sale of any Options or Convertible
Securities for the purpose of which such record date was set;
(b) no further adjustment of the Exercise Price shall be made upon
the subsequent issue or sale of Additional Shares of Common Stock or
Convertible Securities upon the exercise of such Options or the conversion
or exchange of such Convertible Securities;
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<PAGE>
(c) if such Options or Convertible Securities by their terms provide,
with the passage of time or otherwise, for any change in the consideration
payable to the Company, or change in the number of Additional Shares of
Common Stock issuable, upon the exercise, conversion or exchange thereof
(by change of rate or otherwise), the Exercise Price computed upon the
original issue, sale, grant or assumption thereof (or upon the occurrence
of the record date with respect thereto), and any subsequent adjustments
based thereon, shall, upon any such change becoming effective, be
recomputed to reflect such change insofar as it affects such Options, or
the rights of conversion or exchange under such Convertible Securities,
which are outstanding at such time;
(d) upon the expiration of any such Options or of the rights of
conversion or exchange under any such Convertible Securities which shall
not have been exercised (or upon purchase by the Company and cancellation
or retirement of any such Options which shall not have been exercised or of
any such Convertible Securities the rights of conversion or exchange under
which shall not have been exercised), the Exercise Price computed upon the
original issue, sale, grant or assumption thereof (or upon the occurrence
of the record date with respect thereto), and any subsequent adjustments
based thereon, shall, upon such expiration (or such cancellation or
retirement, as the case may be), be recomputed as if:
(i) in the case of Options for Common Stock or in the case of
Convertible Securities, the only Additional Shares of Common Stock
issued or sold (or deemed issued or sold) were the Additional Shares
of Common Stock, if any, actually issued or sold upon the exercise of
such Options or the conversion or exchange of such Convertible
Securities and the consideration received therefor was (x) an amount
equal to (A) the consideration actually received by the Company for
the issue, sale, grant or assumption of all such Options, whether or
not exercised, PLUS (B) the consideration actually received by the
Company upon such exercise, MINUS (C) the consideration paid by the
Company for any purchase of such Options which were not exercised, or
(y) an amount equal to (A) the consideration actually received by the
Company for the issue, sale, grant or assumption of all such
Convertible Securities which were actually converted or exchanged,
PLUS (B) the additional consideration, if any, actually received by
the Company upon such conversion or exchange, MINUS (C) the excess, if
any, of the consideration paid by the Company for any purchase of such
Convertible Securities, the rights of conversion or exchange under
which were not exercised, over an amount that would be equal to the
fair value (as determined in good faith by the Board of Directors of
the Company) of the Convertible Securities so purchased if such
Convertible Securities were not convertible into or exchangeable for
Additional Shares of Common Stock, and
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<PAGE>
(ii) in the case of Options for Convertible Securities, only
the Convertible Securities, if any, actually issued or sold upon the
exercise of such Options were issued at the time of the issue, sale,
grant or assumption of such Options, and the consideration received by
the Company for the Additional Shares of Common Stock deemed to have
then been issued was an amount equal to (x) the consideration actually
received by the Company for the issue, sale, grant or assumption of
all such Options, whether or not exercised, PLUS (y) the consideration
deemed to have been received by the Company (pursuant to section 2E)
upon the issue or sale of the Convertible Securities with respect to
which such Options were actually exercised, MINUS (z) the
consideration paid by the Company for any purchase of such Options
which were not exercised; and
(e) no recomputation pursuant to subsection (c) or (d) above shall
have the effect of increasing the Exercise Price then in effect by an
amount in excess of the amount of the adjustment thereof originally made in
respect of the issue, sale, grant or assumption of such Options or
Convertible Securities.
2D. TREATMENT OF STOCK DIVIDENDS, STOCK SPLITS, ETC. In case the
Company, at any time or from time to time after the date hereof, shall declare
or pay any dividend or other distribution on any class of securities of the
Company payable in shares of Common Stock, or shall effect a subdivision of the
outstanding shares of Common Stock into a greater number of shares of Common
Stock (by reclassification or otherwise than by payment of a dividend in Common
Stock), then, and in each such case, Additional Shares of Common Stock shall be
deemed to have been issued (a) in the case of any such dividend or other
distribution, immediately after the close of business on the record date for the
determination of holders of any class of securities entitled to receive such
dividend or other distribution, or (b) in the case of any such subdivision, at
the close of business on the day immediately prior to the day upon which such
corporate action becomes effective.
2E. COMPUTATION OF CONSIDERATION. For the purposes of this Warrant:
(a) The consideration for the issue or sale of any Additional Shares
of Common Stock or for the issue, sale, grant or assumption of any Options
or Convertible Securities, irrespective of the accounting treatment of such
consideration,
(i) insofar as it consists of cash, shall be computed as the
amount of cash received by the Company, and insofar as it consists of
securities or other property, shall be computed as of the date
immediately preceding such issue, sale, grant or assumption as the
fair value (as determined in good faith by the Board of Directors of
the Company) of such consideration (or, if such consideration is
received for the issue or sale of Additional Shares of Common Stock
and the Market Price thereof is less than the fair value (as
determined in good faith by the Board of Directors of the Company) of
such consideration, then such consideration
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<PAGE>
shall be computed as the Market Price of such Additional Shares of
Common Stock), in each case without deducting any expenses paid or
incurred by the Company, any commissions or compensation paid or
concessions or discounts allowed to underwriters, dealers or other
performing similar services and any accrued interest or dividends in
connection with such issue or sale, and
(ii) in case Additional Shares of Common Stock are issued or
sold or Options or Convertible Securities are issued, sold, granted or
assumed together with other stock or securities or other assets of the
Company for a consideration which covers both, shall be the proportion
of such consideration so received, computed as provided in clause (i)
above, allocable to such Additional Shares of Common Stock or Options
or Convertible Securities, as the case may be, all as determined in
good faith by the Board of Directors or the Company.
(b) All Additional Shares of Common Stock, Options or Convertible
Securities issued in payment of any dividend or other distribution on any
class of stock of the Company and all Additional Shares of Common Stock
issued to effect a subdivision of the outstanding shares of Common Stock
into a greater number of shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in Common Stock) shall be deemed to
have been issued without consideration.
(c) Additional Shares of Common Stock deemed to have been issued for
consideration pursuant to section 2C, relating to Options and Convertible
Securities, shall be deemed to have been issued for a consideration per
share determined by dividing
(i) the total amount, if any, received and receivable by the
Company as consideration for the issue, sale, grant or assumption of
the Options or Convertible Securities in question, PLUS the minimum
aggregate amount of additional consideration (as set forth in the
instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such consideration)
payable to the Company upon the exercise in full of such Options or
the conversion or exchange of such Convertible Securities or, in the
case of Options for Convertible Securities, the exercise of such
Options for Convertible Securities and the conversion or exchange of
such Convertible Securities, in each case computing such consideration
as provided in the foregoing subsection (a),
by
(ii) the maximum number of shares of Common Stock (as set forth
in the instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such number) issuable
upon the exercise of such Options or the conversion or exchange of
such Convertible Securities.
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<PAGE>
2F. ADJUSTMENTS FOR COMBINATIONS, ETC. In case the outstanding
shares of Common Stock shall be combined or consolidated, by reclassification or
otherwise, into a lesser number of shares of Common Stock, the Exercise Price in
effect immediately prior to such combination or consolidation shall,
concurrently with the effectiveness of such combination or consolidation, be
proportionately increased.
2G. DILUTION IN CASE OF OTHER SECURITIES. In case any Other
Securities shall be issued or sold or shall become subject to issue or sale upon
the conversion or exchange of any stock (or Other Securities) of the Company (or
any issuer of Other Securities or any other Person referred to in section 2I) or
to subscription, purchase or other acquisition pursuant to any Options issued or
granted by the Company (or any such other issuer or Person) for a consideration
such as to dilute, on a basis to which the standards established in the other
provisions of this Warrant do not apply, the exercise rights granted by this
Warrant, then, and in each such case, the computations, adjustments and
readjustments provided for in this Warrant with respect to the Exercise Price
shall be made as nearly as possible in the manner so provided and applied to
determine the amount of Other Securities from time to time receivable upon the
exercise of this Warrant, so as to protect the holder of this Warrant against
the effect of such dilution.
2H. MINIMUM ADJUSTMENT OF EXERCISE PRICE. If the amount of any
adjustment of the Exercise Price required hereunder would be less than one
percent of the Exercise Price in effect at the time such adjustment is otherwise
so required to be made, such amount shall be carried forward and adjustment with
respect thereto made at the time of and together with any subsequent adjustment
which, together with such amount and any other amount or amounts so carried
forward, shall aggregate at least one percent of such Exercise Price; PROVIDED,
that upon the exercise of this Warrant, all adjustments carried forward and not
theretofore made up to and including the date of such exercise shall be made to
the nearest .001 of a cent.
2I. CHANGES IN COMMON STOCK. 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 of 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 different
securities of the Company or 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 (excluding, however, any
transaction in which the Company, without more, reincorporates in another
jurisdiction) or in which the Common Stock 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 or Nasdaq SmallCap Market or
any successor thereto or comparable system (each such transaction being herein
called the "TRANSACTION", the date on which the Transaction is first announced
to the public being herein called the "ANNOUNCEMENT DATE", the date of
consummation of the Transaction being herein called the "CONSUMMATION DATE", the
Company (in the case of a recapitalization of the Common Stock or any other such
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
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"ACQUIRING COMPANY", and the common stock (or equivalent equity interest) of the
Acquiring Company being herein called the "ACQUIRER'S COMMON STOCK", except that
if the Acquiring Company shall not meet the requirements set forth in
subsections (d), (e) and (f) below and a corporation which directly or
indirectly controls the Acquiring Company (a "PARENT") meets such requirements,
"Acquiring Company" shall refer to such Parent and "Acquirer's Common Stock"
shall refer to such Parent's common stock (or equivalent equity interests))
then, as a condition of the consummation of the Transaction, lawful and adequate
provisions (in form satisfactory to the Required Holders) shall be made so that
the holder of this Warrant, upon the exercise thereof at any time on or after
the Consummation Date (but subject, in the case of an election pursuant to
subsection (b) or (c) below, to the time limitation hereinafter provided for
such election),
(a) shall be entitled to receive, and this Warrant shall thereafter
represent the right to receive, in lieu of the Common Stock issuable upon
such exercise prior to the Consummation Date, shares of the Acquirer's
Common Stock at an Exercise Price per share equal to the lesser of (i) the
Exercise Price in effect immediately prior to the Consummation Date
multiplied by a fraction the numerator of which is the Market Price per
share of the Acquirer's Common Stock determined as of the Consummation Date
and the denominator of which is the Market Price per share of the Common
Stock determined as of the Consummation Date, or (ii) the Market Price per
share of the Acquirer's Common Stock determined as of the Consummation Date
(subject in each case to adjustments from and after the Consummation Date
as nearly equivalent as possible to the adjustments provided for in this
Warrant),
or at the election of the holder of this Warrant pursuant to notice given
to the Company within six months after the Consummation Date,
(b) shall be entitled to receive, and this Warrant shall thereafter
represent the right to receive, in lieu of each share of Common Stock
issuable upon such exercise prior to the Consummation Date, either (i) the
greatest amount of cash, securities or other property given to any
shareholder in consideration for any share of Common Stock at any time
during the period from and after the Announcement Date to and including the
Consummation Date by the Acquiring Company, the Company or any Affiliate of
either thereof, or (ii) an amount in cash equal to the product obtained by
multiplying (x) the number of shares of the Acquirer's Common Stock
purchasable upon the exercise or conversion of such Warrant as shall result
from adjustments thereto that would have been required pursuant to
subsection (a) above times (y) the Market Price per share for the
Acquirer's Common Stock, determined as of the day within the period from
and after the Announcement Date to and including the Consummation Date for
which the amount determined as provided in the definition of Market Price
shall have been the greatest, or, if neither the Acquiring Company nor the
Parent meets the requirements set forth in subsections (d), (e) and (f)
below, at the election of the holder of this Warrant pursuant to notice
given to the Company within six months after the Consummation Date; or
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<PAGE>
(c) shall be entitled to receive, within 30 days after such election,
in full satisfaction of the exercise rights afforded under this Warrant to
the holder thereof, 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 Required Holders with the approval of the Company, such fair market
value to be determined with regard to all material relevant factors but
without regard to any negative effects on such value of the Transaction.
The Company agrees to obtain, and deliver to each holder of Warrants a copy of
the determination of an independent investment banker (selected by the Required
Holders with the approval of the Company) necessary to permit elections under
subsection (c) above within 15 days after the Consummation Date of any
Transaction to which subsection (c) is applicable.
The requirements referred to above in the case of the Acquiring
Company or its Parent are that immediately after the Consummation Date:
(d) it is 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 or any successor thereto or comparable system, and such
common stock continues to meet such requirements for such listing or
quotation,
(e) it is required to file, and in each of its three fiscal years
immediately preceding the Consummation Date has filed, reports with the
Commission pursuant to Section 13 or 15(d) of the Exchange Act, and
(f) in the case of the Parent, such Parent is required to include the
Acquiring Company in the consolidated financial statements contained in the
Parent's Annual Report on Form 10-K as filed with the Commission and is not
itself included in the consolidated financial statements of any other
Person (other than its consolidated subsidiaries).
Notwithstanding anything contained herein to the contrary, the Company shall not
effect any Transaction unless prior to the consummation thereof each corporation
or entity (other than the Company) which may be required to deliver any
securities or other property upon the exercise of Warrants shall assume, by
written instrument delivered to each holder of Warrants, the obligation to
deliver to such holder such securities or other property as to which, in
accordance with the foregoing provisions, such holder may be entitled, and such
corporation or entity shall have similarly delivered to each holder of Warrants
an opinion of counsel for such corporation or entity, satisfactory to each
holder of Warrants, which opinion shall state that all the outstanding Warrants,
shall thereafter continue in full force and effect and shall be enforceable
against such corporation or entity in accordance with the terms hereof and
thereof, together with such other matters as such holders may reasonably
request.
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2J. CERTAIN ISSUES EXCEPTED. Anything herein to the contrary
notwithstanding, the Company shall not be required to make any adjustment of the
Exercise Price in the case of the issuance of the Warrants and the issuance of
shares of Common Stock issuable upon exercise of the Warrants.
2K. NOTICE OF ADJUSTMENT. Upon the occurrence of any event requiring
an adjustment of the Exercise Price, then and in each such case the Company
shall promptly deliver to the holder of this Warrant an Officer's Certificate
stating the Exercise Price resulting from such adjustment and the increase or
decrease, if any, in the number of shares of Common Stock issuable upon the
exercise of this Warrant, setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based. Within 90 days
after each fiscal year in which any such adjustment shall have occurred, or
within 30 days after any request therefor by the holder of this Warrant stating
that such holder contemplates the exercise of such Warrant, the Company will
obtain and deliver to the holder of this Warrant the opinion of its regular
independent auditors or another firm of independent public accountants of
recognized national standing selected by the Company's Board of Directors, which
opinion shall confirm the statements in the most recent Officer's Certificate
delivered under this section 2K.
2L. OTHER NOTICES. In case at any time:
(a) the Company shall declare to the holders of Common Stock any
dividend other than a regular periodic cash dividend or any periodic cash
dividend in excess of 115% of the cash dividend for the comparable fiscal
period in the immediately preceding fiscal year;
(b) the Company shall declare or pay any dividend upon Common Stock
payable in stock or make any special dividend or other distribution (other
than regular cash dividends) to the holders of Common Stock;
(c) the Company shall offer for subscription pro rata to the holders
of Common Stock any additional shares of stock of any class or other
rights;
(d) there shall be any capital reorganization, or reclassification of
the capital stock of the Company, or consolidation or merger of the Company
with, or sale of all or substantially all of its assets to, another
corporation or other entity;
(e) there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Company;
(f) there shall be made any tender offer for any shares of capital
stock of the Company; or
(g) there shall be any other Transaction;
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<PAGE>
then, in any one or more of such cases, the Company shall give to the holder of
this Warrant (i) at least 15 days prior to any event referred to in subsection
(a) or (b) above, at least 30 days prior to any event referred to in subsection
(c), (d) or (e) above, and within five days after it has knowledge of any
pending tender offer or other Transaction, written notice of the date on which
the books of the Company shall close or a record shall be taken for such
dividend, distribution or subscription rights or for determining rights to vote
in respect of any such reorganization, reclassification, consolidation, merger,
sale, dissolution, liquidation, winding-up or Transaction or the date by which
shareholders must tender shares in any tender offer and (ii) in the case of any
such reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation, winding-up or tender offer or Transaction known to the Company, at
least 30 days prior written notice of the date (or, if not then known, a
reasonable approximation thereof by the Company) when the same shall take place.
Such notice in accordance with the foregoing clause (i) shall also specify, in
the case of any such dividend, distribution or subscription rights, the date on
which the holders of Common Stock shall be entitled thereto, and such notice in
accordance with the foregoing clause (ii) shall also specify the date on which
the holders of Common Stock shall be entitled to exchange their Common Stock for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation,
winding-up, tender offer or Transaction, as the case may be. Such notice shall
also state that the action in question or the record date is subject to the
effectiveness of a registration statement under the Securities Act or to a
favorable vote of security holders, if either is required.
2M. CERTAIN EVENTS. If any event occurs as to which, in the good
faith judgment of the Board of Directors of the Company, the other provisions of
this Warrant are not strictly applicable or if strictly applicable would not
fairly protect the exercise rights of the holders of the Warrants in accordance
with the essential intent and principles of such provisions, then the Board of
Directors of the Company shall appoint its regular independent auditors or
another firm of independent public accountants of recognized national standing
which shall give their opinion upon the adjustment, if any, on a basis
consistent with such essential intent and principles, necessary to preserve,
without dilution, the rights of the holders of the Warrants. Upon receipt of
such opinion, the Board of Directors of the Company shall forthwith make the
adjustments described therein; PROVIDED, that no such adjustment shall have the
effect of increasing the Exercise Price as otherwise determined pursuant to this
Warrant. The Company may make such reductions in the Exercise Price as it deems
advisable, including any reductions necessary to ensure that any event treated
for Federal income tax purposes as a distribution of stock or stock rights not
be taxable to recipients.
2N. PROHIBITION OF CERTAIN ACTIONS. The Company will not, by
amendment of its certificate of incorporation or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed hereunder by the
Company, but will at all times in good faith assist in the carrying out of all
the provisions of this Warrant and in the taking of all such action as may
reasonably be requested by the holder of this Warrant in order to protect the
exercise privilege of the holder of this Warrant against
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dilution or other impairment, consistent with the tenor and purpose of this
Warrant. Without limiting the generality of the foregoing, the Company (a) will
not increase the par value of any shares of Common Stock receivable upon the
exercise of this Warrant above the Exercise Price then in effect, (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
upon the exercise of all Warrants from time to time outstanding, (c) will not
take any action which results in any adjustment of the Exercise Price if the
total number of shares of Common Stock or Other Securities issuable after the
action upon the exercise of all of the Warrants 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 issue upon such
conversion, and (d) will not issue any capital stock of any class which is
preferred as to dividends or as to the distribution of assets upon voluntary or
involuntary dissolution, liquidation or winding-up, unless the rights of the
holders thereof shall be limited to a fixed sum or percentage (or floating rate
related to market yields) of par value or stated value in respect of
participation in dividends and a fixed sum or percentage of par value or stated
value in any such distribution of assets.
3. STOCK TO BE RESERVED. The Company will at all times reserve and keep
available out of the authorized Common Stock, solely for the purpose of issue
upon the exercise of the Warrants as herein provided, such number of shares of
Common Stock as shall then be issuable upon the exercise of all outstanding
Warrants and the Company will maintain at all times all other rights and
privileges sufficient to enable it to fulfill all its obligations hereunder.
The Company covenants that all shares of Common Stock which shall be so issuable
shall, upon issuance, be duly authorized, validly issued, fully paid and
nonassessable, free from preemptive or similar rights on the part of the holders
of any shares of capital stock or securities of the Company or any other Person,
and free from all taxes, liens and charges with respect to the issue thereof
(not including any income taxes payable by the holders of Warrants being
exercised in respect of gains thereon), and the Exercise Price will be credited
to the capital and surplus of the Company. The Company will take all such
action as may be necessary to assure that such shares of Common Stock may be so
issued without violation of any applicable law or regulation, or of any
applicable requirements of the National Association of Securities Dealers, Inc.
and of any domestic securities exchange upon which the Common Stock may be
listed.
4. REGISTRATION OF COMMON STOCK. If any shares of Common Stock required
to be reserved for purposes of the exercise of Warrants require registration
with or approval of any governmental authority under any Federal or State law
(other than the Securities Act, registration under which is governed by the
Registration Rights Agreement), before such shares may be issued upon the
exercise thereof, the Company will, at its expense and as expeditiously as
possible, use its best efforts to cause such shares to be duly registered or
approved, as the case may be. Shares of Common Stock issuable upon exercise of
the Warrants shall be registered by the Company under the Securities Act or
similar statute then in force if required by the Registration Rights Agreement
and subject to the conditions stated in such agreement. At any such time as the
Common Stock is listed on any national securities exchange or quoted by the
Nasdaq National
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Market or Nasdaq SmallCap Market or any successor thereto or any comparable
system, the Company will, at its expense, obtain promptly and maintain the
approval for listing on each such exchange or quoting by the Nasdaq National
Market or Nasdaq SmallCap Market or such successor thereto or comparable system,
upon official notice of issuance, the shares of Common Stock issuable upon
exercise of the then outstanding Warrants and maintain the listing or quoting of
such shares after their issuance so long as the Common Stock is so listed or
quoted; and the Company will also cause to be so listed or quoted, will register
under the Exchange Act and will maintain such listing or quoting of, any Other
Securities that at any time are issuable upon exercise of the Warrants, if and
at the time that any securities of the same class shall be listed on such
national securities exchange by the Company.
5. ISSUE TAX. The issuance of certificates for shares of Common Stock
upon exercise of this Warrant shall be made without charge to the holders hereof
for any issuance tax in respect thereto.
6. CLOSING OF BOOKS. The Company will at no time close its transfer
books against the transfer of any Warrant or of any share of Common Stock issued
or issuable upon the exercise of any Warrant in any manner which interferes with
the timely exercise of such Warrant.
7. NO RIGHTS OR LIABILITIES AS STOCKHOLDERS. This Warrant shall not
entitle the holder thereof to any of the rights of a stockholder of the Company,
except as expressly contemplated herein. No provision of this Warrant, in the
absence of the actual exercise of such Warrant and receipt by the holder thereof
of Common Stock issuable upon such conversion, shall give rise to any liability
on the part of such holder as a stockholder of the Company, whether such
liability shall be asserted by the Company or by creditors of the Company.
8. RESTRICTIVE LEGENDS. Except as otherwise permitted by this section 8,
each Warrant originally issued and each Warrant issued upon direct or indirect
transfer or in substitution for any Warrant pursuant to this section 8 shall be
stamped or otherwise imprinted with a legend in substantially the following
form:
"This Warrant and any shares acquired upon the exercise of this
Warrant have not been registered under the Securities Act of 1933 and
may not be transferred in the absence of such registration or an
exemption therefrom under such Act."
Except as otherwise permitted by this section 8, (a) each certificate for
Original Common Stock (or Other Securities) issued upon the exercise of any
Warrant, and (b) each certificate issued upon the direct or indirect transfer of
any such Original Common Stock (or Other Securities) shall be stamped or
otherwise imprinted with a legend in substantially the following form:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933 and may not be transferred in the
absence of such registration or an exemption therefrom under such
Act."
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<PAGE>
The holder of any Restricted Securities shall be entitled to receive from the
Company, without expense, new securities of like tenor not bearing the
applicable legend set forth above in this section 8 when such securities shall
have been (a) effectively registered under the Securities Act and disposed of in
accordance with the registration statement covering such Restricted Securities,
(b) sold pursuant to Rule 144 or any comparable rule under the Securities Act,
(c) transferred to a limited number of institutional holders, each of which
shall have represented in writing that it is acquiring such Restricted
Securities for investment and not with a view to the disposition thereof, or
(d) when, in the opinion of independent counsel for the holder thereof
experienced in Securities Act matters, such restrictions are no longer required
in order to insure compliance with the Securities Act. The Company will pay the
reasonable fees and disbursements of counsel for any holder of Restricted
Securities in connection with all opinions rendered pursuant to this section 8.
9. AVAILABILITY OF INFORMATION. The Company will cooperate with each
holder of any Restricted Securities in supplying such information as may be
necessary for such holder to complete and file any information reporting forms
presently or hereafter required by the Commission as a condition to the
availability of an exemption from the Securities Act for the sale of any
Restricted Securities. The Company will furnish to each holder of any Warrants,
promptly upon their becoming available, copies of all financial statements,
reports, notices and proxy statements sent or made available generally by the
Company to its stockholders, and copies of all regular and periodic reports and
all registration statements and prospectuses filed by the Company with any
securities exchange or with the Commission.
10. INFORMATION REQUIRED BY RULE 144A. The Company will, upon the request
of the holder of this Warrant, provide such holder, and any qualified
institutional buyer designated by such holder, such financial and other
information as such holder may reasonably determine to be necessary in order to
permit compliance with the information requirements of Rule 144A under the
Securities Act in connection with the resale of Warrants, except at such times
as the Company is subject to the reporting requirements of Section 13 or 15(d)
of the Exchange Act. For the purpose of this section 10, the term "qualified
institutional buyer" shall have the meaning specified in Rule 144A under the
Securities Act.
11. REGISTRATION RIGHTS AGREEMENT. The holder of this Warrant and the
holders of any securities issued or issuable upon the exercise hereof are each
entitled to the benefits of the Registration Rights Agreement, dated of even
date herewith, between the Company and the Purchaser.
12. OWNERSHIP, TRANSFER AND SUBSTITUTION OF WARRANTS.
12A. OWNERSHIP OF WARRANTS. Except as otherwise required by law, the
Company may treat the Person in whose name any Warrant is registered on the
register kept at the principal office of the Company 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, in its
discretion, may (but shall not be obligated to) treat the bearer thereof as the
owner of such
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<PAGE>
Warrant for all purposes, notwithstanding any notice to the Company to the
contrary. Subject to section 8, a Warrant, if properly assigned, may be
exercised by a new holder without first having a new Warrant issued.
12B. TRANSFER AND EXCHANGE OF WARRANTS. Upon the surrender of any
Warrant, properly endorsed, for registration of transfer or for exchange at the
principal office of the Company, the Company at its expense will (subject to
compliance with section 8, 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 Original Common Stock called for on the face
or faces of the Warrant or Warrants so surrendered.
12C. 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 the Purchaser or any institutional investor
reasonably satisfactory to the Company, upon delivery of its unsecured 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
principal office of the Company, the Company at its expense will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
13. DEFINITIONS. As used herein, unless the context otherwise requires,
the following terms have the following respective meanings:
"ACQUIRER'S COMMON STOCK" shall have the meaning specified in section
2I.
"ACQUIRING COMPANY" shall have the meaning specified in section 2I.
"ADDITIONAL SHARES OF COMMON STOCK" shall mean all shares (including
treasury shares) of Common Stock issued or sold (or, pursuant to section 2C or
2D deemed to be issued) by the Company after the date hereof, whether or not
subsequently reacquired or retired by the Company, other than (a) shares of
Common Stock issued upon the exercise or partial exercise of this Warrant, (b)
shares of Common Stock issued to the holder of this Warrant pursuant to section
2B and (c) shares of Common Stock issued pursuant to the Warrant dated December
19, 1996 originally issued to HACL, Ltd. pursuant to that certain Stock Purchase
Agreement dated as of October 16, 1996, and (d) such additional number of shares
as may become issuable upon the exercise of any of the securities referred to in
the foregoing clause (c) by reason of adjustments required pursuant to
anti-dilution provisions applicable to such securities as in effect on the date
hereof, in order to reflect any subdivision or combination of Common Stock, by
reclassification or otherwise, or any dividend on Common Stock payable in Common
Stock.
"ANNOUNCEMENT DATE" shall have the meaning specified in section 2I.
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<PAGE>
"BUSINESS DAY" shall mean any day on which banks are open for business
in New York City (other than a Saturday, a Sunday or a legal holiday in the
States of New York or New Jersey), PROVIDED, that any reference to "days"
(unless Business Days are specified) shall mean calendar days.
"CASHLESS EXERCISE" shall have the meaning specified in section 1F.
"COMMISSION" shall mean the Securities and Exchange Commission or any
successor federal agency having similar powers.
"COMMON STOCK" shall mean the Original Common Stock, any stock into
which such stock shall have been converted or changed or any stock resulting
from any reclassification of such stock and 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" shall mean Equity Compression Services Corporation, an
Oklahoma corporation.
"CONSUMMATION DATE" shall have the meaning specified in section 2I.
"CONVERTIBLE SECURITIES" shall mean 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.
"DIVIDEND RESTRICTIONS" shall mean the restrictions on the ability of
the Company to declare, order, pay or make dividends or other distributions, as
set forth in paragraph 6B of the Purchase Agreement dated as of the Initial Date
by and between the Company and the Purchaser, whether or not such Purchase
Agreement remains in effect.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
"EXERCISE PRICE" shall have the meaning specified in section 1A.
"FAIR VALUE" shall mean with respect to any securities or other
property, the fair value thereof as of a date which is within 15 days of the
date as of which the determination is to be made (a) determined by agreement
between the Company and the Required Holders, or (b) if the Company and the
Required Holders fail to agree, determined jointly by an independent investment
banking firm retained by the Company and by an independent investment banking
firm retained by the Required Holders, either of which firms may be an
independent investment banking firm regularly retained by the Company, or (c) if
the Company or the Required Holders shall fail so to retain an independent
investment banking firm within ten Business Days of the retention of such a
-18-
<PAGE>
firm by the Required Holders or the Company, as the case may be, determined
solely by the firm so retained, or (d) if the firms so retained by the Company
and by such holders shall be unable to reach a joint determination within 15
Business Days of the retention of the last firm so retained, determined by
another independent investment banking firm which is not a regular investment
banking firm of the Company chosen by the first two such firms.
"INITIAL DATE" shall have the meaning specified in section 2A.
"MARKET PRICE" shall mean on any date specified herein, (a) with
respect to Common Stock or to common stock (or equivalent equity interests) of
an Acquiring Person or its Parent, the amount per share equal to (i) the last
sale price of shares of Common Stock, regular way, or of shares of such common
stock (or equivalent equity interests) 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 the same are then listed or admitted to trading, or
(ii) if no shares of Common Stock or no shares of such common stock (or
equivalent equity interests), as the case may be, are then listed or admitted to
trading on any national securities exchange, the last sale price of shares of
Common Stock, regular way, or of shares of such common stock (or equivalent
equity interests) on such date, in each case or, if no such sale takes place on
such date, the average of the reported closing bid and asked prices thereof on
such date as quoted in the Nasdaq National Market or Nasdaq SmallCap Market or,
if no shares of Common Stock or no shares of such common stock (or equivalent
equity interest), as the case may be, are then quoted in the Nasdaq National
Market or Nasdaq SmallCap Market, as published by the National Quotation Bureau,
Incorporated or any similar successor organization, and in either case as
reported by any member firm of the New York Stock Exchange selected by the
Company, or (iii) if no shares of Common Stock or no shares of such common stock
(or equivalent equity interests), as the case may be, are then listed or
admitted to trading on any national securities exchange or quoted or published
in the over-the-counter market, the higher of (x) the book value thereof as
determined by any firm of independent public accountants of recognized standing
selected by the Board of Directors of the Company, as of the last day of any
month ending within 60 days preceding the date as of which the determination is
to be made or (y) the Fair Value thereof; and (b) with respect to any other
securities, the Fair Value thereof.
"NOTES" shall have the meaning specified in the opening paragraphs of
this Warrant.
"OFFICER'S CERTIFICATE" shall mean a certificate signed in the name of
the Company by its President, one of its Vice Presidents or its Treasurer.
"OPTIONS" shall mean rights, options or warrants to subscribe for,
purchase or otherwise acquire either Additional Shares of Common Stock or
Convertible Securities.
"ORIGINAL COMMON STOCK" shall have the meaning specified in the
opening paragraphs of this Warrant.
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<PAGE>
"OTHER SECURITIES" shall mean any stock (other than Common Stock) and
any other securities of the Company or any other Person (corporate or otherwise)
which the holders of the Warrants at any time shall be entitled to receive, or
shall have received, upon the exercise of the Warrants, 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 section 2I or otherwise.
"PARENT" shall have the meaning specified in section 2I.
"PERSON" shall mean and include an individual, a partnership, an
association, a joint venture, a corporation, a trust, a limited liability
company, an unincorporated organization and a government or any department or
agency thereof.
"PURCHASE AGREEMENT" shall have the meaning specified in the opening
paragraphs of this Warrant.
"PURCHASER" shall have the meaning specified in the opening paragraphs
of this Warrant.
"REGISTRATION RIGHTS AGREEMENT" shall mean the Registration Rights
Agreement dated of even date herewith by and between the Company and the
Purchaser.
"REQUIRED HOLDERS" shall mean the holders of at least 66 2/3% of all
the Warrants at the time outstanding, determined on the basis of the number of
shares of Common Stock then purchasable upon the exercise of all Warrants then
outstanding.
"RESTRICTED SECURITIES" shall mean (a) any Warrants bearing the
applicable legend set forth in section 8 and (b) any shares of Original 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 set forth in such section, and (c) unless the context otherwise requires,
any shares of Original 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 set
forth in such section.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"TRANSACTION" shall have the meaning specified in section 2I.
"WARRANTS" shall have the meaning specified in the opening paragraphs
of this Warrant.
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<PAGE>
14. 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.
15. 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 or any holder
of any Common Stock (or Other Securities), at the registered address of such
holder as set forth in the applicable register kept at the principal office of
the Company, or (b) if to the Company, to the attention of its Chief Financial
Officer, at its principal office, provided that the exercise of any Warrant
shall be effected in the manner provided in section 1.
16. MISCELLANEOUS. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought. The agreements of the Company contained in this Warrant other than
those applicable solely to the Warrants and the holders thereof shall inure to
the benefit of and be enforceable by any holder or holders at the time of any
Common Stock (or Other Securities) issued upon the exercise of Warrants, whether
so expressed or not. This Warrant shall be construed and enforced in accordance
with and governed by the laws of the State of New York. 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:
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<PAGE>
FORM OF SUBSCRIPTION
(To be executed only upon exercise of Warrant)
To EQUITY COMPRESSION SERVICES CORPORATION
The undersigned registered holder of the within Warrant hereby
irrevocably exercises such Warrant for, and purchases thereunder, _____(1)
shares of Original Common Stock of EQUITY COMPRESSION SERVICES CORPORATION, [AND
HEREWITH MAKES PAYMENT OF $_______________ THEREFOR](2) [IN A CASHLESS EXERCISE
PURSUANT TO SECTION 1F OF THE WITHIN WARRANT](3) , and requests that the
certificates for such shares be issued in the name of, and delivered to
_________________________ whose address is _________________________.
Dated:
------------------------
---------------------------------------------
(Signature must conform in all respects
to name of holder as specified on the
face of this Warrant)
---------------------------------------------
(Street Address)
---------------------------------------------
(City) (State) (Zip Code)
- -------------------------
1 Insert here 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 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 this Warrant, to the holder
surrendering the same.
2 Use in connection with an exercise involving a delivery of funds to the
Company.
3 Use in connection with a Cashless Exercise.
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<PAGE>
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 _________________________(1) shares of
Original Common Stock of EQUITY COMPRESSION SERVICES CORPORATION, to which such
Warrant relates, and; appoints _________________________ Attorney to make such
transfer on the books of EQUITY COMPRESSION SERVICES CORPORATION, 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 of this Warrant)
---------------------------------------------
(Street Address)
---------------------------------------------
(City) (State) (Zip Code)
Signed in the presence of:
- ---------------------------------
- ---------------------------------
1 Insert here the number of shares called for on the face of the within
Warrant (or, in the case of a partial assignment, the portion thereof as to
which this Warrant is being assigned), in either case without making any
adjustment for additional Common Stock or any other stock or other
securities or property or cash which, pursuant to the adjustment provisions
of the within Warrant, may be delivered upon exercise. In the case of a
partial assignment, a new Warrant or Warrants will be issued and delivered,
representing the portion of the within Warrant not being assigned, to the
holder assigning the same.
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<PAGE>
FIFTH AMENDED AND RESTATED REVOLVING
CREDIT AND TERM LOAN AGREEMENT
THIS FIFTH AMENDED AND RESTATED REVOLVING CREDIT AND TERM LOAN
AGREEMENT, dated as of July 31, 1997 ("this Agreement"), is entered into among
EQUITY COMPRESSION SERVICES CORPORATION, an Oklahoma corporation, formerly known
as Hawkins Energy Corporation ("ECS"), SUNTERRA ENERGY CORPORATION, an Oklahoma
corporation ("Sunterra"), EQUITY COMPRESSORS, INC., an Oklahoma corporation
("Equity") and OUACHITA ENERGY CORPORATION, a Delaware corporation ("Ouachita
Energy") (ECS, Sunterra, Equity and Ouachita Energy being collectively referred
to as the "Borrowers") and BANK OF OKLAHOMA, NATIONAL ASSOCIATION, a national
banking association (the "BOK").
W I T N E S S E T H:
A. WHEREAS, the Borrowers have requested BOK to consent to the
transactions contemplated by that certain (i) Asset Purchase and Sale Agreement
dated as of May 15, 1997, among Ouachita Energy Partners, Ltd., a Louisiana
corporation ("Ouachita Partners"), Ouachita Compression Group, LLC, a Louisiana
limited liability company ("Ouachita Compression") as Sellers, Dennis W. Estis
("Shareholder"), OEC Acquisition Corporation ("Acquisition"), as Purchaser and
ECS (the "Asset Purchase Agreement"), (ii) Agreement and Plan of Merger dated as
of May 15, 1997, among Acquisition, Ouachita Energy Corporation, a Louisiana
corporation ("OEC"), the Shareholder and ECS (the "Merger Agreement"), and
(iii) June 24, 1997 letter of confirmation from The Prudential Insurance Company
of America ("Prudential") to ECS concerning the purchase by Prudential of
(a) $5,000,000 principal amount Senior Floating Rate Secured Term Notes due 2004
("Senior Notes"), (b) $15,000,000 principal amount Secured Senior Subordinated
Notes due 2007 ("Subordinated Pru Notes"); and (c) purchase warrants to purchase
1,000,000 shares of common stock of ECS (the "Warrants"); all pursuant to one or
more comprehensive Note Purchase Agreement(s) between Prudential (or one or more
of its subsidiaries or affiliates) and ECS (collectively the "Note Purchase
Agreements"); and (iv) this Agreement, including without limitation, adding
Ouachita Energy, the corporation surviving the merger of OEC and Acquisition, as
a Borrower hereunder, resetting the initial Bank Borrowing Base of the Borrowers
to $20,000,000 from the Closing Date through November 30, 1997, and increasing
the maximum aggregate Commitments of the Banks (each of the Persons listed as
Banks on the signature page hereto, including BOK in its capacity as a Bank and
such other Persons who may from time to time own a Percentage Interest in the
Bank Obligations) to $40,000,000; subject, however, in all respects to BOK's
Commitment hereunder not in excess of $20,000,000;
B. WHEREAS, BOK is willing to so modify and increase the Bank
Borrowing Base to the Borrowers to $20,000,000 from the Closing Date hereof to
November 30, 1997, and BOK is further willing to consent to the transactions
contemplated in clauses (i), (ii) and (iii) of Recital A above of this Agreement
and increase the maximum aggregate Commitments to $40,000,000, subject in all
respects to BOK's Commitment hereunder not in excess of $20,000,000 and subject
to Borrowers' agreement to such additional Bank(s), Assignee(s) or Credit
Participant(s) as may be obtained by the mutual consent of BOK and Borrowers in
accordance with the provisions of Articles X and XI hereof, all further subject
to the terms, conditions, uses and provisions hereinafter set forth, all of
which are material to BOK and without which BOK would not be willing to enter
into this Agreement; and
C. WHEREAS, ECS and Equity, INTER ALIA, and the Bank are
parties to that certain First Amended and Restated Revolving Credit and Term
Loan Agreement dated as of July 14, 1993, as modified by the Modification
thereto dated as of September 24, 1993, the Second Amended and Restated
Revolving Credit and Term Loan Agreement dated as of April 13, 1994, as modified
by
<PAGE>
the Modification thereto dated as of December 30, 1994, the Third Amended and
Restated Revolving Credit and Term Loan Agreement dated as of September 1, 1996,
as modified by various modification agreements thereto dated as of March 31,
1996, October 1, 1996, and December 16, 1996, respectively, and the Fourth
Amended and Restated Revolving Credit and Term Loan Agreement dated as of March
31, 1997 (all of the foregoing being collectively referred to as the "Prior Loan
Agreements"), and in connection with the Borrowers' requested restructure and
modification of the Revolving Credit Commitment therein described and defined,
the Borrowers and the Bank desire to amend, modify and restate the Prior Loan
Agreements by the terms of this Agreement; and
D. WHEREAS, pursuant to the Merger Agreement and Asset
Purchase Agreement, Ouachita Energy will become a wholly owned subsidiary of
ECS, and the successor in interest to and record title holder of the assets
acquired by Acquisition and previously owned by Ouachita Partners, Ouachita
Compression and OEC, as well as certain assets previously owned individually the
Shareholder; and
E. WHEREAS, pursuant to the Note Purchase Agreements,
Prudential will purchase the Senior Notes, the Subordinated Notes and the
Warrants and the Bank, as a Lender and as the Collateral Agent for the Lenders
under the Security Instruments, and Prudential and all other Noteholders, as
Lenders, will, INTER ALIA, enter into the Intercreditor Agreement dated as of
even date herewith concerning INTER ALIA, their respective rights and
obligations with respect to security interests in and mortgage liens against the
Collateral in favor of the Agent for the ratable benefit of the Bank, the
holders of the Senior Notes and, on a junior and subordinate basis, the holders
of the Subordinated Notes;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein, and other good and valuable consideration, receipt
of which is acknowledged by the parties hereto, the parties agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
When used herein, the following terms shall have the following
meanings:
1.1 "ADDITIONAL COVENANT" shall mean any affirmative or
negative covenant or similar restriction applicable to the Borrowers or any
Subsidiary (regardless of whether such provision is labeled or otherwise
characterized as a covenant) the subject matter of which either (i) is similar
to that of the covenants in Article VII of this Agreement, or related
definitions in Article I of this Agreement, but contains one or more
percentages, amounts or formulas that is more restrictive than those set forth
herein or more beneficial to the holder or holders of the Indebtedness created
or evidenced by the document in which such covenant or similar restriction is
contained (and such covenant or similar restriction shall be deemed an
"Additional Covenant" only to the extent that it is more restrictive or more
beneficial) or (ii) is different from the subject matter of the covenants in
Article VII of this Agreement, or related definitions in Article I of this
Agreement.
1.2 "ADDITIONAL DEFAULT" shall mean any provision contained in
any document or instrument creating or evidencing Indebtedness of the Borrowers
which permits the holder or holders of Indebtedness to accelerate (with the
passage of time or giving of notice or both) the maturity thereof or otherwise
requires the Borrowers or any Subsidiary to purchase such Indebtedness prior to
the stated maturity thereof and which either (i) is similar to the Defaults and
Events of Default
-2-
<PAGE>
contained in Article IX of this Agreement, or related definitions in Article
I of this Agreement, but contains one or more percentages, amounts or
formulas that is more restrictive or has a shorter grace period than those
set forth herein or is more beneficial to the holder or holders of such other
Indebtedness (and such provision shall be deemed an "Additional Default" only
to the extent that it is more restrictive, has a shorter grace period or is
more beneficial) or (ii) is different from the subject matter of the Defaults
and Events of Default contained in Article IX of this Agreement, or related
definitions in Article I of this Agreement.
1.3 "ADJUSTED GROSS PROCEEDS" shall mean (i) all proceeds
received by Sunterra during the applicable period, whether directly or
indirectly, from purchasers of Hydrocarbons produced from the Mortgaged
Property, PLUS (ii) all amounts which Sunterra was entitled to receive during
such period but which were offset by the purchaser of production or an
intermediary against obligations (other than ordinary operating expenses) owing
by Sunterra; LESS the amount of all gathering, severance and windfall profits
taxes required to be paid by Sunterra with respect to said proceeds and all
royalty and overriding royalty payments to third parties and all ordinary and
necessary operating expenses paid by Sunterra with respect to the Mortgaged
Property, excluding only such expenses that (i) qualify as capitalized items
under GAAP or (ii) are defined or described in the energy industry as workover
expenses or costs.
1.4 "ADMINISTRATIVE AGENT" shall mean BOK as appointed by the
Banks pursuant to Section 10.2 hereof.
1.5 "AFFILIATE" shall mean any Person which, directly or
indirectly, controls, or is controlled by, or is under common control with,
another Person and any partner, officer or employee of any such Persons, except
a Subsidiary. For purposes of this definition, "control" shall mean the power,
directly or indirectly, to direct or in effect cause the direction of the
management and policies of such Person whether by contract or otherwise.
1.6 "AIRCRAFT CHATTEL MORTGAGE" shall have the meaning ascribed
thereto in Section 5.1(e) hereof.
1.7 "APPLICABLE PRIME RATE" shall mean the annual rate of
interest announced by Chase Manhattan Bank, National Association, New York, New
York ("Chase") from time to time as its prime or base rate, which rate shall be
the rate used by Chase as a base or standard for pricing purposes and which
shall not necessarily be its "best" or lowest rate, as adjusted pursuant to the
provisions of Section 2.2 hereof. Should Chase cease to announce a prime or
base rate or should it be merged, consolidated, liquidated or dissolved in such
a manner that it loses its separate corporate identity, then the Applicable
Prime Rate shall be the Prime Rate published by the WALL STREET
JOURNAL(Southwest Edition) in its "Money Rates" column or a similar rate if such
rate ceases to be published. Any changes in the Applicable Prime Rate shall be
effective as of the date of the change.
1.8 "ASSIGNEE(S)" shall have the meaning ascribed thereto in
Section 11.2 hereof.
1.9 "BANK" shall initially mean only BOK and "BANKS" shall mean
each of the Persons listed as Banks on the signature page hereto, including BOK
in its capacity as a Bank and such other Persons who may from time to time own a
Percentage Interest in the Credit Obligations in accordance with Article X
hereof, but the term "Bank" shall not include any Bank Participant.
1.10 "BANK BORROWING BASE" shall mean the LESSER of (i) the
Commitments or (ii) the Revolving Credit Borrowing Base calculated in accordance
with the provisions of Section 2.4 hereof (regardless of whether calculated
before or after the Conversion Date) minus the total outstanding principal
balance of the Senior Notes.
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1.11 "BANK NOTE" shall mean the Borrowers' joint and several
$40,000,000 promissory note in the form of EXHIBIT "A" annexed hereto, to be
delivered to the order of BOK pursuant to Section 2.2 hereof, together with any
and all extensions, renewals, modifications, substitutions and changes in form
thereof which may be from time to time and for any term or terms effected.
1.12 "BANK OBLIGATIONS" shall mean and include any and all: (i)
indebtedness, obligations and liabilities of the Borrowers to any Bank incurred
or which may be incurred or purportedly incurred hereafter pursuant to the terms
of this Agreement or any of the other Loan Documents, and any replacements,
amendments, extensions, renewals, substitutions, amendments and increases in
amount thereof, including such amounts as may be evidenced by the Bank Note and
all lawful interest, late charges, service fees, commitment fees, fees in lieu
of balances, letter of credit fees and other charges, and all reasonable costs
and expenses incurred in connection with the preparation, filing and recording
of the Loan Documents, including attorneys fees and legal expenses; (ii) all
reasonable costs and expenses paid or incurred by the Collateral Agent or any
Bank, including attorneys fees, in enforcing or attempting to enforce collection
of any Indebtedness and in enforcing or realizing upon or attempting to enforce
or realize upon any collateral or security for any Indebtedness, including
interest on all sums so expended by the Banks accruing from the date upon which
such expenditures are made until paid, at an annual rate equal to the Default
Rate; and (iii) all sums expended by the Collateral Agent or any Bank in curing
any Event of Default or Default of the Borrowers under the terms of this
Agreement, the other Loan Documents or any other writing evidencing or securing
the payment of the Bank Note together with interest on all sums so expended by
the Collateral Agent or any Bank accruing from the date upon which such
expenditures are made until paid, at an annual rate equal to the Default Rate.
1.13 "BOK BORROWING BASE" shall mean the LESSER of (i) the BOK
Commitment or (ii) BOK's Percentage Interest in the Bank Borrowing Base.
1.14 "BOK COMMITMENT" shall mean BOK's portion of the
Commitments which shall not exceed $20,000,000 unless and until BOK, with
Borrowers' written consent, agrees in writing to increase such BOK Commitment
above $20,000,000 pursuant to the provisions of Articles X and XI hereof.
1.15 "BUSINESS DAY" shall mean a day other than a Saturday,
Sunday or a day upon which banks in the State of Oklahoma are closed to business
generally.
1.16 "CAPITALIZED LEASE OBLIGATION" shall mean any rental
obligation which, under generally accepted accounting principles, would be
required to be capitalized on the books of the Borrowers or any Subsidiary,
taken at the amount thereof accounted for as indebtedness (net of interest
expense) in accordance with such principles.
1.17 "CERCLA" shall mean the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, together with all
regulations and rulings promulgated with respect thereto.
1.18 "CHANGE IN CONTROL" shall mean the failure of the members
of the Control Group to own, on a fully diluted basis, at least 41% of the
combined voting power of all then issued and outstanding Voting Stock of ECS,
together with any one or more of the following: (i) the failure of the members
of the Board of Directors of ECS existing on the Closing Date to constitute a
majority of the members of the Board of Directors of ECS, or (ii) the failure of
the members of the Control Group to own, on a fully diluted basis, the largest
voting block of the outstanding Voting Stock of ECS or (iii) the failure of
either or both of the Persons holding the offices of President and Chief
Financial Officer of ECS as of the Closing Date to continue to hold such
offices.
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1.19 "CLOSING DATE" shall mean August 5, 1997, or such later
date as the parties to this Agreement agree in writing.
1.20 "CODE" shall mean the Internal Revenue Code of 1986, as
amended.
1.21 "COLLATERAL" shall have the meaning assigned to that term
in Article V of this Agreement.
1.22 "COLLATERAL AGENT" shall mean BOK, in its capacity as
Collateral Agent for each Bank and for the holders of the Senior Notes and the
Subordinated Notes, as provided under the Intercreditor Agreement, and its
successors and assigns as such Collateral Agent.
1.23 "COMMITMENTS" shall mean at any time prior to the
Conversion Date the aggregate amount of the Revolving Credit Commitment(s)
extended hereunder to the Borrowers by the Banks in the maximum principal
amount of $40,000,000.
1.24 "COMPRESSOR OPERATING INCOME" shall mean the sum of
Equity's and Ouachita Energy's rental/maintenance fees and revenues less the sum
of direct compressor rental and operating expenses per GAAP.
1.25 "CONSOLIDATED INTEREST EXPENSE" shall mean, with respect to
any period, the sum (without duplication) of the following (in each case,
eliminating all offsetting debits and credits between and among the Borrowers
and all other items required to be eliminated in the course of the preparation
of consolidated financial statements of the Borrowers and all imputed interest
expense for the Warrants in accordance with GAAP) all interest and prepayment
charges in respect to Indebtedness of the Borrowers (including imputed interest
in respect of Capitalized Lease Obligations and net costs of Swaps) deducted in
determining consolidated net income for such period, together with all interest
capitalized or deferred during such period and not deducted in determining
consolidated net income for such period.
1.26 "CONTROL GROUP" shall mean those record or beneficial
owners of ECS listed on Exhibit F attached hereto.
1.27 "CONVERSION DATE" shall mean March 31, 1999 or such later
date as the Banks shall agree to in writing.
1.28 "COVERAGE RATIO" shall have the meaning ascribed
thereto in Section 2.2 hereof.
1.29 "CREDIT PARTICIPANT" is defined in Section 11.2 of this
Agreement.
1.30 "CURRENT ASSETS" shall mean the value of the current assets
of the Borrowers and their Subsidiaries determined in accordance with GAAP on a
consolidated basis.
1.31 "CURRENT LIABILITIES" shall mean the amount of current
liabilities of the Borrowers and their Subsidiaries determined in accordance
with GAAP on a consolidated basis.
1.32 "CURRENT RATIO" shall mean the ratio of Current Assets to
Current Liabilities.
1.33 "DEBT SERVICE" shall mean, with respect to any period, the
sum of the following for the Borrowers, determined on a consolidated basis in
accordance with GAAP: (i) Consolidated Interest Expense for such period and
(ii) all payments of principal in respect of Indebtedness (including the
principal component of any payments in respect of Capitalized Lease Obligations)
but excluding voluntary principal payments on the Bank Note prior to the
Conversion Date.
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1.34 "DEFAULT RATE" shall mean the Applicable Prime Rate plus
four percentage points (4%).
1.35 "EBITDA" shall mean, for any period, the sum of (i) net
income for the Borrowers, determined on a consolidated basis in accordance with
GAAP, PLUS (ii) to the extent deducted in the determination of consolidated net
income, (a) all provisions for federal, state and other income tax,
(b) Consolidated Interest Expense and (c) provisions for depreciation and
amortization, LESS extraordinary items, gains on sales of assets and income from
discontinued operations, which in the aggregate will be deducted only to the
extent they are positive.
1.36 "ENVIRONMENTAL LAWS" shall mean Laws, including without
limitation federal, state or local Laws, ordinances, rules, regulations,
interpretations and orders of courts or administrative 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 CERCLA, SARA, RCRA, HSWA, OPA, HMTA, TSCA
and other Laws relating to (i) Polluting Substances or (ii) the manufacture,
processing, distribution, use, treatment, handling, storage, disposal or
transportation of Polluting Substances.
1.37 "ERISA" shall mean the Federal Employee Retirement Income
Security Act of 1974, as amended, together with all regulations and rulings
promulgated with respect thereto.
1.38 "ERISA AFFILIATE" shall mean any corporation which is a
member of the same controlled group of corporations as ECS within the meaning of
Section 414(b) of the Code, or any trade or business which is under common
control with ECS within the meaning of Section 414(c) of the Code.
1.39 "EVENT OF DEFAULT" shall mean any of the events specified
in Section 9.1 of this Agreement, and "DEFAULT" shall mean any event, which
together with any lapse of time or giving of any notice, or both, would
constitute an Event of Default.
1.40 "FINISHED GOODS" shall mean that portion of the Inventory
which constitutes natural gas compressor units completed for lease or sale by
Equity or Ouachita Energy.
1.41 "GAAP" shall mean generally accepted accounting principles
applied on a consistent basis in all material respects to those applied in the
preceding period, unless the Borrowers' outside accountants reasonably determine
that there should be a different application based upon relevant accepted
Financial Accounting Standards. Unless otherwise indicated herein, all
accounting terms will be defined according to GAAP.
1.42 "GUARANTEE" shall mean, with respect to any Person, any
direct or indirect liability, contingent or otherwise, of such Person with
respect to any indebtedness, lease, dividend or other obligation of another,
including, without limitation, any such obligation directly or indirectly
guaranteed, endorsed (otherwise than for collection or deposit in the ordinary
course of business) or discounted or sold with recourse by such Person, or in
respect of which such Person is otherwise directly or indirectly liable,
including, without limitation, any such obligation in effect guaranteed by such
Person through any agreement (contingent or otherwise) to purchase, repurchase
or otherwise acquire such obligation or any security therefor, or to provide
funds for the payment or discharge of such obligation (whether in the form of
loans, advances, stock purchases, capital contributions or otherwise), or to
maintain the solvency or any balance sheet or other financial condition of the
obligor of such obligation, or to make payment for any products, materials or
supplies or for any transportation or services regardless of the non-delivery or
non-furnishing thereof, in any such case if the purpose or intent of such
agreement is to provide assurance that such obligation will be paid or
discharged, or that any agreements relating thereto will be complied with,
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or that the holders of such obligation will be protected against loss in
respect thereof. The amount of any Guarantee shall be equal to the
outstanding principal amount of the obligation guaranteed or such lesser
amount to which the maximum exposure of the guarantor shall have been
specifically limited.
1.43 "GUARANTY AGREEMENTS" shall mean Guaranty Agreements, dated
as of July 31, 1997, made by each of Equity, Sunterra and Ouachita Energy, each
in favor of Prudential and all subsequent holders of the Senior Notes or
Subordinated Notes, as applicable, substantially in the form of EXHIBIT C to the
Senior Note Agreement and EXHIBIT D to the Subordinated Note Agreement, and all
Guaranty Agreements hereafter executed by any Subsidiary as contemplated under
Section 7.35 hereof as each may be amended, supplemented and otherwise modified
from time to time.
1.44 "HEREBY", "HEREIN", "HEREOF", "HEREUNDER" and similar such
terms shall mean and refer to this Agreement as a whole and not merely to the
specific section, paragraph or clause in which the respective word appears.
1.45 "HMTA" shall mean the Hazardous Materials Transportation
Act, as amended, together with all regulations and rulings promulgated with
respect thereto.
1.46 "HSWA" shall mean the Hazardous and Solid Waste Amendments
of 1984, as amended, together with all regulations and rulings promulgated with
respect thereto.
1.47 "HYDROCARBONS" shall have the meaning assigned to that term
in the Mortgage.
1.48 "INDEBTEDNESS" shall mean, with respect to any Person or
consolidated group of Persons, without duplication, (i) all items (excluding
items of contingency reserves or of reserves for deferred income taxes) which in
accordance with GAAP would be included in determining total liabilities as shown
on the liability side of a balance sheet of such Person or consolidated group of
Persons as of the date on which Indebtedness is to be determined; (ii) all
indebtedness secured by any Lien on, or payable out of the proceeds of
production from, any property or asset owned or held by such Person subject
thereto, whether or not the Indebtedness secured thereby shall have been
assumed; (iii) redemption obligations in respect of mandatorily redeemable
preferred stock; (iv) Swaps; (v) unfunded pension liabilities; (vi) contingent
obligations as an account party in respect of letters of credit; and
(vii) guarantees of Indebtedness of other Persons of the types described in the
foregoing clauses (i) through (vi).
1.49 "INTERCREDITOR AGREEMENT" shall have the meaning ascribed
thereto in Section 6.1(m) hereof.
1.50 "INVENTORY" shall mean and include all of Equity's and
Ouachita Energy's natural gas compressor units and other goods intended for sale
or lease, all Raw Materials, Work In Process, Finished Goods, packaging, labels,
advertising materials and all supplies of every kind or nature which are used or
may be used in manufacturing, selling, leasing, packing, shipping, advertising,
leasing or furnishing of goods (including natural gas compressor units), whether
now owned or hereafter acquired and wherever located.
1.51 "LAWS" shall mean all statutes, laws, ordinances,
regulations, orders, writs, injunctions, or decrees of the United States, any
state or commonwealth, any municipality, any foreign country, any territory or
possession, or any Tribunal.
1.52 "LENDERS" shall mean the Noteholders and each Bank, and
their respective participants, successors and assigns.
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1.53 "LETTERS OF CREDIT" shall mean any and all letters of
credit issued by the Bank pursuant to the request of any of the Borrowers in
accordance with the provisions of Section 2.2.5 hereof which at any time remain
outstanding and subject to draw by the beneficiary, whether in whole or in part.
1.54 "LETTER OF CREDIT EXPOSURE" means, at any date, the sum of
(a) the aggregate face amount of all drafts that may then or thereafter be
presented by beneficiaries under all Letters of Credit then outstanding, PLUS
(b) the aggregate face amount of all drafts that the Letter of Credit Issuer has
previously accepted under Letters of Credit but has not paid.
1.55 "LETTER OF CREDIT ISSUER" means, for any Letter of Credit,
BOK, or in the event BOK does not for any reason issue a requested Letter of
Credit, another Bank designated by BOK to issue such Letter of Credit in
accordance with Section 2.2.5 of this Agreement.
1.56 "LIEN" shall mean any mortgage, pledge, security interest,
assignment, encumbrance, lien (statutory or otherwise), contractual deposit
arrangement or charge of any kind (including any agreement to give any of the
foregoing, any conditional sale or other title retention agreement, any
production payment, any lease in the nature thereof, and the filing of or
agreement to give any financing statement under the Uniform Commercial Code of
any jurisdiction or other type or similar form of public notice under the Laws
of any jurisdiction for the purpose, or having the effect of, protecting a
creditor against loss or securing the payment or performance of an obligation).
1.57 "LOAN DOCUMENTS" shall mean this Agreement, the Note, the
Security Instruments and all other documents, instruments and certificates
executed and delivered to the Collateral Agent on behalf of the Lenders by the
Borrowers pursuant to the terms of this Agreement.
1.58 "LOANS" shall mean all advances made and Letter of Credit
draws funded hereunder pursuant to the Revolving Credit Commitment, including
all sums evidenced by the Bank Note.
1.59 "MORTGAGED PROPERTY" shall mean the property covered by the
Oil and Gas Mortgage defined in Section 5.1(b) of this Agreement.
1.60 "MORTGAGES" shall mean the Aircraft Chattel Mortgage, Oil
and Gas Mortgage and the Real Estate Mortgage, collectively.
1.61 "MULTIEMPLOYER PLAN" shall mean any Plan which is a
"multiemployer plan" (as such term is defined in section 4001(a)(3) of ERISA).
1.62 "NET WORTH" shall mean, on any date as of which the amount
thereof is to be determined, the sum of the following determined on a
consolidated basis in accordance with GAAP:
(a) The amount of stated capital (less cost
of treasury shares),
PLUS
(b) The amount of surplus and retained
earnings (or, in the case of surplus or retained
earnings deficit, minus the amount of such
deficit).
1.63 "NOTE" shall mean the Bank Note.
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1.64 "NOTE PURCHASE AGREEMENTS" shall collectively mean the
Senior Note Agreement and the Subordinated Note Agreement.
1.65 "NOTEHOLDERS" shall mean Prudential and the other holders
of the Pru Notes.
1.66 "OBB RATIO" shall have the meaning ascribed thereto in
Section 2.2.1 hereof.
1.67 "OIL AND GAS MORTGAGE" shall have the meaning assigned to
that term in Section 5.1(b) hereof.
1.68 "OPA" shall mean the Oil Pollution Act of 1990, as amended,
together with all regulations and rulings promulgated with respect thereto.
1.69 "OUACHITA ASSETS" shall mean the Property as described and
defined in the Asset Purchase Agreement.
1.70 "PBGC" shall mean the Pension Benefit Guaranty Corporation
or any successor entity.
1.71 "PERCENTAGE INTEREST" is defined in Section 10.1 hereof.
1.72 "PERSON" shall mean and include an individual, a
partnership, a joint venture, a corporation, a trust, an unincorporated
organization, and a government or any department, agency or political
subdivision thereof.
1.73 "PLAN" shall mean any "employee pension benefit plan" (as
such term is defined in section 3 of ERISA) which is or has been established or
maintained, or to which contributions are or have been made, by ECS or any ERISA
Affiliate.
1.74 "PLEDGE AGREEMENTS" shall have the meaning ascribed thereto
in Section 5.1(d) hereof below.
1.75 "POLLUTING SUBSTANCES" shall mean all pollutants,
contaminants, chemicals or industrial, toxic or hazardous substances or wastes
and shall include, without limitation, any flammable explosives, radioactive
materials, oil, hazardous materials, hazardous or solid wastes, hazardous or
toxic substances or related materials defined in CERCLA/SARA, RCRA/HSWA and in
the HMTA; provided, in the event either CERCLA/SARA, RCRA/HSWA or HMTA is
amended so as to broaden the meaning of any term defined thereby, such broader
meaning shall apply subsequent to the effective date of such amendment and,
provided further, to the extent that the Laws of any State or other Tribunal
establish a meaning for "hazardous substance, "hazardous waste," "hazardous
material," "solid waste" or "toxic substance" which is broader than that
specified in CERCLA/SARA, RCRA/HSWA, or HMTA, such broader meaning shall apply.
1.76 "PRU NOTES" shall mean the Senior Notes and the
Subordinated Notes.
1.77 "PRUDENTIAL" shall mean The Prudential Insurance Company of
America or any one or more of its affiliates or subsidiaries that are parties to
either of the Note Purchase Agreements.
1.78 "PRUDENTIAL OBLIGATIONS" shall mean all obligations of ECS
and its Subsidiaries to Prudential or the Noteholders under the Note Purchase
Agreements and the Guaranty Agreements.
1.79 "RAW MATERIALS" shall mean that portion of the Inventory
which constitutes parts, components, accessories and materials to become a part
of the Finished Goods.
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1.80 "RCRA" shall mean the Resource Conservation and Recovery
Act of 1976, as amended, together with all regulations and rulings promulgated
with respect thereto.
1.81 "REAL ESTATE MORTGAGES" shall have the meaning ascribed
thereto in Section 5.1(c).
1.82 "REGISTER" is defined in Section 11.1.3 of this Agreement.
1.83 "REQUIRED BANKS" with respect to any approval, consent,
modification, waiver or other action to be taken by the Administrative Agent or
the Banks under the Loan Documents which require action by the Required Banks,
such Banks that own 66 2/3% of the outstanding Percentage Interests (it being
stipulated that notwithstanding BOK's Percentage Interest set forth in
Section 10.1 hereof, that for so long as BOK is the only Bank under this
Agreement, BOK shall be deemed to be the holder of 100% of the outstanding
Percentage Interest for purposes of the definition of "Required Banks" as
contemplated hereby), except only as otherwise provided in Section 10.6 of this
Agreement.
1.84 "RESPONSIBLE OFFICER" shall mean the chief executive
officer, chief operating officer, chief financial officer or chief accounting
officer of a Transaction Party or any other officer of such Transaction Party
involved principally in its financial administration or its controllership
function.
1.85 "REVOLVING CREDIT BORROWING BASE" shall mean an amount
equal to the sum of (x) the LESSER of (i) fifty percent (50%) of the aggregate
sum of Equity's and Ouachita Energy's most recent compressor parts inventory
book value determined pursuant to GAAP (lower of cost or market value) or (ii)
$1,000,000; plus (y) a multiple equal to five (5) times the aggregate sum of
Borrowers' compressor fleets most recent six (6) month trailing Compressor
Operating Income (per GAAP), adjusted quarterly effective as of the first day of
each March, June, September and December commencing as of December 1, 1997,
based on the last day of each calendar quarter (initially the calendar quarter
ending September 30, 1997), all pursuant to the provisions hereof but, at the
Banks' sole discretion, future fleet acquisitions by Borrowers requiring a
Revolving Credit Loan advance under Article II hereof may be included in the
Revolving Credit Borrowing Base following each Bank's review and approval of the
data submitted by Borrowers in support thereof; plus (z) the Oil and Gas
Collateral Borrowing Base (as redetermined semi-annually in accordance with
Section 4.1 hereof as rolled forward to the next Oil and Gas Borrowing Base
determination date (either May 31 or November 30 as the case may be).
1.86 "REVOLVING CREDIT COMMITMENT" shall mean the agreement of
the Banks (initially only BOK) to make Revolving Credit Loans under Article II
of this Agreement in the maximum outstanding principal amount of $40,000,000
pursuant to the terms and conditions hereof and subject to the limitations
hereof, from the Closing Date until the Conversion Date, or such later date as
the Banks may extend the Commitments to make Revolving Credit Loans by an
extension in writing, unless earlier terminated pursuant to the terms hereof.
1.87 "REVOLVING CREDIT LOANS" shall mean the advances to the
Borrowers described in Article II of this Agreement, including the sum of
unfunded, outstanding Letters of Credit issued pursuant thereto.
1.88 "SARA" shall mean the Superfund Amendments and
Reauthorization Act of 1987, as amended, together with all regulations and
rulings promulgated with respect thereto.
1.89 "SECURITY AGREEMENT" shall have the meaning assigned to
that term in Article V of this Agreement.
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1.90 "SECURITY INSTRUMENTS" shall mean the Aircraft Chattel
Mortgage, the Oil and Gas Mortgage, the Real Estate Mortgages, the Declaration
(defined in Section 5.1), the Security Agreement, the Pledge Agreements, the
Guaranty Agreements and all other financing statements, assignments, security
agreements, pledges, lien entry forms, documents or writings and any and all
amendments, modifications and supplements thereto or restatements thereof,
granting, conveying, assigning, transferring or in any manner providing the Bank
with a security interest in any property as security for the repayment of all or
any part of the Bank Obligations.
1.91 "SENIOR NOTE AGREEMENT" shall mean the Senior Note
Agreement between ECS and Prudential dated as of July 31, 1997 (pertaining to
the Senior Notes).
1.92 "SENIOR NOTES" shall mean the Senior Notes (in the maximum
aggregate principal amount of $5,000,000) issued by ECS pursuant to the Senior
Note Agreement.
1.93 "SENIOR OBLIGATIONS" shall mean the Bank Obligations and
the Senior Prudential Obligations.
1.94 "SENIOR PRUDENTIAL OBLIGATIONS" shall mean the obligations
of ECS to Prudential and the other Noteholders under the Senior Notes pursuant
to the Senior Note Agreement.
1.95 "SGA" shall mean Selling, General and Administrative
Expenses of Borrowers, on a consolidated basis (per GAAP).
1.96 "SPECIFIED SALES PROCEEDS" shall mean:
(a) with respect to the sale of any of the Mortgaged
Property, the greater of (i) sixty-five percent (65%) of the
sales price of such Mortgaged Property, or (ii) sixty-five
percent (65%) of the discounted present worth of the Mortgaged
Property being sold as evaluated and determined by the most
recent semi-annual engineering report required by Section 4.1
hereof. (In the event the oil and gas properties sold were not
individually evaluated in the most recent engineering reports,
65% of the sales proceeds thereof shall be deemed the Specified
Sales Proceeds thereof); and
(b) with respect to the sale of any compressor unit, the
greater of (i) sixty-five percent (65%) of the sales price of
such compressor unit; or (ii) sixty-five percent (65%) of the
market value thereof stated in the most recent compressor
appraisal provided pursuant to Section 2.9 hereof.
1.97 "SUBORDINATED NOTE AGREEMENT" shall mean that certain
Subordinated Note and Warrant Purchase Agreement between ECS and Prudential
dated as of July 31, 1997 (pertaining to the Subordinated Notes and the
Warrants).
1.98 "SUBORDINATED NOTES" shall mean the Subordinated Notes (in
the maximum aggregate principal amount of $15,000,000) issued by ECS pursuant to
the Subordinated Note Agreement.
1.99 "SUBORDINATED PRUDENTIAL OBLIGATIONS" shall mean the
obligations of ECS and its Subsidiaries to Prudential and the other Noteholders
under the Subordinated Notes, Guaranty Agreements and the Warrants pursuant to
the Subordinated Note Agreement.
1.100 "SUBSIDIARY" shall mean (i) any corporation, at least
50% of the total combined voting power of all classes of Voting Stock of which
shall, at the time as of which any determination is being made, be owned by ECS
either directly or through Subsidiaries, and (ii) any partnership, joint venture
or similar entity if at least a 50% interest in the profits or capital thereof
is owned by
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ECS, either directly or through Subsidiaries (unless such entity can and does
ordinarily take major business actions without the prior approval, direct or
indirect, of ECS).
1.101 "SWAPS" shall mean with respect to any Person, payment
obligations with respect to interest rate swaps, currency swaps and similar
obligations obligating such Person to make payments, whether periodically or
upon the happening of a contingency. For the purposes of this Agreement, the
amount of the obligation under any Swap shall be the amount determined in
respect thereof as of the end of the then most recently ended fiscal quarter of
such Person, based on the assumption that such Swap had terminated at the end of
such fiscal quarter, and in making such determination, if any agreement relating
to such Swap provides for the netting of amounts payable by and to such Person
thereunder or if any such agreement provides for the simultaneous payment of
amounts by and to such Person, then in each such case, the amount of such
obligation shall be the net amount so determined.
1.102 "TANGIBLE NET WORTH" shall mean Net Worth MINUS all
assets which would be classified as intangible assets under GAAP, including
(without limitation) good will, patents, franchises, organization costs,
research and development costs, covenants not to compete and other deferred
charges.
1.103 "TAXES" shall mean all taxes, assessments, fees, or
other charges or levies from time to time or at any time imposed by any Laws or
by any Tribunal.
1.104 "TERMINATION EVENT" shall mean (i) a Reportable Event
described in Section 4043 of ERISA and the regulations issued thereunder (other
than a Reportable Event not subject to the provision for 30-day notice to the
PBGC under such regulations), or (ii) the withdrawal of the Borrowers or any of
their ERISA Affiliates from a Plan during a plan year in which it was a
"substantial employer" as defined in Section 4001(a)(2) of ERISA, or (iii) the
filing of a notice of intent to terminate a Plan or the treatment of a Plan
amendment as a termination under Section 4041 of ERISA, or (iv) the institution
of proceedings to terminate a Plan by the PBGC, or (v) any other event or
condition that might constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Plan.
1.105 "TOTAL LENDER/CAPITALIZED LEASE OBLIGATIONS" shall
mean the amount of all long term debt liabilities established pursuant to this
Agreement and the Note Purchase Agreements plus all current maturities of long
term Indebtedness of the Borrowers plus Capitalized Lease Obligations, all
determined in accordance with GAAP on a consolidated basis.
1.106 "TOTAL REVENUES" shall mean the total gross revenues
of Borrowers on a consolidated basis (per GAAP).
1.107 "TRANSACTION PARTIES" shall mean ECS, Equity, Sunterra
and Ouachita Energy.
1.108 "TRIBUNAL" shall mean any municipal, state,
commonwealth, Federal, foreign, territorial or other sovereign, governmental
entity, governmental department, court, commission, board, bureau, agency or
instrumentality.
1.109 "TSCA" shall mean the Toxic Substances Control Act,
as amended, together with all regulations and rulings promulgated with respect
thereto.
1.110 "VOTING STOCK" shall mean, with respect to any
corporation, any shares of stock of such corporation whose holders are entitled
under ordinary circumstances to vote for the election of directors of such
corporation (irrespective of whether at the time stock of any other class or
classes shall have or might have voting power by reason of the happening of any
contingency).
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1.111 "WARRANTS" shall mean the Common Stock Purchase
Warrants (evidencing rights to purchase an aggregate amount of 1,000,000 shares
of common stock of ECS) issued by ECS pursuant to the Subordinated Note
Agreement.
1.112 "WHOLLY-OWNED" means, as applied to any Subsidiary of
any Person, a Subsidiary at least 98% (by vote or value) of the outstanding
equity interests (other than directors' qualifying shares, if required by law)
of all classes, taken together as a whole, of which are at the time owned by
such Person or by one or more of its Wholly-Owned Subsidiaries or by such person
and one or more of the Wholly-Owned Subsidiaries.
1.113 "WORK IN PROCESS" shall mean that portion of Inventory
of Borrowers, including natural gas compressors, upon which manufacturing,
assembling, fabricating or processing work has commenced but which does not yet
constitute Finished Goods.
ACCOUNTING PRINCIPLES, TERMS AND DETERMINATIONS. All references
in this Agreement to "GAAP" shall be deemed to refer to generally accepted
accounting principles in effect in the United States at the time of application
thereof. Unless otherwise specified herein, all accounting terms used herein
shall be interpreted, all determinations with respect to accounting matters
hereunder shall be made, and all unaudited financial statements and certificates
and reports as to financial matters required to be furnished hereunder shall be
prepared, in accordance with generally accepted accounting principles, applied
on a basis consistent with the most recent audited consolidated financial
statements of the Borrowers and their Subsidiaries delivered pursuant to clause
(b) of Section 7.6 or, if no such statements have been so delivered, the most
recent audited financial statements referred to in Section 8.3 hereof.
ARTICLE II
REVOLVING CREDIT LOAN
2.1 REVOLVING CREDIT LOANS. Subject to recalculation of the
Revolving Credit Borrowing Base as defined in Section 2.4 hereof, the Banks
agree, upon the terms and subject to the conditions hereinafter set forth,
severally in accordance with their respective Percentage Interests and
Commitments to make Revolving Credit Loans from time to time, on or after the
Closing Date to the Borrowers jointly in an outstanding principal amount not to
exceed the Bank Borrowing Base, the unpaid principal balance of which Revolving
Credit Loans is convertible to a sixty (60) month term loan on March 31, 1999
(the "Conversion Date"), pursuant to Section 2.2.2 hereof.
2.2 BANK NOTE. Concurrent with the closing hereof, the
Borrowers will execute and deliver to the order of BOK their joint and several
replacement promissory note in the original principal amount of $40,000,000, a
copy of which is annexed hereto as EXHIBIT "A" and hereby made a part hereof
(hereinafter referred to as the "Bank Note"), bearing interest payable monthly
on the last day of every month commencing August 31, 1997, on unpaid balances of
principal from time to time outstanding and on any past due interest at a
variable annual rate as follows:
2.2.1. THROUGH MAY 31, 1999. Initially from the Closing
Date through August 31, 1997, at a variable annual rate equal from day to day to
Applicable Prime Rate minus .25% and thereafter equal from day to day to the
Applicable Prime Rate less, if applicable, the percentage set forth below, such
variable annual rate being adjustable quarterly as of the close of the second
month after each calendar quarter (based on the immediately preceding calendar
quarter end financial statement calculations and data) commencing as of August
31, 1997 (for the calendar quarter ended June 30, 1997) as follows:
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OBB Ratio Applicable Interest Rate
--------- ------------------------
> 80% Applicable Prime Rate
-
> 60% but < 80% Applicable Prime Rate
minus .25%
< 60% Applicable Prime Rate
- minus .50%
As used herein "OBB Ratio" shall mean the ratio of the average daily outstanding
borrowings under the Bank Note for the most recently completed calendar quarter
from the Closing Date (including unfunded portions of outstanding Letters of
Credit issued hereunder) until the Conversion Date divided by the average daily
Bank Borrowing Base as herein established and redetermined from time to time.
2.2.2 AFTER MAY 31, 1999. The unpaid and outstanding
principal balance of the Bank Note shall be converted on March 31, 1999 to a
term loan ("Convertible Term Loan") payable in fifty-nine (59) consecutive
monthly principal payments each equal to one-sixtieth (1/60th) of the LESSER of
the convertible amount or the Bank Borrowing Base as redetermined as of December
31, 1998 (the "Redetermined Borrowing Base") payable on the last day of each
calendar month commencing April 30, 1999, with the remaining principal and all
accrued interest due and payable at final maturity on March 31, 2004. All
payments received shall be applied first to accrued interest and then to the
outstanding principal amount owing on the Bank Note. The variable annual rate of
interest payable upon the indebtedness evidenced by the Bank Note from and
including April 1, 1999, is subject to quarterly adjustment on the close of the
second month after each calendar quarter (based on the immediately preceding
calendar quarter end financial statement calculations and data) commencing as of
May 31, 1999 (for the calendar quarter ended March 31, 1999), pursuant to the
Coverage Ratio described below:
Coverage Ratio Applicable Interest Rate
- -------------- ------------------------
< 1.30 to 1 Applicable Prime Rate
- -
> 1.30 to 1 but < 1.50 to 1 Applicable Prime Rate
- minus .25%
> 1.50 to 1 Applicable Prime Rate
minus .50%
As used herein "Coverage Ratio" shall mean for Borrowers the following:
EBITDA for previous 6 month
DIVIDED BY Previous 6 months of Bank Note principal and interest payments
PLUS any other term indebtedness principal and interest payments
for same 6 month period
2.2.3. QUARTERLY CERTIFICATES. No later than each February
28, May 31, August 31 and November 30 of each year, commencing as of May 31,
1999, Borrowers shall submit to the Collateral Agent a quarterly certification
signed by the Chief Financial Officer of ECS demonstrating the Borrowers'
calculations of such Coverage Ratio in reasonable detail acceptable to each
Bank.
2.2.4. PAYMENTS/ADVANCES. Prior to the Conversion Date, the
Borrowers may from time to time make prepayments of principal without premium or
penalty, provided that on or after April 1, 1999, interest on the amount
prepaid, accrued to the prepayment date, shall be paid on such prepayment date
shall accompany such prepayment. The Borrowers may not reborrow any amounts
paid or prepaid on the Bank Note on or after March 31, 1999. All payments and
prepayments shall be made in lawful money of the United States of America. All
outstanding principal of and unpaid
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accrued interest on the Bank Note not previously paid hereunder shall be due
and payable at final maturity on March 31, 2004, unless such final maturity
shall be extended by each Bank in writing or accelerated pursuant to the
terms hereof. After maturity (whether by acceleration or otherwise) the Bank
Note shall bear interest at the Default Rate, payable on demand. Interest
shall be calculated on the basis of a year of 365 days but assessed for the
actual number of days elapsed in each accrual period. In no event shall the
outstanding and unpaid principal amount advanced on the Bank Note exceed
$20,000,000 until November 30, 1997 (the "Initial Redetermined Borrowing Base
Date") without the express prior written consent of each Bank.
2.2.5. LETTERS OF CREDIT. Upon the Borrowers' application
from time to time by use of BOK's standard form Letter of Credit Application
Agreement and subject to the terms and provisions therein and herein set forth,
BOK agrees to issue standby letters of credit on behalf of the Borrowers under
the BOK Commitment in an aggregate unfunded amount not in excess of $500,000,
provided that (i) no letters of credit shall be issued on behalf of or on the
account of Borrowers with an expiry date later than March 31, 1999 and (ii) no
letter of credit will be issued on behalf of or for the account of the Borrowers
if at the time of issuance the outstanding amount of all unpaid Revolving Credit
Loans (including the aggregate outstanding and unfunded amount of unexpired
letters of credit then existing) under the Commitments as evidenced by the Bank
Note plus the maximum amount of such Letter of Credit then being requested would
exceed the Bank Borrowing Base. If any letter of credit is drawn upon at any
time, each amount drawn, whether a full or partial draw thereon, shall be
automatically reflected by the Bank as an advance on the Bank Note effective as
of the date of BOK's honoring the sight draft. In consideration of BOK's
agreement to issue standby letters of credit hereunder, the Borrowers agree to
pay to BOK letter of credit fees equal to one and one-half percentage points
(1.5%) per annum on the face amount of each letter of credit, which such fee
shall be due and payable to BOK at the time of issuance of each applicable
letter of credit.
2.2.6 BANKS' PARTICIPATION IN LETTERS OF CREDIT. Upon the
issuance of any Letter of Credit, a participation therein, in an amount equal to
each Bank's Percentage Interest, shall automatically be deemed granted by the
Letter of Credit Issuer to each Bank on the date of such issuance and the Banks
shall automatically be obligated, as set forth in Section 10.4, to reimburse the
Letter of Credit Issuer to the extent of their respective Percentage Interests
for all obligations incurred by the Letter of Credit Issuer to third parties in
respect of such Letter of Credit not reimbursed by the Borrowers. The Letter of
Credit Issuer will send to each Bank a confirmation regarding the participations
in Letters of Credit outstanding during such month.
2.2.7 PRESENTATION. The Letter of Credit Issuer may accept
or pay any draft presented to it, regardless of when drawn and whether or not
negotiated, if such draft, the other required documents and any transmittal
advice are presented to the Letter of Credit Issuer and dated on or before the
expiration date of the Letter of Credit under which such draft is drawn. Except
insofar as instructions actually received may be given by the Borrowers in
writing expressly to the contrary with regard to, and prior to, the Letter of
Credit Issuer's issuance of any Letter of Credit for the account of the
Borrowers and such contrary instructions are reflected in such Letter of Credit,
to the maximum extent permitted by law the Letter of Credit Issuer may honor as
complying with the terms of the Letter of Credit and with this Agreement any
drafts or other documents otherwise in order signed or issued by an
administrator, executor, conservator, trustee in bankruptcy, debtor in
possession, assignee for benefit of creditors, liquidator, receiver or other
legal representative of the party authorized under such Letter of Credit to draw
or issue such drafts or other documents.
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2.2.8 UNIFORM CUSTOMS AND PRACTICE. The Uniform Customs and
Practice for Documentary Credits (1993 Revision), International Chamber of
Commerce Publication No. 500, and any subsequent revisions thereof approved by a
Congress of the International Chamber of Commerce and adhered to by the Letter
of Credit Issuer (the "UNIFORM CUSTOMS AND PRACTICE"), shall be binding on the
Borrowers and the Letter of Credit Issuer except to the extent otherwise
provided herein, in any Letter of Credit or in any other Loan Document.
Anything in the Uniform Customs and Practice to the contrary notwithstanding:
(a) Neither the Borrowers nor any beneficiary of any
Letter of Credit shall be deemed an agent of any Letter of
Credit Issuer.
(b) With respect to each Letter of Credit, neither any
Letter of Credit Issuer nor its correspondents shall be
responsible, except to the extent required by law, for or shall
have any duty to ascertain:
(i) the genuineness of any signature;
(ii) the validity, form, sufficiency, accuracy,
genuineness or legal effect of any endorsements;
(iii) delay in giving, or failure to give, notice
of arrival, notice of refusal of documents or of
discrepancies in respect of which any Letter of Credit
Issuer refuses the documents or any other notice, demand
or protest;
(iv) the performance by any beneficiary under any
Letter of Credit of such beneficiary's obligations to the
Borrowers;
(v) inaccuracy in any notice received by the Letter
of Credit Issuer;
(vi) the validity, form, sufficiency, accuracy,
genuineness or legal effect of any instrument, draft,
certificate or other document required by such Letter of
Credit to be presented before payment of a draft, or the
office held by or the authority of any Person signing any
of the same; or
(vii) failure of any instrument to bear
any reference or adequate reference to such Letter of
Credit, or failure of any Person to note the amount of any
instrument on the reverse of such Letter of Credit or to
surrender such Letter of Credit or to forward documents in
the manner required by such Letter of Credit.
(c) Except as otherwise required by law, the occurrence of
any of the events referred to in the Uniform Customs and
Practice or in the preceding clauses of this Section 2.2.8 shall
not affect or prevent the vesting of any of the Letter of Credit
Issuer's rights or powers hereunder or the Borrowers' obligation
to make reimbursement of amounts paid under any Letter of Credit
or any draft accepted thereunder.
(d) The Borrowers will promptly examine (i) each Letter of
Credit (and any amendments thereof) sent to it by a Letter of
Credit Issuer and (ii) all instruments and documents delivered
to it from time to time by such Letter of Credit Issuer. The
Borrowers will notify the Letter of Credit Issuer of any claim
of noncompliance by notice actually received within three
Business Days after receipt of any of the foregoing documents,
the Borrowers being conclusively deemed to have waived any such
claim against such Letter of Credit Issuer and its
correspondents unless such notice is given. The Letter of
Credit
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Issuer shall have no obligation or responsibility to send
any such Letter of Credit or any such instrument or document to
the Borrowers.
(e) In the event of any conflict between the provisions of
this Agreement and the Uniform Customs and Practice and
Article 5 of the Uniform Commercial Code, the provisions of this
Agreement shall govern to the maximum extent permitted by
applicable law.
2.2.9 SUBROGATION. Upon any payment by a Letter of Credit
Issuer under any Letter of Credit and until the reimbursement of such Letter of
Credit Issuer by the Borrowers with respect to such payment, the Letter of
Credit Issuer shall be entitled to be subrogated to, and to acquire and retain,
the rights which the Person to whom such payment is made may have against the
Borrowers, all for the benefit of the Banks. The Borrowers will take such
action as the Letter of Credit Issuer may reasonably request, including
requiring the beneficiary of any Letter of Credit to execute such documents as
the Letter of Credit Issuer may reasonably request, to assure and confirm to the
Letter of Credit Issuer such subrogation and such rights, including the rights,
if any, of the beneficiary to whom such payment is made in accounts receivable,
inventory and other properties and assets of the Borrowers.
2.2.10 MODIFICATION, CONSENT. If the Borrowers request or
consent in writing to any modification or extension of any Letter of Credit, or
waive any failure of any draft, certificate or other document to comply with the
terms of such Letter of Credit, and if the Letter of Credit Issuer consents
thereto, the Letter of Credit Issuer shall be entitled to rely on such request,
consent or waiver. This Agreement shall be binding upon the Borrowers with
respect to such Letter of Credit as so modified or extended, and with respect to
any action taken or omitted by such Letter of Credit Issuer pursuant to any such
request, consent or waiver.
2.3.1. REVOLVING CREDIT ADVANCES. Each Revolving Credit Loan
requested by the Borrowers hereunder shall (i) be requested from the
Administrative Agent telephonically by ECS (as agent and attorney-in-fact for
all of the Borrowers) or in writing by ECS pursuant to a Loan Advance Request
delivered to the Administrative Agent, the form of which is annexed hereto as
EXHIBIT "B-1", no later than 11:00 o'clock A.M. (applicable current time in
Tulsa, Oklahoma) on the date upon which the advance is to be made; (ii) be in
the amount of $10,000 or an integral multiple thereof (unless the amount then
available to borrow is less than $10,000, in which event an advance may be made
in the amount available); (iii) not cause the aggregate outstanding and unpaid
principal amount of the Bank Note to exceed the Bank Borrowing Base; and (iv) be
advanced by such Bank on the applicable date, provided the request is timely
made in accordance with Section 2.3.1(i) hereof and all other conditions of
funding are met. Borrowers hereby jointly and severally irrevocably appoint ECS
as the Borrowers' duly authorized agent and attorney in fact for all purposes
hereunder in connection with Revolving Credit Loans and applications for the
issuance of letters of credit pursuant to this Article II, including (without
limitation) the execution and delivery to the Administrative Agent for and on
behalf of the Borrowers of all Loan Advance Requests and letters of credit
applications. In consideration of the Banks permitting telephonic requests for
advances, Borrowers state that they fully understand the risk attendant thereto,
agree to accept all such risk and hold the Administrative Agent and the Banks
harmless from any loss which any of the Borrowers may incur by reason of an
advance being made in response to a telephonic request whether such is caused by
mistake or negligence of the Administrative Agent or the Banks or otherwise,
unless it is judicially established that such loss was due to the gross
negligence and wanton disregard of the Administrative Agent or the Banks. All
advances made by the Banks shall, for mutual convenience, be deposited to
Borrowers' joint general deposit account No. 207937943 with BOK or a comparable
joint general deposit account with an affiliated financial institution of BOK
acceptable thereto (the "General Account"), and neither the Administrative Agent
nor the Banks shall have any responsibility to monitor the distribution of such
advances in any other respect.
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2.3.2. PAYMENTS/VOLUNTARY PREPAYMENTS. All advances made by
each Bank on the Bank Note and all payments or prepayments of principal and
interest thereon made by the Borrowers shall be recorded by each Bank in its
records, and the aggregate unpaid principal amount so recorded shall be
conclusive evidence of the principal amount owing and unpaid on the Bank Note.
The failure to so record shall not, however, limit or otherwise affect the
obligations of the Borrowers hereunder or under the Bank Note to repay the
principal amount of each Revolving Credit Loan together with all interest
accrued thereon. If additional lines or blanks shall be needed for the purpose
of recording advances or payments on the schedule, one or more additional
schedules may be annexed to the Bank Note and shall become a part thereof. All
payments and prepayments shall be made in lawful money of the United States of
America. Any payments or prepayments on the Bank Note received by BOK after
2:00 o'clock P.M. (applicable current time in Tulsa, Oklahoma) shall be deemed
to have been made on the next succeeding Business Day. All outstanding
principal of and accrued interest on the Bank Note not previously paid hereunder
shall be converted to the Convertible Term Loan on the Conversion Date, unless
such maturity shall be extended by each Bank in writing or accelerated pursuant
to the terms of the Intercreditor Agreement and hereof.
2.4 REVOLVING CREDIT BORROWING BASE. The Borrowers will not
request, nor will they accept, the proceeds of any Revolving Credit Loans or
advance under the Bank Note at any time when the amount thereof, together with
the unpaid principal amount of the Revolving Credit Note and outstanding but
unfunded letters of credit, exceeds the Bank Borrowing Base or, in the case of
an advance requested to fund an acquisition (asset or stock), the terms thereof
do not fully satisfy the requirements of Section 2.8 hereof below. Through
November 30, 1997, the Initial Redetermined Borrowing Base Date, the Revolving
Credit Borrowing Base shall in no event exceed $27,300,000. Each of the BOK
Borrowing Base, the Bank Borrowing Base and the Revolving Credit Borrowing Base
shall be redetermined initially as of the Initial Redetermined Borrowing Base
Date (November 30, 1997) and as of any subsequent quarterly redetermined
borrowing base date (each February 28 or 29, May 31, August 31 and November 30)
and as of the effective date of any sale(s) pursuant to Sections 3.1 or 3.2
hereof.
2.5 VARIANCE FROM BANK BORROWING BASE. Any Revolving Credit
Loan shall be conclusively presumed to have been made to the Borrowers by each
Bank under the terms and provisions hereof and shall be secured by all of the
Collateral and security described or referred to herein or in the Security
Instruments, whether or not such loan conforms in all respects to the terms and
provisions hereof. If the Banks should (for the convenience of the Borrowers or
for any other reason) make loans or advances which would cause the unpaid
principal amount of the Bank Note to exceed the amount of the BOK Borrowing Base
(for so long as BOK is the only Bank hereunder) or the Bank Borrowing Base, no
such variance, change or departure shall prevent any such loan or loans from
being secured by the Collateral and security created or intended to be created
herein or in the Security Instruments. None of the BOK Borrowing Base, the Bank
Borrowing Base nor the Revolving Credit Borrowing Base shall in any manner limit
the extent or scope of the Collateral and security granted for the repayment of
the Bank Note (or any other Bank Obligations) or limit the amount of
indebtedness under the Bank Note (or any other Bank Obligations) to be secured.
2.6 REVOLVING CREDIT MANDATORY PREPAYMENTS. The Borrowers
shall make mandatory prepayments from time to time on the Bank Note as required
by Section 4.2 hereof below. Borrowers also shall make mandatory prepayments on
the Bank Note concurrent with and at each time prepayments are made under
paragraph 4(B) of the Senior Note Agreement, the amount of which such
prepayments to the Administrative Agent on the Bank Note shall be ratable and
pari passu with the prepayments on the Senior Notes in accordance with the
Intercreditor Agreement.
2.7 AMENDMENT FEE/COMMITMENT FEES. Borrower shall pay a
$20,000 non-refundable amendment fee to BOK on the Closing Date. From the
Closing Date until the earlier of the Conversion Date or the date the Revolving
Credit Commitment is terminated, the Borrowers shall
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pay ratably to the Administrative Agent for the benefit of the Banks, as a
commitment fee for their Commitments, an amount equal to three-eights of one
percentage point (0.375%) per annum of the amount by which the then
applicable Bank Borrowing Base exceeds the outstanding unpaid principal
balance of the Bank Note from time to time computed daily on the basis of a
calendar year of 365 days but assessed for the actual number of days elapsed
during each accrual period. Such fee shall be payable quarterly as the same
accrues on the fifteenth (15th) day after the end of each quarter-annual
period ending March 31, June 30, September 30 and December 31, commencing
October 15, 1997 (for that portion of the calendar quarter from the Closing
Date through such September 30, 1997 fiscal quarter ending date), and at the
Conversion Date of the Bank Note, whether by acceleration or otherwise. The
amount of Commitment Fees payable for each such a quarter shall be paid by a
debit to the joint General Account of Borrowers (as more particularly
described in Section 2.3 hereof) in such amount. For the purposes of this
Section 2.7 and Section 12.9 hereof, Borrowers hereby jointly appoint BOK
their attorney-in-fact for the execution and performance of such debit, and
hereby absolve the Banks of any loss or negligence arising by virtue of its
exercise of such power, except for gross negligence or willful misconduct.
Said power shall be deemed a power coupled with an interest and shall be
irrevocable.
2.8 SPECIAL ACQUISITION BORROWING BASE MID-PERIOD ADJUSTMENTS.
The Borrowers may request the Banks to undertake a review and possible
adjustment of the Revolving Credit Borrowing Base other than at one of the
regularly scheduled redetermination dates pursuant hereto ("Mid-Period
Adjustment"). A Mid-Period Adjustment may be requested by the Borrowers to
adjust the Revolving Credit Borrowing Base as a result of a completed
acquisition, a prospective acquisition, or otherwise. The undertaking of any
such Mid-Period Adjustment shall be at the Banks' sole discretion.
Notwithstanding the foregoing, to the extent Borrowers request the Banks to
undertake more than one (1) Mid-Period Adjustment during any consecutive twelve
(12) month period, the Banks shall be entitled to collect a reasonable fee for
each such additional Mid-Period Adjustment not to exceed $1,000 each. In the
event a Mid-Period Adjustment is requested by the Borrowers to include in the
Revolving Credit Borrowing Base, prior to the consummation of an acquisition,
the value of assets to be acquired in such acquisition, in addition to the
requirements of Section 2.4 hereof above, such Mid-Period Adjustment and any
requested Revolving Credit Loan advance is subject to satisfaction of each of
the following conditions precedent: (i) no Change in Control has occurred or
will result from the contemplated acquisition, and (ii) the Administrative
Agent's review and approval of the assets being acquired (in accordance with the
Revolving Credit Borrowing Base formula then in effect).
2.9 ANNUAL APPRAISAL OF COMPRESSORS. During April of each
calendar year, commencing as of April, 1998, detailed and comprehensive current
annual orderly liquidation value appraisals of the combined compressor unit
lease fleets of Borrowers prepared at the sole cost and expense of the Borrowers
by an outside third party appraiser acceptable to the Collateral Agent shall be
delivered to the Collateral Agent.
ARTICLE III
SALE PROCEEDS/PREPAYMENTS
3.1 PROCEEDS OF SALE OF MORTGAGED PROPERTY. In the event any
interest in any of the Mortgaged Property is sold prior to the Conversion Date,
all net sales proceeds of any such sale or sales in excess of $250,000 in the
aggregate (including any prior sales permitted hereunder) during any consecutive
twelve (12) month period shall be applied initially in reduction of the
principal balance of the Bank Note; provided, however, to the extent a Revolving
Credit Borrowing Base deficiency pursuant to Section 4.2 hereof results from or
is caused thereby, such portion of the net
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sales proceeds as are necessary to satisfy the Section 4.2 deficiency shall
be applied ratably between the Senior Obligations in accordance with their
respective outstanding principal amounts (as adjusted by the election of the
Noteholders of the Senior Notes not to take their ratable share of such
prepayments) prior to application of the remainder of such net proceeds as a
principal prepayment on the Bank Note; and further PROVIDED, HOWEVER, no such
sale or sales in excess of $250,000 in the aggregate during any consecutive
twelve (12) month time period shall occur without the prior written consent
of the Banks and the Collateral Agent. For purposes of this section, "sale
proceeds" shall mean the gross sales price of such Mortgaged Property. Such
sale(s) of Mortgaged Property in excess of $250,000 singularly or in the
aggregate prior to the Conversion Date shall effect an automatic reduction of
the Oil and Gas Collateral Borrowing Base in such amount and shall also
permit the Banks, at their option, to effect a redetermination thereof, in
accordance with the provisions of Section 4.1 hereof, excluding the Mortgaged
Property being sold.
3.2 SALE OF COMPRESSOR UNITS. In the event any of the
compressor units of Borrowers are sold prior to the Conversion Date, all net
sales proceeds of any such compressor unit sale or sales in excess of $1,000,000
in the aggregate (including any prior sales permitted hereunder) during any
consecutive twelve (12) month period shall be applied initially in reduction of
the principal balance of the Bank Note; provided, however, if a Revolving Credit
Borrowing Base deficiency pursuant to Section 4.2 hereof results from or is
caused thereby, such portion of the net sales proceeds as are necessary to
satisfy the Section 4.2 deficiency shall be applied ratably between the Senior
Obligations in accordance with their respective outstanding principal amounts
(as adjusted by the election of the Noteholders of the Senior Notes not to take
their ratable share of such prepayments) prior to application of the remainder
of such net proceeds as a principal prepayment on the Bank Note; and PROVIDED,
HOWEVER, no such sale or sales in excess of $1,000,000 in the aggregate during
any consecutive twelve (12) month time period shall occur without the prior
written consent of the Bank and the Collateral Agent. For purposes of this
section, "sales proceeds" shall mean the net sales price of such compressor
units. Such sale(s) of compressor unit(s) in excess of $1,000,000 singularly or
in the aggregate prior to the Conversion Date shall effect an automatic
reduction of the Revolving Credit Borrowing Base and shall also permit the
Banks, at their option, to effect a redetermination thereof in accordance with
the provisions of Section 2.4 hereof, excluding the unit(s) being sold.
3.3 SALES OF MORTGAGED PROPERTY/COMPRESSOR UNITS AFTER
CONVERSION DATE. In the event any interest in any of the Mortgaged Property or
compressor units of Borrowers are sold after Conversion Date, the Specified
Sales Proceeds of each such sale or sales shall be remitted by Borrowers to the
Collateral Agent for distribution by the Collateral Agent to the Lenders in
accordance with the priorities set forth in the Intercreditor Agreement (i.e.,
ratably between the holders of the Bank Note and the Noteholders of the Senior
Notes and in extinguishment of all Bank Obligations and Senior Prudential
Obligations in accordance with their respective outstanding principal amounts
(as adjusted by the election of the Noteholders of the Senior Notes not to take
their ratable share of such prepayments) prior to any distribution thereof to
the holders of the Subordinated Notes), such remittance to be in addition to and
not in lieu of any prepayment obligations of Borrowers pursuant to Section 4.2
hereof; provided, however, no such sale or sales in excess of $1,000,000 in the
aggregate during any consecutive twelve (12) month time period shall occur
without the prior written consent of the Bank and the Collateral Agent.
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ARTICLE IV
OIL AND GAS COLLATERAL BORROWING BASE
4.1 SEMI-ANNUAL ENGINEERING REPORTS (OIL AND GAS PROPERTIES).
(a) The Borrowers shall deliver to BOK at the Borrowers' cost
by each April 20 and October 20, commencing October 20, 1997 such current data,
reports and engineering information as is necessary or appropriate for BOK's
engineers or any other independent petroleum engineer acceptable to the Bank to
compile and prepare by each May 31 and November 30 (commencing November 30,
1997) an engineering report in form and substance satisfactory to BOK,
evaluating the proven producing oil and gas reserves attributable to Sunterra's
aggregate interest in the Mortgaged Property (as defined in subsection (b)
below), together with the expenses attributable thereto. The engineering data
and information furnished to BOK by or on behalf of the Sunterra shall be
accompanied by such other information as shall be requested by BOK in order for
it to make its determination of the Oil and Gas Collateral Borrowing Base, and
by a certificate of the Borrowers certifying that Sunterra has good and
defensible title to the Mortgaged Properties valued and that payments are being
received from purchasers of production with respect to said interests. At any
time after thirty (30) days of the receipt of such information and in no event
later than each May 31 and November 30 (commencing November 30, 1997) BOK, on
behalf of the Banks, shall (i) make a determination of the present worth, using
such pricing and discount factor as it deems appropriate pursuant to BOK's then
applicable energy lending and engineering policies, procedures and pricing
parameters, of the future net revenue estimated by BOK to be received by
Sunterra from production from the Mortgaged Properties so evaluated, multiplied
by a percentage then determined by BOK to be appropriate on the basis of BOK's
then applicable energy lending criteria; and (ii) report in writing subject to
Prudential's right on behalf of the Noteholders to review the same upon
submission thereto by the Administrative Agent not less than ten (10) days prior
to the applicable May 31 and November 30 redetermination date. If Prudential's
determination differs from the Banks' determination and the Banks and Prudential
are unable to reach an agreement concerning the amount of the redetermined Oil
and Gas Borrowing Base by the then applicable May 31 or November 30, as the case
may be, the lower of the two Oil and Gas Borrowing Base valuation amounts shall
be automatically set by the Administrative Agent and forwarded to the Borrowers
as the redetermined amount of such evaluated oil and gas properties (the "Oil
and Gas Collateral Borrowing Base"). The good faith determinations of BOK and
Prudential in such respects shall be conclusive.
(b) The term "Mortgaged Property" shall refer only to such
properties covered by the Oil and Gas Mortgage (or a supplemental mortgage or
deed of trust, duly executed, acknowledged and delivered by Sunterra to the
Collateral Agent in form satisfactory to counsel for the Banks) and which
properties are, at the time:
(i) Particularly and adequately
described under the Oil and Gas Mortgage or other
supplemental mortgage or deed of trust;
(ii) Completed or developed (in the case of
oil and gas leases) to the extent that value is
being assigned to them by BOK in connection with
such evaluation and BOK has determined that such
properties are capable of producing oil or gas in
commercial quantities; and
(iii) Approved as to title to the satisfaction
of the Collateral Agent.
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4.2 COLLATERAL DEFICIENCY. Should the unpaid outstanding
principal balance of the Senior Obligations (including the unfunded portion of
outstanding Letters of Credit issued by BOK or other Banks pursuant hereto) be
greater than the Revolving Credit Borrowing Base in effect at such time, the
Collateral Agent shall notify the Borrowers in writing of the existence and
amount of such deficiency. Within fifteen (15) days from and after the date of
any such deficiency notice the Borrowers shall notify the Collateral Agent in
writing of their election to:
(a) Make ratable prepayments upon the Bank
Note and the Senior Notes to the extent of such
deficiency (unless the Noteholders of the Senior
Notes elect not to take such prepayment pursuant
to paragraph 4(B)(ii) of the Senior Note Purchase
Agreement) in an amount sufficient to reduce the
unpaid principal amount of the Senior Obligations
to an amount equal to or less than the amount of
the Revolving Credit Borrowing Base; or
(b) Make ratable mandatory equal monthly
principal prepayments on the Bank Note and Senior
Notes to the extent of such deficiency (unless
the Noteholders of the Senior Notes elect not to
take such prepayment pursuant to
paragraph 4(B)(ii) of the Senior Note Purchase
Agreement) due on the next six (6) successive
monthly interest installment due dates on the
Bank Note equal in an aggregate amount that will
reduce the outstanding principal balance of the
Senior Obligations to the projected Revolving
Credit Borrowing Base as of the next immediate
semi-annual redetermination of the Oil and Gas
Collateral Borrowing Base in accordance with the
provisions of Sections 2.4 and 4.1(a) hereof.
All of prepayments made pursuant to paragraphs (a) and/or (b) of this
Section 4.2 with respect to the Bank Note shall be made to the Administrative
Agent. If the Borrowers shall have elected to make a prepayment under Section
4.2(a) hereof, such prepayment shall be due within fifteen (15) days after the
Borrowers shall have notified the Collateral Agent of such election.
ARTICLE V
SECURITY
5.1 COLLATERAL. The repayment of the Bank Obligations and the
Prudential Obligations shall be secured by the following (the collateral
described herein and in the Security Instruments being collectively referred to
as the "Collateral"):
(a) A continuing security interest
pertaining thereto of first priority in, and/or
assignment, as security, of:
(i) all of the natural gas
compressor units and fleets of each of the
Borrowers, including such compressor fleets
of Borrowers more particularly described on
Schedule 3 annexed to the Security Agreement
including all equipment, machinery, tools,
blueprints, plans and fixtures, whether now
owned or hereafter acquired and all spare
parts, Raw Materials, accessories,
components, replacements or substitutions
thereof and therefor;
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(ii) all of the Equipment and
Inventory of each of the Borrowers, wherever
located and whether now owned or hereafter
acquired, including without limitation, all
vehicles and other types of rolling stock,
all airplanes, and all materials, parts,
spare parts, components and supplies of
every kind and description, of the
Borrowers, including all such Equipment and
Inventory located at (x) the fabrication
maintenance facilities in Columbia, Marion
County, Mississippi, and West Monroe,
Ouachita Parish, Louisiana, (y) the yards
and/or storage areas of Borrowers as more
particularly described on Schedule 4 annexed
to the Security Agreement and at all other
locations wherever they may be;
(iii) all accounts, lease receivables,
reimbursements, notes receivable, contracts,
contract rights, general intangibles, chattel paper,
documents and instruments arising out of the sale,
lease or management of compressor units or
compressor fleets or services rendered and any and
all agreements for the sale or lease of compressor
units or products or furnishing of services
pertaining thereto by any of the Borrowers,
including without limitation, all employment
agreements, lease fleet agreements, sales contracts
and purchase orders;
(iv) all general intangibles of any
one, more or all of the Borrowers, whether
now owned or hereafter acquired, including
without limitation the following arising out
of, in connection with or pertaining to the
lease, sale, maintenance, construction or
transportation of natural gas compressor
units:
(a) all lease and sales
contracts, purchase orders and employee
agreements;
(b) all processes, formulae,
scientific and/or technical
information, trade secrets, customer
lists, plans, reports, samples,
prototypes, know-how, all items in
application, development or other
pending status and all similar items
which are used in connection with
Borrowers' conduct of their natural gas
compressor business; and
(c) all of Borrowers' rights,
titles, interests, and benefits under
all partnerships and joint venture
agreements between any of the Borrowers
and any other Person and under all
leases of natural gas compressors units
(whether as lessor or lessee);
provided, however, that neither the
Collateral Agent nor the Banks hereby
assume any liabilities, obligations or
responsibilities in connection
therewith;
(v) all fixtures, furniture and
equipment of Borrowers, now owned or
hereafter acquired, all additions,
accessions, and substitutions thereto and
therefor, and all accessories, parts and
equipment now or hereafter affixed or used
in connection with
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(i) Equity's real property located in
Columbia, Marion County, Mississippi, or
Equity leasehold interest in real property
located in Oklahoma City, Oklahoma County,
Oklahoma, and in or near Kilgore, Texas,
and (ii) Ouachita Energy's real property
in West Monroe, Ouachita Parish,
Louisiana, respectively, and described on
schedules attached to the Security
Agreement, and all goods and other
fixtures, furniture and equipment acquired
with the proceeds thereof;
(vi) all cash, money, certificates
of deposit, time deposits and demand
deposits of any one, more or all of
Borrowers, at any time in the possession or
control of the Bank;
(vii) all ledgers, journals, books,
records, vouchers, shipping tickets,
receipts, sales memoranda, contracts,
partnership agreements, joint venture
agreements, correspondence and other
writings, data or papers evidencing or
relating to the items or types of collateral
described above in subsections (i) through
(vi), inclusive; and
(viii) all products and proceeds of
and all replacements, additions,
substitutions, accessories, appurtenances,
and parts for, the items or types of
collateral described above in subsections
(i) through (vii), inclusive, whether now
owned or hereafter acquired including,
without limitation insurance proceeds.
(b) A first mortgage lien in and to
Sunterra's Mortgaged Property as more
particularly described in the Mortgage, Deed of
Trust, Security Agreement, Financing Statement
and Assignment (with power of sale) dated as of
June 11, 1993, as amended by the First Amended
and Supplemental Mortgage, Deed of Trust,
Security Agreement, Financing Statement and
Assignment (with Power of Sale) dated as of April
13, 1994, as further amended by the Second
Amended and Supplemental Mortgage, Deed of Trust
and Assignment (with Power of Sale) dated as of
September 1, 1995, as further amended by the
Third Amended and Supplemental Mortgage, Deed of
Trust and Assignment (with Power of Sale) dated
as of March 31, 1997, and as further amended by
the Amended and Restated Mortgage, Deed of Trust,
Security Agreement, Financing Statement and
Assignment (with Power of Sale) dated as of even
date herewith, and which instruments collectively
cover and encumber producing oil, gas and other
leasehold and mineral interests situated in
Arkansas, Oklahoma and Texas (collectively the
"Oil and Gas Mortgage");
(c) A (i) first priority Deed of Trust,
Assignment of Rents, Security Agreement and
Financing Statement (with power of sale) in and
to Equity's fabrication maintenance facility in
Columbia, Marion County, Mississippi and
(ii) first priority Multiple Indebtedness
Mortgage Collateral Assignment and Security
Agreement in and to Ouachita Energy's fabrication
facility in West Monroe, Ouachita Parish,
Louisiana (collectively the "Real Estate
Mortgages");
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(d) Pledges and assignments of all capital
stock in the Borrowers other than ECS and of all
subsequently acquired or organized Subsidiaries
of ECS in the form of the Pledge Agreement(s)
described and defined in the Note Purchase
Agreements (the "Pledge Agreements"); and
(e) A first chattel mortgage lien and
security interest in that certain 58P Beech
Turbocharge under Federal Aviation Administration
registration number N831JB, Aircraft Serial No.
TJ-279 (the "Aircraft Chattel Mortgage").
The foregoing mortgage liens, security interests,
pledges and assignments shall be granted to the
Collateral Agent, for the Banks and the
Noteholders, as Secured Party, pursuant to the
terms of (i) the Security Agreement and
Assignment dated as of June 11, 1993, as amended
by the First Amended and Restated Security
Agreement and Assignment dated as of July 14,
1993, as further amended by the Second Amended
and Restated Security Agreement and Assignment
dated as of April 13, 1994, as further amended by
the Third Amended and Restated Security Agreement
and Assignment dated as of September 1, 1995, as
further amended by the Fourth Amended and
Restated Security Agreement and Assignment dated
as of March 31, 1997, and as further amended by
the Fifth Amended and Restated Security Agreement
and Assignment dated as of even date herewith and
in form and content acceptable to the Collateral
Agent and its legal counsel (collectively the
"Security Agreement"); (ii) the Oil and Gas
Mortgage; (iii) the Real Estate Mortgages
(including that certain Declaration of
Immobilization by Ouachita Energy to be filed in
Ouachita Parish, Louisiana (the "Declaration"));
(iv) the Pledge Agreement(s); and (v) the
Aircraft Chattel Mortgage; and the Borrowers
shall execute such financing statements, letters
in lieu of production forms, assignments, notices
and other documents and instruments as shall be
necessary or appropriate to perfect the mortgage
liens and security interests thus created.
The Borrowers hereby acknowledge that all of the Collateral is granted to the
Collateral Agent as security for the repayment of all of the Bank Obligations
and the Prudential Obligations and that the Senior Obligations shall be secured
ratably on a PARI PASSU basis pursuant to the Intercreditor Agreement and
further that the Subordinated Prudential Obligations shall be secured on a
subordinated and junior basis, inferior and subject in all respects to the prior
rights of the Senior Obligations. If the Bank Note and all of the Pru Notes are
paid in full or satisfied, but any portion of the Bank Obligations or the
Prudential Obligations remain unsatisfied, the Collateral Agent may retain its
security interest in all of the Collateral until the remaining Bank Obligations
and the Prudential Obligations are paid in full, even if the value of the
Collateral far exceeds the amount of Bank Obligations and the Prudential
Obligations outstanding.
5.2 LOCKBOX. Borrowers shall establish and maintain a joint
lockbox in either BOK or a BOK affiliated financial institution acceptable to
the Banks (the "Lockbox") pursuant to an agreement in form and substance
satisfactory to the Banks which shall provide, in part, that: (a) Borrowers
shall deposit all checks and other instruments with respect to their accounts
and lease receivables, compressor management, maintenance, sales or rental
proceeds and fees as well as all oil and gas production run checks (including,
without limitation, the Mortgaged Properties) in the form received by them in
the Lockbox, concerning which Lockbox none of the Borrowers shall have any
access or right of withdrawal, (b) unless otherwise directed in writing by the
Administrative
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Agent, Borrowers shall direct all of their account debtors, natural gas
compressor fleet/unit lessees, customers and purchasers of production to make
all payments in respect to their accounts receivable directly to the Lockbox,
(c) the Administrative Agent shall deposit all collected items received by it
to the General Account provided no Default shall have occurred and be
continuing, and (d) if an Event of Default shall have occurred and be
continuing, all such payments may be applied to the Bank Obligations and the
Prudential Obligations, at such times and in such priorities and order, as
set forth in the Intercreditor Agreement and upon termination of the
Intercreditor Agreement, otherwise as the Administrative Agent may elect.
ARTICLE VI
CONDITIONS PRECEDENT TO LOANS
6.1 CONDITIONS PRECEDENT TO INITIAL REVOLVING CREDIT LOAN. The
obligation of each Bank to make the initial Revolving Credit Loan under the
Revolving Credit Commitment, is subject to the satisfaction of all of the
following conditions on or prior to the Closing Date (in addition to the other
terms and conditions set forth herein):
(a) NO DEFAULT. There shall exist no Event
of Default or Default on the Closing Date.
(b) REPRESENTATIONS AND WARRANTIES. The
representations, warranties and covenants set
forth in Article VIII shall be true and correct
on and as of the Closing Date, with the same
effect as though made on and as of the Closing
Date.
(c) BORROWERS' CERTIFICATES. Each of the
Borrowers shall have delivered to BOK a
Certificate, dated as of the Closing Date, and
signed by the President or Vice President and the
Secretary of each of the Borrowers certifying (i)
to the matters covered by the conditions
specified in subsections (a) and (b) of this
Section 6.1, (ii) that the Borrowers have
performed and complied with all agreements and
conditions required to be performed or complied
with by them prior to or on the Closing Date,
(iii) to the name and signature of each officer
of each of the Borrowers authorized to execute
and deliver the Loan Documents and any other
documents, certificates or writings and to borrow
under this Agreement, and (iv) to such other
matters in connection with this Agreement which
BOK shall determine to be advisable. BOK may
conclusively rely on such Certificate until it
receives notice in writing to the contrary.
(d) PROCEEDINGS. On or before the Closing
Date, all corporate proceedings of each of the
Borrowers shall be taken in connection with the
transactions contemplated by the Loan Documents
and shall be satisfactory in form and substance
to BOK and its counsel; and BOK shall have
received certified copies, in form and substance
satisfactory to BOK and its counsel, of the
Articles or Certificate of Incorporation and By-Laws
of each of the Borrowers and the resolutions of the
Board of Directors of each of the Borrowers, as adopted,
authorizing the execution and delivery of the Loan Documents,
the borrowings under this Agreement, and the granting
of the security
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interests in the Collateral pursuant to the Security
Instruments, to secure the payment of the Bank
Obligations and the Prudential Obligations.
(e) SECURITY INSTRUMENTS. The Borrowers
(including without limitation, Ouachita Energy)
shall have delivered to the Collateral Agent, the
Security Instruments, appropriately executed by
all parties, attested, sealed, witnessed and
acknowledged to the satisfaction of the
Collateral Agent and dated as of the Closing
Date, together with such financing statements,
lien entry forms, pledges, stock powers, aircraft
chattel mortgages, and other documents as shall
be necessary and appropriate to perfect the
Collateral Agent's security interests in the
Collateral covered by said Security Instruments.
(f) AMENDMENT FEE. The Borrowers shall
have paid to BOK the $20,000 non-refundable
amendment fee.
(g) OIL AND GAS MORTGAGE. ECS, Sunterra,
and Ouachita Energy shall have executed and
delivered the Oil and Gas Mortgage described in
Section 5.1(b) hereof above to the Collateral
Agent (and where applicable to the Trustee) in
multiple recordable form counterparts as
reasonably required by the Collateral Agent.
(h) REAL ESTATE MORTGAGES. Borrowers shall
have delivered to the Collateral Agent the Real
Estate Mortgages in multiple recordable form
counterparts as reasonably required by the
Collateral Agent.
(i) AIRCRAFT CHATTEL MORTGAGE. Borrowers
shall have delivered to the Collateral Agent the
Aircraft Chattel Mortgage in multiple recordable
form counterparts as reasonably required by the
Collateral Agent.
(j) TITLE. Borrowers shall have provided
the Collateral Agent with evidence satisfactory
to the Collateral Agent and its legal counsel
that Borrowers have valid, merchantable title to
the Collateral, including (without limitation)
title reports, title opinions (division order or
otherwise regarding the Mortgaged Property,
updated title opinion concerning the Mississippi
real property encumbered by the Real Estate
Mortgage and mortgage title insurance concerning
the Louisiana real property encumbered by the
Real Estate Mortgages) and true and complete duly
executed releases and termination or,
alternatively (if acceptable to BOK and
Prudential) assignments (in recordable form) from
the prior record holders or owner(s) thereof
pertaining to all of the Collateral and where
applicable pursuant to the Asset Purchase
Agreement evidencing transfer of lawful title
thereto from the predecessor of Ouachita Energy
or the applicable Seller therein described and
defined to the applicable Borrowers.
(k) OPINION OF BORROWERS' COUNSEL. BOK
shall have received from Borrowers' counsel,
Schlanger, Mills, Mayer & Grossberg, L.L.P., and
from Conner & Winters and Lemler & Kelleher,
local counsel in Oklahoma and Louisiana,
respectively, favorable closing opinions,
satisfactory in form, scope and substance to BOK
and its counsel and the Collateral Agent.
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(l) SECURITY AGREEMENT. Each of the
Borrowers shall execute and deliver to the
Collateral Agent the Fifth Amended and Restated
Security Agreement described in Section 5.1
hereof above and ECS shall have executed and
delivered to the Collateral Agent the Pledge
Agreements, with all schedules and exhibits to
each thereof completed to the Collateral Agent's
satisfaction and applicable UCC financing
statements duly executed and delivered by the
appropriate Borrowers as deemed necessary or
appropriate by the Collateral Agent to perfect
the mortgage liens and security interest in the
Collateral in favor of the Collateral Agent.
(m) INTERCREDITOR AGREEMENT/PRUDENTIAL.
Each Bank (including BOK individually and as
Collateral Agent), the Borrowers and Prudential
and any other Noteholders shall have entered into
an Intercreditor Agreement in form and substance
satisfactory to the Bank. The Note Purchase
Agreement(s) as executed and delivered between
Prudential and ECS shall be acceptable to the
Banks, including without limitation, Prudential's
acquisition of the Senior Notes, the Subordinated
Notes and the Warrants in accordance with the
Note Purchase Agreements.
(n) OUACHITA MATTERS. The Merger Agreement
and the Asset Purchase Agreement shall be closed
concurrently herewith and become effective in
accordance with their respective terms,
provisions and conditions or otherwise in a
manner satisfactory to BOK in its sole
discretion.
(o) OTHER INFORMATION. BOK shall have
received such other information, documents and
assurances as shall be reasonably requested
thereby, including without limitation, applicable
Form UCC-11 or equivalent reports, judgment and
tax lien searches concerning Borrowers and the
Collateral, certificates of insurance naming the
Collateral Agent as loss payee and as mortgagee,
such other information with respect to the
natural gas compressor fleets/units of Borrowers
as shall be requested by the Collateral Agent and
such documentation satisfactory in form and
substance to the Collateral Agent demonstrating
that the Loans advanced hereunder as evidenced by
the Bank Note at all times (including without
limitation the prepayment provisions of Paragraph
4 of the Senior Note Agreement) rank pari passu
in right of payment with the Senior Notes and are
at all times (including without limitation the
prepayment provisions of Paragraph 4 of the
Subordinated Note Agreement) paramount, senior
and prior in right of payment with the
Subordinated Notes.
6.2 CONDITIONS PRECEDENT TO ALL REVOLVING CREDIT LOANS. None
of the Banks shall be obligated to make any Revolving Credit Loan or convert the
Bank Note on the Conversion Date as contemplated by Sections 2.1 and 2.2 hereof
(i) if at such time any Event of Default shall have occurred or any Default
shall have occurred and be continuing; (ii) if any of the representations,
warranties and covenants contained in Article VIII of this Agreement shall be
false or untrue in any material respect on the date of such loan, as if made on
such date; or (iii) unless the Bank Borrowing Base will support the additional
Revolving Credit Loan being requested. Each request by the Borrowers for an
additional Revolving Credit Loan shall constitute a representation by the
Borrowers that there is not at the time of such request an Event of Default or a
Default, and that all
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representations, warranties and covenants in Article VIII of this Agreement
are true and correct on and as of the date of each such request.
ARTICLE VII
COVENANTS
The Borrowers covenant and agree with each Bank that from the
date hereof and so long as this Agreement is in effect (by extension, amendment
or otherwise) and until payment in full of all Bank Obligations and the
performance of all other obligations of the Borrowers under this Agreement,
unless each Bank shall otherwise consent in writing:
7.1 PAYMENT OF TAXES AND CLAIMS. Each of the Borrowers will
pay and discharge or cause to be paid and discharged all Taxes imposed upon the
income or profits of the Borrowers or upon the property, real, personal or
mixed, or upon any part thereof, belonging to the Borrowers before the same
shall be in default, and all lawful claims for labor, rentals, materials and
supplies which, if unpaid, might become a Lien upon its property or any part
thereof; PROVIDED HOWEVER, that none of the Borrowers shall be required to pay
and discharge or cause to be paid or discharged any such Tax, assessment or
claim so long as the validity thereof shall be contested in good faith by
appropriate proceedings, and adequate book reserves shall be established with
respect thereto, and each of the Borrowers shall pay such Tax, charge or claim
before any property subject thereto shall become subject to execution.
7.2 MAINTENANCE OF CORPORATE EXISTENCE. Each of the Borrowers
will do or cause to be done all things necessary to preserve and keep in full
force and effect its corporate existence, rights and franchises and will
continue to conduct and operate its business substantially as being conducted
and operated presently. Each of the Borrowers will become and remain qualified
to conduct business in each jurisdiction where the nature of the business or
ownership of property by such Borrower may require such qualification.
7.3 PRESERVATION OF PROPERTY. Each of the Borrowers will at
all times maintain, preserve and protect all franchises and trade names and keep
all the remainder of its properties which are used or useful in the conduct of
its respective businesses whether owned in fee or otherwise, or leased, in good
repair and operating condition; from time to time make, or cause to be made, all
needful and proper repairs, renewals, replacements, betterments and improvements
thereto so that the business carried on in connection therewith may be properly
and advantageously conducted at all times; and comply with all material leases
to which it is a party or under which it occupies property so as to prevent any
material loss or forfeiture thereunder.
7.4 INSURANCE. Each of the Borrowers will keep or cause to be
kept adequately insured by financially sound and reputable insurers its plants,
equipment, compressor units (whether owned or leased) motor vehicles, and all
other property of a character usually insured by businesses engaged in the same
or similar businesses. Upon demand by the Bank any insurance policies covering
the Collateral shall be endorsed to provide for payment of losses to the Bank as
its interest may appear, to provide that such policies may not be canceled,
reduced or affected in any manner for any reason without thirty days prior
notice to the Bank, and to provide for any other matters which the Bank may
reasonable require; and such insurance shall be against fire, casualty and any
other hazards normally insured against and shall be in the amount of the full
value (less a reasonable deductible not to exceed amounts customary in the
industry for similarly situated businesses and properties) of the property
insured. The Borrowers shall at all times maintain adequate insurance against
damage to persons or property, which insurance shall be by financially sound and
reputable insurers and shall, without limitation, provide the following
coverages: comprehensive general liability
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(including, without limitation, coverage, where applicable, damage caused by
explosion, broad form property damage coverage, broad form coverage for
contractually independent contractors), worker's compensation, products
liability and automobile liability.
7.5 COMPLIANCE WITH APPLICABLE LAWS. Each of the Borrowers
will comply with the requirements of all applicable Laws and orders of any
Tribunal and obtain any licenses, permits, franchises or other governmental
authorizations necessary to the ownership of its properties or to the conduct of
its business.
7.6 FINANCIAL STATEMENTS AND REPORTS.
(a) QUARTERLY OPERATING STATEMENTS. The
Borrowers shall maintain a standard system of
accounting and shall furnish to the
Administrative Agent as soon as practicable after
the end of the first three quarters of each
fiscal year, commencing with the quarter ending
June 30, 1997, and in any event within forty-five
(45) days after the end of each said quarter,
copies for each of the Banks of consolidated and
consolidating statements of income, stockholders'
equity and cash flows for Borrowers and
consolidating and consolidated balance sheet for
Borrowers which shall be certified on behalf of
Borrowers by the chief financial officer or
other authorized officer of Borrowers to have
been prepared in accordance with GAAP
consistently applied and to fairly present the
financial condition of Borrowers for such period
(on a consolidated and consolidating basis), all
in reasonable detail.
(b) ANNUAL FINANCIAL STATEMENTS. As soon
as practicable after the end of each fiscal year
of Borrowers and in any event within one-hundred
twenty (120) days thereafter (but in no event
later than delivery to the Required Holder(s)
pursuant to Paragraph 5A(ii) of the Senior Note
Agreement), the Borrowers shall furnish to the
Administrative Agent copies for each of the Banks
of the following financial statements (on a
consolidated and consolidating basis), together
with a report thereon on and an unqualified
opinion, prepared in accordance with GAAP of
reputable independent certified public
accountants of recognized standing selected by
Borrowers and acceptable to the Administrative
Agent:
(i) A balance sheet of Borrowers at
the end of such year prepared on a
consolidated and consolidating basis,
(ii) A statement of income of
Borrowers for such year prepared on a
consolidated and consolidating basis, and
(iii) A statement of cash flows of
Borrowers for such year prepared on a
consolidated and consolidating basis,
setting forth in each case in comparative form
the figures for the previous fiscal year, if
applicable, all in reasonable detail. The report
of the independent certified public accountants
shall contain a certification that in the course
of the audit necessary for the certification of
such financial statements, they have obtained no
knowledge of any Event of Default or Default as
defined herein, or, if any Event of Default or
Default existed or exists, specifying the nature
and period of existence
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thereof; provided, however, that such accountants shall
not be liable to the Administrative Agent, the Collateral
Agent or the Banks by reason of their failure to obtain
knowledge of any such Event of Default or Default which
would not be disclosed in the course of an audit
conducted in accordance with generally accepted auditing
standards.
(c) QUARTERLY CERTIFICATES. As soon as available
and in any event within forty-five (45) days after the
end of each of the first three calendar quarters of each
year, concurrently with the furnishing of the applicable
quarterly statements pursuant to subsection 7.6(a), there
shall be furnished to the Administrative Agent copies for
each of the Banks of (i) a borrowing base certificate
signed by the chief financial officer of ECS in the form
annexed hereto as EXHIBIT "B-2" (the "Borrowing Base
Certificate") and (ii) a certificate signed by the Chief
Financial Officer of ECS detailing such information and
data concerning Borrowers' compressor fleets as are
necessary to provide the calculations required by clause
(y) of Section 2.4 hereof and further stating that: (a)
the financial statements were prepared (subject to year
end audit adjustments) in conformity with GAAP,
consistently applied; (b) a review of the activities of
Borrowers for the period covered by the financial
statements has been made under his supervision with a
view to determining whether Borrowers have kept,
observed, performed and fulfilled all of their
obligations under this Agreement, the other Loan
Documents and every other document or instrument referred
to herein; and (c) no Event of Default or an event which
with the passage of time or notice, or both, could become
an Event of Default has occurred, and is continuing, or a
statement describing the nature, period of existence and
status of any such event(s) if existing. Such
certificates shall fully demonstrate the method of all
calculations therein contained insofar as compliance with
financial covenants hereof are concerned but shall not be
qualified or limited because of restricted or limited
examination of any material portion of Borrowers' records
by the party preparing such quarterly statements.
(d) ANNUAL/SPECIAL COVENANT CERTIFICATES.
Concurrently with the furnishing of the financial
statements pursuant to 7.6(b), there shall be furnished
to the Administrative Agent copies of each of the Banks
of a separate certificate signed by the chief financial
officer of ECS stating that: (a) the financial statements
were prepared in conformity with GAAP on a basis
consistently applied, and (b) no Event of Default or an
event which with the passage of time or notice, or both,
could become an Event of Default has occurred, and is
continuing, and status of any such event(s) if existing.
Such certificate shall not be qualified or limited
because of restricted or limited examination of any
material portion of Borrowers' records by the party
preparing such annual statements. All certificates of
Borrowers submitted pursuant to this Agreement in
connection with compliance with certain financial or
other covenants herein contained, including, without
limitation, Sections 7.19, 7.20, 7.21, 7.22, 7.32 and
7.33 hereof, shall fully demonstrate the method of
calculations therein contained.
(e) SPECIAL AUDITING REPORTS. Promptly upon
receipt thereof, the Borrowers shall deliver to the
Administrative Agent copies
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for each of the Banks of each report submitted to
any of the Borrowers, by independent accountants in
connection with any annual, interim or special audit
made by them of the books and records of any one,
more or all of the Borrowers, including, without
limitation, any comment letter submitted by such
accountants to management in connection with their
audit.
(f) BUDGETS AND PROJECTIONS. Promptly upon
completion thereof on an annual basis within
sixty (60) days following each fiscal year end,
the Borrowers shall deliver to the Administrative
Agent copies for each of the Banks of each
operating budget and projection of financial
performance prepared for the Borrowers.
(g) PERIODIC REPORTS. Promptly upon their
becoming available, copies for each of the Banks
of all financial statements, reports, notices or
proxy statements sent by any of the Borrowers to
their stockholders and all registration
statements, periodic reports and other statements
and schedules filed by the Borrowers with any
securities exchange, the Securities and Exchange
Commission or any similar state or federal
governmental authority shall be delivered to the
Administrative Agent.
(h) OTHER REPORTS. Borrowers shall
concurrently deliver to the Administrative Agent
any other notices, statements, reports or
certificates delivered to Significant Holder(s)
under or pursuant to Paragraph 5A of the Senior
Note Agreement.
7.7 ENVIRONMENTAL COVENANTS. Borrowers will immediately
notify the Collateral Agent of and provide the Collateral Agent with copies of
any notifications of discharges or releases or threatened releases or discharges
of a Polluting Substance on, upon, into or from the Collateral which are given
or required to be given by or on behalf any of the Borrowers to any federal,
state or local Tribunal if any of the foregoing may materially and adversely
affect any of the Borrowers or any part of the Collateral, and such copies of
notifications shall be delivered to the Collateral Agent at the same time as
they are delivered to the Tribunal. Borrowers further agree promptly to
undertake and diligently pursue to completion any appropriate and legally
required or authorized remedial containment and cleanup action in the event of
any release or discharge or threatened release or discharge of a Polluting
Substance on, upon, into or from the Collateral. At all times while owning and
operating the Collateral, the Borrowers will maintain and retain complete and
accurate records of all releases, discharges or other disposal of Polluting
Substances on, onto, into or from the Collateral, including, without limitation,
records of the quantity and type of any Polluting Substances disposed of on or
off the Collateral.
7.8 ENVIRONMENTAL INDEMNITIES. Borrowers hereby agree to
indemnify, defend and hold harmless the Collateral Agent and the Banks and each
of their respective officers, directors, employees, agents, consultants,
attorneys, contractors and each of its affiliates, successors or assigns, or
transferees from and against, and reimburse said Persons in full with respect
to, any and all loss, liability, damage, fines, penalties, costs and expenses,
of every kind and character, including reasonable attorneys' fees and court
costs, known or unknown, fixed or contingent, occasioned by or associated with
any claims, demands, causes of action, suits and/or enforcement actions,
including any administrative or judicial proceedings, and any remedial, removal
or response actions ever asserted, threatened, instituted or requested by any
Persons, including any Tribunal, arising out of or related to: (a) the breach
of any representation or warranty of Borrowers contained in Section 8.16 set
forth herein; (b) the failure of Borrowers to perform any of their covenants
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contained in Section 7.7 hereunder; (c) the ownership, construction, occupancy,
operation, use of the Collateral prior to the earlier of the date on which (i)
the Bank Obligations and obligations secured hereby have been paid and performed
in full and the Security Instruments have been released, or (ii) the Collateral
has been sold by Collateral Agent following Collateral Agent's ownership of the
Collateral by way of foreclosure of the Liens granted pursuant hereto, deed in
lieu of such foreclosure or otherwise (the "Release Date"); provided, however,
this indemnity shall not apply with respect to matters caused by or arising
solely from the Collateral Agent's activities during any period of time the
Collateral Agent acquires ownership of the Collateral.
7.9 SEMI-ANNUAL PRODUCTION REPORTS. At the Bank's request,
Sunterra shall furnish to the Collateral Agent as soon as practicable after the
end of each calendar semi-annual period, and in any event within thirty (30)
days after the calendar semi-annual period end, a production report and an
expense report for such quarter, certified by Sunterra's chief financial officer
as being true, correct and complete, showing on a lease by lease basis (i) the
gross proceeds from the sale of Hydrocarbons produced from the Mortgaged
Property (including additional properties mortgaged subsequent to the Closing
pursuant to Section 4.2 above) owned by Sunterra, (ii) the severance, production
ad valorem taxes and gathering taxes deducted from or paid from the Mortgaged
Property proceeds, (iii) the Adjusted Gross Proceeds, (iv) the quantity of
Hydrocarbons produced and sold from the Mortgaged Property and the number and
identity of wells operated, drilled or abandoned, and (v) for each of the wells
such operating and other expense and net income information pertaining to the
Mortgaged Property owned by Sunterra as the Collateral Agent may request
including, without limitation, a listing of material royalty liabilities and
obligations on a lease by lease basis.
7.10 NOTICE OF DEFAULT. Immediately upon the happening of any
condition or event which constitutes an Event of Default or Default or any
default or event of default under any other loan, mortgage, financing or
security agreement, the Borrowers will give the Collateral Agent a written
notice thereof specifying the nature and period of existence thereof and what
actions, if any, the Borrowers are taking and propose to take with respect
thereto.
7.11 NOTICE OF LITIGATION. Immediately upon becoming aware of
the existence of any action, suit or proceeding at law or in equity before any
Tribunal, an adverse outcome in which would (i) materially impair the ability of
any of the Borrowers to carry on its business substantially as now conducted,
(ii) materially and adversely affect the condition (financial or otherwise) of
any of the Borrowers, or (iii) result in monetary damages in excess of $100,000,
the Borrowers will give the Collateral Agent a written notice specifying the
nature thereof and what actions, if any, the Borrowers are taking and propose to
take with respect thereto.
7.12 NOTICE OF CLAIMED DEFAULT. Immediately upon becoming aware
that the holder of any note or any evidence of indebtedness or other security of
any of the Borrowers has given notice or taken any action with respect to a
claimed default or event of default thereunder, if the amount of the note or
indebtedness exceeds $50,000 the Borrowers will give the Collateral Agent a
written notice specifying the notice given or action taken by such holder and
the nature of the claimed default or event of default thereunder and what
actions, if any, the Borrowers are taking and propose to take with respect
thereto.
7.13 NOTICE OF CHANGE OF MANAGEMENT. Within five (5) days after
any change in executive management of the Borrowers, including any officers of
any of the Borrowers holding the office of President, Chairman or chief
financial officer thereof, or the occurrence of a Change in Control, the
Borrowers shall give written notice thereof to the Administrative Agent,
together with a description of the reasons for the management/officer change.
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7.14 REQUESTED INFORMATION. With reasonable promptness, the
Borrowers will give the Collateral Agent such other data and information
relating to the Borrowers as from time to time may be reasonably requested by
the Collateral Agent.
7.15 FIELD AUDITS. The Collateral Agent shall be permitted to
conduct, at its own expense, an annual field audit of the Borrowers' accounts
and books and records relating thereto. Each field audit shall be conducted by
agents of the Bank, whether employees of the Collateral Agent or third-party
agents selected by the Collateral Agent. The Borrowers shall fully cooperate
with the Collateral Agent and its agents in connection with such field audits.
7.16 INSPECTION. The Borrowers will keep complete and accurate
books and records with respect to the Collateral and their other properties,
businesses and operations and will permit employees and representatives of the
Collateral Agent to audit, inspect and examine the same and to make copies
thereof and extracts therefrom during normal business hours. All such records
shall be at all times kept and maintained at the chief executive offices of the
Borrowers in Dallas, Texas. Upon any Default or Event of Default, the Borrowers
will surrender all of such records relating to the Collateral to the Collateral
Agent upon receipt of any request therefor from the Bank.
7.17 MAINTENANCE OF EMPLOYEE BENEFIT PLANS. The Borrowers will
maintain each employee benefit plan as to which they may have any liability or
responsibility in compliance with ERISA and all other Laws applicable thereto.
7.18 DISPOSITION/NEGATIVE PLEDGE RE ENCUMBRANCE OF COLLATERAL
AND OTHER ASSETS. Except as otherwise permitted by Article III hereof insofar
as the permitted sale(s) of compressor units, Mortgaged Property or other items
or types of Collateral of Borrowers are concerned, Borrowers will not sell or
encumber any of the Collateral and Borrowers will not sell, lease, transfer,
scrap or otherwise dispose of or mortgage, pledge, grant a security interest in
or otherwise encumber any of Borrowers' other oil and gas mining or mineral
properties or assets, whether for replacement or not, unless such sale or
disposition shall be in the ordinary course of business and for a full and fair
consideration, subject only to the Borrowers' limited right to sell up to
$100,000 worth in the aggregate of its properties or assets (other than and
expressly excluding compressors, oil and gas leasehold, mining or other mineral
interests wherever located) in the ordinary course of business during any
calendar year without obtaining the Collateral Agent's prior written consent.
In no event shall any of the Borrowers cause or permit the voluntary or
involuntary pledge, mortgage or other encumbrance, attachment or levy of or
against any of the properties or assets of whatsoever nature or type to any
Person (financial institution or otherwise) except to the Collateral Agent as
contemplated hereby.
7.19 MAXIMUM DEBT TO TANGIBLE NET WORTH RATIO. The Borrowers
will not at any time during any fiscal year period set forth below permit the
ratio of consolidated Total Lender/Capitalized Lease Obligations to their
consolidated Tangible Net Worth to be greater than the ratio set forth opposite
such fiscal year period below:
<TABLE>
<CAPTION>
Fiscal Year Maximum Ratio
----------- -------------
<S> <C>
Fiscal Years 1997 and 1998 1.6 to 1
Fiscal Year 1999 through
Fiscal Year 2004 1.4 to 1
</TABLE>
7.20 MINIMUM CURRENT RATIO. The Borrowers will not at any time
during any fiscal year period set forth below permit their Current Ratio to be
less than the rates set forth opposite such fiscal year period below:
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<PAGE>
<TABLE>
<CAPTION>
Minimum
Fiscal Year Current Ratio
----------- -------------
<S> <C>
Fiscal Year 1997 1.1 to 1
Fiscal Year 1998 through
Fiscal Year 2004 .6 to 1
</TABLE>
7.21 MINIMUM DEBT SERVICE COVERAGE RATIO. Borrowers will
not permit the ratio of (i) EBITDA for the most recently ended two (2) fiscal
quarters to (ii) Debt Service for such two (2) fiscal quarters to be less than
(x) 2.25 to 1 from the Closing Date until the Conversion Date or (y) 1.5 to 1
from and after such Conversion Date.
7.22 CAPITAL EXPENDITURES. The Borrowers agree not to make or
permit any capital expenditures in any fiscal year subsequent to the fiscal year
in which the Conversion Date occurs for the acquisition, construction, expansion
or improvements of capital assets (whether owned or leased or otherwise) during
fiscal year that aggregate in excess of $3,000,000 for such applicable period or
commit for any such capital expenditure which, if made in the applicable period
for delivery and payment for such applicable period, would result in gross
capital expenditures in excess of the $3,000,000 aggregate limitation herein set
forth.
7.23 LIMITATION ON OTHER INDEBTEDNESS. The Borrowers will not
create, incur, assume, become or be liable in any manner in respect of, or
suffer to exist, any indebtedness whether evidenced by a note, bond, debenture,
agreement, letter of credit or similar or other obligation, or accept any
deposits or advances of any kind, except (i) trade payables and current
indebtedness (other than for borrowed money) incurred in, and deposits and
advances accepted in, the ordinary course of business; (ii) indebtedness
incurred for the acquisition of assets secured by purchase money security
interests not exceeding $500,000 in the aggregate during any fiscal year of the
Borrowers with a cumulative aggregate amount not in excess of $750,000 at any
time outstanding; (iii) the Bank Obligations; and (iv) such other Indebtedness
as defined and permitted in Paragraph 6(C)(2) of the respective Note Purchase
Agreements.
7.24 LIMITATION ON LIENS. The Borrowers will not create or
suffer to exist any Lien upon any of their assets, whether real or personal
property, except purchase money security interests securing indebtedness
incurred for the acquisition of assets and only to the extent such purchase
money lien is confined solely to the item or items of property so acquired and
Liens in favor of the Collateral Agent securing the Bank Obligations, the
Prudential Obligations and such other Liens as defined in and permitted pursuant
to Paragraph 6(C)(1) of the respective Note Purchase Agreements.
7.25 CONTINGENT LIABILITIES; ADVANCES. Except for the items
described on EXHIBIT "C" attached hereto the Borrowers will not either directly
or indirectly otherwise, (i) guarantee, become surety for, discount, endorse,
agree (contingently or otherwise) to purchase, repurchase or otherwise acquire
or supply or advance funds in respect of, or otherwise become or be contingently
liable upon the indebtedness, obligation or liability of any Person, (ii)
guarantee the payment of any dividends or other distributions upon the stock of
any corporation, (iii) discount or sell with recourse or for less than the face
value thereof, any of its notes receivable, accounts receivable or chattel
paper; (iv) loan, agree to loan, or advance money to any Person; or (v) enter
into any agreement for the purchase or other acquisition of any goods, products,
materials or supplies, or for the making of any shipments or for the payment of
services, if in any such case payment therefor is to be made regardless of the
non-delivery of such goods, products, materials or supplies or the non-
furnishing of the transportation of services; provided, however that the
foregoing shall not be applicable to endorsement of negotiable instruments
presented to or deposited with a bank for collection or deposit in the ordinary
course of business or to loan, advance or guarantee amounts not in excess of
$200,000 in the aggregate during any fiscal year.
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<PAGE>
7.26 MERGER, CONSOLIDATION. The Borrowers will not merge or
consolidate with or into any other Person; or permit any other Person to
consolidate with or merge into any of the Borrowers (except only for the merger
contemplated by the Merger Agreement between Acquisition and OEC, with Ouachita
Energy being the survivor thereof, consolidation between or among existing
Subsidiaries); or adopt or effect any plan of reorganization, recapitalization,
liquidation or dissolution.
7.27 DIVIDENDS. The Borrowers will not declare, pay or become
obligated to declare or pay any cash or other dividends on any class of their
capital stock now or hereafter outstanding, make any distribution of cash or
property to holders of any shares of such stock, or redeem, retire, purchase or
otherwise acquire, directly or indirectly, any shares of any class of their
capital stock now or hereafter outstanding.
7.28 CHANGE OF FISCAL YEAR. None of the Borrowers will change
its fiscal year from its present fiscal year (fiscal year ending December 31).
7.29 CHANGE OF BUSINESS. None of the Borrowers will engage in
any business activity substantially different from or unrelated to present
business activities and operations.
7.30 ARTICLES OF INCORPORATION; BY-LAWS; CORPORATE NAME AND
ASSUMED NAMES. The Borrowers will not amend, alter, modify or restate their
Articles or Certificate of Incorporation or By-Laws in any way which would (i)
change the corporate name or adopt a trade name for any of the Borrowers; or
(ii) in any manner adversely affect the Borrowers' obligations or covenants to
the Bank hereunder or under any of the other Loan Documents.
7.31 TRANSACTIONS WITH AFFILIATES. The Borrowers will not enter
into any transaction, including (without limitation) the purchase, sale or
exchange of property or the rendering or furnishing of any service with any
Affiliate of any of the Borrowers, except transactions in the ordinary course of
the businesses of Borrowers and upon fair and reasonable terms no less favorable
than Borrowers would obtain in a transaction for the same purpose with a Person
that is not an Affiliate of any of the Borrowers; provided, however, ECS or an
approved Subsidiary thereof, shall be permitted to enter into as many as three
(3) certain compressor leasing partnerships or compressor limited liability
companies with BOK Capital Services, Inc. ("BCS"), an affiliate of BOK, in which
BCS would provide not more than $6,000,000 in the form of capital or loans to
each such partnership or limited liability company entity (which such loans, if
any, shall be non-recourse to ECS), all as contemplated in summary terms by
BCS's March 26, 1997 commitment letter to ECS.
7.32 SGA TO TOTAL REVENUES. The Borrowers will not permit the
percentage of their aggregate SGA expenses (per GAAP) to Total Revenues (per
GAAP) as calculated quarterly for the previous two (2) fiscal quarters to exceed
(i) 22% through the fiscal quarter ending December 31, 1997, and (ii) from and
including the fiscal quarter ending March 31, 1998, 19%.
7.33 PARTS INVENTORY. Borrowers shall not permit their
aggregate compressor parts inventories to exceed $5,000,000 book value at any
time calculated pursuant to GAAP.
7.34 MAINTENANCE OF INSURANCE. The Borrowers will carry and
maintain insurance (subject to customary deductibles and retentions) in at least
such amounts and against such liabilities and hazards and by such methods as
customarily maintained by other companies operating similar businesses. The
Collateral Agent and the holder of the Note shall be named as additional
insureds, and the Collateral Agent shall be named as loss payee, on each
insurance policy obtained or maintained by the Borrowers with respect to their
properties and businesses.
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7.35 COLLATERAL; NEW SUBSIDIARIES. The Borrowers shall execute
any and all documents, financing statements, agreements and instruments, and
take all action (including filing Uniform Commercial Code and other financing
statements, mortgages and deeds of trust), that may be required under applicable
law, or which the Banks or the Collateral Agent may reasonably request in order
to effectuate the transactions contemplated by the Loan Documents and in order
to grant, preserve, protect and perfect the validity and first priority of the
security interest and Liens created or purported to be created by the Security
Instruments. In addition, at the cost and expense of the Borrowers, the
Borrowers will (i) cause each subsequently acquired or organized Subsidiary
(contemporaneously with such acquisition or organization) to execute and deliver
a Guarantee in favor of the holders of the Bank Note, (ii) pursuant to the
applicable Pledge Agreement, deliver or cause a Subsidiary to deliver to the
Collateral Agent a certificate representing all capital stock of, or other
equity interests in, such subsequently acquired or organized Subsidiary,
together with an undated stock power or assignment, executed in blank by a
Responsible Officer (or take or cause a Subsidiary) to take such other actions
as are necessary to provide the Collateral Agent with a first priority perfected
pledge or security interest in such capital stock or other equity interests),
and (iii) cause such Subsidiary to secure payment of the Note and performance
and observance of all other obligations of the Borrowers and its Subsidiaries
under the Loan Documents by pledging or creating, or causing to be pledged or
created, first priority perfected security interests and Liens with respect to
such of its assets and properties as the Collateral Agent shall designate (it
being understood that it is the intent of the parties that such obligations
shall be secured by, among other things, substantially all the property and
assets of the Borrowers and their Subsidiaries (now or hereafter acquired or
created), including, without limitation, real and other properties acquired
subsequent to the Closing Date). Such security interest and Liens will be
created under the Security Instruments and other security agreements, mortgages,
deeds of trust and other instruments and documents in form, scope and substance
satisfactory to the Banks and the Collateral Agent, and the Borrowers will
deliver or cause to be delivered to the Collateral Agent, all such instruments
and documents (including, without limitation, legal opinions, title insurance
policies, surveys and lien searches) as the Banks or the Collateral Agent shall
request to evidence compliance with this Section 7.35. The Borrowers agree to
provide from time to time such evidence as the Banks or the Collateral Agent
shall request as to the perfection and priority status of each such security
interest and Lien.
7.36 ENFORCEMENT OF ACQUISITION DOCUMENTS. The Borrowers will
enforce, and will cause each of their Subsidiaries parties thereto to enforce,
all covenants, agreements and other obligations contained in the Acquisition
Documents (the Asset Purchase Agreement and the Merger Agreement) which are
binding upon the other parties thereto and which survive the consummation of the
Acquisition (the merger and the asset acquisitions as contemplated by the
Acquisition Documents), including, without limitation, all indemnification
obligations.
7.37 SALE OR DISCOUNT OF RECEIVABLES. Borrowers will not sell
with resource, discount (other than to the extent of finance and interest
charges included therein) or otherwise sell for less than face value thereof,
any of its notes or accounts receivable, except notes or accounts receivable the
collection of which is doubtful in accordance with general accepted accounting
principles.
7.38 MOST FAVORED LENDER STATUS. After the Closing Date, the
Borrowers will not and will not permit any one or more of their Subsidiaries to
enter into, assume or otherwise be bound or obligated under any agreement
creating or evidencing Indebtedness in excess of $500,000 in the aggregate or
any agreement executed and delivered in connection with any Indebtedness in
excess of $500,000 in the aggregate containing one or more Additional Covenants
or Additional Defaults, unless prior written consent to such agreement shall
have been obtained pursuant to Section 12.15 hereof; PROVIDED, HOWEVER, in the
event the Borrowers or any Subsidiary shall enter into, assume or otherwise
become bound by or obligated under any such agreement without the prior written
consent of the holder of the Bank Note, the terms of this Agreement shall,
without any further action on the
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part of the Borrowers or any of the holder of the Bank Note, be deemed to be
amended automatically to include each Additional Covenant and each Additional
Default contained in such agreement, but only for so long as such Additional
Covenants and Additional Defaults remain in effect with respect to such other
agreement. The Borrowers further covenant to promptly execute and deliver at
its expense (including, without limitation, the fees and expenses of counsel
for the holder of the Bank Note) an amendment to this Agreement in form and
substance satisfactory to the Banks evidencing the amendment of this
Agreement to include such Additional Covenants and Additional Defaults,
provided that the execution and delivery of such amendment shall not be a
precondition to the effectiveness of such amendment as provided for in this
paragraph 7.38, but shall merely be for the convenience of the parties hereto.
7.39 OTHER AGREEMENTS/AMENDMENTS. The Borrowers will not (a)
enter into or permit to exist any agreement (i) which would cause an Event of
Default or a Default hereunder; or (ii) which contains any provision which would
be violated or breached by the performance of Borrowers' obligations hereunder
or under any of the other Loan Documents or (b) amend or modify or permit the
amendment or modification of the Pru Notes, the Note Purchase Agreements or the
GUARANTY Agreements or Security Documents therein described and defined,
including without limitation the Senior Note Documents and the Subordinated Note
Documents.
7.40 ACQUISITIONS. Without the prior written consent of the
Administrative Agent, the Borrowers will not acquire from any other Person
assets or capital stock (even if the Borrowers have available cash or borrowing
capacity under the Revolving Credit Borrowing Base) to the extent that more than
$5,000,000 of the consideration to be paid by the Borrowers for the acquisition
is to be paid in cash at the time of the acquisition or within twelve months
thereafter.
7.41 CHANGE IN CONTROL. No Change in Control shall have
occurred.
7.42 PREPAYMENTS ON SUBORDINATED NOTES. Borrowers will not make
any voluntary prepayments on any of the Subordinated Notes.
7.43 PAYMENT OF BANK OBLIGATIONS. The Borrowers hereby agree to
pay, when due and owing, all Bank Obligations, whether or not evidenced by the
Bank Note.
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES
To induce the Banks to enter into this Agreement and to make the
Revolving Credit Loans to the Borrowers under the provisions hereof, and in
consideration thereof, the Borrowers represent, warrant and covenant as follows:
8.1 ORGANIZATION AND QUALIFICATION. Each of the Borrowers is a
corporation duly organized, validly existing, and in good standing under the
Laws of its respective jurisdiction of incorporation, and is duly licensed and
in good standing as a foreign corporation in each jurisdiction in which the
nature of the business transacted or the property owned is such as to require
licensing or qualification as such. Equity, Sunterra and Ouachita Energy are
Wholly Owned Subsidiaries of ECS and ECS has no other Subsidiaries, except
Equity Leasing Corporation, an Oklahoma corporation, which is currently inactive
and owns no assets.
8.2 LITIGATION. Except for the action described on EXHIBIT "D"
attached hereto, there is no action, suit, investigation or proceeding
threatened or pending before any Tribunal against or affecting any of the
Borrowers or any properties or rights of any of the Borrowers which, if
adversely
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determined, would result in a liability of greater than $100,000 or would
otherwise result in any material adverse change in the business or condition,
financial or otherwise, of any of the Borrowers. None of the Borrowers is in
default with respect to any judgment, order, writ, injunction, decree, rule
or regulation of any Tribunal.
8.3 FINANCIAL STATEMENTS. The Borrowers' most recent
consolidated unaudited financial statements which have been furnished to the
Banks have been prepared in conformity with GAAP, show all material liabilities,
direct and contingent, and fairly present the consolidated financial condition
of the Borrowers as of the date of such statements and the results of their
operations for the period then ended, and since the date of such statements
there has been no material adverse change in the business, financial condition
or operations of any of the Borrowers.
8.4 CONFLICTING AGREEMENTS AND OTHER MATTERS. None of the
Borrowers is in default in the performance of any obligation, covenant, or
condition in any agreement to which it is a party or by which it is bound. None
of the Borrowers is a party to any contract or agreement or subject to any
charter or other corporate restriction which materially and adversely affects
its business, property or assets, or financial condition. None of the Borrowers
is a party to or otherwise subject to any contract or agreement which restricts
or otherwise affects the right or ability of any of the Borrowers to execute the
Loan Documents or the performance of any of their respective terms. Neither the
execution nor delivery of any of the Loan Documents, nor fulfillment of nor
compliance with their respective terms and provisions will conflict with, or
result in a breach of the terms, conditions or provisions of, or constitute a
default under, or result in any violation of, or result in the creation of any
Lien (except those created by the Loan Documents) upon any of the properties or
assets of any of the Borrowers pursuant to, or require any consent, approval or
other action by or any notice to or filing with any Tribunal (other than routine
filings after the Closing Date with the Securities and Exchange Commission, any
securities exchange and/or state blue sky authorities) pursuant to, the charter
or By-Laws of any of the Borrowers, any award of any arbitrator, or any
agreement, instrument or Law to which any of the Borrowers is subject.
8.5 CORPORATE AUTHORIZATION. The respective Boards of
Directors of each of the Borrowers have duly authorized the execution and
delivery of each of the Loan Documents and the performance of their respective
terms. No other consent or corporate action of any other Person, except for the
Banks and the Noteholders, is required as a prerequisite to the validity and
enforceability of the Loan Documents.
8.6 PURPOSES. None of the Borrowers is engaged principally, or
as one of its important activities, in the business of extending credit for the
purpose of purchasing or carrying margin stock (within the meaning of Regulation
U of the Board of Governors of the Federal Reserve System) and no part of the
proceeds of any borrowing hereunder will be used to purchase or carry any margin
stock or to extend credit to others for the purpose of purchasing or carrying
any margin stock. If requested by the Banks, the Borrowers will furnish to the
Banks a statement in conformity with the requirements of Federal Reserve Form U-
1, referred to in Regulation U, to the foregoing effect. None of the Borrowers
or any agent acting on behalf of any thereof has taken or will take any action
which might cause this Agreement, or the Note to violate any regulation of the
Board of Governors of the Federal Reserve System (including Regulations G, T, U
and X) or to violate any securities laws, state or federal, in each case as in
effect now or as the same may hereafter be in effect.
8.7 COMPLIANCE WITH APPLICABLE LAWS. The Borrowers are in
compliance with all Laws, ordinances, rules, regulations and other legal
requirements applicable to them and the business conducted by them, the
violation of which could or would have a material adverse effect on their
business or condition, financial or otherwise. Neither the ownership of any
capital stock of any of the Borrowers, nor any continued role of any Person in
the management or other affairs of any of the Borrowers (i) will result or could
result in the Borrowers' noncompliance with any Laws,
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ordinances, rules, regulations and other legal requirements applicable to the
Borrowers, or (ii) could or would have a material adverse effect on the
business or condition, financial or otherwise, of any one, more or all of the
Borrowers.
8.8 POSSESSION OF FRANCHISES, LICENSES. Each of the Borrowers
possesses all franchises, certificates, licenses, permits and other
authorizations from governmental political subdivisions or regulatory
authorities, free from burdensome restrictions, that are necessary in any
material respect for the ownership, maintenance and operation of their
respective properties and assets, and none of the Borrowers is in violation of
any thereof in any material respect.
8.9 LEASES. The Borrowers enjoy peaceful and undisturbed
possession of all leases necessary in any material respect for the operation of
their respective properties and assets, none of which contains any unusual or
burdensome provisions which might materially affect or impair the operation of
such properties and assets. All such leases are valid and subsisting and are in
full force and effect.
8.10 TAXES. The Borrowers have filed all Federal, state and
other income tax returns which are required to be filed and have paid all Taxes,
as shown on said returns, and all Taxes due or payable without returns and all
assessments received to the extent that such Taxes or assessments have become
due. All Tax liabilities of each of the Borrowers are adequately provided for
on the books of the Borrowers, including interest and penalties. No income tax
liability of a material nature has been asserted by taxing authorities for Taxes
in excess of those already paid.
8.11 DISCLOSURE. Neither this Agreement nor any other Loan
Document or writing furnished to the Bank by or on behalf of any of the
Borrowers in connection herewith contains any untrue statement of a material
fact nor do such Loan Documents and writings, taken as a whole, omit to state a
material fact necessary in order to make the statements contained herein and
therein not misleading. There is no fact known to any of the Borrowers and not
reflected in the financial statements or exhibits hereto provided to the Banks
which materially adversely affects or in the future may materially adversely
affect the business, property, or assets, or financial condition of any of the
Borrowers which has not been set forth in this Agreement, in the Loan Documents
or in other documents furnished to the Banks by or on behalf of the Borrowers
prior to the date hereof in connection with the transactions contemplated
hereby.
8.12 INVESTMENT COMPANY ACT REPRESENTATION. None of the
Borrowers is an "investment company" or a company "controlled" by an "investment
company", within the meaning of the Investment Company Act of 1940, as amended.
8.13 PUBLIC UTILITY HOLDING COMPANY ACT; FEDERAL POWER ACT;
INTERSTATE COMMERCE ACT; OTHER REGULATION. Neither the Borrowers, any of their
Subsidiaries nor any Person controlling the Borrowers or any of their
Subsidiaries is subject to regulation under the Public Utilities Holding Company
Act of 1935, as amended, the Federal Power Act, as amended, the Interstate
Commerce Act, as amended, any state public utilities code, as amended from time
to time, or any other federal or state statute or regulation, as amended from
time to time, which limits the ability of (i) the Borrowers to issue the Bank
Note or (ii) the Borrowers or any of their Subsidiaries to perform its
respective obligations under this Agreement, the other Loan Documents or the
Acquisition Documents.
8.14 ERISA. Since the effective date of Title IV of ERISA, no
Reportable Event has occurred with respect to any Plan. For the purposes of
this section the term "Reportable Event" shall mean an event described in
Section 4043(b) of ERISA. For the purposes hereof the term "Plan" shall mean
any plan subject to Title IV of ERISA and maintained for employees of the
Borrowers, or of any member of a controlled group of corporations, as the term
"controlled group of corporations"
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is defined in Section 1563 of the Internal Revenue Code of 1986, as amended
(the "Code"), of which any of the Borrowers is a part. Each Plan established
or maintained by any of the Borrowers is in material compliance with the
applicable provisions of ERISA, and the Borrowers have filed all reports
required by ERISA and the Code to be filed with respect to each Plan. The
Borrowers have met all requirements with respect to funding Plans imposed by
ERISA or the Code. Since the effective date of Title IV of ERISA there have
not been any nor are there now existing any events or conditions that would
permit any Plan to be terminated under circumstances which would cause the
lien provided under Section 4068 of ERISA to attach to the assets of the
Borrowers. The value of each Plan's benefits guaranteed under Title IV of
ERISA on the date hereof does not exceed the value of such Plan's assets
allocable to such benefits on the date hereof.
8.15 FISCAL YEAR. The fiscal years of the respective Borrowers
end as of December 31 of each year.
8.16 TITLE TO PROPERTIES; AUTHORITY. Borrowers have full power,
authority and legal right to own and operate the properties which they now own
and operate, and to carry on the lines of business in which it is now engaged,
and Sunterra has good and marketable title to the Mortgaged Property in
corporate capacity subject to no Lien of any kind except Liens permitted by this
Agreement. Sunterra owns a working interest and net revenue interest in the oil
and gas leasehold estate for the Mortgaged Property of not less than the amounts
set forth on a well by well basis on EXHIBIT "E" attached to the Fourth Amended
and Restated Revolving Credit and Term Loan Agreement dated as of March 31, 1997
(the "Fourth Amended Agreement"). Borrowers have full power, authority and
legal right to execute and deliver and to perform and observe the provisions of
this Agreement and the other Loan Documents. ECS and Sunterra further represent
to the Collateral Agent and Banks that any and all after acquired interest in
any one or more of the Mortgaged Property being concurrently or subsequently
assigned of record to Borrowers is and shall be deemed encumbered by the Oil and
Gas Mortgage in all respects.
8.17 ENVIRONMENTAL REPRESENTATIONS. To the best of
Borrowers' knowledge and belief, upon reasonable and good faith inquiry
exercised with due diligence and in accordance with normal industry standards:
(a) Borrowers are not subject to any
liability or obligation relating to (i) the
environmental conditions on, under or about the
Collateral, including, without limitation, the
soil and ground water conditions at the location
of any of the Borrowers' properties, or (ii) the
use, management, handling, transport, treatment,
generation, storage, disposal, release or
discharge of any Polluting Substance;
(b) Borrowers have not obtained and are not
required to obtain or make application for any
permits, licenses or similar authorizations to
construct, occupy, operate or use any buildings,
improvements, facilities, fixtures and equipment
forming a part of the Collateral by reason of any
Environmental Laws;
(c) Borrowers have taken all steps
necessary to determine and has determined that no
Polluting Substances have been disposed of or
otherwise released on, onto, into, or from the
Collateral (the term "release" shall have the
meanings specified in CERCLA/SARA, and the term
"disposal" or "disposed" shall have the meanings
specified in RCRA/HSWA; provided, in the event
either CERCLA/SARA or RCRA/HSWA is amended so as
to broaden the meaning of any term defined
thereby, such broader meaning shall apply
subsequent to the
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effective date of such amendment and provided
further, to the extent that the laws of any State or
Tribunal establish a meaning for "release,"
"disposal" or "disposed" which is broader than that
specified in CERCLA/SARA, RCRA/HSWA or other
Environmental Laws, such broader meaning shall
apply);
(d) There are no PCB's or asbestos-
containing materials, whether in the nature of
thermal insulation products such as pipe boiler
or breech coverings, wraps or blankets or
sprayed-on or trowelled-on products in, on or
upon the Collateral; and
(e) There is no urea formaldehyde foam
insulation ("UFFI") in, on or upon the
Collateral.
8.18 OIL AND GAS CONTRACTS. All contracts, agreements and
leases related to any of the oil and gas mining, mineral or leasehold properties
and all contracts, agreements, instruments and leases to which any one, more or
all of the Borrowers are a party, are valid and effective in accordance with
their respective terms, and all agreements included in the oil and gas mining,
mineral or leasehold properties in the nature of oil and/or gas purchase
agreements, and oil and/or gas sale agreements are in full force and effect and
are valid and legally binding obligations of the parties thereto and all
payments due thereunder have been made, except for those suspended for
reasonable cause in the ordinary course of business; and, there is not under any
such contract, agreement or lease any existing default by any party thereto or
any event which, with notice or lapse of time, or both, would constitute such
default, other than minor defaults which, in the aggregate, would result in
losses or damages of more than $100,000 to any one, more or all of the
Borrowers.
8.19 NATURAL GAS POLICY ACT AND NATURAL GAS ACT COMPLIANCE.
To the best of Borrowers' knowledge, all material filings and approvals under
the Natural Gas Policy Act of 1978, as amended, and the Natural Gas Act, as
amended, or with the Federal Energy Regulatory Commission (the "FERC") or
required under any rules or regulations adopted by the FERC which are necessary
for the operation of Borrowers' businesses or the Collateral in the manner in
which they are presently being operated have been made and the terms of the
agreements and contractual rights included in the Borrowers' businesses or the
Collateral do not conflict with or contravene any such Law, rule or regulation.
8.20 TAKE OR PAY OBLIGATIONS, PREPAYMENTS, BTU ADJUSTMENTS
AND BALANCING PROBLEMS. To the best of the Borrowers' knowledge, after diligent
inquiry, there is no take or pay obligation under any gas purchase agreement
comprising a portion of the Collateral which is not matched by a commensurate
and corresponding pay or take obligation binding upon the purchaser under a
corresponding gas sales agreement such that with respect to the ownership and
operation of the businesses of any of the Borrowers or the Collateral, any such
obligation in favor of any seller under any gas purchase agreement to which any
one, more or all of the Borrowers are a "buyer" is matched by a corresponding
obligation on the part of "purchasers" under corresponding gas sales agreements
pursuant to which any one, more or all the Borrowers are the "seller". None of
the Borrowers nor the Collateral is subject to requirements to make BTU
adjustments or effect gas balancing in favor of third parties which would result
in any one, more or all of the Borrowers being required to (i) deliver gas at a
price below that established in applicable gas sales agreements or on behalf of
and for the benefit of third parties in exchange or to otherwise compensate for
prior above market or above contract purchases of gas from any one, more or all
of the Borrowers or their predecessors in interest, or (ii) balance in kind by
allowing other owners in the Collateral to make up the past imbalances in gas
sales, or (iii) balance in cash by paying other owners of the collateral for the
past gas imbalances except for the matters described on EXHIBIT "E" hereto which
have been disclosed to the Collateral Agent and the Banks.
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8.21 GAS PURCHASE OBLIGATIONS IN EXCESS OF GAS SALES RIGHTS. The
ownership and operation of the business operations of Borrowers or the
Collateral have not resulted or will not result in the existence of minimum
purchase obligations under any gas purchase agreement (relating to the volume
of gas to be taken thereunder or the price to be paid with respect thereto
for the duration of any such gas purchase agreement) which are not matched by
corresponding and commensurate rights to sell all such gas under applicable
gas sales agreements at prices in excess of the amount to be paid therefor
under gas purchase agreements (without regard to costs associated with
transporting any such gas and risks of volume "shrinkage" occurring in the
transportation process).
ARTICLE IX
EVENTS OF DEFAULT
9.1 EVENTS OF DEFAULT. The occurrence of any one or more of the
following events shall constitute an Event of Default hereunder (whether such
occurrence shall be voluntary or involuntary or come about or be effected by
operation of Law or otherwise):
(a) The Borrowers shall fail to timely make any payment or
prepayment of principal on the due date thereof or, within five (5)
days of the due date thereof, any interest due on the Bank Note, or
fail to pay any other Bank Obligations within ten (10) days after the
same shall become due and payable (whether by extension, renewal,
acceleration or otherwise); or
(b) Any representation or warranty of the Borrowers made
herein or in any writing furnished in connection with or pursuant to
any of the Loan Documents shall have been false or misleading in any
material respect on the date when made and continues to have a material
adverse effect on one or more of the Borrowers or their respective
financial capacity or business operations; or
(c) The Borrowers shall fail to duly observe, perform or comply
with any covenant, agreement or term (other than payment provisions
which are governed by Section 9.1(a) hereof) contained in this
Agreement or any of the Loan Documents and such default or breach shall
have not been cured or remedied within the earlier of thirty (30) days
after any of the Borrowers shall know (or should have known) of its
occurrence or twenty (20) days following receipt of notice thereof from
the Collateral Agent; or
(d) Any of the Borrowers shall default in the payment of principal
or of interest on any other obligation for money borrowed or received
as an advance (or any Capitalized Lease Obligations or obligation under
any conditional sale or other title retention agreement, or any
obligation issued or assumed as full or partial payment for property
whether or not secured by purchase money Lien, or any obligation under
notes payable or drafts accepted representing extensions of credit) in
excess of $100,000 beyond any grace period provided with respect
thereto, including without limitation, the Note Purchase Agreements, or
shall default in the performance of any other agreement, term or
condition contained in the Note Purchase Agreements or any
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agreement under which such obligation is created (or if any other
default under any such agreement shall occur and be continuing beyond
any period of grace provided with respect thereto) if the effect of
such default is to cause the holder or holders of such obligation (or a
trustee on behalf of such holder or holders) to accelerate the due date
of such obligation prior to its scheduled date of maturity; or
(e) Any of the following: (i) any of the Borrowers shall become
insolvent or unable to pay its debts as they mature, make an assignment
for the benefit of creditors or admit in writing its inability to pay
its debts generally as they become due or fail generally to pay its
debts as they mature; or (ii) an order for relief, judgment or decree
is entered in respect of any of the Borrowers under any bankruptcy,
reorganization, compromise, arrangement, insolvency, dissolution,
liquidation or similar law, whether now or hereinafter in effect; and
such order, judgment or decree is not dismissed or discharged within
sixty (60) days from the date of entry; or (iii) any of the Borrowers
shall petition or apply to any Tribunal for the appointment of a
trustee, receiver, custodian or liquidator of any of the Borrowers or
of any substantial part of the assets of any of the Borrowers, or shall
commence any proceedings relating to any of the Borrowers under any
bankruptcy, reorganization, compromise, arrangement, insolvency,
readjustment of debts, dissolution, or liquidation Law of any
jurisdiction, whether now or hereafter in effect; or (iv) any such
petition or application shall be filed, or any such proceedings shall
be commenced, of a type described in subsection (iii) above, against
any of the Borrowers and any of the Borrowers by any act shall indicate
its approval thereof, consent thereto or acquiescence therein, or an
order, judgment or decree shall be entered appointing any such trustee,
receiver, custodian or liquidator, or approving the petition in any
such proceedings, and such order, judgment or decree shall remain
unstayed and in effect, if being vigorously contested, for more than
sixty (60) days; or (v) any order, judgment or decree shall be entered
in any proceedings against any of the Borrowers decreeing the
dissolution of any of the Borrowers and such order, judgment or decree
shall remain unstayed and in effect for more than sixty (60) days; or
(vi) any order, judgment or decree shall be entered in any proceedings
against any of the Borrowers decreeing a split-up of any of the
Borrowers which requires the divestiture of a substantial part of the
assets of any of the Borrowers, and such order, judgment or decree
shall remain unstayed and in effect for more than sixty (60) days; or
(vii) any of the Borrowers shall fail to make timely payment or deposit
of any amount of tax required to be withheld by any of the Borrowers
and paid to or deposited to or to the credit of the United States of
America pursuant to the provisions of the Internal Revenue Code of
1986, as amended, in respect of any and all wages and salaries paid to
employees of any one or more or all of the Borrowers for a tax deposit
amount in excess of $10,000; or
(f) Any final judgment or order or series of judgments or orders
on the merits for the payment of money in an amount in excess of
$250,000 shall be outstanding against any of the Borrowers, and such
judgment shall remain unstayed pending appeal and in effect and unpaid
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for more than thirty (30) days, or within thirty (30) days after
expiration of any such stay, such judgment(s) or order(s) are not
discharged; or
(g) Any Termination Event with respect to a Plan shall have
occurred and, within thirty (30) days after the occurrence thereof, (a)
such Termination Event (if correctable) shall not have been corrected
and (b) the then present value of such Plan's vested benefits exceeds
the then current value of assets accumulated in such Plan by more than
the amount of $250,000 (or in the case of a Termination Event involving
the withdrawal of a "substantial employer" (as defined in Section
4001(a)(2) of ERISA), the withdrawing employer's proportionate share of
such excess shall exceed such amount); or
(h) The Borrowers or any of their ERISA Affiliates as employer
under a Multiemployer Plan shall have made a complete or partial
withdrawal from such Multiemployer Plan and the plan sponsor of such
Multiemployer Plan shall have notified such withdrawing employer that
such employer has incurred a withdrawal liability in an aggregate
amount exceeding $250,000; or
(i) Any Event of Default occurs (after the expiration of any
applicable grace or curative period) under any of the Pru Notes, either
of the Note Purchase Agreements or any of the Guaranty Agreements.
9.2 REMEDIES. Upon the occurrence of any Event of Default referred to
in Section 9.1(e) the Commitments shall immediately terminate and the Bank
Note and all other Bank Obligations shall be immediately due and payable,
without notice of any kind. Upon the occurrence of any other Event of
Default, and without prejudice to any right or remedy of the Banks under this
Agreement or the Loan Documents or under applicable Law of under any other
instrument or document delivered in connection herewith, the Banks may (i)
declare the Commitments terminated or (ii) declare the Commitments terminated
and declare the Bank Note and the other Bank Obligations, or any part
thereof, to be forthwith due and payable, whereupon the Bank Note and the
other Bank Obligations, or such portion as is designated by the Banks shall
forthwith become due and payable, without presentment, demand, notice or
protest of any kind, all of which are hereby expressly waived by all of the
Borrowers. No delay or omission on the part of the Collateral Agent or the
Banks in exercising any power or right hereunder or under the Bank Note, the
Loan Documents or under applicable law shall impair such right or power or be
construed to be a waiver of any default or any acquiescence therein, nor
shall any single or partial exercise by the Collateral Agent or the Bank of
any such power or right preclude other or further exercise thereof or the
exercise of any other such power or right by the Collateral Agent or the
Bank. In the event that all or part of the Bank Obligations becomes or is
declared to be forthwith due and payable as herein provided, the Banks,
subject only to the Intercreditor Agreement, shall have the right to set off
the amount of all the Bank Obligations of the Borrowers owing to such Bank
against, and shall have, and is hereby granted by all of the Borrowers, a
lien upon and security interest in, all property of each of the Borrowers in
such Bank's possession at or subsequent to such default, regardless of the
capacity in which such Bank possesses such property, including but not
limited to any balance or share of any deposit, collection or agency account.
After Default all proceeds received by the Banks may be applied to the Bank
Obligations in such order of application and such proportions as the Banks,
in its discretion, shall choose, subject only to the Intercreditor Agreement.
At any time after the occurrence of any Event of Default, the Collateral
Agent or the Bank may, at its option, cause an audit of any and/or all of the
books, records and documents of all of the Borrowers to be made by auditors
satisfactory to the Banks at the expense of the Borrowers. The Collateral
Agent shall have, and may exercise, each and every right and remedy granted
to the Banks for default under the terms
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of the Security Instruments and the other Loan Documents in accordance with
the terms and provisions of the Intercreditor Agreement.
ARTICLE X
LOAN OPERATIONS
10.1 INTERESTS IN LOANS/COMMITMENTS. The percentage interest of BOK and
each other Bank that may hereafter become an Assignee or Credit Participant
pursuant to Article XI hereof for Bank Obligation amounts in excess of the
BOK Commitment or, alternatively, subject to BOK's consent, extends to
Borrowers hereunder Commitments not in excess of $20,000,000 in the aggregate
(in addition to the existing $20,000,000 BOK Commitment) to be evidenced by
an additional Bank Note jointly and severally issued hereunder by Borrowers
to the order of such additional Bank in form and content similar to the Bank
Note annexed hereto as Exhibit A (in which event such existing $40,000,000
Bank Note would be reissued concurrently therewith in a correspondingly
reduced original principal amount) (in no event shall all Bank Notes issued
hereunder exceed $40,000,000 in the aggregate), in the Revolving Credit
Loans and Letters of Credit, and the Commitments, shall be computed based on
the maximum principal amount for each Bank as follows:
BANK MAXIMUM COMMITMENT AMOUNT PERCENTAGE INTEREST
BOK $ 20,000,000 50.00%
Other Bank(s)
hereafter extending
Commitment(s) or
as Assignee(s)
(other than a Credit
Participant(s)
pursuant to
Article XI below) $ 20,000,000 50.00%
------------ -------
Total $ 40,000,000 100.00%
The foregoing percentage interests, as from time to time in effect and
reflected in the Register, are referred to as the Percentage Interest with
respect to all or any portion of the Revolving Credit Loans and Letters of
Credit, and the Commitments. BOK has no obligation to increase the BOK
Commitment above either its existing Percentage Interest or the maximum
amount of $20,000,000 and any future determination of BOK to increase the BOK
Commitment shall be in its sole and absolute discretion and subject to BOK
obtaining Assignee(s) or Credit Participant(s) under Article XI hereof for
all amounts of the Commitments in excess of the existing $20,000,000 BOK
Commitment.
10.2 ADMINISTRATIVE AGENT'S AUTHORITY TO ACT. Each of the Banks
appoints and authorizes BOK to act for the Banks as Administrative Agent in
connection with the transactions contemplated by this Agreement and the other
Loan Documents on the terms set forth herein. In acting hereunder, the
Administrative Agent is acting for the account of BOK to the extent of its
Percentage Interest and for the account of each other Bank to the extent of
such Bank's Percentage Interest, and all action in connection with the
enforcement of, or the exercise of any remedies (other than the Banks' rights
of set-off as provided herein or in any other Loan Document) in respect of
the Loans and the Indebtedness shall be taken by the Administrative Agent in
accordance with the Intercreditor Agreement.
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10.3 BORROWERS TO PAY ADMINISTRATIVE AGENT. The Borrowers shall be
fully protected in making all payments in respect of the Bank Note evidencing
the Credit Obligations to the Administrative Agent, in relying upon consents,
modifications and amendments executed by the Administrative Agent purportedly
on the Banks' behalf, and in dealing with the Administrative Agent as herein
provided. Upon three (3) Business Days notice, the Administrative Agent may
charge the accounts of the Borrowers, on the dates when the amounts thereof
become due and payable, with the amounts of the principal of and interest on
the Loans, including any amounts paid by the Administrative Agent to third
parties under Letters of Credit or drafts presented thereunder, commitment
fees, Letter of Credit issuance fees and processing/application fees
pertaining thereto and all other fees and amounts owing under any Loan
Document.
10.4 BANK OPERATIONS FOR ADVANCES, LETTERS OF CREDIT.
10.4.1 ADVANCES. On the funding date for each Loan, each Bank
shall advance to the Administrative Agent in immediately available
funds such Bank's Percentage Interest in the portion of a Loan advanced
on such funding date prior to 1:00 P.M. (Tulsa, Oklahoma time). If
such funds are not received at such time, but all applicable conditions
set forth in Article VI have been satisfied, each Bank authorizes and
requests the Administrative Agent to advance for such Bank's account,
pursuant to the terms hereof, the Bank's respective Percentage Interest
in such portion of such Loan and agrees to reimburse the Administrative
Agent in immediately available funds for the amount thereof prior to
3:00 p.m. (Tulsa, Oklahoma time) on the day any portion of such Loan is
advanced hereunder; provided, however, that the Administrative Agent is
not authorized to make any such advance for the account of any Bank who
has previously notified the Administrative Agent in writing that such
Bank will not be performing its obligations to make further advances
hereunder; and provided, further, that the Administrative Agent shall
be under no obligation to make any such advance.
10.4.2 LETTERS OF CREDIT. Each of the Banks authorizes and
requests each Letter of Credit Issuer to issue the Letters of Credit
provided for in Section 2.2.5 and agrees to purchase a participation in
each of such Letters of Credit in an amount equal to its Percentage
Interest in the amount of each such Letter of Credit. Promptly upon
the request of any Letter of Credit Issuer, each Bank shall reimburse
such Letter of Credit Issuer in immediately available funds for such
Bank's Percentage Interest in the amount of all obligations to third
parties incurred by the Letter of Credit Issuer in respect of each
Letter of Credit and each draft accepted under a Letter of Credit to
the extent not timely reimbursed by the Borrowers. Each Letter of
Credit Issuer will notify each Bank (and the Administrative Agent if
the Administrative Agent is not the Letter of Credit Issuer) of the
issuance of each Letter of Credit, the amount and date of payment of
any draft drawn or accepted under a Letter of Credit and whether in
connection with the payment of any such draft the amount thereof was
added to the Revolving Credit Loan or was reimbursed by the Borrowers.
10.4.3 ADMINISTRATIVE AGENT TO ALLOCATE PAYMENTS. All payments of
principal and interest in respect of the extensions of credit made
pursuant to this Agreement, reimbursement of amounts paid by each
Letter of Credit Issuer to third parties under Letters of Credit or
drafts presented thereunder, commitment fees, Letter of Credit issuance
fees and other fees under this Agreement (except for the standard
Letter of Credit application/processing fees of any Letter of Credit
Issuer), which shall not be shared by the Banks shall, as a matter of
convenience, be made by the Borrowers to the applicable Letter of
Credit Issuer or the applicable Administrative Agent, as the case may
be. The share of each Bank shall be credited to such Bank by the
Administrative Agent in immediately available funds in such manner that
the principal amount of the Loans constituting Credit
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Obligations to be paid shall be paid proportionately in accordance with
the Banks' respective Percentage Interests in such Loans, except as
otherwise provided in this Agreement.
10.4.4 DELINQUENT BANKS; NONPERFORMING BANKS. In the event that
any Bank fails to reimburse the Administrative Agent pursuant to
Section 10.4.1 for the Percentage Interest of such Bank (a "Delinquent
Bank") in any credit advanced by the Administrative Agent pursuant
hereto, overdue amounts (the "Delinquent Payment") due from the
Delinquent Bank to the Administrative Agent shall bear interest,
payable by the Delinquent Bank on demand, at a per annum rate equal to
(a) the Federal Funds Rate for the first three days overdue and (b) the
sum of two percentage points (2%) PLUS the Federal Funds Rate for any
longer period. Such interest shall be payable to the Administrative
Agent for its own account for the period commencing on the date of the
Delinquent Payment and ending on the date the Delinquent Bank
reimburses the Administrative Agent on account of the Delinquent
Payment (to the extent not paid by the Borrowers as provided below) and
the accrued interest thereon (the "Delinquency Period"), whether
pursuant to the assignments referred to below or otherwise. Upon notice
by the Administrative Agent, the Borrowers will pay to the
Administrative Agent the principal (but not the interest) portion of
the Delinquent Payment. During the Delinquency Period, in order to
make reimbursements for the Delinquent Payment and accrued interest
thereon, the Delinquent Bank shall be deemed to have assigned to the
Administrative Agent all interest, commitment fees and other payments
made by the Borrowers hereunder that would have thereafter otherwise
been payable under the Loan Documents to the Delinquent Bank. During
any other period in which any Bank is not performing its obligations to
extend credit under Article II hereof (a "Nonperforming Bank"), the
Nonperforming Bank shall be deemed to have assigned to each Bank that
is not a Nonperforming Bank (a "Performing Bank") all principal and
other payments made by the Borrowers that would have thereafter
otherwise been payable thereunder to the Nonperforming Bank. The
Administrative Agent shall credit a portion of such payments to each
Performing Bank in an amount equal to the Percentage Interest of such
Performing Bank in an amount equal to the Percentage Interest of such
Performing Bank divided by one minus the Percentage Interest of the
Nonperforming Bank until the respective portions of the Loans owed to
all the Banks are the same as the Percentage Interests of the Banks
immediately prior to the failure of the Nonperforming Bank to perform
its obligations under Article II hereof. The foregoing provisions
shall be in addition to any other remedies the Administrative Agent,
the Performing Banks or the Borrowers may have under law or equity
against the Delinquent Bank as a result of the Delinquent Payment or
against the Nonperforming Bank as a result of its failure to perform
its obligations under Article II hereof.
10.5 SHARING OF PAYMENTS. To the extent permitted by applicable Bank
regulatory and legal requirements and subject to the provisions of the
Intercreditor Agreement, each Bank agrees that (i) if by exercising any right
of set-off or counterclaim or otherwise, it shall receive payment of (a) a
proportion of the aggregate amount due with respect to its Percentage
Interest in the Loans and Letter of Credit Exposure which is greater than (b)
the proportion received by any other Bank in respect of the aggregate amount
due with respect to such other Bank's Percentage Interest in the Loans and
Letter of Credit Exposure and (ii) if such inequality shall continue for more
than 10 days, the Bank receiving such proportionately greater payment shall
purchase participations in the Percentage Interests in the Loans and Letter
of Credit Exposure held by the other Banks, and such other adjustments shall
be made from time to time (including rescission of such purchases of
participations in the event the unequal payment originally received is
recovered from such Bank through bankruptcy proceedings or otherwise), as may
be required so that all such payments of principal and interest with respect
to the Loans and Letter of Credit Exposure held by the Banks shall be shared
by the Banks pro rata in accordance with their respective Percentage
Interests; PROVIDED, HOWEVER, that this Section 10.5 shall not impair the
right of any Bank to exercise any right of set-off or counterclaim it may
have and to apply the amount subject to such exercise to the payment of
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Indebtedness of Borrowers other than Borrowers' Indebtedness with respect to
the Loans and Letter of Credit Exposure. Each Bank that grants a
participation in the Loans and Commitments to a Credit Participant shall
require as a condition to the granting of such participation that such Credit
Participant agree to share payments received in respect of the Indebtedness
as provided in this Section 10.5. The provisions of this Section 10.5 are
for the sole and exclusive benefit of the Banks and no failure of any Bank to
comply with the terms hereof shall be available to any of the Borrowers as a
defense to the payment of the Loans.
10.6 AMENDMENTS, CONSENTS, WAIVERS. Except as otherwise set forth
herein and subject to the Intercreditor Agreement, the Collateral Agent may
(and upon the written request of the Required Banks the Administrative Agent
shall) take or refrain from taking any action under this Agreement or any
other Loan Document, including giving its written consent to any modification
of or amendment to and waiving in writing compliance with any covenant or
condition in this Agreement or any other Loan Document or any Default or
Event of Default, all of which actions shall be binding upon all of the
Banks; PROVIDED, HOWEVER, that:
(i) Without the written consent of the Banks owning at least two thirds
(2/3) of the Percentage Interests (other than Delinquent Banks during the
existence of a Delinquency Period so long as such Delinquent Bank is treated
the same as the other Banks with respect to any actions enumerated below), no
written modification of, amendment to, consent with respect to, waiver of
compliance with or waiver of a Default under, any of the Loan Documents shall
be made, including without limitation, Section 9.1 of this Agreement, the
related defined terms or this Section 10.6(a) shall be made.
(ii) Without the written consent of such Banks as own 100% of the
Percentage Interests (other than Delinquent Banks during the existence of a
Delinquency Period so long as such Delinquent Bank is treated the same as the
other Banks with respect to any actions enumerated below):
(a) No reduction shall be made in (A) the amount of principal of any
of the Loans or reimbursement obligations for payments made under
Letters of Credit, (B) the interest rate on the Loans or (C) the Letter
of Credit issuance fees (excluding, however, Letter of Credit
processing/application fees, the amount of which shall be within the
sole discretion of each Letter of Credit Issuer) or commitment
(non-usage) fees.
(b) No change shall be made in the stated time of payment of all or
any portion of any of the Loans or interest thereon or reimbursement of
payments made under Letters of Credit or fees relating to any of the
foregoing payable to all of the Banks and no waiver shall be made of
any Default under Section 9.1(a).
(c) No increase shall be made in the amount, or extension of the
term, of the Commitments.
(d) Except as otherwise provided in the Intercreditor Agreement, no
alteration shall be made of the Banks' rights of set-off contained
herein or in the other Loan Documents.
(e) Except as otherwise provided in the Intercreditor Agreement, no
release of any Collateral shall be made (except that the Collateral
Agent may release particular items of Collateral in dispositions
permitted by the Security Instruments in accordance with the terms and
provisions of the Intercreditor Agreement and may release all
Collateral upon payment in full of the Loans evidenced by the Bank Note
and termination of the Commitments together with payment of all of the
Pru Notes without the written consent of the Banks).
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(f) No amendment to or modification of this Section 10.6(ii) shall be
made.
10.7 ADMINISTRATIVE AGENT'S RESIGNATION. The Administrative Agent may
resign at any time by giving at least 30 days' prior written notice of its
intention to do so to each other of the Banks and the Borrowers and upon the
appointment by the Required Banks of a successor Administrative Agent
satisfactory to the Borrowers. If no successor Administrative Agent shall
have been so appointed and shall have accepted such appointment within 45
days after the retiring Administrative Agent's giving of such notice of
resignation, then the retiring Administrative Agent may with the consent of
the Borrowers, which shall not be unreasonably withheld, appoint a successor
Administrative Agent which shall be a bank or a trust Borrowers organized
under the laws of the United States of America or any state thereof and
having a combined capital, surplus and undivided profit of at least
$50,000,000; PROVIDED, HOWEVER, that any successor Administrative Agent
appointed under this sentence may be removed upon the written request of the
Required Banks, which request shall also appoint a successor Administrative
Agent satisfactory to the Borrowers. Upon the appointment of a new
Administrative Agent hereunder, the term "Administrative Agent" shall for all
purposes of this Agreement thereafter mean such successor. After any retiring
Administrative Agent's resignation hereunder as Administrative Agent, or the
removal hereunder of any successor Administrative Agent, the provisions of
this Agreement shall continue to inure to the benefit of such Administrative
Agent as to any actions taken or omitted to be taken by it while it was
Administrative Agent under this Agreement.
10.8 CONCERNING THE ADMINISTRATIVE AGENT.
10.8.1 ACTION IN GOOD FAITH. The Administrative Agent and its
officers, directors, employees and agents shall be under no liability
to any of the Banks or to any future holder of any interest in the
Indebtedness for any action or failure to act taken or suffered in good
faith, and any action or failure to act in accordance with an opinion
of its counsel shall conclusively be deemed to be in good faith. The
Administrative Agent shall in all cases be entitled to rely, and shall
be fully protected in relying, on instructions given to the
Administrative Agent by the Required Holders of the Bank Note
evidencing the Bank Obligations as provided in this Agreement.
10.8.2 NO IMPLIED DUTIES. The Administrative Agent shall have and
may exercise such powers as are specifically delegated to the
Administrative Agent under this Agreement or any other Loan Document
together with all other powers incidental thereto. The Administrative
Agents shall have no implied duties to any Person or any obligation to
take any action under this Agreement or any other Loan Document except
for action specifically provided for in this Agreement or any other
Loan Document to be taken by the Administrative Agent. Before taking
any action under this Agreement or any other Loan Document, the
Administrative Agent may request an appropriate specific indemnity
satisfactory to it from each Bank in addition to the general indemnity
provided for in Section 10.11. Until the Administrative Agent has
received such specific indemnity, the Administrative Agent shall not be
obligated to take (although such Administrative Agent may in its sole
discretion take) any such action under this Agreement or any other Loan
Document. Each Bank confirms that the Administrative Agent does not
have a fiduciary relationship to them under the Loan Documents. The
Borrowers and its Subsidiaries party hereto confirm that neither the
Administrative Agent nor any other Bank has a fiduciary relationship to
them under the Loan Documents.
10.8.3 VALIDITY. The Administrative Agent shall not be responsible
to any Bank or any future holder of any interest in the Loans and
Indebtedness (a) for the legality, validity, enforceability or
effectiveness of this Agreement or any other Loan Document, (b) for any
recitals, reports, representations, warranties or statements contained
in or made in connection with this Agreement or any other Loan
Document, (c) for the existence or value of any assets
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included in any security for the Loans and Indebtedness, (d) for the
effectiveness of any Lien purported to be included in the Collateral,
(e) for the specification or failure to specify any particular assets
to be included in the Collateral, or (f) unless the Administrative
Agent shall have failed to comply with Section 10.8.1, for the
perfection of the security interests in the Collateral.
10.8.4 COMPLIANCE. The Administrative Agent shall not be obligated
to ascertain or inquire as to the performance or observance of any of
the terms of this Agreement or any other Loan Document; and in
connection with any extension of credit under this Agreement or any
other Loan Document, the Administrative Agent shall be fully protected
in relying on a certificates of the Borrowers as to the fulfillment by
the Borrowers of any conditions to such extension of credit.
10.8.5 EMPLOYMENT ADMINISTRATIVE AGENT AND COUNSEL. The
Administrative Agent may execute any of their respective duties as
Administrative Agent under this Agreement or any other Loan Document by
or through employees, agents and attorneys-in-fact and shall not be
responsible to any of the Banks, the Borrowers for the default or
misconduct of any such Administrative Agent or attorneys-in-fact
selected by the Administrative Agent acting in good faith. The
Administrative Agent shall be entitled to advice of counsel concerning
all matters pertaining to the agency hereby created and its duties
hereunder or under any other Loan Document.
10.8.6 RELIANCE ON DOCUMENTS AND COUNSEL. The Administrative Agent
shall be entitled to rely, and shall be fully protected in relying,
upon any affidavit, certificate, cablegram, consent, instrument,
letter, notice, order, document, statement, telecopy, telegram, telex
or teletype message or writing reasonably believed in good faith by the
Administrative Agent to be genuine and correct and to have been signed,
sent or made by the Person in question, including any telephonic or
oral statement made by such Person, and, with respect to legal matters,
upon an opinion or the advice of counsel selected by such
Administrative Agent.
10.8.7 ADMINISTRATIVE AGENT'S REIMBURSEMENT. Each of the Banks
severally agrees to reimburse the Administrative Agent, in the amount
of such Bank's Percentage Interest, for any reasonable expenses not
reimbursed by the Borrowers (without limiting the obligation of the
Borrowers to make such reimbursement): (a) for which the Administrative
Agent are entitled to reimbursement by the Borrowers under this
Agreement or any other Loan Document, and (b) after the occurrence of a
Default, for any other reasonable expenses incurred by the
Administrative Agent on the Banks' behalf in connection with the
enforcement of the Banks' rights under this Agreement or any other Loan
Document.
10.9 RIGHTS AS A BANK. With respect to any Loan(s) or advance(s)
extended by it hereunder, the Administrative Agent shall have the same
rights, obligations and powers hereunder as any other Bank and may exercise
such rights and powers as though it were not an Administrative Agent, and
unless the context otherwise specifies, the Administrative Agent shall be
treated in their respective individual capacities as though they were not the
Administrative Agent hereunder. Without limiting the generality of the
foregoing, the Percentage Interest of the Administrative Agent shall be
included in any computations of Percentage Interests. The Administrative
Agent and its Affiliates may accept deposits from, lend money to, act as
trustee for and generally engage in any kind of banking or trust business
with the Borrowers, any of its Subsidiaries or any Affiliate of any of them
and any Person who may do business with or own an equity interest in the
Borrowers, any of its Subsidiaries or any Affiliate of any of them, all as if
the Administrative Agent were not the Administrative Agent and without any
duty to account therefor to the other Banks.
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10.10 INDEPENDENT CREDIT DECISION. Each of the Banks acknowledges that
it has independently and without reliance upon either of the Administrative
Agent, based on the financial statements and other documents referred to in
Section 8.3, on the other representations and warranties contained herein and
on such other information with respect to the Borrowers and their
Subsidiaries as such Bank deemed appropriate, made such Bank's own credit
analysis and decision to enter into this Agreement and to make the extensions
of credit provided for hereunder. Each Bank represents to the Administrative
Agent that such Bank will continue to make its own independent credit and
other decisions in taking or not taking action under this Agreement or any
other Loan Document. Each Bank expressly acknowledges that neither the
Administrative Agent nor any of its respective officers, directors,
employees, agent, attorneys-in-fact or Affiliates has made any
representations or warranties to such Bank, and no act by the Administrative
Agent taken under this Agreement or any other Loan Document, including any
review of the affairs of the Borrowers and their Subsidiaries, shall be
deemed to constitute any representation or warranty by either of the
Administrative Agent. Except for notices, reports and other documents
expressly required to be furnished to each Bank by the Administrative Agent
under this Agreement or any other Loan Document, the Administrative Agent
shall not have any duty or responsibility to provide any Bank with any credit
or other information concerning the business, operations, property,
condition, financial or otherwise, or creditworthiness of the Borrowers or
any Subsidiary which may come into the possession of the Administrative Agent
or any of their respective officers, directors, employees, agent,
attorneys-in-fact or Affiliates.
10.11 INDEMNIFICATION. The holders of the Indebtedness shall indemnify
the Administrative Agent and its respective officers, directors, employees
and Administrative Agent (to the extent not reimbursed by the Borrowers and
without limiting the obligation of the Borrowers to do so), pro rata in
accordance with their respective Percentage Interests, from and against any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind whatsoever
which may at any time be imposed on, incurred by or asserted against either
of the Administrative Agent or such Persons relating to or arising out of
this Agreement, any other Loan Document, the transactions contemplated hereby
or thereby, or any action taken or omitted by the Administrative Agent in
connection with any of the foregoing; PROVIDED, HOWEVER, that the foregoing
shall not extend to actions or omissions which are taken by the
Administrative Agent with gross negligence or willful misconduct.
ARTICLE XI
ASSIGNMENTS/PARTICIPATIONS
11. SUCCESSORS AND ASSIGNS; BANK ASSIGNMENT AND PARTICIPATIONS. Any
reference in this Agreement to any party hereto shall be deemed to include
the successors and assigns of such party, and all covenants and agreements by
or on behalf of the Borrowers, the Administrative Agent or the Banks that are
contained in this Agreement or any other Loan Documents shall bind and inure
to the benefit of their respective successors and assigns; PROVIDED, HOWEVER,
that (a) the Borrowers may not assign their rights or obligations under this
Agreement, and (b) the Banks shall be not entitled to assign their respective
Percentage Interests in the Loans evidenced by the Bank Note hereunder except
as set forth below in this Section 11.
11.1 ASSIGNMENTS BY BANKS.
11.1.1 ASSIGNEES AND ASSIGNMENT PROCEDURES. Each Bank may (i)
without the consent of the Administrative Agent or the Borrowers if the
proposed assignee is already a Bank hereunder or a Wholly Owned
Subsidiary of the same corporate parent of which the assigning Bank is
a Subsidiary, or (ii) otherwise with the consents of the Administrative
Agent and (so long as no Event of Default exists) the Borrowers (which
consents will not be
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unreasonably withheld), in compliance with applicable laws in
connection with such assignment, assign to one or more commercial banks
or other financial institutions (each, an "Assignee") all or a portion
of its interests, rights and obligations under this Agreement and the
other Loan Documents, including all or a portion, which need not be pro
rata among the Loans and the Letter of Credit Exposure, of its
Commitments, the portion of the Loans and Letter of Credit Exposure at
the time owing to it and the Bank Note held by it, but excluding its
rights and obligations as one of the Administrative Agent; PROVIDED,
HOWEVER, that:
(i) the aggregate amount of the Commitments of the assigning Bank
subject to each such assignment to any Assignee other than another Bank
(determined as of the date the Assignment and Acceptance with respect
to such assignment is delivered to the Administrative Agent) shall be
not less than $1,000,000 and in increments of $500,000; and
(ii) the parties to each such assignment shall execute and deliver
to the Administrative Agent an Assignment and Acceptance (the
"Assignment and Acceptance") in the form satisfactory to the
Administrative Agent and the Collateral Agent, together with the Note
or Notes subject to such assignment.
Upon acceptance and recording pursuant to Section 11.1.4, from and
after the effective date specified in each Assignment and Acceptance
(which effective date shall be at least five (5) Business Days after
the execution thereof unless waived in writing by the Administrative
Agent):
(A) the Assignee shall be a party hereto and, to the extent
provided in such Assignment and Acceptance, have the rights
and obligations of a Bank under this Agreement; and
(B) the assigning Bank shall, to the extent provided in such
assignment, be released from its obligations under this
Agreement (and, in the case of an Assignment and Acceptance
covering all or the remaining portion of an assigning Bank's
rights and obligations under this Agreement, such Bank shall
cease to be a party hereto but shall continue to be entitled
to any fees accrued for its account hereunder and not yet
paid).
11.1.2 TERMS OF ASSIGNMENT AND ACCEPTANCE. By executing and
delivering an Assignment and Acceptance, the assigning Bank and
Assignee shall be deemed to confirm to and agree with each other and
the other parties hereto as follows:
(a) other than the representation and warranty that it is the
legal and beneficial owner of the interest being assigned thereby free
and clear of any adverse claim, such assigning Bank makes no
representation or warranty and assumes no responsibility with respect
to any statements, warranties or representations made in or in
connection with this Agreement or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Agreement,
any other Loan Document or any other instrument or document furnished
pursuant hereto;
(b) such assigning Bank makes no representation or warranty and
assumes no responsibility with respect to the financial condition of
the Borrowers and their Subsidiaries or the performance or observance
by the Borrowers or any of their Subsidiaries of any of its obligations
under this Agreement, any other Loan Document or any other instrument
or document furnished pursuant hereto;
(c) such Assignee confirms that it has received a copy of this
Agreement, together with copies of the most recent quarterly or annual
financial statements delivered
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pursuant hereto and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into such
Assignment and Acceptance;
(d) such Assignee will independently and without reliance upon the
Administrative Agent, such assigning Bank or any other Bank, and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action
under this Agreement;
(e) such Assignee appoints and authorizes the Administrative Agent to
take such action as Administrative Agent on its behalf and to exercise such
powers under this Agreement as are delegated to the Administrative Agent by
the terms hereof, together with such powers as are reasonably incidental
thereto; and
(f) such Assignee agrees that it will perform in accordance with the
terms of this Agreement all the obligations which are required to be
performed by it as a Bank.
11.1.3 REGISTER. The Administrative Agent shall maintain at its main
Tulsa, Oklahoma banking office a register (the "REGISTER") for the
recordation of (a) the names and addresses of the Banks and the Assignees
which assume rights and obligations pursuant to an assignment under Section
11.1.1, (b) the Percentage Interest of each such Bank as set forth in
Section 10.1 and (c) the amount of the Loans and Letter of Credit Exposure
owing to each Bank from time to time. The entries in the Register shall be
conclusive, in the absence of manifest error, and the Borrowers, the
Administrative Agent and the Banks may treat each Person whose name is
registered therein for all purposes as a party to this Agreement. The
Register shall be available for inspection by the Borrowers or any Bank at
any reasonable time and from time to time upon reasonable prior notice.
11.1.4 ACCEPTANCE OF ASSIGNMENT AND ASSUMPTION. Upon its receipt of
a completed Assignment and Acceptance executed by an assigning Bank and an
Assignee, in exchange for the Bank Note subject to such assignment,
together with the Bank Note or Bank Notes subject to such assignment, and
the processing and recordation fee referred to in Section 11.1.1, the
Administrative Agent shall (a) accept such Assignment and Acceptance, (b)
record the information contained therein in the Register and (c) give
prompt notice thereof to the Borrowers. Within five (5) Business Days
after receipt of notice, the Borrowers, at its own expense, shall execute
and deliver to the Administrative Agent, in exchange for the surrendered
Bank Note or Bank Notes, a new Bank Note or Bank Notes to the order of such
Assignee in a principal amount equal to the applicable Commitments and
Loans assumed by it pursuant to such Assignment and Acceptance and, if the
assigning Bank has retained Commitments and Loans, a new Bank Note or Bank
Notes to the order of such assigning Bank in a principal amount equal to
the applicable Commitments and its Percentage Interest in the Loans
retained by it. Such new Bank Note or Bank Notes shall be in an aggregate
principal amount equal to the aggregate principal amount of such
surrendered Bank Note or Bank Notes, and shall be dated the date of the
surrendered Bank Note or Bank Notes which it or they replace. All such
Notes so replaced shall be delivered by the Administrative Agent to the
Borrowers or, alternatively, at the Administrative Agent's election, marked
appropriately to evidence the replacement thereof by such replacement Bank
Note(s).
11.1.5 FEDERAL RESERVE BANK. Notwithstanding the foregoing
provisions of this Section 11, any Bank may at any time pledge or assign
all or any portion of such Bank's rights under this Agreement and the other
Loan Documents to a Federal Reserve Bank; PROVIDED, HOWEVER, that no such
pledge or assignment shall release such Bank from such Bank's obligations
hereunder or under any other Loan Document.
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11.1.6 FURTHER ASSURANCES. The Borrowers and their Subsidiaries shall
sign such documents and take such other actions from time to time
reasonably requested by an Assignee to enable it to share in the benefits
of the rights created by the Loan Documents.
11.2 CREDIT PARTICIPANTS. Each Bank may, without the consent of the
Borrowers and with the consent of the Administrative Agent, in compliance with
applicable laws in connection with such participation, sell to one or more
commercial banks or other financial institutions (each a "Credit Participant")
participations in all or a portion of its interests, rights and obligations
under this Agreement and the other Loan Documents (including all or a portion of
its Percentage Interest in the Commitments, the Loans and Letter of Credit
Exposure owing to it and the Notes held by it); PROVIDED, HOWEVER, that:
(i) such Bank's obligations under this Agreement shall remain unchanged;
(ii) such Bank shall remain solely responsible to the other parties hereto
for the performance of such obligations;
(iii) the Credit Participant shall be entitled to the benefit of any
cost protection provisions contained in the Credit Agreement, but shall not be
entitled to receive any greater payment thereunder than the selling Bank would
have been entitled to receive with respect to the interest so sold if such
interest had not been sold; and
(iv) the Borrowers, the Administrative Agent and the other Banks shall
continue to deal solely and directly with such Bank in connection with such
Bank's rights and obligations under this Agreement, and such Bank shall retain
the sole right as one of the Banks to vote with respect to the enforcement of
the obligations of the Borrowers relating to the Loans and Letter of Credit
Exposure and the approval of any amendment, modification or waiver of any
provision of this Agreement (other than amendments, modifications, consents or
waivers described in Section 10.6(ii)).
Borrowers agree, to the fullest extent permitted by applicable law, that any
Credit Participant and any Bank purchasing a participation from another Bank
pursuant to Section 11.1 may exercise all rights of payment (including the right
of set-off), with respect to its participation as fully as if such Credit
Participant or such Bank were the direct creditor of the Borrowers and a Bank
hereunder in the amount of such participation. Upon receipt of notice of the
address of each Credit Participant, the Borrowers shall thereafter supply such
Credit Participants with the same information and reports communicated to the
Banks. The Borrowers hereby acknowledge and agree that Credit Participants
shall be deemed a holder of the applicable Bank Notes to the extent of their
respective participation, and the Borrowers hereby waive its right, if any, to
offset amounts owing to the Borrowers from the Banks against each Credit
Participant's portion of the applicable Bank Notes.
ARTICLE XII
MISCELLANEOUS
12.1 NOTICES. Unless otherwise provided herein, all notices, requests,
consents and demands shall be in writing and shall be either hand-delivered (by
courier or otherwise) or mailed by certified mail, postage prepaid, to the
respective addresses specified below, or, as to any party, to such other address
as may be designated by it in written notice to the other parties:
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If to the Borrowers, to:
Equity Compression Services Corporation
2501 Cedar Springs
Suite 600
Dallas, Texas 75201
Attn: Jack D. Brannon, Chief Financial Officer
with a copy to:
Schlanger, Mills, Mayer & Grossberg, L.L.P.
5847 San Felipe
Suite 1700
Houston, Texas 77057
Attn: Kyle Longhofer
If to the Bank, to:
Bank of Oklahoma, National Association
P. O. Box 2300
Bank of Oklahoma Tower
One Williams Center
Tulsa, Oklahoma 74192
Attn: Energy Department - 8th Floor
with a copy to:
Crowe & Dunlevy
321 South Boston
500 Kennedy Building
Tulsa, Oklahoma 74103
Attn: Gary R. McSpadden
ECS is hereby designated and appointed and shall serve as agent for all of the
Borrowers insofar as notices hereunder are concerned and notice to ECS shall be
deemed notice to each of the Borrowers with the same force and effect as if each
such Borrower were individually notified in accordance herewith. All notices,
requests, consents and demands hereunder will be effective when hand-delivered
to the applicable notice address set forth above or when mailed by certified
mail, postage prepaid, addressed as aforesaid.
12.2 PLACE OF PAYMENT. All sums payable hereunder shall be paid in
immediately available funds to the Administrative Agent, at its principal
banking offices at Bank of Oklahoma Tower, One Williams Center in Tulsa,
Oklahoma, or at such other place as the Administrative Agent shall notify the
Borrowers in writing. If any interest, principal or other payment falls due on
a date other than a Business Day, then (unless otherwise provided herein) such
due date shall be extended to the next succeeding Business Day, and such
extension of time will in such case be included in computing interest, if any,
in connection with such payment.
12.3 SURVIVAL OF AGREEMENTS. All covenants, agreements, representations
and warranties made herein shall survive the execution and the delivery of Loan
Documents. All statements contained in any certificate or other instrument
delivered by any of the Borrowers hereunder shall be deemed to constitute
representations and warranties by all of the Borrowers.
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12.4 PARTIES IN INTEREST. All covenants, agreements and obligations
contained in this Agreement shall bind and inure to the benefit of the
respective successors and assigns of the parties hereto.
12.5 GOVERNING LAW AND JURISDICTION. This Agreement and the Bank Note
shall be deemed to have been made or incurred under the Laws of the State of
Oklahoma and shall be construed and enforced in accordance with and governed by
the Laws of Oklahoma.
12.6 SUBMISSION TO JURISDICTION. THE BORROWERS HEREBY CONSENT TO THE
JURISDICTION OF ANY OF THE LOCAL, STATE, AND FEDERAL COURTS LOCATED WITHIN TULSA
COUNTY, OKLAHOMA AND WAIVE ANY OBJECTION WHICH BORROWERS MAY HAVE BASED ON
IMPROPER VENUE OR FORUM NON CONVENIENS TO THE CONDUCT OF ANY PROCEEDING IN ANY
SUCH COURT AND WAIVE PERSONAL SERVICE OF ANY AND ALL PROCESS UPON ANY OF THEM,
AND CONSENT THAT ALL SUCH SERVICE OF PROCESS BE MADE BY MAIL OR MESSENGER
DIRECTED TO ANY OF THEM AT THE ADDRESS SET FORTH IN SUBSECTION 12.1 HEREOF AND
THAT SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED UPON THE EARLIER OF ACTUAL
RECEIPT OR THREE (3) BUSINESS DAYS AFTER MAILED OR DELIVERED BY MESSENGER.
12.7 MAXIMUM INTEREST RATE. Regardless of any provision herein, the Banks
shall never be entitled to receive, collect or apply, as interest on the Bank
Obligations any amount in excess of the maximum rate of interest permitted to be
charged by the Banks by applicable Oklahoma Law, and, in the event the Banks
shall ever receive, collect or apply, as interest, any such excess, such amount
which would be excessive interest shall be applied to other Bank Obligations and
then to the reduction of principal; and, if all other Bank Obligations and
principal are paid in full, then any remaining excess shall forthwith be paid to
Equity on behalf of all of the Borrowers.
12.8 NO WAIVER; CUMULATIVE REMEDIES. No failure to exercise, and no delay
in exercising, on the part of the Banks, any right, power or privilege hereunder
or under any other Loan Document or applicable Law shall preclude any other or
further exercise thereof or the exercise of any other right, power or privilege
of the Banks. The rights and remedies herein provided are cumulative and not
exclusive of any other rights or remedies provided by any other instrument or by
law. No amendment, modification or waiver of any provision of this Agreement or
any other Loan Document shall be effective unless the same shall be in writing
and signed by the Banks. No notice to or demand on the Borrowers in any case
shall entitle the Borrowers to any other or further notice or demand in similar
or other circumstances.
12.9 COSTS. The Borrowers agree to pay to BOK on demand all reasonable
costs, fees and expenses (including without limitation reasonable attorneys fees
and legal expenses) incurred or accrued by BOK, individually or as
Administrative Agent or as Collateral Agent, in connection with the negotiation,
preparation, execution, delivery, filing, recording and administration of this
Agreement, the Security Instruments and the other Loan Documents, or any
amendment, waiver, consent or modification thereto or thereof, or any
enforcement thereof. The Borrowers further agree that all such fees and
expenses shall be paid regardless of whether or not the transactions provided
for in this Agreement are eventually closed and regardless of whether or not any
or all sums evidenced by the Bank Note are advanced to the Borrowers by BOK.
Upon Borrowers' failure to pay all such costs and expenses within ten (10)
days of the BOK's submission of invoices therefore, BOK shall pay such costs and
expenses by debit to the joint General Account of Borrowers without further
notice to Borrowers.
12.10 WAIVER OF JURY. BORROWERS FULLY, VOLUNTARILY, KNOWINGLY
INTENTIONALLY AND EXPRESSLY WAIVE ANY RIGHT TO A TRIAL
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<PAGE>
BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THE
BANK NOTE, THIS AGREEMENT, THE SECURITY INSTRUMENTS OR OTHER LOAN DOCUMENTS
OR UNDER ANY AMENDMENT, SUPPLEMENT, INSTRUMENT, DOCUMENT OR AGREEMENT
DELIVERED (OR WHICH MAY IN THE FUTURE BE DELIVERED) BASED HEREON, ARISES OUT
OF, UNDER, OR IN CONNECTION HEREWITH OR THE BANK NOTE, THE SECURITY
INSTRUMENTS OR OTHER LOAN DOCUMENTS OR ARISING FROM ANY TRANSACTIONS OR
BANKING RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT OR ANY COURSE
OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR
ACTIONS OF THE BORROWERS, THE BANK OR THE COLLATERAL AGENT. BORROWERS AGREE
THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT
BEFORE A JURY. THE BORROWERS ACKNOWLEDGE THAT THIS PROVISION IS A MATERIAL
INDUCEMENT FOR THE BANK AND THE COLLATERAL AGENT TO ENTER INTO THIS AGREEMENT.
12.11 FULL AGREEMENT. This Agreement and the other Loan Documents
contain the full agreement of the parties and supersede all negotiations and
agreements prior to the date hereof, including the Prior Agreement which is
replaced in its entirety by this Agreement.
12.12 HEADINGS. The article and section headings of this Agreement are
for convenience of reference only and shall not constitute a part of the text
hereof nor alter or otherwise affect the meaning hereof.
12.13 SEVERABILITY. The unenforceability or invalidity as determined
by a Tribunal of competent jurisdiction, of any provision or provisions of this
Agreement shall not render unenforceable or invalid any other provision or
provisions hereof.
12.14 EXCEPTIONS TO COVENANTS. The Borrowers shall not be deemed to be
permitted to take any action or fail to take any action which is permitted as an
exception to any of the covenants contained herein or which is within the
permissible limits of any of the covenants contained herein if such action or
omission would result in the breach of any other covenant contained herein.
12.15 CONSENT TO AMENDMENTS. This Agreement and any of the other Loan
Documents may be amended, and the Borrowers may take any action herein
prohibited, or omit to perform any act herein required to be performed by it, if
the Borrowers shall obtain the written consent to such amendment, action or
omission to act, of the Banks except that, without the written consent of the
Banks and any other holder or holders of the Bank Note at the time outstanding,
no amendment to this Agreement shall change the maturity of the Bank Note, or
change the principal of, or the rate or time of payment of interest on any Bank
Note, or affect the time, amount or allocation of any prepayments, or change the
proportion of the principal amount of the Bank Note required with respect to any
consent, amendment, waiver or declaration. Each holder of the Bank Note at the
time or thereafter outstanding shall be bound by any consent authorized by this
Section 12.15, whether or not the Bank Note shall have been marked to indicate
such consent, but any Bank Note issued thereafter may bear a notation referring
to any such consent. No course of dealing between the Borrowers and any holder
of the Bank Note nor any delay in exercising any rights hereunder or under the
Note shall operate as a waiver of any rights of any holder of the Bank Note. As
used herein and in the Bank Note, the term "this Agreement" and references
thereto shall mean this Agreement as it may from time to time be amended,
modified or supplemented.
12.16 CONFIDENTIAL TREATMENT. Under the terms of this Agreement and
certain of the other Loan Documents, the Collateral Agent is granted a security
interest in, inspection rights with respect to or other rights in certain data,
files, records and other materials which are proprietary to any or all of the
Borrowers or which constitute or contain confidential information and trade
secrets
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<PAGE>
(collectively referred to as "Confidential Material"). The Collateral Agent
hereby covenants and agrees that, except for disclosure of the terms and
provisions hereof to Prudential or upon an Event of Default, and then only to
the extent appropriate to protect its interests in such Confidential
Material, the Collateral Agent will use its reasonable appropriate efforts to
maintain the confidential status thereof.
12.17 CONFLICT WITH SECURITY INSTRUMENTS. To the extent the terms and
provisions of any of the Security Instruments are in conflict with the terms and
provisions hereof, this Agreement shall be deemed controlling.
12.18 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Fifth Amended and
Restated Revolving Credit and Term Loan Agreement to be duly executed and
delivered in Tulsa, Oklahoma, effective as of the day and year first above
written.
"Borrowers"
EQUITY COMPRESSION SERVICES
CORPORATION, an Oklahoma corporation
By
----------------------------------
Matthew S. Ramsey, President
"ECS"
OUACHITA ENERGY CORPORATION,
a Delaware corporation
By
----------------------------------
Matthew S. Ramsey, President
"Ouachita Energy"
SUNTERRA ENERGY CORPORATION,
an Oklahoma corporation
By
----------------------------------
Matthew S. Ramsey, President
"Sunterra"
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<PAGE>
EQUITY COMPRESSORS, INC.,
an Oklahoma corporation
By
----------------------------------
Matthew S. Ramsey, President
"Equity"
"BOK"
BANK OF OKLAHOMA, NATIONAL
ASSOCIATION
By
----------------------------------
Timothy F. Sheehan, Vice President
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<PAGE>
EXHIBIT LIST
------------
Exhibit A - $40,000,000 Bank Note (Section 2.2)
Exhibit B-1 - Revolving Loan Advance Request (Section
2.3.1)
Exhibit B-2 - Borrowing Base Certificate (Section 7.6(c))
Exhibit C - Liabilities (Section 7.25)
Exhibit D - Pending Litigation (Section 8.2)
Exhibit E - Take or Pay Disputes (Section 8.20)
Exhibit F - Control Group (Section 1.26)
<PAGE>
FIFTH AMENDED AND RESTATED
REVOLVING CREDIT AND
TERM LOAN AGREEMENT
Dated as of
July 31, 1997
among
EQUITY COMPRESSION SERVICES CORPORATION
SUNTERRA ENERGY CORPORATION
EQUITY COMPRESSORS, INC.
AND
OUACHITA ENERGY CORPORATION
"Borrowers"
and
BANK OF OKLAHOMA, NATIONAL ASSOCIATION
"BANK"
<PAGE>
EXHIBIT C
LIABILITIES
(Section 7.25)
There are no long-term liabilities of the Borrowers except the deferred tax
liability as recorded.
<PAGE>
EXHIBIT D
PENDING LITIGATION
(Section 8.2)
NONE
<PAGE>
EXHIBIT E
Take or Pay Disputes
(Section 8.20)
The Borrowers are not involved in any take or pay disputes.
<PAGE>
EXHIBIT F
Control Group
(Section 1.26)
<PAGE>
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is entered into as of the 6th day
of August, 1997 ("Effective Date"), by and between OUACHITA ENERGY
CORPORATION, a Delaware corporation (the "Employer"), EQUITY COMPRESSION
SERVICES CORPORATION, an Oklahoma corporation (the "Parent"), and DENNIS W.
ESTIS (the "Employee"). The Employer, the Parent and the Employee may be
referred to herein collectively as the "Parties" and individually as a
"Party".
W I T N E S S E T H:
WHEREAS, the Employee, Ouachita Energy Corporation, a Louisiana
corporation (the "Predecessor"), the Parent and OEC Acquisition Corporation,
a Delaware corporation (the "Merger Sub"), are parties to that certain
Agreement and Plan of Merger dated as of May 15, 1997 as amended by that
certain First Amendment to Agreement and Plan of Merger dated as of July 30,
1997 (the "Merger Agreement"); and
WHEREAS, pursuant to the Merger Agreement, the Merger Sub and the
Predecessor have been merged together (the "Merger") with the Employer being
the surviving corporation of the Merger; and
WHEREAS, as a result of the Merger, the Employer has succeeded to all of
the assets and business of the Predecessor; and
WHEREAS, pursuant to that certain Asset Purchase and Sale Agreement dated
as of May 15, 1997 by and among the Employee, Ouachita Energy Partners, Ltd.,
a Louisiana corporation ("Seller #1"), Ouachita Compressor Group, LLC, a
Louisiana limited liability company ("Seller #2", and together with Seller
#1, collectively referred to as the "Sellers"), the Parent and the Merger Sub
as amended by that certain First Amendment to Asset Purchase and Sale
Agreement dated as of July 30, 1997 (the "Asset Purchase Agreement"), the
Merger Sub has acquired substantially all of the assets of the Sellers and
has also acquired certain assets from the Employee; and
WHEREAS, the Employee has been the President and Chief Executive Officer
of the Predecessor and each of the Sellers and has substantial and valuable
experience and knowledge concerning the operations of the Sellers and the
Predecessor; and
WHEREAS, one of the conditions to the consummation of the transactions
contemplated by the Merger Agreement and the Asset Purchase Agreement (the
"Purchase Transaction"), is the execution and delivery of this Agreement by
the Employee; and
WHEREAS, the execution and delivery of this Agreement by the Employee is
reasonable and necessary for the Parent and the Merger Sub to realize the
agreed benefits of the Purchase Transaction; and
<PAGE>
WHEREAS, the Parent and the Merger Sub would not have consummated the
Purchase Transaction unless the Employee and Employer executed and delivered
this Agreement; and
WHEREAS, the Parent is the holder of all of the issued and outstanding
shares of stock of the Employer; and
WHEREAS, the transaction contemplated by this Agreement will benefit the
Parent;
NOW THEREFORE, for and in consideration of the mutual covenants and
conditions contained in this Agreement and in consideration of other good and
valuable consideration (including the consummation of the Merger and the
Purchase Transactions), the receipt and sufficiency of which is hereby
acknowledged, the Parties, intending to be legally bound, hereby contract and
agree as follows:
ARTICLE I
TERM OF EMPLOYMENT
The Employer now hereby employs the Employee and the Employee hereby
accepts employment with the Employer for a period (the "Initial Term")
beginning as of the Effective Date and ending on the fifth anniversary of the
Effective Date (the "Initial Termination Date"), subject, however, to earlier
termination as hereinafter provided.
The term of this Agreement shall automatically be extended for one or
more additional one year periods, unless either Party gives the other Party
written notice at least ninety (90) days prior to and of the Initial Term or
any applicable one year extension thereof, as the case may be. The Initial
Term and any extended term are sometimes referred to in this Agreement as the
"Term".
ARTICLE II
DUTIES OF EMPLOYEE
2.01 DUTIES. The Employee is engaged to be the Chief Operating Officer
of the compression operations of the Parent and its affiliates and to be the
President of the Employer. The Employee's duties and powers as such shall be
determined from time to time by the Board of Directors of the Employer
(hereinafter referred to as the "Board of Directors"). The Employee's duties
under this Agreement shall be consistent with his position as the Chief
Operating Officer of the Compression Operations of the Parent and its
affiliates and as the President of the Employer. The Employee shall perform
and discharge such duties well and faithfully to the best of his ability, and
shall be subject to the supervision and direction of the Board of Directors
and such other
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<PAGE>
employees of the Parent and the Employer as are designated from time to time
by the Board of Directors (the "Designated Employees").
2.02 FULL TIME EMPLOYMENT. During the Term, the Employee shall devote
substantially all of his working time, ability, and attention to the business
of the Employer and shall not, directly or indirectly, render any services of
a business, commercial or professional nature to any other person,
corporation, firm or organization, whether for compensation or otherwise,
without the prior written consent of the Employer; provided, however, that
this requirement shall not preclude Employee from (i) serving on the boards
of directors of a reasonable number of other corporations or trade
associations (that are not in competition, directly or indirectly, with the
Employer or the Parent or are customers or suppliers of the Employer or the
Parent); (ii) engaging in charitable activities and community affairs; (iii)
managing his personal investments and affairs; or (iv) engaging in business
activities of a personal nature, provided that such activities do not
significantly interfere or conflict with the reasonable performance of his
duties hereunder. The execution and performance of the Employee's duties
under this Agreement do not conflict with or result in a breach of or a
default under any agreement, contract or instrument to which the Employee is
a party or by which the Employee is otherwise bound.
ARTICLE III
COMPENSATION AND BENEFITS
3.01 BASE COMPENSATION. As compensation for services rendered and the
Employee's covenants and agreements under this Agreement, the Employee shall
be entitled to receive from the Employer a base salary of $175,000 per year,
payable in twenty-four (24) equal semimonthly installments or twenty-six (26)
biweekly installments, as the case may be, for each year during the Term in
accordance with the Employer's normal payment practice.
3.02 BONUS. The Employer shall pay the Employee such bonus, if any, as
the Board of Directors determines to be appropriate in its sole and absolute
discretion. Notwithstanding any provision of this Agreement to the contrary
during the Term, the Employer shall pay to the Employee a bonus of not less
than $65,000 per year (the "Minimum Bonus"). The Minimum Bonus shall be paid
to the Employee on or before the 15th day of August each year. If the Board
of Directors determines that the Employee is entitled to a bonus that is
larger than the Minimum Bonus, then the Employer shall pay such bonus to the
Employee at the same time as similar bonuses are paid to other executive
employees of the Employer or the Parent.
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<PAGE>
3.03 BENEFIT PLAN. The Employer agrees to include the Employee in any
benefit plan adopted by the Employer for the benefit of its senior employees.
The Employee will be entitled to a paid vacation of not less than four weeks
per year. Set forth on Exhibit "A" attached hereto is a list of the employee
benefits that are applicable to the Employee as of the date hereof. The
Parties acknowledge and agree that the Employer may modify, amend, change or
terminate such employee benefits from time to time in accordance with the
terms of the plans establishing such benefits.
3.04 EXPENSES. The Employer, in accordance with the rules and
regulations that the Employer may issue and revise from time to time, shall
reimburse the Employee for business expenses directly and reasonably incurred
in the performance of his duties.
ARTICLE IV
TERMINATION
This Agreement shall terminate prior to the expiration of its Term upon
the occurrence of any one of the following events:
4.01 DISABILITY. In the event that the Employee is unable to perform the
essential function of his jobs with or without reasonable accommodation, by
reason of illness, injury or incapacity for one hundred twenty (120)
consecutive days, during which time the Employee shall continue to be
compensated as provided in Section 3.01 and Section 3.02 hereof, this
Agreement may be terminated by the Employer, and the Employer shall have no
further liability or obligation to the Employee for compensation hereunder;
provided, however, that the Employee will be entitled to receive the payments
prescribed under any disability benefits plan in which the Employee was
participating. In the event of any dispute between the Employer and the
Employee under this Section 4.01 as to whether the Employee's employment may
be terminated under this Section 4.01, the Employee shall submit to a
physical examination by a licensed physician selected jointly by the Employer
and the Employee, and the determination of such physician shall be binding on
the Parties.
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<PAGE>
4.02 DEATH. In the event that the Employee dies during the Term, the
Employer shall pay to his executors, legal representatives or administrators
a lump sum amount equal to:
(a) all unpaid base compensation payable under Section 3.01 through
the date of death; and
(b) all unpaid bonus payable under Section 3.02 through the date of
death, including a pro rata bonus payment equal to the product of (A) the
bonus the Employee received for the full year prior to the year that
includes the date of death (but in no event less than $65,000) multiplied
by (B) a fraction, the numerator of which is the number of days during the
period subsequent to the last day of the year with respect to which a bonus
for an entire year was payable to Employee under Section 3.02 and up to and
including the date of death, and the denominator of which is 365.
The Employer shall have no further liability or obligation hereunder to the
Employee's executors, legal representatives, administrators, heirs or assigns
or any other person claiming under or through the Employee; provided,
however, that the Employee's executors, legal representatives and
administrators will be entitled to receive and disburse to the proper persons
the payments prescribed under any death or disability benefits plan in which
the Employee was participating.
4.03 CAUSE. Nothing in this Agreement shall be construed to prevent the
termination of this Agreement by the Employer for "cause". For purposes of
this Agreement, "cause" shall mean (i) the Employee's failure to perform or
observe (other than by reason of illness, injury or incapacity) any of the
initial terms or provisions of this Agreement, including the failure of the
Employee to follow the reasonable directions of the Board of Directors or any
Designated Employees with respect to the business of the Employer, (ii)
dishonesty, misconduct or action on the part of the Employee that is or is
reasonably likely to be materially damaging or detrimental to the business of
the Employer, (iii) conviction of a felony, or of any misdemeanor involving
moral turpitude, (iv) insobriety or drug addiction that is materially
affecting or is likely to materially affect the Employee's ability to perform
the services required of him hereunder, or (v) misappropriation of funds.
Subject to applicable cure periods as set out in the next sentence, the
Employee's employment may be terminated for cause at any time. Prior to
terminating this Agreement on account of a cause described in clauses (i) or
(iv) above (but not for any of the other enumerated "causes"), the Employer
shall give the Employee thirty (30) days' written notice and an opportunity
to cure such failure to the satisfaction of the Employer. Upon termination
for cause, the Employer shall pay to the Employee all unpaid sums due to the
Employee under Sections 3.01 and 3.02 through the date of such termination.
Following a
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<PAGE>
termination for cause and payment of the amounts required under this Section,
the Employer shall have no further duty or obligation to the Employee;
provided, however, that the Employee shall continue to be bound by Article V.
4.04 TERMINATION WITHOUT CAUSE. The Employer may terminate this
Agreement without cause at any time by giving the Employee written notice of
such termination at least ninety (90) days prior to the scheduled date of
such termination. If this Agreement is terminated without cause pursuant to
this Section 4.04, then the Employer shall provide to the Employee, as
severance and in consideration of his covenants contained in Article V
hereof, a lump sum amount equal to:
(i) an amount equal to one year's salary for such Employee at the
date of such termination; and
(ii) all bonuses that would otherwise be payable under Section 3.02
for a year period following such termination, but in no event less than
$65,000.
All payments due under this Section 4.04 shall be made in full no later
than thirty (30) days after such termination, and after such payment has been
made the Employer shall have no further liability or obligation hereunder to
the Employee; provided, however, that the Employee shall continue to be bound
by Article V.
4.05 CHANGE OF CONTROL. If there is a "Change of Control" (as
hereinafter defined) occurs the Term, then the Employer may terminate this
Agreement by delivering written notice of such termination within ___ days
following such Change of Control and in which event the Employer shall pay to
the Employee a lump sum equal to the amount that the Employee would had
received in this Agreement had been terminated by the Employee under Section
4.06. For the purposes of this Agreement, the term "Change of Control" shall
be defined to be (i) the dissolution of Parent and its subsidiaries; (ii) the
liquidation of more than fifty percent in value of Parent or its
subsidiaries; (iii) a sale of assets involving fifty percent or more in value
of the assets of the Parent or its subsidiaries; (iv) any merger or
reorganization or consolidation of the Parent in which the Parent is not the
surviving entity; (v) any merger or reorganization or consolidation of any
subsidiary in which the subsidiary is not the surviving entity (other than a
merger or reorganization or consolidation with Parent or any entity
controlled by the Parent); (vi) any sale or other disposition of more than
fifty percent of the combined voting securities of the subsidiaries of the
Parent; (vii) any transaction pursuant to which the holders, as a group, of
all of the securities of the Parent outstanding prior to the transaction
hold, as a group, less than fifty percent of the combined voting power of the
Parent or any successor company outstanding after the transaction; (viii) the
acquisition of ownership, beneficial or otherwise, of
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<PAGE>
fifty percent or more of the then outstanding common stock of the Parent, by
any person or entity, together with all associates of such person or entity;
or (ix) a change in the composition of the Parent's Board of Directors, such
that during any two year period, directors of the Parent serving at the
beginning of such period cease for any reason to constitute a majority of the
directors serving on the Board of Directors of the Parent. Following a
termination of this Agreement pursuant to and in compliance with the terms of
this Section 4.05, the Employer shall have no further duty or obligation to
the Employee; provided, however, that the Employee shall continue to be bound
by Article V.
4.06 VOLUNTARY TERMINATION BY EMPLOYEE. If the Employee voluntarily
terminates his employment with the Employer, whether upon a "change of
control" or otherwise, the Employer shall pay to the Employee a lump sum
amount equal to:
(a) all unpaid base compensation payable under Section 3.01 through
the date of termination; and
(b) all unpaid bonus payable under Section 3.02 through the date of
termination, including a pro rata bonus payment equal to the product of (A)
the bonus the Employee received for the full year prior to the year that
includes the date of termination (but in no event less than $65,000)
multiplied by (B) a fraction, the numerator of which is the number of days
during the period subsequent to the last day of the full year with respect
to which a bonus for an entire calendar year was payable to Employee under
Section 3.02 and up to and including the date of termination, and the
nominator of which is 365.
The foregoing payment shall be made in full no later than thirty (30)
days after such termination, and after such payment has been made the
Employer shall have no further liability or obligation hereunder to the
Employee. In addition, the Employee shall have no further liability or
obligation hereunder to the Employer following such termination, provided,
however, that the Employee shall continue to be bound by Article V.
ARTICLE V
PROPERTY RIGHTS
5.01 NON-COMPETITION. During the period the Employee is employed by the
Employer pursuant to the terms of this Agreement and for a period of
thirty-six months following the termination of his employment under this
Agreement, (i) upon expiration of the Term of this Agreement as provided in
Article I hereof, or (ii) by Employer pursuant to and in accordance with the
terms of Sections 4.01, 4.03, 4.04 or 4.05 hereof, or (iii) by Employee for
any reason (including pursuant to Section 4.06), as the case may be, (the
"Non-Competition Period"), Employee shall not, directly or
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<PAGE>
indirectly, either as an employee, employer, consultant, member, agent,
lender, principal, partner, stockholder, corporate officer, director, or in
any other individual or representative capacity, engage or participate in any
business that is in compression services and in competition with the business
of Employer or the Parent within the States of Texas, Oklahoma, Kansas,
Arkansas and the parishes in Louisiana set forth on Exhibit "B" attached
hereto, except as approved in writing by the Employer; provided however, that
if this Agreement is terminated by the Employer pursuant to Section 4.04,
then the Non-Competition Period shall be for a period of two years from such
termination; provided, however, that if the Employer notifies the Employee at
least 60 days prior to the end of such one year Non-Competition Period that
the Employer desires to extend the Non-Competition Period for an additional
year on the terms set forth below, then the Non-Competition Period shall be
extended for an additional year period and the Employer shall pay to the
Employee (at the same time as such amounts would had been paid to the
Employee) the compensation set forth in Sections 3.01 and 3.02 of this
Agreement.
5.02 SOLICITATION. During the Non-Competition Period, the Employee
agrees not to, directly or indirectly, call on or solicit, for the purposes
of engaging in activity that could be competitive with the compression
business of Employer and the Parent as of August __, 1997, any person, firm,
corporation, partnership, limited liability company or other entity who or
which during the Term was or had been a client, customer, referral source,
supplier, or employee of the Employer or the Parent.
5.03 CONFIDENTIAL INFORMATION. Except as may be required for the
provision of his duties under this Agreement, the Employee will not, during
the Term and during the two year period following the termination of this
Agreement, for any reason, disclose any confidential information of the
Employer or the Parent to any person, firm, corporation, association or other
entity for any reason or purpose whatsoever, nor shall the Employee make use
of any such confidential information for his own purposes or for the benefit
of any person, firm, corporation, partnership, limited liability company or
other entity (except the Employer) under any circumstances. The Employee
agrees that, upon termination of this Agreement or on demand of the Employer,
at any time, he shall immediately deliver all such printed or written
material and copies thereof to the Employer. Notwithstanding the foregoing,
nothing herein shall limit the Employee's ability to use any such information
for personal or business purposes as long as such use does not violate the
terms of Section 5.01 hereof or adversely affect the rights or interests of
the Employer or the Parent.
5.04 DEVELOPMENT. All processes, ideas, technical know-how, drawings,
inventions or specifications and other similar property rights and interests
("Intellectual Property") used in or associated with the employment of the
Employee by the Employer, conceived
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<PAGE>
or invented by the Employee during the Term shall upon termination of the
Employee's engagement, belong to the Employer. Upon such termination, the
Employee shall deliver to the Employer any and all documents, including
deeds, bills of sale, endorsements, assignments, documents of title, and
other instruments of transfer and conveyance as the Employer shall reasonably
request, in form and substance satisfactory to the Employer.
5.05 REASONABLENESS OF RESTRICTIONS. Employee agrees that (a) the
covenants contained in Sections 5.01, 5.02, 5.03 and 5.04 hereof are
necessary for the protection of the Employer's business goodwill and trade
secrets, (b) a portion of the compensation paid to the Employee under this
Agreement, including the consideration payable to the Employee pursuant to
Sections 4.04 and 4.05 hereof following a termination of this Agreement, is
paid in consideration of the covenants herein contained, the sufficiency of
which consideration is hereby acknowledged, or (c) that the execution and
delivery of this Agreement was a condition precedent to the consummation of
the Purchase Transaction and that the Employer would not had either executed
either the Merger Agreement or the Asset Purchase Agreement or consummated
the Purchase Transaction or the Merger unless this Agreement and covenants
contained herein were executed by the Employee, and (e) if the scope of any
restriction contained in Sections 5.01, 5.02, 5.03 or 5.04 is too broad to
permit enforcement of such restriction to its full extent, then such
restriction shall be enforced to the maximum extent permitted by law, and the
Parties hereby consent that such scope may be judicially modified accordingly
in any proceeding brought to enforce such restriction.
5.06 ENFORCEMENT. The Employee acknowledges that (i) the restrictions
contained in Sections 5.01, 5.02, 5.03 and 5.04 hereof are reasonable and
necessary to protect the legitimate interests of the Employer and the Parent,
(ii) the Employer would not have entered into this Agreement in the absence
of such restrictions, and (iii) any violation of any provision of those
Sections will result in irreparable injury to the Employer and the Parent.
The Employee also acknowledges that the Employer and the Parent shall be
entitled to preliminary and permanent injunctive relief, which rights shall
be cumulative and in addition to any other rights or remedies to which the
Employer may be entitled. The Employee further acknowledges that the Parent
is an intended third party beneficiary of the covenants contained herein and
may enforce such covenants without the joinder of any other person or party.
5.07 COPY OF COVENANTS. Until the expiration of the applicable
restrictions, the Employee will provide, and the Employer similarly may
provide, a copy of the covenants contained in Sections 5.01, 5.02, 5.03 and
5.04 of this Agreement to any business or enterprise which the Employee may
directly or indirectly own, manage, operate, finance, join, control or
participate in the ownership, management, operation, financing, or
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control of, or serve as an officer, director, employee, partner, principal,
agent, representative, consultant, lender or otherwise, or with which he may
use his name or permit his name to be used.
ARTICLE VI
GENERAL PROVISIONS
6.01 NOTICES. Any notices to be given hereunder by either Party to the
other may be effected either by personal delivery in writing or by mail,
registered or certified, postage prepaid with return receipt requested:
If to Employer: Equity Compression Services Corporation
2501 Cedar Springs Road, Suite 600
Dallas, TX 75201
Attention: Matthew Ramsey, President
with a copy to:
Schlanger, Mills, Mayer & Grossberg, LLP
5847 San Felipe, Suite 1700
Houston, TX 77057
Attention: Kyle Longhofer
If to Employee: Dennis W. Estis
Ouachita Energy Corp.
228 Industrial Street
West Monroe, LA 71292
With a copy to:
Mayor, Day, Caldwell & Keeton, LLP
700 Louisiana, Suite 1900
Houston, TX 77002
Attention: Ed Rogers
Mailed notices shall be addressed to the Parties at the addresses set forth
above, but each Party may change his address by written notice in accordance
with this Section 6.01. Notices delivered personally shall be deemed
communicated as of the date of actual receipt; mailed notices shall be deemed
communicated as of ten (10) days after mailing.
6.02 ENTIRE AGREEMENT. This Agreement supersedes any and all other
agreements, either oral or in writing, between the Parties hereto with
respect to the employment of the Employee by the Employer, and contains all
of the covenants and agreements between the Parties with respect to such
employment in any manner whatsoever.
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6.03 CERTAIN ACKNOWLEDGMENTS. The Employee by his execution and delivery
of this Agreement represents to the Employer as follows:
(i) That the Employee has been advised by the Employer to have this
Agreement reviewed by an attorney representing the Employee, and
the Employee has either had this Agreement reviewed by such
attorney or has chosen not to have this Agreement reviewed
because the Employee, after reading the entire Agreement, fully
and completely understands each provision and has determined not
to obtain the services of an attorney; and
(ii) The Employee either on his own or with the assistance and advice
of his attorney has in particular reviewed Article V and
understands and accepts that the restrictions imposed on the
Employee by Article V are reasonable and necessary for the
protection of the property rights of the Employer.
6.04 HEADINGS. The headings or titles to sections in this Agreement are
intended solely for convenience, and no provision of this Agreement is to be
construed by reference to the heading or title of any section.
6.05 AMENDMENT OR MODIFICATION; WAIVER. No provision of this Agreement
may be amended, modified or waived unless such amendment, modification or
waiver is authorized by the Board of Directors and is agreed to in writing,
signed by the Employee and by an officer of the Employer (other than the
Employee) thereunto duly authorized. Except as otherwise specifically
provided in this Agreement, no waiver by any Party hereto of any breach by
any other party hereto of any condition or provision of this Agreement to be
performed by such other Party shall be deemed a waiver of a similar or
dissimilar provision or condition at the same or at any prior or subsequent
time; nor shall the receipt or acceptance of the Employee's employment be
deemed a waiver of any condition or provision hereof.
6.06 NO SET-OFF. There shall be no right of set-off or counterclaim, in
respect of any claim, debt or obligation, against the payments or benefits to
be made or provided for in this Agreement.
6.07 ASSIGNABILITY. The Employee shall not assign, pledge or encumber
any interest in this Agreement or any part thereof without the express
written consent of the Employer, this Agreement being personal to the
Employee. This Agreement shall, however, inure to the benefit of the
Employee's estate, dependents, beneficiaries and legal representatives. This
Agreement shall not be assignable by
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the Employer without the written consent of the Employee, which consent may
be withheld in his sole discretion, provided that if the Employer shall merge
or consolidate with or into, or transfer substantially all of its assets to,
another person or entity, then this Agreement shall continue to bind and
inure to the benefit of the successor of the Employer resulting from such
merger, consolidation or transfer, except as otherwise provided in Section
4.05.
6.08 GOVERNING LAW. This Agreement has been negotiated, executed and
delivered in the State of Texas, and shall in all respects be interpreted,
construed and governed by and in accordance with the internal substantive law
of the State of Texas.
6.09 SEVERABILITY. Each provision of this Agreement constitutes a
separate and distinct undertaking, covenant and/or provision hereof. In the
event that any provision of this Agreement shall finally be determined to be
unlawful, such provision shall be deemed severed from this Agreement, but
every other provision of this Agreement shall remain in full force and
effect, and in substitution for any such provision held unlawful, there shall
be substituted a provision of similar import reflecting the original intent
of the Parties hereto to the extent permissible under law.
6.10 EXPENSES OF LITIGATION. If any proceeding is brought by any Party or
his or its successors or assigns for the enforcement of this Agreement, or as
a result of any alleged dispute, breach, default or misrepresentation by any
Party of any of the provisions of this Agreement, the successful or
prevailing Party shall be entitled to recover its reasonable attorneys' fees
and other costs incurred in pursuing such proceeding, in addition to such
other relief to which it may be entitled, together with interest thereon at a
rate of 10% per annum.
6.11 PARENT GUARANTEE. It is understood and agreed that the Parent will
benefit from the covenants and agreements of the Employee hereunder.
Accordingly, the Parent hereby unconditionally guarantees the performance by
the Employer of all of the Employer's obligations and agreements hereunder.
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EXECUTED at Houston, Texas, as of the day and year first above written.
EMPLOYER: OUACHITA ENERGY CORPORATION
By:______________________________
Name:____________________________
Title:___________________________
EMPLOYEE: _________________________________
DENNIS W. ESTIS
PARENT: EQUITY COMPRESSION SERVICES
CORPORATION
By:______________________________
Name:____________________________
Title:___________________________
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<PAGE>
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is entered into as of the 6th day
of August, 1997 ("Effective Date"), by and between OUACHITA ENERGY
CORPORATION, a Delaware corporation (the "Employer"), EQUITY COMPRESSION
SERVICES CORPORATION, an Oklahoma corporation (the "Parent"), and ANDY PAYNE
(the "Employee"). The Employer, the Parent and the Employee may be referred
to herein collectively as the "Parties" and individually as a "Party".
W I T N E S S E T H:
WHEREAS, Dennis W. Estis, Ouachita Energy Corporation, a Louisiana
corporation (the "Predecessor"), the Parent and OEC Acquisition Corporation,
a Delaware corporation (the "Merger Sub"), are parties to that certain
Agreement and Plan of Merger dated as of May 15, 1997, as amended by that
certain First Amendment to Agreement and Plan of Merger dated as of July 30,
1997 (the "Merger Agreement"); and
WHEREAS, pursuant to the Merger Agreement, the Merger Sub and the
Predecessor have been merged together (the "Merger") with the Employer being
the surviving corporation of the Merger; and
WHEREAS, as a result of the Merger, the Employer has succeeded to all of
the assets and business of the Predecessor; and
WHEREAS, pursuant to that certain Asset Purchase and Sale Agreement dated
as of May 15, 1997 by and among the Employee, Ouachita Energy Partners, Ltd.,
a Louisiana corporation ("Seller #1"), Ouachita Compressor Group, LLC, a
Louisiana limited liability company ("Seller #2", and together with Seller
#1, collectively referred to as the "Sellers"), the Parent and the Merger
Sub, as amended by that certain First Amendment to Asset Purchase and Sale
Agreement dated as of July 30, 1997 (the "Asset Purchase Agreement"), the
Merger Sub has acquired substantially all of the assets of the Sellers and
has also acquired certain assets from Dennis W. Estis; and
WHEREAS, the Employee has been the Executive Vice President and Chief
Financial Officer of the Predecessor and each of the Sellers and has
substantial and valuable experience and knowledge concerning the operations
of the Sellers and the Predecessor; and
WHEREAS, one of the conditions to the consummation of the transactions
contemplated by the Merger Agreement and the Asset Purchase Agreement (the
"Purchase Transaction"), is the execution and delivery of this Agreement by
the Employee; and
WHEREAS, the execution and delivery of this Agreement by the Employee is
reasonable and necessary for the Parent and the Merger Sub to realize the
agreed benefits of the Purchase Transaction; and
<PAGE>
WHEREAS, the Parent and the Merger Sub would not have consummated the
Purchase Transaction unless the Employee and Employer executed and delivered
this Agreement; and
WHEREAS, the Parent is the holder of all of the issued and outstanding
shares of stock of the Employer; and
WHEREAS, the transaction contemplated by this Agreement will benefit the
Parent; and
WHEREAS, the Employee is a party to an employment contract with the
Predecessor and/or one or more of the Sellers (the "Prior Employment
Contract"); and
WHEREAS, the Parties desire to provide for the termination and
cancellation of the Prior Employment Contract;
NOW THEREFORE, for and in consideration of the mutual covenants and
conditions contained in this Agreement and in consideration of other good and
valuable consideration (including the consummation of the Merger and the
Purchase Transactions), the receipt and sufficiency of which is hereby
acknowledged, the Parties, intending to be legally bound, hereby contract and
agree as follows:
ARTICLE I
PRIOR EMPLOYMENT CONTRACT; TERM OF EMPLOYMENT
1.01 PRIOR EMPLOYMENT CONTRACT. The Parties acknowledge and agree that,
as of the date hereof, the Prior Employment Contract is hereby terminated and
cancelled and that, from and after the date hereof, the employment of the
Employee with the Employer shall be governed by this Agreement. The Employee
hereby releases any rights that he may have under the Prior Employment
Contract.
1.02 TERM. The Employer now hereby employs the Employee and the Employee
hereby accepts employment with the Employer for a period (the "Initial Term")
beginning as of the Effective Date and ending on the second anniversary of
the Effective Date (the "Initial Termination Date"), subject, however, to
earlier termination as hereinafter provided.
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The term of this Agreement shall automatically be extended for one or
more additional one year periods, unless either Party gives the other Party
written notice at least ninety (90) days prior to end of the Initial Term or
any applicable one year extension thereof, as the case may be. The Initial
Term and any extended term are sometimes referred to in this Agreement as the
"Term".
ARTICLE II
DUTIES OF EMPLOYEE
2.01 DUTIES. The Employee is engaged to be a Vice President of the
Employer. The Employee's duties and powers as such shall be determined from
time to time by the Board of Directors of the Employer (hereinafter referred
to as the "Board of Directors"). The Employee's duties under this Agreement
shall be consistent with his position as a Vice President of the Employer.
The Employee shall perform and discharge such duties well and faithfully to
the best of his ability, and shall be subject to the supervision and
direction of the Board of Directors and such other employees of the Parent
and the Employer as are designated from time to time by the Board of
Directors (the "Designated Employees").
2.02 FULL TIME EMPLOYMENT. During the Term, the Employee shall devote
substantially all of his working time, ability, and attention to the business
of the Employer and shall not, directly or indirectly, render any services of
a business, commercial or professional nature to any other person,
corporation, firm or organization, whether for compensation or otherwise,
without the prior written consent of the Employer; provided, however, that
this requirement shall not preclude Employee from (i) serving on the boards
of directors of a reasonable number of other corporations or trade
associations (that are not in competition, directly or indirectly, with the
Employer or the Parent or are customers or suppliers of the Employer or the
Parent); (ii) engaging in charitable activities and community affairs; (iii)
managing his personal investments and affairs; or (iv) engaging in business
activities of a personal nature, provided that such activities do not
significantly interfere or conflict with the reasonable performance of his
duties hereunder. The execution and performance of the Employee's duties
under this Agreement do not conflict with or result in a breach of or a
default under any agreement, contract or instrument to which the Employee is
a party or by which the Employee is otherwise bound.
ARTICLE III
COMPENSATION AND BENEFITS
3.01 BASE COMPENSATION. As compensation for services rendered and the
Employee's covenants and agreements under this Agreement, the Employee shall
be entitled to receive from the Employer a base
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salary of $115,000 per year, payable in twenty-four (24) equal semimonthly
installments or twenty-six (26) biweekly installments, as the case may be,
for each year during the Term in accordance with the Employer's normal
payment practice.
3.02 BONUS. The Employer shall pay the Employee such bonus, if any, as
the Board of Directors determines to be appropriate in its sole and absolute
discretion. Notwithstanding any provision of this Agreement to the contrary
during the first two years of the Term, the Employer shall pay to the
Employee a bonus of not less than $35,000 per year (the "Minimum Bonus").
The Minimum Bonus shall be paid to the Employee on or before the 15th day of
August each year. If during the first two years of the Term the Board of
Directors determines that the Employee is entitled to a bonus that is larger
than the Minimum Bonus, then the Employer shall pay such bonus to the
Employee at the same time as similar bonuses are paid to other executive
employees of the Employer or the Parent. Following the first two years of
the Term, the Employee shall be eligible to participate in such bonus plan,
if any, as the other executive employees of the Parent and the Employer are
participating.
3.03 BENEFIT PLAN. The Employer agrees to include the Employee in any
benefit plan adopted by the Employer for the benefit of its senior employees.
The Employee will be entitled to a paid vacation of not less than three weeks
per year. Set forth on Exhibit "A" attached hereto is a list of the employee
benefits that are applicable to the Employee as of the date hereof. The
Parties acknowledge and agree that the Employer may modify, amend, change or
terminate such employee benefits from time to time in accordance with the
terms of the plans establishing such benefits.
3.04 EXPENSES. The Employer, in accordance with the rules and
regulations that the Employer may issue and revise from time to time, shall
reimburse the Employee for business expenses directly and reasonably incurred
in the performance of his duties.
3.05 STOCK OPTIONS. On the date hereof, the Employee has been granted
non-qualified stock options to purchase 100,000 shares of Parent Common Stock
under the Parent's Employee Stock Option Plan (the "Plan"). The Employee
acknowledges that such options are subject to the terms and conditions
contained in the Plan.
ARTICLE IV
TERMINATION
This Agreement shall terminate prior to the expiration of its Term upon
the occurrence of any one of the following events:
4.01 DISABILITY. In the event that the Employee is unable to perform the
essential function of his job with or without
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reasonable accommodation, by reason of illness, injury or incapacity for one
hundred twenty (120) consecutive days, during which time the Employee shall
continue to be compensated as provided in Section 3.01 and Section 3.02
hereof, this Agreement may be terminated by the Employer, and the Employer
shall have no further liability or obligation to the Employee for
compensation hereunder; provided, however, that the Employee will be entitled
to receive the payments prescribed under any disability benefits plan in
which the Employee was participating. In the event of any dispute between
the Employer and the Employee under this Section 4.01 as to whether the
Employee's employment may be terminated under this Section 4.01, the Employee
shall submit to a physical examination by a licensed physician selected
jointly by the Employer and the Employee, and the determination of such
physician shall be binding on the Parties.
4.02 DEATH. In the event that the Employee dies during the Term, the
Employer shall pay to his executors, legal representatives or administrators
a lump sum amount equal to:
(a) all unpaid base compensation payable under Section 3.01 through
the date of death; and
(b) all unpaid bonus payable under Section 3.02 through the date of
death, including a pro rata bonus payment equal to the product of (A) the
bonus the Employee received for the full year prior to the year that
includes the date of death (but if such death occurs during the first two
years of the Term, then no less than $35,000) multiplied by (B) a fraction,
the numerator of which is the number of days during the period subsequent
to the last day of the year with respect to which a bonus for an entire
year was payable to Employee under Section 3.02 and up to and including the
date of death, and the denominator of which is 365.
The Employer shall have no further liability or obligation hereunder to the
Employee's executors, legal representatives, administrators, heirs or assigns
or any other person claiming under or through the Employee; provided,
however, that the Employee's executors, legal representatives and
administrators will be entitled to receive and disburse to the proper persons
the payments prescribed under any death or disability benefits plan in which
the Employee was participating.
4.03 CAUSE. Nothing in this Agreement shall be construed to prevent the
termination of this Agreement by the Employer for "cause". For purposes of
this Agreement, "cause" shall mean (i) the Employee's failure to perform or
observe (other than by reason of illness, injury or incapacity) any of the
initial terms or provisions of this Agreement, including the failure of the
Employee to follow the reasonable directions of the Board of Directors or any
Designated Employees with respect to the business
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of the Employer, (ii) dishonesty, misconduct or action on the part of the
Employee that is or is reasonably likely to be materially damaging or
detrimental to the business of the Employer, (iii) conviction of a felony, or
of any misdemeanor involving moral turpitude, (iv) insobriety or drug
addiction that is materially affecting or is likely to materially affect the
Employee's ability to perform the services required of him hereunder, or (v)
misappropriation of funds. Subject to applicable cure periods as set out in
the next sentence, the Employee's employment may be terminated for cause at
any time. Prior to terminating this Agreement on account of a cause
described in clauses (i) or (iv) above (but not for any of the other
enumerated "causes"), the Employer shall give the Employee thirty (30) days'
written notice and an opportunity to cure such failure to the satisfaction of
the Employer. Upon termination for cause, the Employer shall pay to the
Employee all unpaid sums due to the Employee under Sections 3.01 and 3.02
through the date of such termination. Following a termination for cause and
payment of the amounts required under this Section, the Employer shall have
no further duty or obligation to the Employee; provided, however, that the
Employee shall continue to be bound by Article V.
4.04 TERMINATION WITHOUT CAUSE. The Employer may terminate this
Agreement without cause at any time by giving the Employee written notice of
such termination at least ninety (90) days prior to the scheduled date of
such termination. If this Agreement is terminated without cause pursuant to
this Section 4.04, then the Employer shall provide to the Employee, as
severance and in consideration of his covenants contained in Article V
hereof, a lump sum amount equal to:
(i) an amount equal to one year's salary for such Employee at the
date of such termination; and
(ii) all bonuses that would otherwise be payable under Section 3.02
for a year period following such termination, but if such termination
occurs during the first two years of the Term, then no less than $35,000.
All payments due under this Section 4.04 shall be made in full no later
than thirty (30) days after such termination, and after such payment has been
made the Employer shall have no further liability or obligation hereunder to
the Employee; provided, however, that the Employee shall continue to be bound
by Article V.
4.05 CHANGE OF CONTROL. (a) If a "Change of Control" (as hereinafter
defined) occurs during the Term, then the Employer may terminate this
Agreement by delivering written notice of such termination within ninety (90)
days following such Change of Control and in which event the Employer shall
pay to the Employee a lump sum equal to the amount that the Employee would
have received if this Agreement had been terminated by the Employer
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under Section 4.04. For the purposes of this Agreement, the term "Change of
Control" shall be defined to be (i) the dissolution of Parent and its
subsidiaries; (ii) the liquidation of more than fifty percent in value of
Parent or its subsidiaries; (iii) a sale of assets involving fifty percent or
more in value of the assets of the Parent or its subsidiaries; (iv) any
merger or reorganization or consolidation of the Parent in which the Parent
is not the surviving entity; (v) any merger or reorganization or
consolidation of any subsidiary in which the subsidiary is not the surviving
entity (other than a merger or reorganization or consolidation with Parent or
any entity controlled by the Parent); (vi) any sale or other disposition of
more than fifty percent of the combined voting securities of the subsidiaries
of the Parent; (vii) any transaction pursuant to which the holders, as a
group, of all of the securities of the Parent outstanding prior to the
transaction hold, as a group, less than fifty percent of the combined voting
power of the Parent or any successor company outstanding after the
transaction; (viii) the acquisition of ownership, beneficial or otherwise, of
fifty percent or more of the then outstanding common stock of the Parent, by
any person or entity, together with all associates of such person or entity;
or (ix) a change in the composition of the Parent's Board of Directors, such
that during any two year period, directors of the Parent serving at the
beginning of such period cease for any reason to constitute a majority of the
directors serving on the Board of Directors of the Parent.
(b) If a Change of Control occurs during the term of this Agreement and
if a Constructive Termination Event (as hereinafter defined) occurs within
one year of such Change of Control, then the Employee may terminate this
Agreement by delivering written notice within sixty (60) days of such
Constructive Termination Event, and the Employer shall pay to the Employee a
lump sum equal to the amount that the Employee would have received if this
Agreement had been terminated by the Employer under Section 4.04. For the
purposes of this Agreement, the term "Constructive Termination Event" means
the (i) reduction in the Employee's salary or (ii) the relocation of the
Employee.
(c) Following a termination of this Agreement pursuant to and in
compliance with the terms of this Section 4.05, (i) all Parent stock options
held by the Employee shall immediately vest and become exercisable and (ii)
the Employer shall have no further duty or obligation to the Employee;
provided, however, that the Employee shall continue to be bound by Article V.
4.06 VOLUNTARY TERMINATION BY EMPLOYEE. If the Employee voluntarily
terminates his employment with the Parent other than in the manner
contemplated in Section 4.06 hereof, the Employer shall pay to the Employee a
lump sum amount equal to:
(a) all unpaid base compensation payable under Section 3.01 through
the date of termination; and
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(b) all unpaid bonus payable under Section 3.02 through the date of
termination, including a pro rata bonus payment equal to the product of (A)
the bonus the Employee received for the full year prior to the year that
includes the date of termination (but if such termination occurs during the
first two years of the Term, then no less than $35,000) multiplied by (B) a
fraction, the numerator of which is the number of days during the period
subsequent to the last day of the full year with respect to which a bonus
for an entire calendar year was payable to Employee under Section 3.02 and
up to and including the date of termination, and the nominator of which is
365.
The foregoing payment shall be made in full no later than thirty (30)
days after such termination, and after such payment has been made the
Employer shall have no further liability or obligation hereunder to the
Employee. In addition, following such termination the Employee shall have no
further liability or obligation hereunder to the Employer; provided, however,
that the Employee shall continue to be bound by Article V.
ARTICLE V
PROPERTY RIGHTS
5.01 NON-COMPETITION. During the period the Employee is employed by the
Employer pursuant to the terms of this Agreement and for a period of twelve
months following the termination of his employment under this Agreement, (i)
upon expiration of the Term of this Agreement as provided in Article I
hereof, or (ii) by Employer pursuant to and in accordance with the terms of
Sections 4.01, 4.03, 4.04 or 4.05 hereof, or (iii) by Employee for any reason
(including pursuant to Sections 4.05(b) and 4.06), as the case may be, (the
"Non-Competition Period"), the Employee shall not, directly or indirectly,
either as an employee, employer, consultant, member, agent, lender,
principal, partner, stockholder, corporate officer, director, or in any other
individual or representative capacity, engage or participate in any business
that is in compression services and in competition with the business of
Employer or the Parent within the States of Texas, Oklahoma, Kansas, Arkansas
and the parishes in Louisiana set forth on Exhibit "B" attached hereto,
except as approved in writing by the Employer; provided however, that if the
Employer notifies the Employee at least six months prior to the end of such
one year Non-Competition Period that the Employer desires to extend the
Non-Competition Period for an additional year on the terms set forth below,
then the Non-Competition Period shall be extended for an additional year
period (the "Additional Non-Competition Period") and the Employer shall pay
to the Employee (at the same time as such amounts would had been paid to the
Employee) the compensation set forth in Sections 3.01 and 3.02 of this
Agreement less an amount equal to 50% of any salary or employment or
consulting compensation earned
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the Employee during the Additional Non-Competition Period. During any
Additional Non-Competition Period, the Employee shall notify and keep the
Employer informed concerning any employment or consulting engagements during
the Additional Non-Competition Period.
5.02 SOLICITATION. During the Non-Competition Period, the Employee
agrees not to, directly or indirectly, call on or solicit, for the purposes
of engaging in activity that could be competitive with the compression
business of the Employer and the Parent as of August __, 1997, any person,
firm, corporation, partnership, limited liability company or other entity who
or which during the Term was or had been a client, customer, referral source,
supplier, or employee of the Employer or the Parent.
5.03 CONFIDENTIAL INFORMATION. Except as may be required for the
provision of his duties under this Agreement, the Employee will not, during
the Term and during the two year period following the termination of this
Agreement, for any reason, disclose any confidential information of the
Employer or the Parent to any person, firm, corporation, association or other
entity for any reason or purpose whatsoever, nor shall the Employee make use
of any such confidential information for his own purposes or for the benefit
of any person, firm, corporation, partnership, limited liability company or
other entity (except the Employer) under any circumstances. The Employee
agrees that, upon termination of this Agreement or on demand of the Employer,
at any time, he shall immediately deliver all such printed or written
material and copies thereof to the Employer. Notwithstanding the foregoing,
nothing herein shall limit the Employee's ability to use any such information
for personal or business purposes as long as such use does not violate the
terms of Section 5.01 hereof or adversely affect the rights or interests of
the Employer or the Parent.
5.04 DEVELOPMENT. All processes, ideas, technical know-how, drawings,
inventions or specifications and other similar property rights and interests
("Intellectual Property") used in or associated with the employment of the
Employee by the Employer, conceived or invented by the Employee during the
Term shall upon termination of the Employee's engagement, belong to the
Employer. Upon such termination, the Employee shall deliver to the Employer
any and all documents, including deeds, bills of sale, endorsements,
assignments, documents of title, and other instruments of transfer and
conveyance as the Employer shall reasonably request, in form and substance
satisfactory to the Employer
5.05 REASONABLENESS OF RESTRICTIONS. Employee agrees that (a) the
covenants contained in Sections 5.01, 5.02, 5.03 and 5.04 hereof are
necessary for the protection of the Employer's business goodwill and trade
secrets, (b) a portion of the compensation paid to the Employee under this
Agreement, including the consideration payable to the Employee pursuant to
Sections 4.04 and 4.05 hereof
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following a termination of this Agreement, is paid in consideration of the
covenants herein contained, the sufficiency of which consideration is hereby
acknowledged, or (c) that the execution and delivery of this Agreement was a
condition precedent to the consummation of the Purchase Transaction and that
the Employer would not had either executed either the Merger Agreement or
the Asset Purchase Agreement or consummated the Purchase Transaction or the
Merger unless this Agreement and covenants contained herein were executed by
the Employee, and (e) if the scope of any restriction contained in Sections
5.01, 5.02, 5.03 or 5.04 is too broad to permit enforcement of such
restriction to its full extent, then such restriction shall be enforced to
the maximum extent permitted by law, and the Parties hereby consent that such
scope may be judicially modified accordingly in any proceeding brought to
enforce such restriction.
5.06 ENFORCEMENT. The Employee acknowledges that (i) the restrictions
contained in Sections 5.01, 5.02, 5.03 and 5.04 hereof are reasonable and
necessary to protect the legitimate interests of the Employer and the Parent,
(ii) the Employer would not have entered into this Agreement in the absence
of such restrictions, and (iii) any violation of any provision of those
Sections will result in irreparable injury to the Employer and the Parent.
The Employee also acknowledges that the Employer and the Parent shall be
entitled to preliminary and permanent injunctive relief, which rights shall
be cumulative and in addition to any other rights or remedies to which the
Employer may be entitled. The Employee further acknowledges that the Parent
is an intended third party beneficiary of the covenants contained herein and
may enforce such covenants without the joinder of any other person or party.
5.07 COPY OF COVENANTS. Until the expiration of the applicable
restrictions, the Employee will provide, and the Employer similarly may
provide, a copy of the covenants contained in Sections 5.01, 5.02, 5.03 and
5.04 of this Agreement to any business or enterprise which the Employee may
directly or indirectly own, manage, operate, finance, join, control or
participate in the ownership, management, operation, financing, or control
of, or serve as an officer, director, employee, partner, principal, agent,
representative, consultant, lender or otherwise, or with which he may use his
name or permit his name to be used.
ARTICLE VI
GENERAL PROVISIONS
6.01 NOTICES. Any notices to be given hereunder by either Party to the
other may be effected either by personal delivery in writing or by mail,
registered or certified, postage prepaid with return receipt requested:
If to Employer: Equity Compression Services Corporation
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2501 Cedar Springs Road, Suite 600
Dallas, TX 75201
Attention: Matthew Ramsey, President
with a copy to:
Schlanger, Mills, Mayer & Grossberg, LLP
5847 San Felipe, Suite 1700
Houston, TX 77057
Attention: Kyle Longhofer
If to Employee: ____________________
c/o Ouachita Energy Corp.
228 Industrial Street
West Monroe, LA 71292
With a copy to:
Mayor, Day, Caldwell & Keeton, LLP
700 Louisiana, Suite 1900
Houston, TX 77002
Attention: Ed Rogers
Mailed notices shall be addressed to the Parties at the addresses set forth
above, but each Party may change his address by written notice in accordance
with this Section 6.01. Notices delivered personally shall be deemed
communicated as of the date of actual receipt; mailed notices shall be deemed
communicated as of ten (10) days after mailing.
6.02 ENTIRE AGREEMENT. This Agreement supersedes any and all other
agreements, either oral or in writing, between the Parties hereto with
respect to the employment of the Employee by the Employer, and contains all
of the covenants and agreements between the Parties with respect to such
employment in any manner whatsoever.
6.03 CERTAIN ACKNOWLEDGMENTS. The Employee by his execution and delivery
of this Agreement represents to the Employer as follows:
(i) That the Employee has been advised by the Employer to have this
Agreement reviewed by an attorney representing the Employee, and
the Employee has either had this Agreement reviewed by such
attorney or has chosen not to have this Agreement reviewed
because the Employee, after reading the entire Agreement, fully
and completely understands each provision and has determined not
to obtain the services of an attorney; and
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(ii) The Employee either on his own or with the assistance and advice
of his attorney has in particular reviewed Article V and
understands and accepts that the restrictions imposed on the
Employee by Article V are reasonable and necessary for the
protection of the property rights of the Employer.
6.04 HEADINGS. The headings or titles to sections in this Agreement are
intended solely for convenience, and no provision of this Agreement is to be
construed by reference to the heading or title of any section.
6.05 AMENDMENT OR MODIFICATION; WAIVER. No provision of this Agreement
may be amended, modified or waived unless such amendment, modification or
waiver is authorized by the Board of Directors and is agreed to in writing,
signed by the Employee and by an officer of the Employer (other than the
Employee) thereunto duly authorized. Except as otherwise specifically
provided in this Agreement, no waiver by any Party hereto of any breach by
any other party hereto of any condition or provision of this Agreement to be
performed by such other Party shall be deemed a waiver of a similar or
dissimilar provision or condition at the same or at any prior or subsequent
time; nor shall the receipt or acceptance of the Employee's employment be
deemed a waiver of any condition or provision hereof.
6.06 NO SET-OFF. There shall be no right of set-off or counterclaim, in
respect of any claim, debt or obligation, against the payments or benefits to
be made or provided for in this Agreement.
6.07 ASSIGNABILITY. The Employee shall not assign, pledge or encumber
any interest in this Agreement or any part thereof without the express
written consent of the Employer, this Agreement being personal to the
Employee. This Agreement shall, however, inure to the benefit of the
Employee's estate, dependents, beneficiaries and legal representatives. This
Agreement shall not be assignable by the Employer without the written consent
of the Employee, which consent may be withheld in his sole discretion,
provided that if the Employer shall merge or consolidate with or into, or
transfer substantially all of its assets to, another person or entity, then
this Agreement shall continue to bind and inure to the benefit of the
successor of the Employer resulting from such merger, consolidation or
transfer, except as otherwise provided in Section 4.05.
6.08 GOVERNING LAW. This Agreement has been negotiated, executed and
delivered in the State of Texas, and shall in all respects be interpreted,
construed and governed by and in accordance with the internal substantive law
of the State of Texas.
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<PAGE>
6.09 SEVERABILITY. Each provision of this Agreement constitutes a
separate and distinct undertaking, covenant and/or provision hereof. In the
event that any provision of this Agreement shall finally be determined to be
unlawful, such provision shall be deemed severed from this Agreement, but
every other provision of this Agreement shall remain in full force and
effect, and in substitution for any such provision held unlawful, there shall
be substituted a provision of similar import reflecting the original intent
of the Parties hereto to the extent permissible under law.
6.10 EXPENSES OF LITIGATION. If any proceeding is brought by any Party or
his or its successors or assigns for the enforcement of this Agreement, or as
a result of any alleged dispute, breach, default or misrepresentation by any
Party of any of the provisions of this Agreement, the successful or
prevailing Party shall be entitled to recover its reasonable attorneys' fees
and other costs incurred in pursuing such proceeding, in addition to such
other relief to which it may be entitled, together with interest thereon at a
rate of 10% per annum.
6.11 PARENT GUARANTEE. It is understood and agreed that the Parent will
benefit from the covenants and agreements of the Employee hereunder.
Accordingly, the Parent hereby unconditionally guarantees the performance by
the Employer of all of the Employer's obligations and agreements hereunder.
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EXECUTED at Houston, Texas, as of the day and year first above written.
EMPLOYER: OUACHITA ENERGY CORPORATION
By:______________________________
Name:____________________________
Title:___________________________
EMPLOYEE: _______________________
ANDY PAYNE
PARENT: EQUITY COMPRESSION SERVICES
CORPORATION
By:______________________________
Name:____________________________
Title:___________________________
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EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is entered into as of the 6th day
of August, 1997 ("Effective Date"), by and between OUACHITA ENERGY
CORPORATION, a Delaware corporation (the "Employer"), EQUITY COMPRESSION
SERVICES CORPORATION, an Oklahoma corporation (the "Parent"), and DAN
McCORMICK (the "Employee"). The Employer, the Parent and the Employee may be
referred to herein collectively as the "Parties" and individually as a
"Party".
W I T N E S S E T H:
WHEREAS, Dennis W. Estis, Ouachita Energy Corporation, a Louisiana
corporation (the "Predecessor"), the Parent and OEC Acquisition Corporation,
a Delaware corporation (the "Merger Sub"), are parties to that certain
Agreement and Plan of Merger dated as of May 15, 1997, as amended by that
certain First Amendment to Agreement and Plan of Merger dated as of July 30,
1997 (the "Merger Agreement"); and
WHEREAS, pursuant to the Merger Agreement, the Merger Sub and the
Predecessor have been merged together (the "Merger") with the Employer being
the surviving corporation of the Merger; and
WHEREAS, as a result of the Merger, the Employer has succeeded to all of
the assets and business of the Predecessor; and
WHEREAS, pursuant to that certain Asset Purchase and Sale Agreement dated
as of May 15, 1997 by and among the Employee, Ouachita Energy Partners, Ltd.,
a Louisiana corporation ("Seller #1"), Ouachita Compressor Group, LLC, a
Louisiana limited liability company ("Seller #2", and together with Seller
#1, collectively referred to as the "Sellers"), the Parent and the Merger
Sub, as amended by that certain First Amendment to Asset Purchase and Sale
Agreement dated as of July 30, 1997 (the "Asset Purchase Agreement"), the
Merger Sub has acquired substantially all of the assets of the Sellers and
has also acquired certain assets from Dennis W. Estis; and
WHEREAS, the Employee has been the Vice President of Marketing and
Business Development of the Predecessor and each of the Sellers and has
substantial and valuable experience and knowledge concerning the operations
of the Sellers and the Predecessor; and
WHEREAS, one of the conditions to the consummation of the transactions
contemplated by the Merger Agreement and the Asset Purchase Agreement (the
"Purchase Transaction"), is the execution and delivery of this Agreement by
the Employee; and
WHEREAS, the execution and delivery of this Agreement by the Employee is
reasonable and necessary for the Parent and the Merger Sub to realize the
agreed benefits of the Purchase Transaction; and
<PAGE>
WHEREAS, the Parent and the Merger Sub would not have consummated the
Purchase Transaction unless the Employee and Employer executed and delivered
this Agreement; and
WHEREAS, the Parent is the holder of all of the issued and outstanding
shares of stock of the Employer; and
WHEREAS, the transaction contemplated by this Agreement will benefit the
Parent; and
WHEREAS, the Employee is a party to an employment contract with the
Predecessor and/or one or more of the Sellers (the "Prior Employment
Contract"); and
WHEREAS, the Parties desire to provide for the termination and
cancellation of the Prior Employment Contract;
NOW THEREFORE, for and in consideration of the mutual covenants and
conditions contained in this Agreement and in consideration of other good and
valuable consideration (including the consummation of the Merger and the
Purchase Transactions), the receipt and sufficiency of which is hereby
acknowledged, the Parties, intending to be legally bound, hereby contract and
agree as follows:
ARTICLE I
PRIOR EMPLOYMENT CONTRACT; TERM OF EMPLOYMENT
1.01 PRIOR EMPLOYMENT CONTRACT. The Parties acknowledge and agree that,
as of the date hereof, the Prior Employment Contract is hereby terminated and
cancelled and that, from and after the date hereof, the employment of the
Employee with the Employer shall be governed by this Agreement. The Employee
hereby releases any rights that he may have under the Prior Employment
Contract.
1.02 TERM. The Employer now hereby employs the Employee and the Employee
hereby accepts employment with the Employer for a period (the "Initial Term")
beginning as of the Effective Date and ending on the second anniversary of
the Effective Date (the "Initial Termination Date"), subject, however, to
earlier termination as hereinafter provided.
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The term of this Agreement shall automatically be extended for one or
more additional one year periods, unless either Party gives the other Party
written notice at least ninety (90) days prior to end of the Initial Term or
any applicable one year extension thereof, as the case may be. The Initial
Term and any extended term are sometimes referred to in this Agreement as the
"Term".
ARTICLE II
DUTIES OF EMPLOYEE
2.01 DUTIES. The Employee is engaged to be the Vice President of
Marketing and Business Development of the Employer. The Employee's duties
and powers as such shall be determined from time to time by the Board of
Directors of the Employer (hereinafter referred to as the "Board of
Directors"). The Employee's duties under this Agreement shall be consistent
with his position as the Vice President of Marketing and Business Development
of the Employer. The Employee shall perform and discharge such duties well
and faithfully to the best of his ability, and shall be subject to the
supervision and direction of the Board of Directors and such other employees
of the Parent and the Employer as are designated from time to time by the
Board of Directors (the "Designated Employees").
2.02 FULL TIME EMPLOYMENT. During the Term, the Employee shall devote
substantially all of his working time, ability, and attention to the business
of the Employer and shall not, directly or indirectly, render any services of
a business, commercial or professional nature to any other person,
corporation, firm or organization, whether for compensation or otherwise,
without the prior written consent of the Employer; provided, however, that
this requirement shall not preclude Employee from (i) serving on the boards
of directors of a reasonable number of other corporations or trade
associations (that are not in competition, directly or indirectly, with the
Employer or the Parent or are customers or suppliers of the Employer or the
Parent); (ii) engaging in charitable activities and community affairs; (iii)
managing his personal investments and affairs; or (iv) engaging in business
activities of a personal nature, provided that such activities do not
significantly interfere or conflict with the reasonable performance of his
duties hereunder. The execution and performance of the Employee's duties
under this Agreement do not conflict with or result in a breach of or a
default under any agreement, contract or instrument to which the Employee is
a party or by which the Employee is otherwise bound.
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<PAGE>
ARTICLE III
COMPENSATION AND BENEFITS
3.01 BASE COMPENSATION. As compensation for services rendered and the
Employee's covenants and agreements under this Agreement, the Employee shall
be entitled to receive from the Employer a base salary of $115,000 per year,
payable in twenty-four (24) equal semimonthly installments or twenty-six (26)
biweekly installments, as the case may be, for each year during the Term in
accordance with the Employer's normal payment practice.
3.02 BONUS. The Employer shall pay the Employee such bonus, if any, as
the Board of Directors determines to be appropriate in its sole and absolute
discretion. Notwithstanding any provision of this Agreement to the contrary
during the first two years of the Term, the Employer shall pay to the
Employee a bonus of not less than $27,000 per year (the "Minimum Bonus").
The Minimum Bonus shall be paid to the Employee on or before the 15th day of
August each year. If during the first two years of the Term the Board of
Directors determines that the Employee is entitled to a bonus that is larger
than the Minimum Bonus, then the Employer shall pay such bonus to the
Employee at the same time as similar bonuses are paid to other executive
employees of the Employer or the Parent. Following the first two years of
the Term, the Employee shall be eligible to participate in such bonus plan,
if any, as the other executive employees of the Parent and the Employer are
participating.
3.03 BENEFIT PLAN. The Employer agrees to include the Employee in any
benefit plan adopted by the Employer for the benefit of its senior employees.
The Employee will be entitled to a paid vacation of not less than three weeks
per year. Set forth on Exhibit "A" attached hereto is a list of the employee
benefits that are applicable to the Employee as of the date hereof. The
Parties acknowledge and agree that the Employer may modify, amend, change or
terminate such employee benefits from time to time in accordance with the
terms of the plans establishing such benefits.
3.04 EXPENSES. The Employer, in accordance with the rules and
regulations that the Employer may issue and revise from time to time, shall
reimburse the Employee for business expenses directly and reasonably incurred
in the performance of his duties.
3.05 STOCK OPTIONS. On the date hereof, the Employee has been granted
non-qualified stock options to purchase 100,000 shares of Parent Common Stock
under the Parent's Employee Stock Option Plan (the "Plan"). The Employee
acknowledges that such options are subject to the terms and conditions
contained in the Plan.
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<PAGE>
ARTICLE IV
TERMINATION
This Agreement shall terminate prior to the expiration of its Term upon
the occurrence of any one of the following events:
4.01 DISABILITY. In the event that the Employee is unable to perform the
essential function of his job with or without reasonable accommodation, by
reason of illness, injury or incapacity for one hundred twenty (120)
consecutive days, during which time the Employee shall continue to be
compensated as provided in Section 3.01 and Section 3.02 hereof, this
Agreement may be terminated by the Employer, and the Employer shall have no
further liability or obligation to the Employee for compensation hereunder;
provided, however, that the Employee will be entitled to receive the payments
prescribed under any disability benefits plan in which the Employee was
participating. In the event of any dispute between the Employer and the
Employee under this Section 4.01 as to whether the Employee's employment may
be terminated under this Section 4.01, the Employee shall submit to a
physical examination by a licensed physician selected jointly by the Employer
and the Employee, and the determination of such physician shall be binding on
the Parties.
4.02 DEATH. In the event that the Employee dies during the Term, the
Employer shall pay to his executors, legal representatives or administrators
a lump sum amount equal to:
(a) all unpaid base compensation payable under Section 3.01 through
the date of death; and
(b) all unpaid bonus payable under Section 3.02 through the date of
death, including a pro rata bonus payment equal to the product of (A) the
bonus the Employee received for the full year prior to the year that
includes the date of death (but if such death occurs during the first two
years of the Term, then no less than $27,000) multiplied by (B) a fraction,
the numerator of which is the number of days during the period subsequent
to the last day of the year with respect to which a bonus for an entire
year was payable to Employee under Section 3.02 and up to and including the
date of death, and the denominator of which is 365.
The Employer shall have no further liability or obligation hereunder to the
Employee's executors, legal representatives, administrators, heirs or assigns
or any other person claiming under or through the Employee; provided,
however, that the Employee's executors, legal representatives and
administrators will be entitled to receive and disburse to the proper persons
the payments prescribed under any death or disability benefits plan in which
the Employee was participating.
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<PAGE>
4.03 CAUSE. Nothing in this Agreement shall be construed to prevent the
termination of this Agreement by the Employer for "cause". For purposes of
this Agreement, "cause" shall mean (i) the Employee's failure to perform or
observe (other than by reason of illness, injury or incapacity) any of the
initial terms or provisions of this Agreement, including the failure of the
Employee to follow the reasonable directions of the Board of Directors or any
Designated Employees with respect to the business of the Employer, (ii)
dishonesty, misconduct or action on the part of the Employee that is or is
reasonably likely to be materially damaging or detrimental to the business of
the Employer, (iii) conviction of a felony, or of any misdemeanor involving
moral turpitude, (iv) insobriety or drug addiction that is materially
affecting or is likely to materially affect the Employee's ability to perform
the services required of him hereunder, or (v) misappropriation of funds.
Subject to applicable cure periods as set out in the next sentence, the
Employee's employment may be terminated for cause at any time. Prior to
terminating this Agreement on account of a cause described in clauses (i) or
(iv) above (but not for any of the other enumerated "causes"), the Employer
shall give the Employee thirty (30) days' written notice and an opportunity
to cure such failure to the satisfaction of the Employer. Upon termination
for cause, the Employer shall pay to the Employee all unpaid sums due to the
Employee under Sections 3.01 and 3.02 through the date of such termination.
Following a termination for cause and payment of the amounts required under
this Section, the Employer shall have no further duty or obligation to the
Employee; provided, however, that the Employee shall continue to be bound by
Article V.
4.04 TERMINATION WITHOUT CAUSE. The Employer may terminate this
Agreement without cause at any time by giving the Employee written notice of
such termination at least ninety (90) days prior to the scheduled date of
such termination. If this Agreement is terminated without cause pursuant to
this Section 4.04, then the Employer shall provide to the Employee, as
severance and in consideration of his covenants contained in Article V
hereof, a lump sum amount equal to:
(i) an amount equal to one year's salary for such Employee at the
date of such termination; and
(ii) all bonuses that would otherwise be payable under Section 3.02
for a year period following such termination, but if such termination
occurs during the first two years of the Term, then no less than $27,000.
All payments due under this Section 4.04 shall be made in full no later
than thirty (30) days after such termination, and after such payment has been
made the Employer shall have no further liability or obligation hereunder to
the Employee; provided, however, that the Employee shall continue to be bound
by Article V.
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<PAGE>
4.05 CHANGE OF CONTROL. (a) If a "Change of Control" (as hereinafter
defined) occurs during the Term, then the Employer may terminate this
Agreement by delivering written notice of such termination within ninety (90)
days following such Change of Control and in which event the Employer shall
pay to the Employee a lump sum equal to the amount that the Employee would
have received if this Agreement had been terminated by the Employer under
Section 4.04. For the purposes of this Agreement, the term "Change of
Control" shall be defined to be (i) the dissolution of Parent and its
subsidiaries; (ii) the liquidation of more than fifty percent in value of
Parent or its subsidiaries; (iii) a sale of assets involving fifty percent or
more in value of the assets of the Parent or its subsidiaries; (iv) any
merger or reorganization or consolidation of the Parent in which the Parent
is not the surviving entity; (v) any merger or reorganization or
consolidation of any subsidiary in which the subsidiary is not the surviving
entity (other than a merger or reorganization or consolidation with Parent or
any entity controlled by the Parent); (vi) any sale or other disposition of
more than fifty percent of the combined voting securities of the subsidiaries
of the Parent; (vii) any transaction pursuant to which the holders, as a
group, of all of the securities of the Parent outstanding prior to the
transaction hold, as a group, less than fifty percent of the combined voting
power of the Parent or any successor company outstanding after the
transaction; (viii) the acquisition of ownership, beneficial or otherwise, of
fifty percent or more of the then outstanding common stock of the Parent, by
any person or entity, together with all associates of such person or entity;
or (ix) a change in the composition of the Parent's Board of Directors, such
that during any two year period, directors of the Parent serving at the
beginning of such period cease for any reason to constitute a majority of the
directors serving on the Board of Directors of the Parent.
(b) If a Change of Control occurs during the term of this Agreement and
if a Constructive Termination Event (as hereinafter defined) occurs within
one year of such Change of Control, then the Employee may terminate this
Agreement by delivering written notice within sixty (60) days of such
Constructive Termination Event, and the Employer shall pay to the Employee a
lump sum equal to the amount that the Employee would have received if this
Agreement had been terminated by the Employer under Section 4.04. For the
purposes of this Agreement, the term "Constructive Termination Event" means
the (i) reduction in the Employee's salary or (ii) the relocation of the
Employee.
(c) Following a termination of this Agreement pursuant to and in
compliance with the terms of this Section 4.05, (i) all Parent stock options
held by the Employee shall immediately vest and become exercisable and (ii)
the Employer shall have no further duty or obligation to the Employee;
provided, however, that the Employee shall continue to be bound by Article V.
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4.06 VOLUNTARY TERMINATION BY EMPLOYEE. If the Employee voluntarily
terminates his employment with the Parent other than in the manner
contemplated in Section 4.06 hereof, the Employer shall pay to the Employee a
lump sum amount equal to:
(a) all unpaid base compensation payable under Section 3.01 through
the date of termination; and
(b) all unpaid bonus payable under Section 3.02 through the date of
termination, including a pro rata bonus payment equal to the product of (A)
the bonus the Employee received for the full year prior to the year that
includes the date of termination (but if such termination occurs during the
first two years of the Term, then no less than $27,000) multiplied by (B) a
fraction, the numerator of which is the number of days during the period
subsequent to the last day of the full year with respect to which a bonus
for an entire calendar year was payable to Employee under Section 3.02 and
up to and including the date of termination, and the nominator of which is
365.
The foregoing payment shall be made in full no later than thirty (30)
days after such termination, and after such payment has been made the
Employer shall have no further liability or obligation hereunder to the
Employee. In addition, following such termination the Employee shall have no
further liability or obligation hereunder to the Employer; provided, however,
that the Employee shall continue to be bound by Article V.
ARTICLE V
PROPERTY RIGHTS
5.01 NON-COMPETITION. During the period the Employee is employed by the
Employer pursuant to the terms of this Agreement and for a period of twelve
months following the termination of his employment under this Agreement, (i)
upon expiration of the Term of this Agreement as provided in Article I
hereof, or (ii) by Employer pursuant to and in accordance with the terms of
Sections 4.01, 4.03, 4.04 or 4.05 hereof, or (iii) by Employee for any reason
(including pursuant to Sections 4.05(b) and 4.06), as the case may be, (the
"Non-Competition Period"), the Employee shall not, directly or indirectly,
either as an employee, employer, consultant, member, agent, lender,
principal, partner, stockholder, corporate officer, director, or in any other
individual or representative capacity, engage or participate in any business
that is in compression services and in competition with the business of
Employer or the Parent within the States of Texas, Oklahoma, Kansas, Arkansas
and the parishes in Louisiana set forth on Exhibit "B" attached hereto,
except as approved in writing by the Employer; provided however, that if the
Employer notifies the Employee at least six months prior to the end of such
one year Non-Competition
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Period that the Employer desires to extend the Non-Competition Period for an
additional year on the terms set forth below, then the Non-Competition Period
shall be extended for an additional year period (the "Additional
Non-Competition Period") and the Employer shall pay to the Employee (at the
same time as such amounts would had been paid to the Employee) the
compensation set forth in Sections 3.01 and 3.02 of this Agreement less an
amount equal to 50% of any salary or employment or consulting compensation
earned the Employee during the Additional Non-Competition Period. During any
Additional Non-Competition Period, the Employee shall notify and keep the
Employer informed concerning any employment or consulting engagements during
the Additional Non-Competition Period.
5.02 SOLICITATION. During the Non-Competition Period, the Employee
agrees not to, directly or indirectly, call on or solicit, for the purposes
of engaging in activity that could be competitive with the compression
business of the Employer and the Parent as of August __, 1997, any person,
firm, corporation, partnership, limited liability company or other entity who
or which during the Term was or had been a client, customer, referral source,
supplier, or employee of the Employer or the Parent.
5.03 CONFIDENTIAL INFORMATION. Except as may be required for the
provision of his duties under this Agreement, the Employee will not, during
the Term and during the two year period following the termination of this
Agreement, for any reason, disclose any confidential information of the
Employer or the Parent to any person, firm, corporation, association or other
entity for any reason or purpose whatsoever, nor shall the Employee make use
of any such confidential information for his own purposes or for the benefit
of any person, firm, corporation, partnership, limited liability company or
other entity (except the Employer) under any circumstances. The Employee
agrees that, upon termination of this Agreement or on demand of the Employer,
at any time, he shall immediately deliver all such printed or written
material and copies thereof to the Employer. Notwithstanding the foregoing,
nothing herein shall limit the Employee's ability to use any such information
for personal or business purposes as long as such use does not violate the
terms of Section 5.01 hereof or adversely affect the rights or interests of
the Employer or the Parent.
5.04 DEVELOPMENT. All processes, ideas, technical know-how, drawings,
inventions or specifications and other similar property rights and interests
("Intellectual Property") used in or associated with the employment of the
Employee by the Employer, conceived or invented by the Employee during the
Term shall upon termination of the Employee's engagement, belong to the
Employer. Upon such termination, the Employee shall deliver to the Employer
any and all documents, including deeds, bills of sale, endorsements,
assignments, documents of title, and other instruments of transfer and
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conveyance as the Employer shall reasonably request, in form and substance
satisfactory to the Employer
5.05 REASONABLENESS OF RESTRICTIONS. Employee agrees that (a) the
covenants contained in Sections 5.01, 5.02, 5.03 and 5.04 hereof are
necessary for the protection of the Employer's business goodwill and trade
secrets, (b) a portion of the compensation paid to the Employee under this
Agreement, including the consideration payable to the Employee pursuant to
Sections 4.04 and 4.05 hereof following a termination of this Agreement, is
paid in consideration of the covenants herein contained, the sufficiency of
which consideration is hereby acknowledged, or (c) that the execution and
delivery of this Agreement was a condition precedent to the consummation of
the Purchase Transaction and that the Employer would not had either executed
either the Merger Agreement or the Asset Purchase Agreement or consummated
the Purchase Transaction or the Merger unless this Agreement and covenants
contained herein were executed by the Employee, and (e) if the scope of any
restriction contained in Sections 5.01, 5.02, 5.03 or 5.04 is too broad to
permit enforcement of such restriction to its full extent, then such
restriction shall be enforced to the maximum extent permitted by law, and the
Parties hereby consent that such scope may be judicially modified accordingly
in any proceeding brought to enforce such restriction.
5.06 ENFORCEMENT. The Employee acknowledges that (i) the restrictions
contained in Sections 5.01, 5.02, 5.03 and 5.04 hereof are reasonable and
necessary to protect the legitimate interests of the Employer and the Parent,
(ii) the Employer would not have entered into this Agreement in the absence
of such restrictions, and (iii) any violation of any provision of those
Sections will result in irreparable injury to the Employer and the Parent.
The Employee also acknowledges that the Employer and the Parent shall be
entitled to preliminary and permanent injunctive relief, which rights shall
be cumulative and in addition to any other rights or remedies to which the
Employer may be entitled. The Employee further acknowledges that the Parent
is an intended third party beneficiary of the covenants contained herein and
may enforce such covenants without the joinder of any other person or party.
5.07 COPY OF COVENANTS. Until the expiration of the applicable
restrictions, the Employee will provide, and the Employer similarly may
provide, a copy of the covenants contained in Sections 5.01, 5.02, 5.03 and
5.04 of this Agreement to any business or enterprise which the Employee may
directly or indirectly own, manage, operate, finance, join, control or
participate in the ownership, management, operation, financing, or control
of, or serve as an officer, director, employee, partner, principal, agent,
representative, consultant, lender or otherwise, or with which he may use his
name or permit his name to be used.
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<PAGE>
ARTICLE VI
GENERAL PROVISIONS
6.01 NOTICES. Any notices to be given hereunder by either Party to the
other may be effected either by personal delivery in writing or by mail,
registered or certified, postage prepaid with return receipt requested:
If to Employer: Equity Compression Services Corporation
2501 Cedar Springs Road, Suite 600
Dallas, TX 75201
Attention: Matthew Ramsey, President
with a copy to:
Schlanger, Mills, Mayer & Grossberg, LLP
5847 San Felipe, Suite 1700
Houston, TX 77057
Attention: Kyle Longhofer
If to Employee: Dan McCormick
190 Cedarcrest Lane
Lewisville, Tx 75067
With a copy to:
Mayor, Day, Caldwell & Keeton, LLP
700 Louisiana, Suite 1900
Houston, TX 77002
Attention: Ed Rogers
Mailed notices shall be addressed to the Parties at the addresses set forth
above, but each Party may change his address by written notice in accordance
with this Section 6.01. Notices delivered personally shall be deemed
communicated as of the date of actual receipt; mailed notices shall be deemed
communicated as of ten (10) days after mailing.
6.02 ENTIRE AGREEMENT. This Agreement supersedes any and all other
agreements, either oral or in writing, between the Parties hereto with
respect to the employment of the Employee by the Employer, and contains all
of the covenants and agreements between the Parties with respect to such
employment in any manner whatsoever.
-11-
<PAGE>
6.03 CERTAIN ACKNOWLEDGMENTS. The Employee by his execution and delivery
of this Agreement represents to the Employer as follows:
(i) That the Employee has been advised by the Employer to have this
Agreement reviewed by an attorney representing the Employee, and
the Employee has either had this Agreement reviewed by such
attorney or has chosen not to have this Agreement reviewed
because the Employee, after reading the entire Agreement, fully
and completely understands each provision and has determined not
to obtain the services of an attorney; and
(ii) The Employee either on his own or with the assistance and advice
of his attorney has in particular reviewed Article V and
understands and accepts that the restrictions imposed on the
Employee by Article V are reasonable and necessary for the
protection of the property rights of the Employer.
6.04 HEADINGS. The headings or titles to sections in this Agreement are
intended solely for convenience, and no provision of this Agreement is to be
construed by reference to the heading or title of any section.
6.05 AMENDMENT OR MODIFICATION; WAIVER. No provision of this Agreement
may be amended, modified or waived unless such amendment, modification or
waiver is authorized by the Board of Directors and is agreed to in writing,
signed by the Employee and by an officer of the Employer (other than the
Employee) thereunto duly authorized. Except as otherwise specifically
provided in this Agreement, no waiver by any Party hereto of any breach by
any other party hereto of any condition or provision of this Agreement to be
performed by such other Party shall be deemed a waiver of a similar or
dissimilar provision or condition at the same or at any prior or subsequent
time; nor shall the receipt or acceptance of the Employee's employment be
deemed a waiver of any condition or provision hereof.
6.06 NO SET-OFF. There shall be no right of set-off or counterclaim, in
respect of any claim, debt or obligation, against the payments or benefits to
be made or provided for in this Agreement.
6.07 ASSIGNABILITY. The Employee shall not assign, pledge or encumber
any interest in this Agreement or any part thereof without the express
written consent of the Employer, this Agreement being personal to the
Employee. This Agreement shall, however, inure to the benefit of the
Employee's estate, dependents, beneficiaries and legal representatives. This
Agreement shall not be assignable by
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<PAGE>
the Employer without the written consent of the Employee, which consent may
be withheld in his sole discretion, provided that if the Employer shall merge
or consolidate with or into, or transfer substantially all of its assets to,
another person or entity, then this Agreement shall continue to bind and
inure to the benefit of the successor of the Employer resulting from such
merger, consolidation or transfer, except as otherwise provided in Section
4.05.
6.08 GOVERNING LAW. This Agreement has been negotiated, executed and
delivered in the State of Texas, and shall in all respects be interpreted,
construed and governed by and in accordance with the internal substantive law
of the State of Texas.
6.09 SEVERABILITY. Each provision of this Agreement constitutes a
separate and distinct undertaking, covenant and/or provision hereof. In the
event that any provision of this Agreement shall finally be determined to be
unlawful, such provision shall be deemed severed from this Agreement, but
every other provision of this Agreement shall remain in full force and
effect, and in substitution for any such provision held unlawful, there shall
be substituted a provision of similar import reflecting the original intent
of the Parties hereto to the extent permissible under law.
6.10 EXPENSES OF LITIGATION. If any proceeding is brought by any Party or
his or its successors or assigns for the enforcement of this Agreement, or as
a result of any alleged dispute, breach, default or misrepresentation by any
Party of any of the provisions of this Agreement, the successful or
prevailing Party shall be entitled to recover its reasonable attorneys' fees
and other costs incurred in pursuing such proceeding, in addition to such
other relief to which it may be entitled, together with interest thereon at a
rate of 10% per annum.
6.11 PARENT GUARANTEE. It is understood and agreed that the Parent will
benefit from the covenants and agreements of the Employee hereunder.
Accordingly, the Parent hereby unconditionally guarantees the performance by
the Employer of all of the Employer's obligations and agreements hereunder.
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<PAGE>
EXECUTED at Houston, Texas, as of the day and year first above written.
EMPLOYER: OUACHITA ENERGY CORPORATION
By:______________________________
Name:____________________________
Title:___________________________
EMPLOYEE: _________________________________
DAN MCCORMICK
PARENT: EQUITY COMPRESSION SERVICES
CORPORATION
By:______________________________
Name:____________________________
Title:___________________________
-14-
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