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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
Equity Compression Services Corporation
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(Name of Issuer)
Common Stock, par value $1.00 per share
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(Title of Class of Securities)
420258 10 5
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(CUSIP Number)
Dennis W. Estis
228 Industrial St.
West Monroe, Louisiana 71292
(318) 388-4930
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(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
August 6, 1997
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(Date of Event which Requires
Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is filing
this Schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ].
Note: Six copies of this statement, including all exhibits, should be
filed with the Commission. See Rule 13d-1(a) for other parties to whom are to
be sent.
*The remainder of this cover page shall be filled our for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which would
alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 ("Act") or otherwise subject to the liabilities of that section of
the Act but shall be subject to all other provisions of the Act (however, see
the Notes).
(Page 1 of 7 Pages)
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SCHEDULE 13D
CUSIP No. 420258 10 5
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1) Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
Dennis W. Estis
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2) Check the Appropriate Box if a Member of a Group (See Instructions)
(a) [ ]
(b) [ ]
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3) SEC Use Only
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4) Source of Funds (See Instructions)
OO
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5) Check if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d)
or 2(e)
[ ]
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6) Citizenship or Place of Organization
U.S.
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7) Sole Voting Power
Common Stock 5,252,177 (See Item 4 below)
Number of
Shares ------------------------------------------------------------------
Beneficially 8) Shared Voting Power
Owned by
Each Common Stock 0
Reporting
Person ------------------------------------------------------------------
With 9) Sole Dispositive Power
Common Stock 5,252,177 (See Item 4 below)
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10) Shared Dispositive Power
Common Stock 0
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11) Aggregate Amount Beneficially Owned By Each Reporting Person
Common Stock 5,252,177 (See Item 4 below)
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12) Check Box If The Aggregate Amount In Row (11) Excludes Certain Shares (See
Instructions)
[ ]
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13) Percent Of Class Represented By Amount In Row (11)
Common Stock 19.7%
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14) Type Of Reporting Person
IN
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(Page 2 of 7 Pages)
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ITEM 1. SECURITY AND ISSUER.
The security to which this statement relates is the common stock, par value
$1.00 per share (the "Common Stock"), of Equity Compression Services
Corporation, an Oklahoma corporation (the "Company"). The principal offices of
the Company are located at 2501 Cedar Springs Road, Suite 600, Dallas, Texas
75201.
ITEM 2. IDENTITY AND BACKGROUND.
(a) This Schedule 13D is being filed by Dennis W. Estis.
(b) The undersigned is a natural person whose business address is P.O.
Box 2457, 228 Industrial St., West Monroe, Louisiana 71292.
(c) The undersigned is the Chief Operating Offer of the compression
operations of the Company and its affiliates and is to be the President of
Ouachita Energy Corporation, a Delaware corporation and wholly-owned subsidiary
of the Company ("Ouachita"). The name and address of the Company are set forth
in Item 1. The principal business of the Company and its affiliates is to
engage in oil and gas production and the sale, remanufacturing, contract
operation and leasing of gas compressors. Ouachita's address is P.O. Box 2457,
228 Industrial St., West Monroe, Louisiana 71292, and its principal business is
currently the contract operation of gas compressors.
(d) During the last five years, the undersigned has not been convicted in
a criminal proceeding (excluding traffic violations or similar misdemeanors).
(e) During the last five years, the undersigned has not been a party to a
civil proceeding of a judicial or administrative body of competent jurisdiction
and as a result of such proceeding was or is subject to a judgment, decree or
final order enjoining future violations of, or prohibiting or mandating
activities subject to, federal or state securities laws or finding any violation
with respect to such laws.
(f) The undersigned is a citizen of the United States.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
The consideration used by the undersigned to acquire 5,252,177 shares of
common stock of the Company consisted of all 212,711 shares of the common stock
of Ouachita Energy Corporation, a Louisiana corporation ("OEC"), formerly owned
by the undersigned. Pursuant to the terms of a certain Agreement and Plan of
Merger dated as of May 15, 1997 among the Company, Ouachita, OEC and the
undersigned, 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"),
OEC was merged into Ouachita, with Ouachita remaining as the surviving
corporation of such merger, which was effective on August 6, 1997 (the
"Merger"). In connection therewith, the undersigned and the other holders of
equity interests in OEC received the aggregate amount of 7,600,000 shares of the
Company's common stock.
ITEM 4. PURPOSE OF TRANSACTION.
The undersigned was issued 5,252,177 shares of Common Stock in connection
with the Merger described in Item 3 above. Subject to the terms of the Merger
Agreement and the Participation Rights Agreement described below, the
undersigned reserves the right to purchase additional securities of the Company
or to sell some or all of his shares of Common Stock at any time in private or
market transactions depending on market conditions, an evaluation of the
Company's business, prospects and financial condition,
(Page 3 of 7 Pages)
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the market for the Common Stock, other opportunities available, general
economic conditions, money and stock market conditions and other further
developments.
(a) The Merger Agreement described in Item 3 provides that for a period of
two years following the closing of the Merger, the undersigned shall
not dispose of any of his Common Stock without the prior consent of
the Board of Directors of the Company.
Pursuant to the terms of an Agreement dated September 14, 1995 between
the undersigned and Barbara D. Estis (the "Option Agreement"),
Barbara D. Estis granted the undersigned an option to purchase 89,560
shares of OEC common stock and 390 shares of OEP common stock for the
aggregate amount of $5 million, payable in cash at the closing of such
purchase.
Subsequent to the execution of the Option Agreement, OEP, Ouachita
Compression Group, LLC, a Louisiana limited liability company ("OCG"),
OEC Acquisition Corporation, a Delaware corporation ("Ouachita"), and
the Company entered into an Asset Purchase and Sale Agreement dated as
of May 15, 1997 and amended by the First Amendment to Asset Purchase
and Sale Agreement dated as of July 30, 1997 (as amended, the "Asset
Purchase Agreement"), pursuant to which substantially all of the
assets of OEP and OCG were sold to Ouachita for cash on August 6,
1997. It is contemplated that OEP and OCG will be liquidated, with
the proceeds of such liquidation being distributed to the shareholders
and members thereof.
In view of the transactions contemplated by the Asset Purchase and
Merger Agreements, the undersigned and Barbara D. Estis entered into
an Option Exercise Agreement effective as of July 31, 1997 (the
"Option Exercise Agreement"), pursuant to which the parties thereto
agreed that the undersigned would, subject to the closing of such
transactions, exercise such option and that as a consequence thereof,
the $5 million owing to Barbara D. Estis pursuant to the Option
Agreement would be payable in the manner summarized as follows:
(i) Barbara D. Estis will receive an amount of cash equal to the
amount of cash she would be entitled to receive if she were to retain
her shares in OEP. Because certain post-closing adjustments to the
purchase price payable under the Asset Purchase Agreement may be
required, however, the amount of cash to be received by the
shareholders of OEP (including Barbara D. Estis) may be subject to
reduction or increase.
(ii) Barbara D. Estis will receive a number of shares of Common Stock
determined by subtracting the total amount of cash paid to the
undersigned under paragraph (a) above from $5 million and dividing the
result by $1.65.
In accordance with the terms of the Option Exercise Agreement,
Barbara D. Estis received 1,380,675 shares of Common Stock, but this
number is subject to adjustment. In the event Barbara D. Estis
becomes entitled to receive additional or fewer shares of Common
Stock, such shares will be transferred to her by the undersigned, or
transferred by her to the undersigned, as appropriate.
The undersigned, the Company and the other persons who formerly held
shares of common stock in OEC or who had a contractual right to
receive an option to buy such shares (Barbara D. Estis, Virginia
Estis, Brett Estis, Lavelle Ivy, Tommy Nicar, Leonard Woodall and
Andy C. Payne) (the undersigned and such persons are sometimes
collectively referred to herein as the "OEC Shareholders") have
entered into a Registration Rights Agreement dated as of August 1,
1997 (the "Registration Rights Agreement"), which provides the OEC
(Page 4 of 7 Pages)
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Shareholders with certain demand and piggyback registration rights.
Subject to certain conditions, the Registration Rights Agreement
generally permits the holders of a majority of the shares of Common
Stock issued to the OEC Shareholders in connection with the Merger to
exercise two demand registration rights at any time after a two year
period has expired. In addition, and subject to certain conditions,
the Registration Rights Agreement generally permits the OEC
Shareholders to participate in other registrations of Common Stock
under the Securities Act of 1933 (other than by a registration on
Form S-4 or Form S-8 or any successor or similar form and other than
pursuant to the OEC Shareholders' demand registration rights).
The Company, The Prudential Insurance Company of America
("Prudential"), Dennis W. Estis, HACL, Ltd. and Energy Investors Joint
Venture have entered into a Participation Rights Agreement dated as of
July 31, 1997 (the "Participation Rights Agreement"), which in certain
circumstances requires the undersigned, HACL, Ltd. and Energy
Investors Joint Venture (collectively, the "Subject Parties") to grant
tagalong rights to any holder of Common Stock Purchase Warrants issued
by the Company to Prudential or any Common Stock issued upon the
exercise of such warrants in connection with transfers of Common Stock
by a Subject Party. The Participation Rights Agreement also requires
the Subject Parties to obtain the written agreement of any proposed
transferee of shares of Common Stock held by a Subject Party to become
a party to the Participation Rights Agreement, unless the Subject
Party is transferring shares of Common Stock pursuant to a public
offering registered under the Securities Act of 1933 or in accordance
with Rule 144 thereof.
Ouachita, the Company and the undersigned have entered into an
Employment Agreement dated as of August 6, 1997 (the "Employment
Agreement"), pursuant to which the undersigned became the Chief
Operating Officer of the Company and its affiliates and is to be the
President of Ouachita for a five-year term, subject to annual
extensions at the option of the parties thereto. The Employment
Agreement generally provides that the undersigned is eligible to
participate in Company's employee benefit plans, pursuant to which the
undersigned may in the future receive additional securities of the
Company.
OEP, OCG, the undersigned, the Company and Ouachita have entered into
an Indemnification Agreement dated as of August 6, 1997 (the
"Indemnification Agreement"), pursuant to which the undersigned may be
required to indemnify the Parent and Ouachita against certain losses
in accordance with the terms thereof. In such event, the
Indemnification Agreement permits the undersigned to satisfy such
obligations by surrendering shares of Common Stock.
(b) The undersigned received his shares of Common Stock in connection with
the Merger described in Item 3 above.
(c) Inapplicable.
(d) Pursuant to the Merger Agreement described in Item 3 above, on August
6, 1996, the undersigned became a director and the Chief Operating
Officer of the Company. In addition, pursuant to the Merger
Agreement, Andy C. Payne, who was the Executive Vice President of OEC,
also became a director of the Company.
(e) As a result of the Merger, 7,600,000 shares of Common Stock were
issued to the OEC Shareholders, including the undersigned.
(f) Inapplicable.
(Page 5 of 7 Pages)
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(g) Inapplicable.
(h) Inapplicable.
(i) Inapplicable.
(j) Inapplicable.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
As a result of the Merger, the Company issued 5,252,177 shares of common
stock to the undersigned. To the best of the undersigned's knowledge, there are
currently 26,718,912 shares of the Company's common stock issued and
outstanding.
(a) The shares of the Company's common stock issued to the undersigned in
connection with the Merger represent, to the best of the undersigned's
knowledge, approximately 19.7% of all of the Company's issued and
outstanding shares of Common Stock. All of the shares of Common Stock
issued to the undersigned are owned beneficially and of record by the
undersigned as of the date hereof, although the undersigned may be
required to transfer or receive shares of Common Stock in accordance
with the Option Exercise Agreement described in Item 4.
(b) The undersigned has sole voting and dispositive power over all
5,252,177 shares issued to the undersigned in connection with the
Merger.
(c) The only transaction in the Common Stock effected by the undersigned
during the past 60 days involved the receipt of shares to the
undersigned in connection with the Merger.
(d) Inapplicable.
(e) Inapplicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER.
Please see the responses to Items 3 and 4(a) with respect to the Merger
Agreement, the Option Exercise Agreement, the Registration Rights Agreement, the
Participation Rights Agreement, the Employment Agreement and the Indemnification
Agreement.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
The undersigned hereby incorporates by reference (a) the Merger Agreement,
(b) the Option Exercise Agreement, (c) the Registration Rights Agreement,
(d) the Participation Rights Agreement, (e) the Employment Agreement and (f) the
Indemnification Agreement.
(Page 6 of 7 Pages)
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
accurate.
Dated: August 12 , 1997
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By: /s/ DENNIS W. ESTIS
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Dennis W. Estis
ATTENTION: INTENTIONAL MISSTATEMENTS OR OMISSIONS OF FACT CONSTITUTE
FEDERAL CRIMINAL VIOLATIONS (SEE 18 U.S.C. 1001).
(Page 7 of 7 Pages)
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EXHIBIT INDEX
Sequentially
Exhibit No. Document Description Numbered Page
- ----------- -------------------- -------------
1 Agreement and Plan of Merger dated as of May 15,
1997 among the Company, Ouachita, OEC and Dennis W.
Estis (incorporated by reference to Exhibit 2.1 to
the Company's Quarterly Report on Form 10-QSB filed
with the Securities and Exchange Commission on
August 14, 1997)
2 First Amendment to Agreement and Plan of Merger
dated as of July 30, 1997 among the Company, Ouachita,
OEC and Dennis W. Estis (incorporated by reference
to Exhibit 2.2 to the Company's Quarterly Report on
Form 10-QSB filed with the Securities and Exchange
Commission on August 14, 1997)
3 Option Exercise Agreement effective as of July 31,
1997 between Barbara DuPont Estis and Dennis W. Estis 9
4 Registration Rights Agreement dated as of August 1,
1997 among the Company and certain stockholders named
therein (incorporated by reference to Exhibit 4.5 to
the Company's Quarterly Report on Form 10-QSB filed with
the Securities and Exchange Commission on August 14, 1997)
5 Participation Rights Agreement dated as of July 31,
1997 among the Company, The Prudential Insurance Company
of America, Dennis W. Estis, HACL, Ltd. and Energy
Investors Joint Venture (incorporated by reference to
Exhibit 4.4 to the Company's Quarterly Report on
Form 10-QSB filed with the Securities and Exchange
Commission on August 14, 1997)
6 Employment Agreement dated as of August 6, 1997 among
Ouachita, the Company and Dennis W. Estis (incorporated
by reference to Exhibit 10.3 to the Company's Quarterly
Report on Form 10-QSB filed with the Securities and
Exchange Commission on August 14, 1997)
7 Indemnification Agreement dated as of August 6, 1997
among OEP, OCG, Dennis W. Estis, the Company and Ouachita 11
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EXHIBIT 3
OPTION EXERCISE AGREEMENT
THIS OPTION EXERCISE AGREEMENT (this "Agreement"), effective as of July
31, 1997, is between Barbara DuPont Estis ("Barbara") and Dennis W. Estis
("Dennis").
RECITALS
A. Barbara and Dennis are parties to that certain Agreement dated
September 14, 1995 (the "Option Agreement").
B. Pursuant to the Option Agreement, Dennis acquired an option to
purchase from Barbara 89,560 shares of common stock of Ouachita Energy
Corporation, a Louisiana corporation ("OEC"), and 390 shares of common stock
of Ouachita Energy Partners, Ltd., a Louisiana corporation ("OEP"), for the
aggregate amount of $5 million, payable in cash at the closing of such
purchase (the "Option").
C. A certain Asset Purchase and Sale Agreement among OEP, Ouachita
Compression Group, LLC, a Louisiana limited liability company ("OCG"),
Dennis, OEC Acquisition Corporation, a Delaware corporation ("Acquisition"),
and Equity Compression Services Corporation, an Oklahoma corporation
("Equity"), dated May 15, 1997 (the "Asset Purchase Agreement") and providing
for the sale of substantially all of the assets of OEP and OCG has been
executed.
D. A certain Agreement and Plan of Merger among Equity, Acquisition,
OEC and Dennis dated May 15, 1997 (the "Merger Agreement") and providing for
the merger of OEC into Acquisition, with Acquisition remaining as the
surviving corporation of such merger has been executed.
E. Barbara and Dennis now desire to provide for a conditional exercise
of the Option, modify the manner in which the $5 million payable upon an
exercise of the Option is paid and to reflect their agreement on certain
other matters.
NOW, THEREFORE, the parties hereto agree as follows:
1. CONDITIONAL EXERCISE OF OPTION. Subject to the closing of the
transactions contemplated by the Asset Purchase Agreement and the Merger
Agreement (the "Equity Transactions"), Dennis hereby exercises the Option,
and Dennis and Barbara agree that the $5 million owing to Barbara shall be
payable as follows, notwithstanding anything to the contrary in the Option
Agreement:
(a) Barbara will receive an amount of cash equal to the amount she
would be entitled to receive if she were to retain her shares in OEP.
Dennis will cause OEP to pay Barbara the cash owing to her at the same
time the other shareholders of OEP are paid, most of which is
anticipated to be paid within a few days of such closing. Barbara
understands that because certain post-closing adjustments to the
purchase price payable under the Asset Purchase Agreement may be
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required, a small part of the cash payable to her may be withheld
pending the determination of whether such purchase price will be
reduced. In addition, a small part of the proceeds received from
Equity will be used to cover final expenses while OEP and OCG are
being liquidated.
(b) Barbara will receive a number of shares of Equity's common stock
determined by subtracting the total amount of cash paid to Barbara
under Section 1(a) above from $5 million and dividing the result by
$1.65, which is the value of the shares being received from Equity.
Dennis agrees to cause OEC to deliver most of such shares to Barbara
at the same time the shareholders of OEC receive their shares of
Equity's common stock, which is anticipated to be within a few days of
such closing. However, because of the post-closing adjustments
described in the preceding paragraph, final delivery of all of
Barbara's shares may not take place until a few months after the
closing.
2. WAIVER OF CONSIDERATION. Barbara acknowledges and agrees that the
cash and stock payable pursuant to Section 1 of this Agreement constitute all
of the consideration that she is entitled to receive pursuant to the exercise
of the Option by Dennis hereunder and hereby waives any right to receive any
cash or common stock of Equity payable pursuant to the terms of the Asset
Purchase Agreement or the Merger Agreement.
3. CONSENT TO ALLOCATION OF CONSIDERATION. Barbara acknowledges that
(a) she has received a Memorandum dated July 25, 1997 to which copies of the
Asset Purchase Agreement, the Merger Agreement and a schedule reflecting the
allocation of consideration to be paid by Equity in connection with the
Equity Transactions among OEC, OEP and OCG are attached; (b) she has been
given an opportunity to ask questions regarding the manner in which such
allocation has been made; (c) such allocation is fair and reasonable; (d) she
hereby releases OEC, OEP, OCG, Dennis and Andy Payne from any claim that such
allocation is unfair; and (e) OEC, OEP, OCG, Dennis and Andy Payne will
exercise reasonable efforts to close the Equity Transactions in reliance on
Barbara's execution of this Agreement.
4. AGREEMENT CONDITIONED ON CLOSING OF EQUITY TRANSACTIONS. In the
event the Equity Transactions do not close for any reason, (a) Dennis shall
not be deemed to have exercised the Option pursuant to the terms of this
Agreement; (b) Barbara and Dennis will remain subject to the terms of the
Option Agreement as set forth therein; and (c) this Agreement shall be void
and of no further force and effect.
IN WITNESS WHEREOF, the parties have executed this Amendment.
/S/ BARBARA DUPONT ESTIS /S/ DENNIS W. ESTIS
- ---------------------------- ----------------------------
Barbara DuPont Estis Dennis W. Estis
2
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EXHIBIT 7
INDEMNIFICATION AGREEMENT
This INDEMNIFICATION AGREEMENT (the "Agreement"), dated as of this 6th day
of August, 1997, is by and among OUACHITA ENERGY PARTNERS, LTD., a Louisiana
corporation ("Seller #1"), OUACHITA COMPRESSOR 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 and Ouachita Energy Corporation, a
Louisiana corporation ("OEC"), are parties to an 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 succeeding to all of the property and
assets of OEC; and
WHEREAS, the Parent, the Purchaser, the Sellers and the Shareholder are
also parties to that certain Asset Purchase and Sale Agreement dated as of May
15, 1997 (the "Asset Purchase Agreement") under which the Purchaser is acquiring
certain assets and assuming certain liabilities of the Sellers and acquiring
certain real and personal property from the Shareholder; and
WHEREAS, the Sellers and the Shareholder desire to indemnify and hold the
Parent and the Purchaser harmless from certain liabilities; and
WHEREAS, the Parent and the Purchaser desire to hold the Sellers and the
Shareholder harmless from certain liabilities; and
WHEREAS, the execution of this Agreement is one of the conditions to the
closing of the transactions contemplated by both the Merger Agreement and the
Asset Purchase Agreement; and
WHEREAS, the Parties would not have consummated the transactions
contemplated by the Asset Purchase Agreement or the Merger Agreement except in
reliance in the indemnification and covenants contained herein;
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:
<PAGE>
1. DEFINED TERMS. Unless defined herein or unless the context indicates
to the contrary, all defined or capitalized terms contained in either the Asset
Purchase Agreement or the Merger Agreement shall have the same meaning in this
Agreement as in either the Asset Purchase Agreement or the Merger Agreement. In
case of any conflict between the Asset Purchase Agreement and the Merger
Agreement, then the terms of the Asset Purchase Agreement will control.
2. INDEMNIFICATION OF THE PARENT AND THE PURCHASER. Subject to the terms
and conditions contained herein, the Sellers and the Shareholder, on a joint and
several basis, agree to indemnify the Parent, the Purchaser and their respective
officers, shareholders, directors and affiliates (the "Purchaser Indemnified
Parties") against, and hold the Purchaser Indemnified Parties harmless from, any
loss, damage or expense (including attorneys' fees) sustained by the Purchaser
Indemnified Parties arising out of or resulting from (A) any inaccuracy or
breach of any of the representations, warranties or covenants made by the
Sellers and the Shareholder either the Asset Purchase Agreement or the Merger
Agreement or (B) any Retained Liabilities (collectively a "Purchaser Indemnified
Loss").
3. INDEMNIFICATION OF THE SELLERS AND THE SHAREHOLDER. Subject to the
terms and conditions contained herein, the Purchaser and the Parent, on a joint
and several basis, agree to indemnify the Sellers and the Shareholder against,
and hold the Sellers and the Shareholder harmless from, any loss, damage or
expense (including reasonable attorneys' fees) sustained by the Sellers arising
out of or resulting from (A) any inaccuracy or breach of any of the
representations, warranties or covenants made by the Purchaser or the Parent in
either the Asset Purchase Agreement or the Merger Agreement, (B) any claims made
pursuant to an Assumed Liability, or (C) any obligations or liability incurred
by OEC or the Purchaser with respect to the Property following the Closing.
4. SURVIVAL. The representations and warranties set forth in the Merger
Agreement and the Asset Purchase Agreement shall survive on the terms set forth
in such document. 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 an
inaccuracy or breach of any representation or warranty shall survive until the
expiration of the period for which claims can be made as to a particular
representation or warranty under either the Merger Agreement or the Asset
Purchase Agreement (the "Representation Expiration Date") and then and
thereafter only with respect to those claims for indemnification for any
inaccuracy or breach of any representation or warrant which are made prior to
the applicable Representation Expiration Date.
5. INDEMNIFICATION PROCEDURES. All claims for indemnification under this
Agreement shall be asserted and resolved as follows:
(A) A Party claiming indemnification under this Agreement (an
"Indemnified Party") shall promptly (i) notify in writing the other Party
(the "Indemnifying Party") of the claim which has given rise to a right of
indemnification under this Agreement, (the "Indemnity Claim") describing in
detail the nature of the claim (the "Claim Notice"). The Indemnifying
Party shall promptly, after receipt of the Claim Notice, at the sole cost
<PAGE>
and expense of the Indemnifying Party, defend the Indemnified Party against
such Indemnity Claim or if the Indemnifying Party denies responsibility it
shall promptly so notify the party claiming indemnification.
(B) The Indemnifying Party shall have full control of such defense
and proceedings, including any compromise or settlement thereof. If
requested by the Indemnifying Party, the Indemnified Party agrees to
cooperate in contesting any Indemnity Claim which the Indemnifying Party
elects to contest and to provide witness and other support at no cost,
other than reimbursement for travel and lodging. The Indemnified Party may
participate in, but not control, any defense or settlement of any Third
Party Claim controlled by the Indemnifying Party pursuant to this Section
5(B).
(C) If the Indemnifying Party wrongfully fails to diligently defend
the Indemnity Claim, then the Indemnified Party shall have the right to
assume the defense of such Indemnity Claim at the sole cost and expense of
the Indemnifying Party.
6. LIMITATIONS.
(A) Neither the Sellers, the Purchaser, the Parent nor the
Shareholder shall be entitled to indemnification hereunder with respect to
any loss, damage or expense (including reasonable attorneys' fees) unless
the aggregate amount of all such losses, damages or expenses (including
reasonable attorneys' fees) exceeds $300,000 (the "Basket Amount"),
whereupon the Purchaser and the Parent, on the one hand, and the Sellers
and the Shareholder on the other hand, shall be entitled to indemnification
for all damages incurred, including the Basket Amount; provided, however,
said Basket Amount shall not apply to the Purchaser's obligation to pay and
discharge the Assumed Liabilities as set forth in the Asset Purchase
Agreement.
(B) In no event shall either the Sellers or the Shareholder on one
hand or the Parent and Purchaser on the other hand be required to indemnify
any other Party hereunder in an amount which, individually or in the
aggregate, exceeds $14,400,000.
(C) In no event shall any Seller, or any shareholder or member of
either Seller or OEC (other than the Shareholder) be liable to the
Purchaser or the Parent under this Agreement for more that the amount of
proceeds actually received by such Seller or member or shareholder from or
due to the transactions contemplated by the Asset Purchase Agreement and
the Merger Agreement.
(D) SOLE REMEDY. The provisions of this Agreement represent the sole
remedy available to any Party hereto for a misstatement or omission from
any representation, or a breach of any warranty or covenant or agreement
contained in the Asset Purchase Agreement, the Merger Agreement or any
other document delivered in connection with the consummation of the
transactions contemplated by the Asset Purchase Agreement or the Merger
Agreement (the "Transaction Documents"), and each Party hereby
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unconditionally waives any other rights that they may have at law or in
equity for a misstatement or omission from any representation, or a breach
of any warranty or covenant or agreement contained in the Asset Purchase
Agreement, the Merger Agreement or any of the Transaction Documents.
7. USE OF PARENT COMMON STOCK. In the event the Sellers or the
Shareholder are the Indemnifying Parties, then such Parties may satisfy their
obligations under this Agreement by surrendering to the Parent and the Purchaser
shares of Parent Common Stock received in the Merger and receive credit for such
shares of Parent Common Stock in an amount equal to the higher of (a) $1.90 per
share for each share of Parent Common Stock so surrendered or (b) the average
closing price for thirty (30) trading days for the Parent Common Stock for the
period prior to such payment.
8. 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 Purchaser:
Equity Compression Services Corporation
Twenty East Fifth Street, Suite 150
Tulsa, OK 74103
Attention: President
With copies to:
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
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With a copy to:
Mayor, Day, Caldwell & Keeton, LLP
700 Louisiana, Suite 1900
Houston, TX 77002
Attention: Ed Rodgers
9. EXCLUSIVE AGREEMENT. This Agreement, together with the Asset Purchase
Agreement, the Merger Agreement, the Confidentiality Agreement and the
Transaction Documents 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 among the Parties.
10. 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.
11. 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 no such assignment shall relieve the assigning
party of liability hereunder. 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.
12. 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.
13. 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.
14. WAIVER. No provision of this Agreement may be amended, modified,
waived, or discharged unless such amendment, waiver, modification, or discharge
is agreed to in writing by Individual and either the president of Company or
another duly authorized officer of Company. No waiver by a party of any breach
by the other party of, or of any compliance by
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the other party with, any condition or provision of this Agreement shall be
deemed a waiver of similar or dissimilar conditions or provisions at the same
time or at any prior or subsequent time.
15. GOVERNING LAW. This Agreement shall be governed by the laws of the
State of Texas.
16. 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.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
PARENT
EQUITY COMPRESSION SERVICES CORPORATION
By: /s/ MATTHEW S. RAMSEY
---------------------------------------
Title: PRESIDENT & CHIEF EXECUTIVE OFFICER
-----------------------------------
PURCHASER
OEC ACQUISITION CORPORATION
By: /s/ MATTHEW S. RAMSEY
--------------------------------------
Title: PRESIDENT
------------------------------------
SELLERS
OUACHITA ENERGY PARTNERS, LTD.
By: /s/ ANDY C. PAYNE
--------------------------------------
Title: EXECUTIVE VICE PRESIDENT
------------------------------------
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OUACHITA COMPRESSION GROUP, LLC.
By: /s/ ANDY C. PAYNE
--------------------------------------
Title: CHIEF FINANCIAL OFFICER
-----------------------------------
SHAREHOLDER:
/s/ DENNIS W. ESTIS
-----------------------------------------
Dennis W. Estis
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