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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): December 19, 1996
EQUITY COMPRESSION SERVICES CORPORATION
(Exact name of Registrant as specified in its charter)
Oklahoma 0-18205 73-1345732
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(State or other (Commission File (I.R.S. Employer
jurisdiction of Number) Identification No.)
incorporation)
20 East 5th Street
Suite 1500
Tulsa, Oklahoma 74103
(918) 587-5815
(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)
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ITEM 1. CHANGES IN CONTROL OF REGISTRANT.
On December 19, 1996, the Registrant consummated the sale of 8,000,000
shares of its common stock, par value $.01 per share (the "Common Stock"), and
warrants which, upon satisfying certain vesting requirements, entitle the holder
to purchase up to an additional 8,000,000 shares of Common Stock at a price of
$.91 per share (the "Warrants"). The sales of the Common Stock and Warrants
were made pursuant to the terms and conditions of the Stock Purchase Agreement
dated October 16, 1996, between the Registrant and HACL, Ltd., a Texas limited
partnership ("HACL"). All of the Warrants and 3,863,636 of the shares of Common
Stock were issued to HACL and 4,136,364 shares of Common Stock were issued to
HACL's designee, Energy Investors Joint Venture ("Energy Investors"), a Texas
joint venture of which HACL is the managing joint venture partner, for aggregate
consideration of $4,400,000 in cash. Capital contributions from the partners
and venturers of the purchasers were used to purchase the Common Stock and
Warrants. As a result of the purchase of the Common Stock and Warrants, HACL
and Energy Investors together own approximately 38% of the Registrant's
outstanding shares of Common Stock based on the number of shares outstanding as
of November 4, 1996. Should the Warrants vest and be exercised in full, HACL
and Energy Investors would own in the aggregate up to approximately 55.1% of the
Registrant's outstanding shares of Common Stock based on the number of shares
outstanding as of November 4, 1996.
The general partner of HACL is Six-Dawaco, Inc., a Texas corporation, whose
directors and executive officers are Ray C. Davis and Kelcy L. Warren.
Pursuant to the Stock Purchase Agreement, HACL was granted the right to
designate up to eight directors of the Registrant upon consummation of the
transaction. Following such consummation, John B. Hawkins, Donald C. Nejedly
and David J. Parsons resigned as directors of the Registrant, and HACL's
designees, Ray C. Davis, Kelcy L. Warren, Matthew S. Ramsey, Richard D. Brannon
and Jon P. Stevenson (each of whom is a limited partner of HACL), were elected
to serve as directors. Under the terms of the Stock Purchase Agreement, the
Registrant has agreed to hereafter include among its nominees for the Board of
Directors a sufficient number of persons designated by HACL such that the
percentage of directors proposed to be composed of HACL's designees is
approximately proportionately equal to HACL's percentage ownership of the
Registrant's total outstanding shares of Common Stock.
Information about the new directors required by Rule 14f-1 under the
Securities Exchange Act of 1934, as amended, was included in the Registrant's
Proxy Statement distributed to its stockholders in connection with the
solicitation of proxies for the Special Meeting of Stockholders held on December
19, 1996.
At a meeting of the Registrant's Board of Directors held immediately
following the consummation of the sales of the Common Stock and Warrants,
Richard D. Brannon was elected Chairman of the Board of Directors, Matthew S.
Ramsey was elected Chief Executive Officer and Jack D. Brannon (the brother of
Richard D. Brannon) was elected Chief Financial Officer of the Registrant.
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ITEM 5. OTHER EVENTS.
On December 19, 1996, the Registrant effected the change of its corporate
name from "Hawkins Energy Corporation" to "Equity Compression Services
Corporation."
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits
Exhibit No. Description
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2.1 Stock Purchase Agreement dated October 16, 1996,
between the Registrant and HACL, Ltd.
4.1 Warrant dated December 19, 1996.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
EQUITY COMPRESSION SERVICES CORPORATION
January 3, 1997 By: /s/ Thomas F. Ostrye
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Thomas F. Ostrye
President
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EXHIBIT INDEX
Exhibit No. Description
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2.1 Stock Purchase Agreement dated October 16, 1996,
between the Registrant and HACL, Ltd.
4.1 Warrant dated December 19, 1996.
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EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
BY AND BETWEEN
HAWKINS ENERGY CORPORATION,
AN OKLAHOMA CORPORATION,
AND
HACL, LTD.,
A TEXAS LIMITED PARTNERSHIP
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TABLE OF CONTENTS
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Page No.
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1. Purchase and Sale of the Shares; Due Diligence; etc.............. -1-
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(a) Purchase.................................................. -1-
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(b) The Closing............................................... -1-
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(c) Due Diligence............................................. -2-
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2. Representations and Warranties of the Company.................... -2-
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(a) Due Organization and Qualification........................ -2-
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(b) Subsidiaries.............................................. -2-
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(c) Authorization............................................. -3-
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(d) Capital Stock............................................. -3-
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(e) Issuance.................................................. -4-
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(f) SEC Reports............................................... -4-
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(g) Absence of Certain Changes................................ -5-
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(h) Litigation................................................ -5-
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(i) Consents.................................................. -6-
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(j) Compliance with Laws...................................... -6-
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(k) Contracts, Agreements, Plans and Commitments.............. -6-
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(l) Employee Benefit Matters.................................. -7-
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(m) Environmental Compliance.................................. -8-
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(n) Condition of Property..................................... -9-
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3. Representations and Warranties of the Purchaser.................. -10-
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(a) Due Organization.......................................... -10-
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(b) Authorization............................................. -10-
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(c) Purchase for Investment................................... -10-
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4. Conditions to the Obligations of the Company..................... -11-
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(a) Representations and Warranties True....................... -11-
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(b) Performance............................................... -11-
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(c) Injunctions............................................... -11-
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(d) Legal Opinion............................................. -11-
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(e) Officer's Certificate..................................... -11-
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5. Conditions to the Obligations of the Purchaser................... -12-
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(a) Representations and Warranties True....................... -12-
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(b) Performance............................................... -12-
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(c) Injunctions............................................... -12-
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(d) Legal Opinion............................................. -12-
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(e) Officer's Certificate..................................... -12-
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(f) Shareholder Approval...................................... -12-
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(g) Information Statement..................................... -12-
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6. Covenants of the Company......................................... -12-
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(a) Interim Operations of the Company......................... -12-
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(b) Access.................................................... -14-
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(c) Notification of Certain Matters........................... -14-
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(d) Publicity................................................. -14-
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(e) Board Representation...................................... -15-
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(f) Listing on Securities Exchanges........................... -15-
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(g) Acquisition of Voting Securities.......................... -15-
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7. Covenants of the Purchaser....................................... -15-
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(a) Efforts to Obtain Compressor Leases and Oil and Gas
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Properties
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(b) Confidentiality........................................... -16-
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(c) Cooperation............................................... -16-
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8. Registration Rights.............................................. -16-
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(a) Right to Request Registration............................. -16-
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(b) Other Registrations....................................... -16-
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(c) Terms and Conditions...................................... -17-
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(d) Underwriting.............................................. -18-
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9. Termination; Effect of Termination............................... -18-
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(a) Termination............................................... -18-
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(b) Effects of Termination.................................... -19-
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10. Miscellaneous.................................................... -19-
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(a) Remedies.................................................. -19-
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(b) Survival of Representations, Warrants and
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Covenants
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(c) Successors and Assigns.................................... -20-
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(d) Notices................................................... -20-
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(e) Waiver.................................................... -21-
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(f) Governing Law............................................. -21-
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(g) Entire Agreement.......................................... -21-
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(h) Expenses.................................................. -21-
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(i) Captions.................................................. -21-
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(j) Counterparts.............................................. -21-
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STOCK PURCHASE AGREEMENT
------------------------
This STOCK PURCHASE AGREEMENT (this "Agreement") is dated as of October 16,
1996, and is by and between HAWKINS ENERGY CORPORATION, an Oklahoma corporation
(the "Company") and HACL, LTD., a Texas limited partnership or its assigns (the
"Purchaser"). The Company and the Purchaser are collectively referred to herein
as the "Parties" and individually as a "Party".
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Company wishes to sell to the Purchaser, and the Purchaser
wishes to purchase from the Company, 8,000,000 shares (the "Shares") of common
stock, $0.01 par value per share ("Common Stock"), and warrants (the "Warrants")
which, upon exercise, will entitle the holder to purchase 8,000,000 shares of
Common Stock pursuant to the form of Warrant attached hereto as Exhibit A and
incorporated herein by reference of the Company for an aggregate cash purchase
price of $4,400,000, plus the additional consideration described herein upon the
terms and subject to the conditions set forth below; and
NOW, THEREFORE, for and in consideration of the mutual covenants and
promises set forth herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Parties, intending
to be legally bound, hereby contract and agree as follows:
1. Purchase and Sale of the Shares; Due Diligence; etc.
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(a) Purchase. On the terms and subject to the conditions contained herein,
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at the closing (the "Closing") referred to in Section 1(b) hereof, the Company
will issue and deliver to the Purchaser a certificate registered in the name of
the Purchaser evidencing the Shares, and the Purchaser will pay to the Company,
in full payment of the purchase price for the Shares, the aggregate sum of
$4,400,000 in cash (the "Purchase Price"). Payment of the Purchase Price shall
be made by wire transfer of immediately available funds to the order of the
Company and/or by physical delivery of a cashier's check.
(b) The Closing. The Closing shall occur at the offices of the Company, or
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at such location as the Parties may mutually agree, at 10:00 A.M. local time, on
the later to occur of (i) December 16, 1996 or (ii) the fifth business day after
all conditions to the Purchaser's obligations to close as set forth in this
Agreement have been satisfied on such other date and at such other time as the
Parties may agree (the "Closing Date"). In addition at the Closing, the Company
will issue to the Purchaser or its Designee(s) the Warrants and each Party will
also deliver such
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certificates, opinions, documents and instruments as may be necessary to
consummated the transactions contemplated hereby.
(c) Due Diligence. The Parties agree that the obligation of the Purchaser
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to the close the transaction evidenced by this Agreement is subject to Purchaser
satisfactorily completing its due diligence on or before October 30, 1996 (the
"Due Diligence Expiration Date"). If, after the Due Diligence Expiration Date,
Purchaser elects not to close, it may cancel this Agreement by mailing or
otherwise sending to the Company within one business day after the Due Diligence
Expiration Date, written notice of its intent to terminate this Agreement
("Termination Notice"). Upon mailing or otherwise sending to the Company the
Termination Notice, the Purchaser shall be deemed released from all of its
obligations, liabilities, and duties under this Agreement and this Agreement
shall be considered to be terminated and of no further force or effect as of
such date.
2. Representations and Warranties of the Company. The Company hereby
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represents and warrants to the Purchaser as follows:
(a) Due Organization and Qualification. The Company is a corporation duly
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organized, validly existing and in good standing under the laws of the State of
Oklahoma, with corporate power to own its properties and to conduct its business
as now conducted. The Company is duly qualified as a foreign corporation to do
business, and is in good standing, in each jurisdiction where the character of
its properties owned or held under lease or the nature of its activities makes
such qualification necessary, except where the failure to so qualify will not
have a material adverse effect on the Company and its subsidiaries taken as a
whole.
(b) Subsidiaries. For the purposes of this Agreement, the term
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"Subsidiary" means any entity of which securities or other ownership interests
are owned directly or indirectly by the Company. Equity Compressors, Inc., an
Oklahoma corporation, is the sole Subsidiary of the Company (the "Subsidiary").
The Subsidiary is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has the
requisite corporate power and authority to carry on its business as it is now
being conducted. The Subsidiary is duly qualified to do business and in good
standing as a foreign corporation in each jurisdiction where the properties
owned, leased or operated, or the business conducted by it require such
qualification except where the failure to be so qualified or in good standing
would not have a material adverse effect on the Company and its Subsidiaries
taken as a whole. All the outstanding shares of capital stock of the Subsidiary
have been duly authorized and validly issued and are fully paid, nonassessable,
and were not issued in violation of the preemptive rights of any person. All of
the shares of capital stock of the Subsidiary are owned, directly or indirectly,
by the Company and there are no outstanding
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subscriptions, options, warrants, rights, convertible securities or other
agreements or commitments of any character relating to the issued or unissued
capital stock or other securities of the Subsidiary obligating the Subsidiary to
issue any securities. There are no stockholders' agreements, option agreements,
voting agreements, agreements covering the purchase or sale of securities or
other agreements to which the Company or the Subsidiary is a party, or by which
the Company or the Subsidiary is bound, which cover or relate to the capital
stock or other securities of the Subsidiary.
(c) Authorization. The Company has the requisite corporate power to enter
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into this Agreement and to carry out its obligations hereunder. This Agreement
has been duly authorized, executed and delivered by the Company and constitutes
a valid and binding agreement of the Company enforceable in accordance with its
terms. Other than the approval of the stockholders of the Company as to the
amendment of the Company's certificate of incorporation to increase the number
of authorized but unissued shares of Common Stock and the consent of the
Company's lenders, neither the execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby, nor compliance with the
terms, conditions hereof will create a breach or violation of any of the terms,
conditions or provisions of the Company's charter or bylaws or of any material
agreement or instrument to which the Company or any Subsidiary is a party or by
which the Company, any Subsidiary or any of their respective material properties
may be bound, or constitute a default or create a right of termination or
acceleration thereunder, or result in the creation of imposition of any
securities interest, mortgage, lien, charge or encumbrance of any nature
whatsoever upon the Company, any Subsidiary or any of their respective material
properties or assets. Other than the approval of an amendment of the Company's
Certificate of Incorporation to increase the number of authorized but unissued
shares of Common Stock, there is no requirement under Oklahoma corporate law or
the rules of the NASDAQ small cap market that require the vote or approval of
the shareholders of the Company as to any of the transactions contemplated by
this Agreement.
(d) Capital Stock. The authorized capital stock of the Company consists of
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(i) 20,000,000 shares of Common Stock, of which at September 30, 1996,
13,040,816 shares were validly issued and outstanding, fully paid, nonassessable
and not entitled to any preemptive rights, and 9,000 shares were held in
treasury, and (ii) 1,000,000 shares of preferred stock $1.00 par value per share
of which at September 30, 1996, no shares of preferred stock were issued or
outstanding, and no shares were held in treasury. In addition, at September 30,
1996, an aggregate of approximately 1,290,000 shares of Common Stock (including
authorized but unissued shares) were reserved for issuance pursuant to presently
existing options and future options under currently existing stock option plans
described on Schedule 2(d) attached hereto. Except as set
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<PAGE>
forth above, there are no other shares of capital stock of the Company
authorized, issued, or outstanding and there are no outstanding subscriptions,
options, warrants, rights, convertible securities, or any other agreements or
commitments of any character relating to the issued or unissued capital stock or
other securities of the Company or the Subsidiary obligating the Company or the
Subsidiary to issue, deliver, or sell, or cause to be issued, delivered or sold,
additional shares of capital stock of the Company or the Subsidiary or
obligating the Company or the Subsidiary to grant, extend, or enter into any
subscription, option, warrant, right, convertible security or other similar
agreement or commitment. There are no outstanding obligations of the Company or
any Subsidiary to repurchase, redeem or otherwise acquire any securities of the
Company or any Subsidiary. Except as disclosed on Schedule 2(d), neither the
Company nor the Subsidiary has any obligation to issue, transfer, contribute, or
sell any shares of capital stock or other securities of the Company or the
Subsidiary pursuant to any employee benefit plan as defined in Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or
any employment, severance, or other similar contract, arrangement or policy or
any plan or arrangement providing for insurance coverage, workers' compensation,
disability benefits, supplemental unemployment benefits, vacation benefits,
retirement benefits or for deferred compensation, profit sharing, bonuses, stock
options, stock appreciation, or other forms of compensation or benefits
(including post-retirement insurance, compensation, or benefits) which, in each
case, (i) is maintained, administered, or contributed to by the Company or any
of its affiliates, and (ii) covers any employee or former employee of the
Company or any of its affiliates or under which the Company or any of its
affiliates has any liability, or otherwise.
(e) Issuance. The Shares, when sold and delivered by the Company to the
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Purchaser pursuant to this Agreement, will be duly authorized, validly issued,
fully paid and nonassessable shares of Common Stock, free and clear of any
security interest, lien, charge or encumbrance whatsoever. The shares of Common
Stock, when issued to the Purchaser or its designee(s) pursuant to the exercise
of the Warrants, will be duly authorized, validly issued, fully paid and
nonassessable shares of Common Stock, free and clear of any security interest,
lien, charge or encumbrance whatsoever No Stockholder or other approval is
required for the valid issuance of the Shares or the Warrants to the Purchaser
pursuant to this Agreement.
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(f) SEC Reports. The Company has filed all forms, reports, schedules,
-----------
statements and registration statements required to be filed by it with the
Securities and Exchange Commission (the "Commission") since January 1, 1991
(collectively, the "SEC Reports"). As of their respective dates, the SEC
Reports did not contain any untrue statement of a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, except for any
statement or omission in any SEC Report which was corrected in a later SEC
Report. The financial statements of the Company included in the SEC Reports
were prepared in accordance with generally accepted accounting principles
applied on a consistent basis, present fairly in accordance with generally
accepted accounting principles the consolidated financial position, results of
operations and changes in financial position of the company and its consolidated
subsidiaries as of the dates and for the periods indicated and conform in all
material respects to all applicable requirements under the Securities Exchange
Act of 1934 ("Exchange Act"). Except as reflected in the SEC Reports, the
Company as of the date of such SEC Reports has no material liabilities,
obligations, or claims of any nature (whether absolute, accrued, contingent or
otherwise and whether due or to become due), including, without limitation, any
tax liabilities or under funded pension plans, and the Company does not have any
knowledge of any basis for the existence of or the assertion against the Company
of any such liability, obligation or claim as of such date.
(g) Absence of Certain Changes. Except as disclosed in the SEC Reports,
--------------------------
since December 31, 1995, the Company and the Subsidiary have conducted their
respective businesses in the ordinary and usual course in all material respects
taking the Company and the Subsidiary as a whole, and there has not been any
material adverse change in the financial condition, properties, business,
results of operations or prospectus of the Company and the Subsidiary taken as a
whole. The Company has not paid any cash dividends with respect to its Common
Stock and no dividend on the Common Stock has been declared which remains
unpaid.
(h) Litigation. Except as disclosed in the SEC Reports, there is no claim,
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suit, action or proceeding pending or, to the knowledge of the Company,
threatened against or affecting the Company or the Subsidiary which can
reasonably be expected to affect materially and adversely the business,
properties, financial condition or prospects of the Company and the Subsidiary
taken as whole. There is no outstanding order, writ, injunction or decree or,
to the knowledge of the Company, any claim or investigation of any court,
governmental agency or arbitration tribunal materially and adversely affecting
or which can reasonably be expected to materially and adversely affect the
Company, the Subsidiary, or
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<PAGE>
their respective properties, assets or business, franchises, licenses or permits
under which they operate.
(i) Consents. Except (i) for filings to be made pursuant to Regulation D
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promulgated by the Commission under the Securities Act of 1933, as amended, (ii)
for compliance with the requirements of any applicable blue sky laws, and (iii)
as otherwise provided in this Agreement, no governmental or other consent,
approval, hearing, filing, registration or other action, including the passage
of time, is necessary for the execution and delivery of this Agreement or
consummation of the transactions contemplated hereby to occur without material
detriment to the Company and its Subsidiaries.
(j) Compliance with Laws. The Company and each Subsidiary has complied
--------------------
with and is currently complying with all applicable federal, state and local
laws, rules, ordinances and regulations, the noncompliance with which would have
a material adverse effect on the Company and its Subsidiaries taken as a whole.
(k) Contracts, Agreements, Plans and Commitments. Schedule 2(k) attached
--------------------------------------------
hereto sets forth a list of all material written and oral agreements, if any,
contracts, agreements, plans and commitments, including all amendments,
modifications and supplements thereto, to which the Company or the Subsidiary is
a party or by which the Company, the Subsidiary or any of their assets or
properties are bound as of the date hereof (the "Contracts"). For the purposes
of this Section 2(k), a contract shall be considered material if such contract
or any series of similar contracts involving the same subject matter involves
$50,000 or more in services to be rendered or obligations during any twelve
month period. The Company and the Subsidiary have each complied with the
provisions of all Contracts and no default or event of default exists under any
of such agreements and such agreements constitute valid and legally binding
obligations of the Company and the Subsidiary and, to best knowledge of the
Company, of each other Person that is a party thereto enforceable against each
party in accordance with their terms. To the best of the Company's knowledge,
the Contracts together with any other written or oral agreements, contracts,
plans and commitments that the Company may have in place (whether or not listed
on Schedule 2(k)) comprise all of the contracts, agreements, plans and
commitments required in order to conduct the business of the Company and the
Subsidiary as it has been and is now being conducted. The issuance of the
Shares and the Warrants at the Closing will not (a) adversely affect the force
and effect of any of the Contracts, (b) constitute a breach or default (or a
condition but for the expiration of time or the giving of notice would
constitute a breach or default) under the Contracts or (c) give any party a
right of first refusal or option to acquire any asset of the Company or the
Subsidiary.
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<PAGE>
(l) Employee Benefit Matters.
------------------------
(i) Schedule 2(l) attached hereto sets forth each "employee
benefit plan" (within the meaning of Section 3(3) of ERISA), stock
purchase plan, stock option plan, fringe benefit plan, bonus plan and
any other deferred compensation agreement or plan or funding
arrangement sponsored, maintained or to which contributions are made
(a "Plan") by the Company, any Subsidiary, or any of their affiliates
or any other organization which is a member of a controlled group of
organizations (within the meaning of Sections 414(b), (c), (m) or (o)
of the Internal Revenue Code of 1986, as amended (the "Code") of which
the Company or any of the Subsidiaries is a member (the "Controlled
Group").
(ii) The Company has delivered to the Purchaser current, accurate
and complete copies of each Plan (including all trust agreements,
funding vehicles and other instruments relating thereto) and, to the
extent applicable, copies of the most recent (a) Internal Revenue
Service determination letter and any outstanding request for a
determination letter for each Plan; (b) Form 5500; (c) attorneys'
response to an auditor's request for information for any Plan; and (d)
any ruling letter and any outstanding request for a ruling letter with
respect to the tax-exempt status of any voluntary employees'
beneficiary association ("VEBA") which is implementing any Plan.
(iii) With respect to each Plan: (a) each Plan which is an
"employee pension benefit plan" (as such term is defined in ERISA
Section 3(2)) has received a favorable determination letter as to its
qualification under the Code; (b) each VEBA which is intended to
implement any Plan has received a favorable ruling or determination
letters to its tax-exempt status; (c) all forms, documents and other
materials have been filed with the Securities and Exchange Commission
or otherwise distributed as required by the Securities Act of 1933 or
the Exchange Act or any regulation or rule promulgated thereunder; and
(d) there are no leased employees (as such term is defined in Code
Section 414(n)) that must be taken into account with respect to the
requirements set forth under Code Section 414(n)(3).
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<PAGE>
(iv) Neither the Company nor the Subsidiary presently maintains, or
within the last 60 months has maintained any (a) "multiemployer plan"
(within the meaning of Section 3(37) of ERISA), or (b) defined benefit
plan.
(v) With respect to any Plan which is an employee welfare benefit
plan (within the meaning of ERISA Section 3(1)): (a) each and every
Plan which is a group health plan (as such term is defined in Code
Section 5000(b) complies in all material respects with the applicable
requirements of Code Section 4980B; and (b) each Plan (including any
Plan covering former employees of the Company) may be amended or
terminated by the Company, any Subsidiary or the Purchaser on or at
any time after the Closing Date.
(vi) Neither the Company nor the Subsidiary maintains any post-
retirement health and life insurance plans for employees and retirees.
(m) Environmental Compliance. For purposes of this Agreement,
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"Environmental Laws" shall mean laws, including without limitation,
federal, state or local laws, ordinances, rules, regulations,
interpretations and orders of courts or governmental agencies or
authorities relating to pollution or protection of the environment
(including, without limitation, ambient air, surface water, groundwater,
land surface, and subsurface strata), including without limitation, the
Comprehensive Environmental Response Compensation and Liability Act of
1980, the Superfund Amendments and Reauthorization Act of 1987, the
Resource Conservation and Recover Act of 1976, the Hazardous and Solid
Waste Amendment of 1984, and the Hazardous Materials Transportation Act,
and any other laws relating to pollution or protection of the environment,
or to the manufacture, processing, distribution, use, treatment, handling,
storage, disposal or transportation or Hazardous Substances (hereafter
defined). Except as set forth on Schedule 2(m) attached hereto:
(1) The Company and the Subsidiary are in compliance in all
material respects with all applicable Environmental Laws and has
obtained and is in compliance with all permits, licenses and other
authorizations required under any Environmental Law. There is no past
or present event, condition or circumstance that is likely to
interfere with the conduct of the business of the Company or any
Subsidiary in the manner now conducted or which would interfere in any
material respect with the Company's or any Subsidiary's compliance
with Environmental Laws or constitute a violation thereof.
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<PAGE>
(2) Neither the Company nor the Subsidiary has leased, operated
or owned any facilities or real property with respect to which the
Company or such Subsidiary is subject to any actual or, to the
knowledge of the Company, after due inquiry, potential action, claim,
investigation, review or other proceeding before any governmental,
judicial or regulatory body, under any Environmental Law.
(3) Neither the Company nor any Subsidiary has sent hazardous
substances as defined in the Environmental Laws ("Hazardous
Substances") to any offsite commercial waste management facilities for
reuse, recycling, reclamation, treatment, storage or disposal.
(4) Neither the Company nor the Subsidiary is subject to any
actual, or, to the knowledge of the Company, after due inquiry,
potential proceeding under any Environmental Law with respect to any
such facility presently or previously used by the Company, the
Subsidiary or their predecessors.
(5) There are no Hazardous Substances in any inactive, closed or
abandoned storage or disposal areas or facilities on property
currently or in the past leased, operated or owned by the Company, any
Subsidiary or their predecessors.
(6) No property currently, or in the past, leased operated or
owned by the Company, any Subsidiary or their predecessors, is
subject to actual or, to the knowledge of the Company, after due
inquiry, potential investigation by federal, state or local officials
or private litigation as a result of any previous onsite management,
treatment, storage or disposal of Polluting Substances.
(7) There are no underground storage tanks located on any
property owned or leased by the Company or the Subsidiary. All above
ground storage tanks owned or lease by the Company or the Subsidiary
are in material compliance with all applicable Environmental Laws.
The Company have or will provide the Purchaser with copies of all
permits or licenses pertaining to such above ground storage tanks.
(n) Condition of Property. The Company's compressors and other
---------------------
personal property have been maintained in accordance with industry
standards and are sufficient for the Company's operations as currently
conducted.
-9-
<PAGE>
3. Representations and Warranties of the Purchaser. The Purchaser
-----------------------------------------------
hereby represents and warrants to the Company as follows:
(a) Due Organization. The Purchaser is a limited partnership duly
----------------
formed and validly existing under the laws of the State of Texas with power to
own its properties and to conduct its business as now conducted.
(b) Authorization. The Purchaser has duly authorized, executed and
-------------
delivered this Agreement and this Agreement is a valid and binding agreement of
the Purchaser enforceable in accordance with its terms.
(c) Purchase for Investment. The Purchaser is purchasing the
-----------------------
Shares for its own account and not with a view to or for sale in connection with
any public distribution thereof within the meaning of the Securities Act, and
any sale, transfer or other disposition of the Shares by the Purchaser will be
made in compliance with all applicable provisions of the Securities Act and the
rules and regulations promulgated thereunder. The Purchaser agrees:
(i) to the placement on the certificate representing the Shares
to be purchased by the Purchaser pursuant to this Agreement of the
following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, THE
TEXAS SECURITIES ACT OR THE OKLAHOMA SECURITIES ACT. NEITHER THE
RECORD NOR THE BENEFICIAL OWNERSHIP OF SAID SHARES MAY BE SOLD OR
TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
FOR SAID SHARES UNDER SAID ACTS AND ANY OTHER APPLICABLE STATE
SECURITIES LAWS OR RULES UNLESS, IN THE OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY, EXEMPTIONS FROM THE REGISTRATION
REQUIREMENTS OF SAID ACTS ARE AVAILABLE WITH RESPECT TO SUCH SALE
OR TRANSFER AND SAID SALE OR TRANSFER IS MADE PURSUANT TO AND IN
STRICT COMPLIANCE WITH THE TERMS AND CONDITIONS OF SAID
EXEMPTIONS."
and to abide by the requirements and restrictions contained in the
foregoing legend.
(ii) to the entry of stop transfer orders with the transfer agent
(or agents) and the registrar (or registrars) of the Company against the
transfer other than in compliance with the requirements of this Agreement
of legended securities of which the Purchaser from time to time is the
Beneficial Owner.
-10-
<PAGE>
(d) Each of the partners of the Purchaser or its designee or its
assigns is an accredited investor, as that term is defined in Regulation D, is
an experienced and sophisticated investor knowledgeable about investments such
as the Common Stock and the Warrants and is capable of evaluating the merits and
risks of the investment contemplated hereby and has the financial means to bear
the financial risks of this investment, including the potential loss of all of
such investment and has acquired his or her interest in the Purchaser or its
designee for investment purposes only and not with a view to distribution
thereof.
(e) Purchaser has been provided with copies of the Company's annual
report on Form 10-KSB for the year ended December 31, 1995, quarterly reports on
Form 10-QSB for the fiscal quarters ended on March 31, 1996 and June 30, 1996,
and the proxy statement submitted to the shareholders of the Company in
connection with its annual meeting of shareholders held May 29, 1996. Any
additional information requested by Purchaser has been provided by the Company.
4. Conditions to the Obligations of the Company. The obligations
--------------------------------------------
of the Company under this Agreement are subject to the fulfillment at the
Closing referred to in Section 1(b) hereof of each of the following conditions:
(a) Representations and Warranties True. The representations and
-----------------------------------
warranties in this Agreement made by the Purchaser shall have been true in all
material respects when made, and shall be true in all material respects on the
Closing Date as though such representations and warranties were made at such
date.
(b) Performance. The Purchaser shall have performed and complied in
-----------
all material respects with all agreements, covenants, obligations and conditions
required by this Agreement to be performed or complied with by them prior to the
closing.
(c) Injunctions. No preliminary or permanent injunction or other
-----------
final order by any United States Federal or state court shall have been issued
which prevents the purchase or sale of the shares pursuant hereto.
(d) Legal Opinion. The Company shall have received an opinion of
-------------
Schlanger, Mills, Mayer & Grossberg, LLP dated the Closing Date, as to the
matters referred to in Sections 3(a) and (b).
(e) Officer's Certificate. The Company shall have delivered a
---------------------
certificate of an officer of the Purchaser, dated the Closing Date, certifying
as to the matters referred to in Sections 4(a) and (b).
-11-
<PAGE>
5. Conditions to the Obligations of the Purchaser. The obligations
----------------------------------------------
of the Purchaser under this Agreement are subject to the fulfillment at the
Closing referred to in Section 1(b) hereof of each of the following conditions:
(a) Representations and Warranties True. The representations and
-----------------------------------
warranties in this Agreement made by the Company shall have been true in all
material respects when made, and shall be true in all material respects on the
Closing Date as though such representations and warranties were made at such
date.
(b) Performance. The Company shall have performed and complied in all
-----------
material respects with all agreements, covenants, obligations and conditions
required by this Agreement to be performed or complied with by them.
(c) Injunctions. No preliminary or permanent injunction or other
-----------
final order by any United States Federal or state court shall have been issued
which prevents the purchase or sale of the shares pursuant hereto.
(d) Legal Opinion. The Purchaser shall have received an opinion of
-------------
Conner & Winters, A Professional Corporation, dated the Closing Date, as to the
legal matters referred to in Sections 2(a), (b), (c) and (d).
(e) Officer's Certificate. The Purchaser shall have delivered a
---------------------
certificate of an executive officer of the Company, dated the Closing Date,
certifying as to the matters referred to in Sections 5(a) and (b).
(f) Shareholder Approval. The Shareholders of the Company shall have
--------------------
approved the amendment of the Company's Certificate of Incorporation to increase
the number of authorized but unissued shares of Common Stock to 40,000,000;
(g) Information Statement. The Company will have provided to the
---------------------
Shareholders of the Company an information statement in compliance with Section
14(f) of the Exchange Act.
6. Covenants of the Company. The Company covenants and agrees
------------------------
with the Purchaser as follows:
(a) Interim Operations of the Company. The Company
---------------------------------
covenants and agrees that, prior to the Closing Date (unless the Purchaser shall
otherwise agree in writing and except as otherwise contemplated by this
Agreement), except as contemplated by this Agreement:
(i) the business of the Company and its Subsidiaries shall be
conducted in all material respects only in the ordinary and usual course
and each of the Company and
-12-
<PAGE>
its Subsidiaries shall use its best efforts to preserve its business
organization intact and maintain its existing relations with customers,
governmental agencies, suppliers, employees, distributors and business
associates in all material respects;
(ii) the Company shall not (a) sell or pledge or agree to sell or
pledge any stock or other ownership interest owned by it in any of its
Subsidiaries (other than in connection with the exercise of currently
outstanding stock options); (b) amend its Certificate of Incorporation or
Bylaws; (c) split, combine or reclassify the outstanding shares of its
voting securities; (d) declare, set aside or pay any dividend payable in
cash, stock or property with respect to the Common Stock or the Preferred
Stock or (e) increase the number of members of the Board of Directors of
the Company;
(iii) neither the Company nor any of its Subsidiaries shall (a)
issue, sell, pledge, dispose of or encumber any additional shares of, or
securities convertible or exchangeable for, or options, warrants, calls,
commits or rights of any kind to acquire any securities or ownership
interest in another Person, including any share of its capital stock or
other ownership interest of any class of the Company or its Subsidiaries or
any other property or assets; (b) transfer, lease, license, sell, mortgage,
pledge, dispose of or encumber any assets material to the Company and its
Subsidiaries taken as a whole, or incur or modify any indebtedness or other
liability material to the Company and its Subsidiaries taken as a whole,
except in the ordinary course of its business; (c) acquire directly or
indirectly by redemption or otherwise any shares of the capital stock of
the Company of any class; or (d) authorize capital expenditures in excess
of $100,000 in the aggregate, except in the ordinary course of business, or
make any acquisition of, or investment in, assets or stock of any other
person in excess of $100,000 in the aggregate.
(iv) except as disclosed in Schedule 6(a)(iv) neither the Company
nor any of its Subsidiaries shall grant any severance or termination pay
to, or enter into any employment or severance agreement with, any director,
officer or other employee of the Company or its Subsidiaries; and neither
the Company nor any of its Subsidiaries shall establish, adopt, enter into
or amend any collective bargaining, bonus, profit sharing, thrift,
compensation, stock option, restricted stock, pension, retirement, deferred
compensation, employment, termination, severance or other plan, agreement,
trust, fund, policy or arrangement for the benefit of any directors,
officers or employees;
-13-
<PAGE>
(v) neither the Company nor any of its Subsidiaries shall modify,
amend or terminate any of its contracts material to the Company and its
Subsidiaries taken as a whole or waive, release or assign any similarly
material rights or claims.
(vi) neither the Company nor any of its Subsidiaries shall take
any action that will cause any representation or warranty contained in this
Agreement to become no longer true and correct; and
(vii) neither the Company nor any of its Subsidiaries will enter
into an agreement to do any of the foregoing.
(b) Access. Upon reasonable notice, the Company shall (and shall
------
cause each of its Subsidiaries to) afford the Purchaser's officers, employees,
counsel, accountants, financial advisors and other authorized representatives
(the "Representatives") access, during normal business hours throughout the
period prior to the Closing Date, to its properties, books, contracts and
records and, during such period, the Company shall (and shall cause each of its
Subsidiaries to) furnish promptly to Purchaser such information concerning its
business, properties and personnel as Purchaser may reasonably request, provided
that no investigation pursuant to this Section 6(b) shall affect or be deemed to
modify any representation or warranty of the Company.
(c) Notification of Certain Matters. The Company shall give prompt
-------------------------------
notice to the Purchaser of: (i) any notice of, or other communication relating
to, a default or event which, with notice or lapse of time or both, would become
a default, received by the Company or any of its Subsidiaries subsequent to the
date of this Agreement and prior to the Closing Date, under any contract
material to the financial condition, properties, business, results of operations
or prospects of the Company and its Subsidiaries taken as a whole to which the
Company or any of its Subsidiaries is a party or is subject; (ii) any material
adverse change in the financial condition, properties, businesses, results of
operations or prospects of the Company and its Subsidiaries taken as a whole.
Each of the Company and the Purchaser shall give prompt notice to the other
Party of any notice or other communication from any third party alleging that
the consent of such third party is or may be required in connection with the
transactions contemplated by this Agreement where the failure to obtain such
consent could have a material adverse effect on the financial condition,
properties, business, results of operations or prospects of the Company and its
Subsidiaries taken as a whole or materially hinder or materially make more
burdensome the consummation of the transactions contemplated by this Agreement.
-14-
<PAGE>
(d) Publicity. The initial press release by the Parties concerning
---------
this transaction shall be a joint press release. Thereafter and until after
closing, neither the Company nor the Purchaser shall issue, or cause the
publication of, any press releases or otherwise make public statements with
respect to the transactions contemplated hereby or make any filings with any
federal or state governmental or regulatory agency or with any national
securities exchange with respect thereto, without the consent of the other
Party, which consent shall not be unreasonably withheld, provided, however, that
either Party may make such disclosures without the consent of the other Party if
advised by counsel that such disclosure is necessary under applicable law or
rule.
(e) Board Representation. As promptly as practicable following the
--------------------
Closing Date, the Company will elect to its Board of Directors up to eight
persons designated by the Purchaser. Thereafter, so long as the Purchaser or
its affiliates own any of the Shares or the Warrants, the Company will include
among its Board of Directors' nominees a sufficient number of persons designated
by Purchaser such that the percentage of the Board of Directors proposed to be
composed of such designees is proportionately equal (to the nearest whole
directorship) to the percentage of outstanding Common Stock which the Purchaser
then has beneficial ownership. Notwithstanding the foregoing, during the term
of this Agreement the Purchaser will be entitled to have always not less than
three designees nominated to the Company's Board of Directors.
(f) Listing on Securities Exchanges. The Company will list the Shares
-------------------------------
and will maintain the listing of the Shares on each national securities exchange
on which the Common Stock may be listed.
(g) Acquisition of Voting Securities. The Company will not oppose any
--------------------------------
action by the Purchaser to acquire shares of Common Stock, except that, to the
extent the fiduciary duties of the Board of Directors of the Company require
that they seek an offer from third persons to acquire or merge with the Company,
the Company may seek such offers.
7. Covenants of the Purchaser. The Purchaser covenants and agrees
--------------------------
with the Company as follows:
(a) Efforts to Obtain Compressor Leases and Oil and Gas Properties.
--------------------------------------------------------------
As additional consideration for the purchase of the Preferred Stock and the
Warrants pursuant hereto, Purchaser commits and agrees to use its reasonable
efforts to effect the actions contemplated by Section 1.5 of the Warrant which
are necessary for the Warrants to vest and become exercisable; provided,
however, that in no event shall the Purchaser be required to expend its own
-15-
<PAGE>
funds or guarantee any obligations of the Company in order to satisfy the
obligations contained in this Section (7)(a).
(b) Confidentiality. Purchaser will not, and will cause its
---------------
Representatives not to, use any information obtained pursuant to Section 6(b) or
previously obtained from the Company in contemplation of entering into this
Agreement for any purpose unrelated to the consummation of the transactions
contemplated by this Agreement. Subject to the requirements of law, pending
consummation of the transactions herein contemplated, Purchaser will keep
confidential, and will cause its Representatives to keep confidential, all
information and documents obtained pursuant to Section 6(b) or previously
obtained from the Company in contemplation of entering into this Agreement.
Upon any termination of this Agreement, Purchaser will collect and deliver to
the Company all documents obtained by it or any of its Representatives then in
their possession and any copies thereof.
(c) Cooperation. The Purchaser shall cooperate with the Company in
-----------
consummating the transactions contemplated by this Agreement.
8. Registration Rights.
-------------------
(a) Right to Request Registration. At any time after the second
-----------------------------
anniversary of the Closing, upon the written request of the Purchaser, the
Company will use its best efforts promptly to file (but in any event within 45
days of such request) with the Commission a registration statement under the
Securities Act, on such appropriate form as the Company shall select, covering
any of the Shares not freely tradeable under Rule 144 and any shares of Common
Stock issued to the Purchaser in connection with the exercise of the Warrants
and will use its reasonable efforts to cause such registration statement to
become effective as soon as practicable following such request; provided,
--------
however, that the Company will not be required to file any such registration
- -------
statement during any period of time when (i) the Company is contemplating a
public offering of its securities and, in the judgment of the managing
underwriter thereof (or the Company, if such offering is not underwritten) such
filing would have an adverse effect on the contemplated offering, or (ii) the
Company is possession of material information that it deems advisable not to
disclose in a registration statement, or (iii) the Company is engaged in any
program for the repurchase of Common Stock. In addition, the Company shall not
be required (i) to effect any registration pursuant to this Section 8(a) unless
at least 2,000,000 shares of Common Stock are to be sold by the Purchaser, or
(ii) to file at the request of the Purchaser more than a total of two
registration statements under this Section 8(a) or more than one such
registration statement in any twelve month period.
-16-
<PAGE>
(b) Other Registrations. If the Company shall at any time propose the
-------------------
registration under the Securities Act of an offering of Common Stock for its own
account, the Company shall give notice as promptly as practicable of such
proposed registration to the Purchaser and the Company will use all reasonable
efforts to cause the offering of such shares of Common Stock owned by the
Purchaser as the Purchaser shall request within 15 days after the receipt of
such notice to be included, upon the same terms (including the method of
distribution) in any such offering; provided, however, that (i) the Company
-------- -------
shall not be required to give notice or include such Shares of Common Stock in
any such registration if the proposed registration is (A) a registration of a
stock option or compensation plan or of securities issued or issuable pursuant
to any such plan or otherwise on Form S-8 or any successor form, or (B) a
registration of securities proposed to be issued (X) in exchange for securities
or assets of, or in connection with a merger or consolidation with, another
corporation, or (Y) any issuance or any offering of Common Stock made solely to
its existing shareholders in connection with a rights offering or solely to
employees and consultants of the Company; (ii) the Company shall not be required
to include such number of Shares of Common Stock in any such registrations to
which the Company and the Purchaser are advised in writing by the Company's
investment banking firm that the inclusion of such Shares of Common Stock would,
in the opinion of such firm, unreasonably interfere with the successful
marketing of such Shares of Common stock; and (iii) the Company may, without the
consent of the Purchaser, withdraw such registration statement and abandon the
proposed offering in which the Purchaser had requested to participate.
(c) Terms and Conditions. The registration rights of the Purchaser
--------------------
pursuant to this Section 8 are subject to the following terms and conditions:
(i) The Purchaser shall provide the Company with such information
with respect to the Shares of Common Stock to be sold, the plans for the
proposed disposition thereof and such other information as shall, in the
opinion of counsel for the Company, be necessary to enable the Company to
include in such registration statement all material facts required to be
disclosed with respect to the Purchaser.
(ii) The Company shall bear the cost of the registration,
including, but not limited to, all registration and filing fees (including
Blue Sky registration and filing fees), printing expenses (including for
such number of prospectuses and other filed material as the Purchaser shall
reasonably request), and fees and disbursements of counsel and accountants
for the Company (subject, however, to subparagraph (iii) below), except
that the Purchaser shall pay the fees and disbursements of its counsel and
the underwriting fees and
-17-
<PAGE>
selling commissions applicable to the Shares of Common Stock sold by the
Purchaser.
(iii) The Company shall not be required to furnish any audited
financial statements at the request of Purchaser other than those
statements customarily prepared at the end of its fiscal year, unless the
Purchaser shall agree to reimburse the company for the out-of-pocket costs
incurred by the company in the preparation of such other audited financial
statements;
(iv) The Company shall be required to amend or supplement and
otherwise keep it effective and current such registration statement for a
period of 90 days following its effective date; and
(v) Purchaser shall not be entitled to exercise any registration
right provided for in this Section 8 after the sixth anniversary of the
Closing Date. Notwithstanding any other provision of this Section 8 to the
contrary, the registration rights granted hereunder will terminate prior to
the sixth anniversary of the Closing Date upon the first day Purchaser is
able to sell all of the shares of Common Stock acquired pursuant to this
Agreement without material restriction and without registration under the
applicable federal and state securities laws.
(d) Underwriting. The Company and the Purchaser each agrees in
------------
connection with any registration of shares of Common Stock contemplated by this
Section 8, (A) to enter into an appropriate underwriting agreement containing
items and provisions (including reasonable provisions as to indemnification)
customary in such agreements, (B) to permit the Company, in its sole discretion,
to select the managing underwriter(s) and (C) to provide the Purchaser and its
representatives with reasonable opportunity for due diligence. The
indemnification provisions referred to in Clause (A) above shall include an
indemnification by the Company of the underwriters and the Purchaser, except
that such selling stockholders shall indemnify the Company and the underwriters
as to information provided pursuant to Section 8(c)(i) and the underwriters
shall indemnify the Company and such selling stockholders as to information
provided by such underwriters.
9. Termination; Effect of Termination.
----------------------------------
(a) Termination. This Agreement may be terminated:
-----------
(i) by either the Company or the Purchaser if the Closing shall
not have occurred by December 31, 1996;
(ii) by the Company if the conditions set forth in Section 4
hereof shall not be satisfied on the Closing Date;
-18-
<PAGE>
(iii) by the Purchaser if the conditions set forth in Section 5
hereof shall not be satisfied on the Closing date;
(iv) by the Purchaser if Shareholder approval of the Amendment of
the Certificate of Incorporation of the Company to increase the authorized
number of shares of Common Stock to 40,000,000 is not obtained by December
16, 1996;
(v) by the Purchaser if on or before the Due Diligence Expiration
Date, the Purchaser has not received binding proxies from 10 or fewer
Shareholders of the Company committing to vote all of their shares of
Common Stock (at least 50% of outstanding shares) held by such person in
favor of the Amendment of the Company's Certificate of Incorporation to
increase the number of shares of Common Stock as set forth above;
(vi) Upon the mutual written consent of both Parties.
(b) Effects of Termination. The following provisions shall apply in
----------------------
the event of a termination of this Agreement:
(i) If this Agreement is terminated by the Company or by the Purchaser
as permitted under Section 9(a)(i), (ii) or (iii), hereof and not as the result
of the failure of either Party to perform its obligations hereunder without
lawful justification, such termination shall be without liability to any Party
to this Agreement or any stockholder, director, officer, employee, agent or
representative of such Party.
(ii) If this Agreement is terminated under Section 9(a)(i) or (iii)
because the Company has breached or is in default under this Agreement, the
Purchaser will be entitled to specific performance or a right to pursue a suit
for damages.
(iii) If this Agreement is terminated as a result of the failure of
the Purchaser to perform its obligations hereunder under Section 9(a)(i) or
Section 9(a)(ii) because the Purchaser has breached or is in default under this
Agreement the Company will be entitled to specific performance or a right to
pursue a suit for damages.
10. Miscellaneous.
-------------
(a) Remedies. The Purchaser and the Company each acknowledge and
--------
agree that the other Party would be irreparably damaged in the event any of the
provisions of this Agreement were not performed by the other in accordance with
their specific terms or were otherwise breached. It is accordingly agreed that
each Party shall be entitled to an injunction or injunctions to redress breaches
of this Agreement and to specifically enforce the terms
-19-
<PAGE>
and provisions hereof in any action instituted in any court of the United States
or any state thereof having subject matter jurisdiction, in addition to any
other remedy to which such Party may be entitled, at law or in equity. In
addition to a right for injunctive relief, the Purchaser shall also have a right
to bring a cause of action for damages if there is a breach or inaccuracy by the
Company of its representations, warranties, covenants or agreements, or the
Company has failed to comply with the conditions for closing. It is understood
that if the Purchaser elects to close this transaction in spite of there being a
breach or inaccuracy of the Company's representations, warranties, covenants or
agreements or failure to comply with the conditions for closing, then such
closing of this transaction by the Purchaser shall not waive the Purchaser's
rights to enforce a claim for damages against the Company.
(b) Survival of Representations, Warrants and Covenants. All
---------------------------------------------------
representations, warranties and covenants contained herein shall survive the
execution of this Agreement and the consummation of the transactions
contemplated hereby.
(c) Successors and Assigns. This Agreement shall be binding upon, and
----------------------
inure to the benefit of, the Parties and their respective heirs, personal
representatives, successors, assigns and Affiliates, but shall not be assignable
by any Party hereto without the prior written consent of the other Party;
provided, however, that the Purchaser may assign the right to purchase a portion
of the Shares to a joint venture or partnership, subject to compliance with
applicable securities laws.
(d) Notices. Any notice or other communication provided for herein or
-------
given hereunder to a Party hereto shall be in writing and shall be given by
delivery, by telex, telecopier, recognized overnight delivery service, or by
mail (registered or certified mail, postage prepaid, return receipt requested)
to the respective parties as follows:
If to the Company:
Hawkins Energy Corporation
20 East 5th Street, Suite 1500
Tulsa, OK 74103
Attention: Thomas F. Ostrye, President
with a copy to:
Conner & Winters, A Professional Corporation
2400 First Place Tower
15 East 5th Street
Tulsa, OK 74103
Attention: Lynnwood R. Moore, Jr.
-20-
<PAGE>
If to the Purchaser:
c/o Energy Transfer Corporation
8080 North Central Expressway, Suite 1600
Dallas, TX 75206
Attention: Ray Davis
with a copy to:
Schlanger, Mills, Mayer & Grossberg, L.L.P.
5847 San Felipe, Suite 1700
Houston, TX 77057
Attention: Kyle Longhofer
(e) Waiver. No Party may waive any of the terms or conditions of this
------
Agreement except by a duly signed writing referring to the specific provision to
be waived.
(f) Governing Law. This Agreement shall be governed by, and construed
-------------
and enforced in accordance with, the laws of the State of Oklahoma.
(g) Entire Agreement. This Agreement (including the Annex hereto)
----------------
constitutes the entire agreement and supersedes all other and prior agreements
and understandings, both written and oral, between the Parties and their
affiliates.
(h) Expenses. Except as otherwise expressly contemplated herein to
--------
the contrary, regardless of whether the transactions contemplated hereby are
consummated, each Party shall pay its own expenses incident to preparing for,
entering into and carrying out this Agreement and the consummation of the
transactions contemplated hereby.
(i) Captions. The Section and Paragraph captions herein are for
--------
convenience of reference only, do not constitute part of this Agreement and
shall not be deemed to limit or otherwise affect any of the provisions hereof.
(j) Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument.
-21-
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
executed and delivered on the day and year first above written.
HAWKINS ENERGY CORPORATION
By: /s/ THOMAS F. OSTRYE
----------------------------
Title: President and Chief
Executive Officer
HACL, LTD.
BY: SIX-DAWACO, INC., its
general partner
By: /s/ KELCY L. WARREN
----------------------------
Title: Executive Vice President
------------------------
-22-
<PAGE>
________________________________________________________________________________
________________________________________________________________________________
EXHIBIT 4.1
WARRANT
EQUITY COMPRESSION SERVICES CORPORATION
(FORMERLY KNOWN AS HAWKINS ENERGY CORPORATION)
an Oklahoma Corporation
(the "Company")
To Purchase 8,000,000
Shares of the Company's Common Stock
granted to
HACL, LTD.
December 19, 1996
________________________________________________________________________________
________________________________________________________________________________
<PAGE>
TABLE OF CONTENTS
-----------------
PAGE NO.
-------
ARTICLE I.................................................................. 2
EXERCISE OF WARRANT................................................... 2
1.1 Manner of Exercise.......................................... 2
1.2 When Exercise Effective..................................... 2
1.3 Delivery of Stock Certificates, etc......................... 2
(a) Certificates............................................ 2
(b) Warrant................................................. 3
1.4 Company to Reaffirm Obligations............................. 3
1.5 Vesting of the Warrants..................................... 3
(a) Compressor Leases....................................... 3
(b) Oil and Gas Reserves.................................... 4
(c) Combination of Compressor Leases and
Acquisitions of Oil and Gas Properties.................. 5
(d) Change of Control....................................... 5
(e) Calculation of Leased Compressor Horsepower............. 6
(f) Acquisition of Compressor Leasing Companies............. 6
(g) Combining Producing Oil and Gas Properties
and Compressor Leases Effected Through
Acquisitions of Companies............................... 7
ARTICLE II................................................................. 7
ADJUSTMENT OF COMMON STOCK ISSUABLE UPON EXERCISE FOR
STOCK SPLITS, ETC..................................................... 7
ARTICLE III................................................................ 8
CONSOLIDATION, MERGER, ETC............................................ 8
3.1 Consolidation, Merger, Sale of Assets,
Reorganization, etc......................................... 8
3.2 Assumption of Obligations................................... 9
ARTICLE IV.................................................................10
OTHER PROVISIONS......................................................10
4.1 No Dilution or Impairment...................................10
4.2 Notices of Corporate Action.................................10
4.3 Availability of Information.................................11
4.4 Reservation of Stock, Etc...................................11
ARTICLE V..................................................................11
RESTRICTIONS ON TRANSFER..............................................11
5.1 Restrictive Legends.........................................11
5.2 Notice of Proposed Transfer; Opinions of
Counsel.....................................................12
i
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5.3 Termination of Restrictions.................................. 13
ARTICLE VI................................................................. 13
OWNERSHIP, TRANSFER AND SUBSTITUTION OF WARRANTS...................... 13
6.1 Ownership of Warrants....................................... 13
6.2 Office, Transfer and Exchange of Warrants................... 13
(a) Office.................................................. 13
(b) New Warrant............................................. 13
6.3 Replacement of Warrants..................................... 14
ARTICLE VII................................................................ 14
DEFINITIONS........................................................... 14
ARTICLE VIII............................................................... 17
MISCELLANEOUS......................................................... 17
8.1 Remedies.................................................... 17
8.2 No Rights or Liabilities as Stockholder..................... 17
8.3 Notices..................................................... 18
8.4 Miscellaneous............................................... 18
ii
<PAGE>
THE ISSUANCE OF THIS WARRANT AND THE ISSUANCE OF SHARES OF COMMON
STOCK UPON THE EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF THE 1933, AS AMENDED, THE TEXAS SECURITIES ACT
OR THE OKLAHOMA SECURITIES ACT. NEITHER THE RECORD OR THE BENEFICIAL
OWNERSHIP OF SAID WARRANT OR SAID SHARES MAY BE SOLD OR TRANSFERRED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR SAID SECURITIES
UNDER SAID ACTS AND ANY OTHER APPLICABLE STATE SECURITIES LAWS OR
RULES OR A VALID EXEMPTION FROM THE REGISTRATION REQUIREMENTS UNDER
SAID ACTS OR RULES CONFIRMED BY AN OPINION OF COUNSEL SATISFACTORY TO
THE COMPANY THAT SUCH SALE OR TRANSFER IS EXEMPT UNDER SUCH ACTS OR
RULES AND SUCH SALE OR TRANSFER IS MADE PURSUANT TO AND IN STRICT
COMPLIANCE WITH THE TERMS AND CONDITIONS OF SAID EXEMPTIONS.
EQUITY COMPRESSION SERVICES CORPORATION
(FORMERLY KNOWN AS HAWKINS ENERGY CORPORATION)
Warrant
No. W-1 December 19, 1996
Equity Compression Services, Inc. (formerly known as Hawkins Energy
Corporation) (the "Company"), an Oklahoma corporation, for value received,
hereby certifies that HACL, Ltd., or registered assigns, is entitled to purchase
from the Company eight million (8,000,000) duly authorized, validly issued,
fully paid and nonassessable shares of Common Stock, $0.01 par value (the
"Common Stock") at any time or from time to time prior to 5:00 p.m., Houston
time, on the Expiration Date, all subject to terms, conditions and adjustments
set forth in this Warrant.
This is one of the Warrants (the "Warrant") (such term to include any
warrants issued in substitution therefor) originally issued pursuant to the
Stock Purchase Agreement. The Warrants originally so issued evidence the right
to purchase an aggregate of Eight Million (8,000,000) shares of Common Stock
subject to adjustment as provided herein. Certain capitalized terms used in
this Warrant are defined in Article VII; unless otherwise specified, references
to an "Exhibit" mean one of the exhibits attached to this Warrant, references to
an "Article" mean one of the articles in this Warrant, and references to a
"Section" mean one of the sections of this Warrant.
<PAGE>
ARTICLE I
EXERCISE OF WARRANT
Section 1.1 Manner of Exercise. This Warrant may be exercised by the
------------------
holder hereof, in whole or in part as to any Vested Warrants, during normal
business hours on any Business Day prior to the Expiration Date, by surrender of
this Warrant to the Company at its office maintained pursuant to subdivision (a)
of Section 6.2, accompanied by a subscription in substantially the form attached
to this Warrant (or a reasonable facsimile thereof) duly executed by such holder
and accompanied by payment, in cash or by certified or official bank check
payable to the order of the Company in the amount obtained by multiplying (a)
the number of shares of Common Stock (without giving effect to any adjustment
thereof) designated in such subscription by (b) the Exercise Price, and such
holder shall thereupon be entitled to receive the number of duly authorized,
validly issued, fully paid and nonassessable shares of Common Stock (or Other
Securities) determined as provided in Articles II through IV; provided however,
in no event will the Holder of this Warrant be entitle to exercise this Warrant
as to any unvested Warrants.
Section 1.2 When Exercise Effective. Each exercise of this Warrant
-----------------------
shall be deemed to have been effected immediately prior to the close of business
on the Business Day on which this Warrant shall have been surrendered to the
Company as provided in Section 1.1, and at such time the Person or Persons in
whose name or names any certificate or certificates for shares of Common Stock
(or Other Securities) shall be issuable upon such exercise as provided in
Section 1.3 shall be deemed to have become the holder or holders of record
thereof.
Section 1.3 Delivery of Stock Certificates, etc. As soon as
-----------------------------------
practicable after each exercise of this Warrant as to any Vested Warrants, in
whole or in part, and in any event within five Business Days thereafter, the
Company, at its expense (including the payment by it of any applicable issue
taxes), will cause to be issued in the name of and delivered to the holder
hereof, subject to Article V, as such holder (upon payment by such holder of any
applicable transfer taxes) may direct, the following:
(a) Certificates. A certificate or certificates for the number of
------------
duly authorized, validly issued, fully paid and nonassessable shares of
Common Stock (or Other Securities) to which such holder shall be entitled
upon such exercise plus, in lieu of any fractional share to which such
holder would otherwise be entitled, cash in an amount equal to the same
fraction of the Market Price per share on the Business Day next preceding
the date of such exercise.
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<PAGE>
(b) Warrant. In case such exercise is in part only, unless this
-------
Warrant has expired, a new Warrant or Warrants of like tenor dated the date
hereof, calling in the aggregate on the face or faces thereof for the
number of shares of Common Stock (or Other Securities) equal (without
giving effect to any adjustment thereof) to the number of such shares
called for on the face of this Warrant minus the number of such shares
designated by the holder upon such exercise as provided in Section 1.1.
Section 1.4 Company to Reaffirm Obligations. The Company will, at the
-------------------------------
time of each exercise of this Warrant, upon the request of the holder hereof,
acknowledge in writing its continuing obligation to afford to such holder all
rights of the Common Stock (or other Securities) issued upon such exercise to
which such holder shall continue to be entitled after such exercise in
accordance with the terms of this Warrant; provided, that if the holder of this
Warrant shall fail to make any such request, such failure shall not affect the
continuing obligation of the Company to afford such rights to such holder.
Section 1.5 Vesting of the Warrants. Notwithstanding any provision of
-----------------------
this Warrant to the contrary, none of the Warrants shall be exercisable until
vested in accordance with this Section 1.5 (any such warrant is hereinafter
referred to as a "Vested Warrant"). The Warrants will vest as set forth below:
(a) Compressor Leases. If the Purchaser or its Affiliates directly
-----------------
or indirectly provide to the Company contracts or agreements committing to
lease from the Company natural gas compressors having an aggregate of
15,000 horsepower on or before the Expiration Date, then all of the
Warrants shall be fully vested. If the Purchaser or its Affiliates
directly or indirectly provide contracts or agreements for less than 15,000
horsepower, then (i) for contract or set of contracts for the lease of
natural gas compressors with an aggregate of 3,750 horsepower delivered by
the Purchaser or its Affiliates on or before the Expiration Date, then one-
fourth (25%) of the Warrants shall be vested, (ii) for contract or set of
contracts for the lease of natural gas compressors with an aggregate of
7,500 horsepower delivered by the Purchaser or its Affiliates on or before
the Expiration Date, then one-half (50%) of the Warrants shall be vested,
and (iii) for contract or set of contracts for the lease of natural gas
compressors with an aggregate of 11,250 horsepower delivered by the
Purchaser or its Affiliates on or before the Expiration Date, then three-
fourths (75%) of the Warrants shall be vested. All of such leases shall
provide for rentals of not less than Market Rates. For the purposes of
this Section 1.5(a) the following transactions shall be considered as being
the equivalent of the Purchaser or its Affiliates providing contracts or
agreements for lease of natural gas compressors
3
<PAGE>
from the Company with respect to the vesting of the Warrants pursuant to
this Section 1.5, (a) any contracts or agreements for compressor leases
originated by the Purchaser or its Affiliates between October 16, 1996 and
the Expiration Date (the "Vesting Period"), (b) if the Company acquires a
company or entity with compressor leases that was identified by the
Purchaser or its Affiliates, then the compressor leases of such acquired
company shall be considered as set forth in Section 1.5(f) hereof, (c) any
sale/lease back transactions provided or originated by the Purchaser or its
Affiliates so long as the purchase price for each natural gas compressors
involved in such transaction does not exceed the fair market value thereof,
the lease rentals payable to the Company are not less than Market Rates and
the transactions are approved by a majority of the members of the Board of
Directors not affiliated with or designated by the Purchaser, and (d) any
compressors provided by the Company to oil and gas properties acquired by
the Company and for which Warrants are being vested pursuant to Section
1.5(b) below.
(b) Oil and Gas Reserves. If the Company has entered into contract
--------------------
or set of contracts for the lease of natural gas compressors with an
aggregate of 7,500 horsepower delivered by the Purchaser or its Affiliates
on or before the Expiration Date, then one hundred percent (100%) of the
Warrants shall vest if the Company acquires during the Vesting Period
producing oil and gas properties identified by the Purchaser or its
Affiliates having a purchase price paid by the Company of at least
$4,000,000 in an transaction that is approved by a majority of the members
of the Board of Directors of the Company not affiliated with or designated
by the Purchaser (an "Approved Transaction"). If the Company acquires
producing oil and gas properties having a purchase price of less than
$4,000,000 in one or more Approved Transaction(s), then (i) if the Company
acquires producing oil and gas properties with an aggregate purchase price
of at least $1,000,000 in one or more Approved Transaction(s) and the
Company has entered into contract or set of contracts for the lease of
natural gas compressors with an aggregate of 2,500 horsepower delivered by
the Purchaser or its Affiliates on or before the Expiration Date, then
twenty-five percent (25%) of the Warrants shall vest, (ii) if the Company
acquires producing oil and gas properties with an aggregate purchase price
of at least $2,000,000 in one or more Approved Transaction(s) and the
Company has entered into contract or set of contracts for the lease of
natural gas compressors with an aggregate of 4,250 horsepower delivered by
the Purchaser or its Affiliates on or before the Expiration Date, then
fifty percent (50%) of the Warrants shall vest, and (iii) if the Company
acquires producing oil and gas properties with an aggregate purchase price
of at least $3,000,000 in one or more Approved Transaction(s) and the
Company has entered into contract or set
4
<PAGE>
of contracts for the lease of natural gas compressors with an aggregate of
6,000 horsepower delivered by the Purchaser or its Affiliates on or before
the Expiration Date, then 75% of the Warrants shall vest. If the Company
acquires a company that was identified by the Purchaser or its Affiliates
with oil and gas properties, then the amount of the purchase price
allocated to the producing oil and gas properties of such acquired company
shall be considered as oil and gas properties acquired by the Company in
determining the amount of vesting under this Warrant.
(c) Combination of Compressor Leases and Acquisitions of Oil and Gas
----------------------------------------------------------------
Properties. It is the intent of the Parties that the Warrants may be
----------
vested through a combination of the methods set forth in Section 1.5(a) and
(b) above. If any portion of the Warrants are vested pursuant to Section
1.5(b), then for each set of contract or set of contracts for the lease of
natural gas compressors with an aggregate of 3,750 horsepower delivered by
the Purchaser or its Affiliates on or before the Expiration Date with no
additional acquisition of oil and gas properties, then an additional one-
fourth (25%) of the Warrants shall be vested over and above the levels
provided in Section 1.5(b) above. For example if (i) 25% of the Warrants
have become vested pursuant to Section 1.5(b)(i) above, and the Company has
entered into contract or set of contracts for the lease of natural gas
compressors with an aggregate of additional 3,750 horsepower delivered by
the Purchaser or its Affiliates on or before the Expiration Date (i.e.
leases for compressors with an aggregate of 6,250 horsepower), then an
additional 25% of the Warrants shall vest (i.e. a total of 50% of the
Warrants shall then be vested), (ii) 50% of the Warrants have become vested
pursuant to Section 1.5(b)(ii) above, and the Company and entered into
contract or set of contracts for the lease of natural gas compressors with
an additional of 3,750 horsepower delivered by the Purchaser or its
Affiliates on or before the Expiration Date (i.e. leases for an aggregate
of 8,000 horsepower), then an additional 25% of the Warrants shall vest
(i.e. a total of 75% of the Warrants shall then be vested), and (iii) 75%
of the Warrants have become vested pursuant to Section 1.5(b)(iii) above,
and the Company and entered into contract or set of contracts for the lease
of natural gas compressors with an aggregate of 9,750 horsepower delivered
by the Purchaser or its Affiliates on or before the Expiration Date (i.e.
leases for additional 3,750 horsepower), then an additional 25% of the
Warrants shall vest (i.e. all of the Warrants shall then be vested).
(d) Change of Control. Upon a Change of Control that occurs on or
-----------------
before the Expiration Date, all of the unvested Warrants shall become
vested.
5
<PAGE>
(e) Calculation of Leased Compressor Horsepower. For the purposes of
-------------------------------------------
the vesting provisions of this Section 1.5 as such provisions relate to
contracts providing for the lease of natural gas compressors, only those
leases in effect, and the horsepower of the natural gas compressors that
are then subject thereto, on the date on which any vesting of the Warrants
is to be determined shall be taken in to account in determining whether any
of the Warrants should vest on that date. Once vested, the termination of
any leases, or the modification of any lease to cover compressors with less
horsepower, shall not adversely affect the vested condition of the
Warrants. For example, if the Purchaser or its Affiliates has provided
contracts for the lease of natural gas compressors with 7,500 horsepower
all of which are in effect on a certain date, then one-half of the Warrants
will be vested on such date and the subsequent termination of any of the
leases for such compressors shall not affect the vested status of the
Warrants.
(f) Acquisition of Compressor Leasing Companies. In the event that
-------------------------------------------
the Company acquires another company identified by the Purchaser or its
Affiliates which is in the business of owning and leasing natural gas
compressors to third parties, any compressors being leased by such company
to others at the time of such acquisition shall be considered for purposes
of this Section 1.5 in the same manner and to the same extent as the
acquisition of producing oil and gas properties identified by the Purchaser
or its Affiliates as set forth in Section 1.5(b) above, with leases of
acquired companies with an aggregate horsepower of 1,875 being considered
the equivalent of acquired producing oil and gas properties with a purchase
price of $1,000,000. In other words, twenty-five percent (25%) of the
Warrants shall vest at any time that the Company has acquired a company or
companies which have compressor leases in effect covering an aggregate of
at least 1,875 horsepower and the Company has in effect a contract or set
of contracts for the lease of natural gas compressors in accordance with
Section 1.5(a) with an aggregate of at least 2,500 horsepower, fifty
percent (50%) of the Warrants shall vest at any time that the Company has
acquired a company or companies which have compressor leases in effect
covering an aggregate of at least 3,750 horsepower and the Company has in
effect a contract or set of contracts for the lease of natural gas
compressors in accordance with Section 1.5(a) with an aggregate of at least
4,250 horsepower; seventy-five percent (75%) of the Warrants shall vest if
at any time that the Company has acquired a company or companies which have
compressors leasing in effect covering an aggregate of at least 5,625
horsepower and the Company has in effect a contract or set of contracts for
the lease of natural gas compressors in accordance with Section 1.5(a) with
an aggregate of at least 6,000 horsepower. The Warrants will be one
hundred percent (100%) vested at any time that the Company has acquired a
company or companies which have
6
<PAGE>
compressor leases in effect covering an aggregate of at least 7,500
horsepower and the Company has in effect a contract or set of contracts for
the lease of natural gas compressors in accordance with Section 1.5(a) with
an aggregate of at least 7,500 horsepower.
(g) Combining Producing Oil and Gas Properties and Compressor Leases
----------------------------------------------------------------
Effected Through Acquisitions of Companies. If the Company has acquired
- ------------------------------------------
producing oil and gas properties identified by the Purchaser or its Affiliates
and has acquired companies identified by the Purchaser or its Affiliates which
are in the business of owning and leasing natural gas compressors to third
parties, both types of acquisitions shall be considered in determining the
vesting of the Warrants, with each $1,000,000 of purchase price of such
producing oil and gas properties being considered to be the equivalent of
compressor leases of such acquired companies with an aggregate horsepower of
1,875 and vice versa. Notwithstanding anything in the foregoing to the
contrary, in no event shall any Warrants vest unless the compressor leases
provided by the Purchaser or its Affiliates pursuant to Section 1.5(a) above
cover compressors which have an aggregate of at least 2,500 horsepower; in no
event shall the percentage of Warrants that vests exceed twenty-five percent
(25%) unless the compressor leases provided by the Purchaser or its Affiliates
pursuant to Section 1.5(a) above cover compressors which have an aggregate of at
least 4,250 horsepower; in no event shall the percentage of Warrants that vests
exceed fifty percent (50%) unless the compressor leases provided by the
Purchaser or its Affiliates pursuant to Section 1.5(a) above cover compressors
which have an aggregate of at least 6,000 horsepower; and in no event shall the
percentage of Warrants that vests exceed seventy-five percent (75%) unless the
compressor leases provided by the Purchaser or its Affiliates pursuant to
Section 1.5(a) above cover compressors which have an aggregate of at least 7,500
horsepower.
ARTICLE II
ADJUSTMENT OF COMMON STOCK ISSUABLE UPON EXERCISE FOR
STOCK SPLITS, ETC.
In case of any reclassification or change of the outstanding shares of
Common Stock (other than a change from par value to no par value or vice versa
or a change in par value, or as a result of a subdivision or combination), the
holder of this Warrant shall thereafter (but only until the Expiration Date)
have the right to purchase the kind and number of shares of stock and/or other
securities or property receivable upon such reclassification or change in
respect of the number of shares purchasable under this Warrant immediately prior
to the time of determination of shareholders of the Company entitled to receive
such shares of stock and/or other securities or property, at a purchase price
equal to the product of (x) the number of shares issuable under this Warrant
immediately prior to such determination, times (y) the Exercise
7
<PAGE>
Price, as if such holder had exercised this Warrant immediately prior to such
determination. The Company shall be obligated to retain and set aside, or
otherwise make fair provision for exercise of the right of the holder hereof to
receive, the shares of stock and/or other securities or property provided for in
this Section 2.1.
ARTICLE III
CONSOLIDATION, MERGER, ETC.
Section 3.1 Consolidation, Merger, Sale of Assets, Reorganization, etc.
-------------------------------------- -------------------
(a) In case at any time the Company shall be a party to any
transaction (including, without limitation, a merger, consolidation, sale
of all or substantially all the Company's assets, liquidation, or
recapitalization of the Common Stock) in which the previously outstanding
Common Stock shall be changed into or exchanged for common stock or other
securities of another corporation or interests in a noncorporate entity or
other property (including cash) or any combination of any of the foregoing
or in which the Common Stock (or Other Securities) ceases to be a publicly
traded security either listed on the New York Stock Exchange or the
American Stock Exchange or quoted by the NASDAQ National Market System or
the NASDAQ Small Cap Market or any successor thereto or comparable system
(each such transaction being herein called the "Transaction", the date of
consummation of the Transaction being herein called the "Consummation
Date", the Company (in the case of a transaction in which the Company
retains substantially all of its assets and survives as a corporation) or
such other corporation or entity (in each other case) being herein called
the "Acquiring Company"), then, as a condition of the consummation of the
Transaction, lawful and adequate provisions shall be made so that the
holder of this Warrant, upon the exercise thereof at any time on or after
the Consummation Date, shall be entitled to receive, and this Warrant shall
thereafter represent the right to receive, in lieu of the Common Stock (or
Other Securities) issuable upon such exercise prior to the Consummation
Date, the highest amount of securities or other property to which such
holder would actually have been entitled as a shareholder upon the
consummation of the Transaction if such holder had exercised this Warrant
immediately prior thereto.
(b) Notwithstanding the provisions of Section 3.1(a) hereof, if the
Common Stock (or Other Securities) is to be converted or changed into, in
whole or in part, securities of the Acquiring Company or any affiliate
thereof and the issuer of such securities does not meet, or as a result of
the
8
<PAGE>
transaction with the Company, will not meet the following requirements:
(i) it is or will be a solvent corporation organized under
the laws of any state of the United States of America having its
common stock listed on the New York Stock Exchange or the American
Stock Exchange or quoted by the NASDAQ National Market System or any
successor thereto or comparable system, and such common stock
continues to meet such requirements for such listing or quotation, and
(ii) it is or will be required to file reports with the
Securities and Exchange Commission pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934, as amended,
then, at the election of the holder of this Warrant pursuant to notice given to
the Company on or before the later of (1) the 30th day following the
Consummation Date, and (2) the 60th day following the date of delivery or
mailing to such holder of the last proxy statement relating to the vote on the
Transaction by the holders of the Common Stock, the holder of this Warrant shall
be entitled to receive, within 30 days after such election or the Consummation
Date, whichever is later, in full satisfaction of the exercise rights and all
other rights afforded to such holder under this Warrant, an amount equal to the
fair market value of such exercise rights as determined by an independent
investment banker (with an established national reputation as a valuer of equity
securities) selected by the Company, such fair market value to be determined
with regard to all material relevant factors but without regard to the effects
on such value of the Transaction. In the event that the holder of this Warrant
elects to receive payment under this Section 3.1(b), the Company shall obtain,
and deliver to the holder of this Warrant a copy of the determination of an
independent investment banker (selected by the Company and reasonably
satisfactory to the holder of this Warrant) necessary for the valuation under
this Section 3.1(b) within 30 days after the Consummation Date of the
Transaction in question.
Section 3.2 Assumption of Obligations. Notwithstanding anything contained
-------------------------
in this Warrant to the contrary, the Company will not effect any of the
transactions described in paragraph 3.1(a) unless, prior to the consummation
thereof, each Person (other than the Company) which may be required to deliver
any stock, securities, cash or property upon the exercise of this warrant as
provided herein shall assume, by written instrument delivered to, and reasonably
satisfactory to, the holder of this Warrant, (a) the obligations of the Company
under this Warrant (and if the Company shall survive the consummation of such
transaction, such assumption shall be in addition to, and shall not release the
Company from, any
9
<PAGE>
continuing obligations of the Company under this Warrant), and (b) the
obligation to deliver to such holder such shares of stock, securities, cash or
property as, in accordance with the foregoing provisions of this Article III,
such holder may be entitled to receive.
ARTICLE IV
OTHER PROVISIONS
Section 4.1 No Dilution or Impairment. The Company will not amend its
-------------------------
certificate of incorporation or consolidate, merge, reorganized, transfer
assets, dissolve, issue or sell securities or take any other voluntary action,
solely or primarily to avoid or seek to avoid the observance or performance of
any of the terms of this Warrant, but will at all times in good faith assist in
the carrying out of all such terms and in the taking of all such action as may
be necessary or appropriate in order to protect the rights of the holder of this
Warrant. Without limiting the generality of the foregoing, the Company (a) will
not permit the par value of any shares of stock receivable upon the exercise of
this Warrant to exceed the amount payable thereof or upon such exercise, (b)
will take all such action as may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and nonassessable shares of
Common Stock (or Other Securities) on the exercise of the Warrant from time to
time outstanding, and (c) will not take any action which results in any
adjustment of the number of shares to be issued upon the exercise of this
Warrant if the total number of shares of Common Stock (or Other Securities)
issuable after the action upon the exercise of the Warrant would exceed the
total number of shares of Common Stock (or Other Securities) then authorized by
the Company's certificate of incorporation and available for the purpose of
issuance upon such exercise.
Section 4.2 Notices of Corporate Action. In the event that any of the
---------------------------
following occurs,
(a) any taking by the Company of a record of the holders of any class
of securities for the purpose of determining the holders thereof who are
entitled to receive any dividend (other than a regular periodic dividend
payable in cash out of earned surplus in an amount not exceeding the amount
of the immediately preceding cash dividend for such period) or other
distribution, or any right to subscribe for, purchase or otherwise acquire
any shares of stock of any class or any other securities or property, or to
receive any other right, or
(b) any capital reorganization of the Company, any reclassification or
recapitalization of the capital stock of the Company or any consolidation
or merger involving the Company and any other Person or any transfer of all
or
10
<PAGE>
substantially all the assets of the company to any other Person, or
(c) any voluntary or involuntary dissolution, liquidation or winding-
up of the Company,
the Company will mail to each holder of a Warrant a notice specifying (i) the
date or expected date as of which any such record is to be taken for the purpose
of such dividend, distribution or right, and the amount and character of such
dividend, distribution or right, and (ii) the date or expected date on which any
such reorganization, reclassification, recapitalization, consolidation, merger,
transfer, dissolution, liquidation or winding-up is to take place and the time,
if any such time is to be fixed, as of which the holders of record of Common
Stock (or Other Securities) shall be entitled to exchange their shares of Common
Stock (or Other Securities) for the securities or other property deliverable
upon such reorganization, reclassification, recapitalization, consolidation,
merger, transfer, dissolution, liquidation or winding-up. Such notice shall be
mailed at least 20 days prior to the date therein specified.
Section 4.3 Availability of Information. The Company will cooperate with
---------------------------
each holder of any Warrant or Restricted Security in supplying such information
as may be reasonably requested by such holder to complete and file any
information reporting forms presently or hereafter required by the Commission to
report such holders beneficial ownership of Common Stock or as a condition to
the availability of an exemption from the provisions of the Securities Act for
the sale of any Restricted Securities.
Section 4.4 Reservation of Stock, Etc. The Company will at all times
-------------------------
reserve and keep available, solely for issuance and delivery upon exercise of
the Warrants, the number of shares of Common Stock (or Other Securities) from
time to time issuable upon exercise of the Warrant. All shares of Common Stock
(or Other Securities) issuable upon exercise of the Warrant shall be duly
authorized and, when issued upon such exercise, shall be validly issued and, in
the case of shares, fully paid and non-assessable with no liability on the part
of the holders thereof.
ARTICLE V
RESTRICTIONS ON TRANSFER
Section 5.1 Restrictive Legends. Except as otherwise permitted by this
-------------------
Article V, each Warrant (including each Warrant issued upon the transfer of any
Warrant) shall be stamped or otherwise imprinted with a legend in substantially
the following form:
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"THE ISSUANCE OF THIS WARRANT AND THE ISSUANCE OF SHARES OF COMMON
STOCK UPON THE EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF THE 1933, AS AMENDED, THE TEXAS SECURITIES ACT OR THE
OKLAHOMA SECURITIES ACT. NEITHER THE RECORD OR THE BENEFICIAL OWNERSHIP OF
SAID WARRANT OR SAID SHARES MAY BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR SAID SECURITIES UNDER SAID ACTS AND
ANY OTHER APPLICABLE STATE SECURITIES LAWS OR RULES OR A VALID EXEMPTION
FROM THE REGISTRATION REQUIREMENTS UNDER SAID ACTS OR RULES CONFIRMED BY AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH SALE OR TRANSFER
IS EXEMPT UNDER SUCH ACTS OR RULES AND SUCH SALE OR TRANSFER IS MADE
PURSUANT TO AND IN STRICT COMPLIANCE WITH THE TERMS AND CONDITIONS OF SAID
EXEMPTIONS."
Except as otherwise permitted by this Article V, each certificate for Common
Stock (or Other Securities) issued upon the exercise of any Warrant, and each
certificate issued upon the transfer of any such Common Stock (or Other
Securities), shall be stamped or otherwise imprinted with a legend in
substantially the following form:
"THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, THE TEXAS SECURITIES ACT OR
THE OKLAHOMA SECURITIES ACT. NEITHER THE RECORD NOR THE BENEFICIAL
OWNERSHIP OF SAID SHARES MAY BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR SAID SHARES UNDER SAID ACTS AND ANY
OTHER APPLICABLE STATE SECURITIES LAWS OR RULES UNLESS, IN THE OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY, EXEMPTIONS FROM THE REGISTRATION
REQUIREMENTS OF SAID ACTS ARE AVAILABLE WITH RESPECT TO SUCH SALE OR
TRANSFER AND SAID SALE OR TRANSFER IS MADE PURSUANT TO AND IN STRICT
COMPLIANCE WITH THE TERMS AND CONDITIONS OF SAID EXEMPTIONS."
Section 5.2 Notice of Proposed Transfer; Opinions of Counsel. Prior to
------------------------------------------------
any transfer of any Restricted Securities which are not registered under an
effective registration statement under the Securities Act, the holder thereof,
will give written notice to the Company of such holders intention to effect such
transfer and to comply in all other respects with this Section 5.2. Each such
notice (a) shall describe the manner and circumstances of the proposed transfer
and (b) shall include an opinion of legal counsel addressed to the Company, in
form and substance reasonably satisfactory to the Company, to the effect that
such transfer does not violate the Securities Act of 1933 and applicable state
securities laws.
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Section 5.3 Termination of Restrictions. The restrictions imposed by this
---------------------------
Article V upon the transferability of Restricted Securities shall cease and
terminate as to any particular Restricted Securities when such securities shall
have been sold pursuant to an effective registration statement under the
Securities Act or otherwise become freely transferable by the holder thereof.
Whenever such restrictions shall cease and terminate as to any Restricted
Securities, the holder thereof shall be entitled to receive from the Company,
without expense (other than applicable transfer taxes, if any), new certificates
representing the securities not bearing the applicable legends required by
Section 5.1.
ARTICLE VI
OWNERSHIP, TRANSFER AND SUBSTITUTION OF WARRANTS
Section 6.1 Ownership of Warrants. The Company may treat the person in
---------------------
whose name any Warrant is registered on the register kept at the office of the
Company maintained pursuant to subdivision (a) of Section 6.2 as the owner and
holder thereof for all purposes, notwithstanding any notice to the contrary,
except that, if and when any Warrant is properly assigned in blank, the Company
may (but shall not be obligated to) treat the bearer thereof as the owner of
such Warrant for all purposes, notwithstanding any notice to the contrary.
Subject to Article V, a Warrant, if properly assigned, may be exercised by a new
holder without a new Warrant first having been issued.
Section 6.2 Office, Transfer and Exchange of Warrants.
-----------------------------------------
(a) Office. The Company will maintain an office in where notices,
------
presentations and demands in respect of this Warrant may be made upon it.
Such office shall be maintained at until such time as the Company shall
notify each holder of the Warrant of any change of location of such office.
(b) New Warrant. Upon the surrender of any Warrant, properly endorsed,
-----------
for registration of transfer or for exchange at the office of the Company
maintained pursuant to subdivision (a) of this Section 6.2, the Company at
such holder's expense will (subject to compliance with Article V, if
applicable) execute and deliver to or upon the order of the holder thereof
a new Warrant or Warrants of like tenor, in the name of such holder or as
such holder (upon payment by such holder of any applicable transfer taxes)
may direct, calling in the aggregate on the face or faces thereof for the
number of shares of Common Stock (or Other Securities) called for on the
face or faces of the Warrant or Warrants so surrendered.
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Section 6.3 Replacement of Warrants. Upon receipt of evidence reasonably
-----------------------
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Warrant and, in the case of any such loss, theft or destruction of any Warrant
held by a Person other than Purchaser or any institutional investor, upon
delivery of indemnity reasonably satisfactory to the Company in form and amount
or, in the case of any such mutilation, upon surrender of such Warrant for
cancellation at the office of the Company maintained pursuant to subdivision (a)
of Section 6.2 the Company at its expense will execute and deliver, in lieu
thereof, a new Warrant of like tenor.
ARTICLE VII
DEFINITIONS
As used herein, unless the context otherwise requires, the following terms
have the following respective meanings:
Business Day: Any day other than a Saturday or a Sunday or a day on which
------------
commercial banking institutions in the States of Oklahoma, Texas or New York are
authorized by law to be closed. Any reference to "days" (unless Business Days
are specified) shall mean calendar days.
Change of Control: A "Change in Control" shall be deemed to take place on
-----------------
the occurrence of any of the following events:
(1) as a result of a proxy solicitation by any party other than the
Company or any other such event, the Continuing Directors no longer
constitute at least a majority of the total number of directors of the
Company;
(2) any person or group of persons (as defined in Rule 13d-5 under
the Securities Exchange Act of 1934, as amended), together with its
Affiliates, become the beneficial owner, directly or indirectly, of fifty
percent (50%) or more of the Company's then outstanding Common Stock or
fifty percent (50%) or more the total voting power of the Company's then
outstanding securities entitled generally to vote for the election of the
Company's directors;
(3) the approval by the Company's shareholders of the merger or
consolidation of the Company with any other corporation or business
organization, the sale of substantially all of the assets of the Company or
the liquidation or dissolution of the Company, unless, in the case of a
merger or consolidation, (i) the Continuing Directors in office immediately
prior to such merger or consolidation will constitute at least a majority
of the directors of the surviving corporation or business organization of
such merger
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or consolidation or any parent (as such term is defined in Rule 12b-2 under
the Securities Exchange Act of 1934, as amended) of such corporation or
business organization, or (ii) a majority of the disinterested members of
the Board of Directors of the Company as it exists immediately prior to
such event approve such transaction (for the purposes hereof, the term
"disinterested" members of the Board of Directors are those members who are
not designated by or affiliated with the Purchaser or any of its assignees
or affiliates); or
(4) a majority of the "disinterested" members of the Board of
Directors in office immediately prior to any other action proposed to be
taken by the Company's shareholders or by the Company's Board of Directors
determine that such proposed action, if taken, would constitute a change of
control of the Company and such action is taken.
Commission: The Securities and Exchange Commission or any other federal
----------
agency at the time administering the Securities Act.
Common Stock: As defined in the introduction to this Warrant, such term to
------------
include (i) any stock into which such Common Stock shall have been changed or
any stock resulting from any reclassification of such Common Stock, and (ii) all
other stock of any class or classes (however designated) of the Company the
holders of which have the right, without limitation as to amount, either to all
or to a share of the balance of current dividends and liquidating dividends
after the payment of dividends and distributions on any shares entitled to
preference.
Company: As defined in the introduction to this Warrant, such term to
-------
include any corporation which shall succeed to or assume the obligations of the
Company hereunder.
Continuing Director: In determining whether there has been a Change of
-------------------
Control, any individual who is a member of the Company's Board of Directors on
the date immediately preceding the event or series of events that resulted in
the purported Change of Control.
Convertible Securities: Any evidences of indebtedness, shares of stock
----------------------
(other than Common Stock) or other securities directly or indirectly convertible
into or exchangeable for Additional Shares of Common Stock.
Exchange Act: The Securities Exchange Act of 1934, or any similar federal
------------
statute, and the rules and regulations of the Commission thereunder, all as the
same shall be in effect at the time.
Exercise Price: $0.91 per share.
--------------
Expiration Date: December 19, 2000.
---------------
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Market Price: On any date specified herein, the amount per share of the
------------
Common Stock, equal to (a) the last sale price of such Common Stock, regular
way, on such date or, if no such sale takes place on such date, the average of
the closing bid and asked prices thereof on such date, in each case as
officially reported on the principal national securities exchange on which such
Common Stock is then listed or admitted to trading, or (b) if such Common Stock
is not then listed or admitted to trading on any national securities exchange
but is designated as a national market system security by the NASD, the last
trading price of the Common Stock on such date, or (c) if there shall have been
no trading on such date or if the Common Stock is not so designated, the average
of the closing bid and asked prices of the Common Stock on such date as shown by
the NASD automated quotation system, or (d) if such Common Stock is not then
listed or admitted to trading on any national exchange or quoted in the over-
the-counter market, the fair value thereof determined in good faith by the Board
of Directors of the Company as of a date which is within 20 days of the date as
of which the determination is to be made.
Market Rates: Either (i) a rate that has been approved by the members of
------------
the Board of Directors not Affiliated with or designated by the Purchaser or
(ii) a rate equal to or greater than the rate (a) that the Company is charging
unrelated third parties for the lease of comparable natural gas compressors in
the same region, or (b) being charged by the competitors of the Company
according to such competitors' rate books or sheets for the lease of comparable
equipment on comparable terms in the same region.
NASD: The National Association of Securities Dealers, Inc.
----
Options: Rights, options or warrants to subscribe for, purchase or
-------
otherwise acquire either Additional Shares of Common Stock or Convertible
Securities.
Other Securities: Any stock (other than Common Stock) and other securities
----------------
of the Company or any other Person (corporate or otherwise) which the holder of
the Warrant at any time shall be entitled to receive, or shall have received
upon the exercise of the Warrant, in lieu of or in addition to Common Stock, or
which at any time shall be issuable or shall have been issued in exchange for or
in replacement of Common Stock or other securities pursuant to Article III or
otherwise.
Person: Any corporation, association, partnership, joint venture, limited
------
liability company, trust, estate, organization, business, individual, government
or political subdivision thereof or governmental agency.
Purchaser: HACL, Ltd., a Texas limited partnership.
---------
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Restricted Securities: All of the following: (a) any Warrants bearing the
---------------------
applicable legend or legends referred to in Section 5.1, (b) any shares of
Common Stock (or Other Securities) which have been issued upon the exercise of
Warrants and which are evidenced by a certificate or certificates bearing the
applicable legend or legends referred to in such section and (c) unless the
context otherwise requires, any shares of Common Stock (or Other Securities)
which are at the time issuable upon the exercise of Warrants and which, when so
issued, will be evidenced by a certificate or certificates bearing the
applicable legend or legends referred to in such section.
Securities Act: The Securities Act of 1933, or any similar federal
--------------
statute, and the rules and regulations of the Commission thereunder, all as the
same shall be in effect at the time.
Stock Purchase Agreement: That certain Stock Purchase Agreement dated as
------------------------
of October 16, 1996, by both the Company and the Purchaser.
Subsidiary: With respect to any Person, any corporation with respect to
----------
which more than 50% of the outstanding shares of stock of each class having
ordinary voting power (other than stock having such power only by reason of the
happening of a contingency) is at the time owned, directly or indirectly, by
such Person or by one or more subsidiaries of such Person.
Transfer: Any sale, assignment, pledge or other disposition of any
--------
security, or of any interest therein, which could constitute a "sale" as that
term is defined in section 2(3) of the Securities Act.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Remedies. The Company stipulates that the remedies at law of
--------
the holder of this Warrant in the event of any default or threatened default by
the Company in the performance of or compliance with any of the terms of this
Warrant are not and will not be adequate and that, to the fullest extent
permitted by law, such terms may be specifically enforced by a decree for the
specific performance of any agreement contained herein or by an injunction
against a violation of any of the terms hereof or otherwise.
Section 8.2 No Rights or Liabilities as Stockholder. The holder of this
---------------------------------------
Warrant and all subsequent holders thereof hereby agree that except to the
extent set forth herein or in the Stock Purchase Agreement, no provision of this
Warrant shall be construed as conferring upon the holder hereof any rights as a
stockholder of the Company or as imposing any obligation on such holder to
purchase any securities or as imposing any liabilities on such holder as a
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stockholder of the Company, whether such obligation or liabilities are asserted
by the Company or by creditors of the Company.
Section 8.3 Notices. All notices and other communications under this
-------
Warrant shall be in writing and shall be mailed by registered or certified mail,
return receipt requested, addressed (a) if to any holder of any Warrant, to the
registered address of such holder as set forth in the register kept at the
principal office of the Company, or (b) if the Company, to the attention of its
President at its office maintained pursuant to subdivision (a) of Section 6.2,
provided that the exercise of any Warrant shall be effective in the manner
provided in Article I.
Section 8.4 Miscellaneous.
-------------
(a) This Warrant may be amended, waived, discharged or terminated,
only if the Company shall have obtained the written consent to such
amendment, waiver, discharge or termination of the holder or holders of
Warrants entitling such holders to purchase 51% or more by number of shares
of the total number of shares of Common Stock issuable under all Warrants
at the time outstanding.
(b) This warrant shall be construed and enforced in accordance with
the laws of the State of Texas.
(c) The section headings in this Warrant are for purposes of
convenience only and shall not constitute a part hereof.
EQUITY COMPRESSION SERVICES CORPORATION
By:
--------------------------
Name:
--------------------------
Title:
-------------------------
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FORM OF SUBSCRIPTION
To: Hawkins Energy Corporation
The undersigned registered holder of the within Warrant hereby irrevocably
exercises such Warrant for, and purchases * shares of Common Stock of
Equity Compression Services Corporation (formerly known as Hawkins Energy
Corporation) and herewith makes payment of $ therefor, and
requests that the certificates for such shares be issued in the name of, and
delivered to , whose address is
.
The undersigned further represents and warrants that it is acquiring the
shares of Common Stock for investment purposes only and not with a view to the
distribution thereof. The undersigned acknowledges that the issuance of the
shares of Common Stock has not been registered under the Securities Act of 1933,
as amended, or any applicable state securities acts and such shares may not be
resold or otherwise transferred except pursuant to a registration statement
declared effective under such acts unless in the opinion of counsel satisfactory
to the Company exemptions from the registration requirements of said acts are
available with respect to such sale or transfer and said sale or transfer is
made pursuant to and in strict compliance with the terms and conditions of said
exemptions.
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Dated: (Signature must conform in all
respects to name of holder as
specified on the face or
Warrant)
(Street Address)
(City) (State) (Zip Code)
*Insert the number of shares called for on the face of this
Warrant (or, in the case of a partial exercise, the portion thereof as
to which this Warrant is being exercised), in either case without
making any adjustment for Additional Shares of Common Stock or any
other stock or other securities or property or cash which, pursuant to
the adjustment provisions of this Warrant, may be delivered upon
exercise. In the case of a partial exercise, a new Warrant or Warrants
will be issued and delivered, representing the unexercised portion of
the Warrant, to the holder surrendering the Warrant.
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FORM OF ASSIGNMENT
[To be executed only upon transfer of Warrant]
For value received, the undersigned registered holder of the within Warrant
hereby sells, assigns and transfers unto the right
represented by such Warrant to purchase shares of Common Stock of to which such
Warrant relates, and appoints Attorney to make such transfer on the books of
maintained for such
purpose, with full power of substitution in the premises.
Dated: (Signature must conform in all
respects to name of holder as
specified on the face or
Warrant)
------------------------------
(Street Address)
-------------------------------
(City) (State) (Zip Code)
Signed in the presence of:
- -------------------------
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