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EQUITY COMPRESSION SERVICES CORPORATION
$15,000,000
10.15% SECURED SENIOR SUBORDINATED NOTES DUE JULY 31, 2007
AND
COMMON STOCK PURCHASE WARRANTS
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SUBORDINATED NOTE AND WARRANT PURCHASE AGREEMENT
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DATED AS OF JULY 31, 1997
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NOTE: This Agreement contains restrictions upon transfer (paragraph 12G) and
confidentiality obligations (paragraph 12H)
TABLE OF CONTENTS
(Not Part of Agreement)
PAGE
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1. Authorization of Issue of Securities. . . . . . . . . . . . . . . . . 1
1A. Authorization of Issue of Notes. . . . . . . . . . . . . . . . . 1
1B. Authorization of Issue of Warrants . . . . . . . . . . . . . . . 1
2. Purchase and Sale of Securities.. . . . . . . . . . . . . . . . . . . 2
2A. Purchase and Sale of Notes . . . . . . . . . . . . . . . . . . . 2
2B. Purchase and Sale of Warrants. . . . . . . . . . . . . . . . . . 2
3. Conditions to Closing . . . . . . . . . . . . . . . . . . . . . . . . 2
3A. Certain Documents. . . . . . . . . . . . . . . . . . . . . . . . 2
3B. Representations and Warranties; No Default; No Material
Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . 5
3C. Purchase Permitted By Applicable Laws. . . . . . . . . . . . . . 5
3D. Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3E. Related Proceedings. . . . . . . . . . . . . . . . . . . . . . . 5
3F. Consummation of Acquisition. . . . . . . . . . . . . . . . . . . 5
3G. Private Placement Number . . . . . . . . . . . . . . . . . . . . 6
3H. Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3I. Amendment of Bank Agreement. . . . . . . . . . . . . . . . . . . 6
4. Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4A. Required Prepayments . . . . . . . . . . . . . . . . . . . . . . 6
4B. Optional Prepayment of Notes with Yield Maintenance Amount . . . 6
4C. Offer to Prepay Notes in the Event of a Change in Control. . . . 7
4D. Partial Payments Pro Rata. . . . . . . . . . . . . . . . . . . . 8
4E. Retirement of Notes. . . . . . . . . . . . . . . . . . . . . . . 8
5. Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . . . . 9
5A. Financial Statements . . . . . . . . . . . . . . . . . . . . . . 9
5B. Information Required by Rule 144A. . . . . . . . . . . . . . . . 11
5C. Inspection of Property . . . . . . . . . . . . . . . . . . . . . 12
5D. Covenant to Secure Notes Equally . . . . . . . . . . . . . . . . 12
ii
5E. Corporate Existence, Licenses and Permits; Maintenance
of Properties. . . . . . . . . . . . . . . . . . . . . . . . . . 12
5F. Maintenance of Insurance . . . . . . . . . . . . . . . . . . . . 13
5G. Payment of Taxes and Other Claims. . . . . . . . . . . . . . . . 13
5H. ERISA Compliance . . . . . . . . . . . . . . . . . . . . . . . . 13
5I. Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . 13
5J. Maintenance of Committed Credit Facility . . . . . . . . . . . . 14
5K. Environmental Covenants. . . . . . . . . . . . . . . . . . . . . 14
5L. Environmental Indemnities. . . . . . . . . . . . . . . . . . . . 14
5M. Collateral; New Subsidiaries . . . . . . . . . . . . . . . . . . 15
5N. Enforcement of Acquisition Documents . . . . . . . . . . . . . . 15
5O. Lockbox Account. . . . . . . . . . . . . . . . . . . . . . . . . 15
6. Negative Covenants. . . . . . . . . . . . . . . . . . . . . . . . . . 16
6B. Limitation on Restricted Payments. . . . . . . . . . . . . . . . 16
6C. Liens, Indebtedness, and Other Restrictions. . . . . . . . . . . 16
6D. Change of Fiscal Year. . . . . . . . . . . . . . . . . . . . . . 20
6E. Change of Business . . . . . . . . . . . . . . . . . . . . . . . 20
6F. Certificates of Incorporation; Bylaws; Trade Names . . . . . . . 21
6G. Other Agreements, Amendments . . . . . . . . . . . . . . . . . . 21
6H. Limitation on Certain Restrictive Agreements . . . . . . . . . . 21
6I. Prohibition Against Layering . . . . . . . . . . . . . . . . . . 21
6J. Change in Control. . . . . . . . . . . . . . . . . . . . . . . . 21
7. Subordination of Notes. . . . . . . . . . . . . . . . . . . . . . . . 21
7A. Subordination. . . . . . . . . . . . . . . . . . . . . . . . . . 21
7B. Obligation of the Company Unconditional. . . . . . . . . . . . . 23
7C. Subrogation. . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7D. Rights of Holders of Senior Debt . . . . . . . . . . . . . . . . 24
7E. Subordination Definitions. . . . . . . . . . . . . . . . . . . . 24
8. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . 25
8A. Acceleration . . . . . . . . . . . . . . . . . . . . . . . . . . 25
8B. Rescission of Acceleration . . . . . . . . . . . . . . . . . . . 28
8C. Notice of Acceleration or Rescission . . . . . . . . . . . . . . 28
8D. Other Remedies . . . . . . . . . . . . . . . . . . . . . . . . . 28
9. Representations, Covenants and Warranties . . . . . . . . . . . . . . 29
9A. Organization and Qualification . . . . . . . . . . . . . . . . . 29
9B. Financial Statements . . . . . . . . . . . . . . . . . . . . . . 29
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9C. Actions Pending. . . . . . . . . . . . . . . . . . . . . . . . . 29
9D. Outstanding Indebtedness . . . . . . . . . . . . . . . . . . . . 30
9E. Title to Properties. . . . . . . . . . . . . . . . . . . . . . . 30
9F. Possession of Franchises, Licenses . . . . . . . . . . . . . . . 30
9G. Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
9H. Conflicting Agreements and Other Matters . . . . . . . . . . . . 31
9J. Offering of the Securities . . . . . . . . . . . . . . . . . . . 31
9K. Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . 32
9L. ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
9M. Governmental Consent . . . . . . . . . . . . . . . . . . . . . . 32
9N. Environmental Compliance . . . . . . . . . . . . . . . . . . . . 33
9O. Oil and Gas Contracts. . . . . . . . . . . . . . . . . . . . . . 33
9P. Natural Gas Policy Act and Natural Gas Act Compliance. . . . . . 34
9Q. Take or Pay Obligations, Prepayments, BTU Adjustments
and Balancing Problems . . . . . . . . . . . . . . . . . . . . . 34
9R. Gas Purchase Obligations in Excess of Gas Sales Rights . . . . . 34
9S. Fiscal Year. . . . . . . . . . . . . . . . . . . . . . . . . . . 35
9T. Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
9U. Investment Company Act . . . . . . . . . . . . . . . . . . . . . 35
9V. Public Utility Holding Company Act; Federal Power Act;
Interstate Commerce Act; Other Regulation. . . . . . . . . . . . 35
9W. Acquisition Representations and Warranties . . . . . . . . . . . 35
10. Representations of the Purchaser. . . . . . . . . . . . . . . . . . . 36
10A. Nature of Purchase . . . . . . . . . . . . . . . . . . . . . . . 36
10B. Source of Funds. . . . . . . . . . . . . . . . . . . . . . . . . 36
11. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
11A. Yield Maintenance Terms. . . . . . . . . . . . . . . . . . . . . 36
11B. Other Terms. . . . . . . . . . . . . . . . . . . . . . . . . . . 38
11C. Accounting Principles, Terms and Determinations. . . . . . . . . 47
12. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
12A. Note Payments. . . . . . . . . . . . . . . . . . . . . . . . . . 48
12B. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
12C. Consent to Amendments. . . . . . . . . . . . . . . . . . . . . . 48
12D. Form, Registration, Transfer and Exchange of Notes; Lost Notes . 49
12E. Persons Deemed Owners; Participations. . . . . . . . . . . . . . 49
12F. Survival of Representations and Warranties; Entire Agreement . . 50
12G. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . 50
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12H. Disclosure to Other Persons. . . . . . . . . . . . . . . . . . . 50
12I. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
12J. Payments Due on Non-Business Days. . . . . . . . . . . . . . . . 51
12K. Satisfaction Requirement . . . . . . . . . . . . . . . . . . . . 51
12L. Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . 51
12M. Waiver of Jury Trial; Consent to Jurisdiction; Limitation of
Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
12N. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . 52
12O. Descriptive Headings . . . . . . . . . . . . . . . . . . . . . . 53
12P. Maximum Interest Payable . . . . . . . . . . . . . . . . . . . . 53
12Q. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . 53
v
PURCHASER SCHEDULE
SCHEDULE 9A -- CONTROLLING STOCKHOLDERS
SCHEDULE 9D -- EXISTING DEBT AND LIENS
SCHEDULE 9H -- LIST OF AGREEMENTS RESTRICTING DEBT
EXHIBIT A -- FORM OF NOTE
EXHIBIT B -- FORM OF WARRANT
EXHIBIT C -- FORM OF OPINION OF COMPANY'S COUNSEL
EXHIBIT D -- FORM OF GUARANTY AGREEMENT
EXHIBIT E -- FORM OF PARTICIPATION RIGHTS AGREEMENT
EXHIBIT F -- FORM OF REGISTRATION RIGHTS AGREEMENT
vi
EQUITY COMPRESSION SERVICES CORPORATION
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
As of July 31, 1997
The Prudential Insurance Company of America
c/o Prudential Capital Group
Four Gateway Center
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
$15,000,000 10.15% SECURED SENIOR SUBORDINATED NOTES DUE 2007
COMMON STOCK PURCHASE WARRANTS
Ladies and Gentlemen:
The undersigned, Equity Compression Services Corporation, an Oklahoma
corporation (the "COMPANY"), hereby agrees with you as follows:
PARAGRAPH 1. AUTHORIZATION OF ISSUE OF SECURITIES.
1A. AUTHORIZATION OF ISSUE OF NOTES. The Company will authorize the issue
of its 10.15% secured senior subordinated promissory notes in the aggregate
principal amount of $15,000,000, to be dated the date of issue thereof, to
mature July 31, 2007, to bear interest on the unpaid balance thereof from the
date thereof until the principal thereof shall have become due and payable at a
rate of 10.15% per annum and on overdue payments at the rate specified therein;
such 10.15% secured senior subordinated promissory notes shall be substantially
in the form of EXHIBIT A attached hereto. The term "NOTES" as used herein shall
include each such 10.15% secured senior subordinated promissory note delivered
pursuant to any provision of this Agreement and each such 10.15% secured senior
subordinated promissory note delivered in substitution or exchange for any other
Note pursuant to any such provision. CAPITALIZED TERMS USED HEREIN HAVE THE
MEANINGS SPECIFIED IN PARAGRAPH 11.
1B. AUTHORIZATION OF ISSUE OF WARRANTS. The Company will also authorize
the issue of its Common Stock Purchase Warrants (any such Common Stock Purchase
Warrants which have been issued pursuant to this Agreement, and any such Common
Stock Purchase Warrants which may be issued in substitution or exchange
therefor, herein collectively called the "WARRANTS") evidencing rights to
purchase from the Company an aggregate of 1,000,000 shares of the Company's
common
1
stock, par value $0.01 per share (the "COMMON STOCK"), at an initial exercise
price per share of $2.80, at any time or from time to time after the Date of
Closing and prior to 5:00 p.m., New York City time, on the earlier of (i) July
31, 2007 or (ii) the later of (a) the date that is six months after the Notes
are fully retired pursuant to paragraph 4B and (b) July 31, 2002, all subject to
the terms, conditions and adjustments set forth in the Warrants; such Warrants
shall be substantially in the form of EXHIBIT B attached hereto.
PARAGRAPH 2. PURCHASE AND SALE OF SECURITIES.
2A. PURCHASE AND SALE OF NOTES. The Company hereby agrees to sell to you
and, subject to the terms and conditions herein set forth, you agree to purchase
from the Company, Notes in the aggregate principal amount of $15,000,000 at 100%
of such aggregate principal amount. The Company will deliver to you, at the
offices of ▇▇▇▇▇ & ▇▇▇▇▇, L.L.P. at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, one
or more Notes registered in your name, evidencing the aggregate principal amount
of Notes to be purchased by you and in the denomination or denominations
specified in the Purchaser Schedule attached hereto, against payment of the
purchase price thereof by transfer of immediately available funds for credit to
the Company's account no. 100968827 at Bank of Oklahoma, National Association,
Tulsa, Oklahoma, ABA No. 103 900 036, on the date of closing, which shall be
August 5, 1997 or any other date on or before August 5, 1997 upon which the
Company and you may mutually agree (the "CLOSING" or the "DATE OF CLOSING").
2B. PURCHASE AND SALE OF WARRANTS. The Company hereby agrees to sell to
you and, subject to the terms and conditions herein set forth, you agree to
purchase from the Company Warrants evidencing rights to purchase an aggregate of
1,000,000 shares of Common Stock. The aggregate purchase price for the Warrants
shall be $10.00. The Company will deliver to you, at the offices of ▇▇▇▇▇ &
▇▇▇▇▇, L.L.P. at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ one or more Warrants,
registered in your name, evidencing rights to purchase an aggregate of 1,000,000
shares of Common Stock, such Warrant or Warrants to evidence rights to purchase
the number of shares of Common Stock specified in the Purchaser Schedule
attached hereto, against payment of the purchase price for the Warrants by
transfer of immediately available funds for credit to the Company's account no.
100968827 at Bank of Oklahoma, National Association, Tulsa, Oklahoma, ABA No.
103 900 036, on the Date of Closing.
PARAGRAPH 3. CONDITIONS PRECEDENT.
3. CONDITIONS TO CLOSING. Your obligation to purchase and pay for the
Securities to be purchased by you hereunder is subject to the satisfaction, on
or before the Date of Closing, of the following conditions:
3A. CERTAIN DOCUMENTS. You shall have received the following, each
dated the Date of Closing (unless a different date is indicated below), and each
in form, scope and substance satisfactory to you:
2
(i) the Notes to be purchased by you;
(ii) the Warrants to be purchased by you;
(iii) certified copies of the resolutions of the Board of Directors
of each of the Transaction Parties approving each of the Subordinated Note
Documents to which each is a party, and certified copies of all documents
evidencing other necessary corporate action and governmental approvals, if
any, with respect to each of the Subordinated Note Documents to which each
is a party;
(iv) a certificate of the Secretary or an Assistant Secretary of
each of the Transaction Parties certifying the names and true signatures of
the officers of such Transaction Party authorized to sign the Subordinated
Note Documents to which it is a party and the other documents to be
delivered hereunder by such Transaction Party;
(v) certified copies of the Certificate of Incorporation
(certified by the Oklahoma or Delaware Secretary of State, as applicable,
within 10 Business Days of the Date of Closing) and bylaws, each as amended
to date, of each of the Transaction Parties;
(vi) a favorable opinion of Schlanger, Mills, ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇,
L.L.P., counsel to the Transaction Parties, substantially in the form of
EXHIBIT C attached hereto;
(vii) a favorable opinion of ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, A Professional
Corporation, special Oklahoma counsel to the Transaction Parties in
connection with this transaction, as to such matters incident to the
matters herein contemplated as you may reasonably request;
(viii) a favorable opinion of ▇▇▇▇▇ & ▇▇▇▇▇▇▇, L.L.P., special
Louisiana counsel to the Transaction Parties in connection with this
transaction, as to such matters incident to the matters herein contemplated
as you may reasonably request;
(ix) a favorable opinion of ▇▇▇▇▇ & ▇▇▇▇▇, L.L.P., who are acting
as special counsel for you in connection with this transaction, as to such
matters incident to the matters herein contemplated as you may reasonably
request;
(x) reliance letters in respect of any other legal opinions
delivered in connection with the Subordinated Note Documents, the
Acquisition Documents and the transactions contemplated thereby;
(xi) certified copies of Requests for Information or Copies (Form
UCC-11) or equivalent reports, dated within 30 days of the Date of Closing,
listing all effective financing statements which name any of the
Transaction Parties or Acquired Companies (under any of their present names
and any previous names) as debtor and which are filed in all jurisdictions
in which any of the Transaction Parties or Acquired Companies own property
3
or conduct business, together with copies of such financing statements;
(xii) the Registration Rights Agreement, duly executed and
delivered by the Company;
(xiii) the Participation Rights Agreement, duly executed and
delivered by the Company and the Company's stockholders parties
thereto;
(xiv) certified copies of each of the Acquisition Documents, the
terms and conditions of which shall be in full force and effect and shall
not have been amended, modified or waived except with your prior consent;
(xv) copies of (a) a pro forma consolidated balance sheet
for the Transaction Parties as at the Closing Date, reflecting the
issuance of the Notes hereunder, the issuance of the Senior Notes
under the Senior Note Agreement and the consummation of the
Acquisition, certified by an authorized financial officer of the
Company and (b) good-faith management projections and pro forma
financial statements for the Transaction Parties for fiscal years 1997
through 2001;
(xvi) the Intercreditor Agreement, duly executed and delivered by
you, the Bank (both in its individual capacity and in its capacity as
Agent) and each of the Transaction Parties;
(xvii) Guaranty Agreements, duly executed and delivered by ECI,
Sunterra and OEC;
(xviii) the Security Documents, duly executed and delivered by each
of the Company and the other Transaction Parties parties thereto;
(xix) all Uniform Commercial Code financing statements deemed
necessary or appropriate by you to perfect the Liens in favor of the Agent
arising under the Security Documents, duly executed and delivered by the
appropriate Transaction Parties, to be recorded with the appropriate filing
offices;
(xx) evidence satisfactory to you and your special counsel that
the Company or one of its Subsidiaries has good and marketable title to the
real property encumbered by the Mortgages and that the Agent possesses
mortgage liens with respect to such real property, which evidence may
include, without limitation, mortgagee policies of title insurance, title
reports, title opinions and division orders;
(xxi) certificates of insurance naming the Agent as loss payee and
the Agent and all holders of Notes as additional insureds, as required by
paragraph 5E; and
4
(xxii) written instructions from a Responsible Officer of the
Company, set forth on the Company's letterhead, authorizing and directing
you to pay the purchase price of the Securities by transfer of immediately
available funds for credit to the bank account of the Company identified in
paragraphs 2A and 2B.
3B. REPRESENTATIONS AND WARRANTIES; NO DEFAULT; NO MATERIAL ADVERSE
CHANGE. The representations and warranties of the Company and each of the other
Transaction Parties contained in this Agreement, the other Subordinated Note
Documents and in the Acquisition Documents shall be true on and as of the Date
of Closing, except to the extent of changes caused by the transactions herein
contemplated; there shall exist on the Date of Closing no Event of Default or
Default; there shall exist or have occurred no condition, event or act which
could have a material adverse effect on the business, condition (financial or
other), assets, properties, operations or prospects of the Company and its
Subsidiaries and the Company and each of the other Transaction Parties shall
have delivered to you an Officer's Certificate, dated the Date of Closing, to
both such effects.
3C. PURCHASE PERMITTED BY APPLICABLE LAWS. The offer by the Company of,
and the purchase of and payment for the Securities, to be purchased by you on
the Date of Closing on the terms and conditions herein provided (including the
use of the proceeds of such Securities by the Company) shall not violate any
applicable law or governmental regulation (including, without limitation,
section 5 of the Securities Act or Regulation G or X of the Board of Governors
of the Federal Reserve System) and shall not subject you to any tax, penalty,
liability or other onerous condition under or pursuant to any applicable law or
governmental regulation, and you shall have received such certificates or other
evidence as you may request to establish compliance with this condition.
3D. PROCEEDINGS. All corporate and other proceedings taken or to be taken
in connection with the transactions contemplated hereby and all documents
incident thereto shall be satisfactory in substance and form to you, and you
shall have received all such counterpart originals or certified or other copies
of such documents as you may reasonably request.
3E. RELATED PROCEEDINGS. All corporate and other proceedings taken or to
be taken in connection with (i) the Acquisition, (ii) the Company's execution,
delivery, issuance and sale to you of the Senior Notes pursuant to the Senior
Note Agreement and (iii) the other transactions contemplated thereby, and all
documents incident thereto, shall be satisfactory in substance and form to you,
and you shall have received all such counterpart originals or certified or other
copies of such documents as you may reasonably request.
3F. CONSUMMATION OF ACQUISITION. You shall have received satisfactory
evidence that the Acquisition has been consummated prior to or concurrently with
issuance of the Securities and the Senior Notes, pursuant to and in accordance
with the terms and conditions of the Acquisition Documents (no material terms
thereof having been amended, supplemented, waived or otherwise modified without
your prior written consent).
5
3G. PRIVATE PLACEMENT NUMBER. A Private Placement number issued by
Standard & Poor's CUSIP Service Bureau (in cooperation with the Securities
Valuation Office of the National Association of Insurance Commissioners) shall
have been obtained for the Notes.
3H. FEES. (i) You shall have received all fees which are due and payable
on or before the Closing Date pursuant to any written agreement between the
Company and you, and (ii) without limiting the provisions of paragraph 12B, your
special counsel shall have received its fees, charges and disbursements to the
extent reflected in a statement of such special counsel rendered to the Company
at least one Business Day prior to the Closing.
3I. AMENDMENT OF BANK AGREEMENT. The Bank Agreement shall have been
amended to permit the transactions contemplated hereby and to permit
implementation and enforcement of the provisions hereof.
PARAGRAPH 4. PREPAYMENTS.
4. PREPAYMENTS. The Notes shall be subject to prepayment only with
respect to the prepayments specified in paragraphs 4A, 4B and 4C.
4A. REQUIRED PREPAYMENTS. Until the Notes shall be paid in full, the
Company shall apply to the prepayment of the Notes, without premium, the sum of
$5,000,000 on July 31 in each of the years 2005 and 2006, and such principal
amounts of the Notes, together with interest thereon to the prepayment dates,
shall become due on such prepayment dates. The remaining outstanding principal
amount of the Notes, together with interest accrued thereon, shall become due on
the maturity date of the Notes.
4B. OPTIONAL PREPAYMENT OF NOTES WITH YIELD MAINTENANCE AMOUNT.
(i) The Notes shall be subject to prepayment, on any Business Day
after January 31, 1999, in whole at any time or from time to time in part
(in integral multiples of $1,000,000), at the option of the Company, at
100% of the principal amount so prepaid plus interest thereon to the
prepayment date and the Yield Maintenance Amount, if any, with respect to
each Note so prepaid. Any partial prepayment of the Notes pursuant to this
paragraph 4B shall be applied in satisfaction of required payments of
principal in inverse order of their scheduled due dates.
(ii) The Company shall give the holder of each Note irrevocable
written notice of any prepayment pursuant to this paragraph 4B not less
than three Business Days prior to the prepayment date, specifying such
prepayment date and the principal amount of the Notes, and of the Notes
held by such holder, to be prepaid on such date and stating that such
prepayment is to be made pursuant to this paragraph 4B. Notice of
prepayment having been given as aforesaid, the principal amount of the
Notes specified in such notice, together with interest thereon to the
prepayment date and together with the Yield Maintenance Amount,
6
if any, with respect thereto, shall become due and payable on such
prepayment date. The Company shall, on or before the day on which it gives
written notice of any prepayment pursuant to this paragraph 4B, give
telephonic notice of the principal amount of the Notes to be prepaid and
the prepayment date to each holder which shall have designated a recipient
of such notices in the Purchaser Schedule attached hereto or by notice in
writing to the Company. On the Business Day preceding the date of
prepayment the Company shall deliver to each holder of Notes being prepaid
a statement showing the Yield Maintenance Amount due in connection with
such prepayment and setting forth the details of the computation of such
amount.
4C. OFFER TO PREPAY NOTES IN THE EVENT OF A CHANGE IN CONTROL.
(i) NOTICE OF IMPENDING CHANGE IN CONTROL. The Company will not
take any action that consummates or finalizes a Change in Control unless at
least 30 days prior to such action it shall have given to each holder of
Notes written notice of such impending Change in Control.
(ii) NOTICE OF OCCURRENCE OF CHANGE IN CONTROL. The Company
will, within five Business Days after any Responsible Officer has knowledge
of the occurrence of any Change in Control, give written notice of such
Change in Control to each holder of Notes. If a Change in Control has
occurred, such notice shall contain and constitute an offer to prepay the
Notes as described in clause (iii) of this paragraph 4C and shall be
accompanied by the certificate described in clause (vi) hereof.
(iii) OFFER TO PREPAY NOTES. The offer to prepay Notes
contemplated by the foregoing clause (ii) shall be an offer to prepay, in
accordance with and subject to this paragraph 4C, all, but not less than
all, the Notes held by each holder (in this case only, "holder" in respect
of any Note registered in the name of a nominee for a disclosed beneficial
owner shall mean such beneficial owner) on a date specified in such offer
(the "PROPOSED PREPAYMENT DATE"). Such Proposed Prepayment Date shall be
not less than 30 days and not more than 60 days after the date of such
offer (if the Proposed Prepayment Date shall not be specified in such
offer, the Proposed Prepayment Date shall be the 30th day after the date of
such offer).
(iv) REJECTION; ACCEPTANCE. A holder of Notes may accept the
offer to prepay made pursuant to this paragraph 4C by causing a notice of
such acceptance to be delivered to the Company at least five days prior to
the Proposed Prepayment Date. A failure by a holder of Notes to respond to
an offer to prepay made pursuant to this paragraph 4C shall be deemed to
constitute an acceptance of such offer by such holder.
(v) PREPAYMENT; REDUCTION OF REQUIRED PREPAYMENTS. Prepayment of
the Notes to be prepaid pursuant to this paragraph 4C shall be at 100% of
the principal amount of such Notes, plus the Yield Maintenance Amount
determined for the date of prepayment with
7
respect to such principal amount, together with interest on such Notes
accrued to the date of prepayment. On the Business Day preceding the date
of prepayment, the Company shall deliver to each holder of Notes being
prepaid a statement showing the Yield Maintenance Amount due in connection
with such prepayment and setting forth the details of the computation of
such amount. The prepayment shall be made on the Proposed Prepayment Date.
Upon any partial prepayment of Notes pursuant to this paragraph 4C, the
principal amount of the required prepayment of the Notes becoming due under
paragraph 4A on or after the date of such prepayment shall be reduced in
the same proportion as the aggregate unpaid principal amount of Notes is
reduced as a result of such prepayment.
(vi) OFFICER'S CERTIFICATE. Each offer to prepay the Notes
pursuant to this paragraph 4C shall be accompanied by a certificate,
executed by a Responsible Officer of the Company and dated the date of such
offer, specifying: (a) the Proposed Prepayment Date; (b) that such offer is
made pursuant to this paragraph 4C; (c) the principal amount of each Note
offered to be prepaid; (d) the estimated Yield Maintenance Amount due in
connection with such prepayment (calculated as if the date of such notice
were the date of the prepayment) and the details of such calculation; (e)
the interest that would be due on each Note offered to be prepaid, accrued
to the Proposed Prepayment Date; (f) that the conditions of this paragraph
4C have been fulfilled; and (g) in reasonable detail, the nature and date
of the Change in Control.
4D. PARTIAL PAYMENTS PRO RATA. Upon any partial prepayment of Notes
pursuant to paragraph 4A or 4B, the principal amount so prepaid shall be
allocated to all Notes at the time outstanding (including, for the purpose of
this paragraph 4D only, all such Notes prepaid or otherwise retired or purchased
or otherwise acquired by the Company or any of its Subsidiaries or Affiliates
other than by prepayment pursuant to paragraph 4A, 4B or 4C) in proportion to
the respective outstanding principal amounts thereof. Upon any partial
prepayment of Notes pursuant to paragraph 4C, the principal amount so prepaid
shall be allocated to all Notes at the time outstanding and held by holders who
have accepted the Company's offer of prepayment made pursuant to paragraph 4C
(including, for the purpose of this paragraph 4D only, all such Notes prepaid or
otherwise retired or purchased or otherwise acquired by the Company or any of
its Subsidiaries or Affiliates other than by prepayment pursuant to
paragraph 4A, 4B or 4C) in proportion to the respective outstanding principal
amounts thereof.
4E. RETIREMENT OF NOTES. The Company shall not, and shall not permit any
of its Subsidiaries or Affiliates to, prepay or otherwise retire in whole or in
part prior to their stated final maturity (other than by prepayment pursuant to
paragraph 4A, 4B or 4C or upon acceleration of such final maturity pursuant to
paragraph 8A), or purchase or otherwise acquire, directly or indirectly, Notes
held by any holder unless the Company or such Subsidiary or Affiliate shall have
offered to prepay or otherwise retire or purchase or otherwise acquire, as the
case may be, the same proportion of the aggregate principal amount of Notes held
by each other holder of Notes at the time outstanding upon the same terms and
conditions. Any Notes so prepaid or otherwise retired or purchased or otherwise
acquired by the Company or any of its Subsidiaries or Affiliates shall not be
8
deemed to be outstanding for any purpose under this Agreement, except as
provided in paragraph 4D.
PARAGRAPH 5. AFFIRMATIVE COVENANTS.
5. AFFIRMATIVE COVENANTS.
So long as any Note shall remain unpaid or you shall have any commitment
hereunder (or, with respect to the covenants of the Company set forth in
paragraphs 5A, 5B and 5C, so long as any Note shall remain unpaid or any Warrant
shall remain outstanding) the Company covenants that
5A. FINANCIAL STATEMENTS. The Company will deliver to each holder in
duplicate:
(i) as soon as practicable and in any event within 45 days after
the end of each quarterly period (other than the last quarterly period) in
each fiscal year, consolidating and consolidated statements of income,
stockholders' equity and cash flows of the Company and its Subsidiaries for
the period from the beginning of the current fiscal year to the end of such
quarterly period, and a consolidating and consolidated balance sheet of the
Company and its Subsidiaries as at the end of such quarterly period,
setting forth in each case in comparative form figures for the
corresponding period in the preceding fiscal year, all in reasonable detail
and satisfactory in form to the Required Holder(s) and certified by an
authorized financial officer of the Company, subject to changes resulting
from year-end adjustment; PROVIDED, that delivery pursuant to clause (iii)
below of copies of the Quarterly Report on Form 10Q or 10-QSB, as the case
may be, of the Company for such quarterly period filed with the Securities
and Exchange Commission shall be deemed to satisfy the requirements of this
clause (i) with respect to consolidated financial statements if such
financial statements are included in such report;
(ii) as soon as practicable and in any event within 90 days after
the end of each fiscal year, consolidating and consolidated statements of
income and cash flows and a consolidated statement of stockholders' equity
of the Company and its Subsidiaries for such year, and a consolidating and
consolidated balance sheet of the Company and its Subsidiaries as at the
end of such year, setting forth in each case in comparative form
corresponding consolidated figures from the preceding annual audit, all in
reasonable detail and satisfactory in form to the Required Holder(s) and,
as to the consolidated statements, reported on by independent public
accountants of recognized national standing selected by the Company whose
report shall be without limitation as to the scope of the audit and
satisfactory in substance to the Required Holder(s) and, as to the
consolidating statements, certified by an authorized financial officer of
the Company; PROVIDED, that delivery pursuant to clause (iii) below of
copies of the Annual Report on Form 10K or 10-KSB, as the case may be, of
the Company for such fiscal year filed with the Securities and Exchange
Commission shall be deemed to satisfy the requirements of this clause (ii)
with respect to consolidated financial statements if such financial
statements are included in such report;
9
(iii) promptly upon transmission thereof, copies of all such
financial statements, proxy statements, notices and reports as it shall
send to its public stockholders and copies of all registration statements
(without exhibits) and all reports which it files with the Securities and
Exchange Commission (or any governmental body or agency succeeding to the
functions of the Securities and Exchange Commission);
(iv) promptly upon receipt thereof, a copy of each other report
submitted to the Company or any Subsidiary by independent accountants in
connection with any annual, interim or special audit made by them of the
books of the Company or any Subsidiary; and
(v) as soon as practicable and in any event within five days
after any officer of the Company obtaining knowledge (a) of any condition
or event which, in the opinion of management of the Company, would have a
material adverse effect on the business, condition (financial or other),
assets, properties, operations or prospects of the Company and its
Subsidiaries, (b) that any Person has given any notice from any Person to
the Company or any of its Subsidiaries or taken any other action with
respect to a claimed default or event or condition of the type referred to
in clause (iii) of paragraph 8A, (c) of the institution of any litigation
involving claims against the Company or any of its Subsidiaries equal to or
greater than $100,000 with respect to any single cause of action or of any
adverse determination in any court proceeding in any litigation involving a
potential liability to the Company or any of its Subsidiaries equal to or
greater than $100,000 with respect to any single cause of action which
makes the likelihood of an adverse determination in such litigation against
the Company or such Subsidiary substantially more probable, (d) of any
regulatory proceeding which may have a material adverse effect on the
Company or any of its Subsidiaries, an Officer's Certificate specifying the
nature and period of existence of any such condition or event, or
specifying the notice given or action taken by such Person and the nature
of any such claimed default, event or condition, or specifying the details
of such proceeding, litigation or dispute and what action the Company or
any of its Subsidiaries has taken, is taking or proposes to take with
respect thereto;
(vi) promptly after the filing or receiving thereof, copies of all
reports and notices which the Company or any Subsidiary files under ERISA
with the Internal Revenue Service or the PBGC or the U.S. Department of
Labor or which the Company or any Subsidiary receives from such
corporation;
(vii) promptly upon delivery thereof to the Banks, copies of all
such notices, reports and other materials which the Company or any
Subsidiary is required under the Bank Agreement to deliver to the Banks,
including, without limitation, (a) engineering data and information with
respect to the Oil and Gas Properties, (b) production and expense reports
with respect to the Oil and Gas Properties, (c) appraisals of compressor
unit fleets and (d) borrowing base certificates and related documentation;
10
(viii) promptly upon receipt thereof from the Banks, copies of all
engineering reports and borrowing base determinations prepared by or on
behalf of the Banks with respect to the Oil and Gas Properties;
(ix) promptly upon completion thereof on an annual basis within 60
days following each fiscal year end, a copy of each operating budget and
projection of financial performance prepared by or for the Company and its
Subsidiaries;
(x) within five days after any change in executive management of
the Company or any of its Subsidiaries, including any officers of the
Company or any of its Subsidiaries holding the office of President,
Chairman of the Board or Chief Financial Officer thereof, or the occurrence
of a Change in Control, written notice thereof, together with a description
of the reasons for such change; and
(xi) with reasonable promptness, such other information respecting
the condition or operations, financial or otherwise, of the Company or any
of its Subsidiaries as such holder may reasonably request.
Together with each delivery of financial statements required by clauses (i) and
(ii) above, the Company will deliver to each Significant Holder an Officer's
Certificate demonstrating (with computations in reasonable detail) compliance by
the Company and its Subsidiaries with the provisions of ▇▇▇▇▇▇▇▇▇▇ ▇▇, ▇▇(▇),
▇▇(▇), 6C(5) and 6C(8) and stating that there exists no Event of Default or
Default, or, if any Event of Default or Default exists, specifying the nature
and period of existence thereof and what action the Company proposes to take
with respect thereto. Together with each delivery of financial statements
required by clause (ii) above, the Company will deliver to each Significant
Holder a certificate of such accountants stating that, in making the audit
necessary for their report on such financial statements, they have obtained no
knowledge of any Event of Default or Default, or, if they have obtained
knowledge of any Event of Default or Default, specifying the nature and period
of existence thereof. Such accountants, however, shall not be liable to anyone
by reason of their failure to obtain knowledge of any Event of Default or
Default which would not be disclosed in the course of an audit conducted in
accordance with generally accepted auditing standards.
The Company also covenants that immediately after any Responsible Officer
obtains knowledge of an Event of Default or Default, it will deliver to each
Significant Holder an Officer's Certificate specifying the nature and period of
existence thereof and what action the Company proposes to take with respect
thereto.
5B. INFORMATION REQUIRED BY RULE 144A. The Company will, upon the request
of the holder of any Note or Warrant, provide such holder, and any qualified
institutional buyer designated by such holder, such financial and other
information as such holder may reasonably determine to be necessary in order to
permit compliance with the information requirements of Rule 144A under the
Securities Act in connection with the resale of Notes or Warrants, except at
such times as the
11
Company is subject to the reporting requirements of section 13 or 15(d) of the
Exchange Act. For the purpose of this paragraph 5B, the term "qualified
institutional buyer" shall have the meaning specified in Rule 144A under the
Securities Act.
5C. INSPECTION OF PROPERTY. The Company will permit any Person designated
by any holder (other than a Competitor or an Affiliate, agent or employee of a
Competitor) in writing, at the Company's expense during the continuance of a
Default or Event of Default and otherwise at such holder's expense, to visit and
inspect any of the properties of the Company and its Subsidiaries, to examine
the corporate books and financial records of the Company and its Subsidiaries
and make copies thereof or extracts therefrom and to discuss the affairs,
finances and accounts of any of such corporations with the principal officers of
the Company and its independent public accountants, all at such reasonable times
and as often as such holder may reasonably request. Each holder desiring to
perform any such inspection or examination shall provide the Company with
reasonable prior notice thereof, which notice shall include the identity of the
Person who is to perform such inspection or examination.
5D. COVENANT TO SECURE NOTES EQUALLY. The Company will, if it or any
Subsidiary shall create or assume any Lien upon any of its property or assets,
whether now owned or hereafter acquired, other than Liens permitted by the
provisions of paragraph 6C(1) (unless prior written consent to the creation or
assumption thereof shall have been obtained pursuant to paragraph 12C), make or
cause to be made effective provision whereby the Notes will be secured by such
Lien equally and ratably with any and all other Indebtedness thereby secured so
long as any such other Indebtedness shall be so secured pursuant to such
agreements and instruments as shall be approved by the Required Holder(s), and
the Company will cause to be delivered to the holder of each Note an opinion of
independent counsel to the effect that such agreements and instruments are
enforceable in accordance with their terms and that the Notes are equally and
ratably secured with such other Indebtedness.
5E. CORPORATE EXISTENCE, LICENSES AND PERMITS; MAINTENANCE OF PROPERTIES.
The Company will at all times do or cause to be done all things necessary to
maintain, preserve and renew its existence as a corporation organized under the
laws of a state of the United States of America, will preserve and keep in force
and effect, and cause each of its Subsidiaries to preserve and keep in force and
effect, all licenses and permits necessary to the conduct of its and their
respective businesses and will maintain and keep, and will cause each of its
Subsidiaries to maintain and keep, its and their respective properties in good
repair, working order and condition, and from time to time make all necessary
and proper repairs, renewals and replacements, so that the business carried on
in connection therewith may be properly and advantageously conducted at all
times in the normal course of business as conducted prior to the date of repair;
PROVIDED, HOWEVER, that nothing contained in this paragraph 5D shall prevent the
Company or any Subsidiary from ceasing or omitting to exercise any right,
license or permit or to make any repair, renewal or replacement that (i) in the
reasonable judgment of the Company or such Subsidiary is no longer in the best
interests of the Company or such Subsidiary and (ii) such cessation or omission
could not result in a material
12
adverse effect on the business, condition (financial or other), assets,
properties, operations or prospects of the Company and its Subsidiaries taken as
a whole.
5F. MAINTENANCE OF INSURANCE. The Company will carry and maintain, and
cause each Subsidiary to carry and maintain, insurance (subject to customary
deductibles and retentions) in at least such amounts and against such
liabilities and hazards and by such methods as customarily maintained by other
companies operating similar businesses. The Agent and all holders of Securities
shall be named as additional insureds, and the Agent shall be named as loss
payee, on each insurance policy obtained or maintained by the Company and its
Subsidiaries with respect to their properties and businesses.
5G. PAYMENT OF TAXES AND OTHER CLAIMS. The Company will and will cause
each of its Subsidiaries to file all income tax or similar tax returns required
to be filed in any jurisdiction and to pay and discharge all taxes shown to be
due and payable on such returns and all other taxes, assessments, governmental
charges, levies, trade accounts payable and claims for work, labor or materials
(all the foregoing being referred to collectively as "CLAIMS") payable by any of
them, to the extent such Claims have become due and payable and before they have
become delinquent; PROVIDED that neither the Company nor any Subsidiary need pay
any Claim if (i) the amount, applicability or validity thereof is contested by
the Company or such Subsidiary on a timely basis in good faith and in
appropriate proceedings, and the Company or a Subsidiary has established
adequate reserves therefor in accordance with GAAP on the books of the Company
or such Subsidiary or (ii) the nonpayment of all such Claims in the aggregate
could not result in a material adverse change in the business, condition
(financial or other), assets, properties, operations or prospects of the Company
and its Subsidiaries taken as a whole.
5H. ERISA COMPLIANCE. The Company will, and will cause each ERISA
Affiliate to, at all times:
(i) with respect to each Plan, make timely payments of
contributions required to meet the minimum funding standard set forth in
ERISA or the Code with respect thereto and, with respect to any
Multiemployer Plan, make timely payment of contributions required to be
paid thereto as provided by Section 515 of ERISA, and
(ii) comply with all other provisions of ERISA,
except for such failures to make contributions and failures to comply as could
not have a material adverse effect on the business, condition (financial or
other), assets, properties, operations or prospects of the Company and its
Subsidiaries taken as a whole.
5I. COMPLIANCE WITH LAWS. The Company will comply, and will cause each of
its Subsidiaries to comply, with all applicable laws, rules, regulations and
orders (including those relating to protection of the environment) except, in
any such case, where failure to comply could
13
not have a material adverse effect on the business, condition (financial or
otherwise), operations or prospects of the Company and its Subsidiaries taken as
a whole.
5J. MAINTENANCE OF COMMITTED CREDIT FACILITY. The Company will at all
times maintain a committed revolving credit facility of not less than
$5,000,000, and will maintain its ability to satisfy all conditions precedent to
its ability to obtain advances thereunder, and the remaining commitment period
with respect to such facility shall at all times be at least 12 months.
5K. ENVIRONMENTAL COVENANTS. The Company will immediately notify each
holder of Securities of and provide such holder with copies of any notifications
of discharges or releases or threatened releases or discharges of a Polluting
Substance on, upon, into or from the Collateral which are given or required to
be given by or on behalf of the Company or any of its Subsidiaries to any
federal, state or local Tribunal if any of the foregoing may materially and
adversely affect the Company, any of its Subsidiaries or any part of the
Collateral, and such copies of notifications shall be delivered to the holders
at the same time as they are delivered to the Tribunal. The Company further
agrees promptly to undertake and diligently pursue to completion, or to cause
its Subsidiaries to undertake and diligently pursue to completion, any
appropriate and legally required or authorized remedial containment and cleanup
action in the event of any release or discharge or threatened release or
discharge of a Polluting Substance on, upon, into or from the Collateral. At
all times while owning and operating the Collateral, the Company will maintain
and retain, or cause its Subsidiaries to maintain and retain, complete and
accurate records of all releases, discharges or other disposal of Polluting
Substances on, onto, into or from the Collateral, including, without limitation,
records of the quantity and type of any Polluting Substances disposed of on or
off the Collateral.
5L. ENVIRONMENTAL INDEMNITIES. The Company hereby agrees to indemnify,
defend and hold harmless each holder of Securities, the Agent and each of their
respective officers, directors, employees, agents, consultants, attorneys,
contractors, affiliates, successors, assigns or transferees from and against,
and reimburse said Persons in full with respect to, any and all loss, liability,
damage, fines, penalties, costs and expenses, of every kind and character,
including reasonable attorneys' fees and court costs, known or unknown, fixed or
contingent, occasioned by or associated with any claims, demands, causes of
action, suits and/or enforcement actions, including any administrative or
judicial proceedings, and any remedial, removal or response actions ever
asserted, threatened, instituted or requested by any Persons, including any
Tribunal, arising out of or related to: (i) the breach of any representation or
warranty of the Company contained in paragraph 9M set forth herein; (ii) the
failure of the Company to perform, or to cause its Subsidiaries to perform, any
of the covenants contained in paragraph 5J; (iii) the ownership, construction,
occupancy, operation, use of the Collateral prior to the earlier of the date on
which (a) the Notes have been paid in full, the Warrants are no longer
outstanding and the Security Documents have been released, or (b) the Collateral
has been sold by the Agent pursuant to foreclosure of the Liens granted under
the Security Documents, deed in lieu of such foreclosure or otherwise (all of
the foregoing, collectively, the "INDEMNIFIED LIABILITIES"); provided, however,
the foregoing indemnity shall not apply with respect to matters caused solely by
or arising solely from the Agent's activities during any period of time the
Agent acquires ownership of the Collateral. THE FOREGOING INDEMNITY OBLIGATIONS
14
OF THE COMPANY SHALL EXTEND TO ALL INDEMNIFIED LIABILITIES, INCLUDING, WITHOUT
LIMITATION, ANY INDEMNIFIED LIABILITIES ARISING FROM OR ATTRIBUTED TO THE
NEGLIGENCE OF ANY INDEMNIFIED PARTY.
5M. COLLATERAL; NEW SUBSIDIARIES. The Company shall execute, and shall
cause its Subsidiaries to execute, any and all documents, financing statements,
agreements and instruments, and take all action (including filing Uniform
Commercial Code and other financing statements, mortgages and deeds of trust),
that may be required under applicable law, or which the Required Holder(s) or
the Agent may reasonably request in order to effectuate the transactions
contemplated by the Subordinated Note Documents and in order to grant, preserve,
protect and perfect the validity and priority of the security interests and
Liens created or purported to be created by the Security Documents. In
addition, at the cost and expense of the Company, the Company will (i) cause
each subsequently acquired or organized Subsidiary (contemporaneously with such
acquisition or organization) to execute and deliver a Guaranty Agreement in
favor of the holders of Securities and (ii) cause such Subsidiary to secure
payment of the Securities and performance and observance of all other
obligations of the Company and its Subsidiaries under the Subordinated Note
Documents by pledging or creating, or causing to be pledged or created,
perfected security interests and Liens with respect to such of its assets and
properties as the Required Holder(s) shall designate (it being understood that
it is the intent of the parties that such obligations shall be secured by, among
other things, substantially all the property and assets of the Company and its
Subsidiaries (now or hereafter acquired or created), including, without
limitation, real and other properties acquired subsequent to the Date of
Closing). Such security interests and Liens will be created under the Security
Documents and other security agreements, mortgages, deeds of trust and other
instruments and documents in form, scope and substance satisfactory to the
Required Holder(s) and the Agent, and the Company will deliver or cause to be
delivered to the Agent, all such instruments and documents (including, without
limitation, legal opinions, title insurance policies, surveys and lien searches)
as the Required Holder(s) or the Agent shall request to evidence compliance with
this paragraph 5M. The Company agrees to provide from time to time such
evidence as the Required Holder(s) or the Agent shall request as to the
perfection and priority status of each such security interest and Lien.
5N. ENFORCEMENT OF ACQUISITION DOCUMENTS. The Company will enforce, and
will cause each of its Subsidiaries parties thereto to enforce, all covenants,
agreements and other obligations contained in the Acquisition Documents which
are binding upon the other parties thereto and which survive the consummation of
the Acquisition, including, without limitation, all indemnification obligations.
5O. LOCKBOX ACCOUNT. The Company and each of its Subsidiaries shall
establish and maintain a joint lockbox account with the Agent (the "LOCKBOX
ACCOUNT") pursuant to the Lockbox Agreement.
15
PARAGRAPH 6. NEGATIVE COVENANTS.
6. NEGATIVE COVENANTS. So long as any Note shall remain unpaid or you
shall have any commitment hereunder, the Company covenants that:
6A. TOTAL INDEBTEDNESS TO EBITDA RATIO. The Company will not permit, at
any time, the ratio of Total Debt to EBITDA to exceed 5.00 to 1.00 for the four
fiscal quarters most recently ended.
6B. LIMITATION ON RESTRICTED PAYMENTS. The Company will not and will not
permit any Subsidiary to directly or indirectly declare, order, pay, make or set
apart any sum for any Restricted Payment.
6C. LIENS, INDEBTEDNESS, AND OTHER RESTRICTIONS. The Company will not and
will not permit any Subsidiary to:
6C(1). LIENS. Create, assume or suffer to exist any Lien upon any
of its properties or assets, whether now owned or hereafter acquired
(whether or not provision is made for the equal and ratable securing of the
Notes in accordance with the provisions of paragraph 5D), EXCEPT:
(i) Liens in favor of the Agent securing the Notes and the
payment, performance and observance of the other obligations under
this Agreement and the other Subordinated Note Documents;
(ii) Liens in favor of the Agent securing Senior Debt of the
Company and its Subsidiaries to the Banks under the Bank Agreement and
other Loan Documents (as such term is defined in the Bank Agreement);
(iii) Liens in favor of the Agent securing Senior Debt evidenced
by the Senior Notes and the payment, performance and observance of the
other obligations under the Senior Note Agreement and the other Senior
Note Documents;
(iv) Liens on property of the Company and its Subsidiaries
outstanding on the Date of Closing, described in SCHEDULE 9D attached
hereto and securing Indebtedness permitted by paragraph 6C(2);
(v) statutory Liens incidental to the conduct of business or the
ownership of properties of the Company and its Subsidiaries (including
Liens in connection with worker's compensation, unemployment insurance
and other like laws (other than ERISA Liens), warehousemen's and
mechanic's liens and statutory landlord's liens) and Liens to secure
the performance of bids, tenders or purchase, construction or sales
contracts, or to secure statutory obligations, property taxes and
assessments or
16
governmental charges, surety or appeal bonds or other Liens of like
general nature which in each case are incurred in the ordinary course
of business and not in connection with the borrowing of money, the
obtaining of advances or credit or the payment of the deferred
purchase price of property and which do not in any event materially
impair the value or use of the property encumbered thereby in the
operation of the business of the Company and its Subsidiaries;
PROVIDED in each case, that the obligation secured is not overdue; and
(vi) any Lien created to secure all or any part of the purchase
price, or to secure Indebtedness incurred or assumed to pay all or any
part of the purchase price, of property acquired by the Company or its
Subsidiaries after the Date of Closing, PROVIDED, that any such Lien
shall be confined solely to the item or items of property so acquired
and, if required by the terms of the instrument originally creating
such Lien, other property which is an improvement to or is acquired
for specific use in connection with such acquired property.
6C(2). LIMITATION ON INDEBTEDNESS. Create, incur, assume or permit
to exist any Indebtedness other than:
(i) Indebtedness incurred pursuant to this Agreement, as
evidenced by the Notes, and the guaranty obligations of the Company's
Subsidiaries with respect thereto;
(ii) Indebtedness incurred pursuant to the Senior Note Agreement,
as evidenced by the Senior Notes, and the guaranty obligations of the
Company's Subsidiaries with respect thereto;
(iii) Indebtedness incurred pursuant to the Bank Agreement, so
long as (a) the Intercreditor Agreement shall remain in effect and (b)
the maximum aggregate outstanding loans or commitments (and other
extensions of credit) of all lenders from time to time parties thereto
does not exceed $40,000,000;
(iv) other Indebtedness of the Company to the extent permitted
under paragraph 6A, provided that such Indebtedness is unsecured and,
by its terms, is subordinated in right of payment to the Notes upon
terms satisfactory to the Required Holder(s);
(v) trade payables and current Indebtedness (other than for
borrowed money) incurred in, and deposits and advances accepted in,
the ordinary course of business; and
(vi) Indebtedness secured by the Liens permitted pursuant to
clause (vi) of paragraph 6C(1); PROVIDED, that such Indebtedness shall
not exceed $500,000 in the
17
aggregate incurred during any fiscal year and $750,000 in the
aggregate outstanding at any time.
6C(3). LOANS, ADVANCES, INVESTMENTS AND CONTINGENT LIABILITIES.
Make or permit to remain outstanding any loan or advance to, or extend
credit (other than trade credit extended in the normal course of business
to any Person that is not a Subsidiary of the Company) to, or make or
permit to remain outstanding any Guarantee in connection with the
obligations, stock or dividends of, or own, purchase or acquire any stock,
obligations or securities of, or any other interest in, or make any capital
contribution to, or acquire all or substantially all of the assets of, any
Person (any of the foregoing, an "INVESTMENT"), EXCEPT that the Company or
any Subsidiary may:
(i) endorse negotiable instruments for collection in the
ordinary course of business;
(ii) provide Guarantees with respect to the Indebtedness and
other obligations of the Company and its Subsidiaries under the Senior
Note Documents and the Subordinated Note Documents;
(iii) own, purchase or acquire stock or other equity interests of
a Wholly Owned Subsidiary or, if permitted under clause (vii) of this
paragraph 6C(3), of a Person which immediately after such purchase or
acquisition will be a Wholly Owned Subsidiary;
(iv) own, purchase or acquire (a) certificates of deposit of
commercial banks organized under the laws of the United States or any
state thereof (having capital resources in excess of $100,000,000) and
commercial paper rated A-1 by Standard and Poor's Ratings Group or P-1
by ▇▇▇▇▇'▇ Investors Service, Inc., in each case due within one year
from the date of purchase and payable in the United States in United
States dollars, (b) obligations of the United States Government or any
agency thereof, and obligations guaranteed by the United States
Government, in any case maturing within one year after the acquisition
thereof, and (c) money market mutual funds that are classified as
current assets in accordance with GAAP and that invest solely in
investments described in clauses (a) and (b) maturing not more than
one year after the acquisition thereof, which funds are managed by
Persons having capital and surplus in excess of $100,000,000; and
(v) make or permit to remain outstanding other loans, advances
and Guarantees, PROVIDED that the aggregate amount of other loans,
advances and Guarantees permitted pursuant to this clause (v) shall
not exceed $200,000 during any fiscal year period;
18
(vi) acquire limited partnership or limited liability company
member interests in up to three compressor leasing limited
partnerships or limited liability companies with BOK Capital Services,
Inc. ("BCS"), each of which shall be subject to the following
limitations: (a) the total capital contribution of the Company or its
applicable Subsidiary shall not exceed $1,000; (b) BCS will provide
not more than $6,000,000, in the form of either a capital contribution
or a loan, to each such entity; (c) neither the Company nor any of its
Subsidiaries nor any of their respective properties shall be liable
with respect to any Indebtedness or other obligations of such entity;
(d) and all organizational, operating and other documents executed in
connection with the formation and operation of each such entity shall
be substantially similar to those previously provided to and approved
by you; and
(vii) acquire all of the capital stock or other equity interests of
a Person, or acquire all or substantially all of the assets of a
Person; provided, that the prior written consent of the Required
Holder(s) (which may be granted or withheld in their sold discretion)
shall be required with respect to any such acquisition for
consideration that includes the payment of cash by the Company or any
of its Subsidiaries, at the time of the acquisition or within twelve
months thereafter, in an amount in excess of $5,000,000.
6C(4). CONSOLIDATION, MERGER OR TRANSFER OF ASSETS. (i) Merge or
consolidate with or into any Person (except that any Subsidiary may merge
or consolidate with or into any other Subsidiary), (ii) convey, transfer,
lease or otherwise dispose of all or substantially all of its assets to any
Person or (iii) adopt or effect any plan of reorganization,
recapitalization, liquidation or dissolution.
6C(5). LIMITATION ON ASSET DISPOSITIONS. Except as permitted under
paragraph 6C(4), make or permit to be made any Asset Disposition, other
than the following:
(i) any Asset Disposition involving any of the compressor units
of the Company or any of its Subsidiaries, PROVIDED that (a) the
aggregate Fair Market Value of all such Asset Dispositions may not
exceed $1,000,000 in any consecutive twelve-month period without the
prior written consent of the Required Holder(s), and (b) the Company
has offered to prepay (x) Senior Notes as provided in paragraph 4B of
the Senior Note Agreement, so long as any Senior Notes remain
outstanding, and (y) at any time that no Senior Notes are outstanding,
Indebtedness incurred pursuant to the Bank Agreement if any such
Indebtedness is then outstanding;
(ii) any Asset Disposition involving an undivided interest in any
of the Oil and Gas Properties, PROVIDED that (a) the aggregate Fair
Market Value of all such Asset Dispositions may not exceed $250,000 in
any consecutive twelve-month period without the prior written consent
of the Required Holder(s), and (b) the Company has offered to prepay
(x) Senior Notes as provided in paragraph 4B of the Senior Note
19
Agreement, so long as any Senior Notes remain outstanding, and (y) at
any time that no Senior Notes are outstanding, Indebtedness incurred
pursuant to the Bank Agreement if any such Indebtedness is then
outstanding; and
(iii) any other Asset Disposition for Fair Market Value of assets
(other than and expressly excluding (a) compressors, (b) oil and gas
leasehold, mining or other mineral interests wherever located, and (c)
capital stock or other equity interests in Subsidiaries), PROVIDED
that the aggregate Fair Market Value of all such Asset Dispositions in
any fiscal year may not exceed $100,000.
6C(6). SALE OR DISCOUNT OF RECEIVABLES. Sell with recourse,
discount (other than to the extent of finance and interest charges included
therein) or otherwise sell for less than face value thereof, any of its
notes or accounts receivable, except notes or accounts receivable the
collection of which is doubtful in accordance with general accepted
accounting principles.
6C(7). TRANSACTIONS WITH AFFILIATES. Directly or indirectly,
purchase, acquire or lease any property from, or sell, transfer or lease
any property to, or otherwise deal with, in the ordinary course of business
or otherwise (i) any Affiliate, (ii) any Person owning, beneficially or of
record, directly or indirectly, either individually or together with all
other Persons to whom such Person is related by blood, adoption or
marriage, stock of the Company (of any class having ordinary voting power
for the election of directors) aggregating 5% or more of such voting power
or (iii) any Person related by blood, adoption or marriage to any Person
described or coming within the provisions of clause (i) or (ii) of this
paragraph 6C(7), except in the ordinary course and pursuant to the
reasonable requirements of the Company's or such Subsidiary's business and
upon fair and reasonable terms no less favorable to the Company or such
Subsidiary than would be obtainable in a comparable arm's-length
transaction with a Person not an Affiliate.
6C(8). LIMITATION ON LEASE RENTALS. The Company will not, at any
time, permit Lease Rentals for any current or future fiscal year of the
Company to exceed $500,000; PROVIDED, HOWEVER, that with respect to rental
and other sums paid by the Company or any Subsidiary in respect of any
compressor unit leased to a customer, such sums will constitute Lease
Rentals for purposes of this paragraph 6C(8) only to the extent that they
exceed the gross rental revenue generated by such compressor unit.
6D. CHANGE OF FISCAL YEAR. The Company will not and will not permit any
Subsidiary to change its fiscal year from its present fiscal year (fiscal year
end of December 31).
6E. CHANGE OF BUSINESS. The Company will not and will not permit any
Subsidiary to engage in any business activity or operation substantially
different than or unrelated to its current business activities or operations.
20
6F. CERTIFICATES OF INCORPORATION; BYLAWS; TRADE NAMES. The Company will
not and will not permit any Subsidiary to amend, alter, modify or restate its
Certificate of Incorporation or bylaws in any way which would (i) change its
corporate name or adopt a trade name, or (ii) in any manner adversely affect the
obligations or covenants of the Company and its Subsidiaries hereunder or under
any of the other Subordinated Note Documents.
6G. OTHER AGREEMENTS, AMENDMENTS. The Company will not and will not
permit any of its Subsidiaries to (i) enter into or permit to exist any
agreement (a) which would cause a Default or Event of Default hereunder or (b)
which contains any provision which would be violated or breached by the
performance of the obligations of the Company and its Subsidiaries hereunder or
under any of the other Subordinated Note Documents or (ii) amend or modify or
permit the amendment or modification of the Bank Note, the Bank Agreement or any
other "Loan Document," as such term is defined in the Bank Agreement as in
effect on the date hereof.
6H. LIMITATION ON CERTAIN RESTRICTIVE AGREEMENTS. The Company will not,
and will not permit any of its Subsidiaries to, enter into or suffer to exist
any contractual obligation, other than the Bank Agreement, the Senior Note
Documents and the Subordinated Note Documents, which in any way restricts the
ability of the Company or any of its Subsidiaries to (i) create, incur, assume
or suffer to exist any Lien upon any of its property, assets or revenues, (ii)
make any prepayments or purchases of the Notes required under this Agreement,
(iii) make any dividends or distributions, or any payments required under this
Agreement or any other Subordinated Note Document or (iv) transfer any of its
property or assets to the Company or a Wholly Owned Subsidiary of the Company.
6I. PROHIBITION AGAINST LAYERING. The Company will not and will not
permit any Subsidiary to incur, create, issue, assume, guarantee or in any other
manner become directly or indirectly liable with respect to or responsible for,
or permit to remain outstanding, any Indebtedness (including, without
limitation, Indebtedness permitted pursuant to paragraphs 6A and 6C(2)), that is
subordinate or junior in right of payment to any Senior Debt or any Guarantee in
respect thereof unless such Indebtedness is also unsecured and subordinate in
right of payment to the Notes or the Guaranty Agreements, as the case may be,
upon terms satisfactory to the Required Holder(s).
6J. CHANGE IN CONTROL. No Change in Control shall occur.
PARAGRAPH 7. SUBORDINATION OF NOTES.
7. SUBORDINATION OF NOTES.
7A. SUBORDINATION. Anything in this Agreement to the contrary
notwithstanding, the indebtedness evidenced by the Notes, including principal,
Yield Maintenance Amount, if any, and interest, shall be subordinate and junior
to the extent set forth in subparagraphs (i) to (v), inclusive, below, to all
Senior Debt.
21
(i) If the Company shall default in the payment of any principal of
or interest on any Senior Debt in an amount in excess of $750,000 owing
under any single instrument when the same becomes due and payable, whether
at maturity or at a date fixed for prepayment or by declaration of
acceleration or otherwise, then, unless and until such default shall have
been remedied by payment in full or waived, no holder of the Notes shall
accept or receive any direct or indirect payment of or on account of any
indebtedness in respect of the Notes.
(ii) In the event of any insolvency, bankruptcy, liquidation,
reorganization or other similar proceedings, or any receivership
proceedings in connection therewith, relative to the Company, and in the
event of any proceedings for voluntary liquidation, dissolution or other
winding up of the Company, whether or not involving insolvency or
bankruptcy proceedings, then all Senior Debt shall first be paid in full
before any payment of or on account of principal, Yield Maintenance Amount,
if any, or interest is made by the Company upon the Notes.
(iii) In any of the proceedings referred to in subparagraph (ii)
above, any payment or distribution of any kind or characters whether in
cash, property, stock or obligations, which may be payable or deliverable
by the Company in respect of the Notes shall be paid or delivered directly
to the holders of Senior Debt (or to a banking institution selected by the
court or Person making the payment or delivery or designated by any holder
of Senior Debt) for application in payment thereof in accordance with the
priorities then existing among such holders, unless and until all Senior
Debt shall have been paid in full PROVIDED, HOWEVER, that
(a) if the payment or delivery by the Company of such cash,
property, stock or obligations to the holders of the Notes is
authorized by an order or decree giving effect, and stating in such
order or decree that effect is given, to the subordination of the
Notes to Senior Debt, and made in a reorganization proceeding under
any applicable bankruptcy or reorganization law, no payment or
delivery by the Company of such cash, property, stock or obligations
payable or deliverable with respect to the Notes shall be made to the
holders of Senior Debt; and
(b) no such delivery shall be made to holders of Senior Debt of
stock or obligations which are issued pursuant to reorganization
proceedings if such stock or obligations are subordinate and junior
(whether by law or agreement) at least to the extent provided in this
paragraph 7 to the payment of all Senior Debt then outstanding and to
the payment or any stock or obligations which are issued in exchange
or substitution for any Senior Debt then outstanding.
The consolidation of the Company with, or the merger of the Company with or
into, another corporation or the liquidation or dissolution of the Company
following the conveyance or transfer of its property as an entirety, or
substantially as an entirety, to another corporation upon the terms and
conditions consented to by the Required Holder(s) (it being understood
22
that the holders of the Notes shall have no obligation whatsoever to
consent to any merger or other consolidation involving the Company) shall
not be deemed a dissolution, winding-up, liquidation or reorganization for
the purposes of this section if such other corporation shall, as a part of
such consolidation, merger, conveyance or transfer, comply with the
conditions to which any such consent of the Required Holder(s) is subject.
(iv) Upon the occurrence and during the continuance of any Default
Subordination Event (other than under circumstances when the terms of
subparagraph (ii) above are applicable), no holder of the Notes shall
accept or receive any direct or indirect payment by set-off or otherwise of
or on account of any indebtedness in respect of the Notes during the
Stand-Still Period, PROVIDED that in the case of any payment on or in
respect of any Note which would (in the absence of any such Default
Subordination Event) have been due and payable on any date during such
Stand-Still Period, the provisions of this subparagraph (iv) shall not
prevent such payment on or after the date immediately following the
termination or such Stand-Still Period.
(v) If any payment or distribution of any character, whether in
cash, securities or other property, shall be received by any holder of Note
in contravention of any of the terms of this paragraph 7 and before all the
Senior Debt shall have been paid in full, such payment or distribution
shall be received in trust for the benefit of the holders of the Senior
Debt at the time outstanding and shall forthwith be paid over or delivered
and transferred to the holders of Senior Debt.
7B. OBLIGATION OF THE COMPANY UNCONDITIONAL. The provisions of this
paragraph 7 are for the purpose for defining the relative rights of the holders
of Senior Debt on the one hand, and the holders of the Notes on the other hand,
against the Company and its property, and nothing herein shall impair, as
between the Company and the holders of the Notes, the obligation of the Company,
which is unconditional and absolute, to pay to the holders thereof the principal
thereof and Yield Maintenance Amount, if any, and interest thereon in accordance
with their terms and the provisions hereof, nor shall anything herein prevent
the holders of the Notes from exercising all remedies otherwise permitted by
applicable law or hereunder upon default hereunder or under the Notes including,
without limitation, the right to demand payment and ▇▇▇ for performance hereof
and of the Notes and to accelerate the maturity thereof as provided in paragraph
8A, subject to the rights, if any, under this paragraph 7 of holders of Senior
Debt to receive cash, property, stock or obligations otherwise payable or
deliverable by the Company to the holders of the Notes.
7C. SUBROGATION. Upon payment in full of Senior Debt, the holders of the
Notes shall be subrogated to the rights of the holders of the Senior Debt to
receive payments or distributions of assets of the Company made on Senior Debt
until the principal of and premium, if any, and interest on the Notes shall be
paid in full, and, for the purposes of such subrogation, no payments to the
holders of Senior Debt of any cash, property, stock or obligations to which the
holders of the Notes would be entitled except for the provisions of paragraph
7A(iii) above shall, as between the
23
Company, its creditors (other than the holders of the Senior Debt) and the
holders of the Notes, be deemed to be a payment by the Company to or on account
of Senior Debt.
7D. RIGHTS OF HOLDERS OF SENIOR DEBT. The provisions of this paragraph 7
shall be deemed a continuing offer to all holders of Senior Debt to act in
reliance on such provisions (but no such reliance shall be required to be proven
to receive the benefits hereof) and may be enforced by such holders and no right
of any present or future holder of any Senior Debt to enforce subordination as
provided in this paragraph 7 shall at any time in any way be prejudiced or
impaired by any act or failure to act on the part of the Company or by any act
or failure to act by any such holder, or by any non-compliance by the Company
with the terms, provisions and covenants of this Agreement or the Notes.
Without in any way limiting the generality of the foregoing, the holders of
Senior Debt may, at any time and from time to time, without the consent of or
notice to the holders of the Notes, and without impairing or releasing the
subordination provided in this paragraph 7 or the obligations hereunder of the
holders of the Notes to the holders of Senior Debt, do any one or more of the
following: (i) change the manner, place or terms of payment or extend the time
of payment of, or renew or alter, or waive defaults under Senior Debt, or
otherwise amend or supplement in any manner Senior Debt or any instrument
evidencing the same or any agreement under which Senior Debt is outstanding;
(ii) release any Person liable in any manner for the payment or collection of
Senior Debt; and (iii) exercise or refrain from exercising any rights against
the Company and any other Person, including any guarantor or surety.
7E. SUBORDINATION DEFINITIONS.
"DEFAULT SUBORDINATION EVENT" shall mean the existence of all of the
following: (i) a Subordination Event of Default shall have occurred and be
continuing in respect of any Senior Debt, (ii) the holder or holders of the
Notes shall have received a notice from or on behalf of any holder of such
Senior Debt specifying that such Subordination Event of Default has occurred and
is continuing and that such notice constitutes a "DEFAULT SUBORDINATION NOTICE"
and (iii) no other Default Subordination Notice shall have been delivered by any
holder of Senior Debt within the 365 day period immediately preceding the giving
of such notice. The "STAND-STILL PERIOD" relating to any Default Subordination
Event shall be deemed to continue until the earlier of (x) the Subordination
Event of Default under the Senior Debt giving rise thereto shall have been cured
or waived, (y) a period of 90 days shall have elapsed from the giving of the
Default Subordination Notice relating thereto and (z) any Senior Debt shall have
been accelerated. There shall be no more than three Stand-Still Periods.
"SENIOR DEBT" shall mean all obligations (whether now outstanding or
hereafter incurred), for the payment of which the Company is responsible or
liable as obligor, guarantor or otherwise in respect of (i) all payment
obligations under the Senior Notes or the Senior Note Agreement in respect of
principal, interest and fees, whether now owing or hereafter incurred, and
(ii) payment obligations under the Bank Agreement in respect of up to
$40,000,000 of principal, together with all interest on and fees with respect to
such principal, whether now owing or hereafter incurred.
24
"SUBORDINATION EVENT OF DEFAULT" shall mean any event of default under
any agreement evidencing Senior Debt arising as a result of a breach of a
covenant which would entitle the holders of such Senior Debt to accelerate the
obligations under such Senior Debt.
PARAGRAPH 8. EVENTS OF DEFAULT.
8. EVENTS OF DEFAULT.
8A. ACCELERATION. If any of the following events shall occur and be
continuing for any reason whatsoever (and whether such occurrence shall be
voluntary or involuntary or come about or be effected by operation of law or
otherwise):
(i) the Company defaults in the payment or prepayment of any
principal of any Note when the same shall become due, either by the terms
thereof or otherwise as herein provided; or
(ii) the Company defaults in the payment of any interest on any
Note for more than five days after the date due, or the Company or any
Subsidiary fails to pay any other amounts owed under this Agreement or any
other Subordinated Note Document within ten days after the date due; or
(iii) the Company or any Subsidiary (a) defaults (whether as
primary obligor or as guarantor or other surety) in any payment of
principal of or interest on any other obligation for money borrowed (or any
Capitalized Lease Obligation, any obligation under a conditional sale or
other title retention agreement, any obligation issued or assumed as full
or partial payment for property whether or not secured by a purchase money
mortgage or any obligation under notes payable or drafts accepted
representing extensions of credit) beyond any period of grace provided with
respect thereto, or (b) fails to perform or observe any other agreement,
term or condition contained in any agreement under which any such
obligation is created (or if any other event thereunder or under any such
agreement shall occur and be continuing) and the effect of such failure or
other event is to cause such obligation to become due (or to be repurchased
by the Company or any Subsidiary) prior to any stated maturity; provided,
that the aggregate amount of all obligations as to which such a payment
default shall occur and be continuing or such a failure or other event
causing acceleration (or sale to the Company or any Subsidiary) shall occur
and be continuing exceeds $1,000,000; or
(iv) any representation or warranty made by the Company or any of
its Subsidiaries herein or in any of the other Subordinated Note Documents,
or by the Company or any of its officers in any writing furnished in
connection with or pursuant to this Agreement shall be false in any
material respect on the date as of which made; or
(v) the Company fails to perform or observe any term, covenant or
agreement contained in paragraphs 5I or 6; or
25
(vi) the Company or any Subsidiary fails to perform or observe any
other agreement, covenant, term or condition contained herein or in any of
the other Subordinated Note Documents and such failure shall not be
remedied within the earlier of (a) 30 days after the Company or any
Subsidiary obtains (or should have obtained) knowledge thereof or (b) 20
days following receipt of notice thereof from any holder; or
(vii) the Company or any Subsidiary makes an assignment for the
benefit of creditors or is generally not paying its debts as such debts
become due; or
(viii) any decree or order for relief in respect of the Company or
any Subsidiary is entered under any bankruptcy, reorganization, compromise,
arrangement, insolvency, readjustment of debt, dissolution or liquidation
or similar law, whether now or hereafter in effect (the "BANKRUPTCY LAW"),
of any jurisdiction; or
(ix) the Company or any Subsidiary petitions or applies to any
Tribunal for, or consents to, the appointment of, or taking possession by,
a trustee, receiver, custodian, liquidator or similar official of the
Company or any Subsidiary, or of any substantial part of the assets of the
Company or any Subsidiary, or commences a voluntary case under the
Bankruptcy Law of the United States or any proceedings (other than
proceedings for the voluntary liquidation and dissolution of a Subsidiary)
relating to the Company or any Subsidiary under the Bankruptcy Law of any
other jurisdiction; or
(x) any such petition or application is filed, or any such
proceedings are commenced, against the Company or any Subsidiary and the
Company or such Subsidiary by any act indicates its approval thereof,
consent thereto or acquiescence therein, or an order, judgment or decree is
entered appointing any such trustee, receiver, custodian, liquidator or
similar official, or approving the petition in any such proceedings, and
such order, judgment or decree remains unstayed and in effect for more than
60 days; or
(xi) any order, judgment or decree is entered in any proceedings
against the Company decreeing the dissolution of the Company and such
order, judgment or decree remains unstayed and in effect for more than 60
days; or
(xii) any order, judgment or decree is entered in any proceedings
against the Company or any Subsidiary decreeing a split-up of the Company
or such Subsidiary which requires the divestiture of assets representing a
substantial part, or the divestiture of the stock of a Subsidiary whose
assets represent a substantial part, of the consolidated assets of the
Company and its Subsidiaries (determined in accordance with generally
accepted accounting principles) or which requires the divestiture of
assets, or stock of a Subsidiary, which shall have contributed a
substantial part of the consolidated net income of the Company and its
Subsidiaries (determined in accordance with generally accepted accounting
principles) for any of the three fiscal years then most recently ended, and
such order, judgment or decree remains unstayed and in effect for more than
60 days; or
26
(xiii) the Company or any Subsidiary fails to make timely payment or
deposit of any amount of tax required under the Code to be withheld by the
Company or any Subsidiary and paid to or deposited to or to the credit of
the United States of America in respect of any and all wages and salaries
paid to employees of any one or more or all of the Company or any of its
Subsidiaries for a tax deposit amount in excess of $10,000; or
(xiv) any judgment or order, or series of judgments or orders, in
an amount in excess of $250,000, is rendered against the Company or any
Subsidiary and either (i) enforcement proceedings have been commenced by
any creditor upon such judgment or order or (ii) within 30 days after entry
thereof, such judgment is not discharged or execution thereof stayed
pending appeal, or within 30 days after the expiration of any such stay,
such judgment is not discharged; or
(xv) any Termination Event with respect to a Plan shall have
occurred and, within 30 days after the occurrence thereof, (a) such
Termination Event (if correctable) shall not have been corrected and (b)
the then present value of such Plan's vested benefits exceeds the then
current value of assets accumulated in such Plan by more than the amount of
$250,000 (or in the case of a Termination Event involving the withdrawal of
a "substantial employer" (as defined in Section 4001(a) (2) of ERISA), the
withdrawing employer's proportionate share of such excess shall exceed such
amount); or
(xvi) the Company or any of its ERISA Affiliates as employer under
a Multiemployer Plan shall have made a complete or partial withdrawal from
such Multiemployer Plan and the plan sponsor of such Multiemployer Plan
shall have notified such withdrawing employer that such employer has
incurred a withdrawal liability in an aggregate amount exceeding $250,000;
then (a) if such event is an Event of Default specified in clause (i) or (ii) of
this paragraph 8A, the holder of any Note (other than the Company or any of its
Subsidiaries or Affiliates) may at its option, by notice in writing to the
Company, declare such Note to be, and such Note shall thereupon be and become,
immediately due and payable at par together with interest accrued thereon,
without presentment, demand, protest or other notice of any kind, all of which
are hereby waived by the Company, (b) if such event is an Event of Default
specified in clause (viii), (ix) or (x) of this paragraph 8A, all of the Notes
at the time outstanding shall automatically become immediately due and payable
together with interest accrued thereon and together with the Yield Maintenance
Amount, if any, with respect to each Note, without presentment, demand, protest
or notice of any kind, all of which are hereby waived by the Company, and (c) if
such event is not an Event of Default specified in clause (viii), (ix) or (x) of
this paragraph 8A, the Required Holder(s) may at its or their option, by notice
in writing to the Company, declare all of the Notes to be, and all of the Notes
shall thereupon be and become, immediately due and payable together with
interest accrued thereon and together with the Yield Maintenance Amount, if any,
with respect to each Note, without presentment, demand, protest or other notice
of any kind, all of which are hereby waived by the Company.
27
The Company acknowledges, and the parties hereto agree, that each holder of
a Note has the right to maintain its investment in the Notes free from repayment
by the Company (except as herein specifically provided for) and that the
provisions for payment of the Yield Maintenance Amount by the Company in the
event that the Notes are prepaid or are accelerated as a result of an Event of
Default are intended to provide compensation for the deprivation of such right
under such circumstances.
8B. RESCISSION OF ACCELERATION. At any time after any or all of the Notes
shall have been declared immediately due and payable pursuant to paragraph 8A,
the Required Holder(s) may, by notice in writing to the Company, rescind and
annul such declaration and its consequences if (i) the Company shall have paid
all overdue interest on the Notes, the principal of the Notes which has become
due otherwise than by reason of such declaration, and interest on such overdue
interest and overdue principal at the rate specified in the Notes, (ii) the
Company shall not have paid any amounts which have become due solely by reason
of such declaration, (iii) all Events of Default and Defaults, other than
non-payment of amounts which have become due solely by reason of such
declaration, shall have been cured or waived pursuant to paragraph 12C, and (iv)
no judgment or decree shall have been entered for the payment of any amounts due
pursuant to the Notes or this Agreement. No such rescission or annulment shall
extend to or affect any subsequent Event of Default or Default or impair any
right arising therefrom.
8C. NOTICE OF ACCELERATION OR RESCISSION. Whenever any Note shall be
declared immediately due and payable pursuant to paragraph 8A or any such
declaration shall be rescinded and annulled pursuant to paragraph 8B, the
Company shall forthwith give written notice thereof to the holder of each Note
at the time outstanding.
8D. OTHER REMEDIES. If any Event of Default or Default shall occur and be
continuing, (i) the holder of any Note may proceed to protect and enforce its
rights under this Agreement, such Note and the other Subordinated Note Documents
by exercising such remedies as are available to such holder in respect thereof
under applicable law, either by suit in equity or by action at law, or both,
whether for specific performance of any covenant or other agreement contained in
this Agreement or the other Subordinated Note Documents or in aid of the
exercise of any power granted in this Agreement or the other Subordinated Note
Documents, and (ii) both the Agent and the holders of the Notes may exercise any
rights or remedies in their respective capacities under the Security Documents
in accordance with the provisions thereof. No remedy conferred in this
Agreement or the other Subordinated Note Documents upon the holder of any Note
or the Agent is intended to be exclusive of any other remedy, and each and every
such remedy shall be cumulative and shall be in addition to every other remedy
conferred herein or now or hereafter existing at law or in equity or by statute
or otherwise.
28
PARAGRAPH 9. REPRESENTATIONS, COVENANTS AND WARRANTIES.
9. REPRESENTATIONS, COVENANTS AND WARRANTIES. The Company represents,
covenants and warrants as follows:
9A. ORGANIZATION AND QUALIFICATION. Each of the Transaction Parties is a
corporation duly organized and validly existing in good standing under the laws
of its state of incorporation, and is duly licensed and in good standing as a
foreign corporation in each jurisdiction in which the nature of the business
transacted or the property owned is such as to require licensing or
qualification as a foreign corporation. The Company has no Subsidiaries other
than ECI, ELC, Sunterra and OEC, and ECI, ELC, Sunterra and OEC are each Wholly
Owned Subsidiaries of the Company. The execution, delivery and performance by
the Company of the Notes, this Agreement, the other Subordinated Note Documents
and the Acquisition Documents to which it is a party, and the execution,
delivery and performance by each of the other Transaction Parties of the
Subordinated Note Documents and Acquisition Documents to which it is a party,
are within the Company's and the other Transaction Parties' respective corporate
powers and have been duly authorized by all necessary corporate action. All
record or beneficial stockholders of the Company comprising the Control Group
are listed on Schedule 9A attached hereto.
9B. FINANCIAL STATEMENTS. The Company has furnished you with the
following financial statements, identified by a principal financial officer of
the Company: (i) a consolidated balance sheet of the Company and its
Subsidiaries as at December 31 in each of the years 1994 to 1996, inclusive, and
consolidated statements of income, stockholders' equity and cash flows of the
Company and its Subsidiaries for each such year, all reported on by Coopers &
▇▇▇▇▇▇▇ L.L.P.; and (ii) a consolidated balance sheet of the Company and its
Subsidiaries as at March 31 in each of the years 1996 and 1997 and consolidated
statements of income, stockholders' equity and cash flows for the three-month
period ended on each such date, prepared by the Company. Such financial
statements (including any related schedules and/or notes) are true and correct
in all material respects (subject, as to interim statements, to changes
resulting from audits and year-end adjustments), have been prepared in
accordance with generally accepted accounting principles consistently followed
throughout the periods involved and show all liabilities, direct and contingent,
of the Company and its Subsidiaries required to be shown in accordance with such
principles. The balance sheets fairly present the condition of the Company and
its Subsidiaries as at the dates thereof, and the statements of income,
stockholders' equity and cash flows fairly present the results of the operations
of the Company and its Subsidiaries and their cash flows for the periods
indicated. There has been no material adverse change in the business, condition
(financial or otherwise), prospects or operations of the Company and its
Subsidiaries taken as a whole since December 31, 1996.
9C. ACTIONS PENDING. There is no action, suit, investigation or
proceeding pending or, to the knowledge of the Company, threatened against the
Company or any of its Subsidiaries, or any properties or rights of the Company
or any of its Subsidiaries, by or before any court, arbitrator or administrative
or governmental body which, if adversely determined, might result in a liability
of greater than $100,000 or might otherwise result in any material adverse
change in the business,
29
condition (financial or otherwise), prospects or operations of the Company and
its Subsidiaries taken as a whole. There is no action, suit, investigation or
proceeding pending or threatened against the Company or any of its Subsidiaries
which purports to affect the validity or enforceability of this Agreement, any
Note, any Warrant, any of the other Subordinated Note Documents or any of the
Acquisition Documents.
9D. OUTSTANDING INDEBTEDNESS. Neither the Company nor any of its
Subsidiaries has outstanding any Indebtedness except as permitted by paragraphs
6A and 6C(2) and all of which is described in SCHEDULE 9D attached hereto. There
exists no default under (and no waiver of default is currently in effect with
respect to) the provisions of any instrument evidencing such Indebtedness or of
any agreement relating thereto, and no event or condition exists with respect to
any Indebtedness of the Company or any Subsidiary that would permit (or that
with notice or the lapse of time, or both, would permit) one or more Persons to
cause such Indebtedness to become due and payable before its stated maturity or
before its regularly scheduled dates of payment.
9E. TITLE TO PROPERTIES. The Company has and each of its Subsidiaries has
good and marketable title to its respective real properties (other than
properties which it leases) and good title to all of its other respective
properties and assets, including the properties and assets reflected in the
balance sheet as at December 31, 1996 referred to in paragraph 9B (other than
properties and assets disposed of in the ordinary course of business), subject
to no Lien of any kind except Liens permitted by paragraph 6C(1). All leases
necessary in any material respect for the conduct of the respective businesses
of the Company and its Subsidiaries are valid and subsisting and are in full
force and effect. The two schedules of natural gas compressor units and related
leases, dated June 30, 1997 (as to OEC) and July 21, 1997 and August 4, 1997 (as
to ECS), previously furnished to you by the Company contain a true, correct and
complete list of all natural gas compressor units owned or leased (as lessee) by
the Company or any of its Subsidiaries and the material terms of the respective
lease agreements pursuant to which the Company or any of its Subsidiaries is
leasing such compressor units to its customers.
9F. POSSESSION OF FRANCHISES, LICENSES. The Company and each of its
Subsidiaries possesses all franchises, certificates, licenses, permits and other
authorizations from governmental political subdivisions or regulatory
authorities, free from burdensome restrictions, that are necessary in any
material respect for the ownership, maintenance and operation of its respective
properties and assets, and none of the Company or any of its Subsidiaries is in
violation of any thereof in any material respect.
9G. TAXES. The Company has and each of its Subsidiaries has filed all
federal, state and other income tax returns which, to the knowledge of the
officers of the Company, are required to be filed, and each has paid all taxes
as shown on such returns and on all assessments received by it to the extent
that such taxes have become due, except such taxes as are being contested in
good faith by appropriate proceedings and for which adequate reserves have been
established in accordance with generally accepted accounting principles.
30
9H. CONFLICTING AGREEMENTS AND OTHER MATTERS. Neither the Company nor any
of its Subsidiaries is a party to any contract or agreement or subject to any
charter or other corporate restriction which materially and adversely affects
its business, property or assets, prospects or financial condition. Neither the
execution nor delivery of this Agreement, the Notes, the Warrants, the other
Subordinated Note Documents or the Acquisition Documents, nor the offering,
issuance and sale of the Notes and the Warrants, nor fulfillment of nor
compliance with the terms and provisions of this Agreement, the Notes, the other
Subordinated Note Documents or the Acquisition Documents will conflict with, or
result in a breach of the terms, conditions or provisions of, or constitute a
default under, or result in any violation of, or result in the creation of any
Lien (except Liens created under the Security Documents) upon any of the
properties or assets of the Company or any of its Subsidiaries pursuant to, the
charter or bylaws of the Company or any of its Subsidiaries, any award of any
arbitrator or any agreement (including any agreement with stockholders),
instrument, order, judgment, decree, statute, law, rule or regulation to which
the Company or any of its Subsidiaries is subject. Neither the Company nor any
of its Subsidiaries is a party to, or otherwise subject to any provision
contained in, any instrument evidencing Indebtedness of the Company or such
Subsidiary, any agreement relating thereto or any other contract or agreement
(including its charter) which limits the amount of, or otherwise imposes
restrictions on the incurring of, Indebtedness of the Company of the type to be
evidenced by the Notes except as set forth in the agreements listed in SCHEDULE
9H attached hereto.
9I. AUTHORIZED CAPITAL STOCK. The authorized capital stock of the Company
consists of 40,000,000 shares of Common Stock, $0.01 per share par value, and
1,000,000 shares of Preferred Sock, $1.00 per share par value. The outstanding
capital stock of the Company consists of 21,466,735 shares of Common Stock. All
of the outstanding shares of Common Stock are duly authorized, validly issued,
fully paid and nonassessable. The Company does not have outstanding any
warrants, options, convertible securities or other rights for the purchase or
acquisition of shares of its capital stock other than (a) the Warrants, (b) the
Warrant dated as of December 19, 1996 evidencing the right of HACL, Ltd., a
Texas limited partnership, to purchase up to 8,000,000 shares of Common Stock
prior to December 19, 2000 at an exercise price of $0.91 and (c) stock options
granted under the Company's employee and director stock option plans. The
Warrants and the shares of Common Stock issuable upon the exercise of the
Warrants have been duly and validly authorized, and such shares of Common Stock
have been duly reserved for issuance upon exercise of the Warrants. No
shareholder of the Company or any other Person is entitled to preemptive or
similar rights with respect to the shares of Common Stock which are issuable
upon exercise of the Warrants and, if and when issued upon exercise of the
Warrants in accordance with the provisions thereof, such shares will be validly
issued, fully paid and nonassessable shares.
9J. OFFERING OF THE SECURITIES. Neither the Company nor any agent acting
on its behalf has, directly or indirectly, offered the Securities or any similar
security of the Company for sale to, or solicited any offers to buy the
Securities or any similar security of the Company from, or otherwise approached
or negotiated with respect thereto with, any Person other than institutional
investors, and neither the Company nor any agent acting on its behalf has taken
or will take any
31
action which would subject the issuance or sale of the Securities to the
provisions of section 5 of the Securities Act or to the provisions of any
securities or Blue Sky law of any applicable jurisdiction.
9K. USE OF PROCEEDS. Neither the Company nor any Subsidiary owns or has
any present intention of acquiring any "margin stock" as defined in Regulation G
(12 CFR Part 207) of the Board of Governors of the Federal Reserve System
("MARGIN STOCK"). The proceeds of sale of the Securities will be used to fund
the Acquisition. None of such proceeds will be used, directly or indirectly,
for the purpose, whether immediate, incidental or ultimate, of purchasing or
carrying any margin stock or for the purpose of maintaining, reducing or
retiring any Indebtedness which was originally incurred to purchase or carry any
stock that is currently a margin stock or for any other purpose which might
constitute this transaction a "purpose credit" within the meaning of such
Regulation G. Neither the Company nor any agent acting on its behalf has taken
or will take any action which might cause this Agreement or the Securities to
violate Regulation G or any other regulation of the Board of Governors of the
Federal Reserve System or to violate the Exchange Act, in each case as in effect
now or as the same may hereafter be in effect.
9L. ERISA. No accumulated funding deficiency (as defined in section 302
of ERISA and section 412 of the Code), whether or not waived, exists with
respect to any Plan (other than a Multiemployer Plan). No liability to the PBGC
has been or is expected by the Company or any ERISA Affiliate to be incurred
with respect to any Plan (other than a Multiemployer Plan) by the Company, any
Subsidiary or any ERISA Affiliate which is or would be materially adverse to the
business, condition (financial or otherwise), prospects or operations of the
Company and its Subsidiaries taken as a whole. Neither the Company, any
Subsidiary nor any ERISA Affiliate has incurred or presently expects to incur
any withdrawal liability under Title IV of ERISA with respect to any
Multiemployer Plan which is or would be materially adverse to the business,
condition (financial or otherwise), prospects or operations of the Company and
its Subsidiaries taken as a whole. The execution and delivery of this Agreement
and the issuance and sale of the Securities will be exempt from, or will not
involve any transaction which is subject to, the prohibitions of section 406 of
ERISA and will not involve any transaction in connection with which a penalty
could be imposed under section 502(i) of ERISA or a tax could be imposed
pursuant to section 4975 of the Code. The representation by the Company in the
next preceding sentence is made in reliance upon and subject to the accuracy of
your representation in paragraph 10B.
9M. GOVERNMENTAL CONSENT. Neither the nature of the Company or of any
Subsidiary, nor any of their respective businesses or properties, nor any
relationship between the Company or any Subsidiary and any other Person, nor any
circumstance in connection with the offering, issuance, sale or delivery of the
Securities is such as to require any authorization, consent, approval, exemption
or other action by or notice to or filing with any court or administrative or
governmental or regulatory body (other than routine filings after the Date of
Closing with the Securities and Exchange Commission and/or state Blue Sky
authorities) in connection with the execution and delivery of this Agreement,
the other Subordinated Note Documents or the Acquisition Documents and the
offering, issuance, sale or delivery of the Securities or fulfillment of or
compliance with the
32
terms and provisions of this Agreement, the Registration Rights Agreement or the
Participation Rights Agreement or of the Securities.
9N. ENVIRONMENTAL COMPLIANCE.
(i) The Company and its Subsidiaries and all of their respective
properties and facilities have complied at all times and in all respects
with all federal, state, local and regional statutes, laws, ordinances and
judicial or administrative orders, judgments, rulings and regulations
relating to protection of the environment except, in any such case, where
failure to comply would not result in a material adverse effect on the
business, condition (financial or otherwise), prospects or operations of
the Company and its Subsidiaries taken as a whole;
(ii) Neither the Company nor any of its Subsidiaries is subject to
any liability or obligation relating to (a) the environmental conditions
on, under or about the Collateral, including, without limitation, the soil
and ground water conditions at the location of any of the properties of the
Company or its Subsidiaries, or (b) the use, management, handling,
transport, treatment, generation, storage, disposal, release or discharge
of any Polluting Substance;
(iii) The Company and its Subsidiaries have not obtained and are
not required to obtain or make application for any permits, licenses or
similar authorizations to construct, occupy, operate or use any buildings,
improvements, facilities, fixtures and equipment forming a part of the
Collateral by reason of any Environmental Laws;
(iv) The Company and its Subsidiaries have taken all steps
necessary to determine and has determined that no Polluting Substances have
been disposed of or otherwise released on, onto, into, or from the
Collateral (the term "release," "disposal" or "disposed" shall have the
respective meanings specified in applicable Environmental Laws);
(v) There are no polychlorinated biphenyls ("PCB'S") or
asbestos-containing materials, whether in the nature of thermal insulation
products such as pipe boiler or breech coverings, wraps or blankets or
sprayed-on or troweled-on products in, on or upon the Collateral; and
(vi) There is no urea formaldehyde foam insulation ("UFFI") in, on
or upon the Collateral.
9O. OIL AND GAS CONTRACTS. All contracts, agreements and leases related
to any of the oil and gas mining, mineral or leasehold properties and all
contracts, agreements, instruments and leases to which the Company or any of its
Subsidiaries is a party, are valid and effective in accordance with their
respective terms, and all agreements included in the oil and gas mining, mineral
or leasehold properties in the nature of oil and/or
33
gas purchase agreements, and oil and/or gas sale agreements are in full force
and effect and are valid and legally binding obligations of the parties thereto
and all payments due thereunder have been made, except for those suspended for
reasonable cause in the ordinary course of business; and, there is not under any
such contract, agreement or lease any existing default by any party thereto or
any event which, with notice or lapse of time, or both, would constitute such
default, other than minor defaults which, in the aggregate, would result in
losses or damages of more than $100,000 to the Company or any of its
Subsidiaries.
9P. NATURAL GAS POLICY ACT AND NATURAL GAS ACT COMPLIANCE. To the
Company's knowledge, all material filings and approvals under the Natural Gas
Policy Act of 1978, as amended, and the Natural Gas Act, as amended, or with the
Federal Energy Regulatory Commission (the "FERC") or required under any rules or
regulations adopted by the FERC which are necessary for the operation of the
respective businesses of the Company and its Subsidiaries or the Collateral in
the manner in which they are presently being operated have been made and the
terms of the agreements and contractual rights included in such businesses or
the Collateral do not conflict with or contravene any such Law, rule or
regulation.
9Q. TAKE OR PAY OBLIGATIONS, PREPAYMENTS, BTU ADJUSTMENTS AND BALANCING
PROBLEMS. To the Company's knowledge, after diligent inquiry, there is no take
or pay obligation under any gas purchase agreement comprising a portion of the
Collateral which is not matched by a commensurate and corresponding pay or take
obligation binding upon the purchaser under a corresponding gas sales agreement
such that with respect to the ownership and operation of the businesses of the
Company or any of its Subsidiaries or the Collateral, any such obligation in
favor of any seller under any gas purchase agreement to which the Company or any
of its Subsidiaries is a "buyer" is matched by a corresponding obligation on the
part of "purchasers" under corresponding gas sales agreements pursuant to which
the Company or any of its Subsidiaries is the "seller". None of the Company and
its Subsidiaries nor the Collateral is subject to requirements to make BTU
adjustments or effect gas balancing in favor of third parties which would result
in the Company or any of its Subsidiaries being required to (i) deliver gas at a
price below that established in applicable gas sales agreements or on behalf of
and for the benefit of third parties in exchange or to otherwise compensate for
prior above market or above contract purchases of gas from the Company or any of
its Subsidiaries or any of their predecessors in interest, or (ii) balance in
kind by allowing other owners in the Collateral to make up the past imbalances
in gas sales, or (iii) balance in cash by paying other owners of the Collateral
for the past gas imbalances.
9R. GAS PURCHASE OBLIGATIONS IN EXCESS OF GAS SALES RIGHTS. The ownership
and operation of the business operations of the Company and its Subsidiaries or
the Collateral have not resulted and will not result in the existence of minimum
purchase obligations under any gas purchase agreement (relating to the volume of
gas to be taken thereunder or the price to be paid with respect thereto for the
duration of any such gas purchase agreement) which are not matched by
corresponding and commensurate rights to sell all such gas under applicable gas
sales agreements at prices in excess of the amount to be paid therefor under gas
purchase agreements (without regard to costs associated with transporting any
such gas and risks of volume "shrinkage" occurring in the transportation
process).
34
9S. FISCAL YEAR. The fiscal year of the Company and each of its
Subsidiaries ends as of December 31 of each year.
9T. DISCLOSURE. Neither this Agreement, the other Subordinated Note
Documents nor any other document, certificate or statement furnished to you by
or on behalf of the Company in connection herewith contains any untrue statement
of a material fact or omits to state a material fact necessary in order to make
the statements contained herein and therein not misleading. There is no fact
peculiar to the Company or any of its Subsidiaries which materially adversely
affects or in the future may (so far as the Company can now foresee) materially
adversely affect the business, property or assets, or financial condition of the
Company or any of its Subsidiaries and which has not been set forth in this
Agreement, the other Subordinated Note Documents or in the other documents,
certificates and statements furnished to you by or on behalf of the Company
prior to the date hereof in connection with the transactions contemplated
hereby. The pro forma financial projections dated as of July 31, 1997 and
previously delivered to you by the Company are reasonable based on the
assumptions stated therein and the best information available to the officers of
the Company.
9U. INVESTMENT COMPANY ACT. Neither the Company, any of its Subsidiaries
nor any Person controlling the Company or any of its Subsidiaries is an
"investment company," or a company "controlled" by an "investment company,"
within the meaning of the Investment Company Act of 1940, as amended.
9V. PUBLIC UTILITY HOLDING COMPANY ACT; FEDERAL POWER ACT; INTERSTATE
COMMERCE ACT; OTHER REGULATION. Neither the Company, any of its Subsidiaries
nor any Person controlling the Company or any of its Subsidiaries is subject to
regulation under the Public Utilities Holding Company Act of 1935, as amended,
the Federal Power Act, as amended, the Interstate Commerce Act, as amended, any
state public utilities code, as amended from time to time, or any other federal
or state statute or regulation, as amended from time to time, which limits the
ability of (i) the Company to issue the Securities or (ii) the Company or any of
its Subsidiaries to perform its respective obligations under this Agreement, the
other Subordinated Note Documents or the Acquisition Documents.
9W. ACQUISITION REPRESENTATIONS AND WARRANTIES. To induce you to enter
into this Agreement and to purchase the Securities, the Company agrees that you
shall be entitled to rely upon each of the representations and warranties of the
Company or any of its Subsidiaries set forth in any of the Acquisition Documents
as fully as if set forth in this Agreement.
35
PARAGRAPH 10. REPRESENTATIONS OF THE PURCHASER.
10. REPRESENTATIONS OF THE PURCHASER. You represent as follows:
10A. NATURE OF PURCHASE. You are not acquiring the Securities to be
purchased by you hereunder with a view to or for sale in connection with any
distribution thereof within the meaning of the Securities Act, provided that the
disposition of your property shall at all times be and remain within your
control.
10B. SOURCE OF FUNDS. No part of the funds being used by you to pay the
purchase price of the Securities being purchased by you hereunder constitutes
assets allocated to any separate account maintained by you in which any employee
benefit plan, other than employee benefit plans identified on a list which has
been furnished by you to the Company, participates to the extent of 10% or more.
For the purpose of this paragraph 10B the terms "separate account" and "employee
benefit plan" shall have the respective meanings specified in section 3 of
ERISA.
PARAGRAPH 11. DEFINITIONS.
11. DEFINITIONS. For the purpose of this Agreement, the terms defined in
the introductory sentence and in paragraphs 1 and 2 shall have the respective
meanings specified therein, and the following terms shall have the meanings
specified with respect thereto below (such meanings to be equally applicable to
both the singular and plural forms of the terms defined):
11A. YIELD MAINTENANCE TERMS.
"CALLED PRINCIPAL" shall mean, with respect to any Note, the principal
of such Note that is to be prepaid pursuant to paragraph 4B or 4C or is declared
to be immediately due and payable pursuant to paragraph 8A, as the context
requires.
"DESIGNATED SPREAD" shall mean, (i) with respect to the Called
Principal of any Note that is prepaid pursuant to paragraph 4C, 2.50%, and
(ii) in all other cases 0.00%.
"DISCOUNTED VALUE" shall mean, with respect to the Called Principal of
any Note, the amount obtained by discounting all Remaining Scheduled Payments
with respect to such Called Principal from their respective scheduled due dates
to the Settlement Date with respect to such Called Principal, in accordance with
accepted financial practice and at a discount factor (applied on the same
periodic basis as that on which interest on the Notes is payable) equal to the
Reinvestment Yield with respect to such Called Principal.
"REINVESTMENT YIELD" shall mean the Designated Spread over the yield
to maturity implied by (a) the yields reported, as of 10:00 a.m. (New York City
time) on the Business Day next preceding the Settlement Date with respect to
such Called Principal, on the display designated as "Page 678" on the Telerate
Service (or such other display as may replace Page 678 on the Telerate
36
Service) for actively traded U.S. Treasury securities having a maturity equal
to the Remaining Average Life of such Called Principal as of such Settlement
Date, or if such yields shall not be reported as of such time or the yields
reported as of such time shall not be ascertainable, (b) the Treasury
Constant Maturity Series yields reported, for the latest day for which such
yields shall have been so reported as of the Business Day next preceding the
Settlement Date with respect to such Called Principal, in Federal Reserve
Statistical Release H.15 (519) (or any comparable successor publication) for
actively traded U.S. Treasury securities having a constant maturity equal to
the Remaining Average Life of such Called Principal as of such Settlement
Date. Such implied yield shall be determined, (x) if necessary, by (1)
converting U.S. Treasury ▇▇▇▇ quotations to bond-equivalent yields in
accordance with accepted financial practice and (2) interpolating linearly
between (I) the actively traded U.S. Treasury security with the maturity
closest to and greater than the Remaining Average Life and (II) the actively
traded U.S. Treasury security with the maturity closest to and less than the
Remaining Average Life and (y) by converting all such implied yields to a
quarterly payment basis in accordance with accepted financial practice.
"REMAINING AVERAGE LIFE" shall mean, with respect to the Called
Principal of any Note, the number of years (calculated to the nearest
one-twelfth year) obtained by dividing (i) such Called Principal into (ii) the
sum of the products obtained by multiplying (a) each Remaining Scheduled Payment
of such Called Principal (but not of interest thereon) by (b) the number of
years (calculated to the nearest one-twelfth year) which will elapse between the
Settlement Date with respect to such Called Principal and the scheduled due date
of such Remaining Scheduled Payment.
"REMAINING SCHEDULED PAYMENTS" shall mean, with respect to the Called
Principal of any Note, all payments of such Called Principal and interest
thereon that would be due on or after the Settlement Date with respect to such
Called Principal if no payment of such Called Principal were made prior to its
scheduled due date.
"SETTLEMENT DATE" shall mean, with respect to the Called Principal of
any Note, the date on which such Called Principal is to be prepaid pursuant to
paragraph 4B or 4C or is declared to be immediately due and payable pursuant to
paragraph 8A, as the context requires.
"YIELD MAINTENANCE AMOUNT" shall mean, with respect to any Note, an
amount equal to the excess, if any, of the Discounted Value of the Called
Principal of such Note over the sum of (i) such Called Principal plus (ii)
interest accrued thereon as of (including interest due on) the Settlement Date
with respect to such Called Principal. The Yield Maintenance Amount shall in no
event be less than zero.
37
11B. OTHER TERMS.
"ACQUIRED COMPANIES" shall mean Ouachita Energy Corporation, a
Louisiana corporation, Ouachita Energy Partners, Ltd., a Louisiana corporation,
and Ouachita Compression Group, LLC, a Louisiana limited liability company.
"ACQUISITION" shall mean, collectively, (i) the merger of Ouachita
Energy Corporation, a Louisiana corporation, with and into OEC and (ii) the
acquisition by OEC of all or substantially all of the assets of Ouachita Energy
Partners, Ltd., a Louisiana corporation, and Ouachita Compression Group, LLC, a
Louisiana limited liability company, pursuant to the Acquisition Documents.
"ACQUISITION AGREEMENTS" shall mean (i) the Agreement and Plan of
Merger dated as of May 15, 1997 among the Company, OEC, Ouachita Energy
Corporation, a Louisiana corporation, and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, and (ii) the Asset
Purchase Agreement dated as of May 15, 1997 among the Company, OEC, Ouachita
Energy Partners, Ltd., a Louisiana corporation, Ouachita Compression Group, LLC,
a Louisiana limited liability company, and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇.
"ACQUISITION DOCUMENTS" shall mean the Acquisition Agreements and all
other written agreements, documents, instruments and certificates now or
hereafter executed and delivered by any Person which are required by the terms
of the Acquisition Agreements to be delivered to consummate the Acquisition, and
any and all amendments, supplements and other modifications thereof and all
renewals, extensions, restatement or substitutions from time to time of all or
any of the foregoing.
"AFFILIATE" shall mean any Person directly or indirectly controlling,
controlled by, or under direct or indirect common control with, another Person
(except, with respect to the Company, a Subsidiary). A Person shall be deemed
to control a corporation if such Person possesses, directly or indirectly, the
power to direct or cause the direction of the management and policies of such
corporation, whether through the ownership of voting securities, by contract or
otherwise.
"AGENT" shall mean Bank of Oklahoma, National Association, in its
capacity as Agent for the Banks, the holders of Notes and the holders of Senior
Notes, as provided under the Intercreditor Agreement, and its successors and
assigns as such Agent.
"AIRCRAFT CHATTEL MORTGAGE" shall mean that certain Security Agreement
(Aircraft Chattel Mortgage), dated as of August 5, 1997 and made by the Company
or one of its Subsidiaries in favor of the Agent for the ratable benefit of the
Banks, the holders of the Notes and, on a junior and subordinated basis, the
holders of the Subordinated Notes, granting the Agent a first priority chattel
mortgage lien and security interest in that certain 58 Baron Turbocharge
aircraft, Federal Aviation Administration registration number N831JB, in
substantially the form of EXHIBIT G attached to the Senior Note Agreement.
38
"ASSET DISPOSITION" shall mean, with respect to the Company or any
Subsidiary, any transaction or series of related transactions in which such
Person sells, conveys, transfers or leases (as lessor) or parts with control of
(collectively, for purposes of this definition, a "TRANSFER"), directly or
indirectly, any of its property or assets, including, without limitation, any
Indebtedness of any Subsidiary or capital stock of or other equity interests in
any Subsidiary (including the issuance of such stock or other equity interests
by such Subsidiary), other than transfers of cash or cash equivalents.
"BANK" shall initially mean only Bank of Oklahoma, National
Association, a national banking association, and "Banks" shall mean Bank of
Oklahoma, National Association, its successors and assigns with respect to the
Bank Agreement, and any other lenders from time to time parties to the Bank
Agreement.
"BANK AGREEMENT" shall mean the Fifth Amended and Restated Revolving
Credit and Term Loan Agreement dated as of even date herewith among the
Transaction Parties and the Bank, as amended, supplemented and otherwise
modified from time to time.
"BANKRUPTCY LAW" shall have the meaning specified in clause (viii) of
paragraph 8A.
"BUSINESS DAY" shall mean any day on which banks are open for business
in New York City (other than a Saturday, a Sunday or a legal holiday in the
States of New York or New Jersey).
"CAPITALIZED LEASE OBLIGATION" shall mean any rental obligation which,
under generally accepted accounting principles, would be required to be
capitalized on the books of the Company or any Subsidiary, taken at the amount
thereof accounted for as indebtedness (net of interest expense) in accordance
with such principles.
"CHANGE IN CONTROL" shall mean the failure of the members of the
Control Group (i) to own, on a fully diluted basis, at least 41%of the combined
voting power of all then issued and outstanding Voting Stock of the Company,
together with any one or more of the following: (i) the failure of the members
of the Board of Directors of the Company as of the Date of Closing to constitute
a majority of the members of the Board of Directors at any time in the future,
or (ii) the failure of the members of the Control Group to own, on a fully
diluted basis, the largest voting block of the outstanding Voting Stock of the
Company, or (iii) the failure of either or both of the Persons holding the
offices of President and Chief Financial Officer of the Company as of the Date
of Closing to continue to hold such offices.
"CLOSING" or "DATE OF CLOSING" shall have the meaning specified in
paragraph 2.
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
39
"COLLATERAL" shall mean the collateral described in the Security
Documents which secures payment of the Notes and payment, performance and
observance of the obligations of the Company and its Subsidiaries under this
Agreement and the other Subordinated Note Documents.
"COMMON STOCK" shall have the meaning specified in paragraph 1B.
"COMPETITOR" shall mean any Person which has a material presence in
the natural gas compression industry.
"CONFIDENTIAL INFORMATION" shall mean any material non-public
information regarding the Company that is provided to any holder of any Note,
any Person that purchases a participation in a Note and any offeree of a Note or
a participation therein pursuant to this Agreement other than information (i)
which was publicly known or otherwise known to such holder, such Person or such
offeree at the time of disclosure, (ii) which subsequently becomes publicly
known through no act or omission of such holder, such Person or such offeree or
(iii) which otherwise becomes known to such holder, such Person or such offeree
other than through disclosure by the Company or any Subsidiary.
"CONTROL GROUP" shall mean those record or beneficial stockholders of
the Company listed on Schedule 9A attached hereto.
"EBITDA" shall mean, for any period, the sum of (i) net income for the
Company and its Subsidiaries, determined on a consolidated basis in accordance
with GAAP, PLUS (ii) to the extent deducted in the determination of consolidated
net income, (a) all provisions for federal, state and other income tax, (b)
Consolidated Interest Expense and (c) provisions for depreciation and
amortization, LESS extraordinary items, gains on sales of assets and income from
discontinued operations, which in the aggregate will be deducted only to the
extent they are positive.
"ECI" shall mean Equity Compressors, Inc., an Oklahoma corporation and
Wholly Owned Subsidiary of the Company.
"ELC" shall mean Equity Leasing Corporation, an Oklahoma corporation
and Wholly Owned Subsidiary of the Company.
"ENVIRONMENTAL LAWS" shall mean applicable federal, state, local and
foreign laws, rules or regulations relating to emissions, discharges, releases
or threatened releases of Polluting Substances into the environment (including,
without limitation, airs, surface water, ground, water or land), or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Polluting Substances.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
40
"ERISA AFFILIATE" shall mean any corporation which is a member of the
same controlled group of corporations as the Company within the meaning of
section 414(b) of the Code, or any trade or business which is under common
control with the Company within the meaning of section 414(c) of the Code.
"EVENT OF DEFAULT" shall mean any of the events specified in paragraph
8A, provided that there has been satisfied any requirement in connection with
such event for the giving of notice, or the lapse of time, or the happening of
any further condition, event or act, and "DEFAULT" shall mean any of such
events, whether or not any such requirement has been satisfied.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
"FAIR MARKET VALUE" shall mean, at any time and with respect to any
property, the sale value of such property that would be realized in an
arm's-length sale at such time between an informed and willing buyer and an
informed and willing seller (neither being under a compulsion to buy or sell).
"GAAP" shall have the meaning specified in paragraph 11B.
"GUARANTEE" shall mean, with respect to any Person, any direct or
indirect liability, contingent or otherwise, of such Person with respect to any
indebtedness, lease, dividend or other obligation of another, including, without
limitation, any such obligation directly or indirectly guaranteed, endorsed
(otherwise than for collection or deposit in the ordinary course of business) or
discounted or sold with recourse by such Person, or in respect of which such
Person is otherwise directly or indirectly liable, including, without
limitation, any such obligation in effect guaranteed by such Person through any
agreement (contingent or otherwise) to purchase, repurchase or otherwise acquire
such obligation or any security therefor, or to provide funds for the payment or
discharge of such obligation (whether in the form of loans, advances, stock
purchases, capital contributions or otherwise), or to maintain the solvency or
any balance sheet or other financial condition of the obligor of such
obligation, or to make payment for any products, materials or supplies or for
any transportation or services regardless of the non-delivery or non-furnishing
thereof, in any such case if the purpose or intent of such agreement is to
provide assurance that such obligation will be paid or discharged, or that any
agreements relating thereto will be complied with, or that the holders of such
obligation will be protected against loss in respect thereof. The amount of any
Guarantee shall be equal to the outstanding principal amount of the obligation
guaranteed or such lesser amount to which the maximum exposure of the guarantor
shall have been specifically limited.
"GUARANTY AGREEMENTS" shall mean the Senior Subordinated Guaranty
Agreements, dated as of the Date of Closing, made by each of ECI, Sunterra and
OEC, each in favor of you and all subsequent holders of the Notes, substantially
in the form of EXHIBIT D attached hereto, and any Senior Subordinated Guaranty
Agreement hereafter executed by any Subsidiary as contemplated under paragraph
5L, as each may be amended, supplemented and otherwise modified from time to
41
time.
"INDEBTEDNESS" shall mean, with respect to any Person or consolidated
group of Persons, without duplication, (i) all items (excluding items of
contingency reserves or of reserves for deferred income taxes) which in
accordance with GAAP would be included in determining total liabilities as shown
on the liability side of a balance sheet of such Person or consolidated group of
Persons as of the date on which Indebtedness is to be determined; (ii) all
indebtedness secured by any Lien on, or payable out of the proceeds of
production from, any property or asset owned or held by such Person subject
thereto, whether or not the indebtedness secured thereby shall have been
assumed; (iii) redemption obligations in respect of mandatorily redeemable
preferred stock; (iv) Swaps; (v) unfunded pension liabilities; (vi) contingent
obligations as an account party in respect of letters of credit; and (vii)
Guarantees of Indebtedness of other Persons of the types described in the
foregoing clauses (i) through (vi).
"INTERCREDITOR AGREEMENT" shall mean an Intercreditor Agreement, dated
as of August 5, 1997, among you, as the initial holder of the Notes and the
Senior Notes, the Bank (in both its individual capacity and its capacity as
Agent) and the Transaction Parties, substantially in the form of EXHIBIT D to
the Senior Note Agreement, as the same may be amended, supplemented and
otherwise modified from time to time.
"INVESTMENT" shall have the meaning specified in paragraph 6C(3).
"LEASE RENTALS" means, with respect to any period, the sum of the
rental and other obligations required to be paid during such period by the
Company or any Subsidiary as lessee under all leases of real or personal
property (other than Capitalized Lease Obligations), excluding any amount
required to be paid by the lessee (whether or not therein designated as rental
or additional rental) on account of maintenance and repairs, insurance, taxes,
assessments, water rates and similar charges, PROVIDED, that if at the date of
determination, any such rental or other obligations (or portion thereof) are
contingent or not otherwise definitely determinable by the terms of the related
lease, the amount of such obligations (or such portion thereof) (i) shall be
assumed to be equal to the amount of such obligations for the period of twelve
consecutive calendar months immediately preceding the date of determination or
(ii) if the related lease was not in effect during such preceding twelve-month
period, shall be the amount estimated by a Responsible Officer of the Company on
a reasonable basis and in good faith.
"LIEN" shall mean any mortgage, pledge, priority, security interest,
encumbrance, contractual deposit arrangement, lien (statutory or otherwise) or
charge of any kind (including any agreement to give any of the foregoing, any
conditional sale or other title retention agreement, any production payment, any
lease in the nature thereof, and the filing of or agreement to give any
financing statement under the Uniform Commercial Code of any jurisdiction) or
any other type of preferential arrangement for the purpose, or having the
effect, of protecting a creditor against loss or securing the payment or
performance of an obligation.
42
"LOCKBOX ACCOUNT" shall have the meaning specified in paragraph 5N.
"LOCKBOX AGREEMENT" shall an agreement or agreements by and among the
Bank, the Company and its Subsidiaries, providing for the collection by the Bank
of substantially all operating revenues of the Company and its Subsidiaries, and
the deposit of such operating revenues into the Lockbox Account.
"MORTGAGES" shall mean the mortgages, deeds of trust or other real
estate security documents executed, acknowledged and delivered by the Company or
one or more of its Subsidiaries, whether (i) prior to the Date of Closing and
amended and supplemented on or about the Date of Closing by a supplemental
document executed, acknowledged and delivered as of the Date of Closing and in
form, scope and substance satisfactory to you, (ii) on or about the Date of
Closing and substantially in the form of EXHIBIT E attached to the Senior Note
Agreement, or (iii) after the Date of Closing as contemplated under paragraph 5L
and substantially in the form of EXHIBIT E attached to the Senior Note
Agreement, pursuant to which mortgage liens in and to the Collateral described
therein shall be provided in favor of the Agent for the ratable benefit of the
Banks, the holders of the Senior Notes and, on a junior and subordinated basis,
the holders of the Notes, and any and all amendments, supplements and other
modifications to any of the foregoing.
"MULTIEMPLOYER PLAN" shall mean any Plan which is a "multiemployer
plan" (as such term is defined in section 4001(a)(3) of ERISA).
"NOTES" shall have the meaning specified in paragraph 1A.
"OEC" shall mean Ouachita Energy Corporation, a Delaware corporation
and Wholly Owned Subsidiary of the Company, formerly known as OEC Acquisition
Corporation.
"OFFICER'S CERTIFICATE" shall mean a certificate signed in the name of
a Transaction Party by its President, one of its Vice Presidents or its
Treasurer.
"OIL AND GAS PROPERTIES" shall mean the producing oil, gas and other
leasehold and mineral interests of Sunterra situated in Oklahoma, Texas and
Kansas, which interests are more particularly described in and encumbered by the
Mortgage executed, acknowledged and delivered by Sunterra as of the Date of
Closing.
"PARTICIPATION RIGHTS AGREEMENT" shall mean the Participation Rights
Agreement, dated of even date herewith, substantially in the form of EXHIBIT E
attached hereto, by and among you, the Company and certain holders of the
Company's common stock.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
successor entity.
43
"PERSON" shall mean and include an individual, a partnership, a joint
venture, a corporation, a trust, a limited liability company, an unincorporated
organization and a government or any department or agency thereof.
"PLAN" shall mean any "employee pension benefit plan" (as such term is
defined in section 3 of ERISA) which is or has been established or maintained,
or to which contributions are or have been made, by the Company or any ERISA
Affiliate.
"POLLUTING SUBSTANCES" shall mean all pollutants, contaminants,
chemicals or industrial, toxic or hazardous substances or wastes and shall
include, without limitation, any flammable explosives, radioactive materials,
oil, hazardous materials, hazardous or solid wastes, hazardous or toxic
substances or related materials defined in applicable federal Environmental
Laws; PROVIDED, that in the event any applicable federal Environmental Law is
amended so as to broaden the meaning of any term defined thereby, such broader
meaning shall apply subsequent to the effective date of such amendment and,
PROVIDED FURTHER, to the extent that the Environmental Laws of any State or
other Tribunal establish a meaning for "hazardous substance," "hazardous waste,"
"hazardous material," "solid waste" or "toxic substance" which is broader than
that specified in any applicable Federal law, such broader meaning shall apply.
"PROPOSED PREPAYMENT DATE" shall have the meaning specified in clause
(iii) of paragraph 4C.
"QUALIFIED INSTITUTIONAL BUYER" shall mean a "qualified institutional
buyer" as such term is defined in Rule 144A under the Securities Act.
"REGISTRATION RIGHTS AGREEMENT" shall mean the Registration Rights
Agreement, dated of even date herewith, substantially in the form of EXHIBIT F
attached hereto, by and between you and the Company.
"REQUIRED HOLDER(S)" shall mean the holder or holders of at least 66
2/3% of the aggregate principal amount of the Notes from time to time
outstanding.
"RESPONSIBLE OFFICER" shall mean the chief executive officer, chief
operating officer, chief financial officer or chief accounting officer of a
Transaction Party or any other officer of such Transaction Party involved
principally in its financial administration or its controllership function.
"RESTRICTED PAYMENT" shall mean (i) the declaration of any dividend
on, or the incurrence of any liability to make any other payment or distribution
in respect of any capital stock or equity equivalent (except, in the case of a
Subsidiary, dividends or other payments or distributions in respect of its
capital stock to the Company or a Wholly Owned Subsidiary) or (ii) the
distribution on account of the purchase, redemption or other retirement of any
such capital stock (except, in the case of a Subsidiary, purchases, redemptions
or other retirements of its capital stock from the Company or a Wholly Owned
Subsidiary).
44
"SALE-LEASEBACK TRANSACTION" shall have the meaning specified in
paragraph 6C(8).
"SECURITIES" shall mean the Notes and the Warrants.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"SECURITY AGREEMENTS" shall mean the Fifth Amended and Restated
Security Agreement and Assignment, dated as of August 5, 1997 and executed and
delivered by each of the Transaction Parties in favor of the Agent for the
ratable benefit of the Bank, the holders of the Senior Notes and, on a junior
and subordinated basis, the holders of the Notes, substantially in the form of
EXHIBIT F attached to the Senior Note Agreement, and all Security Agreements
hereafter executed by any Subsidiary as contemplated under paragraph 5L, as each
may be amended, supplemented and otherwise modified from time to time.
"SECURITY DOCUMENTS" shall mean the Aircraft Chattel Mortgage, the
Security Agreements, the Mortgages, the Aircraft Chattel Mortgage and all
financing statements, assignments, pledges, lien entry forms, documents and
other writings executed and delivered from time to time in favor of the Agent
for the ratable benefit of the Banks, the holders of the Notes and, on a junior
and subordinated basis, the holders of the Subordinated Notes, in order to
secure the obligations of the Company and its Subsidiaries under and in respect
of the Bank Agreement and other Loan Documents (as defined in the Bank
Agreement), the Senior Note Documents and on a junior and subordinated basis the
Subordinated Note Documents, and any and all amendments, supplements and other
modifications thereto.
"SENIOR DEBT" shall having the meaning specified in paragraph 7E.
"SENIOR GUARANTY AGREEMENTS" shall mean the Senior Guaranty
Agreements, dated as of the Date of Closing, made by each of ECI, Sunterra and
OEC, each in favor of the holders of the Senior Notes.
"SENIOR NOTE AGREEMENT" shall mean the Note Agreement, dated of even
date herewith, by and between you and the Company, providing for the issuance,
sale and purchase of the Senior Notes.
"SENIOR NOTE DOCUMENTS" shall mean the Senior Note Agreement, the
Senior Notes, the Senior Guaranty Agreements, the Security Documents, the
Intercreditor Agreement and all other instruments, certificates, documents and
other writings now or hereafter executed and delivered by the Company, any
Subsidiary or any other Person pursuant to or in connection with any of the
foregoing or any of the transactions contemplated thereby, and any and all
amendments, supplements and other modifications to any of the foregoing.
45
"SENIOR NOTES" shall mean the Senior Floating Rate Secured Term Notes
due July, 2004 of the Company, dated of even date with the Notes, issued and
sold to you on the Date of Closing pursuant to the Senior Note Agreement.
"SIGNIFICANT HOLDER" shall mean (i) you, so long as you shall hold (or
be committed under this Agreement to purchase) any Note, or (ii) any other
holder of at least 5% of the aggregate principal amount of the Notes from time
to time outstanding.
"SUBORDINATED NOTE DOCUMENTS" shall mean this Agreement, the Notes,
the Warrants, the Participation Rights Agreement, the Registration Rights
Agreement, the Guaranty Agreements, the Security Documents and all other
instruments, certificates, documents and other writings now or hereafter
executed and delivered by any Transaction Party or any other Person pursuant to
or in connection with any of the foregoing or any of the transactions
contemplated thereby, and any and all amendments, supplements and other
modifications to any of the foregoing.
"SUBSIDIARY" shall mean (i) any corporation, at least 50% of the total
combined voting power of all classes of Voting Stock of which shall, at the time
as of which any determination is being made, be owned by the Company, either
directly or through Subsidiaries, and (ii) any partnership, joint venture or
similar entity if at least a 50% interest in the profits or capital thereof is
owned by the Company, either directly or through Subsidiaries (unless such
entity can and does ordinarily take major business actions without the prior
approval, direct or indirect, of the Company).
"SUNTERRA" shall mean Sunterra Energy Corporation, an Oklahoma
corporation and Wholly Owned Subsidiary of the Company.
"SWAPS" shall mean with respect to any Person, payment obligations
with respect to interest rate swaps, currency swaps and similar obligations
obligating such Person to make payments, whether periodically or upon the
happening of a contingency. For the purposes of this Agreement, the amount of
the obligation under any Swap shall be the amount determined in respect thereof
as of the end of the then most recently ended fiscal quarter of such Person,
based on the assumption that such Swap had terminated at the end of such fiscal
quarter, and in making such determination, if any agreement relating to such
Swap provides for the netting of amounts payable by and to such Person
thereunder or if any such agreement provides for the simultaneous payment of
amounts by and to such Person, then in each such case, the amount of such
obligation shall be the net amount so determined.
"TERMINATION EVENT" shall mean (i) a Reportable Event described in
Section 4043 of ERISA and the regulations issued thereunder (other than a
Reportable Event not subject to the provision for 30-day notice to the PBGC
under such regulations), or (ii) the withdrawal of the Company or any of its
ERISA Affiliates from a Plan during a plan year in which it was a "substantial
employer" as defined in Section 4001(a)(2) of ERISA, or (iii) the filing of a
notice of intent to terminate a Plan or the treatment of a Plan amendment as a
termination under Section 4041 of
46
ERISA, or (iv) the institution of proceedings to terminate a Plan by the PBGC,
or (v) any other event or condition that might constitute grounds under Section
4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any Plan.
"TOTAL DEBT" shall mean the total Indebtedness of the Company and its
Subsidiaries on a consolidated basis.
"TRANSACTION PARTIES" shall mean the Company, ECI, Sunterra and OEC.
"TRANSFEREE" shall mean any direct or indirect transferee of all or
any part of any Note or Warrant purchased by you under this Agreement.
"TRIBUNAL" shall mean any municipal, state, commonwealth, federal,
foreign, territorial or other sovereign, governmental entity, governmental
department, court, commission, board, bureau, agency or instrumentality.
"VOTING STOCK" shall mean, with respect to any corporation, any shares
of stock of such corporation whose holders are entitled under ordinary
circumstances to vote for the election of directors of such corporation
(irrespective of whether at the time stock of any other class or classes shall
have or might have voting power by reason of the happening of any contingency).
"WARRANTS" shall have the meaning specified in paragraph 1B.
"WHOLLY OWNED SUBSIDIARY" shall mean any Subsidiary, at least 98% (by
vote or value) of the outstanding equity interests (except directors' qualifying
shares) of all classes, taken together as a whole, of which are at the time
owned, directly or indirectly, by the Company or other Wholly Owned
Subsidiaries; provided, that no Person other than the Company may own any
preferred stock issued by such Subsidiary.
11C. ACCOUNTING PRINCIPLES, TERMS AND DETERMINATIONS. All references in
this Agreement to "GAAP" shall be deemed to refer to generally accepted
accounting principles in effect in the United States at the time of application
thereof. Unless otherwise specified herein, all accounting terms used herein
shall be interpreted, all determinations with respect to accounting matters
hereunder shall be made, and all unaudited financial statements and certificates
and reports as to financial matters required to be furnished hereunder shall be
prepared, in accordance with generally accepted accounting principles, applied
on a basis consistent with the most recent audited consolidated financial
statements of the Company and its Subsidiaries delivered pursuant to clause (ii)
of paragraph 5A or, if no such statements have been so delivered, the most
recent audited financial statements referred to in clause (i) of paragraph 9B.
47
PARAGRAPH 12. MISCELLANEOUS.
12. MISCELLANEOUS.
12A. NOTE PAYMENTS. So long as you shall hold any Note, the Company will
make payments of principal of and interest on such Note, which comply with the
terms of this Agreement, by wire transfer of immediately available funds for
credit (not later than 12:00 noon, New York City time, on the date due) to your
account or accounts as specified in the Purchaser Schedule attached hereto, or
such other account or accounts in the United States as you may designate in
writing, notwithstanding any contrary provision herein or in any Note with
respect to the place of payment. You agree that, before disposing of any Note,
you will make a notation thereon (or on a schedule attached thereto) of all
principal payments previously made thereon and of the date to which interest
thereon has been paid. The Company agrees to afford the benefits of this
paragraph 12A to any Transferee which shall have made the same agreement as you
have made in this paragraph 12A.
12B. EXPENSES. The Company agrees, whether or not the transactions
contemplated hereby shall be consummated, to pay, and save you, any Transferee
and the Agent harmless against liability for the payment of, all out-of-pocket
expenses arising in connection with such transactions, including (i) all
document production and duplication charges and the fees and expenses of any
special counsel engaged by you, such Transferee or the Agent in connection with
this Agreement, the transactions contemplated hereby and any subsequent proposed
modification of, or proposed consent under, this Agreement or the other
Subordinated Note Documents, whether or not such proposed modification shall be
effected or proposed consent granted, and (ii) the costs and expenses, including
attorneys' fees, incurred by you, such Transferee or the Agent in enforcing (or
determining whether or how to enforce) any rights under this Agreement, the
Securities or the other Subordinated Note Documents or in responding to any
subpoena or other legal process or informal investigative demand issued in
connection with this Agreement, the other Subordinated Note Documents or the
transactions contemplated hereby or thereby, or by reason of your or such
Transferee's having acquired any Note or Warrant, including without limitation
costs and expenses incurred in any bankruptcy case. The obligations of the
Company under this paragraph 12B shall survive the transfer of any Note or
Warrant or portion thereof or interest therein by you or any Transferee, the
payment of any Note or Warrant, the enforcement, amendment or waiver of any
provision of this Agreement or the other Subordinated Note Documents, and the
termination of this Agreement or any of the other Subordinated Note Documents.
12C. CONSENT TO AMENDMENTS. This Agreement and any of the other
Subordinated Note Documents may be amended, and the Company may take any action
herein prohibited, or omit to perform any act herein required to be performed by
it, if the Company shall obtain the written consent to such amendment, action or
omission to act, of the Required Holder(s) except that, without the written
consent of the holder or holders of all Notes at the time outstanding, no
amendment to this Agreement shall change the maturity of any Note, or change the
principal of, or the rate or time of payment of interest on any Note, or affect
the time, amount or allocation of any prepayments, or change the proportion of
the principal amount of the Notes required with respect to any consent,
48
amendment, waiver or declaration. Each holder of any Securities at the time or
thereafter outstanding shall be bound by any consent authorized by this
paragraph 12C, whether or not such Securities shall have been marked to indicate
such consent, but any Securities issued thereafter may bear a notation referring
to any such consent. No course of dealing between the Company and the holder of
any Securities nor any delay in exercising any rights hereunder or under any
Securities shall operate as a waiver of any rights of any holder of such
Securities. As used herein and in the Securities, the term "THIS AGREEMENT" and
references thereto shall mean this Agreement as it may from time to time be
amended or supplemented.
12D. FORM, REGISTRATION, TRANSFER AND EXCHANGE OF NOTES; LOST NOTES. The
Notes are issuable as registered notes without coupons in denominations of at
least $100,000, except as may be necessary to reflect any principal amount not
evenly divisible by $100,000. The Company shall keep at its principal office a
register in which the Company shall provide for the registration of Notes and of
transfers of Notes. Upon surrender for registration of transfer of any Note at
the principal office of the Company, the Company shall, at its expense, execute
and deliver one or more new Notes of like tenor and of a like aggregate
principal amount, registered in the name of such transferee or transferees. At
the option of the holder of any Note, such Note may be exchanged for other Notes
of like tenor and of any authorized denominations, of a like aggregate principal
amount, upon surrender of the Note to be exchanged at the principal office of
the Company. Whenever any Notes are so surrendered for exchange, the Company
shall, at its expense, execute and deliver the Notes which the holder making the
exchange is entitled to receive. Every Note surrendered for registration of
transfer or exchange shall be duly endorsed, or be accompanied by a written
instrument of transfer duly executed, by the holder of such Note or such
holder's attorney duly authorized in writing. Any Note or Notes issued in
exchange for any Note or upon transfer thereof shall carry the rights to unpaid
interest and interest to accrue which were carried by the Note so exchanged or
transferred, so that neither gain nor loss of interest shall result from any
such transfer or exchange. Upon receipt of written notice from the holder of
any Note of the loss, theft, destruction or mutilation of such Note and, in the
case of any such loss, theft or destruction, upon receipt of such holder's
unsecured indemnity agreement, or in the case of any such mutilation upon
surrender and cancellation of such Note, the Company will make and deliver a new
Note, of like tenor, in lieu of the lost, stolen, destroyed or mutilated Note.
12E. PERSONS DEEMED OWNERS; PARTICIPATIONS. Prior to due presentment for
registration of transfer, the Company may treat the Person in whose name any
Note is registered as the owner and holder of such Note for the purpose of
receiving payment of principal of and interest on such Note and for all other
purposes whatsoever, whether or not such Note shall be overdue, and the Company
shall not be affected by notice to the contrary. Subject to the preceding
sentence, the holder of any Note may from time to time grant participations in
such Note to any Person on such terms and conditions as may be determined by
such holder in its sole and absolute discretion, provided that any such
participation shall be in a principal amount of at least $100,000.
49
12F. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT. All
representations and warranties contained herein or in the other Subordinated
Note Documents or otherwise made in writing by or on behalf of the Company and
the other Transaction Parties in connection herewith and therewith shall survive
the execution and delivery of this Agreement, the Notes, the Warrants and the
other Subordinated Note Documents, the transfer by you of any Note or Warrant or
portion thereof or interest therein and the payment of any Note, and may be
relied upon by any Transferee, regardless of any investigation made at any time
by or on behalf of you or any Transferee. Subject to the preceding sentence,
this Agreement, the Notes, the Warrants and the other Subordinated Note
Documents embody the entire agreement and understanding between you and the
Company and supersede all prior agreements and understandings relating to the
subject matter hereof.
12G. SUCCESSORS AND ASSIGNS. All covenants and other agreements in this
Agreement contained by or on behalf of either of the parties hereto shall bind
and inure to the benefit of the respective successors and assigns of the parties
hereto (including, without limitation, any Transferee) whether so expressed or
not; provided, however, that each holder of a Note hereby agrees that, so long
as no Event of Default shall have occurred and be continuing, it will transfer
its Notes only to Qualified Institutional Buyers or, if not to Qualified
Institutional Buyers, to such other Persons which are believed by such holder,
after reasonable inquiry, not to be Competitors.
12H. DISCLOSURE TO OTHER PERSONS. Except as provided in this paragraph
12H, each holder and each Person that purchases a participation in a Note or any
part thereof agrees that it will use its best efforts to hold in confidence and
not to disclose the Confidential Information; provided that such holder or
Person will be free, after notice to the Company, to correct any false or
misleading information which may become public concerning the relationship of
such holder or Person to the Company. The Company acknowledges that the holder
of any Note or Warrant may deliver copies of any financial statements and other
documents or materials delivered to such holder, and disclose any other
information disclosed to such holder, and disclose any other information
disclosed to such holder, by or on behalf of the Company or any Subsidiary in
connection with or pursuant to this Agreement and the other Subordinated Note
Documents to (i) such holder's directors, officers, employees, agents and
professional consultants, (ii) any other holder of any Note or Warrant, (iii)
any Person to which such holder offers to sell such Note or Warrant or any part
thereof and to which such holder could then transfer such Note or Warrant
pursuant to paragraph 12G, (iv) any Person to which such holder sells or offers
to sell a participation in all or any part of such Note or Warrant and to which
such holder could then transfer such Note or Warrant pursuant to paragraph 12G,
(v) any Person from which such holder offers to purchase any security of the
Company and to which such holder could then transfer such Note or Warrant
pursuant to paragraph 12G, (vi) any federal or state regulatory authority having
jurisdiction over such holder, (vii) the National Association of Insurance
Commissioners or any similar organization or (viii) any other Person to which
such delivery or disclosure may be necessary or appropriate (a) in compliance
with any law, rule, regulation or order applicable to such holder, (b) in
response to any subpoena or other legal process or informal investigative demand
or (c) in connection with any litigation to which such holder is a party.
50
12I. NOTICES. All notices or other communications provided for hereunder
(except for the telephonic notice required by paragraph 4B) shall be in writing
and sent by first class mail or nationwide overnight delivery service (with
charges prepaid) and (i) if to you, addressed to you at the address specified
for such communications in the Purchaser Schedule attached hereto, or at such
other address as you shall have specified to the Company in writing, (ii) if to
any other holder of any Note or Warrant, addressed to such other holder at such
address as such other holder shall have specified to the Company in writing or,
if any such other holder shall not have so specified an address to the Company,
then addressed to such other holder in care of the last holder of such Note or
Warrant which shall have so specified an address to the Company, and (iii) if to
the Company, addressed to it at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇, Attention: Chief Financial Officer, with a courtesy copy (which
shall not constitute notice) to Schlanger, Mills, ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, L.L.P.,
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, or
at such other address as the Company shall have specified to the holder of each
Note or Warrant in writing; provided, however, that any such communication to
the Company may also, at the option of the holder of any Note or Warrant, be
delivered by any other means either to the Company at its address specified
above or to any officer of the Company.
12J. PAYMENTS DUE ON NON-BUSINESS DAYS. Anything in this Agreement or the
Notes to the contrary notwithstanding, any payment of principal of or interest
on any Note that is due on a date other than a Business Day shall be made on the
next succeeding Business Day. If the date for any payment is extended to the
next succeeding Business Day by reason of the preceding sentence, the period of
such extension shall be included in the computation of the interest payable on
such Business Day.
12K. SATISFACTION REQUIREMENT. If any agreement, certificate or other
writing, or any action taken or to be taken, is by the terms of this Agreement
required to be satisfactory to you or to the Required Holder(s), the
determination of such satisfaction shall be made by you or the Required
Holder(s), as the case may be, in the sole and exclusive judgment (exercised in
good faith) of the Person or Persons making such determination.
12L. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF
THE STATE OF NEW YORK. This Agreement may not be changed orally, but (subject
to the provisions of paragraph 12C) only by an agreement in writing signed by
the party against whom enforcement of any waiver, change, modification or
discharge is sought.
12M. WAIVER OF JURY TRIAL; CONSENT TO JURISDICTION; LIMITATION OF REMEDIES.
(i) THE COMPANY AND EACH HOLDER OF SECURITIES HEREBY KNOWINGLY,
VOLUNTARILY, AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY
JURY IN ANY LITIGATION OF ANY CLAIM WHICH IS BASED HEREON, OR ARISES OUT
OF, UNDER, OR IN CONNECTION WITH THIS
51
AGREEMENT, THE NOTES, THE WARRANTS OR THE OTHER SUBORDINATED NOTE
DOCUMENTS, OR ANY TRANSACTIONS RELATING HERETO OR THERETO, OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN), OR
ACTIONS OF THE COMPANY, THE HOLDERS OF THE SECURITIES OR THE AGENT. THE
COMPANY ACKNOWLEDGES THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR YOU
TO ENTER INTO THIS AGREEMENT.
(ii) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS
AGREEMENT, THE NOTES, THE WARRANTS, THE OTHER SUBORDINATED NOTE DOCUMENTS
OR ANY TRANSACTIONS RELATING HERETO OR THERETO, OR ANY COURSE OF CONDUCT,
COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN), OR ACTIONS OF THE
COMPANY, THE HOLDERS OF SECURITIES OR THE AGENT MAY BE BROUGHT IN THE
COURTS OF THE STATE OF NEW YORK OR THE UNITED STATES OF AMERICA FOR THE
SOUTHERN DISTRICT OF NEW YORK, AND THE COMPANY HEREBY ACCEPTS FOR ITSELF
AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE
NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS. THE COMPANY AND EACH
HOLDER OF SECURITIES HEREBY IRREVOCABLY WAIVES ANY OBJECTIONS, INCLUDING,
WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE
GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
BRINGING OF ANY SUCH ACTION OR PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS.
(iii) The Company hereby agrees that process may be served on CT
Corporation System, Inc., located at ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇. Any and all service of process and any other notice in any such
action, suit or proceeding shall be effective against such parties if given
by registered or certified mail, return receipt requested, or by any other
means or mail which requires a signed receipt, postage prepaid, mailed to
such parties as herein provided in paragraph 12I. In the event CT
Corporation System, Inc. shall not be able to accept service of process as
aforesaid and if the Company shall not maintain an office in New York City,
the Company shall promptly appoint and maintain an agent qualified to act
as an agent for service of process with respect to all courts in and of New
York City, and acceptable to the Required Holder(s), as the Company's
authorized agent to accept and acknowledge on the Company's behalf service
of any and all process which may be served in any such action, suit or
proceeding.
12N. SEVERABILITY. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
52
12O. DESCRIPTIVE HEADINGS. The descriptive headings of the several
paragraphs of this Agreement are inserted for convenience only and do not
constitute a part of this Agreement.
12P. MAXIMUM INTEREST PAYABLE. The Company, you and any other holders of
the Notes specifically intend and agree to limit contractually the amount of
interest payable under this Agreement, the Notes and all other instruments and
agreements related hereto and thereto to the maximum amount of interest lawfully
permitted to be charged under applicable law. Therefore, none of the terms of
this Agreement, the Notes or any instrument pertaining to or relating to this
Agreement or the Notes shall ever be construed to create a contract to pay
interest at a rate in excess of the maximum rate permitted to be charged under
applicable law, and neither the Company, any guarantor nor any other party
liable or to become liable hereunder, under the Notes, any guaranty or under any
other instruments and agreements related hereto and thereto shall ever be liable
for interest in excess of the amount determined at such maximum rate, and the
provisions of this paragraph 12P shall control over all other provisions of this
Agreement, any Notes, any guaranty or any other instrument pertaining to or
relating to the transactions herein contemplated. If any amount of interest
taken or received by you or any holder of a Note shall be in excess of said
maximum amount of interest which, under applicable law, could lawfully have been
collected by you or such holder incident to such transactions, then such excess
shall be deemed to have been the result of a mathematical error by all parties
hereto and shall be refunded promptly by the Person receiving such amount to the
party paying such amount, or, at the option of the recipient, credited ratably
against the unpaid principal amount of the Note or Notes held by you or such
holder, respectively. All amounts paid or agreed to be paid in connection with
such transactions which would under applicable law be deemed "interest" shall,
to the extent permitted by such applicable law, be amortized, prorated,
allocated and spread throughout the stated term of this Agreement and the Notes.
"APPLICABLE LAW" as used in this paragraph means that law in effect from time to
time which permits the charging and collection of the highest permissible
lawful, nonusurious rate of interest on the transactions herein contemplated
including laws of the State of New York and of the United States of America, and
"MAXIMUM RATE" as used in this paragraph means, with respect to each of the
Notes, the maximum lawful, nonusurious rates of interest (if any) which under
applicable law may be charged to the Company from time to time with respect to
such Notes.
12Q. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original but all of which together shall
constitute one instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; SIGNATURE PAGE FOLLOWS]
53
If you are in agreement with the foregoing, please sign the form of
acceptance on the enclosed counterpart of this letter and return the same to the
Company, whereupon this letter shall become a binding agreement between the
Company and you.
Very truly yours,
EQUITY COMPRESSION SERVICES CORPORATION
By:
----------------------------------
President
The foregoing Agreement is
hereby accepted as of the
date first above written.
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
By:
------------------------------------------
Vice President
PURCHASER SCHEDULE
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
Aggregate Principal
Amount of Notes to
be Purchased Note Denomination(s)
------------ --------------------
$15,000,000 $15,000,000
(No. RS-1)
Aggregate Number
of Shares of
Common Stock for
which Warrant is
Exercisable Warrant Number
----------- --------------
1,000,000 WA-1
(1) All payments on account of Notes held by such
purchaser shall be made by wire transfer of
immediately available funds for credit to:
Account No. ▇▇▇-▇▇▇▇-▇▇▇
The Bank of New York
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
(ABA No.: 021-000-018)
Each such wire transfer shall set forth the name
of the Company, a reference to "10.15% Secured
Senior Subordinated Notes due July 31, 2007,
Security No. !INV5707!", and the due date and
application (as among principal, interest and Yield
Maintenance Amount) of the payment being made.
(2) Address for all notices relating to payments:
The Prudential Insurance Company of America
c/o Prudential Capital Group
Four Gateway Center
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Investment Operations Group
(Attention: Manager)
(3) Address for all other communications and notices:
The Prudential Insurance Company of America
c/o Prudential Capital Group
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: Managing Director
(4) Recipient of telephonic prepayment notices:
Manager, Investment Operations Group
(▇▇▇) ▇▇▇-▇▇▇▇
(5) Tax Identification No.: ▇▇-▇▇▇▇▇▇▇
SCHEDULE 9A
CONTROLLING STOCKHOLDERS
SCHEDULE 9D
EXISTING DEBT AND LIENS
SCHEDULE 9H
LIST OF AGREEMENTS RESTRICTING DEBT
EXHIBIT A
[FORM OF NOTE]
EQUITY COMPRESSION SERVICES CORPORATION
10.15% SECURED SENIOR SUBORDINATED NOTE DUE JULY 31, 2007
No.____________ [Date]
$______________ PPN 294634 A@ 9
FOR VALUE RECEIVED, the undersigned, EQUITY COMPRESSION SERVICES
CORPORATION (the "COMPANY"), a corporation organized and existing under the laws
of the State of Oklahoma, hereby promises to pay to _________________________
___________________________, or registered assigns, the principal sum of
___________________________ DOLLARS ($______________) on July 31, 2007, with
interest (computed on the basis of a 360-day year -- 30-day month) (a) on the
unpaid balance thereof at the rate of 10.15% per annum from the date hereof,
payable quarterly on the 31st day of October, January, April and July in each
year, commencing with the January 31st, April 31st, July 31st or October 31st
next succeeding the date hereof, until the principal hereof shall have become
due and payable, and (b) on any overdue payment (including any overdue
prepayment) of principal, any overdue payment of interest and any overdue
payment of any Yield Maintenance Amount (as defined in the Note Agreement
referred to below), payable quarterly as aforesaid (or, at the option of the
registered holder hereof, on demand), at a rate per annum from time to time
equal to the lesser of (a) the maximum rate permitted by applicable law or (b)
the greater of (i) 4.0% over the rate of interest then in effect with respect to
this Note or (ii) 4.0% over the rate of interest publicly announced by The Bank
of New York from time to time in New York City as its Prime Rate.
Payments of principal of, interest on and any Yield Maintenance Amount
payable with respect to this Note are to be made at the main office of The Bank
of New York in New York City or at such other place as the holder hereof shall
designate to the Company in writing, in lawful money of the United States of
America.
This Note is one of a series of 10.15% Secured Senior Subordinated Notes
(the "NOTES") issued pursuant to a Subordinated Note and Warrant Purchase
Agreement, dated as of July 31, 1997 (the "AGREEMENT"), between the Company and
The Prudential Insurance Company of America, is entitled to the benefits thereof
and is guaranteed by each of the Guaranty Agreements (as defined in the
Agreement) and secured by each of the Security Documents (as defined in the
Agreement) in favor of the Agent (as defined in the Agreement) for the benefit
of the holders of the Notes.
Capitalized terms used and not otherwise defined herein have the meanings
assigned to them in the Agreement.
This Note is a registered Note and, as provided in the Agreement, upon
surrender of this Note for registration of transfer, duly endorsed, or
accompanied by a written instrument of transfer duly executed, by the registered
holder hereof or such holder's attorney duly authorized in writing, a new Note
of like tenor for a like principal amount will be issued to, and registered in
the name of, the transferee. Prior to due presentment for registration of
transfer, the Company may treat the person in whose name this Note is registered
as the owner hereof for the purpose of receiving payment and for all other
purposes, and the Company shall not be affected by any notice to the contrary.
This Note is subject to certain prepayments, as specified in the Agreement.
If an Event of Default, as defined in the Agreement, shall occur and be
continuing, the principal of this Note may be declared or otherwise become due
and payable in the manner and with the effect provided in the Agreement.
The Company, and the purchaser and the registered holder of this Note
specifically intend and agree to limit contractually the amount of interest
payable under this Note to the maximum amount of interest lawfully permitted to
be charged under applicable law. Therefore, none of the terms of this Note
shall ever be construed to create a contract to pay interest at a rate in excess
of the maximum rate permitted to be charged under applicable law, and neither
the Company nor any other party liable or to become liable hereunder shall ever
be liable for interest in excess of the amount determined at such maximum rate,
and the provisions of paragraph 12P of the Agreement shall control over any
contrary provision of this Note.
THIS NOTE IS INTENDED TO BE PERFORMED IN THE STATE OF NEW YORK AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAW OF SUCH STATE.
EQUITY COMPRESSION SERVICES CORPORATION
By:
---------------------------------
[Vice] President
A-2
EXHIBIT B
[FORM OF OPINION OF COMPANY'S COUNSEL]
B-1
EXHIBIT C
[FORM OF WARRANT]
C-1
EXHIBIT D
[FORM OF GUARANTY AGREEMENT]
D-1
EXHIBIT E
[FORM OF PARTICIPATION RIGHTS AGREEMENT]
E-1
EXHIBIT F
[FORM OF REGISTRATION RIGHTS AGREEMENT]
F-1