PURCHASE PRICE ADJUSTMENT AGREEMENT
This Purchase Price Adjustment Agreement ("Agreement") is made as of the 20th
day of February, 1998 by and between Tidewater Inc., a Delaware corporation
("Seller"), and TW Acquisition Corporation ("Buyer") and Universal Compression
Holdings, Inc. ("Parent"). Capitalized terms included and not otherwise defined
herein shall have the meanings ascribed in the Purchase Agreement described
below.
WITNESSETH
WHEREAS, the parties hereto have entered into a Stock Purchase
Agreement dated as of December 18, 1997 (the "Purchase Agreement"), pursuant to
which Buyer has agreed to purchase from Seller and Seller has agreed to sell to
Buyer all of the issued and outstanding shares of capital stock of Tidewater
Compression Service, Inc., a Texas corporation ("Compression");
WHEREAS, under the terms of the Purchase Agreement, Buyer has
agreed to make an additional payment under certain circumstances that are
described herein; and
WHEREAS, Parent owns 100% of the outstanding capital stock of
Buyer and desires to enter into this Agreement for the purposes stated herein;
NOW, THEREFORE, in consideration of the foregoing premises and
for other good and valuable consideration, the receipt and sufficiency of which
is hereby mutually acknowledged, the parties hereto hereby agree as follows:
1. Liquidity Event.
(a) Upon the occurrence of any Liquidity Event (defined
below) and the satisfaction of the requirements set forth in Section 2(a), Buyer
and Parent jointly and severally agree to make an additional payment (the
"Additional Payment") to Seller in the amount required, if any, under Section
2(a) below; provided, however, that such Additional Payment shall be made to
Seller in the same form of consideration as received by CHP III as a result of
such Liquidity Event; and provided, further, that, in the event that the
Liquidity Event is effectuated by a distribution of the Common Stock of
Compression, Buyer or Parent to the general partner of CHP III, Seller shall
receive its Additional Payment in the form of such Common Stock. To the extent
that the Common Stock so distributed is required to be registered under federal
or state securities laws, the Common Stock issued to Seller shall be registered
on terms and conditions comparable to those under which CHP III's Common Stock
is registered. Any Additional Payment, other than in the form of cash, shall be
based upon the Fair Market Value thereof.
(b) A "Liquidity Event" shall mean any one or more of the
following: (i) any public or private sale (including any series of related
sales) of the Common Stock of Buyer, Compression or Parent by any of the CHP III
Parties; (ii) the sale of all or substantially all of the assets of Buyer,
Compression or Parent; (iii) the merger or consolidation of Buyer,
Compression or Parent into or with any other entity or entities; (iv) any
recapitalization of Compression that has the direct or indirect effect of
changing the par value of its capital stock, its stated capital or capital
surplus; or (v) any similar transaction involving Parent, Buyer or Compression;
provided, however, that if any Liquidity Event involves the receipt by CHP III
Parties of restricted securities or securities of a class that is not publicly
traded (other than a transfer of the type described in the second proviso of
Section 1(a)), such Liquidity Event will be deferred until such securities
become freely transferable and such class becomes publicly traded or such
securities are otherwise exchanged for freely transferable securities of a class
of publicly-traded securities or for cash.
2. Purchase Price Adjustment. (a) The "Accreted Initial
Investment Amount" shall be equal to the amount of the Initial Investment
through June 30, 1998. The "Increment" shall initially be equal to 6.25%
multiplied by the Initial Investment. On July 1, 1998, and on the first day of
each subsequent calendar quarter, the Accreted Initial Investment Amount shall
be increased by the Increment. Upon any Liquidity Event, the Accreted Initial
Investment Amount shall be reduced (but not below zero) by the amount of Initial
Investment Allocable Proceeds, and the Increment for each future quarterly
period (until further Liquidity Events) shall be equal to the resultant Accreted
Initial Investment Amount multiplied by 6.25%.
(b) If, upon any Liquidity Event, the Initial Investment
Allocable Proceeds exceeds the Accreted Initial Investment Amount, the
"Additional Payment" shall be equal to 10% of such excess. By way of
explanation, for any Liquidity Event that occurs after the Accreted Initial
Investment Amount has been reduced to zero, the Additional Payment to Buyer
shall equal 10% of Proceeds from such Liquidity Event.
(c) Seller shall receive the Additional Payment required
hereunder no later than five business days after the date that such Liquidity
Event is consummated or completed.
3. As used in this Agreement, the terms:
"Fair Market Value" shall mean (i) with respect to publicly
traded securities, the average of the closing sales prices of such securities
during the ten trading days ending on the last trading day before completion of
the Liquidity Event, and (ii) with respect to any other non-cash consideration,
the value of such consideration as determined by mutual agreement of the Buyer
and Seller or, if they are unable to agree, by binding arbitration conducted by
three financial advisors, with Buyer and Seller each selecting one financial
advisor within 15 days of the date that one party notifies the other that it
desires to seek arbitration of the dispute, and the two financial advisors so
selected to mutually select the third financial advisor within 15 days
thereafter. Any Fair Market Value determination made by such financial advisors
shall be rendered within 60 days of the selection of the last financial advisor
selected and shall be final, binding and non-appealable by the parties.
"Initial Investment" is $81.0 million.
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"Initial Investment Allocable Proceeds" is equal to the
product of (i) Proceeds and (ii) a fraction equal to the Initial Investment over
the Total Investment.
"Investment" is the amount of equity (whether common or
preferred) invested by CHP III Parties in Parent.
"Proceeds" is the amount recognized by the CHP III Parties in
a Liquidity Event equal to the sum of the cash and the Fair Market Value of any
non-cash consideration paid to the CHP III Parties with respect to such
Liquidity Event in respect of any Investments; provided that in the event the
Liquidity Event is effectuated by a distribution of Common Stock to the general
partner of CHP III, Proceeds shall be equal to the Fair Market Value of such
distribution; provided however that Proceeds determined with respect to any
Liquidity Event shall be determined without duplication for any Proceeds
recognized for any other Liquidity Event. As an example, if publicly traded
preferred stock with a $40.0 million value is received in exchange for shares of
Series A Preferred Stock, $40.0 million of Proceeds will be recognized. If,
thereafter, such publicly traded preferred stock is sold for $60.0 million, the
resulting Proceeds will be $20.0 million.
"Total Investment" is the sum of the Initial Investment and
all subsequent Investments by CHP III Parties in Parent.
"CHP III Parties" shall mean the purchasers of the equity of
Parent on the closing of the acquisition contemplated by the Purchase Agreement;
provided that officers and employees of Parent or its subsidiaries shall not
constitute CHP III Parties.
3. Notice of Liquidity Event. If Parent, Buyer or Compression
proposes to engage in any action that would constitute a Liquidity Event, Parent
or Buyer shall give Seller notice thereof at least five days prior to the
contemplated effective date of the Liquidity Event.
4. Notices. Any notice or communication received hereunder
must be in writing and may be given or served by depositing such notice in the
United States mail, postage prepaid and registered or certified with return
receipt requested, or by hand delivering such notice, or by sending such notice
by a national commercial courier service for next business day delivery, in each
case properly addressed as provided below. Notice deposited in the mail in the
manner described above shall be effective 72 hours after such deposit, notice
hand delivered in person or delivered by commercial courier shall be effective
at the time of delivery and notice given by facsimile shall be effective when
such facsimile is transmitted to the facsimile number specified in this Section
4 and confirmation of transmission is received by the giver of such notice
(provided that a confirmation copy is sent no later than the next business day
by documented overnight delivery service). For purposes of notice, the addresses
of the parties shall, until changed as hereinafter provided, be as follows:
If to the Seller:
Tidewater Inc.
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Xxxxxxxxx Xxxxx
0000 Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxx 00000-0000
Attention: Xxx X. Xxxxxxx
Facsimile No: 000-000-0000
With copy to: Cliffe X. Xxxxxxx
and to:
Jones, Walker, Waechter, Poitevent, Carrere & Xxxxxxx, L.L.P.
000 Xx. Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxx 00000-0000
Attention: Xxxxxx X. Xxxxx
Facsimile No: 000-000-0000
If to the Buyer or Parent:
TW Acquisition Corporation
c/o Xxxxxx Xxxxxx Partners III, L.P.
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Attention: President
Facsimile No: 000-000-0000
With copy to:
Xxxxxxx Xxxx & Xxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx Xxxxx
Facsimile No: 000-000-0000
And a copy to:
Xxxxxx Xxxxxx, Inc.
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxx, Managing Director
Facsimile No: 000-000-0000
or such substituted persons or addresses of which any of the parties may give
notice to the other in writing.
5. Miscellaneous.
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(a) Waiver. The failure by any party to enforce any of its
rights hereunder shall not be deemed to be a waiver of such rights, unless such
waiver is an express written waiver which has been signed by the waiving party.
Waiver of any one breach shall not be deemed to be a waiver of any other breach
of the same or any other provision hereof.
(b) Choice of Law. The validity of this Agreement, the
construction of its terms and the determination of the rights and duties of the
parties hereto in accordance therewith shall be governed by and construed in
accordance with the laws of the State of New York applicable to contracts made
and to be performed wholly within such State. Each of Buyer, Parent and Seller
consents to the exclusive jurisdiction of the state courts of and federal courts
located in the City of Wilmington in State of Delaware for the enforcement of
the obligations evidenced by this Agreement and any dispute arising out of this
Agreement, and expressly waives any defense based upon venue or forum non
conveniens.
(c) Parties in Interest. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and no party hereto may assign its rights or obligations hereunder without the
prior written consent of the other party, other than the right of Seller to
assign its rights and obligations hereunder to a direct or indirect subsidiary
of which it owns and continues hereafter to own more than 50% of the voting
securities thereof. Nothing in this Agreement is intended or shall be construed
to confer upon or to give any person other than the parties hereto any rights or
remedies under or by reason of this Agreement.
(d) Amendment. Unless otherwise provided herein, this
Agreement may be amended only by an agreement in writing signed by each party
hereto.
(e) Counterparts. This Agreement may be executed by the
parties in one or more counterparts, all of which shall be deemed an original,
but all of which taken together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement, all as of the day and year first above written.
TIDEWATER INC.
/s/ Xxx X. Xxxxxxx
By: -------------------------------------
Xxx X. Xxxxxxx
Executive Vice President and
Chief Financial Officer
TW ACQUISITION CORPORATION
/s/ Xxxxx Xxxxxx
By: -------------------------------------
Name: Xxxxx Xxxxxx
Title: Chief Financial Officer
UNIVERSAL COMPRESSION
HOLDINGS, INC.
/s/ Xxxxx Xxxxxx
By: -------------------------------------
Name: Xxxxx Xxxxxx
Title: Chief Financial Officer
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