EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
BY AND BETWEEN
XXXXXXX ENERGY CORPORATION,
AN OKLAHOMA CORPORATION,
AND
HACL, LTD.,
A TEXAS LIMITED PARTNERSHIP
TABLE OF CONTENTS
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Page No.
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1. Purchase and Sale of the Shares; Due Diligence; etc.............. -1-
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(a) Purchase.................................................. -1-
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(b) The Closing............................................... -1-
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(c) Due Diligence............................................. -2-
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2. Representations and Warranties of the Company.................... -2-
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(a) Due Organization and Qualification........................ -2-
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(b) Subsidiaries.............................................. -2-
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(c) Authorization............................................. -3-
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(d) Capital Stock............................................. -3-
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(e) Issuance.................................................. -4-
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(f) SEC Reports............................................... -4-
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(g) Absence of Certain Changes................................ -5-
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(h) Litigation................................................ -5-
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(i) Consents.................................................. -6-
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(j) Compliance with Laws...................................... -6-
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(k) Contracts, Agreements, Plans and Commitments.............. -6-
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(l) Employee Benefit Matters.................................. -7-
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(m) Environmental Compliance.................................. -8-
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(n) Condition of Property..................................... -9-
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3. Representations and Warranties of the Purchaser.................. -10-
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(a) Due Organization.......................................... -10-
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(b) Authorization............................................. -10-
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(c) Purchase for Investment................................... -10-
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4. Conditions to the Obligations of the Company..................... -11-
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(a) Representations and Warranties True....................... -11-
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(b) Performance............................................... -11-
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(c) Injunctions............................................... -11-
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(d) Legal Opinion............................................. -11-
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(e) Officer's Certificate..................................... -11-
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5. Conditions to the Obligations of the Purchaser................... -12-
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(a) Representations and Warranties True....................... -12-
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(b) Performance............................................... -12-
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(c) Injunctions............................................... -12-
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(d) Legal Opinion............................................. -12-
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(e) Officer's Certificate..................................... -12-
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(f) Shareholder Approval...................................... -12-
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(g) Information Statement..................................... -12-
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6. Covenants of the Company......................................... -12-
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(a) Interim Operations of the Company......................... -12-
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(b) Access.................................................... -14-
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(c) Notification of Certain Matters........................... -14-
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(d) Publicity................................................. -14-
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(e) Board Representation...................................... -15-
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(f) Listing on Securities Exchanges........................... -15-
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(g) Acquisition of Voting Securities.......................... -15-
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7. Covenants of the Purchaser....................................... -15-
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(a) Efforts to Obtain Compressor Leases and Oil and Gas
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Properties
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(b) Confidentiality........................................... -16-
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(c) Cooperation............................................... -16-
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8. Registration Rights.............................................. -16-
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(a) Right to Request Registration............................. -16-
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(b) Other Registrations....................................... -16-
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(c) Terms and Conditions...................................... -17-
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(d) Underwriting.............................................. -18-
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9. Termination; Effect of Termination............................... -18-
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(a) Termination............................................... -18-
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(b) Effects of Termination.................................... -19-
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10. Miscellaneous.................................................... -19-
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(a) Remedies.................................................. -19-
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(b) Survival of Representations, Warrants and
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Covenants
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(c) Successors and Assigns.................................... -20-
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(d) Notices................................................... -20-
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(e) Waiver.................................................... -21-
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(f) Governing Law............................................. -21-
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(g) Entire Agreement.......................................... -21-
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(h) Expenses.................................................. -21-
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(i) Captions.................................................. -21-
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(j) Counterparts.............................................. -21-
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STOCK PURCHASE AGREEMENT
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This STOCK PURCHASE AGREEMENT (this "Agreement") is dated as of October 16,
1996, and is by and between XXXXXXX ENERGY CORPORATION, an Oklahoma corporation
(the "Company") and HACL, LTD., a Texas limited partnership or its assigns (the
"Purchaser"). The Company and the Purchaser are collectively referred to herein
as the "Parties" and individually as a "Party".
W I T N E S S E T H :
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WHEREAS, the Company wishes to sell to the Purchaser, and the Purchaser
wishes to purchase from the Company, 8,000,000 shares (the "Shares") of common
stock, $0.01 par value per share ("Common Stock"), and warrants (the "Warrants")
which, upon exercise, will entitle the holder to purchase 8,000,000 shares of
Common Stock pursuant to the form of Warrant attached hereto as Exhibit A and
incorporated herein by reference of the Company for an aggregate cash purchase
price of $4,400,000, plus the additional consideration described herein upon the
terms and subject to the conditions set forth below; and
NOW, THEREFORE, for and in consideration of the mutual covenants and
promises set forth herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Parties, intending
to be legally bound, hereby contract and agree as follows:
1. Purchase and Sale of the Shares; Due Diligence; etc.
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(a) Purchase. On the terms and subject to the conditions contained herein,
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at the closing (the "Closing") referred to in Section 1(b) hereof, the Company
will issue and deliver to the Purchaser a certificate registered in the name of
the Purchaser evidencing the Shares, and the Purchaser will pay to the Company,
in full payment of the purchase price for the Shares, the aggregate sum of
$4,400,000 in cash (the "Purchase Price"). Payment of the Purchase Price shall
be made by wire transfer of immediately available funds to the order of the
Company and/or by physical delivery of a cashier's check.
(b) The Closing. The Closing shall occur at the offices of the Company, or
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at such location as the Parties may mutually agree, at 10:00 A.M. local time, on
the later to occur of (i) December 16, 1996 or (ii) the fifth business day after
all conditions to the Purchaser's obligations to close as set forth in this
Agreement have been satisfied on such other date and at such other time as the
Parties may agree (the "Closing Date"). In addition at the Closing, the Company
will issue to the Purchaser or its Designee(s) the Warrants and each Party will
also deliver such
certificates, opinions, documents and instruments as may be necessary to
consummated the transactions contemplated hereby.
(c) Due Diligence. The Parties agree that the obligation of the Purchaser
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to the close the transaction evidenced by this Agreement is subject to Purchaser
satisfactorily completing its due diligence on or before October 30, 1996 (the
"Due Diligence Expiration Date"). If, after the Due Diligence Expiration Date,
Purchaser elects not to close, it may cancel this Agreement by mailing or
otherwise sending to the Company within one business day after the Due Diligence
Expiration Date, written notice of its intent to terminate this Agreement
("Termination Notice"). Upon mailing or otherwise sending to the Company the
Termination Notice, the Purchaser shall be deemed released from all of its
obligations, liabilities, and duties under this Agreement and this Agreement
shall be considered to be terminated and of no further force or effect as of
such date.
2. Representations and Warranties of the Company. The Company hereby
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represents and warrants to the Purchaser as follows:
(a) Due Organization and Qualification. The Company is a corporation duly
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organized, validly existing and in good standing under the laws of the State of
Oklahoma, with corporate power to own its properties and to conduct its business
as now conducted. The Company is duly qualified as a foreign corporation to do
business, and is in good standing, in each jurisdiction where the character of
its properties owned or held under lease or the nature of its activities makes
such qualification necessary, except where the failure to so qualify will not
have a material adverse effect on the Company and its subsidiaries taken as a
whole.
(b) Subsidiaries. For the purposes of this Agreement, the term
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"Subsidiary" means any entity of which securities or other ownership interests
are owned directly or indirectly by the Company. Equity Compressors, Inc., an
Oklahoma corporation, is the sole Subsidiary of the Company (the "Subsidiary").
The Subsidiary is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has the
requisite corporate power and authority to carry on its business as it is now
being conducted. The Subsidiary is duly qualified to do business and in good
standing as a foreign corporation in each jurisdiction where the properties
owned, leased or operated, or the business conducted by it require such
qualification except where the failure to be so qualified or in good standing
would not have a material adverse effect on the Company and its Subsidiaries
taken as a whole. All the outstanding shares of capital stock of the Subsidiary
have been duly authorized and validly issued and are fully paid, nonassessable,
and were not issued in violation of the preemptive rights of any person. All of
the shares of capital stock of the Subsidiary are owned, directly or indirectly,
by the Company and there are no outstanding
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subscriptions, options, warrants, rights, convertible securities or other
agreements or commitments of any character relating to the issued or unissued
capital stock or other securities of the Subsidiary obligating the Subsidiary to
issue any securities. There are no stockholders' agreements, option agreements,
voting agreements, agreements covering the purchase or sale of securities or
other agreements to which the Company or the Subsidiary is a party, or by which
the Company or the Subsidiary is bound, which cover or relate to the capital
stock or other securities of the Subsidiary.
(c) Authorization. The Company has the requisite corporate power to enter
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into this Agreement and to carry out its obligations hereunder. This Agreement
has been duly authorized, executed and delivered by the Company and constitutes
a valid and binding agreement of the Company enforceable in accordance with its
terms. Other than the approval of the stockholders of the Company as to the
amendment of the Company's certificate of incorporation to increase the number
of authorized but unissued shares of Common Stock and the consent of the
Company's lenders, neither the execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby, nor compliance with the
terms, conditions hereof will create a breach or violation of any of the terms,
conditions or provisions of the Company's charter or bylaws or of any material
agreement or instrument to which the Company or any Subsidiary is a party or by
which the Company, any Subsidiary or any of their respective material properties
may be bound, or constitute a default or create a right of termination or
acceleration thereunder, or result in the creation of imposition of any
securities interest, mortgage, lien, charge or encumbrance of any nature
whatsoever upon the Company, any Subsidiary or any of their respective material
properties or assets. Other than the approval of an amendment of the Company's
Certificate of Incorporation to increase the number of authorized but unissued
shares of Common Stock, there is no requirement under Oklahoma corporate law or
the rules of the NASDAQ small cap market that require the vote or approval of
the shareholders of the Company as to any of the transactions contemplated by
this Agreement.
(d) Capital Stock. The authorized capital stock of the Company consists of
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(i) 20,000,000 shares of Common Stock, of which at September 30, 1996,
13,040,816 shares were validly issued and outstanding, fully paid, nonassessable
and not entitled to any preemptive rights, and 9,000 shares were held in
treasury, and (ii) 1,000,000 shares of preferred stock $1.00 par value per share
of which at September 30, 1996, no shares of preferred stock were issued or
outstanding, and no shares were held in treasury. In addition, at September 30,
1996, an aggregate of approximately 1,290,000 shares of Common Stock (including
authorized but unissued shares) were reserved for issuance pursuant to presently
existing options and future options under currently existing stock option plans
described on Schedule 2(d) attached hereto. Except as set
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forth above, there are no other shares of capital stock of the Company
authorized, issued, or outstanding and there are no outstanding subscriptions,
options, warrants, rights, convertible securities, or any other agreements or
commitments of any character relating to the issued or unissued capital stock or
other securities of the Company or the Subsidiary obligating the Company or the
Subsidiary to issue, deliver, or sell, or cause to be issued, delivered or sold,
additional shares of capital stock of the Company or the Subsidiary or
obligating the Company or the Subsidiary to grant, extend, or enter into any
subscription, option, warrant, right, convertible security or other similar
agreement or commitment. There are no outstanding obligations of the Company or
any Subsidiary to repurchase, redeem or otherwise acquire any securities of the
Company or any Subsidiary. Except as disclosed on Schedule 2(d), neither the
Company nor the Subsidiary has any obligation to issue, transfer, contribute, or
sell any shares of capital stock or other securities of the Company or the
Subsidiary pursuant to any employee benefit plan as defined in Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or
any employment, severance, or other similar contract, arrangement or policy or
any plan or arrangement providing for insurance coverage, workers' compensation,
disability benefits, supplemental unemployment benefits, vacation benefits,
retirement benefits or for deferred compensation, profit sharing, bonuses, stock
options, stock appreciation, or other forms of compensation or benefits
(including post-retirement insurance, compensation, or benefits) which, in each
case, (i) is maintained, administered, or contributed to by the Company or any
of its affiliates, and (ii) covers any employee or former employee of the
Company or any of its affiliates or under which the Company or any of its
affiliates has any liability, or otherwise.
(e) Issuance. The Shares, when sold and delivered by the Company to the
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Purchaser pursuant to this Agreement, will be duly authorized, validly issued,
fully paid and nonassessable shares of Common Stock, free and clear of any
security interest, lien, charge or encumbrance whatsoever. The shares of Common
Stock, when issued to the Purchaser or its designee(s) pursuant to the exercise
of the Warrants, will be duly authorized, validly issued, fully paid and
nonassessable shares of Common Stock, free and clear of any security interest,
lien, charge or encumbrance whatsoever No Stockholder or other approval is
required for the valid issuance of the Shares or the Warrants to the Purchaser
pursuant to this Agreement.
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(f) SEC Reports. The Company has filed all forms, reports, schedules,
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statements and registration statements required to be filed by it with the
Securities and Exchange Commission (the "Commission") since January 1, 1991
(collectively, the "SEC Reports"). As of their respective dates, the SEC
Reports did not contain any untrue statement of a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, except for any
statement or omission in any SEC Report which was corrected in a later SEC
Report. The financial statements of the Company included in the SEC Reports
were prepared in accordance with generally accepted accounting principles
applied on a consistent basis, present fairly in accordance with generally
accepted accounting principles the consolidated financial position, results of
operations and changes in financial position of the company and its consolidated
subsidiaries as of the dates and for the periods indicated and conform in all
material respects to all applicable requirements under the Securities Exchange
Act of 1934 ("Exchange Act"). Except as reflected in the SEC Reports, the
Company as of the date of such SEC Reports has no material liabilities,
obligations, or claims of any nature (whether absolute, accrued, contingent or
otherwise and whether due or to become due), including, without limitation, any
tax liabilities or under funded pension plans, and the Company does not have any
knowledge of any basis for the existence of or the assertion against the Company
of any such liability, obligation or claim as of such date.
(g) Absence of Certain Changes. Except as disclosed in the SEC Reports,
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since December 31, 1995, the Company and the Subsidiary have conducted their
respective businesses in the ordinary and usual course in all material respects
taking the Company and the Subsidiary as a whole, and there has not been any
material adverse change in the financial condition, properties, business,
results of operations or prospectus of the Company and the Subsidiary taken as a
whole. The Company has not paid any cash dividends with respect to its Common
Stock and no dividend on the Common Stock has been declared which remains
unpaid.
(h) Litigation. Except as disclosed in the SEC Reports, there is no claim,
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suit, action or proceeding pending or, to the knowledge of the Company,
threatened against or affecting the Company or the Subsidiary which can
reasonably be expected to affect materially and adversely the business,
properties, financial condition or prospects of the Company and the Subsidiary
taken as whole. There is no outstanding order, writ, injunction or decree or,
to the knowledge of the Company, any claim or investigation of any court,
governmental agency or arbitration tribunal materially and adversely affecting
or which can reasonably be expected to materially and adversely affect the
Company, the Subsidiary, or
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their respective properties, assets or business, franchises, licenses or permits
under which they operate.
(i) Consents. Except (i) for filings to be made pursuant to Regulation D
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promulgated by the Commission under the Securities Act of 1933, as amended, (ii)
for compliance with the requirements of any applicable blue sky laws, and (iii)
as otherwise provided in this Agreement, no governmental or other consent,
approval, hearing, filing, registration or other action, including the passage
of time, is necessary for the execution and delivery of this Agreement or
consummation of the transactions contemplated hereby to occur without material
detriment to the Company and its Subsidiaries.
(j) Compliance with Laws. The Company and each Subsidiary has complied
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with and is currently complying with all applicable federal, state and local
laws, rules, ordinances and regulations, the noncompliance with which would have
a material adverse effect on the Company and its Subsidiaries taken as a whole.
(k) Contracts, Agreements, Plans and Commitments. Schedule 2(k) attached
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hereto sets forth a list of all material written and oral agreements, if any,
contracts, agreements, plans and commitments, including all amendments,
modifications and supplements thereto, to which the Company or the Subsidiary is
a party or by which the Company, the Subsidiary or any of their assets or
properties are bound as of the date hereof (the "Contracts"). For the purposes
of this Section 2(k), a contract shall be considered material if such contract
or any series of similar contracts involving the same subject matter involves
$50,000 or more in services to be rendered or obligations during any twelve
month period. The Company and the Subsidiary have each complied with the
provisions of all Contracts and no default or event of default exists under any
of such agreements and such agreements constitute valid and legally binding
obligations of the Company and the Subsidiary and, to best knowledge of the
Company, of each other Person that is a party thereto enforceable against each
party in accordance with their terms. To the best of the Company's knowledge,
the Contracts together with any other written or oral agreements, contracts,
plans and commitments that the Company may have in place (whether or not listed
on Schedule 2(k)) comprise all of the contracts, agreements, plans and
commitments required in order to conduct the business of the Company and the
Subsidiary as it has been and is now being conducted. The issuance of the
Shares and the Warrants at the Closing will not (a) adversely affect the force
and effect of any of the Contracts, (b) constitute a breach or default (or a
condition but for the expiration of time or the giving of notice would
constitute a breach or default) under the Contracts or (c) give any party a
right of first refusal or option to acquire any asset of the Company or the
Subsidiary.
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(l) Employee Benefit Matters.
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(i) Schedule 2(l) attached hereto sets forth each "employee
benefit plan" (within the meaning of Section 3(3) of ERISA), stock
purchase plan, stock option plan, fringe benefit plan, bonus plan and
any other deferred compensation agreement or plan or funding
arrangement sponsored, maintained or to which contributions are made
(a "Plan") by the Company, any Subsidiary, or any of their affiliates
or any other organization which is a member of a controlled group of
organizations (within the meaning of Sections 414(b), (c), (m) or (o)
of the Internal Revenue Code of 1986, as amended (the "Code") of which
the Company or any of the Subsidiaries is a member (the "Controlled
Group").
(ii) The Company has delivered to the Purchaser current, accurate
and complete copies of each Plan (including all trust agreements,
funding vehicles and other instruments relating thereto) and, to the
extent applicable, copies of the most recent (a) Internal Revenue
Service determination letter and any outstanding request for a
determination letter for each Plan; (b) Form 5500; (c) attorneys'
response to an auditor's request for information for any Plan; and (d)
any ruling letter and any outstanding request for a ruling letter with
respect to the tax-exempt status of any voluntary employees'
beneficiary association ("VEBA") which is implementing any Plan.
(iii) With respect to each Plan: (a) each Plan which is an
"employee pension benefit plan" (as such term is defined in ERISA
Section 3(2)) has received a favorable determination letter as to its
qualification under the Code; (b) each VEBA which is intended to
implement any Plan has received a favorable ruling or determination
letters to its tax-exempt status; (c) all forms, documents and other
materials have been filed with the Securities and Exchange Commission
or otherwise distributed as required by the Securities Act of 1933 or
the Exchange Act or any regulation or rule promulgated thereunder; and
(d) there are no leased employees (as such term is defined in Code
Section 414(n)) that must be taken into account with respect to the
requirements set forth under Code Section 414(n)(3).
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(iv) Neither the Company nor the Subsidiary presently maintains, or
within the last 60 months has maintained any (a) "multiemployer plan"
(within the meaning of Section 3(37) of ERISA), or (b) defined benefit
plan.
(v) With respect to any Plan which is an employee welfare benefit
plan (within the meaning of ERISA Section 3(1)): (a) each and every
Plan which is a group health plan (as such term is defined in Code
Section 5000(b) complies in all material respects with the applicable
requirements of Code Section 4980B; and (b) each Plan (including any
Plan covering former employees of the Company) may be amended or
terminated by the Company, any Subsidiary or the Purchaser on or at
any time after the Closing Date.
(vi) Neither the Company nor the Subsidiary maintains any post-
retirement health and life insurance plans for employees and retirees.
(m) Environmental Compliance. For purposes of this Agreement,
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"Environmental Laws" shall mean laws, including without limitation,
federal, state or local laws, ordinances, rules, regulations,
interpretations and orders of courts or governmental agencies or
authorities relating to pollution or protection of the environment
(including, without limitation, ambient air, surface water, groundwater,
land surface, and subsurface strata), including without limitation, the
Comprehensive Environmental Response Compensation and Liability Act of
1980, the Superfund Amendments and Reauthorization Act of 1987, the
Resource Conservation and Recover Act of 1976, the Hazardous and Solid
Waste Amendment of 1984, and the Hazardous Materials Transportation Act,
and any other laws relating to pollution or protection of the environment,
or to the manufacture, processing, distribution, use, treatment, handling,
storage, disposal or transportation or Hazardous Substances (hereafter
defined). Except as set forth on Schedule 2(m) attached hereto:
(1) The Company and the Subsidiary are in compliance in all
material respects with all applicable Environmental Laws and has
obtained and is in compliance with all permits, licenses and other
authorizations required under any Environmental Law. There is no past
or present event, condition or circumstance that is likely to
interfere with the conduct of the business of the Company or any
Subsidiary in the manner now conducted or which would interfere in any
material respect with the Company's or any Subsidiary's compliance
with Environmental Laws or constitute a violation thereof.
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(2) Neither the Company nor the Subsidiary has leased, operated
or owned any facilities or real property with respect to which the
Company or such Subsidiary is subject to any actual or, to the
knowledge of the Company, after due inquiry, potential action, claim,
investigation, review or other proceeding before any governmental,
judicial or regulatory body, under any Environmental Law.
(3) Neither the Company nor any Subsidiary has sent hazardous
substances as defined in the Environmental Laws ("Hazardous
Substances") to any offsite commercial waste management facilities for
reuse, recycling, reclamation, treatment, storage or disposal.
(4) Neither the Company nor the Subsidiary is subject to any
actual, or, to the knowledge of the Company, after due inquiry,
potential proceeding under any Environmental Law with respect to any
such facility presently or previously used by the Company, the
Subsidiary or their predecessors.
(5) There are no Hazardous Substances in any inactive, closed or
abandoned storage or disposal areas or facilities on property
currently or in the past leased, operated or owned by the Company, any
Subsidiary or their predecessors.
(6) No property currently, or in the past, leased operated or
owned by the Company, any Subsidiary or their predecessors, is
subject to actual or, to the knowledge of the Company, after due
inquiry, potential investigation by federal, state or local officials
or private litigation as a result of any previous onsite management,
treatment, storage or disposal of Polluting Substances.
(7) There are no underground storage tanks located on any
property owned or leased by the Company or the Subsidiary. All above
ground storage tanks owned or lease by the Company or the Subsidiary
are in material compliance with all applicable Environmental Laws.
The Company have or will provide the Purchaser with copies of all
permits or licenses pertaining to such above ground storage tanks.
(n) Condition of Property. The Company's compressors and other
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personal property have been maintained in accordance with industry
standards and are sufficient for the Company's operations as currently
conducted.
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3. Representations and Warranties of the Purchaser. The Purchaser
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hereby represents and warrants to the Company as follows:
(a) Due Organization. The Purchaser is a limited partnership duly
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formed and validly existing under the laws of the State of Texas with power to
own its properties and to conduct its business as now conducted.
(b) Authorization. The Purchaser has duly authorized, executed and
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delivered this Agreement and this Agreement is a valid and binding agreement of
the Purchaser enforceable in accordance with its terms.
(c) Purchase for Investment. The Purchaser is purchasing the
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Shares for its own account and not with a view to or for sale in connection with
any public distribution thereof within the meaning of the Securities Act, and
any sale, transfer or other disposition of the Shares by the Purchaser will be
made in compliance with all applicable provisions of the Securities Act and the
rules and regulations promulgated thereunder. The Purchaser agrees:
(i) to the placement on the certificate representing the Shares
to be purchased by the Purchaser pursuant to this Agreement of the
following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, THE
TEXAS SECURITIES ACT OR THE OKLAHOMA SECURITIES ACT. NEITHER THE
RECORD NOR THE BENEFICIAL OWNERSHIP OF SAID SHARES MAY BE SOLD OR
TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
FOR SAID SHARES UNDER SAID ACTS AND ANY OTHER APPLICABLE STATE
SECURITIES LAWS OR RULES UNLESS, IN THE OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY, EXEMPTIONS FROM THE REGISTRATION
REQUIREMENTS OF SAID ACTS ARE AVAILABLE WITH RESPECT TO SUCH SALE
OR TRANSFER AND SAID SALE OR TRANSFER IS MADE PURSUANT TO AND IN
STRICT COMPLIANCE WITH THE TERMS AND CONDITIONS OF SAID
EXEMPTIONS."
and to abide by the requirements and restrictions contained in the
foregoing legend.
(ii) to the entry of stop transfer orders with the transfer agent
(or agents) and the registrar (or registrars) of the Company against the
transfer other than in compliance with the requirements of this Agreement
of legended securities of which the Purchaser from time to time is the
Beneficial Owner.
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(d) Each of the partners of the Purchaser or its designee or its
assigns is an accredited investor, as that term is defined in Regulation D, is
an experienced and sophisticated investor knowledgeable about investments such
as the Common Stock and the Warrants and is capable of evaluating the merits and
risks of the investment contemplated hereby and has the financial means to bear
the financial risks of this investment, including the potential loss of all of
such investment and has acquired his or her interest in the Purchaser or its
designee for investment purposes only and not with a view to distribution
thereof.
(e) Purchaser has been provided with copies of the Company's annual
report on Form 10-KSB for the year ended December 31, 1995, quarterly reports on
Form 10-QSB for the fiscal quarters ended on March 31, 1996 and June 30, 1996,
and the proxy statement submitted to the shareholders of the Company in
connection with its annual meeting of shareholders held May 29, 1996. Any
additional information requested by Purchaser has been provided by the Company.
4. Conditions to the Obligations of the Company. The obligations
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of the Company under this Agreement are subject to the fulfillment at the
Closing referred to in Section 1(b) hereof of each of the following conditions:
(a) Representations and Warranties True. The representations and
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warranties in this Agreement made by the Purchaser shall have been true in all
material respects when made, and shall be true in all material respects on the
Closing Date as though such representations and warranties were made at such
date.
(b) Performance. The Purchaser shall have performed and complied in
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all material respects with all agreements, covenants, obligations and conditions
required by this Agreement to be performed or complied with by them prior to the
closing.
(c) Injunctions. No preliminary or permanent injunction or other
-----------
final order by any United States Federal or state court shall have been issued
which prevents the purchase or sale of the shares pursuant hereto.
(d) Legal Opinion. The Company shall have received an opinion of
-------------
Schlanger, Mills, Xxxxx & Xxxxxxxxx, LLP dated the Closing Date, as to the
matters referred to in Sections 3(a) and (b).
(e) Officer's Certificate. The Company shall have delivered a
---------------------
certificate of an officer of the Purchaser, dated the Closing Date, certifying
as to the matters referred to in Sections 4(a) and (b).
-11-
5. Conditions to the Obligations of the Purchaser. The obligations
----------------------------------------------
of the Purchaser under this Agreement are subject to the fulfillment at the
Closing referred to in Section 1(b) hereof of each of the following conditions:
(a) Representations and Warranties True. The representations and
-----------------------------------
warranties in this Agreement made by the Company shall have been true in all
material respects when made, and shall be true in all material respects on the
Closing Date as though such representations and warranties were made at such
date.
(b) Performance. The Company shall have performed and complied in all
-----------
material respects with all agreements, covenants, obligations and conditions
required by this Agreement to be performed or complied with by them.
(c) Injunctions. No preliminary or permanent injunction or other
-----------
final order by any United States Federal or state court shall have been issued
which prevents the purchase or sale of the shares pursuant hereto.
(d) Legal Opinion. The Purchaser shall have received an opinion of
-------------
Xxxxxx & Xxxxxxx, A Professional Corporation, dated the Closing Date, as to the
legal matters referred to in Sections 2(a), (b), (c) and (d).
(e) Officer's Certificate. The Purchaser shall have delivered a
---------------------
certificate of an executive officer of the Company, dated the Closing Date,
certifying as to the matters referred to in Sections 5(a) and (b).
(f) Shareholder Approval. The Shareholders of the Company shall have
--------------------
approved the amendment of the Company's Certificate of Incorporation to increase
the number of authorized but unissued shares of Common Stock to 40,000,000;
(g) Information Statement. The Company will have provided to the
---------------------
Shareholders of the Company an information statement in compliance with Section
14(f) of the Exchange Act.
6. Covenants of the Company. The Company covenants and agrees
------------------------
with the Purchaser as follows:
(a) Interim Operations of the Company. The Company
---------------------------------
covenants and agrees that, prior to the Closing Date (unless the Purchaser shall
otherwise agree in writing and except as otherwise contemplated by this
Agreement), except as contemplated by this Agreement:
(i) the business of the Company and its Subsidiaries shall be
conducted in all material respects only in the ordinary and usual course
and each of the Company and
-12-
its Subsidiaries shall use its best efforts to preserve its business
organization intact and maintain its existing relations with customers,
governmental agencies, suppliers, employees, distributors and business
associates in all material respects;
(ii) the Company shall not (a) sell or pledge or agree to sell or
pledge any stock or other ownership interest owned by it in any of its
Subsidiaries (other than in connection with the exercise of currently
outstanding stock options); (b) amend its Certificate of Incorporation or
Bylaws; (c) split, combine or reclassify the outstanding shares of its
voting securities; (d) declare, set aside or pay any dividend payable in
cash, stock or property with respect to the Common Stock or the Preferred
Stock or (e) increase the number of members of the Board of Directors of
the Company;
(iii) neither the Company nor any of its Subsidiaries shall (a)
issue, sell, pledge, dispose of or encumber any additional shares of, or
securities convertible or exchangeable for, or options, warrants, calls,
commits or rights of any kind to acquire any securities or ownership
interest in another Person, including any share of its capital stock or
other ownership interest of any class of the Company or its Subsidiaries or
any other property or assets; (b) transfer, lease, license, sell, mortgage,
pledge, dispose of or encumber any assets material to the Company and its
Subsidiaries taken as a whole, or incur or modify any indebtedness or other
liability material to the Company and its Subsidiaries taken as a whole,
except in the ordinary course of its business; (c) acquire directly or
indirectly by redemption or otherwise any shares of the capital stock of
the Company of any class; or (d) authorize capital expenditures in excess
of $100,000 in the aggregate, except in the ordinary course of business, or
make any acquisition of, or investment in, assets or stock of any other
person in excess of $100,000 in the aggregate.
(iv) except as disclosed in Schedule 6(a)(iv) neither the Company
nor any of its Subsidiaries shall grant any severance or termination pay
to, or enter into any employment or severance agreement with, any director,
officer or other employee of the Company or its Subsidiaries; and neither
the Company nor any of its Subsidiaries shall establish, adopt, enter into
or amend any collective bargaining, bonus, profit sharing, thrift,
compensation, stock option, restricted stock, pension, retirement, deferred
compensation, employment, termination, severance or other plan, agreement,
trust, fund, policy or arrangement for the benefit of any directors,
officers or employees;
-13-
(v) neither the Company nor any of its Subsidiaries shall modify,
amend or terminate any of its contracts material to the Company and its
Subsidiaries taken as a whole or waive, release or assign any similarly
material rights or claims.
(vi) neither the Company nor any of its Subsidiaries shall take
any action that will cause any representation or warranty contained in this
Agreement to become no longer true and correct; and
(vii) neither the Company nor any of its Subsidiaries will enter
into an agreement to do any of the foregoing.
(b) Access. Upon reasonable notice, the Company shall (and shall
------
cause each of its Subsidiaries to) afford the Purchaser's officers, employees,
counsel, accountants, financial advisors and other authorized representatives
(the "Representatives") access, during normal business hours throughout the
period prior to the Closing Date, to its properties, books, contracts and
records and, during such period, the Company shall (and shall cause each of its
Subsidiaries to) furnish promptly to Purchaser such information concerning its
business, properties and personnel as Purchaser may reasonably request, provided
that no investigation pursuant to this Section 6(b) shall affect or be deemed to
modify any representation or warranty of the Company.
(c) Notification of Certain Matters. The Company shall give prompt
-------------------------------
notice to the Purchaser of: (i) any notice of, or other communication relating
to, a default or event which, with notice or lapse of time or both, would become
a default, received by the Company or any of its Subsidiaries subsequent to the
date of this Agreement and prior to the Closing Date, under any contract
material to the financial condition, properties, business, results of operations
or prospects of the Company and its Subsidiaries taken as a whole to which the
Company or any of its Subsidiaries is a party or is subject; (ii) any material
adverse change in the financial condition, properties, businesses, results of
operations or prospects of the Company and its Subsidiaries taken as a whole.
Each of the Company and the Purchaser shall give prompt notice to the other
Party of any notice or other communication from any third party alleging that
the consent of such third party is or may be required in connection with the
transactions contemplated by this Agreement where the failure to obtain such
consent could have a material adverse effect on the financial condition,
properties, business, results of operations or prospects of the Company and its
Subsidiaries taken as a whole or materially hinder or materially make more
burdensome the consummation of the transactions contemplated by this Agreement.
-14-
(d) Publicity. The initial press release by the Parties concerning
---------
this transaction shall be a joint press release. Thereafter and until after
closing, neither the Company nor the Purchaser shall issue, or cause the
publication of, any press releases or otherwise make public statements with
respect to the transactions contemplated hereby or make any filings with any
federal or state governmental or regulatory agency or with any national
securities exchange with respect thereto, without the consent of the other
Party, which consent shall not be unreasonably withheld, provided, however, that
either Party may make such disclosures without the consent of the other Party if
advised by counsel that such disclosure is necessary under applicable law or
rule.
(e) Board Representation. As promptly as practicable following the
--------------------
Closing Date, the Company will elect to its Board of Directors up to eight
persons designated by the Purchaser. Thereafter, so long as the Purchaser or
its affiliates own any of the Shares or the Warrants, the Company will include
among its Board of Directors' nominees a sufficient number of persons designated
by Purchaser such that the percentage of the Board of Directors proposed to be
composed of such designees is proportionately equal (to the nearest whole
directorship) to the percentage of outstanding Common Stock which the Purchaser
then has beneficial ownership. Notwithstanding the foregoing, during the term
of this Agreement the Purchaser will be entitled to have always not less than
three designees nominated to the Company's Board of Directors.
(f) Listing on Securities Exchanges. The Company will list the Shares
-------------------------------
and will maintain the listing of the Shares on each national securities exchange
on which the Common Stock may be listed.
(g) Acquisition of Voting Securities. The Company will not oppose any
--------------------------------
action by the Purchaser to acquire shares of Common Stock, except that, to the
extent the fiduciary duties of the Board of Directors of the Company require
that they seek an offer from third persons to acquire or merge with the Company,
the Company may seek such offers.
7. Covenants of the Purchaser. The Purchaser covenants and agrees
--------------------------
with the Company as follows:
(a) Efforts to Obtain Compressor Leases and Oil and Gas Properties.
--------------------------------------------------------------
As additional consideration for the purchase of the Preferred Stock and the
Warrants pursuant hereto, Purchaser commits and agrees to use its reasonable
efforts to effect the actions contemplated by Section 1.5 of the Warrant which
are necessary for the Warrants to vest and become exercisable; provided,
however, that in no event shall the Purchaser be required to expend its own
-15-
funds or guarantee any obligations of the Company in order to satisfy the
obligations contained in this Section (7)(a).
(b) Confidentiality. Purchaser will not, and will cause its
---------------
Representatives not to, use any information obtained pursuant to Section 6(b) or
previously obtained from the Company in contemplation of entering into this
Agreement for any purpose unrelated to the consummation of the transactions
contemplated by this Agreement. Subject to the requirements of law, pending
consummation of the transactions herein contemplated, Purchaser will keep
confidential, and will cause its Representatives to keep confidential, all
information and documents obtained pursuant to Section 6(b) or previously
obtained from the Company in contemplation of entering into this Agreement.
Upon any termination of this Agreement, Purchaser will collect and deliver to
the Company all documents obtained by it or any of its Representatives then in
their possession and any copies thereof.
(c) Cooperation. The Purchaser shall cooperate with the Company in
-----------
consummating the transactions contemplated by this Agreement.
8. Registration Rights.
-------------------
(a) Right to Request Registration. At any time after the second
-----------------------------
anniversary of the Closing, upon the written request of the Purchaser, the
Company will use its best efforts promptly to file (but in any event within 45
days of such request) with the Commission a registration statement under the
Securities Act, on such appropriate form as the Company shall select, covering
any of the Shares not freely tradeable under Rule 144 and any shares of Common
Stock issued to the Purchaser in connection with the exercise of the Warrants
and will use its reasonable efforts to cause such registration statement to
become effective as soon as practicable following such request; provided,
--------
however, that the Company will not be required to file any such registration
-------
statement during any period of time when (i) the Company is contemplating a
public offering of its securities and, in the judgment of the managing
underwriter thereof (or the Company, if such offering is not underwritten) such
filing would have an adverse effect on the contemplated offering, or (ii) the
Company is possession of material information that it deems advisable not to
disclose in a registration statement, or (iii) the Company is engaged in any
program for the repurchase of Common Stock. In addition, the Company shall not
be required (i) to effect any registration pursuant to this Section 8(a) unless
at least 2,000,000 shares of Common Stock are to be sold by the Purchaser, or
(ii) to file at the request of the Purchaser more than a total of two
registration statements under this Section 8(a) or more than one such
registration statement in any twelve month period.
-16-
(b) Other Registrations. If the Company shall at any time propose the
-------------------
registration under the Securities Act of an offering of Common Stock for its own
account, the Company shall give notice as promptly as practicable of such
proposed registration to the Purchaser and the Company will use all reasonable
efforts to cause the offering of such shares of Common Stock owned by the
Purchaser as the Purchaser shall request within 15 days after the receipt of
such notice to be included, upon the same terms (including the method of
distribution) in any such offering; provided, however, that (i) the Company
-------- -------
shall not be required to give notice or include such Shares of Common Stock in
any such registration if the proposed registration is (A) a registration of a
stock option or compensation plan or of securities issued or issuable pursuant
to any such plan or otherwise on Form S-8 or any successor form, or (B) a
registration of securities proposed to be issued (X) in exchange for securities
or assets of, or in connection with a merger or consolidation with, another
corporation, or (Y) any issuance or any offering of Common Stock made solely to
its existing shareholders in connection with a rights offering or solely to
employees and consultants of the Company; (ii) the Company shall not be required
to include such number of Shares of Common Stock in any such registrations to
which the Company and the Purchaser are advised in writing by the Company's
investment banking firm that the inclusion of such Shares of Common Stock would,
in the opinion of such firm, unreasonably interfere with the successful
marketing of such Shares of Common stock; and (iii) the Company may, without the
consent of the Purchaser, withdraw such registration statement and abandon the
proposed offering in which the Purchaser had requested to participate.
(c) Terms and Conditions. The registration rights of the Purchaser
--------------------
pursuant to this Section 8 are subject to the following terms and conditions:
(i) The Purchaser shall provide the Company with such information
with respect to the Shares of Common Stock to be sold, the plans for the
proposed disposition thereof and such other information as shall, in the
opinion of counsel for the Company, be necessary to enable the Company to
include in such registration statement all material facts required to be
disclosed with respect to the Purchaser.
(ii) The Company shall bear the cost of the registration,
including, but not limited to, all registration and filing fees (including
Blue Sky registration and filing fees), printing expenses (including for
such number of prospectuses and other filed material as the Purchaser shall
reasonably request), and fees and disbursements of counsel and accountants
for the Company (subject, however, to subparagraph (iii) below), except
that the Purchaser shall pay the fees and disbursements of its counsel and
the underwriting fees and
-17-
selling commissions applicable to the Shares of Common Stock sold by the
Purchaser.
(iii) The Company shall not be required to furnish any audited
financial statements at the request of Purchaser other than those
statements customarily prepared at the end of its fiscal year, unless the
Purchaser shall agree to reimburse the company for the out-of-pocket costs
incurred by the company in the preparation of such other audited financial
statements;
(iv) The Company shall be required to amend or supplement and
otherwise keep it effective and current such registration statement for a
period of 90 days following its effective date; and
(v) Purchaser shall not be entitled to exercise any registration
right provided for in this Section 8 after the sixth anniversary of the
Closing Date. Notwithstanding any other provision of this Section 8 to the
contrary, the registration rights granted hereunder will terminate prior to
the sixth anniversary of the Closing Date upon the first day Purchaser is
able to sell all of the shares of Common Stock acquired pursuant to this
Agreement without material restriction and without registration under the
applicable federal and state securities laws.
(d) Underwriting. The Company and the Purchaser each agrees in
------------
connection with any registration of shares of Common Stock contemplated by this
Section 8, (A) to enter into an appropriate underwriting agreement containing
items and provisions (including reasonable provisions as to indemnification)
customary in such agreements, (B) to permit the Company, in its sole discretion,
to select the managing underwriter(s) and (C) to provide the Purchaser and its
representatives with reasonable opportunity for due diligence. The
indemnification provisions referred to in Clause (A) above shall include an
indemnification by the Company of the underwriters and the Purchaser, except
that such selling stockholders shall indemnify the Company and the underwriters
as to information provided pursuant to Section 8(c)(i) and the underwriters
shall indemnify the Company and such selling stockholders as to information
provided by such underwriters.
9. Termination; Effect of Termination.
----------------------------------
(a) Termination. This Agreement may be terminated:
-----------
(i) by either the Company or the Purchaser if the Closing shall
not have occurred by December 31, 1996;
(ii) by the Company if the conditions set forth in Section 4
hereof shall not be satisfied on the Closing Date;
-18-
(iii) by the Purchaser if the conditions set forth in Section 5
hereof shall not be satisfied on the Closing date;
(iv) by the Purchaser if Shareholder approval of the Amendment of
the Certificate of Incorporation of the Company to increase the authorized
number of shares of Common Stock to 40,000,000 is not obtained by December
16, 1996;
(v) by the Purchaser if on or before the Due Diligence Expiration
Date, the Purchaser has not received binding proxies from 10 or fewer
Shareholders of the Company committing to vote all of their shares of
Common Stock (at least 50% of outstanding shares) held by such person in
favor of the Amendment of the Company's Certificate of Incorporation to
increase the number of shares of Common Stock as set forth above;
(vi) Upon the mutual written consent of both Parties.
(b) Effects of Termination. The following provisions shall apply in
----------------------
the event of a termination of this Agreement:
(i) If this Agreement is terminated by the Company or by the Purchaser
as permitted under Section 9(a)(i), (ii) or (iii), hereof and not as the result
of the failure of either Party to perform its obligations hereunder without
lawful justification, such termination shall be without liability to any Party
to this Agreement or any stockholder, director, officer, employee, agent or
representative of such Party.
(ii) If this Agreement is terminated under Section 9(a)(i) or (iii)
because the Company has breached or is in default under this Agreement, the
Purchaser will be entitled to specific performance or a right to pursue a suit
for damages.
(iii) If this Agreement is terminated as a result of the failure of
the Purchaser to perform its obligations hereunder under Section 9(a)(i) or
Section 9(a)(ii) because the Purchaser has breached or is in default under this
Agreement the Company will be entitled to specific performance or a right to
pursue a suit for damages.
10. Miscellaneous.
-------------
(a) Remedies. The Purchaser and the Company each acknowledge and
--------
agree that the other Party would be irreparably damaged in the event any of the
provisions of this Agreement were not performed by the other in accordance with
their specific terms or were otherwise breached. It is accordingly agreed that
each Party shall be entitled to an injunction or injunctions to redress breaches
of this Agreement and to specifically enforce the terms
-19-
and provisions hereof in any action instituted in any court of the United States
or any state thereof having subject matter jurisdiction, in addition to any
other remedy to which such Party may be entitled, at law or in equity. In
addition to a right for injunctive relief, the Purchaser shall also have a right
to bring a cause of action for damages if there is a breach or inaccuracy by the
Company of its representations, warranties, covenants or agreements, or the
Company has failed to comply with the conditions for closing. It is understood
that if the Purchaser elects to close this transaction in spite of there being a
breach or inaccuracy of the Company's representations, warranties, covenants or
agreements or failure to comply with the conditions for closing, then such
closing of this transaction by the Purchaser shall not waive the Purchaser's
rights to enforce a claim for damages against the Company.
(b) Survival of Representations, Warrants and Covenants. All
---------------------------------------------------
representations, warranties and covenants contained herein shall survive the
execution of this Agreement and the consummation of the transactions
contemplated hereby.
(c) Successors and Assigns. This Agreement shall be binding upon, and
----------------------
inure to the benefit of, the Parties and their respective heirs, personal
representatives, successors, assigns and Affiliates, but shall not be assignable
by any Party hereto without the prior written consent of the other Party;
provided, however, that the Purchaser may assign the right to purchase a portion
of the Shares to a joint venture or partnership, subject to compliance with
applicable securities laws.
(d) Notices. Any notice or other communication provided for herein or
-------
given hereunder to a Party hereto shall be in writing and shall be given by
delivery, by telex, telecopier, recognized overnight delivery service, or by
mail (registered or certified mail, postage prepaid, return receipt requested)
to the respective parties as follows:
If to the Company:
Xxxxxxx Energy Corporation
00 Xxxx 0xx Xxxxxx, Xxxxx 0000
Xxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxx, President
with a copy to:
Xxxxxx & Xxxxxxx, A Professional Corporation
0000 Xxxxx Xxxxx Tower
00 Xxxx 0xx Xxxxxx
Xxxxx, XX 00000
Attention: Lynnwood X. Xxxxx, Xx.
-20-
If to the Purchaser:
c/o Energy Transfer Corporation
0000 Xxxxx Xxxxxxx Xxxxxxxxxx, Xxxxx 0000
Xxxxxx, XX 00000
Attention: Xxx Xxxxx
with a copy to:
Schlanger, Mills, Xxxxx & Xxxxxxxxx, L.L.P.
0000 Xxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Attention: Xxxx Xxxxxxxxx
(e) Waiver. No Party may waive any of the terms or conditions of this
------
Agreement except by a duly signed writing referring to the specific provision to
be waived.
(f) Governing Law. This Agreement shall be governed by, and construed
-------------
and enforced in accordance with, the laws of the State of Oklahoma.
(g) Entire Agreement. This Agreement (including the Annex hereto)
----------------
constitutes the entire agreement and supersedes all other and prior agreements
and understandings, both written and oral, between the Parties and their
affiliates.
(h) Expenses. Except as otherwise expressly contemplated herein to
--------
the contrary, regardless of whether the transactions contemplated hereby are
consummated, each Party shall pay its own expenses incident to preparing for,
entering into and carrying out this Agreement and the consummation of the
transactions contemplated hereby.
(i) Captions. The Section and Paragraph captions herein are for
--------
convenience of reference only, do not constitute part of this Agreement and
shall not be deemed to limit or otherwise affect any of the provisions hereof.
(j) Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument.
-21-
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
executed and delivered on the day and year first above written.
XXXXXXX ENERGY CORPORATION
By: /s/ XXXXXX X. XXXXXX
----------------------------
Title: President and Chief
Executive Officer
HACL, LTD.
BY: SIX-DAWACO, INC., its
general partner
By: /s/ XXXXX X. XXXXXX
----------------------------
Title: Executive Vice President
------------------------
-22-
