EXHIBIT 7
INDEMNIFICATION AGREEMENT
This INDEMNIFICATION AGREEMENT (the "Agreement"), dated as of this 6th day
of August, 1997, is by and among OUACHITA ENERGY PARTNERS, LTD., a Louisiana
corporation ("Seller #1"), OUACHITA COMPRESSOR GROUP, L.L.C., a Louisiana
limited liability company ("Seller #2") (Seller #1 and Seller #2 are
collectively referred to herein as the "Sellers"), XXXXXX X. XXXXX (the
"Shareholder"), OEC ACQUISITION CORPORATION, a Delaware corporation (the
"Purchaser"), and EQUITY COMPRESSION SERVICES CORPORATION, an Oklahoma
corporation (the "Parent"). Seller #1, Seller #2, the Shareholder, the
Purchaser and the Parent may be referred to herein individually as a "Party" and
collectively as the "Parties."
W I T N E S S E T H:
WHEREAS, the Parent, the Purchaser and Ouachita Energy Corporation, a
Louisiana corporation ("OEC"), are parties to an Agreement and Plan of Merger
dated as of May 15, 1997 (the "Merger Agreement") under which OEC and the
Purchaser will be merged together (the "Merger") with the Purchaser being the
surviving corporation of the Merger and succeeding to all of the property and
assets of OEC; and
WHEREAS, the Parent, the Purchaser, the Sellers and the Shareholder are
also parties to that certain Asset Purchase and Sale Agreement dated as of May
15, 1997 (the "Asset Purchase Agreement") under which the Purchaser is acquiring
certain assets and assuming certain liabilities of the Sellers and acquiring
certain real and personal property from the Shareholder; and
WHEREAS, the Sellers and the Shareholder desire to indemnify and hold the
Parent and the Purchaser harmless from certain liabilities; and
WHEREAS, the Parent and the Purchaser desire to hold the Sellers and the
Shareholder harmless from certain liabilities; and
WHEREAS, the execution of this Agreement is one of the conditions to the
closing of the transactions contemplated by both the Merger Agreement and the
Asset Purchase Agreement; and
WHEREAS, the Parties would not have consummated the transactions
contemplated by the Asset Purchase Agreement or the Merger Agreement except in
reliance in the indemnification and covenants contained herein;
NOW, THEREFORE, in consideration of the premises and of the respective
representations, warranties, covenants, agreements and conditions contained
herein, and after good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the Parties, intending to be legally bound,
hereby contract and agree as follows:
1. DEFINED TERMS. Unless defined herein or unless the context indicates
to the contrary, all defined or capitalized terms contained in either the Asset
Purchase Agreement or the Merger Agreement shall have the same meaning in this
Agreement as in either the Asset Purchase Agreement or the Merger Agreement. In
case of any conflict between the Asset Purchase Agreement and the Merger
Agreement, then the terms of the Asset Purchase Agreement will control.
2. INDEMNIFICATION OF THE PARENT AND THE PURCHASER. Subject to the terms
and conditions contained herein, the Sellers and the Shareholder, on a joint and
several basis, agree to indemnify the Parent, the Purchaser and their respective
officers, shareholders, directors and affiliates (the "Purchaser Indemnified
Parties") against, and hold the Purchaser Indemnified Parties harmless from, any
loss, damage or expense (including attorneys' fees) sustained by the Purchaser
Indemnified Parties arising out of or resulting from (A) any inaccuracy or
breach of any of the representations, warranties or covenants made by the
Sellers and the Shareholder either the Asset Purchase Agreement or the Merger
Agreement or (B) any Retained Liabilities (collectively a "Purchaser Indemnified
Loss").
3. INDEMNIFICATION OF THE SELLERS AND THE SHAREHOLDER. Subject to the
terms and conditions contained herein, the Purchaser and the Parent, on a joint
and several basis, agree to indemnify the Sellers and the Shareholder against,
and hold the Sellers and the Shareholder harmless from, any loss, damage or
expense (including reasonable attorneys' fees) sustained by the Sellers arising
out of or resulting from (A) any inaccuracy or breach of any of the
representations, warranties or covenants made by the Purchaser or the Parent in
either the Asset Purchase Agreement or the Merger Agreement, (B) any claims made
pursuant to an Assumed Liability, or (C) any obligations or liability incurred
by OEC or the Purchaser with respect to the Property following the Closing.
4. SURVIVAL. The representations and warranties set forth in the Merger
Agreement and the Asset Purchase Agreement shall survive on the terms set forth
in such document. All covenants and agreements and in any certificate or
instrument delivered in connection herewith shall survive the Closing; except
that the covenant to indemnify any Party hereunder by another Party hereunder an
inaccuracy or breach of any representation or warranty shall survive until the
expiration of the period for which claims can be made as to a particular
representation or warranty under either the Merger Agreement or the Asset
Purchase Agreement (the "Representation Expiration Date") and then and
thereafter only with respect to those claims for indemnification for any
inaccuracy or breach of any representation or warrant which are made prior to
the applicable Representation Expiration Date.
5. INDEMNIFICATION PROCEDURES. All claims for indemnification under this
Agreement shall be asserted and resolved as follows:
(A) A Party claiming indemnification under this Agreement (an
"Indemnified Party") shall promptly (i) notify in writing the other Party
(the "Indemnifying Party") of the claim which has given rise to a right of
indemnification under this Agreement, (the "Indemnity Claim") describing in
detail the nature of the claim (the "Claim Notice"). The Indemnifying
Party shall promptly, after receipt of the Claim Notice, at the sole cost
and expense of the Indemnifying Party, defend the Indemnified Party against
such Indemnity Claim or if the Indemnifying Party denies responsibility it
shall promptly so notify the party claiming indemnification.
(B) The Indemnifying Party shall have full control of such defense
and proceedings, including any compromise or settlement thereof. If
requested by the Indemnifying Party, the Indemnified Party agrees to
cooperate in contesting any Indemnity Claim which the Indemnifying Party
elects to contest and to provide witness and other support at no cost,
other than reimbursement for travel and lodging. The Indemnified Party may
participate in, but not control, any defense or settlement of any Third
Party Claim controlled by the Indemnifying Party pursuant to this Section
5(B).
(C) If the Indemnifying Party wrongfully fails to diligently defend
the Indemnity Claim, then the Indemnified Party shall have the right to
assume the defense of such Indemnity Claim at the sole cost and expense of
the Indemnifying Party.
6. LIMITATIONS.
(A) Neither the Sellers, the Purchaser, the Parent nor the
Shareholder shall be entitled to indemnification hereunder with respect to
any loss, damage or expense (including reasonable attorneys' fees) unless
the aggregate amount of all such losses, damages or expenses (including
reasonable attorneys' fees) exceeds $300,000 (the "Basket Amount"),
whereupon the Purchaser and the Parent, on the one hand, and the Sellers
and the Shareholder on the other hand, shall be entitled to indemnification
for all damages incurred, including the Basket Amount; provided, however,
said Basket Amount shall not apply to the Purchaser's obligation to pay and
discharge the Assumed Liabilities as set forth in the Asset Purchase
Agreement.
(B) In no event shall either the Sellers or the Shareholder on one
hand or the Parent and Purchaser on the other hand be required to indemnify
any other Party hereunder in an amount which, individually or in the
aggregate, exceeds $14,400,000.
(C) In no event shall any Seller, or any shareholder or member of
either Seller or OEC (other than the Shareholder) be liable to the
Purchaser or the Parent under this Agreement for more that the amount of
proceeds actually received by such Seller or member or shareholder from or
due to the transactions contemplated by the Asset Purchase Agreement and
the Merger Agreement.
(D) SOLE REMEDY. The provisions of this Agreement represent the sole
remedy available to any Party hereto for a misstatement or omission from
any representation, or a breach of any warranty or covenant or agreement
contained in the Asset Purchase Agreement, the Merger Agreement or any
other document delivered in connection with the consummation of the
transactions contemplated by the Asset Purchase Agreement or the Merger
Agreement (the "Transaction Documents"), and each Party hereby
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unconditionally waives any other rights that they may have at law or in
equity for a misstatement or omission from any representation, or a breach
of any warranty or covenant or agreement contained in the Asset Purchase
Agreement, the Merger Agreement or any of the Transaction Documents.
7. USE OF PARENT COMMON STOCK. In the event the Sellers or the
Shareholder are the Indemnifying Parties, then such Parties may satisfy their
obligations under this Agreement by surrendering to the Parent and the Purchaser
shares of Parent Common Stock received in the Merger and receive credit for such
shares of Parent Common Stock in an amount equal to the higher of (a) $1.90 per
share for each share of Parent Common Stock so surrendered or (b) the average
closing price for thirty (30) trading days for the Parent Common Stock for the
period prior to such payment.
8. NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed given when delivered personally or when received if
sent by registered or certified mail, return receipt requested, or by reputable
overnight delivery service, to the Parties at the following addresses (or at
such other address as Party may specify by like notice);
(A) If to Purchaser:
Equity Compression Services Corporation
Twenty Xxxx Xxxxx Xxxxxx, Xxxxx 000
Xxxxx, XX 00000
Attention: President
With copies to:
Schlanger, Mills, Xxxxx & Xxxxxxxxx
0000 Xxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Xxxx Xxxxxxxxx
(B) If to Sellers or the Shareholder to:
Xxxxxx X. Xxxxx
Ouachita Energy Corp.
000 Xxxxxxxxxx Xxxxxx
Xxxx Xxxxxx, XX 00000
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With a copy to:
Mayor, Day, Xxxxxxxx & Xxxxxx, LLP
000 Xxxxxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Attention: Xx Xxxxxxx
9. EXCLUSIVE AGREEMENT. This Agreement, together with the Asset Purchase
Agreement, the Merger Agreement, the Confidentiality Agreement and the
Transaction Documents supersedes all prior agreements between the Parties
(written or oral) and is intended as a complete and exclusive statement of the
terms of the agreement among the Parties.
10. CHOICE OF LAW; AMENDMENTS; HEADINGS. This Agreement shall be governed
by the internal laws of the State of Texas. This Agreement may not be amended
or modified orally. The headings and table of contents contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
11. ASSIGNMENTS AND THIRD PARTIES. No Party hereby shall assign this
Agreement or any part hereof without the prior written consent of the other
Parties; provided, however, that no such assignment shall relieve the assigning
party of liability hereunder. Except as otherwise provided herein, this
Agreement shall be binding upon and inure to the benefit of the Parties hereto
and their respective successors and assigns. No assignment of this Agreement
shall release the assigning party of any of its obligations under the Agreement.
Nothing in this Agreement shall entitle any person other than Sellers or
Purchaser, or their respective successors and assigns permitted hereby, to any
claim, cause of action, remedy or right of any kind.
12. SEVERABILITY. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any adverse manner to
either Party. Upon such determination that any term or other provision is
invalid, illegal or incapable of being enforced, the Parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the Parties as closely as possible in an acceptable manner to the end
that the transactions contemplated hereby are fulfilled to the extent possible.
13. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same Agreement.
14. WAIVER. No provision of this Agreement may be amended, modified,
waived, or discharged unless such amendment, waiver, modification, or discharge
is agreed to in writing by Individual and either the president of Company or
another duly authorized officer of Company. No waiver by a party of any breach
by the other party of, or of any compliance by
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the other party with, any condition or provision of this Agreement shall be
deemed a waiver of similar or dissimilar conditions or provisions at the same
time or at any prior or subsequent time.
15. GOVERNING LAW. This Agreement shall be governed by the laws of the
State of Texas.
16. EXPENSES OF LITIGATION. If any proceeding is brought by any Party or
its successors or assigns for the enforcement of this Agreement, or as a result
of any alleged dispute, breach, default or misrepresentation by any Party of any
of the provisions of this Agreement, the successful or prevailing Party shall be
entitled to recover its reasonable attorneys' fees and other costs incurred in
pursuing such proceeding, in addition to such other relief to which it may be
entitled, together with interest thereon at a rate of 10% per annum.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
PARENT
EQUITY COMPRESSION SERVICES CORPORATION
By: /s/ XXXXXXX X. XXXXXX
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Title: PRESIDENT & CHIEF EXECUTIVE OFFICER
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PURCHASER
OEC ACQUISITION CORPORATION
By: /s/ XXXXXXX X. XXXXXX
--------------------------------------
Title: PRESIDENT
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SELLERS
OUACHITA ENERGY PARTNERS, LTD.
By: /s/ XXXX X. XXXXX
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Title: EXECUTIVE VICE PRESIDENT
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OUACHITA COMPRESSION GROUP, LLC.
By: /s/ XXXX X. XXXXX
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Title: CHIEF FINANCIAL OFFICER
-----------------------------------
SHAREHOLDER:
/s/ XXXXXX X. XXXXX
-----------------------------------------
Xxxxxx X. Xxxxx
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