1
================================================================================
WARRANT
EQUITY COMPRESSION SERVICES CORPORATION
(FORMERLY KNOWN AS XXXXXXX ENERGY CORPORATION)
an Oklahoma Corporation
(the "Company")
To Purchase 8,000,000
Shares of the Company's Common Stock
granted to
HACL, LTD.
December 19, 1996
================================================================================
2
TABLE OF CONTENTS
PAGE NO.
-------
ARTICLE I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
EXERCISE OF WARRANT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1 Manner of Exercise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 When Exercise Effective . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 Delivery of Stock Certificates, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(a) Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(b) Warrant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.4 Company to Reaffirm Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.5 Vesting of the Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(a) Compressor Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(b) Oil and Gas Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(c) Combination of Compressor Leases and Acquisitions of Oil and Gas Properties . . . . . . 5
(d) Change of Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(e) Calculation of Leased Compressor Horsepower . . . . . . . . . . . . . . . . . . . . . . 6
(f) Acquisition of Compressor Leasing Companies . . . . . . . . . . . . . . . . . . . . . . 6
(g) Combining Producing Oil and Gas Properties and Compressor Leases Effected
Through Acquisitions of Companies . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ADJUSTMENT OF COMMON STOCK ISSUABLE UPON EXERCISE FOR
STOCK SPLITS, ETC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
CONSOLIDATION, MERGER, ETC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.1 Consolidation, Merger, Sale of Assets, Reorganization, etc. . . . . . . . . . . . . . . . . . . 8
3.2 Assumption of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE IV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
OTHER PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.1 No Dilution or Impairment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.2 Notices of Corporate Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.3 Availability of Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.4 Reservation of Stock, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE V . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
RESTRICTIONS ON TRANSFER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.1 Restrictive Legends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.2 Notice of Proposed Transfer; Opinions of Counsel . . . . . . . . . . . . . . . . . . . . . . . 12
3
5.3 Termination of Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE VI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
OWNERSHIP, TRANSFER AND SUBSTITUTION OF WARRANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.1 Ownership of Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.2 Office, Transfer and Exchange of Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(a) Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(b) New Warrant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.3 Replacement of Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE VII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE VIII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
8.1 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
8.2 No Rights or Liabilities as Stockholder . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
8.3 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
8.4 Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4
THE ISSUANCE OF THIS WARRANT AND THE ISSUANCE OF
SHARES OF COMMON STOCK UPON THE EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF THE 1933, AS
AMENDED, THE TEXAS SECURITIES ACT OR THE OKLAHOMA SECURITIES
ACT. NEITHER THE RECORD OR THE BENEFICIAL OWNERSHIP OF SAID
WARRANT OR SAID SHARES MAY BE SOLD OR TRANSFERRED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR SAID
SECURITIES UNDER SAID ACTS AND ANY OTHER APPLICABLE STATE
SECURITIES LAWS OR RULES OR A VALID EXEMPTION FROM THE
REGISTRATION REQUIREMENTS UNDER SAID ACTS OR RULES CONFIRMED
BY AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH
SALE OR TRANSFER IS EXEMPT UNDER SUCH ACTS OR RULES AND SUCH
SALE OR TRANSFER IS MADE PURSUANT TO AND IN STRICT COMPLIANCE
WITH THE TERMS AND CONDITIONS OF SAID EXEMPTIONS.
EQUITY COMPRESSION SERVICES CORPORATION
(FORMERLY KNOWN AS XXXXXXX ENERGY CORPORATION)
Warrant
No. W-1 December 19, 1996
Equity Compression Services, Inc. (formerly known as Xxxxxxx Energy
Corporation) (the "Company"), an Oklahoma corporation, for value received,
hereby certifies that HACL, Ltd., or registered assigns, is entitled to
purchase from the Company eight million (8,000,000) duly authorized, validly
issued, fully paid and nonassessable shares of Common Stock, $0.01 par value
(the "Common Stock") at any time or from time to time prior to 5:00 p.m.,
Houston time, on the Expiration Date, all subject to terms, conditions and
adjustments set forth in this Warrant.
This is one of the Warrants (the "Warrant") (such term to include any
warrants issued in substitution therefor) originally issued pursuant to the
Stock Purchase Agreement. The Warrants originally so issued evidence the right
to purchase an aggregate of Eight Million (8,000,000) shares of Common Stock
subject to adjustment as provided herein. Certain capitalized terms used in
this Warrant are defined in Article VII; unless otherwise specified, references
to an "Exhibit" mean one of the exhibits attached to this Warrant, references
to an "Article" mean one of the articles in this Warrant, and references to a
"Section" mean one of the sections of this Warrant.
5
ARTICLE I
EXERCISE OF WARRANT
Section 1.1 Manner of Exercise. This Warrant may be exercised by the
holder hereof, in whole or in part as to any Vested Warrants, during normal
business hours on any Business Day prior to the Expiration Date, by surrender
of this Warrant to the Company at its office maintained pursuant to subdivision
(a) of Section 6.2, accompanied by a subscription in substantially the form
attached to this Warrant (or a reasonable facsimile thereof) duly executed by
such holder and accompanied by payment, in cash or by certified or official
bank check payable to the order of the Company in the amount obtained by
multiplying (a) the number of shares of Common Stock (without giving effect to
any adjustment thereof) designated in such subscription by (b) the Exercise
Price, and such holder shall thereupon be entitled to receive the number of
duly authorized, validly issued, fully paid and nonassessable shares of Common
Stock (or Other Securities) determined as provided in Articles II through IV;
provided however, in no event will the Holder of this Warrant be entitle to
exercise this Warrant as to any unvested Warrants.
Section 1.2 When Exercise Effective. Each exercise of this Warrant
shall be deemed to have been effected immediately prior to the close of
business on the Business Day on which this Warrant shall have been surrendered
to the Company as provided in Section 1.1, and at such time the Person or
Persons in whose name or names any certificate or certificates for shares of
Common Stock (or Other Securities) shall be issuable upon such exercise as
provided in Section 1.3 shall be deemed to have become the holder or holders of
record thereof.
Section 1.3 Delivery of Stock Certificates, etc. As soon as
practicable after each exercise of this Warrant as to any Vested Warrants, in
whole or in part, and in any event within five Business Days thereafter, the
Company, at its expense (including the payment by it of any applicable issue
taxes), will cause to be issued in the name of and delivered to the holder
hereof, subject to Article V, as such holder (upon payment by such holder of
any applicable transfer taxes) may direct, the following:
(a) Certificates. A certificate or certificates for the
number of duly authorized, validly issued, fully paid and
nonassessable shares of Common Stock (or Other Securities) to which
such holder shall be entitled upon such exercise plus, in lieu of any
fractional share to which such holder would otherwise be entitled,
cash in an amount equal to the same fraction of the Market Price per
share on the Business Day next preceding the date of such exercise.
2
6
(b) Warrant. In case such exercise is in part only, unless
this Warrant has expired, a new Warrant or Warrants of like tenor
dated the date hereof, calling in the aggregate on the face or faces
thereof for the number of shares of Common Stock (or Other Securities)
equal (without giving effect to any adjustment thereof) to the number
of such shares called for on the face of this Warrant minus the number
of such shares designated by the holder upon such exercise as provided
in Section 1.1.
Section 1.4 Company to Reaffirm Obligations. The Company will, at
the time of each exercise of this Warrant, upon the request of the holder
hereof, acknowledge in writing its continuing obligation to afford to such
holder all rights of the Common Stock (or other Securities) issued upon such
exercise to which such holder shall continue to be entitled after such exercise
in accordance with the terms of this Warrant; provided, that if the holder of
this Warrant shall fail to make any such request, such failure shall not affect
the continuing obligation of the Company to afford such rights to such holder.
Section 1.5 Vesting of the Warrants. Notwithstanding any provision
of this Warrant to the contrary, none of the Warrants shall be exercisable
until vested in accordance with this Section 1.5 (any such warrant is
hereinafter referred to as a "Vested Warrant"). The Warrants will vest as set
forth below:
(a) Compressor Leases. If the Purchaser or its Affiliates
directly or indirectly provide to the Company contracts or agreements
committing to lease from the Company natural gas compressors having an
aggregate of 15,000 horsepower on or before the Expiration Date, then
all of the Warrants shall be fully vested. If the Purchaser or its
Affiliates directly or indirectly provide contracts or agreements for
less than 15,000 horsepower, then (i) for contract or set of contracts
for the lease of natural gas compressors with an aggregate of 3,750
horsepower delivered by the Purchaser or its Affiliates on or before
the Expiration Date, then one-fourth (25%) of the Warrants shall be
vested, (ii) for contract or set of contracts for the lease of natural
gas compressors with an aggregate of 7,500 horsepower delivered by the
Purchaser or its Affiliates on or before the Expiration Date, then
one-half (50%) of the Warrants shall be vested, and (iii) for contract
or set of contracts for the lease of natural gas compressors with an
aggregate of 11,250 horsepower delivered by the Purchaser or its
Affiliates on or before the Expiration Date, then three-fourths (75%)
of the Warrants shall be vested. All of such leases shall provide for
rentals of not less than Market Rates. For the purposes of this
Section 1.5(a) the following transactions shall be considered as being
the equivalent of the Purchaser or its Affiliates providing contracts
or agreements for lease of natural gas compressors
3
7
from the Company with respect to the vesting of the Warrants pursuant
to this Section 1.5, (a) any contracts or agreements for compressor
leases originated by the Purchaser or its Affiliates between October
16, 1996 and the Expiration Date (the "Vesting Period"), (b) if the
Company acquires a company or entity with compressor leases that was
identified by the Purchaser or its Affiliates, then the compressor
leases of such acquired company shall be considered as set forth in
Section 1.5(f) hereof, (c) any sale/lease back transactions provided
or originated by the Purchaser or its Affiliates so long as the
purchase price for each natural gas compressors involved in such
transaction does not exceed the fair market value thereof, the lease
rentals payable to the Company are not less than Market Rates and the
transactions are approved by a majority of the members of the Board of
Directors not affiliated with or designated by the Purchaser, and (d)
any compressors provided by the Company to oil and gas properties
acquired by the Company and for which Warrants are being vested
pursuant to Section 1.5(b) below.
(b) Oil and Gas Reserves. If the Company has entered into
contract or set of contracts for the lease of natural gas compressors
with an aggregate of 7,500 horsepower delivered by the Purchaser or
its Affiliates on or before the Expiration Date, then one hundred
percent (100%) of the Warrants shall vest if the Company acquires
during the Vesting Period producing oil and gas properties identified
by the Purchaser or its Affiliates having a purchase price paid by the
Company of at least $4,000,000 in an transaction that is approved by a
majority of the members of the Board of Directors of the Company not
affiliated with or designated by the Purchaser (an "Approved
Transaction"). If the Company acquires producing oil and gas
properties having a purchase price of less than $4,000,000 in one or
more Approved Transaction(s), then (i) if the Company acquires
producing oil and gas properties with an aggregate purchase price of
at least $1,000,000 in one or more Approved Transaction(s) and the
Company has entered into contract or set of contracts for the lease of
natural gas compressors with an aggregate of 2,500 horsepower
delivered by the Purchaser or its Affiliates on or before the
Expiration Date, then twenty-five percent (25%) of the Warrants shall
vest, (ii) if the Company acquires producing oil and gas properties
with an aggregate purchase price of at least $2,000,000 in one or more
Approved Transaction(s) and the Company has entered into contract or
set of contracts for the lease of natural gas compressors with an
aggregate of 4,250 horsepower delivered by the Purchaser or its
Affiliates on or before the Expiration Date, then fifty percent (50%)
of the Warrants shall vest, and (iii) if the Company acquires
producing oil and gas properties with an aggregate purchase price of
at least $3,000,000 in one or more Approved Transaction(s) and the
Company has entered into contract or set
4
8
of contracts for the lease of natural gas compressors with an
aggregate of 6,000 horsepower delivered by the Purchaser or its
Affiliates on or before the Expiration Date, then 75% of the Warrants
shall vest. If the Company acquires a company that was identified by
the Purchaser or its Affiliates with oil and gas properties, then the
amount of the purchase price allocated to the producing oil and gas
properties of such acquired company shall be considered as oil and gas
properties acquired by the Company in determining the amount of
vesting under this Warrant.
(c) Combination of Compressor Leases and Acquisitions of Oil
and Gas Properties. It is the intent of the Parties that the
Warrants may be vested through a combination of the methods set forth
in Section 1.5(a) and (b) above. If any portion of the Warrants are
vested pursuant to Section 1.5(b), then for each set of contract or
set of contracts for the lease of natural gas compressors with an
aggregate of 3,750 horsepower delivered by the Purchaser or its
Affiliates on or before the Expiration Date with no additional
acquisition of oil and gas properties, then an additional one-fourth
(25%) of the Warrants shall be vested over and above the levels
provided in Section 1.5(b) above. For example if (i) 25% of the
Warrants have become vested pursuant to Section 1.5(b)(i) above, and
the Company has entered into contract or set of contracts for the
lease of natural gas compressors with an aggregate of additional 3,750
horsepower delivered by the Purchaser or its Affiliates on or before
the Expiration Date (i.e. leases for compressors with an aggregate of
6,250 horsepower), then an additional 25% of the Warrants shall vest
(i.e. a total of 50% of the Warrants shall then be vested), (ii) 50%
of the Warrants have become vested pursuant to Section 1.5(b)(ii)
above, and the Company and entered into contract or set of contracts
for the lease of natural gas compressors with an additional of 3,750
horsepower delivered by the Purchaser or its Affiliates on or before
the Expiration Date (i.e. leases for an aggregate of 8,000
horsepower), then an additional 25% of the Warrants shall vest (i.e. a
total of 75% of the Warrants shall then be vested), and (iii) 75% of
the Warrants have become vested pursuant to Section 1.5(b)(iii) above,
and the Company and entered into contract or set of contracts for the
lease of natural gas compressors with an aggregate of 9,750 horsepower
delivered by the Purchaser or its Affiliates on or before the
Expiration Date (i.e. leases for additional 3,750 horsepower), then an
additional 25% of the Warrants shall vest (i.e. all of the Warrants
shall then be vested).
(d) Change of Control. Upon a Change of Control that occurs
on or before the Expiration Date, all of the unvested Warrants shall
become vested.
5
9
(e) Calculation of Leased Compressor Horsepower. For the
purposes of the vesting provisions of this Section 1.5 as such
provisions relate to contracts providing for the lease of natural gas
compressors, only those leases in effect, and the horsepower of the
natural gas compressors that are then subject thereto, on the date on
which any vesting of the Warrants is to be determined shall be taken
in to account in determining whether any of the Warrants should vest
on that date. Once vested, the termination of any leases, or the
modification of any lease to cover compressors with less horsepower,
shall not adversely affect the vested condition of the Warrants. For
example, if the Purchaser or its Affiliates has provided contracts for
the lease of natural gas compressors with 7,500 horsepower all of
which are in effect on a certain date, then one- half of the Warrants
will be vested on such date and the subsequent termination of any of
the leases for such compressors shall not affect the vested status of
the Warrants.
(f) Acquisition of Compressor Leasing Companies. In the event
that the Company acquires another company identified by the Purchaser
or its Affiliates which is in the business of owning and leasing
natural gas compressors to third parties, any compressors being leased
by such company to others at the time of such acquisition shall be
considered for purposes of this Section 1.5 in the same manner and to
the same extent as the acquisition of producing oil and gas properties
identified by the Purchaser or its Affiliates as set forth in Section
1.5(b) above, with leases of acquired companies with an aggregate
horsepower of 1,875 being considered the equivalent of acquired
producing oil and gas properties with a purchase price of $1,000,000.
In other words, twenty-five percent (25%) of the Warrants shall vest
at any time that the Company has acquired a company or companies which
have compressor leases in effect covering an aggregate of at least
1,875 horsepower and the Company has in effect a contract or set of
contracts for the lease of natural gas compressors in accordance with
Section 1.5(a) with an aggregate of at least 2,500 horsepower, fifty
percent (50%) of the Warrants shall vest at any time that the Company
has acquired a company or companies which have compressor leases in
effect covering an aggregate of at least 3,750 horsepower and the
Company has in effect a contract or set of contracts for the lease of
natural gas compressors in accordance with Section 1.5(a) with an
aggregate of at least 4,250 horsepower; seventy-five percent (75%) of
the Warrants shall vest if at any time that the Company has acquired a
company or companies which have compressors leasing in effect covering
an aggregate of at least 5,625 horsepower and the Company has in
effect a contract or set of contracts for the lease of natural gas
compressors in accordance with Section 1.5(a) with an aggregate of at
least 6,000 horsepower. The Warrants will be one hundred percent
(100%) vested at any time that the Company has acquired a company or
companies which have
6
10
compressor leases in effect covering an aggregate of at least 7,500
horsepower and the Company has in effect a contract or set of
contracts for the lease of natural gas compressors in accordance with
Section 1.5(a) with an aggregate of at least 7,500 horsepower.
(g) Combining Producing Oil and Gas Properties and Compressor
Leases Effected Through Acquisitions of Companies. If the Company has
acquired producing oil and gas properties identified by the Purchaser
or its Affiliates and has acquired companies identified by the
Purchaser or its Affiliates which are in the business of owning and
leasing natural gas compressors to third parties, both types of
acquisitions shall be considered in determining the vesting of the
Warrants, with each $1,000,000 of purchase price of such producing oil
and gas properties being considered to be the equivalent of compressor
leases of such acquired companies with an aggregate horsepower of 1,875
and vice versa. Notwithstanding anything in the foregoing to the
contrary, in no event shall any Warrants vest unless the compressor
leases provided by the Purchaser or its Affiliates pursuant to Section
1.5(a) above cover compressors which have an aggregate of at least
2,500 horsepower; in no event shall the percentage of Warrants that
vests exceed twenty-five percent (25%) unless the compressor leases
provided by the Purchaser or its Affiliates pursuant to Section 1.5(a)
above cover compressors which have an aggregate of at least 4,250
horsepower; in no event shall the percentage of Warrants that vests
exceed fifty percent (50%) unless the compressor leases provided by the
Purchaser or its Affiliates pursuant to Section 1.5(a) above cover
compressors which have an aggregate of at least 6,000 horsepower; and
in no event shall the percentage of Warrants that vests exceed
seventy-five percent (75%) unless the compressor leases provided by the
Purchaser or its Affiliates pursuant to Section 1.5(a) above cover
compressors which have an aggregate of at least 7,500 horsepower.
ARTICLE II
ADJUSTMENT OF COMMON STOCK ISSUABLE UPON EXERCISE FOR
STOCK SPLITS, ETC.
In case of any reclassification or change of the outstanding shares of
Common Stock (other than a change from par value to no par value or vice versa
or a change in par value, or as a result of a subdivision or combination), the
holder of this Warrant shall thereafter (but only until the Expiration Date)
have the right to purchase the kind and number of shares of stock and/or other
securities or property receivable upon such reclassification or change in
respect of the number of shares purchasable under this Warrant immediately
prior to the time of determination of shareholders of the Company entitled to
receive such shares of stock and/or other securities or property, at a purchase
price equal to the product of (x) the number of shares issuable under this
Warrant immediately prior to such determination, times (y) the Exercise
7
11
Price, as if such holder had exercised this Warrant immediately prior to such
determination. The Company shall be obligated to retain and set aside, or
otherwise make fair provision for exercise of the right of the holder hereof to
receive, the shares of stock and/or other securities or property provided for
in this Section 2.1.
ARTICLE III
CONSOLIDATION, MERGER, ETC.
Section 3.1 Consolidation, Merger, Sale of Assets, Reorganization,
etc.
(a) In case at any time the Company shall be a party to any
transaction (including, without limitation, a merger, consolidation,
sale of all or substantially all the Company's assets, liquidation, or
recapitalization of the Common Stock) in which the previously
outstanding Common Stock shall be changed into or exchanged for common
stock or other securities of another corporation or interests in a
noncorporate entity or other property (including cash) or any
combination of any of the foregoing or in which the Common Stock (or
Other Securities) ceases to be a publicly traded security either
listed on the New York Stock Exchange or the American Stock Exchange
or quoted by the NASDAQ National Market System or the NASDAQ Small Cap
Market or any successor thereto or comparable system (each such
transaction being herein called the "Transaction", the date of
consummation of the Transaction being herein called the "Consummation
Date", the Company (in the case of a transaction in which the Company
retains substantially all of its assets and survives as a corporation)
or such other corporation or entity (in each other case) being herein
called the "Acquiring Company"), then, as a condition of the
consummation of the Transaction, lawful and adequate provisions shall
be made so that the holder of this Warrant, upon the exercise thereof
at any time on or after the Consummation Date, shall be entitled to
receive, and this Warrant shall thereafter represent the right to
receive, in lieu of the Common Stock (or Other Securities) issuable
upon such exercise prior to the Consummation Date, the highest amount
of securities or other property to which such holder would actually
have been entitled as a shareholder upon the consummation of the
Transaction if such holder had exercised this Warrant immediately
prior thereto.
(b) Notwithstanding the provisions of Section 3.1(a) hereof,
if the Common Stock (or Other Securities) is to be converted or
changed into, in whole or in part, securities of the Acquiring Company
or any affiliate thereof and the issuer of such securities does not
meet, or as a result of the
8
12
transaction with the Company, will not meet the following
requirements:
(i) it is or will be a solvent
corporation organized under the laws of any state of the
United States of America having its common stock listed on the
New York Stock Exchange or the American Stock Exchange or
quoted by the NASDAQ National Market System or any successor
thereto or comparable system, and such common stock continues
to meet such requirements for such listing or quotation, and
(ii) it is or will be required to file
reports with the Securities and Exchange Commission pursuant
to Section 13 or 15(d) of the Securities Exchange Act of 1934,
as amended,
then, at the election of the holder of this Warrant pursuant to notice given to
the Company on or before the later of (1) the 30th day following the
Consummation Date, and (2) the 60th day following the date of delivery or
mailing to such holder of the last proxy statement relating to the vote on the
Transaction by the holders of the Common Stock, the holder of this Warrant
shall be entitled to receive, within 30 days after such election or the
Consummation Date, whichever is later, in full satisfaction of the exercise
rights and all other rights afforded to such holder under this Warrant, an
amount equal to the fair market value of such exercise rights as determined by
an independent investment banker (with an established national reputation as a
valuer of equity securities) selected by the Company, such fair market value to
be determined with regard to all material relevant factors but without regard
to the effects on such value of the Transaction. In the event that the holder
of this Warrant elects to receive payment under this Section 3.1(b), the
Company shall obtain, and deliver to the holder of this Warrant a copy of the
determination of an independent investment banker (selected by the Company and
reasonably satisfactory to the holder of this Warrant) necessary for the
valuation under this Section 3.1(b) within 30 days after the Consummation Date
of the Transaction in question.
Section 3.2 Assumption of Obligations. Notwithstanding anything
contained in this Warrant to the contrary, the Company will not effect any of
the transactions described in paragraph 3.1(a) unless, prior to the
consummation thereof, each Person (other than the Company) which may be
required to deliver any stock, securities, cash or property upon the exercise
of this warrant as provided herein shall assume, by written instrument
delivered to, and reasonably satisfactory to, the holder of this Warrant, (a)
the obligations of the Company under this Warrant (and if the Company shall
survive the consummation of such transaction, such assumption shall be in
addition to, and shall not release the Company from, any
9
13
continuing obligations of the Company under this Warrant), and (b) the
obligation to deliver to such holder such shares of stock, securities, cash or
property as, in accordance with the foregoing provisions of this Article III,
such holder may be entitled to receive.
ARTICLE IV
OTHER PROVISIONS
Section 4.1 No Dilution or Impairment. The Company will not amend its
certificate of incorporation or consolidate, merge, reorganized, transfer
assets, dissolve, issue or sell securities or take any other voluntary action,
solely or primarily to avoid or seek to avoid the observance or performance of
any of the terms of this Warrant, but will at all times in good faith assist in
the carrying out of all such terms and in the taking of all such action as may
be necessary or appropriate in order to protect the rights of the holder of
this Warrant. Without limiting the generality of the foregoing, the Company
(a) will not permit the par value of any shares of stock receivable upon the
exercise of this Warrant to exceed the amount payable thereof or upon such
exercise, (b) will take all such action as may be necessary or appropriate in
order that the Company may validly and legally issue fully paid and
nonassessable shares of Common Stock (or Other Securities) on the exercise of
the Warrant from time to time outstanding, and (c) will not take any action
which results in any adjustment of the number of shares to be issued upon the
exercise of this Warrant if the total number of shares of Common Stock (or
Other Securities) issuable after the action upon the exercise of the Warrant
would exceed the total number of shares of Common Stock (or Other Securities)
then authorized by the Company's certificate of incorporation and available for
the purpose of issuance upon such exercise.
Section 4.2 Notices of Corporate Action. In the event that any of the
following occurs,
(a) any taking by the Company of a record of the holders of
any class of securities for the purpose of determining the holders
thereof who are entitled to receive any dividend (other than a regular
periodic dividend payable in cash out of earned surplus in an amount
not exceeding the amount of the immediately preceding cash dividend
for such period) or other distribution, or any right to subscribe for,
purchase or otherwise acquire any shares of stock of any class or any
other securities or property, or to receive any other right, or
(b) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the
Company or any consolidation or merger involving the Company and any
other Person or any transfer of all or
10
14
substantially all the assets of the company to any other Person, or
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
the Company will mail to each holder of a Warrant a notice specifying (i) the
date or expected date as of which any such record is to be taken for the
purpose of such dividend, distribution or right, and the amount and character
of such dividend, distribution or right, and (ii) the date or expected date on
which any such reorganization, reclassification, recapitalization,
consolidation, merger, transfer, dissolution, liquidation or winding-up is to
take place and the time, if any such time is to be fixed, as of which the
holders of record of Common Stock (or Other Securities) shall be entitled to
exchange their shares of Common Stock (or Other Securities) for the securities
or other property deliverable upon such reorganization, reclassification,
recapitalization, consolidation, merger, transfer, dissolution, liquidation or
winding-up. Such notice shall be mailed at least 20 days prior to the date
therein specified.
Section 4.3 Availability of Information. The Company will cooperate
with each holder of any Warrant or Restricted Security in supplying such
information as may be reasonably requested by such holder to complete and file
any information reporting forms presently or hereafter required by the
Commission to report such holders beneficial ownership of Common Stock or as a
condition to the availability of an exemption from the provisions of the
Securities Act for the sale of any Restricted Securities.
Section 4.4 Reservation of Stock, Etc. The Company will at all times
reserve and keep available, solely for issuance and delivery upon exercise of
the Warrants, the number of shares of Common Stock (or Other Securities) from
time to time issuable upon exercise of the Warrant. All shares of Common Stock
(or Other Securities) issuable upon exercise of the Warrant shall be duly
authorized and, when issued upon such exercise, shall be validly issued and, in
the case of shares, fully paid and non-assessable with no liability on the part
of the holders thereof.
ARTICLE V
RESTRICTIONS ON TRANSFER
Section 5.1 Restrictive Legends. Except as otherwise permitted by
this Article V, each Warrant (including each Warrant issued upon the transfer
of any Warrant) shall be stamped or otherwise imprinted with a legend in
substantially the following form:
11
15
"THE ISSUANCE OF THIS WARRANT AND THE ISSUANCE OF SHARES OF
COMMON STOCK UPON THE EXERCISE OF THIS WARRANT HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF THE 1933, AS AMENDED, THE
TEXAS SECURITIES ACT OR THE OKLAHOMA SECURITIES ACT. NEITHER THE
RECORD OR THE BENEFICIAL OWNERSHIP OF SAID WARRANT OR SAID SHARES MAY
BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR SAID SECURITIES UNDER SAID ACTS AND ANY OTHER APPLICABLE
STATE SECURITIES LAWS OR RULES OR A VALID EXEMPTION FROM THE
REGISTRATION REQUIREMENTS UNDER SAID ACTS OR RULES CONFIRMED BY AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH SALE OR
TRANSFER IS EXEMPT UNDER SUCH ACTS OR RULES AND SUCH SALE OR TRANSFER
IS MADE PURSUANT TO AND IN STRICT COMPLIANCE WITH THE TERMS AND
CONDITIONS OF SAID EXEMPTIONS."
Except as otherwise permitted by this Article V, each certificate for Common
Stock (or Other Securities) issued upon the exercise of any Warrant, and each
certificate issued upon the transfer of any such Common Stock (or Other
Securities), shall be stamped or otherwise imprinted with a legend in
substantially the following form:
"THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, THE TEXAS
SECURITIES ACT OR THE OKLAHOMA SECURITIES ACT. NEITHER THE RECORD NOR
THE BENEFICIAL OWNERSHIP OF SAID SHARES MAY BE SOLD OR TRANSFERRED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR SAID SHARES
UNDER SAID ACTS AND ANY OTHER APPLICABLE STATE SECURITIES LAWS OR
RULES UNLESS, IN THE OPINION OF COUNSEL SATISFACTORY TO THE COMPANY,
EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF SAID ACTS ARE
AVAILABLE WITH RESPECT TO SUCH SALE OR TRANSFER AND SAID SALE OR
TRANSFER IS MADE PURSUANT TO AND IN STRICT COMPLIANCE WITH THE TERMS
AND CONDITIONS OF SAID EXEMPTIONS."
Section 5.2 Notice of Proposed Transfer; Opinions of Counsel. Prior
to any transfer of any Restricted Securities which are not registered under an
effective registration statement under the Securities Act, the holder thereof,
will give written notice to the Company of such holders intention to effect
such transfer and to comply in all other respects with this Section 5.2. Each
such notice (a) shall describe the manner and circumstances of the proposed
transfer and (b) shall include an opinion of legal counsel addressed to the
Company, in form and substance reasonably satisfactory to the Company, to the
effect that such transfer does not violate the Securities Act of 1933 and
applicable state securities laws.
12
16
Section 5.3 Termination of Restrictions. The restrictions imposed by
this Article V upon the transferability of Restricted Securities shall cease
and terminate as to any particular Restricted Securities when such securities
shall have been sold pursuant to an effective registration statement under the
Securities Act or otherwise become freely transferable by the holder thereof.
Whenever such restrictions shall cease and terminate as to any Restricted
Securities, the holder thereof shall be entitled to receive from the Company,
without expense (other than applicable transfer taxes, if any), new
certificates representing the securities not bearing the applicable legends
required by Section 5.1.
ARTICLE VI
OWNERSHIP, TRANSFER AND SUBSTITUTION OF WARRANTS
Section 6.1 Ownership of Warrants. The Company may treat the person
in whose name any Warrant is registered on the register kept at the office of
the Company maintained pursuant to subdivision (a) of Section 6.2 as the owner
and holder thereof for all purposes, notwithstanding any notice to the
contrary, except that, if and when any Warrant is properly assigned in blank,
the Company may (but shall not be obligated to) treat the bearer thereof as the
owner of such Warrant for all purposes, notwithstanding any notice to the
contrary. Subject to Article V, a Warrant, if properly assigned, may be
exercised by a new holder without a new Warrant first having been issued.
Section 6.2 Office, Transfer and Exchange of Warrants.
(a) Office. The Company will maintain an office in where
notices, presentations and demands in respect of this Warrant may be
made upon it. Such office shall be maintained at until such time as
the Company shall notify each holder of the Warrant of any change of
location of such office.
(b) New Warrant. Upon the surrender of any Warrant, properly
endorsed, for registration of transfer or for exchange at the office
of the Company maintained pursuant to subdivision (a) of this Section
6.2, the Company at such holder's expense will (subject to compliance
with Article V, if applicable) execute and deliver to or upon the
order of the holder thereof a new Warrant or Warrants of like tenor,
in the name of such holder or as such holder (upon payment by such
holder of any applicable transfer taxes) may direct, calling in the
aggregate on the face or faces thereof for the number of shares of
Common Stock (or Other Securities) called for on the face or faces of
the Warrant or Warrants so surrendered.
13
17
Section 6.3 Replacement of Warrants. Upon receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of any Warrant and, in the case of any such loss, theft or
destruction of any Warrant held by a Person other than Purchaser or any
institutional investor, upon delivery of indemnity reasonably satisfactory to
the Company in form and amount or, in the case of any such mutilation, upon
surrender of such Warrant for cancellation at the office of the Company
maintained pursuant to subdivision (a) of Section 6.2 the Company at its
expense will execute and deliver, in lieu thereof, a new Warrant of like tenor.
ARTICLE VII
DEFINITIONS
As used herein, unless the context otherwise requires, the following
terms have the following respective meanings:
Business Day: Any day other than a Saturday or a Sunday or a day on
which commercial banking institutions in the States of Oklahoma, Texas or New
York are authorized by law to be closed. Any reference to "days" (unless
Business Days are specified) shall mean calendar days.
Change of Control: A "Change in Control" shall be deemed to take
place on the occurrence of any of the following events:
(1) as a result of a proxy solicitation by any party other
than the Company or any other such event, the Continuing Directors no
longer constitute at least a majority of the total number of directors
of the Company;
(2) any person or group of persons (as defined in Rule 13d-5
under the Securities Exchange Act of 1934, as amended), together with
its Affiliates, become the beneficial owner, directly or indirectly,
of fifty percent (50%) or more of the Company's then outstanding
Common Stock or fifty percent (50%) or more the total voting power of
the Company's then outstanding securities entitled generally to vote
for the election of the Company's directors;
(3) the approval by the Company's shareholders of the merger
or consolidation of the Company with any other corporation or business
organization, the sale of substantially all of the assets of the
Company or the liquidation or dissolution of the Company, unless, in
the case of a merger or consolidation, (i) the Continuing Directors in
office immediately prior to such merger or consolidation will
constitute at least a majority of the directors of the surviving
corporation or business organization of such merger or consolidation
or any parent (as such term is defined in Rule
14
18
12b-2 under the Securities Exchange Act of 1934, as amended) of such
corporation or business organization, or (ii) a majority of the
disinterested members of the Board of Directors of the Company as it
exists immediately prior to such event approve such transaction (for
the purposes hereof, the term "disinterested" members of the Board of
Directors are those members who are not designated by or affiliated
with the Purchaser or any of its assignees or affiliates); or
(4) a majority of the "disinterested" members of the Board of
Directors in office immediately prior to any other action proposed to
be taken by the Company's shareholders or by the Company's Board of
Directors determine that such proposed action, if taken, would
constitute a change of control of the Company and such action is
taken.
Commission: The Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.
Common Stock: As defined in the introduction to this Warrant, such
term to include (i) any stock into which such Common Stock shall have been
changed or any stock resulting from any reclassification of such Common Stock,
and (ii) all other stock of any class or classes (however designated) of the
Company the holders of which have the right, without limitation as to amount,
either to all or to a share of the balance of current dividends and liquidating
dividends after the payment of dividends and distributions on any shares
entitled to preference.
Company: As defined in the introduction to this Warrant, such term to
include any corporation which shall succeed to or assume the obligations of the
Company hereunder.
Continuing Director: In determining whether there has been a Change
of Control, any individual who is a member of the Company's Board of Directors
on the date immediately preceding the event or series of events that resulted
in the purported Change of Control.
Convertible Securities: Any evidences of indebtedness, shares of
stock (other than Common Stock) or other securities directly or indirectly
convertible into or exchangeable for Additional Shares of Common Stock.
Exchange Act: The Securities Exchange Act of 1934, or any similar
federal statute, and the rules and regulations of the Commission thereunder,
all as the same shall be in effect at the time.
Exercise Price: $0.91 per share.
Expiration Date: December 19, 2000.
15
19
Market Price: On any date specified herein, the amount per share of
the Common Stock, equal to (a) the last sale price of such Common Stock,
regular way, on such date or, if no such sale takes place on such date, the
average of the closing bid and asked prices thereof on such date, in each case
as officially reported on the principal national securities exchange on which
such Common Stock is then listed or admitted to trading, or (b) if such Common
Stock is not then listed or admitted to trading on any national securities
exchange but is designated as a national market system security by the NASD,
the last trading price of the Common Stock on such date, or (c) if there shall
have been no trading on such date or if the Common Stock is not so designated,
the average of the closing bid and asked prices of the Common Stock on such
date as shown by the NASD automated quotation system, or (d) if such Common
Stock is not then listed or admitted to trading on any national exchange or
quoted in the over-the-counter market, the fair value thereof determined in
good faith by the Board of Directors of the Company as of a date which is
within 20 days of the date as of which the determination is to be made.
Market Rates: Either (i) a rate that has been approved by the members
of the Board of Directors not Affiliated with or designated by the Purchaser or
(ii) a rate equal to or greater than the rate (a) that the Company is charging
unrelated third parties for the lease of comparable natural gas compressors in
the same region, or (b) being charged by the competitors of the Company
according to such competitors' rate books or sheets for the lease of comparable
equipment on comparable terms in the same region.
NASD: The National Association of Securities Dealers, Inc.
Options: Rights, options or warrants to subscribe for, purchase or
otherwise acquire either Additional Shares of Common Stock or Convertible
Securities.
Other Securities: Any stock (other than Common Stock) and other
securities of the Company or any other Person (corporate or otherwise) which
the holder of the Warrant at any time shall be entitled to receive, or shall
have received upon the exercise of the Warrant, in lieu of or in addition to
Common Stock, or which at any time shall be issuable or shall have been issued
in exchange for or in replacement of Common Stock or other securities pursuant
to Article III or otherwise.
Person: Any corporation, association, partnership, joint venture,
limited liability company, trust, estate, organization, business, individual,
government or political subdivision thereof or governmental agency.
Purchaser: HACL, Ltd., a Texas limited partnership.
16
20
Restricted Securities: All of the following: (a) any Warrants bearing
the applicable legend or legends referred to in Section 5.1, (b) any shares of
Common Stock (or Other Securities) which have been issued upon the exercise of
Warrants and which are evidenced by a certificate or certificates bearing the
applicable legend or legends referred to in such section and (c) unless the
context otherwise requires, any shares of Common Stock (or Other Securities)
which are at the time issuable upon the exercise of Warrants and which, when so
issued, will be evidenced by a certificate or certificates bearing the
applicable legend or legends referred to in such section.
Securities Act: The Securities Act of 1933, or any similar federal
statute, and the rules and regulations of the Commission thereunder, all as the
same shall be in effect at the time.
Stock Purchase Agreement: That certain Stock Purchase Agreement dated
as of October 16, 1996, by both the Company and the Purchaser.
Subsidiary: With respect to any Person, any corporation with respect
to which more than 50% of the outstanding shares of stock of each class having
ordinary voting power (other than stock having such power only by reason of the
happening of a contingency) is at the time owned, directly or indirectly, by
such Person or by one or more subsidiaries of such Person.
Transfer: Any sale, assignment, pledge or other disposition of any
security, or of any interest therein, which could constitute a "sale" as that
term is defined in section 2(3) of the Securities Act.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Remedies. The Company stipulates that the remedies at
law of the holder of this Warrant in the event of any default or threatened
default by the Company in the performance of or compliance with any of the
terms of this Warrant are not and will not be adequate and that, to the fullest
extent permitted by law, such terms may be specifically enforced by a decree
for the specific performance of any agreement contained herein or by an
injunction against a violation of any of the terms hereof or otherwise.
Section 8.2 No Rights or Liabilities as Stockholder. The holder of
this Warrant and all subsequent holders thereof hereby agree that except to the
extent set forth herein or in the Stock Purchase Agreement, no provision of
this Warrant shall be construed as conferring upon the holder hereof any rights
as a stockholder of the Company or as imposing any obligation on such holder to
purchase any securities or as imposing any liabilities on such holder as a
17
21
stockholder of the Company, whether such obligation or liabilities are asserted
by the Company or by creditors of the Company.
Section 8.3 Notices. All notices and other communications under this
Warrant shall be in writing and shall be mailed by registered or certified
mail, return receipt requested, addressed (a) if to any holder of any Warrant,
to the registered address of such holder as set forth in the register kept at
the principal office of the Company, or (b) if the Company, to the attention of
its President at its office maintained pursuant to subdivision (a) of Section
6.2, provided that the exercise of any Warrant shall be effective in the manner
provided in Article I.
Section 8.4 Miscellaneous.
(a) This Warrant may be amended, waived, discharged or
terminated, only if the Company shall have obtained the written
consent to such amendment, waiver, discharge or termination of the
holder or holders of Warrants entitling such holders to purchase 51%
or more by number of shares of the total number of shares of Common
Stock issuable under all Warrants at the time outstanding.
(b) This warrant shall be construed and enforced in
accordance with the laws of the State of Texas.
(c) The section headings in this Warrant are for purposes of
convenience only and shall not constitute a part hereof.
EQUITY COMPRESSION SERVICES CORPORATION
By:
--------------------------
Name:
--------------------------
Title:
-------------------------
18
22
FORM OF SUBSCRIPTION
To: Xxxxxxx Energy Corporation
The undersigned registered holder of the within Warrant hereby
irrevocably exercises such Warrant for, and purchases * shares of Common
Stock of Equity Compression Services Corporation (formerly known as Xxxxxxx
Energy Corporation) and herewith makes payment of $ therefor,
and requests that the certificates for such shares be issued in the name of,
and delivered to , whose address is
.
The undersigned further represents and warrants that it is acquiring
the shares of Common Stock for investment purposes only and not with a view to
the distribution thereof. The undersigned acknowledges that the issuance of
the shares of Common Stock has not been registered under the Securities Act of
1933, as amended, or any applicable state securities acts and such shares may
not be resold or otherwise transferred except pursuant to a registration
statement declared effective under such acts unless in the opinion of counsel
satisfactory to the Company exemptions from the registration requirements of
said acts are available with respect to such sale or transfer and said sale or
transfer is made pursuant to and in strict compliance with the terms and
conditions of said exemptions.
19
23
Dated: (Signature must conform in all
respects to name of holder as
specified on the face or
Warrant)
(Street Address)
(City) (State) (Zip Code)
*Insert the number of shares called for on the face
of this Warrant (or, in the case of a partial exercise, the
portion thereof as to which this Warrant is being exercised),
in either case without making any adjustment for Additional
Shares of Common Stock or any other stock or other securities
or property or cash which, pursuant to the adjustment
provisions of this Warrant, may be delivered upon exercise. In
the case of a partial exercise, a new Warrant or Warrants will
be issued and delivered, representing the unexercised portion
of the Warrant, to the holder surrendering the Warrant.
20
24
FORM OF ASSIGNMENT
[To be executed only upon transfer of Warrant]
For value received, the undersigned registered holder of the within
Warrant hereby sells, assigns and transfers unto the
right represented by such Warrant to purchase shares of Common Stock of to
which such Warrant relates, and appoints Attorney to make such transfer on the
books of maintained for such purpose, with full power of substitution in the
premises.
Dated: (Signature must conform in all
respects to name of holder as
specified on the face or
Warrant)
------------------------------
(Street Address)
-------------------------------
(City) (State) (Zip Code)
Signed in the presence of:
------------------------
21
