-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FyR4DWeohToXWp9taRfa8bAldR31cdAkQCT82FvEZsnrd08c+VBGXDBftvsJcg/S VgUrUbalcwnMWDpGV/uJDg== /in/edgar/work/0000950129-00-004811/0000950129-00-004811.txt : 20001003 0000950129-00-004811.hdr.sgml : 20001003 ACCESSION NUMBER: 0000950129-00-004811 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 20000915 ITEM INFORMATION: ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 20000929 FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNIVERSAL COMPRESSION HOLDINGS INC CENTRAL INDEX KEY: 0001057234 STANDARD INDUSTRIAL CLASSIFICATION: [7359 ] IRS NUMBER: 133989167 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-15843 FILM NUMBER: 732754 BUSINESS ADDRESS: STREET 1: 4440 BRITTMOORE RD CITY: HOUSTON STATE: TX ZIP: 77041 BUSINESS PHONE: 7134664103 MAIL ADDRESS: STREET 1: 4440 BRITTMOORE RD CITY: HOUSTON STATE: TX ZIP: 77041 FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNIVERSAL COMPRESSION INC CENTRAL INDEX KEY: 0001057233 STANDARD INDUSTRIAL CLASSIFICATION: [7359 ] IRS NUMBER: 741282680 STATE OF INCORPORATION: TX FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 333-48279 FILM NUMBER: 732755 BUSINESS ADDRESS: STREET 1: 4440 BRITTMOORE RD CITY: HOUSTON STATE: TX ZIP: 77041 BUSINESS PHONE: 7134664103 MAIL ADDRESS: STREET 1: 4440 BRITTMOORE RD CITY: HOUSTON STATE: TX ZIP: 77041 8-K 1 h80568e8-k.txt UNIVERSAL COMPRESSION HOLDINGS, INC. 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 --------- FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d)of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): September 29, 2000 (September 15, 2000) UNIVERSAL COMPRESSION HOLDINGS, INC. UNIVERSAL COMPRESSION, - ------------------------------------------------------------------------------- (Exact names of registrants as specified in their charters) DELAWARE 001-15843 13-3989167 TEXAS 333-48279 74-1282680 ------------------ ---------------- ------------------- (States or other (Commission File (IRS Employer jurisdictions of Numbers) Identification Nos.) incorporation) 4440 BRITTMOORE ROAD, HOUSTON, TEXAS 77041 - -------------------------------------------- ----------- (Address of principal executive offices) (Zip Code) (713) 335-7000 ---------------------------------------- (Registrants' telephone number, including area code) 2 Item 2. Acquisition or Disposition of Assets On September 15, 2000, Universal Compression Holdings, Inc., a Delaware corporation (the "Company"), completed its acquisition of Gas Compression Services, Inc., a Michigan corporation ("GCSI"), by merging GCSI with and into Universal Compression, Inc., a Texas corporation ("UCI") and wholly-owned operating subsidiary of the Company (the "Merger"). Pursuant to the terms of the Agreement and Plan of Merger dated as of August 4, 2000 (the "Merger Agreement"), the shareholders of GCSI received an aggregate of approximately $12 million in cash and 1,400,726 shares of newly issued restricted common stock of the Company, par value $.01 per share (the "Common Stock"), which number of shares was based on the trading price of the Common Stock on the New York Stock Exchange for a specified trading period prior to consummation of the Merger. In addition, UCI assumed approximately $57 million in related debt and operating leases of GCSI, and approximately $6 million of debt related to customer equipment financing and the associated customer notes receivable. In connection with the Merger, the Company entered into an Escrow Agreement with the GCSI shareholders, which is filed herewith as Exhibit 10.1 (the "Escrow Agreement"). Of the shares of the Common Stock issued in the Merger, 135,887 shares are being held in escrow pursuant to the terms of the Escrow Agreement to indemnify and reimburse the Company against certain losses and expenses the Company or UCI may incur as a result of a breach by GCSI or the GCSI shareholders of their representations and warranties or their failure to perform their obligations set forth in the Merger Agreement, or as a result of certain contingencies and matters identified in the Merger Agreement and Escrow Agreement. Copies of the Merger Agreement and the Escrow Agreement are filed herewith as Exhibits 2.1 and 10.1, respectively. The Company issued a press release on September 18, 2000 announcing the completion of the Merger, a copy of which is filed herewith as Exhibit 99.1. Item 5. Other Events Filing of a Registration Statement on Form S-3 and Related Agreements. In connection with the Merger, the Company entered into a Registration Agreement with the GCSI shareholders, a copy of which is filed herewith as Exhibit 4.1 (the "Registration Agreement"). Pursuant to the terms of the Registration Agreement, the Company filed on September 20, 2000 a Registration Statement on Form S-3 with the Securities and Exchange Commission with respect to the registration of the resale of up to 500,000 shares of Common Stock received in the Merger by the two GCSI shareholders. The Reuben James Helton Trust Dated January 24, 2000 and Michael Pahl, received 1,278,580 shares or 8.7% and 122,146 shares or 0.8%, respectively, of the Common Stock in the Merger on September 15, 2000. Mr. Reuben James Helton, the settlor and trustee of the Trust, is a consultant and Mr. Pahl is an employee of the Company. Copies of their respective Consulting and Non-Competition Agreement and Non-Disclosure and Non-Competition Agreement are filed herewith as Exhibits 10.2 and 10.3, respectively (the "Company Agreements"). Once the Registration Statement is declared effective, the selling shareholders may sell up to an aggregate of 500,000 shares of Common Stock in one or more offerings, following the November 20, 2000 lock-up period, except that one of the selling shareholders may request to sell up to 250,000 shares under a hardship exemption prior to the expiration of such lock-up period. The Company will not receive any of the proceeds from any sale of such shares. The Company has also agreed to register the resale of the remainder of the 3 shares issued to the GCSI shareholders in the Merger on November 20, 2000 in accordance with the terms of the Registration Agreement. The Registration Statement has not yet become effective. The securities may not be sold nor may offers to buy be accepted prior to the time the Registration Statement becomes effective. This Current Report on Form 8-K shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the securities in any state in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state. New Appointment to the Board of Directors. On September 28, 2000, the Company issued a press release announcing the expansion of its Board of Directors (the "Board") from seven to eight members. With the expansion of the Board, the Company has appointed, effective October 1, 2000, Edmund P. Segner III, who will serve as a Class B director, with his term of office expiring at the 2002 annual meeting of the Company's shareholders. A copy of the press release is filed herewith as Exhibit 99.2. The Merger Agreement, the Escrow Agreement, the Registration Agreement, the Company Agreements and the press releases are incorporated herein by reference into Items 2 and 5 and the foregoing description of such documents and the transactions contemplated therein are qualified in their entirety by reference to such exhibits. The statements contained herein that are not historical are forward-looking statements that are subject to risks and uncertainties that could cause actual results and events to differ materially from those expressed in the forward looking statements. These risks and uncertainties are discussed in the Company's filings with the Securities and Exchange Commission, copies of which are available to the public. Item 7. Financial Statements, Pro Forma Financial Information and Exhibits (a) Financial Statements of Business Acquired Not applicable. (b) Pro Forma Financial Information Not applicable. (c) Exhibits Exhibit No. Description 2.1 Agreement and Plan of Merger dated as of August 4, 2000 by and among Universal Compression Holdings, Inc., Universal Compression, Inc., Gas Compression Services, Inc., the Reuben James Helton Trust Dated January 24, 2000 and Michael Pahl. 4 4.1 Registration Agreement dated as of September 15, 2000 by and among Universal Compression Holdings, Inc., the Reuben James Helton Trust Dated January 24, 2000 and Michael Pahl. 10.1 Escrow Agreement dated as of September 15, 2000 by and among Universal Compression Holdings, Inc., the Reuben James Helton Trust Dated January 24, 2000, Richard J. Zerafa, as representative of the Trust, Michael Pahl and State Street Bank and Trust Company. 10.2 Consulting and Non-Competition Agreement effective as of September 14, 2000 by and between Universal Compression, Inc. and Reuben James Helton. 10.3 Non-Disclosure and Non-Competition Agreement effective as of September 14, 2000 by and between Universal Compression Holdings, Inc. and Michael Pahl. 99.1 Press Release of Universal Compression Holdings, Inc. dated September 18, 2000. 99.2 Press Release of Universal Compression Holdings, Inc. dated September 28, 2000. 5 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrants have duly caused this report to be signed on their behalf by the undersigned hereunto duly authorized. UNIVERSAL COMPRESSION HOLDINGS, INC. UNIVERSAL COMPRESSION, INC. (Registrants) Date: September 29, 2000 By: /s/ RICHARD W. FITZGERALD -------------------------------- Richard W. FitzGerald Senior Vice President and Chief Financial Officer 6 INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION ------- ----------- 2.1 Agreement and Plan of Merger dated as of August 4, 2000 by and among Universal Compression Holdings, Inc., Universal Compression, Inc., Gas Compression Services, Inc., the Reuben James Helton Trust Dated January 24, 2000 and Michael Pahl. 4.1 Registration Agreement dated as of September 15, 2000 by and among Universal Compression Holdings, Inc., the Reuben James Helton Trust Dated January 24, 2000 and Michael Pahl. 10.1 Escrow Agreement dated as of September 15, 2000 by and among Universal Compression Holdings, Inc., the Reuben James Helton Trust Dated January 24, 2000, Richard J. Zerafa, as representative of the Trust, Michael Pahl and State Street Bank and Trust Company. 10.2 Consulting and Non-Competition Agreement effective as of September 14, 2000 by and between Universal Compression, Inc. and Reuben James Helton. 10.3 Non-Disclosure and Non-Competition Agreement effective as of September 14, 2000 by and between Universal Compression Holdings, Inc. and Michael Pahl. 99.1 Press Release of Universal Compression Holdings, Inc. dated September 18, 2000. 99.2 Press Release of Universal Compression Holdings, Inc. dated September 28, 2000.
EX-2.1 2 h80568ex2-1.txt AGREEMENT & PLAN OF MERGER - DATED AUGUST 4, 2000 1 EXHIBIT 2.1 ================================================================================ AGREEMENT AND PLAN OF MERGER BY AND AMONG UNIVERSAL COMPRESSION HOLDINGS, INC., UNIVERSAL COMPRESSION, INC., GAS COMPRESSION SERVICES, INC., THE REUBEN JAMES HELTON TRUST DATED JANUARY 24, 2000 AND MICHAEL PAHL DATED AS OF AUGUST 4, 2000 ================================================================================ 2 TABLE OF CONTENTS ARTICLE I THE MERGER..............................................................................................2 Section 1.1. The Merger..................................................................................2 Section 1.2. Effective Time; Closing.....................................................................2 Section 1.3. Effect of the Merger........................................................................2 Section 1.4. Merger Consideration; Conversion of Company Common Stock....................................3 Section 1.5. Escrowed Shares.............................................................................4 Section 1.6. Tax-Free Reorganization.....................................................................4 Section 1.7. Withholding Rights..........................................................................4 ARTICLE II THE SURVIVING CORPORATION..............................................................................4 Section 2.1. Articles of Incorporation...................................................................4 Section 2.2. Bylaws......................................................................................5 Section 2.3. Directors and Officers......................................................................5 ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE COMPANY HOLDERS.................................5 Section 3.1. Organization, Good Standing, Capitalization and Authority...................................5 Section 3.2. No Conflict.................................................................................7 Section 3.3. Required Filings and Consents...............................................................8 Section 3.4. Compliance..................................................................................8 Section 3.5. Government Licenses, Permits and Related Approvals..........................................8 Section 3.6. Financial Statements; Liabilities...........................................................8 Section 3.7. Absence of Certain Changes or Events........................................................9 Section 3.8. Taxes.......................................................................................9 Section 3.9. Title to Assets............................................................................10 Section 3.10. Condition of Equipment and Inventory.......................................................11 Section 3.11. Change of Control Agreements...............................................................12 Section 3.12. Litigation.................................................................................12 Section 3.13. Contracts and Commitments..................................................................12 Section 3.14. Compression Contracts......................................................................13 Section 3.15. Warranties and Product Liability...........................................................13 Section 3.16. Customers and Suppliers....................................................................14 Section 3.17. Employees..................................................................................14 Section 3.18. Employee Benefit Plans.....................................................................14 Section 3.19. Labor and Employment Matters...............................................................15 Section 3.20. Environmental Compliance and Disclosure....................................................16 Section 3.21. Intellectual Property......................................................................17 Section 3.22. Brokers....................................................................................17 Section 3.23. Insurance Policies.........................................................................18 Section 3.24. Notes and Accounts Receivable..............................................................18 Section 3.25. Transactions with Affiliates...............................................................18 Section 3.26. Books and Records..........................................................................19 Section 3.27. Bank Accounts..............................................................................19 Section 3.28. The Trust; Fiduciary Capacity..............................................................19 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT..............................................................19 Section 4.1. Organization and Standing..................................................................19 Section 4.2. Capitalization.............................................................................20 Section 4.3. Corporate Authority........................................................................20
i 3 Section 4.4. No Conflict................................................................................21 Section 4.5. Required Filings and Consents..............................................................21 Section 4.6. Compliance.................................................................................21 Section 4.7. SEC Filings; Financial Statements..........................................................22 Section 4.8. Absence of Certain Changes or Events.......................................................22 Section 4.9. Litigation.................................................................................22 Section 4.10. Brokers....................................................................................22 ARTICLE V COVENANTS RELATING TO CONDUCT OF BUSINESS..............................................................23 Section 5.1. Covenants of the GCS Entities..............................................................23 Section 5.2. Covenants of Parent........................................................................25 ARTICLE VI ADDITIONAL AGREEMENTS.................................................................................26 Section 6.1. Access.....................................................................................26 Section 6.2. Reasonable Efforts; Consents and Approvals.................................................26 Section 6.3. Exclusive Dealing..........................................................................27 Section 6.4. Pahl Option................................................................................28 Section 6.5. Affiliated Companies.......................................................................28 Section 6.6. Transactions with Sub......................................................................28 Section 6.7. Benefit Plans..............................................................................29 Section 6.8. Fees and Expenses..........................................................................29 Section 6.9. Public Announcements.......................................................................29 Section 6.10. Listing....................................................................................29 Section 6.11. Tax Treatment..............................................................................30 Section 6.12. Board Participation........................................................................30 Section 6.13. Further Assurances.........................................................................30 Section 6.14. Registration of the Sale of Merger Shares..................................................30 Section 6.15. Notices of Certain Events..................................................................30 ARTICLE VII CONDITIONS...........................................................................................31 Section 7.1. Conditions to the Obligation of Each Party.................................................31 Section 7.2. Conditions to Obligations of Parent and Sub to Effect the Merger...........................31 Section 7.3. Conditions to Obligations of the Company and the Company Holders to Effect the Merger..........................................................33 ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER...................................................................34 Section 8.1. Termination................................................................................34 Section 8.2. Effect of Termination......................................................................35 Section 8.3. Amendments.................................................................................35 Section 8.4. Waiver.....................................................................................35 ARTICLE IX INDEMNIFICATION.......................................................................................35 Section 9.1. Company Holders' Indemnification Obligations...............................................35 Section 9.2. Parent's Indemnification Obligations.......................................................36 Section 9.3. Survival...................................................................................36 Section 9.4. Threshold..................................................................................36 Section 9.5. Notice of Claim............................................................................36 Section 9.6. Defense....................................................................................37 Section 9.7. Limitation on Recourse.....................................................................37 Section 9.8. Express Negligence.........................................................................38 ARTICLE X GENERAL PROVISIONS.....................................................................................38 Section 10.1. No Third Party Beneficiaries...............................................................38 Section 10.2. Entire Agreement...........................................................................38
ii 4 Section 10.3. Succession and Assignment..................................................................38 Section 10.4. Counterparts...............................................................................39 Section 10.5. Headings...................................................................................39 Section 10.6. Governing Law..............................................................................39 Section 10.7. Consent to Jurisdiction; Waiver of Jury Trial..............................................39 Section 10.8. Severability...............................................................................39 Section 10.9. Specific Performance.......................................................................39 Section 10.10. Construction...............................................................................40 Section 10.11. Certain Definitions........................................................................40 Section 10.12. Notices....................................................................................40
EXHIBITS Exhibit A Form of Escrow Agreement Exhibit B Form of Special Retention Bonus Plan Exhibit C Form of Special Retention Payment Plan Exhibit D Board Participation Letter Agreement Exhibit E Form of Lock-up Letter Exhibit F Form of Legal Opinion of Mayor, Day, Caldwell & Keeton, L.L.P. Exhibit G Form of Legal Opinion of Warner Norcross & Judd, L.L.P. Exhibit H Form of Legal Opinion of Zerafa Law Offices, P.C. Exhibit I Form of Certificate of Trustee Exhibit J Form of Registration Agreement Exhibit K Form of Legal Opinion of Valerie L. Banner Exhibit L Form of Legal Opinion of King & Spalding
iii 5 AGREEMENT AND PLAN OF MERGER THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of August 4, 2000, by and among Universal Compression Holdings, Inc., a Delaware corporation ("Parent"), Universal Compression, Inc., a Texas corporation and wholly owned subsidiary of Parent ("Sub"), Gas Compression Services, Inc., a Michigan corporation (the "Company"), the Reuben James Helton Trust Dated January 24, 2000, a revocable trust formed pursuant to the laws of the State of Michigan, which, as of the date hereof, is the sole stockholder of the Company (the "Stockholder"), and Michael Pahl, an individual resident of the State of Michigan and, as of the date hereof, the sole holder of an option to acquire capital stock of the Company (the "Optionholder") (the Stockholder and the Optionholder, collectively, the "Company Holders" or the "Stockholders"). WITNESSETH: WHEREAS, the respective Boards of Directors of each of Parent, Sub and the Company deem it advisable and in the best interests of each corporation and its respective shareholders, that Parent and the Company combine in order to advance the long-term business strategies of Parent and the Company; WHEREAS, the Board of Directors of the Company has unanimously determined that the merger of the Company with and into Sub (the "Merger") and this Agreement are fair to, and in the best interests of, the Company and the holder of the common stock of the Company, par value $1.00 per share (the "Company Common Stock"); WHEREAS, the Board of Directors of Parent has unanimously determined that the Merger and this Agreement are fair to, and in the best interests of, Parent and the holders of the common stock of Parent, par value $.01 per share (the "Parent Common Stock"); WHEREAS, the respective Boards of Directors of each of Parent, Sub and the Company have approved this Agreement and the Merger on the terms and conditions contained in this Agreement; WHEREAS, Parent, as the sole shareholder of Sub, has approved this Agreement, the Merger and the transactions contemplated by this Agreement in accordance with the requirements of the Texas Business Corporation Act (the "TBCA") and the articles of incorporation and bylaws of Sub; WHEREAS, the Stockholder, as the sole shareholder of the Company as of the date hereof, has approved this Agreement, the Merger and the transactions contemplated by this Agreement in accordance with the requirements of the Michigan Business Corporation Act (the "MBCA") and the certificate of incorporation and bylaws of the Company, and the Optionholder approves this Agreement, the Merger and the transactions contemplated by this Agreement; and 6 WHEREAS, for federal income tax purposes, the parties hereto intend that the Merger shall qualify as a "reorganization" within the meaning of Section 368 of the Internal Revenue Code of 1986, as amended (the "Code"); NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements contained in this Agreement and intending to be legally bound hereby, the parties hereto agree as follows: ARTICLE I THE MERGER Section 1.1. The Merger. Upon the terms and subject to the conditions of this Agreement and in accordance with the provisions of the TBCA and the MBCA, at the Effective Time (as hereinafter defined), the Company shall be merged with and into Sub. As a result of the Merger, the separate corporate existence of the Company shall cease and Sub shall continue as the surviving corporation following the Merger (the "Surviving Corporation"). The corporate existence of Sub, with all its purposes, rights, privileges, franchises, powers and objects, shall continue unaffected and unimpaired by the Merger and, as the Surviving Corporation, it shall continue to be governed by the laws of the State of Texas. Section 1.2. Effective Time; Closing. As promptly as practicable, and in any event within three Business Days (as such term is defined in Section 10.11 hereof) after the satisfaction or waiver of the conditions set forth in Article VII hereof, the parties hereto shall cause the Merger to be consummated by filing articles of merger (the "Articles of Merger") with the Secretary of State of the State of Texas and a certificate of merger (the "Certificate of Merger") with the Secretary of State of the State of Michigan, and by making all other filings or recordings required under the TBCA and the MBCA in connection with the Merger, in such form as is required by, and executed in accordance with the relevant provisions of, the TBCA and the MBCA. The Merger shall become effective after the Articles of Merger are duly filed with the Secretary of State of the State of Texas and the Certificate of Merger is duly filed with the Secretary of State of the State of Michigan at such time on the date of such filings as the parties hereto agree shall be specified in the Articles of Merger and the Certificate of Merger (the date and time that the Merger becomes effective, the "Effective Time"). On the date of such filings, a closing (the "Closing") shall be held at 10:00 a.m., Houston, Texas time, at the offices of King & Spalding, 1100 Louisiana Street, Suite 3300, Houston, Texas 77002, or at such other time and location as the parties hereto shall otherwise agree. The date on which the Closing occurs is referred to herein as the "Closing Date." Except as otherwise specified herein, each reference to the Closing or the Closing Date refers to the time on the Closing Date immediately prior to the Effective Time. Section 1.3. Effect of the Merger. At the Effective Time, the effect of the Merger shall be as provided in the applicable provisions of the TBCA and the MBCA. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, all of the property, rights, privileges, powers and franchises of the Company shall continue with, or vest in, as the case may be, the Surviving Corporation, and all debts, liabilities, obligations, restrictions, disabilities and 2 7 duties of the Company shall continue to be, or become, as the case may be, the debts, liabilities, obligations, restrictions, disabilities and duties of the Surviving Corporation. Section 1.4. Merger Consideration; Conversion of Company Common Stock. At the Effective Time, by virtue of the Merger and without any action on the part of any holder thereof: (a) Each share of Company Common Stock issued and outstanding immediately prior to the Effective Time (other than shares canceled pursuant to Section 1.4(b) hereof, if any) shall be canceled and shall, by virtue of the Merger and without any action on the part of the holder thereof, be converted automatically into the right to receive (subject to the escrow arrangements described in Section 1.5 below) (i) $241.7199 in cash (such cash, the "Merger Cash") and (ii) a number of shares of Parent Common Stock equal to the lesser of X or Y, where X is equal to 42 and Y is equal to the quotient determined by dividing $1,035.0104 by the weighted average sales price of Parent Common Stock on the New York Stock Exchange (the "NYSE") for the 20 consecutive trading days ending the third Business Day prior to the Closing Date (such shares, the "Merger Shares") (such Merger Cash and Merger Shares, the "Merger Consideration"), subject to the applicable escrow arrangements described in Section 1.5 below. As of the Closing Date, the Merger Shares will be duly authorized, validly issued, fully paid and non-assessable, but the issuance will not be registered under the Securities Act of 1933, as amended (the "Securities Act"), or any applicable state securities Laws, provided, however, the subsequent offering and sale of the Merger Shares by the Stockholders will be subject to registration as described in the Registration Agreement referred to in Section 6.14 hereof. The Merger Cash will be paid to the record holders of Company Common Stock by wire transfer of immediately available funds immediately after the Effective Time. The certificates with appropriate legends representing the Merger Shares will be delivered to the record holders of Company Common Stock (or, as provided in Section 1.5 into escrow) immediately after the Effective Time. (b) Each share of Company Common Stock that is owned by the Company as treasury stock shall be canceled and retired and cease to exist and no payment or distribution shall be made with respect thereto. (c) At the Effective Time, all shares of Company Common Stock converted pursuant to Section 1.4(a) shall no longer be outstanding and shall automatically be canceled and retired and cease to exist, and each holder of a certificate representing any such shares of Company Common Stock shall cease to have any rights with respect thereto, except the right to receive the Merger Consideration in accordance with Section 1.4(a). (d) Each share of common stock, par value $.01 per share, of Sub issued and outstanding immediately prior to the Effective Time shall remain outstanding and continue unchanged by virtue of the Merger, and shall constitute the only outstanding shares of capital stock of the Surviving Corporation. (e) No fractional shares of Parent Common Stock shall be issued in the Merger. In lieu of any such fractional shares, the Company Holders, the only stockholders of the Company immediately prior to the Merger, will receive the next highest whole number of a share of Parent Common Stock. 3 8 Section 1.5. Escrowed Shares. Immediately after the Effective Time, the parties shall cause to be deposited in escrow such number of the Merger Shares (the "Escrowed Shares") as is equal to 9.5652% of the number of Merger Shares otherwise issuable to each holder of Company Common Stock pursuant to Section 1.4(a) (provided that no fractional share will be deposited but instead the next highest number of whole shares of Parent Common Stock shall be deposited), pursuant to an Escrow Agreement to be entered into by the Company Holders and Parent, which Escrow Agreement shall be substantially in the form of Exhibit A hereto (the "Escrow Agreement"). The Escrowed Shares shall be released to Parent as needed during the escrow period to cover (i) any amounts to which Parent may be entitled pursuant to Article IX hereof, (ii) any amounts in excess of $250,000 payable to or on behalf of Ms. Colleen Yuncker in connection with this Agreement, the transactions contemplated hereby, or any termination of or change in her employment in connection herewith or therewith (whether pursuant to the Agreement dated June 26, 2000 between Ms. Yuncker and the Company (the "Yuncker Agreement") or any other agreement of the GCS Entities entered into prior to the Effective Time, and (iii) the costs associated with the retention plans substantially in the forms of Exhibits B and C hereto (collectively, the "Retention Plan"), each as described more fully in the Escrow Agreement; provided, however, that the maximum aggregate amount of Escrowed Shares to which Parent shall be entitled for (ii) and (iii) above shall not exceed that number of Escrowed Shares valued at $800,000. Each Escrowed Share so released to Parent shall be released and valued as provided in the Escrow Agreement. Pursuant to the terms of the Escrow Agreement, (x) on June 30, 2001, all Escrowed Shares except for those with an aggregate value of $1,800,000 and those subject to pending claims shall be released to the Stockholders; and (y) on June 30, 2002, (A) Escrowed Shares with an aggregate value of $1,000,000 shall be released to Parent, (B) Escrowed Shares subject to any pending claims shall be retained in escrow and (C) all remaining Escrowed Shares shall be released to the Stockholders. Section 1.6. Tax-Free Reorganization. The Merger is intended to be a reorganization within the meaning of Section 368(a) of the Code, and this Agreement is intended to be a "plan of reorganization" within the meaning of the regulations promulgated under Section 368(a) of the Code. The parties hereto agree to report the Merger as, and to use their reasonable efforts to cause the Merger to constitute, a reorganization under the provisions of Section 368(a). Section 1.7. Withholding Rights. The Surviving Corporation shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement to the Stockholders such amounts, if any, as it is required to deduct and withhold with respect to the making of such payment under the Code and the rules and regulations promulgated thereunder, or any provision of state, local or foreign tax Law. To the extent that amounts are so withheld by the Surviving Corporation, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the Stockholders in respect of which such deduction and withholding was made by the Surviving Corporation. ARTICLE II THE SURVIVING CORPORATION Section 2.1. Articles of Incorporation. The Articles of Incorporation of Sub as in effect immediately prior to the Effective Time shall be the Articles of Incorporation of the Surviving 4 9 Corporation, until the same shall thereafter be altered, amended or repealed in accordance with applicable Law and such Articles of Incorporation. Section 2.2. Bylaws. The Bylaws of Sub as in effect immediately prior to the Effective Time shall be the Bylaws of the Surviving Corporation, until the same shall thereafter be altered, amended or repealed in accordance with applicable Law, the Articles of Incorporation of the Surviving Corporation and such Bylaws. Section 2.3. Directors and Officers. From and after the Effective Time, until the earlier of their resignation or removal or until their respective successors are duly elected or appointed and qualified in accordance with applicable Law, the directors and officers of Sub at the Effective Time shall continue to be the directors and officers of the Surviving Corporation. ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE COMPANY HOLDERS The Company, the Stockholder and the Optionholder hereby jointly and severally represent and warrant (except as to Section 3.28, as to which the Stockholder, solely and severally, represents and warrants) to each of the other parties hereto as follows: Section 3.1. Organization, Good Standing, Capitalization and Authority. (a) The Company (i) is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and (ii) has full corporate power and authority and all necessary government approvals to own, lease and operate its properties and assets and to conduct its business as presently conducted. The Company has no subsidiaries other than Gas Compression Realty, L.L.C., a Michigan limited liability company (the "Subsidiary"). Each of the Subsidiary, GCFC and Distributing (as such terms are defined in Section 3.1(b) below) (i) is a limited liability company or corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its formation and (ii) has full power and authority and all necessary governmental approvals to own, lease and operate its properties and assets and to conduct its business as presently conducted. Each of the Company, the Subsidiary, GCFC and Distributing (collectively, the "GCS Entities" and individually, a "GCS Entity") is duly qualified or licensed to do business as a foreign corporation or limited liability company and is in good standing in each jurisdiction where the character of the properties owned, leased or operated by it or the nature of its business makes such qualification or licensing necessary, except where failure to be so qualified or licensed would not, individually or in the aggregate, have a Company Material Adverse Effect (as defined below). The Company has furnished to Parent correct and complete copies of its articles of incorporation (the "Company Articles of Incorporation") and bylaws (the "Company Bylaws"), and the charter, bylaws, certificate of formation and other organizational documents of GCFC and Distributing (collectively, the "Affiliated Companies") and the Subsidiary, each as amended to date. Such articles of incorporation, bylaws, certificates of formation and other organizational documents are in full force and effect, and none of the GCS Entities is in violation of any provision thereof. The term "Company Material Adverse Effect" shall mean, with respect to the Company, any 5 10 change, event or effect that materially adversely affects the business, operations, properties, condition (financial or otherwise), assets or liabilities (including, without limitation, contingent liabilities) of the GCS Entities, taken as a whole, except to the extent that any such change, event or effect is the result of adverse changes in economic conditions in or affecting the U.S. gas compression service industry generally. (b) The authorized capital stock of the Company consists of 50,000 shares of Company Common Stock. As of the date hereof, 40,000 shares of Company Common Stock are issued and outstanding and as of the Closing Date, 44,444 shares of Company Common Stock will be issued and outstanding. All of such shares are (or, with respect to the 4,444 shares of Company Common Stock to be issued pursuant to exercise of Optionholder's option, will be as of the Closing Date) validly issued, fully paid and nonassessable and free of preemptive rights, and no shares of Company Common Stock will as of the Closing Date be held in the treasury of the Company. Other than the option granted to Optionholder pursuant to that certain Stock Option Agreement dated August 1, 1995, which shall be amended to comply with Section 6.4 of this Agreement (the "Pahl Option"), and the contingent equity-based cash payment rights of Ms. Colleen Yuncker pursuant to the Yuncker Agreement; (i) there are no options, warrants, convertible securities, subscriptions, stock appreciation rights, phantom stock plans or stock equivalents or other rights, agreements, arrangements or commitments (contingent or otherwise) of any character issued or authorized relating to the issued or unissued capital stock or membership interests of any of the GCS Entities or obligating any of them to issue or sell any shares of capital stock or membership interests of, or options, warrants, convertible securities, subscriptions or other equity interests in, any of the GCS Entities; (ii) there are no outstanding contractual obligations of the GCS Entities to repurchase, redeem or otherwise acquire any shares of Company Common Stock or any equity interests in the Subsidiary or the Affiliated Companies or to pay any dividend or make any other distribution in respect thereof or to provide funds to, or make any investment (in the form of a loan, capital contribution or otherwise) in, any Person; and (iii) as of the date hereof, the Stockholder owns, and immediately prior to the Effective Time the Stockholders shall own, all of the issued and outstanding capital stock of the Company, free and clear of all security interests, liens, claims, pledges, options rights of first refusal, agreements, limitations on voting rights, charges and other encumbrances of any nature whatsoever. As of the date hereof: (x) the Company owns beneficially and of record 99% and Chad Helton owns beneficially and of record 1% of the issued and outstanding ownership interests in the Subsidiary; (y) the Stockholder owns 79% and the Optionholder owns beneficially and of record 21% of the issued and outstanding shares of capital stock of Gas Compression Finance Corporation, a Michigan corporation ("GCFC"); and (z) the Stockholder owns 79% and Randy Irish owns 21% of the issued and outstanding ownership interests in G.C.S. Distributing L.L.C., a Texas limited liability company ("Distributing"). As of the Closing Date in accordance with the transactions contemplated in this Agreement: (x) the Company will own beneficially and of record 100% of the issued and outstanding ownership interests in the Subsidiary; (y) each of the Stockholder and the Optionholder will own 79% and 21%, respectively, of the issued and outstanding shares of capital stock of GCFC; and (z) each of the Stockholder and the Company will own 79% and 21%, respectively, of the issued and outstanding ownership interests in Distributing. The Company does not own an equity interest in any other corporation, partnership or entity other than the Subsidiary. Each outstanding equity interest in the Subsidiary, GCFC and Distributing is or on the Closing Date will be duly authorized, validly issued, fully paid and nonassessable and free and clear of all security 6 11 interests, liens, claims, pledges, options, rights of first refusal, agreements, limitations on voting rights, charges and other encumbrances of any nature whatsoever. (c) Each of the Company and the Company Holders has all necessary power and authority to execute and deliver this Agreement and the other agreements contemplated in this Agreement, to perform its obligations hereunder and to consummate the Merger and the other transactions contemplated hereby. The execution, delivery and performance by the Company of this Agreement, and the consummation by the Company of the Merger and the other transactions contemplated by this Agreement, have been duly authorized by all necessary corporate action (including, without limitation, the approval of the Board of Directors of the Company and the approval of all security holders entitled to vote thereon pursuant to the MBCA) and no other corporate proceedings on the part of the Company are necessary to authorize this Agreement or to consummate the Merger or the other transactions contemplated by this Agreement (other than, (i) with respect to the Merger, the filing and recordation of appropriate merger documents as required by applicable Law (as hereafter defined) and (ii) with respect to the transactions contemplated in Sections 6.4, 6.5 and 6.6, the completion of the other corporate proceedings contemplated in Sections 6.4, 6.5 and 6.6). This Agreement has been, and at Closing the other agreements contemplated in this Agreement will have been, duly executed and delivered by the Company, the Stockholder and the Optionholder and, assuming the due authorization, execution and delivery by Parent and Sub, constitutes a legal, valid and binding obligation of each of the Company, the Stockholder and the Optionholder enforceable against each of them in accordance with its terms, subject to applicable bankruptcy, insolvency and other similar Laws affecting the enforceability of creditors' rights generally, general equitable principles and the discretion of courts in granting equitable remedies. (d) The Board of Directors of the Company has (i) determined that this Agreement and the other transactions contemplated hereby, including the Merger, are in the best interests of the Company and the Stockholders and (ii) approved, authorized and adopted this Agreement, the Merger and the other transactions contemplated hereby. No state anti-takeover or similar statute or regulation is applicable to this Agreement, the Merger or the other transactions contemplated hereby. Section 3.2. No Conflict. The execution and delivery of this Agreement by the Company do not, and the performance of this Agreement by the Company and the consummation of the Merger and the other transactions contemplated hereby will not, (i) conflict with or violate the Company Articles of Incorporation or Company Bylaws or the organizational documents of the Subsidiary or the Affiliated Companies, (ii) subject to Section 3.3 hereof, conflict with or violate any United States federal, state or local or any foreign statute, law, rule, regulation, ordinance, code, order, judgment, decree or any other requirement or rule of law (a "Law") applicable to any of the GCS Entities or by which any property or asset of any of the GCS Entities is bound or affected, or (iii) except as set forth in that certain letter dated the date hereof from the Company and the Company Holders to Parent with respect to certain disclosure matters (the "Company Disclosure Letter"), result in a breach of or constitute a default (or an event which with notice or lapse of time or both would become a default) under, give to others any right of termination, amendment, acceleration or cancellation of, result in triggering any payment or other obligations, or result in the creation of a lien or other encumbrance on any property or asset of any of the GCS Entities pursuant to, any note, bond, mortgage, indenture, 7 12 contract, agreement, lease, license, permit, franchise or other instrument or obligation to which any of the GCS Entities is a party or by which any of them or any of their properties or assets are bound or affected, except in the case of clauses (ii) and (iii) above for any such conflicts, violations, breaches, defaults or other occurrences which would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect. Section 3.3. Required Filings and Consents. The execution and delivery of this Agreement by the Company does not, and the transactions contemplated hereby and the performance of this Agreement by the Company and the Company Holders will not, require any consent, approval, authorization or permit of, or filing with or notification to, any United States federal, state or local or any foreign government or any court, administrative or regulatory agency or commission or other governmental authority or agency, domestic or foreign (a "Governmental Entity"), except (i) for those required by the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and (ii) where failure to obtain such consents, approvals, authorizations or permits, or to make such filings or notifications, would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect. Section 3.4. Compliance. Except as disclosed in the Company Disclosure Letter, each of the GCS Entities and the Stockholder Properties (as defined in Section 6.6 hereof) (i) has been operated at all times in compliance with all Laws applicable to them or by which any property, business or asset of any of them is bound or affected and (ii) is not in default or violation of any notes, bonds, mortgages, indentures or similar agreements or similar obligations to which any of the GCS Entities is a party or by which any of them or any of their properties or assets is bound or affected, except in the case of clause (i) which would not reasonably be expected to, individually or in the aggregate, have a Company Material Adverse Effect. Section 3.5. Government Licenses, Permits and Related Approvals. The Company Disclosure Letter contains a complete and accurate list of all licenses, permits, registrations and approvals of Governmental Entities required for the Stockholder Properties and each of the GCS Entities to own, lease or operate their assets and properties and to conduct and operate their business in the manner currently conducted and operated, including, without limitation, all air emission permits for compressors (collectively, the "Permits"), true and complete copies of which have been previously furnished or made available for copying to Parent and all of which are valid and in full force and effect, except in each case for Permits as to which failure to have such Permits would not reasonably be expected to have, individually or in the aggregate, a material adverse effect on the business of the GCS Entities taken as a whole. Each of the GCS Entities is in compliance in all respects with the terms and conditions of all of the Permits applicable to such entity, except in each case for Permits as to which failure to comply with such terms and conditions would not reasonably be expected to have, individually or in the aggregate, a material adverse effect on the business of the GCS Entities taken as a whole. No representation or warranty is made in this Section 3.5 with respect to any matter that is the subject of a more specific representation in this Article III (including, without limitation and only as an example, Section 3.20). Section 3.6. Financial Statements; Liabilities. The Company has heretofore furnished Parent (i) the audited consolidated balance sheets of the Company as of July 31, 1998 and July 8 13 31, 1999, and the related consolidated statements of income, stockholders' equity and cash flow for the years then ended, all certified by Follmer, Rudzewicz & Co., P.C. (the "Auditors"), whose unqualified reports thereon are included therewith (the "Audited Historical Financial Statements"), and (ii) the unaudited unconsolidated balance sheets of each of the GCS Entities as of June 30, 2000, and the related unconsolidated statements of income, stockholders' equity and cash flow for the eleven-month period then ended (the "Interim Financial Statements"). The Historical Audited Financial Statements (including the footnotes thereto) were prepared in accordance with generally accepted accounting principles ("GAAP") consistently applied, and present fairly, in all material respects, the Company's consolidated financial condition, results of the operations and cash flows as of the dates and for the periods presented. The Interim Financial Statements were prepared in good faith and in a manner consistent with the Company's normal operating practices and are subject to audit adjustments and accruals. The audited consolidated balance sheet of the Company as of July 31, 2000, and the related consolidated statements of income, stockholders' equity and cash flow for the year then ended (each including footnotes thereto) (the "Current Audited Financial Statements"), which will be delivered to the Parent prior to the Closing Date, when so delivered (i) will have been certified by the Auditors with unqualified reports thereto, (ii) will have been prepared in accordance with GAAP consistently applied, (iii) will present fairly, in all material respects, the Company's consolidated financial condition, results of the operations and cash flows as of the dates and for the periods presented, and (iv) will not disclose any material adverse change from the information disclosed in the Interim Financial Statements or pursuant to this Agreement, including, without limitation, any material adverse change in liabilities and assets. Section 3.7. Absence of Certain Changes or Events. Except as contemplated by this Agreement or as disclosed in the Company Disclosure Letter, during the period from July 31, 1999 to the date of this Agreement, the GCS Entities have conducted their respective businesses in a manner substantially consistent with past practice and there has not occurred (i) any condition that has had or would reasonably be expected to have a Company Material Adverse Effect, (ii) any declaration, setting aside or payment of any dividend or any other distribution with respect to any of the capital stock of the Company or GCFC or equity interests of the Subsidiary or Distributing, (iii) any change in accounting methods, principles or practices employed by any of the GCS Entities, (iv) any material write-off as uncollectible of any notes or accounts receivable, except write-offs in the ordinary course of business, none of which, individually or in the aggregate, is material to the applicable GCS Entity, (v) any material increase in the rate of wages, salaries, bonuses or other remuneration of any officer, director or other key employee of any of the GCS Entities, or of any other employee of the GCS Entities not in the ordinary course and consistent with past practice, (vi) any cancellation or waiver of any claims or rights of substantial value that would reasonably be expected to have a Company Material Adverse Effect, (vii) any sale, lease or other disposition of any material assets or material equipment except in the ordinary course of business, (viii) any material capital expenditures other than in the ordinary course of business, or (ix) any action of the type described in Section 5.1(a), (d) or (e) which, had such action been taken after the date of this Agreement, would be in violation of such Section. Section 3.8. Taxes. Except as disclosed in the Company Disclosure Schedule, each of the GCS Entities has timely filed all Tax Returns (as hereinafter defined) required to be filed by it, except where the failure to file Tax Returns that would not reasonably be expected to be 9 14 material to the applicable GCS Entity. All such Tax Returns are correct and complete and accurately reflect the taxes due from the GCS Entities in all material respects. All Taxes (as hereinafter defined) of any of the GCS Entities which are (i) shown as due on such Tax Returns or (ii) claimed or asserted by any taxing authority to be due, have been paid, except for those Taxes being contested in good faith and for which reserves have been established in the Interim Financial Statements or will be established in the Current Audited Financial Statements in accordance with GAAP. There are no liens for any Taxes payable upon the assets of any of the GCS Entities, other than statutory liens for Taxes not yet due and payable or being contested in good faith. The Company has no Knowledge of any threatened material Tax claims or assessments. None of the GCS Entities has made an election under Section 341(f) of the Code. Except as set forth in the Company Disclosure Letter, none the GCS Entities has waived any statute of limitations in respect of Taxes or agreed to any extension of time with respect to a Tax assessment or deficiency. The GCS Entities have withheld and paid over to the relevant taxing authority all Taxes required to have been withheld and paid in connection with payments to employees, independent contractors, creditors, shareholders or other third parties, except where a failure to withhold and pay would be immaterial to the GCS Entities taken as a whole. GCFC has been a validly electing S corporation within the meaning of Sections 1361 and 1362 of the Code at all times since its inception and will be an S corporation up to and including the time immediately prior to the Effective Time. For purposes of this Agreement, (a) "Tax" (and, with correlative meaning, "Taxes") means any federal, state, local or foreign income, gross receipts, property, sales, use, license, excise, franchise, business, employment, payroll, premium, withholding, social security, alternative or added minimum, ad valorem, service, leasing, occupation, transfer or excise tax, or any other tax, custom, duty, governmental fee or other like assessment or charge of any kind whatsoever, including without limitation the Michigan Single Business Tax, together with any interest or penalty or addition thereto, whether disputed or not, imposed by any Governmental Entity, and (b) "Tax Return" means any return, report or similar statement required to be filed with respect to any Tax (including any attached schedules), including, without limitation, any information return, claim for refund, amended return or declaration of estimated Tax. Section 3.9. Title to Assets. (a) Each of the GCS Entities has good and marketable title to, or a valid leasehold interest in, all of its real property, compressors, and other material personal property and assets reflected on the balance sheet of the Current Audited Financial Statements as owned or leased by it, and as of the Closing Date, the Stockholder will have good and marketable title to the Stockholder Properties, in each case free and clear of all mortgages, title defects, liens, pledges, security interests, encumbrances, restrictions, reservations, covenants and adverse claims, except for (i) liens, encumbrances or restrictions which secure indebtedness disclosed in the Company Disclosure Letter; (ii) liens for Taxes not yet payable or being contested in good faith; (iii) liens arising as a matter of law in the ordinary course of business; (iv) matters set forth in the title policies related to the real property, including the Stockholder Properties, referred to in Section 3.9(b) hereof, and (v) such title defects, liens, encumbrances and restrictions, if any, as individually or in the aggregate do not interfere materially with the use by any of the GCS Entities of such properties or assets and are otherwise immaterial. Except as otherwise set forth in the Company Disclosure Letter, all of the real property, compressors, and other material personal property and assets necessary for the business of the GCS Entities are either owned and 10 15 held in the name of, or leased under valid leasehold interests of, the GCS Entities. Except as set forth in the Company Disclosure Letter, none of the GCS Entities has received any written notice of condemnation or suspension of its right to use with respect to any of the real property used by it, none of such real property is subject to condemnation proceedings to which it is a party and there is not now pending or threatened any governmental or regulatory action to which it is a party or action by a private party adverse to which it is a party to the uses contemplated for the real property by any of the GCS Entities. (b) The Company Disclosure Letter sets forth a correct and complete list of all real property (i) owned or leased by any of the GCS Entities (including any intercompany leases), (ii) as to which any of the GCS Entities has a license, easement, right of way or other right to use, or (iii) as to which any of the GCS Entities has the option to purchase, lease, license or acquire an easement, right of way or other right. The Company has previously delivered or made available for copying to Parent copies of all title reports and title insurance policies owned by or in the possession of any of the GCS Entities or with respect to the Stockholder Properties. (c) The Company Disclosure Letter sets forth a correct and complete list of all vehicles owned or leased by any of the GCS Entities as of July 25, 2000 and there has been no material change between such date and the date hereof. (d) Except as set forth in the Company Disclosure Letter, as of the date hereof, none of the GCS Entities has any legal obligation, absolute or contingent, to any other person to sell, lease or otherwise dispose of any of its real property, compressors, or other material personal property and assets, other than pursuant to mortgages and security interests or leases with financing sources in the ordinary course of business. Section 3.10. Condition of Equipment and Inventory. The Company Disclosure Letter sets forth a true and complete list of all compressor units owned or leased by any of the GCS Entities as of July 27, 2000, including a reasonably detailed description of each such compressor and its then current location. Where conformity with a published standard is required by Law or contract, the compressors of the GCS Entities comply with such standards. Except as set forth in the Company Disclosure Letter, all compressors, equipment, vehicles and other similar assets owned by any of the GCS Entities or used in connection with their business are in good operating condition and in a good state of maintenance and repair, ordinary wear and tear excepted, and are usable in the ordinary course of business. All items of completed inventory of the GCS Entities are, in all material respects, in usable or saleable condition in the ordinary course of business, or serviceable for use in the field. All raw materials, supplies and work-in-process material to the business of the GCS Entities taken as a whole, are at least the standard quality for such items in the compression service industry, are in such condition that they can be converted into merchantable products by industry standard processing procedures currently used by the GCS Entities, and are not materially in excess of the normal purchasing patterns of the GCS Entities. The Company has not been advised in writing by a specific supplier as to any material decrease in the supply of materials available to the GCS Entities, and the Company has no Knowledge that the cost associated with current work-in-process exceeds the saleable value of the final products. 11 16 Section 3.11. Change of Control Agreements. Except as set forth in the Company Disclosure Letter or contemplated by this Agreement, neither the execution and delivery of this Agreement nor the consummation of the Merger or the other transactions contemplated hereby, will (either alone or in conjunction with any other event) result in, cause the accelerated vesting or delivery of, or increase the amount or value of, any payment by or benefit from the GCS Entities to any director, officer, employee of the Company or any other person. Without limiting the generality of the foregoing, no amount paid or payable by the Company in connection with the Merger or the other transactions contemplated by this Agreement, including accelerated vesting of options (either solely as a result thereof or as a result of such transactions in conjunction with any other event) will be an "excess parachute payment" within the meaning of Section 280G of the Code. Section 3.12. Litigation. Except as set forth in the Company Disclosure Letter, there are no claims, suits, actions, investigations, indictments or information, or administrative, arbitration or other proceedings ("Litigation") pending or, to the Knowledge of the Company and the Company Holders, threatened against any of the GCS Entities or with respect to the Stockholder Properties. Except as set forth in the Company Disclosure Letter, there are no judgments, orders, injunctions, decrees, stipulations or awards (whether rendered by a court, administrative agency, or by arbitration, pursuant to a grievance or other procedure) against or relating to any of the GCS Entities or the Stockholder Properties. Section 3.13. Contracts and Commitments. The Company Disclosure Letter sets forth as of the date hereof a correct and complete list of the following contracts to which any of the GCS Entities is a party or which involve the Stockholder Properties (including any amendments, modifications or supplements thereto): (a) all employee agreements, contracts and commitments providing for compensation, severance or other benefits to any employee, former employee or director of any of the GCS Entities and all bonus, deferred compensation, pension, profit sharing, stock option, employee stock purchase, retirement and other employee benefit plans, compensation arrangements and other benefit arrangements (whether written or oral); (b) all agreements, contracts, and commitments relating to capital expenditures or borrowings in excess of $10,000 individually; (c) all loans, advances to, and investments in, any other Person (as defined in Section 10.11 hereof), and all agreements, contracts or commitments relating to the making of any such loan, advance or investment; (d) all service contracts (including management, consulting and other service contracts) other than with employees; (e) all leases as lessee of personal property (including vehicles); (f) all other agreements, contracts and commitments relating to sales of compression equipment; 12 17 (g) all other agreements, contracts and commitments that involve $100,000 or more per year individually; and (h) all other agreements, contracts and commitments containing any change of control or similar provision that would (either alone or in conjunction with any other event) be triggered by the execution and delivery of this Agreement or consummation of the Merger or the other transactions contemplated hereby; and (i) all other agreements, contracts and commitments, the breach or termination of which would reasonably be expected to have a Company Material Adverse Effect. Except for agreements, arrangements or commitments disclosed in the Company Disclosure Letter, none of the GCS Entities is a party to, and the Stockholder Properties are not involved in, any agreement, arrangement or commitment that is material to the business of the GCS Entities taken as a whole. The Company has delivered or made available for copying to Parent correct and complete copies of all such agreements, arrangements and commitments. None of the GCS Entities has Knowledge that it is in default under any such agreement, arrangement or commitment which has had, or would reasonably be expected to have, a Company Material Adverse Effect. Section 3.14. Compression Contracts. The Company has delivered or otherwise made available for copying to Parent and its representatives true and complete copies of all contracts pursuant to which, as of the date hereof, any of the GCS Entities leases or rents compressor units to third parties, or provides compressor operations, maintenance or service ("Compression Contracts"). Except as set forth in the Company Disclosure Letter, no GCS Entity has Knowledge of any material breach, default under or violation of any of the Compression Contracts that are material in the aggregate, by any party to such Compression Contracts, or any event or circumstance that with notice, or lapse of time or both, would constitute an event of default under the terms of any of the Compression Contracts that are material in the aggregate, and all of such Compression Contracts are in full force and effect. Except as set forth in the Company Disclosure Letter, to the Knowledge of the Company, no credits in excess of $10,000 are owed to any customer under any of the Compression Contracts, and there are no oral agreements relating to compression equipment or modifying the terms of any of the Compression Contracts that are material in the aggregate. Section 3.15. Warranties and Product Liability. Except for warranties implied by Law or as set forth in the Company Disclosure Letter, none of the GCS Entities has given or made any warranties or guarantees in connection with the sale, rental or lease of goods or operations and maintenance services performed thereon. None of the GCS Entities, to their Knowledge, has given any warranties agreeing to be liable for consequential damages. Except as set forth in the Company Disclosure Letter, neither the Company nor the Company Holders has Knowledge of any pending or threatened claim against any of the GCS Entities with respect to warranties relating to products sold or rented by any of them or maintenance services performed by or on behalf of any of them, including but not limited to warranties related to run time performance, other than pass-throughs of manufacturers' warranties as to which there are no material claims as of the date hereof. 13 18 Section 3.16. Customers and Suppliers. (a) The Company Disclosure Letter contains a true and correct list of (i) the names and addresses of the top twenty customers of the GCS Entities (in terms of revenue) during the eleven-month period ended June 30, 2000 (each, a "Significant Customer"), together with the approximate dollar amount of revenue attributable to each Significant Customer for such period and (ii) gas compression contract customers as of March 21, 2000 showing the approximate total monthly income amounts for such customers. Except as set forth in the Company Disclosure Letter, no Significant Customer has advised the Company that it has terminated or, to the Knowledge of the Company, threatened to terminate its business dealings with any of the GCS Entities during the six-month period ending on the date hereof or has, during such six-month period, materially decreased, or threatened to materially decrease, its business dealings with any of the GCS Entities in terms of recurring revenue on a monthly basis compared to the average monthly revenue attributable to such Significant Customer over such six-month period. (b) The Company Disclosure Letter contains a true and correct list of the names and addresses of the top ten suppliers of the GCS Entities (in terms of expenses) during the eleven-month period ended June 30, 2000 (each, a "Significant Supplier"), together with a brief description of the type of goods or services provided by such Significant Supplier. Section 3.17. Employees. The Company Disclosure Letter contains a true and complete list of all of the employees of the GCS Entities as of July 28, 2000 (and there has been no material change in the number of such employees since that date), specifying their position, age and their weekly salary or hourly wages (including any bonus commitments, if applicable). Section 3.18. Employee Benefit Plans. All bonus, deferred compensation, pension, profit sharing, stock option, employee stock (purchase, retirement and other), employee benefit plans, compensation arrangements and other benefit arrangements covering employees or former employees or directors of any of the GCS Entities and all employee agreements, contracts and commitments providing for compensation, severance or other benefits to any employee or former employee or director of any of the GCS Entities or to which any of the GCS Entities has or has had an obligation to make contributions to (whether written or oral) (the "Company Benefit Plans") are set forth in the Company Disclosure Letter. Correct and complete copies of the Company Benefit Plans, any amendments thereto, all Internal Revenue Service, Department of Labor or Pension Benefit Guaranty Corporation rulings or determinations, annual reports, summary plan descriptions, actuarial and other financial reports and such other documentation as reasonably requested by Parent have been provided or made available for copying to Parent. The Company Benefit Plans comply in all material respects with the currently mandatory requirements of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and the Code, and any Company Benefit Plan intended to be qualified under Section 401(a) of the Code has received a determination letter or is a model prototype plan and continues to satisfy the requirements for such qualification. None of the GCS Entities nor any ERISA Affiliate (as defined below) of any of them maintains, contributes to, or has an obligation to contribute to, or has maintained or contributed to, or has an obligation to contribute to, any benefit plan which is covered by Title IV of ERISA or Section 412 of the Code, or which is a "multiemployer plan" within the meaning of Section 3(37) of ERISA. Neither any Company Benefit Plan, nor any of 14 19 the GCS Entities has incurred any material liability or penalty under Section 4975 of the Code or Section 502(i) of ERISA or engaged in any transaction that is reasonably likely to result in any such liability or penalty. Each Company Benefit Plan has been maintained and administered in compliance in all material respects with its terms and with ERISA, the Code and all other applicable Laws. All contributions required to be made as of the date hereof by or on behalf of any GCS Entity to the Company Benefit Plans have been made or provided for. Except as required by Law, none of the GCS Entities maintains or contributes to any plan or arrangement which provides or has any liability to provide life insurance or medical or other employee welfare benefits to any employee or former employee upon his retirement or termination of employment, except to the extent such benefits are required to satisfy the minimum requirements under Part 6 of Subtitle B of Title I of ERISA, and none of the GCS Entities has ever represented, promised or contracted (whether in oral or written form) to any employee or former employee that such benefits would be provided, other than in the discretion of the Company. To the Knowledge of the Company, there is no audit or investigation by any governmental agency announced or pending with respect to any Company Benefit Plan. For purposes of this Agreement "ERISA Affiliate" means any business or entity which is a member of the same "controlled group of corporations," an "affiliated service group" or is under "common control" with an entity within the meanings of Sections 414(b), (c) or (m) of the Code, is required to be aggregated with the entity under Section 414(o) of the Code, or is under "common control" with the entity, within the meaning of Section 4001(a)(14) of ERISA, or any regulations promulgated or proposed under any of the foregoing Sections. Section 3.19. Labor and Employment Matters. Except as set forth in the Company Disclosure Letter and except as would not reasonably be expected to have, individually or in the aggregate, a material adverse effect on the GCS Entities taken as a whole: (a) None of the GCS Entities is a party to, or bound by, any collective bargaining agreement or other contracts, arrangements, agreements or understandings with a labor union or labor organization that was certified by the National Labor Relations Board ("NLRB"). None of the employees of any of the GCS Entities is represented by a union, and to the Knowledge of the Company there is no existing, pending or threatened (i) unfair labor practice charge or complaint, labor dispute, labor arbitration proceeding or any other matter before the NLRB or any other comparable state agency against or involving any of the GCS Entities, (ii) activity or proceeding by a labor union or representative thereof to organize any employees of any of the GCS Entities, (iii) certification or decertification question relating to collective bargaining units at the premises of any of the GCS Entities or (iv) lockout, strike, organized slowdown, work stoppage or work interruption with respect to such employees. (b) None of the GCS Entities has taken any action that would constitute a "Mass Layoff" or "Plant Closing" within the meaning of the Worker Adjustment and Retraining Notification ("WARN") Act or would otherwise trigger notice requirements or liability under any state or local plant closing notice Law. No agreement, arbitration or court decision or governmental order to which any of the GCS Entities is a party in any way limits or restricts any of the GCS Entities, Parent or Sub from relocating or closing any of the operations of any of the GCS Entities. 15 20 (c) None of the GCS Entities has failed to pay when due any wages, bonuses, commissions, benefits, taxes, penalties or assessments or other monies, owed to, or arising out of the employment of or any relationship or arrangement with, any officer, director, stockholder, employee, sales representative, contractor, consultant or other agent. (d) Each of the GCS Entities is in substantial compliance with all immigration Laws relating to employment and have properly completed and maintained in all material respects all applicable forms (including but not limited to I-9 forms). Section 3.20. Environmental Compliance and Disclosure. Except as set forth in the Company Disclosure Letter and except as would not, individually or in the aggregate, reasonably be expected to have a material adverse effect on the GCS Entities taken as a whole: (a) The GCS Entities possess, and are in substantial compliance with, all permits (including air emission permits), licenses and government authorizations and have filed all notices and registrations that are required under local, state and federal Laws and regulations relating to protection of the environment, pollution control, product registration and hazardous materials ("Environmental Laws") applicable to any of the GCS Entities, their compressors and other assets, and the Stockholder Properties and the GCS Entities are in compliance with all applicable limitations, restrictions, conditions, standards, prohibitions, requirements, obligations, schedules and timetables contained in those Laws or contained in any Law, regulation, code, plan, order, decree, judgment, notice, permit or demand letter issued, entered, promulgated or approved thereunder; (b) None of the GCS Entities has received written notice of actual or threatened liability under the Federal Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA") or any similar state or local statute or ordinance from any governmental agency or any third party, and the GCS Entities and the Stockholder have no Knowledge of facts or circumstances which would reasonably be expected to form the basis for the assertion of any claim against any of the GCS Entities under any Environmental Laws including, without limitation, CERCLA or any similar local, state or foreign Law with respect to any on-site or off-site location (including, without limitation, the Stockholder Properties); (c) None of the GCS Entities has entered into or agreed to, nor does any of the GCS Entities contemplate entering into, any consent decree or order, and none of such entities is subject to any judgment, decree or judicial or administrative order relating to compliance with, or the cleanup of hazardous materials under, any applicable Environmental Laws; (d) None of the GCS Entities or the Stockholder Properties is or to the Knowledge of the Company has been subject to any administrative or judicial proceeding pursuant to, and, to the Knowledge of the Company none has been alleged to be in violation of, applicable Environmental Laws or regulations any time during the past five years; (e) None of the GCS Entities or the Stockholder has received notice that it or the Stockholder Properties is subject to any claim, obligation, liability, loss, damage or expense 16 21 of whatever kind or nature, contingent or otherwise, incurred or imposed or based upon any provision of any Environmental Law and arising out of any act or omission of the Stockholder or any of the GCS Entities, or any of their employees, agents or representatives or, to the Knowledge of the Company, arising out of the ownership, use, control or operation by the Stockholder or any of the GCS Entities of any plant, facility, site, area or property (including, without limitation, the Stockholder Properties and any other plant, facility, site, area or property currently or previously owned or leased by any of the GCS Entities) from which any hazardous materials were released into the environment (the term "release" meaning any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping or disposing into the environment, and the term "environment" meaning any surface or ground water, drinking water supply, soil, surface or subsurface strata or medium, or the ambient air); (f) The Company has, to the Knowledge of the Company, heretofore provided Parent with correct and complete copies of all files of the GCS Entities and the Stockholder relating to environmental matters, including, without limitation, any reports of prior environmental assessments of the Company's operations, facilities and properties and the Stockholder Properties and any correspondence to or from any Governmental Entities with respect to environmental matters. None of the GCS Entities or the Stockholder has paid any fines, penalties or assessments within the last five years with respect to environmental matters for such properties; and (g) None of the Stockholder Properties, the assets owned by the GCS Entities or (to the Knowledge of the Company) any real property leased by any of them contains any friable asbestos, regulated PCBs or underground storage tanks. As used in this Section 3.20, the term "Hazardous Materials" means any waste, pollutant, hazardous substance, toxic, ignitable, reactive or corrosive substance, hazardous waste, special waste, industrial substance, by-product, process intermediate product or waste, petroleum or petroleum-derived substance or waste, chemical liquids or solids, liquid or gaseous products, or any constituent of any such substance or waste, the use, handling or disposal of which by any of the GCS Entities or with respect to the Stockholder Properties is in any way governed by or subject to any applicable Law, rule or regulation of any Governmental Entity. Section 3.21. Intellectual Property. Except as disclosed in the Company Disclosure Letter, none of the GCS Entities owns, uses or possesses any patents, patent applications, trade names, logos, service marks, service mark applications, trademarks, trademark applications, copyrights, copyright applications, trade secrets, know-how and confidential business information (whether patentable or unpatentable), exclusive of "shrink-wrap" licensed software. The Company Disclosure Letter sets forth a true and complete list of all websites, webpages, Internet addresses, home pages and domain names owned or used by any of the GCS Entities. Section 3.22. Brokers. Except for Garlin R. Rhymes and Edward C. Stanton III (the "Company's Independent Advisors"), no third-party broker, finder or investment banker is entitled to any brokerage, finder's or other fee or commission in connection with this Agreement, the Merger or the other transactions contemplated by this Agreement based upon arrangements made by or on behalf of any of the GCS Entities or the Company Holders. The Company Disclosure Letter includes a complete and correct description of all agreements between any of 17 22 the GCS Entities or the Company Holders and the Company's Independent Advisors pursuant to which such advisors would be entitled to any payment relating to this Agreement, the Merger or the other transactions contemplated by this Agreement, and true and complete copies of such agreements have been previously delivered to Parent. Section 3.23. Insurance Policies The Company has delivered or made available for copying to Parent prior to the date hereof a complete and accurate list and summary description of all its material insurance policies currently in force that relate to the Stockholder Properties or name any of the GCS Entities or their employees as an insured or beneficiary or as a loss payee or for which any of the GCS Entities has paid or is obligated to pay all or part of the premiums (including with respect to the Stockholder Properties) and has provided the name of the insurance agent for insurance policies providing coverage during any of the preceding three years. None of the GCS Entities has received notice of any pending or threatened cancellation or premium increase (retroactive or otherwise) with respect thereto, and each of the GCS Entities is in compliance in all material respects with all conditions contained therein. Except as set forth in the Company Disclosure Letter, there are no pending claims against such insurance policies by any of the GCS Entities or as to which insurers are defending under reservation of rights or have denied liability, and there exists no material claim under such insurance policies that has not been properly filed by the GCS Entities. All such policies are to the Knowledge of the Company in full force and effect, all premiums due thereon have been duly paid, and each of the GCS Entities has complied in all material respects with the provisions of such policies. Section 3.24. Notes and Accounts Receivable. (a) Except as disclosed in the Company Disclosure Letter, as of June 30, 2000, there are no notes receivable payable by or to any of the GCS Entities and there has been no material change between such date and the date hereof. (b) The Company has heretofore delivered or made available for copying to Parent a list of its accounts receivable as of June 30, 2000, showing the amounts due and an aging analysis thereof. Such listing is complete and accurate in all material respects, and all accounts receivable listed thereon are bona fide accounts receivable arising in the ordinary course of the business of the GCS Entities and, to the Knowledge of the GCS Entities, are valid claims against the applicable account debtors and not subject to any asserted set-offs as of the date hereof, except as otherwise disclosed in the Company Disclosure Letter. Section 3.25. Transactions with Affiliates. Except as set forth in the Company Disclosure Letter (other than compensation and benefits received in the ordinary course of business as an employee or director of the GCS Entities), no director, officer, stockholder or other "affiliate" or "associate" (as hereinafter defined) of any of the GCS Entities (or any entity in which, to the Knowledge of the Company or the Company Holders, any such director, officer or other affiliate or associate, has any interest, direct or indirect) has an interest, direct or indirect, in: (i) any contract, arrangement or understanding with, or relating to the business or operations of the GCS Entities; (ii) any loan, arrangement, understanding, agreement or contract for or relating to indebtedness of any of the GCS Entities; or (iii) any property (real, personal or mixed), tangible, or intangible, used or currently intended to be used in, the business or operations of the GCS Entities. 18 23 Section 3.26. Books and Records. The minute books of the GCS Entities, have previously been made available for copying to Parent and its representatives. Except as set forth in the Company Disclosure Letter, the GCS Entities do not have any of their records, systems, controls, data or information recorded, stored, maintained, operated or otherwise wholly or partly dependent upon or held by any means (including any electronic, mechanical or photographic process, whether computerized or not, and all means of access thereto and therefrom) which are not under the exclusive ownership and direct control of such entities. Section 3.27. Bank Accounts. The Company Disclosure Letter sets forth an accurate and complete list showing the name and address of each bank in which any of the GCS Entities has an account or safe deposit box, the number of each such account or box, and the names of all persons authorized to draw thereon or that have access thereto. Section 3.28. The Trust; Fiduciary Capacity. The Stockholder has provided or made available for review by Parent a true, complete and accurate copy of the Restated Trust Agreement of the Reuben James Helton Trust Dated January 24, 2000 (the "Trust") and all related documents, including any amendments thereto, but redacted to exclude information regarding the beneficiaries of the Trust (the "Trust Documents"). The Trust is a duly formed and valid revocable trust under Michigan law. The Trust authorizes the trustee thereof to sign such documents and take such actions as are necessary to consummate the transactions contemplated by the Merger Agreement. The Trust Documents have been duly executed by Reuben James Helton, as settlor, and by Richard J. Zerafa, as trustee, of the Trust, and James Bauters is the successor trustee upon the resignation, death or disability of Richard J. Zerafa. In the event of the death of Reuben James Helton, the Trust becomes irrevocable. Reuben James Helton has validly transferred to the Trust all of his interest in and to the issued and outstanding shares of Company Common Stock, the Stockholder Properties, and his ownership interests in GCFC and Distributing. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT Parent hereby represents and warrants to the Company as follows: Section 4.1. Organization and Standing. Each of Parent and Sub (a) is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation, (b) has full corporate power and authority to own, lease and operate it properties and assets and to conduct its business as presently conducted and (c) is duly qualified or licensed to do business as a foreign corporation and is in good standing in each jurisdiction where the character of the properties owned, leased or operated by it or the nature of its business makes such qualification or licensing necessary, except where the failure to be so qualified or licensed would not, individually or in the aggregate, have a Parent Material Adverse Effect (as hereinafter defined). Sub is the only significant subsidiary of Parent. Parent has furnished or made available for copying to the Company correct and complete copies of its amended and restated certificate of incorporation (the "Parent Restated Certificate of Incorporation") and bylaws (the "Parent Bylaws") and the charter and bylaws of Sub, each as amended to date. Such charters and 19 24 bylaws are in full force and effect, and neither Parent nor Sub is in violation of any provision of its charter, bylaws or equivalent organizational documents. Section 4.2. Capitalization. The authorized capital stock of Parent consists of 200,000,000 shares of Parent Common Stock. As of the date hereof, (i) 13,260,061 shares of Parent Common Stock are issued and outstanding, all of which are validly issued, fully paid and nonassessable and free of preemptive rights, (ii) 13,162 shares of Parent Common Stock are held in the treasury of Parent, (iii) 860,310 options are outstanding pursuant to the Parent Stock Option Plans ("Parent Options"), each such option entitling the holder thereof to purchase one share of Parent Common Stock, and 1,912,421 shares of Parent Common Stock are authorized and reserved for future issuance pursuant to the exercise of such Parent Options. Except as set forth above or in that certain letter dated the date hereof from Parent to the Company and the Company Holders with respect to certain disclosure matters (the "Parent Disclosure Letter"), there are no options, warrants, convertible securities, subscriptions, stock appreciation rights, phantom stock plans or stock equivalents or other rights, agreements, arrangements or commitments (contingent or otherwise) of any character issued or authorized by the Parent relating to the issued or unissued capital stock of Parent or obligating Parent to issue or sell any shares of capital stock of, or options, warrants, convertible securities, subscriptions or other equity interests in, Parent. All shares of Parent Common Stock subject to issuance as aforesaid, upon issuance on the terms and conditions specified in the instruments pursuant to which they are issuable, will be duly authorized, validly issued, fully paid and nonassessable. Except as set forth in the Parent Disclosure Letter, there are no outstanding contractual obligations of Parent to repurchase, redeem or otherwise acquire any shares of Parent Common Stock or to pay any dividend or make any other distribution in respect thereof. Section 4.3. Corporate Authority. (a) Each of Parent and Sub has all necessary power and authority to execute and deliver this Agreement and the other agreements contemplated in this Agreement, to perform its obligations hereunder and to consummate the Merger and the other transactions contemplated by this Agreement. The execution, delivery and performance by each of Parent and Sub of this Agreement, and the consummation by each of Parent and Sub of the Merger and the other transactions contemplated by this Agreement, have been duly authorized by all necessary corporate action and no other corporate proceedings on the part of either Parent or Sub are necessary to authorize this Agreement or to consummate the Merger or the other transactions contemplated by this Agreement (other than, with respect to the Merger, the filing and recordation of appropriate merger documents as required by the TBCA and MBCA). This Agreement has been, and at Closing the other agreements contemplated in this Agreement will have been, duly executed and delivered by each of Parent and Sub and, assuming the due authorization, execution and delivery by the Company and the Company Holders, constitute a legal, valid and binding obligation of each of Parent and Sub enforceable against each of Parent and Sub in accordance with its terms, subject to applicable bankruptcy, insolvency and other similar Laws affecting the enforceability of creditors' rights generally, general equitable principles and the discretion of courts in granting equitable remedies. (b) The Board of Directors of each of Parent and Sub has (i) determined that this Agreement and the other transactions contemplated hereby, including the Merger, are in the 20 25 best interests of each of Parent and Sub and the holders of Parent Common Stock and (ii) approved, authorized and adopted this Agreement, the Merger and the other transactions contemplated hereby. Section 4.4. No Conflict. The execution and delivery of this Agreement by each of Parent and Sub do not, and the performance of this Agreement by each of Parent and Sub and the consummation of the Merger and the other transactions contemplated hereby will not, (i) conflict with or violate Parent's or Sub's charters or bylaws, (ii) subject to Section 4.5, conflict with or violate any Law applicable to Parent or Sub or by which any property or asset of either of them is bound or affected, or (iii) except as set forth in the Parent Disclosure Letter, result in a breach of or constitute a default (or an event which with notice or lapse of time or both would become a default) under, give to others any right of termination, amendment, acceleration or cancellation of, result in triggering any payment or other obligations, or result in the creation of a lien or other encumbrance on any property or asset of Parent or Sub pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which Parent or Sub is a party or by which Parent or Sub or any property or asset of any of them is bound or affected, except in the case of clauses (ii) and (iii) above for any such conflicts, violations, breaches, defaults or other occurrences which would not reasonably be expected to, individually or in the aggregate, have a Parent Material Adverse Effect. The term "Parent Material Adverse Effect" shall mean, with respect to Parent, any change, event or effect that materially adversely affects the business, operations, properties, condition (financial or otherwise), assets or liabilities (including, without limitation, contingent liabilities) of Parent, taken as a whole, except to the extent that any such change, event or effect is the result of adverse changes in economic conditions in or affecting the U.S. gas compression service industry generally. Section 4.5. Required Filings and Consents. The execution and delivery of this Agreement by Parent and Sub do not, and the performance of this Agreement by such persons will not, require any consent, approval, authorization or permit of, or filing with or notification to, any Governmental Entity, except (i) for applicable requirements, if any, of the Securities Act, the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and any applicable state securities Laws and filing and recordation of appropriate merger documents as required by the TBCA and the MBCA, (ii) for those required by the HSR Act and (iii) where failure to obtain such consents, approvals, authorizations or permits, or to make such filings or notifications, would not, individually or in the aggregate, prevent or materially delay the performance by such person of any of its respective obligations under this Agreement or the consummation of the Merger or the other transactions contemplated by this Agreement. Section 4.6. Compliance. Except as disclosed in the Parent Disclosure Letter, each of Parent and Sub (i) has been operated at all times in compliance with all Laws applicable to Parent and Sub or by which any property, business or asset of Parent or Sub is bound or affected and (ii) is not in default or violation of any notes, bonds, mortgages, indentures, contracts, agreements, leases, licenses, permits, franchises, or other instruments or obligations to which Parent or Sub is a party or by which Parent or Sub or any property or asset of Parent or Sub is bound or affected, except where the failure to be in compliance or for such defaults or violations, that would not, individually or in the aggregate, have a Parent Material Adverse Effect. 21 26 Section 4.7. SEC Filings; Financial Statements. (a) Parent has filed all forms, reports, statements and documents required to be filed with the Securities and Exchange Commission (the "SEC") since the date of its initial public offering of Parent Common Stock (collectively, the "Parent SEC Reports"), each of which has complied in all material respects with the applicable requirements of the Securities Act or the Exchange Act, each as in effect on the date so filed. None of the Parent SEC Reports contained when filed any untrue statement of a material fact or omitted or omits to state a material fact required to be stated or incorporated by reference therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. (b) All of the financial statements included in the Parent SEC Reports, in each case including any related notes thereto, as filed with the SEC (collectively, the "Parent Financial Statements"), have been prepared in accordance with GAAP applied on a consistent basis throughout the periods involved (except as may be indicated in the notes thereto and subject, in the case of the unaudited statements, to normal, recurring audit adjustments) and fairly present the consolidated financial position of Parent and its subsidiaries at the respective date thereof and the consolidated results of its operations and changes in cash flows for the periods indicated. Section 4.8. Absence of Certain Changes or Events. Except as contemplated by this Agreement or as disclosed in the Parent Disclosure Letter, since March 31, 2000, Parent and Sub have conducted their respective businesses in a manner substantially consistent with prior practice and there has not occurred (i) any event or condition that has had or would reasonably be expected to have a Parent Material Adverse Effect, (ii) any declaration, setting aside or payment of any dividend or any other distribution with respect to any of the capital stock of Parent or Sub, (iii) any material change in accounting methods, principles or practices employed by Parent, or (iv) any material action of the type described in Section 5.2 which, had such action been taken after the date of this Agreement, would be in violation of any such Section. Section 4.9. Litigation. Except as set forth in the Parent Disclosure Letter, there is no Litigation pending or, to the Knowledge of Parent, threatened against Parent that would reasonably be expected to have a Parent Material Adverse Effect. Except for such matters which have not had, and would not reasonably be expected to have, a Parent Material Adverse Effect, there are no judgments, orders, injunctions, decrees, stipulations or awards (whether rendered by a court, administrative agency, or by arbitration, pursuant to a grievance or other procedure) against or relating to Parent or Sub. Section 4.10. Brokers. No broker, finder or investment banker Parent or Subsidiary is entitled to any brokerage, finder's or other fee or commission payable by such person in connection with this Agreement, the Merger or the other transactions contemplated by this Agreement based upon arrangements made by or on behalf of either of them. 22 27 ARTICLE V COVENANTS RELATING TO CONDUCT OF BUSINESS Section 5.1. Covenants of the GCS Entities. During the period from the date of this Agreement and continuing until the Effective Time, each of the Company and the Company Holders agrees as to itself or himself that (except as expressly contemplated or permitted by this Agreement or as otherwise indicated on the Company Disclosure Letter or to the extent that Parent shall otherwise consent in writing): (a) Ordinary Course. The Company shall, and the Company, the Stockholder and the Optionholder shall cause each of the Subsidiary and the Affiliated Companies to, carry on its business in the usual, regular and ordinary course, in substantially the same manner as heretofore conducted, and shall use all reasonable efforts to maintain its rights and franchises and preserve its relationships with customers, suppliers and others having business dealings with it. (b) Dividends; Changes in Share Capital. The Company shall not, and the Company, the Stockholder and the Optionholder shall not permit the Subsidiary or the Affiliated Companies to, and shall not propose to, (i) declare or pay any dividends on or make other distributions in respect of any of its capital stock, (ii) split, combine or reclassify any of its capital stock or issue or authorize or propose the issuance of any other securities in respect of, in lieu of or in substitution for, shares of its capital stock, (iii) issue any securities or grant options, warrants or rights to purchase any securities or (iv) repurchase, redeem or otherwise acquire any shares of its capital stock or any securities convertible into or exercisable for any shares of its capital stock. (c) Issuance of Securities. The Company shall not, and the Company, the Stockholder and the Optionholder shall not permit the Subsidiary or any of the Affiliated Companies to, issue, deliver or sell, or authorize or propose the issuance, delivery or sale of, any shares of its capital stock of any class or any securities convertible into or exercisable for, or any rights, warrants or options to acquire, any such shares, or enter into any agreement with respect to any of the foregoing. (d) Governing Documents. The Company shall not, and the Company, the Stockholder and the Optionholder shall cause the Subsidiary and the Affiliated Companies not to, amend the charter or bylaws or other governing documents of such entities or, except as otherwise contemplated by this Agreement, propose or authorize any plan or complete or partial liquidation or dissolution. (e) No Acquisitions. The Company shall not, and the Company, the Stockholder and the Optionholder shall not permit the Subsidiary or the Affiliated Companies to, acquire or agree to acquire by merging or consolidating with, or by purchasing any equity interest in or all or any portion of assets of, or by any other manner, any business or any corporation, partnership, association or other business organization or division thereof. The Company will not materially change its vehicle fleet from that set forth in the Company Disclosure Letter without notifying Parent. 23 28 (f) No Dispositions. The Company shall not, and the Company, the Stockholder and the Optionholder shall not permit the Subsidiary or any of the Affiliated Companies to, sell, lease (whether by operating lease, capital lease, synthetic lease or otherwise), encumber or otherwise dispose of, or agree to sell, lease, encumber or otherwise dispose of (including by way of a spin-off or similar transaction), any assets or equipment except in the ordinary course of business pursuant to contractual obligations existing as of the date hereof. (g) Capital Expenditures. The Company shall not, and the Company, the Stockholder and the Optionholder shall not permit the Subsidiary or the Affiliated Companies to, incur or commit to any capital expenditures except as described in the Company Disclosure Letter other than additional capital expenditures incurred or committed to in the ordinary course of business consistent with past practice; provided that no such additional capital expenditure shall be incurred or committed to with respect to (i) the repair or retrofitting of existing compressor equipment in excess of $100,000 per compressor or (ii) other expenditures in excess of $50,000 per item, in each case unless consented to by Sub, such consent not to be unreasonably withheld. (h) No Incurrence or Compromise of Indebtedness. Other than borrowings in the ordinary course of business, the Company shall not, and the Company, the Stockholder and the Optionholder shall not permit the Subsidiary or the Affiliated Companies to (i) incur, create, assume, guarantee or otherwise become liable for indebtedness for borrowed money, or (ii) forgive or compromise indebtedness owing to any of the GCS Entities. (i) No Changes in Employment Arrangements. The GCS Entities shall not enter into or amend any employee agreements, contracts or commitments, to any of their directors or any of their officers or other employees; enter into, adopt or amend any bonus, deferred compensation, pension, profit sharing, stock option, employee stock purchase, retirement or other employee benefit plan, compensation arrangement or other arrangement; or grant any increases in the compensation of (i) any director or any officer or (ii) with respect to any other employee, any increase outside the ordinary annual increase to such employees. (j) Consultation with Parent. The GCS Entities and management thereof shall consult Parent concerning all material business and operating decisions affecting the GCS Entities and advise Parent of any material adverse changes or developments relating to customers. (k) Other Actions. Neither the Company nor the Company Holders shall, and shall not permit the Subsidiary or the Affiliated Companies to, take any action that would reasonably be expected to result in any of the conditions to the Merger set forth in Article VII not being satisfied. (l) Accounting Matters. Except as required by a Governmental Entity, the Company shall not make any change to its methods, principles or practices of accounting in effect at July 31, 1999, except as required by changes in GAAP or as concurred with by the Auditors. The Company shall not change its fiscal year. The Company shall deliver the Current Audited Financial Statements to Parent as soon as available but in any event not less than two Business Days prior to Closing. 24 29 (m) Tax Matters. The GCS Entities shall not, without the prior written consent of Parent (which consent shall not unreasonably be withheld), make any change with respect to their methods of reporting income or deductions for federal income tax purposes from those employed in the preparation of Tax Returns for prior taxable years, except for any change required by applicable Law. (n) Authorization of the Foregoing. The Company shall not, and shall not permit the Subsidiary or any of the Affiliated Companies to, authorize, commit or agree to take any of the foregoing actions, as the case may be. Section 5.2. Covenants of Parent. During the period from the date of this Agreement and continuing until the Effective Time, Parent agrees as to itself and Sub that (except as expressly contemplated or permitted or required by this Agreement or as otherwise indicated on the Parent Disclosure Letter or to the extent that the Company shall otherwise consent in writing, which consent shall not be unreasonably withheld or delayed): (a) Dividends; Changes in Share Capital. Parent shall not, and shall not propose to, (i) declare or pay any dividends on or make other distributions in respect of any of its capital stock, (ii) split, combine or reclassify any of its capital stock or issue or authorize or propose the issuance of any other securities in respect of, in lieu of or in substitution for, shares of its capital stock or (iii) repurchase, redeem or otherwise acquire any shares of its capital stock or any securities convertible into or exercisable for any shares of its capital stock. (b) Issuance of Securities. Parent shall not issue, deliver or sell, or authorize or propose the issuance, delivery or sale of, any shares of its capital stock of any class or any securities convertible into or exercisable for, or any rights, warrants or options to acquire, any such shares or enter into any agreement with respect to any of the foregoing, other than (i) the issuance of Parent Common Stock upon the exercise of stock options or in connection with rights under other stock-based benefits plans or upon the exercise of the stock options issued pursuant to clause (iii) below, (ii) issuances by a wholly owned subsidiary of Parent of capital stock to such subsidiary's parent, (iii) issuances of stock options in connection with option grants by Parent or for new hires in the ordinary course of business, (iv) the issuance of Parent Common Stock in connection with acquisitions, or (v) the issuance of Parent Common Stock pursuant to contractual purchase rights or preemptive rights held by shareholders of Parent. (c) Governing Documents. Except to the extent required to comply with their respective obligations hereunder, required by Law or required by the rules and regulations of the NYSE, Parent shall not amend the Parent Restated Certificate of Incorporation or the Parent Bylaws, or other governing documents. (d) Other Actions. Parent shall not, and shall not permit Sub to, take any action that would reasonably be expected to result in any of the conditions to the Merger set forth in Article VII not being satisfied. (e) Authorization of the Foregoing. Parent shall not, and shall not permit Sub to, authorize, commit or agree to take any of the foregoing actions. 25 30 ARTICLE VI ADDITIONAL AGREEMENTS Section 6.1. Access. (a) Upon reasonable advance notice, each of Parent and the Company shall, and shall cause its Subsidiaries and Affiliated Companies to, afford to the other party and to the officers, employees, accountants, counsel, financial advisors and other representatives ("Representatives") of such other party reasonable access during normal business hours, during the period prior to the Effective Time, to all of its properties, books, contracts, commitments and records and, during such period, each of Parent and the Company shall, and shall cause its Subsidiaries to, furnish promptly to the other party consistent with its legal obligations all other information concerning its business, properties and personnel as such other party may reasonably request; provided, however, that each of Parent and the Company may restrict the foregoing access to the extent that (i) a Governmental Entity requires either party or any of its Subsidiaries to restrict access to any properties or information reasonably related to any such contract on the basis of applicable Law with respect to national security matters or (ii) in the reasonable judgment of such party any Law or treaty of any Governmental Entity applicable to such party requires it or its Subsidiaries to restrict access to any properties or information. The parties will hold any such information in confidence to the extent required by, and in accordance with, the provisions of the Non-Disclosure Agreement dated as of June 20, 2000 between Parent and the Company (the "Confidentiality Agreement"). Any investigation by Parent, any of the GCS Entities or the Company Holders shall not affect the representations and warranties of Parent or the Company and the Company Holders, as the case may be. (b) Upon reasonable advance notice, the Company shall, and shall cause its Subsidiary and the Affiliated Companies to, afford to Parent and its Representatives, from the date hereof until the Effective Time, reasonable access during normal business hours to all employees, agents and independent contractors of such entities. (c) Prior to the Closing Date, Parent shall have the right to conduct a Phase I environmental assessment of the operations, facilities and properties of the GCS Entities (including the Stockholder Properties), whether owned or leased, which assessment shall be conducted by an environmental consultant of Parent's choice. Section 6.2. Reasonable Efforts; Consents and Approvals. (a) Subject to the terms and conditions of this Agreement, each party hereto will use all commercially reasonable efforts to (i) take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable under applicable Law to consummate the Merger and the other transactions contemplated by this Agreement as soon as practicable after the date hereof and (ii) obtain and maintain all approvals, consents, waivers, registrations, permits, authorizations, clearances and other confirmations required to be obtained from any third party and/or any Governmental Entity that are necessary to consummate the Merger and the transactions contemplated hereby (each a "Required Approval"). In furtherance and not in limitation of the foregoing, each of Parent, Company and Stockholder agrees to make as 26 31 promptly as practicable, to the extent it has not already done so, (i) an appropriate filing of a Notification and Report Form pursuant to the HSR Act with respect to the transactions contemplated hereby (which filing shall be made in any event within five Business Days of the date hereof) and (ii) any other necessary filings with other Governmental Entities relating to the Merger, and, in each case, to supply as promptly as practicable any additional information and documentary material that may be requested pursuant to such Law and to use its commercially reasonable efforts to cause the expiration or termination of the applicable waiting periods under the HSR Act and the receipt of Required Approvals under such other Law as soon as practicable. (b) Each of Parent and the Company shall, in connection with the efforts referenced in Section 6.2(a) to obtain all Required Approvals, use its commercially reasonable efforts to (i) cooperate in all respects with each other in connection with any filing or submission and in connection with any investigation or other inquiry, (ii) promptly inform the other party of any communication received by such party from, or given by such party to, the Antitrust Division of the Department of Justice (the "DOJ") or any other Governmental Entity regarding any of the transactions contemplated hereby, and (iii) promptly inform the other party of the timing and content of any communications with the DOJ or any such other Governmental Entity, and, to the extent permitted by the DOJ or such other applicable Governmental Entity, give the other party the opportunity to attend and participate in such meetings and conferences. (c) Each of Parent and the Company, and their respective Board of Directors, shall, if any state takeover statute or similar statute becomes applicable to this Agreement, the Merger or any other transactions contemplated hereby, to the extent legally permissible, take all action reasonably necessary to ensure that the Merger and the other transactions contemplated by this Agreement may be consummated as promptly as practicable on the terms contemplated hereby and otherwise to minimize the effect of such statute or regulation on this Agreement, the Merger and the other transactions contemplated hereby. Section 6.3. Exclusive Dealing. (a) During the period from the date of this Agreement to the Effective Time, neither the Company, the Stockholder, the Optionholder, the Subsidiary nor the Affiliated Companies shall take any action to, directly or indirectly, encourage, initiate or engage in discussion or negotiations with, or provide any information to, any Person, other than Parent or its representatives, concerning any purchase of the stock or any merger or sale of all or any substantial portion of the assets of the Company, the Subsidiary or the Affiliated Companies or of the Stockholder Properties or similar transaction involving the Company, the Stockholder, the Optionholder, the Subsidiary, the Affiliated Companies or the Stockholder Properties or any merger, consolidation, business combination, recapitalization, liquidation, dissolution or other extraordinary transaction involving the Company, the Subsidiary or the Affiliated Companies (an "Alternative Transaction"), other than the transactions contemplated by this Agreement. (b) The Company will notify Parent orally (within two Business Days) and in writing (as promptly as is reasonably practicable) of all relevant terms of any proposals by a third party with respect to any Alternative Transaction which the Company, or any of their respective officers, directors, employees, investment bankers, financial advisors, attorneys, accounts or other representatives may receive during the period from the date hereof to the Effective Time 27 32 relating to any Alternative Transaction and, if such proposal is in writing, the Company will deliver to Parent a copy of such inquiry or proposal. (c) The Company will promptly request and pursue the return or destruction of confidential Company information in accordance with all applicable confidentiality agreements. Section 6.4. Pahl Option. On the Closing Date, effective immediately prior to the Effective Time, Optionholder shall exercise the Pahl Option for 4,444 shares of Company Common Stock and shall surrender any right to receive any additional shares of Company Common Stock pursuant to the Pahl Option or otherwise. In payment of the option exercise price for the Pahl Option, Optionholder shall transfer, convey, assign and deliver to the Company and the Company shall accept all right, title and interest (including all rights to receive payment) in respect of the note or account payable from GCFC to Optionholder in the principal amount of $401,901. (If such note or account payable is evidenced by a promissory note, Optionholder will endorse and deliver such note to the Company.) In satisfaction of his obligation to provide for the withholding taxes arising from the exercise of the Pahl Option, Optionholder directs Parent to deliver to the Company (i) the $60,000 payable to Optionholder by Sub for Optionholder's shares in GCFC as provided in Section 6.6 below, (ii) the cash payable to Optionholder in the Merger attributable to his ownership of Company Common Stock and (iii) that number of Merger Shares attributable to his ownership of Company Common Stock with a value determined under Section 1.4(a) equal to the minimum withholding tax obligation applicable to the ordinary income recognized by Optionholder as a result of the exercise of the Pahl Option less the sum of the amounts in clauses (i) and (ii) of this sentence. Section 6.5. Affiliated Companies. (a) Prior to the Closing Date, the Company will purchase, accept and assume, for $100,000 in cash, the 21% membership interest in Distributing held by Randy Irish together with all right, title and interest of Randy Irish in and to any amounts payable or distributable by Distributing to Randy Irish or in respect of such membership interest (the foregoing, collectively, the "Irish Distributing Interests"). (b) Prior to the Closing Date, the Company will purchase, accept and assume, for $10,000 in cash, the 1% membership interest in Subsidiary held by Chad Helton together with all right, title and interest of Chad Helton in and to any amounts payable or distributable by Subsidiary to Chad Helton or in respect of such membership interest (the foregoing, collectively, the "Chad Helton Subsidiary Interests"). (c) The Company and Stockholder will take any and all actions reasonably necessary to cause the Company to so acquire the Irish Distributing Interests and the Chad Helton Subsidiary Interests for the aforementioned cash amounts, including implementing cash-out statutory mergers, if necessary subject to the approval of Parent, which approval shall not be unreasonably withheld. Section 6.6. Transactions with Sub. At the Effective Time, the Optionholder shall convey and transfer to Sub and Sub shall purchase, accept and assume from the Optionholder, for an aggregate purchase price of $60,000 in cash, all of the Optionholder's shares of capital 28 33 stock of GCFC representing his 21% interest in GCFC together with all right, title and interest of the Optionholder in and to any amounts payable or distributable by GCFC to the Optionholder or in respect of such capital stock, including any S corporation distributions payable. At the Effective Time, the Stockholder shall convey and transfer to Sub and Sub shall purchase, accept and assume from the Stockholder for an aggregate purchase price of $1,197,000 in cash: (i) all of the shares of capital stock of GCFC representing the Stockholder's 79% interest in GCFC, together with all right, title and interest of the Stockholder in and to any amounts payable or distributable by GCFC to the Stockholder or in respect of such capital stock, including any S corporation distributions payable; (ii) the 79% membership interest in Distributing held by the Stockholder together with all right, title and interest of the Stockholder in and to any amounts payable or distributable by Distributing to the Stockholder or in respect of such membership interest; and (iii) the real estate assets described and identified as the Stockholder Properties in the Company Disclosure Letter (the "Stockholder Properties"). The aggregate purchase price for the Stockholder Properties shall be allocated as set forth in the Company Disclosure Letter. All parties agree that the purchase by Sub of the stock of GCFC shall be subject to an election under Section 338(h)(10) of the Code. The Company, the Stockholder and the Optionholder each represents and warrants to Parent that, upon consummation of the Merger and the transactions contemplated by this Section 6.6, there shall have been conveyed to Sub 100% of the authorized, issued and outstanding capital stock of GCFC and 100% of the authorized, issued and outstanding membership interests in each of Distributing and Subsidiary, in each case free and clear of all security interests, liens, claims, pledges, options, rights of first refusal, agreements, limitations on voting rights, charges and other encumbrances of any nature whatsoever. Section 6.7. Benefit Plans. Immediately prior to the Closing, the Company shall take appropriate action to cease benefit accruals under and terminate the Company's 401(k) plan. All employees of the Company at the Effective Time will become employees of Sub. Section 6.8. Fees and Expenses. Whether or not the Merger is consummated, all Expenses (as hereinafter defined) incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such Expenses, except (i) as otherwise set forth in Section 8.2 hereof and, (ii) that the Expenses incurred by the GCS Entities as set forth in the Company Disclosure Letter shall not exceed the amounts reflected therein. As used in this Agreement, the term "Expenses" includes all out-of-pocket expenses (including all fees and expenses of counsel, accountants, investment bankers, experts and consultants to a party hereto and its affiliates) incurred by a party or on its behalf in connection with or related to the authorization, preparation, negotiation, execution, satisfaction of conditions and performance of this Agreement and the transactions contemplated hereby. Section 6.9. Public Announcements. Parent and the Company shall consult each other before issuing any press release or other public announcement regarding this Agreement or the Merger, and shall not issue any such press release or other public announcement without the consent of the other (which consent shall not be unreasonably withheld) unless required by Law, as advised by counsel, or by obligations pursuant to any listing agreement with any national securities exchange. Section 6.10. Listing. Parent shall cause the shares of Parent Common Stock to be issued in connection with the Merger to be listed on the NYSE. 29 34 Section 6.11. Tax Treatment. Each of Parent and the Company and their respective Subsidiaries shall use reasonable efforts to cause the Merger to qualify as a "reorganization" under the provisions of Section 368(a) of the Code. The Company and Parent (and their subsidiaries) and the Stockholders shall treat the Merger Shares as property permitted to be received by Section 354 of the Code without the recognition of gain. Each of the Company and Parent covenants and agrees to, and agrees to cause its affiliates to, vigorously and in good faith defend all challenges to the treatment of the reorganization as described in this Section 6.11. Each of the Company and Parent agrees that if it becomes aware of any such fact or circumstance that is reasonably likely to prevent the Merger from qualifying as a reorganization described in Section 368(a) of the Code, it will promptly notify the other party in writing. Section 6.12. Board Participation. Reuben James Helton, if he so elects on or prior to the Closing Date, shall be offered the opportunity to be nominated to serve in his individual capacity on the Board of Directors of Parent in accordance with the provisions of the Parent Restated Certificate of Incorporation and Parent Bylaws, as described in the letter agreement to be entered into by Parent and the Company Holders, which letter agreement shall be substantially in the form of Exhibit D hereto (the "Board Participation Letter Agreement"). Section 6.13. Further Assurances. (a) At and after the Effective Time, the officers and directors of the Surviving Corporation will be authorized to execute and deliver, in the name and on behalf of the Company, any deeds, bills of sale, assignments or assurances and to take any other actions and do any other things, in the name and on behalf of the Company, reasonably necessary to vest, perfect or confirm of record or otherwise in the Surviving Corporation any and all right, title and interest in, to and under any of the rights, properties or assets of the Company acquired or to be acquired by the Surviving Corporation as a result of, or in connection with, the Merger. (b) In case at any time after the Effective Time any further action is necessary to carry out the purposes and intent of this Agreement and the transactions contemplated hereby, each of the Company Holders agrees to take or cause to be taken such further action (including the execution and delivery of such further instruments and documents) as Parent reasonably may request. Section 6.14. Registration of the Sale of Merger Shares. Parent agrees that it shall prepare and cause to be filed, within two Business Days after the Closing Date, at its sole expense, a shelf registration statement on Form S-3 covering the offering and sale by the Company Holders of 500,000 of the Merger Shares and provide subsequent registration rights in accordance with the Registration Agreement substantially in the form attached as Exhibit J hereto (the "Registration Agreement"). Section 6.15. Notices of Certain Events. From the date hereof until the Closing Date, each of the Company and the Company Holders, on the one hand, and Parent, on the other, shall promptly notify the other party of: (a) the occurrence of any event whose occurrence would be likely to cause either (i) any representation or warranty contained in this Agreement to be untrue or inaccurate 30 35 in any material respect at any time from the date hereof to the Effective Time, (ii) any condition set forth in Article VII to not be satisfied, or (iii) any Company Material Adverse Effect or Parent Material Adverse Effect, as applicable, on such party; (b) any material failure of such party, to comply with in any material respect any covenant or agreement to be complied with by it hereunder; and (c) any notice or other communication from any Person alleging that a material consent of such Person is or may be required in connection with the transactions contemplated by this Agreement. ARTICLE VII CONDITIONS Section 7.1. Conditions to the Obligation of Each Party. The respective obligations of Parent, Sub, the Company and the Company Holders to effect the Merger are subject to the satisfaction of the following conditions, unless waived in writing by all parties: (a) No temporary restraining order, preliminary or permanent injunction or other order issued by any court of competent jurisdiction or other legal restraint or prohibition (including, any statute, rule, regulation, injunction, order or decree proposed, enacted, enforced, promulgated, issued or applied to, or the withholding any consent or approval withheld with respect to, the Merger, by any Governmental Entity) preventing the consummation of the Merger shall be in effect; provided, however, that the parties invoking this condition shall have used commercially reasonable efforts to have any such order or injunction vacated; and (b) All actions by or in respect of or filings with any Governmental Entity required to permit the consummation of the Merger shall have been obtained or made (including the expiration or termination of any applicable waiting period under the HSR Act). Section 7.2. Conditions to Obligations of Parent and Sub to Effect the Merger. The obligations of Parent and Sub to effect the Merger are further subject to satisfaction or waiver at or prior to the Effective Time of the following conditions: (a) (i) the representations and warranties of the Company and the Company Holders in this Agreement that are qualified by materiality shall be true and correct in all respects as of the date of the Agreement and as of the Effective Time (except that any representations and warranties made as of a specified date or as to a specified period of time need be true and correct only as of such date or as to such period of time); (ii) the representations and warranties of the Company and the Company Holders in the Agreement that are not qualified by materiality shall be true and correct in all material respects as of the date of this Agreement and as of the Effective Time (except that any representations and warranties made as of a specified date or as to a specified period of time need be true and correct only as of such date or as to such period of time); (iii) the Company and the Company Holders shall have performed in all material respects all obligations required to be performed by it under this Agreement; and (iv) an officer of the Company and each of the Company Holders shall have 31 36 delivered to Parent and Sub a certificate to the effect that each of the foregoing conditions and the conditions in Section 7.2(c) and (i) is satisfied in all respects; (b) Each of Parent, the Company, the Affiliated Companies and any of their Subsidiaries shall have fully cooperated in good faith to procure applicable third party consents or waivers with respect to consummation of the Merger and the other transactions contemplated hereby; (c) There shall not have occurred since the date hereof any change, condition, event or development that has resulted in, or would reasonably be expected to result in, a Company Material Adverse Effect; (d) The Company and the Company Holders shall have tendered to Sub certificates representing all of the issued and outstanding shares of capital stock of the Company and GCFC. (e) Each of the Company Holders shall have executed and delivered to Parent a lock-up letter in substantially the form of Exhibit E hereto; (f) Michael Pahl shall have exercised the Pahl Option; (g) Each of the Company Holders shall have executed and delivered to Parent the Escrow Agreement; (h) The Company shall have executed and delivered the Retention Plan; (i) No holder of equity securities of the Company, the Subsidiary or any of the Affiliated Companies shall have exercised any dissenters', appraisal or similar rights with respect to the Merger or the other transactions contemplated hereby; (j) Parent shall have received the legal opinions, dated the Closing Date, of (i) Mayor, Day, Caldwell & Keeton, L.L.P., Warner Norcross and Judd, L.L.P. and Zerafa Law Offices, P.C., substantially to the effects, subject to customary qualifications and assumptions, set forth in Exhibits F, G and H, respectively, hereto and (ii) King & Spalding that the Merger will qualify as a reorganization under Section 368(a) of the Code; (k) Phase I environmental assessments of the operations, facilities and properties of the GCS Entities and the Stockholder Properties shall have been completed, and, within Parent's reasonable judgment, shall not indicate material potential liabilities; provided, however, that Parent shall have advised the Company as to any such judgment by Parent on or before August 21, 2000, and Parent shall have, at its option, the right (i) to terminate this Agreement by notice on or before August 23, 2000 or (ii) to continue with the Closing and pursue any remedies with respect to any Loss (as hereafter defined) related to such operations, facilities and properties subject to all the provisions of Article IX; and with respect to any Stockholder Property, Parent may elect by notice on or before August 23, 2000 to exclude such property from purchase under this Agreement and require the property to be retained by the Stockholder (in which event the parties shall enter into a lease termination agreement with respect to such excluded property in substantially the form of the lease termination agreement 32 37 attached as an exhibit to the Company Disclosure Letter) and pursue any remedies with respect to any Loss related to such Stockholder Property, or the operations or facilities thereon, subject to all the provisions of Article IX; (l) The trustee of the Trust shall have delivered to Parent a Certificate of Trustee substantially in the form of Exhibit I hereto; and (m) Indebtedness of Reuben James Helton to the Company in the amount of $950,000 shall be repaid at the Closing. Section 7.3. Conditions to Obligations of the Company and the Company Holders to Effect the Merger. The obligations of the Company and the Company Holders to effect the Merger are further subject to satisfaction or waiver at or prior to the Effective Time of the following conditions: (a) (i) the representations and warranties of Parent and Sub in this Agreement that are qualified by materiality shall be true and correct in all respects as of the date of the Agreement and as of the Effective Time; (ii) the representations and warranties of Parent and Sub in the Agreement that are not qualified by materiality shall be true and correct in all material respects as of the date of this Agreement and as of the Effective Time; (iii) each of Parent and Sub shall have performed in all material respects all obligations required to be performed by it under this Agreement; and (v) an officer of each of Parent and Sub shall have delivered to the Company a certificate to the effect that each of the foregoing conditions and the condition in Section 7.3(b) is satisfied in all respects; (b) There shall not have occurred any change, condition, event or development that has resulted in, or would reasonably be expected to result in, a Parent Material Adverse Effect; (c) Parent shall have executed and delivered to the Company Holders a Registration Agreement in substantially the form of Exhibit J hereto; (d) The Company and the Company Holders shall have received the legal opinions, dated the Closing Date, of Valerie L. Banner, Senior Vice President and General Counsel of Parent and King & Spalding, substantially to the effects, subject to customary qualifications and conditions, set forth in Exhibits K and L, respectively, hereto; (e) If Reuben James Helton so elects, Parent shall have executed and delivered to him the Board Participation Letter Agreement; (f) Parent shall have executed and delivered the Escrow Agreement; (g) Parent shall have executed and delivered the Retention Plan; and (h) Reuben James Helton shall have been released from all guarantees or other similar obligations in respect of debt or other similar agreements of the GCS Entities disclosed in the Company Disclosure Letter. 33 38 ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER Section 8.1. Termination. This Agreement may be terminated and the Merger may be abandoned at any time prior to the Effective Time: (a) By mutual written consent of Parent and the Company; (b) By either the Company or Parent if the Effective Time shall not have occurred on or before September 30, 2000 (the "Termination Date"); (c) By either the Company or Parent if any Governmental Entity (i) shall have issued an order, decree or ruling or taken any other action permanently restraining, enjoining or otherwise prohibiting the transactions contemplated by this Agreement, and such order, decree, ruling or other action shall have become final and nonappealable or (ii) shall have failed to issue an order, decree or ruling or to take any other action, in each of case (i) and (ii) which is necessary to fulfill the conditions set forth in Section 7.1(b) and such denial of a request to issue such order, decree, ruling or take such other action shall have become final and nonappealable; provided, however, that the right to terminate this Agreement under this Section 8.1(c) shall not be available to any party whose failure to comply with Section 6.2 has caused or resulted in such action or inaction; and provided, further that if an information request is received under the HSR Act, the Termination Date will be extended as necessary for up to sixty days; (d) By the Company, if Parent or Sub shall have breached or failed to perform any of its representations, warranties, covenants or other agreements contained in this Agreement, which breach or failure to perform (A) would give rise to the failure of a condition set forth in Section 7.3 and (B) has not been or is incapable of being cured by Parent or Sub within 30 calendar days after its receipt of written notice thereof from the Company; (e) By Parent, if any of the Company or the Company Holders shall have breached or failed to perform any of its or his representations, warranties, covenants or other agreements contained in this Agreement, which breach or failure to perform (A) would give rise to the failure of a condition set forth in Section 7.2 and (B) has not been or is incapable of being cured by the Company or the Company Holders within 30 calendar days after its receipt of written notice thereof from Parent; (f) By the Company or Parent if the mean of the closing prices of Parent Common Stock on the NYSE for the 20 consecutive trading day period ending the third Business Day prior to the Closing Date is less than $22.00 per share; (g) By the Company or Parent if trading in any securities of Parent has been suspended or materially limited by the SEC or the NYSE, or if trading generally on the NYSE has been suspended or materially limited, or minimum or maximum prices for trading have been fixed, or maximum ranges for prices have been required, by said exchange or by order of the SEC, the National Association of Securities Dealers, Inc. or any Governmental Entity, or if a banking moratorium has been declared by either Federal or New York authorities; and 34 39 (h) By Parent as and on or prior to the date provided in Section 7.2(l) hereof. Notwithstanding anything else contained in this Agreement, the right to terminate this Agreement under Section 8.1(b), (d) or (e) shall not be available to any party (a) that is in material breach of its obligations hereunder or (b) whose failure to fulfill its obligations or to comply with its covenants under this Agreement has been the cause of, or resulted in, the failure to satisfy any condition to the obligations of either party hereunder. Section 8.2. Effect of Termination. (a) In the event of the termination of this Agreement pursuant to Section 8.1 hereof, this Agreement shall forthwith be terminated and have no further effect except as specifically provided herein and, except as provided in this Section 8.2 and in Section 6.8, there shall be no liability on the part of any party hereto; provided that nothing herein shall relieve any party from liability for any willful breach hereof. (b) In the event of termination of this Agreement other than pursuant to Section 8.1(e), Parent agrees to reimburse the Company for up to $250,000 in reasonable out-of-pocket third party expenses (including the reasonable fees and expenses of legal counsel, accountants and other consultants) actually incurred by the GCS Entities in connection with the preparation and negotiation of this Agreement or the furtherance of the transactions contemplated hereby. Section 8.3. Amendments. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties hereto. Section 8.4. Waiver. At any time prior to the Effective Time, any party hereto may (i) extend the time for the performance of any of the covenants, obligations or other acts of any other party hereto or (ii) waive any inaccuracy of any representations or warranties or compliance with any of the agreements, covenants or conditions of any other party or with any conditions to its own obligations. Any agreement on the part of a party hereto to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such party by its duly authorized officer. The failure of any party to this Agreement to assert any of its rights under this Agreement or otherwise shall not constitute a waiver of such rights. The waiver of any such right with respect to particular facts and other circumstances shall not be deemed a waiver with respect to any other facts and circumstances and each such right shall be deemed an ongoing right that may be asserted at any time and from time to time. ARTICLE IX INDEMNIFICATION Section 9.1. Company Holders' Indemnification Obligations. Subject to the further provisions hereof and of the Escrow Agreement, after the Effective Time, the Company Holders shall indemnify and reimburse Parent for any and all claims, losses, liabilities, damages (including fines, penalties, and criminal or civil judgments and settlements), costs (including court costs) and expenses (including attorneys' and accountants' fees and expenses) (hereinafter 35 40 "Loss" or "Losses"), suffered or incurred by Parent or Sub or any of their directors, officers, employees, successors or assigns (the "Parent Indemnified Parties"), as a result of, or with respect to, (i) any breach or inaccuracy of any representation or warranty of the Company or the Company Holders set forth in this Agreement, whether such breach or inaccuracy exists or is made on the date of the Agreement or as of the Closing Date and without regard to any qualification in such representation or warranty for material, immaterial, Company Material Adverse Effect or similar terms (but subject to the provisions of Sections 9.3 through 9.8), and (ii) any breach of or noncompliance by the Company or the Company Holders with any covenant or agreement of either of them contained in this Agreement. Section 9.2. Parent's Indemnification Obligations. Subject to the further provisions hereof, after the Effective Time, Parent shall indemnify and reimburse the Company Holders, for any and all Losses suffered or incurred by Company Holders or any of their trustees, representatives, heirs, beneficiaries, successors or assigns (the "Stockholder Indemnified Parties"), as a result of, or with respect to, (i) any breach or inaccuracy of any representation or warranty of Parent or Sub set forth in this Agreement, whether such breach or inaccuracy exists or is made on the date of the Agreement or as of the Closing Date (but subject to the provisions of Sections 9.3 through 9.8), and (ii) any breach of or noncompliance by Parent or Sub with any covenant or agreement of Parent contained in this Agreement. Section 9.3. Survival. The representations and warranties contained herein or in any certificate or other document delivered pursuant hereto or in connection herewith shall not be extinguished by the Closing, but shall survive until June 30, 2001, except that (i) the representations and warranties contained in Sections 3.1, 3.6, 3.15, 3.18, 3.20, 3.23, 4.1, 4.2 and 4.3 shall survive until June 30, 2002 and (ii) the representations and warranties contained in clause (iii) of the fourth sentence, the sixth sentence and the eighth sentence of Section 3.1(b), Section 3.8 and the last sentence of Section 6.6 shall survive the until the expiration of the applicable statute of limitations. No investigation or other examination by Parent or its designees or representatives, on the one hand, or the Company, the Company Holders or their designees or representatives, on the other, shall affect the term of survival of the representations and warranties set forth above. Section 9.4. Threshold. The Parent Indemnified Parties will not make a Claim (as hereafter defined) against the Company Holders, and the Stockholder Indemnified Parties will not make a Claim against Parent, for indemnification under Section 9.1 and 9.2, respectively, herein unless and until the aggregate amount of such Claims against such party exceeds $650,000 (the "Threshold"), in which event such party may claim indemnification for all such Losses, including the amount of the Threshold. For purposes of this Section 9.4, the Company Holders shall be considered a single party. No Claim may be made in respect of any breach of a representation, warranty, covenant or agreement pursuant to Section 9.1 unless the amount of such Claim is in excess of $40,000, and Claims with respect to separate breaches may not be aggregated for purposes of this requirement. Section 9.5. Notice of Claim. Parent shall promptly notify the Company Holders, and the Company Holders shall promptly notify Parent, as applicable, in writing, of any claim for recovery, specifying in reasonable detail the nature of the Loss and, if known, the amount, or an estimate of the amount, of the liability arising therefrom (a "Claim"). The party seeking indemnification shall provide to the indemnifying party, as promptly as practicable thereafter, information and documentation reasonably requested by such indemnifying party to support and verify the claim asserted, unless the party seeking 36 41 indemnification has been advised by counsel that there are no reasonable grounds to assert a joint defense privilege with respect to such information and documentation. Section 9.6. Defense. If the facts pertaining to a Loss arise out of the claim of any third party, or if there is any claim against a third party available by virtue of the circumstances of the Loss, the indemnifying party may assume the defense or the prosecution thereof by written notice to the party seeking indemnification, including the employment of counsel or accountants, in each case reasonably satisfactory to such party, at their cost and expense. The party seeking indemnification shall have the right to employ counsel separate from counsel employed by the indemnifying party in any such action and to participate therein, but the fees and expenses of such counsel employed by the party seeking indemnification shall be at its expense. The indemnifying party shall not be liable for any settlement of any such claim effected without its prior written consent, which shall not be unreasonably withheld; provided that if the indemnifying party does not assume the defense or prosecution of a claim within 30 days of notice thereof, the party seeking indemnification may settle such claim without the indemnifying party's consent. The Company Holder shall not agree to a settlement of any claim which provides for any relief other than the payment of monetary damages or which could have a material precedential impact or effect on the business or financial condition of the Company and the Subsidiary without Parent's prior written consent. Whether or not the indemnifying party does choose to so defend or prosecute such claim, all the parties hereto shall cooperate in the defense or prosecution thereof and shall furnish such records, information and testimony, and attend such conferences, discovery proceedings, hearings, trials and appeals, as may be reasonably requested in connection therewith. The indemnifying party shall be subrogated to all rights and remedies of the party seeking indemnification. Section 9.7. Limitation on Recourse. Except as provided in the next sentence, all amounts owed by the Company Holders to the Parent Indemnified Parties under this Article IX shall be offset by Parent against the Escrowed Shares, to the extent of such shares, in accordance with the terms of the Escrow Agreement without regard to whether the obligation was owed by the Company or the Company Holders, or the relative fault of any of them, and such offset shall be the sole remedy and recourse of the Parent Indemnified Parties. Notwithstanding the foregoing, (i) in the event and to the extent that Escrowed Shares have been released to the Company Holders in accordance with the Escrow Agreement and thereafter the value of any remaining Escrowed Shares, if any, is insufficient to cover amounts owed by the Company Holders to the Parent Indemnified Parties in respect of Losses attributable to a breach of the representations and warranties contained in Section 3.8, the Parent Indemnified Parties shall have the right to recover from the Company Holders (or their heirs, successors or assigns) prior to the expiration of the survival period for such representations and warranties as specified in Section 9.3, the total amount of such deficiency that does not exceed the total value of all Escrowed Shares so released to the Company Holders (which value shall be calculated on the date of such release in the same manner as described in Article I); and (ii) in the event and to the extent that the value of then remaining Escrowed Shares, if any, is insufficient to cover amounts owed by the Company Holders to the Parent Indemnified Parties in respect of Losses attributable to a breach of the representations and warranties contained in clause (iii) of the fourth sentence, 37 42 the sixth sentence and the eighth sentence of Section 3.1(b) and the last sentence of Section 6.6, the Parent Indemnified Parties shall have the right to recover from the Company Holders (or their heirs, successors or assigns) prior to the expiration of the survival period for such representations and warranties as specified in Section 9.3, the total amount of such deficiency. Parent's indemnification and reimbursement obligation to Stockholder Indemnified Parties shall not exceed $3,600,000. It is further expressly agreed that, after the Effective Time, neither the Company, any Parent Indemnified Party, the GCS Entities nor any Stockholder Indemnified Party shall have any claim, cause of action or right as to any representation, warranty, covenant, agreement, act or omission under or relating to this Agreement, the other instruments and agreements referred to herein or the transactions contemplated hereby or thereby, other than the rights of indemnity under and subject to the provisions of Articles VIII and IX and the Escrow Agreement; and all such other claims, causes of action and rights are hereby irrevocably and fully released for all purposes effective as of the Effective Time; provided, however, that this Section 9.7 shall not limit any covenant or agreement of the parties which contemplates performance after the Effective Time, or limit any claim, cause of action or right arising from any fraudulent act or omission. Section 9.8. Express Negligence. THE INDEMNITIES SET FORTH IN THIS ARTICLE IX ARE INTENDED TO BE ENFORCEABLE AGAINST THE PARTIES IN ACCORDANCE WITH THE EXPRESS TERMS AND SCOPE HEREOF NOTWITHSTANDING TEXAS'S EXPRESS NEGLIGENCE RULE OR ANY SIMILAR DIRECTIVE, OR THE SIMPLE GROSS NEGLIGENCE (WHETHER SOLE, CONCURRENT, ACTIVE OR PASSIVE), OR OTHER FAULT OR STRICT LIABILITY OF ANY OF THE INDEMNIFIED PARTIES. ARTICLE X GENERAL PROVISIONS Section 10.1. No Third Party Beneficiaries. Except as specifically provided herein, nothing in this Agreement shall confer any rights or remedies upon any person other than the parties hereto. Section 10.2. Entire Agreement. This Agreement (including the Company Disclosure Letter and the Parent Disclosure Letter), together with the Confidentiality Agreement, constitutes the entire Agreement among the parties with respect to the subject matter hereof and supersedes any prior understandings, agreements, or representations by or among the parties, written or oral, with respect to the subject matter hereof (including, without limitation, that certain letter agreement dated July 13, 2000 between the Company and Parent). Section 10.3. Succession and Assignment. This Agreement shall be binding upon and inure to the benefit of the parties named herein and their respective successors, heirs and assigns. No party may assign either this Agreement or any of its rights, interests, or obligations hereunder without the prior written approval of the other parties; provided, however, that Sub may freely assign its rights to another wholly owned subsidiary of Parent without such prior written approval. 38 43 Section 10.4. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. Section 10.5. Headings. The section headings contained in this Agreement are inserted for convenience only and shall not affect in any way the meaning or interpretation of this Agreement. Section 10.6. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW THEREOF; PROVIDED, HOWEVER, THAT THE MERGER SHALL BE GOVERNED BY THE APPLICABLE LAWS OF THE STATES OF TEXAS AND MICHIGAN. Section 10.7. Consent to Jurisdiction; Waiver of Jury Trial. The parties hereto irrevocably submit to the jurisdiction of the United States District Court for the Southern District of Texas, and/or any state court of the State of Texas located in Harris County in any action, suit or proceeding brought by or against such party in connection with, arising from or relating to this Agreement, the transactions contemplated hereby and any document contemplated herein or otherwise relating hereto, and each party hereby waives and further agrees not to assert as a defense in any such suit, action or proceeding any claim that such party is not personally subject to the jurisdiction of any such courts, that the venue of the suit, action or proceeding is brought in an inconvenient forum or that this Agreement or the subject matter hereof may not be enforced in or by such courts. THE PARTIES HEREBY WAIVE IRREVOCABLY ANY AND ALL RIGHTS TO DEMAND A TRIAL BY JURY IN CONNECTION WITH THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREBY OR ANY DOCUMENT CONTEMPLATED HEREIN OR OTHERWISE RELATED HERETO. Section 10.8. Severability. Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction. If the final judgment of a court of competent jurisdiction declares that any term or provision hereof is invalid or unenforceable, the parties agree that the court making the determination of invalidity or unenforceability shall have the power to reduce the scope, duration, or area of the term or provision, to delete specific words or phrases, or to replace any invalid or unenforceable term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision, and this Agreement shall be enforceable as so modified after the expiration of the time within which the judgment may be appealed. Section 10.9. Specific Performance. Each of the parties acknowledges and agrees that the other party would be damaged irreparably in the event any of the provisions of this Agreement are not performed in accordance with their specific terms or otherwise are breached. Accordingly, each of the parties agrees that the other party shall be entitled to seek an injunction or injunctions to prevent breaches of the provisions of this Agreement and to enforce specifically this Agreement and the terms and provisions hereof in any action instituted in any federal or state 39 44 court located in the State of Texas, in addition to any other remedy to which it may be entitled, at law or in equity. Section 10.10. Construction. The language used in this Agreement shall be deemed to be the language chosen by the parties hereto to express their mutual intent, and no rule of strict construction shall be applied against any party. Whenever the words "include," "includes" or "including" are used in this Agreement, they shall be deemed to be followed by the words "without limitation." Section 10.11. Certain Definitions. For purposes of this Agreement, the terms: (a) "Associate" and "Affiliate" shall have the same meaning as set forth in Rule l2b-2 promulgated under the Exchange Act. (b) "Business Day" means any day on which banks are not required or authorized to close in the City of New York. (c) "Knowledge" means the actual knowledge of a Person. With respect to any of the GCS Entities, such Persons shall be deemed to have Knowledge only of those matters actually known by Reuben James Helton, Colleen M. Yuncker, Michael Pahl, Randy Irish, Lois E. Pahl, Verna Blackwell, Michael Taylor, Jaclynn K. Richards, Sandy Shields-Zoulek, Amy Rogers, Carry Miterko, Chris Helton and Richard J. Zerafa. (d) "Person" means any individual, corporation, partnership (general or limited), limited liability company, limited liability partnership, trust, joint venture, joint stock company, syndicate, association, entity, unincorporated organization, government or any political subdivision, agency or instrumentality thereof, or other entity or group (as defined in the Exchange Act). Section 10.12. Notices. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given (and shall be deemed to have been duly given upon receipt) by delivery in person, by telecopy or by registered or certified mail (postage prepaid, return receipt requested) to the respective parties at the following addresses, or at such other address for a party as shall be specified in a notice given in accordance with this Section 10.12: If to Parent or Sub: Universal Compression Holdings, Inc. 4440 Brittmoore Road Houston, Texas 77041 Attention: Mr. Stephen A. Snider, President Telecopy: (713) 466-6720 40 45 with copies to: Universal Compression Holdings, Inc. 4440 Brittmoore Road Houston, Texas 77041 Attention: Ms. Valerie L. Banner, Senior Vice President and General Counsel Telecopy: (713) 466-6720 King & Spalding 1100 Louisiana Street, Suite 3300 Houston, Texas 77002 Attention: Ms. Christine LaFollette Telecopy: (713) 751-3290 If to the Company, the Stockholder or the Optionholder: Gas Compression Services, Inc. 2480 Aero Park Drive Traverse City, Michigan 49686 Attention: Chief Executive Officer Telecopy: (231) 946-0926 with copies to: Zerafa Law Offices, P.C. 134 River Street Elk Rapids, Michigan 49629 Attention: Richard J. Zerafa, Esq. Telecopy: (231) 264-8127 Mayor, Day, Caldwell & Keeton 700 Louisiana Street, Suite 1900 Houston, Texas 77002 Attention: Ms. Kathleen M. Kopp Telecopy: (713) 225-7047 41 46 IN WITNESS WHEREOF, each of the Company, the Company Holders, Parent and Sub have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized. GAS COMPRESSION SERVICES, INC. By: /s/ Colleen M. Yuncker ------------------------------------------- Name: Colleen Yuncker Title: President and Chief Executive Officer THE REUBEN JAMES HELTON TRUST DATED JANUARY 24, 2000 By: /s/ Richard J. Zerafa ------------------------------------------- Name: Richard J. Zerafa Title: Trustee UNIVERSAL COMPRESSION HOLDINGS, INC. By: /s/ Ernie L. Danner ------------------------------------------- Name: Ernie L. Danner Title: Executive Vice President UNIVERSAL COMPRESSION, INC. By: /s/ Ernie L. Danner ------------------------------------------- Name: Ernie L. Danner Title: Executive Vice President MICHAEL PAHL By: /s/ Michael Pahl ------------------------------------------- Michael Pahl 42 47 JOINDER Each of the undersigned hereby acknowledges and confirms that he or she (i) has reviewed and is fully informed with respect to the foregoing Agreement and Plan of Merger (the "Agreement") and the transactions contemplated thereby, (ii) approves, consents to and endorses the Agreement, agrees and consents to the consummation of the Agreement and the transactions contemplated by the Agreement in accordance with the terms and conditions of the Agreement and agrees to take such further actions as may be necessary to carry out the purposes of the Agreement or to further evidence the matters represented herein or therein, and (iii) agrees that any interest he or she may have had or may have in the GCS Entities or Stockholder Properties shall be irrevocably bound by the terms and conditions of the Agreement. The undersigned Reuben James Helton hereby further represents and warrants (i) that he has validly transferred to the Trust all of his right, title and interest in and to the issued and outstanding shares of Company Common Stock, the Stockholder Properties and his ownership interests in Gas Compression Finance Corporation and GCS. Distributing, LLC, (together, the "Trust Properties"), (ii) that the Trust has not been revoked and will not be revoked prior to the earlier of the Effective Time or the termination of the Agreement as provided therein, and that Richard J. Zerafa is fully empowered to act as Trustee without any further authorization or consent of the undersigned. The undersigned Susan Helton hereby further represents and warrants that she had no interest in the Trust Properties prior to the transfer of the Trust Properties to the Trust. Dated this 4th day of August, 2000. /s/ Reuben James Helton ------------------------------------- Reuben James Helton /s/ Susan Helton ------------------------------------- Susan Helton 43 EX-4.1 3 h80568ex4-1.txt REGISTRATION AGREEMENT - DATED SEPTEMBER 15, 2000 1 EXHIBIT 4.1 REGISTRATION AGREEMENT THIS REGISTRATION AGREEMENT (the "AGREEMENT") is made and entered into as of September 15, 2000, by and among Universal Compression Holdings, Inc., a Delaware corporation (the "COMPANY"), The Reuben James Helton Trust Dated January 24, 2000 (the "TRUST INVESTOR"), and Michael Pahl (the "INDIVIDUAL INVESTOR") (the Trust Investor and the Individual Investor collectively referred to as the "INVESTORS" and individually as the "INVESTOR"). This Agreement is made in connection with the proposed merger (the "MERGER") of Gas Compression Services, Inc., a Michigan corporation, with and into Universal Compression, Inc., a Texas corporation and wholly owned subsidiary of the Company. In connection with the Merger, the Company has agreed to provide the Investor with the registration and sale rights set forth in this Agreement. In consideration of the foregoing, the parties hereto agree as follows: SECTION 1. CERTAIN DEFINITIONS: "COMMON STOCK" shall mean the common stock of the Company, $.01 par value per share. "ELIGIBLE COMMON STOCK" shall mean the shares of Common Stock acquired in the Merger and held by the Investors and any of such shares thereafter held by any transferee or assignee of an Investor pursuant to Section 11(c) hereof on the date of determination. "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder. "PERMITTED TRANSFEREE" shall mean a Person (i) to whom the Investor has transferred Eligible Common Stock pursuant to Section 11(c) hereof and (ii) who has executed and delivered to the Company an Additional Party Counterpart in the form set forth in Exhibit A. "PERSON" shall mean any individual, partnership, corporation, trust or unincorporated organization, or a government or agency or political subdivision thereof. "PROSPECTUS" shall mean the prospectus included in a Registration Statement, including any preliminary prospectus, and any such prospectus as amended or supplemented by any prospectus supplement with respect to the terms of the offering of the Common Stock covered by the Registration Statement, and by all other amendments and supplements to such Prospectus, including post-effective amendments, and in each case including all materials incorporated by reference therein. "REGISTRATION STATEMENT" shall mean any registration statement of the Company on an appropriate form under the Securities Act (other than any registration statement with respect to equity securities filed on a Form S-4 or S-8 or any other forms prescribed for the same or similar purposes) and all amendments and supplements to such 2 2 registration statement, including post-effective amendments, in each case including the Prospectus contained therein, all material incorporated by reference therein and all exhibits thereto. "REQUISITE COMMON STOCK" shall mean shares of Eligible Common Stock as to which registration is requested hereunder aggregating at least $11 million in the case of a Underwritten Offering and $3 million in the case of a non-Underwritten Offering. "SEC" shall mean the Securities and Exchange Commission. "SECURITIES ACT" shall mean the Securities Act of 1933, as amended, and the rules and regulations thereunder. "UNDERWRITTEN REGISTRATION" or "UNDERWRITTEN OFFERING" shall mean an offering of the Common Stock pursuant to a Registration Statement in which the Common Stock of the Company is sold to an underwriter in a firm commitment underwriting for reoffering to the public or sold through an investment banker or manager on a best efforts basis. SECTION 2. COMMON STOCK SUBJECT TO REGISTRATION RIGHTS. Shares of Eligible Common Stock will cease to be Eligible Common Stock when (i) a Registration Statement covering such Eligible Common Stock has been declared effective by the SEC and such Eligible Common Stock has been disposed of pursuant to such effective Registration Statement, (ii) they may be distributed without a holding period or volume amount limitations or are distributed to the public pursuant to Rule 144 (or any similar provision then in force) under the Securities Act, (iii) they have otherwise been transferred (other than to a Permitted Transferee), or (iv) at all times after the first anniversary hereof if the Investor ceases to be the beneficial holder of at least 1% of the then issued and outstanding Common Stock. SECTION 3. DEMAND REGISTRATION RIGHTS. (a) The Investors hereby request that the Company file, and (x) subject to Section 4 hereof, the Company agrees with the Investors to file within two business days after the closing date of the Merger a Registration Statement with respect to 450,000 shares of Eligible Common Stock held by the Trust Investor and 50,000 shares of Eligible Common Stock held by the Individual Investor (the "CLOSING DEMAND") and (y) the Company agrees with the Investors to file on November 20, 2000 a Registration Statement (or, if available, at the Company's option, a post-effective amendment to an existing Registration Statement) with respect to the remaining Requisite Common Stock held by the Investors (the "NOVEMBER DEMAND") (the Closing Demand and the November Demand collectively referred to as the "DEMANDS" or individually a "DEMAND"), each such Registration Statement to be filed on Form S-3 (or, if unavailable, Form S-2 or Form S-1) or any other appropriate or successor form under the Securities Act; provided, that the Company shall not be obligated to effect, or take any action to effect, any such registration pursuant to this Section 3(a) in any particular jurisdiction in which the Company would be required to execute a general consent to service of process in effecting such registration, qualification or compliance, unless the Company is already subject to service in 3 3 such jurisdiction and except as may be required by the Securities Act or applicable rules or regulations thereunder. (b) With respect to each Demand, the Company will, at the request of the Trust Investor, file either a post-effective amendment to the effective Registration Statement or a Form 8-K incorporated by reference into the Registration Statement in order to permit a firm commitment underwriting. The Company shall be required to effect an additional registration pursuant to Section 3(a) if the Company fails to effect either of the two registrations upon the Demands referred to in Section 3(a) (unless such registration has not been effected solely by reason of the fault of an Investor). (c) If any offering or sale of Common Stock by the Investor pursuant to a Registration Statement is not consummated due to any failure by the Company to perform its obligations under this Agreement, the Demand with respect to which such Registration Statement was filed shall not be included among the Demands contemplated by Sections 3(a) and (b) above. (d) Subject to compliance with rights and obligations under the Company's existing registration rights agreements, the Company will not include in any Registration Statement any securities other than the Requisite Common Stock without the prior written consent of the applicable Investors, which consent shall not be unreasonably withheld. SECTION 4. COMPANY PURCHASE RIGHT. (a) If the Trust Investor proposes to sell shares of Common Stock pursuant to the Registration Statement relating to the Closing Demand prior to November 20, 2000, it shall notify (a "SALE NOTICE") the Company as to the shares proposed to be sold. The Company shall have the right (but not the obligation) to purchase (and shall be deemed to have effected registration as to the shares so purchased) from the Investor a number determined by the Company of the shares referenced in the Sale Notice, but the number of shares subject to such purchase right shall not exceed the lesser of 450,000 shares of Common Stock or such number of shares as would not cause the Merger to fail to qualify as a reorganization under Section 368 of the Internal Revenue Code, as amended. If the Company elects to exercise its right pursuant to this Section 4(a), it shall notify (the "PURCHASE NOTICE") the Investor of such election and shall thereafter proceed to consummate the purchase within three business days of such Purchase Notice. (b) The purchase price to be paid to the Investor for such shares of Eligible Common Stock shall be the weighted average sales price per share of Common Stock as quoted on the New York Stock Exchange for the 20 business days ended on the business day immediately prior to the date of the Purchase Notice. SECTION 5. HOLDBACK AGREEMENTS. (a) Each Investor agrees, if it is requested by the managing underwriter or underwriters in an Underwritten Offering by the Company, not to effect any public sale or distribution of securities of the Company of the same class as the securities included in the 4 4 Registration Statement, during the 15 day period prior to, and during the 90 day period (or such longer period requested for all similar holders by the underwriters) beginning on, the effective date of such Registration Statement, including a sale pursuant to Rule 144 under the Securities Act, to the extent timely notified in writing by the Company or the managing underwriters; provided, however, that the restrictions contained in this sentence shall terminate on the first anniversary of the date hereof unless such Investor is a 5% or greater stockholder of the Company at the time of such primary offering by the Company. (b) The Company agrees, if requested by the Trust Investor, not to effect a public or private sale or distribution of its Common Stock, or any securities convertible into or exchangeable for such securities (other than any such sale or distribution of such securities in connection with any merger or consolidation by the Company or a subsidiary thereof or the acquisition by the Company or a subsidiary thereof of the capital stock or assets of any other Person or registration on Form S-4 or Form S-8 or any successor forms) during the 15-day period prior to, and during the 90-day period beginning on, the effective date of any underwritten Registration Statement filed pursuant to Section 3(a) hereof unless the underwriters managing the requested public offering otherwise agree; provided, however, that the provisions of this paragraph (b) shall not prevent the sale, distribution, conversion or exchange of any securities and grants of options during such periods pursuant to stock option or benefit plans of the Company. SECTION 6. REGISTRATION PROCEDURES. In connection with the Company's registration obligations pursuant to Section 3(a) hereof, the Company will make reasonable efforts to effect the registration of the Eligible Common Stock in accordance with the intended method or methods of distribution thereof, and pursuant thereto the Company shall: (a) prepare and file with the SEC, as soon as practicable, a Registration Statement, which form shall include all financial statements and other information required by the SEC to be filed therewith, and use its reasonable best efforts to cause such Registration Statement to become effective; (b) prepare and file with the SEC such amendments to the Registration Statement as may be necessary to keep the Registration Statement effective until the distribution of the Eligible Common Stock under the Registration Statement is complete (which period shall not extend beyond the earlier to occur of (i) the first anniversary of the date hereof or (ii) the date on which all of the Eligible Common Stock has been disposed of by the Investors); cause the Prospectus to be supplemented by any required prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 under the Securities Act; and comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such Registration Statement; (c) notify the Investor and the managing underwriters promptly, and (if requested by any such Person) confirm such advice in writing, (i) when the Registration Statement has become effective and when any post-effective amendment or supplements thereto become effective, (ii) of the issuance by the SEC of any stop order suspending the 5 5 effectiveness of the Registration Statement or the initiation of any proceedings for the purpose, (iii) if between the effective date of the Registration Statement and the closing of the sale of the securities covered thereby, the representations and warranties of the Company contained in any underwriting agreement entered into pursuant to Section 6(m) below cease to be true and correct, (iv) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Eligible Common Stock for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose and (v) of the happening of any event which makes any material statement made in the Registration Statement or the Prospectus or any document incorporated therein by reference untrue or which requires the making of any changes in the Registration Statement or the Prospectus or any document incorporated therein by reference to make the statements therein not misleading; (d) use its reasonable best efforts to obtain the withdrawal of any order suspending the effectiveness of the Registration Statement at the earliest possible time; (e) as promptly as practicable prior to the filing of any document which is to be incorporated by reference into the Registration Statement or the Prospectus (after initial filing of the Registration Statement), provide copies of such document to the Investor and to the managing underwriters, if any, make the Company's representatives available for discussion of such document and make such changes in such document prior to the filing thereof as the Investor or underwriters may reasonably request; (f) upon request, furnish to each managing underwriter, if any, and the Investor, without charge, at least one signed copy of the Registration Statement and any post-effective amendment thereto, including financial statements and schedules, all documents incorporated therein by reference and all exhibits (including those incorporated by reference); (g) deliver to the Investor and each underwriter, if any, without charge, as many copies of the Prospectus (including each preliminary prospectus) and any amendment or supplement thereto as the Investor may reasonably request; the Company consents to the use of the Prospectus or any amendment or supplement thereto by the Investor and the underwriters, if any, in connection with the offering and sale of the Eligible Common Stock covered by the Prospectus or any amendment or supplement thereto; (h) prior to any public offering of Eligible Common Stock, use its reasonable best efforts to register or qualify or cooperate with the Investor, the underwriters, if any, and their respective counsel in connection with the registration or qualification of such Eligible Common Stock for offer and sale under the securities or blue sky laws of such jurisdictions as the Investor or any underwriter reasonably requests in writing and do any and all other acts or things necessary or advisable to enable the underwriters or the Investor, as the case may be, to consummate the disposition in such jurisdictions of the Eligible Common Stock covered by the Registration Statement; provided that the Company will not be required to (i) qualify generally to do business in any jurisdiction where it is not then so qualified; (ii) subject itself to taxation in any such jurisdiction; or 6 6 (iii) take any action which would subject it to general service of process in any such jurisdiction where it is not then so subject; (i) cooperate with the Investor and the managing underwriters to facilitate the timely preparation and delivery of certificates representing the Eligible Common Stock to be sold and not bearing any restrictive legends; and enable such Eligible Common Stock to be in such denominations and registered in such names as the managing underwriters or the Investor, as the case may be, may request at least two business days prior to any sale of the Eligible Common Stock; (j) as promptly as practicable following the occurrence of any event contemplated by Section 6(c)(v) above, use its reasonable best efforts to prepare a supplement or post-effective amendment to the Registration Statement or the related Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchasers of the Eligible Common Stock, the Prospectus will not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; (k) use its reasonable best efforts to cause all the Eligible Common Stock covered by the Registration Statement to be listed on each securities exchange or automated quotation system, if any, on which similar securities issued by the Company are then listed if requested by the Investor or by the managing underwriters, (l) provide a CUSIP number for all Eligible Common Stock, not later than the effective date of the applicable Registration Statement; (m) if requested by the Investor, enter into an underwriting agreement with an underwriter or underwriters providing for the sale of such Eligible Common Stock in an Underwritten Offering which shall be customary in form, substance and scope and shall contain customary requirements for representations, warranties, covenants and opinions of counsel; and make reasonable efforts to obtain any customary opinions of counsel or customary accountants' "cold comfort" letters referred to in such underwriting agreement, and enter into such other customary agreements and take all such other reasonable actions in connection therewith to expedite or facilitate the disposition of Eligible Common Stock as contemplated by such agreements; (n) make available for inspection by the Investor and representatives of the underwriters participating in any disposition pursuant to the Registration Statement, and any attorney or accountant retained by the Investor or an underwriter, all relevant financial and other records, pertinent corporate documents and properties of the Company, and cause the Company's officers, directors and employees to supply all information reasonably requested by the Investor or any such representative, attorney or accountant in connection with such Registration Statement; provided, however, that any records, information or documents that are designated by the Company in writing as confidential shall be kept confidential by such Persons unless disclosure of such records, information or documents is required by court or administrative order; provided, further, 7 7 if the Investor or such representative, counsel or accountant is ordered to disclose any of such records, documents or information, the Investor or such representative, counsel or accountant will provide the Company with prompt written notice of such requirement so that the Company at its expense may seek a protective order or other appropriate remedy and/or waive compliance with this Section 6(n), and, in the event that such protective order or other remedy is not obtained, or that the Company waives compliance with the provisions hereof, the Investor and such representative, counsel and accountant agrees to furnish only that portion of such records, documents or information which the Investor or such representative, counsel or accountant is legally required to disclose in the opinion of the special counsel or counsel representing the Investor or such representative, underwriter or accountant; and (o) otherwise use its reasonable best efforts to comply with all applicable rules and regulations of the SEC, and make generally available to its security holders, earnings statements no later than 45 days after the end of any 12-month period (or 90 days, if such period is a fiscal year) commencing at the end of any fiscal quarter in which Eligible Common Stock is sold to underwriters in an Underwritten Offering, which statements shall cover said 12-month period. The Company may require the Investor (i) to furnish to the Company such information regarding the distribution of the Eligible Common Stock as the Company may from time to time reasonably request in writing and (ii) to enter into an underwriting agreement in the form contemplated by Section 6(m). The Investor agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 6(c)(v) hereof, the Investor will forthwith discontinue the offering and disposition of Eligible Common Stock until the Investor's receipt of the copies of the supplemented or amended Prospectus contemplated by Section 6(j) hereof, or until it is advised in writing (the "ADVICE") by the Company that the use of the Prospectus may be resumed, and has received copies of any additional or supplemental filings which are incorporated by reference in the Prospectus, and, if so directed by the Company, the Investor will deliver to the Company (at the Company's expense) all copies, other than permanent file copies then in the Investor's possession, of the Prospectus covering such Eligible Common Stock current at the time of receipt of such notice. In the event the Company shall give any such notice to suspend the offering and disposition of the Eligible Common Stock, the time periods regarding the maintenance of the applicable Registration Statement shall be extended by the number of days during the period from and including the date of the giving of such notice pursuant to Section 6(c)(v) hereof to and including the date when the Investor shall have received the copies of the supplemented or amended Prospectus contemplated by Section 6(j) hereof or the Advice. Notwithstanding the foregoing, (a) the Company may delay the filing of any Registration Statement, any amendment thereof or any supplement to the related Prospectus, and may withhold efforts to cause any Registration Statement to become effective, and (b) in the case of an effective Registration Statement, upon the request of the Company each Investor shall refrain from selling any shares pursuant to such Registration Statement, if the Company reasonably determines in good faith that (i) such registration or sale would interfere with or affect the 8 8 negotiation or completion of any transaction that is being contemplated by the Company (whether or not a final decision has been made to undertake such transaction) at the time the right to delay is exercised, (ii) such registration or sale would involve initial or continuing disclosure obligations with respect to material non-public information not otherwise required by law or the rules and regulations of the SEC which disclosure would not be in the best interest of the Company's stockholders, or (iii), in the case of an Underwritten Offering, the Investors would be unable to consummate such Underwritten Offering on reasonable terms due to then currently prevailing market conditions as advised by the Investor's underwriters; provided, however, that the duration of all such delays or periods in which shares of Eligible Common Stock may not be sold pursuant to an effective Registration Statement shall not exceed 180 days in the aggregate. SECTION 7. REGISTRATION EXPENSES. All expenses incident to the Company's performance of or compliance with this Agreement, including without limitation SEC registration and filing fees, fees with respect to filings required to be made with the National Association of Securities Dealers, Inc., fees and expenses in compliance with state securities, or blue sky, laws (including fees and disbursements of counsel for the underwriters in connection with blue sky qualifications of the Eligible Common Stock), printing expenses, and fees and disbursements of counsel for the Company and of all independent certified public accountants of the Company (including the expenses of any special audit and "cold comfort" letters required by or incident to such performance) and the fees and expenses incurred in connection with the listing of the securities to be registered on each securities exchange on which similar securities issued by the Company are then listed in connection with the Demand Registration will be borne by the Company, provided, that all underwriting discounts and selling commissions applicable to the sale of the Eligible Common Stock and all other expenses of the Investors incurred in connection with the distribution of Eligible Common Stock (including all fees and expenses of the consultants, advisors, attorneys, special experts and other Persons engaged by the Investors, and all relevant taxes, including transfer taxes) will be borne by the Investors. SECTION 8. INDEMNIFICATION; CONTRIBUTION. (a) INDEMNIFICATION BY THE COMPANY. The Company agrees to indemnify and hold harmless the Investors, each Person who participates as an underwriter (any such Person being an "UNDERWRITER"), and each Person, if any, who controls any Underwriter within the meaning of the Securities Act as follows: (i) against any and all loss, claim, damage and expense whatsoever, as incurred, arising out of any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement (or any amendment thereto) pursuant to which Eligible Common Stock was registered under the Securities Act, including all documents incorporated therein by reference, or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein not misleading or arising out of any untrue statement or alleged untrue statement of a material fact contained in any Prospectus (or any amendment or supplement thereto), including all documents incorporated therein by reference, or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; (ii) against any and all loss, liability, claim, damage and expense whatsoever, as 9 9 incurred, to the extent of the aggregate amount paid in settlement of any litigation, or investigation or proceeding by any governmental agency or body, commenced or threatened, or of any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, if such settlement is effected with the written consent of the Company; and (iii) against any and all expense whatsoever, as incurred (including, subject to the provisions of subsection (c), fees and disbursements of counsel), reasonably incurred in investigating, preparing or defending against any litigation, or investigation or proceeding by any governmental agency or body, commenced or threatened, in each case whether or not a party, or any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, to the extent that any such expense is not paid under (i) or (ii) above; provided, however, that the Company shall not be liable in any such case to the extent that any such loss, claim, damage, liability or expense arises out of or is based upon an untrue statement or omission, or alleged untrue statement or omission, in a Prospectus, if such untrue statement or omission, or alleged untrue statement or omission, is corrected in an amendment or supplement to such Prospectus and if the Investors or the Underwriter, as the case may be, thereafter fails to deliver such Prospectus as so amended or supplemented prior to or concurrently with the sale by the Investors or the Underwriter, as the case may be, of the Eligible Common Stock to the Person asserting such loss, claim, damage, liability or expense and if the Company has furnished the Investors or the Underwriter, as the case may be, within a reasonable period of time prior to such sale with the number of copies of such amended or supplemented Prospectus reasonably required by the Investors or the Underwriter, as the case may be; and provided, further, that this indemnity agreement does not apply to the Investors or any Underwriter with respect to any loss, liability, claim, damage or expense to the extent arising out of any untrue statement or omission, or alleged untrue statement or omission, made in reliance upon and in conformity with information furnished to the Company by the Investors or any Underwriter expressly for use in a Registration Statement (or any amendment thereto) or any Prospectus (or any amendment or supplement thereto). (b) INDEMNIFICATION BY THE INVESTORS. In connection with the applicable Registration Statement, each Investor will furnish promptly to the Company in writing such information and affidavits as the Company reasonably requests for use in connection with the Registration Statement or Prospectus and agrees to indemnify and hold harmless the Company and each Underwriter, if any, and each of their respective directors and officers (including each officer of the Company who signed the Registration Statement), and each Person, if any, who controls the Company or any Underwriter within the meaning of the Securities Act, against any and all loss, liability, claim, damage and expense described in the indemnity contained in Section 8(a) hereof, as incurred, but only with respect to untrue statements or omissions, or alleged untrue statements or omissions, made in a Registration Statement (or any amendment thereto) or any Prospectus (or any amendment or supplement thereto) in reliance upon and in conformity with written information furnished to the Company by such Investor expressly for use in such Registration Statement (or any amendment thereto) or such Prospectus (or any amendment or supplement thereto). (c) CONDUCT OF INDEMNIFICATION PROCEEDINGS. Each indemnified party shall give reasonably prompt notice to each indemnifying party of any action or proceeding commenced against it in respect of which indemnity may be sought hereunder, provided, that failure to so notify an indemnifying party shall not relieve it from any liability which it may have under this 10 10 indemnity agreement.If the indemnifying party so elects within a reasonable time after receipt of such notice, the indemnifying party may assume the defense of such action or proceeding at such indemnifying party's own expense with counsel chosen by the indemnifying party and approved by the indemnified parties defendant in such action or proceeding, which approval shall not be unreasonably withheld; provided, however, that, if such indemnified party or parties reasonably determine that a conflict of interest exists where it is advisable for such indemnified party or parties to be represented by separate counsel or that, upon advice of counsel, there may be legal defenses available to them which are different from or in addition to those available to the indemnifying party, then the indemnifying party shall not be entitled to assume the defense and the indemnified party or parties shall be entitled to one separate counsel at the indemnifying party's expense. If an indemnifying party is not entitled to assume the defense of such action or proceeding as a result of the proviso to the preceding sentence, such indemnifying party's counsel shall be entitled to conduct such indemnifying party's defense and counsel for the indemnified party or parties shall be entitled to conduct the defense of such indemnified party or parties, it being understood that both such counsel will cooperate with each other to conduct the defense of such action or proceeding as efficiently as possible. If an indemnifying party is not so entitled to assume the defense of such action or does not assume such defense, after having received the notice referred to in the first sentence of this Section 8(c), the indemnifying party or parties will pay the reasonable fees and expenses of counsel for the indemnified party or parties. In such event, however, no indemnifying party will be liable for any settlement effected without the written consent of such indemnifying party. If an indemnifying party is entitled to assume, and assumes, the defense of such action or proceeding in accordance with this Section 8(c), such indemnifying party shall not be liable for any fees and expenses of counsel for the indemnified parties incurred thereafter in connection with such action or proceeding. (d) CONTRIBUTION. If for any reason the indemnification provided for in the preceding subsections (a) and (b) of this Section 8 is unavailable to an indemnified party or insufficient to hold it harmless as contemplated by such preceding subsections, then the indemnifying party shall contribute to the amount paid or payable by the indemnified party as a result of such unavailability or insufficiency in proportion as is appropriate to reflect not only the relative benefits received by the indemnified party and the indemnifying party, but also the relative fault of the indemnified party and the indemnifying party, as well as any other relevant equitable considerations, provided, that the Investors shall not be required to contribute in any amount greater than the dollar amount of the proceeds received by the Investors with respect to the sale of any Eligible Common Stock. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. SECTION 9. RULE 144. With a view to making available the benefits of certain rules and regulations of the SEC which may permit the sale of restricted securities to the public without registration, the Company agrees to: (a) make and keep public information available as those terms are understood and defined in Rule 144 under the Securities Act, or any successor rule ("RULE 144"), at all times; 11 11 (b) use its reasonable best efforts to file with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act at all times; and (c) so long as either Investor owns any Eligible Common Stock, furnish to such Investor upon request, a written statement by the Company as to its compliance with the reporting requirements of Rule 144, and of the Securities Act and the Exchange Act, a copy of the most recent annual or quarterly report of the Company, and such other reports and documents so filed as the Investor may reasonably request in availing itself of any rule or regulation of the SEC allowing the Investor to sell any such securities without registration. SECTION 10. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS. Merrill Lynch & Co. will serve as the investment banker, manager and underwriter that will administer the registration of the Eligible Common Stock pursuant to a Demand unless it requires compensation in excess of prevailing market rates or unless a different firm is otherwise selected by the Company; provided, that such other investment banker, manager, or underwriter must be reasonably satisfactory to the Investor and the Company. Investors acknowledge to the Company that they will comply with their obligations in the letter to Merrill Lynch dated the date hereof. No person may participate in any Underwritten Registration hereunder unless such Person (a) agrees to sell such Person's securities on the basis provided in any underwriting arrangements approved by the Persons entitled hereunder to approve such arrangements and (b) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents required under the terms of such underwriting arrangements. Nothing in this Section 10 shall be construed to create any additional rights regarding the registration of Eligible Common Stock in any Person otherwise than as set forth herein. SECTION 11. MISCELLANEOUS. (a) AMENDMENTS AND WAIVERS. The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given unless the Company has obtained the written consent of the Investor. (b) NOTICES. All notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivery, registered first-class mail, telex, telecopier, or air courier guaranteeing overnight delivery: (i) if to the Trust Investor, initially at 24106 Bay Hill Blvd., Katy, Texas 77494, Attention: Garlin R. Rhymes, and thereafter at such other address, notice of which is given in accordance with this Section 11(b). (ii) If to the Individual Investor, initially at 5319 N. Liberty Drive, Traverse City, MI 49684, and thereafter at such other address, notice of which is given in accordance with this Section 11(b). 12 12 (iii) if to the Company, initially at 4440 Brittmoore Road, Houston, Texas 77041, Attention: President, Stephen A. Snider, and thereafter at such other address, notice of which is given in accordance with the provisions of this Section 11(b), with copies to 4440 Brittmoore Road, Houston, Texas 77041, Attention: Valerie L. Banner, Esq., Senior Vice President and General Counsel, and King & Spalding, 1100 Louisiana, Suite 3300, Houston, Texas 77002-5219, Attention: Christine B. LaFollette, Esq. All such notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five business days after being deposited in the mail, postage prepaid, if mailed; when answered back, if telexed; when receipt acknowledged, if telecopied; and on the next business day, if timely delivered to any air courier guaranteeing overnight delivery. (c) ASSIGNMENT OF REGISTRATION RIGHTS. Except as otherwise provided below, neither party may assign this Agreement or any of the rights and obligations of the parties hereunder without the prior written consent of the other party; provided, that (i) the Individual Investor may assign this Agreement and all of his rights and obligations hereunder to one Permitted Transferee, (ii) the Trust Investor may assign this Agreement and (x) all of its rights and obligations hereunder, other than pursuant to Section 4, to one Permitted Transferee and (y) the rights and obligations hereunder, other than pursuant to Section 4, to Permitted Transferees that are beneficiaries of the Trust Investor as to shares of Eligible Common Stock owned by the Trust Investor and (iii) the Company may assign this Agreement and all of its rights and obligations hereunder to any entity that succeeds to all or substantially all of the assets of the Company, whether by merger, sale or otherwise. This Agreement shall inure to the benefit of and be binding upon the successors and permitted assigns of each of the parties. If the Company shall so request, any such successor or assign shall agree in writing to acquire and hold the Eligible Common Stock subject to all of the terms hereof. In the event of any assignment by the Trust Investor to a Permitted Transferee: (i) such Permitted Transferee shall participate in all rights of the Trust Investor, and shall be bound by all obligations of the Trust Investor, as provided in this Agreement, in each case proportionately based on the relative number of shares of Eligible Common Stock held by such Permitted Transferee; and (ii) all notices, decisions and elections provided in this Agreement to be given to or made by the Trust Investor shall be so given to or made by (and shall be for all purposes conclusively deemed to have been adequately given or made if so given to or made by) the Trustee of The Reuben James Helton Trust Dated January 24, 2000 for and on behalf of such Permitted Transferee. (d) COUNTERPARTS. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (e) HEADINGS. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (f) GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of Texas, without giving effect to such jurisdiction's conflicts of law provisions. 13 13 (g) SEVERABILITY. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby. (h) ENTIRE AGREEMENT. This Agreement is intended by the parties as a final expression of their agreement and intended to be complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter. (i) CONFIDENTIALITY. The parties hereto agree, and will cause all Persons under their control to agree, to maintain the confidentiality of any material, non-public information with respect to the Company that they may obtain pursuant to the terms of this Agreement, and not to use, or permit the use of, such information for any improper purpose or in any manner that might be detrimental to the Company. (j) TERMINATION. This Agreement shall terminate on the second anniversary of the date hereof or, if earlier, when there is no Eligible Common Stock. 14 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. UNIVERSAL COMPRESSION HOLDINGS, INC. By: /s/ ERNIE L. DANNER ------------------- Name: Ernie L. Danner Title: Executive Vice President TRUST INVESTOR: THE REUBEN JAMES HELTON TRUST DATED JANUARY 24, 2000 By: /s/ GARLIN R. RHYMES -------------------- Name: Garlin R. Rhymes Title: Trustee INDIVIDUAL INVESTOR: /s/ MICHAEL PAHL ----------------- Michael Pahl 15 EXHIBIT A ADDITIONAL PARTY COUNTERPART The undersigned, after having received and reviewed to its satisfaction a copy of the Registration Agreement, dated as of _________ __, 2000 (the "Registration Agreement"), by and between Universal Compression Holdings, Inc. (the "Company") and the Investor, does hereby agree to become party to the Registration Agreement thereby accepting all the rights, benefits and obligations of a holder of Eligible Common Stock thereunder. The Company may attach this page as a counterpart to the Registration Agreement and the undersigned agrees that such attachment shall be deemed conclusive evidence of its acknowledgment and acceptance of the terms thereof. Defined terms used herein and not otherwise defined herein shall have the meaning given such terms in the Registration Agreement. Dated: [NAME] [ADDRESS FOR NOTICES] By: ----------------------- Name: Title: Acknowledged and Accepted By: UNIVERSAL COMPRESSION HOLDINGS, INC. By: --------------------------- Name: Title: EX-10.1 4 h80568ex10-1.txt ESCROW AGREEMENT - DATED SEPTEMBER 15, 2000 1 EXHIBIT 10.1 ESCROW AGREEMENT This Escrow Agreement (this "Agreement") is entered into as of September 15, 2000 by and among Universal Compression Holdings, Inc., a Delaware corporation ("Universal"), the Reuben James Helton Trust Dated January 24, 2000 as amended and in effect, a trust formed pursuant to the laws of the State of Michigan (the "Trust"), Garlin R. Rhymes, as trustee of the Trust ("Trustee"), Michael Pahl ("Pahl") (collectively, the Trust, Trustee and Pahl are referred to as the "Stockholders"), Garlin R. Rhymes, as representative (the "Representative") of the former stockholders of Gas Compression Services, Inc., a Michigan corporation ("GCSI"), and State Street Bank and Trust Company, a Massachusetts trust company, as escrow agent (the "Escrow Agent"). Capitalized terms used in this Agreement and not otherwise defined herein will have the meanings given them in the Merger Agreement (as defined below). Universal and the Stockholders are sometimes referred to herein collectively as the "Interested Parties" or individually as the "Interested Party." RECITALS: A. Universal, Universal Compression, Inc., a Texas corporation and wholly-owned subsidiary of Universal ("Sub"), GCSI and the Company Holders have entered into an Agreement and Plan of Merger dated as of August 4, 2000 (the "Merger Agreement") pursuant to which GCSI will merge with and into Sub (the "Merger"), with Sub as the surviving corporation in the Merger. B. Pursuant to the Merger Agreement, the outstanding shares of capital stock of GCSI are to be converted into the right to receive cash and an aggregate of 1,420,631 shares of common stock, par value $.01 per share, of Universal (the "Universal Common Stock") at the effective time of the Merger (such shares, the "Merger Shares"). C. The Merger Agreement provides that 9.5652% of the Merger Shares, or 135,887 Merger Shares (the "Escrow Shares"), are to be placed in an escrow account (the "Escrow Account") to provide for the payment of certain obligations that the Stockholders may owe to Universal and Sub and their affiliates, directors, officers and employees (collectively, the "Covered Persons"). The Escrow Shares of each Stockholder so required to be deposited in the Escrow Account pursuant to this Agreement and the Merger Agreement are shown on Exhibit A attached hereto. D. The parties hereto desire to establish the terms and conditions pursuant to which the Escrow Shares will be deposited, held in and disbursed from the Escrow Account. NOW, THEREFORE, the parties hereto agree as follows: 1. Escrow and Recovery. (a) Escrow of Shares. Promptly after the Effective Time, the transfer agent of Universal (the "Transfer Agent"), will deposit the Escrow Shares, in the manner prescribed in Section 2, with the Escrow Agent, who will hold them in escrow to provide 2 for the payment of the obligations of the Stockholders to Covered Persons as set forth in this Agreement until the Escrow Agent is required to release such Escrow Shares pursuant to the terms of this Agreement. The Escrow Shares will include "Additional Escrow Shares" as that term is defined in Section 2(b) of this Agreement. The Escrow Agent agrees to accept delivery of the Escrow Shares and to hold in escrow and release such Escrow Shares subject to the terms and conditions of this Agreement. (b) Recovery. Pursuant to the Merger Agreement and that certain Letter Agreement for the transfer of insurance dated September 15, 2000, by and among Universal, Reuben James Helton and the Trust (the "Letter Agreement"), Universal is entitled to recover from the Escrow Shares the following amounts (each, a "Claim"): (i) any amounts to which the Covered Persons may be entitled pursuant to Article IX of the Merger Agreement; (ii) any amounts in excess of $250,000 payable to or on behalf of Ms. Colleen Yuncker in connection with the Merger Agreement, the transactions contemplated thereby, or any termination of or change in her employment in connection herewith or therewith (whether pursuant to the Agreement dated June 26, 2000 between Ms. Yuncker and the Company or any other agreement entered into by the GCS Entities prior to the Effective Time (as defined in the Merger Agreement) (such arrangements, the "Yuncker Arrangements")); (iii) the costs associated with the Retention Plan (as defined in the Merger Agreement); and (iv) any indemnity payments or interest thereon payable to Universal pursuant to the Letter Agreement; provided, however, that the maximum aggregate amount of Escrow Shares to which Universal shall be entitled for (ii) and (iii) above shall not exceed that number of Escrow Shares valued at $800,000 (with the actual number of shares based on the value at the release date calculated in accordance with Section 4(c) hereof), and provided further, that Universal shall be entitled to receive without Claim the Escrow Shares as provided in Section 2(c)(ii)(A). (c) Defense of Claim. Promptly after the receipt by Universal of notice or discovery of any Claim giving rise to recovery rights under this Agreement, Universal will give the Representative and the Escrow Agent written notice of such Claim in accordance with Section 3 hereof. Failure to give prompt notice of a Claim hereunder shall not affect the obligations of any party. Universal shall provide the Representative with reasonable access to its premises, books and records during Universal's regular business hours and shall furnish such information as the Representative shall reasonably request from time to time, in each case to the extent reasonably required in connection with the verification of such Claim; provided, however, that any records, information or documents that are not publicly available shall not be disclosed by the Representative unless disclosure of such records, information or documents is required by court or administrative order or as may be necessary or appropriate in connection with the resolution of any dispute regarding a Claim; and provided further, that if the Representative is ordered to disclose any of such records, documents or information, the Representative will provide Universal with prompt written notice of such requirement so that Universal may seek a protective order or other appropriate remedy if it so chooses, and, in the event that such protective order or other remedy is not obtained, or Universal waives compliance with the provisions hereof, the Representative agrees to furnish only that portion of such records, documents or information that the Representative is legally required to disclose in the written opinion of counsel to the Representative. 2 3 (d) Time Period of Claims. No Claim or Claims hereunder may be made by Universal after June 30, 2002. 2. Deposit of Escrow Shares; Release from Escrow. (a) Delivery of Escrow Shares. On the Closing Date, the Escrow Shares allocable to the Stockholders (the "Initial Escrow Shares") will be delivered by the Transfer Agent to the Escrow Agent in the form of a single duly authorized stock certificate with applicable restrictive legends issued in the name of "Embassy & Co." as nominee for the Escrow Agent. In the event Universal issues any Additional Escrow Shares (as defined below), such shares will be issued and delivered to the Escrow Agent and treated in the same manner as the Initial Escrow Shares. The Escrow Agent shall hold and administer the Escrow Shares (said Escrow Shares, together with any dividends and other distributions therefrom or proceeds thereof received by the Escrow Agent, collectively, the "Escrow Property") subject to the terms of this Agreement. The Escrow Agent shall have no responsibility for the genuineness, validity, market value, title or sufficiency for any intended purpose of the Escrow Property. (b) Dividends, Voting and Rights of Ownership. Except for tax-free dividends paid in stock declared with respect to the Escrow Shares pursuant to Section 305(a) of the Code ("Additional Escrow Shares"), any cash dividends, dividends payable in securities or other distributions of any kind made in respect of the Escrow Shares will be distributed promptly by Universal to the Stockholders proportionate to their respective interests as set forth in Exhibit A hereto. Neither the Escrow Agent nor its nominee shall be under any duty to take any action to preserve, protect, exercise or enforce any rights or remedies under or with respect to the Escrow Property (including without limitation the exercise of any voting or consent rights, conversion or exchange rights, defense of title, preservation of rights against prior matters or otherwise). Notwithstanding the foregoing, if the Escrow Agent is so requested in a written request of the Representative received by the Escrow Agent at least three Business Days prior to the date on which the Escrow Agent is requested therein to take such action (or such later date as may be acceptable to the Escrow Agent), the Escrow Agent shall execute or cause its nominee to execute, and deliver to the Representative a proxy or other instrument in the form supplied to it by the Representative for voting or otherwise exercising any right of consent with respect to any of the Escrow Shares held by it hereunder, to authorize therein the Stockholder's Representative to exercise such voting or consent authority in respect of the Escrow Shares (provided that the Escrow Agent shall not be obliged to execute any such proxy or other instrument if, in its judgment, the terms thereof may subject the Escrow Agent to any liabilities or obligations in its individual capacity). Subject to compliance with applicable law, the Escrow Agent shall not be under any duty or responsibility to forward to any Interested Party, or to notify any Interested Party with respect to, or to take any action with respect to, any notice, solicitation or other document or information, written or otherwise, received from an issuer or other person with respect to the Escrow Shares, including but not limited to, proxy material, tenders, options, the pendency of calls and maturities and expiration of rights. Each Stockholder will have the right to vote his share of the Escrow Shares deposited in the Escrow Account for the account of such Stockholder so long as such Escrow Shares are held in escrow, and Universal will take all 3 4 reasonable steps necessary to allow the exercise of such rights. While the Escrow Shares remain in the Escrow Agent's possession pursuant to this Agreement, the Stockholders will retain and will be able to exercise all other incidents of ownership of said Escrow Shares that are not inconsistent with the terms and conditions hereof. (c) Distributions. The Escrow Shares shall be released and distributed as follows: (i) On June 30, 2001, the Escrow Agent will release from the Escrow Account to the Stockholders their pro rata portions (as provided in Section 2(d)) of all of the Escrow Shares except for (A) $1,800,000 of the Escrow Shares (with the actual number of shares based on the value at such release date calculated in accordance with Section 4(c) hereof), (B) any Escrow Shares (with the actual number of shares based on the value at such release date calculated in accordance with Section 4(c) of this Agreement) subject, in accordance with Section 4 hereof, to any then pending but unresolved Claims ("Pending Claim Collateral"), and (C) in the event that any Escrow Shares have been released to Universal in payment of any amounts owed pursuant to the Letter Agreement prior to such date (the "Letter Agreement Shares"), a number of Escrow Shares equal to the number of Letter Agreement Shares so released. Any Pending Claim Collateral held by the Escrow Agent as a result of the preceding sentence will be released to the Stockholders or released to Universal, as appropriate, promptly upon resolution of the specific Claim or Claims involved. (ii) On June 30, 2002, the Escrow Agent will (A) release from the Escrow Account to Universal $1,000,000 of the Escrow Shares (with the actual number of shares based on the value at such release date calculated in accordance with Section 4(c) hereof) or, to the extent the Escrow Shares in the Escrow Account have a value less than $1,000,000, all remaining Escrow Shares, (B) to the extent Escrow Shares remain in the Escrow Account after the release of Escrow Shares pursuant to Section 2(c)(ii)(A) hereof, hold in the Escrow Account and not release any then Pending Claim Collateral (with the actual number of shares based on the value at such release date calculated in accordance with Section 4(c) hereof) and (C) release from the Escrow Account to the Stockholders their pro rata portion (as provided in Section 2(d)) of all remaining Escrow Shares other than as provided in subclauses (A) and (B). (iii) In the event that any Pending Claim Collateral has not been released on or prior to the date which is seven years after its applicable Claim date, the Representative may, at its option, submit the amount of the Claim to arbitration in accordance with Section 10 hereof and the arbitrator(s) shall determine the value of the Claim, and any Escrow Shares (as determined in accordance with Section 4(c) of this Agreement) not needed to satisfy such Claim (as so determined by the arbitrator(s)) shall be released to the Stockholders. (d) Release of Shares. The Escrow Shares will be held by the Escrow Agent until required to be released pursuant to Section 2(c) above or Section 4, below. Upon the applicable release date or with respect to the Pending Claim Collateral, if any, within five Business Days after the release condition is met as confirmed by Universal and the Representative to the Escrow Agent in writing, the Escrow Agent will distribute to each 4 5 Stockholder or Universal, as the case may be, the requisite number of Escrow Shares as of the applicable release date. Universal and the Representative undertake to deliver a timely notice to the Escrow Agent identifying the number of Escrow Shares to be released within such five business day period. Escrow Shares will be distributed pro rata to the respective Stockholders in proportion to their respective interests as set forth in Exhibit A; provided, however, that in the event any Letter Agreement Shares and Escrow Shares are thereafter distributed to the Stockholders as provided herein, then the pro rata portion of such Escrow Shares otherwise distributable to the Trust shall be reduced, and the pro rata portion of the Escrow Shares otherwise distributable to Pahl shall be correspondingly increased, by a number of such Escrow Shares equal to 10% of the number of such Letter Agreement Shares so released to Universal. Universal will take such action as may be necessary to cause stock certificates to be issued bearing any appropriate legends. (e) No Encumbrances. Except as otherwise provided in this Agreement, no Escrow Shares nor any beneficial interest therein may be pledged, sold, assigned or transferred, including by operation of law, by a Stockholder, or be taken or reached by any legal or equitable process in satisfaction of any debt or other liability of a Stockholder (other than such Stockholder's obligations under this Agreement), prior to the release to such Stockholder of the Escrow Shares by the Escrow Agent. Either Stockholder may distribute, transfer, convey or assign its obligations hereunder together with its right to receive Escrow Shares; provided, that the transferee of such right shall execute and deliver to the Escrow Agent, Universal and the other Stockholder(s) party hereto an Additional Party Counterpart in the form of Exhibit B hereto; and provided further, that such distribution, transfer, conveyance or assignment shall not adversely affect the rights of Universal, the Escrow Agent or the other Stockholder(s) party hereto as evidenced by their written acknowledgment and acceptance of such transfer. No such transfer shall be effective until there shall have been delivered to the Escrow Agent such fully executed Additional Party Counterpart, whereupon such transferee shall succeed in all respects to the rights and obligations of the related transferor. (f) Power to Transfer Escrow Shares. The Escrow Agent is hereby granted the power to effect any transfer of Escrow Shares contemplated by this Agreement. Universal will cooperate with the Escrow Agent in promptly issuing stock certificates to effect such transfers. (g) Any distribution of all or a portion of the Escrow Shares to the Stockholders shall be made by delivery of the stock certificate held by the Escrow Agent representing the Escrow Shares to the Transfer Agent, endorsed for transfer, with instruction to the Transfer Agent to transfer and issue such aggregate number of Escrow Shares being distributed, allocated among the Stockholders based upon his or her pro rata share according to the percentages set forth on Schedule A (as nearly as practicable, and, if applicable, as adjusted for the future release of any Letter Agreement shares as provided in Section 2(d)), in each case by issuing to each such Stockholder a stock certificate representing such allocated shares, registered in his or her name set forth on Schedule A and mailed by first class mail to such Stockholder's address set forth on Schedule A (or to such other address as such Stockholder may have previously provided 5 6 to the Escrow Agent in writing); and, if less than all the then remaining Escrow Shares are to be so distributed and transferred, the Escrow Agent shall instruct the Transfer Agent to issue and return to the Escrow Agent (or its nominee, if the Escrow Agent shall so instruct) a stock certificate representing the remaining Escrow Shares. The Escrow Agent shall have no liability for the actions or omissions of, or any delay on the part of, the Transfer Agent in connection with the foregoing. (h) Any distribution of all or a portion of the Escrow Shares to Universal shall be made by delivery of the stock certificate held by the Escrow Agent representing the Escrow Shares to the Transfer Agent, endorsed for transfer, with instruction to the Transfer Agent to transfer to Universal or its designee or cancel the released Escrow Shares as requested by Universal; and, if less than all the then remaining Escrow Shares are to be so distributed and transferred or canceled, the Escrow Agent shall instruct the Transfer Agent to issue and return to the Escrow Agent (or its nominee, if the Escrow Agent shall so instruct) a stock certificate representing the remaining Escrow Shares. The Escrow Agent shall have no liability for the actions or omissions of, or any delay on the part of, the Transfer Agent in connection with the foregoing. 3. Notice of Claim. (a) Each notice of a Claim by Universal (the "Notice of Claim") will be in writing and will contain the following information to the extent it is reasonably available to Universal: (i) Universal's good faith estimate of the reasonably foreseeable maximum amount of the alleged amounts related to the Claim; and (ii) A brief description in reasonable detail of the facts, circumstances or events giving rise to the alleged amounts based on Universal's good faith belief thereof, including, without limitation, if applicable, the identity and address of any third party claimant and copies of any formal demand or complaint. (b) The Escrow Agent will not transfer any of the Escrow Shares held in the Escrow Account to Universal pursuant to a Notice of Claim until such Notice of Claim has been resolved in accordance with Section 4 below. 4. Resolution of Notice of Claim and Transfer of Escrow Shares. Any Notice of Claim received by the Representative and the Escrow Agent pursuant to Section 3 above will be resolved as follows: (a) Uncontested Claims. In the event that the Representative does not contest a Notice of Claim in writing to the Escrow Agent within 30 calendar days after a Notice of Claim containing a statement of the amounts claimed is delivered pursuant to Section 9 below, the Escrow Agent will promptly distribute to Universal that number of Escrow Shares having a value (determined pursuant to Section 4(c) hereof) equal to the amounts specified in the Notice of Claim and notify the Representative of such transfer. 6 7 (b) Contested Claims. In the event that the Representative gives written notice to Universal and the Escrow Agent contesting all, or a portion of, the Claim specified in a Notice of Claim (a "Contested Claim") within the 30-day period described above (which contesting notice shall specify the Claim, or portion or amount thereof, being contested), matters that are subject to any Claim described in Sections 1(b)(i) or (iv) of this Agreement, including third party Claims brought against Universal, Sub or the GCSI Entities or any of their affiliates in litigation or arbitration will await the final nonappealable decision, award or settlement of such Claim, while all other disputes, controversies or claims that arise between Universal, Sub or GCSI, on the one hand, and the Stockholders, on the other hand, (including their agents and employees) out of this Agreement, or the breach, termination or invalidity thereof (all "Arbitrable Claims"), will be settled by agreement between Representative and Universal, or failing such agreement, by binding arbitration pursuant to Section 10 hereof. This Section 4(b) is not intended to alter the parties rights or remedies under the Merger Agreement or the Letter Agreement. Any portion of the Notice of Claim that is not contested will be resolved as set forth above in Section 4(a). The final decision of the arbitrator will be furnished to the Escrow Agent, the Representative, the Stockholders and Universal in writing and will constitute a conclusive determination of the issue in question, binding upon the Stockholders, the Representative, Universal, Sub and all Covered Persons. After notice that the Notice of Claim is contested by the Representative, the Escrow Agent will not release any Escrow Shares from the Escrow Account, except as provided in Section 2(c) and notwithstanding the expiration of the applicable release date, until (i) execution of a settlement agreement by Universal and the Representative setting forth a resolution of the Notice of Claim, or (ii) receipt of a copy of the final decision of the court or award of the arbitrator(s), as applicable, subject to Section 2(c)(iii) above. (c) Determination of Amount of Claims. Pursuant to Section 4(a) or (b) above, any amount owed to Universal for, or to be held pending resolution of, any Claim, subject to the provisions of the Merger Agreement with respect to the Threshold, will be payable to Universal for, or withheld by the Escrow Agent pending resolution of, such Claim out of the applicable Escrow Shares then held by the Escrow Agent at a per share value for all Escrow Shares equal to the weighted average sales price of Universal Common Stock as quoted on the New York Stock Exchange (or other principal securities exchange on which such shares are then traded) for the 20 consecutive trading days up to the third business day immediately preceding the date of such payment or, with respect to Pending Claim Collateral, the applicable release date. As to the calculation of such per share value, the Escrow Agent may request and rely upon a written certification from Universal and the Representative. In no event will the amount owed for any Claim with respect to the Yuncker Arrangements, the Retention Plan or the Letter Agreement be subject to the Threshold, and the amount owed for Claims for the Yuncker Arrangements and the Retention Plan in the aggregate shall not exceed $800,000. 5. Concerning the Escrow Agent. (a) Each Interested Party and the Representative acknowledge and agree that the Escrow Agent (i) shall not be responsible for any of the agreements referred to or described herein (including without limitation the Merger Agreement and the Letter 7 8 Agreement), or for determining or compelling compliance therewith, and shall not otherwise be bound thereby, (ii) shall be obligated only for the performance of such duties as are expressly and specifically set forth in this Agreement on its part to be performed, each of which is ministerial (and shall not be construed to be fiduciary) in nature, and no implied duties or obligations of any kind shall be read into this Agreement against or on the part of the Escrow Agent, (iii) shall not be obligated to take any legal or other action hereunder which might in its judgment involve or cause it to incur any expense or liability unless it shall have been furnished with acceptable indemnification, (iv) may rely on and shall be protected in acting or refraining from acting upon any written notice, instruction (including, without limitation, wire transfer instructions, whether incorporated herein or provided in a separate written instruction), instrument, statement, certificate, request or other document furnished to it hereunder and believed by it to be genuine and to have been signed or presented by the proper person, and shall have no responsibility for making inquiry as to or determining the genuineness, accuracy or validity thereof, or of the authority of the person signing or presenting the same, and (v) may consult counsel satisfactory to it, including in-house counsel, and the opinion or advice of such counsel in any instance shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with the opinion or advice of such counsel. Documents and written materials referred to in this paragraph include, without limitation, e-mail and other electronic transmissions capable of being printed, whether or not they are in fact printed; and any such e-mail or other electronic transmission may be deemed and treated by the Escrow Agent as having been signed or presented by a person if it bears, as sender, the person's e-mail address. (b) The Escrow Agent shall not be liable to anyone for any action taken or omitted to be taken by it hereunder except in the case of the Escrow Agent's gross negligence or willful misconduct in breach of the terms of this Agreement. In no event shall the Escrow Agent be liable for indirect, punitive, special or consequential damage or loss (including but not limited to lost profits) whatsoever, even if the Escrow Agent has been informed of the likelihood of such loss or damage and regardless of the form of action. (c) The Escrow Agent shall have no more or less responsibility or liability on account of any action or omission of any book-entry depository, securities intermediary or other subescrow agent employed by the Escrow Agent than any such book-entry depository, securities intermediary or other subescrow agent has to the Escrow Agent, except to the extent that such action or omission of any book-entry depository, securities intermediary or other subescrow agent was caused by the Escrow Agent's own gross negligence or willful misconduct in breach of this Agreement. (d) Notwithstanding any term appearing in this Agreement to the contrary, in no instance shall the Escrow Agent be required or obligated to distribute any Escrow Property (or take other action that may be called for hereunder to be taken by the Escrow Agent) sooner than two Business Days after (i) it has received the applicable documents required under this Agreement in good form, or (ii) passage of the applicable time period (or both, as applicable under the terms of this Agreement), as the case may be. 8 9 (e) Conflicting Instructions. In the event conflicting demands are made or conflicting notices are served upon the Escrow Agent with respect to the Escrow Account, the Escrow Agent will have the absolute right, at the Escrow Agent's election, to do either or both of the following: (i) resign, in which case a successor escrow agent will appointed pursuant to Section 14 hereof or (ii) file a suit in interpleader and obtain an order from a court of competent jurisdiction requiring the parties to interplead and litigate in such court their several claims and rights among themselves. In the event such interpleader suit is brought, the Escrow Agent will thereby be fully released and discharged from all further obligations imposed upon it under this Agreement, and Universal will pay the Escrow Agent (subject to reimbursement from the Stockholders pursuant to Section 13 hereof) all costs, expenses and reasonable attorneys' fees expended or incurred by the Escrow Agent pursuant to the exercise of the Escrow Agent's rights under this Section 5 (such costs, fees and expenses will be treated as extraordinary fees and expenses for the purposes of Section 13 hereof). (f) The Escrow Agent may execute any of its powers or responsibilities hereunder and exercise any rights hereunder either directly or by or through its agents or attorneys. Nothing in this Agreement shall be deemed to impose upon the Escrow Agent any duty to qualify to do business or to act as a fiduciary in any jurisdiction other than the Commonwealth of Massachusetts. (g) The Escrow Agent shall not be responsible for delays or failures in performance resulting from acts beyond its control. Such acts shall include but not be limited to acts of God, strikes, lockouts, riots, acts of war, epidemics, governmental regulations superimposed after the fact, fire, communication line failures, computer viruses, power failures, earthquakes or other disasters. 6. Compensation, Expense Reimbursement and Indemnification. (a) Each of the Interested Parties agrees, jointly and severally, (i) to pay or reimburse the Escrow Agent for its reasonable attorney's fees and expenses incurred in connection with the preparation of this Agreement and (ii) to pay the Escrow Agent's compensation for its normal services hereunder in accordance with the fee schedule attached hereto as Exhibit C and made a part hereof, which may be subject to change hereafter by the Escrow Agent on an annual basis. (b) Each of the Interested Parties agrees, jointly and severally, to reimburse the Escrow Agent on demand for all costs and expenses incurred in connection with the administration of this Agreement or the escrow created hereby or the performance or observance of its duties hereunder which are in excess of its compensation for normal services hereunder, including without limitation, payment of any reasonable legal fees and expenses incurred by the Escrow Agent in connection with resolution of any claim by any party hereunder. (c) EACH OF THE INTERESTED PARTIES, JOINTLY AND SEVERALLY (EACH, AN "INDEMNIFYING PARTY" AND TOGETHER, THE "INDEMNIFYING PARTIES"), HEREBY COVENANTS AND AGREES TO REIMBURSE, INDEMNIFY AND HOLD HARMLESS THE 9 10 ESCROW AGENT AND THE ESCROW AGENT'S EMPLOYEES AND AGENTS (SEVERALLY AND COLLECTIVELY, THE "ESCROW AGENT"), FROM AND AGAINST ANY LOSS, LIABILITY, DAMAGE, COST AND EXPENSE OF ANY NATURE INCURRED BY THE ESCROW AGENT ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR WITH THE ADMINISTRATION OF ITS DUTIES HEREUNDER, INCLUDING BUT NOT LIMITED TO REASONABLE ATTORNEY'S FEES AND OTHER COSTS AND EXPENSES OF DEFENDING OR PREPARING TO DEFEND AGAINST ANY CLAIM OF LIABILITY UNLESS AND EXCEPT TO THE EXTENT SUCH LOSS, LIABILITY, DAMAGE, COST AND EXPENSE SHALL BE CAUSED BY THE ESCROW AGENT'S GROSS NEGLIGENCE, OR WILLFUL MISCONDUCT. THE FOREGOING INDEMNIFICATION AND AGREEMENT TO HOLD HARMLESS SHALL SURVIVE THE TERMINATION OF THIS AGREEMENT. (d) Participation in Defense of Claim Against Escrow Agent. Each Indemnifying Party may participate at its own expense in the defense of any claim or action that may be asserted against the Escrow Agent and, if the Indemnifying Parties so elect, the Indemnifying Parties may assume the defense of such claim or action; provided, however, that if there exists a conflict of interest that would make it inappropriate for the same counsel to represent both the Escrow Agent and the Indemnifying Parties, the Escrow Agent's retention of separate counsel shall be reimbursable as hereinabove provided. The Escrow Agent's right to indemnification hereunder shall survive the Escrow Agent's resignation or removal as the Escrow Agent and shall survive the termination of this Agreement by lapse of time or otherwise. (e) Notice of Claim Against Escrow Agent. The Escrow Agent hereby represents that the Escrow Agent will notify each Indemnifying Party by letter, or by telephone or telex confirmed by letter, of any receipt by the Escrow Agent of a written assertion of a claim against the Escrow Agent, or any action commenced against the Escrow Agent, within ten calendar days after the Escrow Agent's receipt of written notice of such claim. However, the Escrow Agent's failure to so notify each Indemnifying Party shall not operate in any manner whatsoever to relieve an Indemnifying Party from any liability that it may have otherwise than on account of this Section 6, unless the defense of such claim is materially prejudiced by the failure of the Escrow Agent to notify the Indemnifying Parties within such ten-day period. (f) Without altering or limiting the joint and several liability of any of the Interested Parties to the Escrow Agent hereunder, each of the Interested Parties agrees as among themselves that they shall share responsibility for amounts payable to the Escrow Agent as specified in Section 13 hereof. 7. Tax Indemnification. Each of the Interested Parties agrees, jointly and severally, with the Escrow Agent (i) to assume any and all obligations imposed now or hereafter on the Escrow Agent by any applicable tax law with respect to any payment or distribution of the Escrow Property or performance of other activities under this Agreement (and as among the Interested Parties, each Interested Party agrees to assume any obligations imposed now or hereafter on them by any applicable tax law with respect to any payment or distribution of the Escrow Property), (ii) to instruct the Escrow Agent in writing with respect to the Escrow Agent's 10 11 responsibility for withholding and other taxes, assessments or other governmental charges, and to instruct the Escrow Agent with respect to any certifications and governmental reporting that may be required under any tax laws or regulations that may be applicable in connection with its acting as Escrow Agent under this Agreement, and (iii) to indemnify and hold the Escrow Agent harmless from any liability or obligation on account of taxes, assessments, additions for late payment, interest, penalties, expenses and other governmental charges that may be assessed or asserted against the Escrow Agent in connection with, on account of or relating to the Escrow Property, the management established hereby, any payment or distribution of or from the Escrow Property pursuant to the terms hereof or other activities performed under the terms of this Agreement, including without limitation any liability for the withholding or deduction of (or the failure to withhold or deduct) the same, and any liability for failure to obtain proper certifications or to report properly to governmental authorities in connection with this Agreement, including costs and expenses (including reasonable legal fees and expenses), interest and penalties. The foregoing indemnification and agreement to hold harmless shall survive the termination of this Agreement. 8. Stockholders' Representative. For purposes of this Agreement, the Stockholders hereby consent to, confirm and irrevocably effect the appointment of Garlin R. Rhymes as the Representative, as representative of the Stockholders, and as the attorney-in-fact for and on behalf of each Stockholder, and, subject to the express limitations set forth below, the taking by the Representative of any and all actions and the making of any decisions required or permitted to be taken by him under this Agreement, including, without limitation, the exercise of the power to (i) authorize delivery to Universal of the Escrow Shares or any portion thereof, in satisfaction of Claims, (ii) agree to, negotiate, enter into settlements and compromises of, and demand and conduct arbitration and comply with orders of courts and awards of arbitrators with respect to such Claims, (iii) resolve any Claims, and (iv) take all actions necessary in the judgment of the Representative for the accomplishment of the foregoing and all of the other terms, conditions and limitations of this Agreement. The Representative will have unlimited authority and power to act on behalf of each Stockholder with respect to this Agreement and the disposition, settlement or other handling of all Claims, rights or obligations arising under this Agreement so long as all Stockholders are treated in the same manner. The Stockholders will be bound by all actions taken by the Representative in connection with this Agreement, and Universal will be entitled to rely on any action or decision of the Representative. In performing his functions hereunder, the Representative will not be liable to the Stockholders in the absence of gross negligence or willful misconduct. In the event the Representative becomes unavailable or unwilling to continue in his capacity herewith, the Representative may resign and be discharged from his duties or obligations hereunder by giving his resignation to the parties to this Agreement, specifying a date not less than ten days following such notice date of when such resignation will take effect and, in that event, James Bauters will be deemed to be appointed by the Stockholders as the new Representative. In the event Mr. Bauters then becomes unavailable or unwilling to continue in his capacity as Representative, he may resign and be discharged from his duties or obligations hereunder by giving his resignation to the parties to this Agreement, specifying a date not less than ten days following such notice date of when such resignation will take effect. In that event, the Stockholder(s) owning a majority of the Escrow Shares will designate a successor Representative prior to the expiration of such ten-day period by giving written notice to the Escrow Agent and Universal. If the Stockholders have not appointed a successor Representative 11 12 and notified Universal of the identity and address of such successor Representative within such ten-day period, Universal shall be relieved of the obligation to send notices to or obtain consents from the Representative while there is no Representative and, for purposes of this Agreement, in each such case, it shall be deemed that the Representative has received the required notice and/or approved such action. Until notified in writing by the Representative that he has resigned, the Escrow Agent may rely conclusively and act upon the directions, instructions and notices of the Representative named above and, thereafter, upon the directions, instructions and notices of any successor Representative named in a writing executed by a majority-in-interest of the Stockholders filed with the Escrow Agent. 9. Notices. All notices, instructions and other communications required or permitted to be given hereunder or necessary or convenient in connection herewith must be in writing and will be deemed delivered (i) when personally served or when delivered by telex or facsimile (to the telex or facsimile number of the person to whom the notice is given), (ii) the first business day following the date of deposit with an overnight courier service or (iii) on the earlier of actual receipt or the third business day following the date on which the notice is deposited in the United States mail, first class certified, postage prepaid, addressed as follows: If to the Escrow Agent: State Street Bank and Trust Company Corporate Trust Lafayette Corporate Center 2 Avenue De Lafayette 6th Floor South Boston, Massachusetts 02110 Attention: Christina Mullen Facsimile: 617/662-1463 If to Universal: Universal Compression Holdings, Inc. 4440 Brittmoore Road Houston, Texas 77041 Attention: Valerie L. Banner, Senior Vice President and General Counsel Facsimile: 713/466-6720 With a copy to: King & Spalding 1100 Louisiana, Suite 3300 Houston, Texas 77002 Attention: Christine B. LaFollette Facsimile: 713/751-3290 If to the Representative: Garlin R. Rhymes 24106 Bay Hill Blvd. Katy, Texas 77494 Facsimile: (281) 392-0832 12 13 With a copy to: Mayor, Day, Caldwell & Keeton, L.L.P. 700 Louisiana, Suite 1900 Houston, Texas 77002 Attention: Ms. Kathleen M. Kopp Facsimile: (713) 225-7047 or to such other address as Universal, the Representative or the Escrow Agent, as the case may be, designates in a writing delivered to each of the other parties hereto. 10. Arbitration. (a) Universal, the Stockholders and the Representative hereby agree that all Arbitrable Claims, except those that involve the Escrow Agent pursuant to Section 11 hereof, shall be submitted to, and determined by, binding arbitration. Nothing in this Section 10 is intended to alter the parties rights or remedies under the Merger Agreement or the Letter Agreement. Such arbitration shall be conducted pursuant to the Commercial Arbitration Rules (the "Rules") then in effect of the American Arbitration Association, except to the extent such rules are inconsistent with this Section 10. If the amount in controversy in the arbitration exceeds $1,000,000, exclusive of interest, attorneys' fees and costs, the arbitration shall be conducted by a panel of three neutral arbitrators with Universal and the Representative each selecting one arbitrator and the third arbitrator being chosen by the two served. Otherwise, the arbitration shall be conducted by a single neutral arbitrator mutually agreed upon by the parties, or if no such agreement is reached then by the panel of three arbitrators. The arbitrator(s) shall be selected pursuant to the Rules and shall be a person or persons experienced in the oil and gas industry and the nature of the issues to be arbitrated. Exclusive venue for such arbitration shall be in Houston, Texas. The arbitrator(s) shall apply the internal laws of the State of Texas (without regard to conflict of law rules) in determining the substance of the dispute, controversy or claim and shall decide the same in accordance with the applicable usages and terms of trade. The proceedings shall be governed by the Texas Rules of Civil Procedure and the Texas Rules of Evidence. The arbitrator(s)' award shall be in writing and shall set forth the findings and conclusions upon which the arbitrator(s) based the award. The prevailing party in any such arbitration shall be entitled to recover its reasonable attorneys' fees, costs and expenses incurred in connection with the arbitration. Any award pursuant to such arbitration shall be final and binding upon Universal, the Stockholders and the Representative, and judgment on the award may be entered in any federal or state court with appropriate jurisdiction sitting or located in Harris County, Texas. The provisions of this Section 10 shall survive the termination of this Agreement. (b) The arbitration shall commence within 60 days after the selection of neutral arbitrator(s) in accordance with the provisions of this Section 10. In fulfilling his or her duties, the arbitrator(s) may consider such matters as, in the opinion of the arbitrator(s), are necessary or helpful to render an appropriate decision. All discovery shall be expedited, consistent with the nature and complexity of the claim or dispute and consistent with fairness and justice. The arbitrator(s) shall have the power to compel any party to comply with discovery requests of the other parties and to issue binding orders 13 14 relating to any discovery dispute which shall be enforceable in the same manner as awards. The arbitrator(s) also shall have the power to impose sanctions for abuse or frustration of the arbitration process, including without limitation, the refusal to comply with orders of the arbitrator(s) relating to discovery and compliance with subpoenas. (c) Without limiting the enforceability or scope of this Section 10, Universal, the Stockholders and the Representative agree that if a controversy or claim between them pursuant to this Section 10 arises out of or relates to this Agreement and results in litigation, the courts of Harris County, Texas or the courts of the United States of America located in Harris County, Texas shall have jurisdiction to hear and decide such matter, and Universal, the Stockholders and the Representative hereby submit to the jurisdiction of such courts. The foregoing notwithstanding, Universal, the Stockholders and the Representative may seek and obtain from a court of competent jurisdiction a temporary restraining order, temporary injunction or other temporary emergency relief without first having to submit such dispute to arbitration. (d) Governing Law. With respect to matters governed by this Section 10, this Agreement will be governed by and construed in accordance with the internal laws of the State of Texas without regard to conflict of law principles and will be binding upon, and inure to the benefit of, the parties hereto and their respective successors and permitted assigns. 11. Dispute Resolution Involving Escrow Agent or Escrow Property. (a) It is understood and agreed that, should any dispute arise with respect to this Agreement between the Interested Parties and the Escrow Agent or any claim made by the Escrow Agent with respect to the delivery, ownership, right of possession, and/or disposition of the Escrow Property other than the resolution of Claims pursuant to Section 4 or 10 hereof, or should any claim be made upon the Escrow Agent or the Escrow Property by a third party, the Escrow Agent upon receipt of notice of such dispute or claim is authorized and shall be entitled (at its sole option and election) to retain in its possession without liability to anyone, all or any of said Escrow Property until such dispute shall have been settled either by the mutual written agreement of the parties involved or by a final order, decree or judgment of a court in the United States of America, the time for perfection of an appeal of such order, decree or judgment having expired. The Escrow Agent may, but shall be under no duty whatsoever to, institute or defend any legal proceedings which relate to the Escrow Property. (b) Universal, the Stockholders, the Representative and the Escrow Agent further agree that if a controversy or claim between them which (i) arises out of or relates to this Agreement or the delivery, ownership, right of possession, and/or disposition of the Escrow Property, other than the resolution of Claims pursuant to Section 4 or 10 hereof, (ii) involves the Escrow Agent and (iii) results in litigation, then the courts of the State of New York or the courts of the United States of America located in the State of New York shall have jurisdiction to hear and decide such matter, and Universal, the Stockholders, the Representative and the Escrow Agent hereby submit to the jurisdiction of such courts. This Section 11 is intended to apply only to the above limited matters involving the 14 15 Escrow Agent or the Escrow Property and is not intended to alter the resolution agreement set forth in Section 4 hereof or the arbitration agreement set forth in Section 10 hereof. The foregoing notwithstanding, Universal, the Stockholders, the Representative and the Escrow Agent may seek and obtain from a court of competent jurisdiction a temporary restraining order, temporary injunction or other temporary emergency relief without first having to submit such dispute to arbitration. (c) Each of the Interested Parties and the Representative hereby absolutely and irrevocably consent and submit to the jurisdiction of the courts in the State of New York and of any Federal court located in said State in connection with any actions or proceedings brought against the Interested Parties (or any of them) or the Representative by the Escrow Agent arising out of or relating to this Escrow Agreement. In any such action or proceeding, the Interested Parties each hereby absolutely and irrevocably (i) waives any objection to jurisdiction or venue, (ii) waives personal service of any summons, complaint, declaration or other process, and (iii) agrees that the service thereof may be made by certified or registered first-class mail directed to such party, as the case may be, at their respective addresses in accordance with Section 9 hereof. (d) WITH RESPECT TO MATTERS GOVERNED BY THIS SECTION 11, THE ESCROW AGENT, THE INTERESTED PARTIES AND THE REPRESENTATIVE HEREBY WAIVE A TRIAL BY JURY OF ANY AND ALL ISSUES ARISING IN ANY ACTION OR PROCEEDING BETWEEN THEM OR THEIR SUCCESSORS OR ASSIGNS, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF ITS PROVISIONS OR ANY NEGOTIATIONS IN CONNECTION HEREWITH. (e) Governing Law. With respect to matters governed by this Section 11, this Agreement will be governed by and construed in accordance with the internal laws of the State of New York without regard to conflict of law principles and will be binding upon, and inure to the benefit of, the parties hereto and their respective successors and permitted assigns. 12. General. (a) Governing Law; Assigns. Except as otherwise provided in Section 10 hereof, this Agreement will be governed by and construed in accordance with the internal laws of the State of New York without regard to conflict of law principles and will be binding upon, and inure to the benefit of, the parties hereto and their respective successors and permitted assigns. Except as otherwise provided in this Agreement, no party to this Agreement may assign all or any portion of its or their rights, obligations or liabilities under this Agreement without the prior written consent of the other parties hereto. Any attempted assignment in violation of this Section 12(a) shall be voidable. (b) Counterparts. This Agreement may be executed in two or more counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument. 15 16 (c) Entire Agreement. This Agreement constitutes the entire understanding and agreement of the parties with respect to the subject matter of this Agreement and supersedes all prior agreements or understandings, written or oral, between the parties with respect to the subject matter hereof. (d) Headings. The section headings contained in this Agreement are inserted for convenience only and shall not affect in any way the meaning or interpretation of this Agreement. (e) Severability. Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction. If the final judgment of a court of competent jurisdiction declares that any term or provision hereof is invalid or unenforceable, the parties agree that the court making the determination of invalidity or unenforceability shall have the power to reduce the scope, duration, or area of the term or provision, to delete specific words or phrases, or to replace any invalid or unenforceable term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision, and this Agreement shall be enforceable as so modified after the expiration of the time within which the judgment may be appealed. (f) Waivers. No waiver by any party hereto of any condition or of any breach of any provision of this Agreement will be effective unless in writing. No waiver by any party of any such condition or breach, in any one instance, will be deemed to be a further or continuing waiver of any such condition or breach or a waiver of any other condition or breach of any other provision contained herein. 13. Expenses. (a) Escrow Agent. All fees and expenses of the Escrow Agent incurred in the ordinary course of performing its responsibilities hereunder will be borne by Universal upon receipt of a written invoice by Escrow Agent. Any extraordinary fees and expenses, including, without limitation, any fees or expenses incurred by the Escrow Agent in connection with a dispute over the distribution of Escrow Shares or the validity of a Notice of Claim or as described in Sections 6(b) or 7, will be paid 50% by Universal and 50% by the Stockholders, other than fees and expenses related to withholding or other taxes, assessments or governmental charges that apply to the Stockholders, which will be paid 100% by the Stockholders directly. The Stockholders' 50% liability for the extraordinary fees and expenses of the Escrow Agent (which will be pro rata for each Stockholder based on the proportion of the total Escrow Shares attributable to such Stockholder) will be paid by Universal and recovered as a claim hereunder out of the Escrow Shares or, if there are no Escrow Shares remaining, recovered from the Stockholders directly. (b) Representative. The Representative will not be entitled to receive any compensation from Universal or the Stockholders in connection with this Agreement. 16 17 Any out-of-pocket costs and expenses reasonably incurred by the Representative in connection with actions taken pursuant to the terms of this Agreement will be paid by the Stockholders to the Representative in proportion to their percentage interests in the Escrow Shares as set forth on Exhibit A. 14. Successor Escrow Agent. In the event the Escrow Agent becomes unavailable or unwilling to continue in its capacity herewith, the Escrow Agent may resign and be discharged from its duties or obligations hereunder by giving written notice of resignation to the parties to this Agreement, specifying a date not less than 21 days following such notice date of when such resignation will take effect. Universal will designate a successor Escrow Agent prior to the expiration of such 21-day period by giving written notice to the Escrow Agent and the Representative. Universal may appoint a successor Escrow Agent without the consent of the Stockholders or the Representative so long as such successor is a bank with assets of at least $50 million, and may appoint any other successor Escrow Agent with the consent of the Representative, which consent will not be unreasonably withheld. The Escrow Agent will promptly transfer the Escrow Shares to such designated successor. 15. Limitation of Responsibility. The Escrow Agent's duties are limited to those set forth in this Agreement, and Escrow Agent, acting as such under this Agreement, and charged with knowledge of or any duties or responsibilities under any other document or agreement, including, without limitation, the Merger Agreement. 16. Amendment. This Agreement may be amended by the written agreement of Universal, the Escrow Agent and the Representative; provided, that if the Escrow Agent does not agree to an amendment agreed upon by Universal and the Representative, the Escrow Agent will resign and Universal will appoint a successor Escrow Agent in accordance with Section 14 above. 17 18 IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the day and first above written. UNIVERSAL COMPRESSION HOLDINGS, INC. By: /s/ ERNIE L. DANNER ------------------------------- Name: Ernie L. Danner Title: Executive Vice President REUBEN JAMES HELTON TRUST DATED JANUARY 24, 2000 By: /s/ GARLIN R. RHYMES ------------------------------- Name: Garlin R. Rhymes, Trustee /s/ MICHAEL PAHL ---------------------------------- Michael Pahl REPRESENTATIVE: /s/ GARLIN R. RHYMES ---------------------------------- Name: Garlin R. Rhymes STATE STREET BANK AND TRUST COMPANY, AS ESCROW AGENT By: /s/ CHI C. MA ------------------------------- Name: Chi C. Ma Title: Vice President 18 19 EXHIBIT A
STOCKHOLDER NAME NUMBER OF ESCROW PRO RATA AND ADDRESS SHARES INITIALLY DEPOSITED INTEREST ---------------- -------------------------- -------- The Reuben James Helton 122,299 90% Trust Dated January 24, 2000 c/o Garlin R. Rhymes, Trustee 24106 Bay Hill Blvd. Katy, Texas 77494 Michael L. Pahl 13,588 10% 5319 N. Liberty Drive Traverse City, Michigan 49684
20 EXHIBIT B ADDITIONAL PARTY COUNTERPART The undersigned, after having received and reviewed to its, his or her satisfaction a copy of the Escrow Agreement, dated as of September 15, 2000 (the "Escrow Agreement"), by and among Universal Compression Holdings, Inc. (the "Company"), the Reuben James Helton Trust Dated January 24, 2000 as amended and in effect, a trust formed pursuant to the laws of the State of Michigan (the "Trust"), Garlin R. Rhymes, as trustee of the Trust ("Trustee"), Michael Pahl ("Pahl") (collectively, the Trust, Trustee and Pahl are referred to as the "Stockholders"), Garlin R. Rhymes, as representative of the former stockholders of Gas Compression Services, Inc., a Michigan corporation, and State Street Bank and Trust Company, a Massachusetts trust company, as the Escrow Agent, does hereby agree to become party to the Escrow Agreement, thereby accepting all of the rights, benefits and obligations of a Stockholder thereunder. The Company may attach this page as a counterpart to the Escrow Agreement and the undersigned agrees that such attachment shall be deemed conclusive evidence of its, his or her acknowledgment and acceptance of the terms thereof. Capitalized terms used herein and not otherwise defined herein shall have the meaning given such terms in the Escrow Agreement. Dated: [NAME] [ADDRESS FOR NOTICES] By: ----------------------------- Name: Title: Acknowledged and Accepted By: UNIVERSAL COMPRESSION HOLDINGS, INC. By: ------------------------------- Name: Title: 21 EXHIBIT C FEE SCHEDULE STATE STREET SCHEDULE OF FEES FOR ESCROW SERVICES UNIVERSAL COMPRESSION, INC., GAS COMPRESSION SERVICES, INC., REUBEN JAMES HELTON TRUST DATED JANUARY 24, 2000 AND MICHAEL L. PAHL ACCEPTANCE FEE: Waived ADMINISTRATION FEE: $3,500.00 per year or part thereof PLUS $35.00 PER SHAREHOLDER INVESTMENT FEE: (if applicable) $65.00 per buy/sell direct investments in treasuries, C/D's CP, Repo's, etc. SWEEP FEE: (if applicable) 40 basis points per annum of the SSgA or selected other Money Market average daily net assets Funds State Street's Insured Money Market No Charge Account WIRE TRANSFER FEE (outgoing): $20.00 OUT-OF-POCKET EXPENSES At cost LEGAL FEES (Peabody & Arnold): At Cost
August 2, 2000 EX-10.2 5 h80568ex10-2.txt CONSULTING AND NON-COMPETITION AGREEMENT 1 EXHIBIT 10.2 CONSULTING AND NON-COMPETITION AGREEMENT This Consulting and Non-Competition Agreement (this "Agreement") is entered into effective as of the close of business on the day preceding the Effective Time, by and between Universal Compression, Inc., a Texas corporation with its principal place of business in Houston, Texas ("UCI") (hereinafter, UCI, including all predecessors, successors and affiliates, including but not limited to the GCS Entities, shall be referred to as the "Company"), and Reuben James Helton, an individual resident of the State of Texas ("Consultant"). Capitalized terms used but not herein defined shall have the meanings assigned to them in the Merger Agreement (as defined below). WITNESSETH: WHEREAS, UCI desires to engage Consultant to render general management and operational consulting services to UCI in connection with its business; WHEREAS, Consultant desires to accept such engagement upon the terms and conditions set forth in this Agreement; WHEREAS, the parties thereto are entering into that certain Agreement and Plan of Merger dated August 4, 2000 (the "Merger Agreement"), which provides for, among other things, (i) the merger of Gas Compression Services, Inc., a Michigan corporation ("GCSI"), of which Consultant was the principal shareholder and served as Chairman of the Board, with and into UCI (the "Merger"), and (ii) a trust, of which Consultant is grantor, to receive substantial consideration for its ownership interest in GCSI in connection with the Merger; and WHEREAS, as a condition to the Merger, and to preserve the value of the business being acquired by UCI, the Merger Agreement contemplates, among other things, that UCI shall offer to enter into this Agreement with Consultant; NOW, THEREFORE, in consideration of the foregoing and for the covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties to this Agreement, intending to be legally bound, agree as follows: Section 1. Consulting Services. 1.1. Consulting Term. Consultant's employment with GCSI shall terminate on the effective date of this Agreement. The term of this Agreement and Consultant's consultancy shall commence on the effective date hereof and continue for a period of five years, subject to its earlier termination pursuant to Section 1.10 of this Agreement (the "Consulting Term"). 1.2. Consulting Services. Consultant agrees to be available at UCI's reasonable request to consult with and advise UCI on the strategy, plans, and objectives of UCI's 2 compression service business. Consultant will use his special knowledge, experience, judgment, and relationships to faithfully and efficiently perform and fulfill consulting services. 1.3. Compliance with Applicable Law. In performing the consulting services, during the Consulting Term, Consultant shall comply with all applicable federal, state, and local laws and regulations that relate to Consultant's duties as a consultant, and conduct himself in an ethical manner at all times. 1.4. Consulting Fee and 401(k) Plan. UCI agrees to pay Consultant a consulting fee of $8,333.33 per month plus an additional fee of $471.59 per month for the first 18 months. Notwithstanding any provisions of this Agreement to the contrary, UCI's obligation to make the payments contemplated in this Section shall be contingent upon Consultant's compliance with his obligations and covenants under this Agreement. Consultant shall not be entitled to make contributions to the Universal Compression, Inc. 401(k) Retirement and Savings Plan (the "Universal Plan"). However, Consultant shall be entitled to leave his vested account balance in the Gas Compression Services, Inc. 401(k) Plan (the "GCSI Plan") until his account under the GCSI Plan either is distributed in connection with the termination of the GCSI Plan or distributed at his request as a result of his termination of employment with GCSI. If the GCSI Plan is merged into the Universal Plan, Consultant shall be entitled to a distribution from that plan at his request. In connection with a distribution of his account, consultant shall be entitled to make a direct rollover contribution to an individual retirement account established by Consultant or another eligible retirement plan (other than the Universal Plan). 1.5. Automobile. UCI will reimburse Consultant up to $1,200 per month for the lease of an automobile during the term of this Agreement. UCI shall also issue to Consultant a UCI credit card for gasoline expenses with respect to the automobile referred to in the preceding sentence. All other operating and maintenance expenses with respect to such automobile will be the responsibility of Consultant. 1.6. Health Insurance. Consultant and his spouse will extend their coverage under the Gas Compression Services, Inc. group health plan in which they are enrolled as of the effective date of this Agreement (or under a successor group health plan made available by UCI) under the continuation health coverage provisions of Section 4980B of the Internal Revenue Code of 1986, as amended, and Title 6 of Part I of the Employee Retirement Income Security Act of 1974, as amended (commonly known as "COBRA"), for the 18-month statutory period, or for such lesser period as Consultant remains eligible under COBRA. At the time Consultant is no longer eligible for COBRA coverage and until the end of the Consulting Term, UCI shall either make coverage available to Consultant and his spouse under the UCI plan at the same level and under the same terms and conditions as in effect for UCI's full time employees, from time to time, or shall provide other reasonably comparable coverage to the coverage provided to UCI's full-time employees under the UCI group health plan during the remainder of the Consulting Term, which will be without regard to pre-existing conditions to Consultant or his spouse. In the event of Consultant's death and prior to the end of the Consulting Term, Consultant's spouse will be entitled, at her expense and to the extent required by law, to continue such health coverage for a period not to exceed the period that coverage would be made available to the spouse of a deceased participant under COBRA. 2 3 1.7. Life Insurance. During the Consulting Term, UCI shall pay the premium on Consultant's existing life insurance policy as described in Schedule I hereto. Should such life insurance policy terminate for any reason, other than by reason of UCI's failure to pay the premiums pursuant to this Section 1.7, UCI shall have no obligation to obtain or pay premiums for any other life insurance policy for the Consultant. 1.8. Consulting Expenses. UCI agrees to reimburse Consultant for reasonable expenses incurred in connection with the performance of the consulting services upon presentation of appropriate supporting documentation for all consulting expenses. UCI will not reimburse Consultant for any office, staff, or other overhead expenses. 1.9. Status of Consultant. Consultant will perform all consulting services as an independent contractor and not as an employee. As an independent contractor, Consultant shall be responsible for all taxes and withholding on payments UCI tenders to Consultant for consulting services under this Agreement. 1.10. Early Termination. In the event that Consultant is unable to continue to perform the consulting services set forth in Section 1.2 hereof due to his death or disability, this Agreement shall terminate automatically; provided, however, that Section 1.6 shall survive such termination in accordance with its terms. Section 2. Trade Secrets and Confidential Information. 2.1. Definitions. 1. "Trade Secret" shall mean information, including, but not limited to, technical or non-technical data, a formula, pattern, compilation, program, device, method, technique, drawing, process, financial data, financial plan, product plan, list of actual or potential customers or suppliers, or other information similar to any of the foregoing, which derives economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can derive economic value from its disclosure or use and which is subject to reasonable efforts by the Company or the GCS Entities, or their parents, subsidiaries or affiliates, to maintain its secrecy or confidentiality. 2. "Confidential Information" shall mean any secret, confidential, or proprietary data or information of the Company and the GCS Entities, including information received by the Company, the GCS Entities or Consultant from any customer or client or potential customer or client of the Company or the GCS Entities, or their parents, subsidiaries or affiliates, not otherwise included in the definition of Trade Secret. The term Confidential Information shall not include information that Consultant can show by competent proof has become generally known to the public by the act of one who has the right to disclose such information without violating any right of the Company or any customer or client to which such information pertains. 3 4 2.2. Background. 1. The Company owns, controls, and has exclusive access to Confidential Information and Trade Secrets concerning its operations, methods, and the sale and development of its products and services, including those of the GCS Entities. UCI seeks reasonable protections for the Company's and the GCS Entities's valuable Confidential Information and Trade Secrets. The parties intend for this Agreement to protect all Confidential Information and Trade Secrets owned by the Company and the GCS Entities, from disclosure and misappropriation of any kind, whether inadvertent or deliberate. Consultant acknowledges that the Confidential Information and Trade Secrets are an important and valuable asset of UCI and the GCS Entities, for which UCI is paying substantial consideration. 2. Consultant acknowledges that during the course of his executive positions with the GCSI and his consultancy with UCI, he did, and will continue to, receive and have access to Confidential Information and Trade Secrets of the GCS Entities and the Company, including but not limited to confidential and secret business and marketing plans, technical data, strategies, and studies, detailed customer and/or client lists and information relating to the operations and business requirements of those customers and/or clients. Consultant agrees that UCI has a legitimate interest in protecting the Company's valuable Confidential Information and Trade Secrets. Consultant also acknowledges that due to the executive nature of his position with the GCSI and his consultancy with UCI, Consultant did, and will continue to, perform his duties and responsibilities throughout the Territory (as defined in Section 3.1.2). Consultant agrees that the Company's and the GCS Entities's customer and client contacts and relations are established and maintained at great expense to UCI and that Consultant may have, by virtue of his consultancy, unique and extensive exposure to and personal contact with the Company's and the GCS Entities's customers and clients and that he did, will continue to be able to, establish a unique relationship with those customers and clients. 2.3. Trade Secrets. In consideration for the promises under this Agreement and his consultancy by UCI, Consultant agrees and covenants that, both during and after his consultancy with UCI, Consultant will hold in a fiduciary capacity for the benefit of UCI, and will not directly or indirectly use or disclose (whether on Consultant's own behalf or on behalf of any other person, corporation, partnership, venture, or any other entity or form of business), except as authorized by UCI in connection with the performance of Consultant's duties, any Trade Secret that Consultant may have or acquire (whether or not developed or compiled by Consultant and whether or not Consultant has been authorized to have access to such Trade Secret) during his employment with the GCS Entities or his consultancy with UCI, for so long as the such information remains a Trade Secret. At all times, including after termination of Consultant's employment for any reason, Consultant will take all reasonable steps necessary to ensure that no Trade Secrets are disclosed, whether inadvertently or deliberately, misappropriated, stolen, misused or their value to UCI diminished in any way. 2.4. Confidential Information. In consideration for the promises under this Agreement and his consultancy by UCI, Consultant agrees and covenants that, both during and after his consultancy with UCI, Consultant will hold in a fiduciary capacity for the benefit of UCI and 4 5 will not directly or indirectly use or disclose (whether on Consultant's own behalf or on behalf of any other person, corporation, partnership, venture, or any other entity or form of business), except as authorized by UCI in connection with the performance of Consultant's duties, any Confidential Information that Consultant may have or acquire (whether or not developed or compiled by Consultant and whether or not Consultant has been authorized to have access to such Confidential Information) during his employment with the GCS Entities and his consultancy with UCI. At all times, including after termination of Consultant's employment for any reason, Consultant will take all reasonable steps necessary to ensure that no Confidential Information is disclosed, whether inadvertently or deliberately, misappropriated, stolen, misused or its value to UCI diminished in any way. 2.5. No Waiver. Consultant acknowledges and agrees that nothing contained in this Agreement shall be deemed a waiver, modification, or limitation of any rights UCI may have under applicable federal, state, or local laws pertaining to the protection of trade secrets or confidential information. 2.6. No Prior Commitments. Consultant represents and warrants that he (i) will not use or disclose any trade secrets or other protected information of any other person or entity during Consultant's consultancy with UCI and (ii) does not have any agreements, relationships or commitments to any other person or entity that conflict in any way with Consultant's obligations to UCI under this Agreement. Section 3. Non-Competition and Non-Solicitation Covenants. 3.1. Definitions. 1. "Company Business" shall mean the business of designing, manufacturing, servicing, operating, marketing, assembling, fabricating, renting or leasing of air or gas compressors or devices using comparable technologies or other business in which the Company or its subsidiaries may be engaged during the term of Consultant's consultancy with UCI. To the extent that any entity is primarily engaged in a business other than a Company Business, the term "Company Business" shall mean the operations, division, segment or subsidiary of such entity that is engaged in any Company Business. 2. "Territory" shall mean all states in which the GCS Entities operate or have customers as of the day before the consummation of the Merger as contemplated in the Merger Agreement. 3.2. Non-Competition. In consideration for the promises under this Agreement and Consultant's consultancy with UCI, and in order to protect UCI from unfair competition, Consultant covenants and agrees to the following: 1. During Consultant's consultancy with UCI, Consultant will not compete with the Company in any manner or in any capacity (whether on Consultant's own behalf or as an owner, partner, stockholder, investor, officer, director, agent, independent 5 6 contractor, associate, executive, employee, consultant or licensor), including by engaging in the Company Business. 2. For a period of 3 years after the termination of Consultant's consultancy with UCI, Consultant will not directly or indirectly (i) carry on, be engaged in, or take part in any activities or services identical or substantially similar to any of Consultant's duties and responsibilities with UCI or the GCS Entities anywhere in the Territory or (ii) engage in the Company Business (whether on Consultant's own behalf or on behalf of any other person, corporation, partnership, venture, or any other entity or form of business). 3. The covenants in this Section 3 shall not apply to Consultant's ownership of common stock of the Company or the acquisition by Consultant, solely as an investment, of securities of any issuer that is registered under Section 12(b) or 12(g) of the Securities Exchange Act of 1934, as amended, and that are listed or admitted for trading on any United States national securities exchange or that are quoted on the National Association of Securities Dealers Automated Quotation System, or any similar system or automated dissemination of quotations of securities prices in common use, so long as Consultant does not participate in the management of, serve on the board of directors of, control, acquire a controlling interest in or become a member of a group which exercises direct or indirect control of more than five percent (5%) of any class of capital stock of such corporation. 3.3. Non-Solicitation of Customers. In consideration for the promises under this Agreement and Consultant's consultancy with UCI, and in order to protect the Company from unfair competition, Consultant covenants and agrees to the following: 1. During Consultant's consultancy with UCI, Consultant will not solicit, divert, or take away, or attempt to solicit, divert, or take away, any customer, client or actively sought prospective client or customer of the Company or the GCS Entities for the benefit of any person or entity other than the Company. 2. For a period of 3 years after the termination of Consultant's consultancy for any reason, Consultant will not, without the prior written consent of UCI, directly or indirectly solicit, divert, or take away, or attempt to solicit, divert, or take away, any customer and/or client of the Company or the GCS Entities with whom Consultant had material business contact at any time during the twelve months prior to such termination. 3.4. Non-Solicitation of Employees. In consideration for the promises under this Agreement and UCI's consultancy of Consultant, and in order to protect the Company from unfair competition, Consultant covenants and agrees to the following: 1. During Consultant's consultancy with UCI, Consultant will not hire (except on behalf of UCI) or solicit or encourage to leave the employment or other service of the Company, including the GCS Entities, any employee or independent contractor of the Company, including the GCS Entities (except in connection with the business and affairs of UCI). 6 7 2. For a period of 3 years after the termination of Consultant's consultancy for any reason, Consultant will not, for any reason (whether on Consultant's own behalf or on behalf of any other person, corporation, partnership, venture, or any other entity or form of business), directly or indirectly solicit or encourage to leave consultancy or other service of UCI, including the GCS Entities, any employee or independent contractor of UCI, including the GCS Entities, with whom Consultant had material business contact any time during the twelve months prior to such termination. Section 4. Work Product. 4.1. Ownership of Work Product. 1. Consultant agrees to promptly report and disclose to UCI all developments, discoveries, methods, processes, designs, inventions, ideas, or improvements (hereinafter collectively called "Work Product"), conceived, made, implemented, or reduced to practice by Consultant, whether alone or acting with others, during the Consulting Term, that are developed (i) while performing consulting services, or (ii) while utilizing, directly or indirectly, the Company's equipment, supplies, facilities, or Trade Secret information. Consultant acknowledges and agrees that all Work Product is the sole and exclusive property of UCI. Consultant agrees to assign, and hereby automatically assigns, without further consideration, to UCI any and all rights, title, and interest in and to all Work Product; provided, however, that this Section shall not apply to any Work Product for which no equipment, supplies, facilities, or trade secret information of the Company was used and which was developed entirely on Consultant's own time, unless the Work Product (i) relates directly to UCI's business or its actual or demonstratably anticipated research or development, or (ii) results from any work performed by Consultant for UCI. 2. UCI, its successors and assigns, shall have the right to obtain and hold in its or their own name copyright registrations, trademark registrations, patents and any other protection available to the Work Product. 4.2. Cooperation. Consultant agrees to perform, upon the reasonable request of UCI, during or after the Consulting Term, such further acts as may be necessary or desirable to transfer, perfect, and defend UCI's ownership of the Work Product, including but not limited to: (i) executing, acknowledging, and delivering any requested affidavits and documents of assignment and conveyance; (ii) assisting in the preparation, prosecution, procurement, maintenance and enforcement of all copyrights and/or patents with respect to the Work Product in any countries; (iii) providing testimony in connection with any proceeding affecting the right, title, or interest of UCI in any Work Product; and (iv) performing any other acts deemed necessary or desirable to carry out the purposes of this Agreement. UCI shall reimburse all reasonable out-of-pocket expenses incurred by Consultant at UCI's request in connection with the foregoing. 7 8 Section 5. Reasonableness of Covenants and Injunctive Relief. Consultant agrees and acknowledges that the consideration he will receive for the restrictions, prohibitions, and covenants specified in Sections 2, 3, and 4 of this Agreement is fair and adequate. In return, Consultant agrees to enter into the restrictions, prohibitions, and covenants specified in Sections 2, 3, and 4 in order to provide UCI with what he considers to be reasonable protection for its interests. Consultant agrees the covenants are reasonable, fair and equitable and contain reasonable limitations as to time, geographical area and scope of activities to be restricted and that such covenants do not impose a greater restraint on Consultant than is necessary to protect the goodwill, confidential information and other legitimate business interests of the Company, including its investment in the GCS Entities. Consultant further acknowledges and confirms that his full and faithful observance of each of the covenants contained in this Agreement will not cause him any undue hardship, financial or otherwise. Accordingly, Consultant acknowledges that he could cause irreparable injury to UCI by violating these covenants and UCI shall therefore be entitled to injunctive relief enjoining a breach or threatened breach. Consultant further acknowledges that UCI shall also have the right to seek a remedy at law in addition to equitable relief in the event of any such breach. Section 6. Reformation. If any of the covenants or promises of this Agreement, including but not limited to the covenants in Sections 2, 3 and 4, are determined by any court of law or equity, with jurisdiction over this matter, to be unreasonable or unenforceable, in whole or in part, as written, the parties hereby consent to and affirmatively request that said court reform the covenant or promise so as to be reasonable and enforceable and to accomplish, as closely as possible, the intent of the parties with respect to such provision and that said court enforce the covenant or promise as reformed. Section 7. Company Property. All the Company's property, equipment, funds, books, records, files, memoranda, reports, lists, drawings, plans, sketches, documents, Confidential Information, Trade Secrets, Work Product, and other material (together with all copies thereof), including that of the GCS Entities, which Consultant shall have used, prepared or come in contact with, or possession of, during the course of, or as a result of, his executive positions with the GCS Entities or his consultancy with UCI shall, as between the parties hereto, remain the sole property of UCI. Upon the termination of this Agreement or upon the prior demand of UCI, Consultant shall immediately return all such property or materials and thereafter shall not remove or cause to be removed such materials from the premises of UCI. Section 8. Indemnification. Consultant agrees to defend, indemnify, and hold harmless UCI, any of its affiliated companies, and the directors, officers, employees, and agents of each of them, from and against any and all claims, losses, damages, suits, fees, judgements, costs and expenses (including attorneys' fees) which UCI may suffer or incur arising out of or in connection with (i) injuries to 8 9 persons (including death) or loss of, or damage to, property, occasioned by negligence, unlawful act, or willful misconduct of Consultant, and (ii) any claim that UCI's use of any Work Product or portion thereof, infringes or violates any patent, copyright, trade secret, or other third party intellectual property right. In the event that UCI is in any way enjoined from using any Work Product, or any portion thereof, Consultant shall promptly, at his expense (including, but not limited to the payment of any royalties occasioned by the following) either (i) provide to UCI non-infringing means of using the Work Product, or (ii) negotiate and procure for UCI the right to use the Work Product without restriction. Section 9. Miscellaneous. 9.1. Assignment. This Agreement is for the personal services of Consultant, and the rights and obligations of Consultant under this Agreement are not assignable or delegable in whole or in part by Consultant without the prior written consent of UCI. This Agreement is assignable in whole or in part to any parent, subsidiaries, or affiliates of UCI or to any successor in interest to UCI or the business of UCI. 9.2. Applicable Law. This Agreement has been entered into in and shall be governed by and construed under the laws of the State of Texas (except to the extent that its choice of law rules would apply the laws of another State). 9.3. Consent to Jurisdiction. Consultant consents, and waives any objection, to personal jurisdiction and venue in the federal and state courts in the State of Texas in any action by UCI to enforce this Agreement. 9.4. Dispute between the Parties. IN THE EVENT A DISPUTE OR CLAIM ARISES BETWEEN CONSULTANT AND UCI ARISING OUT OF, RELATED TO, OR IN CONNECTION WITH THIS AGREEMENT, WHETHER IN CONTRACT, TORT OR OTHER LEGAL CAUSE OF ACTION, OR EQUITABLE REMEDY, CONSULTANT AND COMPANY BOTH EXPRESSLY AGREE TO WAIVE THEIR RIGHT TO A TRIAL BY JURY, WHETHER IN FEDERAL OR STATE COURT, AND TO WAIVE THE RIGHT TO RECOVER ANY PUNITIVE DAMAGES, EXEMPLARY DAMAGES OR STATUTORY PENALTIES IMPOSED BY LAW. THIS PROVISION SPECIFICALLY ACKNOWLEDGES THAT THE PARTIES INTEND FOR ANY AND ALL DISPUTES, CAUSES OF ACTIONS, CLAIMS, LAWSUITS, OR OTHER EQUITABLE REMEDIES TO BE RESOLVED BY A COURT OF COMPETENT JURISDICTION BEFORE A JUDGE, AND THE PARTIES EXPRESSLY WAIVE THEIR RIGHTS TO PUNITIVE DAMAGES OR STATUTORY PENALTIES OF ANY KIND IMPOSED BY LAW. THE PARTIES CONFIRM THEIR AGREEMENT TO THIS SECTION 9.4 BY INITIALING BELOW: /s/ ERNIE L. DANNER /s/ REUBEN JAMES HELTON - -------------------- ----------------------- UCI Consultant 9.5. 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. 9 10 9.6. Headings and Captions. The headings and captions used in this Agreement are for convenience of reference only, and shall in no way define, limit, expand or otherwise affect the meaning or construction of any provision of this Agreement. 9.7. Attorneys' Fees. If any action at law or in equity is necessary to enforce or interpret the terms of this Agreement, the prevailing party will be entitled to reasonable attorneys' fees, costs and necessary disbursements in addition to any other relief to which such party may be entitled. 9.8. Modification. Except as provided in Section 6, no provision of this Agreement may be amended, changed, altered, modified or waived except in writing signed by Consultant and an officer of UCI, which writing shall specifically reference this Agreement and the provision which the parties intend to waive or modify. 9.9. Severability. Except as provided in Section 6, should any provision of this Agreement be declared or determined by any court of competent jurisdiction to be unenforceable or invalid for any reason, the validity of the remaining parts, terms or provisions of this Agreement shall not be affected thereby and the invalid or unenforceable part, term or provision shall be deemed not to be a part of this Agreement. 9.10. Waiver. The waiver by any party to this Agreement of a breach of any of the provisions of this Agreement shall not operate or be construed as a waiver of any subsequent or simultaneous breach of the same or different provisions. 9.11. Survival. Any provision of this Agreement which is expressly or by implication intended to survive the termination of this Agreement, including Sections 2, 3, and 4, shall survive and remain in effect after the termination of this Agreement. 9.12. Jointly Drafted. The parties and their respective counsel have participated jointly in the negotiation and drafting of this Agreement. In the event that an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any of the provisions of this Agreement. 9.13. No Third-Party Beneficiaries. Except as provided in Sections 1.6 and 9.1, nothing herein, expressed or implied, is intended or will be construed to confer upon or give to any person, firm, corporation or legal entity, other than the parties hereto and the parent of UCI and its subsidiaries or affiliates, any rights, remedies or other benefits under or by reason of this Agreement. 9.14. Entire Agreement. This Agreement constitutes a single integrated contract expressing the entire agreement of the parties hereto. There are no other agreements, written or oral, express or implied, between the parties hereto, concerning the subject matter hereof. 9.15. Notices. All notices, communications and deliveries hereunder shall be made in writing signed by or on behalf of the party making the same and shall be delivered personally or 10 11 by telecopy transmission or sent by registered or certified mail (return receipt requested) or by any national overnight courier service (with postage and other fees prepaid) as follows: If to UCI: Universal Compression, Inc. 4440 Brittmoore Road Houston, Texas 77041 Attention: Ms. Valerie L. Banner Telephone No.: (713) 335-7000 Telecopy No.: (713) 466-6720 If to the Consultant: Reuben James Helton Route 1, Box 42 Weimer, Texas 78962 Telephone No.: (979) 263-5334 or to such other representative or at such other address of a party as such party hereto may furnish to the other parties in writing. Any such notice, communication or delivery shall be deemed given or made (a) on the date of delivery if delivered in person (by courier service or otherwise), (b) upon transmission by facsimile if receipt is confirmed by telephone, provided transmission is made during regular business hours, or if not, the next business day, or (c) on the fifth business day after it is mailed by registered or certified mail. 9.16. Understanding. The parties herewith covenant and agree that they have read and fully understand the contents and the effect of this Agreement. Consultant and UCI warrant and agree that they have had a reasonable opportunity and been advised in writing to seek the advice of an attorney as to such content and effect. The parties accept each and all of the terms, provisions, and conditions of this Agreement, and do so voluntarily and with full knowledge and understanding of the contents, nature and effect of this Agreement. [SIGNATURE PAGE FOLLOWS] 11 12 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. UNIVERSAL COMPRESSION, INC. By: /s/ Ernie L. Danner ------------------------------------- Name: Ernie L. Danner Title: Executive Vice President CONSULTANT /s/ Reuben James Helton ---------------------------------------- Reuben James Helton 12 13 SCHEDULE I Policy for term life insurance to age 95 with Federal Kemper Life Assurance Company of Long Grove, Illinois 80049. Insured: Reuben J. Helton Policy Date: October 16, 1995 Policy Number: FK2300391 Face Amount: $10,000,000 Expiry Date: October 16, 2038 EX-10.3 6 h80568ex10-3.txt NON-DISCLOSURE AND NON-COMPETITION AGREEMENT 1 EXHIBIT 10.3 NON-DISCLOSURE AND NON-COMPETITION AGREEMENT This Non-Disclosure and Non-Competition Agreement (this "Agreement") is made and entered into effective as of the close of business on the day preceding the Effective Time, by and between Universal Compression Holdings, Inc., a Delaware corporation with its principal place of business in Houston, Texas (including all predecessors, successors and affiliates, including but not limited to the GCS Entities, the "Company"), and Michael Pahl, an individual resident of the State of Michigan ("Executive"). Capitalized terms used but not herein defined shall have the meanings assigned to them in the Merger Agreement (as referenced below). WHEREAS, the parties have entered into that certain Agreement and Plan of Merger dated August 4, 2000 (the "Merger Agreement"), which provides for, among other things, (i) the merger of Gas Compression Services, Inc., a Michigan corporation ("GCSI"), with and into Universal Compression, Inc., a Texas corporation and wholly-owned subsidiary of the Company, and (ii) Executive to receive substantial consideration for his ownership interest in GCSI in connection with the Merger; and WHEREAS, as a condition to the Merger, and to preserve the value of the business being acquired by the Company, the Merger Agreement contemplates, among other things, that Executive shall enter into this Agreement; NOW, THEREFORE, in consideration of the foregoing and the promises and mutual covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, agree as follows: Section 1. Definitions. For purposes of this Agreement, the following terms shall have the following meanings: 1.1 "Company Business" shall mean the business of designing, manufacturing, servicing, operating, marketing, assembling, fabricating, renting or leasing of air or gas compressors or devices using comparable technologies or other business in which the Company or its subsidiaries may be engaged immediately following the consummation of the Merger. To the extent that any entity is primarily engaged in a business other than a Company Business, the term "Company Business" shall mean the operations, division, segment or subsidiary of such entity that is engaged in any Company Business. 1.2 "Confidential Information" shall mean any secret, confidential, or proprietary data or information of the Company and GCSI, including information received by the Company, GCSI or Executive from any customer or client or potential customer or client of the Company or GCSI, or their parents, subsidiaries or affiliates, not otherwise included in the definition of Trade Secret. The term Confidential Information shall not include information that Executive can show by competent proof has become generally known to the public by the act of one who 2 has the right to disclose such information without violating any right of the Company or any customer or client to which such information pertains. 1.3 "Inventions" shall mean any and all developments, discoveries, concepts, methods, processes, designs, inventions, ideas, or improvements, whether or not patentable, conceived, made, implemented, or reduced to practice by Executive, whether alone or acting with others, during Executive's employment by the Company and GCSI, that are developed (i) on the Company's or GCSI's time, or (ii) while utilizing, directly or indirectly, the Company's or GCSI's equipment, supplies, facilities, or Trade Secret information. 1.4 "Territory" shall mean all states in which GCSI operates or has customers as of the day before the consummation of the Merger as contemplated in the Merger Agreement. 1.5 "Trade Secret" shall mean information, including, but not limited to, technical or non-technical data, a formula, pattern, compilation, program, device, method, technique, drawing, process, financial data, financial plan, product plan, list of actual or potential customers or suppliers, or other information similar to any of the foregoing, which derives economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can derive economic value from its disclosure or use and which is subject to reasonable efforts by the Company or GCSI, or their parents, subsidiaries or affiliates, to maintain its secrecy or confidentiality. Section 2. Background. 2.1 The Company owns, controls, and has exclusive access to Confidential Information and Trade Secrets concerning its operations, methods, and the sale and development of its products and services, including those of GCSI. The Company seeks reasonable protections for its and GCSI's valuable Confidential Information and Trade Secrets. The parties intend for this Agreement to protect all Confidential Information and Trade Secrets owned by the Company and GCSI, and from disclosure and misappropriation of any kind, whether inadvertent or deliberate. Executive acknowledges that the Confidential Information and Trade Secrets are an important and valuable asset of the Company and GCSI, for which the Company is paying substantial consideration. 2.2 Executive acknowledges that during the course of his employment with GCSI and the Company, he did, and may continue to, receive and have access to Confidential Information and Trade Secrets of GCSI and the Company, including but not limited to confidential and secret business and marketing plans, technical data, strategies, and studies, detailed customer and/or client lists and information relating to the operations and business requirements of those customers and/or clients. Executive agrees that the Company has a legitimate interest in protecting its valuable Confidential Information and Trade Secrets. Executive also acknowledges that due to the executive nature of his position with GCSI and the Company, Executive did, and may continue to, perform his duties and responsibilities throughout the Territory. Executive agrees that the Company's and GCSI's customer and client contacts and relations are established and maintained at great expense to the Company and that Executive did, and may continue to, have, by virtue of his employment, unique and extensive exposure to and -2- 3 personal contact with the Company's and GCSI's customers and clients and that he did, and may continue to be able to, establish a unique relationship with those customers and clients. Section 3. Protection of Trade Secrets and Confidential Information. 3.1 Trade Secrets. In consideration of the premises and for the promises under this Agreement, Executive agrees and covenants that, upon consummation of the Merger, Executive will hold in a fiduciary capacity for the benefit of the Company, and will not directly or indirectly use or disclose (whether on Executive's own behalf or on behalf of any other person, corporation, partnership, venture, or any other entity or form of business), except as authorized by the Company in connection with the performance of Executive's duties, any Trade Secret that Executive may have or acquire (whether or not developed or compiled by Executive and whether or not Executive has been authorized to have access to such Trade Secret) during employment with GCSI or the Company, for so long as such information remains a Trade Secret. At all times immediately following the consummation of the Merger, Executive will take all reasonable steps necessary to ensure that no Trade Secrets are disclosed, whether inadvertently or deliberately, misappropriated, stolen, misused or their value to the Company diminished in any way. 3.2 Confidential Information. In consideration of the premises and for the promises under this Agreement, Executive agrees and covenants that, upon consummation of the Merger, Executive will hold in a fiduciary capacity for the benefit of the Company and will not directly or indirectly use or disclose (whether on Executive's own behalf or on behalf of any other person, corporation, partnership, venture, or any other entity or form of business), except as authorized by the Company in connection with the performance of Executive's duties, any Confidential Information that Executive may have or acquire (whether or not developed or compiled by Executive and whether or not Executive has been authorized to have access to such Confidential Information) during his employment with GCSI and the Company. At all times immediately following the consummation of the Merger, Executive will take all reasonable steps necessary to ensure that no Confidential Information is disclosed, whether inadvertently or deliberately, misappropriated, stolen, misused or its value to the Company diminished in any way. 3.3 No Waiver. Executive acknowledges and agrees that nothing contained in this Agreement shall be deemed a waiver, modification, or limitation of any rights the Company may have under applicable federal, state, or local laws pertaining to the protection of trade secrets or confidential information. Section 4. Protection Against Unfair Competition. 4.1 Non-Competition. In consideration of the premises and for the promises under this Agreement, and in order to protect the Company from unfair competition, Executive covenants and agrees to the following: a. During Executive's employment with the Company, Executive will not compete with the Company in any manner or in any capacity (whether on Executive's own behalf or as an owner, partner, stockholder, investor, officer, director, agent, -3- 4 independent contractor, associate, executive, consultant or licensor), including by engaging in the Company Business. b. For a period of 2 years after the termination of Executive's employment for any reason, Executive will not directly or indirectly (i) carry on, be engaged in, or take part in any activities or services identical or substantially similar to any of Executive's duties and responsibilities with the Company or GCSI, anywhere in the Territory, or (ii) engage in the Company Business (whether on Executive's own behalf or on behalf of any other person, corporation, partnership, venture, or any other entity or form of business). c. The covenants in this Section 4 shall not apply to Executive's ownership of common stock of the Company or the acquisition by Executive, solely as an investment, of securities of any issuer that is registered under Section 12(b) or 12(g) of the Securities Exchange Act of 1934, as amended, and that are listed or admitted for trading on any United States national securities exchange or that are quoted on the National Association of Securities Dealers Automated Quotations System, or any similar system or automated dissemination of quotations of securities prices in common use, so long as Executive does not participate in the management of, serve on the board of, control, acquire a controlling interest in or become a member of a group which exercises direct or indirect control of more than five percent (5%) of any class of capital stock of such corporation. 4.2 Non-Solicitation of Customers. In consideration of the premises and for the promises under this Agreement, and in order to protect the Company from unfair competition, Executive covenants and agrees to the following: a. During Executive's employment with the Company, Executive will not solicit, divert, or take away, or attempt to solicit, divert, or take away, any customer and/or client or actively sought prospective client and/or customer of the Company or GCSI, for the benefit of any person or entity other than Company. b. For a period of 2 years after the termination of Executive's employment with the Company for any reason, Executive will not, without prior written consent of the Company, directly or indirectly solicit, divert, or take away, or attempt to solicit, divert, or take away, any customer and/or client of the Company or GCSI with whom Executive had material business contact at any time during the twelve months prior to such termination. 4.3 Non-Solicitation of Employees. In consideration of the premises and for the promises under this Agreement, and in order to protect the Company from unfair competition, Executive covenants and agrees to the following: a. During Executive's employment with the Company, Executive will not hire (except on behalf of the Company) or solicit or encourage to leave the employment or other service of the Company, including GCSI, any employee or independent -4- 5 contractor of the Company, including GCSI (except in connection with the business and affairs of the Company). b. For a period of 2 years after the termination of Executive's employment with the Company for any reason, Executive will not, for any reason (whether on Executive's own behalf or on behalf of any other person, corporation, partnership, venture, or any other entity or form of business), directly or indirectly solicit or encourage to leave employment or other service of the Company, including GCSI, any employee or independent contractor of the Company, including GCSI, with whom Executive had material business contact at any time during the twelve months prior to such termination. Section 5. Protection of Inventions. In consideration of the premises and for the promises under this Agreement, Executive agrees to the following: 5.1 Disclosure of Inventions. Executive agrees and covenants that during his employment with the Company and following the termination of such employment, Executive shall promptly report and disclose to the Company in writing all Inventions. 5.2 Ownership of Inventions. Executive acknowledges and agrees that all Inventions are the sole and exclusive property of the Company. Executive agrees to assign, and hereby automatically assigns, without further consideration, to the Company any and all rights, title, and interest in and to all Inventions; provided, however, that this Agreement shall not apply to any Inventions for which no equipment, supplies, facilities, or trade secret information of the Company or GCSI was used and which was developed entirely on Executive's own time, unless the Inventions (i) relate directly to the Company's business or its actual or demonstrably anticipated research or development, or (ii) result from any work performed by Executive for the Company or GCSI. 5.3 Patents and Trademarks. The Company, its successors and assigns, shall have the right to obtain and hold in its or their own name copyright registrations, trademark registrations, patents and any other protection available to the Inventions. 5.4 Cooperation. Executive agrees to perform, upon the reasonable request of the Company, during or after employment, such further acts as may be necessary or desirable to transfer, perfect, and defend the Company's ownership of the Inventions, including but not limited to: (i) executing, acknowledging, and delivering any requested affidavits and documents of assignment and conveyance; (ii) assisting in the preparation, prosecution, procurement, maintenance and enforcement of all copyrights and/or patents with respect to the Inventions in any countries; (iii) providing testimony in connection with any proceeding affecting the right, title, or interest of the Company in any Inventions; and (iv) performing any other acts deemed necessary or desirable to carry out the purposes of this Agreement. The Company shall reimburse all reasonable out-of-pocket expenses incurred by Executive at the Company's request in connection with the foregoing. -5- 6 Section 6. Acknowledgements. 6.1 Reasonable Restrictions. Executive acknowledges and confirms that the restrictions and covenants contained in this Agreement are reasonably necessary to protect the good will and legitimate business interests of the Company, including its investment in GCSI, are not overbroad, overlong, or unfair (including in duration and scope), and are not the result of overreaching, duress or coercion of any kind. Executive further acknowledges and confirms that Executive's full, uninhibited, and faithful observance of each of the covenants contained in this Agreement will not cause any undue hardship, financial or otherwise, and that enforcement of each of the covenants contained herein will not impair Executive's ability to obtain employment commensurate with Executive's abilities and on terms fully acceptable to Executive or otherwise to obtain income required for the comfortable support of Executive and Executive's family and the satisfaction of the needs of Executive's creditors. Executive acknowledges and confirms that the violation of these covenants and the disclosure of any Confidential Information or Trade Secrets would cause the Company serious, irreparable injury or loss. Executive acknowledges and confirms that his special abilities and knowledge of the Company Business are such that it would cause the Company serious, irreparable injury or loss if he were to use such abilities and knowledge to the benefit of a competitor or were to otherwise violate these covenants. Executive further acknowledges that the restrictions contained in this Agreement are intended to be, and shall be, for the benefit of and shall be enforceable by, the Company's successors and assigns. 6.2 Legal and Equitable Remedies. Executive agrees that for any breach or threatened breach of any of the provisions of this Agreement, the Company shall be entitled to immediate injunctive relief and that a restraining order and/or an injunction may issue against Executive to prevent or restrain any such breach or threatened breach, in addition to any other rights or remedies at law the Company may have. 6.3 No Prior Commitments. Executive represents and warrants that he (i) will not use or disclose any trade secrets or other protected information of any other person or entity during Executive's employment with the Company and (ii) does not have any agreements, relationships, or commitments to any other person or entity that conflict in any way with Executive's obligations to the Company under this Agreement. 6.4 Company Property. All the Company's property, equipment, funds, books, records, files, memoranda, reports, lists, drawings, plans, sketches, documents, Confidential Information, Trade Secrets, Work Product, and other material (together with all copies thereof), including that of the GCS Entities, which Executive shall have used, prepared or come in contact with, or possession of, during the course of, or as a result of, his employment with GCSI or the Company shall, as between the parties hereto, remain the sole property of the Company. Upon the termination of this Agreement or upon the prior demand of the Company, Executive shall immediately return all such property or materials and thereafter shall not remove or cause to be removed such materials from the premises of the Company. -6- 7 Section 7. Miscellaneous. 7.1 Assignment. This Agreement is assignable in whole or in part to any parent, subsidiaries, or affiliates of the Company or to any successor to the Company, whether by merger, consolidation, sale of stock, sale of assets or otherwise. 7.2 Applicable Law. This Agreement has been entered into in and shall be governed by and construed under the laws of the State of Michigan (except to the extent that its choice of law rules would apply the laws of another State). 7.3 Consent to Jurisdiction. Executive consents, and waives any objection, to personal jurisdiction and venue in the federal and state courts in the State of Michigan in any action by the Company to enforce this Agreement or an arbitration decision related to this Agreement. 7.4 Dispute between the Parties. IN THE EVENT A DISPUTE OR CLAIM ARISES BETWEEN EXECUTIVE AND THE COMPANY ARISING OUT OF, RELATED TO, OR IN CONNECTION WITH THIS AGREEMENT, WHETHER IN CONTRACT, TORT OR OTHER LEGAL CAUSE OF ACTION, OR EQUITABLE REMEDY, EXECUTIVE AND THE COMPANY BOTH EXPRESSLY AGREE TO WAIVE THEIR RIGHT TO A TRIAL BY JURY, WHETHER IN FEDERAL OR STATE COURT, AND TO WAIVE THE RIGHT TO RECOVER ANY PUNITIVE DAMAGES, EXEMPLARY DAMAGES OR STATUTORY PENALTIES IMPOSED BY LAW. THIS PROVISION SPECIFICALLY ACKNOWLEDGES THAT THE PARTIES INTEND FOR ANY AND ALL DISPUTES, CAUSES OF ACTIONS, CLAIMS, LAWSUITS, OR OTHER EQUITABLE REMEDIES TO BE RESOLVED BY A COURT OF COMPETENT JURISDICTION BEFORE A JUDGE, AND THE PARTIES EXPRESSLY WAIVE THEIR RIGHTS TO PUNITIVE DAMAGES OR STATUTORY PENALTIES OF ANY KIND IMPOSED BY LAW. THE PARTIES CONFIRM THEIR AGREEMENT TO THIS SECTION 7.4 BY INITIALING BELOW: - ------------ ----------- The Company Executive 7.5 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. 7.6 Headings and Captions. The headings and captions used in this Agreement are for convenience of reference only, and shall in no way define, limit, expand or otherwise affect the meaning or construction of any provision of this Agreement. 7.7 Reformation. If any of the covenants in this Agreement are determined by any court of law or equity, with jurisdiction over this matter, to be unreasonable or unenforceable, in whole or in part, as written, the parties hereby consent to and affirmatively request that said court reform the covenant or promise so as to be reasonable and enforceable and to accomplish, as closely as possible, the intent of the parties with respect to such provision and that said court enforce the covenant or promise as reformed. 7.8 Modification. Except as provided in Section 7.7, no provision of this Agreement may be amended, changed, altered, modified or waived except in writing signed by Executive -7- 8 and an officer of the Company, which writing shall specifically reference this Agreement and the provision which the parties intend to waive or modify. 7.9 Severability. Should any provision of this Agreement be declared or determined by any court of competent jurisdiction to be unenforceable or invalid for any reason, the validity of the remaining parts, terms or provisions of this Agreement shall not be affected thereby and the invalid or unenforceable part, term or provision shall be deemed not to be a part of this Agreement. This Section 7.9 shall not apply to any Section which is reformed pursuant to Section 7.7. 7.10 Attorneys' Fees and Costs. Executive shall be liable to the Company for its reasonable costs and attorneys' fees incurred in any action to enforce this Agreement to the extent that the Company is the prevailing party. 7.11 Waiver. The waiver by any party to this Agreement of a breach of any of the provisions of this Agreement shall not operate or be construed as a waiver of any subsequent or simultaneous breach of the same or different provisions. 7.12 No Third-Party Beneficiaries. Except as provided in Section 7.1, nothing herein, expressed or implied, is intended or will be construed to confer upon or give to any person, firm, corporation or legal entity, other than the parties and any parent, subsidiary, affiliate, or successor of the Company, any rights, remedies or other benefits under or by reason of this Agreement. 7.13 Entire Agreement. This Agreement constitutes a single integrated contract expressing the entire agreement of the parties. There are no other agreements, written or oral, express or implied, between the parties, concerning the subject matter hereof. 7.14 Jointly Drafted. The parties and their respective counsel have participated jointly in the negotiation and drafting of this Agreement. In the event that an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any of the provisions of this Agreement. 7.15 Understanding. Executive herewith covenants and agrees that Executive has read and fully understands the contents and the effect of this Agreement. Executive warrants and agrees that Executive has had a reasonable opportunity and is hereby advised in writing to seek the advice of an attorney as to such content and effect. Executive accepts each and all of the terms, provisions, and conditions of this Agreement, and does so voluntarily and with full knowledge and understanding of the contents, nature, and effect of this Agreement. 7.16 Survival. Any provision of this Agreement which is expressly or by implication intended to survive the termination of this Agreement, including Sections 3, 4, and 5, shall survive and remain in effect after the termination of this Agreement. -8- 9 7.17 Notices. All notices, communications and deliveries hereunder shall be made in writing signed by or on behalf of the party making the same and shall be delivered personally or by telecopy transmission or sent by registered or certified mail (return receipt requested) or by any national overnight courier service (with postage and other fees prepaid) as follows: If to the Company: Universal Compression Holdings, Inc. 4440 Brittmoore Road Houston, Texas 77041 Attention: Ms. Valerie L. Banner Telephone No.: (713) 335-7000 Telecopy No.: (713) 466-6720 If to the Executive: Michael Pahl ---------------------- ---------------------- Telephone No.: ---------------------- Telecopy No.: ---------------------- or to such other representative or at such other address of a party as such party hereto may furnish to the other parties in writing. Any such notice, communication or delivery shall be deemed given or made (a) on the date of delivery if delivered in person (by courier service or otherwise), (b) upon transmission by facsimile if receipt is confirmed by telephone, provided transmission is made during regular business hours, or if not, the next business day, or (c) on the fifth business day after it is mailed by registered or certified mail. [SIGNATURE PAGE FOLLOWS] -9- 10 IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first above written. THE COMPANY: UNIVERSAL COMPRESSION HOLDINGS, INC. By: /s/ Ernie L. Danner ---------------------------------- Print Name: Ernie L. Danner -------------------------- Title: Executive Vice President ------------------------------- EXECUTIVE: /s/ Michael L. Pahl ------------------------------------- Michael Pahl Social Security No.: ***-**-**** ----------------- -10- EX-99.1 7 h80568ex99-1.txt PRESS RELEASE - DATED SEPTEMBER 18, 2000 1 EXHIBIT 99.1 UNIVERSAL COMPRESSION COMPLETES MERGER WITH GCSI HOUSTON, TX - Sept. 18, 2000 -- Universal Compression Holdings, Inc. (NYSE: UCO) today announced it has completed its merger with Gas Compression Services, Inc. (GCSI), based in Traverse City, Michigan. GCSI adds approximately 170,000 aggregate horsepower to Universal's fleet and is expected to be immediately accretive to Universal's earnings per share. GCSI adds high quality compression equipment with excellent utilization rates, all of which is located domestically. The company operates a significant amount of customer-owned equipment and owns fabrication and overhaul facilities in Michigan and Texas. GSCI's annual revenue for the fiscal year ended July 31, 2000 was approximately $36 million. Pursuant to the merger agreement, GCSI merged with and into a wholly owned operating subsidiary of Universal Compression, Inc., a wholly owned operating subsidiary. The shareholders of GCSI received an aggregate of approximately $12 million in cash and 1,400,726 shares of newly issued restricted Universal common stock in the merger. Universal assumed approximately $57 million in related debt and operating leases of GCSI. In addition, Universal assumed approximately $6 million of debt related to customer equipment financing and the associated customer notes receivable. "The merger with GSCI is in keeping with our growth strategy and is another of the steps we are taking to create shareholder value by enhancing our position as one of the leaders in the gas compression services industry," said Universal Compression President and Chief Executive Officer Stephen Snider. "The combination will increase Universal's presence with several key customers and in additional market segments. Over the past twenty years, GCSI has earned a great reputation in the gas compressor rental industry through its excellent service and equipment. Our two businesses are very similar with respect to operating procedures and equipment, therefore we are confident that GCSI's operations can be integrated quickly and without difficulty." Universal is headquartered in Houston, Texas and is a leading natural gas compression service company providing a full range of rental, sales, operations, maintenance and fabrication services and products to the domestic and international natural gas industry. Statements about Universal Compression Holdings' or Gas Compression Services' outlook and all other statements in this release other than historical facts are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements rely on a number of assumptions concerning future events and are subject to a number of uncertainties and factors, many of which are outside Universal's control, that could cause actual results to differ materially from such statements. While Universal believes that the assumptions concerning future events are reasonable, it cautions that there are inherent difficulties in predicting certain important factors that could impact future performance and the successful integration of the businesses. These factors, when applicable, are discussed in Universal's filings with the Securities and Exchange Commission, copies of which are available to the public. Universal disclaims any intention or obligation to revise any forward-looking statements whether as a result of new information, future event, or otherwise. EX-99.2 8 h80568ex99-2.txt PRESS RELEASE - DATED SEPTEMBER 28, 2000 1 EXHIBIT 99.2 UNIVERSAL COMPRESSION APPOINTS NEW BOARD MEMBER HOUSTON, TX - Sept. 28, 2000 -- Universal Compression Holdings, Inc. (NYSE: UCO) today announced the expansion of its Board of Directors from 7 members to 8. With the expansion of the Board, Universal has appointed Edmund P. Segner, III, President and Chief of Staff of EOG Resources, to its Board. Mr. Segner will assume his post on October 1 and his term will expire at the 2002 annual meeting of Universal's stockholders. Mr. Segner has served as President of EOG Resources since August of 1999 when he was also elected to the Board of Directors. EOG Resources is involved in the exploration for, and the development, production, and marketing of oil and gas reserves. Mr. Segner was with Enron Corp. since 1988 when he joined the company as Vice President of Public and Investor Relations. He later served as Executive Vice President and Chief of Staff until 1997 when he moved to Enron Oil & Gas Company as Vice Chairman and Chief of Staff. Mr. Segner is a Certified Public Accountant and a member of the Houston Society of Financial Analysts. He is also a Director of the Domestic Petroleum Council. Universal Compression Holdings, Inc., together with its operating subsidiary Universal Compression, Inc., is headquartered in Houston, Texas, and is a leading natural gas compression service company, providing a full range of rental, sales, operations, maintenance and fabrication services and products to the domestic and international natural gas industry. Statements about Universal Compression Holdings' in this release other than historical facts are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements rely on a certain number of assumptions concerning future events and are subject to a number of uncertainties and factors, many of which are outside Universal Compression Holdings' control, that could cause actual results to differ materially from such statements. These factors, when applicable, are discussed in Universal Compression Holdings' filings with the Securities and Exchange Commission, copies of which are available to the public. Universal Compression Holdings disclaims any intention or obligation to revise any forward-looking statements whether as a result of new information, future event, or otherwise. -----END PRIVACY-ENHANCED MESSAGE-----