Exhibit  10.4
 
GUARANTEE AND COLLATERAL AGREEMENT
made by
HANOVER COMPRESSOR COMPANY
HANOVER COMPRESSION LIMITED PARTNERSHIP
and certain of their Subsidiaries
in favor of
JPMORGAN CHASE BANK, N.A.,
as Administrative Agent
Dated as of November 21, 2005
 

 

--------------------------------------------------------------------------------

 

TABLE OF CONTENTS

                                      Page SECTION 1.   DEFINED TERMS     1  
 
    1.1     Definitions     1  
 
    1.2     Other Definitional Provisions     5  
 
                    SECTION 2.   GUARANTEE     5  
 
    2.1     Guarantee     5  
 
    2.2     Right of Contribution     6  
 
    2.3     No Subrogation     6  
 
    2.4     Amendments, etc. with respect to Borrower Obligations     6  
 
    2.5     Guarantee Absolute and Unconditional     6  
 
    2.6     Reinstatement     7  
 
    2.7     Payments     7  
 
                    SECTION 3.   GRANT OF SECURITY INTEREST     7  
 
                    SECTION 4.   REPRESENTATIONS AND WARRANTIES     8  
 
    4.1     Title; No Other Liens     9  
 
    4.2     Jurisdiction of Organization; Chief Executive Office     9  
 
    4.3     Inventory and Equipment     9  
 
    4.4     Farm Products     9  
 
    4.5     Investment Property     9  
 
    4.6     Receivables     9  
 
    4.7     Intellectual Property     9  
 
                    SECTION 5.   COVENANTS     9  
 
    5.1     Delivery of Instruments, Certificated Securities and Chattel Paper  
  10  
 
    5.2     Maintenance of Perfected Security Interest; Further Documentation  
  10  
 
    5.3     Changes in Locations, Name, etc     10  
 
    5.4     Notices     11  
 
    5.5     Investment Property     11  
 
    5.6     Receivables     11  
 
    5.7     Intellectual Property     12  
 
    5.8     Vehicles     13  
 
    5.9     Commercial Tort Claims     13  
 
                    SECTION 6.   REMEDIAL PROVISIONS     13  
 
    6.1     Certain Matters Relating to Receivables     13  
 
    6.2     Communications with Obligors; Grantors Remain Liable     13  
 
    6.3     Pledged Stock     14  
 
    6.4     Proceeds to be Turned Over To Administrative Agent     14  
 
    6.5     Application of Proceeds     15  
 
    6.6     Code and Other Remedies     15  
 
    6.7     Private Sales     16  
 
    6.8     Deficiency     16  
 
                    SECTION 7.   THE ADMINISTRATIVE AGENT     16  
 
    7.1     Administrative Agent’s Appointment as Attorney-in-Fact, etc     16  

i

--------------------------------------------------------------------------------

 

                                      Page
 
    7.2     Duty of Administrative Agent     18  
 
    7.3     Execution of Financing Statements     18  
 
    7.4     Authority of Administrative Agent     18  
 
                    SECTION 8.   MISCELLANEOUS     19  
 
    8.1     Amendments in Writing     19  
 
    8.2     Notices     19  
 
    8.3     No Waiver by Course of Conduct; Cumulative Remedies     19  
 
    8.4     Enforcement Expenses; Indemnification     19  
 
    8.5     Successors and Assigns     19  
 
    8.6     Set-Off     19  
 
    8.7     Counterparts     20  
 
    8.8     Severability     20  
 
    8.9     Section Headings     20  
 
    8.10     Integration     20  
 
    8.11     GOVERNING LAW     20  
 
    8.12     Submission To Jurisdiction; Waivers     20  
 
    8.13     Acknowledgements     21  
 
    8.14     Additional Grantors     21  
 
    8.15     Releases     21  
 
    8.16     WAIVER OF JURY TRIAL     22  

SCHEDULES

     
Schedule 1
  Notice Addresses
Schedule 2
  Perfection Matters
Schedule 3
  Jurisdictions of Organization and Chief Executive Offices
Schedule 4
  Investment Property
Schedule 5
  Location of Inventory and Equipment Held for Lease or Sale
Schedule 6
  Post-Closing Pledged Subsidiaries

ANNEXES

     
Annex 1
  Form of Assumption Agreement

ii

 

--------------------------------------------------------------------------------

 

GUARANTEE AND COLLATERAL AGREEMENT
          GUARANTEE AND COLLATERAL AGREEMENT, dated as of November 21, 2005,
made by each of the signatories hereto (together with any other entity that may
become a party hereto as provided herein, the “Grantors”), in favor of JPMorgan
Chase Bank, N.A., as Administrative Agent (in such capacity, the “Administrative
Agent”) for the Secured Parties (as hereinafter defined).
W I T N E S S E T H:
          WHEREAS, pursuant to the Credit Agreement, dated as of November 21,
2005 (as may be amended, supplemented or otherwise modified from time to time,
the “Credit Agreement”), among Hanover Compressor Company (“Hanover”), Hanover
Compression Limited Partnership (“HCLP”; Hanover and HCLP being collectively
referred to herein as the “Borrowers”), the banks and other financial
institutions parties thereto from time to time (the “Lenders”), The Royal Bank
of Scotland plc, as syndication agent and JPMorgan Chase Bank, N.A. as
administrative agent, whether or not with the same parties, the Lenders have
severally agreed to make extensions of credit to the Borrowers upon the terms
and subject to the conditions set forth therein;
          WHEREAS, Hanover is a member of an affiliated group of companies that
includes each other Grantor;
          WHEREAS, the proceeds of the extensions of credit under the Loan
Documents (as hereinafter defined) have been and will continue to be used in
part to enable the Borrowers to make valuable transfers to one or more of the
other Grantors in connection with the operation of their respective businesses;
          WHEREAS, the Borrowers and the other Grantors are engaged in related
businesses, and each Grantor will derive substantial direct and indirect benefit
from the continued making of the extensions of credit under the Loan Documents;
and
          WHEREAS, it is a condition precedent to the obligation of the Lenders
to make their respective extensions of credit to the Borrowers under the Credit
Agreement that the Grantors shall have executed and delivered this Agreement to
the Administrative Agent for the ratable benefit of the Secured Parties;
          NOW, THEREFORE, in consideration of the premises and to induce the
Administrative Agent and the Lenders to enter into the Credit Agreement and make
their respective extensions of credit to the Borrowers under the Loan Documents,
each Grantor hereby agrees with the Administrative Agent, for the ratable
benefit of the Secured Parties, as follows:
SECTION 1. DEFINED TERMS
    1.1 Definitions. (a) Unless otherwise defined herein, terms defined in the
Credit Agreement are used herein as therein defined, and the following terms are
used herein as defined in the New York UCC: Accounts, Certificated Security,
Chattel Paper, Commercial Tort Claims, Documents, Equipment, Farm Products,
General Intangibles, Instruments, Inventory, Letter-of-Credit Rights and
Supporting Obligations.
    (b) The following terms shall have the following meanings:

--------------------------------------------------------------------------------

 

  2

          “Agreement”: this Guarantee and Collateral Agreement, as the same may
be amended, supplemented or otherwise modified from time to time.
          “Borrower Obligations”: the collective reference to the unpaid
principal of and interest on the Loans and Reimbursement Obligations and all
other obligations and liabilities of the Borrowers (including, without
limitation, interest accruing at the then applicable rate provided in the Credit
Agreement after the maturity of the Loans and Reimbursement Obligations and
interest accruing at the then applicable rate provided in the Credit Agreement
after the filing of any petition in bankruptcy, or the commencement of any
insolvency, reorganization or like proceeding, relating to any Borrower, whether
or not a claim for post-filing or post-petition interest is allowed in such
proceeding) to the Administrative Agent or any Lender (or, in the case of any
Derivatives Agreements, any Affiliate of any such Lender) whether direct or
indirect, absolute or contingent, due or to become due, or now existing or
hereafter incurred, which may arise under, out of, or in connection with, the
Credit Agreement, this Agreement, the other Loan Documents, any Letter of
Credit, any Derivatives Agreements or any other document made, delivered or
given in connection with any of the foregoing, in each case whether on account
of principal, interest, reimbursement obligations, fees, indemnities, costs,
expenses or otherwise (including, without limitation, all fees and disbursements
of counsel to the Administrative Agent or to the Lenders that are required to be
paid by any Borrower pursuant to the terms of any of the foregoing agreements).
          “Collateral”: as defined in Section 3.
          “Collateral Account”: any collateral account established by the
Administrative Agent as provided in Section 6.1 or 6.4.
          “Copyright Licenses”: any written agreement naming any Grantor as
licensor or licensee, granting any right under any Copyright, including, without
limitation, the grant of rights to manufacture, distribute, exploit and sell
materials derived from any Copyright.
          “Copyrights”: (i) all copyrights arising under the laws of the United
States, any other country or any political subdivision thereof, whether
registered or unregistered and whether published or unpublished, all
registrations and recordings thereof, and all applications in connection
therewith, including, without limitation, all registrations, recordings and
applications in the United States Copyright Office, and (ii) the right to obtain
all renewals thereof.
          “Default”: any default or event of default under any Loan Document.
          “Deposit Account”: as defined in the Uniform Commercial Code of any
applicable jurisdiction and, in any event, including, without limitation, any
demand, time, savings, passbook or like account maintained with a depositary
institution.
          “Derivatives Agreements”: any agreement in respect of Derivatives
entered into by Hanover or any of its Subsidiaries with a Lender or any
Affiliate of a Lender permitted by Section 8.9 of the Credit Agreement.
          “Excluded Equipment Lease Property”: any property or assets of any
Grantor that is subject to a Lien created under the documentation governing the
2001A Equipment Lease Transaction or the 2001B Equipment Lease Transaction;
provided, that any such property or assets shall cease to be “Excluded Equipment
Lease Property” at such time as Incremental Term Loans are borrowed.
          “Excluded Foreign Subsidiary Stock”: any shares of Capital Stock of
Foreign Subsidiaries exceeding 66% of the outstanding voting Capital Stock of
each Foreign Subsidiary. For the

--------------------------------------------------------------------------------

 

3

avoidance of doubt, it is understood and agreed that such Excluded Foreign
Subsidiary Stock shall in no event be pledged hereunder or required to be
pledged hereunder. Notwithstanding anything herein to the contrary, (a) the
shares of Capital Stock of Production Operators Cayman Inc. and Hanover Cayman,
Limited, (b) the shares of Capital Stock of Subsidiaries of Production Operators
Cayman Inc. and Hanover Cayman, Limited that are directly owned by HCLP to the
extent these shares do not exceed 1% of the outstanding voting Capital Stock of
any such Subsidiary, (c) the shares of Capital Stock of HCC Mantova S.r.l. that
are directly owned by HCLP to the extent these shares do not exceed 0.01% of the
outstanding voting Capital Stock of such Subsidiary, (d) the shares of Capital
Stock of Foreign Subsidiaries that are not directly owned by Hanover, HCLP or
any Qualified Subsidiaries and (e) the shares of Capital Stock of Post-Closing
Pledged Subsidiaries shall also be deemed to be “Excluded Foreign Subsidiary
Stock”.
          “Foreign Subsidiary”: any Subsidiary organized under the laws of any
jurisdiction outside the United States of America.
          “Foreign Subsidiary Voting Stock”: the voting Capital Stock of any
Foreign Subsidiary.
          “Guarantor Obligations”: with respect to any Guarantor, all
obligations and liabilities of such Guarantor which may arise under or in
connection with this Agreement (including, without limitation, Section 2), any
other Loan Document, or any Derivatives Agreement to which such Guarantor is a
party, in each case whether on account of guarantee obligations, reimbursement
obligations, fees, indemnities, costs, expenses or otherwise (including, without
limitation, all fees and disbursements of counsel to the Administrative Agent or
to the Secured Parties that are required to be paid by such Guarantor pursuant
to the terms of this Agreement or any such Loan Document).
          “Guarantors”: the collective reference to (a) each Grantor other than
the Borrowers, (b) with respect to all Borrower Obligations of HCLP, Hanover and
(c) with respect to all Borrower Obligations of Hanover, HCLP.
          “Intellectual Property”: the collective reference to all rights,
priorities and privileges relating to intellectual property, whether arising
under United States, multinational or foreign laws or otherwise, including,
without limitation, the Copyrights, the Copyright Licenses, the Patents, the
Patent Licenses, the Trademarks and the Trademark Licenses, and all rights to
sue at law or in equity for any infringement or other impairment thereof,
including the right to receive all proceeds and damages therefrom.
          “Intercompany Note”: any promissory note evidencing loans made by any
Grantor to Hanover or any of its Subsidiaries.
          “Investment Property”: the collective reference to (i) all “investment
property” as such term is defined in Section 9-102(a)(49) of the New York UCC
(other than Excluded Foreign Subsidiary Stock) and (ii) whether or not
constituting “investment property” as so defined, all Pledged Notes and all
Pledged Stock.
          “Issuers”: the collective reference to each issuer of any Investment
Property.
          “Loan Documents”: the Loan Documents (as defined in the Credit
Agreement) and the Derivatives Agreements, as the same may be amended from time
to time.
          “New York UCC”: the Uniform Commercial Code as from time to time in
effect in the State of New York.

--------------------------------------------------------------------------------

 

4

          “Obligations”: (i) in the case of each Borrower, its Borrower
Obligations, and (ii) in the case of each Guarantor, its Guarantor Obligations.
          “Patent License”: all agreements, whether written or oral, providing
for the grant by or to any Grantor of any right to manufacture, use or sell any
invention covered in whole or in part by a Patent.
          “Patents”: (i) all letters patent of the United States, any other
country or any political subdivision thereof, all reissues and extensions
thereof and all goodwill associated therewith, (ii) all applications for letters
patent of the United States or any other country and all divisions,
continuations and continuations-in-part thereof, and (iii) all rights to obtain
any reissues or extensions of the foregoing.
          “Pledged Notes”: all promissory notes listed on Schedule 4, all
Intercompany Notes at any time issued to any Grantor and all other promissory
notes issued to or held by any Grantor (other than promissory notes issued in
connection with extensions of trade credit by any Grantor in the ordinary course
of business or promissory notes received in connection with Dispositions
permitted by Section 8.6(d) of the Credit Agreement).
          “Pledged Stock”: the shares of Capital Stock listed on Schedule 4,
together with any other shares, stock certificates, options, interests or rights
of any nature whatsoever in respect of the Capital Stock of any Person that may
be issued or granted to, or held by, any Grantor while this Agreement is in
effect, but excluding the Excluded Foreign Subsidiary Stock.
          “Post-Closing Pledged Subsidiary”: Each Foreign Subsidiary identified
on Schedule 6 hereto.
          “Proceeds”: all “proceeds” as such term is defined in
Section 9-102(a)(64) of the New York UCC and, in any event, shall include,
without limitation, all dividends or other income from the Investment Property,
collections thereon or distributions or payments with respect thereto.
          “Receivable”: any right to payment for goods sold or leased or for
services rendered, whether or not such right is evidenced by an Instrument or
Chattel Paper and whether or not it has been earned by performance (including,
without limitation, any Account).
          “Secured Parties”: the collective reference to the Administrative
Agent, the Lenders and any Affiliate of any Lender to which Borrower Obligations
or Guarantor Obligations, as applicable, are owed.
          “Securities Act”: the Securities Act of 1933, as amended.
          “Subsidiary Guarantor”: each Guarantor which is a Subsidiary of
Hanover.
          “Trademark License”: any agreement, whether written or oral, providing
for the grant by or to any Grantor of any right to use any Trademark.
          “Trademarks”: (i) all trademarks, trade names, corporate names,
company names, business names, fictitious business names, trade styles, service
marks, logos and other source or business identifiers, and all goodwill
associated therewith, now existing or hereafter adopted or acquired, all
registrations and recordings thereof, and all applications in connection
therewith, whether in the United States Patent and Trademark Office or in any
similar office or agency of the United States, any State thereof or any other
country or any political subdivision thereof, or otherwise, and all common-law
rights related thereto, and (ii) the right to obtain all renewals thereof.

--------------------------------------------------------------------------------

 

5

          “Vehicles”: all cars, trucks, trailers, construction and earth moving
equipment and other vehicles covered by a certificate of title law of any state
and all tires and other appurtenances to any of the foregoing.
    1.2 Other Definitional Provisions. (a) The words “hereof,” “herein”,
“hereto” and “hereunder” and words of similar import when used in this Agreement
shall refer to this Agreement as a whole and not to any particular provision of
this Agreement, and Section and Schedule references are to this Agreement unless
otherwise specified.
    (b) The meanings given to terms defined herein shall be equally applicable
to both the singular and plural forms of such terms.
    (c) Where the context requires, terms relating to the Collateral or any part
thereof, when used in relation to a Grantor, shall refer to such Grantor’s
Collateral or the relevant part thereof.
SECTION 2. GUARANTEE
    2.1 Guarantee. (a) Each of the Guarantors hereby, jointly and severally,
unconditionally and irrevocably, guarantees to the Administrative Agent, for the
ratable benefit of the Secured Parties and their respective successors,
indorsees, transferees and assigns, the prompt and complete payment and
performance by the Borrowers when due (whether at the stated maturity, by
acceleration or otherwise) of the Borrower Obligations.
    (b) Anything herein or in any other Loan Document to the contrary
notwithstanding, the maximum liability of each Guarantor hereunder and under the
other Loan Documents shall in no event exceed the amount which can be guaranteed
by such Guarantor under applicable federal and state laws relating to the
insolvency of debtors (after giving effect to the right of contribution
established in Section 2.2).
    (c) Each Guarantor agrees that the Borrower Obligations may at any time and
from time to time exceed the amount of the liability of such Guarantor hereunder
without impairing the guarantee contained in this Section 2 or affecting the
rights and remedies of the Administrative Agent or any Secured Party hereunder.
    (d) The guarantee contained in this Section 2 shall remain in full force and
effect until all the Borrower Obligations and the obligations of each Guarantor
under the guarantee contained in this Section 2 shall have been satisfied by
payment in full, no Letter of Credit shall be outstanding (or any outstanding
Letters of Credit shall have been cash collateralized in accordance with
subsection 11.18(b) of the Credit Agreement) and the Commitments shall be
terminated, notwithstanding that, from time to time during the term of the Loan
Documents, either Borrower may be free from any Borrower Obligations.
    (e) No payment made by the Borrowers, any of the Guarantors, any other
guarantor or any other Person or received or collected by the Administrative
Agent or any Secured Party from any Borrower, any of the Guarantors, any other
guarantor or any other Person by virtue of any action or proceeding or any
set-off or appropriation or application at any time or from time to time in
reduction of or in payment of Borrower Obligations shall be deemed to modify,
reduce, release or otherwise affect the liability of any Guarantor hereunder
(other than any payment made by such Person in respect of Borrower Obligations
or any payment received or collected from such Person in respect of Borrower
Obligations). Each Guarantor shall remain liable for the Borrower Obligations up
to the maximum liability of such Guarantor hereunder until the Borrower
Obligations are paid in full, no Letter of Credit shall be outstanding and the
Commitments are terminated

--------------------------------------------------------------------------------

 

6

    2.2 Right of Contribution. Each Subsidiary Guarantor hereby agrees that to
the extent that a Subsidiary Guarantor shall have paid more than its
proportionate share of any payment made hereunder, such Subsidiary Guarantor
shall be entitled to seek and receive contribution from and against any other
Subsidiary Guarantor hereunder which has not paid its proportionate share of
such payment. Each Subsidiary Guarantor’s right of contribution shall be subject
to the terms and conditions of Section 2.3. The provisions of this Section 2.2
shall in no respect limit the obligations and liabilities of any Subsidiary
Guarantor to the Administrative Agent and the Secured Parties, and each
Subsidiary Guarantor shall remain liable to the Administrative Agent and the
Secured Parties for the full amount guaranteed by such Subsidiary Guarantor
hereunder.
    2.3 No Subrogation. Notwithstanding any payment made by any Guarantor
hereunder or any set-off or application of funds of any Guarantor by the
Administrative Agent or any Secured Party, no Guarantor shall be entitled to be
subrogated to any of the rights of the Administrative Agent or any Secured Party
against any Borrower or any other Guarantor or any collateral security or
guarantee or right of offset held by the Administrative Agent or any Secured
Party for the payment of Borrower Obligations, nor shall any Guarantor seek or
be entitled to seek any contribution or reimbursement from any Borrower or any
other Guarantor in respect of payments made by such Guarantor hereunder, until
all amounts owing to the Administrative Agent and the Secured Parties by the
Borrowers on account of Borrower Obligations are paid in full, no Letter of
Credit shall be outstanding (or any outstanding Letters of Credit shall have
been cash collateralized in accordance with subsection 11.18(b) of the Credit
Agreement) and the Commitments are terminated. If any amount shall be paid to
any Guarantor on account of such subrogation rights at any time when all of the
Borrower Obligations shall not have been paid in full, such amount shall be held
by such Guarantor in trust for the Administrative Agent and the Secured Parties,
segregated from other funds of such Guarantor, and shall, forthwith upon receipt
by such Guarantor, be turned over to the Administrative Agent in the exact form
received by such Guarantor (duly indorsed by such Guarantor to the
Administrative Agent, if required), to be applied against Borrower Obligations,
whether matured or unmatured, in the order set forth in Section 6.5.
    2.4 Amendments, etc. with respect to Borrower Obligations. Each Guarantor
shall remain obligated hereunder notwithstanding that, without any reservation
of rights against any Guarantor and without notice to or further assent by any
Guarantor, any demand for payment of any of Borrower Obligations made by the
Administrative Agent or any Secured Party may be rescinded by the Administrative
Agent or such Secured Party and any of the Borrower Obligations continued, and
Borrower Obligations, or the liability of any other Person upon or for any part
thereof, or any collateral security or guarantee therefor or right of offset
with respect thereto, may, from time to time, in whole or in part, be renewed,
extended, amended, modified, accelerated, compromised, waived, surrendered or
released by the Administrative Agent or any Secured Party, and the Loan
Documents and any other documents executed and delivered in connection therewith
may be amended, modified, supplemented or terminated, in whole or in part, as
the Administrative Agent (or the Required Lenders, the applicable Majority
Facility Lenders or all Secured Parties, as the case may be) may deem advisable
from time to time, and any collateral security, guarantee or right of offset at
any time held by the Administrative Agent or any Secured Party for the payment
of the Borrower Obligations may be sold, exchanged, waived, surrendered or
released. Neither the Administrative Agent nor any Secured Party shall have any
obligation to protect, secure, perfect or insure any Lien at any time held by it
as security for the Borrower Obligations or for the guarantee contained in this
Section 2 or any property subject thereto.
    2.5 Guarantee Absolute and Unconditional. Each Guarantor waives any and all
notice of the creation, renewal, extension or accrual of any of the Borrower
Obligations and notice of or proof of reliance by the Administrative Agent or
any Secured Party upon the guarantee contained in this Section 2 or acceptance
of the guarantee contained in this Section 2; the Borrower Obligations, and any
of them, shall conclusively be deemed to have been created, contracted or
incurred, or renewed, extended,

--------------------------------------------------------------------------------

 

7

amended or waived, in reliance upon the guarantee contained in this Section 2;
and all dealings between the Borrowers and any of the Guarantors, on the one
hand, and the Administrative Agent and the Secured Parties, on the other hand,
likewise shall be conclusively presumed to have been had or consummated in
reliance upon the guarantee contained in this Section 2. Each Guarantor waives
diligence, presentment, protest, demand for payment and notice of default or
nonpayment to or upon any of the Borrowers or any of the Guarantors with respect
to the Borrower Obligations. Each Guarantor understands and agrees that, to the
fullest extent permitted under applicable law, the guarantee contained in this
Section 2 shall be construed as a continuing, absolute and unconditional
guarantee of payment without regard to (a) the validity or enforceability of the
Loan Documents, any of the Borrower Obligations or any other collateral security
therefor or guarantee or right of offset with respect thereto at any time or
from time to time held by the Administrative Agent or any Secured Party, (b) any
defense, set-off or counterclaim (other than a defense of payment or
performance) which may at any time be available to or be asserted by any
Borrower or any other Person against the Administrative Agent or any Secured
Party, or (c) any other circumstance whatsoever (with or without notice to or
knowledge of such Borrower or such Guarantor) which constitutes, or might be
construed to constitute, an equitable or legal discharge of either Borrower for
the Borrower Obligations, or of such Guarantor under the guarantee contained in
this Section 2, in bankruptcy or in any other instance. When making any demand
hereunder or otherwise pursuing its rights and remedies hereunder against any
Guarantor, the Administrative Agent or any Secured Party may, but shall be under
no obligation to, make a similar demand on or otherwise pursue such rights and
remedies as it may have against any Borrower, any other Guarantor or any other
Person or against any collateral security or guarantee for the Borrower
Obligations or any right of offset with respect thereto, and any failure by the
Administrative Agent or any Secured Party to make any such demand, to pursue
such other rights or remedies or to collect any payments from any Borrower, any
other Guarantor or any other Person or to realize upon any such collateral
security or guarantee or to exercise any such right of offset, or any release of
any Borrower, any other Guarantor or any other Person or any such collateral
security, guarantee or right of offset, shall not relieve any Guarantor of any
obligation or liability hereunder, and shall not impair or affect the rights and
remedies, whether express, implied or available as a matter of law, of the
Administrative Agent or any Secured Party against any Guarantor. For the
purposes hereof “demand” shall include the commencement and continuance of any
legal proceedings.
    2.6 Reinstatement. The guarantee contained in this Section 2 shall continue
to be effective, or be reinstated, as the case may be, if at any time payment,
or any part thereof, of any of the Borrower Obligations is rescinded or must
otherwise be restored or returned by the Administrative Agent or any Secured
Party upon the insolvency, bankruptcy, dissolution, liquidation or
reorganization of any Borrower or any other Guarantor, or upon or as a result of
the appointment of a receiver, intervenor or conservator of, or trustee or
similar officer for, any Borrower or any other Guarantor or any substantial part
of its property, or otherwise, all as though such payments had not been made.
    2.7 Payments. Each Guarantor hereby guarantees that payments hereunder will
be paid to the Administrative Agent without set-off or counterclaim in the
Agreement Currency at the applicable funding office set forth in Section 11.2 of
the Credit Agreement.
SECTION 3. GRANT OF SECURITY INTEREST
          Each Grantor hereby assigns and transfers to the Administrative Agent,
and hereby grants to the Administrative Agent, for the ratable benefit of the
Secured Parties, a security interest in, all of the following property now owned
or at any time hereafter acquired by such Grantor or in which such Grantor now
has or at any time in the future may acquire any right, title or interest
(collectively, the “Collateral”), as collateral security for the prompt and
complete payment and performance when due (whether at the stated maturity, by
acceleration or otherwise) of such Grantor’s Obligations,:

--------------------------------------------------------------------------------

 

8

    (a) all Accounts;
    (b) all Chattel Paper;
    (c) all Deposit Accounts;
    (d) all Documents;
    (e) all Equipment;
    (f) all General Intangibles;
    (g) all Instruments;
    (h) all Intellectual Property;
    (i) all Inventory;
    (j) all Investment Property;
    (k) all Letter-of-Credit Rights;
    (l) all Commercial Tort Claims to the extent they have been notified to the
Administrative Agent pursuant to Section 5.9;
    (m) all other property not otherwise described above (except for any
property specifically excluded from any clause in this section above, and any
property specifically excluded from any defined term used in any clause of this
section above);
    (n) all books and records pertaining to the Collateral; and
    (o) to the extent not otherwise included, all Proceeds, Supporting
Obligations and products of any and all of the foregoing and all collateral
security and guarantees given by any Person with respect to any of the
foregoing;
          provided, however, that notwithstanding any of the other provisions
set forth in this Section 3, (i) this Agreement shall not constitute a grant of
a security interest in any property to the extent that such grant of a security
interest is prohibited by any Requirements of Law, requires a consent not
obtained of any Governmental Authority pursuant to such Requirement of Law or is
prohibited by, or constitutes a breach or default under or results in the
termination of or requires any consent not obtained under, any contract,
license, agreement, instrument or other document evidencing or giving rise to
such property or, in the case of any Investment Property, Pledged Stock or
Pledged Note, any applicable shareholder or similar agreement, except to the
extent that such Requirement of Law or the term in such contract, license,
agreement, instrument or other document or shareholder or similar agreement
providing for such prohibition, breach, default or termination or requiring such
consent is ineffective under applicable law and (ii) the Collateral shall in no
event include the Excluded Foreign Subsidiary Stock or the Excluded Equipment
Lease Property.
SECTION 4. REPRESENTATIONS AND WARRANTIES

--------------------------------------------------------------------------------

 

9

          To induce the Administrative Agent and the Lenders to enter into the
Credit Agreement and to induce the Lenders to make their respective extensions
of credit to the Borrowers, each Grantor hereby represents and warrants to the
Administrative Agent and each Secured Party that:
    4.1 Title; No Other Liens. No financing statement or other public notice
with respect to all or any part of the Collateral is on file or of record in any
public office, except such as have been filed in favor of the Administrative
Agent, for the ratable benefit of the Secured Parties, pursuant to this
Agreement or as are permitted by the Credit Agreement (or, if the Credit
Agreement shall have been paid in full or terminated, by the last version of the
Credit Agreement as in effect immediately prior to such payment in full or
termination). For the avoidance of doubt, it is understood and agreed that any
Grantor may, as part of its business, grant licenses to third parties to use
Intellectual Property owned or developed by a Grantor. For purposes of this
Agreement and the other Loan Documents, such licensing activity shall not
constitute a “Lien” on such Intellectual Property. Each of the Administrative
Agent and each Secured Party understands that any such licenses may be exclusive
to the applicable licensees, and such exclusivity provisions may limit the
ability of the Administrative Agent to utilize, sell, lease or transfer the
related Intellectual Property or otherwise realize value from such Intellectual
Property pursuant hereto.
    4.2 Jurisdiction of Organization; Chief Executive Office. On the date
hereof, such Grantor’s jurisdiction of organization, identification number from
the jurisdiction of organization (if any), and the location of such Grantor’s
chief executive office or sole place of business or principal residence, as the
case may be, are specified on Schedule 3. Such Grantor has furnished to the
Administrative Agent a certified charter, certificate of incorporation or other
organization document and good standing certificate as of a date which is recent
to the date hereof.
    4.3 Inventory and Equipment. On the date hereof, all Inventory and Equipment
(other than mobile goods) held for lease or sale in the United States are kept
at the locations listed on Schedule 5.
    4.4 Farm Products. None of the Collateral constitutes, or is the Proceeds
of, Farm Products.
    4.5 Investment Property. (a) The shares of Pledged Stock covered by the
grant of the security interest in Section 3 hereof constitute all the issued and
outstanding shares of all classes of the Capital Stock of each Issuer owned by
each Grantor (except for the Excluded Foreign Subsidiary Stock).
    (b) All the shares of the Pledged Stock have been duly and validly issued
and, with respect to each Issuer that is a corporation, are fully paid and
nonassessable.
    (c) Each of the Pledged Notes constitutes the legal, valid and binding
obligation of the Issuer thereof, enforceable in accordance with its terms,
subject to the effects of bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or affecting
creditors’ rights generally, general equitable principles (whether considered in
a proceeding in equity or at law) and an implied covenant of good faith and fair
dealing.
    4.6 Receivables. The amounts represented by such Grantor to the Secured
Parties from time to time as owing to such Grantor in respect of the Receivables
will at such times be accurate in all material respects.
    4.7 Intellectual Property. On the date hereof, all material Intellectual
Property is valid, subsisting, unexpired and enforceable and has not been
abandoned.
SECTION 5. COVENANTS

--------------------------------------------------------------------------------

 

10

          Each Grantor covenants and agrees with the Administrative Agent and
the Secured Parties that, from and after the date of this Agreement until the
Obligations shall have been paid in full, no Letter of Credit shall be
outstanding (or any outstanding Letters of Credit shall have been cash
collateralized in accordance with subsection 11.18(b) of the Credit Agreement)
and the Commitments shall have terminated:
    5.1 Delivery of Instruments, Certificated Securities and Chattel Paper. If
any amount payable under or in connection with any of the Collateral shall be or
become evidenced by any Instrument, Certificated Security or Chattel Paper, such
Instrument, Certificated Security or Chattel Paper in excess of $100,000 shall,
if requested by the Administrative Agent or the Required Lenders, be promptly
delivered to the Administrative Agent, duly indorsed in a manner satisfactory to
the Administrative Agent, to be held as Collateral pursuant to this Agreement.
    5.2 Maintenance of Perfected Security Interest; Further Documentation.
(a) Such Grantor shall maintain the security interest created by this Agreement
as a perfected security interest (it being agreed that, unless other means of
perfection have been requested by the Administrative Agent or the Required
Lenders, such perfected security interest is only to the extent that perfection
may be achieved through the filing of a Uniform Commercial Code financing
statement in the appropriate filing office) having at least the priority
described in Section 5.19(a) of the Credit Agreement and shall defend such
security interest against the claims and demands of all Persons whomsoever
(other than Persons holding Liens permitted by Section 8.3 of the Credit
Agreement), subject to the rights of such Grantor under the Loan Documents to
Dispose of the Collateral.
    (b) Such Grantor will furnish to the Administrative Agent and the Secured
Parties from time to time statements and schedules further identifying and
describing the assets and property of such Grantor and such other reports in
connection therewith as the Administrative Agent may reasonably request, all in
reasonable detail.
    (c) At any time and from time to time, upon the written and reasonable
request of the Administrative Agent, and at the sole expense of such Grantor,
such Grantor will promptly and duly execute and deliver, and have recorded, such
further instruments and documents and take such further actions as the
Administrative Agent may reasonably request for the purpose of obtaining or
preserving the full benefits of this Agreement and of the rights and powers
herein granted, including, without limitation, (i) filing any financing or
continuation statements under the Uniform Commercial Code (or other similar
laws) in effect in any jurisdiction with respect to the security interests
created hereby and (ii) in the case of Investment Property, Deposit Accounts,
Letter-of-Credit Rights and any other relevant Collateral, taking any actions
necessary to enable the Administrative Agent to obtain “control” (within the
meaning of the applicable Uniform Commercial Code) with respect thereto.
    (d) Notwithstanding any other provision of the Loan Documents to the
contrary, the Grantors shall not be required to take any action to perfect the
security interests created hereunder except for filing of properly completed
Uniform Commercial Code financing statements in appropriate filing offices
unless otherwise requested by the Administrative Agent or the Required Lenders.
    5.3 Changes in Locations, Name, etc. Such Grantor will not, except upon
15 days’ prior written notice to the Administrative Agent and delivery to the
Administrative Agent of all additional executed financing statements and other
documents reasonably requested by the Administrative Agent to maintain the
validity, perfection and priority of the security interests provided for herein:

 

--------------------------------------------------------------------------------

 

11
     (i) change its jurisdiction of organization or the location of its chief
executive office or sole place of business or principal residence from that
referred to in Section 4.2; or
     (ii) change its name.
     5.4 Notices. Such Grantor will advise the Administrative Agent and the
Secured Parties promptly, in reasonable detail, of any Lien (other than security
interests created hereby or Liens permitted under the Credit Agreement (or, if
the Credit Agreement shall have been paid in full or terminated, by the last
version of the Credit Agreement as in effect immediately prior to such payment
in full or termination)) on any of the Collateral which would adversely affect
the ability of the Administrative Agent to exercise any of its remedies
hereunder.
     5.5 Investment Property. (a) If such Grantor shall become entitled to
receive or shall receive any certificate (including, without limitation, any
certificate representing a dividend or a distribution in connection with any
reclassification, increase or reduction of capital or any certificate issued in
connection with any reorganization), option or rights in respect of the Capital
Stock (other than Excluded Foreign Subsidiary Stock) of any Issuer, whether in
addition to, in substitution of, as a conversion of, or in exchange for, any
shares of the Pledged Stock, or otherwise in respect thereof, such Grantor
shall, if requested by the Administrative Agent or the Required Lenders, accept
the same as the agent of the Administrative Agent and the Secured Parties, hold
the same in trust for the Administrative Agent and the Secured Parties and
deliver the same forthwith to the Administrative Agent in the exact form
received, duly indorsed by such Grantor to the Administrative Agent, if
required, together with an undated stock power covering such certificate duly
executed in blank by such Grantor and with, if the Administrative Agent so
requests, signature guaranteed, to be held by the Administrative Agent, subject
to the terms hereof, as additional collateral security for the Obligations. Any
sums paid upon or in respect of the Investment Property upon the liquidation or
dissolution of any Issuer shall be paid over to the Administrative Agent to be
held by it hereunder as additional collateral security for the Obligations, and
in case any distribution of capital shall be made on or in respect of the
Investment Property or any property shall be distributed upon or with respect to
the Investment Property pursuant to the recapitalization or reclassification of
the capital of any Issuer or pursuant to the reorganization thereof, the
property so distributed shall, unless otherwise subject to a perfected security
interest in favor of the Administrative Agent, if requested by the
Administrative Agent or the Required Lenders, be delivered to the Administrative
Agent to be held by it hereunder as additional collateral security for the
Obligations. If any sums of money or property so paid or distributed in respect
of the Investment Property shall be received by such Grantor, such Grantor
shall, until such money or property is paid or delivered to the Administrative
Agent, if requested by the Administrative Agent or the Required Lenders, hold
such money or property in trust for the Administrative Agent and the Secured
Parties, segregated from other funds of such Grantor, as additional collateral
security for the Obligations.
     (b) In the case of each Grantor which is an Issuer, such Issuer agrees that
(i) it will be bound by the terms of this Agreement relating to the Investment
Property issued by it and will comply with such terms insofar as such terms are
applicable to it and (ii) the terms of Sections 6.3(c) and 6.7(b) shall apply to
it, mutatis mutandis, with respect to all actions that may be required of it
pursuant to Section 6.3(c) or 6.7(b) with respect to the Investment Property
issued by it.
     5.6 Receivables. Other than in the ordinary course of business or as
permitted by Section 8.6(d) or 8.10(m) of the Credit Agreement, such Grantor
will not (i) grant any extension of the time of payment of any Receivable,
(ii) compromise or settle any Receivable for less than the full amount thereof,
(iii) release, wholly or partially, any Person liable for the payment of any
Receivable, (iv) allow any credit or discount whatsoever on any Receivable or
(v) amend, supplement or modify any Receivable in any manner that could
adversely affect the value thereof.

 

--------------------------------------------------------------------------------

 

12
     5.7 Intellectual Property. (a) Such Grantor (either itself or through
licensees) will not (and not permit any licensee or sublicensee thereof to) do
any act or knowingly omit to do any act whereby any material Trademark may
become invalidated or impaired in any material way.
     (b) Such Grantor (either itself or through licensees) will not do any act,
or omit to do any act, whereby any material Patent may become forfeited,
abandoned or dedicated to the public.
     (c) Such Grantor (either itself or through licensees) will not (and will
not permit any licensee or sublicensee thereof to) do any act or knowingly omit
to do any act whereby any material portion of the Copyrights may become
invalidated or otherwise materially impaired. Such Grantor will not (either
itself or through licensees) do any act whereby any material portion of the
Copyrights may fall into the public domain.
     (d) Such Grantor (either itself or through licensees) will not do any act
that knowingly uses any material Intellectual Property to infringe, in any
material way, the intellectual property rights of any other Person.
     (e) Such Grantor will notify the Administrative Agent and the Secured
Parties promptly if it knows, or has reason to know, that any application or
registration relating to any material Intellectual Property may become
forfeited, abandoned or dedicated to the public, or of any material and adverse
determination or development (including, without limitation, the institution of,
or any such determination or development in, any proceeding in the United States
Patent and Trademark Office, the United States Copyright Office or any court or
tribunal in any country) regarding such Grantor’s ownership of, or the validity
of, any material Intellectual Property or such Grantor’s right to register the
same or to own and maintain the same.
     (f) Whenever such Grantor, either by itself or through any agent, employee,
licensee or designee, shall file an application for the registration of any
Intellectual Property with the United States Patent and Trademark Office, the
United States Copyright Office or any similar office or agency in any other
country or any political subdivision thereof, such Grantor shall, if so
requested by the Administrative Agent, report such filing to the Administrative
Agent within five Business Days after the last day of the fiscal quarter in
which such filing occurs. Upon request of the Administrative Agent, such Grantor
shall execute and deliver, and have recorded, any and all agreements,
instruments, documents, and papers as the Administrative Agent may request to
evidence the Administrative Agent’s and the Secured Parties’ security interest
in any Copyright, Patent or Trademark and the goodwill and general intangibles
of such Grantor relating thereto or represented thereby.
     (g) Such Grantor will take all reasonable and necessary steps, including,
without limitation, in any proceeding before the United States Patent and
Trademark Office, the United States Copyright Office or any similar office or
agency in any other country or any political subdivision thereof, to maintain
and pursue each application (and to obtain the relevant registration) and to
maintain each registration of the material Intellectual Property, including,
without limitation, filing of applications for renewal, affidavits of use and
affidavits of incontestability.
     (h) In the event that any material Intellectual Property is infringed,
misappropriated or diluted by a third party, such Grantor shall (i) take such
actions as such Grantor shall reasonably deem appropriate under the
circumstances to protect such Intellectual Property and (ii) if such
Intellectual Property is of material economic value, promptly notify the
Administrative Agent after a Responsible Officer of such Grantor learns thereof
and sue for infringement, misappropriation or dilution, to seek injunctive
relief where appropriate and to recover any and all damages for such
infringement, misappropriation or dilution.

 

--------------------------------------------------------------------------------

 

13
     5.8 Vehicles. No Grantor shall be required to take any action to perfect
any security interest in Vehicles created pursuant to this Agreement.
     5.9 Commercial Tort Claims. If such Grantor shall obtain an interest in any
Commercial Tort Claim with a potential value in excess of $1,000,000, such
Grantor shall within 30 days of obtaining such interest sign and deliver
documentation acceptable to the Administrative Agent granting a security
interest under the terms and provisions of this Agreement in and to such
Commercial Tort Claim.
SECTION 6. REMEDIAL PROVISIONS
     6.1 Certain Matters Relating to Receivables. (a) The Administrative Agent
hereby authorizes each Grantor to collect such Grantor’s Receivables, and the
Administrative Agent may curtail or terminate said authority at any time after
the occurrence and during the continuance of an Event of Default. If required by
the Administrative Agent at any time after the occurrence and during the
continuance of an Event of Default, any payments of Receivables, when collected
by any Grantor, (i) shall be forthwith (and, in any event, within two Business
Days) deposited by such Grantor in the exact form received, duly indorsed by
such Grantor to the Administrative Agent if required, in a Collateral Account
maintained under the sole dominion and control of the Administrative Agent,
subject to withdrawal by the Administrative Agent for the account of the Secured
Parties only as provided in Section 6.5, and (ii) until so turned over, shall be
held by such Grantor in trust for the Administrative Agent and the Secured
Parties, segregated from other funds of such Grantor. Each such deposit of
Proceeds of Receivables shall be accompanied by a report identifying in
reasonable detail the nature and source of the payments included in the deposit.
     (b) At the Administrative Agent’s request after the occurrence and during
the continuance of an Event of Default, each Grantor shall deliver to the
Administrative Agent all original and other documents evidencing, and relating
to, the agreements and transactions which gave rise to the Receivables,
including, without limitation, all original orders, invoices and shipping
receipts.
     6.2 Communications with Obligors; Grantors Remain Liable. (a) The
Administrative Agent in its own name or in the name of others may at any time
after the occurrence and during the continuance of an Event of Default
communicate with obligors under the Receivables to verify with them to the
Administrative Agent’s satisfaction the existence, amount and terms of any
Receivables.
     (b) Upon the request of the Administrative Agent at any time after the
occurrence and during the continuance of an Event of Default, each Grantor shall
notify obligors on the Receivables that the Receivables have been assigned to
the Administrative Agent for the ratable benefit of the Secured Parties and that
payments in respect thereof shall be made directly to the Administrative Agent.
     (c) Anything herein to the contrary notwithstanding, each Grantor shall
remain liable under each of the Receivables to observe and perform all the
conditions and obligations to be observed and performed by it thereunder, all in
accordance with the terms of any agreement giving rise thereto. Neither the
Administrative Agent nor any Secured Party shall have any obligation or
liability under any Receivable (or any agreement giving rise thereto) by reason
of or arising out of this Agreement or the receipt by the Administrative Agent
or any Secured Party of any payment relating thereto, nor shall the
Administrative Agent or any Secured Party be obligated in any manner to perform
any of the obligations of any Grantor under or pursuant to any Receivable (or
any agreement giving rise thereto), to make any payment, to make any inquiry as
to the nature or the sufficiency of any payment received by it or as to the
sufficiency of any performance by any party thereunder, to present or file any
claim, to take any action to

 

--------------------------------------------------------------------------------

 

14
enforce any performance or to collect the payment of any amounts which may have
been assigned to it or to which it may be entitled at any time or times.
     6.3 Pledged Stock. (a) Unless an Event of Default shall have occurred and
be continuing and the Administrative Agent shall have given notice to the
relevant Grantor of the Administrative Agent’s intent to exercise its
corresponding rights pursuant to Section 6.3(b), each Grantor shall be permitted
to receive all cash dividends paid in respect of the Pledged Stock and all
payments made in respect of the Pledged Notes, in each case paid in the normal
course of business of the relevant Issuer, and to exercise all voting and
corporate or other organizational rights with respect to the Investment
Property; provided, however, that no vote shall be cast or corporate or other
organizational right exercised or other action taken which would result in any
violation of any provision of this Agreement or any other Loan Documents.
     (b) If an Event of Default shall occur and be continuing and the
Administrative Agent shall give notice of its intent to exercise such rights to
the relevant Grantor or Grantors, (i) the Administrative Agent shall have the
right to receive any and all cash dividends, payments or other Proceeds paid in
respect of the Investment Property and make application thereof to the
Obligations in the order set forth in Section 6.5, and (ii) any or all of the
Investment Property shall be registered in the name of the Administrative Agent
or its nominee, and the Administrative Agent or its nominee may thereafter
exercise (x) all voting, corporate and other rights pertaining to such
Investment Property at any meeting of shareholders of the relevant Issuer or
Issuers or otherwise and (y) any and all rights of conversion, exchange and
subscription and any other rights, privileges or options pertaining to such
Investment Property as if it were the absolute owner thereof (including, without
limitation, the right to exchange at its discretion any and all of the
Investment Property upon the merger, consolidation, reorganization,
recapitalization or other fundamental change in the corporate or other
organizational structure of any Issuer, or upon the exercise by any Grantor or
the Administrative Agent of any right, privilege or option pertaining to such
Investment Property, and in connection therewith, the right to deposit and
deliver any and all of the Investment Property with any committee, depositary,
transfer agent, registrar or other designated agency upon such terms and
conditions as the Administrative Agent may determine), all without liability
except to account for property actually received by it, but the Administrative
Agent shall have no duty to any Grantor to exercise any such right, privilege or
option and shall not be responsible for any failure to do so or delay in so
doing.
     (c) Each Grantor hereby authorizes and instructs each Issuer of any
Investment Property pledged by such Grantor hereunder to (i) comply with any
instruction received by it from the Administrative Agent in writing that
(x) states that an Event of Default has occurred and is continuing and (y) is
otherwise in accordance with the terms of this Agreement, without any other or
further instructions from such Grantor, and each Grantor agrees that each Issuer
shall be fully protected in so complying, and (ii) unless otherwise expressly
permitted hereby, pay any dividends or other payments with respect to the
Investment Property directly to the Administrative Agent.
     6.4 Proceeds to be Turned Over To Administrative Agent. In addition to the
rights of the Administrative Agent and the Secured Parties specified in
Section 6.1 with respect to payments of Receivables, if an Event of Default
shall occur and be continuing, all Proceeds received by any Grantor consisting
of cash, checks and other near-cash items shall be held by such Grantor in trust
for the Administrative Agent and the Secured Parties, segregated from other
funds of such Grantor, and shall, forthwith upon receipt by such Grantor, be
turned over to the Administrative Agent in the exact form received by such
Grantor (duly indorsed by such Grantor to the Administrative Agent, if
required). All Proceeds received by the Administrative Agent hereunder shall be
held by the Administrative Agent in a Collateral Account maintained under its
sole dominion and control. All Proceeds while held by the Administrative Agent
in a Collateral Account (or by such Grantor in trust for the Administrative
Agent

 

--------------------------------------------------------------------------------

 

15
and the Secured Parties) shall continue to be held as collateral security for
all the Obligations and shall not constitute payment thereof until applied as
provided in Section 6.5.
     6.5 Application of Proceeds. At such intervals as may be agreed upon by the
Borrowers and the Administrative Agent, or, if an Event of Default shall have
occurred and be continuing, at any time at the Administrative Agent’s election,
the Administrative Agent shall apply all or any part of Proceeds constituting
Collateral, whether or not held in any Collateral Account, and any proceeds of
the guarantee set forth in Section 2, in payment of the Obligations in the
following order:
     First, to pay incurred and unpaid fees and expenses of the Administrative
Agent under the Loan Documents;
     Second, to the Administrative Agent, for application by it towards payment
of amounts then due and owing and remaining unpaid in respect of the
Obligations, pro rata among the Secured Parties according to the amounts of the
Obligations then due and owing and remaining unpaid to the Secured Parties;
     Third, to the Administrative Agent, for application by it towards
prepayment of the Obligations, pro rata among the Secured Parties according to
the amounts of the Obligations then held by the Secured Parties; and
     Fourth, any balance remaining after the Obligations shall have been paid in
full, no Letters of Credit shall be outstanding (other than Letters of Credit
cash collateralized in accordance with subsection 11.18(b) of the Credit
Agreement) and the Commitments shall have terminated shall be paid over to the
relevant Borrower or to whomsoever may be lawfully entitled to receive the same.
     6.6 Code and Other Remedies. If an Event of Default shall occur and be
continuing, the Administrative Agent, on behalf of the Secured Parties, may
exercise, in addition to all other rights and remedies granted to them in this
Agreement and in any other instrument or agreement securing, evidencing or
relating to the Obligations, all rights and remedies of a secured party under
the New York UCC or any other applicable law. Without limiting the generality of
the foregoing, the Administrative Agent, without demand of performance or other
demand, presentment, protest, advertisement or notice of any kind (except any
notice required by law referred to below) to or upon any Grantor or any other
Person (all and each of which demands, defenses, advertisements and notices are
hereby waived), may in such circumstances forthwith collect, receive,
appropriate and realize upon the Collateral, or any part thereof, and/or may
forthwith sell, lease, assign, give option or options to purchase, or otherwise
dispose of and deliver the Collateral or any part thereof (or contract to do any
of the foregoing), in one or more parcels at public or private sale or sales, at
any exchange, broker’s board or office of the Administrative Agent or any
Secured Party or elsewhere upon such terms and conditions as it may deem
advisable and at such prices as it may deem best, for cash or on credit or for
future delivery without assumption of any credit risk. The Administrative Agent
or any Secured Party shall have the right upon any such public sale or sales,
and, to the extent permitted by law, upon any such private sale or sales, to
purchase the whole or any part of the Collateral so sold, free of any right or
equity of redemption in any Grantor, which right or equity is hereby waived and
released. Each Grantor further agrees, at the Administrative Agent’s request, to
assemble the Collateral and make it available to the Administrative Agent at
places which the Administrative Agent shall reasonably select, whether at such
Grantor’s premises or elsewhere. The Administrative Agent shall apply the net
proceeds of any action taken by it pursuant to this Section 6.6, after deducting
all reasonable costs and expenses of every kind incurred in connection therewith
or incidental to the care or safekeeping of any of the Collateral or in any way
relating to the Collateral or the rights of the Administrative Agent and the
Secured Parties hereunder, including, without limitation,

 

--------------------------------------------------------------------------------

 

16
reasonable attorneys’ fees and disbursements, to the payment in whole or in part
of the Obligations, in the order set forth in Section 6.5, and only after such
application and after the payment by the Administrative Agent of any other
amount required by any provision of law, including, without limitation,
Section 9-615(a)(3) of the New York UCC, need the Administrative Agent account
for the surplus, if any, to any Grantor. To the extent permitted by applicable
law, each Grantor waives all claims, damages and demands it may acquire against
the Administrative Agent or any Secured Party arising out of the exercise by
them of any rights hereunder. If any notice of a proposed sale or other
disposition of Collateral shall be required by law, such notice shall be deemed
reasonable and proper if given at least 10 days before such sale or other
disposition.
     6.7 Private Sales. (a) Each Grantor recognizes that the Administrative
Agent may be unable to effect a public sale of any or all the Pledged Stock, by
reason of certain prohibitions contained in the Securities Act and applicable
state securities laws or otherwise, and may be compelled to resort to one or
more private sales thereof to a restricted group of purchasers which will be
obliged to agree, among other things, to acquire such securities for their own
account for investment and not with a view to the distribution or resale
thereof. Each Grantor acknowledges and agrees that any such private sale may
result in prices and other terms less favorable than if such sale were a public
sale and, notwithstanding such circumstances, agrees that any such private sale
shall be deemed to have been made in a commercially reasonable manner. The
Administrative Agent shall be under no obligation to delay a sale of any of the
Pledged Stock for the period of time necessary to permit the Issuer thereof to
register such securities for public sale under the Securities Act, or under
applicable state securities laws, even if such Issuer would agree to do so.
     (b) Each Grantor agrees to use its commercially reasonable efforts to do or
cause to be done all such other acts as may be necessary to make such sale or
sales of all or any portion of the Pledged Stock pursuant to this Section 6.7
valid and binding and in compliance with any and all other applicable
Requirements of Law. Each Grantor further agrees that a breach of any of the
covenants contained in this Section 6.7 will cause irreparable injury to the
Administrative Agent and the Secured Parties, that the Administrative Agent and
the Secured Parties have no adequate remedy at law in respect of such breach
and, as a consequence, that each and every covenant contained in this
Section 6.7 shall be specifically enforceable against such Grantor, and such
Grantor hereby waives and agrees not to assert any defenses against an action
for specific performance of such covenants except for a defense that no Event of
Default has occurred under the Credit Agreement.
     6.8 Deficiency. Each Grantor shall remain liable for any deficiency if the
proceeds of any sale or other disposition of the Collateral are insufficient to
pay its Obligations and the fees and disbursements of any attorneys employed by
the Administrative Agent or any Secured Party to collect such deficiency.
SECTION 7. THE ADMINISTRATIVE AGENT
     7.1 Administrative Agent’s Appointment as Attorney-in-Fact, etc. (a) Each
Grantor hereby irrevocably constitutes and appoints the Administrative Agent and
any officer or agent thereof, with full power of substitution, as its true and
lawful attorney-in-fact with full irrevocable power and authority in the place
and stead of such Grantor and in the name of such Grantor or in its own name,
for the purpose of carrying out the terms of this Agreement, to take any and all
appropriate action and to execute any and all documents and instruments which
may be necessary or desirable to accomplish the purposes of this Agreement, and,
without limiting the generality of the foregoing, each Grantor hereby gives the
Administrative Agent the power and right, on behalf of such Grantor, without
notice to or assent by such Grantor, to do any or all of the following:

 

--------------------------------------------------------------------------------

 

17
     (i) in the name of such Grantor or its own name, or otherwise, take
possession of and indorse and collect any checks, drafts, notes, acceptances or
other instruments for the payment of moneys due under any Receivable or with
respect to any other Collateral and file any claim or take any other action or
proceeding in any court of law or equity or otherwise deemed appropriate by the
Administrative Agent for the purpose of collecting any and all such moneys due
under any Receivable or with respect to any other Collateral whenever payable;
     (ii) in the case of any Intellectual Property, execute and deliver, and
have recorded, any and all agreements, instruments, documents and papers as the
Administrative Agent may request to evidence the Administrative Agent’s and the
Secured Partys’ security interest in such Intellectual Property and the goodwill
and general intangibles of such Grantor relating thereto or represented thereby;
     (iii) pay or discharge taxes and Liens levied or placed on or threatened
against the Collateral, effect any repairs or any insurance called for by the
terms of this Agreement and pay all or any part of the premiums therefor and the
costs thereof;
     (iv) execute, in connection with any sale provided for in Section 6.6 or
6.7, any indorsements, assignments or other instruments of conveyance or
transfer with respect to the Collateral; and
     (v) (1) direct any party liable for any payment under any of the Collateral
to make payment of any and all moneys due or to become due thereunder directly
to the Administrative Agent or as the Administrative Agent shall direct; (2) ask
or demand for, collect, and receive payment of and receipt for, any and all
moneys, claims and other amounts due or to become due at any time in respect of
or arising out of any Collateral; (3) sign and indorse any invoices, freight or
express bills, bills of lading, storage or warehouse receipts, drafts against
debtors, assignments, verifications, notices and other documents in connection
with any of the Collateral; (4) commence and prosecute any suits, actions or
proceedings at law or in equity in any court of competent jurisdiction to
collect the Collateral or any portion thereof and to enforce any other right in
respect of any Collateral; (5) defend any suit, action or proceeding brought
against such Grantor with respect to any Collateral; (6) settle, compromise or
adjust any such suit, action or proceeding and, in connection therewith, give
such discharges or releases as the Administrative Agent may deem appropriate;
(7) assign any Copyright, Patent or Trademark (along with the goodwill of the
business to which any such Copyright, Patent or Trademark pertains), throughout
the world for such term or terms, on such conditions, and in such manner, as the
Administrative Agent shall in its sole discretion determine; and (8) generally,
sell, transfer, pledge and make any agreement with respect to or otherwise deal
with any of the Collateral as fully and completely as though the Administrative
Agent were the absolute owner thereof for all purposes, and do, at the
Administrative Agent’s option and such Grantor’s expense, at any time, or from
time to time, all acts and things which the Administrative Agent deems necessary
to protect, preserve or realize upon the Collateral and the Administrative
Agent’s and the Secured Partys’ security interests therein and to effect the
intent of this Agreement, all as fully and effectively as such Grantor might do.
     Anything in this Section 7.1(a) to the contrary notwithstanding, the
Administrative Agent agrees that it will not exercise any rights under the power
of attorney provided for in this Section 7.1(a) unless an Event of Default shall
have occurred and be continuing.
     (b) Upon the occurrence and continuance of an Event of Default, if any
Grantor fails to perform or comply with any of its agreements contained herein,
the Administrative Agent, at its option, but without any obligation so to do,
may perform or comply, or otherwise cause performance or compliance, with such
agreement.

 

--------------------------------------------------------------------------------

 

18
     (c) The expenses of the Administrative Agent incurred in connection with
actions undertaken as provided in this Section 7.1, together with interest
thereon at a rate per annum equal to the highest rate per annum at which
interest would then be payable on any category of past due ABR Loans under the
Credit Agreement (or, if the Credit Agreement shall have been paid in full or
terminated, by the last version of the Credit Agreement as in effect immediately
prior to such payment in full or termination), from the date of payment by the
Administrative Agent to the date reimbursed by the relevant Grantor, shall be
payable by such Grantor to the Administrative Agent on demand.
     (d) Each Grantor hereby ratifies all that said attorneys shall lawfully do
or cause to be done by virtue hereof. All powers, authorizations and agencies
contained in this Agreement are coupled with an interest and are irrevocable
until this Agreement is terminated and the security interests created hereby are
released.
     7.2 Duty of Administrative Agent. The Administrative Agent’s sole duty with
respect to the custody, safekeeping and physical preservation of the Collateral
in its possession, under Section 9-207 of the New York UCC or otherwise, shall
be to deal with it in the same manner as the Administrative Agent deals with
similar property for its own account. Neither the Administrative Agent, any
Secured Party nor any of their respective officers, directors, employees or
agents shall be liable for failure to demand, collect or realize upon any of the
Collateral or for any delay in doing so or shall be under any obligation to sell
or otherwise dispose of any Collateral upon the request of any Grantor or any
other Person or to take any other action whatsoever with regard to the
Collateral or any part thereof. The powers conferred on the Administrative Agent
and the Secured Parties hereunder are solely to protect the Administrative
Agent’s and the Secured Partys’ interests in the Collateral and shall not impose
any duty upon the Administrative Agent or any Secured Party to exercise any such
powers. The Administrative Agent and the Secured Parties shall be accountable
only for amounts that they actually receive as a result of the exercise of such
powers, and neither they nor any of their officers, directors, employees or
agents shall be responsible to any Grantor for any act or failure to act
hereunder, except for their own gross negligence or willful misconduct.
     7.3 Execution of Financing Statements. Pursuant to any applicable law, each
Grantor authorizes the Administrative Agent to file or record financing
statements and other filing or recording documents or instruments with respect
to the Collateral without the signature of such Grantor in such form and in such
offices as the Administrative Agent determines appropriate to perfect the
security interests of the Administrative Agent under this Agreement. Each
Grantor authorizes the Administrative Agent to use the collateral description
“all personal property” or “all personal property, whether now owned or
hereafter acquired” in any such financing statements. Each Grantor hereby
ratifies and authorizes the filing by the Administrative Agent of any financing
statement with respect to the Collateral made prior to the date hereof.
     7.4 Authority of Administrative Agent. Each Grantor acknowledges that the
rights and responsibilities of the Administrative Agent under this Agreement
with respect to any action taken by the Administrative Agent or the exercise or
non-exercise by the Administrative Agent of any option, voting right, request,
judgment or other right or remedy provided for herein or resulting or arising
out of this Agreement shall, as between the Administrative Agent and the Secured
Parties, be governed by the Loan Documents and by such other agreements with
respect thereto as may exist from time to time among them, but, as between the
Administrative Agent and the Grantors, the Administrative Agent shall be
conclusively presumed to be acting as agent for the Secured Parties with full
and valid authority so to act or refrain from acting, and no Grantor shall be
under any obligation, or entitlement, to make any inquiry respecting such
authority.

 

--------------------------------------------------------------------------------

 

19
SECTION 8. MISCELLANEOUS
     8.1 Amendments in Writing. None of the terms or provisions of this
Agreement may be waived, amended, supplemented or otherwise modified except in
accordance with Section 11.1 of the Credit Agreement, notwithstanding any
provisions of the Loan Documents to the contrary.
     8.2 Notices. All notices, requests and demands to or upon the
Administrative Agent or any Grantor hereunder shall be effected in the manner
provided for in Section 11.2 of the Credit Agreement; provided that any such
notice, request or demand to or upon any Guarantor shall be addressed to such
Guarantor at its notice address set forth on Schedule 1.
     8.3 No Waiver by Course of Conduct; Cumulative Remedies. Neither the
Administrative Agent nor any Secured Party shall by any act (except by a written
instrument pursuant to Section 8.1), delay, indulgence, omission or otherwise be
deemed to have waived any right or remedy hereunder or to have acquiesced in any
Default or Event of Default. No failure to exercise, nor any delay in
exercising, on the part of the Administrative Agent or any Secured Party, any
right, power or privilege hereunder shall operate as a waiver thereof. No single
or partial exercise of any right, power or privilege hereunder shall preclude
any other or further exercise thereof or the exercise of any other right, power
or privilege. A waiver by the Administrative Agent or any Secured Party of any
right or remedy hereunder on any one occasion shall not be construed as a bar to
any right or remedy which the Administrative Agent or such Secured Party would
otherwise have on any future occasion. The rights and remedies herein provided
are cumulative, may be exercised singly or concurrently and are not exclusive of
any other rights or remedies provided by law.
     8.4 Enforcement Expenses; Indemnification. (a) Each Grantor agrees to pay
or reimburse the Administrative Agent and each Secured Party for all its
reasonable costs and expenses incurred in connection with the enforcement or
preservation of any rights under this Agreement and the other Loan Documents to
which such Grantor is a party, including, without limitation, reasonable fees
and disbursements of counsel to the Administrative Agent and the several Secured
Parties.
     (b) Each Grantor agrees to pay, and to save the Administrative Agent and
the Secured Parties harmless from, any and all liabilities with respect to, or
resulting from any delay in paying, any and all stamp, excise, sales or other
taxes which may be payable or determined to be payable with respect to any of
the Collateral or in connection with any of the transactions contemplated by
this Agreement.
     (c) Each Grantor agrees to pay, and to save the Administrative Agent and
the Secured Parties harmless from, any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind or nature whatsoever with respect to the execution, delivery,
enforcement, performance and administration of this Agreement to the extent that
either Borrower would be required to do so pursuant to Section 11.5 of the
Credit Agreement, mutatis mutandis.
     (d) The agreements in this Section 8.4 shall survive repayment of the
Obligations and all other amounts payable under the Loan Documents.
     8.5 Successors and Assigns. This Agreement shall be binding upon the
successors and assigns of each Grantor and shall inure to the benefit of the
Administrative Agent and the Secured Parties and their successors and assigns;
provided that no Grantor may assign, transfer or delegate any of its rights or
obligations under this Agreement without the prior written consent of the
Administrative Agent.
     8.6 Set-Off. Each Grantor hereby irrevocably authorizes the Administrative
Agent and each Secured Party at any time and from time to time while an Event of
Default shall have occurred and be

 

--------------------------------------------------------------------------------

 

20
continuing, without notice to such Grantor or any other Grantor, any such notice
being expressly waived by each Grantor, to set-off and appropriate and apply any
and all deposits (general or special, time or demand, provisional or final), in
any currency, and any other credits, indebtedness or claims, in any currency, in
each case whether direct or indirect, absolute or contingent, matured or
unmatured, at any time held or owing by the Administrative Agent or such Secured
Party to or for the credit or the account of such Grantor, or any part thereof
in such amounts as the Administrative Agent or such Secured Party may elect,
against and on account of the obligations and liabilities of such Grantor to the
Administrative Agent or such Secured Party hereunder and claims of every nature
and description of the Administrative Agent or such Secured Party against such
Grantor, in any currency, whether arising hereunder, under any Loan Document or
otherwise, as the Administrative Agent or such Secured Party may elect, whether
or not the Administrative Agent or any Secured Party has made any demand for
payment and although such obligations, liabilities and claims may be contingent
or unmatured. The Administrative Agent and each Secured Party shall notify such
Grantor promptly of any such set-off and the application made by the
Administrative Agent or such Secured Party of the proceeds thereof, provided
that the failure to give such notice shall not affect the validity of such
set-off and application. The rights of the Administrative Agent and each Secured
Party under this Section 8.6 are in addition to other rights and remedies
(including, without limitation, other rights of set-off) which the
Administrative Agent or such Secured Party may have.
     8.7 Counterparts. This Agreement may be executed by one or more of the
parties to this Agreement on any number of separate counterparts (including by
telecopy), and all of said counterparts taken together shall be deemed to
constitute one and the same instrument.
     8.8 Severability. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
     8.9 Section Headings. The Section headings used in this Agreement are for
convenience of reference only and are not to affect the construction hereof or
be taken into consideration in the interpretation hereof.
     8.10 Integration. This Agreement and the other Loan Documents represent the
agreement of the Grantors, the Administrative Agent and the Secured Parties with
respect to the subject matter hereof and thereof, and there are no promises,
undertakings, representations or warranties by the Administrative Agent or any
Secured Party relative to subject matter hereof and thereof not expressly set
forth or referred to herein or in the other Loan Documents.
     8.11 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
     8.12 Submission To Jurisdiction; Waivers. Each Grantor hereby irrevocably
and unconditionally:
     (a) submits for itself and its property in any legal action or proceeding
relating to this Agreement and the other Loan Documents to which it is a party,
or for recognition and enforcement of any judgment in respect thereof, to the
non-exclusive general jurisdiction of the courts of the State of New York, the
courts of the United States of America for the Southern District of New York,
and appellate courts from any thereof;

 

--------------------------------------------------------------------------------

 

21
     (b) consents that any such action or proceeding may be brought in such
courts and waives any objection that it may now or hereafter have to the venue
of any such action or proceeding in any such court or that such action or
proceeding was brought in an inconvenient court and agrees not to plead or claim
the same;
     (c) agrees that service of process in any such action or proceeding may be
effected by mailing a copy thereof by registered or certified mail (or any
substantially similar form of mail), postage prepaid, to such Grantor at its
address referred to in Section 8.2 or at such other address of which the
Administrative Agent shall have been notified pursuant thereto;
     (d) agrees that nothing herein shall affect the right to effect service of
process in any other manner permitted by law or shall limit the right to sue in
any other jurisdiction; and
     (e) waives, to the maximum extent not prohibited by law, any right it may
have to claim or recover in any legal action or proceeding referred to in this
Section any special, exemplary, punitive or consequential damages.
     8.13 Acknowledgements. Each Grantor hereby acknowledges that:
     (a) it has been advised by counsel in the negotiation, execution and
delivery of this Agreement and the other Loan Documents to which it is a party;
     (b) neither the Administrative Agent nor any Secured Party has any
fiduciary relationship with or duty to any Grantor arising out of or in
connection with this Agreement or any of the other Loan Documents, and the
relationship between the Grantors, on the one hand, and the Administrative Agent
and Secured Parties, on the other hand, in connection herewith or therewith is
solely that of debtor and creditor; and
     (c) no joint venture is created hereby or by the other Loan Documents or
otherwise exists by virtue of the transactions contemplated hereby among the
Secured Parties or among the Grantors and the Secured Parties.
     8.14 Additional Grantors. Each Subsidiary of Hanover that is required to
become a party to this Agreement pursuant to Section 7.9 of the Credit Agreement
shall become a Grantor for all purposes of this Agreement upon execution and
delivery by such Subsidiary of an Assumption Agreement in the form of Annex 1
hereto.
     8.15 Releases. (a) At such time as the Loans, the Reimbursement Obligations
and the other Obligations (other than Obligations in respect of Derivatives
Agreements) shall have been paid in full, the Commitments have been terminated
and no Letters of Credit shall be outstanding (other than Letters of Credit cash
collateralized in accordance with subsection 11.18(b) of the Credit Agreement),
the Collateral shall be released from the Liens created hereby, and this
Agreement and all obligations (other than those expressly stated to survive such
termination) of the Administrative Agent and each Grantor hereunder shall
terminate, all without delivery of any instrument or performance of any act by
any party, and all rights to the Collateral shall revert to the Grantors. At the
request and sole expense of any Grantor following any such termination, the
Administrative Agent shall deliver to such Grantor any Collateral held by the
Administrative Agent hereunder, and execute and deliver to such Grantor such
documents as such Grantor shall reasonably request to evidence such termination.
     (b) If any of the Collateral shall be sold, transferred or otherwise
disposed of by any Grantor in a transaction permitted by the Loan Documents,
then the Administrative Agent, at the request and sole

 

--------------------------------------------------------------------------------

 

22
expense of such Grantor, shall execute and deliver to such Grantor all releases
or other documents reasonably necessary or desirable for the release of the
Liens created hereby on such Collateral. At the request and sole expense of the
Borrowers, a Subsidiary Guarantor shall be released from its obligations
hereunder in the event that all the Capital Stock of such Subsidiary Guarantor
shall be sold, transferred or otherwise disposed of in a transaction permitted
by the Loan Documents.
     8.16 WAIVER OF JURY TRIAL. EACH GRANTOR HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING
TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.

 

--------------------------------------------------------------------------------

 

     IN WITNESS WHEREOF, each of the undersigned has caused this Guarantee and
Collateral Agreement to be duly executed and delivered as of the date first
above written.

              HANOVER COMPRESSOR COMPANY
 
       
 
  By:        /s/ LEE E. BECKELMAN
 
       
 
      Name: Lee E. Beckelman
 
      Title: Senior Vice President and Chief Financial Officer
 
            HANOVER COMPRESSION LIMITED     PARTNERSHIP
 
       
 
  By:        /s/ LEE E. BECKELMAN
 
       
 
      Name: Lee E. Beckelman
 
      Title: Senior Vice President and Chief Financial Officer
 
       

Signature Page to Guarantee and Collateral Agreement

--------------------------------------------------------------------------------

 

              EQUITY LEASING CORPORATION     ENERGY TRANSFER – HANOVER VENTURES
L.P.     HANOVER ASIA, INC.     HANOVER AUSTRALIA, L.L.C.     HANOVER COLOMBIA
LEASING, LLC     HANOVER COMPRESSED NATURAL GAS SERVICES, LLC     HANOVER
COMPRESSOR NIGERIA, INC.     HANOVER COMPRESSION GENERAL HOLDINGS LLC    
HANOVER ECUADOR L.L.C.     HANOVER GENERAL ENERGY TRANSFER, LLC     HANOVER IDR,
INC.     HANOVER LIMITED ENERGY TRANSFER, LLC     HANOVER PARTNERS NIGERIA LLC  
  HANOVER SPE L.L.C.     HANOVER/TRINIDAD, L.L.C.     HC CAYMAN LLC     HC
LEASING, INC.     HCL COLOMBIA, INC.     KOG, INC.     NIGERIAN LEASING, LLC    
SOUTHWEST INDUSTRIES, INC.
 
       
 
  By:        /s/ LEE E. BECKELMAN
 
       
 
      Name: Lee E. Beckelman
 
      Title: Vice President & Treasurer
 
            HANOVER HL HOLDINGS, LLC     HANOVER HL, LLC
 
       
 
  By:        /s/ CHARLES R. SCOTT
 
       
 
      Name: Charles R. Scott
 
      Title: Manager

Signature Page to Guarantee and Collateral Agreement

--------------------------------------------------------------------------------

 

ACKNOWLEDGEMENT AND CONSENT
     The undersigned hereby acknowledges receipt of a copy of the Guarantee and
Collateral Agreement dated as of November 21, 2005 (the “Agreement”), made by
the Grantors parties thereto for the benefit of JPMorgan Chase Bank, N.A., as
Administrative Agent. The undersigned agrees for the benefit of the
Administrative Agent and the Secured Parties as follows:
          1. The undersigned will be bound by the terms of the Agreement and
will comply with such terms insofar as such terms are applicable to the
undersigned.
          2. The terms of Sections 6.3(c) and 6.7(b) of the Agreement shall
apply to it, mutatis mutandis, with respect to all actions that may be required
of it pursuant to Section 6.3(c) or 6.7(b) of the Agreement.

            [NAME OF ISSUER]
                       

         
 
  By:    
 
       
 
      Name:
 
      Title:

     
 
  Address for Notices:
 
 
 

 
 
 

 
 
 
Fax:

         

 

--------------------------------------------------------------------------------

 

                                   

Annex 1 to
Guarantee and Collateral Agreement
     ASSUMPTION AGREEMENT, dated as of _____________, 200_, is made by
_______________________(the “Additional Grantor”), in favor of JPMorgan Chase
Bank, N.A., as Administrative Agent (in such capacity, the “Administrative
Agent”) for the banks and other financial institutions or entities (the “Secured
Parties”) parties to the Loan Documents referred to below. All capitalized terms
not defined herein shall have the meaning ascribed to them in such Credit
Agreement.
W I T N E S S E T H
:
     WHEREAS, Hanover Compressor Company (“Hanover”), Hanover Compression
Limited Partnership (“HCLP”) and the Secured Parties have entered into the Loan
Documents (as defined in the Guarantee and Collateral Agreement referred to
below);
     WHEREAS, in connection with the Loan Documents, Hanover and certain of its
Subsidiaries (other than the Additional Grantor) have entered into the Guarantee
and Collateral Agreement, dated as of November 21, 2005 (and as may be further
amended, supplemented or otherwise modified from time to time, the “Guarantee
and Collateral Agreement”) in favor of the Administrative Agent for the benefit
of the Secured Parties;
     WHEREAS, the Credit Agreement requires the Additional Grantor to become a
party to the Guarantee and Collateral Agreement; and
     WHEREAS, the Additional Grantor has agreed to execute and deliver this
Assumption Agreement in order to become a party to the Guarantee and Collateral
Agreement;
     NOW, THEREFORE, IT IS AGREED:
     1. Guarantee and Collateral Agreement. By executing and delivering this
Assumption Agreement, the Additional Grantor, as provided in Section 8.14 of the
Guarantee and Collateral Agreement, hereby becomes a party to the Guarantee and
Collateral Agreement as a Grantor thereunder with the same force and effect as
if originally named therein as a Grantor and, without limiting the generality of
the foregoing, hereby expressly assumes all obligations and liabilities of a
Grantor thereunder. The information set forth in Annex 1-A hereto is hereby
added to the information set forth in the Schedules to the Guarantee and
Collateral Agreement. The Additional Grantor hereby represents and warrants that
each of the representations and warranties contained in Section 4 of the
Guarantee and Collateral Agreement is true and correct on and as the date hereof
(after giving effect to this Assumption Agreement) as if made on and as of such
date.
     2. Governing Law. THIS ASSUMPTION AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

 

--------------------------------------------------------------------------------

 

2
     IN WITNESS WHEREOF, the undersigned has caused this Assumption Agreement to
be duly executed and delivered as of the date first above written.

                  [ADDITIONAL GRANTOR]                 By:           Name:      
    Title:        

 

--------------------------------------------------------------------------------

 

Annex 1-A to
Assumption Agreement
Supplement to Schedule 1
Supplement to Schedule 2
Supplement to Schedule 3