EXHIBIT 10.3
EXECUTION COPY
(WACHOVIA CAPITAL lOGO) [c86621c8662102.gif]
Wachovia Capital Markets, LLC,
Solely as agent of Wachovia Bank, National Association
375 Park Avenue
New York, NY 10152
June 4, 2009

     
To:
  Exterran Holdings, Inc.
 
  16666 Northchase Drive
 
  Houston, Texas 77060
 
  Attention: Treasurer
 
  Telephone No.: (281) 836-7000
 
  Facsimile No.: (281) 836-8106

Re: Call Option Transaction
The purpose of this letter agreement (this “Confirmation”) is to confirm the
terms and conditions of the call option transaction entered into between
Wachovia Bank, National Association (“Dealer”), represented by Wachovia Capital
Markets, LLC (“Agent”) as its agent, and Exterran Holdings, Inc.
(“Counterparty”) as of the Trade Date specified below (the “Transaction”). This
letter agreement constitutes a “Confirmation” as referred to in the ISDA Master
Agreement specified below. This Confirmation shall replace any previous
agreements and serve as the final documentation for this Transaction.
The definitions and provisions contained in the 2002 ISDA Equity Derivatives
Definitions (the “Equity Definitions”), as published by the International Swaps
and Derivatives Association, Inc. (“ISDA”) are incorporated into this
Confirmation. In the event of any inconsistency between the Equity Definitions
and this Confirmation, this Confirmation shall govern. Certain defined terms
used herein have the meanings assigned to them in the Prospectus dated June 3,
2009, as supplemented by the Prospectus Supplement dated June 4, 2009 (as so
supplemented, the “Prospectus”) relating to the USD 325,000,000 principal amount
of 4.25% Convertible Senior Notes due 2014 (the “Convertible Notes” and each USD
1,000 principal amount of Convertible Notes, a “Convertible Note”) issued by
Counterparty pursuant to the Indenture to be dated as of June 10, 2009 (the
“Base Indenture”), as supplemented by a Supplemental Indenture thereto (the
“Supplemental Indenture”) to be dated June 10, 2009, between Counterparty and
Wells Fargo Bank, National Association, as trustee (the Base Indenture as so
supplemented, the “Indenture”). In the event of any inconsistency between the
terms defined in the Prospectus, the Indenture and this Confirmation, this
Confirmation shall govern. The parties acknowledge that this Confirmation is
entered into on the date hereof with the understanding that (i) definitions set
forth in the Indenture which are also defined herein by reference to the
Indenture and (ii) sections of the Indenture that are referred to herein will
conform to the descriptions thereof in the Prospectus. If any such definitions
in the Indenture or any such sections of the Indenture differ from the
descriptions thereof in the Prospectus, the descriptions thereof in the
Prospectus will govern for purposes of this Confirmation. The parties further
acknowledge that the Indenture section numbers used herein are based on the
draft of the Indenture last reviewed by Dealer as of the date of this
Confirmation, and if any such section numbers are changed in the Indenture as
executed, the parties will amend this Confirmation in good faith to preserve the
intent of the parties. For the avoidance of doubt, references to the Base
Indenture or Supplemental Indenture, as the case may be, herein are references
to the Base Indenture or the Supplemental Indenture, as the case may be, as in
effect on the date of its execution and if the Base Indenture or the
Supplemental Indenture is amended following such date, any such amendment will
be disregarded for purposes of this Confirmation unless the parties agree
otherwise in writing.

 

 

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Each party is hereby advised, and each such party acknowledges, that the other
party has engaged in, or refrained from engaging in, substantial financial
transactions and has taken other material actions in reliance upon the parties’
entry into the Transaction to which this Confirmation relates on the terms and
conditions set forth below.
1. This Confirmation evidences a complete and binding agreement between Dealer
and Counterparty as to the terms of the Transaction to which this Confirmation
relates. This Confirmation shall supplement, form a part of, and be subject to
an agreement in the form of the 2002 ISDA Master Agreement (the “Agreement”) as
if Dealer and Counterparty had executed an agreement in such form (but without
any Schedule except for the election of the laws of the State of New York as the
governing law (without reference to the choice of law doctrine)) on the Trade
Date. In the event of any inconsistency between provisions of the Agreement and
this Confirmation, this Confirmation will prevail for the purpose of the
Transaction to which this Confirmation relates. The parties hereby agree that no
Transaction other than the Transaction to which this Confirmation relates shall
be governed by the Agreement.
2. The terms of the particular Transaction to which this Confirmation relates
are as follows:
General Terms:

         
 
  Trade Date:   June 4, 2009
 
       
 
  Effective Date:   The third Exchange Business Day immediately prior to the
Premium Payment Date
 
       
 
  Option Style:   “Modified American”, as described under “Procedures for
Exercise” below
 
       
 
  Option Type:   Call
 
       
 
  Buyer:   Counterparty
 
       
 
  Seller:   Dealer
 
       
 
  Shares:   The common stock of Counterparty, par value USD 0.01 per Share
(Exchange symbol “EXH”)
 
       
 
  Number of Options:   325,000. For the avoidance of doubt, the Number of
Options shall be reduced by any Options exercised by Counterparty. In no event
will the Number of Options be less than zero.
 
       
 
  Applicable Percentage:   40% 
 
       
 
  Option Entitlement:   As of any date, a number equal to the product of the
Applicable Percentage and the Conversion Rate as of such date (as defined in the
Supplemental Indenture, but without regard to any adjustments to the Conversion
Rate pursuant to Section 4.04(f) or (g) or Section 4.06 of the Supplemental
Indenture and subject to “Method of Adjustment” below), for each Convertible
Note.  
 
  Strike Price:   USD 23.1508 
 
       
 
  Premium:   USD 35,763,000 
 
       
 
  Premium Payment Date:   June 10, 2009
 
       
 
  Exchange:   The New York Stock Exchange
 
       
 
  Related Exchange(s):   All Exchanges

 

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Procedures for Exercise:

         
 
       
 
  Exercise Period(s):   Notwithstanding anything to the contrary in the Equity
Definitions, an Exercise Period shall occur with respect to an Option hereunder
only if such Option is an Exercisable Option (as defined below) and the Exercise
Period shall be, in respect of any Exercisable Option, the period commencing on,
and including, the relevant Conversion Date and ending on, and including, the
Scheduled Valid Day immediately preceding the first day of the relevant
Settlement Averaging Period in respect of such Conversion Date; provided that in
respect of Exercisable Options relating to Convertible Notes for which the
relevant Conversion Date occurs on or after March 15, 2014, the final day of the
Exercise Period shall be the Scheduled Valid Day immediately preceding the
Expiration Date.
 
       
 
  Conversion Date:   With respect to any conversion of Convertible Notes, the
date on which the Holder (as such term is defined in the Supplemental Indenture)
of such Convertible Notes satisfies all of the requirements for conversion
thereof as set forth in Section 4.02(b) of the Supplemental Indenture.
 
       
 
  Exercisable Options:   In respect of any Exercise Period (the “Relevant
Exercise Period”), the lesser of (i) the number of Convertible Notes surrendered
to Counterparty for conversion on the first day of the Relevant Exercise Period,
and (ii) the Number of Options as of the first day of the Relevant Exercise
Period; provided that if there are any other Exercisable Options as to which a
prior Exercise Period has commenced but no Exercise Date has yet occurred which
would thereby reduce the Number of Options as of the related Exercise Date (such
other Exercisable Options, the “Other Exercisable Options”), then solely for the
purposes of determining the number of Exercisable Options for the Relevant
Exercise Period, the Number of Options on the first day of the Relevant Exercise
Period shall be reduced by such Other Exercisable Options.  
 
      Notwithstanding the foregoing, in no event shall the number of Exercisable
Options exceed the Number of Options.  
 
  Expiration Time:   The Valuation Time
 
       
 
  Expiration Date:   June 15, 2014, subject to earlier exercise.
 
       
 
  Multiple Exercise:   Applicable, as described under Exercisable Options above.
 
       
 
  Automatic Exercise:   Applicable; and means that in respect of an Exercise
Period, a number of Options not previously exercised hereunder equal to the
number of Exercisable Options shall be deemed to be exercised on the final day
of such Exercise Period for such Exercisable Options; provided that such Options
shall be deemed exercised only if Counterparty has provided a Notice of Exercise
to Dealer.

 

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  Notice of Exercise:   Notwithstanding anything to the contrary in the Equity
Definitions, in order to exercise any Exercisable Options, Counterparty must
notify Dealer in writing before 5:00 p.m. (New York City time) on the Scheduled
Valid Day prior to the scheduled first day of the Settlement Averaging Period
for the Exercisable Options being exercised of (i) the number of such Options,
(ii) the scheduled first day of the Settlement Averaging Period and the
scheduled Settlement Date and (iii) if Counterparty elects a Settlement Method
other than Net Share Settlement Method in accordance with “Settlement Method”
below, such notice must include the information, representations,
acknowledgements and agreements required pursuant to “Settlement Method Election
Conditions” below; provided that in respect of Exercisable Options relating to
Convertible Notes with a Conversion Date occurring on or after March 15, 2014,
such notice may be given on or prior to the second Scheduled Valid Day
immediately preceding the Expiration Date and need only specify the information
required in clause (i) above, and the information in clause (iii) above, if
applicable, will be provided in a Notice of Final Settlement Method.
 
       
 
  Notice of Final Settlement Method:   In order to elect a Settlement Method
other than Net Share Settlement for any Exercisable Options relating to
Convertible Notes with a Conversion Date occurring on or after March 15, 2014,
Counterparty must notify Dealer in writing before 5:00 p.m. (New York City time)
on or prior to March 15, 2014 of such election, and any such notice must include
the information, representations, acknowledgements and agreements required
pursuant to “Settlement Method Election Conditions” below.
 
       
 
  Valuation Time:   At the close of trading of the regular trading session on
the Exchange; provided that if the principal trading session is extended, the
Calculation Agent shall determine the Valuation Time in its reasonable
discretion.
 
       
 
  Market Disruption Event:   Section 6.3(a) of the Equity Definitions is hereby
replaced in its entirety by the following:
 
       
 
      “‘Market Disruption Event’ means, in respect of a Share, (i) a failure by
the primary United States national or regional securities exchange or market on
which the Shares are listed or admitted to trading to open for trading during
its regular trading session or (ii) the occurrence or existence prior to 1:00
p.m. (New York City time) on any Scheduled Valid Day for the Shares for more
than one half-hour period in the aggregate during regular trading hours of any
suspension or limitation imposed on trading (by reason of movements in price
exceeding limits permitted by the relevant stock exchange or otherwise) in the
Shares or in any options, contracts or future contracts relating to the Shares.”

 

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Settlement Terms:

         
 
       
 
  Settlement Method:   For any Exercisable Option, Net Share Settlement;
provided that Counterparty may elect Cash Settlement or Combination Settlement
for such Exercisable Option in accordance with the “Settlement Method Election
Conditions” below.
 
       
 
  Settlement Method Election
Conditions:   In order to elect a Settlement Method other than Net Share
Settlement for any Exercisable Option, the Notice of Exercise or Notice of Final
Settlement Method for such Exercisable Option, as applicable, shall:
 
       
 
      (i) include Counterparty’s election of such other Settlement Method for
such Exercisable Options;
 
       
 
      (ii) if such other Settlement Method is Combination Settlement, specify
the fixed amount of cash per Exercisable Option that is to be delivered to
Counterparty (the “Specified Option Cash Amount”);
 
       
 
      (iii) contain a representation that, on the date of such Notice of
Exercise or Notice of Final Settlement Method, as applicable, Counterparty is
not in possession of any material non-public information with respect to
Counterparty or the Shares;
 
       
 
      (iv) contain a representation that Counterparty is electing such other
Settlement Method in good faith and not as part of a plan or scheme to evade the
prohibitions of Rule 10b-5 under the Securities Exchange Act of 1934, as amended
(the “Exchange Act”);
 
       
 
      (v) contain a representation that Counterparty has not entered into or
altered any hedging transaction relating to the Shares corresponding to or
offsetting the Transaction;
 
       
 
      (vi) contain a representation that Counterparty is not electing such other
Settlement Method to create actual or apparent trading activity in the Shares
(or any security convertible into or exchangeable for the Shares) or to raise or
depress or otherwise manipulate the price of the Shares (or any security
convertible into or exchangeable for the Shares); and
 
       
 
      (vii) contain an acknowledgment by Counterparty that (A) any transaction
by Dealer following Counterparty’s election of such other Settlement Method
shall be made at Dealer’s sole discretion and for Dealer’s own account and
(B) Counterparty does not have, and shall not attempt to exercise, any influence
over how, when, whether or at what price to effect such transactions, including,
without limitation, the price paid or received per Share pursuant to such
transactions, or whether such transactions are made on any securities exchange
or privately.

 

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  Net Share Settlement:   If Net Share Settlement is applicable to any
Exercisable Option exercised or deemed exercised hereunder, Dealer will deliver
to Counterparty, on the relevant Settlement Date for each such Exercisable
Option, a number of Shares (the “Net Share Settlement Amount”) equal to the sum,
for each Valid Day during the Settlement Averaging Period for each such
Exercisable Option, of (i) the Daily Option Value for such Valid Day, divided by
(ii) the Relevant Price on such Valid Day, divided by (iii) the number of Valid
Days in the Settlement Averaging Period; provided that in no event shall the Net
Share Settlement Amount for any Exercisable Option exceed a number of Shares
equal to the Applicable Limit for such Exercisable Option divided by the
Relevant Price on the last Valid Day of the Settlement Averaging Period.
 
       
 
      Dealer will deliver cash in lieu of any fractional Shares to be delivered
with respect to any Net Share Settlement Share Amount valued at the Relevant
Price for the last Valid Day of the Settlement Averaging Period.
 
       
 
  Combination Settlement:   If Combination Settlement is applicable to any
Exercisable Option exercised or deemed exercised hereunder, Dealer will deliver
to Counterparty, on the relevant Settlement Date for each such Exercisable
Option:
 
       
 
      (i) an amount of cash (the “Combination Settlement Cash Amount”) equal to
the sum, for each Valid Day during the Settlement Averaging Period for such
Exercisable Option, of (A) an amount (the “Daily Combination Settlement Cash
Amount”) equal to the lesser of (1) the product of the Applicable Percentage and
the Specified Option Cash Amount and (2) the Daily Option Value, divided by (B)
the number of Valid Days in the Settlement Averaging Period; and
 
       
 
      (ii) a number of Shares (the “Combination Settlement Share Amount”) equal
to the sum, for each Valid Day during the Settlement Averaging Period for such
Exercisable Option, of (A) the Daily Option Value on such Valid Day minus Daily
Combination Settlement Cash Amount for such Valid Day, divided by (B) the
Relevant Price on such Valid Day, divided by (C) the number of Valid Days in the
Settlement Averaging Period; provided that if the calculation in clause
(A) above results in zero or a negative number for any Valid Day, the
Combination Settlement Share Amount for such Valid Day shall be deemed to be
zero;
 
       
 
      provided that in no event shall the sum of (x) the Combination Settlement
Cash Amount for any Exercisable Option and (y) the Combination Settlement Share
Amount for such Exercisable Option multiplied by the Relevant Price on the last
Valid Day of the Settlement Averaging Period, exceed the Applicable Limit for
such Exercisable Option.
 
       
 
      Dealer will deliver cash in lieu of any fractional Shares to be delivered
with respect to any Combination Settlement Share Amount valued at the Relevant
Price for the last Valid Day of the Settlement Averaging Period.

 

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  Cash Settlement:   If Cash Settlement is applicable to any Exercisable Option
exercised or deemed exercised hereunder, in lieu of Section 8.1 of the Equity
Definitions, Dealer will pay to Counterparty, on the relevant Settlement Date
for each such Exercisable Option, an amount of cash (the “Cash Settlement
Amount”) equal to the sum, for each Valid Day during the Settlement Averaging
Period for such Exercisable Option, of (i) the Daily Option Value for such Valid
Day, divided by (ii) the number of Valid Days in the Settlement Averaging
Period; provided that in no event shall the Cash Settlement Amount for any
Exercisable Option exceed the Applicable Limit for such Exercisable Option.
 
       
 
  Daily Option Value:   For any Valid Day, an amount equal to (i) the Option
Entitlement on such Valid Day, multiplied by (ii) the Relevant Price on such
Valid Day less the Strike Price on such Valid Day; provided that if the
calculation contained in clause (ii) above results in a negative number, the
Daily Option Value for such Valid Day shall be deemed to be zero. In no event
will the Daily Option Value be less than zero.
 
       
 
  Applicable Limit:   For any Exercisable Option, an amount of cash equal to the
Applicable Percentage multiplied by the excess of (i) the aggregate of (A) the
amount of cash, if any, delivered to the Holder of the related Convertible Note
upon conversion of such Convertible Note and (B) the number of Shares, if any,
delivered to the Holder of the related Convertible Note upon conversion of such
Convertible Note multiplied by the Relevant Price on the last Valid Day of the
Settlement Averaging Period for such Exercisable Option, over (ii) USD 1,000.
 
       
 
  Valid Day:   A day on which (i) there is no Market Disruption Event and
(ii) trading in the Shares generally occurs on the Exchange or, if the Shares
are not then listed on the Exchange, on the principal other United States
national or regional securities exchange on which the Shares are then listed or,
if the Shares are not then listed on a United States national or regional
securities exchange, on the principal other market on which the Shares are then
traded. If the Shares are not so listed or traded, “Valid Day” means a Business
Day.
 
       
 
  Scheduled Valid Day:   A day that is scheduled to be a Valid Day on the
principal United States national or regional securities exchange or market on
which the Shares are listed or admitted for trading. If the Shares are not so
listed or admitted for trading, “Scheduled Valid Day” means a Business Day.
 
       
 
  Business Day:   Any day other than a Saturday, a Sunday or a day on which the
Federal Reserve Bank of New York is authorized or required by law or executive
order to close or be closed.
 
       
 
  Relevant Price:   On any Valid Day, the per Share volume-weighted average
price as displayed under the heading “Bloomberg VWAP” on Bloomberg page EXH.N
<equity> AQR (or any successor thereto) in respect of the period from the
scheduled opening time of the Exchange to the Scheduled Closing Time of the
Exchange on such Valid Day (or if such volume-weighted average price is
unavailable, the market value of one Share on such Valid Day, as determined by
the Calculation Agent using a volume-weighted method).

 

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  Settlement Averaging Period:   For any Exercisable Option and regardless of
the Settlement Method applicable to such Exercisable Option:
 
       
 
      (i) if Counterparty has, on or prior to March 15, 2014, delivered a Notice
of Exercise to Dealer with respect to such Exercisable Option with a Conversion
Date occurring prior to March 15, 2014, the forty (40) consecutive Valid Days
commencing on and including the second Scheduled Valid Day following such
Conversion Date; or
 
       
 
      (ii) if Counterparty has, on or following March 15, 2014, delivered a
Notice of Exercise to Dealer with respect to such Exercisable Option with a
Conversion Date occurring on or following March 15, 2014, the forty
(40) consecutive Valid Days commencing on, and including, the forty-second
(42nd) Scheduled Valid Day immediately prior to the Expiration Date.
 
       
 
  Settlement Date:   For any Exercisable Option, the third Business Day
immediately following the final Valid Day of the Settlement Averaging Period for
such Exercisable Option.
 
       
 
  Settlement Currency:   USD
 
       
 
  Other Applicable Provisions:   The provisions of Sections 9.1(c), 9.8, 9.9,
9.11, 9.12 and 10.5 of the Equity Definitions will be applicable, except that
all references in such provisions to “Physically-settled” shall be read as
references to “Share Settled”. “Share Settled” in relation to any Option means
that Net Share Settlement or Combination Settlement is applicable to that
Option.
 
       
 
  Representation and Agreement:   Notwithstanding Section 9.11 of the Equity
Definitions, the parties acknowledge that any Shares delivered to Counterparty
shall be, upon delivery, subject to restrictions and limitations arising from
Counterparty’s status as issuer of the Shares under applicable securities laws.

3. Additional Terms applicable to the Transaction:
               Adjustments applicable to the Transaction:

         
 
  Potential Adjustment Events:   Notwithstanding Section 11.2(e) of the Equity
Definitions, a “Potential Adjustment Event” means an occurrence of any event or
condition, as set forth in Section 4.04(a), (b), (c), (d) or (e) of the
Supplemental Indenture that would result in an adjustment to the Conversion Rate
of the Convertible Notes; provided that in no event shall there be any
adjustment hereunder as a result of an adjustment to the Conversion Rate
pursuant to Section 4.04(f) or (g) or Section 4.06 of the Supplemental
Indenture.

 

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  Method of Adjustment:   Calculation Agent Adjustment, and means that,
notwithstanding Section 11.2(c) of the Equity Definitions, upon any adjustment
to the Conversion Rate of the Convertible Notes pursuant to the Supplemental
Indenture (other than Section 4.04(f) or (g) or Section 4.06 of the Supplemental
Indenture) or any adjustment pursuant to Section 4.05 of the Supplemental
Indenture, the Calculation Agent will make a corresponding adjustment to any one
or more of the Strike Price, Number of Options, Option Entitlement and any other
variable relevant to the exercise, settlement or payment for the Transaction;
provided that if the Calculation Agent in good faith disagrees with any
adjustment to the Conversion Rate pursuant to Section 4.04(n) or Section 4.05 of
the Supplemental Indenture, the Calculation Agent will determine the
corresponding adjustment to be made to any one or more of the Strike Price,
Number of Options, Option Entitlement and any other variable relevant to the
exercise, settlement or payment for the Transaction in a commercially reasonable
manner.

Extraordinary Events applicable to the Transaction:

         
 
       
 
  Merger Events:   Applicable; provided that notwithstanding Section 12.1(b) of
the Equity Definitions, a “Merger Event” means the occurrence of any event or
condition set forth in the definition of “Merger Event” in Section 4.07(a) of
the Supplemental Indenture.
 
       
 
  Tender Offers:   Applicable; provided that notwithstanding Section 12.1(d) of
the Equity Definitions, a “Tender Offer” means the occurrence of any event or
condition set forth in Section 4.04(e) of the Indenture.
 
       
 
  Consequence of Merger Events/Tender Offers:   Notwithstanding Section 12.2 and
Section 12.3 of the Equity Definitions, upon the occurrence of a Merger Event or
a Tender Offer, the Calculation Agent shall make a corresponding adjustment in
respect of any adjustment under the Supplemental Indenture to any one or more of
the nature of the Shares, Strike Price, Number of Options, Option Entitlement
and any other variable relevant to the exercise, settlement or payment for the
Transaction; provided, however, that such adjustment shall be made without
regard to any adjustment to the Conversion Rate for the issuance of additional
shares as set forth in Section 4.06 of the Supplemental Indenture; provided
further that if, with respect to a Merger Event or Tender Offer, (i) the
consideration for the Shares includes (or, at the option of a holder of Shares,
may include) shares of an entity or person not organized under the laws of the
United States, any State thereof or the District of Columbia or (ii) the
Counterparty to the Transaction following such Merger Event or Tender Offer,
will not be the Issuer following such Merger Event or Tender Offer, then
Cancellation and Payment (Calculation Agent Determination) shall apply.
 
       
 
  Nationalization, Insolvency or Delisting:   Cancellation and Payment
(Calculation Agent Determination); provided that, in addition to the provisions
of Section 12.6(a)(iii) of the Equity Definitions, it will also constitute a
Delisting if the Exchange is located in the United States and the Shares are not
immediately re-listed, re-traded or re-quoted on any of the New York Stock
Exchange, The NASDAQ Global Select Market or The NASDAQ Global Market (or their
respective successors); if the Shares are immediately re-listed, re-traded or
re-quoted on any of the New York Stock Exchange, The NASDAQ Global Select Market
or The NASDAQ Global Market (or their respective successors), such exchange or
quotation system shall thereafter be deemed to be the Exchange.

 

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  Additional Disruption Events:    
 
       
 
 
Change in Law:
  Applicable; provided that Section 12.9(a)(ii)(X) of the Equity Definitions is
hereby amended by replacing the word “Shares” with the phrase “Hedge Positions.”
 
       
 
 
Failure to Deliver:
  Applicable
 
       
 
 
Hedging Disruption:
  Applicable; provided that Section 12.9(a)(v) of the Equity Definitions is
hereby modified by inserting the following two phrases at the end of such
Section:
 
       
 
      “For the avoidance of doubt, the term “equity price risk” shall be deemed
to include, but shall not be limited to, stock price and volatility risk. And,
for the further avoidance of doubt, any such transactions or assets referred to
in phrases (A) or (B) above must be available on commercially reasonable pricing
terms.”
 
       
 
 
Hedging Party:
  For all applicable Additional Disruption Events, Dealer.
 
       
 
 
Determining Party:
  For all applicable Extraordinary Events, Dealer.
 
       

     
Non-Reliance:
  Applicable
 
   
Agreements and Acknowledgements Regarding Hedging Activities:
  Applicable
 
   
Additional Acknowledgments:
  Applicable
 
   
4. Calculation Agent:
  Dealer; provided that all determinations made by Dealer as Calculation Agent
shall be made in good faith and in a commercially reasonable manner. Following
any calculation or determination by Calculation Agent hereunder and a prior
written request by Counterparty, the Calculation Agent shall provide
Counterparty a written explanation of such calculation or determination
including, where applicable, a description of the methodology and the basis for
such calculation or determination in reasonable detail, it being understood that
the Calculation Agent shall not be obligated to disclose any proprietary models
used by it for such calculation or determination. No transferee of Dealer shall
act as Calculation Agent without the prior written consent of Counterparty, such
consent not to be unreasonably withheld or delayed.

5. Account Details:

  (a)  
Account for payments to Counterparty:

Bank: JPMorgan Chase Bank, N.A., New York
ABA: 021000021
Acct: Exterran Holdings, Inc.
Acct No.: 737308817
Account for delivery of Shares to Counterparty:

 

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To be provided by Counterparty.

  (b)  
Account for payments to Dealer:

Wachovia Bank, National Association
Charlotte, NC
ABA: 053-000-219
Account No.: 04659360009768
Attn: Equity Derivatives
Account for delivery of Shares from Dealer:
To be provided by Dealer.
6. Offices:
The Office of Counterparty for the Transaction is: Inapplicable, Counterparty is
not a Multibranch Party.
The Office of Dealer for the Transaction is: New York
Wachovia Bank, National Association
375 Park Avenue
New York, NY 10152
7. Notices: For purposes of this Confirmation:

  (a)  
Address for notices or communications to Counterparty:

Exterran Holdings, Inc.
16666 Northchase Drive
Houston, Texas 77060
Attention: Treasurer
Telephone No.: (281) 836-7000
Facsimile No.: (281) 836-8106

  (b)  
Address for notices or communications to Dealer:

Wachovia Bank, National Association
c/o Mark Kohn or Head Trader
375 Park Avenue, NY4073
New York, NY 10152
Telephone No.: (212) 214-6089
Facsimile No.: (212) 214-8917
8. Representations and Warranties of Counterparty
Each of the representations and warranties of Counterparty set forth in
Section 3 of the Underwriting Agreement (the “Underwriting Agreement”) dated as
of June 4, 2009 between Counterparty and J.P. Morgan Securities Inc., Merrill
Lynch, Pierce, Fenner & Smith Incorporated, Wachovia Capital Markets, LLC and
Credit Suisse Securities (USA) LLC as representative of the Underwriters party
thereto (the “Underwriters”), are true and correct and are hereby deemed to be
repeated to Dealer on the date hereof and on and as of the Premium Payment Date
as if set forth herein. Counterparty hereby further represents and warrants to
Dealer that:

  (a)  
Counterparty has all necessary corporate power and authority to execute, deliver
and perform its obligations in respect of this Transaction; such execution,
delivery and performance have been duly authorized by all necessary corporate
action on Counterparty’s part; and this Confirmation has been duly and validly
executed and delivered by Counterparty and constitutes its valid and binding
obligation, enforceable against Counterparty in accordance with its

 

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terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors’ rights and
remedies generally, and subject, as to enforceability, to general principles of
equity, including principles of commercial reasonableness, good faith and fair
dealing (regardless of whether enforcement is sought in a proceeding at law or
in equity) and except that rights to indemnification and contribution hereunder
may be limited by federal or state securities laws or public policy relating
thereto.
    (b)  
Neither the execution and delivery of this Confirmation nor the incurrence or
performance of obligations of Counterparty hereunder will conflict with or
result in a breach of the certificate of incorporation or by-laws (or any
equivalent documents) of Counterparty, or any applicable law or regulation, or
any order, writ, injunction or decree of any court or governmental authority or
agency, or any agreement or instrument to which Counterparty or any of its
subsidiaries is a party or by which Counterparty or any of its subsidiaries is
bound or to which Counterparty or any of its subsidiaries is subject, or
constitute a default under, or result in the creation of any lien under, any
such agreement or instrument.
    (c)  
No consent, approval, authorization, or order of, or filing with, any
governmental agency or body or any court is required in connection with the
execution, delivery or performance by Counterparty of this Confirmation, except
such as have been obtained or made and such as may be required under the
Securities Act of 1933, as amended (the “Securities Act”) or state securities
laws.
    (d)  
Counterparty is not and will not be required to register as an “investment
company” as such term is defined in the Investment Company Act of 1940, as
amended.
    (e)  
It is an “eligible contract participant” (as such term is defined in Section
1a(12) of the Commodity Exchange Act, as amended (the “CEA”)) because one or
more of the following is true:
       
Counterparty is a corporation, partnership, proprietorship, organization, trust
or other entity and:

  (A)  
Counterparty has total assets in excess of USD 10,000,000;
    (B)  
the obligations of Counterparty hereunder are guaranteed, or otherwise supported
by a letter of credit or keepwell, support or other agreement, by an entity of
the type described in Section 1a(12)(A)(i) through (iv), 1a(12)(A)(v)(I),
1a(12)(A)(vii) or 1a(12)(C) of the CEA; or
    (C)  
Counterparty has a net worth in excess of USD 1,000,000 and has entered into
this Agreement in connection with the conduct of Counterparty’s business or to
manage the risk associated with an asset or liability owned or incurred or
reasonably likely to be owned or incurred by Counterparty in the conduct of
Counterparty’s business.

  (f)  
Each of it and its affiliates is not, on the date hereof, in possession of any
material non-public information with respect to Counterparty.
    (g)  
Counterparty is entering into the Transaction for bona fide business purposes
and not for speculative purposes.

9. Other Provisions:

  (a)  
Opinions. Counterparty shall deliver to Dealer an opinion of counsel, dated as
of the Trade Date and reasonably acceptable to Dealer in form and substance,
with respect to (i) due incorporation, existence and good standing of
Counterparty in Delaware, (ii) Counterparty’s qualifications as a foreign
corporation and good standing in Texas, (iii) the due authorization, execution
and delivery of the Confirmation, and (iv) the absence of conflict of the
execution and delivery of the Confirmation with any material agreement required
to be filed as any exhibit to Counterparty’s Annual Report on Form 10-K,
Counterparty’s charter documents and any applicable law or regulation. Delivery
of such opinion to Dealer shall be a condition precedent for the purpose of
Section 2(a)(iii) of the Agreement with respect to each obligation of Dealer
under Section 2(a)(i) of the Agreement.

 

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  (b)  
Repurchase Notices. Counterparty shall, on any day on which Counterparty effects
any repurchase of Shares, promptly give Dealer a written notice of such
repurchase (a “Repurchase Notice”) on such day if following such repurchase, the
number of outstanding Shares as determined on such day is (i) less than
59.2 million (in the case of the first such notice) or (ii) thereafter more than
3.0 million less than the number of Shares included in the immediately preceding
Repurchase Notice. Counterparty agrees to indemnify and hold harmless Dealer and
its affiliates and their respective officers, directors, employees, affiliates,
advisors, agents and controlling persons (each, an “Indemnified Person”) from
and against any and all losses (including losses relating to Dealer’s hedging
activities as a consequence of becoming, or of the risk of becoming, a
Section 16 “insider”, including without limitation, any forbearance from hedging
activities or cessation of hedging activities and any losses in connection
therewith with respect to this Transaction), claims, damages, judgments,
liabilities and expenses (including reasonable attorney’s fees), joint or
several, which an Indemnified Person may become subject to, as a result of
Counterparty’s failure to provide Dealer with a Repurchase Notice on the day and
in the manner specified in this paragraph, and to reimburse, within 30 days,
upon written request, each of such Indemnified Persons for any reasonable legal
or other expenses incurred in connection with investigating, preparing for,
providing testimony or other evidence in connection with or defending any of the
foregoing. If any suit, action, proceeding (including any governmental or
regulatory investigation), claim or demand shall be brought or asserted against
the Indemnified Person as a result of Counterparty’s failure to provide Dealer
with a Repurchase Notice in accordance with this paragraph, such Indemnified
Person shall promptly notify Counterparty in writing, and Counterparty, upon
request of the Indemnified Person, shall retain counsel reasonably satisfactory
to the Indemnified Person to represent the Indemnified Person and any others
Counterparty may designate in such proceeding and shall pay the fees and
expenses of such counsel related to such proceeding. Counterparty shall not be
liable for any settlement of any proceeding contemplated by this paragraph that
is effected without its written consent, but if settled with such consent or if
there be a final judgment for the plaintiff, Counterparty agrees to indemnify
any Indemnified Person from and against any loss or liability by reason of such
settlement or judgment. Counterparty shall not, without the prior written
consent of the Indemnified Person, effect any settlement of any pending or
threatened proceeding contemplated by this paragraph that is in respect of which
any Indemnified Person is or could have been a party and indemnity could have
been sought hereunder by such Indemnified Person, unless such settlement
includes an unconditional release of such Indemnified Person from all liability
on claims that are the subject matter of such proceeding on terms reasonably
satisfactory to such Indemnified Person. If the indemnification provided for in
this paragraph is unavailable to an Indemnified Person or insufficient in
respect of any losses, claims, damages or liabilities referred to therein, then
Counterparty hereunder, in lieu of indemnifying such Indemnified Person
thereunder, shall contribute to the amount paid or payable by such Indemnified
Person as a result of such losses, claims, damages or liabilities. The remedies
provided for in this paragraph (b) are not exclusive and shall not limit any
rights or remedies which may otherwise be available to any Indemnified Party at
law or in equity. The indemnity and contribution agreements contained in this
paragraph shall remain operative and in full force and effect regardless of the
termination of this Transaction.
    (c)  
Regulation M. Counterparty is not on the date hereof engaged in a distribution,
as such term is used in Regulation M under the Exchange Act, of any securities
of Counterparty, other than the distribution of the Convertible Notes.
Counterparty shall not, until the second Scheduled Trading Day immediately
following the Effective Date, engage in any such distribution.

 

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  (d)  
No Manipulation. Counterparty is not entering into this Transaction to create
actual or apparent trading activity in the Shares (or any security convertible
into or exchangeable for the Shares) or to raise or depress or otherwise
manipulate the price of the Shares (or any security convertible into or
exchangeable for the Shares) or otherwise in violation of the Exchange Act.
    (e)  
Transfer or Assignment. (i) Counterparty shall have the right to transfer or
assign its rights and obligations hereunder with respect to all, but not less
than all, of the Options hereunder (such Options, the “Transfer Options”);
provided that such transfer or assignment shall be subject to reasonable
conditions that Dealer may impose, including but not limited, to the following
conditions:

(A) With respect to any Transfer Options, Counterparty shall not be released
from its notice and indemnification obligations pursuant to Section 9(b) or any
obligations under Section 9(m) or 9(r) of this Confirmation;
(B) Any Transfer Options shall only be transferred or assigned to a third party
that is a United States person (as defined in the Internal Revenue Code of 1986,
as amended);
(C) Such transfer or assignment shall be effected on terms, including any
reasonable undertakings by such third party (including, but not limited to, an
undertaking with respect to compliance with applicable securities laws in a
manner that, in the reasonable judgment of Dealer, will not expose Dealer to
material risks under applicable securities laws) and execution of any
documentation and delivery of legal opinions with respect to securities laws and
other matters by such third party and Counterparty, as are requested and
reasonably satisfactory to Dealer;
(D) Dealer will not, as a result of such transfer and assignment, be required to
pay the transferee on any payment date an amount under Section 2(d)(i)(4) of the
Agreement greater than an amount that Dealer would have been required to pay to
Counterparty in the absence of such transfer and assignment;
(E) An Event of Default, Potential Event of Default or Termination Event will
not occur as a result of such transfer and assignment;
(F) Without limiting the generality of clause (B), Counterparty shall cause the
transferee to make such Payee Tax Representations and to provide such tax
documentation as may be reasonably requested by Dealer to permit Dealer to
determine that results described in clauses (D) and (E) will not occur upon or
after such transfer and assignment; and
(G) Counterparty shall be responsible for all reasonable costs and expenses,
including reasonable counsel fees, incurred by Dealer in connection with such
transfer or assignment.

     
(ii) Dealer may, without Counterparty’s consent, transfer or assign all or any
part of its rights or obligations under the Transaction to any third party with
a rating for its long term, unsecured and unsubordinated indebtedness equal to
or better than the lesser of (x) the credit rating of Dealer at the time of the
transfer and (y) A- by Standard and Poor’s Rating Group, Inc. or its successor
(“S&P”), or A3 by Moody’s Investor Service, Inc. (“Moody’s”) or, if either S&P
or Moody’s ceases to rate such debt, at least an equivalent rating or better by
a substitute rating agency mutually agreed by Counterparty and Dealer. If at any
time at which (1) the Section 16 Percentage exceeds 7.5%, (2) the Option Equity
Percentage exceeds 14.5%, or (3) the Share Amount exceeds the Post-Effective
Limit (if any applies), Dealer is unable after using its commercially reasonable
efforts to effect a transfer or assignment of Options to a third party on
pricing terms reasonably acceptable to Dealer and within a time period
reasonably acceptable to Dealer such that (1) the Section 16 Percentage will be
equal to or less than 7.5%, (2) the Option Equity Percentage will be equal to or
less than 14.5%, and (3) the Share Amount will be equal to or less than any such
Post-Effective Limit, then Dealer may designate any Exchange Business Day as an
Early Termination Date with respect to a portion of the Transaction (the
“Terminated Portion”), such that following such partial termination (1) the
Section 16 Percentage will be equal to or less than 7.5%, (2) the Option Equity
Percentage will be equal to or less than 14.5%, and (3) the Share Amount

 

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will be equal to or less than such Post-Effective Limit. In the event that
Dealer so designates an Early Termination Date with respect to a Terminated
Portion, a payment shall be made pursuant to Section 6 of the Agreement as if
(1) an Early Termination Date had been designated in respect of a Transaction
having terms identical to this Transaction and a Number of Options equal to the
number of Options underlying the Terminated Portion, (2) Counterparty shall be
the sole Affected Party with respect to such partial termination and (3) the
Terminated Portion shall be the sole Affected Transaction (and, for the
avoidance of doubt, the provisions of Section 9(k) shall apply to any amount
that is payable by Dealer to Counterparty pursuant to this sentence as if
Counterparty was not the Affected Party). The “Section 16 Percentage” as of any
day is the fraction, expressed as a percentage, (A) the numerator of which is
the number of Shares that Dealer and each person subject to aggregation of
Shares with Dealer under Section 13 or Section 16 of the Exchange Act and rules
promulgated thereunder directly or indirectly beneficially own (as defined under
Section 13 or Section 16 of the Exchange Act and rules promulgated thereunder)
and (B) the denominator of which is the number of Shares outstanding. The
“Option Equity Percentage” as of any day is the fraction, expressed as a
percentage, (A) the numerator of which is the sum of (x) the product of the
Number of Options and the Option Entitlement and (y) the aggregate number of
Shares underlying any other call option transaction sold by Dealer to
Counterparty, and (B) the denominator of which is the number of Shares
outstanding. The “Share Amount” as of any day is the number of Shares that
Dealer and any person whose ownership position would be aggregated with that of
Dealer (Dealer or any such person, a “Dealer Person”) under any law, rule,
regulation or regulatory order that for any reason becomes applicable to
ownership of Shares after the Trade Date (“Applicable Laws”), owns, beneficially
owns, constructively owns, controls, holds the power to vote or otherwise meets
a relevant definition of ownership of under the Applicable Laws, as determined
by Dealer in its reasonable discretion. The “Post-Effective Limit” means (x) the
minimum number of Shares that would give rise to reporting or registration
obligations or other requirements (including obtaining prior approval from any
person or entity) of a Dealer Person, or would result in an adverse effect on a
Dealer Person, under the Applicable Laws, as determined by Dealer in its
reasonable discretion, minus (y) 1% of the number of Shares outstanding.

     
(iii) Notwithstanding any other provision in this Confirmation to the contrary
requiring or allowing Dealer to purchase, sell, receive or deliver any Shares or
other securities to or from Counterparty, Dealer may designate any of its
affiliates to purchase, sell, receive or deliver such Shares or other securities
and otherwise to perform Dealer’s obligations in respect of this Transaction and
any such designee may assume such obligations. Dealer shall be discharged of its
obligations to Counterparty to the extent of any such performance.

  (f)  
Staggered Settlement. If upon advice of counsel with respect to applicable legal
and regulatory requirements, including any requirements relating to Dealer’s
hedging activities hereunder, Dealer reasonably determines that it would not be
practicable or advisable to deliver, or to acquire Shares to deliver, any or all
of the Shares to be delivered by Dealer on the Settlement Date for the
Transaction, Dealer may, by notice to Counterparty on or prior to any Settlement
Date (a “Nominal Settlement Date”), elect to deliver the Shares on two or more
dates (each, a “Staggered Settlement Date”) as follows:
       
(i) in such notice, Dealer will specify to Counterparty the related Staggered
Settlement Dates (the first of which will be such Nominal Settlement Date and
the last of which will be no later than the twentieth (20th) Exchange Business
Day following such Nominal Settlement Date) and the number of Shares that it
will deliver on each Staggered Settlement Date;
       
(ii) the aggregate number of Shares that Dealer will deliver to Counterparty
hereunder on all such Staggered Settlement Dates will equal the number of Shares
that Dealer would otherwise be required to deliver on such Nominal Settlement
Date; and
       
(iii) if the Net Share Settlement terms or the Combination Settlement terms set
forth above were to apply on the Nominal Settlement Date, then the Net Share
Settlement terms or the Combination Settlement terms, as applicable, will apply
on each Staggered Settlement Date, except that the Shares deliverable pursuant
to such terms on the Nominal Settlement Date will be allocated among such
Staggered Settlement Dates as specified by Dealer in the notice referred to in
clause (i) above.

 

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  (g)  
Role of Agent.
       
(i) The Agent is registered as a broker-dealer with the U.S. Securities and
Exchange Commission and the National Association of Securities Dealers, is
acting hereunder for and on behalf of Dealer solely in its capacity as agent for
Dealer pursuant to instructions from Dealer, and is not and will not be acting
as Counterparty’s agent, broker, advisor or fiduciary in any respect under or in
connection with this Transaction.
       
(ii) In addition to acting as Dealer’s agent in executing this Transaction, the
Agent is authorized from time to time to give written payment and/or delivery
instructions to Counterparty directing it to make its payments and/or deliveries
under this Transaction to an account of the Agent for remittance to Dealer (or
its designee), and for that purpose any such payment or delivery by Counterparty
to the Agent shall be treated as a payment or delivery to Dealer.
       
(iii) Except as otherwise provided herein, any and all notices, demands, or
communications of any kind transmitted in writing by either Dealer or
Counterparty under or in connection with this Transaction will be transmitted
exclusively by such Party to the other Party through the Agent at the following
address:
       
Wachovia Capital Markets, LLC
201 South College Street, 6th Floor
Charlotte, NC 28288-0601
Facsimile No.: (704) 383-8425
Telephone No.: (704) 715-8086
Attention: Equity Derivatives
       
(iv) The Agent shall have no responsibility or liability to Dealer or
Counterparty for or arising from (A) any failure by either Dealer or
Counterparty to perform any of their respective obligations under or in
connection with this Transaction, (B) the collection or enforcement of any such
obligations, or (C) the exercise of any of the rights and remedies of either
Dealer or Counterparty under or in connection with this Transaction. Each of
Dealer and Counterparty agrees to proceed solely against the other to collect or
enforce any such obligations, and the Agent shall have no liability in respect
of this Transaction except for its gross negligence or willful misconduct in
performing its duties as the agent of Dealer.
       
(v) Upon written request, the Agent will furnish to Dealer and Counterparty the
date and time of the execution of this Transaction and a statement as to the
source and amount of any remuneration received or to be received by the Agent in
connection with this Transaction.
    (h)  
Additional Termination Events. Notwithstanding anything to the contrary in this
Confirmation if an event of default with respect to Counterparty shall occur
under the terms of the Convertible Notes as set forth in Section 5.01 of the
Supplemental Indenture or under Section 6.01 of the Base Indenture, as modified
by Section 5.01 of the Supplemental Indenture, which event of default results in
the Convertible Notes becoming due and payable before their stated maturity,
then such event of default shall constitute an Additional Termination Event
applicable to the Transaction and, with respect to such event of default
(A) Counterparty shall be deemed to be the sole Affected Party and the
Transaction shall be the sole Affected Transaction and (B) Dealer shall be the
party entitled to designate an Early Termination Date pursuant to Section 6(b)
of the Agreement.
    (i)  
Amendments to Equity Definitions.
       
(i) Section 12.6(a)(ii) of the Equity Definitions is hereby amended by
(1) deleting from the fourth line thereof the word “or” after the word
“official” and inserting a comma therefor, and (2) deleting the semi-colon at
the end of subsection (B) thereof and inserting the following words therefor “or
(C) at Dealer’s option, the occurrence of any of the events specified in
Section 5(a)(vii)(1) through (9) of the ISDA Master Agreement with respect to
that Issuer.”

 

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(ii) Section 12.9(b)(i) of the Equity Definitions is hereby amended by
(1) replacing “either party may elect” with “Dealer may elect” and (2) replacing
“notice to the other party” with “notice to Counterparty” in the first sentence
of such section.
    (j)  
No Set-Off. Neither party shall have the right to set off any obligation that it
may have to the other party under this Transaction against any obligation such
other party may have to it, whether arising under the Agreement, this
Confirmation or any other agreement between the parties hereto, by operation of
law or otherwise.
    (k)  
Alternative Calculations and Payment on Early Termination and on Certain
Extraordinary Events. If in respect of this Transaction, an amount is payable by
Dealer to Counterparty (i) pursuant to Section 12.7 or Section 12.9 of the
Equity Definitions or (ii) pursuant to Section 6(d)(ii) of the Agreement (a
“Payment Obligation”), Counterparty may request Dealer to satisfy any such
Payment Obligation by the Share Termination Alternative (as defined below)
(except that Counterparty shall not make such an election in the event of a
Nationalization, Insolvency, Merger Event or Tender Offer, in each case, in
which the consideration to be paid to holders of Shares consists solely of cash,
or an Event of Default in which Counterparty is the Defaulting Party or a
Termination Event in which Counterparty is the Affected Party, other than an
Event of Default of the type described in Section 5(a)(iii), (v), (vi), (vii) or
(viii) of the Agreement or a Termination Event of the type described in Section
5(b) of the Agreement in each case that resulted from an event or events outside
Counterparty’s control) and shall give irrevocable telephonic notice to Dealer,
confirmed in writing within one Scheduled Trading Day, no later than 12:00 p.m.
(New York City time) on the Merger Date, the Tender Offer Date, the Announcement
Date (in the case of Nationalization, Insolvency or Delisting), the Early
Termination Date or date of cancellation, as applicable; provided that if
Counterparty does not validly request Dealer to satisfy its Payment Obligation
by the Share Termination Alternative, Dealer shall have the right, in its
reasonable discretion, to satisfy its Payment Obligation by the Share
Termination Alternative, notwithstanding Counterparty’s election to the
contrary. In calculating any amounts under Section 6(e) of the Agreement,
notwithstanding anything to the contrary in the Agreement, (1) separate amounts
shall be calculated as set forth in Section 6(e) with respect to (i) this
Transaction and (ii) all other Transactions, and (2) such separate amounts shall
be payable pursuant to Section 6(d)(ii) of the Agreement.

     
Share Termination Alternative:
  Applicable and means that Dealer shall deliver to Counterparty the Share
Termination Delivery Property on, or within a commercially reasonable period of
time after, the date when the Payment Obligation would otherwise be due pursuant
to Section 12.7 or 12.9 of the Equity Definitions or Section 6(d)(ii) and 6(e)
of the Agreement, as applicable (the “Share Termination Payment Date”), in
satisfaction of the Payment Obligation in the manner reasonably requested by
Counterparty free of payment.
 
   
Share Termination Delivery Property:
  A number of Share Termination Delivery Units, as calculated by the Calculation
Agent, equal to the Payment Obligation divided by the Share Termination Unit
Price. The Calculation Agent shall adjust the Share Termination Delivery
Property by replacing any fractional portion of a security therein with an
amount of cash equal to the value of such fractional security based on the
values used to calculate the Share Termination Unit Price.

 

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Share Termination Unit Price:
  The value to Dealer of property contained in one Share Termination Delivery
Unit, as determined by the Calculation Agent in its discretion by commercially
reasonable means and notified by the Calculation Agent to Dealer at the time of
notification of the Payment Obligation. For the avoidance of doubt, the parties
agree that in determining the Share Termination Delivery Unit Price the
Calculation Agent may consider the purchase price paid in connection with the
purchase of Share Termination Delivery Property.
 
   
Share Termination Delivery Unit:
  One Share or, if a Merger Event has occurred and a corresponding adjustment to
this Transaction has been made, a unit consisting of the number or amount of
each type of property received by a holder of one Share (without consideration
of any requirement to pay cash or other consideration in lieu of fractional
amounts of any securities) in such Merger Event, as determined by the
Calculation Agent.
 
   
Failure to Deliver:
  Applicable
 
   
Other applicable provisions:
  If Share Termination Alternative is applicable, the provisions of
Sections 9.8, 9.9, 9.11, 9.12 and 10.5 (as modified above) of the Equity
Definitions will be applicable, except that all references in such provisions to
“Physically-settled” shall be read as references to “Share Termination Settled”
and all references to “Shares” shall be read as references to “Share Termination
Delivery Units”. “Share Termination Settled” in relation to this Transaction
means that Share Termination Alternative is applicable to this Transaction.

  (l)  
Waiver of Jury Trial. Each party waives, to the fullest extent permitted by
applicable law, any right it may have to a trial by jury in respect of any suit,
action or proceeding relating to this Transaction. Each party (i) certifies that
no representative, agent or attorney of either party has represented, expressly
or otherwise, that such other party would not, in the event of such a suit,
action or proceeding, seek to enforce the foregoing waiver and (ii) acknowledges
that it and the other party have been induced to enter into this Transaction, as
applicable, by, among other things, the mutual waivers and certifications
provided herein.
    (m)  
Registration. Counterparty hereby agrees that if, in the good faith reasonable
judgment of Dealer (A) the Shares acquired by Dealer for the purpose of hedging
its obligations pursuant to this Transaction (the “Hedge Shares”) or (B) any
Early Unwind Shares delivered to Dealer pursuant to Section 9(s) (any such Hedge
Shares or Early Unwind Shares, “Restricted Shares”) cannot be sold in the public
market by Dealer without registration under the Securities Act, Counterparty
shall, at its election, either (i) in order to allow Dealer to sell the
Restricted Shares in a registered offering, make available to Dealer an
effective registration statement under the Securities Act and enter into an
agreement, in form and substance satisfactory to Dealer, substantially in the
form of an underwriting agreement for a registered secondary offering; provided,
however, that if Dealer, in its sole reasonable discretion, is not satisfied
with

 

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access to due diligence materials, the results of its due diligence
investigation, or the procedures and documentation for the registered offering
referred to above, then clause (ii) or clause (iii) of this paragraph shall
apply at the election of Counterparty, (ii) in order to allow Dealer to sell the
Restricted Shares in a private placement, enter into a private placement
agreement substantially similar to private placement purchase agreements
customary for private placements of equity securities, in form and substance
satisfactory to Dealer (in which case, the Calculation Agent shall make any
adjustments to the terms of this Transaction that are necessary, in its
reasonable judgment, to compensate Dealer for any discount from the public
market price of the Shares incurred on the sale of Restricted Shares in a
private placement), or (iii) purchase the Restricted Shares from Dealer at the
Reference Price on such Exchange Business Days, and in the amounts, requested by
Dealer.

  (n)  
Tax Disclosure. Effective from the date of commencement of discussions
concerning the Transaction, Counterparty and each of its employees,
representatives, or other agents may disclose to any and all persons, without
limitation of any kind, the tax treatment and tax structure of the Transaction
and all materials of any kind (including opinions or other tax analyses) that
are provided to Counterparty relating to such tax treatment and tax structure.
    (o)  
Right to Extend. Dealer may postpone, in whole or in part, any Settlement Date
or any other date of valuation or delivery by Dealer or add additional
Settlement Dates or any other date of valuation or delivery, with respect to
some or all of the Options hereunder, if Dealer reasonably determines, in its
discretion, that such extension is reasonably necessary or appropriate to
preserve Dealer’s hedging or hedge unwind activity hereunder in light of
existing liquidity conditions or to enable Dealer to effect purchases of Shares
in connection with its hedging, hedge unwind or settlement activity hereunder in
a manner that would, if Dealer were Counterparty or an affiliated purchaser of
Counterparty, be in compliance with applicable legal, regulatory or
self-regulatory requirements, or with related policies and procedures applicable
to Dealer.
    (p)  
Status of Claims in Bankruptcy. Dealer acknowledges and agrees that this
Confirmation is not intended to convey to Dealer rights against Counterparty
with respect to the Transaction that are senior to the claims of common
stockholders of Counterparty in any United States bankruptcy proceedings of
Counterparty; provided that nothing herein shall limit or shall be deemed to
limit Dealer’s right to pursue remedies in the event of a breach by Counterparty
of its obligations and agreements with respect to the Transaction; provided,
further, that nothing herein shall limit or shall be deemed to limit Dealer’s
rights in respect of any transactions other than the Transaction.
    (q)  
Securities Contract; Swap Agreement. The parties hereto intend for: (a) the
Transaction to be a “securities contract” and a “swap agreement” as defined in
the Bankruptcy Code (Title 11 of the United States Code) (the “Bankruptcy
Code”), and the parties hereto to be entitled to the protections afforded by,
among other Sections, Sections 362(b)(6), 362(b)(17), 546(e), 546(g), 555 and
560 of the Bankruptcy Code; (b) a party’s right to liquidate the Transaction and
to exercise any other remedies upon the occurrence of any Event of Default under
the Agreement with respect to the other party to constitute a “contractual
right” as described in the Bankruptcy Code; and (c) each payment and delivery of
cash, securities or other property hereunder to constitute a “margin payment” or
“settlement payment” and a “transfer” as defined in the Bankruptcy Code.
    (r)  
Notice of Merger Consideration. Counterparty covenants and agrees that, as
promptly as practicable following the public announcement of any consolidation,
merger and binding share exchange to which Counterparty is a party, or any sale
of all or substantially all of Counterparty’s assets, in each case pursuant to
which the Shares will be converted into cash, securities or other property,
Counterparty shall notify Dealer in writing of the types and amounts of
consideration that holders of Shares have elected to receive upon consummation
of such transaction or event (the date of such notification, the “Consideration
Notification Date”); provided that in no event shall the Consideration
Notification Date be later than the date on which such transaction or event is
consummated.

 

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  (s)  
Early Unwind. (i) In the event the sale of the “Underwritten Securities” (as
defined in the Underwriting Agreement) is not consummated with the Underwriters
for any reason, or if Counterparty fails to deliver to Dealer opinions of
counsel as required pursuant to Section 9(a), in each case by 5:00 p.m. (New
York City time) on the Premium Payment Date, or such later date as agreed upon
by the parties (the Premium Payment Date or such later date, the “Early Unwind
Date”), the Transaction shall automatically terminate (the “Early Unwind”), on
the Early Unwind Date and (i) the Transaction and all of the respective rights
and obligations of Dealer and Counterparty under the Transaction shall be
cancelled and terminated and (ii) each party shall be released and discharged by
the other party from and agrees not to make any claim against the other party
with respect to any obligations or liabilities of the other party arising out of
and to be performed in connection with the Transaction either prior to or after
the Early Unwind Date; provided that Counterparty shall reimburse Dealer for any
costs or expenses (including market losses) relating to the unwinding of its
hedging activities in connection with the Transaction (including any loss or
cost incurred as a result of terminating, liquidating, obtaining or
reestablishing any hedge or related trading position of Dealer or one or more of
its affiliates in connection with the Transaction). The amount of any such
reimbursement shall be determined by Dealer in its sole good faith discretion.
Dealer shall notify Counterparty of such amount and Counterparty shall pay such
amount in immediately available funds on the Early Unwind Date. Each of Dealer
and Counterparty represent and acknowledge to the other that, subject to the
proviso included in this Section, upon an Early Unwind, all obligations with
respect to the Transaction shall be deemed fully and finally discharged.
       
(ii) If an amount is payable by Counterparty to Dealer pursuant to
Section 9(s)(i) (a “Reimbursement Obligation”), Counterparty shall have the
right, in its sole discretion, to satisfy any such Reimbursement Obligation by
delivering to Dealer, on the Exchange Business Day immediately following the
Early Unwind Date, the Early Unwind Shares (as defined below) in satisfaction of
such Reimbursement Obligation in the manner reasonably requested by Dealer free
of payment. The “Early Unwind Shares” shall be a number of Shares equal to the
Reimbursement Obligation otherwise payable under Section 9(s)(i) divided by the
value to Dealer per Share on the date such Shares are to be delivered as Early
Unwind Shares (the “Early Unwind Share Price”), as determined by the Calculation
Agent in its discretion using commercially reasonable means, together with cash
in lieu of any fractional Shares based on the Early Unwind Share Price. The
Calculation Agent shall notify Counterparty of the Early Unwind Share Price at
the time of notification of the Reimbursement Obligation. If such Early Unwind
Shares are Restricted Shares as set forth in Section 9(m), the Early Unwind
Share Price may reflect, in the Calculation Agent’s judgment, a discount
applicable to such Early Unwind Shares. If such Early Unwind Shares are not
Restricted Shares as set forth in Section 9(m), the Early Unwind Price shall be
Relevant Price on the Early Unwind Date. Counterparty shall give irrevocable
telephonic notice, confirmed in writing within one Scheduled Trading Day, to
Dealer of its election to satisfy any Reimbursement Obligation by delivery of
Early Unwind Shares pursuant to this Section 9(s)(ii) no later than 6:00 p.m.
(New York City time) on the Early Unwind Date.

 

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(iii) Notwithstanding any other provision of this Confirmation or the Agreement,
in no event will Counterparty be required to deliver more than the Number of
Shares in the aggregate to Dealer pursuant to this Section 9(s). In the event
Counterparty shall not have delivered the full number of Shares otherwise
applicable as a result of the foregoing sentence (such deficit, the “Deficit
Shares”), Counterparty shall be continually obligated to deliver, from time to
time until the full number of Deficit Shares have been delivered pursuant to
this Section 9(s), Shares when, and to the extent, that (A) Shares are
repurchased, acquired or otherwise received by Counterparty or any of its
subsidiaries after the Trade Date (whether or not in exchange for cash, fair
value or any other consideration), (B) authorized and unissued Shares reserved
for issuance in respect of other transactions prior to such date which prior to
the relevant date become no longer so reserved and (C) Counterparty additionally
authorizes any unissued Shares that are not reserved for other transactions.
Counterparty shall immediately notify Dealer of the occurrence of any of the
foregoing events (including the number of Shares subject to clause (A), (B) or
(C) and the corresponding number of Shares to be delivered) and promptly deliver
the Applicable Percentage of the aggregate number of such Shares thereafter.

  (t)  
Payment by Counterparty. In the event that (i) an Early Termination Date occurs
or is designated with respect to the Transaction as a result of a Termination
Event or an Event of Default (other than an Event of Default arising under
Section 5(a)(ii) or 5(a)(iv) of the Agreement) and, as a result, Counterparty
owes to Dealer an amount calculated under Section 6(e) of the Agreement, or
(ii) Counterparty owes to Dealer, pursuant to Section 12.7 or Section 12.9 of
the Equity Definitions, an amount calculated under Section 12.8 of the Equity
Definitions, such amount shall be deemed to be zero.

 

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Counterparty hereby agrees (a) to check this Confirmation carefully and
immediately upon receipt so that errors or discrepancies can be promptly
identified and rectified and (b) to confirm that the foregoing (in the exact
form provided by Dealer) correctly sets forth the terms of the agreement between
Dealer and Counterparty with respect to the Transaction, by manually signing
this Confirmation or this page hereof as evidence of agreement to such terms and
providing the other information requested herein and immediately returning an
executed copy by facsimile to 212-214-5913 (Attention: Equity Division
Documentation Unit, by telephone contact 212-214-6100).

         
Very truly yours,

 
    Wachovia Capital Markets, LLC, acting solely in its capacity as Agent of
Wachovia Bank, National Association
      By:    /s/ Mary Louise Guttmann       Authorized Signatory       
Name: Mary Louise Guttmann
            Senior Vice President       Wachovia Bank, National Association, by
Wachovia Capital Markets, LLC, acting solely in its capacity as Agent        
By:    /s/ Mary Louise Guttmann       Authorized Signatory        Name: Mary
Louise Guttmann
            Senior Vice President  

              Accepted and confirmed as of the Trade Date:    
 
            Exterran Holdings, Inc.    
 
            By:
 
 /s/ J. Michael Anderson        
 
 
 
        Authorized Signatory         Name: J. Michael Anderson    

 

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