**Exhibit 10.4** GUARANTEE AND COLLATERAL AGREEMENTmade byHANOVER COMPRESSOR COMPANYHANOVER COMPRESSION LIMITED PARTNERSHIPand certain of their Subsidiariesin favor ofJPMORGAN CHASE BANK, N.A.,as Administrative AgentDated as of November 21, 2005 
 

 
TABLE OF CONTENTS                   PageSECTION 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 
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                   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 AddressesSchedule 2 Perfection MattersSchedule 3 Jurisdictions of Organization and Chief Executive OfficesSchedule 4 Investment PropertySchedule 5 Location of Inventory and Equipment Held for Lease or SaleSchedule 6 Post-Closing Pledged SubsidiariesANNEXES   Annex 1 Form of Assumption Agreementii
 

 
GUARANTEE AND COLLATERAL AGREEMENT          GUARANTEE AND COLLATERAL AGREEMENT, dated as of November 21, 2005, made by each of thesignatories hereto (together with any other entity that may become a party hereto as providedherein, the “Grantors”), in favor of JPMorgan Chase Bank, N.A., as Administrative Agent (insuch capacity, the “Administrative Agent”) for the Secured Parties (as hereinafterdefined).WITNESSETH:          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”), amongHanover 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 ChaseBank, N.A. as administrative agent, whether or not with the same parties, the Lenders haveseverally agreed to make extensions of credit to the Borrowers upon the terms and subject to theconditions set forth therein;          WHEREAS, Hanover is a member of an affiliated group of companies that includes each otherGrantor;          WHEREAS, the proceeds of the extensions of credit under the Loan Documents (as hereinafterdefined) have been and will continue to be used in part to enable the Borrowers to make valuabletransfers to one or more of the other Grantors in connection with the operation of their respectivebusinesses;          WHEREAS, the Borrowers and the other Grantors are engaged in related businesses, and eachGrantor will derive substantial direct and indirect benefit from the continued making of theextensions of credit under the Loan Documents; and          WHEREAS, it is a condition precedent to the obligation of the Lenders to make their respectiveextensions of credit to the Borrowers under the Credit Agreement that the Grantors shall haveexecuted and delivered this Agreement to the Administrative Agent for the ratable benefit of theSecured Parties;          NOW, THEREFORE, in consideration of the premises and to induce the Administrative Agent andthe Lenders to enter into the Credit Agreement and make their respective extensions of credit tothe 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 CreditAgreement are used herein as therein defined, and the following terms are used herein as defined inthe New York UCC: Accounts, Certificated Security, Chattel Paper, Commercial Tort Claims,Documents, Equipment, Farm Products, General Intangibles, Instruments, Inventory, Letter-of-CreditRights 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 andinterest on the Loans and Reimbursement Obligations and all other obligations and liabilities ofthe Borrowers (including, without limitation, interest accruing at the then applicable rateprovided in the Credit Agreement after the maturity of the Loans and Reimbursement Obligations andinterest accruing at the then applicable rate provided in the Credit Agreement after the filing ofany petition in bankruptcy, or the commencement of any insolvency, reorganization or likeproceeding, relating to any Borrower, whether or not a claim for post-filing or post-petitioninterest is allowed in such proceeding) to the Administrative Agent or any Lender (or, in the caseof 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 mayarise under, out of, or in connection with, the Credit Agreement, this Agreement, the other LoanDocuments, any Letter of Credit, any Derivatives Agreements or any other document made, deliveredor 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 theLenders that are required to be paid by any Borrower pursuant to the terms of any of the foregoingagreements).          “Collateral”: as defined in Section 3.          “Collateral Account”: any collateral account established by the Administrative Agentas provided in Section 6.1 or 6.4.          “Copyright Licenses”: any written agreement naming any Grantor as licensor orlicensee, granting any right under any Copyright, including, without limitation, the grant ofrights to manufacture, distribute, exploit and sell materials derived from any Copyright.          “Copyrights”: (i) all copyrights arising under the laws of the United States, anyother country or any political subdivision thereof, whether registered or unregistered and whetherpublished or unpublished, all registrations and recordings thereof, and all applications inconnection therewith, including, without limitation, all registrations, recordings and applicationsin 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 applicablejurisdiction and, in any event, including, without limitation, any demand, time, savings, passbookor like account maintained with a depositary institution.          “Derivatives Agreements”: any agreement in respect of Derivatives entered into byHanover or any of its Subsidiaries with a Lender or any Affiliate of a Lender permitted by Section8.9 of the Credit Agreement.          “Excluded Equipment Lease Property”: any property or assets of any Grantor that issubject to a Lien created under the documentation governing the 2001A Equipment Lease Transactionor the 2001B Equipment Lease Transaction; provided, that any such property or assets shallcease to be “Excluded Equipment Lease Property” at such time as Incremental Term Loans areborrowed.          “Excluded Foreign Subsidiary Stock”: any shares of Capital Stock of ForeignSubsidiaries exceeding 66% of the outstanding voting Capital Stock of each Foreign Subsidiary. Forthe

 

3avoidance of doubt, it is understood and agreed that such Excluded Foreign Subsidiary Stockshall in no event be pledged hereunder or required to be pledged hereunder. Notwithstandinganything herein to the contrary, (a) the shares of Capital Stock of Production Operators CaymanInc. and Hanover Cayman, Limited, (b) the shares of Capital Stock of Subsidiaries of ProductionOperators Cayman Inc. and Hanover Cayman, Limited that are directly owned by HCLP to the extentthese 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 extentthese 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 orany Qualified Subsidiaries and (e) the shares of Capital Stock of Post-Closing Pledged Subsidiariesshall also be deemed to be “Excluded Foreign Subsidiary Stock”.          “Foreign Subsidiary”: any Subsidiary organized under the laws of any jurisdictionoutside the United States of America.          “Foreign Subsidiary Voting Stock”: the voting Capital Stock of any ForeignSubsidiary.          “Guarantor Obligations”: with respect to any Guarantor, all obligations andliabilities 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 Agreementto which such Guarantor is a party, in each case whether on account of guarantee obligations,reimbursement obligations, fees, indemnities, costs, expenses or otherwise (including, withoutlimitation, all fees and disbursements of counsel to the Administrative Agent or to the SecuredParties that are required to be paid by such Guarantor pursuant to the terms of this Agreement orany 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 BorrowerObligations of Hanover, HCLP.          “Intellectual Property”: the collective reference to all rights, priorities andprivileges relating to intellectual property, whether arising under United States, multinational orforeign 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 sueat law or in equity for any infringement or other impairment thereof, including the right toreceive all proceeds and damages therefrom.          “Intercompany Note”: any promissory note evidencing loans made by any Grantor toHanover or any of its Subsidiaries.          “Investment Property”: the collective reference to (i) all “investment property” assuch term is defined in Section 9-102(a)(49) of the New York UCC (other than Excluded ForeignSubsidiary Stock) and (ii) whether or not constituting “investment property” as so defined, allPledged 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 theDerivatives 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 theState 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 byor to any Grantor of any right to manufacture, use or sell any invention covered in whole or inpart by a Patent.          “Patents”: (i) all letters patent of the United States, any other country or anypolitical subdivision thereof, all reissues and extensions thereof and all goodwill associatedtherewith, (ii) all applications for letters patent of the United States or any other country andall divisions, continuations and continuations-in-part thereof, and (iii) all rights to obtain anyreissues or extensions of the foregoing.          “Pledged Notes”: all promissory notes listed on Schedule 4, all IntercompanyNotes at any time issued to any Grantor and all other promissory notes issued to or held by anyGrantor (other than promissory notes issued in connection with extensions of trade credit by anyGrantor in the ordinary course of business or promissory notes received in connection withDispositions permitted by Section 8.6(d) of the Credit Agreement).          “Pledged Stock”: the shares of Capital Stock listed on Schedule 4, togetherwith any other shares, stock certificates, options, interests or rights of any nature whatsoever inrespect of the Capital Stock of any Person that may be issued or granted to, or held by, anyGrantor while this Agreement is in effect, but excluding the Excluded Foreign Subsidiary Stock.          “Post-Closing Pledged Subsidiary”: Each Foreign Subsidiary identified on Schedule6 hereto.          “Proceeds”: all “proceeds” as such term is defined in Section 9-102(a)(64) of the NewYork UCC and, in any event, shall include, without limitation, all dividends or other income fromthe 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 hasbeen earned by performance (including, without limitation, any Account).          “Secured Parties”: the collective reference to the Administrative Agent, the Lendersand any Affiliate of any Lender to which Borrower Obligations or Guarantor Obligations, asapplicable, 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 grantby 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 orbusiness identifiers, and all goodwill associated therewith, now existing or hereafter adopted oracquired, 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 theUnited States, any State thereof or any other country or any political subdivision thereof, orotherwise, and all common-law rights related thereto, and (ii) the right to obtain all renewalsthereof.

 

5          “Vehicles”: all cars, trucks, trailers, construction and earth moving equipment andother vehicles covered by a certificate of title law of any state and all tires and otherappurtenances 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 Agreementas a whole and not to any particular provision of this Agreement, and Section and Schedulereferences are to this Agreement unless otherwise specified.    (b) The meanings given to terms defined herein shall be equally applicable to both thesingular and plural forms of such terms.    (c) Where the context requires, terms relating to the Collateral or any part thereof, whenused in relation to a Grantor, shall refer to such Grantor’s Collateral or the relevant partthereof.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 ofthe Secured Parties and their respective successors, indorsees, transferees and assigns, the promptand complete payment and performance by the Borrowers when due (whether at the stated maturity, byacceleration or otherwise) of the Borrower Obligations.    (b) Anything herein or in any other Loan Document to the contrary notwithstanding, the maximumliability of each Guarantor hereunder and under the other Loan Documents shall in no event exceedthe amount which can be guaranteed by such Guarantor under applicable federal and state lawsrelating to the insolvency of debtors (after giving effect to the right of contribution establishedin Section 2.2).    (c) Each Guarantor agrees that the Borrower Obligations may at any time and from time to timeexceed the amount of the liability of such Guarantor hereunder without impairing the guaranteecontained in this Section 2 or affecting the rights and remedies of the Administrative Agent or anySecured Party hereunder.    (d) The guarantee contained in this Section 2 shall remain in full force and effect until allthe Borrower Obligations and the obligations of each Guarantor under the guarantee contained inthis Section 2 shall have been satisfied by payment in full, no Letter of Credit shall beoutstanding (or any outstanding Letters of Credit shall have been cash collateralized in accordancewith 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 maybe free from any Borrower Obligations.    (e) No payment made by the Borrowers, any of the Guarantors, any other guarantor or any otherPerson 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 orproceeding or any set-off or appropriation or application at any time or from time to time inreduction of or in payment of Borrower Obligations shall be deemed to modify, reduce, release orotherwise affect the liability of any Guarantor hereunder (other than any payment made by suchPerson in respect of Borrower Obligations or any payment received or collected from such Person inrespect of Borrower Obligations). Each Guarantor shall remain liable for the Borrower Obligationsup to the maximum liability of such Guarantor hereunder until the Borrower Obligations are paid infull, 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 extentthat a Subsidiary Guarantor shall have paid more than its proportionate share of any payment madehereunder, such Subsidiary Guarantor shall be entitled to seek and receive contribution from andagainst any other Subsidiary Guarantor hereunder which has not paid its proportionate share of suchpayment. Each Subsidiary Guarantor’s right of contribution shall be subject to the terms andconditions of Section 2.3. The provisions of this Section 2.2 shall in no respect limit theobligations and liabilities of any Subsidiary Guarantor to the Administrative Agent and the SecuredParties, and each Subsidiary Guarantor shall remain liable to the Administrative Agent and theSecured Parties for the full amount guaranteed by such Subsidiary Guarantor hereunder.    2.3 No Subrogation. Notwithstanding any payment made by any Guarantor hereunder orany set-off or application of funds of any Guarantor by the Administrative Agent or any SecuredParty, no Guarantor shall be entitled to be subrogated to any of the rights of the AdministrativeAgent or any Secured Party against any Borrower or any other Guarantor or any collateral securityor guarantee or right of offset held by the Administrative Agent or any Secured Party for thepayment of Borrower Obligations, nor shall any Guarantor seek or be entitled to seek anycontribution or reimbursement from any Borrower or any other Guarantor in respect of payments madeby such Guarantor hereunder, until all amounts owing to the Administrative Agent and the SecuredParties by the Borrowers on account of Borrower Obligations are paid in full, no Letter of Creditshall be outstanding (or any outstanding Letters of Credit shall have been cash collateralized inaccordance 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 whenall of the Borrower Obligations shall not have been paid in full, such amount shall be held by suchGuarantor in trust for the Administrative Agent and the Secured Parties, segregated from otherfunds of such Guarantor, and shall, forthwith upon receipt by such Guarantor, be turned over to theAdministrative Agent in the exact form received by such Guarantor (duly indorsed by such Guarantorto the Administrative Agent, if required), to be applied against Borrower Obligations, whethermatured 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 anyreservation of rights against any Guarantor and without notice to or further assent by anyGuarantor, any demand for payment of any of Borrower Obligations made by the Administrative Agentor any Secured Party may be rescinded by the Administrative Agent or such Secured Party and any ofthe Borrower Obligations continued, and Borrower Obligations, or the liability of any other Personupon or for any part thereof, or any collateral security or guarantee therefor or right of offsetwith 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 orany Secured Party, and the Loan Documents and any other documents executed and delivered inconnection therewith may be amended, modified, supplemented or terminated, in whole or in part, asthe Administrative Agent (or the Required Lenders, the applicable Majority Facility Lenders or allSecured Parties, as the case may be) may deem advisable from time to time, and any collateralsecurity, guarantee or right of offset at any time held by the Administrative Agent or any SecuredParty for the payment of the Borrower Obligations may be sold, exchanged, waived, surrendered orreleased. Neither the Administrative Agent nor any Secured Party shall have any obligation toprotect, secure, perfect or insure any Lien at any time held by it as security for the BorrowerObligations 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 ofthe creation, renewal, extension or accrual of any of the Borrower Obligations and notice of orproof of reliance by the Administrative Agent or any Secured Party upon the guarantee contained inthis Section 2 or acceptance of the guarantee contained in this Section 2; the BorrowerObligations, and any of them, shall conclusively be deemed to have been created, contracted orincurred, or renewed, extended,

 

7amended or waived, in reliance upon the guarantee contained in thisSection 2; and all dealings between the Borrowers and any of the Guarantors, on the one hand, andthe Administrative Agent and the Secured Parties, on the other hand, likewise shall be conclusivelypresumed to have been had or consummated in reliance upon the guarantee contained in this Section2. Each Guarantor waives diligence, presentment, protest, demand for payment and notice of defaultor nonpayment to or upon any of the Borrowers or any of the Guarantors with respect to the BorrowerObligations. Each Guarantor understands and agrees that, to the fullest extent permitted underapplicable 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 orenforceability of the Loan Documents, any of the Borrower Obligations or any other collateralsecurity therefor or guarantee or right of offset with respect thereto at any time or from time totime held by the Administrative Agent or any Secured Party, (b) any defense, set-off orcounterclaim (other than a defense of payment or performance) which may at any time be available toor be asserted by any Borrower or any other Person against the Administrative Agent or any SecuredParty, or (c) any other circumstance whatsoever (with or without notice to or knowledge of suchBorrower or such Guarantor) which constitutes, or might be construed to constitute, an equitable orlegal discharge of either Borrower for the Borrower Obligations, or of such Guarantor under theguarantee contained in this Section 2, in bankruptcy or in any other instance. When making anydemand hereunder or otherwise pursuing its rights and remedies hereunder against any Guarantor, theAdministrative Agent or any Secured Party may, but shall be under no obligation to, make a similardemand on or otherwise pursue such rights and remedies as it may have against any Borrower, anyother Guarantor or any other Person or against any collateral security or guarantee for theBorrower Obligations or any right of offset with respect thereto, and any failure by theAdministrative Agent or any Secured Party to make any such demand, to pursue such other rights orremedies or to collect any payments from any Borrower, any other Guarantor or any other Person orto 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 collateralsecurity, guarantee or right of offset, shall not relieve any Guarantor of any obligation orliability hereunder, and shall not impair or affect the rights and remedies, whether express, implied or available as a matter of law, of the AdministrativeAgent or any Secured Party against any Guarantor. For the purposes hereof “demand” shall includethe commencement and continuance of any legal proceedings.    2.6 Reinstatement. The guarantee contained in this Section 2 shall continue to beeffective, or be reinstated, as the case may be, if at any time payment, or any part thereof, ofany of the Borrower Obligations is rescinded or must otherwise be restored or returned by theAdministrative Agent or any Secured Party upon the insolvency, bankruptcy, dissolution, liquidationor reorganization of any Borrower or any other Guarantor, or upon or as a result of the appointmentof a receiver, intervenor or conservator of, or trustee or similar officer for, any Borrower or anyother Guarantor or any substantial part of its property, or otherwise, all as though such paymentshad not been made.    2.7 Payments. Each Guarantor hereby guarantees that payments hereunder will be paidto the Administrative Agent without set-off or counterclaim in the Agreement Currency at theapplicable 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 tothe 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 inwhich 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 completepayment and performance when due (whether at the stated maturity, by acceleration or otherwise) ofsuch 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 AdministrativeAgent pursuant to Section 5.9;    (m) all other property not otherwise described above (except for any property specificallyexcluded from any clause in this section above, and any property specifically excluded from anydefined 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 ofany and all of the foregoing and all collateral security and guarantees given by any Person withrespect to any of the foregoing;          provided, however, that notwithstanding any of the other provisions set forth in thisSection 3, (i) this Agreement shall not constitute a grant of a security interest in any propertyto 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 Lawor is prohibited by, or constitutes a breach or default under or results in the termination of orrequires any consent not obtained under, any contract, license, agreement, instrument or otherdocument 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 theextent that such Requirement of Law or the term in such contract, license, agreement, instrument orother document or shareholder or similar agreement providing for such prohibition, breach, defaultor termination or requiring such consent is ineffective under applicable law and (ii) theCollateral shall in no event include the Excluded Foreign Subsidiary Stock or the ExcludedEquipment Lease Property.SECTION 4. REPRESENTATIONS AND WARRANTIES

 

9          To induce the Administrative Agent and the Lenders to enter into the Credit Agreement and toinduce the Lenders to make their respective extensions of credit to the Borrowers, each Grantorhereby 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 respectto all or any part of the Collateral is on file or of record in any public office, except such ashave been filed in favor of the Administrative Agent, for the ratable benefit of the SecuredParties, pursuant to this Agreement or as are permitted by the Credit Agreement (or, if the CreditAgreement shall have been paid in full or terminated, by the last version of the Credit Agreementas in effect immediately prior to such payment in full or termination). For the avoidance ofdoubt, it is understood and agreed that any Grantor may, as part of its business, grant licenses tothird parties to use Intellectual Property owned or developed by a Grantor. For purposes of thisAgreement and the other Loan Documents, such licensing activity shall not constitute a “Lien” onsuch Intellectual Property. Each of the Administrative Agent and each Secured Party understandsthat any such licenses may be exclusive to the applicable licensees, and such exclusivityprovisions may limit the ability of the Administrative Agent to utilize, sell, lease or transferthe related Intellectual Property or otherwise realize value from such Intellectual Propertypursuant hereto.    4.2 Jurisdiction of Organization; Chief Executive Office. On the date hereof, suchGrantor’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 onSchedule 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 adate which is recent to the date hereof.    4.3 Inventory and Equipment. On the date hereof, all Inventory and Equipment (otherthan mobile goods) held for lease or sale in the United States are kept at the locations listed onSchedule 5.    4.4 Farm Products. None of the Collateral constitutes, or is the Proceeds of, FarmProducts.    4.5 Investment Property. (a) The shares of Pledged Stock covered by the grant of thesecurity interest in Section 3 hereof constitute all the issued and outstanding shares of allclasses of the Capital Stock of each Issuer owned by each Grantor (except for the Excluded ForeignSubsidiary Stock).    (b) All the shares of the Pledged Stock have been duly and validly issued and, with respect toeach Issuer that is a corporation, are fully paid and nonassessable.    (c) Each of the Pledged Notes constitutes the legal, valid and binding obligation of theIssuer thereof, enforceable in accordance with its terms, subject to the effects of bankruptcy,insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to oraffecting creditors’ rights generally, general equitable principles (whether considered in aproceeding 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 fromtime to time as owing to such Grantor in respect of the Receivables will at such times be accuratein all material respects.    4.7 Intellectual Property. On the date hereof, all material Intellectual Property isvalid, 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, noLetter of Credit shall be outstanding (or any outstanding Letters of Credit shall have been cashcollateralized in accordance with subsection 11.18(b) of the Credit Agreement) and the Commitmentsshall have terminated:    5.1 Delivery of Instruments, Certificated Securities and Chattel Paper. If any amountpayable under or in connection with any of the Collateral shall be or become evidenced by anyInstrument, Certificated Security or Chattel Paper, such Instrument, Certificated Security orChattel Paper in excess of $100,000 shall, if requested by the Administrative Agent or the Required Lenders, be promptly delivered to the Administrative Agent, dulyindorsed in a manner satisfactory to the Administrative Agent, to be held as Collateral pursuant tothis Agreement.    5.2 Maintenance of Perfected Security Interest; Further Documentation. (a) SuchGrantor shall maintain the security interest created by this Agreement as a perfected securityinterest (it being agreed that, unless other means of perfection have been requested by theAdministrative Agent or the Required Lenders, such perfected security interest is only to theextent that perfection may be achieved through the filing of a Uniform Commercial Code financingstatement in the appropriate filing office) having at least the priority described in Section5.19(a) of the Credit Agreement and shall defend such security interest against the claims anddemands of all Persons whomsoever (other than Persons holding Liens permitted by Section 8.3 of theCredit Agreement), subject to the rights of such Grantor under the Loan Documents to Dispose of theCollateral.    (b) Such Grantor will furnish to the Administrative Agent and the Secured Parties from time totime statements and schedules further identifying and describing the assets and property of suchGrantor and such other reports in connection therewith as the Administrative Agent may reasonablyrequest, all in reasonable detail.    (c) At any time and from time to time, upon the written and reasonable request of theAdministrative Agent, and at the sole expense of such Grantor, such Grantor will promptly and dulyexecute and deliver, and have recorded, such further instruments and documents and take suchfurther actions as the Administrative Agent may reasonably request for the purpose of obtaining orpreserving 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 theUniform Commercial Code (or other similar laws) in effect in any jurisdiction with respect to thesecurity 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 enablethe Administrative Agent to obtain “control” (within the meaning of the applicable UniformCommercial Code) with respect thereto.    (d) Notwithstanding any other provision of the Loan Documents to the contrary, the Grantorsshall not be required to take any action to perfect the security interests created hereunder exceptfor filing of properly completed Uniform Commercial Code financing statements in appropriate filingoffices 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 alladditional executed financing statements and other documents reasonably requested by theAdministrative Agent to maintain the validity, perfection and priority of the security interestsprovided for herein:
 

 
11     (i) change its jurisdiction of organization or the location of its chief executiveoffice 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 SecuredParties promptly, in reasonable detail, of any Lien (other than security interests created herebyor Liens permitted under the Credit Agreement (or, if the Credit Agreement shall have been paid infull or terminated, by the last version of the Credit Agreement as in effect immediately prior tosuch payment in full or termination)) on any of the Collateral which would adversely affect theability of the Administrative Agent to exercise any of its remedies hereunder.     5.5 Investment Property. (a) If such Grantor shall become entitled to receive orshall receive any certificate (including, without limitation, any certificate representing adividend or a distribution in connection with any reclassification, increase or reduction ofcapital or any certificate issued in connection with any reorganization), option or rights inrespect of the Capital Stock (other than Excluded Foreign Subsidiary Stock) of any Issuer, whetherin addition to, in substitution of, as a conversion of, or in exchange for, any shares of thePledged Stock, or otherwise in respect thereof, such Grantor shall, if requested by theAdministrative Agent or the Required Lenders, accept the same as the agent of the AdministrativeAgent and the Secured Parties, hold the same in trust for the Administrative Agent and the SecuredParties and deliver the same forthwith to the Administrative Agent in the exact form received, dulyindorsed by such Grantor to the Administrative Agent, if required, together with an undated stockpower covering such certificate duly executed in blank by such Grantor and with, if theAdministrative 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 paidupon or in respect of the Investment Property upon the liquidation or dissolution of any Issuershall be paid over to the Administrative Agent to be held by it hereunder as additional collateralsecurity for the Obligations, and in case any distribution of capital shall be made on or inrespect of the Investment Property or any property shall be distributed upon or with respect to theInvestment Property pursuant to the recapitalization or reclassification of the capital of anyIssuer or pursuant to the reorganization thereof, the property so distributed shall, unlessotherwise subject to a perfected security interest in favor of the Administrative Agent, ifrequested by the Administrative Agent or the Required Lenders, be delivered to the AdministrativeAgent to be held by it hereunder as additional collateral security for the Obligations. If anysums of money or property so paid or distributed in respect of the Investment Property shall bereceived by such Grantor, such Grantor shall, until such money or property is paid or delivered tothe Administrative Agent, if requested by the Administrative Agent or the Required Lenders, holdsuch money or property in trust for the Administrative Agent and the Secured Parties, segregatedfrom 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 bebound by the terms of this Agreement relating to the Investment Property issued by it and willcomply with such terms insofar as such terms are applicable to it and (ii) the terms of Sections6.3(c) and 6.7(b) shall apply to it, mutatismutandis, with respect to all actionsthat may be required of it pursuant to Section 6.3(c) or 6.7(b) with respect to the InvestmentProperty issued by it.     5.6 Receivables. Other than in the ordinary course of business or as permitted bySection 8.6(d) or 8.10(m) of the Credit Agreement, such Grantor will not (i) grant any extension ofthe time of payment of any Receivable, (ii) compromise or settle any Receivable for less than thefull amount thereof, (iii) release, wholly or partially, any Person liable for the payment of anyReceivable, (iv) allow any credit or discount whatsoever on any Receivable or (v) amend, supplement or modify any Receivable inany 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 doany 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 anyact, 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 anylicensee or sublicensee thereof to) do any act or knowingly omit to do any act whereby any materialportion of the Copyrights may become invalidated or otherwise materially impaired. Such Grantorwill not (either itself or through licensees) do any act whereby any material portion of theCopyrights may fall into the public domain.     (d) Such Grantor (either itself or through licensees) will not do any act that knowingly usesany material Intellectual Property to infringe, in any material way, the intellectual propertyrights of any other Person.     (e) Such Grantor will notify the Administrative Agent and the Secured Parties promptly if itknows, or has reason to know, that any application or registration relating to any materialIntellectual Property may become forfeited, abandoned or dedicated to the public, or of anymaterial and adverse determination or development (including, without limitation, the institutionof, or any such determination or development in, any proceeding in the United States Patent andTrademark 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 orsuch 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 ordesignee, shall file an application for the registration of any Intellectual Property with theUnited States Patent and Trademark Office, the United States Copyright Office or any similar officeor agency in any other country or any political subdivision thereof, such Grantor shall, if sorequested by the Administrative Agent, report such filing to the Administrative Agent within fiveBusiness Days after the last day of the fiscal quarter in which such filing occurs. Upon requestof the Administrative Agent, such Grantor shall execute and deliver, and have recorded, any and allagreements, instruments, documents, and papers as the Administrative Agent may request to evidencethe Administrative Agent’s and the Secured Parties’ security interest in any Copyright, Patent orTrademark and the goodwill and general intangibles of such Grantor relating thereto or representedthereby.     (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 CopyrightOffice 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 maintaineach registration of the material Intellectual Property, including, without limitation, filing ofapplications for renewal, affidavits of use and affidavits of incontestability.     (h) In the event that any material Intellectual Property is infringed, misappropriated ordiluted by a third party, such Grantor shall (i) take such actions as such Grantor shall reasonablydeem appropriate under the circumstances to protect such Intellectual Property and (ii) if suchIntellectual Property is of material economic value, promptly notify the Administrative Agent aftera 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 suchinfringement, misappropriation or dilution.
 

 
13     5.8 Vehicles. No Grantor shall be required to take any action to perfect any securityinterest 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 potentialvalue in excess of $1,000,000, such Grantor shall within 30 days of obtaining such interest signand deliver documentation acceptable to the Administrative Agent granting a security interest underthe 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 herebyauthorizes each Grantor to collect such Grantor’s Receivables, and the Administrative Agent maycurtail or terminate said authority at any time after the occurrence and during the continuance ofan Event of Default. If required by the Administrative Agent at any time after the occurrence andduring the continuance of an Event of Default, any payments of Receivables, when collected by anyGrantor, (i) shall be forthwith (and, in any event, within two Business Days) deposited by suchGrantor in the exact form received, duly indorsed by such Grantor to the Administrative Agent ifrequired, in a Collateral Account maintained under the sole dominion and control of theAdministrative Agent, subject to withdrawal by the Administrative Agent for the account of theSecured Parties only as provided in Section 6.5, and (ii) until so turned over, shall be held bysuch Grantor in trust for the Administrative Agent and the Secured Parties, segregated from otherfunds of such Grantor. Each such deposit of Proceeds of Receivables shall be accompanied by areport identifying in reasonable detail the nature and source of the payments included in thedeposit.     (b) At the Administrative Agent’s request after the occurrence and during the continuance ofan Event of Default, each Grantor shall deliver to the Administrative Agent all original and otherdocuments evidencing, and relating to, the agreements and transactions which gave rise to theReceivables, including, without limitation, all original orders, invoices and shipping receipts.     6.2 Communications with Obligors; Grantors Remain Liable. (a) The AdministrativeAgent in its own name or in the name of others may at any time after the occurrence and during thecontinuance of an Event of Default communicate with obligors under the Receivables to verify withthem 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 duringthe continuance of an Event of Default, each Grantor shall notify obligors on the Receivables thatthe Receivables have been assigned to the Administrative Agent for the ratable benefit of theSecured Parties and that payments in respect thereof shall be made directly to the AdministrativeAgent.     (c) Anything herein to the contrary notwithstanding, each Grantor shall remain liable undereach of the Receivables to observe and perform all the conditions and obligations to be observedand performed by it thereunder, all in accordance with the terms of any agreement giving risethereto. Neither the Administrative Agent nor any Secured Party shall have any obligation orliability under any Receivable (or any agreement giving rise thereto) by reason of or arising outof this Agreement or the receipt by the Administrative Agent or any Secured Party of any paymentrelating thereto, nor shall the Administrative Agent or any Secured Party be obligated in any manner to perform any of theobligations of any Grantor under or pursuant to any Receivable (or any agreement giving risethereto), to make any payment, to make any inquiry as to the nature or the sufficiency of anypayment received by it or as to the sufficiency of any performance by any party thereunder, topresent or file any claim, to take any action to
 

 
14enforce 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 ortimes.     6.3 Pledged Stock. (a) Unless an Event of Default shall have occurred and becontinuing and the Administrative Agent shall have given notice to the relevant Grantor of theAdministrative Agent’s intent to exercise its corresponding rights pursuant to Section 6.3(b), eachGrantor shall be permitted to receive all cash dividends paid in respect of the Pledged Stock andall payments made in respect of the Pledged Notes, in each case paid in the normal course ofbusiness of the relevant Issuer, and to exercise all voting and corporate or other organizationalrights with respect to the Investment Property; provided, however, that no voteshall be cast or corporate or other organizational right exercised or other action taken whichwould 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 shallgive notice of its intent to exercise such rights to the relevant Grantor or Grantors, (i) theAdministrative Agent shall have the right to receive any and all cash dividends, payments or otherProceeds paid in respect of the Investment Property and make application thereof to the Obligationsin the order set forth in Section 6.5, and (ii) any or all of the Investment Property shall beregistered in the name of the Administrative Agent or its nominee, and the Administrative Agent orits nominee may thereafter exercise (x) all voting, corporate and other rights pertaining to suchInvestment Property at any meeting of shareholders of the relevant Issuer or Issuers or otherwiseand (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 ownerthereof (including, without limitation, the right to exchange at its discretion any and all of theInvestment Property upon the merger, consolidation, reorganization, recapitalization or otherfundamental change in the corporate or other organizational structure of any Issuer, or upon theexercise by any Grantor or the Administrative Agent of any right, privilege or option pertaining tosuch Investment Property, and in connection therewith, the right to deposit and deliver any and allof the Investment Property with any committee, depositary, transfer agent, registrar or otherdesignated agency upon such terms and conditions as the Administrative Agent may determine), allwithout liability except to account for property actually received by it, but the AdministrativeAgent shall have no duty to any Grantor to exercise any such right, privilege or option and shallnot 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 Propertypledged by such Grantor hereunder to (i) comply with any instruction received by it from theAdministrative Agent in writing that (x) states that an Event of Default has occurred and iscontinuing and (y) is otherwise in accordance with the terms of this Agreement, without any otheror further instructions from such Grantor, and each Grantor agrees that each Issuer shall be fullyprotected in so complying, and (ii) unless otherwise expressly permitted hereby, pay any dividendsor 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 ofthe Administrative Agent and the Secured Parties specified in Section 6.1 with respect to paymentsof Receivables, if an Event of Default shall occur and be continuing, all Proceeds received by anyGrantor consisting of cash, checks and other near-cash items shall be held by such Grantor in trustfor 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 inthe exact form received by such Grantor (duly indorsed by such Grantor to the Administrative Agent, ifrequired). All Proceeds received by the Administrative Agent hereunder shall be held by theAdministrative Agent in a Collateral Account maintained under its sole dominion and control. AllProceeds while held by the Administrative Agent in a Collateral Account (or by such Grantor intrust for the Administrative Agent
 

 
15and the Secured Parties) shall continue to be held as collateralsecurity for all the Obligations and shall not constitute payment thereof until applied as providedin Section 6.5.     6.5 Application of Proceeds. At such intervals as may be agreed upon by the Borrowersand the Administrative Agent, or, if an Event of Default shall have occurred and be continuing, atany time at the Administrative Agent’s election, the Administrative Agent shall apply all or anypart of Proceeds constituting Collateral, whether or not held in any Collateral Account, and anyproceeds of the guarantee set forth in Section 2, in payment of the Obligations in the followingorder:     First, to pay incurred and unpaid fees and expenses of the Administrative Agentunder the Loan Documents;     Second, to the Administrative Agent, for application by it towards payment ofamounts then due and owing and remaining unpaid in respect of the Obligations, prorata among the Secured Parties according to the amounts of the Obligations then dueand owing and remaining unpaid to the Secured Parties;     Third, to the Administrative Agent, for application by it towards prepayment ofthe Obligations, prorata among the Secured Parties according to the amountsof the Obligations then held by the Secured Parties; and     Fourth, any balance remaining after the Obligations shall have been paid infull, no Letters of Credit shall be outstanding (other than Letters of Credit cashcollateralized in accordance with subsection 11.18(b) of the Credit Agreement) and theCommitments shall have terminated shall be paid over to the relevant Borrower or towhomsoever 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 otherrights and remedies granted to them in this Agreement and in any other instrument or agreementsecuring, evidencing or relating to the Obligations, all rights and remedies of a secured partyunder the New York UCC or any other applicable law. Without limiting the generality of theforegoing, 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, advertisementsand notices are hereby waived), may in such circumstances forthwith collect, receive, appropriateand 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 partthereof (or contract to do any of the foregoing), in one or more parcels at public or private saleor sales, at any exchange, broker’s board or office of the Administrative Agent or any SecuredParty or elsewhere upon such terms and conditions as it may deem advisable and at such prices as itmay 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 orsales, and, to the extent permitted by law, upon any such private sale or sales, to purchase thewhole or any part of the Collateral so sold, free of any right or equity of redemption in anyGrantor, which right or equity is hereby waived and released. Each Grantor further agrees, at theAdministrative Agent’s request, to assemble the Collateral and make it available to theAdministrative Agent at places which the Administrative Agent shall reasonably select, whether atsuch Grantor’s premises or elsewhere. The Administrative Agent shall apply the net proceeds of any action taken by it pursuant to thisSection 6.6, after deducting all reasonable costs and expenses of every kind incurred in connectiontherewith or incidental to the care or safekeeping of any of the Collateral or in any way relatingto the Collateral or the rights of the Administrative Agent and the Secured Parties hereunder,including, without limitation,
 

 
16reasonable attorneys’ fees and disbursements, to the payment inwhole or in part of the Obligations, in the order set forth in Section 6.5, and only after suchapplication and after the payment by the Administrative Agent of any other amount required by anyprovision of law, including, without limitation, Section 9-615(a)(3) of the New York UCC, need theAdministrative Agent account for the surplus, if any, to any Grantor. To the extent permitted byapplicable law, each Grantor waives all claims, damages and demands it may acquire against theAdministrative Agent or any Secured Party arising out of the exercise by them of any rightshereunder. If any notice of a proposed sale or other disposition of Collateral shall be requiredby law, such notice shall be deemed reasonable and proper if given at least 10 days before suchsale or other disposition.     6.7 Private Sales. (a) Each Grantor recognizes that the Administrative Agent may beunable to effect a public sale of any or all the Pledged Stock, by reason of certain prohibitionscontained in the Securities Act and applicable state securities laws or otherwise, and may becompelled to resort to one or more private sales thereof to a restricted group of purchasers whichwill be obliged to agree, among other things, to acquire such securities for their own account forinvestment and not with a view to the distribution or resale thereof. Each Grantor acknowledgesand agrees that any such private sale may result in prices and other terms less favorable than ifsuch sale were a public sale and, notwithstanding such circumstances, agrees that any such privatesale shall be deemed to have been made in a commercially reasonable manner. The AdministrativeAgent shall be under no obligation to delay a sale of any of the Pledged Stock for the period oftime necessary to permit the Issuer thereof to register such securities for public sale under theSecurities Act, or under applicable state securities laws, even if such Issuer would agree to doso.     (b) Each Grantor agrees to use its commercially reasonable efforts to do or cause to be doneall such other acts as may be necessary to make such sale or sales of all or any portion of thePledged Stock pursuant to this Section 6.7 valid and binding and in compliance with any and allother applicable Requirements of Law. Each Grantor further agrees that a breach of any of thecovenants contained in this Section 6.7 will cause irreparable injury to the Administrative Agentand the Secured Parties, that the Administrative Agent and the Secured Parties have no adequateremedy at law in respect of such breach and, as a consequence, that each and every covenantcontained in this Section 6.7 shall be specifically enforceable against such Grantor, and suchGrantor hereby waives and agrees not to assert any defenses against an action for specificperformance of such covenants except for a defense that no Event of Default has occurred under theCredit Agreement.     6.8 Deficiency. Each Grantor shall remain liable for any deficiency if the proceedsof any sale or other disposition of the Collateral are insufficient to pay its Obligations and thefees and disbursements of any attorneys employed by the Administrative Agent or any Secured Partyto collect such deficiency.SECTION 7. THE ADMINISTRATIVE AGENT     7.1 Administrative Agent’s Appointment as Attorney-in-Fact, etc. (a) Each Grantorhereby irrevocably constitutes and appoints the Administrative Agent and any officer or agentthereof, with full power of substitution, as its true and lawful attorney-in-fact with fullirrevocable power and authority in the place and stead of such Grantor and in the name of suchGrantor or in its own name, for the purpose of carrying out the terms of this Agreement, to takeany and all appropriate action and to execute any and all documents and instruments which may benecessary or desirable to accomplish the purposes of this Agreement, and, without limiting the generality of the foregoing, each Grantor hereby givesthe Administrative Agent the power and right, on behalf of such Grantor, without notice to orassent 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 andindorse and collect any checks, drafts, notes, acceptances or other instruments for the paymentof moneys due under any Receivable or with respect to any other Collateral and file any claim ortake any other action or proceeding in any court of law or equity or otherwise deemedappropriate by the Administrative Agent for the purpose of collecting any and all such moneysdue 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, anyand all agreements, instruments, documents and papers as the Administrative Agent may request toevidence the Administrative Agent’s and the Secured Partys’ security interest in suchIntellectual Property and the goodwill and general intangibles of such Grantor relating theretoor represented thereby;     (iii) pay or discharge taxes and Liens levied or placed on or threatened against theCollateral, effect any repairs or any insurance called for by the terms of this Agreement andpay 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, anyindorsements, assignments or other instruments of conveyance or transfer with respect to theCollateral; and     (v) (1) direct any party liable for any payment under any of the Collateral to makepayment of any and all moneys due or to become due thereunder directly to the AdministrativeAgent or as the Administrative Agent shall direct; (2) ask or demand for, collect, andreceive payment of and receipt for, any and all moneys, claims and other amounts due or tobecome due at any time in respect of or arising out of any Collateral; (3) sign and indorseany invoices, freight or express bills, bills of lading, storage or warehouse receipts, draftsagainst debtors, assignments, verifications, notices and other documents in connection with anyof the Collateral; (4) commence and prosecute any suits, actions or proceedings at law or inequity in any court of competent jurisdiction to collect the Collateral or any portion thereofand to enforce any other right in respect of any Collateral; (5) defend any suit, action orproceeding brought against such Grantor with respect to any Collateral; (6) settle, compromiseor adjust any such suit, action or proceeding and, in connection therewith, give such dischargesor releases as the Administrative Agent may deem appropriate; (7) assign any Copyright, Patentor Trademark (along with the goodwill of the business to which any such Copyright, Patent orTrademark pertains), throughout the world for such term or terms, on such conditions, and insuch 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 withany of the Collateral as fully and completely as though the Administrative Agent were theabsolute owner thereof for all purposes, and do, at the Administrative Agent’s option and suchGrantor’s expense, at any time, or from time to time, all acts and things which theAdministrative Agent deems necessary to protect, preserve or realize upon the Collateral and theAdministrative Agent’s and the Secured Partys’ security interests therein and to effect theintent 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 Agentagrees that it will not exercise any rights under the power of attorney provided for in thisSection 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 toperform or comply with any of its agreements contained herein, the Administrative Agent, at itsoption, but without any obligation so to do, may perform or comply, or otherwise cause performanceor compliance, with such agreement.
 

 
18     (c) The expenses of the Administrative Agent incurred in connection with actions undertaken asprovided in this Section 7.1, together with interest thereon at a rate per annum equal to thehighest rate per annum at which interest would then be payable on any category of past due ABRLoans under the Credit Agreement (or, if the Credit Agreement shall have been paid in full orterminated, by the last version of the Credit Agreement as in effect immediately prior to suchpayment in full or termination), from the date of payment by the Administrative Agent to the datereimbursed by the relevant Grantor, shall be payable by such Grantor to the Administrative Agent ondemand.     (d) Each Grantor hereby ratifies all that said attorneys shall lawfully do or cause to be doneby virtue hereof. All powers, authorizations and agencies contained in this Agreement are coupledwith an interest and are irrevocable until this Agreement is terminated and the security interestscreated hereby are released.     7.2 Duty of Administrative Agent. The Administrative Agent’s sole duty with respectto the custody, safekeeping and physical preservation of the Collateral in its possession, underSection 9-207 of the New York UCC or otherwise, shall be to deal with it in the same manner as theAdministrative Agent deals with similar property for its own account. Neither the AdministrativeAgent, any Secured Party nor any of their respective officers, directors, employees or agents shallbe liable for failure to demand, collect or realize upon any of the Collateral or for any delay indoing so or shall be under any obligation to sell or otherwise dispose of any Collateral upon therequest of any Grantor or any other Person or to take any other action whatsoever with regard tothe Collateral or any part thereof. The powers conferred on the Administrative Agent and theSecured 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 anySecured Party to exercise any such powers. The Administrative Agent and the Secured Parties shallbe accountable only for amounts that they actually receive as a result of the exercise of suchpowers, and neither they nor any of their officers, directors, employees or agents shall beresponsible to any Grantor for any act or failure to act hereunder, except for their own grossnegligence or willful misconduct.     7.3 Execution of Financing Statements. Pursuant to any applicable law, each Grantorauthorizes the Administrative Agent to file or record financing statements and other filing orrecording documents or instruments with respect to the Collateral without the signature of suchGrantor in such form and in such offices as the Administrative Agent determines appropriate toperfect the security interests of the Administrative Agent under this Agreement. Each Grantorauthorizes 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 financingstatement with respect to the Collateral made prior to the date hereof.     7.4 Authority of Administrative Agent. Each Grantor acknowledges that the rights andresponsibilities of the Administrative Agent under this Agreement with respect to any action takenby the Administrative Agent or the exercise or non-exercise by the Administrative Agent of anyoption, voting right, request, judgment or other right or remedy provided for herein or resultingor arising out of this Agreement shall, as between the Administrative Agent and the SecuredParties, be governed by the Loan Documents and by such other agreements with respect thereto as mayexist from time to time among them, but, as between the Administrative Agent and the Grantors, theAdministrative Agent shall be conclusively presumed to be acting as agent for the Secured Parties with full and validauthority so to act or refrain from acting, and no Grantor shall be under any obligation, orentitlement, to make any inquiry respecting such authority.
 

 
19SECTION 8. MISCELLANEOUS     8.1 Amendments in Writing. None of the terms or provisions of this Agreement may bewaived, amended, supplemented or otherwise modified except in accordance with Section 11.1 of theCredit 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 orany Grantor hereunder shall be effected in the manner provided for in Section 11.2 of the CreditAgreement; provided that any such notice, request or demand to or upon any Guarantor shallbe 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 AdministrativeAgent nor any Secured Party shall by any act (except by a written instrument pursuant to Section8.1), delay, indulgence, omission or otherwise be deemed to have waived any right or remedyhereunder or to have acquiesced in any Default or Event of Default. No failure to exercise, norany 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 ofany right, power or privilege hereunder shall preclude any other or further exercise thereof or theexercise of any other right, power or privilege. A waiver by the Administrative Agent or anySecured Party of any right or remedy hereunder on any one occasion shall not be construed as a barto any right or remedy which the Administrative Agent or such Secured Party would otherwise have onany future occasion. The rights and remedies herein provided are cumulative, may be exercisedsingly 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 orreimburse the Administrative Agent and each Secured Party for all its reasonable costs and expensesincurred in connection with the enforcement or preservation of any rights under this Agreement andthe 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 SecuredParties.     (b) Each Grantor agrees to pay, and to save the Administrative Agent and the Secured Partiesharmless from, any and all liabilities with respect to, or resulting from any delay in paying, anyand all stamp, excise, sales or other taxes which may be payable or determined to be payable withrespect to any of the Collateral or in connection with any of the transactions contemplated by thisAgreement.     (c) Each Grantor agrees to pay, and to save the Administrative Agent and the Secured Partiesharmless from, any and all liabilities, obligations, losses, damages, penalties, actions,judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever with respect tothe execution, delivery, enforcement, performance and administration of this Agreement to theextent that either Borrower would be required to do so pursuant to Section 11.5 of the CreditAgreement, mutatismutandis.     (d) The agreements in this Section 8.4 shall survive repayment of the Obligations and allother amounts payable under the Loan Documents.     8.5 Successors and Assigns. This Agreement shall be binding upon the successors andassigns of each Grantor and shall inure to the benefit of the Administrative Agent and the SecuredParties and their successors and assigns; provided that no Grantor may assign, transfer or delegateany of its rights or obligations under this Agreement without the prior written consent of theAdministrative Agent.     8.6 Set-Off. Each Grantor hereby irrevocably authorizes the Administrative Agent andeach Secured Party at any time and from time to time while an Event of Default shall have occurredand be
 

 
20continuing, without notice to such Grantor or any other Grantor, any such notice beingexpressly 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 orcontingent, matured or unmatured, at any time held or owing by the Administrative Agent or suchSecured Party to or for the credit or the account of such Grantor, or any part thereof in suchamounts as the Administrative Agent or such Secured Party may elect, against and on account of theobligations and liabilities of such Grantor to the Administrative Agent or such Secured Partyhereunder and claims of every nature and description of the Administrative Agent or such SecuredParty against such Grantor, in any currency, whether arising hereunder, under any Loan Document orotherwise, as the Administrative Agent or such Secured Party may elect, whether or not theAdministrative Agent or any Secured Party has made any demand for payment and although suchobligations, liabilities and claims may be contingent or unmatured. The Administrative Agent andeach Secured Party shall notify such Grantor promptly of any such set-off and the application madeby the Administrative Agent or such Secured Party of the proceeds thereof, provided that thefailure to give such notice shall not affect the validity of such set-off and application. Therights of the Administrative Agent and each Secured Party under this Section 8.6 are in addition toother rights and remedies (including, without limitation, other rights of set-off) which theAdministrative Agent or such Secured Party may have.     8.7 Counterparts. This Agreement may be executed by one or more of the parties tothis Agreement on any number of separate counterparts (including by telecopy), and all of saidcounterparts taken together shall be deemed to constitute one and the same instrument.     8.8 Severability. Any provision of this Agreement which is prohibited orunenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent ofsuch prohibition or unenforceability without invalidating the remaining provisions hereof, and anysuch prohibition or unenforceability in any jurisdiction shall not invalidate or renderunenforceable such provision in any other jurisdiction.     8.9 Section Headings. The Section headings used in this Agreement are for convenienceof reference only and are not to affect the construction hereof or be taken into consideration inthe interpretation hereof.     8.10 Integration. This Agreement and the other Loan Documents represent the agreementof the Grantors, the Administrative Agent and the Secured Parties with respect to the subjectmatter hereof and thereof, and there are no promises, undertakings, representations or warrantiesby the Administrative Agent or any Secured Party relative to subject matter hereof and thereof notexpressly set forth or referred to herein or in the other Loan Documents.     **8.11****GOVERNING LAW****. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED ANDINTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.**     8.12 Submission To Jurisdiction; Waivers. Each Grantor hereby irrevocably andunconditionally:     (a) submits for itself and its property in any legal action or proceeding relating to thisAgreement and the other Loan Documents to which it is a party, or for recognition and enforcementof any judgment in respect thereof, to the non-exclusive general jurisdiction of the courts of theState of New York, the courts of the United States of America for the Southern District of NewYork, and appellate courts from any thereof;
 

 
21     (b) consents that any such action or proceeding may be brought in such courts and waives anyobjection that it may now or hereafter have to the venue of any such action or proceeding in anysuch court or that such action or proceeding was brought in an inconvenient court and agrees not toplead or claim the same;     (c) agrees that service of process in any such action or proceeding may be effected by mailinga copy thereof by registered or certified mail (or any substantially similar form of mail), postageprepaid, to such Grantor at its address referred to in Section 8.2 or at such other address ofwhich the Administrative Agent shall have been notified pursuant thereto;     (d) agrees that nothing herein shall affect the right to effect service of process in anyother 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 orrecover 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 thisAgreement and the other Loan Documents to which it is a party;     (b) neither the Administrative Agent nor any Secured Party has any fiduciary relationship withor duty to any Grantor arising out of or in connection with this Agreement or any of the other LoanDocuments, and the relationship between the Grantors, on the one hand, and the Administrative Agentand Secured Parties, on the other hand, in connection herewith or therewith is solely that ofdebtor and creditor; and     (c) no joint venture is created hereby or by the other Loan Documents or otherwise exists byvirtue of the transactions contemplated hereby among the Secured Parties or among the Grantors andthe Secured Parties.     8.14 Additional Grantors. Each Subsidiary of Hanover that is required to become aparty to this Agreement pursuant to Section 7.9 of the Credit Agreement shall become a Grantor forall purposes of this Agreement upon execution and delivery by such Subsidiary of an AssumptionAgreement in the form of Annex 1 hereto.     8.15 Releases. (a) At such time as the Loans, the Reimbursement Obligations and theother Obligations (other than Obligations in respect of Derivatives Agreements) shall have beenpaid 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 theCredit Agreement), the Collateral shall be released from the Liens created hereby, and thisAgreement and all obligations (other than those expressly stated to survive such termination) ofthe Administrative Agent and each Grantor hereunder shall terminate, all without delivery of anyinstrument or performance of any act by any party, and all rights to the Collateral shall revert tothe Grantors. At the request and sole expense of any Grantor following any such termination, the Administrative Agent shall deliver to such Grantor anyCollateral held by the Administrative Agent hereunder, and execute and deliver to such Grantor suchdocuments 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 anyGrantor in a transaction permitted by the Loan Documents, then the Administrative Agent, at therequest and sole
 

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

 
     IN WITNESS WHEREOF, each of the undersigned has caused this Guarantee and Collateral Agreementto 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 andChief Financial Officer     
*Signature Page toGuarantee 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 toGuarantee and Collateral Agreement*

 
ACKNOWLEDGEMENT AND CONSENT     The undersigned hereby acknowledges receipt of a copy of the Guarantee and CollateralAgreement dated as of November 21, 2005 (the “Agreement”), made by the Grantors partiesthereto for the benefit of JPMorgan Chase Bank, N.A., as Administrative Agent. The undersignedagrees 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 termsinsofar 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, mutatismutandis, 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]