exv10w4



 








Exhibit
 10.4




 







GUARANTEE AND COLLATERAL AGREEMENT




made by




HANOVER COMPRESSOR COMPANY




HANOVER COMPRESSION LIMITED PARTNERSHIP




and certain of their Subsidiaries




in favor of




JPMORGAN CHASE BANK, N.A.,




as Administrative Agent




Dated as of November 21, 2005




 


 








 



TABLE OF CONTENTS




	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	Page
	SECTION 1.	 	DEFINED TERMS	 	 	1	 
	 

	 	 	1.1	 	 	Definitions
	 	 	1	 
	 

	 	 	1.2	 	 	Other Definitional Provisions
	 	 	5	 
	 
	 	 	 	 	 	 	 	 	 	 
	SECTION 2.	 	GUARANTEE	 	 	5	 
	 

	 	 	2.1	 	 	Guarantee
	 	 	5	 
	 

	 	 	2.2	 	 	Right of Contribution
	 	 	6	 
	 

	 	 	2.3	 	 	No Subrogation
	 	 	6	 
	 

	 	 	2.4	 	 	Amendments, etc. with respect to Borrower Obligations
	 	 	6	 
	 

	 	 	2.5	 	 	Guarantee Absolute and Unconditional
	 	 	6	 
	 

	 	 	2.6	 	 	Reinstatement
	 	 	7	 
	 

	 	 	2.7	 	 	Payments
	 	 	7	 
	 
	 	 	 	 	 	 	 	 	 	 
	SECTION 3.	 	GRANT OF SECURITY INTEREST	 	 	7	 
	 
	 	 	 	 	 	 	 	 	 	 
	SECTION 4.	 	REPRESENTATIONS AND WARRANTIES	 	 	8	 
	 

	 	 	4.1	 	 	Title; No Other Liens
	 	 	9	 
	 

	 	 	4.2	 	 	Jurisdiction of Organization; Chief Executive Office
	 	 	9	 
	 

	 	 	4.3	 	 	Inventory and Equipment
	 	 	9	 
	 

	 	 	4.4	 	 	Farm Products
	 	 	9	 
	 

	 	 	4.5	 	 	Investment Property
	 	 	9	 
	 

	 	 	4.6	 	 	Receivables
	 	 	9	 
	 

	 	 	4.7	 	 	Intellectual Property
	 	 	9	 
	 
	 	 	 	 	 	 	 	 	 	 
	SECTION 5.	 	COVENANTS	 	 	9	 
	 

	 	 	5.1	 	 	Delivery of Instruments, Certificated Securities and Chattel Paper
	 	 	10	 
	 

	 	 	5.2	 	 	Maintenance of Perfected Security Interest; Further Documentation
	 	 	10	 
	 

	 	 	5.3	 	 	Changes in Locations, Name, etc
	 	 	10	 
	 

	 	 	5.4	 	 	Notices
	 	 	11	 
	 

	 	 	5.5	 	 	Investment Property
	 	 	11	 
	 

	 	 	5.6	 	 	Receivables
	 	 	11	 
	 

	 	 	5.7	 	 	Intellectual Property
	 	 	12	 
	 

	 	 	5.8	 	 	Vehicles
	 	 	13	 
	 

	 	 	5.9	 	 	Commercial Tort Claims
	 	 	13	 
	 
	 	 	 	 	 	 	 	 	 	 
	SECTION 6.	 	REMEDIAL PROVISIONS	 	 	13	 
	 

	 	 	6.1	 	 	Certain Matters Relating to Receivables
	 	 	13	 
	 

	 	 	6.2	 	 	Communications with Obligors; Grantors Remain Liable
	 	 	13	 
	 

	 	 	6.3	 	 	Pledged Stock
	 	 	14	 
	 

	 	 	6.4	 	 	Proceeds to be Turned Over To Administrative Agent
	 	 	14	 
	 

	 	 	6.5	 	 	Application of Proceeds
	 	 	15	 
	 

	 	 	6.6	 	 	Code and Other Remedies
	 	 	15	 
	 

	 	 	6.7	 	 	Private Sales
	 	 	16	 
	 

	 	 	6.8	 	 	Deficiency
	 	 	16	 
	 
	 	 	 	 	 	 	 	 	 	 
	SECTION 7.	 	THE ADMINISTRATIVE AGENT	 	 	16	 
	 

	 	 	7.1	 	 	Administrative Agent’s Appointment as Attorney-in-Fact, etc
	 	 	16	 





i







 





	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	Page
	 

	 	 	7.2	 	 	Duty of Administrative Agent
	 	 	18	 
	 

	 	 	7.3	 	 	Execution of Financing Statements
	 	 	18	 
	 

	 	 	7.4	 	 	Authority of Administrative Agent
	 	 	18	 
	 
	 	 	 	 	 	 	 	 	 	 
	SECTION 8.	 	MISCELLANEOUS	 	 	19	 
	 

	 	 	8.1	 	 	Amendments in Writing
	 	 	19	 
	 

	 	 	8.2	 	 	Notices
	 	 	19	 
	 

	 	 	8.3	 	 	No Waiver by Course of Conduct; Cumulative Remedies
	 	 	19	 
	 

	 	 	8.4	 	 	Enforcement Expenses; Indemnification
	 	 	19	 
	 

	 	 	8.5	 	 	Successors and Assigns
	 	 	19	 
	 

	 	 	8.6	 	 	Set-Off
	 	 	19	 
	 

	 	 	8.7	 	 	Counterparts
	 	 	20	 
	 

	 	 	8.8	 	 	Severability
	 	 	20	 
	 

	 	 	8.9	 	 	Section Headings
	 	 	20	 
	 

	 	 	8.10	 	 	Integration
	 	 	20	 
	 

	 	 	8.11	 	 	GOVERNING LAW
	 	 	20	 
	 

	 	 	8.12	 	 	Submission To Jurisdiction; Waivers
	 	 	20	 
	 

	 	 	8.13	 	 	Acknowledgements
	 	 	21	 
	 

	 	 	8.14	 	 	Additional Grantors
	 	 	21	 
	 

	 	 	8.15	 	 	Releases
	 	 	21	 
	 

	 	 	8.16	 	 	WAIVER OF JURY TRIAL
	 	 	22	 






SCHEDULES




	 	 	 
	Schedule 1

	 	Notice Addresses
	Schedule 2

	 	Perfection Matters
	Schedule 3

	 	Jurisdictions of Organization and Chief Executive Offices
	Schedule 4

	 	Investment Property
	Schedule 5

	 	Location of Inventory and Equipment Held for Lease or Sale
	Schedule 6

	 	Post-Closing Pledged Subsidiaries






ANNEXES




	 	 	 
	Annex 1

	 	Form of Assumption Agreement






ii




 







 




GUARANTEE AND COLLATERAL AGREEMENT




          GUARANTEE AND COLLATERAL AGREEMENT, dated as of November 21, 2005, made by each of the
signatories hereto (together with any other entity that may become a party hereto as provided
herein, the “Grantors”), in favor of JPMorgan Chase Bank, N.A., as Administrative Agent (in
such capacity, the “Administrative Agent”) for the Secured Parties (as hereinafter
defined).




W I T N E S S E T H:




          WHEREAS, pursuant to the Credit Agreement, dated as of November 21, 2005 (as may be amended,
supplemented or otherwise modified from time to time, the “Credit Agreement”), among
Hanover Compressor Company (“Hanover”), Hanover Compression Limited Partnership
(“HCLP”; Hanover and HCLP being collectively referred to herein as the
“Borrowers”), the banks and other financial institutions parties thereto from time to time
(the “Lenders”), The Royal Bank of Scotland plc, as syndication agent and JPMorgan Chase
Bank, N.A. as administrative agent, whether or not with the same parties, the Lenders have
severally agreed to make extensions of credit to the Borrowers upon the terms and subject to the
conditions set forth therein;




          WHEREAS, Hanover is a member of an affiliated group of companies that includes each other
Grantor;




          WHEREAS, the proceeds of the extensions of credit under the Loan Documents (as hereinafter
defined) have been and will continue to be used in part to enable the Borrowers to make valuable
transfers to one or more of the other Grantors in connection with the operation of their respective
businesses;




          WHEREAS, the Borrowers and the other Grantors are engaged in related businesses, and each
Grantor will derive substantial direct and indirect benefit from the continued making of the
extensions of credit under the Loan Documents; and




          WHEREAS, it is a condition precedent to the obligation of the Lenders to make their respective
extensions of credit to the Borrowers under the Credit Agreement that the Grantors shall have
executed and delivered this Agreement to the Administrative Agent for the ratable benefit of the
Secured Parties;




          NOW, THEREFORE, in consideration of the premises and to induce the Administrative Agent and
the Lenders to enter into the Credit Agreement and make their respective extensions of credit to
the Borrowers under the Loan Documents, each Grantor hereby agrees with the Administrative Agent,
for the ratable benefit of the Secured Parties, as follows:




SECTION 1. DEFINED TERMS




    1.1 Definitions. (a) Unless otherwise defined herein, terms defined in the Credit
Agreement are used herein as therein defined, and the following terms are used herein as defined in
the New York UCC: Accounts, Certificated Security, Chattel Paper, Commercial Tort Claims,
Documents, Equipment, Farm Products, General Intangibles, Instruments, Inventory, Letter-of-Credit
Rights and Supporting Obligations.



    (b) The following terms shall have the following meanings:








 




 
2




          “Agreement”: this Guarantee and Collateral Agreement, as the same may be amended,
supplemented or otherwise modified from time to time.




          “Borrower Obligations”: the collective reference to the unpaid principal of and
interest on the Loans and Reimbursement Obligations and all other obligations and liabilities of
the Borrowers (including, without limitation, interest accruing at the then applicable rate
provided in the Credit Agreement after the maturity of the Loans and Reimbursement Obligations and
interest accruing at the then applicable rate provided in the Credit Agreement after the filing of
any petition in bankruptcy, or the commencement of any insolvency, reorganization or like
proceeding, relating to any Borrower, whether or not a claim for post-filing or post-petition
interest is allowed in such proceeding) to the Administrative Agent or any Lender (or, in the case
of any Derivatives Agreements, any Affiliate of any such Lender) whether direct or indirect,
absolute or contingent, due or to become due, or now existing or hereafter incurred, which may
arise under, out of, or in connection with, the Credit Agreement, this Agreement, the other Loan
Documents, any Letter of Credit, any Derivatives Agreements or any other document made, delivered
or given in connection with any of the foregoing, in each case whether on account of principal,
interest, reimbursement obligations, fees, indemnities, costs, expenses or otherwise (including,
without limitation, all fees and disbursements of counsel to the Administrative Agent or to the
Lenders that are required to be paid by any Borrower pursuant to the terms of any of the foregoing
agreements).




          “Collateral”: as defined in Section 3.




          “Collateral Account”: any collateral account established by the Administrative Agent
as provided in Section 6.1 or 6.4.




          “Copyright Licenses”: any written agreement naming any Grantor as licensor or
licensee, granting any right under any Copyright, including, without limitation, the grant of
rights to manufacture, distribute, exploit and sell materials derived from any Copyright.




          “Copyrights”: (i) all copyrights arising under the laws of the United States, any
other country or any political subdivision thereof, whether registered or unregistered and whether
published or unpublished, all registrations and recordings thereof, and all applications in
connection therewith, including, without limitation, all registrations, recordings and applications
in the United States Copyright Office, and (ii) the right to obtain all renewals thereof.




          “Default”: any default or event of default under any Loan Document.




          “Deposit Account”: as defined in the Uniform Commercial Code of any applicable
jurisdiction and, in any event, including, without limitation, any demand, time, savings, passbook
or like account maintained with a depositary institution.




          “Derivatives Agreements”: any agreement in respect of Derivatives entered into by
Hanover or any of its Subsidiaries with a Lender or any Affiliate of a Lender permitted by Section
8.9 of the Credit Agreement.




          “Excluded Equipment Lease Property”: any property or assets of any Grantor that is
subject to a Lien created under the documentation governing the 2001A Equipment Lease Transaction
or the 2001B Equipment Lease Transaction; provided, that any such property or assets shall
cease to be “Excluded Equipment Lease Property” at such time as Incremental Term Loans are
borrowed.




          “Excluded Foreign Subsidiary Stock”: any shares of Capital Stock of Foreign
Subsidiaries exceeding 66% of the outstanding voting Capital Stock of each Foreign Subsidiary. For
the








 





3



avoidance of doubt, it is understood and agreed that such Excluded Foreign Subsidiary Stock
shall in no event be pledged hereunder or required to be pledged hereunder. Notwithstanding
anything herein to the contrary, (a) the shares of Capital Stock of Production Operators Cayman
Inc. and Hanover Cayman, Limited, (b) the shares of Capital Stock of Subsidiaries of Production
Operators Cayman Inc. and Hanover Cayman, Limited that are directly owned by HCLP to the extent
these shares do not exceed 1% of the outstanding voting Capital Stock of any such Subsidiary, (c)
the shares of Capital Stock of HCC Mantova S.r.l. that are directly owned by HCLP to the extent
these shares do not exceed 0.01% of the outstanding voting Capital Stock of such Subsidiary, (d)
the shares of Capital Stock of Foreign Subsidiaries that are not directly owned by Hanover, HCLP or
any Qualified Subsidiaries and (e) the shares of Capital Stock of Post-Closing Pledged Subsidiaries
shall also be deemed to be “Excluded Foreign Subsidiary Stock”.




          “Foreign Subsidiary”: any Subsidiary organized under the laws of any jurisdiction
outside the United States of America.




          “Foreign Subsidiary Voting Stock”: the voting Capital Stock of any Foreign
Subsidiary.




          “Guarantor Obligations”: with respect to any Guarantor, all obligations and
liabilities of such Guarantor which may arise under or in connection with this Agreement
(including, without limitation, Section 2), any other Loan Document, or any Derivatives Agreement
to which such Guarantor is a party, in each case whether on account of guarantee obligations,
reimbursement obligations, fees, indemnities, costs, expenses or otherwise (including, without
limitation, all fees and disbursements of counsel to the Administrative Agent or to the Secured
Parties that are required to be paid by such Guarantor pursuant to the terms of this Agreement or
any such Loan Document).




          “Guarantors”: the collective reference to (a) each Grantor other than the Borrowers,
(b) with respect to all Borrower Obligations of HCLP, Hanover and (c) with respect to all Borrower
Obligations of Hanover, HCLP.




          “Intellectual Property”: the collective reference to all rights, priorities and
privileges relating to intellectual property, whether arising under United States, multinational or
foreign laws or otherwise, including, without limitation, the Copyrights, the Copyright Licenses,
the Patents, the Patent Licenses, the Trademarks and the Trademark Licenses, and all rights to sue
at law or in equity for any infringement or other impairment thereof, including the right to
receive all proceeds and damages therefrom.




          “Intercompany Note”: any promissory note evidencing loans made by any Grantor to
Hanover or any of its Subsidiaries.




          “Investment Property”: the collective reference to (i) all “investment property” as
such term is defined in Section 9-102(a)(49) of the New York UCC (other than Excluded Foreign
Subsidiary Stock) and (ii) whether or not constituting “investment property” as so defined, all
Pledged Notes and all Pledged Stock.




          “Issuers”: the collective reference to each issuer of any Investment Property.




          “Loan Documents”: the Loan Documents (as defined in the Credit Agreement) and the
Derivatives Agreements, as the same may be amended from time to time.




          “New York UCC”: the Uniform Commercial Code as from time to time in effect in the
State of New York.









 




4




          “Obligations”: (i) in the case of each Borrower, its Borrower Obligations, and (ii)
in the case of each Guarantor, its Guarantor Obligations.




          “Patent License”: all agreements, whether written or oral, providing for the grant by
or to any Grantor of any right to manufacture, use or sell any invention covered in whole or in
part by a Patent.




          “Patents”: (i) all letters patent of the United States, any other country or any
political subdivision thereof, all reissues and extensions thereof and all goodwill associated
therewith, (ii) all applications for letters patent of the United States or any other country and
all divisions, continuations and continuations-in-part thereof, and (iii) all rights to obtain any
reissues or extensions of the foregoing.




          “Pledged Notes”: all promissory notes listed on Schedule 4, all Intercompany
Notes at any time issued to any Grantor and all other promissory notes issued to or held by any
Grantor (other than promissory notes issued in connection with extensions of trade credit by any
Grantor in the ordinary course of business or promissory notes received in connection with
Dispositions permitted by Section 8.6(d) of the Credit Agreement).




          “Pledged Stock”: the shares of Capital Stock listed on Schedule 4, together
with any other shares, stock certificates, options, interests or rights of any nature whatsoever in
respect of the Capital Stock of any Person that may be issued or granted to, or held by, any
Grantor while this Agreement is in effect, but excluding the Excluded Foreign Subsidiary Stock.




          “Post-Closing Pledged Subsidiary”: Each Foreign Subsidiary identified on Schedule
6 hereto.




          “Proceeds”: all “proceeds” as such term is defined in Section 9-102(a)(64) of the New
York UCC and, in any event, shall include, without limitation, all dividends or other income from
the Investment Property, collections thereon or distributions or payments with respect thereto.




          “Receivable”: any right to payment for goods sold or leased or for services rendered,
whether or not such right is evidenced by an Instrument or Chattel Paper and whether or not it has
been earned by performance (including, without limitation, any Account).




          “Secured Parties”: the collective reference to the Administrative Agent, the Lenders
and any Affiliate of any Lender to which Borrower Obligations or Guarantor Obligations, as
applicable, are owed.




          “Securities Act”: the Securities Act of 1933, as amended.




          “Subsidiary Guarantor”: each Guarantor which is a Subsidiary of Hanover.




          “Trademark License”: any agreement, whether written or oral, providing for the grant
by or to any Grantor of any right to use any Trademark.




          “Trademarks”: (i) all trademarks, trade names, corporate names, company names,
business names, fictitious business names, trade styles, service marks, logos and other source or
business identifiers, and all goodwill associated therewith, now existing or hereafter adopted or
acquired, all registrations and recordings thereof, and all applications in connection therewith,
whether in the United States Patent and Trademark Office or in any similar office or agency of the
United States, any State thereof or any other country or any political subdivision thereof, or
otherwise, and all common-law rights related thereto, and (ii) the right to obtain all renewals
thereof.









 




5




          “Vehicles”: all cars, trucks, trailers, construction and earth moving equipment and
other vehicles covered by a certificate of title law of any state and all tires and other
appurtenances to any of the foregoing.




    1.2 Other Definitional Provisions. (a) The words “hereof,” “herein”, “hereto” and
“hereunder” and words of similar import when used in this Agreement shall refer to this Agreement
as a whole and not to any particular provision of this Agreement, and Section and Schedule
references are to this Agreement unless otherwise specified.



    (b) The meanings given to terms defined herein shall be equally applicable to both the
singular and plural forms of such terms.



    (c) Where the context requires, terms relating to the Collateral or any part thereof, when
used in relation to a Grantor, shall refer to such Grantor’s Collateral or the relevant part
thereof.



SECTION 2. GUARANTEE




    2.1 Guarantee. (a) Each of the Guarantors hereby, jointly and severally,
unconditionally and irrevocably, guarantees to the Administrative Agent, for the ratable benefit of
the Secured Parties and their respective successors, indorsees, transferees and assigns, the prompt
and complete payment and performance by the Borrowers when due (whether at the stated maturity, by
acceleration or otherwise) of the Borrower Obligations.



    (b) Anything herein or in any other Loan Document to the contrary notwithstanding, the maximum
liability of each Guarantor hereunder and under the other Loan Documents shall in no event exceed
the amount which can be guaranteed by such Guarantor under applicable federal and state laws
relating to the insolvency of debtors (after giving effect to the right of contribution established
in Section 2.2).



    (c) Each Guarantor agrees that the Borrower Obligations may at any time and from time to time
exceed the amount of the liability of such Guarantor hereunder without impairing the guarantee
contained in this Section 2 or affecting the rights and remedies of the Administrative Agent or any
Secured Party hereunder.



    (d) The guarantee contained in this Section 2 shall remain in full force and effect until all
the Borrower Obligations and the obligations of each Guarantor under the guarantee contained in
this Section 2 shall have been satisfied by payment in full, no Letter of Credit shall be
outstanding (or any outstanding Letters of Credit shall have been cash collateralized in accordance
with subsection 11.18(b) of the Credit Agreement) and the Commitments shall be terminated,
notwithstanding that, from time to time during the term of the Loan Documents, either Borrower may
be free from any Borrower Obligations.



    (e) No payment made by the Borrowers, any of the Guarantors, any other guarantor or any other
Person or received or collected by the Administrative Agent or any Secured Party from any Borrower,
any of the Guarantors, any other guarantor or any other Person by virtue of any action or
proceeding or any set-off or appropriation or application at any time or from time to time in
reduction of or in payment of Borrower Obligations shall be deemed to modify, reduce, release or
otherwise affect the liability of any Guarantor hereunder (other than any payment made by such
Person in respect of Borrower Obligations or any payment received or collected from such Person in
respect of Borrower Obligations). Each Guarantor shall remain liable for the Borrower Obligations
up to the maximum liability of such Guarantor hereunder until the Borrower Obligations are paid in
full, no Letter of Credit shall be outstanding and the Commitments are terminated








 




6


    2.2 Right of Contribution. Each Subsidiary Guarantor hereby agrees that to the extent
that a Subsidiary Guarantor shall have paid more than its proportionate share of any payment made
hereunder, such Subsidiary Guarantor shall be entitled to seek and receive contribution from and
against any other Subsidiary Guarantor hereunder which has not paid its proportionate share of such
payment. Each Subsidiary Guarantor’s right of contribution shall be subject to the terms and
conditions of Section 2.3. The provisions of this Section 2.2 shall in no respect limit the
obligations and liabilities of any Subsidiary Guarantor to the Administrative Agent and the Secured
Parties, and each Subsidiary Guarantor shall remain liable to the Administrative Agent and the
Secured Parties for the full amount guaranteed by such Subsidiary Guarantor hereunder.



    2.3 No Subrogation. Notwithstanding any payment made by any Guarantor hereunder or
any set-off or application of funds of any Guarantor by the Administrative Agent or any Secured
Party, no Guarantor shall be entitled to be subrogated to any of the rights of the Administrative
Agent or any Secured Party against any Borrower or any other Guarantor or any collateral security
or guarantee or right of offset held by the Administrative Agent or any Secured Party for the
payment of Borrower Obligations, nor shall any Guarantor seek or be entitled to seek any
contribution or reimbursement from any Borrower or any other Guarantor in respect of payments made
by such Guarantor hereunder, until all amounts owing to the Administrative Agent and the Secured
Parties by the Borrowers on account of Borrower Obligations are paid in full, no Letter of Credit
shall be outstanding (or any outstanding Letters of Credit shall have been cash collateralized in
accordance with subsection 11.18(b) of the Credit Agreement) and the Commitments are terminated.
If any amount shall be paid to any Guarantor on account of such subrogation rights at any time when
all of the Borrower Obligations shall not have been paid in full, such amount shall be held by such
Guarantor in trust for the Administrative Agent and the Secured Parties, segregated from other
funds of such Guarantor, and shall, forthwith upon receipt by such Guarantor, be turned over to the
Administrative Agent in the exact form received by such Guarantor (duly indorsed by such Guarantor
to the Administrative Agent, if required), to be applied against Borrower Obligations, whether
matured or unmatured, in the order set forth in Section 6.5.



    2.4 Amendments, etc. with respect to Borrower Obligations. Each Guarantor shall remain obligated hereunder notwithstanding that, without any
reservation of rights against any Guarantor and without notice to or further assent by any
Guarantor, any demand for payment of any of Borrower Obligations made by the Administrative Agent
or any Secured Party may be rescinded by the Administrative Agent or such Secured Party and any of
the Borrower Obligations continued, and Borrower Obligations, or the liability of any other Person
upon or for any part thereof, or any collateral security or guarantee therefor or right of offset
with respect thereto, may, from time to time, in whole or in part, be renewed, extended, amended,
modified, accelerated, compromised, waived, surrendered or released by the Administrative Agent or
any Secured Party, and the Loan Documents and any other documents executed and delivered in
connection therewith may be amended, modified, supplemented or terminated, in whole or in part, as
the Administrative Agent (or the Required Lenders, the applicable Majority Facility Lenders or all
Secured Parties, as the case may be) may deem advisable from time to time, and any collateral
security, guarantee or right of offset at any time held by the Administrative Agent or any Secured
Party for the payment of the Borrower Obligations may be sold, exchanged, waived, surrendered or
released. Neither the Administrative Agent nor any Secured Party shall have any obligation to
protect, secure, perfect or insure any Lien at any time held by it as security for the Borrower
Obligations or for the guarantee contained in this Section 2 or any property subject thereto.



    2.5 Guarantee Absolute and Unconditional. Each Guarantor waives any and all notice of
the creation, renewal, extension or accrual of any of the Borrower Obligations and notice of or
proof of reliance by the Administrative Agent or any Secured Party upon the guarantee contained in
this Section 2 or acceptance of the guarantee contained in this Section 2; the Borrower
Obligations, and any of them, shall conclusively be deemed to have been created, contracted or
incurred, or renewed, extended,








 




7


amended or waived, in reliance upon the guarantee contained in this
Section 2; and all dealings between the Borrowers and any of the Guarantors, on the one hand, and
the Administrative Agent and the Secured Parties, on the other hand, likewise shall be conclusively
presumed to have been had or consummated in reliance upon the guarantee contained in this Section
2. Each Guarantor waives diligence, presentment, protest, demand for payment and notice of default
or nonpayment to or upon any of the Borrowers or any of the Guarantors with respect to the Borrower
Obligations. Each Guarantor understands and agrees that, to the fullest extent permitted under
applicable law, the guarantee contained in this Section 2 shall be construed as a continuing,
absolute and unconditional guarantee of payment without regard to (a) the validity or
enforceability of the Loan Documents, any of the Borrower Obligations or any other collateral
security therefor or guarantee or right of offset with respect thereto at any time or from time to
time held by the Administrative Agent or any Secured Party, (b) any defense, set-off or
counterclaim (other than a defense of payment or performance) which may at any time be available to
or be asserted by any Borrower or any other Person against the Administrative Agent or any Secured
Party, or (c) any other circumstance whatsoever (with or without notice to or knowledge of such
Borrower or such Guarantor) which constitutes, or might be construed to constitute, an equitable or
legal discharge of either Borrower for the Borrower Obligations, or of such Guarantor under the
guarantee contained in this Section 2, in bankruptcy or in any other instance. When making any
demand hereunder or otherwise pursuing its rights and remedies hereunder against any Guarantor, the
Administrative Agent or any Secured Party may, but shall be under no obligation to, make a similar
demand on or otherwise pursue such rights and remedies as it may have against any Borrower, any
other Guarantor or any other Person or against any collateral security or guarantee for the
Borrower Obligations or any right of offset with respect thereto, and any failure by the
Administrative Agent or any Secured Party to make any such demand, to pursue such other rights or
remedies or to collect any payments from any Borrower, any other Guarantor or any other Person or
to realize upon any such collateral security or guarantee or to exercise any such right of offset,
or any release of any Borrower, any other Guarantor or any other Person or any such collateral
security, guarantee or right of offset, shall not relieve any Guarantor of any obligation or
liability hereunder, and shall not impair or affect the rights and remedies, whether express, implied or available as a matter of law, of the Administrative
Agent or any Secured Party against any Guarantor. For the purposes hereof “demand” shall include
the commencement and continuance of any legal proceedings.




    2.6 Reinstatement. The guarantee contained in this Section 2 shall continue to be
effective, or be reinstated, as the case may be, if at any time payment, or any part thereof, of
any of the Borrower Obligations is rescinded or must otherwise be restored or returned by the
Administrative Agent or any Secured Party upon the insolvency, bankruptcy, dissolution, liquidation
or reorganization of any Borrower or any other Guarantor, or upon or as a result of the appointment
of a receiver, intervenor or conservator of, or trustee or similar officer for, any Borrower or any
other Guarantor or any substantial part of its property, or otherwise, all as though such payments
had not been made.



    2.7 Payments. Each Guarantor hereby guarantees that payments hereunder will be paid
to the Administrative Agent without set-off or counterclaim in the Agreement Currency at the
applicable funding office set forth in Section 11.2 of the Credit Agreement.



SECTION 3. GRANT OF SECURITY INTEREST




          Each Grantor hereby assigns and transfers to the Administrative Agent, and hereby grants to
the Administrative Agent, for the ratable benefit of the Secured Parties, a security interest in,
all of the following property now owned or at any time hereafter acquired by such Grantor or in
which such Grantor now has or at any time in the future may acquire any right, title or interest
(collectively, the “Collateral”), as collateral security for the prompt and complete
payment and performance when due (whether at the stated maturity, by acceleration or otherwise) of
such Grantor’s Obligations,:









 




8




    (a) all Accounts;



    (b) all Chattel Paper;



    (c) all Deposit Accounts;



    (d) all Documents;



    (e) all Equipment;



    (f) all General Intangibles;



    (g) all Instruments;



    (h) all Intellectual Property;



    (i) all Inventory;



    (j) all Investment Property;



    (k) all Letter-of-Credit Rights;



    (l) all Commercial Tort Claims to the extent they have been notified to the Administrative
Agent pursuant to Section 5.9;



    (m) all other property not otherwise described above (except for any property specifically
excluded from any clause in this section above, and any property specifically excluded from any
defined term used in any clause of this section above);



    (n) all books and records pertaining to the Collateral; and



    (o) to the extent not otherwise included, all Proceeds, Supporting Obligations and products of
any and all of the foregoing and all collateral security and guarantees given by any Person with
respect to any of the foregoing;



          provided, however, that notwithstanding any of the other provisions set forth in this
Section 3, (i) this Agreement shall not constitute a grant of a security interest in any property
to the extent that such grant of a security interest is prohibited by any Requirements of Law,
requires a consent not obtained of any Governmental Authority pursuant to such Requirement of Law
or is prohibited by, or constitutes a breach or default under or results in the termination of or
requires any consent not obtained under, any contract, license, agreement, instrument or other
document evidencing or giving rise to such property or, in the case of any Investment Property,
Pledged Stock or Pledged Note, any applicable shareholder or similar agreement, except to the
extent that such Requirement of Law or the term in such contract, license, agreement, instrument or
other document or shareholder or similar agreement providing for such prohibition, breach, default
or termination or requiring such consent is ineffective under applicable law and (ii) the
Collateral shall in no event include the Excluded Foreign Subsidiary Stock or the Excluded
Equipment Lease Property.




SECTION 4. REPRESENTATIONS AND WARRANTIES









 




9




          To induce the Administrative Agent and the Lenders to enter into the Credit Agreement and to
induce the Lenders to make their respective extensions of credit to the Borrowers, each Grantor
hereby represents and warrants to the Administrative Agent and each Secured Party that:




    4.1 Title; No Other Liens. No financing statement or other public notice with respect
to all or any part of the Collateral is on file or of record in any public office, except such as
have been filed in favor of the Administrative Agent, for the ratable benefit of the Secured
Parties, pursuant to this Agreement or as are permitted by the Credit Agreement (or, if the Credit
Agreement shall have been paid in full or terminated, by the last version of the Credit Agreement
as in effect immediately prior to such payment in full or termination). For the avoidance of
doubt, it is understood and agreed that any Grantor may, as part of its business, grant licenses to
third parties to use Intellectual Property owned or developed by a Grantor. For purposes of this
Agreement and the other Loan Documents, such licensing activity shall not constitute a “Lien” on
such Intellectual Property. Each of the Administrative Agent and each Secured Party understands
that any such licenses may be exclusive to the applicable licensees, and such exclusivity
provisions may limit the ability of the Administrative Agent to utilize, sell, lease or transfer
the related Intellectual Property or otherwise realize value from such Intellectual Property
pursuant hereto.



    4.2 Jurisdiction of Organization; Chief Executive Office. On the date hereof, such
Grantor’s jurisdiction of organization, identification number from the jurisdiction of organization
(if any), and the location of such Grantor’s chief executive office or sole place of business or principal residence, as the case may be, are specified on
Schedule 3. Such Grantor has furnished to the Administrative Agent a certified charter,
certificate of incorporation or other organization document and good standing certificate as of a
date which is recent to the date hereof.



    4.3 Inventory and Equipment. On the date hereof, all Inventory and Equipment (other
than mobile goods) held for lease or sale in the United States are kept at the locations listed on
Schedule 5.



    4.4 Farm Products. None of the Collateral constitutes, or is the Proceeds of, Farm
Products.



    4.5 Investment Property. (a) The shares of Pledged Stock covered by the grant of the
security interest in Section 3 hereof constitute all the issued and outstanding shares of all
classes of the Capital Stock of each Issuer owned by each Grantor (except for the Excluded Foreign
Subsidiary Stock).



    (b) All the shares of the Pledged Stock have been duly and validly issued and, with respect to
each Issuer that is a corporation, are fully paid and nonassessable.



    (c) Each of the Pledged Notes constitutes the legal, valid and binding obligation of the
Issuer thereof, enforceable in accordance with its terms, subject to the effects of bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or
affecting creditors’ rights generally, general equitable principles (whether considered in a
proceeding in equity or at law) and an implied covenant of good faith and fair dealing.



    4.6 Receivables. The amounts represented by such Grantor to the Secured Parties from
time to time as owing to such Grantor in respect of the Receivables will at such times be accurate
in all material respects.



    4.7 Intellectual Property. On the date hereof, all material Intellectual Property is
valid, subsisting, unexpired and enforceable and has not been abandoned.



SECTION 5. COVENANTS









 




10




          Each Grantor covenants and agrees with the Administrative Agent and the Secured Parties that,
from and after the date of this Agreement until the Obligations shall have been paid in full, no
Letter of Credit shall be outstanding (or any outstanding Letters of Credit shall have been cash
collateralized in accordance with subsection 11.18(b) of the Credit Agreement) and the Commitments
shall have terminated:




    5.1 Delivery of Instruments, Certificated Securities and Chattel Paper. If any amount
payable under or in connection with any of the Collateral shall be or become evidenced by any
Instrument, Certificated Security or Chattel Paper, such Instrument, Certificated Security or
Chattel Paper in excess of $100,000 shall, if requested by the Administrative Agent or the Required Lenders, be promptly delivered to the Administrative Agent, duly
indorsed in a manner satisfactory to the Administrative Agent, to be held as Collateral pursuant to
this Agreement.



    5.2 Maintenance of Perfected Security Interest; Further Documentation. (a) Such
Grantor shall maintain the security interest created by this Agreement as a perfected security
interest (it being agreed that, unless other means of perfection have been requested by the
Administrative Agent or the Required Lenders, such perfected security interest is only to the
extent that perfection may be achieved through the filing of a Uniform Commercial Code financing
statement in the appropriate filing office) having at least the priority described in Section
5.19(a) of the Credit Agreement and shall defend such security interest against the claims and
demands of all Persons whomsoever (other than Persons holding Liens permitted by Section 8.3 of the
Credit Agreement), subject to the rights of such Grantor under the Loan Documents to Dispose of the
Collateral.



    (b) Such Grantor will furnish to the Administrative Agent and the Secured Parties from time to
time statements and schedules further identifying and describing the assets and property of such
Grantor and such other reports in connection therewith as the Administrative Agent may reasonably
request, all in reasonable detail.



    (c) At any time and from time to time, upon the written and reasonable request of the
Administrative Agent, and at the sole expense of such Grantor, such Grantor will promptly and duly
execute and deliver, and have recorded, such further instruments and documents and take such
further actions as the Administrative Agent may reasonably request for the purpose of obtaining or
preserving the full benefits of this Agreement and of the rights and powers herein granted,
including, without limitation, (i) filing any financing or continuation statements under the
Uniform Commercial Code (or other similar laws) in effect in any jurisdiction with respect to the
security interests created hereby and (ii) in the case of Investment Property, Deposit Accounts,
Letter-of-Credit Rights and any other relevant Collateral, taking any actions necessary to enable
the Administrative Agent to obtain “control” (within the meaning of the applicable Uniform
Commercial Code) with respect thereto.



    (d) Notwithstanding any other provision of the Loan Documents to the contrary, the Grantors
shall not be required to take any action to perfect the security interests created hereunder except
for filing of properly completed Uniform Commercial Code financing statements in appropriate filing
offices unless otherwise requested by the Administrative Agent or the Required Lenders.



    5.3 Changes in Locations, Name, etc. Such Grantor will not, except upon 15 days’
prior written notice to the Administrative Agent and delivery to the Administrative Agent of all
additional executed financing statements and other documents reasonably requested by the
Administrative Agent to maintain the validity, perfection and priority of the security interests
provided for herein:



 








 






11





     (i) change its jurisdiction of organization or the location of its chief executive
office or sole place of business or principal residence from that referred to in Section 4.2; or




     (ii) change its name.



     5.4 Notices. Such Grantor will advise the Administrative Agent and the Secured
Parties promptly, in reasonable detail, of any Lien (other than security interests created hereby
or Liens permitted under the Credit Agreement (or, if the Credit Agreement shall have been paid in
full or terminated, by the last version of the Credit Agreement as in effect immediately prior to
such payment in full or termination)) on any of the Collateral which would adversely affect the
ability of the Administrative Agent to exercise any of its remedies hereunder.



     5.5 Investment Property. (a) If such Grantor shall become entitled to receive or
shall receive any certificate (including, without limitation, any certificate representing a
dividend or a distribution in connection with any reclassification, increase or reduction of
capital or any certificate issued in connection with any reorganization), option or rights in
respect of the Capital Stock (other than Excluded Foreign Subsidiary Stock) of any Issuer, whether
in addition to, in substitution of, as a conversion of, or in exchange for, any shares of the
Pledged Stock, or otherwise in respect thereof, such Grantor shall, if requested by the
Administrative Agent or the Required Lenders, accept the same as the agent of the Administrative
Agent and the Secured Parties, hold the same in trust for the Administrative Agent and the Secured
Parties and deliver the same forthwith to the Administrative Agent in the exact form received, duly
indorsed by such Grantor to the Administrative Agent, if required, together with an undated stock
power covering such certificate duly executed in blank by such Grantor and with, if the
Administrative Agent so requests, signature guaranteed, to be held by the Administrative Agent,
subject to the terms hereof, as additional collateral security for the Obligations. Any sums paid
upon or in respect of the Investment Property upon the liquidation or dissolution of any Issuer
shall be paid over to the Administrative Agent to be held by it hereunder as additional collateral
security for the Obligations, and in case any distribution of capital shall be made on or in
respect of the Investment Property or any property shall be distributed upon or with respect to the
Investment Property pursuant to the recapitalization or reclassification of the capital of any
Issuer or pursuant to the reorganization thereof, the property so distributed shall, unless
otherwise subject to a perfected security interest in favor of the Administrative Agent, if
requested by the Administrative Agent or the Required Lenders, be delivered to the Administrative
Agent to be held by it hereunder as additional collateral security for the Obligations. If any
sums of money or property so paid or distributed in respect of the Investment Property shall be
received by such Grantor, such Grantor shall, until such money or property is paid or delivered to
the Administrative Agent, if requested by the Administrative Agent or the Required Lenders, hold
such money or property in trust for the Administrative Agent and the Secured Parties, segregated
from other funds of such Grantor, as additional collateral security for the Obligations.



     (b) In the case of each Grantor which is an Issuer, such Issuer agrees that (i) it will be
bound by the terms of this Agreement relating to the Investment Property issued by it and will
comply with such terms insofar as such terms are applicable to it and (ii) the terms of Sections
6.3(c) and 6.7(b) shall apply to it, mutatis mutandis, with respect to all actions
that may be required of it pursuant to Section 6.3(c) or 6.7(b) with respect to the Investment
Property issued by it.



     5.6 Receivables. Other than in the ordinary course of business or as permitted by
Section 8.6(d) or 8.10(m) of the Credit Agreement, such Grantor will not (i) grant any extension of
the time of payment of any Receivable, (ii) compromise or settle any Receivable for less than the
full amount thereof, (iii) release, wholly or partially, any Person liable for the payment of any
Receivable, (iv) allow any credit or discount whatsoever on any Receivable or (v) amend, supplement or modify any Receivable in
any manner that could adversely affect the value thereof.



 









 





12




     5.7 Intellectual Property. (a) Such Grantor (either itself or through licensees)
will not (and not permit any licensee or sublicensee thereof to) do any act or knowingly omit to do
any act whereby any material Trademark may become invalidated or impaired in any material way.



     (b) Such Grantor (either itself or through licensees) will not do any act, or omit to do any
act, whereby any material Patent may become forfeited, abandoned or dedicated to the public.



     (c) Such Grantor (either itself or through licensees) will not (and will not permit any
licensee or sublicensee thereof to) do any act or knowingly omit to do any act whereby any material
portion of the Copyrights may become invalidated or otherwise materially impaired. Such Grantor
will not (either itself or through licensees) do any act whereby any material portion of the
Copyrights may fall into the public domain.



     (d) Such Grantor (either itself or through licensees) will not do any act that knowingly uses
any material Intellectual Property to infringe, in any material way, the intellectual property
rights of any other Person.



     (e) Such Grantor will notify the Administrative Agent and the Secured Parties promptly if it
knows, or has reason to know, that any application or registration relating to any material
Intellectual Property may become forfeited, abandoned or dedicated to the public, or of any
material and adverse determination or development (including, without limitation, the institution
of, or any such determination or development in, any proceeding in the United States Patent and
Trademark Office, the United States Copyright Office or any court or tribunal in any country)
regarding such Grantor’s ownership of, or the validity of, any material Intellectual Property or
such Grantor’s right to register the same or to own and maintain the same.



     (f) Whenever such Grantor, either by itself or through any agent, employee, licensee or
designee, shall file an application for the registration of any Intellectual Property with the
United States Patent and Trademark Office, the United States Copyright Office or any similar office
or agency in any other country or any political subdivision thereof, such Grantor shall, if so
requested by the Administrative Agent, report such filing to the Administrative Agent within five
Business Days after the last day of the fiscal quarter in which such filing occurs. Upon request
of the Administrative Agent, such Grantor shall execute and deliver, and have recorded, any and all
agreements, instruments, documents, and papers as the Administrative Agent may request to evidence
the Administrative Agent’s and the Secured Parties’ security interest in any Copyright, Patent or
Trademark and the goodwill and general intangibles of such Grantor relating thereto or represented
thereby.



     (g) Such Grantor will take all reasonable and necessary steps, including, without limitation,
in any proceeding before the United States Patent and Trademark Office, the United States Copyright
Office or any similar office or agency in any other country or any political subdivision thereof,
to maintain and pursue each application (and to obtain the relevant registration) and to maintain
each registration of the material Intellectual Property, including, without limitation, filing of
applications for renewal, affidavits of use and affidavits of incontestability.



     (h) In the event that any material Intellectual Property is infringed, misappropriated or
diluted by a third party, such Grantor shall (i) take such actions as such Grantor shall reasonably
deem appropriate under the circumstances to protect such Intellectual Property and (ii) if such
Intellectual Property is of material economic value, promptly notify the Administrative Agent after
a Responsible Officer of such Grantor learns thereof and sue for infringement, misappropriation or dilution,
to seek injunctive relief where appropriate and to recover any and all damages for such
infringement, misappropriation or dilution.



 









 





13




     5.8 Vehicles. No Grantor shall be required to take any action to perfect any security
interest in Vehicles created pursuant to this Agreement.



     5.9 Commercial Tort Claims. If such Grantor shall obtain an interest in any Commercial Tort Claim with a potential
value in excess of $1,000,000, such Grantor shall within 30 days of obtaining such interest sign
and deliver documentation acceptable to the Administrative Agent granting a security interest under
the terms and provisions of this Agreement in and to such Commercial Tort Claim.




SECTION 6. REMEDIAL PROVISIONS




     6.1 Certain Matters Relating to Receivables. (a) The Administrative Agent hereby
authorizes each Grantor to collect such Grantor’s Receivables, and the Administrative Agent may
curtail or terminate said authority at any time after the occurrence and during the continuance of
an Event of Default. If required by the Administrative Agent at any time after the occurrence and
during the continuance of an Event of Default, any payments of Receivables, when collected by any
Grantor, (i) shall be forthwith (and, in any event, within two Business Days) deposited by such
Grantor in the exact form received, duly indorsed by such Grantor to the Administrative Agent if
required, in a Collateral Account maintained under the sole dominion and control of the
Administrative Agent, subject to withdrawal by the Administrative Agent for the account of the
Secured Parties only as provided in Section 6.5, and (ii) until so turned over, shall be held by
such Grantor in trust for the Administrative Agent and the Secured Parties, segregated from other
funds of such Grantor. Each such deposit of Proceeds of Receivables shall be accompanied by a
report identifying in reasonable detail the nature and source of the payments included in the
deposit.



     (b) At the Administrative Agent’s request after the occurrence and during the continuance of
an Event of Default, each Grantor shall deliver to the Administrative Agent all original and other
documents evidencing, and relating to, the agreements and transactions which gave rise to the
Receivables, including, without limitation, all original orders, invoices and shipping receipts.



     6.2 Communications with Obligors; Grantors Remain Liable. (a) The Administrative
Agent in its own name or in the name of others may at any time after the occurrence and during the
continuance of an Event of Default communicate with obligors under the Receivables to verify with
them to the Administrative Agent’s satisfaction the existence, amount and terms of any Receivables.



     (b) Upon the request of the Administrative Agent at any time after the occurrence and during
the continuance of an Event of Default, each Grantor shall notify obligors on the Receivables that
the Receivables have been assigned to the Administrative Agent for the ratable benefit of the
Secured Parties and that payments in respect thereof shall be made directly to the Administrative
Agent.



     (c) Anything herein to the contrary notwithstanding, each Grantor shall remain liable under
each of the Receivables to observe and perform all the conditions and obligations to be observed
and performed by it thereunder, all in accordance with the terms of any agreement giving rise
thereto. Neither the Administrative Agent nor any Secured Party shall have any obligation or
liability under any Receivable (or any agreement giving rise thereto) by reason of or arising out
of this Agreement or the receipt by the Administrative Agent or any Secured Party of any payment
relating thereto, nor shall the Administrative Agent or any Secured Party be obligated in any manner to perform any of the
obligations of any Grantor under or pursuant to any Receivable (or any agreement giving rise
thereto), to make any payment, to make any inquiry as to the nature or the sufficiency of any
payment received by it or as to the sufficiency of any performance by any party thereunder, to
present or file any claim, to take any action to



 









 





14



enforce any performance or to collect the payment of any amounts which may have been assigned to it or to which it may be entitled at any time or
times.




     6.3 Pledged Stock. (a) Unless an Event of Default shall have occurred and be
continuing and the Administrative Agent shall have given notice to the relevant Grantor of the
Administrative Agent’s intent to exercise its corresponding rights pursuant to Section 6.3(b), each
Grantor shall be permitted to receive all cash dividends paid in respect of the Pledged Stock and
all payments made in respect of the Pledged Notes, in each case paid in the normal course of
business of the relevant Issuer, and to exercise all voting and corporate or other organizational
rights with respect to the Investment Property; provided, however, that no vote
shall be cast or corporate or other organizational right exercised or other action taken which
would result in any violation of any provision of this Agreement or any other Loan Documents.



     (b) If an Event of Default shall occur and be continuing and the Administrative Agent shall
give notice of its intent to exercise such rights to the relevant Grantor or Grantors, (i) the
Administrative Agent shall have the right to receive any and all cash dividends, payments or other
Proceeds paid in respect of the Investment Property and make application thereof to the Obligations
in the order set forth in Section 6.5, and (ii) any or all of the Investment Property shall be
registered in the name of the Administrative Agent or its nominee, and the Administrative Agent or
its nominee may thereafter exercise (x) all voting, corporate and other rights pertaining to such
Investment Property at any meeting of shareholders of the relevant Issuer or Issuers or otherwise
and (y) any and all rights of conversion, exchange and subscription and any other rights,
privileges or options pertaining to such Investment Property as if it were the absolute owner
thereof (including, without limitation, the right to exchange at its discretion any and all of the
Investment Property upon the merger, consolidation, reorganization, recapitalization or other
fundamental change in the corporate or other organizational structure of any Issuer, or upon the
exercise by any Grantor or the Administrative Agent of any right, privilege or option pertaining to
such Investment Property, and in connection therewith, the right to deposit and deliver any and all
of the Investment Property with any committee, depositary, transfer agent, registrar or other
designated agency upon such terms and conditions as the Administrative Agent may determine), all
without liability except to account for property actually received by it, but the Administrative
Agent shall have no duty to any Grantor to exercise any such right, privilege or option and shall
not be responsible for any failure to do so or delay in so doing.



     (c) Each Grantor hereby authorizes and instructs each Issuer of any Investment Property
pledged by such Grantor hereunder to (i) comply with any instruction received by it from the
Administrative Agent in writing that (x) states that an Event of Default has occurred and is
continuing and (y) is otherwise in accordance with the terms of this Agreement, without any other
or further instructions from such Grantor, and each Grantor agrees that each Issuer shall be fully
protected in so complying, and (ii) unless otherwise expressly permitted hereby, pay any dividends
or other payments with respect to the Investment Property directly to the Administrative Agent.



     6.4 Proceeds to be Turned Over To Administrative Agent. In addition to the rights of
the Administrative Agent and the Secured Parties specified in Section 6.1 with respect to payments
of Receivables, if an Event of Default shall occur and be continuing, all Proceeds received by any
Grantor consisting of cash, checks and other near-cash items shall be held by such Grantor in trust
for the Administrative Agent and the Secured Parties, segregated from other funds of such Grantor,
and shall, forthwith upon receipt by such Grantor, be turned over to the Administrative Agent in
the exact form received by such Grantor (duly indorsed by such Grantor to the Administrative Agent, if
required). All Proceeds received by the Administrative Agent hereunder shall be held by the
Administrative Agent in a Collateral Account maintained under its sole dominion and control. All
Proceeds while held by the Administrative Agent in a Collateral Account (or by such Grantor in
trust for the Administrative Agent



 









 





15



and the Secured Parties) shall continue to be held as collateral
security for all the Obligations and shall not constitute payment thereof until applied as provided
in Section 6.5.




     6.5 Application of Proceeds. At such intervals as may be agreed upon by the Borrowers
and the Administrative Agent, or, if an Event of Default shall have occurred and be continuing, at
any time at the Administrative Agent’s election, the Administrative Agent shall apply all or any
part of Proceeds constituting Collateral, whether or not held in any Collateral Account, and any
proceeds of the guarantee set forth in Section 2, in payment of the Obligations in the following
order:




     First, to pay incurred and unpaid fees and expenses of the Administrative Agent
under the Loan Documents;




     Second, to the Administrative Agent, for application by it towards payment of
amounts then due and owing and remaining unpaid in respect of the Obligations, pro
rata among the Secured Parties according to the amounts of the Obligations then due
and owing and remaining unpaid to the Secured Parties;




     Third, to the Administrative Agent, for application by it towards prepayment of
the Obligations, pro rata among the Secured Parties according to the amounts
of the Obligations then held by the Secured Parties; and




     Fourth, any balance remaining after the Obligations shall have been paid in
full, no Letters of Credit shall be outstanding (other than Letters of Credit cash
collateralized in accordance with subsection 11.18(b) of the Credit Agreement) and the
Commitments shall have terminated shall be paid over to the relevant Borrower or to
whomsoever may be lawfully entitled to receive the same.



     6.6 Code and Other Remedies. If an Event of Default shall occur and be continuing,
the Administrative Agent, on behalf of the Secured Parties, may exercise, in addition to all other
rights and remedies granted to them in this Agreement and in any other instrument or agreement
securing, evidencing or relating to the Obligations, all rights and remedies of a secured party
under the New York UCC or any other applicable law. Without limiting the generality of the
foregoing, the Administrative Agent, without demand of performance or other demand, presentment,
protest, advertisement or notice of any kind (except any notice required by law referred to below)
to or upon any Grantor or any other Person (all and each of which demands, defenses, advertisements
and notices are hereby waived), may in such circumstances forthwith collect, receive, appropriate
and realize upon the Collateral, or any part thereof, and/or may forthwith sell, lease, assign,
give option or options to purchase, or otherwise dispose of and deliver the Collateral or any part
thereof (or contract to do any of the foregoing), in one or more parcels at public or private sale
or sales, at any exchange, broker’s board or office of the Administrative Agent or any Secured
Party or elsewhere upon such terms and conditions as it may deem advisable and at such prices as it
may deem best, for cash or on credit or for future delivery without assumption of any credit risk.
The Administrative Agent or any Secured Party shall have the right upon any such public sale or
sales, and, to the extent permitted by law, upon any such private sale or sales, to purchase the
whole or any part of the Collateral so sold, free of any right or equity of redemption in any
Grantor, which right or equity is hereby waived and released. Each Grantor further agrees, at the
Administrative Agent’s request, to assemble the Collateral and make it available to the
Administrative Agent at places which the Administrative Agent shall reasonably select, whether at
such Grantor’s premises or elsewhere. The Administrative Agent shall apply the net proceeds of any action taken by it pursuant to this
Section 6.6, after deducting all reasonable costs and expenses of every kind incurred in connection
therewith or incidental to the care or safekeeping of any of the Collateral or in any way relating
to the Collateral or the rights of the Administrative Agent and the Secured Parties hereunder,
including, without limitation,



 









 





16



reasonable attorneys’ fees and disbursements, to the payment in
whole or in part of the Obligations, in the order set forth in Section 6.5, and only after such
application and after the payment by the Administrative Agent of any other amount required by any
provision of law, including, without limitation, Section 9-615(a)(3) of the New York UCC, need the
Administrative Agent account for the surplus, if any, to any Grantor. To the extent permitted by
applicable law, each Grantor waives all claims, damages and demands it may acquire against the
Administrative Agent or any Secured Party arising out of the exercise by them of any rights
hereunder. If any notice of a proposed sale or other disposition of Collateral shall be required
by law, such notice shall be deemed reasonable and proper if given at least 10 days before such
sale or other disposition.




     6.7 Private Sales. (a) Each Grantor recognizes that the Administrative Agent may be
unable to effect a public sale of any or all the Pledged Stock, by reason of certain prohibitions
contained in the Securities Act and applicable state securities laws or otherwise, and may be
compelled to resort to one or more private sales thereof to a restricted group of purchasers which
will be obliged to agree, among other things, to acquire such securities for their own account for
investment and not with a view to the distribution or resale thereof. Each Grantor acknowledges
and agrees that any such private sale may result in prices and other terms less favorable than if
such sale were a public sale and, notwithstanding such circumstances, agrees that any such private
sale shall be deemed to have been made in a commercially reasonable manner. The Administrative
Agent shall be under no obligation to delay a sale of any of the Pledged Stock for the period of
time necessary to permit the Issuer thereof to register such securities for public sale under the
Securities Act, or under applicable state securities laws, even if such Issuer would agree to do
so.



     (b) Each Grantor agrees to use its commercially reasonable efforts to do or cause to be done
all such other acts as may be necessary to make such sale or sales of all or any portion of the
Pledged Stock pursuant to this Section 6.7 valid and binding and in compliance with any and all
other applicable Requirements of Law. Each Grantor further agrees that a breach of any of the
covenants contained in this Section 6.7 will cause irreparable injury to the Administrative Agent
and the Secured Parties, that the Administrative Agent and the Secured Parties have no adequate
remedy at law in respect of such breach and, as a consequence, that each and every covenant
contained in this Section 6.7 shall be specifically enforceable against such Grantor, and such
Grantor hereby waives and agrees not to assert any defenses against an action for specific
performance of such covenants except for a defense that no Event of Default has occurred under the
Credit Agreement.



     6.8 Deficiency. Each Grantor shall remain liable for any deficiency if the proceeds
of any sale or other disposition of the Collateral are insufficient to pay its Obligations and the
fees and disbursements of any attorneys employed by the Administrative Agent or any Secured Party
to collect such deficiency.



SECTION 7. THE ADMINISTRATIVE AGENT




     7.1 Administrative Agent’s Appointment as Attorney-in-Fact, etc. (a) Each Grantor
hereby irrevocably constitutes and appoints the Administrative Agent and any officer or agent
thereof, with full power of substitution, as its true and lawful attorney-in-fact with full
irrevocable power and authority in the place and stead of such Grantor and in the name of such
Grantor or in its own name, for the purpose of carrying out the terms of this Agreement, to take
any and all appropriate action and to execute any and all documents and instruments which may be
necessary or desirable to accomplish the purposes of this Agreement, and, without limiting the generality of the foregoing, each Grantor hereby gives
the Administrative Agent the power and right, on behalf of such Grantor, without notice to or
assent by such Grantor, to do any or all of the following:



 









 





17





     (i) in the name of such Grantor or its own name, or otherwise, take possession of and
indorse and collect any checks, drafts, notes, acceptances or other instruments for the payment
of moneys due under any Receivable or with respect to any other Collateral and file any claim or
take any other action or proceeding in any court of law or equity or otherwise deemed
appropriate by the Administrative Agent for the purpose of collecting any and all such moneys
due under any Receivable or with respect to any other Collateral whenever payable;




     (ii) in the case of any Intellectual Property, execute and deliver, and have recorded, any
and all agreements, instruments, documents and papers as the Administrative Agent may request to
evidence the Administrative Agent’s and the Secured Partys’ security interest in such
Intellectual Property and the goodwill and general intangibles of such Grantor relating thereto
or represented thereby;




     (iii) pay or discharge taxes and Liens levied or placed on or threatened against the
Collateral, effect any repairs or any insurance called for by the terms of this Agreement and
pay all or any part of the premiums therefor and the costs thereof;




     (iv) execute, in connection with any sale provided for in Section 6.6 or 6.7, any
indorsements, assignments or other instruments of conveyance or transfer with respect to the
Collateral; and




     (v) (1) direct any party liable for any payment under any of the Collateral to make
payment of any and all moneys due or to become due thereunder directly to the Administrative
Agent or as the Administrative Agent shall direct; (2) ask or demand for, collect, and
receive payment of and receipt for, any and all moneys, claims and other amounts due or to
become due at any time in respect of or arising out of any Collateral; (3) sign and indorse
any invoices, freight or express bills, bills of lading, storage or warehouse receipts, drafts
against debtors, assignments, verifications, notices and other documents in connection with any
of the Collateral; (4) commence and prosecute any suits, actions or proceedings at law or in
equity in any court of competent jurisdiction to collect the Collateral or any portion thereof
and to enforce any other right in respect of any Collateral; (5) defend any suit, action or
proceeding brought against such Grantor with respect to any Collateral; (6) settle, compromise
or adjust any such suit, action or proceeding and, in connection therewith, give such discharges
or releases as the Administrative Agent may deem appropriate; (7) assign any Copyright, Patent
or Trademark (along with the goodwill of the business to which any such Copyright, Patent or
Trademark pertains), throughout the world for such term or terms, on such conditions, and in
such manner, as the Administrative Agent shall in its sole discretion determine; and (8)
generally, sell, transfer, pledge and make any agreement with respect to or otherwise deal with
any of the Collateral as fully and completely as though the Administrative Agent were the
absolute owner thereof for all purposes, and do, at the Administrative Agent’s option and such
Grantor’s expense, at any time, or from time to time, all acts and things which the
Administrative Agent deems necessary to protect, preserve or realize upon the Collateral and the
Administrative Agent’s and the Secured Partys’ security interests therein and to effect the
intent of this Agreement, all as fully and effectively as such Grantor might do.



     Anything in this Section 7.1(a) to the contrary notwithstanding, the Administrative Agent
agrees that it will not exercise any rights under the power of attorney provided for in this
Section 7.1(a) unless an Event of Default shall have occurred and be continuing.



     (b) Upon the occurrence and continuance of an Event of Default, if any Grantor fails to
perform or comply with any of its agreements contained herein, the Administrative Agent, at its
option, but without any obligation so to do, may perform or comply, or otherwise cause performance
or compliance, with such agreement.



 









 





18




     (c) The expenses of the Administrative Agent incurred in connection with actions undertaken as
provided in this Section 7.1, together with interest thereon at a rate per annum equal to the
highest rate per annum at which interest would then be payable on any category of past due ABR
Loans under the Credit Agreement (or, if the Credit Agreement shall have been paid in full or
terminated, by the last version of the Credit Agreement as in effect immediately prior to such
payment in full or termination), from the date of payment by the Administrative Agent to the date
reimbursed by the relevant Grantor, shall be payable by such Grantor to the Administrative Agent on
demand.



     (d) Each Grantor hereby ratifies all that said attorneys shall lawfully do or cause to be done
by virtue hereof. All powers, authorizations and agencies contained in this Agreement are coupled
with an interest and are irrevocable until this Agreement is terminated and the security interests
created hereby are released.



     7.2 Duty of Administrative Agent. The Administrative Agent’s sole duty with respect
to the custody, safekeeping and physical preservation of the Collateral in its possession, under
Section 9-207 of the New York UCC or otherwise, shall be to deal with it in the same manner as the
Administrative Agent deals with similar property for its own account. Neither the Administrative
Agent, any Secured Party nor any of their respective officers, directors, employees or agents shall
be liable for failure to demand, collect or realize upon any of the Collateral or for any delay in
doing so or shall be under any obligation to sell or otherwise dispose of any Collateral upon the
request of any Grantor or any other Person or to take any other action whatsoever with regard to
the Collateral or any part thereof. The powers conferred on the Administrative Agent and the
Secured Parties hereunder are solely to protect the Administrative Agent’s and the Secured Partys’
interests in the Collateral and shall not impose any duty upon the Administrative Agent or any
Secured Party to exercise any such powers. The Administrative Agent and the Secured Parties shall
be accountable only for amounts that they actually receive as a result of the exercise of such
powers, and neither they nor any of their officers, directors, employees or agents shall be
responsible to any Grantor for any act or failure to act hereunder, except for their own gross
negligence or willful misconduct.



     7.3 Execution of Financing Statements. Pursuant to any applicable law, each Grantor
authorizes the Administrative Agent to file or record financing statements and other filing or
recording documents or instruments with respect to the Collateral without the signature of such
Grantor in such form and in such offices as the Administrative Agent determines appropriate to
perfect the security interests of the Administrative Agent under this Agreement. Each Grantor
authorizes the Administrative Agent to use the collateral description “all personal property” or
“all personal property, whether now owned or hereafter acquired” in any such financing statements.
Each Grantor hereby ratifies and authorizes the filing by the Administrative Agent of any financing
statement with respect to the Collateral made prior to the date hereof.



     7.4 Authority of Administrative Agent. Each Grantor acknowledges that the rights and
responsibilities of the Administrative Agent under this Agreement with respect to any action taken
by the Administrative Agent or the exercise or non-exercise by the Administrative Agent of any
option, voting right, request, judgment or other right or remedy provided for herein or resulting
or arising out of this Agreement shall, as between the Administrative Agent and the Secured
Parties, be governed by the Loan Documents and by such other agreements with respect thereto as may
exist from time to time among them, but, as between the Administrative Agent and the Grantors, the
Administrative Agent shall be conclusively presumed to be acting as agent for the Secured Parties with full and valid
authority so to act or refrain from acting, and no Grantor shall be under any obligation, or
entitlement, to make any inquiry respecting such authority.



 









 





19




SECTION 8. MISCELLANEOUS




     8.1 Amendments in Writing. None of the terms or provisions of this Agreement may be
waived, amended, supplemented or otherwise modified except in accordance with Section 11.1 of the
Credit Agreement, notwithstanding any provisions of the Loan Documents to the contrary.



     8.2 Notices. All notices, requests and demands to or upon the Administrative Agent or
any Grantor hereunder shall be effected in the manner provided for in Section 11.2 of the Credit
Agreement; provided that any such notice, request or demand to or upon any Guarantor shall
be addressed to such Guarantor at its notice address set forth on Schedule 1.



     8.3 No Waiver by Course of Conduct; Cumulative Remedies. Neither the Administrative
Agent nor any Secured Party shall by any act (except by a written instrument pursuant to Section
8.1), delay, indulgence, omission or otherwise be deemed to have waived any right or remedy
hereunder or to have acquiesced in any Default or Event of Default. No failure to exercise, nor
any delay in exercising, on the part of the Administrative Agent or any Secured Party, any right,
power or privilege hereunder shall operate as a waiver thereof. No single or partial exercise of
any right, power or privilege hereunder shall preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. A waiver by the Administrative Agent or any
Secured Party of any right or remedy hereunder on any one occasion shall not be construed as a bar
to any right or remedy which the Administrative Agent or such Secured Party would otherwise have on
any future occasion. The rights and remedies herein provided are cumulative, may be exercised
singly or concurrently and are not exclusive of any other rights or remedies provided by law.



     8.4 Enforcement Expenses; Indemnification. (a) Each Grantor agrees to pay or
reimburse the Administrative Agent and each Secured Party for all its reasonable costs and expenses
incurred in connection with the enforcement or preservation of any rights under this Agreement and
the other Loan Documents to which such Grantor is a party, including, without limitation,
reasonable fees and disbursements of counsel to the Administrative Agent and the several Secured
Parties.



     (b) Each Grantor agrees to pay, and to save the Administrative Agent and the Secured Parties
harmless from, any and all liabilities with respect to, or resulting from any delay in paying, any
and all stamp, excise, sales or other taxes which may be payable or determined to be payable with
respect to any of the Collateral or in connection with any of the transactions contemplated by this
Agreement.



     (c) Each Grantor agrees to pay, and to save the Administrative Agent and the Secured Parties
harmless from, any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever with respect to
the execution, delivery, enforcement, performance and administration of this Agreement to the
extent that either Borrower would be required to do so pursuant to Section 11.5 of the Credit
Agreement, mutatis mutandis.



     (d) The agreements in this Section 8.4 shall survive repayment of the Obligations and all
other amounts payable under the Loan Documents.



     8.5 Successors and Assigns. This Agreement shall be binding upon the successors and
assigns of each Grantor and shall inure to the benefit of the Administrative Agent and the Secured
Parties and their successors and assigns; provided that no Grantor may assign, transfer or delegate
any of its rights or obligations under this Agreement without the prior written consent of the
Administrative Agent.



     8.6 Set-Off. Each Grantor hereby irrevocably authorizes the Administrative Agent and
each Secured Party at any time and from time to time while an Event of Default shall have occurred
and be



 









 





20



continuing, without notice to such Grantor or any other Grantor, any such notice being
expressly waived by each Grantor, to set-off and appropriate and apply any and all deposits
(general or special, time or demand, provisional or final), in any currency, and any other credits,
indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or
contingent, matured or unmatured, at any time held or owing by the Administrative Agent or such
Secured Party to or for the credit or the account of such Grantor, or any part thereof in such
amounts as the Administrative Agent or such Secured Party may elect, against and on account of the
obligations and liabilities of such Grantor to the Administrative Agent or such Secured Party
hereunder and claims of every nature and description of the Administrative Agent or such Secured
Party against such Grantor, in any currency, whether arising hereunder, under any Loan Document or
otherwise, as the Administrative Agent or such Secured Party may elect, whether or not the
Administrative Agent or any Secured Party has made any demand for payment and although such
obligations, liabilities and claims may be contingent or unmatured. The Administrative Agent and
each Secured Party shall notify such Grantor promptly of any such set-off and the application made
by the Administrative Agent or such Secured Party of the proceeds thereof, provided that the
failure to give such notice shall not affect the validity of such set-off and application. The
rights of the Administrative Agent and each Secured Party under this Section 8.6 are in addition to
other rights and remedies (including, without limitation, other rights of set-off) which the
Administrative Agent or such Secured Party may have.




     8.7 Counterparts. This Agreement may be executed by one or more of the parties to
this Agreement on any number of separate counterparts (including by telecopy), and all of said
counterparts taken together shall be deemed to constitute one and the same instrument.



     8.8 Severability. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.



     8.9 Section Headings. The Section headings used in this Agreement are for convenience
of reference only and are not to affect the construction hereof or be taken into consideration in
the interpretation hereof.



     8.10 Integration. This Agreement and the other Loan Documents represent the agreement
of the Grantors, the Administrative Agent and the Secured Parties with respect to the subject
matter hereof and thereof, and there are no promises, undertakings, representations or warranties
by the Administrative Agent or any Secured Party relative to subject matter hereof and thereof not
expressly set forth or referred to herein or in the other Loan Documents.



     8.11 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.



     8.12 Submission To Jurisdiction; Waivers. Each Grantor hereby irrevocably and
unconditionally:



     (a) submits for itself and its property in any legal action or proceeding relating to this
Agreement and the other Loan Documents to which it is a party, or for recognition and enforcement
of any judgment in respect thereof, to the non-exclusive general jurisdiction of the courts of the
State of New York, the courts of the United States of America for the Southern District of New
York, and appellate courts from any thereof;



 









 





21




     (b) consents that any such action or proceeding may be brought in such courts and waives any
objection that it may now or hereafter have to the venue of any such action or proceeding in any
such court or that such action or proceeding was brought in an inconvenient court and agrees not to
plead or claim the same;



     (c) agrees that service of process in any such action or proceeding may be effected by mailing
a copy thereof by registered or certified mail (or any substantially similar form of mail), postage
prepaid, to such Grantor at its address referred to in Section 8.2 or at such other address of
which the Administrative Agent shall have been notified pursuant thereto;



     (d) agrees that nothing herein shall affect the right to effect service of process in any
other manner permitted by law or shall limit the right to sue in any other jurisdiction; and



     (e) waives, to the maximum extent not prohibited by law, any right it may have to claim or
recover in any legal action or proceeding referred to in this Section any special, exemplary,
punitive or consequential damages.



     8.13 Acknowledgements. Each Grantor hereby acknowledges that:



     (a) it has been advised by counsel in the negotiation, execution and delivery of this
Agreement and the other Loan Documents to which it is a party;



     (b) neither the Administrative Agent nor any Secured Party has any fiduciary relationship with
or duty to any Grantor arising out of or in connection with this Agreement or any of the other Loan
Documents, and the relationship between the Grantors, on the one hand, and the Administrative Agent
and Secured Parties, on the other hand, in connection herewith or therewith is solely that of
debtor and creditor; and



     (c) no joint venture is created hereby or by the other Loan Documents or otherwise exists by
virtue of the transactions contemplated hereby among the Secured Parties or among the Grantors and
the Secured Parties.



     8.14 Additional Grantors. Each Subsidiary of Hanover that is required to become a
party to this Agreement pursuant to Section 7.9 of the Credit Agreement shall become a Grantor for
all purposes of this Agreement upon execution and delivery by such Subsidiary of an Assumption
Agreement in the form of Annex 1 hereto.



     8.15 Releases. (a) At such time as the Loans, the Reimbursement Obligations and the
other Obligations (other than Obligations in respect of Derivatives Agreements) shall have been
paid in full, the Commitments have been terminated and no Letters of Credit shall be outstanding
(other than Letters of Credit cash collateralized in accordance with subsection 11.18(b) of the
Credit Agreement), the Collateral shall be released from the Liens created hereby, and this
Agreement and all obligations (other than those expressly stated to survive such termination) of
the Administrative Agent and each Grantor hereunder shall terminate, all without delivery of any
instrument or performance of any act by any party, and all rights to the Collateral shall revert to
the Grantors. At the request and sole expense of any Grantor following any such termination, the Administrative Agent shall deliver to such Grantor any
Collateral held by the Administrative Agent hereunder, and execute and deliver to such Grantor such
documents as such Grantor shall reasonably request to evidence such termination.



     (b) If any of the Collateral shall be sold, transferred or otherwise disposed of by any
Grantor in a transaction permitted by the Loan Documents, then the Administrative Agent, at the
request and sole



 









 





22



expense of such Grantor, shall execute and deliver to such Grantor all releases or
other documents reasonably necessary or desirable for the release of the Liens created hereby on
such Collateral. At the request and sole expense of the Borrowers, a Subsidiary Guarantor shall be
released from its obligations hereunder in the event that all the Capital Stock of such Subsidiary
Guarantor shall be sold, transferred or otherwise disposed of in a transaction permitted by the
Loan Documents.




     8.16 WAIVER OF JURY TRIAL. EACH GRANTOR HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES
TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.



 









 





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



	 	 	 	 	 
	 	 	HANOVER COMPRESSOR COMPANY
	 
	 	 	 	 
	 

	 	By:
	 	     /s/ LEE E. BECKELMAN
	 

	 	 	 	 
	 

	 	 	 	Name: Lee E. Beckelman
	 

	 	 	 	Title: Senior Vice President and Chief Financial Officer
	 
	 	 	 	 
	 	 	HANOVER COMPRESSION LIMITED
	 	 	PARTNERSHIP
	 
	 	 	 	 
	 

	 	By:
	 	     /s/ LEE E. BECKELMAN
	 

	 	 	 	 
	 

	 	 	 	Name: Lee E. Beckelman
	 

	 	 	 	Title: Senior Vice President and
Chief Financial Officer
	 

	 	 	 	 






Signature Page to
Guarantee and Collateral Agreement









 






	 	 	 	 	 
	 	 	EQUITY LEASING CORPORATION
	 	 	ENERGY TRANSFER – HANOVER VENTURES L.P.
	 	 	HANOVER ASIA, INC.
	 	 	HANOVER AUSTRALIA, L.L.C.
	 	 	HANOVER COLOMBIA LEASING, LLC
	 	 	HANOVER COMPRESSED NATURAL GAS SERVICES, LLC
	 	 	HANOVER COMPRESSOR NIGERIA, INC.
	 	 	HANOVER COMPRESSION GENERAL HOLDINGS LLC
	 	 	HANOVER ECUADOR L.L.C.
	 	 	HANOVER GENERAL ENERGY TRANSFER, LLC
	 	 	HANOVER IDR, INC.
	 	 	HANOVER LIMITED ENERGY TRANSFER, LLC
	 	 	HANOVER PARTNERS NIGERIA LLC
	 	 	HANOVER SPE L.L.C.
	 	 	HANOVER/TRINIDAD, L.L.C.
	 	 	HC CAYMAN LLC
	 	 	HC LEASING, INC.
	 	 	HCL COLOMBIA, INC.
	 	 	KOG, INC.
	 	 	NIGERIAN LEASING, LLC
	 	 	SOUTHWEST INDUSTRIES, INC.
	 
	 	 	 	 
	 

	 	By:
	 	     /s/ LEE E. BECKELMAN
	 

	 	 	 	 
	 

	 	 	 	Name: Lee E. Beckelman
	 

	 	 	 	Title: Vice President & Treasurer
	 
	 	 	 	 
	 	 	HANOVER HL HOLDINGS, LLC
	 	 	HANOVER HL, LLC
	 
	 	 	 	 
	 

	 	By:
	 	     /s/ CHARLES R. SCOTT
	 

	 	 	 	 
	 

	 	 	 	Name: Charles R. Scott
	 

	 	 	 	Title: Manager







Signature Page to
Guarantee and Collateral Agreement











 






ACKNOWLEDGEMENT AND CONSENT




     The undersigned hereby acknowledges receipt of a copy of the Guarantee and Collateral
Agreement dated as of November 21, 2005 (the “Agreement”), made by the Grantors parties
thereto for the benefit of JPMorgan Chase Bank, N.A., as Administrative Agent. The undersigned
agrees for the benefit of the Administrative Agent and the Secured Parties as follows:



          1. The undersigned will be bound by the terms of the Agreement and will comply with such terms
insofar as such terms are applicable to the undersigned.



          2. The terms of Sections 6.3(c) and 6.7(b) of the Agreement shall apply to it, mutatis
mutandis, with respect to all actions that may be required of it pursuant to Section 6.3(c)
or 6.7(b) of the Agreement.



	 	 	 	 	 
	 	[NAME OF ISSUER]

 	 
	 	 	 
	 	 	 
	 	 	 
	 



	 	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	 	 	Name:
	 

	 	 	 	Title:






	 	 	 
	 

	 	Address for Notices:
	 

	 	 


	 

	 	 


	 

	 	 

Fax:






	 	 	 	 	 



 









 






	 	 	 	 	 
	 	 	 
	 	 	 
	 	 	 
	 	 	 
	 



Annex 1 to




Guarantee and Collateral Agreement





     ASSUMPTION AGREEMENT, dated as of _____________, 200_, is made by
_______________________(the “Additional Grantor”), in favor of JPMorgan Chase Bank,
N.A., as Administrative Agent (in such capacity, the “Administrative Agent”) for the banks
and other financial institutions or entities (the “Secured Parties”) parties to the Loan
Documents referred to below. All capitalized terms not defined herein shall have the meaning
ascribed to them in such Credit Agreement.



W I T N E S S E T H

:




     WHEREAS, Hanover Compressor Company (“Hanover”), Hanover Compression Limited
Partnership (“HCLP”) and the Secured Parties have entered into the Loan Documents (as
defined in the Guarantee and Collateral Agreement referred to below);



     WHEREAS, in connection with the Loan Documents, Hanover and certain of its Subsidiaries (other
than the Additional Grantor) have entered into the Guarantee and Collateral Agreement, dated as of
November 21, 2005 (and as may be further amended, supplemented or otherwise modified from time to
time, the “Guarantee and Collateral Agreement”) in favor of the Administrative Agent for
the benefit of the Secured Parties;



     WHEREAS, the Credit Agreement requires the Additional Grantor to become a party to the
Guarantee and Collateral Agreement; and



     WHEREAS, the Additional Grantor has agreed to execute and deliver this Assumption Agreement in
order to become a party to the Guarantee and Collateral Agreement;



     NOW, THEREFORE, IT IS AGREED:



     1. Guarantee and Collateral Agreement. By executing and delivering this Assumption
Agreement, the Additional Grantor, as provided in Section 8.14 of the Guarantee and Collateral
Agreement, hereby becomes a party to the Guarantee and Collateral Agreement as a Grantor thereunder
with the same force and effect as if originally named therein as a Grantor and, without limiting
the generality of the foregoing, hereby expressly assumes all obligations and liabilities of a
Grantor thereunder. The information set forth in Annex 1-A hereto is hereby added to the
information set forth in the Schedules to the Guarantee and Collateral Agreement. The Additional
Grantor hereby represents and warrants that each of the representations and warranties contained in
Section 4 of the Guarantee and Collateral Agreement is true and correct on and as the date hereof
(after giving effect to this Assumption Agreement) as if made on and as of such date.



     2. Governing Law. THIS ASSUMPTION AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.



 









 






2



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



	 	 	 	 	 
	 	 	 
	 	[ADDITIONAL GRANTOR]	 
	 	 	 
	 	 	 
	 	By:  	
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 



 









 








Annex 1-A to




Assumption Agreement




Supplement to Schedule 1




Supplement to Schedule 2




Supplement to Schedule 3