Document:

exv10w10

 

EXHIBIT 10.10

GUARANTY

     THIS GUARANTY, dated as of August 20, 2007 (as amended, modified or supplemented from time to
time in accordance with its terms, this “Guaranty”), is issued by EXTERRAN HOLDINGS, INC.,
a Delaware corporation (together with its successors and permitted assigns, the
“Guarantor”), for the benefit of EXTERRAN ABS 2007 LLC, a Delaware limited liability
company (together with its successors and permitted assigns, the “Issuer”), EXTERRAN ABS
LEASING 2007 LLC, a Delaware limited liability company (together with its successors and permitted
assigns, “Equipment Lessor”) and WELLS FARGO BANK, NATIONAL ASSOCIATION, a national banking
association, as indenture trustee on behalf of the parties set forth in the hereinafter defined
Indenture (together with its successors and permitted assigns, the “Indenture Trustee”;
each of the Issuer and the Indenture Trustee (for the benefit of the Noteholders, any Series
Enhancer and any Interest Rate Hedge Provider), a “Beneficiary” and collectively, the
“Beneficiaries”).

          PRELIMINARY STATEMENTS:

          (1) The Issuer, Equipment Lessor and Exterran, Inc. (“EI”) have entered into that
certain Management Agreement, dated as of August 20, 2007 (as amended, modified or supplemented
from time to time in accordance with its terms, the “Management Agreement”) pursuant to
which EI has and will manage certain Compressors on behalf of the Issuer;

          (2) The Issuer is issuing one or more classes of notes (collectively, the “Notes”)
pursuant to that certain Indenture (as amended, modified or supplemented from time to time in
accordance with its terms, the “Indenture”), dated as of August 20, 2007, among the Issuer,
Equipment Lessor and the Indenture Trustee, which Notes will be collateralized by, inter alia, all
of the Issuer’s right, title and interest in and to the Owner Compressors, the User Contracts and
the Management Agreement;

          (3) EI is a wholly-owned subsidiary of the Guarantor;

          (4) Guarantor will obtain substantial direct and indirect benefit from the management of the
Compressors by EI, and is willing to provide this guaranty on the terms and conditions set forth
herein; and

          (5) Beneficiaries have entered into the Indenture in reliance upon the benefits of this
Guaranty;

     NOW, THEREFORE, in consideration of the premises and other consideration, the receipt and
sufficiency of which is hereby acknowledged by the Guarantor, the Guarantor hereby agrees as
follows:

     SECTION 1. Definitions. Capitalized terms used in this Guaranty, unless otherwise
defined herein, shall have the meaning set forth in Appendix A to the Indenture.

     SECTION 2. Guaranty. Guarantor hereby irrevocably, absolutely and unconditionally
guarantees: (i) the full and timely performance by EI of all of its payment and deposit
obligations as the initial Manager under the Management Agreement (EI in this capacity, the
“Guaranteed Party”) and all other amounts from time to time owing by EI under the
Management Agreement, and (ii) the full and timely performance of, and compliance with each and
every other duty, agreement, covenant, undertaking, indemnity, and obligation of the Guaranteed
Party under the Management Agreement, in each case, howsoever created, arising or evidenced,
whether direct or indirect, primary or secondary, absolute or contingent, joint or several, now or
hereafter existing or due or to become due, which arises

 

 

out of or in connection with the Management Agreement (all of such obligations described in
clauses (i) and (ii) being hereinafter collectively called the “Obligations”); provided
that nothing contained herein shall be deemed to constitute liability of or credit recourse to the
Guarantor for payment of: (A) losses arising from the financial inability of, or failure by, a
User to make contract payments or other payments under a User Contract, (B) losses arising from the
failure of the remarketing proceeds of a Compressor to equal or exceed the Appraised Value thereof
for reasons other than the Manager’s failure to comply with the Services Standard, or (C) the
Notes. Guarantor further agrees to pay all costs and expenses (including reasonable attorneys’
fees and legal expenses) paid or incurred by any Beneficiary in endeavoring to collect the
Obligations, or any part thereof, and in enforcing this Guaranty.

     SECTION 3. Continuing Guaranty. This Guaranty shall in all respects be a continuing,
absolute and unconditional guaranty, and shall remain in full force and effect (notwithstanding,
without limitation, that at any time or from time to time all Obligations may have been performed
in full), subject to discontinuance only upon performance in full of: (i) all Obligations and (ii)
any and all expenses paid or incurred by a Beneficiary in endeavoring to collect the Obligations
and in enforcing this Guaranty; and all of the agreements and obligations under this Guaranty shall
remain fully in effect until all such obligations and expenses finally shall have been performed in
full.

     SECTION 4. Rescission. Guarantor further agrees that, if at any time all or any part
of any payment theretofore applied by Beneficiary to any of the Obligations is or must be rescinded
or returned by Beneficiary for any reason whatsoever, such Obligations shall, for the purposes of
this Guaranty, to the extent that such payment is or must be rescinded or returned, be deemed to
have continued in existence, notwithstanding such application by Beneficiary, and this Guaranty
shall continue to be effective or be reinstated, as the case maybe, as to such Obligations, all as
though such application by Beneficiary had not been made.

     SECTION 5. Certain Actions. Each Beneficiary may, from time to time at its sole
discretion and without notice to Guarantor, take any or all of the following actions without
affecting the obligations of Guarantor hereunder: (a) retain or obtain the primary or secondary
obligation of any obligor or obligors, in addition to Guarantor, with respect to any of the
Obligations or any obligation hereunder; (b) extend or renew for one or more periods (regardless of
whether longer than the original period), alter or exchange any of the Obligations, or release or
compromise any obligation of Guarantor hereunder or any obligation of any nature of any other
obligor including EI with respect to any of the Obligations; and (c) resort to Guarantor for
performance of any of the Obligations, regardless of whether Beneficiary shall have proceeded
against any other obligor primarily or secondarily obligated with respect to any of the
Obligations.

     SECTION 6. Subrogation. Any amounts received by a Beneficiary from whatsoever source
on account of the Obligations may be applied by it toward the satisfaction of such of the
Obligations, and in such order of application, as Beneficiary may from time to time elect. Until
one year and one day after performance in full of all Obligations, the performance of all of
Guarantor’s obligations hereunder and the termination of this Guaranty, no amount expended by or
for the account of Guarantor pursuant to this Guaranty shall entitle Guarantor by subrogation,
indemnity or otherwise to any payment by EI or from or out of any property of EI, and Guarantor
shall not exercise any right or remedy against EI or any property of EI by reason of any
performance by Guarantor of this Guaranty. If any amount shall be paid to the Guarantor on account
of such subrogation rights at any time when all of the Obligations shall not have been performed in
full, such amount shall be held in trust for the benefit of the Beneficiaries and shall forthwith
be paid to the Indenture Trustee to be credited and applied upon the Obligations in accordance with
the terms of this Guaranty.

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     SECTION 7. Waiver; Waiver of Defenses. Guarantor hereby expressly waives: (a) notice
of any Beneficiary’s acceptance of this Guaranty; (b) notice of the existence or creation or non
performance of all or any of the Obligations; (c) demand and all other notices whatsoever (provided
that nothing contained in this clause (c) shall affect any obligations to give notice or make
demand as set forth in the Management Agreement); and (d) all diligence in protection of or
realization upon the Obligations or any thereof, any obligation hereunder, or guaranty of any of
the foregoing. To the fullest extent permitted by Applicable Law, Guarantor agrees not to assert,
and hereby waives for the benefit of each Beneficiary, all rights (whether by counterclaim, setoff
or otherwise) and defenses (including, without limitation, the defense of fraud or fraud in the
inducement), whether acquired by subrogation, assignment or otherwise, to the extent that such
rights and defenses may be available to Guarantor to avoid performance of its obligations under
this Guaranty in accordance with the express provisions of this Guaranty.

     SECTION 8. Unconditional Nature of Guaranty. This Guaranty shall constitute a
guaranty of performance and not of collection, and the Guarantor specifically agrees that it shall
not be necessary, and that the Guarantor shall not be entitled to require, before or as a condition
of enforcing the liability of the Guarantor under this Guaranty or requiring performance of the
Obligations by the Guarantor hereunder, or at any time thereafter, that any Person: (a) file suit
or proceed to obtain or assert a claim for personal judgment against EI or any other Person that
may be liable for any Obligations; (b) make any other effort to obtain performance of any
Obligations from EI or any other Person that may be liable for such Obligations; (c) exercise or
assert any other right or remedy to which such Person is or may be entitled in connection with any
Obligations or other guaranty therefor; or (d) assert or file any claim against the assets of EI or
any other Person liable for any Obligations. Notwithstanding anything herein to the contrary, no
provision of this Guaranty shall require the Guarantor to perform or discharge any Obligations
prior to the time such Obligations are performable. No delay on any Beneficiary’s part in the
exercise of any right or remedy shall operate as a waiver thereof, and no single or partial
exercise by any Beneficiary of any right or remedy shall preclude other or further exercise thereof
or the exercise of any other right or remedy; nor shall any modification or waiver of any of the
provisions of this Guaranty be binding upon Beneficiary except as expressly set forth in a writing
duly signed by each Beneficiary. The Beneficiaries may in all events pursue their rights under
this Guaranty prior to or simultaneously with pursuing their various rights referred to in the
Management Agreement, as the Beneficiaries may determine. No action of any Beneficiary permitted
hereunder shall in any way affect or impair any Beneficiary’s rights or Guarantor’s obligations
under this Guaranty. For the purposes of this Guaranty, Obligations shall include all of EI’s
obligations under the Management Agreement, notwithstanding any right or power of EI or anyone else
to assert any claim or defense as to the invalidity or unenforceability of any such obligation, and
no such claim or defense shall affect or impair the obligations of Guarantor hereunder. The
obligations of the Guarantor are unlimited in amount (but not greater than the Obligations plus
costs and expenses payable hereunder) and shall be continuing and irrevocable, absolute and
unconditional, primary, original and immediate and not contingent and shall remain in full force
and effect without regard to and not be released, discharged or in any way affected by any
circumstance or condition (other than by performance in full of Obligations) including, without
limitation, the occurrence of any one or more of the following:

     (i) any lack of validity or enforceability of any of the Obligations under the
Management Agreement or any document entered into in connection with the
transactions contemplated by the Management Agreement, any provision thereof, or any
other agreement or instrument relating thereto or the absence of any action to
enforce the same;

     (ii) any failure, omission, delay or lack on the part of the Beneficiaries to
enforce, assert or exercise any right, power, privilege or remedy conferred on the
Beneficiaries in the Management Agreement or this Guaranty, or the inability of the

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Beneficiaries to enforce any provision of the Management Agreement for any
reason, or any other act or omission on the part of the Beneficiaries; provided that
the foregoing shall not apply to applicable statutes of limitation;

     (iii) any change in the time, manner or place of performance or of performance,
or in any other term of, all or any of the Obligations, or any other modification,
supplement, amendment or waiver of or any consent to departure from the terms and
conditions of any of the Management Agreement, the Intercreditor Agreement or any
document entered into in connection with the transactions contemplated by the
Management Agreement or the Related Documents;

     (iv) any taking, release or amendment or waiver of or consent to departure from
any other guaranty, for all or any of the Obligations;

     (v) the waiver by the Beneficiaries of the performance or observance by the
Guaranteed Party of any Obligations, the waiver of any default in the performance or
observance thereof, any extension by the Beneficiaries of the time for performance
and discharge by the Guaranteed Party of any Obligations or any extension,
indulgence or renewal of any Obligations; provided that the foregoing shall not
apply to applicable statutes of limitation;

     (vi) any bankruptcy, suspension of payments, insolvency, sale of assets,
winding-up, dissolution, liquidation, receivership or reorganization of, or similar
proceedings involving, the Guaranteed Party or its assets or any resulting release
or discharge of any of the Obligations;

     (vii) the recovery of any judgment against any Person or any action to enforce
the same;

     (viii) any failure or delay in the enforcement of the Obligations of any Person
under the Management Agreement or any document entered into in connection with the
transactions contemplated by the Management Agreement or any provision thereof;
provided that the foregoing shall not apply to applicable statutes of limitation;

     (ix) any set-off, counterclaim, deduction, defense, abatement, suspension,
deferment, diminution, recoupment, limitation or termination available with respect
to any Obligations and, to the extent permitted by Applicable Law, irrespective of
any other circumstances that might otherwise limit recourse by or against the
Guarantor or any other Person;

     (x) the obtaining, the amendment or the release of or consent to any departure
from the primary or secondary obligation of any other Person, in addition to the
Guarantor, with respect to any Obligations;

     (xi) any compromise, alteration, amendment, modification, extension, renewal,
release or other change, or waiver, consent or other action, or delay or omission or
failure to act, in respect of any of the terms, covenants or conditions of the
Management Agreement or any document entered into in connection with the
transactions contemplated by the Management Agreement or any Obligations, or any
other agreement or any related document referred to therein, or any assignment or
transfer of any thereof

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     (xii) any change in control or the ownership of the Guaranteed Party, any
change, merger, demerger, consolidation, restructuring or termination of the
corporate structure or existence of the Guaranteed Party or its subsidiaries;

     (xiii) to the fullest extent permitted by Applicable Law, any other
circumstance which might otherwise constitute a defense available to, or a discharge
of, a guarantor or surety with respect to any Obligations;

     (xiv) any default, failure or delay, whether as a result of actual or alleged
force majeure, commercial impracticability or otherwise, in the performance of the
Obligations, or by any other act or circumstances which may or might in any manner
or to any extent vary the risk of the Guarantor, or which would otherwise operate as
a discharge of the Guarantor;

     (xv) the existence of any other obligation of the Guarantor, or any limitation
thereof, in the Management Agreement;

     (xvi) any regulatory change or other governmental action (whether or not
adverse or other change in applicable law); or

     (xvii) the partial performance of the Obligations (whether as a result of the
exercise of any right, remedy, power or privilege or otherwise) or the invalidity of
any payment for any reason whatsoever.

Should any money due or owing in respect of Guarantor’s required performance under this Guaranty
not be recoverable from the Guarantor due to any of the matters specified in clauses (i) through
(xvii) above or for any other reason, then, in any such case, such money shall nevertheless be
recoverable from the Guarantor as though the Guarantor were principal debtor or obligor in respect
thereof and not merely a guarantor and shall be paid by the Guarantor forthwith.

     This Guaranty shall continue to be effective or be automatically reinstated, as the case may
be, if at any time any payment, or any part thereof, in respect of any of the Obligations is
rescinded or must otherwise be restored or returned by the Beneficiaries for any reason whatsoever,
whether upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of the
Guaranteed Party or otherwise, all as though such payment had not been made, and the Guarantor
agrees that it will indemnify the Beneficiaries on demand for all reasonable costs and expenses
(including, without limitation, fees and disbursements of counsel) incurred by the Beneficiaries in
connection with such rescission or restoration. If an event permitting the exercise of remedies
under the Management Agreement shall at any time have occurred and be continuing and such exercise,
or any consequences thereof provided in the Management Agreement, shall at such time be prevented
by reason of the pendency against the Guaranteed Party of a case or proceeding under a bankruptcy
or insolvency law, the Guarantor agrees that, for purposes of this Guaranty and its obligations
hereunder, amounts payable under the Management Agreement shall be deemed to have been declared in
default, with all attendant consequences as provided in the Management Agreement as if such
declaration of default and the consequences thereof had been accomplished in accordance with the
terms of the Management Agreement, and the Guarantor shall forthwith provide performance as to the
Obligations guaranteed hereunder, without further notice or demand.

     SECTION 9. Information; Reporting Requirements.

     (a) Information. Guarantor has and will continue to have independent means of
obtaining information concerning EI’s affairs, financial condition and business. Beneficiary
shall

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not have any duty or responsibility to provide Guarantor with any credit or other
information concerning EI’s affairs, financial condition or business which may come into
Beneficiary’s possession.

     (b) Financial Statements. (i) As soon as available and in any event within one
hundred twenty (120) days after the end of any fiscal year of the Guarantor, a copy of each
annual report and any amendment to a report filed with the SEC or any successor agency
pursuant to Section 13 or 15(d) of the Exchange Act (currently Form 10-K), as the same may
be amended from time to time (which shall include, inter alia, the consolidated and
consolidating statements of income, stockholders’ equity and cash flows of the Guarantor and
its consolidated subsidiaries as at the end of the fiscal year, and setting forth in each
case in comparative form the corresponding figures from the corresponding figures for the
preceding fiscal year, and accompanied by the related opinion of independent public
accountants of recognized national standing reasonably acceptable to the Requisite Global
Majority which opinion shall state that said financial statements fairly present the
consolidated and consolidating financial condition and results of operations of the
Guarantor and its consolidating subsidiaries as at the end of, and for, such fiscal year and
that such financial statements have been prepared in accordance with GAAP, except for such
changes in such principles which the independent public accountants shall have concurred and
such opinion shall not contain a “going concern” or like qualification or exception, and a
certificate of such accountants stating that, in making the examination necessary for their
opinion, they obtained no knowledge, except as specifically stated, of any Manager Default),
(ii) as soon as available and in any event within sixty (60) days after the end of each of
the first three fiscal quarterly periods of each fiscal year of the Guarantor, a copy of
each quarterly report and any amendment to any quarterly report filed with the SEC or any
successor agency pursuant to Section 13 or 15(d) of the Exchange Act (currently Form 10-Q),
as the same may be amended from time to time (which shall include consolidated and
consolidating statements of income, stockholders’ equity and cash flows of the Guarantor and
its consolidated subsidiaries for such period and for the period from the beginning of the
respective fiscal year to the end of such period, and the related consolidated and
consolidating balance sheets as at the end of such period, and setting forth in each case in
comparative form the corresponding figures for the corresponding period in the preceding
fiscal year, accompanied by the certificate of a Responsible Officer, which certificate
shall state that said financial statements fairly present the consolidated and consolidating
financial condition and result of operations of the Guarantor and its consolidated
subsidiaries in accordance with GAAP, as of, and for, such period (subject to normal year
end audit adjustments)); provided, however, that the Guarantor shall be deemed to have
furnished the information required by this Section 9 (b) if the Guarantor shall have
timely made the same available on “EDGAR” and/or on its home page on the worldwide web (at
the date of this Agreement located at http://www.exterran.com); provided, further, however,
that if the Requisite Global Majority and/or Indenture Trustee, as the case may be, is
unable to access EDGAR or the Guarantor’s home page on the worldwide web, the Guarantor
agrees to provide the Requisite Global Majority and/or the Indenture Trustee, as the case
may be, with paper copies of the information required to be furnished pursuant to this
Section 9(b) promptly following notice from the Requisite Global Majority and/or
Indenture Trustee, as the case may be. Information required to be delivered pursuant to
this Section 9(b) shall be deemed to have been delivered on the date on which the
Guarantor provides notice to the Requisite Global Majority and/or Indenture Trustee, as the
case may be, that such information has been posted on “EDGAR” or Guarantor’s website or
another website identified in such notice and accessible by the Requisite Global Majority
and/or Indenture Trustee, as the case may be, without charge (and the Guarantor hereby
agrees to provide such notice).

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     SECTION 10. Representations and Warranties. Guarantor represents and warrants as
follows:

     (a) Organization and Good Standing. It has been duly organized and is validly
existing as a corporation in good standing under the laws of its state of incorporation,
with corporate power and authority to own its properties and to conduct its business as such
properties are presently owned and such business is presently conducted.

     (b) Due Qualification. It is duly licensed, qualified and authorized to do
business and is in good standing in each jurisdiction where the ownership, leasing or
operation of its property or the conduct of its business requires such license or
qualification except for failures to be so qualified which, individually or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect.

     (c) Power and Authority; Due Authorization. It has (i) all necessary power,
authority and legal right to execute, deliver and perform its obligations under this
Guaranty and (ii) duly authorized by all necessary corporate action such execution, delivery
and performance of this Guaranty.

     (d) Binding Obligations. This Guaranty constitutes the legal, valid and
binding obligation of Guarantor, enforceable in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization or other similar
laws affecting the enforcement of creditors’ rights generally and by general principles of
equity, regardless of whether such enforceability is considered in a proceeding in equity or
at law.

     (e) No Violation. The execution, delivery and performance of this Guaranty
will not (i) conflict with, or result in any breach of any of the terms and provisions of,
or constitute (with or without notice or lapse of time or both) a default under (A) the
certificate of incorporation or by-laws of Guarantor or (B) any indenture, lease, loan
agreement, receivables purchase agreement, mortgage, deed of trust, or other agreement or
instrument to which Guarantor is a party or by which it or its property is bound, (ii)
result in or require the creation or imposition of any Lien upon any of its properties
pursuant to the terms of any such indenture, lease, loan agreement, receivables purchase
agreement, mortgage, deed of trust, or other agreement or instrument or (iii) violate any
law or any order, rule, regulation applicable to Guarantor of any court or of any federal,
state or foreign regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over Guarantor or any of its properties.

     (f) Solvency. The execution, delivery and performance by the Guarantor of this
Guaranty will not render the Guarantor insolvent, nor is it being made in contemplation of
the Guarantor’s insolvency; the Guarantor does not, in its reasonable judgment, have an
unreasonably small capital for conducting its business as presently contemplated by it.

     SECTION 11. Successors and Assigns; Amendment.

     (a) This Guaranty shall be binding upon Guarantor and upon Guarantor’s successors and
assigns and all references herein to Guarantor or EI shall be deemed to include any
successor or successors whether immediate or remote, to such Person. Guarantor shall not
assign any of its obligations hereunder without the prior written consent of each
Beneficiary.

     (b) This Guaranty shall inure to the benefit of each Beneficiary and respective its
successors and assigns and all references herein to Beneficiary shall be deemed to include
any

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successors and assigns of Beneficiary (whether or not reference in a particular
provision is made to such successors and assigns).

     (c) No amendment or waiver of any provision of this Guaranty, and no consent to any
departure by the Guarantor herefrom, shall in any event be effective unless the same shall
be in writing and signed by the Guarantor and each Beneficiary and then such waiver or
consent shall be effective only in the specific instance and for the specific purpose for
which given.

     SECTION 12. GOVERNING LAW. THIS GUARANTY SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, INCLUDING SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK
GENERAL OBLIGATIONS LAW, BUT OTHERWISE WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES. Wherever
possible each provision of this Guaranty shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Guaranty shall be prohibited by or invalid
under such law, such provision shall be ineffective only to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the remaining provisions of
this Guaranty.

     SECTION 13. Consent to Jurisdiction; Waiver of Jury Trial. Each Beneficiary may
enforce any claim arising out of this Guaranty in any state or federal court having subject matter
jurisdiction and located in New York, New York and with respect to any such claim, Guarantor hereby
irrevocably submits to the jurisdiction of such courts. Guarantor irrevocably consents to the
service of process out of said courts by mailing a copy thereof, by registered mail, postage
prepaid, to Guarantor, and agrees that such service, to the fullest extent permitted by law, (i)
shall be deemed in every respect effective service of process upon it in any such suit, action or
proceeding and (ii) shall be taken and held to be valid personal service upon and personal delivery
to it. Nothing herein contained shall preclude Beneficiary from bringing an action or proceeding
in respect hereof in any other country, state or place having jurisdiction over such action.
Guarantor irrevocably waives, to the fullest extent permitted by law, any objection which it may
now or hereafter have to the laying of the venue of any such suit, action or proceeding brought in
such a court located in New York, New York and any claim that any such suit, action or proceeding
brought in such court has been brought in an inconvenient forum. GUARANTOR HEREBY EXPRESSLY WAIVES
ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS
GUARANTY OR UNDER ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE
FUTURE BE DELIVERED IN CONNECTION HEREWITH OR ARISING FROM ANY RELATIONSHIP EXISTING IN CONNECTION
WITH THIS GUARANTY, AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND
NOT BEFORE A JURY.

     SECTION 14. Notices. All notices, demands or requests given pursuant to this Guaranty
shall be in writing, sent by overnight courier service or by telefax or hand delivery to the
following addresses:

	 	 	 
	     To Manager:

	 	Exterran, Inc
	 

	 	4444 Brittmoore Road
	 

	 	Houston, Texas 77041
	 

	 	Telephone:   (713) 335-7295
	 

	 	Facsimile:      (713) 446-6720
	 

	 	Attention:
	 
	 	 
	     To Issuer:

	 	Exterran ABS 2007 LLC
	 

	 	4444 Brittmoore Road

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	 	Houston, Texas 77041
	 

	 	Telephone:   (713) 335-7295
	 

	 	Facsimile:     (713) 446-6720
	 

	 	Attention:
	 
	 	 
	     To the Indenture Trustee:

	 	Wells Fargo Bank, National Association
	 

	 	Norwest Center
	 

	 	Sixth Street and Marquette Avenue
	 

	 	Minneapolis, MN 55479
	 

	 	Telephone:   (612) 667-8058
	 

	 	Facsimile:      (612) 667-3464
	 

	 	Attention:    Corporate Trust Services -Asset- Backed Administration
	 
	     To the Interest Rate Hedge Provider:

	 	Wachovia Bank, National Association
	 

	 	301 South College St., DC-8
	 

	 	Charlotte, North Carolina 28202-0600
	 

	 	Telephone:   (704) 383-8778
	 

	 	Facsimile:     (704) 383-0575
	 

	 	Attention:   Derivatives Documentation Group

     Notice shall be effective and deemed received (a) one (1) day after being delivered to the
courier service, if sent by courier, (b) upon receipt of confirmation of transmission, if sent by
telecopy, or (c) when delivered, if delivered by hand. Copies of each such notice shall be sent to
the Administrative Agent at Wachovia Capital Markets, LLC, Structured Asset Finance 301 S. College
St., Mailcode: NCO610, Charlotte, North Carolina 28288-0610.

     SECTION 15. Third Party Beneficiary. In addition to its rights as a Beneficiary
hereunder as a secured party under the Indenture, the Series Enhancer shall be a third party
beneficiary of this Guaranty and shall be entitled to directly enforce its rights hereunder as
though it were a party hereto.

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     IN WITNESS WHEREOF, this Guaranty has been executed and delivered by Guarantor’s duly
authorized officer as of the date first written above.

	 	 	 	 	 
	 	EXTERRAN HOLDINGS, INC.

 	 
	 	By:  	/s/ J. Michael Anderson
 	 
	 	Name: 	J. Michael Anderson 	 
	 	Title:	Senior Vice President and Chief Financial
Officer 	 
	 

Accepted and Agreed:

WELLS FARGO BANK,

NATIONAL ASSOCIATION,

as Indenture Trustee

	 	 	 	 	 
	By:

	 	/s/ Melissa Philibert	 	 
	Name:

	 	 

Melissa Philibert
	 	 
	Title:

	 	Vice President	 	 
	 
	 	 	 	 
	EXTERRAN ABS 2007 LLC	 	 
	 
	 	 	 	 
	By:

	 	/s/ J. Michael Anderson	 	 
	Name:

	 	 

J. Michael Anderson
	 	 
	Title:

	 	Senior Vice Presidentexv10w11

 

Exhibit 10.11

MANAGEMENT AGREEMENT

BY AND BETWEEN

EXTERRAN, INC.,

AS THE MANAGER,

EXTERRAN ABS 2007 LLC,

AS THE ISSUER, AND

EXTERRAN ABS LEASING 2007 LLC, AS THE ABS LESSOR

AUGUST 20, 2007

ALL RIGHT, TITLE AND INTEREST IN AND TO THIS AGREEMENT ON THE PART OF EACH OF EXTERRAN ABS 2007 LLC
AND EXTERRAN ABS LEASING 2007 LLC HAS BEEN ASSIGNED TO AND IS SUBJECT TO A SECURITY INTEREST IN
FAVOR OF WELLS FARGO BANK, NATIONAL ASSOCIATION, AS INDENTURE TRUSTEE, UNDER AN INDENTURE, DATED AS
OF AUGUST 20, 2007, FOR THE BENEFIT OF THE PERSONS REFERRED TO THEREIN.

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	 	 	Page
	1. DEFINITIONS
	 	 	2	 
	 
	 	 	 	 
	2. APPOINTMENT OF THE MANAGER
	 	 	2	 
	2.1 Appointment
	 	 	2	 
	2.2 Standard of Performance
	 	 	2	 
	2.3 Conflicts of Interest
	 	 	2	 
	2.4 Similar Services
	 	 	2	 
	2.5 Use of Affiliates, Assignment of Rights and Obligations
	 	 	3	 
	2.6 Relationship between the Issuer, the ABS Lessor and the Manager
	 	 	3	 
	2.7 Back-up Manager
	 	 	4	 
	 
	 	 	 	 
	3. MANAGEMENT TERM
	 	 	4	 
	3.1 Duration of Management Term
	 	 	4	 
	3.2 Resignation by the Manager
	 	 	4	 
	3.3 Termination with Respect to an Owner Compressor
	 	 	4	 
	 
	 	 	 	 
	4. OWNERSHIP OF OWNER COMPRESSORS
	 	 	5	 
	4.1 Retention of Title
	 	 	5	 
	4.2 Liens
	 	 	5	 
	 
	 	 	 	 
	5. DUTIES/RIGHTS OF THE MANAGER
	 	 	5	 
	5.1 Duties of the Manager
	 	 	5	 
	5.2 Marketing
	 	 	5	 
	5.3 Contract and Administration Obligations
	 	 	6	 
	5.4 Billing and Other Information
	 	 	6	 
	5.5 Defaults by Users; Contract Amendments and Waiver
	 	 	6	 
	5.6 Maintenance; Manager’s Expenses
	 	 	7	 
	5.7 Insurance
	 	 	8	 
	5.8 Taxes
	 	 	9	 
	5.9 Compliance with Law
	 	 	9	 
	5.10 Records and Information
	 	 	10	 
	5.11 User Contract
	 	 	10	 
	5.12 Other Services
	 	 	11	 
	5.13 Mutual Maintenance and Servicing
	 	 	11	 
	5.14 Purchase Account
	 	 	11	 
	5.15 Consent and Agreement by ABS Lessor
	 	 	11	 
	 
	 	 	 	 
	6. AUTHORITY AND CONSENTS
	 	 	12	 
	6.1 The Issuer and the ABS Lessor
	 	 	12	 
	6.2 Manager Default
	 	 	12	 
	 
	 	 	 	 
	7. ACCOUNTS AND PAYMENTS
	 	 	12	 
	7.1 Lockbox Accounts
	 	 	12	 
	7.2 Deposits to the Lockbox Account
	 	 	13	 

(i)

 

	 	 	 	 	 
	 	 	Page
	7.3 Withdrawal from Trust Account
	 	 	13	 
	7.4 No Set-Off, Counterclaim, etc
	 	 	13	 
	7.5 Manner of Payment
	 	 	14	 
	 
	 	 	 	 
	8. MANAGER ADVANCES
	 	 	14	 
	8.1 Manager Advances
	 	 	14	 
	 
	 	 	 	 
	9. COVENANTS OF THE MANAGER
	 	 	14	 
	9.1 Preparation and Delivery of Reports
	 	 	14	 
	9.2 Maintenance of Offices
	 	 	17	 
	9.3 Inspection
	 	 	17	 
	9.4 Ownership of Owner Compressors
	 	 	18	 
	9.5 Separate Bank Accounts
	 	 	18	 
	9.6 Compliance with Organizational Documents; Applicable Law
	 	 	18	 
	9.7 Substantive Consolidation
	 	 	18	 
	9.8 Credit Policy
	 	 	18	 
	9.9 Appraisals
	 	 	19	 
	9.10 Lockbox Account
	 	 	19	 
	 
	 	 	 	 
	10. WARRANTY
	 	 	19	 
	10.1 ISSUER
	 	 	19	 
	10.2 MANAGER
	 	 	19	 
	 
	 	 	 	 
	11. COMPENSATION AND REIMBURSEMENT OF THE MANAGER
	 	 	20	 
	11.1 Compensation of the Manager
	 	 	20	 
	11.2 S&A Fee
	 	 	20	 
	11.3 Operations Fee
	 	 	21	 
	11.4 Incentive Management Fee
	 	 	21	 
	11.5 Reimbursable Services
	 	 	21	 
	 
	 	 	 	 
	12. MANAGER DEFAULT
	 	 	22	 
	12.1 Events or Conditions
	 	 	22	 
	12.2 Unpaid Outstanding Obligations
	 	 	24	 
	12.3 Appointment of Back-up Manager or Replacement Manager
	 	 	25	 
	12.4 Rights of User
	 	 	26	 
	12.5 Termination
	 	 	26	 
	12.6 Issuer’s Duties
	 	 	26	 
	 
	 	 	 	 
	13. NO PARTNERSHIP
	 	 	26	 
	 
	 	 	 	 
	14. NO FORCE MAJEURE
	 	 	26	 
	 
	 	 	 	 
	15. CURRENCY/BUSINESS DAY
	 	 	26	 
	15.1 US Currency
	 	 	26	 
	15.2 Payment Date
	 	 	26	 
	 
	 	 	 	 
	16. INDEMNIFICATION
	 	 	26	 
	16.1 Issuer
	 	 	26	 
	16.2 EI
	 	 	27	 

(ii)

 

	 	 	 	 	 
	 	 	Page
	16.3 Survival
	 	 	27	 
	 
	 	 	 	 
	17. NO BANKRUPTCY PETITION AGAINST THE ISSUER OR THE ABS LESSOR
	 	 	27	 
	 
	 	 	 	 
	18. REPRESENTATIONS AND WARRANTIES OF THE ISSUER AND THE ABS LESSOR
	 	 	27	 
	18.1 Organization and Good Standing
	 	 	27	 
	18.2 Due Qualification
	 	 	28	 
	18.3 Power and Authority
	 	 	28	 
	18.4 Enforceable Obligations
	 	 	28	 
	18.5 No Violation
	 	 	28	 
	18.6 No Proceedings or Injunctions
	 	 	28	 
	18.7 Compliance with Law
	 	 	28	 
	18.8 Principal Place of Business; Operations in the United States
	 	 	29	 
	18.9 Approvals
	 	 	29	 
	18.10 Governmental Consent
	 	 	29	 
	18.11 Ordinary Course
	 	 	29	 
	18.12 Taxes
	 	 	29	 
	 
	 	 	 	 
	19. REPRESENTATIONS AND WARRANTIES OF THE MANAGER
	 	 	30	 
	19.1 Organization and Good Standing
	 	 	30	 
	19.2 Due Qualification
	 	 	30	 
	19.3 Power and Authority
	 	 	30	 
	19.4 Enforceable Obligations
	 	 	30	 
	19.5 No Violation
	 	 	30	 
	19.6 No Proceedings or Injunctions
	 	 	30	 
	19.7 Compliance with Law
	 	 	31	 
	19.8 Principal Place of Business; Operations in the United States
	 	 	31	 
	19.9 Approvals
	 	 	31	 
	19.10 Governmental Consent
	 	 	31	 
	19.11 Ordinary Course
	 	 	31	 
	19.12 Identification Marks
	 	 	32	 
	19.13 Taxes
	 	 	32	 
	 
	 	 	 	 
	20. GENERAL
	 	 	32	 
	20.1 Notices
	 	 	32	 
	20.2 Attorneys’ Fees
	 	 	34	 
	20.3 Further Assurances
	 	 	34	 
	20.4 Severability
	 	 	34	 
	20.5 Assignability and Successors
	 	 	34	 
	20.6 Waiver
	 	 	35	 
	20.7 Headings
	 	 	35	 
	20.8 Entire Agreement; Amendments
	 	 	35	 
	20.9 Counterparts
	 	 	35	 
	20.10 Signatures
	 	 	35	 
	20.11 GOVERNING LAW
	 	 	35	 
	20.12 CONSENT TO JURISDICTION
	 	 	36	 

(iii)

 

	 	 	 	 	 
	 	 	Page
	20.13 WAIVER OF JURY TRIAL
	 	 	36	 
	20.14 Waiver of Immunity
	 	 	36	 
	20.15 Judgment Currency
	 	 	37	 
	20.16 Limitation on Payment
	 	 	37	 
	20.17 Rights of Series Enhancer
	 	 	37	 

EXHIBITS AND SCHEDULES

	 	 	 
	Exhibit A

	 	FORM OF ASSET BASE CERTIFICATE
	Exhibit B

	 	CREDIT AND COLLECTION POLICIES
	Exhibit C

	 	FORM OF MANAGER REPORT
	Exhibit D

	 	OVERHAUL POLICY
	Schedule 5.7(a)

	 	SUBLIMIT TO PERILS SCHEDULE

(iv)

 

MANAGEMENT AGREEMENT

THIS MANAGEMENT AGREEMENT, dated as of August 20, 2007 (as amended, modified or supplemented from
time to time in accordance with the terms hereof, this “Agreement”) is entered into by and
between EXTERRAN ABS 2007 LLC, a limited liability company formed under the laws of the State of
Delaware, whose principal office is at 4444 Brittmoore Road, Houston, Texas 77041 (together with
its successors and permitted assigns, the “Issuer”), EXTERRAN ABS LEASING 2007 LLC, a
limited liability company formed under the laws of the State of Delaware, whose principal office is
at 4444 Brittmoore Road, Houston, Texas 77041 (together with its successors and permitted assigns,
the “ABS Lessor”) and EXTERRAN, INC., a corporation organized under the laws of the State
of Texas whose principal office is at 4444 Brittmoore Road, Houston, Texas 77041 (together with its
successors and permitted assigns, “EI”), as the initial Manager hereunder (in such
capacity, together with any Replacement Manager appointed hereunder, including, upon the occurrence
of the Management Replacement Date under and as defined in the Back-up Management Agreement, the
Back-up Manager, the “Manager”).

RECITALS

     WHEREAS, the ABS Lessor, a subsidiary of the Issuer, leases certain of the Owner Compressors
to the Issuer;

     WHEREAS, the Issuer is lessee from the ABS Lessor of certain of the Owner Compressors and the
owner of any remaining Owner Compressors;

     WHEREAS, the Manager is in the business of providing contract compression services relating to
the use of Compressors to various Users thereof;

     WHEREAS, the Issuer, the ABS Lessor and the Manager desire to enter into this Agreement
pursuant to which the Manager will operate, maintain, manage and provide contract compression
services for the Owner Compressors to Users on behalf of the Issuer, and the ABS Lessor;

     WHEREAS, the ABS Lessor acknowledges that its revenues are expected to be derived solely from
lease rentals received from the Issuer and the Issuer’s operating revenues, in turn, are expected
to be derived solely from contract compression services for Owner Compressors provided to Users;
and

     WHEREAS, the ABS Lessor acknowledges that if there were no services (as described below)
provided by the Manager, the ability of the ABS Lessor to obtain revenue would be materially
impaired;

     NOW, THEREFORE, in consideration of the premises and mutual representations, warranties,
covenants and agreements contained herein, the parties hereto hereby agree as follows:

 

 

1. DEFINITIONS

     Capitalized terms used in this Agreement and not otherwise defined herein shall have the
meanings assigned to such terms in Appendix A to the Indenture, dated as of August 20, 2007 (as
amended, modified or supplemented from time to time in accordance with its terms, the
“Indenture”), among the Issuer, the ABS Lessor and Wells Fargo Bank, National Association,
as indenture trustee (together with its successors and assigns, the “Indenture Trustee”),
as such Appendix A may be amended, supplemented or otherwise modified from time to time in
accordance with the provisions of the Indenture, and the rules of usage set forth in such Appendix
A shall apply to this Agreement.

2. APPOINTMENT OF THE MANAGER

     2.1 Appointment. Upon the terms and conditions hereinafter provided, each of the
Issuer and the ABS Lessor hereby appoint EI as the initial Manager of the Owner Compressors. The
Manager shall be responsible for providing contract compression services, maintaining, operating
and managing the Owner Compressors on behalf of the Issuer. The ABS Lessor consents to and joins in
with the contract engaging the Manager for the purpose of assuring that the Owner Compressors are
under management as provided herein. . EI, as initial Manager, and each other Replacement Manager
as may from time to time become Manager hereunder, hereby accepts such appointment and agrees to so
maintain, operate and manage the Owner Compressors, and provide contract compression services
therefor, in accordance with this Agreement.

     2.2 Standard of Performance. In performing its obligations hereunder (including
Manager’s obligations (x) to identify Collections that are allocable to the Securitization
Collateral and (y) to perform its obligations under the Intercreditor Agreement), the Manager shall
use such efforts which are in accordance with the Services Standard. The duties of the Manager
will be limited to those expressly set forth in this Agreement and the Related Documents and the
Manager will not have any fiduciary or other implied duties or obligations to the Issuer or any of
its assignees.

     2.3 Conflicts of Interest. Except as otherwise permitted, the Manager shall perform
its duties and obligations under this Agreement on a fair and equitable basis. Without prejudice
to the generality of the foregoing, the Manager will not discriminate between the Owner Compressors
and the Other Exterran Compressors (or, in the case of any Manager other than EI or an Exterran
Affiliate, Compressors or any other equipment of a type similar to the Owner Compressors that is
owned, managed or for which contract compression services are provided by such Manager for its own
account) on any basis which could reasonably be considered discriminatory or adverse; provided,
however, notwithstanding the foregoing to the contrary, the Manager’s management of the Compressors
owned or leased by EXLP Operating LLC (“EXLPOP”) and its Subsidiaries that are subject to service
contracts with Persons that are not Users of Owner Compressors shall be excluded from the
application of this covenant for all purposes until April 30, 2009.

     2.4 Similar Services. It is expressly understood and agreed that nothing herein shall
be construed to prevent, prohibit or restrict the Manager or any Affiliate of the Manager from
providing the same or similar services as those provided under this Agreement to any other

2

 

Person or from manufacturing, selling, owning, providing contract compression services,
managing, maintaining, operating or otherwise dealing with Compressors on its or others’ behalf;
provided that no such activity shall in any way reduce the obligations of the Manager hereunder to
comply with the Services Standard.

     2.5 Use of Affiliates, Assignment of Rights and Obligations. (a) Each of the Issuer
and ABS Lessor hereby consents to and agrees that, in performing its duties hereunder, the Manager
may further contract with, or delegate to, its Affiliates to provide any or all services to be
provided by the Manager pursuant to this Agreement; provided that the Manager shall remain liable
for all services to be provided and which any of its Affiliates have been contracted to perform;
and provided, further, that the Manager shall be solely responsible for the payment of all fees and
expenses (which shall be negotiated and determined at an arm’s-length basis) owing to all such
Affiliates.

          (b) Each of the Issuer and ABS Lessor hereby agrees that EI may assign all of its rights,
duties and obligations as Manager under this Agreement and the other Related Documents to which the
Manager is a party to an Exterran Affiliate upon satisfaction of all of the following conditions:

     (i) Such Exterran Affiliate shall, simultaneously with such assignment, assume
the responsibilities for all, or substantially all, of the Domestic Contract
Compressor Business of Exterran;

     (ii) Such Exterran Affiliate shall (A) be an entity organized and validly
existing under the laws of the United States or any State thereof or the District of
Columbia; (B) expressly assume, by supplemental agreement (in form and substance
satisfactory to the Requisite Global Majority) executed by such Exterran Affiliate,
all of the rights, obligations and duties of EI under this Agreement and the other
Related Documents to which EI is a party; and (C) deliver such documents,
agreements, and amendments and Opinions of Counsel, as the Requisite Global Majority
may reasonably require in connection with such assumption; and

     (iii) The Manager Guarantor confirms in a written agreement acceptable to the
Requisite Global Majority that the Manager Guaranty remains in full force and effect
with respect to the obligations of the Exterran Affiliate under this Agreement.

Upon satisfaction of all of the foregoing conditions, EI shall be released from its obligations as
Manager under this Agreement other than obligations arising on or prior to the date of such
transfer.

     2.6 Relationship between the Issuer, the ABS Lessor and the Manager. All of the
functions, duties and services performed by the Manager under this Agreement shall be performed by
the Manager as an independent contractor and not as an agent of the Issuer or the ABS Lessor except
to the limited extent set forth in the following sentences. The Manager does not have the
authority to act as an agent of the Issuer or the ABS Lessor and the Manager, in its capacity as
such, does not, except as to the execution of User Contracts with respect to the

3

 

Owner Compressors, have the authority to bind the Issuer or the ABS Lessor or their assets.
The Manager is authorized to act as the agent of the Issuer (and, to the extent relevant to the
particular situation, of the ABS Lessor) with respect to administering, collecting, reporting and
remitting sales, use and other taxes due from Users. Neither the Issuer nor the ABS Lessor shall
have any liability for the acts of the Manager. The foregoing provision regarding liability shall
not affect the ability of a state or other taxing authority to hold the Issuer (or, to the extent
relevant to the particular situation, the ABS Lessor) liable for sales, use or similar taxes that
the Manager fails to collect from the Users, including related penalties and interest. Any fee or
other compensation payable by the Issuer to the Manager is an ordinary and necessary business
expense of the Issuer. No fee is anticipated to be paid by the ABS Lessor to the Manager, it being
understood that the compensation received by the Manager from the Issuer is the full compensation
to which the Manager is to be entitled for all services to be rendered to both the Manager and ABS
Lessor pursuant to the terms of this Agreement.

     2.7 Back-up Manager. If the Back-up Manager or any other Person shall become the
Replacement Manager, then the Requisite Global Majority shall have the right to appoint another
Eligible Back-up Manager as Back-up Manager.

3. MANAGEMENT TERM

     3.1 Duration of Management Term. The Management Term shall commence as of the Closing
Date and shall continue in force with respect to an Owner Compressor until the earliest to occur
of: (i) the occurrence of a Compressor Termination Event with respect to such Owner Compressor,
(ii) the date on which the Indenture is discharged in accordance with its terms and all Outstanding
Obligations (including all amounts owing to any Series Enhancer pursuant to any Enhancement
Agreement) have been paid in full, and (iii) with respect to any Manager, the removal and
replacement of the Manager in accordance with the provisions of Section 12 hereof. Except
as set forth in this Section 3 or Section 12 hereof, the rights and obligations of
the Manager hereunder may not be terminated by, or on behalf of, the Issuer for any reason.

     3.2 Resignation by the Manager. Neither EI nor any successor Manager may resign from
its obligations and duties as the Manager hereunder, except upon (a) an assignment pursuant to
Section 2.5(b), or (b) a determination that the performance by EI or such successor Manager, as the
case may be, of its duties under this Agreement is no longer permissible under Applicable Law,
which determination shall be evidenced by an Opinion of Counsel, in form and substance reasonably
satisfactory to the Requisite Global Majority, to such effect addressed and delivered to the
Indenture Trustee (on behalf of the Noteholders, each Series Enhancer and the other Persons
specified in the Indenture), the Issuer and each Series Enhancer. No such resignation under clause
(b) of the preceding sentence will become effective until a Replacement Manager has assumed the
obligations and duties of the Manager under this Agreement in accordance with the terms hereof.

     3.3 Termination with Respect to an Owner Compressor. Notwithstanding the other
provisions of this Section 3 to the contrary (but subject to the provisions of Section
12), the Management Term shall terminate with respect to any Owner Compressor which is subject
to a Casualty Loss, sold, foreclosed upon, lost, stolen, damaged beyond repair, requisitioned
(other than a temporary requisition for a period of not more than 180 days) by any Governmental

4

 

Authority, worn out, unsuitable for use or economically obsolete (any of the foregoing, a
“Compressor Termination Event”) as of the date of such Compressor Termination Event after
the deposit into the Trust Account of all Casualty Proceeds or other amounts received with respect
to the Casualty Loss, sale, foreclosure, other loss, theft, damage, requisition, obsolescence or
unsuitability of such Owner Compressor. The Issuer and the Manager shall notify the other party
and the Indenture Trustee promptly after it obtains knowledge of any Compressor Termination Event.

4. OWNERSHIP OF OWNER COMPRESSORS

     4.1 Retention of Title. The Issuer or the ABS Lessor, as the case may be, shall at
all times retain full legal and equitable title to the Owner Compressors, notwithstanding the
management thereof by the Manager hereunder. The Manager shall not make reference to or otherwise
deal with or treat the Owner Compressors in any manner except in conformity with this Section
4.1.

     4.2 Liens. The Manager will promptly pay or discharge any and all sums claimed by any
party which, if unpaid, might become a Lien, charge, security interest or other encumbrance upon or
with respect to any Owner Compressor, including any accession thereto, or any part thereof or the
interest of the Issuer therein other than Permitted Encumbrances (each a “Lien Claim”) and
will promptly discharge any Lien Claim which arises; provided, however, that the Manager shall be
under no obligation to pay or discharge any Lien Claim so long as it is contesting the validity
thereof in good faith, in a reasonable manner and by appropriate legal proceedings, and the
nonpayment thereof does not, in the commercially reasonable opinion of the Manager, adversely
affect the title, property or rights of any Entitled Party thereto. Without limiting the
generality of this Section 4.2, the Manager shall be required to pay or discharge any Lien
Claim (1) that results from an act or omission by the Manager with respect to which the Manager
would not be entitled to indemnification pursuant to Section 16 hereof (“Manager
Malfeasance”) or (2) if prior to such payment or discharge, the Manager receives from the
Issuer the amount thereof (the “Owner Lien Claim Amount”). If any Lien Claim shall have
resulted from Manager Malfeasance and shall have been paid by the Issuer, whether directly or by
payment of the Owner Lien Claim Amount to the Manager, then, in either case, the Manager shall
promptly reimburse the Issuer, upon presentation of an invoice therefor.

5. DUTIES/RIGHTS OF THE MANAGER

     5.1 Duties of the Manager. Subject to the terms and provisions hereof, the Manager
shall provide the services specified in this Section 5 to, and on behalf of, the Issuer and
the ABS Lessor during the Management Term with respect to the Owner Compressors. The parties hereto
acknowledge and agree that, if an Owner Compressor is then subject to a User Contract, the User
under such User Contract may provide certain of the obligations set forth in Sections 5.6, 5.7,
5.8 and 5.9 hereof.

     5.2 Marketing.

          (a) During the Management Term, the Manager shall market, service, maintain, operate and
provide contract compression services for the Owner Compressors consistent with the Services
Standard. In addition, for so long as EI or an Exterran Affiliate is

5

 

the Manager, EI or such Exterran Affiliate as Manager shall keep the Owner Compressors under
User Contracts subject to approximately the same (and not materially lower) utilization rates and
contract rates and in the same manner as the Other Exterran Compressors. In addition, the Manager
shall, consistent with the Services Standard, negotiate the terms and conditions of all User
Contracts; provided that the terms and conditions of such User Contracts must be consistent with
those of User Contracts for the Other Exterran Compressors viewed as a single group (or, if the
Manager is not EI or an Exterran Affiliate, any Compressors or equipment of a type similar to the
Owner Compressors, for which contract compression services are provided, operated or managed by
such Manager for its own account and third parties other than the Issuer and the ABS Lessor) and,
in any event, must comply with (i) then generally accepted industry standards, (ii) for so long as
the Manager is EI or an Exterran Affiliate, the terms of the Contribution Agreement and (iii) the
requirements of the Related Documents. Notwithstanding the foregoing to the contrary, the
Manager’s management of the Compressors owned or leased by EXLPOP, and its Subsidiaries shall be
excluded from the application of this covenant for all purposes until April 30, 2009.

          (b) In performing its marketing duties pursuant to this Section 5.2, the Manager shall
use its best efforts to comply with the applicable concentration limits set forth in Appendix A to
the Indenture in the definitions of Excess 499 H/P Amount, Excess 999 H/P Amount and Excess
Customer Concentration Amount.

     5.3 Contract and Administration Obligations. The Manager shall, consistent with the
Services Standard, cause to be performed when due, on behalf of the Issuer (and, if applicable, the
ABS Lessor), all of the Issuer’s (or, where applicable, the ABS Lessor’s) performance obligations
under the User Contracts and the other Related Documents to which the Issuer is a party; provided,
however, that nothing contained herein shall be construed as creating credit recourse to the
Manager for (i) the principal balance of, and accrued interest or Commitment Fees on, the Notes or
other amounts owing by either the Issuer or ABS Lessor under the Related Documents or (ii)
indemnification payments otherwise the obligation of the Issuer or the ABS Lessor pursuant to the
Related Documents (except to the extent that the Manager would otherwise be liable for such
indemnification payment pursuant to the provisions of Section 16 hereof).

     5.4 Billing and Other Information. During the Management Term, the Manager shall
bill, on behalf of the Issuer (and, if applicable, the ABS Lessor), for all contract payments and
other sums due to the Issuer with respect to those Owner Compressors then subject to a User
Contract and shall also be responsible for the collection thereof. Such bills may be prepared in
summary format for all Compressors for which contract compression services are provided to a User,
but shall contain a detailed listing of each Compressor so contracted.

     5.5 Defaults by Users; Contract Amendments and Waiver.

          (a) In the event of any breach or default by a User under a User Contract, the Manager shall,
consistent with the Services Standard, take appropriate remedial action, in the name of the Issuer
(which action the ABS Lessor hereby agrees shall also bind the ABS Lessor), with respect to such
defaulted User Contract including, without limitation, (i) the termination of such User Contract as
to any or all Owner Compressors subject thereto, (ii) the recovery of possession of any or all
Owner Compressors subject thereto and (iii) the enforcement of any

6

 

other rights or remedies of the Issuer under such User Contract, including, without
limitation, the right to payment for any contract compression services or payment of other amounts
owed by such User under such User Contract. In furtherance of the foregoing, the Manager shall,
consistent with the Services Standard, (i) institute and prosecute such legal proceedings in the
name of the Issuer or the ABS Lessor as is permitted by Applicable Law in order to accomplish the
foregoing, (ii) settle, compromise and/or terminate such proceedings or (iii) reinstate such User
Contract; provided that the Manager shall not be required to take any such action if, in the
exercise of its reasonable commercial judgment, the Manager would not take such action if such
Owner Compressors were Other Exterran Compressors (or, if the Manager is not EI or an Exterran
Affiliate, Compressors or equipment of a type similar to the Compressors that is owned, managed,
maintained, operated or for which contract compression services are provided by such Manager for
its own account and third parties other than the Issuer and the ABS Lessor). All amounts expended
by the Manager in performing its obligations pursuant to the provisions of this Section
5.5, after reduction of such amounts for enforcement costs actually received by the Manager
pursuant to the terms of the related User Contracts, shall be a Reimbursable Service. The Issuer
reserves the right to take, upon written notice to the Manager, in its sole discretion, any or all
of the actions described in this Section 5.5 directly in its own name and on its own
behalf. In such an event the Manager, at the Issuer’s expense, shall cooperate with the Issuer (or
its designee or assignee) and provide the Issuer (or its designee or assignee) with such assistance
as the Issuer may reasonably request.

          (b) In performing its obligations hereunder, the Manager may, acting in the name of the Issuer
or the ABS Lessor and without the necessity of obtaining the prior consent of the Issuer, the ABS
Lessor or any Entitled Party, grant consents or enter into and grant modifications, waivers and
amendments to the terms of any User Contract except for consents, modifications, waivers or
amendments that (x) are inconsistent with the Services Standard or (y) contravene (or permit the
contravention of) any provision of the Indenture (including without limitation, Sections 636
through 649 thereof).

     5.6 Maintenance; Manager’s Expenses.

          (a) The Manager shall, consistent with the Services Standard, cause the Owner Compressors to
be maintained in good operating order and condition. The standard for such maintenance shall be the
highest of the following: (i) any standard required or set forth for the Owner Compressors by
Applicable Law, (ii) the Services Standard, and (iii) with respect to the Owner Compressors
provided to any User, any standard set forth in the related User Contract. All amounts expended by
the Manager for maintenance (other than an overhaul made in compliance with Section 5.6(b)
hereof) of the Owner Compressors, after reduction of such amounts for maintenance payments actually
received by the Manager pursuant to the terms of any related User Contract, shall be at the expense
of the Manager.

          (b) The Manager shall conduct, or cause to be conducted, overhauls of the Owner Compressors at
such intervals and in such detail as it conducts overhauls of the Other Exterran Compressors (or,
if the Manager is not EI or an Exterran Affiliate, Compressors or equipment of a type similar to
the Compressors that are owned, maintained, operated, managed or for which contract compression
services are provided by such Manager for its own account and third parties other than the Issuer
and the ABS Lessor).

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          (c) Maintenance, modifying, repackaging and/or overhauls of the Owner Compressors may be
performed by the Manager or third parties as reasonably determined by the Manager. For maintenance,
modifying, repackaging and/or overhauls of the Owner Compressors, the Issuer will pay for (i)
materials, supplies and parts at the Manager’s actual out-of-pocket cost therefor and (ii) labor at
hourly rates established by the Manager from time to time; provided that such costs and rates are
reasonable and consistent with industry expenses for such services (the sum of (i) and (ii), the
“Overhaul Fee”). Such hourly rates shall be based upon the Manager’s direct costs of labor
plus amounts for the Manager’s plant or facility overhead based on the Manager’s job cost system
for allocating overhead.

     5.7 Insurance.

          (a) The Manager will cause to be carried and maintained, at its sole expense (unless insured
in a manner consistent with this paragraph by Users), with respect to all Owner Compressors at all
times during the Management Term thereof and for the geographic area in which any Owner Compressor
is at any time located (i) physical damage insurance insuring against risks of physical loss or
damage to the Owner Compressors (“Property Insurance”) with an aggregate annual loss limit
of not less than $20,000,000 per occurrence except for certain perils which have sub-limits in the
amounts set forth on Schedule 5.7(a) attached hereof, and (ii) liability insurance against
liability for bodily injury, death and property damage resulting from the use and operation of the
Owner Compressors (“Liability Insurance”) with an aggregate loss limit of not less than
$20,000,000 per occurrence except for certain perils which have sub-limits in the amounts set forth
on Schedule 5.7(a) hereof and in each case shall be on terms consistent with current
practices; provided, however, that if by reason of a force majeure event or other event outside of
the control of the Manager, one or more of the terms of such insurance as required hereby are not
available in the commercial insurance markets on commercially reasonable terms, the Manager shall
nevertheless be deemed to have complied with this Section 5.7 if the Manager obtains such
insurance on commercially reasonable terms then available to the Manager with such premiums,
deductibles and policy limits that are consistent with industry standards which are reasonably
satisfactory to each Series Enhancer. Property Insurance and Liability Insurance shall be subject
to deductibles that are consistent with industry standards. The policies of insurance required
under this Section 5.7(a) shall be valid and enforceable policies issued by insurers having
an A.M. Best Company general policyholder rating of “A-” and a financial rating of
“IX” or in each case better or otherwise acceptable to each Series Enhancer and shall
provide coverage with respect to incidents occurring anywhere in the United States.

          (b) Such Property Insurance policy or policies will name the Issuer and the Indenture Trustee,
individually and on behalf of the Entitled Parties, as the loss payees, as their respective
interest may appear, with the ABS Lessor for purposes of this sentence agreeing that any insurable
interest it has in the Owner Compressors is subject to administration and management by the Issuer
and the Indenture Trustee. Such Liability Insurance policy or policies will name the Issuer, the
ABS Lessor and the Indenture Trustee, individually and on behalf of the Entitled Parties, as
additional insureds (each an “Additional Insured”). Each such policy shall provide that
(i) the insurers waive any claim for premiums and any right of subrogation or setoff against the
Additional Insureds, (ii) it may not be invalidated against any Additional Insured by reason of any
violation of a condition or breach of warranty of the policies or the application therefor by the
Manager or the Issuer, (iii) it may be canceled by the insurer only after no less

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than ten (10) days’ prior written notice from the Manager’s insurance broker to the Indenture
Trustee and each Series Enhancer, and (iv) the insurer will give written notice to the Indenture
Trustee and each Series Enhancer in the event of nonpayment of premium by the Manager when due.

          (c) On the initial Series Issuance Date, and thereafter not less than five (5) days prior to
the expiration dates of any expiring policies required under this Section 5.7, the Manager
shall furnish the Indenture Trustee and each Series Enhancer with certificates of the insurance or
replacement insurance coverage required by this Section 5.7.

          (d) Any deductibles or losses that are not covered by either the Property Insurance or
Liability Insurance shall be paid by, and for the account of, the Manager. The Manager agrees to
promptly, but in any event within three (3) Business Days after receipt of proceeds of such loss,
deposit such amounts into the Trust Account or the Purchase Account, as applicable, in accordance
with Section 302(b) of the Indenture for distribution in accordance with Section 302 of the
Indenture.

          (e) Any Casualty Loss, to the extent recovery is not received from a User, insurance coverage
or other external source, shall be borne by the Manager, without reimbursement by the Issuer, to
the extent such Casualty Loss is included in the Operations Fee Rate.

     5.8 Taxes. The Manager shall cause to be paid when due, and will indemnify each
Entitled Party from and against, all local, state, federal and foreign personal property, sales or
use taxes, license fees, assessments, charges, fines, interest and penalties (all such taxes,
license fees, assessments, charges, fines, interest and penalties being hereinafter called
“Impositions”) hereafter levied or imposed upon any Entitled Party, in connection with or
measured by the possession, contract for services, use or operation of any Owner Compressors but
excluding any federal, state or local tax calculated based on the taxable income of the applicable
Entitled Party. The Manager (whether such Manager is EI or an Exterran Affiliate or a Replacement
Manager) will promptly remit all Excluded Payments received by it pursuant to Sections 302(c),
302(d)(2) or 302(e)(2) of the Indenture to the relevant taxing authority. The Manager will also
pay (if the Manager is not EI or an Exterran Affiliate, such payments will be paid to the Manager
as a Reimbursable Service) all Impositions that might in any way affect the title of the Issuer or
the ABS Lessor, as the case may be, or result in a Lien upon any Owner Compressors or result in a
Material Adverse Change, in each case, before the same shall become delinquent; provided, however,
that the Manager shall not be required to pay any Imposition of any kind so long as it is
contesting such Imposition in good faith and by appropriate legal proceedings; provided, further,
that the nonpayment thereof shall not, in the reasonable opinion of the Manager, adversely affect
the title, property or rights of the Issuer or the ABS Lessor. In the event any reports or returns
with respect to Impositions are required to be filed, the Manager will prepare and file such
reports or returns, or cause such reports or returns to be prepared and filed, in such manner as to
show the interests of the Issuer or the ABS Lessor, as the case may be, in the Owner Compressors,
where required by the state or other taxing authority.

     5.9 Compliance with Law. The Manager, at the expense of the Issuer, shall, consistent
with the Services Standard, cause the Owner Compressors to comply, and each User Contract entered
into or renewed after the date hereof shall require the User thereunder to

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comply, in all material respects with all Applicable Laws, including to the extent applicable
to the Manager and its undertakings hereunder, all laws, rules and regulations promulgated, imposed
or monitored by OFAC, and Section 604 of the Indenture. In the event that such Applicable Laws
require any alteration of an Owner Compressor, or in the event that any equipment or appliance of
an Owner Compressor shall be required to be changed or replaced, or in the event that any
additional or other equipment or appliance is required to be installed on an Owner Compressor in
order to materially comply with such Applicable Laws, the Manager, at the expense of the Issuer,
shall make such alteration, change, replacement or addition (a “Mandatory Alteration”);
provided, however, that the Manager, in good faith, shall contest the validity or application of
any such Applicable Law which it would have contested if the affected Owner Compressor had been an
Other Exterran Compressor (or, if the Manager is not EI or an Exterran Affiliate, any Compressors
or equipment of a type similar to the Compressors owned, managed, operated or for which contract
compression services are provided by the Manager (or any appointed subcontractor) for its own
account and third parties other than the Issuer and the ABS Lessor), in any reasonable manner which
does not, in the opinion of the Manager, adversely affect the title, property or rights of the
Issuer or the ABS Lessor.

     5.10 Records and Information. The Manager shall, consistent with the Services
Standard, maintain separate, complete and accurate records relating to the Owner Compressors and
all matters covered by this Agreement in the same form and to the same extent as the Manager
customarily maintains records in respect of the Other Exterran Compressors (or, if the Manager is
not EI or an Exterran Affiliate, any Compressors or equipment of a type similar to the Compressors
owned, managed, operated or for which contract compression services are provided by the Manager (or
any appointed subcontractor) for its own account and third parties other than the Issuer and the
ABS Lessor). The Manager shall promptly, upon request of the Issuer or any Series Enhancer,
deliver to the Issuer, such Series Enhancer or any designee of any of the foregoing such records.
Upon request, the Manager shall promptly supply the Issuer with all information necessary for the
Issuer to prepare all reports required of the Issuer under the Related Documents.

     5.11 User Contract. The Manager shall store at its offices at 4444 Brittmoore Road,
Houston, Texas 77041, or at the offices of any of its Affiliates, all written User Contracts and
all written compression services documents related thereto, including without limitation, the
related Contract File, in a locked, fire retardant storage facility; provided, however that to the
extent the Issuer or the Manager uses electronic (as opposed to paper) User Contracts, the Manager
will maintain such User Contracts in a secure data storage facility, with restrictions on authority
for signatures, document modification and access codes. The Manager shall provide the Issuer, the
Indenture Trustee and each Series Enhancer thirty (30) days prior written notice of a change in the
location of the Manager’s offices, which shall include the relocation address. Within ninety (90)
days after the Closing Date (or, in the case of any Owner Compressor acquired by the Issuer after
the Closing Date, within thirty (30) days after the related Purchase Date, Contribution Date or
Substitution Date), the Manager shall stamp (or, in the case of any electronic User Contracts,
electronically mark conspicuously) the appropriate schedule of equipment attached to each User
Contract relating to an Owner Compressor acquired by the Issuer on the Closing Date or any
subsequent Purchase Date, Contribution Date or Substitution Date to indicate the Indenture
Trustee’s security interest in such User Contract.

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     5.12 Other Services. The Manager shall be responsible for the provision of such other
services incidental to the foregoing as may from time to time be required under the User Contracts
and other Related Documents or may be reasonably necessary in connection with the ownership,
maintenance, and the Domestic Contract Compression Business of the Owner Compressors.

     5.13 Mutual Maintenance and Servicing. So long as the Manager is EI or an Exterran
Affiliate, the Manager, the Issuer and the ABS Lessor agree that in order for the Manager to
provide mutually beneficial maintenance and servicing of the Owner Compressors in the same manner
as it maintains and provides for the Other Exterran Compressors, the Manager is permitted to use
parts, engines, inventory or supplies from (x) Other Exterran Compressors to service and maintain
the Owner Compressors and the Other Exterran Compressors, and (y) Owner Compressors to service and
maintain the Owner Compressors and the Other Exterran Compressors, in all instances in accordance
with Sections 2.2 and 2.3 hereof and in the normal and customary business practices
of the Manager; provided however, in the event any Owner Compressor is utilized for parts in
accordance with the foregoing mutual maintenance and servicing provisions, such Owner Compressor,
to the extent not repaired, replaced or rebuilt within 90 days after the date on which such parts
or engines were utilized, will become an Ineligible Compressor. The Manager will have the option
to replace such Ineligible Compressor with another Compressor of equal or greater value (based on
and subject to the criteria set forth in Section 3.04 of the Contribution Agreement) as the
Ineligible Compressor within 90 days after the date on which such parts or engines were utilized.
To the extent the Compressor added in replacement of any such Ineligible Compressor exceeds the
value of such Ineligible Compressor, an appropriate adjustment to approximate such excess value
shall be made for the benefit of the Manager to the Operations Fee and the Overhaul Fee. The
Issuer and the Manager acknowledge and agree that each party derives independent and mutual benefit
from this maintenance and servicing arrangement set forth in this Section 5.13.

     5.14 Purchase Account. Subject to the conditions, covenants and agreements set forth
in Section 313 of the Indenture, the Manager, the Issuer and the ABS Lessor agree that the Manager
shall (a) remit, or shall cause to be remitted, any and all Compressor Reinvestment Sales Proceeds
to the Purchase Account, (b) use, or shall cause the use of, all or any portion of the Compressor
Reinvestment Sales Proceeds on deposit in the Purchase Account to purchase Additional Compressors,
and (c) direct, or shall cause the direction of, the Indenture Trustee to liquidate as necessary
any and all Eligible Investments credited to the Purchase Account and to transfer from the Purchase
Account to the Trust Account, (i) in accordance with, and at the times required by, Section 313(c)
of the Indenture, any unused portion of such Compressor Reinvestment Sales Proceeds and (ii) in
accordance with, and at the times required by, Section 313(d) of the Indenture, all funds in the
Purchase Account.

     5.15 Consent and Agreement by ABS Lessor. The ABS Lessor hereby consents to (i) the
execution, enforcement, and amendment of, and other actions under, all such User Contracts by the
Manager and by the Issuer as provided herein and (ii) the taking of all actions by the Manager
under and pursuant to the provisions of this Article 5. The ABS Lessor agrees that (i) the rights
of Users that arise under the User Contracts that affect or limit the use of the Owner Compressors
shall affect or limit the interest of the ABS Lessor therein and (ii) any other undertakings by the
Manager under and pursuant to this Article 5, to the extent that they bind or affect any Owner
Compressor, shall bind and limit the interest of the ABS Lessor therein.. The

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provisions of this Section 5.15 evidence a fully effective consent and agreement and do not
require the performance by the ABS Lessor of any further act to be fully effective and binding.

     6. AUTHORITY AND CONSENTS.

     6.1 The Issuer and the ABS Lessor. The Issuer and the ABS Lessor confer on the
Manager all such authorities and grant all such consents as may be necessary for the Manager’s
performance of its duties under this Agreement, and will, at the request of the Manager, confirm
any such authorities and consents to any third parties, execute such other documents and do such
other things as the Manager may reasonably request for the purpose of giving full effect to this
Agreement and enabling the Manager to carry out its duties hereunder.

     6.2 Manager Default. After the occurrence and during the continuance of a Manager
Default, the Manager irrevocably, and by way of security to the Issuer and the ABS Lessor for the
obligations of the Manager herein, appoints the Issuer or the Issuer’s designee (which shall be the
Indenture Trustee so long as any Outstanding Obligations remain unpaid) to be its attorney-in-fact
with full power of substitution on behalf of the Manager and in its name or otherwise to execute
any documents contemplated by this Agreement and any Related Document, and to give any notice and
to do any act or thing which the Manager is obliged to execute or do under this Agreement and any
Related Document. The Manager hereby confirms and agrees to ratify and confirm whatever any such
attorney shall do or propose to do in the exercise or purported exercise of all or any of the
powers, authorities and discretion referred to in this paragraph.

7. ACCOUNTS AND PAYMENTS

     7.1 Lockbox Accounts.

          (a) On or prior to the initial Series Issuance Date, the Lockbox Accounts shall have been
established and shall be under the exclusive control of the respective Intercreditor Collateral
Agents, and Manager shall, or shall cause, all Collections related to its Domestic Contract
Compression Business to be deposited in one of the Lockbox Accounts, in each case, in accordance
with the terms of the applicable Intercreditor Agreement. So long as the Manager is EI or an
Exterran Affiliate, the Manager shall comply with its obligations and duties under the
Intercreditor Agreements. Immediately after the completion of the daily allocation of funds in the
Lockbox Accounts, all Collections allocable to the Securitization Collateral will be transferred to
the Trust Account. Upon the occurrence of an Event of Default or a Manager Default, the
disbursement of the Collections in the Lockbox Accounts shall be made in accordance with the terms
of the applicable Intercreditor Agreement.

          (b) During the continuation of a Trigger Event, the Manager shall, on a weekly basis, provide
to the Issuer, each Series Enhancer and the Indenture Trustee a copy of each daily cash
reconciliation prepared during the preceding week. At any time during the continuation of a
Trigger Event, each of the Issuer, each Series Enhancer and the Indenture Trustee and their
respective accountants and attorneys shall be entitled, at the expense of the Manager, to visit the
Manager’s office and conduct a review of all backup documentation supporting the daily cash
allocation report.

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          (c) Upon an Event of Default or a Manager Default and the continuation of such event, as the
case may be, the Back-up Manager and the Requisite Global Majority (or their designees), are each
hereby authorized and empowered, as the Issuer’s and the ABS Lessor’s attorney-in-fact, to endorse
any contract compression payments relating to an Owner Compressor deposited in a Lockbox Account or
presented for deposit in any Lockbox Account requiring the endorsement of the Issuer or the ABS
Lessor, which authorization is coupled with an interest.

     7.2 Deposits to the Lockbox Account. If the Manager shall receive any Collections
with respect to any Owner Compressor directly, the Manager shall deposit such funds into the
Lockbox Account within three (3) Business Days of the receipt thereof. The obligation of the
Manager to make such deposit shall constitute a full recourse obligation of the Manager (for which
the Manager shall not be entitled to receive indemnification from the Issuer or the ABS Lessor).

     7.3 Withdrawal from Trust Account. The Manager shall be entitled to submit a written
request (which may be given by e-mail) for withdrawals to the Indenture Trustee to distribute to
the Manager from the Trust Account on a Business Day other than a Payment Date funds in an amount
equal to the sum of (i) an estimate (based on actual accrued amounts as of the date of such
request) of the Operations Fee and S&A Fee expected to be paid on the immediately succeeding
Payment Date and (ii) an estimate of the Overhaul Fee (based on actual accrued amounts as of the
date of such request) expected to be paid on the immediately succeeding Payment Date; provided,
however, that notwithstanding any right of the Manager pursuant hereto or pursuant to the
Management Agreement to request such interim distributions with respect to the Operations Fee, S&A
Fee and Overhaul Fee, such interim distributions shall be made only so long as (i) no Event of
Default or Manager Default shall have occurred and be continuing, (ii) the Manager Termination Date
shall not have occurred unless the Indenture Trustee (acting at the direction of the Requisite
Global Majority) shall have consented to such interim distribution(s), and (iii) with respect to
the Overhaul Fee, the Overhaul Fee Release Conditions shall have been satisfied on the date of such
request.

          In addition, so long as no Event of Default shall have occurred and be continuing, the Manager
shall be entitled to request withdrawals from the Trust Account an amount equal to the sum of (x)
all Excluded Payments then on deposit in the Trust Account, and (y) so long as all Scheduled
Principal Payment Amounts for all Series of Notes then Outstanding were paid in full on the
immediately preceding Payment Date, all Ineligible Collections then on deposit in the Trust
Account.

     The Indenture Trustee is under no obligation to verify that the requirements of Section 302(c)
of the Indenture have been met before funding such withdrawal to the Manager.

     7.4 No Set-Off, Counterclaim, etc. The Manager’s obligations under this Agreement and
the other Related Documents to make deposits to the Lockbox Account shall be absolute and
unconditional and all payments thereof shall be made free and clear of and without any deduction
for or on account of any set-off (except to the extent expressly set forth herein) or counterclaim
or any circumstance, recoupment, defense or other right which the Manager may have against the
Issuer or any other Person for any reason whatsoever (whether in connection with the transactions
contemplated hereby or any other transactions), including, without limitation, (i) any defect in
title, condition, design or fitness for use of, or any damage to or loss

13

 

or destruction of, any Compressor, (ii) any insolvency, bankruptcy, moratorium, reorganization
or similar proceeding by or against the Manager or any other Person, or (iii) any other
circumstance, happening or event whatsoever, whether or not unforeseen or similar to any of the
foregoing.

     7.5 Manner of Payment. All payments required to be made by the Manager hereunder
shall be made in Dollars by wire transfer of immediately available funds prior to 3:00 p.m., New
York time, on the date of payment.

8. MANAGER ADVANCES

     8.1 Manager Advances.

          (a) On each Determination Date, the Manager may (in its sole discretion) advance funds (each,
a “Manager Advance”) and remit to the Trust Account, in such manner as will ensure
immediately available funds will be on account thereof by 11:00 a.m. New York time on the Business
Day prior to the Payment Date, an amount equal to all or any portion of contract payments (other
than uncollectible amounts) (i) due on User Contracts with respect to the Owner Compressors during
the preceding Collection Period for which the related Users have not remitted such payment on or
prior to such Determination Date and (ii) for which the Manager in good faith and in its
commercially reasonable judgment expects to collect promptly. Except for the first three (3)
Payment Dates following the Closing Date, the aggregate amount of all such Manager Advances
outstanding (i.e., not yet reimbursed under Section 8.1(b) below) at any point in time may
not exceed an amount equal to the product of (x) ten percent (10%) and (y) the Aggregate Note
Principal Balance on the immediately preceding Payment Date (after giving effect to payments made
on such date). The Manager will not make a Manager Advance with respect to (i) any defaulted User
Contract, or (ii) any User Contract if the Manager, in its reasonable good faith judgment, believes
that such Manager Advance would not be recoverable from a corresponding remittance from the User on
the related User Contract.

          (b) The Manager shall be reimbursed for Manager Advances on each Payment Date pursuant to
Section 302(d) or 302(e), as applicable, of the Indenture.

9. COVENANTS OF THE MANAGER

     9.1 Preparation and Delivery of Reports. The Manager shall deliver to each Series
Enhancer and the Indenture Trustee, or as otherwise specified in any of the clauses below:

          (a) Financial Statements. (i) So long as EI or an Exterran Affiliate is the
Manager, the Manager shall deliver or shall cause Exterran to deliver to the Indenture
Trustee and each Series Enhancer a copy of (x) each annual report of Exterran and (y) each
quarterly report of Exterran, in each case, within the time periods, and in the manner
required by, Section 9(b) of the Manager Guaranty and unaudited, consolidating income
statements and balance sheets for the Manager and its consolidated Subsidiaries; provided,
however, that Manager shall be deemed to have furnished the information required by this
Section 9.1(a) if Exterran shall have timely made the same available on “EDGAR”
and/or on its home page on the worldwide web (at the date of this Agreement located at
[http://www.exterran.com]); provided, further, however, that if any Series

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Enhancer or the Indenture Trustee is unable to access EDGAR or Exterran’s home page on
the worldwide web or is unable to access such information from such sources, the Manager
agrees to provide such Series Enhancer or the Indenture Trustee, as the case may be, with
paper copies of the information required to be furnished pursuant to this Section
9.1(a) promptly following notice from such Series Enhancer or the Indenture Trustee, as
the case may be. Information required to be delivered pursuant to this Section
9.1(a) shall be deemed to have been delivered on the date on which the Manager provides
notice to each Series Enhancer and the Indenture Trustee that such information has been
posted on “EDGAR” or Exterran’s website or another website identified in such notice and
accessible by each Series Enhancer or the Indenture Trustee without charge (and the Manager
hereby agrees to provide such notice). In the event that Exterran is no longer required to
file quarterly or annual reports with the SEC or any successor agency pursuant to Section 13
or 15(d) of the Exchange Act, the Manager agrees to provide each Series Enhancer and the
Indenture Trustee with paper copies of the information required to be furnished pursuant to
this Section 9.1(a) when and as if Exterran was required to file such quarterly and
annual reports with the SEC or any successor agency pursuant to Section 13 or 15(d) of the
Exchange Act, and

     (ii) if the Manager is not EI or an Exterran Affiliate, (1) as soon as available and in
any event within one hundred twenty (120) days after the end of each fiscal year of the
Manager, the audited consolidated and unaudited consolidated statements of income,
stockholders’ equity and cash flows of the Manager and its consolidated subsidiaries for
such fiscal year, and the related consolidated balance sheet of the Manager and its
consolidated subsidiaries as at the end of the fiscal year, and setting forth in each case
in comparative form the corresponding figures for the preceding fiscal year, and accompanied
by the related opinion of Independent Accountants, which opinion shall state that said
financial statements fairly present the consolidated financial condition and results of
operations of the Manager and its consolidated subsidiaries as at the end of, and for, such
fiscal year and that such financial statements have been prepared in accordance with GAAP,
except for such changes in such principles with which the Independent Accountants shall have
concurred and such opinion shall not contain a “going concern” or like qualification or
exception, and a certificate of such accountants stating that, in making the examination
necessary for their opinion, they obtained no knowledge, except as specifically stated, of
any Manager Default and (2) as soon as available and in any event within sixty (60) days
after the end of each of the first three fiscal quarterly periods of each fiscal year of the
Manager, consolidated statements of income, stockholders’ equity and cash flows of the
Manager and its consolidated subsidiaries for such period and for the period from the
beginning of the respective fiscal year to the end of such period, and the related
consolidated balance sheets as at the end of such period, and setting forth in each case in
comparative form the corresponding figures for the corresponding period in the preceding
fiscal year, accompanied by the certificate of a Responsible Officer, which certificate
shall state that said financial statements fairly present the consolidated financial
condition and result of operations of the Manager and its consolidated subsidiaries in
accordance with GAAP, as at the end of, and for, such period (subject to normal year-end
audit adjustments);

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          (b) Monthly Asset Base Certificate. By not later than each Determination Date, an
Asset Base Certificate, substantially in the form of Exhibit “A” attached hereto,
calculated as of the last day of the immediately preceding Collection Period;

          (c) SEC and Other Reports. Promptly upon their becoming available, one copy of each
report (if any), definitive proxy statement, registration statement (upon it becoming effective)
and definitive prospectus filed by the Guarantor with or delivered to any securities exchange, the
Securities and Exchange Commission (or any successor agency or any other Governmental Authority),
which such delivery and/or availability may be accomplished in the manner provided by Section 9.1
hereof for the delivery of annual and quarterly reports (excluding any time periods required for
the delivery of such reports);

          (d) Requested Information. After a request of the Deal Agent, any Series Enhancer or
the Indenture Trustee, with reasonable promptness, any data, information and reports regarding the
Owner Compressors that is reasonably available;

          (e) Updated Policies. Within sixty (60) days of the Manager’s fiscal year end and
only to the extent such policies have been materially changed or updated, (i) two (2) copies of its
current Credit and Collection Policy, a currently effective copy of which is attached hereto as
Exhibit “B” and (ii) two (2) copies of its current Overhaul Policy, a currently effective
copy of which is attached hereto as Exhibit “D”;

          (f) Manager Report. On each Determination Date, a Manager Report, substantially in
the form of Exhibit “C” hereto, calculated for the immediately preceding Collection Period,
a copy of which shall also be delivered to the Indenture Trustee, the Deal Agent, each Series
Enhancer and each Interest Rate Hedge Provider;

          (g) Manager Report on Hedging Calculations. On each Determination Date, a monthly
report reflecting the hedging policy calculations as of the end of the preceding calendar month
based on all transactions outstanding as of the end of such month under Interest Rate Swap
Agreements then in effect, including transactions entered into on such date which are scheduled to
commence on a future date;

          (h) Monthly Tape. On each Determination Date, the Manager shall deliver the Monthly
Tape to the Indenture Trustee and, on request, to each Series Enhancer;

          (i) Insurance Renewals. Within five (5) days of the then current expiry date of the
Property Insurance and Liability Insurance, evidence of renewals of such policies;

          (j) Material Adverse Change. With reasonable promptness, notice of any Material
Adverse Change;

          (k) Notice of Inaccuracy in Manager Report. Within five (5) Business Days of the date
on which any Responsible Officer of the Manager shall have actual knowledge or shall have received,
or been deemed to have received, from any Person, notice that the Manager Report delivered by the
Manager is inaccurate in any material respect, notice of such inaccuracy indicating the inaccuracy;

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          (l) Notice of Default. Notice of any Trigger Event or any event that with notice or
the passage of time (or both) would constitute any such event, a copy of which shall also be
delivered to the Intercreditor Collateral Agent;

          (m) Financial Projections. At least annually, and within ten (10) Business Days of
delivery (or deemed delivery, as the case may be) of the audited financial statements under
Section 9.1(a) hereof or, if earlier, concurrently with delivery thereof to any other
lenders or creditors, projected financial information prepared by Exterran in its ordinary course
of business and delivered by Exterran to its lenders in accordance with the terms of the Senior
Secured Credit Agreement or to any of its other lenders or creditors, including revisions of
previously delivered information. Such projections shall include balance sheets, income statements
and cash flows by business segment;

          (n) Public Debt Ratings. Promptly, but in any event within five (5) Business Days
after the date of any change in Exterran’s public debt ratings, Manager shall deliver to the Deal
Agent and each Series Enhancer a written confirmation of Exterran’s public debt ratings after
giving effect to such change; and

          (o) Purchase Option Report. The Manager shall provide to the Deal Agent and each
Series Enhancer, simultaneously with delivery of the Manager Report, a supplement to the monthly
Manager Report setting forth a list of the total number of all Owner Compressors subject to User
Contracts that contain purchase options and the Aggregate Depreciated Value of all such Owner
Compressors.

     9.2 Maintenance of Offices. The Manager shall maintain, at its office complex located
at 4444 Brittmoore Road, Houston, Texas 77041 (or, if EESLP becomes the Manager at that address or
12001 North Houston Rosslyn, Houston, Texas 77086), such books and records (including computer
records) with respect to the Owner Compressors in the same manner as it maintains for the Other
Exterran Compressors, including a computer database which includes the Owner Compressors
(containing sufficient information to generate a listing of all such Owner Compressors and the
reports required to be delivered pursuant to this Agreement and the Related Documents), any User
Contracts relating thereto, the Users and their locations, and the Appraised Value and Depreciated
Value of each Owner Compressor. The Manager shall notify the Issuer, each Series Enhancer and the
Indenture Trustee of any change in the location of the Manager’s office complex or its books and
records.

     9.3 Inspection.

          (a) Each of (i) the Requisite Global Majority (acting as one group) and their agents, (ii) if
the Manager is not EI or an Exterran Affiliate and the Issuer has not been furnished with a copy of
the report generated by the Requisite Global Majority (or its agents) with respect to its rights
hereunder, the Issuer (and its agents), and (iii) any Series Enhancer in connection with any
refinancing involving such Series Enhancer shall have the right to inspect the Owner Compressors,
the receivables aging system and all books, records, reports, User Contracts, insurance policies,
and other documents relating to the Owner Compressors (including those involving any refinancing of
a Series Enhancer), all in the format which the Manager uses for the Other Exterran Compressors
(or, if the Manager is not EI or an Exterran Affiliate, any Compressors or equipment of a type
similar to the Owner Compressors for which contract

17

 

compression services are provided, operated or managed by such Manager for its own account and
third parties other than the Issuer). Such inspections shall be conducted upon reasonable request
and notice to the Manager and shall (a) be conducted during normal business hours, (b) be subject
to the Manager’s customary security procedures and the execution of reasonable and customary
confidentiality agreements and (c) not unreasonably disrupt the Manager’s business. For purposes
of any such inspection, the Manager shall grant the Requisite Global Majority, the Issuer and their
agents (as applicable) access to the Manager’s computer systems (including the receivables aging
system) and data relating solely to the Owner Compressors contained therein (and with respect to
the Exterran Compressors to the extent necessary to evaluate compliance with the Related
Documents).

          (b) Each of (i) the Requisite Global Majority (acting as one group) and their agents and (ii)
if the Manager is not EI or an Exterran Affiliate and the Issuer has not been furnished with a copy
of the report generated by the Requisite Global Majority (or its agents) with respect to its rights
hereunder, the Issuer (and its agents) shall have the right to (i) one such inspection per calendar
year (and an additional inspection by any Series Enhancer in connection with any refinancing
involving such Series Enhancer), at the reasonable cost and expense (including reasonable legal and
accounting fees incurred by the Issuer, the Requisite Global Majority or, in connection with any
refinancing involving any Series Enhancer, the applicable Series Enhancer) of the Manager and (ii)
one additional inspection at the cost and expense of the Requisite Global Majority or the Issuer
(as the case may be), unless a Trigger Event shall have occurred and be continuing, in which case,
the Requisite Global Majority and, if applicable, the Issuer (and their respective agents) shall
have the right to conduct such inspections any number of times and each time the costs and expenses
shall be borne by the Manager.

     9.4 Ownership of Owner Compressors. The Manager agrees to promptly indicate to all
parties with a valid interest inquiring as to the true ownership of the Owner Compressors that the
Issuer or the ABS Lessor, as the case may be, is the owner of the Owner Compressors and the Manager
will not claim any ownership interest in the Owner Compressors.

     9.5 Separate Bank Accounts. The Manager will maintain separate bank accounts and
books of account from those of the Issuer and of the ABS Lessor. The Manager shall not conduct
business in the name of the Issuer or the ABS Lessor except when acting as an agent and identifying
itself as such.

     9.6 Compliance with Organizational Documents; Applicable Law. The Manager agrees to
comply with all of its company, organizational and managerial procedures required by its formation
documents and Applicable Law.

     9.7 Substantive Consolidation. The Manager will be operated so that neither the
Issuer nor the ABS Lessor will be “substantively consolidated” with the Manager or any of its
Affiliates. In connection therewith, the Manager makes herein by this reference each of the
representations and warranties made by it to Baker Botts LLP in support of its opinions issued and
delivered in connection with the issuance of the Notes, as if specifically made herein and agrees
to comply with each of the factual assumptions contained in such opinions.

     9.8 Credit Policy. The Manager will not make any material modifications to the terms
of its Credit and Collection Policy to the detriment of any Series Enhancer without the

18

 

prior written consent of the Series Enhancer so affected. The Credit and Collection Policy of
the Manager and the Manager’s compliance therewith shall be consistent with the reasonable and
prudent policies and business practices of managers of similar types of equipment in the Manager’s
industry.

     9.9 Appraisals. No later than January 31, 2008, the Manager shall (at its expense)
furnish (or cause to be furnished) to the Control Party two (2) Appraisals setting forth the
Appraised Value of the Owner Compressors as of the initial Series Issuance Date. Upon delivery of
such Appraisals, the Appraised Value of each Compressor shall be adjusted in accordance with the
provisions set forth in the definition of the term “Appraised Value”.

     9.10 Lockbox Account. Until the termination of the Intercreditor Agreements in
accordance with their terms, the Manager shall maintain, and shall cause the applicable
Intercreditor Collateral Agent to maintain, the relevant Lockbox Account and shall not terminate
such Lockbox Account, or close such Lockbox Account, without the prior written consent in each
instance of the Indenture Trustee and the Requisite Global Majority. The Manager shall not
establish any new account that will receive payments or Collections in respect of the User
Contracts, the Securitization Collateral or any funds attributable to its Domestic Contract
Compression Business without the prior written consent in each instance of the Indenture Trustee
and the Requisite Global Majority. Exterran, EI and their Affiliates may establish separate
accounts for other funds not attributable to the Domestic Contract Compression Business, including
but not limited to funds attributable to the fabrication, service, after-service market and
international compression business. Notwithstanding the foregoing, until the incorporation of EI’s
contract compression business into EESLP’s enterprise reporting program, a Lockbox and Lockbox
Account will be maintained by each of EI and EESLP. The Manager shall instruct and cause each
User to remit all contract payments and other payments arising under each User Contract and all
payments attributable to the Domestic Contract Compression Business of Exterran to the Lockbox
Account as set forth in the Intercreditor Agreement. The obligations of EI and any Exterran
Affiliate under this Section 9.10 shall survive the resignation or removal of EI or any
Exterran Affiliate as Manager and the termination of this Agreement until the termination of the
Intercreditor Agreement(s) in accordance with Section 21 thereof.

10. WARRANTY

     10.1 ISSUER. NEITHER THE ISSUER NOR ABS LESSOR MAKES ANY REPRESENTATIONS OR
WARRANTIES, EXPRESS OR IMPLIED, WITH RESPECT TO THE CONDITION, MERCHANTABILITY OR FITNESS FOR ANY
PARTICULAR PURPOSE OF THE OWNER COMPRESSORS, THE ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT
DISCOVERABLE, THE ABSENCE OF OBLIGATIONS BASED ON STRICT LIABILITY IN TORT, OR ANY OTHER
REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED.

     10.2 MANAGER. THE MANAGER WARRANTS THAT IT WILL CARRY OUT ITS SERVICES WITH
REASONABLE CARE AND SKILL. THIS EXPRESS WARRANTY IS IN LIEU OF ALL OTHER WARRANTIES, WHETHER
EXPRESS OR IMPLIED. UNDER NO CIRCUMSTANCES SHALL THE MANAGER HAVE ANY LIABILITY TO THE ISSUER FOR
ANY SPECIAL, INDIRECT OR CONSEQUENTIAL DAMAGES.

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11. COMPENSATION AND REIMBURSEMENT OF THE MANAGER

     11.1 Compensation of the Manager. As compensation to the Manager for the performance
of its services hereunder, the Issuer shall pay to the Manager an S&A Fee, an Operations Fee, an
Overhaul Fee, an Incentive Management Fee and a charge for Reimbursable Services. Subject to the
terms and conditions of the Indenture, each of the S&A Fee (including any Excess S&A Expenses), the
Operations Fee (including any Excess Operations Expenses), the Overhaul Fee, the Incentive
Management Fee and the charge for Reimbursable Services shall be payable to the Manager from the
Trust Account, to the extent monies are available for the payment thereof, in accordance with
Sections 302(d) and (e) of the Indenture, as follows:

          (a) on each Payment Date, an amount equal to the S&A Fee (including any Excess S&A Expenses),
the Overhaul Fee, the Operations Fee (including any Excess Operations Expenses) and the Incentive
Management Fee, in each case for the calendar month preceding the month in which such Payment Date
occurs; and

          (b) on each Payment Date, the amount of Reimbursable Services submitted by the Manager to the
Issuer on or prior to the last day of the calendar month immediately preceding the month in which
such Payment Date occurs.

     11.2 S&A Fee.

          (a) The selling and administrative fee payable to EI as initial Manager for each Collection
Period (or any portion thereof) shall be the product of (i) the S&A Fee Rate and (ii) the Gross
Compressor Contract Revenues actually billed during such Collection Period (such product, the
“Exterran S&A Fee”). The S&A Fee for any Manager other than EI or any Exterran Affiliate
shall be the amount calculated in accordance with the definition thereof, subject to the
adjustments and limitations contained therein and herein.

          (b) The S&A Fee Rate following the initial Issuance Date shall be seven percent (7%), which
percentage shall be adjusted annually thereafter in accordance with the provisions of Section
11.2(c) (the “S&A Fee Rate”).

          (c) So long as no Trigger Event shall have occurred and then be continuing, the S&A Fee Rate
may be recomputed by the Manager or any Replacement Manager and automatically adjusted each year on
the last day of the quarter following the Manager’s fiscal year end, to reflect the actual selling
and administrative costs incurred by the Manager in managing the Exterran Compressors during the
most recently completed fiscal year. Any such adjustment shall be accompanied by a certification
by the Manager that any increase in the S&A Fee Rate reflects increases in selling and
administrative costs which are also being incurred in respect of the Other Exterran Compressors.
The reasonableness of the amount of such cost increase will, at the request of any Entitled Party,
be verified by a third party consultant selected by the Requisite Global Majority and reasonably
satisfactory to the Manager. Increases in the S&A Fee in excess of the levels permitted in the
definition of S&A Fee shall be payable at a subordinated level in accordance with Sections 302(d)
and (e) of the Indenture. In addition to the adjustment set forth above, the S&A Fee Rate may be
adjusted with the prior consent of the Manager, the Issuer, and the Requisite Global Majority to
reflect material non-recurring costs incurred in any fiscal year.

20

 

          (d) The S&A Fee, as adjusted from time to time under Section 11.2(c), is intended to
include all direct selling and administrative costs and expenses relating to the performance of the
Manager’s services, duties and obligations under this Agreement but shall not include (x) the costs
and expenses of the Manager that are incurred in connection with the Reimbursable Services or (y)
the costs and expenses of the Manager in connection with its indemnification obligations owing to
any MA Indemnified Party.

     11.3 Operations Fee.

          (a) The operations fee (the “Exterran Operations Fee”) for each calendar month shall
be an amount equal to the product of (i) the Operations Fee Rate then in effect and (ii) the Gross
Compressor Contract Revenues actually billed during such Collection Period. The Operations Fee for
a successor Manager is set forth in the definition thereof, subject to the adjustments and
limitations contained therein and herein.

          (b) So long as EI or one of its Affiliates is the Manager, the Operations Fee Rate shall
automatically adjust on the forty-fifth (45th) day after the end of each calendar
quarter in order to reflect the “Gross Margin Percentage for Domestic Contract Compression”, as set
forth in the most recent consolidated financial statements of Exterran delivered pursuant to
Section 9.1(a) hereof. Increases in the Operations Fee in excess of the levels permitted in the
definition of Operations Fee shall be payable at a subordinated level in accordance with Sections
302(d) and (e) of the Indenture. In addition to the adjustment set forth above, the Operations Fee
Rate may be adjusted with the prior consent of the Manager, the Issuer, and the Requisite Global
Majority to reflect material non-recurring costs incurred in any year.

          (c) The Operations Fee, as adjusted from time to time, is intended to include all direct
operating costs and expenses relating to the performance of the Manager’s services, duties and
obligations under this Agreement but shall not include (x) the costs and expenses of the Manager
that are incurred in connection with the Reimbursable Services or (y) the costs and expenses of the
Manager in connection with its reimbursement, payment or indemnification obligations owing to any
MA Indemnified Party.

     11.4 Incentive Management Fee. In addition to the Operations Fee and the S&A Fee, the
Manager (whether the Manager is EI, any Exterran Affiliate or a Replacement Manager) shall be
entitled to receive on each Payment Date an additional fee in an amount equal to the Incentive
Management Fee.

     11.5 Reimbursable Services. To the extent not included in another fee category, the
Manager shall be separately compensated for the following services rendered on behalf of the Issuer
under this Agreement (collectively, the “Reimbursable Services”) in accordance with the
priorities established therefor in Sections 302(d) and (e) of the Indenture: (i) enforcement costs
in accordance with Section 5.5 hereof (ii) the cost of any Mandatory Alterations made after
the Closing Date in accordance with Section 5.9 hereof and (iii) if the Manager is not EI
or an Exterran Affiliate, Impositions actually paid by such Manager in accordance with Section
5.8. In addition to such Reimbursable Services, the Manager shall be entitled to be reimbursed
for Manager Advances in accordance with the provisions of Section 8 hereof.

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12. MANAGER DEFAULT

     12.1 Events or Conditions. Any of the following events or conditions shall constitute
a Manager Default:

          (a) The Manager shall fail to (i) deposit (or cause the deposit) to the Trust Account any
deposit required pursuant to Section 7.1 hereof, (ii) deliver either or both of the Manager
Report or the monthly Asset Base Certificate on the dates specified in Section 9.1 hereof,
(iii) deliver the Monthly Tape, or (iv) deposit to the Purchase Account or perform or observe the
covenants contained in Section 5.14 hereof, and in each case, such failure shall continue
for three (3) Business Days after the date when due;

          (b) The Manager shall fail to pay the Back-up Manager Fee when due;

          (c) (i) with respect to EI or any Exterran Affiliate as the Manager, the Manager shall fail to
perform or observe in any material respect any other covenant, condition, or agreement to be
performed or observed by it hereunder or under any Related Document (other than (x) those
identified in any other clause of this Section 12.1 and (y) any such covenant, condition,
or agreement that contains a specified numerical threshold or basket, in which case such covenant,
condition or agreement shall be strictly performed or observed); or (ii) with respect to any
Manager other than EI or any Exterran Affiliate, the Manager shall fail to perform or observe any
other covenant, condition, or agreement to be performed or observed by it under any Related
Document (other than those identified in any other clause of this Section 12.1), and such
failure shall continue unremedied for a period of thirty (30) days after the earlier to occur of
(i) receipt by the Manager of written notice thereof from the Issuer or the Indenture Trustee (at
the direction of the Requisite Global Majority) and (ii) the date on which any Responsible Officer
of the Manager responsible for the management of the Owner Compressors shall have actual knowledge
of such failure;

          (d) Any representation or warranty made by the Manager in any of the Related Documents, or in
any certificate delivered pursuant thereto, shall prove to be untrue in any material respect, and
such misrepresentation or untrue warranty, if capable of cure, shall continue unremedied for a
period of fifteen (15) days after the earlier to occur of (x) receipt by the Manager of written
notice thereof from the Issuer, the Indenture Trustee (acting at the direction of the Requisite
Global Majority) or any Series Enhancer and (y) the date on which any Responsible Officer of the
Manager shall have actual knowledge of such failure;

          (e) The inaccuracies specified in the notice specified in Section 9.1(k) remain
unremedied or uncured, by the Manager’s failure to provide an accurate Manager Report, for a period
of fifteen (15) days after the date such notice is required to be delivered;

          (f) The Manager shall fail to deliver the notice specified in Section 9.1(k) within
the time frame prescribed therein;

          (g) The entry of a decree or order for relief by a court having jurisdiction in respect of the
Manager or the Manager Guarantor in any involuntary case under any applicable Insolvency Law, or
other similar law now or hereafter in effect, or appointing a receiver, liquidator, assignee,
custodian, trustee, or sequestrator (or other similar official) for the Manager,

22

 

or the Manager Guarantor or for any substantial part of their properties, or ordering the
winding up or liquidation of its affairs and the continuance of any such decree or order unstayed
and in effect for a period of sixty (60) consecutive days;

          (h) The commencement by the Manager or the Manager Guarantor of a voluntary case under any
applicable Insolvency Law, or other similar law now or hereafter in effect, or the consent by the
Manager to the appointment of or taking possession by a receiver, liquidator, assignee, custodian,
trustee or sequestrator (or other similar official) of the Manager or the Manager Guarantor or any
substantial part of their respective properties, or the making by the Manager or the Manager
Guarantor of any general assignment for the benefit of creditors, or the inability or failure by
the Manager or the Manager Guarantor to pay its debts generally when due, or the taking of any
action by the Manager or the Manager Guarantor in furtherance of any such action;

          (i) The Manager Guarantor shall fail to pay any principal of, premium or interest on or any
other amount payable in respect of (x) any Debt that is outstanding under the Senior Secured Credit
Agreement or any replacement thereof or (y) if the Senior Secured Credit Agreement has been
terminated and not replaced, any Debt in a principal or notional amount of at least $35,000,000 for
the first three (3) fiscal years from the Closing Date and $75,000,000 thereafter (either
individually or in the aggregate), in each case when the same becomes due and payable (whether by
scheduled maturity, required prepayment, acceleration, demand or otherwise), and such failure shall
continue after the applicable grace period, if any, specified in such applicable agreement
governing such Debt and provided further that such payment default shall be determined without
giving effect to any (i) extensions of applicable grace periods which in the aggregate exceed ten
(10) Business Days or (ii) waivers, amendments or forbearances which in the aggregate exceed ten
(10) Business Days; or any other event (i.e., not involving a payment default) shall occur or
condition shall exist under such applicable agreement governing such Debt and shall continue after
the applicable grace period, if any, specified in any applicable agreement governing such Debt and
provided further that any such event or condition shall be determined without giving effect to any
(i) extensions of applicable grace periods which in the aggregate exceed thirty (30) days or (ii)
waivers, amendments or forbearances which in the aggregate exceed thirty (30) days, if the effect
of such event or condition is to accelerate, or to permit the acceleration of (regardless of
whether such amounts are actually accelerated), the maturity of such Debt or otherwise to cause, or
to permit the holder thereof to cause, such Debt to become due and payable prior to the stated
maturity thereof;

          (j) Any Person or “group”, within the meaning of Section 13(d) of the Exchange Act, not an
Exterran Affiliate shall become the “beneficial owner”, as defined in Rule 13(d)3 under the
Exchange Act, of shares representing more than 50% of the aggregate voting power represented by the
capital stock of Exterran or either Contributor;

          (k) For any calendar month the Average Contract Rate for the Other Exterran Compressors (which
for avoidance of doubt shall include the Compressors owned by or leased by EXLPOP and all other
master limited partnerships sponsored by Exterran) exceeds the Average Contract Rate for the Owner
Compressors by ten percentage points (10%) or more;

          (l) For any calendar month the Monthly Utilization Rate for the Other Exterran Compressors
(which for avoidance of doubt shall include the Compressors owned by or

23

 

leased by EXLPOP and all other master limited partnerships sponsored by Exterran) exceeds the
Monthly Utilization Rate for the Owner Compressors by fifteen percentage points (15%) or more;

          (m) As of any Determination Date, the Run-time Credit Ratio exceeds five percent (5%);

          (n) For so long as EI or any Exterran Affiliate is the Manager, an interest coverage ratio
automatically adjusted from time to time to always be .50 in excess of Exterran’s Interest Coverage
Ratio (as such term is defined in the Senior Secured Credit Agreement or any replacement thereof);
provided however, in the event that the definition of Interest Coverage Ratio no longer exists, or
the Senior Secured Credit Agreement or any replacement thereof no longer exists or such agreement
no longer contains a covenant testing the coverage of Exterran’s total interest expense, then the
interest coverage ratio to be adjusted for the purposes of this Section 12.1(n) shall be
the Interest Coverage Ratio stated in the Senior Secured Credit Agreement as in effect one calendar
year prior to the date on which such definition or agreement ceased to exist, plus.50;

          (o) For so long as EI or any Exterran Affiliate is the Manager, the Manager shall fail to
observe or perform any of the covenants, agreements or obligations set forth in Section 5.7
hereof (relating to the maintenance of insurance) and such failure shall continue unremedied for a
period of fifteen (15) days after the earlier to occur of (x) receipt by the Manager of written
notice thereof from the any of the Entitled Parties and (y) the date on which any Responsible
Officer of the Manager shall have actual knowledge of such failure;

          (p) For so long as EI or any Exterran Affiliate is the Manager, the Owner Compressors become
subject to any Lien except for Permitted Encumbrances and the Manager fails to remove such Lien
within ten (10) days;

          (q) For so long as EI or any Exterran Affiliate is the Manager, (i) EI or EESLP shall fail to
observe or perform any of its covenants or agreements set forth in Section 7(a)(i) of the
applicable Intercreditor Agreement and, if EI or EESLP is diligently attempting to determine the
proper allocation of the applicable unallocated amounts, such failure shall not be cured within
three (3) Business Days, or (ii) EI or EESLP shall be required to make any deposit into the Lockbox
Account pursuant to Section 7(b)(ii) of the applicable Intercreditor Agreement and shall fail to
make such deposit into such account on or prior to the date on which such deposit is required to be
made pursuant to such Section;

          (r) For so long as EI or any Exterran Affiliate is the Manager, the Manager Guarantor shall
repudiate its obligations under the Manager Guaranty or the Manager Guaranty shall cease to be in
full force and effect; or

          (s) The Manager shall fail to deliver to the Indenture Trustee and the Deal Agent, by
September 15, 2007, a fully-executed counterpart of the Back-up Management Agreement.

     12.2 Unpaid Outstanding Obligations. If a Manager Default or an Exterran Group Event
shall have occurred and be continuing and the Outstanding Obligations have not been paid

24

 

in full, the Indenture Trustee (acting at the written direction of the Requisite Global
Majority) shall have the right (and shall exercise such right as and when directed to do so by the
Requisite Global Majority), in addition to any other rights or remedies that the Issuer or any of
its respective assignees may have under any Applicable Law or in equity to: (i) terminate this
Agreement, (ii) appoint the Back-up Manager or another Replacement Manager selected by the
Requisite Global Majority to manage the Owner Compressors, and/or (iii) exercise any other remedies
available under this Agreement, the Indenture and the other Related Documents. In addition, EI
hereby agrees that if (a) a Manager Default shall have occurred and be continuing, a Manager
Termination Notice shall have been delivered to EI and the Outstanding Obligations have not been
paid in full, (b) an Exterran Group Event shall have occurred and be continuing, or (c) an Event of
Default shall have occurred and be continuing, then the Requisite Global Majority (or the Indenture
Trustee, the Manager or the Back-up Manager, as the case may be, at the direction of the Requisite
Global Majority) shall have the right to notify the Users and any other Account Debtors of the
Issuer and the ABS Lessor, including, without limitation, any Person obligated to make payments
pursuant to any User Contract, parties to the Contracts of the Issuer and the ABS Lessor and
obligors in respect of Instruments of the Issuer and the ABS Lessor, that (x) the User Contracts,
Accounts, Contracts and Instruments, and the right, title and interest of the Issuer, the ABS
Lessor and the Manager on behalf of the Issuer and the ABS Lessor in and under such, User
Contracts, Accounts, Contracts and Instruments, have been assigned to the Indenture Trustee, and
(y) payments in respect of such User Contracts, Accounts, Contracts and Instruments shall be made
directly to the ABS Lockbox Account for the benefit of the Indenture Trustee, and the Indenture
Trustee (at the direction of the Requisite Global Majority), or such other Person specified
pursuant to the terms hereof, may communicate with such Users and other Account Debtors, parties to
such Contracts and obligors in respect of such Instruments to verify with such parties, to the
Indenture Trustee’s and Requisite Global Majority’s satisfaction, the existence, amount and terms
of such Accounts, Contracts and Instruments. The Issuer shall direct the Indenture Trustee to give
notice in writing to the Rating Agencies and the Back-up Manager of any such Manager Default.
Notwithstanding anything contained herein to the contrary, this Agreement shall continue in full
force and effect with respect to each Owner Compressor, and the Manager shall continue to manage
such Owner Compressors pursuant to the terms and conditions of this Agreement, until the Management
Replacement Date.

     12.3 Appointment of Back-up Manager or Replacement Manager. Upon the appointment of
the Back-Up Manager or other Replacement Manager, as the Manager, the Manager shall cooperate with
the Issuer or their assignees, the Indenture Trustee and each Series Enhancer in transferring to
the Back-up Manager or other Replacement Manager the management of the Owner Compressors,
including, but not limited to, making available all books and records (including data contained in
the Manager’s computer) pertaining to such Owner Compressors, providing access to, and cooperating
in the transfer of, information pertaining to such Owner Compressors from the Manager’s computer
system to the Back-up Manager’s, other Replacement Manager or its designee’s system, and taking any
other action as may be reasonably requested by the Issuer or its assignee to ensure the orderly
assumption of management of such Owner Compressors by the Back-up Manager or other Replacement
Manager. Notwithstanding the foregoing, in no event shall the Manager be required to, and the Deal
Agent shall not, deliver or disclose to any Replacement Manager any information, data, document or
agreement which is proprietary to the Manager.

25

 

     12.4 Rights of User. In no event shall the Manager be required to act in any manner
inconsistent with the rights of any User under any User Contract to which an Owner Compressor is
then subject.

     12.5 Termination. Termination of this Agreement with respect to any Manager shall be
without prejudice to the rights and obligations of the parties which have accrued prior to such
termination; provided, however, that any amount then due to the Manager shall be reduced by the
reasonable and necessary out-of-pocket costs incurred by the Issuer (excluding Management Fees and
any other costs incurred within the ordinary scope of management and operation of the Owner
Compressors that are no longer subject to this Agreement) in connection with the removal and
replacement of the Manager as the manager of the Owner Compressors; provided, further, however,
that all obligations of the parties hereto to pay any fees to the then current Manager hereunder
shall cease upon the occurrence of the Management Replacement Date with respect to such Manager
(other than fees accrued through such Management Replacement Date).

     12.6 Issuer’s Duties. The Issuer shall give notice to the Rating Agencies, if any, in
the event of a removal or replacement of the Manager or a termination of this Agreement.

13. NO PARTNERSHIP

     The parties hereto also expressly recognize and acknowledge that this Agreement is not
intended to create a partnership, joint venture or other entity among any of the Issuer and the
Manager, and is intended only to provide a sharing of specified income and expenses attributable to
providing contract compression services for the Owner Compressors.

14. NO FORCE MAJEURE

     The Issuer’s, the ABS Lessor’s and the Manager’s obligations under this Agreement are
unconditional and shall not be subject to suspension, delay or interruption on account of the
occurrence of any event, whether or not such event is beyond its control.

15. CURRENCY/BUSINESS DAY

     15.1 US Currency. All sums payable under this Agreement shall be paid in US Dollars.

     15.2 Payment Date. Notwithstanding anything to the contrary contained herein, if any
date on which a payment becomes due hereunder is not a Business Day, then such payment may be made
on the next succeeding Business Day with the same force and effect as if made on such scheduled
date.

16. INDEMNIFICATION

     16.1 Issuer. The Issuer shall defend, indemnify and hold the Manager (and the Back-up
Manager or any Replacement Manager, after a Management Replacement Date) harmless from and against
any and all claims, actions, damages, losses, liabilities, costs and expenses (including reasonable
legal fees) (each a “Claim”) incurred by or asserted against the Manager to the extent
resulting or arising from the Issuer’s failure to comply with or perform its obligations under this
Agreement, except for Claims which arise out of the Manager’s willful misconduct,

26

 

negligence or failure to comply with or perform its obligations under this Agreement. The
Manager subordinates its claims against the Issuer under this Section 16.1 to all claims
which have priority in payment under Sections 302(d) and (e) of the Indenture, and further agrees
that any such claims shall (i) be non-recourse to the Issuer, (ii) only be payable at the times and
in the amounts for which funds are available for such purpose pursuant to Sections 302(d) and (e)
of the Indenture and (iii) not constitute a “claim” (as defined in Section 101(5) of the Bankruptcy
Code) against the Issuer.

     16.2 EI. EI agrees to, and hereby does, indemnify and hold harmless each Entitled
Party and their respective officers, directors, employees and agents (each of the foregoing, an
“MA Indemnified Party”) against any and all “Claims” (as defined in the Bankruptcy Code)
(including costs of defense and legal fees and expenses) which may be incurred or suffered by such
MA Indemnified Party (except to the extent caused by the gross negligence or willful misconduct of
such MA Indemnified Party) as a result of claims, actions, suits or judgments asserted or imposed
against such MA Indemnified Party and arising out of (i) any action or inaction by the Manager
(including the Back-up Manager or any Replacement Manager) that is contrary to the terms of this
Agreement, (ii) a material breach by the Manager (including the Back-up Manager or any Replacement
Manager) of its representations and covenants set forth in this Agreement, (iii) any information
certified in any schedule or report delivered by the Manager (including the Back-up Manager or any
Replacement Manager), being untrue in any material respect as of the date of such certification, or
(iv) the use or operation of the Owner Compressors; provided that the foregoing indemnity shall in
no way be deemed to impose on EI any obligation to reimburse an MA Indemnified Party for losses
arising solely from the financial inability of the related User with respect to a User Contract to
make contract and other service-related payments.

     16.3 Survival. The obligations of EI (or any Exterran Affiliate acting as the
Manager) and the Issuer under this Section 16 shall survive the resignation or removal of
the Manager and the termination of this Agreement.

17. NO BANKRUPTCY PETITION AGAINST THE ISSUER OR THE ABS LESSOR

     Neither the Manager nor the Back-up Manager will, prior to the date that is one (1) year and
one (1) day after the payment in full of all Outstanding Obligations, institute against the Issuer,
or join any other Person in instituting an Insolvency Proceeding against the Issuer or the ABS
Lessor. This Section 17 shall survive the termination of this Agreement.

18. REPRESENTATIONS AND WARRANTIES OF THE ISSUER AND THE ABS LESSOR

     Each of the Issuer and the ABS Lessor hereby makes the following representations and
warranties for the benefit of each Entitled Party, which representations and warranties are made as
of the Closing Date (unless otherwise indicated).

     18.1 Organization and Good Standing. It is duly organized, validly existing and in
good standing, under the laws of the State of Delaware with the requisite power and authority to
own its properties and to conduct its business as such properties are currently owned and such
business is currently conducted, had at all relevant times, and now has, power, authority, and

27

 

legal right to perform its obligations under this Agreement, and does not conduct business
under any other name.

     18.2 Due Qualification. It is qualified to transact business in each jurisdiction and
has obtained all necessary licenses and approvals as required under Applicable Law, in each case,
where the failure to be so qualified, licensed or approved, could reasonably be expected to
materially and adversely affect (x) its ability to perform its obligations under and comply with
the terms of this Agreement or (y) the rights and remedies of the Manager hereunder.

     18.3 Power and Authority. It has the requisite power and authority to execute and
deliver this Agreement and to carry out its terms. The execution, delivery, and performance of
this Agreement by it and all of its obligations hereunder have been duly authorized by all
necessary action, and this Agreement has been duly executed and delivered by it.

     18.4 Enforceable Obligations. This Agreement, when duly executed and delivered by it,
will constitute a legal, valid, and binding obligation of it, enforceable against it in accordance
with its terms subject as to enforceability to applicable bankruptcy, reorganization, insolvency,
moratorium, fraudulent conveyance or other laws affecting creditors’ rights generally and to
general principles of equity (regardless of whether enforcement is sought in a proceeding in equity
or at law).

     18.5 No Violation. The execution and delivery of this Agreement and the consummation
of the transactions contemplated by and the fulfillment of the terms of this Agreement and the
Related Documents to which the Issuer or the ABS Lessor is a party will not contravene or conflict
with any of the terms and provisions of, result in any breach of any of the terms and provisions
of, or constitute (with or without notice or lapse of time or both) a default under, the
certificate of incorporation and by-laws of the Issuer or the ABS Lessor or any material term of
any indenture, agreement, mortgage, deed of trust, or other instrument to which the Issuer or the
ABS Lessor is a party or by which it or its property or any assets is bound, or result in the
creation or imposition of any Lien upon any of its properties pursuant to the terms of any such
indenture, agreement, mortgage, deed of trust, or other instrument, other than this Agreement and
the Indenture, or violate any Applicable Law applicable to the Issuer or the ABS Lessor.

     18.6 No Proceedings or Injunctions. There are (i) no litigations, proceedings or
investigations pending, or, to its knowledge, threatened, before any court, regulatory body,
administrative agency, or other tribunal or Governmental Authority (A) asserting the invalidity of
this Agreement, (B) seeking to prevent the consummation of any of the transactions contemplated by
this Agreement, or (C) seeking any determination or ruling that could reasonably be expected to
materially and adversely affect the performance of its obligations under, or the validity or
enforceability of, this Agreement and (ii) no injunctions, writs, restraining orders or other
orders in effect against it that would adversely affect its ability to perform under this
Agreement.

     18.7 Compliance with Law. It:

     (i) is not in violation of any Applicable Laws to which it is subject, the
violation of which could reasonably be expected to materially and adversely

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affect the ability of the Issuer or the ABS Lessor to perform its obligations
under and comply with the terms of this Agreement and any other Related Document to
which it is a party;

     (ii) has not failed to obtain any licenses, permits, franchises or other
governmental authorizations which failure could reasonably be expected to materially
and adversely affect the ownership of its property or the conduct of its business
including, without limitation, with respect to transactions contemplated by this
Agreement and the other Related Documents to which it is a party; and

     (iii) is not in violation in any respect of any term of its Organizational
Documents or any agreement (including any User Contract) or other instrument to
which it is a party or by which it may be bound, which violation, individually or in
the aggregate, could reasonably be expected to materially and adversely affect the
business or condition (financial or otherwise) of the Issuer or the ABS Lessor
individually or the Issuer and its Subsidiaries taken as a whole, or the interest of
the Noteholders or any Series Enhancer in any Contributed Asset;

     18.8 Principal Place of Business; Operations in the United States. The principal
place of business and chief executive office of the Issuer and of the ABS Lessor is at 4444
Brittmoore Road, Houston, Texas 77041 and has been maintained at such address since its formation.

     18.9 Approvals. All approvals, authorizations, consents, orders or other actions of
any Person required to be obtained by it in connection with the execution and delivery of this
Agreement have been or will be taken or obtained on or prior to the Closing Date.

     18.10 Governmental Consent. No consent, approval or authorization of, or filing,
registration or qualification with, any Governmental Authority is or will be necessary or required
on its part in connection with the execution and delivery of this Agreement, except for any such
consents, approvals and authorizations that have been obtained, and all filings, registrations and
qualifications that have been made, on or prior to the Closing Date.

     18.11 Ordinary Course. The transactions contemplated by this Agreement are being
consummated in furtherance of its ordinary business purposes and constitute a practical and
reasonable course of action by it designed to improve its financial position, with no contemplation
of insolvency and with no intent to hinder, delay or defraud any of its present or future
creditors.

     18.12 Taxes. It has filed or caused to be filed all tax returns which, to its
knowledge, are required to be filed by the Issuer or the ABS Lessor. All Taxes against the Issuer
or the ABS Lessor or their property which have become due have been paid (other than any amount of
Taxes the validity of which is currently being contested in good faith by appropriate proceedings
and with respect to which reserves in accordance with GAAP have been provided on the books of the
Issuer or the ABS Lessor or other appropriate provisions therefor as may be required by GAAP have
been made), and no tax Lien other than as would constitute a Permitted Encumbrance has been filed
against the Issuer or the ABS Lessor or their property and, to its knowledge, no Claim is being
asserted, with respect to any such Taxes.

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19. REPRESENTATIONS AND WARRANTIES OF THE MANAGER

     The Manager hereby makes the following representations and warranties for the benefit of each
Entitled Party, which representations and warranties are made as of the Closing Date (unless
otherwise indicated).

     19.1 Organization and Good Standing. It is duly organized, validly existing and in
good standing and in compliance under the laws of its State of organization, with the requisite
power and authority to own its properties and to conduct its business as such properties are
currently owned and such business is currently conducted, had at all relevant times, and now has,
power, authority, and legal right to perform its obligations under this Agreement, and does not
conduct business under any other name.

     19.2 Due Qualification. It is qualified to transact business in each jurisdiction and
has obtained all necessary licenses and approvals as required under Applicable Law, in each case,
where the failure to be so qualified, licensed or approved, could reasonably be expected to
materially and adversely affect (x) its ability to perform its obligations under and comply with
the terms of this Agreement or (y) the rights and remedies of the Issuer hereunder.

     19.3 Power and Authority. It has the requisite power and authority to execute and
deliver this Agreement and to carry out its terms. The execution, delivery, and performance of
this Agreement by it and all of its obligations hereunder has been duly authorized by all necessary
action, and this Agreement has been duly executed and delivered by it.

     19.4 Enforceable Obligations. This Agreement, when duly executed and delivered by it,
will constitute a legal, valid, and binding obligation of it, enforceable against it in accordance
with its terms subject as to enforceability to applicable bankruptcy, reorganization, insolvency,
moratorium, fraudulent conveyance or other laws affecting creditors’ rights generally and to
general principles of equity (regardless of whether enforcement is sought in a proceeding in equity
or at law).

     19.5 No Violation. The execution and delivery of this Agreement and the consummation
of the transactions contemplated by and the fulfillment of the terms of this Agreement and the
Related Documents to which the Manager is a party will not contravene or conflict with any of the
terms and provisions of, result in any breach of any of the terms and provisions of, or constitute
(with or without notice or lapse of time or both) a default under, the certificate of incorporation
and by-laws of the Manager, or any material term of any indenture, agreement, mortgage, deed of
trust, or other instrument to which the Manager is a party or by which it or its property or assets
is bound, or result in the creation or imposition of any Lien upon any of its properties pursuant
to the terms of any such indenture, agreement, mortgage, deed of trust, or other instrument, other
than this Agreement and the Indenture, or violate any Applicable Law applicable to the Manager.

     19.6 No Proceedings or Injunctions. There are (i) no litigations, proceedings or
investigations pending, or, to its knowledge, threatened, before any court, regulatory body,
administrative agency, or other tribunal or Governmental Authority (A) asserting the invalidity of
this Agreement, (B) seeking to prevent the consummation of any of the transactions contemplated by
this Agreement, or (C) seeking any determination or ruling that could

30

 

reasonably be expected to materially and adversely affect the performance of its obligations
under, or the validity or enforceability of, this Agreement and (ii) no injunctions, writs,
restraining orders or other orders in effect against it that would adversely affect its ability to
perform under this Agreement.

     19.7 Compliance with Law.

     The Manager:

     (i) is not in violation of any Applicable Laws to which it is subject, the
violation of which could reasonably be expected to materially and adversely affect
the ability of the Manager to perform its obligations under and comply with the
terms of this Agreement and any other Related Document to which it is a party;

     (ii) has not failed to obtain any licenses, permits, franchises or other
governmental authorizations which failure could reasonably be expected to materially
and adversely affect the ownership of its property or the conduct of its business
including, without limitation, with respect to transactions contemplated by this
Agreement and the other Related Documents to which it is a party; and

     (iii) is not in violation in any respect of any term of any agreement
(including any User Contract), certificate of incorporation, by-law or other
instrument to which it is a party or by which it may be bound, which violation,
individually or in the aggregate, could reasonably be expected to materially and
adversely affect the business or condition (financial or otherwise) of the Manager
individually, or the Manager and its Subsidiaries taken as a whole, or the interest
of the Noteholders or any Series Enhancer in any Contributed Asset;

     19.8 Principal Place of Business; Operations in the United States. Its principal
place of business and chief executive office is at 4444 Brittmoore Road, Houston, Texas 77041 and
has been maintained at such address since its formation.

     19.9 Approvals. All approvals, authorizations, consents, orders or other actions of
any Person required to be obtained by it in connection with the execution and delivery of this
Agreement have been or will be taken or obtained on or prior to the Closing Date.

     19.10 Governmental Consent. No consent, approval or authorization of, or filing,
registration or qualification with, any Governmental Authority is or will be necessary or required
on its part in connection with the execution and delivery of this Agreement, except for any such
consents, approvals and authorizations that have been obtained, and all filings, registrations and
qualifications that have been made, on or prior to the Closing Date.

     19.11 Ordinary Course. The transactions contemplated by this Agreement are being
consummated in furtherance of its ordinary business purposes and constitute a practical and
reasonable course of action by it designed to improve its financial position, with no contemplation
of insolvency and with no intent to hinder, delay or defraud any of its present or future
creditors.

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     19.12 Identification Marks. The Manager shall use its best efforts to cause, within
ninety (90) days after the Closing Date, the applicable Purchase Date, the Contribution Date or the
Substitution Date, as the case may be, and at all times thereafter, to be affixed and shall keep
and maintain, prominently displayed on each Owner Compressor acquired by the Issuer or the ABS
Lessor on the Closing Date, any Purchase Date, Contribution Date or Substitution Date, as
applicable, a sticker with the phrase “Owned by Exterran ABS 2007 LLC or Exterran ABS Leasing 2007
LLC and subject to a security interest in favor of Wells Fargo Bank, National Association, as
Indenture Trustee” or other appropriate words designated by the Indenture Trustee, with appropriate
changes thereof and additions thereto as from time to time may be required by law in order to
protect the Issuer’s, the ABS Lessor’s and the Indenture Trustee’s interests in such Owner
Compressors. The Manager shall not allow the name of any Person to be placed upon any Owner
Compressor as a designation that might be interpreted as indicating a claim of ownership thereto or
a security interest therein by any Person other than the Issuer, the ABS Lessor or the Indenture
Trustee.

     19.13 Taxes. It has filed or caused to be filed all tax returns which, to its
knowledge, are required to be filed by the Manager. All Taxes against the Manager or any of its
property which have become due have been paid (other than any amount of Taxes the validity of which
is currently being contested in good faith by appropriate proceedings and with respect to which
reserves in accordance with GAAP have been provided on the books of the Manager or other
appropriate provisions therefor as may be required by GAAP have been made), and no tax Lien other
than as would constitute a Permitted Encumbrance has been filed against the Manager or its property
and, to its knowledge, no Claim is being asserted, with respect to any such Taxes.

20. GENERAL

     20.1 Notices. All notices, demands or requests given pursuant to this Agreement shall
be sent by internationally-recognized, overnight courier service, facsimile or hand delivery to the
following addresses and facsimile numbers:

To the Manager:

EXTERRAN, INC.

4444 Brittmoore Road

Houston, Texas 77041

Telephone: (713) 335-7295

Facsimile: (713) 446-6720

Attention: J. Michael Anderson

With a            Lee Sumrall

copy to:

To the Issuer:

Exterran ABS 2007 LLC

4444 Brittmoore Road

Houston, Texas 77041

Telephone: (713) 335-7295

Facsimile: (713) 446-6720

Attention: J. Michael Anderson

With a            Lee Sumrall

copy to:

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To the ABS Lessor:

Exterran ABS Leasing 2007 LLC

4444 Brittmoore Road

Houston, Texas 77041

Telephone: (713) 335-7295

Facsimile: (713) 446-6720

Attention: J. Michael Anderson

with a            Lee Sumrall

copy to:

To the Indenture Trustee:

Wells Fargo Bank, National Association

MAC N9311-161

Sixth Street and Marquette Avenue

Minneapolis, MN 55479

Telephone: (612) 667-8058

Facsimile: (612) 667-3464

Attention: Corporate Trust Services — Asset-Backed Administration

To the Deal Agent:

Wachovia Capital Markets, LLC

Structured Asset Finance

301 S. College St., Mailcode: NC0174

Charlotte, North Carolina 28288

Telephone: (704) 374-3077

Facsimile: (704) 383-4012

Attention: Kyle Shenton

If there is an Event of Default under Section 12 hereof, then:

To the Intercreditor Collateral Agent:

JP Morgan Chase Bank, N.A.

600 Travis Street, Floor 20

Houston, Texas 77002-3009

Telephone: (713) 216-7794

Facsimile: (713) 216-6603

Attention: Dianne L. Russell

To the Back-up Manager:

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Caterpillar Inc.

100 NE Adams Street

Peoria, Illinois 61629

Telephone: (309) 675-1000

Facsimile: (309) 675-6620

Attention: General Counsel

To each Series Enhancer:

At the address as set forth in the related Enhancement Agreement

To each Rating Agency:

At the address as set forth in the related Supplement

To the Indenture Trustee, as collateral agent under the Intercreditor Agreement:

At the address set forth above

Notice shall be effective and deemed received (a) on the day delivered to the courier service, if
sent by courier, (b) upon receipt of confirmation of transmission, if sent by facsimile, or (c)
when delivered, if delivered by hand or by certified first class mail, return receipt requested.
Each party delivering a notice hereunder shall deliver a copy of such notice to the Deal Agent at
the address set forth above.

     20.2 Attorneys’ Fees. If any proceeding is brought for enforcement of this Agreement
or because of an alleged dispute, breach or default in connection with any provision of this
Agreement, the prevailing party shall be entitled to recover, in addition to other relief to which
it may be entitled, reasonable attorneys’ fees and other costs incurred in connection therewith.

     20.3 Further Assurances. The Issuer, the ABS Lessor and the Manager shall each
perform such further acts and execute such further documents as may be reasonably necessary to
implement the intent of, and consummate the transactions contemplated by, this Agreement.

     20.4 Severability. If any term or provision of this Agreement or the performance
thereof shall to any extent be or become invalid or unenforceable, such invalidity or
unenforceability shall not affect or render invalid or unenforceable any other provision of this
Agreement and this Agreement shall continue to be valid and enforceable to the fullest extent
permitted by law.

     20.5 Assignability and Successors. This Agreement shall be binding upon and inure to
the benefit of, and be enforceable by, the Issuer (for its own account and on behalf of the ABS
Lessor) and the Manager, and their respective successors in interest or permitted assigns;
provided, however, that: (a) except as provided in Section 2.5(a), this Agreement and the rights
and duties of the Manager hereunder may not be assigned by the Manager to any other Person,

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without the prior written consent of the Issuer, the Indenture Trustee and the Requisite
Global Majority; and (b) the Issuer and the ABS Lessor may charge, assign, pledge or hypothecate
their rights (but not their obligations) under this Agreement pursuant to the Related Documents.
The Manager hereby acknowledges that the Issuer and the ABS Lessor will assign all of their rights,
title and interest under this Agreement to the Indenture Trustee, and that each Series Enhancer
will be a beneficiary of such assignments, and agrees that each such assignee and beneficiary shall
be express third party beneficiaries of this Agreement and shall be entitled to enforce the rights
and obligations hereunder as though it were a party hereto. Each party hereto agrees that, if the
Indenture Trustee shall fail to act hereunder as directed by the Requisite Global Majority at any
time at which it is so required hereby or by any other Related Document, then the Requisite Global
Majority shall be entitled to directly enforce the provisions of this Agreement or take any such
action directly in its own capacity or on behalf of the Indenture Trustee in accordance with the
terms of this Agreement and, in the event any party receives instructions from both the Indenture
Trustee and the Requisite Global Majority, such party may act on and rely upon the instructions
from the Requisite Global Majority. The Manager hereby consents to such assignments. The Manager
shall give the Rating Agencies, if any, prior notice of any assignment of the Manager’s rights or
obligations hereunder effected pursuant to this Section 20.5.

     20.6 Waiver. Waiver of any term or condition of this Agreement (including any
extension of time required for performance) shall be effective only if in writing and shall not be
construed as a waiver of any subsequent breach or waiver of the same term or condition or a waiver
of any other term or condition of this Agreement. No delay on the part of any party in exercising
any right, power or privilege hereunder shall operate as a waiver hereof.

     20.7 Headings. The headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this Agreement.

     20.8 Entire Agreement; Amendments. This Agreement represents the entire agreement
between the parties with respect to the subject matter hereof and may not be amended or modified
except by an instrument in writing signed by the parties hereto and approved by the Requisite
Global Majority. The Manager shall send prior notice of any amendment or modification to the Rating
Agencies, if applicable.

     20.9 Counterparts. This Agreement may be signed in counterparts each of which shall
constitute an original instrument, but all of which together shall constitute but one and the same
instrument.

     20.10 Signatures. Any signature required with respect to this Agreement may be
provided via facsimile; provided that originals of such signatures are supplied by each party to
the other party promptly thereafter.

     20.11 GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED BY AND INTERPRETED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK INCLUDING SECTIONS 5-1401 AND 5-1402 OF THE
GENERAL OBLIGATIONS LAWS BUT OTHERWISE WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS OF LAW,
THAT WOULD RESULT IN APPLICATION OF LAWS OTHER THAN NEW YORK, AND THE RIGHTS, OBLIGATIONS AND
REMEDIES OF THE

35

 

PARTIES HERETO SHALL BE DETERMINED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

     20.12 CONSENT TO JURISDICTION. ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST THE
MANAGER, THE ISSUER, OR THE ABS LESSOR ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR ANY
TRANSACTION CONTEMPLATED HEREBY, MAY BE INSTITUTED IN ANY FEDERAL OR STATE COURT IN THE CITY OF NEW
YORK, STATE OF NEW YORK AND THE MANAGER, THE ISSUER AND THE ABS LESSOR EACH HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVE ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF
ANY SUCH SUIT, ACTION OR PROCEEDING, AND, SOLELY FOR THE PURPOSES OF ENFORCING THIS AGREEMENT, THE
ISSUER AND THE ABS LESSOR HEREBY IRREVOCABLY SUBMIT TO THE JURISDICTION OF ANY SUCH COURT IN ANY
SUCH SUIT, ACTION OR PROCEEDING. EACH OF THE ISSUER AND THE ABS LESSOR HEREBY SEVERALLY AND
IRREVOCABLY APPOINTS AND DESIGNATES CT CORPORATION SYSTEM, WITH AN ADDRESS AT 111 EIGHTH AVENUE,
NEW YORK, NEW YORK 10001, ITS TRUE AND LAWFUL ATTORNEY-IN-FACT AND DULY AUTHORIZED AGENT FOR THE
LIMITED PURPOSE OF ACCEPTING SERVICE OF LEGAL PROCESS AND EACH OF THE PARTIES HERETO EACH AGREE
THAT SERVICE OF PROCESS UPON SUCH PARTY SHALL CONSTITUTE PERSONAL SERVICE OF SUCH PROCESS ON SUCH
PERSON. EACH OF THE PARTIES HERETO SHALL EACH MAINTAIN THE DESIGNATION AND APPOINTMENT OF SUCH
AUTHORIZED AGENT UNTIL ALL AMOUNTS PAYABLE UNDER THIS AGREEMENT AND THE INDENTURE SHALL HAVE BEEN
PAID IN FULL. IF SUCH AGENT SHALL CEASE TO SO ACT, EACH OF THE PARTIES HERETO AS THE CASE MAY BE,
SHALL IMMEDIATELY DESIGNATE AND APPOINT ANOTHER SUCH AGENT SATISFACTORY TO THE INDENTURE TRUSTEE
AND SHALL PROMPTLY DELIVER TO THE INDENTURE TRUSTEE EVIDENCE IN WRITING OF SUCH OTHER AGENT’S
ACCEPTANCE OF SUCH APPOINTMENT.

     20.13 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, AS
AGAINST THE OTHER PARTIES HERETO, ANY RIGHTS IT MAY HAVE TO A JURY TRIAL IN RESPECT OF ANY CIVIL
ACTION OR PROCEEDING (WHETHER ARISING IN CONTRACT OR TORT OR OTHERWISE), INCLUDING ANY
COUNTERCLAIM, ARISING UNDER OR RELATING TO THIS AGREEMENT OR ANY OTHER RELATED DOCUMENT, INCLUDING
IN RESPECT OF THE NEGOTIATION, ADMINISTRATION OR ENFORCEMENT HEREOF OR THEREOF.

     20.14 Waiver of Immunity. To the extent that any party hereto or any of its property
is or becomes entitled at any time to any immunity on the grounds of sovereignty or otherwise from
any legal actions, suits or proceedings, from set-off or counterclaim, from the jurisdiction or
judgment of any competent court, from service of process, from execution of a judgment, from
attachment prior to judgment, from attachment in aid of execution, or from execution prior to
judgment, or other legal process in any jurisdiction, such party, for itself and its successors and
assigns and its property, does hereby irrevocably and unconditionally waive, and agrees not to
plead or claim, any such immunity with respect to its obligations, liabilities or any other matter
under or arising out of or in connection with this Agreement, the other Related Documents or the

36

 

subject matter hereof or thereof, subject, in each case, to the provisions of the Related
Documents and mandatory requirements of applicable law.

     20.15 Judgment Currency. The parties hereto (A) acknowledge that the matters
contemplated by this Agreement are part of an international financing transaction and (B) hereby
agree that (i) specification and payment of US Dollars is of the essence, (ii) US Dollars shall be
the currency of account in the case of all obligations under the Related Documents unless otherwise
expressly provided herein or therein, (iii) the payment obligations of the parties under the
Related Documents shall not be discharged by an amount paid in a currency or in a place other than
that specified with respect to such obligations, whether pursuant to a judgment or otherwise,
except to the extent actually received by the Person entitled thereto and converted into US Dollars
by such Person (it being understood and agreed that, if any transaction party shall so receive an
amount in a currency other than US Dollars, it shall (A) if it is not the Person entitled to
receive payment, promptly return the same (in the currency in which received) to the Person from
whom it was received or (B) if it is the Person entitled to receive payment, either, in its sole
discretion, (x) promptly return the same (in the currency in which received) to the Person from
whom it was received or (y) subject to reasonable commercial practices, promptly cause the
conversion of the same into US Dollars), (iv) to the extent that the amount so paid on prompt
conversion to US Dollars under normal commercial practices does not yield the requisite amount of
US Dollars, the obligee of such payment shall have a separate cause of action against the party
obligated to make the relevant payment for the additional amount necessary to yield the amount due
and owing under the Related Documents, (v) if, for the purpose of obtaining a judgment in any court
with respect to any obligation under any of the Related Documents, it shall be necessary to convert
to any other currency any amount in US Dollars due thereunder and a change shall occur between the
rate of exchange applied in making such conversion and the rate of exchange prevailing on the date
of payment of such judgment, the obligor in respect of such obligation will pay such additional
amounts (if any) as may be necessary to insure that the amount paid on the date of payment is the
amount in such other currency which, when converted into US Dollars and transferred to New York
City, New York, in accordance with normal banking procedures, will result in realization of the
amount then due in US Dollars and (vi) any amount due under this paragraph shall be due as a
separate debt and shall not be affected by or merged into any judgment being obtained for any other
sum due under or in respect of any Related Document. In no event, however, shall the respective
judgment debtor be required to pay a larger amount in such other currency, at the rate of exchange
in effect on the date of payment than the amount of US Dollars stated to be due under the
respective Related Document, so that in any event the obligations of the respective judgment debtor
under the Related Document will be effectively maintained as US Dollar obligations.

     20.16 Limitation on Payment. Any amounts payable by the Issuer hereunder are
contingent upon the availability of funds to make such payment in accordance with the provisions of
the Indenture, to the extent such funds are available, and shall not constitute a “Claim” (as
defined in Section 101(5) of the Bankruptcy Code) against the Issuer in any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings involving the Issuer.

     20.17 Rights of Series Enhancer. All of the rights and privileges (but not duties or
obligations) granted to the Series Enhancer of a Series of Notes hereunder or under any other
Related Document shall vest in the Control Party for such Series of Notes so long as (i) such

37

 

Series of Notes does not have the benefit of an Enhancement Agreement, or (ii) if such Series
of Notes has the benefit of an Enhancement Agreement, a Series Enhancer Default has occurred and is
continuing.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK — 

SIGNATURE PAGE FOLLOWS]

38

 

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year
first above written.

	 	 	 	 	 	 	 
	 	 	EXTERRAN, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ J. Michael Anderson	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:
	 	J. Michael Anderson	 	 
	 

	 	Title:
	 	Senior Vice President and Chief Financial Officer
	 	 
	 
	 	 	 	 	 	 
	 	 	EXTERRAN ABS 2007 LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ J. Michael Anderson	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:
	 	J. Michael Anderson	 	 
	 

	 	Title:
	 	Senior Vice President	 	 
	 
	 	 	 	 	 	 
	 	 	EXTERRAN ABS LEASING 2007 LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ J. Michael Anderson	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:
	 	J. Michael Anderson	 	 
	 

	 	Title:
	 	Senior Vice President	 	 

Acknowledged and Agreed by:

WELLS FARGO BANK, NATIONAL ASSOCIATION,

not in its individual capacity, but solely as Indenture Trustee

	 	 	 	 	 
	By:

	 	/s/ Melissa Philibert
	 	 
	 

	 	 	 	 
	Name:

	 	Melissa Philibert	 	 
	Title:

	 	Vice President	 	 

 

 

EXHIBIT “A”

FORM OF ASSET BASE CERTIFICATE

[SEE ATTACHED]

 

 

EXHIBIT “B”

CREDIT AND COLLECTION POLICIES

SECTION 9.1(E)

Credit & Collections Overview:

Collections:

In an effort to reduce DSO and mitigate bad debt exposure by insuring timely collections, customer
accounts are assigned to Collections Analyst, (“CA”). The CA has an on-line A/R system that
provides real time information regarding a customer’s account. Since the CA’s are assigned a number
of customer accounts, time management and prioritization are critical to managing their portfolio.

The CA’s have the capability of creating aging reports on their assigned customer base to aide in
the collections process. Department policy requires that the CA’s generate a summary aging report
for their customer base in descending order every Monday morning. This aging provides the aging of
accounts starting with the customer that maintains the largest balance due to the smallest balance
due. The CA’s focus on collections of the largest outstanding balances first, whether current or
past due and work down to the smaller balances due.

The A/R system also allows Sales Rep’s and Operations Management to run aging reports on their
customers or by GBU. Sales and Operations staff are encouraged to run these reports monthly and to
provide assistance on any of their past due customers. It’s requested that Sales and Operations
communicate with the appropriate CA, Credit Manager, or the Director of Credit before proceeding
with any collections calls.

The A/R system provides a notes section which allows the Credit personnel to insert collection
comments on the collections status of their accounts. The collections notes are viewable by all
employees in the Credit and Collections Department as well as the Sales and Operations Departments.
This also provides the Credit Manager and Director of Credit with collection updates on all the
accounts.

The Credit Manager meets with the CA’s every other week to review the agings and determine if any
collections assistance is required. Intervention by the Credit Manager occurs on any account that
is deemed to be a collection problem or if the account is 60 days past due. The Credit Manager and
the CA’s meet with the Director of Credit once a month to review agings and any accounts deemed to
require the Directors assistance. The Director will immediately address any accounts he deems
requires his immediate intervention regardless of the aging of the receivable balance.

The Credit Manager and the Director of Credit have the final say on any suspension of open account
purchasing privileges or services. However, that decision will not be rendered without the proper
notification to Sales and Operation Management.

 

 

ACCOUNTS RECEIVABLE AND COLLECTIONS PROCESS NARRATIVE

Director of Credit

     Dave Gutierrez

Credit Manager

     Becky Lee

NOTE: Accounts receivable management and collections are component parts of the revenue
recognition process. The Director of Credit (DOC), Dave Gutierrez, oversees Accounts Receivable
and Collections Activities. These activities fall under the Treasury Department, and the DOC
reports to the Vice-President and Treasurer, Peter Schreck.

AR046 Segregation of duties and access for key functions are setup for Order Entry and Account
Receivables including cash applications, reconciliation of accounts and preparation of invoices.

Accounts Receivable

Transactions

There are several transactions that occur in the AR process such as:

	 	•	 	Processing New Credit Applications
	 
	 	•	 	Updating New Customer Accounts
	 
	 	•	 	Letters of Credit for International Customers
	 
	 	•	 	International Customer AR
	 
	 	•	 	Cash Applications

New credit applications are processed by the Credit Support Analyst and submitted to the
collections Credit Manager (CM). Based on the credit information gathered, if the CM decides to
approve the customer’s application, the CM will fill out the credit approval form and send it to
the DOC for final approval if required. The Collections CM is authorized to approve credit up to
$25,000. Any amount over that must be approved by the DOC.

Once the application is approved, the application is forwarded to the CSA to be set up in Oracle AR
module. Any changes made in Oracle are made only by the CSAs with proper review and support.

	 	 	 
	Transaction Name:

	 	Processing New Credit Applications and Updating
	 

	 	New Customer Accounts
	Individuals responsible:

	 	Becky Lee/ Shantel Caesar
	Title:

	 	Collections CM/ CSA
	 
	 	 
	Responsibilities:
	 	 

B-2

 

	 	•	 	Setting up new customer accounts and Collections/ Setting up and update new customer
accounts

Description:

In order to become a customer of Hanover, the requesting customer fills out the credit application,
signs it and sends it back to Hanover. The CSA at Hanover receives the credit application and or
trade information from the customer. The trade information includes information about the company
such as credit references and bank information. If only the trade information is received by the
customer without credit application, the CSA sends an e-mail to sales associates or to the customer
requesting the credit application. If the application is not signed, it is returned to the customer
for signature. The CSA maintains the status of the customer application from the time it is sent
until it is approved on the Hanover Intranet. This report is called Credit Application Status
Report. It is kept so that all the sales personnel and other Hanover employees can have the most
updated information about the customer credit approval status. It is updated daily.

After the application or trade information is received from the customer, CSA calls the references
listed in the credit sheet. The CSA has to contact at least three references to verify the credit
history of the customer. In addition to the three references , the CSA pulls a Dun and
Bradstreet (D&B) report on the customer. In some cases the CSA may be asked to pull financial
information on the company from the companies website. If enough information is still not available
CSA, CM, or DOC will contact the customer and inform them that Hanover requires more credit
references.

After calling the credit references, the CSA will then submit the information to the Collection CM
for review. Using this information, the CM will make a decision to determine whether the company is
credit worthy and what the credit limit amount should be based on facts collected. The Collection
CM also uses the customer’s financial information to make this determination. In some instances
when financial information is not available online or a D&B report is not available because the
applicant is a small company, the CM will call the customer to acquire financial information.
(AR012) Collection Manager determines the credit limit of the customer based on facts collected
from the credit sheet and or trade information provided by the customer. The Credit Manager and
International Senior Credit Analyst are authorized to approve up to $25,000. Credit over $25,000
must be approved by the Director of Credit. Transactions reflecting an open terms amount of $2MM
or greater require the approval of the Vice President/Treasurer.

(AR044) For most international customers, letters of credit or acceptable progress payment terms
are required. Most international customers have a $1 credit limit, which automatically puts
every order on hold. Some international customers are extended a credit facility based on the
credit worthiness of the customer and the destination of the goods sold. The Sr Credit Analyst
reviews each order to ensure that exposure is minimized and releases the hold accordingly. AR010
Based on the information collected, if the CM decides to

B-3

 

approve the customer application, the CM will fill out the credit approval form and send it to the
DOC for final approval if required. The Collections CM is authorized to approve credit up to
$25,000. Any amount over that, up to $2MM exposure must be approved by the DOC. In the absence of
the DOC the CM will approve accounts for credit with open terms in excess of the $25,000 up to
$500,000 provided the review of financial statements warrant that decision. If the financial
statements don’t warrant the approval of the credit and time is of the essence the CM will email or
fax the pertinent information to the DOC for his review and approval. The DOC will formally approve
the credit file upon his return. Once the customer account is approved by both the CM and the
DOC, the application is forwarded to the CSA to be set up in Oracle AR module, except in the
absence of the DOC who will approve the credit file upon his return.

When the Collection CM sets up the credit limit for customer, the limit is established based on the
results of the customers credit evaluation and on the estimated monthly high balance anticipated
for the transaction, (annual rental volume for rental unit sales) or the risk-assessed amount
granted, whichever is lower. When the credit limit of customer is approved, it is entered into
Oracle. (AR015) If the transaction exceeds the customer limit, the hold is placed by the system
which can only be removed by the Collections Manager, Int’l Sr. Credit Analyst, and/or Director of
Credit. If the customer is new and the credit information has not been entered, an automatic hold
is placed on the customer which can be removed by any personnel in the collection dept but is
usually done by the credit support analyst. (AR016) Access to release the hold on credit status
is restricted to the Director of Credit, Collections Manager, and or the Sr. Int’l Credit Analyst
Responsibility within the credit department. CSA and other credit collectors don’t have an access
to do so.

If based on the information gathered, the CM decides not to approve the customer’s credit
application; the customer can still do business with Hanover using alternative methods of payment
such as cash in advance, progress payments, or credit cards. If the CM decides not to approve the
customer, the salesperson will be informed about the decision via a phone call or e-mail. The
salesperson can then coordinate with the customer to see if they are willing to pay using a
proposed alternative payment method. . Customers also have the option to talk to the CM regarding
their credit application directly. The DOC has the final authority to approve the customer.
Customer accounts cannot be opened without the DOC’s approval if the credit limit needed is over
$25,000, except as stated above in the absence of the DOM.

Once the customer is approved, the CSA e-mails information to the sales representative indicating
that the customer has been approved and asks for other information about the customer such as the
Ship to Address. However if sales representatives are not involved, then the customer is contacted
directly by the CSA for more information. The CSA then sets up the customer account in the system
(Oracle). Effective 10/11/05, for proofing purposes the CSA will printout a copy of the account
setup and place in the credit file for review and approval by the DOC, or CM, or the Sr.

B-4

 

Credit Analyst. The approving person will initial the printout confirming that the account has been
established as approved.

Before entering a new customer into the system the CSA will look into the e-business area of the
Oracle system to see if the customer information is already there. In most cases when the sales
representatives identify potential customers, they enter the customer information into the
e-business area of the system. However; the sales representatives only have the ability to enter
potential customers. No orders can be shipped to customer until the CSA assigns a customer number
to the new customer, which will change the status of customer from potential to existing.

If the CSA finds the customer information already exists in the system, the CSA will assign a
customer number, verify that the customer information is correct, enter the GBU or revenue
operating code, and enter credit limit information in the system. If the CSA does not find the
customer information in the e-business area of the system they will go to the standard screen and
ensure that the customer is not an existing customer. (If a customer does not have any activity
for a period of time Hanover may require a new credit check be processed before doing business with
the customer). If the customer is still not found in the system the CSA will add the details about
the customer. In some cases, a sales person or the customer may be in a hurry to place an order,
however, the credit has not yet been approved. The CSA may enter the customer information in the
system but not enter the credit limit information. The system would automatically put a hold on
customer account. However, this allows sales personnel to input an order into the system which
expedites the process for the customer. The order will not be shipped to the customer until the
hold is removed by the CSA when they input the credit limit information into the system. All
collectors have access to update or enter customer information, however, the CSA performs this
function for the department. After entering or updating information on customer data, the CSA will
always send an e-mail to the sales representative and update the Credit Application Status Report
on the Intranet.

There is a formal procedure in place before any changes could be made to customer account. If the
customer wants to change their shipping or receiving information, they inform Hanover in writing.
The customer’s correspondence is then sent to the sales personnel. A salesperson is then assigned
to verify by communication and through physical observation the updated customer information. After
verification, a form with new customer information is sent to the CSA who keys the updated customer
information into the system and keeps the original form in the customer file.

Transaction Name: Review of non-active accounts:

Effective 10/11/05, since no audit report exists that provides the last activity of any customer,
the DOC, CM, and Sr. Credit Analyst will review the billing master quarterly and try to best
identify those accounts that have had no activity for twelve months. Those customers that are
identified as dormant will be placed on

B-5

 

credit hold with an update required notice placed in the customer credit notes and file.

	 	 	 
	Transaction Name:

	 	Letters of Credit for International Customers and AR
	Individuals responsible:

	 	Jason Nasra
	Title:

	 	Sr CA

Responsibilities: Handling and managing International AR by setting up Letters of credit

Description:

Letters of Credit

Responsibilities:

     •    Processing requests for the issuance of Letters of Credits supporting Bid Bonds, Guarantees
and Vendor Requirements.

Description:

In order to participate in the International Market companies must be prepared to issue Bid Bonds
and Guarantees. The Bid Bonds are required to submit a bid and the Guarantees are contractually
required if you’re the successful bidder. The Guarantees are issued to support progress payments
remitted during the course of the construction phase. Guarantees are also issued to support the
performance of the equipment once the equipment has been paid in full and has been shipped. The
Credit Department reviews all requests for Bid Bonds and Guarantees. Initially, this process occurs
up front when the contract is being reviewed as part of the bid process. The Credit Department
reviews the terms and conditions for payment and guarantees. They provide any required revisions to
the payment or guarantee terms on the contract before the bid is submitted. If we are the
successful bidders the process of completing the contracts commences, as the approval and execution
of the contract is pivotal to supporting the issuance of any required guarantees.

Issuance of Bid Bonds: The Sr. CA in the Credit Department receives a completed Standby Letter of
Credit Request Form (attached), which identifies the requirements of the bid bond. He reviews the
form and insures the authorizing individual has the authority level, as per the approval authority
matrix to approve the dollar value of the request. If the request is in order he will proceed with
the preparation of the request and submit it to the DOC for approval. The DOC will review and
approve the request. Once approved the request will be forwarded to The DOC of Financial Services
for final approval and issuance. After the Letter of Credit is issued the Treasury Analyst will log
on the outstanding Letter of Credits log.

Issuance of Guarantees: The Sr. CA in the Credit Department receives a completed Standby Letter of
Credit Request Form, which identifies the requirements of the guarantee. The Sr. CA will verify
that the contract related to that specific guarantee has been fully executed and insure that the
individual executing the contract has the level of

B-6

 

authority to approve the contract based on the approval authority matrix. If the contract has been
properly authorized in accordance to the approval matrix the Standby Letter of Credit Request Form
will be processed. The designated Project CM, Country Manger or the DOC must approve the Standby
Letter of Credit Request Form. The Sr. CA reviews the required language and structures the language
in accordance to the terms and conditions previously agreed at the time the bid was submitted or if
the guarantee language was not negotiated when the bid was submitted, he will structure the
guarantee utilizing Hanover’s standard guarantee language. The Sr. CA will present the Letter of
Credit request to the DOC for review and approval. After the approval has been obtained the Letter
of Credit request will be forwarded to the DOC of Financial Services for final approval and
issuance. Once the Letter of Credit is issued the Treasury Analyst will log on the outstanding
Letter of Credits log.

Vendor Letter of Credits: (See Treasury Narrative)

Reconciliation of issued Letter of Credits:

(AR111) The International Sr. Credit Analyst will be responsible for preparing a monthly
reconciliation of the outstanding standby, (“SB”) and commercial, (CM”) letters of credit issued.
The SCA will download the open SB and CM letters of credit information from the JPMorgan Ties
system and compare that information to his Treasury LC master list, (“master”) for accuracy. He
will review and compare the Ties report to insure that all additions, revisions, and cancellations
reflected on the master reconcile to the Ties information. He will investigate, advise or rectify
any variances. Upon completion of the reconciliation he will forward the reconciled master via
email to the Treasury Manager who will compare it to Hanover’s open LC balances reflected on the JP
Morgan Chase Trade Information Exchange system. If any variances exist the Treasury Manager will
resolve. If no variances exist the Treasury Manger will provide his consent via reply email to the
International Sr. Credit Analyst. Effective May 17, 2006 the Trade Information Exchange System has
been replaced by the Trade Channel System.

A/R International Aging

Not all International A/R is processed or maintained through the Oracle System. Some
International A/R aging reports are prepared manually and kept on an excel file by the
International Accounting Group. International A/R is entered into Oracle or Macola by International
Financial Reporting Group. Every month, as of May 2004, the Senior CA (SCA) reviews all the
international AR Agings for delinquencies and potential exposure. SCA also investigates variances
between the sub-ledger and the general ledger and ensures they are cleared. Prior to May 2004,
these processes were performed every quarter. The reconciliation for each international
destination is performed by the designated international accountant (In-Country or CCD).

Cash Applications

B-7

 

	 	 	 
	Transaction Name:

	 	Application of Cash to Customer AR
	Individuals responsible:

	 	Christina Loera/Suzanne Rashall
	Title:

	 	Cash Applications Specialist (CAS)

Responsibilities:

	 	•	 	Apply incoming cash (Checks, wires, etc.)
	 
	 	•	 	Research unidentified payments
	 
	 	•	 	Reconcile bank’s deposit support of cash received to deposit amount
	 
	 	•	 	Tie closed batch to totals of all payments

Description:

(AR030) The Cash Application Analyst receives daily cash sheets from Treasury which list all the
customer and non-customer receipts received by Hanover. The Cash Application Analyst enters this
information in the appropriate accounts into Oracle. The appropriate G/L entry is recorded when the
Cash Applications Analyst posts the batch and A/R completes the upload.

Effective December 19, 2006 any checks received at the Hanover offices are now forwarded to the
Credit Support Analyst and deposited daily through the Wells Fargo Desk Top deposit process. The
CSA will provide the CAS with a copy of all the checks deposited. Any checks not deposited will be
returned to the DOC, or CM, or Sr. Credit Analyst for placing in the credit department safe which
is located in the DOC’s office. The DOC’s office is locked everynight.

Deposit advices for lockbox receipts are received daily from the bank on-line access system and
occasionally via Federal Express. The Treasury Cash Analyst (TCA) incoming wires and credit card
receipts for customer payments The wire advices notate customer names and other payment
application details. Credit cards application details are forwarded by the company branches that
transact the charges. For any unidentified wires, Collectors help CAS identify the correct
application of the funds. (AR027) The Cash Application Analyst receives daily a cash sheet from
Treasury which lists all the lockbox deposits, wires, and check information. The Cash Applications
Analyst applies cash from Wells Fargo lockboxes. The Wells Fargo lockboxes’ deposits are uploaded
from a file. The upload automatically applies cash to Hanover’s AR. There are deposits which
can’t be posted so the Cash Application Analyst will manually post these to the appropriate AR
account. (1) The CAA’s review of the Lockbox Execution Report and (2) the review of the cash sheet
to ensure completion of cash receipts by comparing the components of the cash sheet to the
applicable support. This occurs after the CAA completes posting cash for a specific day. The
Cash Application Analyst enters this information in the appropriate accounts into the system
(Oracle). There are some deposits which can’t be posted through the Oracle system so the CAA will
manually post these transactions to the appropriate G/L account. Daily as required, as of July 25,
the Cash Application Analyst records the appropriate entry in the G/L. When the Bank Recons are
performed (Accountant in Corporate Consolidations and Accounting group), any previously
unidentified receipts

B-8

 

deposited are research, identified, and given to the CAS to post. This ensures that any items
which might have been missed by the TCA, not communicated by the TCA to the CAS, or missed by the
CAS are posted each month-end.

CAS also enters adjustments requested by the Collectors and approved by the DOC or the Collections
CM. CAS prepares JE’s (mainly for non-trade AR cash receipts) to record other cash received.
These receipts are initially posted to AR Clearing and subsequently coded and posted to the correct
G/L accounts by clearing them from the AR Clearing account. AR050 Access to AR applications to
enter manual transactions is restricted to the CAS.

CAS prepares and enters all JE’s for the Credit Department.. . (OR002619) DOC reviews all the
Journal Entries performed by the Cash Application Analyst and initials the printout of the entries.
DOC reviews all the manually entered transactions with supporting documentation.

     All cash reconciliations are performed by the Shared Services Accountant or the Corporate and
Consolidations Accounting group for proper segregation of duties.

     The CSA generates cash refund requests (on a change request form) and they are approved by
the Collection CM and the Collections DOC if the amount involved is more then $5,000 before it is
processed. AR025 Oracle Collections is configured to assign approval limits to the Director of
Credit and the Credit Manager Responsibility to write off balances.These refund requests are posted
by the CAS, also to AR clearing, and to the customer accounts. When the payments are entered into
Payables by that department, they are also posted to AR clearing.

Collection Process Flow

Transactions

There are several transactions that occur in the Collection process such as:

	 	•	 	Collect/Investigate Past Due Invoices
	 
	 	•	 	Settle Unapplied Cash from Customers
	 
	 	•	 	Refund Customers Due to Realignment Issues or Downtime
	 
	 	•	 	Credit Authorizations

     AR036 Aging reports from Oracle are reviewed every week by collection personnel who work on
their assigned customers and investigate in descending order of customer balance. The Collection
Manager runs an aging which identifies over 90 big customer balances and Collections personnel pay
close attention to these customers.

B-9

 

The Collections Analyst request a descending aging report every Monday that is reviewed and
updated with prior weeks aging notes. The prior weeks descending aging report is discarded. The
aging report obtain is reviewed for current large dollar amounts due and any balances over 60 days
past due. Each item on the report is further investigated and attempts are made to resolve
delinquent payments with customers.

     Furthermore, several times a month, the Collection Dept will issue refunds upon customer
requests. This overpayment may be due to open credit memos, overpayments, and payments received
in error. The analysts try to use the funds as a credit on future expenditures by the customer.
However, in some cases it is necessary to send a check to the customer. All supporting
documentation, account status and billing history reports, will be gathered and forwarded on to the
Collections CM for approval.

	 	 	 
	Transaction Name:

	 	Aging
	Individuals responsible:

	 	Various
	Title:

	 	CA/Collector

Responsibilities:

	 	•	 	Controlling the Financial Exposure

Description:

There are four main CAs who handle the Hanover Compression Limited Partnership customer accounts.
Every Monday the analysts run their own assigned customer HCCA Aging – 7 Bucket Descending Amount
report. The report is divided by analyst number and lists all the clients that each analyst is
assigned. In general the clients are divided alphabetically with a few exceptions. The analysts
review the report for large dollar amounts and balances over 60 days past due. The analysts will
then log into the Oracle system and review the notes for the particular client. (Validation). The
analysts will then call the customers to investigate the late payment. In some instances the
customer will call into the credit department because the late payment is due to an incorrect
invoice or no invoice being received. Several other issues for delinquent payment include
downtime, change of address, rates incorrect, wrong location billed and reassignment issues. A
reassignment is when one company purchases another company or lease and a leased compressor is on
the property included in the transaction. The acquiring company must assume the lease payments
however, unless the information was received after the billings were generated invoices may have
been sent to the old company after the sale. Once the information is provided, all details are
forwarded via email to all sales rep’s and sales assistant to review and verify so they can inform
operations and billings of the changes.(Completion). From that point on, all departments will
communicate to correct the billings.

The analyst will try to determine what the issue is and then proceed to either collect or have the
account placed on “hold status” until all billings are corrected. If there is a problem
account-payment arrangements can be made. There is no standard

B-10

 

arrangement policy. The analyst informs management of customer issues. Management will make the
decision to determine if payment arrangements can be made, if the customer does not forward payment
as promised then management will make the decision on how to proceed to collect the account. The
analyst will make attempts to motivate the customer to pay however they are not authorized to make
“deals”. The analysts keep the collections CM and the DOC informed of the situations and if they
feel it is necessary to make a deal they will work it out with the customer. This is when the
account is escalated to upper management to handle. Once the account is brought current the
account will then be assigned back to the assigned collector.

If there is a billing problem, the billing department will be informed. The analysts will give the
customers a little leniency regarding the payments however; they will set deadlines and repossess
compressors if management has provided instructions to do so. (Authorization of leniency and
Deadline Follow up). Sales representatives, sales assistant and various operation locations are
copied via email of the collection CM’s final decision. After all discussions with customers the
analysts will enter comments into the notes log to let everyone know what is going on with the
customers.

On Electronic Data Interchange (EDI) customers (Anadarko, BP, Chevron Texaco and Marathon) CA
will run a separate aging for the various EDI accounts for delinquent invoices. CA will review the
account status report looking for outstanding items and credit invoices issued for balance due
invoices. (Validation). Also the billing history screen in Oracle will be examined to determine the
credit memo number issued. For most large customers the analyst has different directions to
request or inquire about any of the EDI accounts. For all EDI customers, the analyst will contact
the customer’s accounts payable department to resolve the problem. Most of the communication is
done via e-mail, relaying invoice numbers, check numbers, payment dates and disputed issues.

In some cases an analyst will request, via e-mail to the collections CM, that an account be put on
“hold status” pending the issue(s). This is done on an internal basis to allow time for
corrections to be made. This allows the billing department, sales representative and sales
assistant time to enter the correct information into Oracle and informs the analysts not to contact
the customer until all issues are resolved in a timely manner.

	 	 	 
	Transaction Name:

	 	Unapplied Cash
	Individuals responsible:

	 	CAS
	Title:

	 	CA/Collector

Responsibilities:

	 	•	 	Generates the Unapplied Cash Report

(AR109) The Cash Applications Analyst investigates the Unapplied cash receipts daily. If an
adjustment is required, the Cash Applications Analyst will properly

B-11

 

reapply the unapplied cash or if necessary prepare an adjustment form, attach the backup, and
forward it to the DOC or Collections CM for approval.

     Unapplied funds are primarily due to reassignment issues, inability to produce an
invoice, manual invoices, and international cash in advance jobs. The analyst collects on the large
dollar amounts first by researching in Oracle and talking to the client. The CAS and Collectors
attempt to find where the cash should be applied by reviewing for data entry error by the bank or
by looking for any outstanding items or credit items that may be causing the problem. Once the CAS
or Collector has determined what the problem is the CAS will appropriately reapply the cash. In
most cases the reapplication of the cash will clear the unapplied cash but if an adjustment is
required. The CAS will prepare the adjustment to include collector name as well as the customer
account number, invoice number, dollar amount and the reason for the adjustment. The proper backup
must accompany the adjustment. The adjustment form is then forwarded to the DOC or Collections CM
for approval. AR026 Oracle requires the approvals of adjustments by the Collections CM, Sr.
International Credit Analyst or the DOC. The Credit Manager and Sr. International Credit Analyst
are authorized to approve adjustments up to $5,000. Adjustments over $5,000 must be approved by
the Director of credit. (Authorization and Completeness)

	 	 	 
	Transaction Name:

	 	Customer Refunds
	Individuals responsible:

	 	Various
	Title:

	 	CA/Collector

Responsibilities:

	 	•	 	Creating Check Requests

Sometimes customers will request a refund check. This overpayment/credit memo may be due to
reassignment issues, duplicate payments or downtime. The analysts will request the customer to
take the credit or overpayment on their next check run if possible. Depending on the customer’s
decision, should they want the refund check forwarded to them the customer will have to fax/email
their request in writing along with their W-9 taxpayer certificate. The CAS will proceed with the
refund request by researching the account to verify if there are no outstanding unpaid invoices. If
all is in good standing the “Refund Request” is completed and forward to management for approval.
Checks will be sent only after verifying that the customer has the credits on their account.
(Verification). (e.g. A reassignment may have caused a company to pay an invoice that was no
longer their responsibility and they no longer have any Hanover compressors, thus they would
request a refund) The analysts will complete a standardized check request form designed by the
Hanover collection department with all the detail info requested per the form. (Completeness).
All supporting documentation, account status and billing history reports, will be attached. The
request will be forwarded on to the DOC for approval. . If approved the DOC will sign the form
and send it on to the AP department for processing. (Authorization). The CAS will make the
adjusting enrty to clear the credit balance from A/R. A/P will then

B-12

 

mail the check to the customer. The Collector will make a copy of the transaction for their file.

Accounts Receivable/Collections/Credit Authorizations

Provided by Dave Gutierrez

Title: DOC

Responsibilities: Managing Credit and Collections Departments

Credit Authorizations

When attempting to approve new customers that have sales in excess of $50,000 the DOC and the
Collections CM will attempt to look at financial statements for the company. (Credit
Checks/Authorizations) They attempt to determine the liquid net worth of the company and then look
at 15-20% of that value for credit limit approval limits. They can also look at company trends,
NACM reports, Dun and Bradstreet reports, and trade references. For most rentals they look for
credit for 90 days. For example, a $1,500 a month rental times 3 months equals $4,500. A credit
limit of $5,000 would be what the DOC and Collections CM would attempt to obtain. When talking to
trade references they will ask about twice the attempted credit limit or in the previous example
$10,000.

For smaller firms they try to be a little more flexible. These companies rent smaller horsepower
items that the bigger firms will not rent. They will be more creative with payment options such as
requiring first and last month rent to be paid in advance. If the client is within trucking range
it is relatively easy for Hanover to get the compressor back if the client does not pay their bill.
Hanover also looks at the qualitative factors like the reputation and payment history of the
customer as well as the prior relationship of the customer with Hanover in making credit limit
decisions.

The Collections CM approves credit limits up to $25,000 and the DOC provides secondary approval for
all limits over that amount.

Accounts Receivable Month End

Hanover performs a hard close on the 30th of each month. When the check and other
deposits come in, they are recorded on a cash sheet by Treasury. That sheet is sent to the Cash
Application Analyst the next day. Cash Application Analyst makes sure that the information is
correct and enters the information in the Oracle. Cash Application Analyst only enters information
in Oracle once the Analyst is certain that the information is accurate. Since it may occasionally
take two days from the time when the deposit and checks are received until they are recorded in
Oracle, all deposits and checks that are received on the last two days of month are accrued for in
unapplied cash account in GL. Any unbilled or unapplied revenue at the month end is also accrued
for in separate G/L account. Finally, any unbilled or unapplied revenue or unapplied cash related
to International A/R is accrued for in separate G/L account. (Accruals-Timing-Cutoff/Completeness)
Also, the Cash Applications Analyst performs journal entries to clear out the AR clearing account
at the end of the

B-13

 

month and now daily as of July 25, 2005. The DOC signs off on these journal entries and they are
filed at a central location. (Approval of manual JE’s) These accounts all roll into the total
receivable balance monthly and quarterly.

Quarterly the DOC puts together a schedule of bad debts for all items to be written off. An
adjustment is then performed for the bad debts write offs. A copy is provided to various
individuals for review.

Collections

The DOC oversees the unapplied cash report by requiring all collectors to work a part of it each
week and the CAS daily as of July 25, 2005. This is an attempt to clear as much as possible by
month end.

     AR041 A Quarterly review and analysis of outstanding receivables is performed by the
Director of Credit to ensure that collection issues are resolved in a timely manner and
uncollectible accounts are reserved and written off as appropriate. The Director of Credit
prepares a Bad Debt Reserve Analysis which is reviewed with Treasury Management on a quarterly
basis. The Collections CM runs an over 90 day report over $50,000 that is reviewed by the DOC.
The DOC reviews these reports with the collectors and reviews collectors’ notes on-line to
determine which clients may have issues and the DOC helps resolve significant issues with past due
accounts as required The Collections CM additionally helps in this regard. (Expedite collections)
The DOC is the only one allowed to approve special terms and/or payment arrangements with a
customer regarding invoice payment. E-mail correspondence or other documentation (hard copy and/or
on-line) is kept documenting discussions with the client. Also, collection accounts placed with an
attorney are documented.

If there is a credit is to be generated for a customer and it is the responsibility of operations
then the operations department must complete a credit request form.

Accounts Receivable has a reserve account for any credit or bad debts. This reserve is created by
taking 10% of the over 90 day items and 2.5 % of the remaining outstanding items. This reserve
also includes amounts for specifically identified accounts which are accounts that have been
determined to be at risk of default. The DOC looks at these problem accounts every quarter in order
to update them. The DOC sends this updated version to the Treasurer for discussion and approval.
The reserve analysis preparation and review procedure is documented quarterly.

     AR049 Oracle AR provides that adjustments to accounts receivable are accurately calculated
and recorded. (This is a field control, and related testing is documented in locations’ matrices.)

B-14

 

(OR003089) Credit memos are approved based on company policy. (This is a field control, and
related testing is documented in locations’ matrices.)

Setting Credit Limits

Definitions

	 	1.	 	Credit Application: Approved form to be used in all new credit application requests.
Blank forms are located on US Division shared drive H.
	 
	 	2.	 	Credit Investigator: Person in the Credit Department assigned to prepare the customer
file for analysis by gathering commercial credit information that includes but is not
limited to, credit application, public information sources, and financial statements.
	 
	 	3.	 	Credit Approver: Person in the Credit Department responsible for determining the
recommended credit limit.
	 
	 	4.	 	Trade references: Suppliers who have sold the customer on open credit terms in the past
and are willing to give objective ledger information about balances and payment habits.
	 
	 	5.	 	Bank references: Banks or financial institutions who have loaned capital to customers
and are willing to give objective loan and payment information.

Responsibilities

	 	1.	 	Accounts Receivable Manager – Responsible for protecting the Accounts Receivable asset
from risk of credit loss through the execution of the Credit Policy in the areas of credit
approval and collections as well as management of day-to-day operations of the Credit
Department.
	 
	 	2.	 	Business Unit Manager – Co-owner of the responsibility for protection of the Accounts
Receivable asset through collection of outstanding Accounts Receivable balances in their
Business Unit. Responsible for obtaining credit information from their customers and to
aid in the investigation process where needed. Co-owner of the responsibility of
establishing payment terms.
	 
	 	3.	 	VP of Financial Services – Responsible for protecting the Accounts Receivable asset
from risk of credit loss through the execution of the Credit Policy in the areas of credit
approval and collections. Co-owner of the responsibility of establishing payment terms.

Approval Authority

	 	1.	 	Accounts Receivable Manager – Approval level of up to $500,000 for credit sales.
Approval level is delegated from the Vice President of Financial Services.
	 
	 	2.	 	Vice President of Financial Services – Approval level of up to $3,000,000. Approval
level is delegated from Chief Financial Officer.
	 
	 	3.	 	Chief Financial Officer – Approval level of up to $5,000,000 or as governed by the
Board of Directors delegation of authority guidelines.
	 
	 	4.	 	Operating Division President – Approval level of up to $5,000,000 or as governed by the
Board of Directors delegation of authority guidelines.

B-15

 

Determination of a Credit Limit

	 	1.	 	Based on the customer’s financial capacity and willingness to honor its’ financial
obligations over time.
	 
	 	2.	 	Accurate credit limit requires analysis of the customer financial and qualitative
information.

Credit Approval Process (see appendix A – Checklist for Obtaining Credit)

	 	1.	 	Customer fills out Credit Application form and signs.
	 
	 	2.	 	Customer attaches financial statements as available (income statement, balance sheet,
statement of cash flows).
	 
	 	3.	 	Credit Investigator obtains information from the trade and bank references supplied on
the Credit Application and records it to the customer file.
	 
	 	4.	 	Credit Investigator reviews, analyzes, and records financial statements to the customer
file.
	 
	 	5.	 	Credit Approver reviews all information in the customer file and determines a
recommended credit limit based on credit policy criteria.
	 
	 	6.	 	All information obtained or contained in the customer file is to be treated with
complete confidentiality. All information shared by the Credit Department with other
Universal Compression departments for the purpose of granting credit is to be treated with
complete confidentiality.
	 
	 	7.	 	Credit Limit information is internal and is designed to manage credit risk and is
subject to change. Credit Limits are not to be discussed or disclosed to anyone outside of
the company.

When Proposed Credit Limit is Greater than Recommended Credit Limit

	 	1.	 	Security arrangements must be made to approve the credit sale. Security arrangements
can include but are not limited to: corporate guarantee from related entity, Irrevocable
Letter of Credit issued by a bank that is acceptable to Universal Compression, deposit on
the account and prepayment of all or part of the proposed sale.
	 
	 	2.	 	Authority to approve credit sales above recommended credit limits will reside with
management at level of Division President and above.

Payment Terms

Establishment of payment terms will be a shared responsibility of the Business Unit Management and
Financial Services Department. Standard payment terms will apply to all customers who have an
assigned credit limit.

	 	1.	 	Standard payment terms will be Net 30 days from date of invoice for aftermarket
services and parts invoices.
	 
	 	2.	 	Standard payment terms will be 1st of the month following issuance for
contract compression invoices.
	 
	 	3.	 	The standard for fabrication invoices will be Net 30 days from date of invoice.
Invoices will be based on milestones in the project and executed through progress billing
invoices.

B-16

 

	 	 	 	No shipments of the completed project are to go out until all progress billings that are due
have been paid.

When Standard Payment Terms are Not Appropriate

	 	1.	 	Field sales professional will advise the Business Unit management and Accounts
Receivable Manager of reason standard terms do not apply.
	 
	 	2.	 	Field sales professional will submit a payment terms authorization form with the
justification for the deviation from standard included to the Business Unit Manager. The
Business Unit Manager will approve and route to the Accounts Receivable Manager.
	 
	 	3.	 	Accounts Receivable Manager will review, make assessments and recommendations as
necessary.
	 
	 	4.	 	Accounts Receivable Manager will route to VP of Financial Services for final approval.

Changes to the Credit Policy and Procedures

	 	1.	 	Changes to the Credit Policy and Procedures will be initiated by the Credit Manager.
	 
	 	2.	 	All changes will be in writing and approved by the Vice President of Financial
Services.

CREDIT INVESTIGATION PROCEDURES

Addendum to “Setting Credit Limits” Policy

Delegation Of Authority Guidelines:

	 	 	 	 	 
	Credit Approval Amounts:
	 	 	 	 
	Credit Analyst
	 	$	10,000	 
	Credit Manager –Canada
	 	$	10,000	 
	AR Supervisor
	 	$	100,000	 
	AR Manager
	 	$	500,000  	**
	VP Financial Services
	 	$	3,000,000 **a	 

** — Initial Approval or Increase of Existing Limit

a-Additional approval levels delegated based on written approval from corporate officers on a case
by case basis

For all initial credit limit approvals or modifications to inactive accounts after September
1, 2004 the following minimum standards must be documented in the credit file:

Credit Limits Below $10,000

To include but is not limited to:

1. Completed & approved Customer Master Approval (CMA) form (Appendix A)

2. Signed and completed credit application or substitute form from customer (Appendix B)

3. Completed credit references from 3 independent trade reference sources.

4. Bank reference as available.

5. Copy of executed proof of security documents, when applicable, (Corporate Guarantee,
Letter of Credit, ect) with original to appropriate entity (eg Guarantee to Legal
Department).

Credit Limits Above $10,000:

To include but is not limited to:

1. Completed & approved CMA form.

B-17

 

2. Signed and completed credit application or substitute form from customer (Appendix B)

3. Dun & Bradstreet or similar trade bureau report, or documentation that such report was
requested but not available.

4. Adequate public credit and financial information such as audited financial statements,
bank references, or completed credit references from 3 independent trade reference sources.

5. Copy of executed proof of security documents, when applicable, (Corporate Guarantee,
Letter of Credit, ect) with original to appropriate entity (eg Guarantee to Legal
Department).

NOTE: Written approval by the AR Manager or Company Officer with sufficient approval authority may
be substituted for items 3 through 5 above.

Responsibilities:

Credit Manager — Canada: Responsible for making entries into JDE to set up approved new accounts
and to make approved changes to the Address Book and Customer Master. Responsible for the
timeliness of the credit approval process and compliance to standard procedures. Responsible for
the investigation and approval of new and existing accounts and sales order holds within delegation
of authority limits. Responsible for the maintenance of the credit files and the related archive
process.

Credit Analyst: Responsible for making entries into JDE to set up approved new accounts and to
make approved changes to the Address Book and Customer Master. Responsible for the timeliness of
the credit approval process and compliance to standard procedures. Responsible for the
investigation and approval of new and existing accounts and sales order holds within delegation of
authority limits. Responsible for the maintenance of the credit files and the related archive
process.

AR Credit and Collections Supervisor: Supervises approval work assigned Collections Clerks.
Responsible for the investigation and approval of new and existing accounts and sales order holds
within delegation of authority limits.

AR Manager: Supervises approval work of the Credit Department and is responsible for the
investigation and approval of new and existing accounts and sales order holds within delegation of
authority limits.

VP of Financial Services: General supervision of the approval work done in the Credit Department
and for specific approval of those new and existing accounts within delegation of authority limits.

Credit Investigation Process:

1) New account requests will be routed to the Credit Analyst or Credit Manager – Canada for
Canadian accounts.

2) Account will be investigated adhering to minimum standards for the credit file.

3) New limits will be established with proper approval signed on the Customer Master
Approval (CMA) form. CANADA: Credit Manager Canada will email this and credit file
information to AR Manager or AR Credit and Collections Supervisor.

4) Approved completed credit files with signed CMA will be routed to Credit Analyst for
posting to the Address Book in JDE. CANADA: Credit Manager Canada will be notified of
approved completed credit files and approval will be granted in the Customer Master Workflow
process in JDE.

5) Credit Analyst and Credit Manager – Canada will also maintain the Customer Master File in
their respective areas in JDE and consequently initiate the workflow process for those
requests over their limit to the appropriate approver.

6) Credit Analyst and Credit Manager – Canada will file the completed credit files.

Credit Holds:

	 	1)	 	Holds will be monitored through the Release Holds screen in JDE by the Credit
Analyst, Credit Manager – Canada, AR Credit and Collections Supervisor, and AR Manager,
based on the delegation of authority guidelines regarding the total exposure amounts
related to the hold.

B-18

 

	 	2)	 	Situations calling for a credit limit change will be treated as any other
existing account request for changing the credit limit and will follow the credit
investigation process.

Lease Takeover Accounts

	 	1)	 	Fleet Applications Coordinators will send Credit Analyst information regarding
company taking over lease if an account is not already established.
	 
	 	2)	 	Credit Analyst will set new account up and notify coordinator, sales, and
appropriate credit approver if over their delegation of authority limits.
	 
	 	3)	 	Credit Analyst will work with the salesman to obtain proper credit information
adhering to minimum standards for the credit file and credit approval will follow the
credit investigation process.
	 
	 	4)	 	Any contingencies involving extension of credit to these customers will be
worked out between Credit and Sales Management.

B-19

 

EXHIBIT “C”

FORM OF MANAGER REPORT

[SEE ATTACHED]

 

 

EXHIBIT “D”

OVERHAUL POLICY

Overhaul Capitalization Guidelines (Service Types C71 through C78)

	 	•	 	Separate overhaul cap-adds are required for each component (i.e. engine overhaul,
compressor overhaul, cooler overhaul).
	 
	 	•	 	On integral units (i.e. Ajax) the power-end is defined as the frame out to the power
cylinders and heads. The compressor-end is defined as the C.E. crosshead pin and guide
out.
	 
	 	•	 	Capitalized overhauls are limited to one current asset per overhaul type. The net book
value of any existing overhaul asset will be expensed to the responsible region.
	 
	 	•	 	Minimum total cost to qualify for capitalization is based on HP:

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Overhaul	 	Top End
	 	 	Horsepower of Unit	 	Minimum Cost	 	Minimum Cost
	 
	 	 	0-70	 	 	$	5,000	 	 	 	N/A	 
	 
	 	 	71-699	 	 	$	7,500	 	 	$	3,000	*
	 
	 	 	700+	 	 	$	10,000	 	 	$	7,000	 

	 	•	 	Freight charges for swing components and overhaul parts to the work site, and lift
equipment associated with the overhaul or swing should be included for capitalization.
	 
	 	•	 	Freight charges within a single region from the yard to the shop for overhaul should be
included for capitalization.
	 
	 	•	 	Freight charges to transport a unit from a customer site to a shop for overhaul, from a
shop to a customer lease site, or between two separate regional shops should not
be included for capitalization.
	 
	 	•	 	Removal of structures over the compressor package to facilitate in overhaul of the
component should be included for capitalization.
	 
	 	•	 	On compressor overhauls, only parts on the compressor within the cylinder suction and
discharge flanges, and to the mounting feet and coupling should be included for
capitalization. If re-grouting the frame is required as part of the overhaul, these costs
may be included for capitalization.
	 
	 	•	 	On engine overhauls, only parts on the engine, to the mounting feet and coupling should
be included for capitalization. This includes, auxiliary components

 

 

	 	 	 	mounted on the engine such as starters, governors, alternators, fuel regulators, oil
coolers, after-coolers, and ignition devices. On smaller units with a separate engine
radiator, repair of the radiator may be included with the overhaul for capitalization.
	 
	 	•	 	Replacement of catalyst elements should not be included for capitalization.
	 
	 	•	 	On engine swings, a supplemental work order is to be opened to capture charges for
engine adders. Missing parts not sent in with the engine core will not be capitalized.
	 
	 	•	 	Complete top-end overhauls may be capitalized when the entire set of heads are
replaced. Additional parts may include fuel regulators, magnetos, water pumps,
thermostats, carburetors, and turbochargers.
	 
	 	•	 	Top-end overhauls on G3400 series Turbocharged Caterpillar engines should not
be included for capitalization
	 
	 	•	 	On cooler overhauls replacement bundles or tubes, structural repairs to the cooler, and
fan/drive components should be included for capitalization. Where repairs to individual
sections meet capital minimum cost amounts, a separate cap-add is allowed for each section
so long as each asset can be identified. Identifiers for cooler sections should be as
follows: EJW, IC1, IC2, IC3, and AC. Only one fixed asset is allowed per section.
	 
	 	•	 	Labor to overhaul or exchange the component should be capitalized.
	 
	 	•	 	Labor and materials associated with problems with start-up and / or running the unit,
troubleshooting, or standby time should not be included for capitalization.
	 
	 	•	 	Any charges associated with repairs performed prior to or after the overhaul should
not be included for capitalization.
	 
	 	•	 	Coolant / antifreeze should not be included for capitalization and should be
expensed as part of R&M cost.
	 
	 	•	 	Oil should not be included for capitalization and should be expensed as part of
R&M cost.
	 
	 	•	 	Spare parts should not be included for capitalization and should be expensed as
part of R&M cost.
	 
	 	•	 	Additional charges for general repairs of the unit and make ready charges are
not to be included on the overhaul cap-add and should be expensed if not covered
by a separate cap-add. These may include, but are not limited to: dump valves, process
piping, vessels, relief valves, mist pad replacement, panel repairs, control repairs, etc.

 

 

	 	•	 	Re-cylindering and re-staging units may be capitalizable if it is determined that it
increases the quantity and / or quality of services received from the unit by extending
the useful life of the asset or increasing the lot-term utilization. Such charges should
not be included as a capitalized overhaul, but should be captured under a separate
modification or repackage cap-add.
	 
	 	•	 	Additions of AFRC systems and new catalytic converters may be capitalizable, but should
be captured under a separate cap-add as a modification.
	 
	 	•	 	New panels and engine control devices may be capitalizable, but should be captured
under a separate cap-add as a modification.

See Overhaul Capital Expenditures corporate accounting policy FA101 for clarification.

 

 

Schedule 5.7(a)

SUBLIMITS TO PERILS SCHEDULE

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