Document:

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                                                                     EXHIBIT 4.4

                               GUARANTEE AGREEMENT

                                     BETWEEN

                          LINCOLN NATIONAL CORPORATION
                                 (AS GUARANTOR)

                                       AND

                  BANK ONE TRUST COMPANY, NATIONAL ASSOCIATION
                                  (AS TRUSTEE)

                                   DATED AS OF

                                NOVEMBER 19, 2001

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                             CROSS-REFERENCE TABLE*
                         SECTION OF GUARANTEE AGREEMENT
TRUST INDENTURE ACT                                                   SECTION OF
OF 1939, AS AMENDED                                                   GUARANTEE
AGREEMENT

310(a)...................................................................4.1(a)
310(b)..............................................................4.1(c), 2.8
310(c).............................................................Inapplicable
311(a)...................................................................2.2(b)
311(b)...................................................................2.2(b)
311(c).............................................................Inapplicable
312(a)...................................................................2.2(a)
312(b)...................................................................2.2(b)
313.........................................................................2.3
314(a)......................................................................2.4
314(b).............................................................Inapplicable
314(c)......................................................................2.5
314(d).............................................................Inapplicable
314(e)............................................................1.1, 2.5, 3.2
314(f).................................................................2.1, 3.2
315(a)...................................................................3.1(d)
315(b)......................................................................2.7
315(c)......................................................................3.1
315(d)...................................................................3.1(d)
316(a)............................................................1.1, 2.6, 5.4
316(b)......................................................................5.3
316(c)......................................................................8.2
317(a).............................................................Inapplicable
317(b).............................................................Inapplicable
318(a)...................................................................2.1(b)
318(b)......................................................................2.1
318(c)...................................................................2.1(a)
---------
*    This Cross-Reference Table does not constitute part of the Guarantee
     Agreement and shall not affect the interpretation of any of its terms or
     provisions.

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                                TABLE OF CONTENTS

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<CAPTION>

<S>                                                                                                              <C>
ARTICLE I. DEFINITIONS............................................................................................1
   Section 1.1    Definitions.....................................................................................1
ARTICLE II. TRUST INDENTURE ACT...................................................................................4
   Section 2.1    Trust Indenture Act; Application................................................................4
   Section 2.2    List of Holders.................................................................................4
   Section 2.3    Reports by the Guarantee Trustee................................................................5
   Section 2.4    Periodic Reports to the Guarantee Trustee.......................................................5
   Section 2.5    Evidence of Compliance with Conditions Precedent................................................5
   Section 2.6    Events of Default; Waiver.......................................................................5
   Section 2.7    Event of Default; Notice........................................................................5
   Section 2.8    Conflicting Interests...........................................................................6
ARTICLE III. POWERS, DUTIES AND RIGHTS OF THE GUARANTEE TRUSTEE...................................................6
   Section 3.1    Powers and Duties of the Guarantee Trustee......................................................6
   Section 3.2    Certain Rights of Guarantee Trustee.............................................................7
   Section 3.3    Indemnity.......................................................................................9
ARTICLE IV. GUARANTEE TRUSTEE.....................................................................................9
   Section 4.1    Guarantee Trustee: Eligibility..................................................................9
   Section 4.2    Appointment, Removal and Resignation of the Guarantee Trustee..................................10
ARTICLE V. GUARANTEE.............................................................................................11
   Section 5.1    Guarantee......................................................................................11
   Section 5.2    Waiver of Notice and Demand....................................................................11
   Section 5.3    Obligations Not Affected.......................................................................11
   Section 5.4    Rights of Holders..............................................................................12
   Section 5.5    Guarantee of Payment...........................................................................12
   Section 5.6    Subrogation....................................................................................12
   Section 5.7    Independent Obligations........................................................................13
ARTICLE VI. COVENANTS AND SUBORDINATION..........................................................................13
   Section 6.1    Subordination..................................................................................13
   Section 6.2    Pari Passu Guarantees..........................................................................13
ARTICLE VII. TERMINATION.........................................................................................13
   Section 7.1    Termination....................................................................................13
ARTICLE VIII. MISCELLANEOUS......................................................................................13
   Section 8.1    Successors and Assigns.........................................................................13
   Section 8.2    Amendments.....................................................................................14
   Section 8.3    Notices........................................................................................14
   Section 8.4    Benefit........................................................................................15
   Section 8.5    Interpretation.................................................................................15
   Section 8.6    Governing Law..................................................................................16

</TABLE>

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                               GUARANTEE AGREEMENT

     This GUARANTEE AGREEMENT, dated as of November 19, 2001, is executed and
delivered by LINCOLN NATIONAL CORPORATION, an Indiana corporation (the
"Guarantor") having its principal office at 1500 Market Street, Suite 3900,
Philadelphia, Pennsylvania 19102-2112, and BANK ONE TRUST COMPANY, a national
banking association, as trustee (the "Guarantee Trustee"), for the benefit of
the Holders (as defined herein) from time to time of the Preferred Securities
(as defined herein) of Lincoln National Capital V, a Delaware statutory business
trust (the "Issuer").

     WHEREAS, pursuant to an Amended and Restated Trust Agreement (the "Trust
Agreement"), dated as of November 19, 2001 among the Issuer Trustees named
therein, the Guarantor, as Depositor, and the Holders from time to time of
undivided beneficial interests in the assets of the Issuer, the Issuer is
issuing $172,500,000 aggregate liquidation preference of its 7.65% Preferred
Securities, Series E (liquidation preference $25 per preferred security) (the
"Preferred Securities") representing preferred undivided beneficial interests in
the assets of the Issuer and having the terms set forth in the Trust Agreement;

     WHEREAS, the Preferred Securities will be issued by the Issuer and the
proceeds thereof, together with the proceeds from the issuance of the Issuer's
Common Securities (as defined below), will be used to purchase the Debentures
(as defined in the Trust Agreement) of the Guarantor which will be deposited
with Bank One Trust Company, National Association, as Property Trustee under the
Trust Agreement, as trust assets; and

     WHEREAS, as incentive for the Holders to purchase Preferred Securities, the
Guarantor desires irrevocably and unconditionally to agree, to the extent set
forth herein, to pay to the Holders of the Preferred Securities the Guarantee
Payments (as defined herein) and to make certain other payments on the terms and
conditions set forth herein.

         NOW, THEREFORE, in consideration of the purchase by each Holder of
Preferred Securities, which purchase the Guarantor hereby agrees shall benefit
the Guarantor, the Guarantor executes and delivers this Guarantee Agreement for
the benefit of the Holders from time to time of the Preferred Securities.

                             ARTICLE I. DEFINITIONS

SECTION 1.1   DEFINITIONS.

     As used in this Guarantee Agreement, the terms set forth below shall,
unless the context otherwise requires, have the following meanings. Capitalized
or otherwise defined terms used but not otherwise defined herein shall have the
meanings assigned to such terms in the Trust Agreement as in effect on the date
hereof.

     "Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person, provided, however, that an Affiliate of the
Guarantor shall not be deemed to include the

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Issuer. For the purposes of this definition, "control" when used with respect to
any specified Person means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.

     "Common Securities" means the securities representing common undivided
beneficial interests in the assets of the Issuer.

     "Debt" means, with respect to any Person, whether recourse is to all or a
portion of the assets of such Person and whether or not contingent, (i) every
obligation of such Person for money borrowed; (ii) every obligation of such
Person evidenced by bonds, debentures, notes or other similar instruments,
including obligations incurred in connection with the acquisition of property,
assets or businesses; (iii) every reimbursement obligation of such Person with
respect to letters of credit, bankers' acceptances or similar facilities issued
for the account of such Person; (iv) every obligation of such Person issued or
assumed as the deferred purchase price of property or services (but excluding
trade accounts payable or accrued liabilities arising in the ordinary course of
business); (v) every capital lease obligation of such Person; and (vi) every
obligation of the type referred to in clauses (i) through (v) of another Person
and all dividends of another Person the payment of which, in either case, such
Person has guaranteed or is responsible or liable for, directly or indirectly,
as obligor or otherwise.

     "Event of Default" means a default by the Guarantor on any of its payment
or other obligations under this Guarantee Agreement; provided, however, that,
except with respect to a default in payment of any Guarantee Payments, the
Guarantor shall have received notice of default and shall not have cured such
default within 60 days after receipt of such notice.

     "Guarantee Payments" means the following payments or distributions, without
duplication, with respect to the Preferred Securities, to the extent not paid or
made by or on behalf of the Issuer; (i) any accrued and unpaid Distributions (as
defined in the Trust Agreement) required to be paid on the Preferred Securities,
to the extent the Issuer shall have funds on hand available therefor at such
time, (ii) the redemption price, including all accrued and unpaid Distributions
to the date of redemption (the "Redemption Price"), with respect to the
Preferred Securities called for redemption by the Issuer to the extent the
Issuer shall have funds on hand available therefor at such time, and (iii) upon
a voluntary or involuntary termination, winding-up or liquidation of the Issuer,
unless Debentures are distributed to the Holders, the lesser of (a) the
aggregate of the liquidation preference of $25 per Preferred Security plus
accrued and unpaid Distributions on the Preferred Securities to the date of
payment to the extent the Issuer shall have funds on hand available to make such
payment at such time and (b) the amount of assets of the Issuer remaining
available for distribution to Holders in liquidation of the Issuer (in either
case, the "Liquidation Distribution").

     "Guarantee Trustee" means Bank One Trust Company, National Association,
until a Successor Guarantee Trustee has been appointed and has accepted such
appointment pursuant to the terms of this Guarantee Agreement and thereafter
means each such Successor Guarantee Trustee.

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     "Holder" means any holder, as registered on the books and records of the
Issuer, of any Preferred Securities; provided, however, that in determining
whether the holders of the requisite percentage of Preferred Securities have
given any request, notice, consent or waiver hereunder, "Holder" shall not
include the Guarantor, the Guarantee Trustee, or any Affiliate of the Guarantor
or the Guarantee Trustee.

     "Indenture" means the Junior Subordinated Indenture dated as of May 1,
1996, as supplemented and amended between the Guarantor and Bank One Trust
Company, National Association (as successor in interest to The First National
Bank of Chicago), as trustee.

     "List of Holders" has the meaning specified in Section 2.2(a).

     "Majority in liquidation preference of the Preferred Securities" means,
except as provided by the Trust Indenture Act, a vote by the Holder(s), voting
separately as a class, of more than 50% of the liquidation preference of all
then outstanding Preferred Securities issued by the Issuer.

     "Officers' Certificate" means, with respect to any Person, a certificate
signed by the Chief Executive Officer, President or a Vice President, and by the
Treasurer, and Associate Treasurer, an Assistant Treasurer, the Controller, the
Secretary or an Assistant Secretary of such Person, and delivered to the
Guarantee Trustee. Any Officers' Certificate delivered with respect to
compliance with a condition or covenant provided for in this Guarantee Agreement
shall include:

     (a)  a statement that each officer signing the Officers' Certificate has
          read the covenant or condition and the definitions relating thereto;

     (b)  a brief statement of the nature and scope of the examination or
          investigation undertaken by each officer in rendering the Officers'
          Certificate;

     (c)  a statement that each officer has made such examination or
          investigation as, in such officer's opinion, is necessary to enable
          such officer to express an informed opinion as to whether or not such
          covenant or condition has been complied with; and

     (d)  a statement as to whether, in the opinion of each officer, such
          condition or covenant has been complied with.

     "Person" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint stock company, limited
liability company, trust, unincorporated association, or government or any
agency or political subdivision thereof, or any other entity of whatever nature.

     "Responsible Officer" means, with respect to the Guarantee Trustee, any
Senior Vice President, any Vice President, any Assistant Vice President, the
Secretary, any Assistant

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Secretary, the Treasurer, any Assistant Treasurer, any Trust Officer or
Assistant Trust Officer or any other officer of the Corporate Trust Department
of the above-designated officers and also means, with respect to a particular
corporate trust matter, any other officer to whom such matter is referred
because of that officer's knowledge of and familiarity with the particular
subject.

     "Senior Debt" means the principal of (and premium, if any) and interest, if
any (including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to the Guarantor whether or not such
claim for post-petition interest is allowed in such proceeding), on Debt,
whether incurred on or prior to the date of this Guarantee Agreement or
thereafter incurred, unless, in the instrument creating or evidencing the same
or pursuant to which the same is outstanding, it is provided that such
obligations are not superior in right of payment to this Guarantee Agreement or
to other Debt which is pari passu with, or subordinated to, this Guarantee
Agreement; provided, however, that Senior Debt shall not be deemed to include
(a) any Debt of the Guarantor which when incurred and without respect to any
election under Section 1111(b) of the Bankruptcy Reform Act of 1978, was without
recourse to the Guarantor, (b) any Debt of the Guarantor to any of its
Subsidiaries, (c) Debt to any employee of the Guarantor, (d) any liability for
taxes, (e) Debt or other monetary obligations to trade creditors created or
assumed by the Guarantor or any of its Subsidiaries in the ordinary course of
business in connection with the obtaining of goods, materials or services and
(f) Debt issued under the Indenture and (g) similar Guarantee Agreements issued
by the Guarantor on behalf of the holders of Preferred Securities issued by
Lincoln National Capital II, Lincoln National Capital III and Lincoln National
Capital IV.

     "Successor Guarantee Trustee" means a successor Guarantee Trustee
possessing the qualifications to act as Guarantee Trustee under Section 4.1.

     "Trust Indenture Act" means the Trust Indenture Act of 1939, as amended.

                        ARTICLE II. TRUST INDENTURE ACT

SECTION 2.1   TRUST INDENTURE ACT; APPLICATION.

     (a) This Guarantee Agreement is subject to the provisions of the Trust
Indenture Act that are required to be part of this Guarantee Agreement and
shall, to the extent applicable, be governed by such provisions.

     (b) If and to the extent that any provision of this Guarantee Agreement
limits, qualifies or conflicts with the duties imposed by Sections 310 to 317,
inclusive, of the Trust Indenture Act, such imposed duties shall control.

SECTION 2.2   LIST OF HOLDERS.

     (a) The Guarantor shall furnish or cause to be furnished to the Guarantee
Trustee (a) semiannually, on or before January 15 and July 15 of each year, a
list, in such form as the Guarantee Trustee may reasonably require, of the names
and addresses of the Holders ("List of Holders") as of a date not more than 15
days prior to the delivery thereof, and (b) at such other times as the Guarantee
Trustee may request in writing, within 30 days after the receipt by the

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Guarantor of any such request, a List of Holders as of a date not more than 15
days prior to the time such list is furnished, in each case to the extent such
information is in the possession or control of the Guarantor and is not
identical to a previously supplied list of Holders or has not otherwise been
received by the Guarantee Trustee in its capacity as such. The Guarantee Trustee
may destroy any List of Holders previously given to it on receipt of a new List
of Holders.

     (b) The Guarantee Trustee shall comply with its obligations under Section
311(a), Section 311(b) and Section 312(b) of the Trust Indenture Act.

SECTION 2.3   REPORTS BY THE GUARANTEE TRUSTEE.

     Within 60 days of May 15 of each year, commencing May 15, 2002, the
Guarantee Trustee shall provide to the Holders such reports as are required by
Section 313 of the Trust Indenture Act, if any, in the form and in the manner
provided by Section 313 of the Trust Indenture Act. The Guarantee Trustee shall
also comply with the requirements of Section 313(d) of the Trust Indenture Act.

SECTION 2.4   PERIODIC REPORTS TO THE GUARANTEE TRUSTEE.

     The Guarantor shall provide to the Guarantee Trustee, the Securities and
Exchange Commission and the Holders such documents, reports and information, if
any, as required by Section 314 of the Trust Indenture Act and the compliance
certificate required by Section 314 of the Trust Indenture Act, in the form, in
the manner and at the times required by Section 314 of the Trust Indenture Act.

SECTION 2.5   EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT.

     The Guarantor shall provide to the Guarantee Trustee such evidence of
compliance with such conditions precedent, if any, provided for in this
Guarantee Agreement that relate to any of the matters set forth in Section
314(c) of the Trust Indenture Act. Any certificate or opinion required to be
given by an officer pursuant to Section 314(c)(1) may be given in the form of an
Officers' Certificate.

SECTION 2.6   EVENTS OF DEFAULT; WAIVER.

     The Holders of a Majority in liquidation preference of the Preferred
Securities may, by vote, on behalf of the Holders, waive any past Event of
Default and its consequences. Upon such waiver, any such Event of Default shall
cease to exist, and any Event of Default arising therefrom shall be deemed to
have been cured, for every purpose of this Guarantee Agreement, but no such
waiver shall extend to any subsequent or other default or Event of Default or
impair any right consequent therefrom.

SECTION 2.7   EVENT OF DEFAULT; NOTICE.

     (a) The Guarantee Trustee shall, within 90 days after the occurrence of an
Event of Default known to the Guarantee Trustee, transmit by mail, first class
postage prepaid, to the Holders, notices of all Events of Default, unless such
defaults have been cured or waived before

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<PAGE>

the giving of such notice, provided, that, except in the case of a default in
the payment of a Guarantee Payment, the Guarantee Trustee shall be protected in
withholding such notice if and so long as the Board of Directors, the executive
committee or a trust committee of directors and/or Responsible Officers of the
Guarantee Trustee in good faith determines that the withholding of such notice
is in the interests of the Holders.

     (b) The Guarantee Trustee shall not be deemed to have knowledge of any
Event of Default unless the Guarantee Trustee shall have received written
notice, or a Responsible Officer charged with the administration of the Trust
Agreement shall have obtained written notice, of such Event of Default.

SECTION 2.8   CONFLICTING INTERESTS.

     The Trust Agreement shall be deemed to be specifically described in this
Guarantee Agreement for the purposes of clause (i) of the first proviso
contained in Section 310(b) of the Trust Indenture Act.

                   ARTICLE III. POWERS, DUTIES AND RIGHTS OF
                              THE GUARANTEE TRUSTEE

SECTION 3.1   POWERS AND DUTIES OF THE GUARANTEE TRUSTEE.

     (a) This Guarantee Agreement shall be held by the Guarantee Trustee for the
benefit of the Holders, and the Guarantee Trustee shall not transfer this
Guarantee Agreement to any Person except a Holder exercising his or her rights
pursuant to Section 5.4(iv) or to a Successor Guarantee Trustee on acceptance by
such Successor Guarantee Trustee of its appointment to act as Successor
Guarantee Trustee. The right, title and interest of the Guarantee Trustee shall
automatically vest in any Successor Guarantee Trustee, upon acceptance by such
Successor Guarantee Trustee of its appointment hereunder, and such vesting and
cessation of title shall be effective whether or not conveyancing documents have
been executed and delivered pursuant to the appointment of such Successor
Guarantee Trustee.

     (b) If an Event of Default has occurred and is continuing, the Guarantee
Trustee shall enforce this Guarantee Agreement for the benefit of the Holders.

     (c) The Guarantee Trustee, before the occurrence of any Event of Default
and after the curing or waiver of all Events of Default that may have occurred,
shall undertake to perform only such duties as are specifically set forth in
this Guarantee Agreement, and no implied covenants shall be read into this
Guarantee Agreement against the Guarantee Trustee. In case an Event of Default
has occurred (that has not been cured or waived pursuant to Section 2.6), the
Guarantee Trustee shall exercise such of the rights and powers vested in it by
this Guarantee Agreement, and use the same degree of care and skill in its
exercise thereof, as a prudent person would exercise or use under the
circumstances in the conduct of his or her own affairs.

     (d) No provision of this Guarantee Agreement shall be construed to relieve
the Guarantee Trustee from liability for its own negligent action, its own
negligent failure to act or its own willful misconduct, except that:

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     (i)  prior to the occurrence of any Event of Default and after the curing
          or waiving of all such Events of Default that may have occurred:

          (A)  the duties and obligations of the Guarantee Trustee shall be
               determined solely by the express provisions of this Guarantee
               Agreement, and the Guarantee Trustee shall not be liable except
               for the performance of such duties and obligations as are
               specifically set forth in this Guarantee Agreement; and

          (B)  in the absence of bad faith on the part of the Guarantee Trustee,
               the Guarantee Trustee may conclusively rely, as to the truth of
               the statements and the correctness of the opinions expressed
               therein, upon any certificates or opinions furnished to the
               Guarantee Trustee and conforming to the requirements of this
               Guarantee Agreement; but in the case of any such certificates or
               opinions that by any provision hereof or of the Trust Indenture
               Act are specifically required to be furnished to the Guarantee
               Trustee, the Guarantee Trustee shall be under a duty to examine
               the same to determine whether or not they conform to the
               requirements of this Guarantee Agreement;

     (ii) the Guarantee Trustee shall not be liable for any error of judgment
          made in good faith by a Responsible Officer of the Guarantee Trustee,
          unless it shall be proved that the Guarantee Trustee was negligent in
          ascertaining the pertinent facts upon which such judgment was made;

    (iii) the Guarantee Trustee shall not be liable with respect to any action
          taken or omitted to be taken by it in good faith in accordance with
          the direction of the Holders of not less than a Majority in
          liquidation preference of the Preferred Securities relating to the
          time, method and place of conducting any proceeding for any remedy
          available to the Guarantee Trustee, or exercising any trust or power
          conferred upon the Guarantee Trustee under this Guarantee Agreement;
          and

     (iv) no provision of this Guarantee Agreement shall require the Guarantee
          Trustee to expend or risk its own funds or otherwise incur personal
          financial liability in the performance of any of its duties or in the
          exercise of any of its rights or powers, if the Guarantee Trustee
          shall have reasonable grounds for believing that the repayment of such
          funds or liability is not reasonably assured to it under the terms of
          this Guarantee Agreement or adequate indemnity against such risk or
          liability is not reasonably assured to it.

SECTION 3.2   CERTAIN RIGHTS OF GUARANTEE TRUSTEE.

     (a)  Subject to the provisions of Section 3.1:

     (i)  The Guarantee Trustee may rely and shall be fully protected in acting
          or refraining from acting upon any resolution, certificate, statement,
          instrument, opinion, report, notice, request, direction, consent,
          order, bond, debenture, note,

                                      -7-
<PAGE>

          other evidence of indebtedness or other paper or document reasonably
          believed by it to be genuine and to have been signed, sent or
          presented by the proper party or parties.

     (ii) Any direction or act of the Guarantor contemplated by this Guarantee
          Agreement shall be sufficiently evidenced by an Officer's Certificate
          unless otherwise prescribed herein.

    (iii) Whenever, in the administration of this Guarantee Agreement, the
          Guarantee Trustee shall deem it desirable that a matter be proved or
          established before taking, suffering or omitting to take any action
          hereunder, the Guarantee Trustee (unless other evidence is herein
          specifically prescribed) may, in the absence of bad faith on its part,
          request and rely upon an Officers' Certificate which, upon receipt of
          such request from the Guarantee Trustee, shall be promptly delivered
          by the Guarantor.

     (iv) The Guarantee Trustee may consult with legal counsel, and the written
          advice or opinion of such legal counsel with respect to legal matters
          shall be full and complete authorization and protection in respect of
          any action taken, suffered or omitted to be taken by it hereunder in
          good faith and in accordance with such advice or opinion. Such legal
          counsel may be legal counsel to the Guarantor or any of its Affiliates
          and may be one of its employees. The Guarantee Trustee shall have the
          right at any time to seek instructions concerning the administration
          of this Guarantee Agreement from any court of competent jurisdiction.

     (v)  The Guarantee Trustee shall be under no obligation to exercise any of
          the rights or powers vested in it by this Guarantee Agreement at the
          request or direction of any Holder, unless such Holder shall have
          provided to the Guarantee Trustee such adequate security and indemnity
          as would satisfy a reasonable person in the position of the Guarantee
          Trustee, against the costs, expenses (including attorneys' fees and
          expenses) and liabilities that might be incurred by it in complying
          with such request or direction, including such reasonable advances as
          may be requested by the Guarantee Trustee; provided that, nothing
          contained in this Section 3.2(a)(v) shall be taken to relieve the
          Guarantee Trustee, upon the occurrence of an Event of Default, of its
          obligation to exercise the rights and powers vested in it by this
          Guarantee Agreement.

     (vi) The Guarantee Trustee shall not be bound to make any investigation
          into the facts or matters stated in any resolution, certificate,
          statement, instrument, opinion, report, notice, request, direction,
          consent, order, bond, debenture, note, other evidence of indebtedness
          or other paper or document, but the Guarantee Trustee, in its
          discretion, may make such further inquiry or investigation into such
          facts or matters as it may see fit.

    (vii) The Guarantee Trustee may execute any of the trusts or powers
          hereunder or perform any duties hereunder either directly or by or
          through its agents or

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<PAGE>

          attorneys, and the Guarantee Trustee shall not be responsible for any
          misconduct or negligence on the part of any such agent or attorney
          appointed with due care by it hereunder.

   (viii) Any action taken by the Guarantee Trustee or its agents hereunder
          shall bind the Holders, and the signature of the Guarantee Trustee or
          its agents alone shall be sufficient and effective to perform any such
          action. No third party shall be required to inquire as to the
          authority of the Guarantee Trustee to so act or as to its compliance
          with any of the terms and provisions of this Guarantee Agreement, both
          of which shall be conclusively evidenced by the Guarantee Trustee's or
          its agent's taking such action.

     (ix) Whenever in the administration of this Guarantee Agreement the
          Guarantee Trustee shall deem it desirable to receive instructions with
          respect to enforcing any remedy or right or taking any other action
          hereunder, the Guarantee Trustee (A) may request instructions from the
          Holders of a Majority in liquidation preference of the Preferred
          Securities, (B) may refrain from enforcing such remedy or right or
          taking such other action until such instructions are received, and (C)
          shall be protected in acting in accordance with such instructions.

     (b) No provision of this Guarantee Agreement shall be deemed to impose any
duty or obligation on the Guarantee Trustee to perform any act or acts or
exercise any right, power, duty or obligation conferred or imposed on it in any
jurisdiction in which it shall be illegal, or in which the Guarantee Trustee
shall be unqualified or incompetent in accordance with applicable law, to
perform any such act or acts or to exercise any such right, power, duty or
obligation. No permissive power or authority available to the Guarantee Trustee
shall be construed to be a duty to act in accordance with such power and
authority.

SECTION 3.3   INDEMNITY.

     The Guarantor agrees to indemnify the Guarantee Trustee for, and to hold it
harmless against, any loss, liability or expense incurred without negligence or
bad faith on the part of the Guarantee Trustee, arising out of or in connection
with the acceptance or administration of this Guarantee Agreement, including the
costs and expenses of defending itself against any claim or liability in
connection with the exercise or performance of any of its powers or duties
hereunder. The Guarantee Trustee will not claim or exact any lien or charge on
any Guarantee Payments as a result of any amount due to it under this Guarantee
Agreement.

     The provisions of this Section 3.3 shall survive the termination of this
Guarantee Agreement or the resignation or removal of the Guarantee Trustee.

                         ARTICLE IV. GUARANTEE TRUSTEE

SECTION 4.1   GUARANTEE TRUSTEE: ELIGIBILITY.

     (a) There shall at all times be a Guarantee Trustee which shall:

                                      -9-
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     (i)  not be an Affiliate of the Guarantor; and

     (ii) be a Person that is eligible pursuant to the Trust Indenture Act to
          act as such and has a combined capital and surplus of at least
          $50,000,000, and shall be a corporation meeting the requirements of
          Section 310(c) of the Trust Indenture Act. If such corporation
          publishes reports of condition at least annually, pursuant to law or
          to the requirements of the supervising or examining authority, then,
          for the purposes of this Section and to the extent permitted by the
          Trust Indenture Act, the combined capital and surplus of such
          corporation shall be deemed to be its combined capital and surplus as
          set forth in its most recent report of condition so published.

     (b) If at any time the Guarantee Trustee shall cease to be eligible to so
act under Section 4.1(a), the Guarantee Trustee shall immediately resign in the
manner and with the effect set out in Section 4.2(c).

     (c) If the Guarantee Trustee has or shall acquire any "conflicting
interest" within the meaning of Section 310(b) of the Trust Indenture Act, the
Guarantee Trustee and Guarantor shall in all respects comply with the provisions
of Section 310(b) of the Trust Indenture Act.

SECTION 4.2   APPOINTMENT, REMOVAL AND RESIGNATION OF THE GUARANTEE TRUSTEE.

     (a) Subject to Section 4.2(b), the Guarantee Trustee may be appointed or
removed without cause at any time by the Guarantor.

     (b) The Guarantee Trustee shall not be removed until a Successor Guarantee
Trustee has been appointed and has accepted such appointment by written
instrument executed by such Successor Guarantee Trustee and delivered to the
Guarantor.

     (c) The Guarantee Trustee appointed hereunder shall hold office until a
Successor Guarantee Trustee shall have been appointed or until its removal or
resignation. The Guarantee Trustee may resign from office (without need for
prior or subsequent accounting) by an instrument in writing executed by the
Guarantee Trustee and delivered to the Guarantor, which resignation shall not
take effect until a Successor Guarantee Trustee has been appointed and has
accepted such appointment by instrument in writing executed by such Successor
Guarantee Trustee and delivered to the Guarantor and the resigning Guarantee
Trustee.

     (d) If no Successor Guarantee Trustee shall have been appointed and
accepted appointment as provided in this Section 4.2 within 60 days after
delivery to the Guarantor of an instrument of resignation, the resigning
Guarantee Trustee may petition any court of competent jurisdiction for
appointment of a Successor Guarantee Trustee. Such court may thereupon, after
prescribing such notice, if any, as it may deem proper, appoint a Successor
Guarantee Trustee.

                                      -10-
<PAGE>

                              ARTICLE V. GUARANTEE

SECTION 5.1   GUARANTEE.

     The Guarantor irrevocably and unconditionally agrees to pay in full to the
Holders the Guarantee Payments (without duplication of amounts theretofore paid
by or on behalf of the Issuer), as and when due, regardless of any defense,
right of set-off or counterclaim which the Issuer may have or assert. The
Guarantor's obligation to make a Guarantee Payment may be satisfied by direct
payment of the required amounts by the Guarantor to the Holders or by causing
the Issuer to pay such amounts to the Holders.

SECTION 5.2   WAIVER OF NOTICE AND DEMAND.

     The Guarantor hereby waives notice of acceptance of this Guarantee
Agreement and of any liability to which it applies or may apply, presentment,
demand for payment, any right to require a proceeding first against the
Guarantee Trustee, Issuer or any other Person before proceeding against the
Guarantor, protest, notice of nonpayment, notice of dishonor, notice of
redemption and all other notices and demands.

SECTION 5.3   OBLIGATIONS NOT AFFECTED.

     The obligations, covenants, agreements and duties of the Guarantor under
this Guarantee Agreement shall in no way be affected or impaired by reason of
the happening from time to time of any of the following:

     (a) the release or waiver, by operation of law or otherwise, of the
performance or observance by the Issuer of any express or implied agreement,
covenant, term or condition relating to the Preferred Securities to be performed
or observed by the Issuer;

     (b) the extension of time for the payment by the Issuer of all or any
portion of the Distributions, Redemption Price, Liquidation Distribution or any
other sums payable under the terms of the Preferred Securities or the extension
of time for the performance of any other obligation under, arising out of, or in
connection with, the Preferred Securities (other than an extension of time for
payment of Distributions, Redemption Price, Liquidation Distribution or other
sums payable that results from the extension of any interest payment period on
the Debentures as so provided in the Indenture);

     (c) any failure, omission, delay or lack of diligence on the part of the
Holders to enforce, assert or exercise any right, privilege, power or remedy
conferred on the Holders pursuant to the terms of the Preferred Securities, or
any action on the part of the Issuer granting indulgence or extension of any
kind;

     (d) the voluntary or involuntary liquidation, dissolution, sale of any
collateral, receivership, insolvency, bankruptcy, assignment for the benefit of
creditors, reorganization, arrangement, composition or readjustment of debt of,
or other similar proceedings affecting, the Issuer or any of the assets of the
Issuer;

     (e) any invalidity of, or defect or deficiency in, the Preferred
Securities;

     (f) the settlement or compromise of any obligation guaranteed hereby or
hereby incurred; or

                                      -11-
<PAGE>

     (g) any other circumstance whatsoever that might otherwise constitute a
legal or equitable discharge or defense of a guarantor, it being the intent of
this Section 5.3 that the obligations of the Guarantor hereunder shall be
absolute and unconditional under any and all circumstances.

     There shall be no obligation of the Holders to give notice to, or obtain
the consent of, the Guarantor with respect to the happening of any of the
foregoing.

SECTION 5.4   RIGHTS OF HOLDERS.

     The Guarantor expressly acknowledges that: (i) this Guarantee Agreement
will be deposited with the Guarantee Trustee to be held for the benefit of the
Holders; (ii) the Guarantee Trustee has the right to enforce this Guarantee
Agreement on behalf of the Holders; (iii) the Holders of a Majority in
liquidation preference of the Preferred Securities have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the Guarantee Trustee in respect of this Guarantee Agreement or exercising any
trust or power conferred upon the Guarantee Trustee under this Guarantee
Agreement; and (iv) if the Guarantee Trustee fails to enforce this Guarantee
Agreement after a Holder has made a written request for the Guarantee Trustee to
do so, any Holder may, to the extent permitted by law, institute a legal
proceeding directly against the Guarantor to enforce its rights under this
Guarantee Agreement, without first instituting a legal proceeding against the
Guarantee Trustee, the Issuer or any other Person. Notwithstanding the
foregoing, if the Guarantor has failed to make a Guarantee Payment, a Holder may
directly institute a proceeding against the Guarantor for enforcement of this
Guarantee Agreement for such payment. The Guarantor waives any right or remedy
to require that any action on this Guarantee Agreement be brought first against
the Issuer or any other Person or entity before proceeding directly against the
Guarantor.

SECTION 5.5   GUARANTEE OF PAYMENT.

     This Guarantee Agreement creates a guarantee of payment and not of
collection.

SECTION 5.6   SUBROGATION.

     The Guarantor shall be subrogated to all (if any) rights of the Holders
against the Issuer in respect of any amounts paid to the Holders by the
Guarantor under this Guarantee Agreement and shall have the right to waive
payment by the Issuer pursuant to Section 5.1; provided, however, that the
Guarantor shall not (except to the extent required by mandatory provisions of
law) be entitled to enforce or exercise any rights which it may acquire by way
of subrogation or any indemnity, reimbursement or other agreement, in all cases
as a result of payment under this Guarantee Agreement if, at the time of any
such payment, any amounts are due and unpaid under this Guarantee Agreement. If
any amount shall be paid to the Guarantor in violation of the preceding
sentence, the Guarantor agrees to hold such amount in trust for the Holders and
to pay over such amount to the Holders.

                                      -12-
<PAGE>

SECTION 5.7   INDEPENDENT OBLIGATIONS.

     The Guarantor acknowledges that its obligations hereunder are independent
of the obligations of the Issuer with respect to the Preferred Securities and
that the Guarantor shall be liable as principal and as debtor hereunder to make
Guarantee Payments pursuant to the terms of this Guarantee Agreement
notwithstanding the occurrence of any event referred to in subsections (a)
through (g), inclusive, of Section 5.3 hereof.

                    ARTICLE VI. COVENANTS AND SUBORDINATION

SECTION 6.1   SUBORDINATION.

     This Guarantee Agreement will constitute an unsecured obligation of the
Guarantor and will rank subordinate and junior in right of payment to all Senior
Debt of the Guarantor.

SECTION 6.2   PARI PASSU GUARANTEES.

     This Guarantee Agreement shall rank pari passu with any similar Guarantee
Agreements issued by the Guarantor on behalf of the holders of Preferred
Securities issued by Lincoln National Capital II, Lincoln National Capital III
and Lincoln National Capital IV.

                            ARTICLE VII. TERMINATION

SECTION 7.1   TERMINATION.

     This Guarantee Agreement shall terminate and be of no further force and
effect upon (i) full payment of the Redemption Price of all Preferred
Securities, (ii) the distribution of Debentures to the Holders in exchange for
all of the Preferred Securities or (iii) full payment of the amounts payable in
accordance with the Trust Agreement upon liquidation of the Issuer.
Notwithstanding the foregoing, this Guarantee Agreement will continue to be
effective or will be reinstated, as the case may be, if at any time any Holder
must restore payment of any sums paid with respect to Preferred Securities or
this Guarantee Agreement.

                          ARTICLE VIII. MISCELLANEOUS

SECTION 8.1   SUCCESSORS AND ASSIGNS.

     All guarantees and agreements contained in this Guarantee Agreement shall
bind the successors, assigns, receivers, trustees and representatives of the
Guarantor and shall inure to the benefit of the Holders of the Preferred
Securities then outstanding. Except in connection with a consolidation, merger
or sale involving the Guarantor that is permitted under Article Eight of the
Indenture and pursuant to which the assignee agrees in writing to perform the
Guarantor's obligations hereunder, the Guarantor shall not assign its
obligations hereunder.

SECTION 8.2   AMENDMENTS.

     Except with respect to any changes which do not adversely affect the rights
of the Holders in any material respect (in which case no consent of the Holders
will be required), this Guarantee Agreement may only be amended with the prior
approval of the Holders of not less

                                      -13-
<PAGE>

than a Majority in liquidation preference of all the outstanding Preferred
Securities. The provisions of Article VI of the Trust Agreement concerning
meetings of the Holders shall apply to the giving of such approval.

SECTION 8.3   NOTICES.

     Any notice, request or other communication required or permitted to be
given hereunder shall be in writing, duly signed by the party giving such
notice, and delivered, telecopied or mailed by first class mail as follows:

     (a) If given to the Guarantee Trustee, at the Guarantee Trustee's mailing
address set forth below (or such other address as the Guarantee Trustee may give
notice of to the Guarantor and the Holders):

               Bank One Trust Company, National Association
               One Bank One Plaza
               Suite 0126
               Chicago, Illinois 60670
               Facsimile No.: (312) 407-1708
               Attention: Corporate Trust Services Division

     (b) if given to the Guarantor, to the address set forth below or such other
address as the Guarantor may give notice to the Holders:

               Lincoln National Corporation
               1500 Market Street, Suite 3900
               Philadelphia, Pennsylvania  19102-2112
               Facsimile No.: (215) 448-3954
               Attention: Treasurer

     (c) if given to the Issuer, in care of the Guarantee Trustee, at the
Issuer's (and the Guarantee Trustee's) address set forth below or such other
address as the Guarantee Trustee on behalf of the Issuer may give notice to the
Holders:

               Lincoln Capital V
               c/o Lincoln National Corporation
               1500 Market Street, Suite 3900
               Philadelphia, Pennsylvania  19102-2112
               Facsimile No.: (215) 448-3954
               Attention: Treasurer

     with a copy to:

               Bank One Trust Company, National Association
               One Bank One Plaza
               Suite 0126

                                      -14-
<PAGE>
               Chicago, Illinois 60670
               Facsimile No.: (312) 407-1708
               Attention: Corporate Services Division

     (d) if given to any Holder, at the address set forth on the books and
records of the Issuer.

     All notices hereunder shall be deemed to have been given when received in
person, telecopied with receipt confirmed, or mailed by first class mail,
postage prepaid, except that if a notice or other document is refused delivery
or cannot be delivered because of a changed address of which no notice was
given, such notice or other document shall be deemed to have been delivered on
the date of such refusal or inability to deliver.

SECTION 8.4   BENEFIT

     This Guarantee Agreement is solely for the benefit of the Holders and is
not separately transferable from the Preferred Securities.

SECTION 8.5   INTERPRETATION.

     In this Guarantee Agreement, unless the context otherwise requires:

     (a) capitalized terms used in this Guarantee Agreement but not defined in
the preamble hereto have the respective meanings assigned to them in Section
1.1;

     (b) a term defined anywhere in this Guarantee Agreement has the same
meaning throughout;

     (c) all references to "the Guarantee Agreement" or "this Guarantee
Agreement" are to this Guarantee Agreement as modified, supplemented or amended
from time to time;

     (d) all references in this Guarantee Agreement to Articles and Sections are
to Articles and Sections of this Guarantee Agreement unless otherwise specified;

     (e) a term defined in the Trust Indenture Act has the same meaning when
used in this Guarantee Agreement unless otherwise defined in this Guarantee
Agreement or unless the context otherwise requires;

     (f) a reference to the singular includes the plural and vice versa; and

     (g) the masculine, feminine or neuter genders used herein shall include the
masculine, feminine and neuter genders.

                                      -15-
<PAGE>

SECTION 8.6   GOVERNING LAW.

THIS GUARANTEE AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE CONFLICT
OF LAW PRINCIPLES THEREOF.

     This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.

                                      -16-
<PAGE>

     THIS GUARANTEE AGREEMENT is executed as of the day and year first above
written.

                                   LINCOLN NATIONAL CORPORATION

                                   By:      /s/ Richard C. Vaughan
                                        ---------------------------------------
                                            Name:  Richard C. Vaughan
                                            Title:  Executive Vice President and
                                                     Chief Financial Officer

                                   BANK ONE TRUST COMPANY, NATIONAL ASSOCIATION,
                                   as Guarantee Trustee

                                   By:      /s/ John R. Prendiville
                                        ----------------------------------------
                                            Name:  John R. Prendiville
                                            Title:  First Vice President<PAGE>
                           HANOVER COMPRESSOR COMPANY
                           2001 EQUITY INCENTIVE PLAN

                                   ARTICLE I.
                                    PREAMBLE

     1.1 Preamble. Hanover Compressor Company, a Delaware corporation (the
"Company"), hereby establishes the Hanover Compressor Company 2001 Equity
Incentive Plan (the "Plan") as a means whereby the Company may, through awards
of restricted stock and non-qualified stock options:

          (a) provide Company Officers, Employees, Directors and Consultants
     with additional incentive to promote the success of the Company's and its
     Subsidiaries' businesses;

          (b) enable such Employees to acquire proprietary interests in the
     Company; and

          (c) encourage such Employees to remain in the employ of the Company
     and its Subsidiaries.

     Except as specifically provided herein, the provisions of this Plan do not
apply to or affect any option, stock appreciation rights, or stock heretofore or
hereafter granted under any other stock plan of the Company or any Subsidiary,
and all such options, stock appreciation right or stock continue to be governed
by and subject to the applicable provisions of the plan or agreement under which
they were granted.

                                   ARTICLE II.
                                   DEFINITIONS

     2.1 "Award" means an Option or Restricted Stock award, which may be granted
or purchased under the Plan.

     2.2 "Award Agreement" means a written agreement executed by an authorized
officer of the Company and the Participant, which shall contain such terms and
conditions with respect to an Award as the Committee shall determine, consistent
with the Plan.

     2.3 "Award Limit" means 500,000 shares of Common Stock.

     2.4 "Board" or "Board of Directors" means the board of directors of the
Company.

     2.5 "Cause" means (i) the commission by such Participant of an act of
fraud, embezzlement or willful breach of a fiduciary duty to the Company
(including the unauthorized disclosure of confidential or proprietary material
information of the Company), (ii) a conviction of such Participant (or a plea of
nolo contendere in lieu thereof) for a felony or a crime involving fraud,
dishonesty or moral turpitude, (iii) willful failure of a Participant to follow
the written directions of the chief executive officer of the Company or the
Board in the case of executive officers of the Company; (iv) willful misconduct
as an Employee of the Company, (v) the willful

<PAGE>

failure of such Participant to render services to the Company in accordance with
his employment or consulting arrangement, which failure amounts to a material
neglect of his duties to the Company or (vi) substantial dependence, as
determined by the Board, on alcohol or any drug, immediate precursor or other
substance listed in Schedule I-V of the Federal Comprehensive Drug Abuse
Prevention and Control Act of 1970, as amended, as determined in the sole
discretion of the Committee.

     2.6 "Change in Control" means the occurrence of any one of the following
events:

          (a) any (A) consolidation or merger of the Company in which the
     Company is not the continuing or surviving corporation or which
     contemplates that all or substantially all of the business and/ or assets
     of the Company shall be controlled by another corporation or (B) a
     recapitalization (including an exchange of Company equity securities by the
     holders thereof), in either case, in which any "Person" (as such term is
     used in Sections 13(d) and (14(d)(2) of the Exchange Act), other than the
     Controlling Shareholders, becomes the beneficial owner (within the meaning
     of Rule 13d-3 promulgated under the Exchange Act) of securities of the
     Company representing more than 50% of the combined voting power of the
     Company's then outstanding securities ordinarily having the right to vote
     in the election of directors;

          (b) any sale, lease, exchange or transfer (in one transaction or
     series of related transactions) of all or substantially all of the assets
     of the Company and its Subsidiaries or Affiliates;

          (c) approval by the shareholders of the Company of any plan or
     proposal for the liquidation or dissolution of the Company, unless such
     plan or proposal is abandoned within 60 days following such approval; or

          (d) any "Person" (as such term is used in Sections 13(d) and 14(d)(2)
     of the Exchange Act), other than the Controlling Shareholders, shall become
     the beneficial owner of securities of the Company representing more than
     50% of the combined voting power of the Company's then outstanding
     securities ordinarily having the right to vote in the election of
     directors.

     2.7 "Code" means the Internal Revenue Code of 1986, as it exists now and as
it may be amended from time to time.

     2.8 "Committee" means the Compensation Committee of the Board or any other
committee comprised of two or more Directors appointed by the Board to
administer the Plan, as the case may be. Each member of the Committee shall (a)
be a "non-employee director" as defined by Rule 16b-3 of the Exchange Act, as
amended from time to time or any successor rule thereof; and (b) be an outside
Director as determined under Treasury Regulation 26 CFR ss.1.162-27(e)(3) or any
successor regulation thereto. Once appointed, the Committee shall continue to
serve until otherwise directed by the Board of Directors.

     2.9 "Common Stock" means the common stock of the Company, $.001 par value.

                                       2
<PAGE>

     2.10 "Company" means Hanover Compressor Company, a Delaware corporation,
and any successor thereto.

     2.11 "Consultant" means any consultant or adviser if: (i) the consultant or
adviser renders bona fide services to the Company; (ii) the services rendered by
the consultant or adviser are not in connection with the offer or sale of
securities in a capital-raising transaction and do not directly or indirectly
promote or maintain a market for the Company's securities; and (iii) the
consultant or adviser is a natural person.

     2.12 "Controlling Shareholders" means GKH Investments, L.P., GKH Partners,
L.P., and the partners therein.

     2.13 "Director" means a member of the Board.

     2.14 "Disability" means being entitled to disability benefits under the
terms of the Company's long term disability plan.

     2.15 "Employee" means any person, including an Officer or Director, who is
an employee (within the meaning of Section 3401(c) of the Code) of the Company
or any Parent or Subsidiary of the Company.

     2.16 "Exchange Act" means the Securities Exchange Act of 1934, as it exists
now or from time to time may hereafter be amended.

     2.17 "Fair Market Value" means for the relevant day:

          (a) If shares of Common Stock are listed or admitted to unlisted
     trading privileges on any national or regional securities exchange, the
     last reported sale price, regular way, as reported in the Wall Street
     Journal for the day Fair Market Value is to be determined;

          (b) If the Common Stock is not listed or admitted to unlisted trading
     privileges as provided in paragraph (a), and if sales prices for shares of
     Common Stock are reported by the National Association of Securities
     Dealers, Inc. Automated Quotations, Inc. National Market System ("NASDAQ
     System"), then the last sale price for Common Stock reported as of the
     close of business on the day Fair Market Value is to be determined, or if
     no such sale takes place on that day, the average of the high bid and low
     asked prices so reported; if Common Stock is not traded on that day, the
     next preceding day on which such stock was traded; or

          (c) If trading of the Common Stock is not reported by the NASDAQ
     System or on a stock exchange, Fair Market Value will be determined by the
     Committee in its discretion based upon the best available data.

     2.18 "Grant Date" means the date upon which an Award is granted to a
Participant under the Plan.

                                       3
<PAGE>

     2.19 "Officer" means a corporate or equivalent officer of the Company or
any Subsidiary or Affiliate of the Company.

     2.20 "Option" means the right of a Participant to purchase a specified
number of shares of Common Stock, subject to the terms and conditions of the
Plan.

     2.21 "Option Price" means the price per share at which an Option may be
exercised.

     2.22 "Participant" means an individual to whom an Option or Restricted
Stock has been granted under the Plan.

     2.23 "Plan" means the Hanover Compressor Company 2001 Equity Incentive
Plan, as set forth herein and as from time to time amended.

     2.24 "Restricted Stock" means Common Stock awarded under Article VI of the
Plan.

     2.25 "Securities Act" means the Securities Act of 1933, as it exists now or
from time to time may hereinafter be amended.

     2.26 "Subsidiary" means any corporation or other entity of which the
majority voting power or equity interest is owned directly or indirectly by the
Company.

     2.27 "Termination of Employment" means:

          (a) with respect to an Employee when the Employee's employment
     relationship with the Company and all of its Subsidiaries is terminated,
     regardless of any severance arrangements. A transfer from the Company to a
     Subsidiary or affiliate, or vice versa is not a termination of employment
     for purposes of this Plan;

          (b) with respect to a Consultant when the Consultant's consulting
     relationship with the Company is terminated either due to the termination
     of any consulting agreement, or otherwise, regardless of the fact that no
     employment relationship exists;

          (c) with respect to an Officer or Director when such individual is no
     longer serving as an Officer or Director of the Company, as a Consultant to
     or Employee of the Company and any of its Subsidiaries.

                                  ARTICLE III.
                            STOCK SUBJECT TO THE PLAN

     3.1 Stock Subject to the Plan. The shares of stock subject to awards of
Restricted Stock and Options shall be shares of the Company's Common Stock.
Subject to adjustment as provided in Article XI, the aggregate number of shares
which may be used upon exercise of Options and the purchase of Restricted Stock
under the Plan shall not exceed 1,500,000 of which no more than 1,000,000 may be
granted as Restricted Stock. Reserved shares may be either authorized but
unissued shares or treasury shares, in the Board's discretion. The maximum
number of shares which may be subject to Awards granted under this Plan to any
individual in any calendar year shall not exceed the Award Limit. If any Option
grants hereunder shall

                                       4
<PAGE>

terminate or expire such shares shall be eligible to be granted as new Options
under this Plan; provided, however, to the extent required by Section 162(m) of
the Code, shares subject to Options which are canceled continue to be counted
against the Award Limit granted to the Participant.

     3.2 Add-back of Awards. If any Option under the Plan expires or is canceled
without having been fully exercised, or is exercised in whole or in part for
cash as permitted by the Plan, the number of shares subject to such Option but
as to which such Option is not exercised prior to its expiration, cancellation
or exercise may again be optioned, granted or awarded hereunder, subject to the
limitations of Section 3.1. Furthermore, any shares subject to Options which are
adjusted pursuant to Article XI and become exercisable with respect to shares of
stock of another corporation shall be considered cancelled and may again be
optioned, granted or awarded hereunder, subject to the limitations of Section
3.1. Shares of Common Stock which are delivered by the Participant or withheld
by the Company upon the exercise of any Award under the Plan, in payment of the
exercise price thereof or tax withholding thereon, may again be optioned,
granted or awarded hereunder, subject to the limitations of Section 3.1. If any
shares of Restricted Stock are surrendered by the Participant or repurchased by
the Company pursuant to Section 6.3 hereof, such shares may again be optioned,
granted or awarded hereunder, subject to the limitations of Section 3.1.

ARTICLE IV.
                              ELIGIBLE PARTICIPANTS

4.1 Eligible Participants. All Employees, Officers, and Directors of the Company
and its Subsidiaries, and those Consultants (who are not otherwise Employees of
the Company or any of its Subsidiaries) are eligible to participate in the Plan.
Subject to the provisions of the Plan, the Committee shall determine from time
to time those individuals who shall be designated as Participants and the
number, if any, of Awards to be granted to each such Participant.

                                   ARTICLE V.
                               GRANTING OF AWARDS

     5.1 Granting of Awards. The Committee may grant Participants Restricted
Stock or Options under the Plan. The Committee shall establish the amount of
such Awards and the terms and conditions of each Award, provided that no
Participant may be granted Awards in excess of the Award Limit.

     5.2 Non-Competition and Confidential Information. Each Participant
receiving an Award shall be subject to the restriction that, during the term of
his Award Agreement and for a period of two years thereafter, he or she (i) will
not compete with any business of the Company or its Subsidiaries and (ii) will
not disclose to persons outside the Company confidential information concerning
the Company or its Subsidiaries without the Company's express written consent.

                                       5
<PAGE>

                                  ARTICLE VI.
                    TERMS AND CONDITIONS OF RESTRICTED STOCK

     6.1 Subscription Agreement. Each Award under the Plan shall be evidenced by
a Subscription Agreement. Each Subscription Agreement, in such form as is
approved by the Committee, shall be subject to such terms and conditions, not
inconsistent with the Plan as the Committee may deem appropriate. Awards of
Restricted Stock may, as determined by the Committee, be made for a purchase
price, as established by the Committee or without payment of a purchase price
therefor, but in consideration of performance of prior services for the Company
or any Subsidiary.

     6.2 Rights as Stockholders. Subject to Section 6.3 and Article IX, upon
delivery of the shares of Restricted Stock to the Participant, the Participant
shall have, unless otherwise provided by the Committee, all the rights of a
stockholder with respect to said shares, subject to the restrictions in his or
her Award Agreement, including the right to receive all dividends and other
distributions paid or made with respect to the shares; provided, however, that
in the discretion of the Committee, any extraordinary distributions with respect
to the Common Stock shall be subject to the restrictions set forth in Section
6.3.

     6.3 Restriction. All shares of Restricted Stock issued under the Plan
(including any shares received by holders thereof with respect to shares of
Restricted Stock as a result of stock dividends, stock splits or any other form
of recapitalization) shall, in the terms of each individual Award Agreement, be
subject to such restrictions as the Committee shall provide, which restrictions
may include, without limitation, restrictions concerning voting rights and
transferability and restrictions based on duration of employment with the
Company, Company performance and individual performance; provided, however, that
by action taken after the Restricted Stock is issued, the Committee may, on such
terms and conditions as it may determine to be appropriate, remove any or all of
the restrictions imposed by the terms of the Restricted Stock. Restricted Stock
may not be sold or encumbered until all restrictions are terminated or expire.

     6.4 Legend. In order to enforce the restrictions imposed upon shares of
Restricted Stock hereunder, the Committee shall cause a legend or legends to be
placed on certificates representing the restrictions applicable to all shares of
Restricted Stock, which legend or legends shall make appropriate reference to
the conditions imposed thereby.

     6.5 Escrow. The Secretary of the Company or such other escrow holder as the
Committee may appoint shall retain physical custody of each certificate
representing Restricted Stock as collateral, until such time as the Participant
satisfies his or her obligation on the four year loan between the Company and
the Participant.

     6.6 Section 83(b) Election. If a Participant makes an election under
Section 83(b) of the Code, or any successor section thereto, to be taxed with
respect to the Restricted Stock as of the date of transfer of the Restricted
Stock rather than as of the date or dates upon which the Participant would
otherwise be taxable under Section 83(a) of the Code, the Participant shall
deliver a copy of such election to the Company immediately after filing such
election with the Internal Revenue Service.

                                       6
<PAGE>
                                  ARTICLE VII.
                         TERMS AND CONDITIONS OF OPTIONS

     7.1 Option Agreement. Each Option shall be evidenced by an agreement
between the Company and the Participant. Each Option Agreement, in such form as
is approved by the Committee, shall be subject to the following express terms
and conditions and to such other terms and conditions, not inconsistent with the
Plan as the Committee may deem appropriate:

          (a) Option Period. Each Option will expire as of the earliest of:

               (i) ten years from the Grant Date;

               (ii) the date on which it is forfeited under the provisions of
          Article IX;

               (iii) the date three months after the Participant's Termination
          of Employment for any reason other than death or Disability; or

               (iv) the date twelve months after the Participant's death or
          Disability.

          (b) Option Price. At the time when the Option is granted, the
     Committee will fix the Option Price. The Option Price may be greater than,
     less than, or equal to Fair Market Value on the Option Date, as determined
     in the sole discretion of the Committee.

          (c) Other Option Provisions. The form of Option authorized by the Plan
     may contain such other provisions as the Committee may from time to time
     determine.

     7.2 Non-Qualified Stock Options. All Options granted under this Plan shall
be nonstatutory options, which are not intended to be classified as "incentive
stock options" under Section 422 of the Code.

     7.3 Non-transferability of Options. The Options granted under the Plan are
not transferable, voluntarily or involuntarily, other than by will or the laws
of descent and distribution, or to the extent permissible under Section 422 of
the Code pursuant to a qualified domestic relations order as defined in Section
414(p) of the Code. During a Participant's lifetime his Options may be exercised
only by him.

     7.4 Rights as Stockholders. No Common Stock may be delivered upon the
exercise of any Option until full payment has been made and all income tax
withholding requirements thereon have been satisfied. A Participant has no
rights whatsoever as a stockholder with respect to any shares covered by an
Option until the date of the issuance of a stock certificate for the shares.

                                 ARTICLE VIII.
                          MANNER OF EXERCISE OF OPTIONS

     8.1 Manner of Exercise of Options. To exercise an Option in whole or in
part, a Participant (or, after his death, his executor or administrator) must
give written notice to the Committee, stating the number of shares to which he
intends to exercise the Option. The

                                       7
<PAGE>

Company will issue the shares with respect to which the Option is exercised upon
payment in full of the Option Price. The Option Price may be paid (i) in cash,
(ii) in shares of Common Stock that the Participant has held for at least six
months having an aggregate Fair Market Value, as determined on the date of
delivery, equal to the Option Price, (iii) if permitted by the Committee, by
cash or certified or cashier's check for the par value of the Plan Shares plus a
promissory note for the balance of the purchase price, which note shall be
recourse to the Participant, bear a reasonable rate of interest and contain such
terms and provisions as the Committee may determine, or (iv) by delivery of
irrevocable instructions to a broker to promptly deliver to the Company the
amount of sale or loan proceeds necessary to pay for all Common Stock acquired
through such exercise and any tax withholding obligations resulting from such
exercise.

                                  ARTICLE IX.
                                VESTING OF AWARDS

     9.1 Vesting. Unless otherwise provided in a Participant's Award Agreement,
Awards shall vest and become exercisable and nonforfeitable as provided herein.
A Participant may not exercise an Award until it has become vested. The portion
of an Award that is vested depends upon the period that has elapsed since the
Grant Date. Unless the Committee establishes a different vesting schedule at the
time when an Option is granted, all Options granted under this Plan shall vest
according to the following schedule:

             Period Elapsed                        Vested Percentage
             --------------                        -----------------

     First Anniversary of Grant Date                       10%
     Second Anniversary of Grant Date                      30%
     Third Anniversary of Grant Date                       60%
     Fourth Anniversary of Grant Date                     100%

     9.2 Forfeiture. Except as provided in this section, upon a Termination of
Employment, a Participant forfeits any Awards that are not yet vested. Unless
otherwise specified by the Committee in a Participant's Award Agreement, a
Participant may exercise any Options to the extent vested upon Termination of
Employment within the following periods: (a) if Termination of Employment is for
any reason other than death, Disability or for Cause, then 90 days following
Termination of Employment, or (b) if Termination of Employment is for death or
Disability, then for 12 months following Termination of Employment. Unless the
Committee in its sole discretion specifically waives the application of this
sentence, then notwithstanding the vesting schedule contained herein or in the
Participant's agreement, if the Participant's Termination of Employment is
terminated for Cause all Options granted to the Participant will be immediately
cancelled and forfeited by the Participant upon delivery to him of notice of
such termination for Cause.

                                   ARTICLE X.
                                 ADMINISTRATION

     10.1 Administration. The Plan shall be administered by the Committee. In
addition to any other powers set forth in this Plan, the Committee has the
exclusive authority:

                                       8
<PAGE>

          (a) to construe and interpret the Plan, and to remedy any ambiguities
     or inconsistencies therein;

          (b) to establish, amend and rescind appropriate rules and regulations
     relating to the Plan;

          (c) subject to the express provisions of the Plan, to determine the
     individuals who will receive Awards, the times when they will receive them,
     the number of shares to be subject to each Award, the Option Price, payment
     terms, payment method, and expiration date applicable to each Award;

          (d) to contest on behalf of the Company or Participants, at the
     expense of the Company, any ruling or decision on any matter relating to
     the Plan or to any Awards;

          (e) generally, to administer the Plan, and to take all such steps and
     make all such determinations in connection with the Plan and the grants of
     Awards as it may deem necessary or advisable;

          (f) to determine the form in which tax withholding under Section 11.3
     of this Plan will be made; and

          (g) to amend the Plan or any Award granted hereunder as may be
     necessary in order for any business combination involving the Company to
     qualify for pooling-of-interest treatment under APB No. 16.

     10.2 Amendment of the Plan. The Committee may from time to time amend or
revise the terms of this Plan in whole or in part and may adopt any amendment
deemed necessary; provided, however, that, except as provided in Section 4(g),
no change in any Options previously granted to a Participant may be made that
would impair the rights of the Participant without the Participant's consent;
provided, however, that without the consent of the shareholders, the Committee
may not (i) amend the number of shares which may be issued upon exercise of
Options or granted as Restricted Stock, (ii) increase the Award Limit, or (iii)
extend the term of the Plan beyond ten (10) years.

                                  ARTICLE XI.
                            MISCELLANEOUS PROVISIONS

     11.1 Change of Control. Notwithstanding the provisions of Section 8 or
anything contained in a Participant's agreement to the contrary, upon a Change
in Control all Awards as determined by the Committee in its discretion shall be
subject to the following:

          (a) The Company shall have the right to acquire from Participants
     their vested Options by payment of the difference between the price per
     share of Common Stock established in the Change in Control and the Option
     Price;

          (b) All unvested Options shall either (i) convert into options to
     purchase securities of the successor in the Change of Control on the same
     terms and conditions as apply to the Options under the Plan, (ii) convert
     into such consideration as the Participant

                                       9
<PAGE>

     would have received had the Options been fully vested, or (iii) be treated
     as otherwise determined by the Committee; and

          (c) All unvested shares of Restricted Stock shall either (i) convert
     into shares of Restricted Stock of the successor in the Change of Control
     on the same terms and conditions as apply to the shares Restricted Stock
     under the Plan, (ii) fully vest, no longer be subject to any restrictions
     and become transferable, or (iii) be treated as otherwise determined by the
     Committee.

     11.2 Adjustments to Reflect Changes in Capital Structure. If there is any
change in the corporate structure or shares of the Company, the Committee may,
in its discretion, make any adjustments necessary to prevent accretion, or to
protect against dilution, in the number and kind of shares authorized by the
Plan and, with respect to outstanding Awards, in the number and kind of shares
covered thereby and with respect to Options in the applicable Option Price. For
the purpose of this Section 11.2, a change in the corporate structure or shares
of the Company includes, without limitation, any change resulting from a
recapitalization, stock split, stock dividend, consolidation, rights offering,
spin-off, reorganization, or liquidation and any transaction in which shares of
Common Stock are changed into or exchanged for a different number or kind of
shares of stock or other securities of the Company or another entity.

     11.3 Withholding Tax. The Company shall have the right to withhold in cash
or shares of Common Stock with respect to the exercise of Options or grants of
Restricted Stock under the Plan any taxes required by law to be withheld.

     11.4 At-Will Employment. Nothing in the Plan or in any Award Agreement
hereunder shall confer upon any Participant any right to continue in the employ
of, or as a Consultant for, the Company or any Subsidiary, or as a Director of
the Company, or shall interfere with or restrict in any way the rights of the
Company and any Subsidiary, which are hereby expressly reserved, to discharge
any Participant at any time for any reason whatsoever, with or without cause,
except to the extent expressly provided otherwise in a written employment
agreement between the Participant and the Company and any Subsidiary.

     11.5 Rules of Construction.

          (a) Governing Law. The construction and operation of this Plan are
     governed by the laws of the State of Delaware.

          (b) Undefined Terms. Unless the context requires another meaning, any
     term not specifically defined in this Plan has the meaning given to it by
     the Code.

          (c) Headings. All headings in this Plan are for reference only and are
     not to be utilized in construing the Plan.

          (d) Gender. Unless clearly appropriate, all nouns of whatever gender
     refer indifferently to persons of any gender.

          (e) Singular and Plural. Unless clearly inappropriate, singular terms
     refer also to the plural and vice versa.

                                       10
<PAGE>

          (f) Severability. If any provision of this Plan is determined to be
     illegal or invalid for any reason, the remaining provisions shall continue
     in full force and effect and shall be construed and enforced as if the
     illegal or invalid provision did not exist, unless the continuance of the
     Plan in such circumstances is not consistent with its purposes.

                                  ARTICLE XII.
                       CONDITIONS UPON ISSUANCE OF SHARES

     12.1 Conditions Upon Issuance Of Shares. An Option shall not be exercisable
and a share of Common Stock shall not be issued pursuant to the exercise of an
Option or grant of Restricted Stock until such time as the Plan has been
approved by the Board of Directors and unless the exercise of such Option and
the issuance and delivery of such share pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act,
the Exchange Act, the rules and regulations promulgated thereunder, and the
requirements of any stock exchange upon which the shares of Common Stock may
then be listed, and shall be further subject to the approval of counsel for the
Company with respect to such compliance. As a condition to the exercise of an
Option or grant of Restricted Stock, the Company may require the person
exercising such Option or receiving such Award to represent and warrant that the
Common Stock is being purchased only for investment and without any present
intention to sell or distribute such shares if, in the opinion of counsel for
the Company, such a representation is required by any of the aforementioned
relevant provisions of law.

                                 ARTICLE XIII.
                     EFFECTIVE DATE AND TERMINATION OF PLAN

     13.1 Effective Date. This Plan is effective as of the date of its adoption
by the Board of Directors subject to the approval of the Company's shareholders.
Prior to obtaining shareholder's approval, the Committee may, in its discretion,
grant options under the Plan as if the Plan were effective, provided the
exercise of the options so granted shall be expressly subject to the approval of
the Plan by the shareholders.

     13.2 Termination of the Plan. The Board may terminate the Plan at any time
with respect to any shares that are not then subject to Awards. Termination of
the Plan will not affect the rights and obligations of any Participant with
respect to Awards granted before termination. No Options or Restricted Stock
shall be granted under the Plan after the tenth anniversary of the date the Plan
is approved by the Company's shareholders under Section 13.1.

                                  * * * * * * *

     I hereby certify that the Plan was duly adopted by the Board of Directors
of Hanover Compressor Company on March ___, 2001 and approved by the
shareholders of Hanover Compressor Company on May 17, 2001.

                                     /s/ Richard S. Meller
                                     ---------------------
                                     Secretary

                                       11

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