EXECUTION COPY
GUARANTEE
GUARANTEE dated as of June 15, 1999, made by HANOVER COMPRESSOR COMPANY,
a Delaware corporation, HANOVER/XXXXX, INC., a Delaware corporation, HANOVER
MAINTECH, INC., a Texas corporation and HANOVER LAND COMPANY, a Texas
corporation (individually, a "Guarantor", collectively, the "Guarantors"), in
favor of the beneficiaries (as hereinafter defined).
Preliminary Statement
The Guarantors wish to induce (i) Hanover Equipment Trust 1999A (the
"Lessor") to enter into the Lease and the other Operative Agreements to which it
is a party; (ii) the Lenders to enter into the Credit Agreement and the other
Operative Agreements to which they are party; and (iii) Societe Generale
Financial Corporation and FBTC Leasing Corp. (the "Investors") to enter into the
Participation Agreement (as hereinafter defined) and the other Operative
Agreements to which it is a party.
NOW, THEREFORE, in consideration of the premises contained herein and to
induce (i) the Lessor to enter into the Lease and the other Operative Agreements
to which it is a party; (ii) the Lenders to enter into the Credit Agreement and
the other Operative Agreements to which it is a party; and (iii) the Investors
to enter into the Participation Agreement and the other Operative Agreements to
which it is a party, the Guarantors hereby agree for the benefit of the Lessor,
the Agent, for the ratable benefit of the Lenders and the Investors and their
respective successors and assigns (individually a "Beneficiary", collectively,
the "Beneficiaries"), as follows:
1. Defined Terms. (a) Capitalized terms not otherwise defined herein
(including in the Preliminary Statement) shall have the meanings ascribed to
them in Annex A to the Participation Agreement dated as of the date hereof among
Hanover Compressor Company ("HCC"), the Lessor, the Investors, The Chase
Manhattan Bank, as agent (the "Agent") and the several banks and financial
institutions from time to time party thereto (the "Lenders"), as the same may
from time to time be amended, supplemented or otherwise modified (the
"Participation Agreement").
(b) As used herein, the following terms shall have the following
meanings:
"Contribution Obligations" means the collective reference to the
outstanding amount of the Investor Contributions and the Investor Yield with
respect thereto and all rights of the Investors to receive distributions under
the Trust Agreement and any of the other Operative Agreements.
"Guaranteed Obligations" means the collective reference to (i) the Note
Obligations, (ii) the Contribution Obligations and (iii) the Lease Obligations
and, with respect to each such obligation, interest accruing thereon at the
applicable rate provided in the Operative
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Agreements after maturity and interest accruing at the then applicable rate
provided in the Operative Agreements after the filing of any petition in
bankruptcy, or the commencement of an insolvency, reorganization or like
proceeding, whether or not a claim for post-filing or post-petition interest is
allowed in such proceeding and whether such obligations are direct or indirect,
absolute or contingent, due or to become due, or now existing or hereinafter
incurred, which may arise, under, out of or in connection with any of the
Operative Agreements, any other document made, delivered or given in connection
therewith, in each case whether on account of principal, interest, Investor
Contributions or Investor Yield, reimbursement obligations, fees, indemnities,
costs, expenses, or payment obligations (including, without limitation, all fees
and disbursements of counsel to any of the Beneficiaries that are required to be
paid by HCC pursuant to the terms of the Operative Agreements).
"Lease Obligations" means the collective reference to the payment
obligations and undertakings applicable to HCC contained in or arising under the
Lease or any of the other Operative Agreements to which HCC is a party,
including, but not limited to, the full and punctual payment by HCC, when due,
of any and all Rent, the payments required pursuant to Section 17.2 and 17.3 of
the Lease, the Purchase Option Price and the Maximum Residual Guarantee Amount.
"Note Obligations" means the collective reference to the unpaid
principal of and interest on the Notes and all other payment obligations and
liabilities of the Lessor to the Agent and the Lenders under the Notes, the
Credit Agreement and any of the other Operative Agreements.
2. Guaranty. (a) Subject to the provisions of paragraph 2(b) and (c),
the Guarantors hereby, jointly and severally, unconditionally and irrevocably
guaranty to the Beneficiaries and their respective successors, endorsees,
transferees and assigns the prompt and complete payment when due (whether at the
stated maturity, by acceleration or otherwise) of the Guaranteed Obligations.
(b) Anything to the contrary notwithstanding, the Guarantors shall not
at anytime be required to make any payment with regard to the Tranche B Loans or
with respect to the Contribution Obligations unless at such time a Lease Event
of Default has occurred and is continuing.
(c) Anything herein or in any other Operative Agreement to the contrary
notwithstanding, the maximum liability of each Guarantor (other than HCC)
hereunder and under the other Operative Agreement shall in no event exceed the
amount which can be guaranteed by such Guarantor under applicable federal and
state laws relating to the insolvency of debtors.
(d) The Guarantors further agree, jointly and severally, to pay any and
all costs, expenses (including all fees and disbursements of counsel) and
damages which may be paid or incurred in enforcing, or obtaining advice of
counsel in respect of, any rights with respect to, or collecting from the
Guarantors, any or all of the Guaranteed Obligations and/or enforcing any rights
with respect to, or collecting against, the Guarantors under this Guarantee.
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3. Right of Set-off. In addition to any rights now or hereafter granted
under applicable law or otherwise, and not by way of limitation of any such
rights, upon the occurrence and during the continuance of an Event of Default,
each of the Investors, Agent and each Lender is hereby authorized at any time or
from time to time, without presentment, demand, protest or other notice of any
kind to the Borrower, the Guarantors or to any other Person, any such notice
being hereby expressly waived, to set off and to appropriate and apply any and
all deposits (general or special) and any other Indebtedness at any time held or
owing by such Investor, Agent or such Lender (including, without limitation, by
branches and agencies of such Investor, Agent or such Lender wherever located)
to or for the credit or the account of the Guarantors against and on account of
the obligations and liabilities of the Guarantors hereunder or under any of the
other Operative Agreements, and all other claims of any nature or description
arising out of or connected with this Guarantee or any other Operative
Agreement, irrespective of whether such Investor, Agent or such Lender shall
have made any demand hereunder and although said obligations, liabilities or
claims, or any of them, shall be contingent or unmatured. Each of the Investors,
Agent and each Lender shall notify such Guarantor promptly of any such set-off
and the application made by such Investor, Agent or such Lender; provided, that
the failure to give such notice shall not affect the validity of such set-off
and application.
4. No Subrogation. Notwithstanding any payment or payments made by the
Guarantors hereunder or any set-off or application of funds of the Guarantors by
any Lender, the Guarantors shall not be entitled to exercise or enforce any
subrogation rights of the Investors, Agent or any Lender against the Borrower or
any other Person or any collateral security or guarantee or right of offset held
by the Investors, Agent or any Lender for the payment of the Guaranteed
Obligations, nor shall the Guarantors seek or be entitled to seek any
contribution or reimbursement from the Borrower or any other Person in respect
of payments made by the Guarantors hereunder, until all amounts owing to the
Investors, Agent and the Lenders by the Borrower on account of the Guaranteed
Obligations and all amounts owing hereunder are paid in full and the Commitments
are terminated. If any amount shall be paid to the Guarantors on account of such
subrogation rights at any time when all of the Guaranteed Obligations and all
amounts owing hereunder shall not have been paid in full or the Commitments
shall not have been terminated, such amount shall be held by the Guarantors in
trust for the Investors, Agent and the Lenders, segregated from other funds of
the Guarantors, and shall, forthwith upon receipt by the Guarantors, be turned
over to the Agent in the exact form received by the Guarantors (duly indorsed by
the Guarantors to the Agent, if required), to be applied against the Guaranteed
Obligations, whether matured or unmatured, in such order as the Agent may
determine.
5. Amendments, etc. with respect to the Guaranteed Obligations; Waiver
of Rights. The Guarantors shall remain obligated hereunder notwithstanding that,
without any reservation of rights against the Guarantors and without notice to
or further assent by the Guarantors, any demand for payment of any of the
Guaranteed Obligations made by the Investors, Agent or any Lender may be
rescinded by such party and any of the Guaranteed Obligations continued, and the
Guaranteed Obligations, or the liability of any other party upon or for any part
thereof, or any collateral security or guarantee therefor or right of offset
with respect thereto, may, from time to time, in whole or in part, be renewed,
extended, amended, modified, accelerated, compromised, waived, surrendered or
released by the Investors, Agent or any Lender, and the Credit Agreement, the
Participation Agreement and the other Operative
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Agreements may be amended, modified, supplemented or terminated, in whole or in
part, as the Agent (or the Required Lenders, as the case may be) may deem
advisable from time to time in accordance with the terms thereof, and any
collateral security, guarantee or right of offset at any time held by the
Investors, Agent or any Lender for the payment of the Guaranteed Obligations may
be sold, exchanged, waived, surrendered or released. Neither the Investors,
Agent nor any Lender shall have any obligation to protect, secure, perfect or
insure any Lien at any time held by it as security for the Guaranteed
Obligations or for this Guarantee or any property subject thereto. When making
any demand hereunder against the Guarantors, the Investors, Agent or any Lender
may, but shall be under no obligation to, make a similar demand on the Borrower
or any other guarantor, and any failure by the Investors, Agent or any Lender to
make any such demand or to collect any payments from the Borrower or any other
guarantor or any release of the Borrower or such other guarantor shall not
relieve the Guarantors from their obligations under this Guarantee, and shall
not impair or affect the rights and remedies, express or implied, or as a matter
of law, of the Investors, Agent or any Lender against the Guarantors. For the
purposes hereof "demand" shall include the commencement and continuance of any
legal proceedings.
6. Guarantee Absolute and Unconditional. Each Guarantor waives any and
all notice of the creation, renewal, extension or accrual of any of the
Guaranteed Obligations and notice of or proof of reliance by the Investors,
Agent or any Lender upon this Guarantee or acceptance of this Guarantee, the
Guaranteed Obligations, and any of them, shall conclusively be deemed to have
been created, contracted or incurred, or renewed, extended, amended or waived,
in reliance upon this Guarantee; and all dealings between the Borrower and such
Guarantor, on the one hand, and the Agent and the Lenders, on the other hand,
likewise shall be conclusively presumed to have been had or consummated in
reliance upon this Guarantee. Each Guarantor waives diligence, presentment,
protest, demand for payment and notice of default or nonpayment to or upon the
Borrower or such Guarantor with respect to the Guaranteed Obligations. Each
Guarantor understands and agrees that this Guarantee shall be construed as a
continuing, absolute and unconditional guarantee and surety of payment without
regard to (a) the validity, regularity or enforceability of the Credit Agreement
or any other Operative Agreement, any of the Guaranteed Obligations or any other
collateral security therefor or guarantee or right of offset with respect
thereto at any time or from time to time held by the Investors, Agent or any
Lender, (b) any defense, set-off or counterclaim (other than a defense of
payment or performance) which may at any time be available to or be asserted by
the Borrower or such Guarantor against the Investors, Agent or any Lender, or
(c) any other circumstance whatsoever (with or without notice to or knowledge of
the Borrower or such Guarantor) which constitutes, or might be construed to
constitute, an equitable or legal discharge of the Borrower for the Guaranteed
Obligations, or of such Guarantor under this Guarantee, in bankruptcy or in any
other instance. When pursuing its rights and remedies hereunder against any
Guarantor, the Investors, the Agent and any Lender may, but shall be under no
obligation to, pursue such rights and remedies as it may have against the
Borrower or any other Person or against any collateral security or guarantee for
the Guaranteed Obligations or any right of offset with respect thereto, and any
failure by the Investors, Agent or any Lender to pursue such other rights or
remedies or to collect any payments from the Borrower or any such other Person
or to realize upon any such collateral security or guarantee or to exercise any
such right of offset, or any release of the Borrower or any such other Person or
any such collateral security, guarantee or right of offset, shall not relieve
such Guarantor of any liability hereunder, and shall not impair or affect the
rights and remedies,
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whether express, implied or available as a matter of law, of the Investors, the
Agent and the Lenders against such Guarantor. This Guarantee shall remain in
full force and effect and be binding in accordance with and to the extent of its
terms upon such Guarantor and the successors and assigns thereof, and shall
inure to the benefit of the Investors, the Lessor, the Agent and the Lenders,
and their respective successors, indorsees, transferees and assigns, until all
the Guaranteed Obligations and the obligations of such Guarantor under this
Guarantee shall have been satisfied by payment in full and the Commitments shall
be terminated, notwithstanding that from time to time during the term of the
Credit Agreement the Borrower may be free from any Guaranteed Obligations.
7. Reinstatement. This Guarantee shall continue to be effective, or be
reinstated, as the case may be, if at any time payment, or any part thereof, of
any of the Guaranteed Obligations is rescinded or must otherwise be restored or
returned by the Investors, Agent or any Lender upon the insolvency, bankruptcy,
dissolution, liquidation or reorganization of the Borrower or the Guarantors, or
upon or as a result of the appointment of a receiver, intervenor or conservator
of, or trustee or similar officer for, the Borrower or the Guarantors or any
substantial part of its property, or otherwise, all as though such payments had
not been made.
8. Payments. The Guarantors hereby guarantee that payments hereunder
will be paid to the Agent without set-off or counterclaim in Dollars at the
office of the Agent located at 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000.
9. Representations, Warranties. In order to induce the Lenders to enter
into the Credit Agreement and to make the Loans, the Investors to enter into the
Participation Agreement and make the Investor Contribution and the Lessor to
enter into the Lease, HCC hereby represents and warrants to the Beneficiaries as
follows, all of which shall survive the execution and delivery of this Guarantee
and the Credit Agreement and the making of the Loans:
9.1 Financial Condition. (a) The consolidated balance sheets of HCC and
its consolidated Subsidiaries as at December 31, 1998 and December 31, 1997 and
the related consolidated statements of income and of cash flows for the fiscal
year ended on such date, reported on by PricewaterhouseCoopers LLP copies of
which have heretofore been furnished to each Lender, present fairly, in all
material respects, the consolidated financial condition of HCC and its
consolidated Subsidiaries as at such dates, and the consolidated results of
their operations and their consolidated cash flows for the fiscal year then
ended. The unaudited consolidated balance sheets of HCC and its consolidated
Subsidiaries as at March 31, 1999, the related unaudited consolidated statements
of income and of cash flows for the three month period ended on such date,
certified by a Responsible Officer of HCC, copies of which have heretofore been
furnished to each Lender, present fairly, in all material respects, the
consolidated financial condition of HCC, and its consolidated Subsidiaries as at
such dates, and the consolidated results of its operations and consolidated cash
flows for the three month period then ended (subject to normal year-end audit
adjustments).
(b) All such financial statements, including the related schedules and
notes thereto, have been prepared in accordance with GAAP applied consistently
throughout the periods involved (except as approved by such accountants or
Responsible Officer, as the case may
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be, and as disclosed therein). Other than the Other Equipment Leases and the
Guarantor Obligations permitted under Section 11.4 below, neither HCC nor any of
its consolidated Subsidiaries had, at the date of the most recent balance sheet
referred to above, any material Guarantor Obligation, reasonably foreseeable
contingent liability or liability for taxes, or any long-term lease or unusual
forward or long-term commitment, including, without limitation, any interest
rate or foreign currency swap or exchange transaction, which is not reflected in
the foregoing statements or in the notes thereto. Except as disclosed on
Schedule 9.1(b) hereto, during the period from March 31, 1999 to and including
the date hereof there has been no sale, transfer or other disposition by HCC or
any of its consolidated Subsidiaries of any material part of its business or
property and no purchase or other acquisition of any business or property
(including any capital stock of any other Person) material in relation to the
consolidated financial condition of HCC and its consolidated Subsidiaries at
March 31, 1999.
9.2 No Change. Except as set forth in HCC's form 10-Q filed with respect
to the period ending March 31, 1999, (a) there has been no development or event
nor any prospective development or event, which has had or would reasonably be
expected to have a Material Adverse Effect and (b) except as disclosed on
Schedule 9.2 to this Guarantee, as of the date hereof, no dividends or other
distributions have been declared, paid or made upon the Capital Stock of HCC nor
has any of the Capital Stock of HCC been redeemed, retired, purchased or
otherwise acquired for value by HCC or any of its respective Subsidiaries.
9.3 Corporate Existence; Compliance with Law. Each Guarantor (a) is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization, (b) has the corporate power and authority, and
the legal right, to own and operate its property, to lease the property it
operates as lessee and to conduct the business in which it is currently engaged,
(c) is duly qualified as a foreign corporation and in good standing under the
laws of each jurisdiction where its ownership, lease or operation of property or
the conduct of its business requires such qualification, except where the
failure to be so qualified would not reasonably be expected to have a Material
Adverse Effect, and (d) is in compliance with all Requirements of Law except to
the extent that the failure to comply therewith would not, in the aggregate,
reasonably be expected to have a Material Adverse Effect.
9.4 Corporate Power; Authorization; Enforceable Obligations. Each
Guarantor has the corporate power and authority, and the legal right, to make,
deliver and perform the Operative Agreements to which it is a party. HCC has the
corporate power and authority, and the legal right, to perform the Operative
Agreements and has taken all necessary corporate action to authorize the
performing under the Operative Agreements on the terms and conditions of the
Operative Agreements. Each Guarantor has taken all necessary corporate action to
authorize the execution, delivery and performance of this Guarantee. No consent
or authorization of, filing with or other act by or in respect of, any
Governmental Authority or any other Person (other than consents that have been
obtained and consents or authorizations the failure to obtain would not, in the
aggregate, reasonably be expected to have a Material Adverse Effect) is required
in connection with the Loans or with the execution, delivery, performance,
validity or enforceability of this Guarantee or any of the other Operative
Agreements. This Guarantee has been duly executed and delivered on behalf of the
Guarantors party hereto. This Guarantee constitutes, each Operative Agreement
when executed and delivered will constitute, a
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legal, valid and binding obligation of the Guarantors party thereto enforceable
against such Guarantors in accordance with their respective terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law).
9.5 No Legal Bar. The execution, delivery and performance of this
Guarantee and the other Operative Agreements, the Loans and the use of the
proceeds thereof will not violate any Requirement of Law or Contractual
Obligation of any Guarantor party thereto and will not result in, or require,
the creation or imposition of any Lien on any of their respective properties or
revenues pursuant to any such Requirement of Law or Contractual Obligation,
except as contemplated hereby or thereby and except to the extent any such
violation or creation or imposition of a Lien would not reasonably be expected
to have a Material Adverse Effect.
9.6 No Material Litigation. Except as set forth in HCC's Form 10-Q,
filed with respect to the period ending March 31, 1999, no litigation,
investigation or proceeding of or before any arbitrator or Governmental
Authority is pending or, to the knowledge of HCC, threatened by or against any
Guarantor or against any of their respective properties or revenues (a) with
respect to this Guarantee or the other Operative Agreements or any of the
transactions contemplated hereby, or (b) which would reasonably be expected to
have a Material Adverse Effect.
9.7 No Default. None of the Guarantors nor any of their respective
Subsidiaries is in default under or with respect to any of their respective
Contractual Obligations in any respect which if not cured would reasonably be
expected to have a Material Adverse Effect. No Default or Event of Default has
occurred and is continuing.
9.8 Ownership of Property; Liens; Leases of Equipment. Each of the
Guarantors has good record and marketable title in fee simple (except for
exceptions to title as will not in the aggregate materially interfere with the
present or contemplated use of the property affected thereby) to, or a valid
leasehold interest in, all its real property, and good title to all its other
property, and none of such property is subject to any Lien except as permitted
by Section 11.3. None of the Equipment or Inventory (as defined in the Uniform
Commercial Code) owned by any Guarantor has been leased by such Guarantor as
lessor, except pursuant to operating leases (which do not constitute Financing
Leases). As used herein, Equipment or Inventory leased by a Guarantor under a
Financing Lease shall be deemed "owned" by such Guarantor.
9.9 Intellectual Property. Each Guarantor owns, or is licensed to use,
all trademarks, tradenames, trade secrets, copyrights, technology, know-how and
processes necessary for the conduct of its business as currently conducted
except for those the failure to own or license which would not reasonably be
expected to have a Material Adverse Effect (the "Intellectual Property"). To the
knowledge of each Guarantor, no claim has been asserted and is pending by any
Person challenging or questioning the use of any such Intellectual Property or
the validity or effectiveness of any such Intellectual Property, nor does each
Guarantor know of any valid basis for any such claim, which would reasonably be
expected to have a Material Adverse Effect. The use of such Intellectual
Property by the Guarantors does not infringe on the rights of
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any Person, except for such claims and infringements that, in the aggregate,
would not reasonably be expected to have a Material Adverse Effect.
9.10 Taxes. Each of the Guarantors has filed or caused to be filed all
tax returns which, to the knowledge of each Guarantor, are required to be filed
and has paid all taxes shown to be due and payable on said returns or on any
assessments made against it or any of its property and all other taxes, fees or
other charges imposed on it or any of its property by any Governmental Authority
(other than any the amount or validity of which are currently being contested in
good faith by appropriate proceedings and with respect to which reserves in
conformity with GAAP have been provided on the books of any of the Guarantors,
as the case may be); no tax Lien has been filed against the property of any
Guarantor, and, to the knowledge of each Guarantor, no claim is being asserted,
with respect to any such tax, fee or other charge.
9.11 Federal Regulations. No part of the proceeds of any Loans will be
used for "purchasing" or "carrying" any "margin stock" within the respective
meanings of each of the quoted terms under Regulation U of the Board of
Governors of the Federal Reserve System as now and from time to time hereafter
in effect or for any purpose which violates the provisions of the Regulations of
such Board of Governors. If requested by any Lender or the Agent, HCC will
furnish to the Agent and each Lender a statement to the foregoing effect in
conformity with the requirements of FR Form U-1 referred to in said
Regulation U.
9.12 ERISA. Neither a Reportable Event nor an "accumulated funding
deficiency" (within the meaning of Section 412 of the Code or Section 302 of
ERISA) has occurred during the five-year period prior to the date on which this
representation is made or deemed made with respect to any Plan, and each Plan
has complied in all material respects with the applicable provisions of ERISA
and the Code. No termination of a Single Employer Plan has occurred and no lien
in favor of the PBGC or a Plan has arisen during the five-year period prior to
the date as of which this representation is deemed made. The present value of
all accrued benefits under each Single Employer Plan maintained by HCC, or any
Commonly Controlled Entity (based on those assumptions used to fund the Plans)
did not, as of the last annual valuation date prior to the date on which this
representation is made or deemed made, exceed the value of the assets of such
Plan allocable to such accrued benefits. Neither HCC nor any Commonly Controlled
Entity has had a complete or partial withdrawal from any Multiemployer Plan, and
neither HCC nor any Commonly Controlled Entity would become subject to any
liability under ERISA if HCC or any such Commonly Controlled Entity were to
withdraw completely from all Multiemployer Plans as of the valuation date most
closely preceding the date on which this representation is made or deemed made.
No such Multiemployer Plan is in Reorganization or Insolvent. The present value
(determined using actuarial and other assumptions which are reasonable in
respect of the benefits provided and the employees participating) of the
liability of HCC and each Commonly Controlled Entity for post retirement
benefits to be provided to their current and former employees under Plans which
are welfare benefit plans (as defined in Section 3(1) of ERISA) does not, in the
aggregate, exceed the assets under all such Plans allocable to such benefits.
9.13 Investment Company Act; Other Regulations. None of the Guarantors
is an "investment company", or a company "controlled" by an "investment
company", within the meaning of the Investment Company Act of 1940, as amended.
None of the Guarantors is subject
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to regulation under any Federal or State statute or regulation which limits its
ability to incur Indebtedness or change rates or change tariffs. None of the
Guarantors are "holding companies" or "subsidiary companies" of a "holding
company" or a "subsidiary company" of a "holding company" within the meaning of
the Public Utility Holding Company Act of 1935, as amended.
9.14 Subsidiaries. As of the Initial Closing Date, HCC has no
Subsidiaries other than as set forth on Schedule 9.14. Except if a Guarantor,
other than cash or Cash Equivalents located in bank accounts at the Agent, none
of the assets owned by any Unqualified Subsidiary as of the date hereof are
located within the United States of America or any territory thereof.
9.15 Environmental Matters. Each of the representations and warranties
set forth in paragraphs (a) through (e) of this subsection is true and correct
with respect to each parcel of real property owned or operated by any of the
Guarantors (the "Properties"), except to the extent that the facts and
circumstances giving rise to any such failure to be so true and correct would
not reasonably be expected to have a Material Adverse Effect:
(a) Except as set forth on Schedule 9.15, the Properties do not contain,
and have not previously contained, in, on, or under, including, without
limitation, the soil and groundwater thereunder, any Hazardous Substances in
concentrations which violate Environmental Laws.
(b) Except as set forth on Schedule 9.15, the Properties and all
operations and facilities at the Properties are in compliance with all
Environmental Laws, and there is no Hazardous Substances contamination or
violation of any Environmental Law which would reasonably be expected to
interfere with the continued operation of any of the Properties or impair the
fair saleable value of any thereof.
(c) Except as set forth on Schedule 9.15, none of the Guarantors has
received any complaint, notice of violation, alleged violation, investigation or
advisory action or of potential liability or of potential responsibility
regarding environmental protection matters or environmental permit compliance
with regard to the Properties, nor is HCC aware that any Governmental Authority
is contemplating delivering to any Guarantor any such notice.
(d) Hazardous Substances have not been generated, treated, stored,
disposed of, at, on or under any of the Properties, nor have any Hazardous
Substances been transferred to any other location, in violation of any
Environmental Laws from the Properties or as a result of the sale or lease of
any equipment or inventory of any Guarantor.
(e) There are no governmental, administrative actions or judicial
proceedings pending or contemplated under any Environmental Laws to which any
Guarantor is or to HCC's knowledge will be named as a party with respect to the
Properties, nor to HCC's knowledge are there any consent decrees or other
decrees, consent orders, administrative orders or other orders, or other
administrative or judicial requirements outstanding under any Environmental Law
with respect to any of the Properties.
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9.16 Accuracy and Completeness of Information. The factual statements
contained in the Operative Agreements and each other agreement, instrument,
certificate and document related thereto and any other certificates or documents
furnished or to be furnished to the Investors, the Agent or the Lenders by any
Guarantor from time to time in connection with this Guarantee (in any case
excluding any of the financial statements referred to in Section 9.1(a) and 10.1
hereof), taken as a whole, and taking into consideration all corrections or
substituted documents, do not and will not, as of the date when made, contain
any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements contained therein not misleading in
light of the circumstances in which the same were made, all except as otherwise
qualified herein or therein.
9.17 Year 2000 Matters. Any reprogramming required to permit the proper
functioning (but only to the extent that such proper functioning would otherwise
be impaired by the occurrence of the year 2000) in and following the year 2000
of computer systems and other equipment containing embedded microchips, in
either case owned or operated by Guarantors or used or relied upon in the
conduct of their business (including any such systems and other equipment
supplied by others or with which the computer systems of Guarantors interface),
and the testing of all such systems and other equipment as so reprogrammed, has
been completed by January 1, 1999. The costs to Guarantors that have not been
incurred as of the date hereof for such reprogramming and testing and for the
other reasonably foreseeable consequences to them of any improper functioning of
other computer systems and equipment containing embedded microchips due to the
occurrence of the year 2000 could not reasonably be expected to result in an
Event of Default or to have a Material Adverse Effect. Except for any
reprogramming referred to above, the computer systems of Guarantors are and,
with ordinary course upgrading and maintenance, will continue to be, sufficient
for the conduct of Guarantors' business as currently conducted.
10. Affirmative Covenants of the Guarantor. Each Guarantor hereby
covenants and agrees that so long as this Guarantee is in effect and until the
Commitments have terminated and the Guaranteed Obligations and all amounts owing
hereunder are paid in full such Guarantor will:
10.1 Financial Statements. Furnish to each Lender and each of the
Investors:
(a) as soon as available for distribution to shareholders and creditors
generally, but in any event within 120 days after the end of each fiscal year of
HCC, a copy of the consolidated balance sheet of HCC and its consolidated
Subsidiaries, as at the end of such year and the related consolidated statements
of income and retained earnings and of cash flows for such year, setting forth
in each case in comparative form the figures for the previous year, reported on
without a "going concern" or like qualification or exception, or qualification
arising out of the scope of the audit, by Price Waterhouse or other independent
certified public accountants of nationally recognized standing not unacceptable
to the Required Lenders;
(b) as soon as available for distribution to shareholders and creditors
generally, but in any event within 90 days after the end of each fiscal year of
HCC, a copy of the
11
unaudited consolidated balance sheet of HCC and its consolidated Subsidiaries,
as at the end of such year, and the related unaudited consolidated statements of
income and retained earnings and of cash flows for such year, in each case
setting forth in comparative form the figures for the corresponding period of
the previous year and the figures for such period as shown on the budgets of HCC
for such year; and
(c) as soon as available, but in any event not later than 45 days after
the end of each of the first three quarterly periods of each fiscal year of HCC,
the unaudited consolidated balance sheet of HCC and its consolidated
Subsidiaries, as at the end of such quarter, and the related unaudited
consolidated statements of income and retained earnings and of cash flows of HCC
and its consolidated Subsidiaries, for such quarter and the portion of the
fiscal year through the end of such quarter, setting forth in each case in
comparative form the figures for the corresponding period of the previous year,
certified by a Responsible Officer as being fairly stated in all material
respects when considered in relation to the consolidated financial statements of
HCC and its consolidated Subsidiaries, (subject to normal year-end audit
adjustments), and in each case setting forth in comparative form the figures for
such periods as shown on the budgets of such Person for such year; all such
financial statements to be complete and correct in all material respects and to
be prepared in reasonable detail and in accordance with GAAP applied
consistently throughout the periods reflected therein and with prior periods
(except as approved by such accountants or officer, as the case may be, and
disclosed therein).
10.2 Certificates; Other Information. Furnish to each Lender and each of
the Investors:
(a) concurrently with the delivery of the financial statements referred
to in subsection 10.1(a), a certificate of the independent certified public
accountants reporting on such financial statements stating that in making the
examination necessary therefor no knowledge was obtained of any Default or Event
of Default, except as specified in such certificate;
(b) concurrently with the delivery of the financial statements referred
to in subsections 10.1(a) and 10.1(c), a certificate of a Responsible Officer
stating that, to the best of such Responsible Officer's knowledge, HCC during
such period has observed or performed all of its covenants and other agreements,
and satisfied every material condition, contained in this Guarantee and the
other Operative Agreements to which it is a party to be observed, performed or
satisfied by it, and that such Responsible Officer has obtained no knowledge of
any Default or Event of Default except as specified in such certificate;
(c) not later than 45 days following the end of each fiscal year of HCC,
a copy of the projections by HCC of the operating budget and cash flow budget of
HCC and its Subsidiaries for the succeeding fiscal year, such projections to be
accompanied by a certificate of a Responsible Officer to the effect that such
projections have been prepared
12
on the basis of reasonable assumptions and that such Officer has no reason to
believe they are incorrect or misleading in any material respect;
(d)(i) within five days after the same are sent, copies of all financial
statements and reports which HCC, if at such time any class of HCC's securities
are held by the public, sends to its stockholders generally, or, if otherwise,
such financial statements and reports as are made generally available to the
public, and (ii) within five days after the same are filed, copies of all
financial statements and reports which HCC may make to, or file with, the
Securities and Exchange Commission or any successor or analogous Governmental
Authority;
(e) concurrently with the delivery of the financial statements referred
to in subsections 10.1(b) and (c), a management summary describing and analyzing
the performance of HCC and its Subsidiaries during the periods covered by such
financial statements;
(f) within 45 days after the end of each quarter in each fiscal year of
HCC, a certificate of the principal financial officer of HCC showing in detail
the computations necessary to calculate the Applicable Margin (an "Applicable
Margin Certificate"); and
(g) promptly, such additional financial and other information as any
Lender or either of the Investors may from time to time reasonably request.
10.3 Payment of Obligations. Pay, discharge or otherwise satisfy at or
before maturity or before they become delinquent, as the case may be, all its
obligations of whatever nature, except where the amount or validity thereof is
currently being contested in good faith by appropriate proceedings and reserves
in conformity with GAAP with respect thereto have been provided on the books of
HCC or any Subsidiary of HCC, as the case may be.
10.4 Conduct of Business and Maintenance of Existence. Continue to
engage in business of the same general type as now conducted by it and preserve,
renew and keep in full force and effect its corporate existence and take all
reasonable action to maintain all rights, privileges and franchises necessary or
desirable in the normal conduct of its business except as otherwise permitted
pursuant to Section 11.5; comply with all Contractual Obligations and
Requirements of Law except to the extent that failure to comply therewith would
not, in the aggregate, reasonably be expected to have a Material Adverse Effect.
10.5 Maintenance of Property; Insurance. HCC will, and will cause each
of its Subsidiaries to, (a) keep and maintain all property material to the
conduct of its business in good working order and condition, ordinary wear and
tear excepted, and (b) maintain, with financially sound and reputable insurance
companies, insurance in such amounts and against such risks as are customarily
maintained by companies engaged in the same or similar businesses operating in
the same or similar locations.
10.6 Inspection of Property; Books and Records; Discussions. Keep proper
books of records and account in which full, true and correct entries in
conformity with GAAP and
13
all Requirements of Law shall be made of all dealings and transactions in
relation to its business and activities; and permit representatives of either of
the Investors or any Lender to visit and inspect any of its properties and
examine and make abstracts from any of its books and records at any reasonable
time and as often as may reasonably be desired and to discuss the business,
operations, properties and financial and other condition of HCC and Subsidiaries
of HCC with officers and employees of HCC and Subsidiaries of HCC and with its
independent certified public accountants; provided, however, that no such visit,
inspection or examination or discussion shall unreasonably disrupt or interfere
with normal operations of HCC or any of its Subsidiaries and any such
representatives of such Investor, Agent and the Lenders shall be accompanied by
a Responsible Officer of HCC. No failure to comply with any request for the
exercise of rights hereunder shall be cause for any Event of Default unless such
request is submitted in writing to HCC with reference to this Section 10.6.
10.7 Notices. Promptly give notice to the Investors, Agent and each
Lender of:
(a) the occurrence of any Default or Event of Default of which HCC has
actual knowledge;
(b) any (i) default or event of default by HCC or any of its
Subsidiaries under or with respect to any of their respective Contractual
Obligations in any respect which, if not cured, would reasonably be expected to
have a Material Adverse Effect, or to HCC's knowledge any default or event of
default by any third party under or with respect to any Contractual Obligation
of said third party with HCC or any of its Subsidiaries in a respect which, if
not cured, would reasonably be expected to have a Material Adverse Effect or
(ii) litigation, investigation or proceeding of which HCC has actual knowledge
which may exist at any time between HCC or any Subsidiary of HCC and any
Governmental Authority, which in either case, if not cured or if adversely
determined, as the case may be, would reasonably be expected to have a Material
Adverse Effect;
(c) any litigation or proceeding affecting HCC or any Subsidiary of HCC
of which HCC has actual knowledge in which the amount involved is $5,000,000 or
more and not covered by insurance or in which injunctive or similar relief is
sought and which if adversely determined would reasonably be expected to have a
Material Adverse Effect;
(d) the following events, as soon as possible and in any event within 30
days after HCC has actual knowledge thereof: (i) the occurrence or expected
occurrence of any Reportable Event with respect to any Plan, or any withdrawal
from, or the termination, Reorganization or Insolvency of any Multiemployer Plan
or (ii) the institution of proceedings or the taking of any other action by the
PBGC or HCC, any Commonly Controlled Entity with respect to the termination of
any Single Employer Plan; and
(e) a development or event which has had or would reasonably be expected
to have a Material Adverse Effect.
14
Each notice pursuant to this subsection shall be accompanied by a statement of a
Responsible Officer setting forth details of the occurrence referred to therein
and stating what action HCC proposes to take with respect thereto.
10.8 Environmental Laws.
(a) Comply in all material respects with, and undertake all reasonable
efforts to ensure compliance by all tenants and subtenants, if any, with, all
Environmental Laws and obtain and comply in all material respects with and
maintain, and undertake all reasonable efforts to ensure that all tenants and
subtenants obtain and comply with and maintain, any and all licenses, approvals,
registrations or permits required by Environmental Laws, and upon discovery of
any non-compliance or suspected non-compliance, undertake all reasonable efforts
to attain full compliance;
(b) Conduct and complete all investigations, studies, sampling and
testing, and all remedial, removal and other actions required under
Environmental Laws and promptly comply in all material respects with all lawful
orders and directives of all Governmental Authorities respecting Environmental
Laws, except to the extent that the failure to so conduct, complete or take such
actions, or to comply with such orders and directives, would not in the
aggregate reasonably be expected to have a Material Adverse Effect; and
(c) Defend, indemnify and hold harmless the Investors, the Lessor, the
Agent and the Lenders, and their respective employees, agents, officers and
directors, from and against any claims, demands, penalties, fines, liabilities,
settlements, damages, costs and expenses of whatever kind or nature known or
unknown, contingent or otherwise, arising out of, or in any way relating to the
violation of or noncompliance with any Environmental Laws applicable to the real
property owned or operated by HCC or any Subsidiary of HCC, or any orders,
requirements or demands of Governmental Authorities related thereto, including,
without limitation, reasonable attorney's and consultant's fees, investigation
and laboratory fees, court costs and litigation expenses, except to the extent
that any of the foregoing arise out of the gross negligence or willful
misconduct of the party seeking indemnification therefor.
(d) Maintain a program to identify and promote substantial compliance
with and to minimize prudently any liabilities or potential liabilities under
any Environmental Law that may affect HCC or any of its Qualified Subsidiaries.
10.9 Subsequent Guarantees. HCC shall cause each Qualified Subsidiary of
HCC for which the aggregate value of all assets owned by such Qualified
Subsidiary is or becomes greater than $20,000,000, to execute an amendment to
this Guarantee, substantially in the form of Exhibit A hereto within one-year
after the later of (i) the date on which such Qualified Subsidiary becomes a
Subsidiary of HCC and (ii) the date on which such Qualified Subsidiary's assets
attain an aggregate value in excess of $20,000,000; provided, however, that if
during such one-year period the aggregate value of such Qualified Subsidiary's
assets is or becomes $20,000,000 or less, such Qualified Subsidiary shall not be
required to become a party to this Guarantee.
15
11. Negative Covenants. Each Guarantor hereby agrees that so long as
this Guarantee is in effect and until the Commitments have terminated and the
Guaranteed Obligations and all amounts owing hereunder are paid in full, the
Guarantor shall not, directly or indirectly:
11.1 Financial Condition Covenants. (a) Maintenance of Consolidated
Indebtedness to Consolidated Capitalization. Permit the ratio (expressed as a
percentage) of Consolidated Indebtedness to Consolidated Capitalization of HCC
and its Subsidiaries as at the end of any of HCC's fiscal quarters to be greater
than .65 to 1.0.
(b) Current Ratio. Permit the Current Ratio of HCC and its Subsidiaries
at the end of any of HCC's fiscal quarters to be less than 1.0 to 1.0.
(c) Consolidated Indebtedness to Consolidated U.S. EBITDA. Permit the
ratio of Consolidated Indebtedness to Consolidated U.S. EBITDA for the four
consecutive fiscal quarters of HCC most recently ended to be greater than 5.25
to 1.0.
(d) Consolidated Indebtedness to Consolidated EBITDA. Permit the ratio
of Consolidated Indebtedness to Consolidated EBITDA for the four consecutive
fiscal quarters of HCC most recently ended to be greater than 4.0 to 1.0.
(e) Interest Coverage Ratio. Permit the ratio of Consolidated EBITDA to
Consolidated Interest Expense for the period of four consecutive fiscal quarters
of HCC most recently ended to be less than 2.5 to 1.0.
11.2 Limitation on Indebtedness. Create, incur, assume or suffer to
exist any Indebtedness, except:
(a) Indebtedness in respect of the loans, the notes and other
obligations of the Guarantors under the Corporate Credit Agreement and the other
Loan Documents as defined in the Corporate Credit Agreement;
(b) Indebtedness of HCC to any of its Subsidiaries and of any such
Subsidiary which is a Guarantor to HCC or any other Subsidiary of HCC;
(c) Indebtedness outstanding on the Initial Closing Date and listed on
Schedule 11.2 and all extensions, renewals, replacements, refinancings and
modifications thereof permitted hereunder;
(d) Indebtedness of HCC or any of its Subsidiaries in an aggregate
amount not to exceed $10,000,000 at any time outstanding which is recourse only
to the assets of HCC or any Subsidiaries acquired or financed with the proceeds
of such Indebtedness;
(e) Indebtedness in respect of Financing Leases provided that, after
giving effect thereto, Section 11.7 is not contravened;
16
(f) Indebtedness in respect of Subordinated Debt, the terms and
conditions of which have been approved in writing by the Required Lenders and
all extensions, renewals, replacements, refinancings and modifications thereof
permitted hereunder;
(g) Indebtedness of Unqualified Subsidiaries of HCC; provided that any
such Indebtedness is Non-Recourse Indebtedness;
(h) Indebtedness of a Person which becomes a Subsidiary after the date
hereof in an aggregate principal amount not exceeding as to HCC and its
Subsidiaries $10,000,000 at any time outstanding, provided that
(i) such indebtedness existed at the time such Person became a
Subsidiary and was not created in anticipation thereof and immediately after
giving effect to the acquisition of such Person by HCC or any of its
Subsidiaries no Default or Event of Default shall have occurred and be
continuing;
(i) Indebtedness in respect of the Tranche A Loans and the Other
Equipment Lease Tranche A Loans; and
(j) Indebtedness not contemplated by clauses (a)-(i) above not exceeding
$5,000,000 in the aggregate at any time outstanding.
11.3 Limitation on Liens. Create, incur, assume or suffer to exist any
Lien upon any of its property, assets or revenues, whether now owned or
hereafter acquired, except for:
(a) Liens for taxes not yet due or which are being contested in good
faith by appropriate proceedings, provided that adequate reserves with respect
thereto are maintained on the books of HCC or any Subsidiary of HCC, as the case
may be, in conformity with GAAP;
(b) carriers', warehousemen's, mechanics', materialmen's, repairmen's or
other like Liens arising in the ordinary course of business which are not
overdue for a period of more than 60 days or which are being contested in good
faith by appropriate proceedings;
(c) pledges or deposits in connection with workers' compensation,
unemployment insurance and other social security legislation and deposits
securing liability to insurance carriers under insurance or self insurance
arrangements;
(d) deposits to secure the performance of bids, trade contracts (other
than for borrowed money), leases, statutory obligations, surety and appeal
bonds, performance bonds and other obligations of a like nature incurred in the
ordinary course of business;
(e) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business which, in the
aggregate, are not substantial in amount and which do not in any case materially
detract from the value of the property subject thereto or materially interfere
with the ordinary conduct of the business of HCC or any of its Subsidiaries;
17
(f) leases or subleases granted to third Persons not interfering in any
material respect with the business of HCC or any of its Subsidiaries;
(g) Liens arising from UCC financing statements regarding leases
permitted by the Corporate Credit Agreement or the Other Equipment Leases;
(h) any interest or title of a lessor or sublessor under any lease
permitted by the Corporate Credit Agreement or the Other Equipment Leases;
(i) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of custom duties in connection with the
importation of goods so long as such Liens attach only to the imported goods;
(j) Liens arising out of consignment or similar arrangements for the
sale of goods entered into by HCC or any of its Subsidiaries in the ordinary
course of business;
(k) Liens created pursuant to Financing Leases permitted pursuant to
Section 11.2(e);
(l) Liens in existence on the Initial Closing Date listed on Schedule
11.3(l), securing Indebtedness permitted by Section 11.2(c), provided that no
such Lien is spread to cover any additional property after the Initial Closing
Date and that the amount of Indebtedness secured thereby is not increased;
(m) Liens on (i) natural gas compressors and related equipment, and
usual accessories and improvements and proceeds thereof (other than the
Equipment), and (ii) oil and gas production equipment, in each case, the
acquisition of which were financed with the proceeds of the Indebtedness
permitted by Section 11.2(e) and which secures only such Indebtedness, provided
that any such Lien is placed upon such natural gas compressor or related
equipment or such oil and gas production equipment at the time of the
acquisition of such natural gas compressors or related equipment or such oil and
gas production equipment by HCC or any of its Subsidiaries and the Lien extends
to no other property, and provided, further, that no such Lien is spread to
cover any additional property after the date such Lien attaches and that the
amount of Indebtedness secured thereby is not increased;
(n) Liens on assets of the Guarantors listed on Schedule 11.3(n),
provided that no such Lien is spread to cover any additional property after the
Initial Closing Date and that the amount of Indebtedness secured thereby is not
increased;
(o) Liens on the assets of Unqualified Subsidiaries of HCC securing
Indebtedness of such Unqualified Subsidiaries permitted under Section 11.2(g);
(p) Liens securing Derivatives entered into by HCC and its Subsidiaries
which are permitted hereunder;
18
(q) Liens securing Indebtedness of HCC or any Subsidiary permitted under
Section 11.2(d) so long as such Liens attach only to the assets acquired or
financed pursuant to such subsection;
(r) Liens on the property or assets of a Person which becomes a
Subsidiary of HCC after the date hereof securing Indebtedness permitted by
Section 11.2(h), provided that (i) such Liens existed at the time such Person
became a Subsidiary and were not created in anticipation thereof, (ii) any such
Lien is not spread to cover any property or assets of such Person after the time
such Person becomes a Subsidiary, and (iii) the amount of Indebtedness secured
thereby is not increased;
(s) Liens that arise in connection with the Operative Agreements and the
Other Equipment Lease Operative Agreements;
(t) Lessor Liens; and
(u) Liens not otherwise permitted in clauses (a)-(t) above securing
Indebtedness not exceeding $2,500,000 in the aggregate.
11.4 Limitation on Guarantor Obligations. Create, incur, assume or
suffer to exist any Guarantor Obligation except:
(a) this Guarantee and the Other Equipment Lease Guarantees;
(b) the Corporate Guarantees;
(c) the Wartsilla Guaranty Obligation;
(d) up to $5,000,000 in the aggregate of Guarantor Obligations of HCC or
any of its Subsidiaries in connection with indebtedness incurred by customers of
HCC or any of its Subsidiaries; provided, that the proceeds of any such
indebtedness shall be used by such customers to purchase natural gas compressors
or oil and gas production equipment from HCC or any of its Subsidiaries;
(e) Guarantor Obligations (in respect of obligations not constituting
Indebtedness) arising under agreements entered into by HCC or any Subsidiary in
the ordinary course of business;
(f) guarantees in respect of Indebtedness (other than Subordinated Debt)
permitted under the Corporate Credit Agreement; and
(g) the Guarantor Obligations arising pursuant to the Operative
Agreements and the Other Equipment Lease Operative Agreements.
11.5 Limitations on Fundamental Changes. Enter into any merger,
consolidation or amalgamation, or liquidate, wind up or dissolve itself (or
suffer any liquidation or
19
dissolution), or convey, sell, lease, assign, transfer or otherwise dispose of,
all or substantially all of its property, business or assets, or make any
material change in its present method of conducting business, except:
(a) any Qualified Subsidiary may be merged or consolidated with or into
HCC or any other Qualified Subsidiary; provided, that HCC or a Qualified
Subsidiary shall be the continuing or surviving corporation;
(b) HCC or any Qualified Subsidiary may be merged or consolidated with
any other Person organized under a jurisdiction of the United States with assets
held primarily in the United States; provided, that HCC or such Qualified
Subsidiary shall be the continuing or surviving corporation; the Agent is
provided with written notice, and after giving effect thereto no Default or
Event of Default would exist or reasonably be expected to be caused thereby;
(c) any Qualified Subsidiary may sell, lease, assign, transfer or
otherwise dispose of any or all of its assets to HCC or any Qualified
Subsidiary;
(d) any Unqualified Subsidiary may be merged or consolidated with or
into any other Person and/or may sell, lease, assign, transfer or otherwise
dispose of any of its assets (upon voluntary liquidation or otherwise) to any
other Person provided that, if merged or consolidated with or into a Qualified
Subsidiary, the Qualified Subsidiary will remain as a "Qualified Subsidiary"
after the merger; and
(e) pursuant to the Operative Agreements and Other Equipment Lease
Operative Agreements.
11.6 Limitation on Sale or Lease of Assets. Convey, sell, lease, assign,
transfer or otherwise dispose of any of its property, business or assets
(including, without limitation, receivables and leasehold interests), whether
now owned or hereafter acquired, except:
(a) obsolete or worn out property disposed of in the ordinary course of
business, provided that the aggregate value of obsolete or worn out natural gas
compressors and oil and gas production equipment disposed of in the ordinary
course of business does not exceed $5,000,000 during any fiscal year of HCC;
(b) the sale of inventory in the ordinary course of business, provided
that if such inventory is comprised of natural gas compressors or oil and gas
production equipment, such natural gas compressors or oil and gas production
equipment were never part of the natural gas compressors or oil and gas
production equipment leased or held for lease by HCC or any of its Subsidiaries;
(c) the lease or sublease by HCC or any of its Subsidiaries as lessor of
natural gas compressors and oil and gas production equipment in the ordinary
course of business under operating leases (which do not constitute Financing
Leases);
20
(d) the sale or discount without recourse of defaulted accounts
receivable arising in the ordinary course of business in connection with the
compromise or collection thereof;
(e) as permitted by subsection 11.5;
(f) the sale of natural gas compressors and oil and gas production
equipment, other than disposals and sales covered by clauses (a) and (b) above,
provided that the fair market value of natural gas compressors and oil and gas
production equipment sold during the Term does not exceed ten percent of the
aggregate fair market value of all natural gas compressors and oil and gas
production equipment owned by HCC and its Qualified Subsidiaries; provided
further that if the proceeds are reinvested in natural gas compressors or oil
and gas production equipment to be owned by HCC or its Qualified Subsidiaries
within nine months after the sale of the assets which produced such proceeds,
such proceeds shall not be included for purposes of this covenant;
(g) the lease by Hanover Land Company or any other Qualified Subsidiary
as lessor of real estate properties to HCC or any Qualified Subsidiary of HCC
for use by HCC or such Qualified Subsidiary as the site of its offices and
facilities; and
(h) the sale of natural gas compressors to the Lessor and Other
Equipment Lessors in connection with the Operative Agreements and the Other
Equipment Lease Operative Agreements.
11.7 Limitation on Leases. Permit Consolidated Lease Expense for any
fiscal year of HCC to exceed $10,000,000.
11.8 Limitation on Dividends. Declare or pay any dividend (other than
dividends payable solely in common stock of such Person) on, or make any payment
on account of, or set apart assets for a sinking or other analogous fund for,
the purchase, redemption, defeasance, retirement or other acquisition of, any
shares of any class of Capital Stock of such Person or any warrants or options
to purchase any such Capital Stock, whether now or hereafter outstanding, or
make any other distribution in respect thereof, either directly or indirectly,
whether in cash or property or in obligations of HCC or any Subsidiary of HCC,
except that if no Default or Event of Default exists or would reasonably be
expected to be caused thereby (i) Subsidiaries of HCC may declare and pay
dividends to HCC and other shareholders of such Subsidiaries, (ii) HCC may
repurchase or redeem shares of HCC common stock from its employees and former
employees so long as the aggregate amount of all such repurchases since the
Initial Closing Date does not exceed $7,500,000, (iii) HCC may make open market
repurchases of shares of HCC common stock so long as the aggregate amount of all
such repurchases during the Term does not exceed $25,000,000, (iv) HCC may
declare or pay dividends on and make mandatory stock repurchases (pursuant to
the terms of the applicable certificate of designation) of its preferred stock,
if any, and (v) HCC may declare or pay dividends on shares of HCC common stock,
provided that the aggregate amount of such declarations or payments pursuant to
this clause (v) above does not exceed 25% of the Consolidated Net Income of HCC
for the period (taken as one accounting period) from the beginning of the fiscal
quarter
21
commencing October 1, 1998 to the end of HCC's most recently ended fiscal
quarter for which financial statements have been delivered to the Agent and the
Lenders pursuant to subsection 10.1 at or prior to the time of such declaration
or payment.
11.9 Limitation on Derivatives. Enter into or assume any obligations
with respect to any Derivatives except for Derivatives used by HCC or any of its
Subsidiaries in reducing the interest rate risk exposure or foreign currency
risk exposure of HCC and its Subsidiaries which have been provided by a lender
under the Corporate Credit Agreement, the Operative Agreements or the Other
Equipment Lease Operative Agreements; provided, that the aggregate notional
amounts of such Derivatives shall not exceed the aggregate amount of loans
outstanding under the Corporate Credit Agreement, the Operative Agreements and
the Other Equipment Lease Operative Agreements.
11.10 Limitation on Investments, Loans and Advances. Make any advance,
loan, extension of credit or capital contribution to, or purchase any stock,
bonds, notes, debentures or other securities of or any assets constituting a
business unit of, or make any other investment in (all of the foregoing being
herein collectively referred to as "Investments"), any Person, except:
(a) extensions of trade credit in the ordinary course of business;
(b) Investments in Cash Equivalents;
(c) loans and advances to employees of such Person or its Subsidiaries
for travel, entertainment and relocation expenses in the ordinary course of
business in an aggregate amount for HCC and its Subsidiaries not to exceed
$250,000 at any one time outstanding;
(d) Investments by HCC in its Subsidiaries which are or become
Guarantors and investments by such Subsidiaries which are or become Guarantors
in HCC and in other Subsidiaries of HCC which are or become Guarantors;
(e) Investments by HCC in Hanover Land Company in an aggregate amount
not to exceed $5,000,000 plus amounts necessary to maintain and operate the real
property and improvements thereon owned by Hanover Land Company;
(f) Investments in Unqualified Subsidiaries of HCC;
(g) Investments constituting Permitted Business Acquisitions so long as,
after giving effect to the consummation of the transactions contemplated by each
Permitted Business Acquisition and the Loans and the loans to be made and the
Letters of Credit to be issued in connection with the Corporate Credit
Agreement, the sum of (i) the cash and Cash Equivalents then held by HCC and
(ii) an amount equal to the difference between (A) the aggregate Commitments
under the Corporate Credit Agreement, the aggregate Commitments, and the
aggregate Investor Commitments in effect at such time and (B) the aggregate
amount of the Aggregate Outstanding Extensions of Credit under the Corporate
22
Credit Agreement, the Available Commitments and the Available Investor
Commitments at such time, equals at least $20,000,000;
(h) Investments or acquisitions by HCC or its Subsidiaries in up to 50%
of the shares of capital stock, partnership interests, joint venture interests,
limited liability company interests or other similar equity interests in, a
Person (other than a Subsidiary), provided that the aggregate amount of all such
investments or acquisitions does not exceed $25,000,000 in any fiscal year; and
(i) Loans to employees, officers and directors of HCC and its
Subsidiaries to acquire shares of capital stock of HCC not to exceed
$20,000,000.
11.11 Limitation on Optional Payments and Modifications of Debt
Instruments. (i) Make any optional payment or prepayment on or redemption of any
portion of the Shareholder Subordinated Debt except for prepayments aggregating
up to $7,817,055 made on or prior to June 30, 1999 or (ii) with respect to any
Indebtedness other than the Shareholder Subordinated Debt, Indebtedness under
the Corporate Credit Agreement, the Operative Agreements or the Other Equipment
Lease Operative Agreements, (a) make any optional payment or prepayment in
excess of $10,000,000 during any calendar year on or redemption of any
Indebtedness (other than Indebtedness pursuant to the Corporate Credit
Agreement, the Operative Agreements or the Other Equipment Lease Operative
Agreements) or (b) amend, modify or change, or consent or agree to any
amendment, modification or change to any of the terms of any such Indebtedness
(other than any such amendment, modification or change which would extend the
maturity or reduce the amount of any payment of principal thereof or which would
reduce the rate or extend the date for payment of interest thereon, or any
amendment or waiver which would render the terms of such Indebtedness less
restrictive).
11.12 Transactions with Affiliates. Except for transactions of a type
set forth on Schedule 11.12, enter into any transaction, including, without
limitation, any purchase, sale, lease or exchange of property or the rendering
of any service, with any Affiliate unless such transaction is otherwise
permitted under this Agreement, is in the ordinary course of HCC's or such
Subsidiary's business and is upon fair and reasonable terms no less favorable to
HCC or such Subsidiary, as the case may be, than it would obtain in a comparable
arm's length transaction with a Person not an Affiliate.
11.13 Sale and Leaseback. Except for the transactions contemplated by
the Operative Agreements, the Other Equipment Lease Operative Agreements or of a
type set forth on Schedule 11.13, enter into any arrangement with any Person
where HCC or any of the Subsidiaries of HCC is the lessee of real or personal
property which has been or is to be sold or transferred by HCC or such
Subsidiary to such Person or to any other Person to whom funds have been or are
to be advanced by such Person on the security of such property or rental
obligations of HCC or such Subsidiary (any of such arrangements, a "Sale or
Leaseback Transaction"), except that (i) HCC and its Subsidiaries may enter into
Financing Leases as lessee for natural gas compressors and oil and gas
production equipment if after giving effect thereto subsection 11.2 is not
contravened and (ii) HCC may enter into Sale and Leaseback Transactions as
lessee for
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natural gas compressors in connection with the Operative Agreements and the
Other Equipment Lease Operative Agreements.
11.14 Corporate Documents. Amend its Certificate of Incorporation in any
way adverse to the interests of the Agent and the Lenders.
11.15 Fiscal Year. Permit the fiscal year of HCC to end on a day other
than December 31.
11.16 Nature of Business. Engage in any business other than (a) the
leasing, maintenance, purchase, sale and operation of natural gas compressor
units and oil and gas production equipment, (b) the design, engineering and
fabrication of natural gas compressor units, (c) the design, engineering and
fabrication of oil and gas production equipment, (d) the provision of contract
compression and related services and (e) any activities related thereto which
are consistent with past practice and conducted in the ordinary course of
business.
11.17 Unqualified Subsidiaries. Permit any Unqualified Subsidiary to
directly or indirectly own any assets (other than cash or Cash Equivalents
located in bank accounts at Chase) which are located in the United States of
America or any territory thereof.
12. Notices. All notices, requests and demands to or upon the respective
parties hereto to be effective shall be in writing (including by facsimile
transmission), and, unless otherwise expressly provided herein, shall be deemed
to have been duly given or made (a) when delivered by hand, (b) one Business Day
after delivery to a nationally recognized courier service specifying overnight
delivery, (c) three Business Days after being deposited in the mail, certified
or registered, postage prepaid, or (d) in the case of facsimile notice, when
sent and receipt has been confirmed, addressed as follows:
(a) if to the Agent or any Lender, at its address or transmission number
for notices provided in Section 9.2 of the Credit Agreement; and
(b) if to any Guarantor, at its address or transmission number for
notices set forth on the signature page below.
(c) if to the Investors, at their address or transmission number for
notices provided in Section 13.3 of the Participation Agreement.
The Investors, Agent, each Lender and each Guarantor may change its
address and transmission numbers for notices by notice in the manner provided in
this Section 12.
13. Severability. Any provision of this Guarantee which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
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14. Integration. This Guarantee and the other Operative Agreements
represents the agreement of the Guarantors with respect to the subject matter
hereof and there are no promises or representations by the Investors, Agent, any
Lender or any Guarantor relative to the subject matter hereof not reflected
herein or in the other Operative Agreements.
15. Amendments in Writing; No Waiver; Cumulative Remedies (a) None of
the terms or provisions of this Guarantee may be waived, amended, supplemented
or otherwise modified except as provided in Section 9.1 of the Credit Agreement.
(b) Neither the Investors, Agent nor any Lender shall not by any act
(except by a written instrument pursuant to Section 15(a) hereof), delay,
indulgence, omission or otherwise be deemed to have waived any right or remedy
hereunder or to have acquiesced in any Default or Event of Default or in any
breach of any of the terms and conditions hereof. No failure to exercise, nor
any delay in exercising, on the part of the Investors, Agent or any Lender, any
right, power or privilege hereunder shall operate as a waiver thereof. No single
or partial exercise of any right, power or privilege hereunder shall preclude
any other or further exercise thereof or the exercise of any other right, power
or privilege. A waiver by both Investors, Agent or any Lender of any right or
remedy hereunder on any one occasion shall not be construed as a bar to any
right or remedy which the Investors, Agent or such Lender would otherwise have
on any future occasion.
(c) The rights and remedies herein provided are cumulative, may be
exercised singly or concurrently and are not exclusive of any other rights or
remedies provided by law.
16. Section Headings. The section headings used in this Guarantee are
for convenience of reference only and are not to affect the construction hereof
or be taken into consideration in the interpretation hereof.
17. Successors and Assigns. This Guarantee shall be binding upon the
successors and assigns of the Guarantors and shall inure to the benefit of the
Investors, Agent and the Lenders and their successors and assigns.
18. SUBMISSION TO JURISDICTION; WAIVERS. (a) EACH GUARANTOR HEREBY
IRREVOCABLY AND UNCONDITIONALLY:
(i) SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR PROCEEDING
RELATING TO THIS GUARANTEE AND THE OTHER OPERATIVE AGREEMENTS TO WHICH IT IS A
PARTY, OR FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGEMENT IN RESPECT THEREOF,
TO THE NON-EXCLUSIVE GENERAL JURISDICTION OF THE COURTS OF THE STATE OF NEW
YORK, THE COURTS OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF
NEW YORK, AND APPELLATE COURTS FROM ANY THEREOF;
(ii) CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT IN SUCH
COURTS AND WAIVES ANY OBJECTION THAT IT
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MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING IN ANY
SUCH COURT OR THAT SUCH ACTION OR PROCEEDING WAS BROUGHT IN AN INCONVENIENT
COURT AND AGREES NOT TO PLEAD OR CLAIM THE SAME;
(iii) AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR PROCEEDING
MAY BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL (OR
ANY SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE PREPAID, TO SUCH PERSON AT ITS
ADDRESS SET FORTH IN SECTION 12 OR AT SUCH OTHER ADDRESS OF WHICH THE AGENT
SHALL HAVE BEEN NOTIFIED PURSUANT THERETO;
(iv) AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO EFFECT SERVICE
OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT TO XXX
IN ANY OTHER JURISDICTION; AND
(v) WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT
MAY HAVE TO CLAIM OR RECOVER IN ANY LEGAL ACTION OR PROCEEDING REFERRED TO IN
THIS SUBSECTION ANY SPECIAL, EXEMPLARY, PUNITIVE, INDIRECT OR CONSEQUENTIAL
DAMAGES.
19. GOVERNING LAW. THIS GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED
AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
20. Survival of Representations, Warranties, etc. All representations,
warranties, covenants and agreements made herein and in statements or
certificates delivered pursuant hereto shall survive any investigation or
inspection made by or on behalf of the Lessor and shall continue in full force
and effect until all of the obligations of the Guarantors under this Guaranty
shall be fully performed in accordance with the terms hereof, and until the
payment in full of all the Guaranteed Obligations, and until performance in full
of all obligations of HCC in accordance with the terms and provisions of such
agreements.
21. Authority of Agent. Each Guarantor acknowledges that the rights and
responsibilities of the Agent under this Guarantee with respect to any action
taken by the Agent or the exercise or non-exercise by the Agent of any option,
right, request, judgment or other right or remedy provided for herein or
resulting or arising out of this Guarantee shall, as between the Investors,
Agent and the Lenders, be governed by the Credit Agreement and by such other
agreements with respect thereto as may exist from time to time among them, but,
as between the Agent and each Guarantor, the Agent shall be conclusively
presumed to be acting as agent for the Lenders with full and valid authority so
to act or refrain from acting, and no Guarantor shall be under any obligation,
or entitlement, to make any inquiry respecting such authority.
22. Third Party Beneficiaries. Each Guarantor expressly acknowledges and
agrees that each Indemnified Person shall be a third party beneficiary of this
Guaranty.
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23. Right of Contribution. Each Guarantor hereby agrees that to the
extent that a Guarantor shall have paid more than its proportionate share of any
payment made hereunder, such Guarantor shall be entitled to seek and receive
contribution from and against any other Guarantor hereunder who has not paid its
proportionate share of such payment. Each Guarantor's right of contribution
shall be subject to the terms and conditions of Section 4 hereof. The provisions
of this Section shall in no respect limit the obligations and liabilities of any
Guarantor to Beneficiaries and each Guarantor shall remain liable to the
Beneficiaries for the full amount guaranteed by such Guarantor hereunder.
24. WAIVER OF JURY TRIAL. THE GUARANTORS EACH HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING
TO THIS GUARANTY AND FOR ANY COUNTERCLAIM THEREIN.
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IN WITNESS WHEREOF, the undersigned has caused this Guarantee to be duly
executed and delivered by its duly authorized officer as of the day and year
first above written.
HANOVER COMPRESSOR COMPANY
By: ______________________________
Name:
Title:
HANOVER/XXXXX, INC.
By: ______________________________
Name:
Title:
HANOVER MAINTECH, INC.
By: ______________________________
Name:
Title:
HANOVER LAND COMPANY
By: ______________________________
Name:
Title:
Address for Notices for all Guarantors:
00000 Xxxxx Xxxxxxx Xxxxxxx
Xxxxxxx, Xxxxx 00000
Attention: Chief Financial Officer
Telecopy: 000-000-0000
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with a copy to:
Xxxxxx & Xxxxxxx
Sears Tower, Suite 5800
000 Xxxxx Xxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx and Xxxxxxx X. Pucker
Telecopy: 000-000-0000
