Exhibit 10.72
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PARTICIPATION AGREEMENT
among
HANOVER COMPRESSION LIMITED PARTNERSHIP,
as Lessee,
HANOVER EQUIPMENT TRUST 2001B,
a Delaware business trust,
as Lessor,
GENERAL ELECTRIC CAPITAL CORPORATION,
as Certificate Holders,
HANOVER COMPRESSION LIMITED PARTNERSHIP,
HANOVER COMPRESSOR COMPANY,
HANOVER APPLIED PROCESS SOLUTIONS, INC.,
EUREKA ENERGY LIMITED PARTNERSHIP,
HANOVER ACQUISITION LIMITED PARTNERSHIP,
HANOVER COMPRESSOR LIMITED HOLDINGS LLC,
HANOVER LAND LIMITED PARTNERSHIP,
HANOVER MAINTECH LIMITED PARTNERSHIP,
HANOVER/XXXXX LIMITED PARTNERSHIP,
HANOVER OEC COMPRESSION CORPORATION,
PRODUCTION OPERATORS CORPORATION, and
PRODUCTION OPERATORS, INC.
as Guarantors,
and
WILMINGTON TRUST FSB
as Indenture Trustee,
Collateral Agent under the Indenture,
and in its individual capacity, only to the extent expressly set forth herein
and
WILMINGTON TRUST COMPANY,
in its individual capacity,
only to the extent expressly set forth herein
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Dated as of August 31, 2001
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TABLE OF CONTENTS
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SECTION 1. SALE OF SECURITIES
1.1 Authorization and Issuance of Securities.......................................1
1.2 Sale and Purchase of Securities................................................1
SECTION 2. CERTIFICATE HOLDER CONTRIBUTION
2.1 Certificate Holder Contribution................................................2
2.2 Prepayment of the Certificates.................................................2
SECTION 3. SUMMARY OF THE TRANSACTIONS
3.1 Operative Agreements...........................................................2
3.2 Equipment Purchase and Lease...................................................2
SECTION 4. THE CLOSING OF THE LEASE TRANSACTIONS
4.1 Release Date...................................................................2
4.2 Trust Company Authorization....................................................2
SECTION 5. FUNDING OF ADVANCE
5.1 General........................................................................3
5.2 Procedures for Funding.........................................................3
SECTION 6. CONDITIONS OF THE RELEASE AND ADVANCE
6.1 General Conditions to the Release of the Certificate Holder
Contributions and the Proceeds of the Securities...............................3
SECTION 7. REPRESENTATIONS AND WARRANTIES
7.1 Representations and Warranties of the Indenture Trustee,
the Collateral Agent, and Wilmington Trust FSB.................................6
7.2 Representations and Warranties of Lessor.......................................7
7.3 Representations and Warranties of the Trust Company...........................10
7.4 Representations and Warranties of the Lessee and the Guarantors...............11
SECTION 8. PAYMENT OF CERTAIN EXPENSES
8.1 Transaction Expenses..........................................................16
8.2 Brokers' Fees and Stamp Taxes.................................................16
8.3 Certain Fees and Expenses.....................................................16
8.4 Continuous Perfection of Security Interests...................................17
8.5 Oklahoma Equipment Subleases..................................................17
8.6 Operative Agreements and Related Obligations..................................17
SECTION 9. COVENANTS OF THE LESSEE AND THE GUARANTORS
9.1 Limitation on Indebtedness....................................................17
9.2 Limitation on Layering........................................................21
9.3 Limitation on Restricted Payments.............................................21
9.4 Limitation on Liens...........................................................24
9.5 Limitation on Restrictions on Distributions from Restricted Subsidiaries......24
9.6 Limitation on Sales of Assets and Subsidiary Stock............................25
9.7 Limitation on Affiliate Transactions..........................................26
9.8 Limitation on Sale of Capital Stock of Restricted Subsidiaries................27
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9.9 SEC Reports and Available Information.........................................27
9.10 Merger and Consolidation......................................................27
9.11 Future Subsidiary Guarantors..................................................29
9.12 Changes in Name, Jurisdiction of Incorporation, etc...........................29
SECTION 10. OTHER COVENANTS AND AGREEMENTS
10.1 Covenants of the Trust, the Certificate Holders, Indenture
Trustee and the Trust Company.................................................29
10.2 Amendment of Certain Documents................................................31
10.3 Proceeds of Casualty..........................................................31
10.4 Income Tax Reporting..........................................................31
10.5 Financial Statements and Other Information....................................32
10.6 Financial Reporting...........................................................32
10.7 Appraisal.....................................................................32
SECTION 11. LESSEE'S RIGHTS
11.1 Rights of Lessee Regarding the Indenture......................................33
11.2 Agent for Acquisition of Equipment............................................35
SECTION 12. TRANSFER OF INTEREST
12.1 Restrictions on Transfer......................................................35
12.2 Effect of Transfer............................................................35
SECTION 13. INDEMNIFICATION
13.1 General Indemnity.............................................................36
13.2 General Tax Indemnity.........................................................37
13.3 Entity Tax Indemnity..........................................................41
SECTION 14. MISCELLANEOUS
14.1 Survival of Agreements........................................................41
14.2 No Broker, etc................................................................41
14.3 Notices.......................................................................41
14.4 Counterparts..................................................................43
14.5 Amendments and Termination....................................................43
14.6 Headings, etc.................................................................43
14.7 Parties in Interest...........................................................43
14.8 GOVERNING LAW.................................................................44
14.9 Severability..................................................................44
14.10 Liability Limited.............................................................44
14.11 Rights of Lessee..............................................................44
14.12 Further Assurances............................................................44
14.13 Successors and Assigns........................................................45
14.14 No Representation or Warranty.................................................45
14.15 Highest Lawful Rate...........................................................45
14.16 Waiver ......................................................................46
14.17 Integration...................................................................46
14.18 Obligations of Guarantors.....................................................46
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Annex A Rules of Usage and Definitions
Exhibits
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Exhibit A Form of Requisition
Exhibit B Form of Opinions
Schedules
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Schedule 9.7(b)
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PARTICIPATION AGREEMENT dated as of August 31, 2001 (this
"Agreement"), among HANOVER COMPRESSION LIMITED PARTNERSHIP, a Delaware limited
partnership and a wholly owned subsidiary of Hanover (the "Lessee"); HANOVER
EQUIPMENT TRUST 2001B, a Delaware business trust (the "Trust" or the "Lessor"),
GENERAL ELECTRIC CAPITAL CORPORATION, as Certificate Holders (the "Certificate
Holders"), HANOVER COMPRESSION LIMITED PARTNERSHIP, a Delaware limited
partnership, HANOVER COMPRESSOR COMPANY, a Delaware corporation ("Hanover" or
"Holdings"), HANOVER APPLIED PROCESS SOLUTIONS, INC., a Delaware corporation,
EUREKA ENERGY LIMITED PARTNERSHIP, a Delaware limited partnership, HANOVER
ACQUISITION LIMITED PARTNERSHIP, a Delaware limited partnership, HANOVER
COMPRESSOR LIMITED HOLDINGS LLC, a Delaware limited liability company, HANOVER
LAND LIMITED PARTNERSHIP, a Delaware limited partnership, HANOVER MAINTECH
LIMITED PARTNERSHIP, a Delaware limited partnership, HANOVER/XXXXX LIMITED
PARTNERSHIP, a Delaware limited partnership, HANOVER OEC COMPRESSION
CORPORATION, an Oklahoma corporation, PRODUCTION OPERATORS CORPORATION, a
Delaware corporation, and PRODUCTION OPERATORS, INC., a Delaware corporation, as
Guarantors (collectively, together with the Lessee and Hanover, the
"Guarantors"), WILMINGTON TRUST FSB, as indenture trustee for the
Securityholders (the "Indenture Trustee") and as collateral agent for the
Securityholders and the Certificate Holders (the "Collateral Agent"), and in its
individual capacity only to the extent expressly set forth herein (in its
individual capacity, "Wilmington Trust FSB"), and WILMINGTON TRUST COMPANY (the
"Trust Company") in its individual capacity only to the extent expressly set
forth herein. Capitalized terms used but not otherwise defined in this Agreement
shall have the meanings set forth in Annex A hereto.
Preliminary Statement
In consideration of the mutual agreements herein contained and
other good and valuable consideration, receipt of which is hereby acknowledged,
the parties hereto hereby agree as follows:
SECTION 1. SALE OF SECURITIES
1.1 Authorization and Issuance of Securities. On the Closing Date,
the Lessor authorized the issuance and sale of $250,000,000 aggregate principal
amount of the Securities. The Securities were issued pursuant to, are entitled
to the benefits of, and are governed by, the Indenture and secured by a first
priority security interest in the Equipment pursuant to the Security Documents.
1.2 Sale and Purchase of Securities. Pursuant to the terms and
conditions of the Purchase Agreement and in reliance on the representations and
warranties contained therein and in this Agreement, the Initial Purchasers have
purchased Securities in an aggregate principal amount of $250,000,000.
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SECTION 2. CERTIFICATE HOLDER CONTRIBUTION
2.1 Certificate Holder Contribution. On the Closing Date, the
Certificate Holders made an investment in the Lessor (a "Certificate Holder
Contribution") in an amount equal to $7,750,000. The Lessor shall use the
Certificate Holder Contribution to pay a portion of the Equipment Costs
simultaneously and pro rata with the proceeds of the Securities.
2.2 Prepayment of the Certificates. The Lessor shall prepay the
Certificate Holder Contribution in accordance with Section 5.1 of the Indenture
in connection with the exercise by the Lessee of its right to direct the Lessor
to prepay the Securities.
SECTION 3. SUMMARY OF THE TRANSACTIONS
3.1 Operative Agreements. (a) On the Closing Date, (i) the
applicable parties thereto shall have executed the Indenture, the Securities,
the Trust Agreement, the Certificates and the Escrow Agreement, (ii) the
Securities and the Certificates shall have been issued, and (iii) the proceeds
of the Securities and Certificate Holder Contribution shall have been deposited
in the Escrow.
(b) On the Release Date, each of the applicable parties thereto
shall execute and deliver this Agreement, the Lease, the Security Agreement, the
Hanover Guarantee, the Assignment of Lease, the Consent to Assignment, and such
other documents, instruments, certificates and opinions of counsel as agreed to
by the parties hereto.
3.2 Equipment Purchase and Lease. On the Release Date and subject
to the terms and conditions of this Agreement and the Indenture (i) the Lessor
will use the Escrowed Funds to purchase all right, title and interest in and to
each Unit of Equipment on the Release Date and (ii) the Lessor will
simultaneously lease all of its right, title and interest in the Equipment to
the Lessee by executing and delivering the Lease.
SECTION 4. THE CLOSING OF THE LEASE TRANSACTIONS
4.1 Release Date. All documents and instruments required to be
delivered on the Release Date shall be delivered at the offices of Xxxxxxx
Xxxxxxx & Xxxxxxxx, 425 Lexington Avenue, New York, New York, or at such other
location as may be determined by the Initial Purchasers.
4.2 Trust Company Authorization. The Certificate Holders agree
that, with respect to the Release Date, the satisfaction or waiver of the
conditions contained in Section 6 hereof shall constitute authorization and
direction by the Certificate Holders to the Trustee, without further act, to
take on behalf of the Lessor the actions specified in Section 2.1 of the Trust
Agreement.
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SECTION 5. FUNDING OF ADVANCE
5.1 General. To the extent funds have been made available to the
Lessor from proceeds of the Securities and Certificate Holder Contributions and,
if the Escrow Agreement is executed and delivered, are released from the 2001B
Escrow Account, the Lessor will (i) acquire the Equipment in accordance with the
terms of this Agreement and the other Operative Agreements; (ii) on behalf of
the Lessee, pay Transaction Expenses; and (iii) pay all other Equipment Costs.
5.2 Procedures for Funding. (a) On the Release Date, the Lessee
shall deliver to the Certificate Holders and the Indenture Trustee, a
requisition (the "Requisition"), appropriately completed, in the form of Exhibit
A hereto.
(b) The Requisition shall (i) be irrevocable; and (ii) request
funds for the payment of Equipment Costs.
SECTION 6. CONDITIONS OF THE RELEASE AND ADVANCE
6.1 General Conditions to the Release of the Certificate Holder
Contributions and the Proceeds of the Securities. If the Escrow Agreement is
executed and delivered, the agreement of the Initial Purchasers and each
Certificate Holder to have the proceeds of the Securities and the Certificate
Holder Contribution released from the 2001B Escrow Account on the Release Date
to the Lessor to pay Equipment Costs is subject to the satisfaction of or waiver
by the Certificate Holders and the Initial Purchasers, immediately prior to or
concurrently with the making of such release, of the following conditions
precedent:
(a) Operative Agreements. Each of the Operative Agreements
entered into on the Closing Date and the Release Date shall have been
duly authorized, executed, acknowledged and delivered by the parties
thereto and shall be in full force and effect, and no event of default
thereunder or default under Section 17.1(i) or (ii) of the Lease shall
exist (both before and after giving effect to the transactions
contemplated by the Operative Agreements), and the Initial Purchasers,
the Indenture Trustee, the Trust Company, the Certificate Holders and
Lessee each shall have received a fully executed copy of each of the
Operative Agreements (other than the Securities of which the Indenture
Trustee shall have received the originals thereof and the Certificates
of which each Certificate Holder shall have received its original
thereof);
(b) Taxes. All taxes, fees and other charges in connection with
the execution, delivery, and, where applicable, recording, filing and
registration of the Operative Agreements shall have been paid or
provisions for such payment shall have been made to the reasonable
satisfaction of the Indenture Trustee and the Certificate Holders;
(c) Governmental Approvals. All necessary Governmental Approvals,
in each case required by any law or regulation enacted, imposed or
adopted on the date hereof shall have been obtained or made and be in
full force and effect;
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(d) Insurance. The Indenture Trustee, the Initial Purchasers and
the Certificate Holders shall have received evidence in form and
substance reasonably satisfactory to them that all of the requirements
of Section 14 of the Lease shall have been satisfied (which evidence
shall include a report from a reputable insurance broker certifying
that all such requirements have been satisfied);
(e) Legal Requirements. The transactions contemplated by the
Operative Agreements do not and will not violate in any respect any
Legal Requirements that would reasonably be expected to have a Material
Adverse Effect and do not and will not subject the Indenture Trustee,
any Initial Purchaser, the Trust Company, the Certificate Holders or
the Lessee to any adverse regulatory prohibitions or constraints;
(f) Corporate Proceedings of the Lessee and Each Guarantor. On
the Release Date, the Indenture Trustee, the Initial Purchasers and the
Certificate Holders shall have received a copy of the resolutions or
minutes of the Board of Directors of the Lessee and each Guarantor
authorizing the execution, delivery and performance of this Agreement,
the Hanover Guarantee and the other Operative Agreements to which it is
a party, certified by the Secretary or an Assistant Secretary of the
Lessee or of such Guarantor as of the Release Date, which certificate
shall state that the resolutions or minutes thereby certified have not
been amended, modified, revoked or rescinded;
(g) Lessee and Guarantor Incumbency Certificate. On the Release
Date, the Indenture Trustee, the Initial Purchasers and the Certificate
Holders shall have received a certificate of the Lessee and each
Guarantor, dated the Release Date, as to the incumbency and signature
of the officers of the Lessee and each Guarantor executing any
Operative Agreement reasonably satisfactory in form and substance to
the Initial Purchasers and the Certificate Holders, executed by the
President or any Vice President and the Secretary or any Assistant
Secretary of the Lessee or of such Guarantor with true and complete
copies of their respective certificates of incorporation and by-laws
attached;
(h) Corporate Proceedings of the Trust Company and Wilmington
Trust FSB. On the Release Date, the Initial Purchasers, the Certificate
Holders and the Lessee shall have received a copy of the resolutions,
in form and substance reasonably satisfactory to the Initial
Purchasers, Certificate Holders and the Lessee, of the Board of
Directors of the Trust Company and of the Board of Directors of
Wilmington Trust FSB, in each case authorizing the execution, delivery
and performance of the Operative Agreements to which it is a party,
certified by the Secretary or an Assistant Secretary of the Trust
Company as of the Release Date, which certificate shall state that the
resolutions thereby certified have not been amended, modified, revoked
or rescinded;
(i) Trust Company and Wilmington Trust FSB Incumbency
Certificate. On the Release Date, the Initial Purchasers, the
Certificate Holders and the Lessee shall have received a certificate of
the Trust Company, and a certificate of Wilmington Trust FSB, in each
case dated the Release Date, as to the incumbency and signature of the
officers of the Trust Company or Wilmington Trust FSB, as applicable,
executing any Operative Agreement, executed by the President or any
Vice President, Assistant Vice President, or a duly authorized Trust
Officer or Wilmington Trust FSB, as applicable, and
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the Secretary or any Assistant Secretary of the Trust Company or
Wilmington Trust FSB, as applicable;
(j) Consents, Licenses and Approvals. All consents,
authorizations and filings required in order to allow Lessee and the
Guarantors to consummate the transaction contemplated by this Agreement
shall have been obtained and be in full force and effect, except to the
extent the failure to obtain or maintain any such consent,
authorization or filing would not individually or in the aggregate have
a Material Adverse Effect;
(k) Legal Opinions. (1) The Indenture Trustee, the Lessee, the
Guarantors, the Certificate Holders and the Initial Purchasers shall
have received the executed legal opinion of Xxxxxx & Xxxxxxx, counsel
to the Lessee and the Guarantors substantially in the form set forth in
Exhibit B-1 hereto;
(ii) The Indenture Trustee, the Lessee, the Guarantors, the
Certificate Holders and the Initial Purchasers shall have
received the executed legal opinion of Morris, James, Hitchens &
Xxxxxxxx, counsel to the Trust, the Trust Company, and Wilmington
Trust FSB, substantially in the form set forth in Exhibit B-2
hereto;
(iii) The Indenture Trustee, the Lessee, the Certificate
Holders, the Trust Company and the Initial Purchasers shall have
received the executed legal opinion of local counsel to the
Lessee in the following states: Texas, Louisiana, New Mexico,
Wyoming, Oklahoma, Colorado, and Arkansas, substantially in the
form of Exhibit B-3 hereto.
(l) Actions to Perfect Liens. The Indenture Trustee shall have
received evidence in form and substance satisfactory to it that all
filings, recordings, registrations and other actions, including the
filing of duly executed Lessee Financing Statements and Lessor
Financing Statements, necessary or, in the opinion of the Collateral
Agent or the Certificate Holders, desirable to perfect the Liens
created by the Security Documents shall have been completed or shall be
completed promptly thereafter;
(m) Lien Searches. By the Release Date, the Indenture Trustee and
the Certificate Holders shall have received the results of recent
searches by a Person reasonably satisfactory to the Initial Purchasers
and the Certificate Holders, of the Uniform Commercial Code, judgment
and tax lien filings which may have been filed (i) in each State in
which any Equipment is located with respect to personal property of the
Lessee and the owners of the Equipment immediately prior to the date
hereof and (ii) the state of organization of Lessee and such owners,
and the results of such search shall be satisfactory to the Initial
Purchasers and the Certificate Holders;
(n) Representations and Warranties. The representations and
warranties of the Lessor, the Lessee, the Initial Purchaser, the
Certificate Holders and the Guarantors contained herein and in each of
the other Operative Agreements shall be true and correct
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in all material respects on and as of the Release Date as if made on
and as of the Release Date (unless such representations and warranties
specifically refer to another date);
(o) Performance of Operative Agreements. The parties hereto
(other than the Initial Purchaser or the Certificate Holders) shall
have performed in all material respects their respective agreements
contained herein and in the other Operative Agreements on or prior to
the Release Date (to the extent required to be performed prior to the
Release Date);
(p) Default. There shall not have occurred and be continuing any
Default or Event of Default and no Default or Event of Default will
have occurred after giving effect to the Advance requested by the
Requisition.
(q) Requisition. The Indenture Trustee and the Certificate
Holders shall have received a fully completed executed counterpart of
the Requisition dated as of the Release Date;
(r) Xxxx of Sale. There shall have been delivered to the Lessor,
a xxxx of sale (the "Xxxx of Sale"), in form and substance reasonably
acceptable to the Indenture Trustee and the Certificate Holders, with
respect to the Equipment, conveying title to the Equipment to the
Lessor, subject only to the Permitted Exceptions;
(s) Title. The Lessor shall have good and valid title to the
Equipment on the Release Date subject only to the Permitted Exceptions,
and the Lessor shall have granted the security interest pursuant to the
Security Agreement with respect to the Equipment; and
(t) Appraisal. The Initial Purchasers and the Certificate Holders
shall have received an Appraisal of the Equipment and such Appraisal
shall be in form and substance acceptable to the Initial Purchasers and
the Certificate Holders.
SECTION 7. REPRESENTATIONS AND WARRANTIES
7.1 Representations and Warranties of the Indenture Trustee, the
Collateral Agent, and Wilmington Trust FSB. Wilmington Trust FSB, in its
individual capacity and in its capacity as Indenture Trustee and Collateral
Agent, hereby represents and warrants to each of the other parties hereto as of
the Release Date as follows:
(a) Due Organization, etc. It is a federal savings bank duly
organized and validly existing and in good standing and has the power
and authority to enter into and perform its obligations under the
Indenture and the other Operative Agreements to which it is or will be
a party, and has the corporate power and authority to act as the
Indenture Trustee and Collateral Agent under the Indenture and the
other Operative Agreements to which it is or will be a party and to
enter into and perform the obligations under each of the other
Operative Agreements to which it is or will be a party and each other
agreement, instrument and document to be executed and delivered by it
in connection
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with or as contemplated by each such Operative Agreement to which it is
or will be a party.
(b) Authorization; No Conflict. The execution, delivery and
performance of each Operative Agreement to which it is a party, either
in its individual capacity or as Indenture Trustee or Collateral Agent,
have been duly authorized by all necessary action on its part and
neither the execution and delivery thereof, nor the consummation of the
transactions contemplated thereby, nor compliance by it with any of the
terms and provisions thereof (i) does or will require any approval or
consent of any Person, (ii) does or will contravene any Legal
Requirement applicable to or binding on it as of the date hereof, (iii)
does or will contravene or result in any breach of or constitute any
default under, or result in the creation of any Lien upon any of its
property under, its leases, organizational documents or by-laws, or any
indenture, mortgage, chattel mortgage, deed of trust, conditional sales
contract, bank loan or credit agreement or other agreement or
instrument to which it is a party or by which it or its properties may
be bound or affected or (iv) does or will require any Governmental
Action by any Governmental Authority governing its banking or trust
powers.
(c) Enforceability, etc. Each Operative Agreement to which it is
a party has been duly executed and delivered by it and constitutes a
legal, valid and binding obligation enforceable against it in
accordance with the terms thereof except as enforceability may be
limited by applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or
affecting the enforcement of creditors' rights generally and by general
equitable principles (whether enforcement is sought by proceedings in
equity or at law).
(d) Litigation. No litigation, investigation or proceeding of or
before any arbitrator or Governmental Authority is pending or, to the
knowledge of Wilmington Trust FSB, threatened by or against Wilmington
Trust FSB with respect to any of the Operative Agreements or any of the
transactions contemplated hereby or thereby.
7.2 Representations and Warranties of Lessor. Lessor represents
and warrants to each of the other parties hereto as of the Release Date as
follows:
(a) Due Organization, etc. Lessor is a duly organized and validly
existing business trust in good standing under the laws of the State of
Delaware and has the power and authority to carry on its business as
now conducted and to enter into and perform its obligations under this
Agreement, each Operative Agreement to which it is a party and each
other agreement, instrument and document executed and delivered by it
on the Closing Date or the Release Date in connection with or as
contemplated by each such Operative Agreement.
(b) Authorization; No Conflict. The execution, delivery and
performance of each Operative Agreement to which it is a party has been
duly authorized by all necessary action on its part and neither the
execution and delivery thereof by the Lessor, nor the consummation of
the transactions contemplated thereby by the Lessor, nor compliance by
it with any of the terms and provisions thereof (i) requires or will
require
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any approval of (which approval has not been obtained) any Person, (ii)
contravenes or will contravene any Legal Requirement applicable to or
binding on it as of the date hereof, (iii) does or will contravene or
result in any breach of or constitute any default under, or result in
the creation of any Lessor Lien upon the Equipment or the Trust
Agreement, any indenture, mortgage, chattel mortgage, deed of trust,
conditional sales contract, bank loan or credit agreement or other
agreement or instrument to which it or its properties may be bound or
(iv) does or will require any Governmental Action by any Governmental
Authority.
(c) Enforceability, etc. Each Operative Agreement to which it is
a party has been duly executed and delivered by it and constitutes, or
upon execution and delivery will constitute, a legal, valid and binding
obligation enforceable against it in accordance with the terms thereof
except as enforceability may be limited by applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other
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).
(d) Litigation. No litigation, investigation or proceeding of or
before any arbitrator or Governmental Authority is pending or
threatened by or against the Lessor (a) with respect to any of the
Operative Agreements or any of the transactions contemplated hereby or
thereby, or (b) which would reasonably be expected to have a material
adverse effect on the assets, liabilities, operations, business or
financial condition of the Lessor.
(e) Assignment. Lessor has not assigned or transferred any of its
right, title or interest in or under the Lease, any other Operative
Agreement or any Equipment, except in accordance with the other
Operative Agreements.
(f) No Default. The Lessor is not in default under or with
respect to any of its Contractual Obligations or the Trust Agreement or
other organizational documents in any respect which would reasonably be
expected to have a material adverse effect on the assets, liabilities,
operations, business or financial condition of the Lessor. No Default
or Event of Default attributable to it has occurred and is continuing.
(g) Use of Proceeds. The proceeds from the issuance and sale of
the Securities and the Certificate Holder Contributions shall be
applied by the Lessor solely in accordance with the provisions of the
Operative Agreements.
(h) Chief Place of Business; Identity. The Lessor's chief place
of business, chief executive office and office where the documents,
accounts and records relating to the transactions contemplated by this
Agreement and each other Operative Agreement are kept are located at
0000 Xxxxx Xxxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxx 00000-0000. Lessor's
correct and complete legal name is "Hanover Equipment Trust 2001B".
Lessor's type of organization (as that term is defined in Article 9 of
the UCC) is a Delaware business trust, and Lessor's organizational
number is 3421490.
(i) Federal Reserve Regulations. The Lessor is not engaged
principally in, and does not have as one of its most important
activities, the business of extending
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credit for the purpose of purchasing or carrying any margin stock
(within the meaning of Regulation U of the Board), and no part of the
proceeds from the issuance and sale of the Securities and the
Certificate Holder Contribution will be used by it, directly or
indirectly, to purchase or carry any margin stock (within the meaning
of Regulation U of the Board) or to extend credit to others for the
purpose of purchasing or carrying any such margin stock (within the
meaning of Regulation U of the Board) or for any purpose that violates,
or is inconsistent with, the provisions of Regulations of the Board,
including but not limited to, T, U or X of the Board.
(j) Investment and Holding Company Status. The Lessor is not (i)
an "investment company" as defined in, or subject to regulation under
the Investment Company Act of 1940 or (ii) a "holding company" as
defined in, or subject to regulation under, the Public Utility Holding
Company Act of 1935.
(k) Securities Act. Neither the Lessor nor any Person authorized
by the Lessor to act on its behalf has offered or sold any interest in
the Equipment or the Securities, or in any similar security or interest
relating to the Equipment, or in any security the offering of which for
the purposes of the Securities Act would be deemed to be part of the
same offering as the offering of the aforementioned securities to, or
solicited any offer to acquire any of the same from, any Person other
than, in the case of the Securities, the Indenture Trustee, and neither
the Lessor nor any Person authorized by the Lessor to act on its behalf
will take any action which would subject the issuance or sale of any
interest in the Equipment or the Securities to the provisions of
Section 5 of the Securities Act or require the qualification of any
Operative Agreement under the Trust Indenture Act of 1939, as amended
except as expressly set forth in the Operative Agreements.
(l) Lessor Liens. The Equipment is free and clear of all Lessor
Liens.
(m) Representations and Warranties; No Default. The
representations and warranties of the Lessor set forth herein and in
each of the other Operative Agreements are true and correct in all
respects. The Lessor is in compliance with its respective obligations
under the Operative Agreements. No Default or Event of Default will
occur under any of the Operative Agreements as a result of, or after
giving effect to, the Advance requested by the Requisition on the
Release Date.
(n) Conditions Precedent in Operative Agreements. All conditions
precedent contained in this Agreement and in the other Operative
Agreements to be satisfied by Lessor relating to the acquisition of the
Equipment by the Lessor have been satisfied in full or waived by the
Initial Purchasers and the Certificate Holders.
(o) Available Information. So long as any of the Securities are
"restricted securities" within the meaning of Rule 144(a)(3) under the
Act, the Lessor will, during any period in which the Lessee is not
subject to and in compliance with Section 13 or 15(d) of the Exchange
Act or the Lessee is not exempt from such reporting requirements
pursuant to and in compliance with Rule 12g3-2(b) under the Exchange
Act, provide to each holder of such restricted securities and to each
prospective purchaser (as designated
10
by such holder) of such restricted securities, upon the request of such
holder or prospective purchaser, any information required to be
provided by Rule 144A(d)(4) under the Act. This covenant is intended to
be for the benefit of the holders, and the prospective purchasers
designated by such holders, from time to time of such restricted
securities.
7.3 Representations and Warranties of the Trust Company. The
Trust Company represents and warrants to each of the other parties hereto as of
the Release Date as follows:
(a) Due Organization, etc. It is a Delaware banking corporation
duly organized and validly existing and in good standing under the laws
of the State of Delaware and has the power and authority to enter into
and perform its obligations under the Trust Agreement and has the
corporate power and authority to act as the trustee under the Trust
Agreement and to enter into and perform the obligations under each of
the other Operative Agreements to which Trust Company or the Trust, as
the case may be, is or will be a party and each other agreement,
instrument and document to be executed and delivered by it on or before
the Closing Date or the Release Date in connection with or as
contemplated by each such Operative Agreement to which the Trust
Company or the Trust, as the case may be, is or will be a party.
(b) Authorization; No Conflict. The execution, delivery and
performance of each Operative Agreement to which it is a party, either
in its individual capacity or (assuming due authorization, execution
and delivery of the Trust Agreement by the Certificate Holders) as the
trustee for Lessor, as the case may be, has been duly authorized by all
necessary action on its part and neither the execution and delivery
thereof, nor the consummation of the transactions contemplated thereby,
nor compliance by it with any of the terms and provisions thereof (i)
does or will require any approval or consent of any Person, (ii) does
or will contravene any current United States federal law, governmental
rule or regulation relating to its banking or trust powers, (iii) does
or will contravene or result in any breach of or constitute any default
under, or result in the creation of any Lien upon any of its property
under, its charter or by-laws, or any indenture, mortgage, chattel
mortgage, deed of trust, conditional sales contract, bank loan or
credit agreement or other agreement or instrument to which it is a
party or by which it or its properties may be bound or affected or (iv)
does or will require any Governmental Action by any Governmental
Authority of the State of Delaware or the United States governing its
banking or trust powers.
(c) Trust Agreement Enforceability, etc. The Trust Agreement and,
assuming the Trust Agreement is the legal, valid and binding obligation
of the Certificate Holders, each other Operative Agreement to which
Trust Company is a party have been, or on or before the Release Date
will be, duly executed and delivered by Trust Company or the Trust, as
the case may be, and the Trust Agreement and each such other Operative
Agreement to the extent entered into by the Trust Company constitutes,
or upon execution and delivery will constitute, a legal, valid and
binding obligation enforceable against Trust Company in accordance with
the terms thereof except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar
11
laws affecting the enforcement of creditors' rights generally and by
general equitable principles (whether enforcement is sought by
proceedings in equity or at law).
(d) Litigation. No litigation, investigation or proceeding of or
before any arbitrator or Governmental Authority is pending or
threatened by or against the Trust Company with respect to any of the
Operative Agreements or any of the transactions contemplated hereby or
thereby.
(e) Liens. The Trust Estate is free and clear of Lessor Liens
attributable to the Trust Company, and there are no Liens affecting the
title of the Trust to the Equipment or resulting from any act or claim
against the Trust Company arising out of any event or condition not
related to the ownership, leasing use or operation of the Equipment or
any other transaction contemplated by this Agreement or any of the
other Operative Agreements, including any Lien resulting from the
nonpayment by the Trust Company of any Taxes imposed or measured by its
net income.
7.4 Representations and Warranties of the Lessee and the
Guarantors. The Lessee and each of the Guarantors jointly and severally
represent and warrant to the Lessor, the Indenture Trustee, the Initial
Purchasers, the Trust Company and each Certificate Holder as of the Release Date
as follows:
(a) Organization; Powers. Each of the Lessee and the Guarantors
(i) is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization, (ii) has all requisite
power and authority to own its property and assets and to carry on its
business as now conducted and as proposed to be conducted, (iii) is
qualified to do business in every jurisdiction where such qualification
is required, except where the failure so to qualify would not result in
a Material Adverse Effect, and (iv) has the power and authority to
execute, deliver and perform its obligations under each of the
Operative Agreements and each other agreement or instrument
contemplated thereby to which it is or will be a party;
(b) Authorization. The execution, delivery and performance by
each of the Lessee and the Guarantors of each of the Operative
Agreements to which it is a party (a) have been duly authorized by all
requisite action, including, if required, stockholder action on the
part of the Lessee and each of the Guarantors and (b) will not (i)
violate (A) any provision of law, statute, rule or regulation, or of
the certificate or articles of incorporation or other constitutive
documents or by-laws of the Lessee or such Guarantor, (B) any order of
any Governmental Authority or (C) any provision of any indenture,
agreement or other instrument to which the Lessee or such Guarantor is
a party or by which it or any of its property is or may be bound, (ii)
be in conflict with, result in a breach of or constitute (alone or with
notice or lapse of time or both) a default under any such indenture,
agreement or other instrument or (iii) result in the creation or
imposition of any Lien upon or with respect to any property or assets
now owned or hereafter acquired by the Lessee or such Guarantor, except
in accordance with the Operative Agreements;
12
(c) Enforceability, etc. Each Operative Agreement to which the
Lessee and each of the Guarantors is a party has been duly executed and
delivered by the Lessee and each of the Guarantors and constitutes a
legal, valid and binding obligation of the Lessee and each of the
Guarantors enforceable against the Lessee or such Guarantor in
accordance with its terms, except as such enforceability may be limited
by the effects of applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws relating
to or affecting creditors' rights generally or general equitable
principles (whether considered in a proceeding in equity or at law);
(d) Governmental Approvals. No action, consent or approval of,
registration or filing with or any other action by any Governmental
Authority is or will be required by the Lessee or any of the Guarantors
in connection with the sale, leasing or financing of the Equipment,
except such as have been made or obtained and are in full force and
effect;
(e) Financial Statements. Hanover has heretofore furnished to the
Indenture Trustee, the Initial Purchasers and the Certificate Holders
the consolidated balance sheets and statements of income and cash flow
of Hanover, as of and for the fiscal year ended December 31, 2000,
accompanied by a certificate of a financial officer of Hanover. Such
financial statements present fairly the financial condition and results
of operations of Hanover and its consolidated subsidiaries as of such
dates and for such periods. Such financial statements were prepared in
accordance with GAAP applied on a consistent basis;
(f) Offering Memorandum. The Lessee and the Guarantors have
delivered to each Securityholder, through the Initial Purchasers, and
to each Certificate Holder a copy of an Offering Memorandum, dated
August 16, 2001 (the "Offering Memorandum"), relating to the
transactions contemplated hereby;
(g) No Material Adverse Change. There has been no adverse change
in the business, assets, property or condition, financial or otherwise,
of the Lessee or any of the Guarantors (not in the ordinary course of
business) since March 31, 2001 and neither Hanover nor any of its
subsidiaries has sustained since March 31, 2001 any loss or
interference with its business from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any labor
dispute or court or governmental action, order or decree, otherwise
than as set forth or contemplated in the Disclosure Documents, other
than any such adverse change or loss or interference which is
immaterial;
(h) Title to Assets. Each of the Lessee and the Guarantors has
good and marketable title to, or valid leasehold interests in, all its
properties and assets. All such properties and assets, if any, that
constitute the Trust Estate are free and clear of Liens, other than
Liens expressly permitted by any of the Operative Agreements;
(i) Litigation. There are not any actions, suits or proceedings
at law or in equity or by or before any Governmental Authority now
pending or, to the knowledge of the Lessee and the Guarantors,
threatened against or affecting the Lessee or any business, property or
rights of the Lessee or the Guarantors (x) which involve any Operative
13
Agreements or the transactions contemplated hereby or (y) which could
reasonably be anticipated to have a Material Adverse Effect except as
set forth in Disclosure Documents;
(j) Compliance with Laws. Neither the Lessee nor any Guarantor is
in violation of any law, rule or regulation, or in default with respect
to any judgment, writ, injunction or decree, of any Governmental
Authority, where such violation or default could reasonably be
anticipated to result in a Material Adverse Effect;
(k) Agreements. Neither the Lessee nor any Guarantor is a party
to any agreement or instrument or subject to any corporate or other
restriction that has resulted or could reasonably be anticipated to
result in a Material Adverse Effect except as set forth in the
Disclosure Documents;
(l) No Defaults. Neither the Lessee nor any Guarantor is in
default in any manner under any provision of any indenture or other
agreement or instrument evidencing Indebtedness, or any other material
agreement or instrument to which it is a party or by which it or any of
its properties or assets are or may be bound, except where such default
could reasonably be anticipated to not result in a Material Adverse
Effect. No Default or Event of Default will occur under any of the
Operative Agreements as a result of, or after giving effect to, the
Advance requested by a Requisition;
(m) Federal Reserve Regulations. Neither the Lessee nor any
Guarantor is engaged principally, or as one of its important
activities, in the business of extending credit for the purpose of
purchasing or carrying margin stock (within the meaning of Regulation U
of the Board);
(n) Investment Company Act; Public Utility Holding Company Act.
Neither the Lessee nor any Guarantor is (i) an "investment company" as
defined in, or subject to regulation under, the Investment Company Act
or (ii) a "holding company" as defined in, or subject to regulation
under, the Public Utility Holding Company Act of 1935;
(o) No Material Misstatements. No information, report, financial
statement, exhibit or schedule furnished by or on behalf of the Lessee
or any Guarantor to the Indenture Trustee or any Initial Purchaser or
Certificate Holder in connection with the negotiation of any Operative
Agreement or included therein or delivered pursuant thereto (including,
without limitation, the Offering Memorandum) contains any misstatement
of fact or omits to state any fact necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading, except for any such untrue statement or omission which
would make such statements misleading only in immaterial respects;
(p) Employee Benefit Plans. Each of the Lessee and the Guarantors
is in compliance in all material respects with the applicable
provisions of ERISA and the regulations and published interpretations
thereunder. No Reportable Event has occurred as to which the Lessee or
any Guarantor was required to file a report with the PBGC, and
14
the present value of all benefit liabilities under each Plan (based on
those assumptions used to fund such Plan) did not, as of the last
annual valuation date applicable thereto, exceed by more than
$5,000,000 the value of the assets of such Plan. Neither the Lessee nor
any Guarantor has incurred any withdrawal liability under Title IV of
ERISA which remains unpaid and that could result in a Material Adverse
Effect. Neither the Lessee nor any Guarantor has received any
notification that any Multiemployer Plan is in reorganization or has
been terminated within the meaning of Title IV of ERISA, and, to the
best knowledge of the Lessee and each Guarantor, no Multiemployer Plan
is reasonably expected to be in reorganization or to be terminated,
where such reorganization or termination has resulted or could
reasonably be expected to result, through increases in the
contributions required to be made to such Plan or otherwise, in a
Material Adverse Effect;
(q) Environmental Matters.
(i) The Equipment does not contain any Hazardous
Substances in amounts or concentrations which (i) constitute a
material violation of , or (ii) would reasonably be expected to
give rise to material liability under any Environmental Law.
(ii) The Equipment is in compliance in all material
respects with all applicable Environmental Laws.
(iii) Neither the Lessee nor any Guarantor has received
any notice of violation, alleged violation, non-compliance,
liability or potential liability regarding any material
non-compliance with Environmental Laws with regard to the
Equipment, nor does the Lessee or any Guarantor have knowledge
that any such notice will be received or is being threatened.
(iv) Hazardous Substances have not been transported or
discharged from the Equipment so as to create a material
violation of any Environment Law, nor have any Hazardous
Substances been generated, created or used with respect to the
Equipment so as to create a material violation of any applicable
Environmental Law.
(v) No judicial proceeding or governmental or
administrative action is pending or, to the best knowledge of the
Lessee, threatened, under any Environmental Law to which the
Lessee or any Guarantor is or, to Lessee's knowledge, will be
named as a party with respect to the Equipment, nor 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 the Equipment.
(vi) There has been no release or threat of release of
Hazardous Substances at or from the Equipment, or arising from or
related to the operations of the Lessee or any Guarantor in
connection with the Equipment, in violation of,
15
or in amounts or in a manner that would reasonably be expected to
give rise to any material liability, under any Environmental
Laws.
(r) Insurance. The Lessee and the Guarantors have obtained
insurance coverage covering the Equipment which meets the requirements
of the Lease before commencing repairs or modifications, as the case
may be, and such coverage is in full force and effect;
(s) Representations and Warranties. The representations and
warranties of each of the Lessee and the Guarantors set forth herein
and in each of the other Operative Agreements, as applicable, are true
and correct in all respects. Each of the Lessee and the Guarantors is
in compliance with its obligations under the Operative Agreements and
there exists no Default or Event of Default;
(t) UCC Filings. On the Release Date, the UCC Financing
Statements with respect to the Equipment will be filed (or deposited
with the Collateral Agent for filing) with the appropriate Governmental
Authorities;
(u) Priority of Liens. Upon proper filing on the Release Date,
the Security Documents will constitute a valid and perfected first lien
on each Unit of Equipment in an amount not less than the Equipment Cost
with respect to such Equipment, subject only to the Permitted
Exceptions;
(v) Legal Requirements. Each Unit of Equipment complies in all
material respects with all Legal Requirements (including all
Environmental Laws);
(w) Consents, etc. All consents, licenses and permits required by
all Legal Requirements for operation of each Unit of Equipment have
been obtained and are in full force and effect;
(x) Title to the Equipment. Upon the acquisition of each Unit of
Equipment on the Release Date, the Lessor will have good and marketable
title to the Equipment, subject in each case only to the Permitted
Exceptions;
(y) Location of the Equipment. Each Unit of Equipment being
acquired on the Release Date is located within the United States or on
lands covered by leases under the exclusive jurisdiction of the United
States of America pursuant to the Outer Continental Shelf Lands Act, as
amended, 43 U.S.C. ss.ss.1331, et seq. (1986);
(z) Conditions Precedent in Operative Agreements. All conditions
precedent contained in this Agreement and in the other Operative
Agreements relating to the acquisition of a Unit of Equipment by the
Lessor have been satisfied in full in all material respects or waived
by the Initial Purchasers and the Certificate Holders;
(aa) Xxxx-Xxxxx-Xxxxxx. The acquisition of the Equipment being
acquired by Lessor on the Release Date does not conflict with, violate,
or require the consent of any governmental entity, under the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended.
16
(bb) Available Information. So long as any of the Securities are
"restricted securities" within the meaning of Rule 144(a)(3) under the
Act, each of the Lessee and the Guarantors will, during any period in
which the Lessee or such Guarantor is not subject to and in compliance
with Section 13 or 15(d) of the Exchange Act or the Lessee or such
Guarantor is not exempt from such reporting requirements pursuant to
and in compliance with Rule 12g3-2(b) under the Exchange Act, provide
to each holder of such restricted securities and to each prospective
purchaser (as designated by such holder) of such restricted securities,
upon the request of such holder or prospective purchaser, any
information required to be provided by Rule 144A(d)(4) under the Act.
This covenant is intended to be for the benefit of the holders, and the
prospective purchasers designated by such holders, from time to time of
such restricted securities.
SECTION 8. PAYMENT OF CERTAIN EXPENSES
The Lessee agrees, for the benefit of the Certificate Holders,
the Initial Purchasers, the Trust Company, the Lessor and the Indenture Trustee.
8.1 Transaction Expenses. On the Release Date, pay, or cause to
be paid, all reasonable fees, expenses and disbursements of one counsel to each
of the Lessor, the Trust Company, the Indenture Trustee, the Initial Purchasers
and the Certificate Holders in connection with the transactions contemplated by
the Operative Agreements and incurred in connection with the Closing Date and
the Release Date, including all Transaction Expenses, and all other reasonable
expenses in connection with the Closing Date and the Release Date, including all
expenses relating to all fees, taxes and expenses for the recording,
registration and filing of documents.
8.2 Brokers' Fees and Stamp Taxes. Pay or cause to be paid
brokers' fees with respect to brokers retained by or with the prior written
consent of Lessee and any and all stamp, transfer and other similar taxes, fees
and excises, if any, including any interest and penalties, which are payable in
connection with the transactions contemplated by this Agreement and the other
Operative Agreements.
8.3 Certain Fees and Expenses. Pay or cause to be paid in a
timely manner (i) the initial and annual fee and all reasonable expenses of the
Trust Company and the Indenture Trustee and any necessary co-trustees (including
reasonable counsel fees and expenses) or any successor owner trustee, for acting
as trustee under the Trust Agreement and the Indenture, (ii) all reasonable
costs and expenses incurred by the Lessee, the Indenture Trustee, the
Certificate Holders, the Initial Purchasers, the Trust Company or the Lessor in
entering into any future amendments or supplements with respect to any of the
Operative Agreements, whether or not such amendments or supplements are
ultimately entered into, or giving or withholding of waivers of consents hereto
or thereto, which have been requested by the Lessee, (iii) all reasonable costs
and expenses incurred by the Lessor, the Lessee, the Certificate Holders, the
Initial Purchasers, or the Trust Company in connection with any purchase of any
Equipment by the Lessee pursuant to Section 20 of the Lease, and (iv) the costs
and expenses incurred by any Initial Purchaser, Certificate Holder or
Securityholder in enforcing or defending (or determining whether or how to
enforce or defend) any rights under this Agreement, the Certificates or any
other Operative
17
Agreement, or in responding to any subpoena or other legal process or informal
investigative demand issued to such Initial Purchaser or Certificate Holder or
Securityholders in connection with this Agreement or any other Operative
Agreement, or by reason of being a holder of any Security or Certificate.
8.4 Continuous Perfection of Security Interests. Lessee shall,
and shall cause Lessor to, make all filing, recordings, registrations and take
such actions, including, without limitation, the filing of duly executed Lessee
Financing Statements and Lessor Financing Statements, necessary to insure that
the Security Documents create a perfected first priority Lien (subject to
Permitted Exceptions) to secure the Securities and the Certificates and that
Lessor complies with Sections 3.5, 3.6 and 3.9 of the Indenture. If the
Officer's Certificate required to be delivered by Lessee pursuant to Section
10.3(b) of the Lease shall indicate that any of the Equipment has been
relocated, then Lessee will provide to the Indenture Trustee, together with the
Officer's Certificate, evidence that all filings, recordings, registrations and
other actions, including the filing of duly executed Lessee Financing Statements
and Lessor Financing Statements, necessary or desirable to perfect the Liens
granted by the Security Documents shall have been completed.
8.5 Oklahoma Equipment Subleases. With respect to any leases or
other agreements entered into by Lessee with respect to Equipment located in the
State of Oklahoma ("Oklahoma Subleases"), Lessee shall, by November 30, 2001 (or
within 90 days of the date any Oklahoma Sublease is subsequently entered into),
undertake to file, in accordance with 60 Okla. Stat. 1991 " 319. et. Seq., the
original Oklahoma Sublease instrument or a true copy thereof in the chattel
mortgage records of the office of the county clerk in the county where the
Equipment is located and provide the Collateral Agent with reasonably
satisfactory evidence of Lessee's compliance with this Section 8.5.
8.6 Operative Agreements and Related Obligations. Pay, before the
due date thereof, all costs, fees, indemnities, expenses and other amounts
(other than principal and interest on the Securities, except to the extent the
same is payable pursuant to the Lease) required to be paid by the Lessor under
any Operative Agreement.
SECTION 9. COVENANTS OF THE LESSEE AND THE GUARANTORS
Each of Hanover, the Lessee and the other Guarantors hereby
agrees that so long as this Agreement in is effect:
9.1 Limitation on Indebtedness. (b) Hanover will not, and will
not permit any of its Restricted Subsidiaries to, Incur any Indebtedness;
provided, however, that Hanover, the Subsidiary Guarantors and the Restricted
Subsidiaries may Incur Indebtedness if on the date of the Incurrence: (1) the
Consolidated Coverage Ratio for Hanover and its Restricted Subsidiaries is at
least 2.25 to 1.00; and (2) no Default or Event of Default has occurred or is
continuing or would occur as a consequence of Incurring the Indebtedness and the
application of the proceeds thereof.
18
(b) Section 9.1(a) will not prohibit the incurrence of the
following Indebtedness:
(i) Indebtedness of Hanover and its Subsidiaries Incurred
pursuant to the Senior Credit Agreement together with the
principal component of amounts outstanding under Qualified
Receivables Transactions in an aggregate amount not to exceed
$400.0 million at any time outstanding, less the aggregate
principal amount of repayments with the proceeds from Asset
Dispositions pursuant to the provisions of Section 9.6 and the
Guarantees of the Restricted Subsidiaries in respect of the
Indebtedness Incurred pursuant to the Senior Credit Agreement;
(ii) the Lease, the 2001A Lease, the Hanover Guarantee and
the 2001A Guarantee;
(iii) Indebtedness of Hanover owing to and held by any
Wholly-Owned Subsidiary (other than a Receivables Entity) or
Indebtedness of a Restricted Subsidiary owing to and held by
Hanover or any Wholly-Owned Subsidiary (other than a Receivables
Entity); provided, however,
(A) if Hanover is the obligor on such Indebtedness,
such Indebtedness is expressly subordinated to the
prior payment in full in cash of all obligations
with respect to the Lease and the Hanover
Guarantee; and
(B) (i) any subsequent issuance or transfer of Capital
Stock or any other event which results in any such
Indebtedness being beneficially held by a Person
other than Hanover, or a Wholly-Owned Subsidiary
(other than a Receivables Entity) of Hanover; and
(ii) any sale or other transfer of any such
Indebtedness to a Person other than Hanover, or a
Wholly-Owned Subsidiary (other than a Receivables
Entity) of Hanover shall be deemed, in each case, to
constitute an Incurrence of such Indebtedness by
Hanover or such Subsidiary, as the case may be;
(iv) Indebtedness represented by (A) the
Securities, (B) any Indebtedness (other than the Indebtedness
described in clauses (i), (ii), (iii), (vi), (viii), (ix) and
(x)) outstanding on the Issue Date, (C) Indebtedness of
Production Operators Corporation or any of its subsidiaries in
existence as of the Issue Date and (D) any Refinancing
Indebtedness Incurred in respect of any Indebtedness described in
this clause (iv) or clause (v) or Incurred pursuant to Section
9.1(a);
(v) Indebtedness of a Restricted Subsidiary
Incurred and outstanding on the date on which such Restricted
Subsidiary was acquired by Hanover (other than Indebtedness
Incurred (A) to provide all or any portion of the funds utilized
to consummate the transaction or series of related transactions
19
pursuant to which such Restricted Subsidiary became a Restricted
Subsidiary or was otherwise acquired by Hanover or (B) otherwise
in connection with, or in contemplation of, such acquisition);
provided, however, that at the time such Restricted Subsidiary is
acquired by Hanover would have been able to Incur $1.00 of
additional Indebtedness pursuant to Section 9.1(a) after giving
effect to the Incurrence of such Indebtedness pursuant to this
clause (v);
(vi) Indebtedness under Currency Agreements and
Interest Rate Agreements; provided that in the case of Currency
Agreements and Interest Rate Agreements, such Currency Agreements
and Interest Rate Agreements are entered into for bona fide
hedging purposes of Hanover or its Restricted Subsidiaries (as
determined in good faith by the Board of Directors or senior
management of Hanover) and substantially correspond in terms of
notional amount, duration, currencies and interest rates, as
applicable, to Indebtedness of Hanover or its Restricted
Subsidiaries on customary terms entered into in the ordinary
course of business and Incurred without violation of the terms of
this Agreement;
(vii) the Incurrence by Hanover or any of its
Restricted Subsidiaries of Indebtedness represented by
Capitalized Lease Obligations, mortgage financings or purchase
money obligations with respect to assets other than Capital Stock
or other Investments, in each case Incurred for the purpose of
financing all or any part of the purchase price or cost of
construction or improvements of property used in the business of
Hanover or such Restricted Subsidiary, in an aggregate principal
amount not to exceed $75.0 million at any time outstanding (it
being understood that any Indebtedness Incurred pursuant to this
clause (vii) shall cease to be deemed to be Incurred or
outstanding for purposes hereof but shall be deemed Incurred for
purposes of Section 9.1(a) from and after the first date on which
Hanover or its Restricted Subsidiaries could have Incurred such
Indebtedness under Section 9.1(a) without reliance on this clause
(vii));
(viii) Indebtedness Incurred in respect of workers'
compensation claims, self-insurance obligations, performance,
surety and similar bonds and completion guarantees provided by
Hanover or a Restricted Subsidiary in the ordinary course of
business;
(ix) Indebtedness arising from agreements of
Hanover or a Restricted Subsidiary providing for indemnification,
adjustment of purchase price or similar obligations, in each
case, Incurred or assumed in connection with the disposition of
any business, assets or Capital Stock of a Restricted Subsidiary;
(x) Indebtedness arising from the honoring by a bank or
other financial institution of a check, draft or similar
instrument (except in the case of daylight overdrafts) drawn
against insufficient funds in the ordinary course of business,
provided, however, that such Indebtedness is extinguished within
five business days of Incurrence; and
20
(xi) in addition to the items referred to in clauses (i)
through (x) above, Indebtedness of Hanover and its Restricted
Subsidiaries in an aggregate outstanding principal amount which,
when taken together with the principal amount of all other
Indebtedness Incurred pursuant to this clause (xi) and then
outstanding, will not exceed $75.0 million (it being understood
that any Indebtedness Incurred pursuant to this clause (xi) shall
cease to be deemed to be Incurred or outstanding for purposes
hereof but shall be deemed Incurred for purposes of Section
9.1(a) from and after the first date on which Hanover or its
Restricted Subsidiaries could have Incurred such Indebtedness
under Section 9.1(a) without reliance on this clause (xi)).
(c) For purposes of determining compliance with, and the
outstanding principal amount of any particular Indebtedness Incurred pursuant to
and in compliance with, this Section 9.1:
(1) (A) Indebtedness permitted by Section 9.1 need not be
permitted solely by reference to one provision permitting
such Indebtedness but may be permitted in part by one such
provision and in part by one or more other provisions of
Section 9.1 permitting such Indebtedness and (B) in the
event that Indebtedness meets the criteria of more than
one of the types of Indebtedness described in Section
9.1(a) or (b), Hanover, in its sole discretion, will
classify such item of Indebtedness and only be required to
include the amount and type of such Indebtedness in one of
such clauses; and
(2) the amount of Indebtedness issued at a price that is less
than the principal amount thereof will be equal to the
amount of the liability in respect thereof determined in
accordance with GAAP.
Accrual of interest, accrual of dividends, the accretion of accreted value, the
payment of interest in the form of additional Indebtedness and the payment of
dividends in the form of additional shares of Preferred Stock will not be deemed
to be an incurrence of Indebtedness for purposes of this Section 9.1. The amount
of any Indebtedness outstanding as of any date shall be (i) the accreted value
of the Indebtedness in the case of any Indebtedness issued with original issue
discount and (ii) the principal amount or liquidation preference thereof,
together with any interest thereon that is more than 30 days past due, in the
case of any other Indebtedness.
(d) Hanover will not permit any of its Unrestricted Subsidiaries
to Incur any Indebtedness or issue any shares of Disqualified Stock, other than
Non-Recourse Debt. If at any time an Unrestricted Subsidiary becomes a
Restricted Subsidiary, any Indebtedness of such Subsidiary shall be deemed to be
Incurred by a Restricted Subsidiary of Hanover as of such date (and, if such
Indebtedness is not permitted to be Incurred as of such date under this Section
9.1, Hanover shall be in Default of this Section 9.1).
(e) For purposes of determining compliance with any U.S.
dollar-denominated restriction on the Incurrence of Indebtedness, the U.S.
dollar-equivalent principal amount of Indebtedness denominated in a foreign
currency shall be calculated based on the
21
relevant currency exchange rate in effect on the date such Indebtedness was
Incurred, in the case of term Indebtedness, or first committed, in the case of
revolving credit Indebtedness; provided that if such Indebtedness is Incurred to
refinance other Indebtedness denominated in a foreign currency, and such
refinancing would cause the applicable U.S. dollar-denominated restriction to be
exceeded if calculated at the relevant currency exchange rate in effect on the
date of such refinancing, such U.S. dollar-dominated restriction shall be deemed
not to have been exceeded so long as the principal amount of such Refinancing
Indebtedness does not exceed the principal amount of such Indebtedness being
refinanced. Notwithstanding any other provision of this Section 9.1, the maximum
amount of Indebtedness that Hanover may incur pursuant to this Section 9.1 shall
not be deemed to be exceeded solely as a result of fluctuations in the exchange
rate of currencies. The principal amount of any Indebtedness incurred to
refinance other Indebtedness, if Incurred in a different currency from the
Indebtedness being refinanced, shall be calculated based on the currency
exchange rate applicable to the currencies in which such Refinancing
Indebtedness is denominated that is in effect on the date of such refinancing.
9.2 Limitation on Layering. Hanover will not Incur any
Indebtedness if such Indebtedness is subordinate or junior in ranking in any
respect to any Senior Indebtedness unless such Indebtedness is Senior
Subordinated Indebtedness or is contractually subordinated in right of payment
to Senior Subordinated Indebtedness. Neither the Lessee nor any other Subsidiary
Guarantor will Incur any Indebtedness if such Indebtedness is contractually
subordinate or junior in ranking in any respect to any Guarantor Senior
Indebtedness of such Subsidiary Guarantor unless such Indebtedness is Guarantor
Senior Subordinated Indebtedness of such Subsidiary Guarantor or is
contractually subordinated in right of payment to Guarantor Senior Subordinated
Indebtedness of such Subsidiary Guarantor.
9.3 Limitation on Restricted Payments. (c) Hanover will not, and
will not permit any of its Restricted Subsidiaries, directly or indirectly, to
(i) declare or pay any dividend or make any distribution on or in respect of its
Capital Stock (including any payment in connection with any merger or
consolidation involving Hanover or any of its Restricted Subsidiaries) except
(A) dividends or distributions payable in Capital Stock of Hanover (other than
Disqualified Stock) or in options, warrants or other rights to purchase such
Capital Stock; and (B) dividends or distributions payable to Hanover or a
Restricted Subsidiary (and if such Restricted Subsidiary is not a Wholly-Owned
Subsidiary, to its other holders of common Capital Stock on a pro rata basis);
(ii) purchase, redeem, retire or otherwise acquire for value any Capital Stock
of Hanover or any direct or indirect parent of Hanover held by Persons other
than Hanover or a Restricted Subsidiary of Hanover (other than in exchange for
Capital Stock of Hanover (other than Disqualified Stock)); (iii) purchase,
repurchase, redeem, defease or otherwise acquire or retire for value, prior to
scheduled maturity, scheduled repayment or scheduled sinking fund payment, any
Subordinated Obligations or Guarantor Subordinated Obligations (other than the
purchase, repurchase or other acquisition of Subordinated Obligations or
Guarantor Subordinated Obligations purchased in anticipation of satisfying a
sinking fund obligation, principal installment or final maturity, in each case
due within one year of the date of purchase, repurchase or acquisition); or (iv)
make any Restricted Investment in any Person; (any such dividend, distribution,
purchase, redemption, repurchase, defeasance, other acquisition, retirement or
Restricted Investment referred to in clauses (i) through (iv) shall be referred
to herein as a "Restricted Payment"), if at the time Hanover or such Restricted
Subsidiary makes such Restricted Payment:
22
(1) a Default shall have occurred and be continuing (or would
result therefrom); or
(2) Hanover is not able to incur an additional $1.00 of
Indebtedness pursuant to Section 9.1(a) after giving effect, on a pro
forma basis, to such Restricted Payment; or
(3) the aggregate amount of such Restricted Payment and all other
Restricted Payments declared or made subsequent to the Issue Date would
exceed the sum of (A) 50% of Consolidated Net Income for the period
(treated as one accounting period) from the Issue Date to the end of
the most recent fiscal quarter ending prior to the date of such
Restricted Payment for which financial statements are in existence (or,
in case such Consolidated Net Income is a deficit, minus 100% of such
deficit); (B) the aggregate Net Cash Proceeds received by Hanover from
the issue or sale of its Capital Stock (other than Disqualified Stock)
or other capital contributions subsequent to the Issue Date (other than
Net Cash Proceeds received from an issuance or sale of such Capital
Stock to a Subsidiary of Hanover or an employee stock ownership plan,
option plan or similar trust to the extent such sale to an employee
stock ownership plan, option plan or similar trust is financed by loans
from or guaranteed by Hanover or any Restricted Subsidiary unless such
loans have been repaid with cash on or prior to the date of
determination); (C) the amount by which Indebtedness of Hanover is
reduced on Hanover's balance sheet upon the conversion or exchange
(other than by a Subsidiary of Hanover) subsequent to the Issue Date of
any Indebtedness of Hanover convertible or exchangeable for Capital
Stock (other than Disqualified Stock) of Hanover (less the amount of
any cash, or other property, distributed by Hanover upon such
conversion or exchange); (D) the amount equal to the net reduction in
Restricted Investments made by Hanover or any of its Restricted
Subsidiaries in any Person resulting from (x) repurchases or
redemptions of such Restricted Investments by such Person, proceeds
realized upon the sale of such Restricted Investment to an unaffiliated
purchaser, repayments of loans or advances or other transfers of assets
(including by way of dividend or distribution) by such Person to
Hanover or any Restricted Subsidiary of Hanover; or (y) the
redesignation of Unrestricted Subsidiaries as Restricted Subsidiaries
(valued in each case as provided in the definition of "Investment") not
to exceed, in the case of any Unrestricted Subsidiary, the amount of
Investments previously made by Hanover or any Restricted Subsidiary in
such Unrestricted Subsidiary, which amount in each case under this
clause (D) was included in the calculation of the amount of Restricted
Payments; provided, however, that no amount will be included under this
clause (D) to the extent it is already included in Consolidated Net
Income; and (E) $75.0 million.
(b) The provisions of Section 9.3(a) will not prohibit (1) any
purchase or redemption of Capital Stock or Subordinated Obligations of
Hanover made by exchange for, or out of the proceeds of the
substantially concurrent sale of, Capital Stock of Hanover (other than
Disqualified Stock and other than Capital Stock issued or sold to a
Subsidiary or an employee stock ownership plan or similar trust to the
extent such sale to an employee stock ownership plan or similar trust
is financed by loans from or Guaranteed by Hanover or any Restricted
Subsidiary unless such loans have been repaid with cash on or prior to
the date of determination); provided, however, that such purchase or
redemption will be excluded in subsequent calculations of the amount of
Restricted
23
Payments; (2) any purchase or redemption of Subordinated Obligations of
Hanover made by exchange for, or out of the proceeds of the
substantially concurrent sale of, Subordinated Obligations of Hanover
that qualifies as Refinancing Indebtedness; provided, however, that
such purchase or redemption will be excluded in subsequent calculations
of the amount of Restricted Payments; (3) so long as no Default or
Event of Default has occurred and is continuing, any purchase or
redemption of Subordinated Obligations from Net Available Cash to the
extent permitted under Section 9.6; provided, however, that such
purchase or redemption will be excluded in subsequent calculations of
the amount of Restricted Payments; (4) dividends paid within 60 days
after the date of declaration if at such date of declaration such
dividend would have complied with this Section 9.3; provided, however,
that such dividends will be included in subsequent calculations of the
amount of Restricted Payments; (5) so long as no Default or Event of
Default has occurred and is continuing, (A) the purchase, redemption or
other acquisition, cancellation or retirement for value of Capital
Stock, or options, warrants, equity appreciation rights or other rights
to purchase or acquire Capital Stock of Hanover or any Restricted
Subsidiary of Hanover or any parent of Hanover held by any existing or
former directors, employees or management of Hanover or any Subsidiary
of Hanover or their assigns, estates or heirs, in each case in
connection with the repurchase provisions under employee or director
stock option or stock purchase agreements or other agreements to
compensate management employees or directors; provided that such
redemptions or repurchases pursuant to this clause will not exceed
$25.0 million in the aggregate during any calendar year; provided,
however, that the amount of any such repurchase or redemption will be
included in subsequent calculations of the amount of Restricted
Payments; and (B) loans or advances to employees or directors of
Hanover or any Subsidiary of Hanover the proceeds of which are used to
purchase Capital Stock of Hanover, in an aggregate amount not in excess
of $25.0 million at any one time outstanding; provided, however that
the amount of such loans and advances will be included in subsequent
calculations of the amount of Restricted Payments; (6) repurchases of
Capital Stock deemed to occur upon the exercise of stock options if
such Capital Stock represents a portion of the exercise price thereof;
provided, however, that such repurchases will be excluded from
subsequent calculations of the amount of Restricted Payments; and (7)
payments under the Subordinated Acquisition Note permitted by the
subordination provisions contained therein, which permit repayment only
upon an issuance of equity by Hanover or upon a change of control at
Hanover.
The amount of all Restricted Payments (other than cash) shall be
the fair market value on the date of such Restricted Payment of the asset(s) or
securities proposed to be paid, transferred or issued by Hanover or such
Restricted Subsidiary, as the case may be, pursuant to such Restricted Payment.
The fair market value of any cash Restricted Payment shall be its face amount
and any non-cash Restricted Payment shall be determined conclusively by the
Board of Directors of Hanover acting in good faith whose resolution with respect
thereto shall be delivered to the Indenture Trustee (with a copy to the Lessor),
such determination to be based upon an opinion or appraisal issued by an
accounting, appraisal or investment banking firm of national standing if such
fair market value is estimated to exceed $10.0 million. Not later than the date
of making any Restricted Payment, Hanover shall deliver to the Indenture Trustee
(with a copy to the Lessor) an Officers' Certificate stating that such
Restricted Payment is permitted
24
and setting forth the basis upon which the calculations required by the covenant
"Restricted Payments" were computed, together with a copy of any fairness
opinion or appraisal required by this Agreement.
9.4 Limitation on Liens. Hanover will not, and will not permit
any of its Restricted Subsidiaries to, directly or indirectly, create, incur or
suffer to exist any Lien (other than Permitted Liens) upon any of its, or any
such Restricted Subsidiary's, property or assets (including Capital Stock),
whether owned on the date of this Agreement or acquired after the date hereof,
securing any Senior Subordinated Indebtedness, Subordinated Obligations,
Guarantor Senior Subordinated Indebtedness or Guarantor Subordinated
Obligations, unless contemporaneously with the Incurrence of the Liens effective
provision is made to secure the Hanover Guarantee equally and ratably with (or
prior to in the case of Liens with respect to Subordinated Obligations or
Guarantor Subordinated Obligations, as the case may be) the Indebtedness secured
by such Lien for so long as such Indebtedness is so secured.
9.5 Limitation on Restrictions on Distributions from Restricted
Subsidiaries. Hanover will not, and will not permit any Restricted Subsidiary
to, create or otherwise cause or permit to exist or become effective any
consensual encumbrance or consensual restriction on the ability of any
Restricted Subsidiary to (1) pay dividends or make any other distributions on
its Capital Stock or pay any Indebtedness or other obligations owed to Hanover
or any Restricted Subsidiary; (2) make any loans or advances to Hanover or any
Restricted Subsidiary; or (3) transfer any of its property or assets to Hanover
or any Restricted Subsidiary. The preceding provisions will not prohibit (i) any
encumbrance or restriction pursuant to an agreement in effect at or entered into
on the date of this Agreement, including, without limitation, this Agreement,
the 2001A Participation Agreement and the Senior Credit Agreement in effect on
such date; (ii) any encumbrance or restriction with respect to a Restricted
Subsidiary pursuant to an agreement relating to any Indebtedness Incurred by a
Restricted Subsidiary on or before the date on which such Restricted Subsidiary
was acquired by Hanover (other than Indebtedness Incurred as consideration in,
or to provide all or any portion of the funds utilized to consummate, the
transaction or series of related transactions pursuant to which such Restricted
Subsidiary became a Restricted Subsidiary or was acquired by Hanover or in
contemplation of the transaction) and outstanding on such date; (iii) any
encumbrance or restriction with respect to a Restricted Subsidiary pursuant to
an agreement effecting a refunding, replacement or refinancing of Indebtedness
Incurred pursuant to an agreement referred to in Section 9.5(i) or (ii) or this
clause (iii) or contained in any amendment to an agreement referred to in
Section 9.5(i) or (ii) or this clause (iii); provided, however, that the
encumbrances and restrictions with respect to such Restricted Subsidiary
contained in any such agreement or amendment are no less favorable in any
material respect to the Holders of the Securities than the encumbrances and
restrictions contained in such agreements referred to in Section 9.5(i) or (ii)
on the Issue Date or the date such Restricted Subsidiary became a Restricted
Subsidiary, whichever is applicable; (iv) in the case of clause (3) of this
Section 9.5, any encumbrance or restriction (a) that restricts in a customary
manner the subletting, assignment or transfer of any property or asset that is
subject to a lease, license or similar contract, or the assignment or transfer
of any such lease, license or other contract; (b) contained in mortgages,
pledges or other security agreements permitted under this Agreement securing
Indebtedness of Hanover or a Restricted Subsidiary to the extent such
encumbrances or restrictions restrict the transfer of the property subject to
such mortgages, pledges or other security agreements; or (c) pursuant to
customary provisions restricting
25
dispositions of real property interests set forth in any reciprocal easement
agreements of Hanover or any Restricted Subsidiary; (v) purchase money
obligations for property acquired in the ordinary course of business that impose
encumbrances or restrictions of the nature described in clause (3) of this
Section 9.5 on the property so acquired; (vi) any Purchase Money Note or other
Indebtedness or contractual requirements incurred with respect to a Qualified
Receivables Transaction relating exclusively to a Receivables Entity that, in
the good faith determination of the Board of Directors, are necessary to effect
such Qualified Receivables Transaction; (vii) any restriction with respect to a
Restricted Subsidiary (or any of its property or assets) imposed pursuant to an
agreement entered into for the direct or indirect sale or disposition of all or
substantially all the Capital Stock or assets of such Restricted Subsidiary (or
the property or assets that are subject to such restriction) pending the closing
of such sale or disposition; and (viii) encumbrances or restrictions arising or
existing by reason of applicable law or any applicable rule, regulation or
order.
9.6 Limitation on Sales of Assets and Subsidiary Stock. (d)
Hanover will not, and will not permit any of its Restricted Subsidiaries to,
make any Asset Disposition unless (1) Hanover or such Restricted Subsidiary, as
the case may be, receives consideration at the time of such Asset Disposition at
least equal to the fair market value, as determined in good faith by the Board
of Directors (including as to the value of all non-cash consideration), of the
shares and assets subject to such Asset Disposition; (2) at least 80% of the
consideration from such Asset Disposition received by Hanover or such Restricted
Subsidiary, as the case may be, is in the form of cash or Cash Equivalents; and
(3) an amount equal to 100% of the Net Available Cash from such Asset
Disposition is applied by Hanover or such Restricted Subsidiary, as the case may
be, (A) first, to the extent Hanover or any Restricted Subsidiary, as the case
may be, elects (or is required by the terms of any Senior Indebtedness) to
prepay, repay or purchase Senior Indebtedness or Indebtedness (other than any
Preferred Stock or Guarantor Subordinated Obligation) of a Restricted Subsidiary
that is a Subsidiary Guarantor (in each case other than Indebtedness owed to
Hanover or an Affiliate of Hanover); provided, however, that, in connection with
any prepayment, repayment or purchase of Indebtedness pursuant to this clause
(A), Hanover or such Restricted Subsidiary will retire such Indebtedness and
will cause the related commitment (if any) to be permanently reduced in an
amount equal to the principal amount so prepaid, repaid or purchased; and (B)
second, to the extent of the balance of such Net Available Cash after
application in accordance with clause (A), to the extent Hanover or such
Restricted Subsidiary elects to invest in Additional Assets within 360 days from
the later of the date of such Asset Disposition or the receipt of such Net
Available Cash.
(b) Any Net Available Cash from Asset Dispositions that is not
applied or invested as provided in Section 9.6(a) will be deemed to constitute
"Excess Proceeds." On the 361st day after an Asset Disposition, if the aggregate
amount of Excess Proceeds exceeds $25.0 million, Hanover will notify the Lessor
and the 2001A Lessor that it will, upon notice by the Indenture Trustee and/or
the 2001A Indenture Trustee, cause the Lessee to purchase Equipment having a
Termination Value and/or a 2001A Termination Value equal to or less than such
excess amount. Concurrently with the repurchase, if any, of the Securities
described in Section 3.3 of the Indenture, (A) the Lessee will purchase the
amount of Equipment, at such Equipment's Termination Value necessary to generate
sufficient proceeds for the Lessor to prepay a proportionate amount of the
Certificates and (B) the Lessee will make a payment of Supplemental Rent to the
Lessor sufficient for the Lessor to pay any accrued and unpaid interest
26
on the Securities being repurchased and Certificate Holder Yield on the
Certificates being prepaid, as well as any applicable redemption premium. Using
the proceeds from the Equipment purchase by the Lessee, if any, the Lessor shall
promptly comply with the procedures set forth under Section 3.3 of the
Indenture.
For the purposes of this Section 9.6, the following will be
deemed to be cash:
(i) the assumption by the transferee of Senior
Indebtedness of Hanover or Indebtedness (other than Guarantor
Senior Subordinated Indebtedness, Guarantor Subordinated
Obligations or Preferred Stock) of any Restricted Subsidiary of
Hanover and the release of Hanover or such Restricted Subsidiary
from all liability on such Senior Indebtedness or Indebtedness in
connection with such Asset Disposition (in which case Hanover
will, without further action, be deemed to have applied such
deemed cash to Indebtedness in accordance with Section
9.6(a)(3)(A) above); and
(ii) securities, notes or other obligations received by
Hanover or any Restricted Subsidiary of Hanover from the
transferee that are promptly converted by Hanover or such
Restricted Subsidiary into cash.
9.7 Limitation on Affiliate Transactions. (e) Hanover will not,
and will not permit any of its Restricted Subsidiaries to, directly or
indirectly, enter into or conduct any transaction (including the purchase, sale,
lease or exchange of any property or the rendering of any service) with any
Affiliate of Hanover (an "Affiliate Transaction") unless (i) the terms of such
Affiliate Transaction are no less favorable to Hanover or such Restricted
Subsidiary, as the case may be, than those that could be obtained in a
comparable transaction at the time of such transaction in arm's-length dealings
with a Person who is not such an Affiliate; (ii) in the event such Affiliate
Transaction involves an aggregate amount in excess of $10.0 million, the terms
of such transaction have been approved by a majority of the members of the Board
of Directors of Hanover and by a majority of the members of such Board having no
personal stake in such transaction, if any (and such majority or majorities, as
the case may be, determines that such Affiliate Transaction satisfies the
criteria in Section 9.7(a)(i)); and (iii) in the event such Affiliate
Transaction involves an aggregate amount in excess of $25.0 million, Hanover has
received a written opinion from an independent investment banking firm of
nationally recognized standing that such Affiliate Transaction is not materially
less favorable than those that might reasonably have been obtained in a
comparable transaction at such time on an arms-length basis from a Person that
is not an Affiliate.
(b) Section 9.7(a) will not apply to (i) transactions among
Hanover, the Lessee, the Lessor and the Guarantors under the Operative
Agreements and transactions pursuant to the 2001A Operative Agreements; (ii) any
Restricted Payment (other than a Restricted Investment) permitted to be made
pursuant to Section 9.3; (iii) any issuance of securities, or other payments,
awards or grants in cash, securities or otherwise pursuant to, or the funding
of, employment arrangements, stock options and stock ownership plans and other
reasonable fees, compensation, benefits and indemnities paid or entered into by
Hanover or its Restricted Subsidiaries in the ordinary course of business to or
with officers, directors or employees of Hanover and its Restricted
Subsidiaries; (iv) loans or advances to employees and consultants in
27
the ordinary course of business of Hanover or any of its Restricted Subsidiaries
in an amount not to exceed $5.0 million in the aggregate during any calendar
year; (v) any transaction between Hanover and a Restricted Subsidiary (other
than a Receivables Entity) or between Restricted Subsidiaries (other than a
Receivables Entity); (vi) the payment of reasonable and customary fees paid to,
and indemnity provided on behalf of, officers, directors or employees of Hanover
or any Restricted Subsidiary of Hanover; (vii) the performance of obligations of
Hanover or any of its Restricted Subsidiaries under the terms of any agreement
to which Hanover or any of its Restricted Subsidiaries is a party on the Issue
Date and identified on Schedule 9.7(b) hereto, as these agreements may be
amended, modified or supplemented from time to time; provided, however, that any
future amendment, modification or supplement entered into after the Issue Date
will be permitted to the extent that its terms are not more disadvantageous in
its entirety to the Holders of the Securities than the terms of the agreements
in effect on the Issue Date; (viii) sales or other transfers or dispositions of
accounts receivable and other related assets customarily transferred in an asset
securitization transaction involving accounts receivable to a Receivables Entity
in a Qualified Receivables Transaction, and acquisitions of Permitted
Investments in connection with a Qualified Receivables Transaction; and (ix)
transactions with joint venture partners in an amount not to exceed $10.0
million in the aggregate during any calendar year.
9.8 Limitation on Sale of Capital Stock of Restricted
Subsidiaries. Hanover will not, and will not permit any of its Restricted
Subsidiaries to, transfer, convey, sell, lease or otherwise dispose of any
Voting Stock of any Restricted Subsidiary or issue any Voting Stock of any
Restricted Subsidiary (other than, if necessary, shares of its Voting Stock
constituting directors' qualifying shares) to any Person except (1) to Hanover
or a Wholly-Owned Subsidiary other than a Receivables Entity; or (2) in
compliance with Section 9.6 and, immediately after giving effect to such
issuance or sale, such Restricted Subsidiary would continue to be a Restricted
Subsidiary.
Notwithstanding the preceding paragraph, Hanover may sell all the
Voting Stock of a Restricted Subsidiary as long as Hanover complies with the
terms of Section 9.6.
9.9 SEC Reports and Available Information. Notwithstanding that
Hanover may not be subject to the reporting requirements of Section 13 or 15(d)
of the Exchange Act, to the extent permitted by the Exchange Act, Hanover will
file with the Commission, and provide the Indenture Trustee with, the annual
reports and the information, documents and other reports (or copies of such
portions of any of the foregoing as the Commission may by rules and regulations
prescribe) that are specified in Sections 13 and 15(d) of the Exchange Act
within the time periods specified therein. In the event that Hanover is not
permitted to file such reports, documents and information with the Commission
pursuant to the Exchange Act, Hanover will nevertheless provide such Exchange
Act information to the Indenture Trustee as if Hanover were subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Act within the
time periods specified therein.
9.10 Merger and Consolidation. Hanover will not consolidate with
or merge with or into, or convey, transfer or lease all or substantially all its
assets to, any Person, unless:
(i) the resulting, surviving or transferee Person (the
"Successor Company") will be a corporation, partnership, trust or
limited liability company
28
organized and existing under the laws of the United States of
America, any State of the United States or the District of
Columbia and the Successor Company (if not Hanover) will
expressly assume, by an assumption agreement supplemental to this
Agreement, executed by the Successor Company and delivered to the
Indenture Trustee, in form satisfactory to the Indenture Trustee,
all the obligations of Hanover under the Hanover Guarantee and
this Agreement;
(ii) immediately after giving effect to such transaction
(and treating any Indebtedness that becomes an obligation of the
Successor Company or any Subsidiary of the Successor Company as a
result of such transaction as having been Incurred by the
Successor Company or such Subsidiary at the time of such
transaction), no Default or Event of Default shall have occurred
and be continuing;
(iii) immediately after giving effect to such transaction,
the Successor Company would be able to Incur at least an
additional $1.00 of Indebtedness pursuant to Section 9.1(a); and
(iv) Hanover shall have delivered to the Indenture Trustee
an Officers' Certificate and an Opinion of Counsel, each stating
that such consolidation, merger or transfer and such assumption
agreement (if any) comply with this Agreement.
For purposes of this Section 9.10, the sale, lease, conveyance,
assignment, transfer, or other disposition of all or substantially all of the
properties and assets of one or more Subsidiaries of Hanover, which properties
and assets, if held by Hanover instead of such Subsidiaries, would constitute
all or substantially all of the properties and assets of Hanover on a
consolidated basis, shall be deemed to be the transfer of all or substantially
all of the properties and assets of Hanover; provided, however, that a
Sale/Leaseback Transaction involving all or substantially all of the properties
and assets of Hanover or of one or more Subsidiaries of Hanover, which
properties and assets, if held by Hanover instead of such Subsidiaries, would
constitute all or substantially all of the properties and assets of Hanover on a
consolidated basis, shall not be deemed to be the transfer of all or
substantially all of the properties and assets of Hanover; and provided,
further, that such Sale/Leaseback Transaction shall be subject to the covenants
under Sections 9.1 and 9.6.
The Successor Company will succeed to, and be substituted for,
and may exercise every right and power of, Hanover under this Agreement, but, in
the case of a lease of all or substantially all its assets, Hanover will not be
released from the obligation to pay the principal of and interest on the
Securities pursuant to the Hanover Guarantee.
Notwithstanding clause (iii) of the first sentence of this
Section 9.10, (x) any Restricted Subsidiary of Hanover may consolidate with,
merge into or transfer all or part of its properties and assets to Hanover and
(y) Hanover may merge with an Affiliate incorporated solely for the purpose of
reincorporating Hanover in another jurisdiction to realize tax or other
benefits.
29
9.11 Future Subsidiary Guarantors. After the Issue Date, Hanover
will cause each Restricted Subsidiary (other than a Foreign Subsidiary or a
Receivables Entity) that (i) becomes, or upon its creation or acquisition by
Hanover or one or more of its Restricted Subsidiaries is, a Material Subsidiary
and (ii) becomes a guarantor under the Senior Credit Agreement, to execute and
deliver to the Collateral Agent, promptly thereafter, a Hanover Guarantee
pursuant to which such Subsidiary Guarantor will become a Hanover Guarantor.
9.12 Changes in Name, Jurisdiction of Incorporation, etc. Lessee
shall give prompt prior notice to the Collateral Agent if it shall change its
name in any way, change its jurisdiction of organization or change its type of
organization or its organizational number.
SECTION 10. OTHER COVENANTS AND AGREEMENTS
10.1 Covenants of the Trust, the Certificate Holders, Indenture
Trustee and the Trust Company. Each of the parties hereby agrees that so long as
this Agreement is in effect:
(a) Discharge of Liens. Each of the Certificate Holders, the
Trust, Indenture Trustee, the Collateral Agent, Wilmington Trust FSB,
in its individual capacity, and the Trust Company, in its individual
capacity, will not create or permit to exist at any time, and will, at
its own cost and expense, promptly take such action as may be necessary
or reasonably requested by Lessee duly to discharge, or to cause to be
discharged, all Lessor Liens on the Equipment attributable to it or any
of its Affiliates; provided, however, that the Certificate Holders, the
Trust, Indenture Trustee, the Collateral Agent, Wilmington Trust FSB
and the Trust Company shall not be required to so discharge any such
Lessor Lien while the same is being contested in good faith by
appropriate proceedings diligently prosecuted so long as such
proceedings shall not cause Lessee or any other party hereto to be in
default under any of the Operative Agreements and shall not involve any
material danger of impairment of the Liens of the Security Documents or
of the sale, forfeiture or loss of, and shall not materially interfere
with the use or disposition of, the Equipment or title thereto or any
interest therein or the payment of Rent.
(b) Trust Agreement. Without prejudice to any right under the
Trust Agreement of the Trust Company to resign, or the Certificate
Holders' right under the Trust Agreement to remove the institution
acting as Indenture Trustee, each of the Certificate Holders and the
Trust Company hereby agrees with the Lessee and the Indenture Trustee
(i) not to terminate or revoke the trust created by the Trust Agreement
except as permitted by the Trust Agreement, (ii) not to amend,
supplement, terminate or revoke or otherwise modify any provision of
the Trust Agreement without the prior written consent of any party
adversely affected by such amendment and in any event with prior notice
to the Lessee and (iii) to comply with all of the terms of the Trust
Agreement, the nonperformance of which would adversely affect the
Lessee or Indenture Trustee. The Trust Company will provide each party
hereto with a copy of any amendment to the Trust Agreement promptly,
and in any event within 30 days, after such amendment is effective.
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(c) Successor Trust Company. The Trust Company or any successor
may resign or be removed by both Certificate Holders as owner trustee,
a successor owner trustee may be appointed, and a corporation may
become the owner trustee under the Trust Agreement, only in accordance
with the provisions of Section 8 of the Trust Agreement and with the
consent of the Lessee, which consent shall not be unreasonably withheld
or delayed.
(d) Indebtedness; Other Business. The Trust shall not contract
for, create, incur or assume any indebtedness, or enter into any
business or other activity, or hold title to any assets other than
pursuant to or under the Operative Agreements.
(e) No Violation. Neither the Certificate Holders nor the Trust
Company will instruct the Trust to take any action in violation of the
terms of any Operative Agreement.
(f) No Voluntary Bankruptcy. Neither the Certificate Holders nor
the Trust shall (i) commence, consent to, approve of or acquiesce to
any case, proceeding or other action under any existing or future law
of any jurisdiction, domestic or foreign, relating to bankruptcy,
insolvency, reorganization, arrangement, winding-up, liquidation,
dissolution, composition or other relief with respect to it or its
debts, or (ii) seek appointment of a receiver, trustee, custodian or
other similar official for it or for all or any substantial part of its
assets, or make a general assignment for the benefit of its creditors;
and neither the Certificate Holders nor the Trust shall take any action
in furtherance of, or indicating its consent to, approval of, or
acquiescence in, any of the acts set forth in this paragraph.
(g) Changes in Name, Jurisdiction of Incorporation, etc. The
Trust shall give prompt prior notice to the Lessee and the Collateral
Agent if it shall change its name in any way, change its jurisdiction
of organization or change its type of organization or its
organizational number.
(h) Amendments. Provided that no Lease Event of Default is
continuing, none of the Trust Company, the Lessor, the Indenture
Trustee or the Certificate Holders shall consent to or permit any
amendment, supplement, waiver or other modification of the terms and
provisions of the Indenture, the Securities or the Security Documents
which would reasonably be expected to adversely impact the Lessee, in
each case without the prior written consent of the Lessee.
(i) Disposition of Assets. The Trust shall not convey, sell,
lease, assign, transfer or otherwise dispose of any of its property,
business or assets (including, without limitation, its right, title and
interest in, to and under the Operative Agreements and the Equipment),
whether now owned or hereafter acquired, except to the extent expressly
authorized by the Operative Agreements.
(j) Compliance with Operative Agreements. It shall at all times
observe and perform all of the covenants, conditions and obligations
required to be performed by it under each Operative Agreement to which
it is a party.
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(k) Tax Reporting. No party hereto other than the Lessee will
file (or permit to be filed) any tax return taking the position that
such party (or its affiliates) is the owner of the Equipment for
federal, state or foreign or local tax purposes.
(l) Use of Proceeds. The Lessor shall only use the proceeds of
the Securities and the Certificate Holder Contribution for payment of
Equipment Costs and Transaction Expenses.
(m) Cooperation. The Lessor and the Indenture Trustee will, at
Lessee's expense, cooperate with Lessee to insure compliance with
Lessee's obligations with respect to all necessary filings required of
Lessee under the Operative Agreements.
(n) Appointment of the Wilmington Trust FSB as Collateral Agent.
The Certificate Holders hereby appoint Wilmington Trust FSB, or any
successor Indenture Trustee, to act as Collateral Agent pursuant to the
terms of Article XII of the Indenture.
10.2 Amendment of Certain Documents. The Indenture Trustee and
the Collateral Agent, each for itself and on behalf of the Initial Purchasers,
the Securityholders and the Certificate Holders, hereby agrees for the benefit
of the Lessor and the Certificate Holders that it will not amend, alter or
otherwise modify, or consent to any amendment, alteration or modification of,
the Lease (including the definitions of any terms used in such document) without
the prior written consent of the Lessor and all of the Certificate Holders, as
the case may be, if such amendment, alteration or modification would materially
adversely affect the interests of the Lessor or the Certificate Holders.
Provisions requiring consent, include any amendment, alteration or modification
that would release the Lessee from any of its obligations in respect of the
payment of Basic Rent, Supplemental Rent, Termination Value, the Final Rent
Payment, the Purchase Option Price, the Equity Proceeds Purchase Price, the
Control Purchase Price, the Excess Proceeds Purchase Price, the Expiration
Purchase Price or any other payments in respect of the Equipment as set forth in
the Lease, or reduce the amount of, or change the time or manner of payment of,
obligations of the Lessee as set forth in the Lease, or create or impose any
obligation on the part of the Trust or the Certificate Holders under the Lease,
or extend or shorten the duration of the Term, or modify the provisions of this
Section 10.2.
10.3 Proceeds of Casualty. Subject to Section 15 of the Lease,
the Lessor agrees, for the benefit of the Indenture Trustee and the Certificate
Holders, that if at any time the Lessor receives any proceeds as a result,
directly or indirectly, of any Casualty or Condemnation with respect to the
Equipment which the Lessor is entitled to retain and hold in accordance with the
terms of the Lease, the Lessor agrees that it will promptly deposit such amounts
in an account with the Collateral Agent. The Lessor and the Certificate Holders
also agree that they will execute and deliver such documents and instruments as
the Collateral Agent may reasonably request in order to grant the Collateral
Agent, for the benefit of the Securityholders and Certificate Holders, a valid
and perfected, first priority security interest in such proceeds.
10.4 Income Tax Reporting. The Trust Company and the Lessee each
agree that they will file all federal, state, local and foreign income tax
returns consistently with the intention described in Section 7.1(a)(ii) of the
Lease and will take no position for such purposes inconsistent with that intent.
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10.5 Financial Statements and Other Information. For so long as
any Security or Certificate remains outstanding, each of the Lessee and the
Guarantors shall make available, upon request, to any holder of a Security or
Certificate and any prospective purchaser to whom such Security or Certificate
may be offered or sold by such holder the information required to allow the
resale of such Security or Certificate pursuant to Rule 144A of the 1933 Act
Regulations and shall further amend or supplement the Offering Memorandum as
required to satisfy Rule 144A(d)(4)(ii).
10.6 Financial Reporting. Hanover and the Lessee shall deliver to
the Indenture Trustee and the Lessor:
(a) As soon as available and in any event within sixty (60) days
after the end of each quarterly fiscal period of each fiscal year of
Hanover, consolidated statements of income and cash flow of Hanover and
its consolidated subsidiaries, if any, for such period and for the
period from the beginning of the respective fiscal year to the end of
such period, and the related consolidated balance sheet as at the end
of such period, setting forth in each case in comparative form the
corresponding consolidated figures for the corresponding period in the
preceding fiscal year, accompanied by a certificate of a financial
officer of Hanover, which certificate shall state that said financial
statements fairly present the consolidated financial condition and
results of operations of Hanover and its consolidated subsidiaries in
accordance with generally accepted accounting principles, consistently
applied, as at the end of, and for, such period.
(b) As soon as available and in any event within one hundred
twenty (120) days after the end of each fiscal year of Hanover
consolidated statements of income, shareholders' equity and cash flow
of Hanover and its consolidated subsidiaries, if any, for such year and
the related consolidated balance sheet as at the end of such year,
setting forth in each case in comparative form the corresponding
consolidated figures for the preceding fiscal year, and accompanied, in
the case of said consolidated statements and balance sheet, by an
opinion thereon of independent certified public accountants of
recognized national standing, which opinion shall state that said
consolidated financial statements fairly present the consolidated
financial condition and results of operations of Hanover and its
consolidated subsidiaries, if any, in accordance with generally
accepted accounting principles, consistently applied, as at the end of,
and for, such fiscal year.
The Indenture Trustee shall be under no obligation to analyze or
make any review of any certificates, documents, information, certifications,
statements or reports received by it hereunder, but shall hold any such
documents delivered to it solely for the benefit of, and review by, the
Securityholders. The Indenture Trustee shall have no duty to request copies of
any such documents which are required to be furnished to it hereunder.
10.7 Appraisal. The Lessee agrees that on or prior to any
Replacement Equipment Closing Date, and upon the written request of the
Indenture Trustee or the Required Holders, the Lessee shall provide to the
Collateral Agent and the Certificate Holders an Appraisal of the Replacement
Equipment, such Appraisal in form and substance satisfactory to the Collateral
Agent and all of the Certificate Holders; provided that the Lessee is not
required to provide more than one such Appraisal in any twelve month period;
provided further, that
33
notwithstanding anything in this Section 10.7 to the contrary, if the aggregate
value of (i) the Replacement Equipment relating to a prospective Replacement
Equipment Closing Date and (ii) any Replacement Equipment acquired subsequent to
the latest Replacement Equipment Closing Date relating to which the Lessee
delivered an Appraisal, is equal to or greater than 10% of the aggregate value
of the Equipment, then the Lessee shall provide to the Indenture Trustee and the
Certificate Holders an Appraisal of all Replacement Equipment acquired or to be
acquired since the latest Appraisal and such Appraisal shall include valuations
of the Equipment replaced or being replaced by the Replacement Equipment that is
the subject of such Appraisal.
SECTION 11. LESSEE'S RIGHTS
11.1 Rights of Lessee Regarding the Indenture.
(a) Notwithstanding anything to the contrary contained herein or in the other
Operative Documents, the Indenture Trustee, the Collateral Agent, the Trust
Company, the Certificate Holders, the Lessee and the Lessor hereby agree that:
(i) the Lessee shall receive copies of all notices
delivered to the Lessor under the Indenture and the other
Operative Agreements, and all notices delivered to the Trustee
under the Trust Agreement, and such notices shall not be
effective until received by Lessee;
(ii) the Lessee shall have the right to give notice of
redemption or purchase of the Securities in accordance with the
terms of the Indenture and the terms of the Securities, provided
that if the Lessee shall give notice of redemption or purchase of
the Securities, the Lessee shall purchase from the Lessor, in
accordance with the terms of the Lease, Equipment having a
Termination Value equal to or less than the principal amount of
the Securities to be redeemed or purchased and the pro rata
portion of the Certificate Holder Contribution to be repaid and
shall pay Supplemental Rent sufficient to pay any other amounts
due on the Securities to be redeemed or purchased pursuant to the
Indenture and the terms of the Securities and a pro rata portion
of the Certificate Holder Contributions to be repaid;
(iii) the Lessee shall have the right to cure, to the
extent susceptible to a cure, any Default of the Lessor under the
Indenture or any of the other Operative Agreements within the
cure periods provided to the Lessor therein;
(iv) the Lessee shall have the right to remove the
Indenture Trustee pursuant to Section 7.8 of the Indenture on
behalf of and in lieu of Lessor to the extent Lessor has the
right to remove the Indenture Trustee under such Section 7.8;
(v) so long as no Lease Event of Default has occurred and
is continuing, the Lessee shall have the right to approve any
successor Indenture Trustee pursuant to Sections 7.8 of the
Indenture, such approval not to be unreasonably withheld,
conditioned or delayed;
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(vi) the Lessee shall have the right to request the
release (and documents reasonably necessary to evidence such
release ) of any Unit from the Lien of any Security Document in
accordance with Section 11.2(d) of the Indenture;
(vii) so long as no Lease Event of Default shall have
occurred and be continuing (or if a Lease Event of Default shall
have occurred and is continuing, if Lessee has timely delivered a
Purchase Notice or Substitution Notice and the purchase or
substitution thereby would cure such Lease Lease Event of
Default), without limiting the foregoing clauses (i) through
(vi), and in addition thereto, (A) the Lessor shall not exercise
any right under the Indenture without giving the Lessee at least
fifteen (15) Business Days' prior written notice (or such shorter
period as may be required but in no case less than five (5)
Business Days) and, following such notice, the Lessor shall take
such action, or forbear from taking such action, as the Lessee
shall direct and (B) the Lessee shall have the right to exercise
any other right of the Lessor under the Indenture upon not less
than two (2) Business Days' prior written notice from the Lessee
to the Lessor;
(viii) the Lessee shall have the right to enforce its
rights to receive any payments due to Lessee pursuant to the
Indenture and any other Operative Agreement;
(ix) the Lessee shall have the right to perform on behalf
and in lieu of the Lessor any or all of the obligations of Lessor
under paragraphs 1, 2, 3, 4 and 8 of the Exchange and
Registration Rights Agreement; and
(x) without limiting the generality of the foregoing
clause (ix), and in addition thereto, (A) the Lessor shall not
exercise any right under the Exchange and Registration Rights
Agreement without giving the Lessee at least ten (10) Business
Days' prior written notice (or such shorter period as may be
required but in no case less than three (3) Business Days) and,
following such notice, the Lessor shall take such action, or
forbear from taking such action, as the Lessee shall direct and
(B) the Lessee shall have the right to exercise any other right
of the Lessor under the Exchange and Registration Rights
Agreement upon not less than two (2) Business Days' prior written
notice from the Lessee to the Lessor.
(b) Restriction on Lessor's Rights. So long as no Lease
Event of Default shall have occurred and be continuing, the Lessor will not take
any action with respect to matters as to which the Lessee is authorized,
pursuant to this Section 11.1, to act, and Lessor shall not take any
discretionary or voluntary or other action not expressly required to be taken
pursuant to the terms of the Indenture or the Securities in each case, without
the prior written consent of the Lessee.
(c) Trust Agreement. Without prejudice to any right under
the Trust Agreement of the Trust Company to resign, or the Certificate Holders'
right under the Trust Agreement to remove the institution acting as Indenture
Trustee, each of the Certificate Holders and the Trust Company hereby agrees
with the Lessee and the Indenture Trustee (i) not to
35
terminate or revoke the trust created by the Trust Agreement except as permitted
by the Trust Agreement, and (ii) not to amend, supplement, terminate or revoke
or otherwise modify any provision of the Trust Agreement without the prior
written consent of any party adversely affected by such amendment and in any
event with prior notice to the Lessee.
11.2 Agent for Acquisition of Equipment. Provided no Lease
Default or Lease Event of Default has occurred or is continuing, the Lessor
appoints the Lessee as its agent to receive the proceeds from the sale of the
Securities and Certificates and to use the same to purchase the Equipment in the
name of the Lessor provided that the Lessee shall have no right or power to
cause the Lessor to assume any liability, indemnity or other obligation with
respect to such purchase.
SECTION 12. TRANSFER OF INTEREST
12.1 Restrictions on Transfer. None of the Certificate Holders
may, directly or indirectly, assign, convey or otherwise transfer any of its
right, title or interest in or to the Trust Estate or the Trust Agreement
without the consent of the Indenture Trustee and the Lessee, which consent shall
not be unreasonably withheld, conditioned or delayed, except as may be required
by law or unless the proposed transferee is a Permitted Transferee (as defined
below). Any transfer by a Certificate Holder as above provided, shall be
effected pursuant to the Trust Agreement. As used herein, a "Permitted
Transferee" shall mean any of (a) a financial institution with a combined
capital, surplus and undivided profits of at least $100,000,000 determined in
accordance with GAAP, (b) any subsidiary of such financial institution if such
financial institution furnishes to Lessor, Indenture Trustee and Lessee a
support agreement of a direct or indirect parent meeting the requirements set
forth in clause (a) of this Section 12.1, in form and substance reasonably
satisfactory to Lessee and Indenture Trustee, and (c) any Affiliate of the
transferring Certificate Holder, provided that if such Affiliate does not meet
the requirement set forth in clause (a) of this Section 12.1, such transferring
Certificate Holder (or an Affiliate of such Certificate Holder meeting the
requirements set forth in clause (a) of this Section 12.1) shall remain
secondarily liable for all of the obligations of the Permitted Transferee and
furnish to Lessor, Indenture Trustee and Lessee a support agreement in form and
substance reasonably satisfactory to Lessee and Indenture Trustee. Each transfer
pursuant to this Section 12.1 shall be subject to the conditions that (i) the
transferee has the requisite power and authority to enter into and carry out the
transactions contemplated hereby, (ii) the transferee enters into an agreement,
in form and substance reasonably satisfactory to Indenture Trustee and Lessee,
whereby such transferee confirms that it shall be a party to this Agreement and
the Trust Agreement, and agrees to be bound by the terms thereof, (iii) such
transfer does not violate any Legal Requirements, and (iv) Lessee and Indenture
Trustee shall have received an opinion of counsel, in form and substance
reasonably satisfactory to Lessee and Indenture Trustee, opining as to such
matters incident to such a transfer as such person may reasonably request.
Notwithstanding the provisions of Section 13.2, in the event of a transfer by a
Certificate Holder under this Section 12.1, the Lessee shall not be liable under
Section 13.2 for any increased liability for Impositions arising solely as a
result of such transfer.
12.2 Effect of Transfer. From and after any transfer effected in
accordance with this Section 12, the transferor shall be released, to the extent
of such transfer, from its
36
liability hereunder and under the other documents to which it is a party in
respect of obligations to be performed on or after the date of such transfer;
provided, however, that any transferor Certificate Holder shall remain liable
under the Trust Agreement to the extent that the transferee Certificate Holder
shall not have assumed the obligations of the transferor Certificate Holder
thereunder. Upon any transfer by a Certificate Holders as above provided, any
such transferee shall assume the obligations of the same entity, and the Lessor
or such Certificate Holder, as the case may be, and shall be deemed the "same
entity", as the case may be, for all purposes of such documents and each
reference herein to the transferor shall thereafter be deemed a reference to
such transferee for all purposes, except as provided in the preceding sentence.
Notwithstanding any transfer of all or a portion of the transferor's interest as
provided in this Section 12, the transferor shall be entitled to all benefits
accrued and all rights vested prior to such transfer including rights to
indemnification under any such document.
SECTION 13. INDEMNIFICATION
13.1 General Indemnity. The Lessee hereby assumes liability for
and agrees to defend, indemnify and hold harmless each Indemnified Person on an
After Tax Basis from and against any Claims which may be imposed on, incurred by
or asserted against an Indemnified Person in any way relating to or arising out
of (a) the financing, refinancing, purchase, acceptance, rejection, ownership,
design, delivery, acceptance, nondelivery, leasing, subleasing, possession, use,
operation, repair, modification, transportation, condition, sale, return,
repossession (whether by summary proceedings or otherwise), or any other
disposition of the Equipment or any part thereof; (b) any latent or other
defects in any Unit of Equipment whether or not discoverable by an Indemnified
Person or the Lessee; (c) a violation of Environmental Laws, Environmental
Claims or other loss of or damage relating to the Equipment; (d) the Operative
Agreements, or any transaction contemplated thereby; (e) any breach by the
Lessee of any of its representations or warranties under the Operative
Agreements or failure by the Lessee to perform or observe any covenant or
agreement to be performed by it under any of the Operative Agreements; and (f)
personal injury, death or property damage relating to the Equipment, including
Claims based on strict liability in tort; but in any event excluding (v) Claims
to the extent such Claims arise solely out of the gross negligence or willful
misconduct of such Indemnified Person, (w) Claims to the extent such Claims
arise solely out of events occurring after Lessee's discharge of all its
obligations under the Lease or (x) any Taxes including any Claim (or any portion
of a Claim) made upon an Indemnified Person by a third party that at its origin
is based upon a Tax (other than amounts necessary to make any payments hereunder
on an After Tax Basis, where the Lessee is otherwise specifically required to
make such payments on an After Tax Basis), (y) legal proceedings commenced
against an Indemnified Person by any security holder or creditor solely in its
capacity as such, or (z) legal proceedings commenced against an Indemnified
Person by any other Indemnified Person or by any transferee of an Indemnified
Person. The Lessee shall be entitled to control, and shall assume full
responsibility for the defense of any Claim; provided, however, that the Trust,
the Trust Company, the Indenture Trustee and the Certificate Holders named in
such Claim, may each retain separate counsel at the expense of the Lessee in the
event of and to the extent of an actual conflict or a potential conflict. The
Lessee and each Indemnified Person agree to give each other prompt written
notice of any Claim hereby indemnified against but the giving of any such notice
37
by an Indemnified Person shall not be a condition to the Lessee's obligations
under this Section 13.1, except only as and to the extent failure to give such
notice materially prejudices Lessee's rights hereunder or with respect to the
defense or settlement of such Claim. After an Indemnified Person has been fully
indemnified for a Claim pursuant to this Section 13.1, and so long as no Lease
Event of Default shall have occurred and be continuing, the Lessee shall be
subrogated to any right of such Indemnified Person with respect to such Claim.
So long as no Lease Event of Default shall have occurred and be continuing (or
if or Lease Event of Default shall have occurred and is continuing, if Lessee
has timely delivered a Purchase Notice or Substitution Notice and the purchase
or substitution thereby would cure such Lease Event of Default), none of the
Indemnified Persons shall settle a Claim without the prior written consent of
the Lessee, which consent shall not be unreasonably withheld, conditioned or
delayed. Any claims in respect of loss of value of or nonpayment of principal of
or interest on the Securities or other amounts payable in respect thereof shall
be subordinated in right of payment to the prior payment of Guarantor Senior
Indebtedness of the Lessee to the same extent as the Lessee's payment
obligations under the Lease are subordinated to prior payments of such Guarantor
Senior Indebtedness, mutatis mutandis.
13.2 General Tax Indemnity. (a) The Lessee shall pay and assume
liability for, and does hereby agree to indemnify, protect and defend the
Equipment and all Tax Indemnitees, and hold them harmless against, all
Impositions on an After Tax Basis.
(b) Provided that no Default or Event of Default has occurred and
is continuing, if any Tax Indemnitee obtains a refund or a reduction in
a liability (but only if such reduction relates to a Tax not otherwise
indemnifiable hereunder and has not been taken into account in
determining the amount of a payment on an After Tax Basis) as a result
of any Imposition paid or reimbursed by the Lessee (in whole or in
part), such Tax Indemnitee shall promptly pay to the Lessee the lesser
of (x) the amount of such refund or reduction in liability and (y) the
amount previously so paid or advanced by the Lessee, in each case net
of reasonable expenses not already paid or reimbursed by the Lessee.
(c) (i) Subject to the terms of Section 13.2(g), the Lessee shall
pay or cause to be paid all Impositions directly to the taxing
authorities where feasible and otherwise to the Tax Indemnitee, as
appropriate, and the Lessee shall at its own expense, upon such Tax
Indemnitee's reasonable request, furnish to such Tax Indemnitee copies
of official receipts or other satisfactory proof evidencing such
payment.
(ii) In the case of Impositions for which no contest is
conducted pursuant to Section 13.2(g) and which the Lessee pays
directly to the taxing authorities, the Lessee shall pay such
Impositions prior to the latest time permitted by the relevant
taxing authority for timely payment. In the case of Impositions
for which the Lessee reimburses a Tax Indemnitee, the Lessee
shall do so within twenty (20) days after receipt by the Lessee
of demand by such Tax Indemnitee describing in reasonable detail
the nature of the Imposition and the basis for the demand
(including the computation of the amount payable), but in no
event shall the Lessee be required to pay such reimbursement
prior to 15 days before the latest time permitted by the relevant
taxing authority for timely payment. In the case of Impositions
for which a contest is conducted pursuant to Section 13.2(g), the
38
Lessee shall pay such Impositions or reimburse such Tax
Indemnitee for such Impositions, to the extent not previously
paid or reimbursed pursuant to subsection (a), prior to the
latest time permitted by the relevant taxing authority for timely
payment after conclusion of all contests under Section 13.2(g).
(iii) Impositions imposed with respect to a Unit of
Equipment for a billing period during which the Lease expires or
terminates with respect to such Equipment (unless the Lessee has
exercised the Purchase Option with respect to the Equipment)
shall be adjusted and prorated on a daily basis between the
Lessee and the Lessor, whether or not such Imposition is imposed
before or after such expiration or termination and each party
shall pay or reimburse the other for each party's pro rata share
thereof.
(iv) At the Lessee's request, the amount of any
indemnification payment by the Lessee pursuant to subsection (a)
shall be verified and certified by an independent public
accounting firm mutually acceptable to the Lessee and the Tax
Indemnitee. The fees and expenses of such independent public
accounting firm shall be paid by the Lessee unless such
verification shall result in an adjustment in the Lessee's favor
of 10% or more of the payment as computed by such Tax Indemnitee,
in which case such fee shall be paid by such Tax Indemnitee.
(d) The Lessee shall be responsible for preparing and filing any
real and personal property or ad valorem tax returns in respect of the
Equipment. In case any other report or tax return shall be required to
be made with respect to any obligations of the Lessee under or arising
out of subsection (a) and of which the Lessee has knowledge, the
Lessee, at its sole cost and expense, shall notify the relevant Tax
Indemnitee of such requirement and (except if such Tax Indemnitee
notifies the Lessee that such Person intends to file such report or
return) (A) to the extent required or permitted by and consistent with
Legal Requirements, make and file in its own name such return,
statement or report; and (B) in the case of any other such return,
statement or report required to be made in the name of such Tax
Indemnitee, advise such Tax Indemnitee of such fact and prepare such
return, statement or report for filing by such Tax Indemnitee or, where
such return, statement or report shall be required to reflect items in
addition to any obligations of the Lessee under or arising out of
subsection (a), provide such Tax Indemnitee at the Lessee's expense
with information sufficient to permit such return, statement or report
to be properly made with respect to any obligations of the Lessee under
or arising out of subsection (a). Such Tax Indemnitee shall, upon the
Lessee's request and at the Lessee's expense, provide any data
maintained by such Tax Indemnitee (and not otherwise within the control
of the Lessee) with respect to the Equipment which the Lessee may
reasonably require to prepare any required tax returns or reports;
(e) If as a result of the payment or reimbursement by the Lessee
of any expenses of a Tax Indemnitee or the payment of any Transaction
Expenses incurred in connection with the transactions contemplated by
the Operative Agreements, any Tax Indemnitee, shall suffer a net
increase in any federal, state or local income tax liability, the
Lessee shall indemnify such Tax Indemnitees (without duplication of any
indemnification required by subsection (a)) on an After Tax Basis for
the amount of such
39
increase. The calculation of any such net increase shall take into
account any current or future tax savings realized or reasonably
expected to be realized by such Tax Indemnitees, in respect thereof, as
well as any interest, penalties and additions to tax payable by such
Tax Indemnitees, in respect thereof;
(f) As between the Lessee and the Lessor, the Lessee shall be
responsible for, and the Lessee shall indemnify and hold harmless the
Trust Company in its individual capacity and as the Lessor (without
duplication of any indemnification required by subsection (a)) on an
After Tax Basis against, any obligation for United States withholding
taxes imposed in respect of the interest payable on the Securities (to
the extent that the Securities are determined not to be debt for income
tax purposes) or the Certificates to the extent, but only to the
extent, Lessor has actually paid funds to a taxing authority with
respect to such withholding taxes (and, if the Lessor receives a demand
for such payment from any taxing authority, the Lessee shall discharge
such demand on behalf of the Lessor);
(g) (i) If a written claim is made against any Tax Indemnitee or
if any proceeding shall be commenced against such Tax Indemnitee
(including a written notice of such proceeding), for any Impositions,
such Tax Indemnitee shall promptly notify Lessee in writing and shall
not take action with respect to such claim or proceeding without the
consent of Lessee for thirty (30) days after the receipt of such notice
by Lessee; provided, that, in the case of any such claim or proceeding,
if action shall be required by law or regulation to be taken prior to
the end of such 30-day period, such Tax Indemnitee shall, in such
notice to Lessee, inform Lessee, and no action shall be taken with
respect to such claim or proceeding without the consent of Lessee
before the end of such shorter period; provided, further, that the
failure of such Tax Indemnitee to give the notices referred to this
sentence shall not diminish Lessee's obligation hereunder except to the
extent such failure materially adversely affects Lessee in contesting
all or part of such claim.
(ii) If, within thirty (30) days of receipt of such notice
from the Tax Indemnitee (or such shorter period as the Tax
Indemnitee has noticed Lessee is required by law or regulation
for the Tax Indemnitee to commence such contest), Lessee shall
request in writing that such Tax Indemnitee contest such
Imposition, the Tax Indemnitee shall, at the expense of Lessee,
in good faith conduct and control such contest (including,
without limitation, by pursuit of appeals) relating to the
validity, applicability or amount of such Impositions (provided,
however, that (A) if such contest can be pursued independently
from any other proceeding involving a tax liability of such Tax
Indemnitee, the Tax Indemnitee, at Lessee's request, shall allow
Lessee to conduct and control such contest and (B) in the case of
any contest that Lessee is not entitled to control, the Tax
Indemnitee may request Lessee to conduct and control such contest
if possible or permissible under applicable law or regulation)
by, in the sole discretion of the Person conducting and
controlling such contest, (1) resisting payment thereof, (2) not
paying the same except under protest, if protest is necessary and
proper, (3) if the payment be made, using reasonable efforts to
obtain a refund thereof in
40
appropriate administrative and judicial proceedings, or (4)
taking such other action as is reasonably requested by Lessee
from time to time.
(iii) The party controlling any contest shall consult in
good faith with the non-controlling party and shall keep the
non-controlling party reasonably informed as to the conduct of
such contest; provided that all decisions ultimately shall be
made in the sole discretion of the controlling party. The parties
agree that an Tax Indemnitee may at any time decline to take
further action with respect to the contest of any Imposition and
may settle such contest if such Tax Indemnitee shall waive its
rights to any indemnity from Lessee that otherwise would be
payable in respect of such claim (and any future claim by any
taxing authority with respect to other taxable periods that is
based, in whole or in part, upon the resolution of such claim)
and shall pay to Lessee any amount previously paid or advanced by
Lessee pursuant to this Section 13.2 by way of indemnification or
advance for the payment of an Imposition, and no other then
future liability of the Lessee is likely with respect to such
Imposition.
(iv) Notwithstanding the foregoing provisions of this
Section 13.2, a Tax Indemnitee shall not be required to take any
action and Lessee shall not be permitted to contest any
Impositions in its own name or that of the Tax Indemnitee unless
(A) Lessee shall have agreed to pay and shall pay to such Tax
Indemnitee on demand and on an After Tax Basis all reasonable
costs, losses and expenses that such Tax Indemnitee actually
incurs in connection with contesting such Impositions, including,
without limitation, all reasonable legal, accounting and
investigatory fees and disbursements, (B) in the case of a claim
that must be pursued in the name of an Tax Indemnitee (or an
Affiliate thereof), the amount of the potential indemnity (taking
into account all similar or logically related claims that have
been or could be raised in any audit involving such Tax
Indemnitee for which Lessee may be liable to pay an indemnity
under this Section 13.2) is more than $25,000, unless the pursuit
of such contest is in a manner mutually satisfactory to the Tax
Indemnitee and the Lessee, but in no event shall such right
prevent the Lessee from prosecuting or continuing such contest,
(C) the Tax Indemnitee shall have reasonably determined that the
action to be taken will not result in any material danger of
sale, forfeiture or loss of any Unit of Equipment, or any part
thereof or interest therein, will not interfere with the payment
of Rent, and will not result in risk of criminal liability, (D)
if such contest shall involve the payment of the Imposition prior
to the contest, Lessee shall provide to the Tax Indemnitee an
interest-free advance in an amount equal to the Imposition that
the Tax Indemnitee is required to pay (with no additional net
after-tax cost to such Tax Indemnitee), (E) in the case of a
claim that must be pursued in the name of an Tax Indemnitee (or
an Affiliate thereof), Lessee shall have provided to such Tax
Indemnitee an opinion of independent tax counsel selected by the
Lessee and reasonably satisfactory to such Tax Indemnitee stating
that a reasonable basis exists to contest such claim (or, in the
case of an appeal of an adverse determination, an opinion of such
counsel to the effect that there is substantial authority for the
position asserted in such appeal) and (F) no Event of Default
shall have occurred and be continuing. In no event shall a Tax
Indemnitee be
41
required to appeal an adverse judicial determination to the
United State Supreme Court. In addition, a Tax Indemnitee shall
not be required to contest any claim in its name (or that of an
Affiliate) if the subject matter thereof shall be of a continuing
nature and shall have previously been decided adversely by a
court of competent jurisdiction pursuant to the contest
provisions of this Section 13.2, unless there shall have been a
change in law (or interpretation thereof) and the shall Tax
Indemnitee have received, at the Lessee's expense, an opinion of
independent tax counsel selected by the Lessee and reasonably
acceptable to the Tax Indemnitee stating that as a result of such
change in law (or interpretation thereof), it is more likely than
not that the Tax Indemnitee will prevail in such contest.
13.3 Entity Tax Indemnity. Notwithstanding anything in this
Section 13 to the contrary, the Lessee shall indemnify and hold harmless, on an
After Tax Basis, the Lessor for any and all Taxes based on or measured by the
net income of the Lessor.
SECTION 14. MISCELLANEOUS
14.1 Survival of Agreements. The representations, warranties,
covenants, indemnities and agreements of the parties provided for in the
Operative Agreements, and the parties' obligations under any and all thereof,
shall survive the execution and delivery of this Agreement, the transfer of the
Equipment to the Trust, any disposition of any interest of the Trust in the
Equipment or any interest of the Certificate Holders in the Trust, the payment
of the Securities and any disposition thereof and shall be and continue in
effect notwithstanding any investigation made by any party and the fact that any
party may waive compliance with any of the other terms, provisions or conditions
of any of the Operative Agreements. Except as otherwise expressly set forth
herein or in other Operative Agreements, the indemnities of the parties provided
for in the Operative Agreements shall survive the expiration or termination of
any thereof.
14.2 No Broker, etc. Each of the parties hereto represents to the
others that it has not retained or employed any broker, finder or financial
adviser to act on its behalf in connection with this Agreement, nor has it
authorized any broker, finder or financial adviser retained or employed by any
other Person so to act, except for the Arranger, the fees of which shall be paid
by the Lessee in accordance with the Fee Letter. Any party who is in breach of
this representation shall indemnify and hold the other parties harmless from and
against any liability arising out of such breach of this representation.
14.3 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
in the case of the Lessee, the Trust, the Trust Company, the Indenture Trustee,
the Collateral Agent and Wilmington Trust FSB:
42
If to the Lessee, to it at: Hanover Compression Limited Partnership
00000 Xxxxx Xxxxxxx Xxxxxxx
Xxxxxxx, Xxxxx 00000
Attention: Chief Financial Officer
Telecopy No.: 000-000-0000
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 No.: 000-000-0000
If to the Trust, to it at: Hanover Equipment Trust 2001B
c/o Wilmington Trust Company
0000 Xxxxx Xxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxx 00000
Attention: Corporate Trust Administration
Telecopy No.: 000-000-0000
If to the Certificate Holders,
to them at: General Electric Capital Corporation
000 Xxxxxx Xxxxx, Xxxxx 00
Xxxxxxx, Xxxxxxxxxxx 00000-0000
Attention: Xxxxx XxXxxxx
Telecopy No.: 000-000-0000
with a copy to:
Ober, Kaler, Xxxxxx & Xxxxxxx
A Professional Corporation
000 X. Xxxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxx X. Xxxxx, Esq.
Telecopy No.: 000-000-0000
If to the Trust Company, to it at: Wilmington Trust Company
0000 Xxxxx Xxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxx 00000
Attention: Corporate Trust Administration
Telecopy No.: 000-000-0000
If to Indenture Trustee, to it at: Wilmington Trust FSB
0000 Xxxxx Xxxxxx Xxxxxx
00
Xxxxxxxxxx, Xxxxxxxx 00000
Attention: Corporate Trust Administration
Telecopy No.: 000-000-0000
with a copy to:
Wilmington Trust FSB
0000 Xxxxxx Xxxxxx Xxxxxxx
Xxxxx 000X
Xxx Xxxxx, Xxxxxx 00000
Attention:
Telecopy No.:
If to Collateral Agent: Same as for Indenture Trustee
If to Wilmington Trust FSB Same as for Indenture Trustee
From time to time any party may designate a new address for purposes of notice
hereunder by notice to each of the other parties hereto.
14.4 Counterparts. This Agreement may be executed by the parties
hereto in separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together constitute but
one and the same instrument.
14.5 Amendments and Termination. Neither this Agreement nor any
of the terms hereof may be terminated, amended, supplemented, waived or modified
without the written agreement and consent of, the Indenture Trustee acting on
behalf of the Required Holders and any other party against which the enforcement
of the termination, amendment, supplement, waiver or modification shall be
sought. In the case of the Indenture Trustee, the actions of the Indenture
Trustee shall be governed by the provisions of Article IX of the Indenture. The
consent of the Certificate Holders, the Lessor, the Trust Company, the
Collateral Agent and the Indenture Trustee shall only be required if such
amendment, supplement, waiver or modification would materially adversely affect
their respective interests under the Participation Agreement and in any event
the Certificate Holders, the Lessor, the Trust Company and the Collateral Agent
shall have no right of consent with respect to any amendment, supplement, waiver
or modification to Section 9 hereof.
14.6 Headings, etc. The Table of Contents and headings of the
various Sections and Subsections of this Agreement are for convenience of
reference only and shall not modify, define, expand or limit any of the terms or
provisions hereof.
14.7 Parties in Interest. Except as expressly provided herein,
none of the provisions of this Agreement are intended for the benefit of any
Person except the parties hereto.
44
14.8 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
14.9 Severability. Any provision of this Agreement that 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.
14.10 Liability Limited. The Lessee, the Indenture Trustee, the
Securityholders and the Certificate Holders each acknowledge and agree that the
Trust Company is (except as otherwise expressly provided herein or therein)
entering into this Agreement and the other Operative Agreements to which it is a
party (other than the Trust Agreement), solely in its capacity as trustee under
the Trust Agreement, Indenture Trustee and Collateral Agent under the Indenture,
and not in its individual capacity and that Trust Company shall not be liable or
accountable under any circumstances whatsoever in its individual capacity for or
on account of any statements, representations, warranties, covenants or
obligations stated to be those of the Trust, except for its own gross negligence
or willful misconduct and as otherwise expressly provided herein or in the other
Operative Agreements.
14.11 Rights of Lessee. Notwithstanding any provision of the
Operative Agreements, if at any time all obligations (i) of the Trust under the
Securities and Indenture and the Security Documents and (ii) of the Lessee under
the Operative Agreements have in each case been satisfied or discharged in full,
then the Lessee shall be entitled to (a) terminate the Lease (to the extent not
previously terminated) and (b) receive all amounts then held under the Operative
Agreements and all proceeds with respect to the Equipment. Upon the fulfillment
of the obligations contained in clauses (i) and (ii) above, the Lessor shall
transfer to the Lessee all of its right, title and interest in and to the
Equipment (to the extent not previously transferred to the Lessee in accordance
with the Lease) by means of a xxxx of sale, without representation or warranty,
and other such documents and acts as Lessee may reasonably request, all at
Lessee's expense, and any amounts or proceeds referred to in the foregoing
clause (b) shall be paid over to the Lessee.
14.12 Further Assurances. The parties hereto shall promptly cause
to be taken, executed, acknowledged or delivered, at the sole expense of the
Lessee (other than with respect to the removal of Lessor Liens), all such
further acts, conveyances, documents and assurances as any of the other parties
may from time to time reasonably request in order to carry out and effectuate
the intent and purposes of this Agreement, the other Operative Agreements and
the transactions contemplated hereby and thereby (including, without limitation,
the preparation, execution and filing of any and all Uniform Commercial Code
financing statements and other filings or registrations which the parties hereto
may from time to time request to be filed or effected). The Lessee, at its own
expense, shall take such action as may be reasonably requested in order to
maintain and protect all security interests provided for hereunder or under any
other Operative Agreement.
45
14.13 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns.
14.14 No Representation or Warranty. Nothing contained herein, in
any other Operative Agreement or in any other materials delivered to the Lessee
in connection with the transactions contemplated hereby or thereby shall be
deemed a representation or warranty by the Indenture Trustee or the Arranger or
any of their Affiliates as to the proper accounting treatment or tax treatment
that should be afforded to the Lease and the Lessor's ownership of the Equipment
and the Indenture Trustee expressly disclaims any representation or warranty
with respect to such matters.
14.15 Highest Lawful Rate. It is the intention of the parties
hereto conform strictly to applicable usury laws and, anything herein to the
contrary notwithstanding, the obligations of the Lessee, the Lessor or the
Certificate Holders or any other party under any Operative Agreement, shall be
subject to the limitation that payments of interest or of other amounts
constituting interest shall not be required to the extent that receipt thereof
would be in excess of the Highest Lawful Rate, or otherwise contrary to
provisions of law applicable to the recipient limiting rates of interest which
may be charged or collected by the recipient. Accordingly, if the transactions
or the amount paid or otherwise agreed to be paid for the use, forbearance or
detention of money under this Agreement, the Lease and any other Operative
Agreement would exceed the Highest Lawful Rate or otherwise be usurious with
respect to the recipient of any such amount, then, in that event,
notwithstanding anything to the contrary in this Agreement, the Lease or any
other Operative Agreement, it is agreed as follows as to the recipient of any
such amount:
(a) the provisions of this Section 14.15 shall govern and control
over any other provision in this Agreement, the Lease and any other
Operative Agreement and each provision set forth therein is hereby so
limited;
(b) the aggregate of all consideration which constitutes interest
that is contracted for, charged or received under this Agreement, the
Lease, or any other Operative Agreement shall under no circumstances
exceed the maximum amount of interest allowed by any Requirement of Law
(such maximum lawful interest rate, if any, with respect to such Lender
herein called the "Highest Lawful Rate"), and all amounts owed under
this Agreement, the Lease and any other Operative Agreement shall be
held subject to reduction and (i) the amount of interest which would
otherwise be payable to the recipient hereunder and under the Lease,
the Loan Documents and any other Operative Agreement, shall be
automatically reduced to the amount allowed under any Requirement of
Law and (ii) any unearned interest paid in excess of the Highest Lawful
Rate shall be credited to the payor by the recipient (or, if such
consideration shall have been paid in full, refunded to the payee);
(c) all sums paid, or agreed to be paid for the use, forbearance
and detention of the money under this Agreement, the Lease, or any
other Operative Agreement shall, to the extent permitted by any
Requirement of Law, be amortized, prorated, allocated and spread
throughout the full term of such indebtedness until
46
payment in full so that the actual rate of interest is uniform
throughout the full term thereof; and
(d) if at any time the interest, together with any other fees,
late charges and other sums payable pursuant to or in connection with
this Agreement, the Lease, and any other Operative Agreement executed
in connection herewith or therewith, and deemed interest under any
Requirement of Law exceeds that amount which would have accrued at the
Highest Lawful Rate, the amount of interest and any such fees, charges
and sums to accrue to the recipient of such interest, fees, charges and
sums pursuant to the Operative Agreement shall be limited,
notwithstanding anything to the contrary in the Operative Agreement to
that amount which would have accrued at the Highest Lawful Rate for the
recipient, but any subsequent reductions, as applicable, shall not
reduce the interest to accrue pursuant to the Operative Agreement below
the recipient's Highest Lawful Rate until the total amount of interest
payable to the recipient (including all consideration which constitutes
interest) equals the amount of interest which would have been payable
to the recipient (including all consideration which constitutes
interest), plus the amount of fees which would have been received but
for the effect of this Section 14.15.
14.16 Waiver . EACH PARTY HERETO FOR THE BENEFIT OF THE PARTIES
HERETO AND THE GUARANTORS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE
EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY
LEGAL ACTION OR PROCEEDING PURSUANT TO THE OPERATIVE AGREEMENTS ANY SPECIAL,
EXEMPLARY, PUNITIVE, INDIRECT OR CONSEQUENTIAL DAMAGES.
14.17 Integration. This Agreement, together with the other
Operative Agreements, represents the entire agreement of the parties hereto to
the subject matter of this Agreement and the Operative Agreements, and there are
no promises, undertakings, representations, warranties or agreements by any
party hereto relative to the subject matter of this Agreement and the Operative
Agreements that are not expressly set forth in this Agreement or the other
Operative Agreements.
14.18 Obligations of Guarantors. The obligations of each
Guarantor under this Agreement shall be subordinated in right of payment to the
prior payment of Senior Indebtedness and Guarantor Senior Indebtedness of such
Guarantor to the same extent as such Guarantor's payment obligations under the
Hanover Guarantee are subordinated to prior payment of Senior Indebtedness and
Guarantor Senior Indebtedness, mutatis mutandis.
IN WITNESS WHEREOF, the parties hereto have caused this
Participation Agreement to be duly executed by their respective officers
thereunto duly authorized as of the day and year first above written.
HANOVER COMPRESSION LIMITED PARTNERSHIP,
as Lessee and a Guarantor
By: ________________________________________
Name:
Title:
HANOVER EQUIPMENT TRUST 2001B
By: Wilmington Trust Company, not
individually but solely as Trustee
By: ________________________________________
Name:
Title:
GENERAL ELECTRIC CAPITAL CORPORATION,
as Certificate Holder
By: ________________________________________
Name:
Title:
HANOVER COMPRESSOR COMPANY, as Guarantor
By: ________________________________________
Name:
Title:
HANOVER APPLIED PROCESS SOLUTIONS, INC.,
as Guarantor
By: ________________________________________
Name:
Title:
EUREKA ENERGY LIMITED PARTNERSHIP,
as Guarantor
By: ________________________________________
Name:
Title:
HANOVER ACQUISITION LIMITED PARTNERSHIP,
as Guarantor
By: ________________________________________
Name:
Title:
HANOVER COMPRESSOR LIMITED HOLDINGS LLC,
as Guarantor
By: ________________________________________
Name:
Title:
HANOVER LAND LIMITED PARTNERSHIP,
as Guarantor
By: ________________________________________
Name:
Title:
HANOVER MAINTECH LIMITED PARTNERSHIP,
as Guarantor
By: ________________________________________
Name:
Title:
HANOVER/XXXXX LIMITED PARTNERSHIP,
as Guarantor
By: ________________________________________
Name:
Title:
HANOVER OEC COMPRESSION CORPORATION,
as Guarantor
By: ________________________________________
Name:
Title:
PRODUCTION OPERATORS CORPORATION,
as Guarantor
By: ________________________________________
Name:
Title:
PRODUCTION OPERATORS, INC., as Guarantor
By: ________________________________________
Name:
Title:
WILMINGTON TRUST FSB, as Indenture
Trustee for the Securityholders, as
Collateral Agent for the
Securityholders and the Certificate
Holders, and in its individual
capacity only to the extent
expressly set forth herein
By: ________________________________________
Name:
Title:
WILMINGTON TRUST COMPANY, in its individual
capacity, only to the extent expressly set
forth herein
By: ________________________________________
Name:
Title:
