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EXHIBIT 10.2
GUARANTEE
GUARANTEE dated as of July 22, 1998, made by HANOVER
COMPRESSOR COMPANY, a Delaware corporation, HANOVER/XXXXX, INC., a Delaware
corporation, HANOVER MAINTECH, INC., a Texas corporation and HANOVER LAND
COMPANY, a Texas corporation (individually, a "Guarantor", collectively, the
"Guarantors"), in favor of the Beneficiaries (as hereinafter defined).
Preliminary Statement
The Guarantors wish to induce (i) Hanover Equipment Trust
1998A (the "Lessor") to enter into the Lease and the other Operative Agreements
to which it is a party; (ii) the Lenders to enter into the Credit Agreement and
the other Operative Agreements to which they are party; and (iii) Societe
Generale Financial Corporation (the "Investor") to enter into the Participation
Agreement (as hereinafter defined) and the other Operative Agreements to which
it is a party.
NOW, THEREFORE, in consideration of the premises contained
herein and to induce (i) the Lessor to enter into the Lease and the other
Operative Agreements to which it is a party; (ii) the Lenders to enter into the
Credit Agreement and the other Operative Agreements to which it is a party; and
(iii) the Investor to enter into the Participation Agreement and the other
Operative Agreements to which it is a party, the Guarantors hereby agree for the
benefit of the Lessor, the Agent, for the ratable benefit of the Lenders and the
Investor and their respective successors and assigns (individually a
"Beneficiary", collectively, the "Beneficiaries"), as follows:
1. Defined Terms. (a) Capitalized terms not otherwise defined
herein (including in the Preliminary Statement) shall have the meanings ascribed
to them in Annex A to the Participation Agreement dated as of the date hereof
among Hanover Compressor Company ("HCC"), the Lessor, the Investor, The Chase
Manhattan Bank, as agent (the "Agent") and the several banks and financial
institutions from time to time party thereto (the "Lenders"), as the same may
from time to time be amended, supplemented or otherwise modified (the
"Participation Agreement").
(b) As used herein, the following terms shall have the
following meanings:
"Contribution Obligations" means the collective reference
to the outstanding amount of the Investor Contributions and the Investor Yield
with respect thereto and all rights of the Investor to receive distributions
under the Trust Agreement and any of the other Operative Agreements.
"Guaranteed Obligations" means the collective reference to
(i) the Note Obligations, (ii) the Contribution Obligations and (iii) the Lease
Obligations and, with respect to each such obligation, interest accruing thereon
at the applicable rate provided in
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the Operative Agreements after maturity and interest accruing at the then
applicable rate provided in the Operative Agreements after the filing of any
petition in bankruptcy, or the commencement of an insolvency, reorganization or
like proceeding, whether or not a claim for post-filing or post-petition
interest is allowed in such proceeding and whether such obligations are direct
or indirect, absolute or contingent, due or to become due, or now existing or
hereinafter incurred, which may arise, under, out of or in connection with any
of the Operative Agreements, any other document made, delivered or given in
connection therewith, in each case whether on account of principal, interest,
Investor Contributions or Investor Yield, reimbursement obligations, fees,
indemnities, costs, expenses, or payment obligations (including, without
limitation, all fees and disbursements of counsel to any of the Beneficiaries
that are required to be paid by HCC pursuant to the terms of the Operative
Agreements).
"Lease Obligations" means the collective reference to the
payment obligations and undertakings applicable to HCC contained in or arising
under the Lease or any of the other Operative Agreements to which HCC is a
party, including, but not limited to, the full and punctual payment by HCC, when
due, of any and all Rent, the payments required pursuant to Section 17.2 and
17.3 of the Lease, the Purchase Option Price and the Maximum Residual Guarantee
Amount.
"Note Obligations" means the collective reference to the
unpaid principal of and interest on the Notes and all other payment obligations
and liabilities of the Lessor to the Agent and the Lenders under the Notes, the
Credit Agreement and any of the other Operative Agreements.
2. Guaranty. (a) Subject to the provisions of paragraph 2(b)
and (c), the Guarantors hereby, jointly and severally, unconditionally and
irrevocably guaranty to the Beneficiaries and their respective successors,
endorsees, transferees and assigns the prompt and complete payment when due
(whether at the stated maturity, by acceleration or otherwise) of the Guaranteed
Obligations.
(b) Anything to the contrary notwithstanding, the Guarantors
shall not at anytime be required to make any payment with regard to the Tranche
B Loans or with respect to the Contribution Obligations unless at such time a
Lease Event of Default has occurred and is continuing.
(c) Anything herein or in any other Operative Agreement to the
contrary notwithstanding, the maximum liability of each Guarantor (other than
HCC) hereunder and under the other Operative Agreement shall in no event exceed
the amount which can be guaranteed by such Guarantor under applicable federal
and state laws relating to the insolvency of debtors.
(d) The Guarantors further agree, jointly and severally, to
pay any and all costs, expenses (including all fees and disbursements of
counsel) and damages which may be paid or incurred in enforcing, or obtaining
advice of counsel in respect of, any rights with respect to, or collecting from
the Guarantors, any or all of the Guaranteed Obligations
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and/or enforcing any rights with respect to, or collecting against, the
Guarantors under this Guarantee.
3. Right of Set-off. In addition to any rights now or
hereafter granted under applicable law or otherwise, and not by way of
limitation of any such rights, upon the occurrence and during the continuance of
an Event of Default, the Investor, Agent and each Lender is hereby authorized at
any time or from time to time, without presentment, demand, protest or other
notice of any kind to the Borrower, the Guarantors or to any other Person, any
such notice being hereby expressly waived, to set off and to appropriate and
apply any and all deposits (general or special) and any other Indebtedness at
any time held or owing by the Investor, Agent or such Lender (including, without
limitation, by branches and agencies of the Investor, Agent or such Lender
wherever located) to or for the credit or the account of the Guarantors against
and on account of the obligations and liabilities of the Guarantors hereunder or
under any of the other Operative Agreements, and all other claims of any nature
or description arising out of or connected with this Guarantee or any other
Operative Agreement, irrespective of whether the Investor, Agent or such Lender
shall have made any demand hereunder and although said obligations, liabilities
or claims, or any of them, shall be contingent or unmatured. The Investor, Agent
and each Lender shall notify such Guarantor promptly of any such set-off and the
application made by the Investor, Agent or such Lender; provided, that the
failure to give such notice shall not affect the validity of such set-off and
application.
4. No Subrogation. Notwithstanding any payment or payments
made by the Guarantors hereunder or any set-off or application of funds of the
Guarantors by any Lender, the Guarantors shall not be entitled to exercise or
enforce any subrogation rights of the Investor, Agent or any Lender against the
Borrower or any other Person or any collateral security or guarantee or right of
offset held by the Investor, Agent or any Lender for the payment of the
Guaranteed Obligations, nor shall the Guarantors seek or be entitled to seek any
contribution or reimbursement from the Borrower or any other Person in respect
of payments made by the Guarantors hereunder, until all amounts owing to the
Investor, Agent and the Lenders by the Borrower on account of the Guaranteed
Obligations and all amounts owing hereunder are paid in full and the Commitments
are terminated. If any amount shall be paid to the Guarantors on account of such
subrogation rights at any time when all of the Guaranteed Obligations and all
amounts owing hereunder shall not have been paid in full or the Commitments
shall not have been terminated, such amount shall be held by the Guarantors in
trust for the Investor, Agent and the Lenders, segregated from other funds of
the Guarantors, and shall, forthwith upon receipt by the Guarantors, be turned
over to the Agent in the exact form received by the Guarantors (duly indorsed by
the Guarantors to the Agent, if required), to be applied against the Guaranteed
Obligations, whether matured or unmatured, in such order as the Agent may
determine.
5. Amendments, etc. with respect to the Guaranteed
Obligations; Waiver of Rights. The Guarantors shall remain obligated hereunder
notwithstanding that, without any reservation of rights against the Guarantors
and without notice to or further assent by the Guarantors, any demand for
payment of any of the Guaranteed Obligations made by the Investor, Agent or any
Lender may be rescinded by such party and any of the Guaranteed Obligations
continued, and the Guaranteed Obligations, or the liability of any other party
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upon or for any part thereof, or any collateral security or guarantee therefor
or right of offset with respect thereto, may, from time to time, in whole or in
part, be renewed, extended, amended, modified, accelerated, compromised, waived,
surrendered or released by the Investor, Agent or any Lender, and the Credit
Agreement, the Participation Agreement and the other Operative Agreements may be
amended, modified, supplemented or terminated, in whole or in part, as the Agent
(or the Required Lenders, as the case may be) may deem advisable from time to
time in accordance with the terms thereof, and any collateral security,
guarantee or right of offset at any time held by the Investor, Agent or any
Lender for the payment of the Guaranteed Obligations may be sold, exchanged,
waived, surrendered or released. Neither the Investor, Agent nor any Lender
shall have any obligation to protect, secure, perfect or insure any Lien at any
time held by it as security for the Guaranteed Obligations or for this Guarantee
or any property subject thereto. When making any demand hereunder against the
Guarantors, the Investor, Agent or any Lender may, but shall be under no
obligation to, make a similar demand on the Borrower or any other guarantor, and
any failure by the Investor, Agent or any Lender to make any such demand or to
collect any payments from the Borrower or any other guarantor or any release of
the Borrower or such other guarantor shall not relieve the Guarantors from their
obligations under this Guarantee, and shall not impair or affect the rights and
remedies, express or implied, or as a matter of law, of the Investor, Agent or
any Lender against the Guarantors. For the purposes hereof "demand" shall
include the commencement and continuance of any legal proceedings.
6. Guarantee Absolute and Unconditional. Each Guarantor waives
any and all notice of the creation, renewal, extension or accrual of any of the
Guaranteed Obligations and notice of or proof of reliance by the Investor, Agent
or any Lender upon this Guarantee or acceptance of this Guarantee, the
Guaranteed Obligations, and any of them, shall conclusively be deemed to have
been created, contracted or incurred, or renewed, extended, amended or waived,
in reliance upon this Guarantee; and all dealings between the Borrower and such
Guarantor, on the one hand, and the Agent and the Lenders, on the other hand,
likewise shall be conclusively presumed to have been had or consummated in
reliance upon this Guarantee. Each Guarantor waives diligence, presentment,
protest, demand for payment and notice of default or nonpayment to or upon the
Borrower or such Guarantor with respect to the Guaranteed Obligations. Each
Guarantor understands and agrees that this Guarantee shall be construed as a
continuing, absolute and unconditional guarantee and surety of payment without
regard to (a) the validity, regularity or enforceability of the Credit Agreement
or any other Operative Agreement, any of the Guaranteed Obligations or any other
collateral security therefor or guarantee or right of offset with respect
thereto at any time or from time to time held by the Investor, Agent or any
Lender, (b) any defense, set-off or counterclaim (other than a defense of
payment or performance) which may at any time be available to or be asserted by
the Borrower or such Guarantor against the Investor, Agent or any Lender, or (c)
any other circumstance whatsoever (with or without notice to or knowledge of the
Borrower or such Guarantor) which constitutes, or might be construed to
constitute, an equitable or legal discharge of the Borrower for the Guaranteed
Obligations, or of such Guarantor under this Guarantee, in bankruptcy or in any
other instance. When pursuing its rights and remedies hereunder against any
Guarantor, the Agent and any Lender may, but shall be under no obligation to,
pursue such rights and remedies as it may have against the Borrower or any
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other Person or against any collateral security or guarantee for the Guaranteed
Obligations or any right of offset with respect thereto, and any failure by the
Investor, Agent or any Lender to pursue such other rights or remedies or to
collect any payments from the Borrower or any such other Person or to realize
upon any such collateral security or guarantee or to exercise any such right of
offset, or any release of the Borrower or any such other Person or any such
collateral security, guarantee or right of offset, shall not relieve such
Guarantor of any liability hereunder, and shall not impair or affect the rights
and remedies, whether express, implied or available as a matter of law, of the
Agent and the Lenders against such Guarantor. This Guarantee shall remain in
full force and effect and be binding in accordance with and to the extent of its
terms upon such Guarantor and the successors and assigns thereof, and shall
inure to the benefit of the Agent and the Lenders, and their respective
successors, indorsees, transferees and assigns, until all the Guaranteed
Obligations and the obligations of such Guarantor under this Guarantee shall
have been satisfied by payment in full and the Commitments shall be terminated,
notwithstanding that from time to time during the term of the Credit Agreement
the Borrower may be free from any Guaranteed Obligations.
7. Reinstatement. This Guarantee shall continue to be
effective, or be reinstated, as the case may be, if at any time payment, or any
part thereof, of any of the Guaranteed Obligations is rescinded or must
otherwise be restored or returned by the Investor, Agent or any Lender upon the
insolvency, bankruptcy, dissolution, liquidation or reorganization of the
Borrower or the Guarantors, or upon or as a result of the appointment of a
receiver, intervenor or conservator of, or trustee or similar officer for, the
Borrower or the Guarantors or any substantial part of its property, or
otherwise, all as though such payments had not been made.
8. Payments. The Guarantors hereby guarantee that payments
hereunder will be paid to the Agent without set-off or counterclaim in Dollars
at the office of the Agent located at 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000.
9. Representations, Warranties. In order to induce the Lenders
to enter into the Credit Agreement and to make the Loans, the Investor to enter
into the Participation Agreement and make the Investor Contribution and the
Lessor to enter into the Lease, HCC hereby represents and warrants to the
Beneficiaries as follows, all of which shall survive the execution and delivery
of this Guarantee and the Credit Agreement and the making of the Loans:
9.1 Financial Condition. (a) The consolidated balance sheets
of HCC and its consolidated Subsidiaries as at December 31, 1997 and December
31, 1996 and the related consolidated statements of income and of cash flows for
the fiscal year ended on such date, reported on by Price Waterhouse copies of
which have heretofore been furnished to each Lender, present fairly, in all
material respects, the consolidated financial condition of HCC and its
consolidated Subsidiaries as at such dates, and the consolidated results of
their operations and their consolidated cash flows for the fiscal year then
ended. The unaudited consolidated balance sheets of HCC and its consolidated
Subsidiaries as at March 31, 1998, the related unaudited consolidated statements
of income and of cash flows for the three month period ended on such date,
certified by a Responsible Officer of HCC, copies
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of which have heretofore been furnished to each Lender, present fairly, in all
material respects, the consolidated financial condition of HCC, and its
consolidated Subsidiaries as at such dates, and the consolidated results of its
operations and consolidated cash flows for the three month period then ended
(subject to normal year-end audit adjustments).
(b) All such financial statements, including the related
schedules and notes thereto, have been prepared in accordance with GAAP applied
consistently throughout the periods involved (except as approved by such
accountants or Responsible Officer, as the case may be, and as disclosed
therein). Other than the Guarantor Obligations permitted under Section 11.4
below, neither HCC nor any of its consolidated Subsidiaries had, at the date of
the most recent balance sheet referred to above, any material Guarantor
Obligation, reasonably foreseeable contingent liability or liability for taxes,
or any long-term lease or unusual forward or long-term commitment, including,
without limitation, any interest rate or foreign currency swap or exchange
transaction, which is not reflected in the foregoing statements or in the notes
thereto. Except as disclosed on Schedule 9.1(b) hereto, during the period from
March 31, 1998 to and including the date hereof there has been no sale, transfer
or other disposition by HCC or any of its consolidated Subsidiaries of any
material part of its business or property and no purchase or other acquisition
of any business or property (including any capital stock of any other Person)
material in relation to the consolidated financial condition of HCC and its
consolidated Subsidiaries at March 31, 1998.
9.2 No Change. Except as set forth in HCC's form 10-Q filed
with respect to the period ending March 31, 1998, (a) there has been no
development or event nor any prospective development or event, which has had or
would reasonably be expected to have a Material Adverse Effect and (b) except as
disclosed on Schedule 9.2 to this Guarantee, as of the date hereof, no dividends
or other distributions have been declared, paid or made upon the Capital Stock
of HCC nor has any of the Capital Stock of HCC been redeemed, retired, purchased
or otherwise acquired for value by HCC or any of its respective Subsidiaries.
9.3 Corporate Existence; Compliance with Law. Each Guarantor
(a) is duly organized, validly existing and in good standing under the laws of
the jurisdiction of its organization, (b) has the corporate power and authority,
and the legal right, to own and operate its property, to lease the property it
operates as lessee and to conduct the business in which it is currently engaged,
(c) is duly qualified as a foreign corporation and in good standing under the
laws of each jurisdiction where its ownership, lease or operation of property or
the conduct of its business requires such qualification, except where the
failure to be so qualified would not reasonably be expected to have a Material
Adverse Effect, and (d) is in compliance with all Requirements of Law except to
the extent that the failure to comply therewith would not, in the aggregate,
reasonably be expected to have a Material Adverse Effect.
9.4 Corporate Power; Authorization; Enforceable Obligations.
Each Guarantor has the corporate power and authority, and the legal right, to
make, deliver and perform the Operative Agreements to which it is a party. HCC
has the corporate power and authority, and the legal right, to perform the
Operative Agreements and has taken all
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necessary corporate action to authorize the performing under the Operative
Agreements on the terms and conditions of the Operative Agreements. Each
Guarantor has taken all necessary corporate action to authorize the execution,
delivery and performance of this Guarantee. No consent or authorization of,
filing with or other act by or in respect of, any Governmental Authority or any
other Person (other than consents that have been obtained and consents or
authorizations the failure to obtain would not, in the aggregate, reasonably be
expected to have a Material Adverse Effect) is required in connection with the
Loans or with the execution, delivery, performance, validity or enforceability
of this Guarantee or any of the other Operative Agreements. This Guarantee has
been duly executed and delivered on behalf of the Guarantors party hereto. This
Guarantee constitutes, each Operative Agreement when executed and delivered will
constitute, a legal, valid and binding obligation of the Guarantors party
thereto enforceable against such Guarantors in accordance with their respective
terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the enforcement
of creditors' rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law).
9.5 No Legal Bar. The execution, delivery and performance of
this Guarantee and the other Operative Agreements, the Loans and the use of the
proceeds thereof will not violate any Requirement of Law or Contractual
Obligation of any Guarantor party thereto and will not result in, or require,
the creation or imposition of any Lien on any of their respective properties or
revenues pursuant to any such Requirement of Law or Contractual Obligation,
except as contemplated hereby or thereby and except to the extent any such
violation or creation or imposition of a Lien would not reasonably be expected
to have a Material Adverse Effect.
9.6 No Material Litigation. Except as set forth in HCC's Form
10-Q, filed with respect to the period ending March 31, 1998, no litigation,
investigation or proceeding of or before any arbitrator or Governmental
Authority is pending or, to the knowledge of HCC, threatened by or against any
Guarantor or against any of their respective properties or revenues (a) with
respect to this Guarantee or the other Operative Agreements or any of the
transactions contemplated hereby, or (b) which would reasonably be expected to
have a Material Adverse Effect.
9.7 No Default. None of the Guarantors nor any of their
respective Subsidiaries is in default under or with respect to any of their
respective Contractual Obligations in any respect which if not cured would
reasonably be expected to have a Material Adverse Effect. No Default or Event of
Default has occurred and is continuing.
9.8 Ownership of Property; Liens; Leases of Equipment. Each of
the Guarantors has good record and marketable title in fee simple (except for
exceptions to title as will not in the aggregate materially interfere with the
present or contemplated use of the property affected thereby) to, or a valid
leasehold interest in, all its real property, and good title to all its other
property, and none of such property is subject to any Lien except as permitted
by Section 11.3. None of the Equipment or Inventory (as defined in the Uniform
Commercial Code) owned by any Guarantor has been leased by such Guarantor as
lessor, except pursuant to operating leases (which do not constitute Financing
Leases). As used
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herein, Equipment or Inventory leased by a Guarantor under a Financing Lease
shall be deemed "owned" by such Guarantor.
9.9 Intellectual Property. Each Guarantor owns, or is licensed
to use, all trademarks, tradenames, trade secrets, copyrights, technology,
know-how and processes necessary for the conduct of its business as currently
conducted except for those the failure to own or license which would not
reasonably be expected to have a Material Adverse Effect (the "Intellectual
Property"). To the knowledge of each Guarantor, no claim has been asserted and
is pending by any Person challenging or questioning the use of any such
Intellectual Property or the validity or effectiveness of any such Intellectual
Property, nor does each Guarantor know of any valid basis for any such claim,
which would reasonably be expected to have a Material Adverse Effect. The use of
such Intellectual Property by the Guarantors does not infringe on the rights of
any Person, except for such claims and infringements that, in the aggregate,
would not reasonably be expected to have a Material Adverse Effect.
9.10 Taxes. Each of the Guarantors has filed or caused to be
filed all tax returns which, to the knowledge of each Guarantor, are required to
be filed and has paid all taxes shown to be due and payable on said returns or
on any assessments made against it or any of its property and all other taxes,
fees or other charges imposed on it or any of its property by any Governmental
Authority (other than any the amount or validity of which are currently being
contested in good faith by appropriate proceedings and with respect to which
reserves in conformity with GAAP have been provided on the books of any of the
Guarantors, as the case may be); no tax Lien has been filed against the property
of any Guarantor, and, to the knowledge of each Guarantor, no claim is being
asserted, with respect to any such tax, fee or other charge.
9.11 Federal Regulations. No part of the proceeds of any Loans
will be used for "purchasing" or "carrying" any "margin stock" within the
respective meanings of each of the quoted terms under Regulation U of the Board
of Governors of the Federal Reserve System as now and from time to time
hereafter in effect or for any purpose which violates the provisions of the
Regulations of such Board of Governors. If requested by any Lender or the Agent,
HCC will furnish to the Agent and each Lender a statement to the foregoing
effect in conformity with the requirements of FR Form U-1 referred to in said
Regulation U.
9.12 ERISA. Neither a Reportable Event nor an "accumulated
funding deficiency" (within the meaning of Section 412 of the Code or Section
302 of ERISA) has occurred during the five-year period prior to the date on
which this representation is made or deemed made with respect to any Plan, and
each Plan has complied in all material respects with the applicable provisions
of ERISA and the Code. No termination of a Single Employer Plan has occurred and
no lien in favor of the PBGC or a Plan has arisen during the five-year period
prior to the date as of which this representation is deemed made. The present
value of all accrued benefits under each Single Employer Plan maintained by HCC,
or any Commonly Controlled Entity (based on those assumptions used to fund the
Plans) did not, as of the last annual valuation date prior to the date on which
this representation is made or deemed made, exceed the value of the assets of
such Plan allocable to such
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accrued benefits. Neither HCC nor any Commonly Controlled Entity has had a
complete or partial withdrawal from any Multiemployer Plan, and neither HCC nor
any Commonly Controlled Entity would become subject to any liability under ERISA
if HCC or any such Commonly Controlled Entity were to withdraw completely from
all Multiemployer Plans as of the valuation date most closely preceding the date
on which this representation is made or deemed made. No such Multiemployer Plan
is in Reorganization or Insolvent. The present value (determined using actuarial
and other assumptions which are reasonable in respect of the benefits provided
and the employees participating) of the liability of HCC and each Commonly
Controlled Entity for post retirement benefits to be provided to their current
and former employees under Plans which are welfare benefit plans (as defined in
Section 3(1) of ERISA) does not, in the aggregate, exceed the assets under all
such Plans allocable to such benefits.
9.13 Investment Company Act; Other Regulations. None of the
Guarantors is an "investment company", or a company "controlled" by an
"investment company", within the meaning of the Investment Company Act of 1940,
as amended. None of the Guarantors is subject to regulation under any Federal or
State statute or regulation which limits its ability to incur Indebtedness or
change rates or change tariffs. None of the Guarantors are "holding companies"
or "subsidiary companies" of a "holding company" or a "subsidiary company" of a
"holding company" within the meaning of the Public Utility Holding Company Act
of 1935, as amended.
9.14 Subsidiaries. As of the Initial Closing Date, HCC has no
Subsidiaries other than as set forth on Schedule 9.14. Except if a Guarantor,
other than cash or Cash Equivalents located in bank accounts at the Agent, none
of the assets owned by any Unqualified Subsidiary as of the date hereof are
located within the United States of America or any territory thereof.
9.15 Environmental Matters. Each of the representations and
warranties set forth in paragraphs (a) through (e) of this subsection is true
and correct with respect to each parcel of real property owned or operated by
any of the Guarantors (the "Properties"), except to the extent that the facts
and circumstances giving rise to any such failure to be so true and correct
would not reasonably be expected to have a Material Adverse Effect:
(a) Except as set forth on Schedule 9.15, the Properties do
not contain, and have not previously contained, in, on, or under,
including, without limitation, the soil and groundwater thereunder, any
Hazardous Substances in concentrations which violate Environmental
Laws.
(b) Except as set forth on Schedule 9.15, the Properties and
all operations and facilities at the Properties are in compliance with
all Environmental Laws, and there is no Hazardous Substances
contamination or violation of any Environmental Law which would
reasonably be expected to interfere with the continued operation of any
of the Properties or impair the fair saleable value of any thereof.
(c) Except as set forth on Schedule 9.15, none of the
Guarantors has received any complaint, notice of violation, alleged
violation, investigation or
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advisory action or of potential liability or of potential
responsibility regarding environmental protection matters or
environmental permit compliance with regard to the Properties, nor is
HCC aware that any Governmental Authority is contemplating delivering
to any Guarantor any such notice.
(d) Hazardous Substances have not been generated, treated,
stored, disposed of, at, on or under any of the Properties, nor have
any Hazardous Substances been transferred to any other location, in
violation of any Environmental Laws from the Properties or as a result
of the sale or lease of any equipment or inventory of any Guarantor.
(e) There are no governmental, administrative actions or
judicial proceedings pending or contemplated under any Environmental
Laws to which any Guarantor is or to HCC's knowledge will be named as a
party with respect to the Properties, nor to HCC's knowledge are there
any consent decrees or other decrees, consent orders, administrative
orders or other orders, or other administrative or judicial
requirements outstanding under any Environmental Law with respect to
any of the Properties.
9.16 Accuracy and Completeness of Information. The factual
statements contained in the Operative Agreements and each other agreement,
instrument, certificate and document related thereto and any other certificates
or documents furnished or to be furnished to the Agent or the Lenders by any
Guarantor from time to time in connection with this Guarantee (in any case
excluding any of the financial statements referred to in Section 9.1(a) and 10.1
hereof), taken as a whole, and taking into consideration all corrections or
substituted documents, do not and will not, as of the date when made, contain
any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements contained therein not misleading in
light of the circumstances in which the same were made, all except as otherwise
qualified herein or therein.
10. Affirmative Covenants of the Guarantor. Each Guarantor
hereby covenants and agrees that so long as this Guarantee is in effect and
until the Commitments have terminated and the Guaranteed Obligations and all
amounts owing hereunder are paid in full such Guarantor will:
10.1 Financial Statements. Furnish to each Lender and the
Investor:
(a) as soon as available for distribution to shareholders and
creditors generally, but in any event within 120 days after the end of
each fiscal year of HCC, a copy of the consolidated balance sheet of
HCC and its consolidated Subsidiaries, as at the end of such year and
the related consolidated statements of income and retained earnings and
of cash flows for such year, setting forth in each case in comparative
form the figures for the previous year, reported on without a "going
concern" or like qualification or exception, or qualification arising
out of the scope of the audit, by Price Waterhouse or other independent
certified public accountants of nationally recognized standing not
unacceptable to the Required Lenders;
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(b) as soon as available for distribution to shareholders and
creditors generally, but in any event within 90 days after the end of
each fiscal year of HCC, a copy of the unaudited consolidated balance
sheet of HCC and its consolidated Subsidiaries, as at the end of such
year, and the related unaudited consolidated statements of income and
retained earnings and of cash flows for such year, in each case setting
forth in comparative form the figures for the corresponding period of
the previous year and the figures for such period as shown on the
budgets of HCC for such year; and
(c) as soon as available, but in any event not later than 45
days after the end of each of the first three quarterly periods of each
fiscal year of HCC, the unaudited consolidated balance sheet of HCC and
its consolidated Subsidiaries, as at the end of such quarter, and the
related unaudited consolidated statements of income and retained
earnings and of cash flows of HCC and its consolidated Subsidiaries,
for such quarter and the portion of the fiscal year through the end of
such quarter, setting forth in each case in comparative form the
figures for the corresponding period of the previous year, certified by
a Responsible Officer as being fairly stated in all material respects
when considered in relation to the consolidated financial statements of
HCC and its consolidated Subsidiaries, (subject to normal year-end
audit adjustments), and in each case setting forth in comparative form
the figures for such periods as shown on the budgets of such Person for
such year;
all such financial statements to be complete and correct in all material
respects and to be prepared in reasonable detail and in accordance with GAAP
applied consistently throughout the periods reflected therein and with prior
periods (except as approved by such accountants or officer, as the case may be,
and disclosed therein).
10.2 Certificates; Other Information. Furnish to each Lender
and the Investor:
(a) concurrently with the delivery of the financial statements
referred to in subsection 10.1(a), a certificate of the independent
certified public accountants reporting on such financial statements
stating that in making the examination necessary therefor no knowledge
was obtained of any Default or Event of Default, except as specified in
such certificate;
(b) concurrently with the delivery of the financial statements
referred to in subsections 10.1(a) and 10.1(c), a certificate of a
Responsible Officer stating that, to the best of such Responsible
Officer's knowledge, HCC during such period has observed or performed
all of its covenants and other agreements, and satisfied every material
condition, contained in this Guarantee and the other Operative
Agreements to which it is a party to be observed, performed or
satisfied by it, and that such Responsible Officer has obtained no
knowledge of any Default or Event of Default except as specified in
such certificate;
(c) not later than 45 days following the end of each fiscal
year of HCC, a copy of the projections by HCC of the operating budget
and cash flow budget of
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HCC and its Subsidiaries for the succeeding fiscal year, such
projections to be accompanied by a certificate of a Responsible Officer
to the effect that such projections have been prepared on the basis of
reasonable assumptions and that such Officer has no reason to believe
they are incorrect or misleading in any material respect;
(d)(i) within five days after the same are sent, copies of all
financial statements and reports which HCC, if at such time any class
of HCC's securities are held by the public, sends to its stockholders
generally, or, if otherwise, such financial statements and reports as
are made generally available to the public, and (ii) within five days
after the same are filed, copies of all financial statements and
reports which HCC may make to, or file with, the Securities and
Exchange Commission or any successor or analogous Governmental
Authority;
(e) concurrently with the delivery of the financial statements
referred to in subsections 10.1(b) and (c), a management summary
describing and analyzing the performance of HCC and its Subsidiaries
during the periods covered by such financial statements;
(f) within 45 days after the end of each quarter in each
fiscal year of HCC, a certificate of the principal financial officer of
HCC showing in detail the computations necessary to calculate the
Applicable Margin (an "Applicable Margin Certificate"); and
(g) promptly, such additional financial and other information
as any Lender or the Investor may from time to time reasonably request.
10.3 Payment of Obligations. Pay, discharge or otherwise
satisfy at or before maturity or before they become delinquent, as the case may
be, all its obligations of whatever nature, except where the amount or validity
thereof is currently being contested in good faith by appropriate proceedings
and reserves in conformity with GAAP with respect thereto have been provided on
the books of HCC or any Subsidiary of HCC, as the case may be.
10.4 Conduct of Business and Maintenance of Existence.
Continue to engage in business of the same general type as now conducted by it
and preserve, renew and keep in full force and effect its corporate existence
and take all reasonable action to maintain all rights, privileges and franchises
necessary or desirable in the normal conduct of its business except as otherwise
permitted pursuant to Section 11.5; comply with all Contractual Obligations and
Requirements of Law except to the extent that failure to comply therewith would
not, in the aggregate, reasonably be expected to have a Material Adverse Effect.
10.5 Maintenance of Property; Insurance. HCC will, and will
cause each of its Subsidiaries to, (a) keep and maintain all property material
to the conduct of its business in good working order and condition, ordinary
wear and tear excepted, and (b) maintain, with financially sound and reputable
insurance companies, insurance in such
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amounts and against such risks as are customarily maintained by companies
engaged in the same or similar businesses operating in the same or similar
locations.
10.6 Inspection of Property; Books and Records; Discussions.
Keep proper books of records and account in which full, true and correct entries
in conformity with GAAP and all Requirements of Law shall be made of all
dealings and transactions in relation to its business and activities; and permit
representatives of Investor or any Lender to visit and inspect any of its
properties and examine and make abstracts from any of its books and records at
any reasonable time and as often as may reasonably be desired and to discuss the
business, operations, properties and financial and other condition of HCC and
Subsidiaries of HCC with officers and employees of HCC and Subsidiaries of HCC
and with its independent certified public accountants; provided, however, that
no such visit, inspection or examination or discussion shall unreasonably
disrupt or interfere with normal operations of HCC or any of its Subsidiaries
and any such representatives of the Investor, Agent and the Lenders shall be
accompanied by a Responsible Officer of HCC. No failure to comply with any
request for the exercise of rights hereunder shall be cause for any Event of
Default unless such request is submitted in writing to HCC with reference to
this Section 10.6.
10.7 Notices. Promptly give notice to the Investor, Agent and
each Lender of:
(a) the occurrence of any Default or Event of Default of which
HCC has actual knowledge;
(b) any (i) default or event of default by HCC or any of its
Subsidiaries under or with respect to any of their respective
Contractual Obligations in any respect which, if not cured, would
reasonably be expected to have a Material Adverse Effect, or to HCC's
knowledge any default or event of default by any third party under or
with respect to any Contractual Obligation of said third party with HCC
or any of its Subsidiaries in a respect which, if not cured, would
reasonably be expected to have a Material Adverse Effect or (ii)
litigation, investigation or proceeding of which HCC has actual
knowledge which may exist at any time between HCC or any Subsidiary of
HCC and any Governmental Authority, which in either case, if not cured
or if adversely determined, as the case may be, would reasonably be
expected to have a Material Adverse Effect;
(c) any litigation or proceeding affecting HCC or any
Subsidiary of HCC of which HCC has actual knowledge in which the amount
involved is $5,000,000 or more and not covered by insurance or in which
injunctive or similar relief is sought and which if adversely
determined would reasonably be expected to have a Material Adverse
Effect;
(d) the following events, as soon as possible and in any event
within 30 days after HCC has actual knowledge thereof: (i) the
occurrence or expected occurrence of any Reportable Event with respect
to any Plan, or any withdrawal from, or the termination, Reorganization
or Insolvency of any Multiemployer Plan or
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(ii) the institution of proceedings or the taking of any other action
by the PBGC or HCC, any Commonly Controlled Entity with respect to the
termination of any Single Employer Plan; and
(e) a development or event which has had or would reasonably
be expected to have a Material Adverse Effect.
Each notice pursuant to this subsection shall be accompanied by a statement of a
Responsible Officer setting forth details of the occurrence referred to therein
and stating what action HCC proposes to take with respect thereto.
10.8 Environmental Laws.
(a) Comply in all material respects with, and undertake all
reasonable efforts to ensure compliance by all tenants and subtenants,
if any, with, all Environmental Laws and obtain and comply in all
material respects with and maintain, and undertake all reasonable
efforts to ensure that all tenants and subtenants obtain and comply
with and maintain, any and all licenses, approvals, registrations or
permits required by Environmental Laws, and upon discovery of any
non-compliance or suspected non-compliance, undertake all reasonable
efforts to attain full compliance;
(b) Conduct and complete all investigations, studies, sampling
and testing, and all remedial, removal and other actions required under
Environmental Laws and promptly comply in all material respects with
all lawful orders and directives of all Governmental Authorities
respecting Environmental Laws, except to the extent that the failure to
so conduct, complete or take such actions, or to comply with such
orders and directives, would not in the aggregate reasonably be
expected to have a Material Adverse Effect; and
(c) Defend, indemnify and hold harmless the Agent and the
Lenders, and their respective employees, agents, officers and
directors, from and against any claims, demands, penalties, fines,
liabilities, settlements, damages, costs and expenses of whatever kind
or nature known or unknown, contingent or otherwise, arising out of, or
in any way relating to the violation of or noncompliance with any
Environmental Laws applicable to the real property owned or operated by
HCC or any Subsidiary of HCC, or any orders, requirements or demands of
Governmental Authorities related thereto, including, without
limitation, reasonable attorney's and consultant's fees, investigation
and laboratory fees, court costs and litigation expenses, except to the
extent that any of the foregoing arise out of the gross negligence or
willful misconduct of the party seeking indemnification therefor.
(d) Maintain a program to identify and promote substantial
compliance with and to minimize prudently any liabilities or potential
liabilities under any Environmental Law that may affect HCC or any of
its Qualified Subsidiaries.
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10.9 Subsequent Guarantees. HCC shall cause each Qualified
Subsidiary of HCC for which the aggregate value of all assets owned by such
Qualified Subsidiary is or becomes greater than $20,000,000, to execute an
amendment to this Guarantee, substantially in the form of Exhibit A hereto
within one-year after the later of (i) the date on which such Qualified
Subsidiary becomes a Subsidiary of HCC and (ii) the date on which such Qualified
Subsidiary's assets attain an aggregate value in excess of $20,000,000;
provided, however, that if during such one-year period the aggregate value of
such Qualified Subsidiary's assets is or becomes $20,000,000 or less, such
Qualified Subsidiary shall not be required to become a party to this Guarantee.
10.10 Year 2000 Matters. Any reprogramming required to permit
the proper functioning (but only to the extent that such proper functioning
would otherwise be impaired by the occurrence of the year 2000) in and following
the year 2000 of computer systems and other equipment containing embedded
microchips, in either case owned or operated by Guarantors or used or relied
upon in the conduct of their business (including any such systems and other
equipment supplied by others or with which the computer systems of Guarantors
interface), and the testing of all such systems and other equipment as so
reprogrammed, will be completed by January 1, 1999. The costs to Guarantors that
have not been incurred as of the date hereof for such reprogramming and testing
and for the other reasonably foreseeable consequences to them of any improper
functioning of other computer systems and equipment containing embedded
microchips due to the occurrence of the year 2000 could not reasonably be
expected to result in an Event of Default or to have a Material Adverse Effect.
Except for any reprogramming referred to above, the computer systems of
Guarantors are and, with ordinary course upgrading and maintenance, will
continue to be, sufficient for the conduct of Guarantors' business as currently
conducted.
11. Negative Covenants. Each Guarantor hereby agrees that so
long as this Guarantee is in effect and until the Commitments have terminated
and the Guaranteed Obligations and all amounts owing hereunder are paid in full,
the Guarantor shall not, directly or indirectly:
11.1 Financial Condition Covenants. (a) Maintenance of
Consolidated Indebtedness to Consolidated Capitalization. Permit the ratio
(expressed as a percentage) of Consolidated Indebtedness to Consolidated
Capitalization of HCC and its Subsidiaries as at the end of any of HCC's fiscal
quarters to be greater than .65 to 1.0.
(b) Current Ratio. Permit the Current Ratio of HCC and its
Subsidiaries at the end of any of HCC's fiscal quarters to be less than 1.0 to
1.0.
(c) Consolidated U.S. EBITDA to Consolidated Indebtedness.
Permit the ratio of Consolidated U.S. EBITDA to Consolidated Indebtedness for
the four consecutive fiscal quarters of HCC most recently ended to be less than
1.0 to 4.5.
(d) Interest Coverage Ratio. Permit the ratio of Consolidated
EBITDA to Consolidated Interest Expense for the period of four consecutive
fiscal quarters of HCC most recently ended to be less than 2.5 to 1.0.
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11.2 Limitation on Indebtedness. Create, incur, assume or
suffer to exist any Indebtedness, except:
(a) Indebtedness in respect of the loans, the notes and other
obligations of the Guarantors under the Corporate Credit Agreement and
the other Loan Documents as defined in the Corporate Credit Agreement;
(b) Indebtedness of HCC to any of its Subsidiaries and of any
such Subsidiary which is a Guarantor to HCC or any other Subsidiary of
HCC;
(c) Indebtedness outstanding on the Initial Closing Date and
listed on Schedule 11.2 and all extensions, renewals, replacements,
refinancings and modifications thereof permitted hereunder;
(d) Indebtedness of HCC or any of its Subsidiaries in an
aggregate amount not to exceed $10,000,000 at any time outstanding
which is recourse only to the assets of HCC or any Subsidiaries
acquired or financed with the proceeds of such Indebtedness;
(e) Indebtedness in respect of Financing Leases provided that,
after giving effect thereto, Section 11.7 is not contravened;
(f) Indebtedness in respect of Subordinated Debt, the terms
and conditions of which have been approved in writing by the Required
Lenders and all extensions, renewals, replacements, refinancings and
modifications thereof permitted hereunder;
(g) Indebtedness of Unqualified Subsidiaries of HCC; provided
that any such Indebtedness is Non-Recourse Indebtedness;
(h) Indebtedness of a Person which becomes a Subsidiary after
the date hereof in an aggregate principal amount not exceeding as to
HCC and its Subsidiaries $10,000,000 at any time outstanding, provided
that (i) such indebtedness existed at the time such Person became a
Subsidiary and was not created in anticipation thereof and (ii)
immediately after giving effect to the acquisition of such Person by
HCC or any of its Subsidiaries no Default or Event of Default shall
have occurred and be continuing;
(i) Indebtedness in respect of the Tranche A Loans; and
(j) Indebtedness not contemplated by clauses (a)-(i) above not
exceeding (i) $35,000,000 until the earlier of (A) September 10, 1998
and (B) the date of the initial extension of credit made under the
Operative Agreements, and (ii) thereafter $5,000,000 in the aggregate
at any time outstanding.
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11.3 Limitation on Liens. Create, incur, assume or suffer to
exist any Lien upon any of its property, assets or revenues, whether now owned
or hereafter acquired, except for:
(a) Liens for taxes not yet due or which are being contested
in good faith by appropriate proceedings, provided that adequate
reserves with respect thereto are maintained on the books of HCC or any
Subsidiary of HCC, as the case may be, in conformity with GAAP;
(b) carriers', warehousemen's, mechanics', materialmen's,
repairmen's or other like Liens arising in the ordinary course of
business which are not overdue for a period of more than 60 days or
which are being contested in good faith by appropriate proceedings;
(c) pledges or deposits in connection with workers'
compensation, unemployment insurance and other social security
legislation and deposits securing liability to insurance carriers under
insurance or self insurance arrangements;
(d) deposits to secure the performance of bids, trade
contracts (other than for borrowed money), leases, statutory
obligations, surety and appeal bonds, performance bonds and other
obligations of a like nature incurred in the ordinary course of
business;
(e) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business which, in the
aggregate, are not substantial in amount and which do not in any case
materially detract from the value of the property subject thereto or
materially interfere with the ordinary conduct of the business of HCC
or any of its Subsidiaries;
(f) leases or subleases granted to third Persons not
interfering in any material respect with the business of HCC or any of
its Subsidiaries;
(g) Liens arising from UCC financing statements regarding
leases permitted by the Corporate Credit Agreement;
(h) any interest or title of a lessor or sublessor under any
lease permitted by the Corporate Credit Agreement;
(i) Liens in favor of customs and revenue authorities arising
as a matter of law to secure payment of custom duties in connection
with the importation of goods so long as such Liens attach only to the
imported goods;
(j) Liens arising out of consignment or similar arrangements
for the sale of goods entered into by HCC or any of its Subsidiaries in
the ordinary course of business;
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(k) Liens created pursuant to Financing Leases permitted
pursuant to Section 11.2(e);
(l) Liens in existence on the Initial Closing Date listed on
Schedule 11.3(l), securing Indebtedness permitted by Section 11.2(c),
provided that no such Lien is spread to cover any additional property
after the Initial Closing Date and that the amount of Indebtedness
secured thereby is not increased;
(m) Liens on (i) natural gas compressors and related
equipment, and usual accessories and improvements and proceeds thereof
(other than the Equipment), and (ii) oil and gas production equipment,
in each case, the acquisition of which were financed with the proceeds
of the Indebtedness permitted by Section 11.2(e) and which secures only
such Indebtedness, provided that any such Lien is placed upon such
natural gas compressor or related equipment or such oil and gas
production equipment at the time of the acquisition of such natural gas
compressors or related equipment or such oil and gas production
equipment by HCC or any of its Subsidiaries and the Lien extends to no
other property, and provided, further, that no such Lien is spread to
cover any additional property after the date such Lien attaches and
that the amount of Indebtedness secured thereby is not increased;
(n) Liens on assets of the Guarantors listed on Schedule
11.3(n), provided that no such Lien is spread to cover any additional
property after the Initial Closing Date and that the amount of
Indebtedness secured thereby is not increased;
(o) Liens on the assets of Unqualified Subsidiaries of HCC
securing Indebtedness of such Unqualified Subsidiaries permitted under
Section 11.2(g);
(p) Liens securing Derivatives entered into by HCC and its
Subsidiaries which are permitted hereunder;
(q) Liens securing Indebtedness of HCC or any Subsidiary
permitted under Section 11.2(d) so long as such Liens attach only to
the assets acquired or financed pursuant to such subsection;
(r) Liens on the property or assets of a Person which becomes
a Subsidiary of HCC after the date hereof securing Indebtedness
permitted by Section 11.2(h), provided that (i) such Liens existed at
the time such Person became a Subsidiary and were not created in
anticipation thereof, (ii) any such Lien is not spread to cover any
property or assets of such Person after the time such Person becomes a
Subsidiary, and (iii) the amount of Indebtedness secured thereby is not
increased;
(s) Liens that arise in connection with the Operative
Agreements;
(t) Lessor Liens; and
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(u) Liens not otherwise permitted in clauses (a)-(t) above
securing Indebtedness not exceeding $2,500,000 in the aggregate.
11.4 Limitation on Guarantor Obligations. Create, incur,
assume or suffer to exist any Guarantor Obligation except:
(a) this Guarantee;
(b) the Corporate Guarantees;
(c) the Wartsilla Guaranty Obligation;
(d) up to $5,000,000 in the aggregate of Guarantor Obligations
of HCC or any of its Subsidiaries in connection with indebtedness
incurred by customers of HCC or any of its Subsidiaries; provided, that
the proceeds of any such indebtedness shall be used by such customers
to purchase natural gas compressors or oil and gas production equipment
from HCC or any of its Subsidiaries;
(e) Guarantor Obligations (in respect of obligations not
constituting Indebtedness) arising under agreements entered into by HCC
or any Subsidiary in the ordinary course of business;
(f) guarantees in respect of Indebtedness (other than
Subordinated Debt) permitted under the Corporate Credit Agreement; and
(g) the Guarantor Obligations arising pursuant to the
Operative Agreements.
11.5 Limitations on Fundamental Changes. Enter into any
merger, consolidation or amalgamation, or liquidate, wind up or dissolve itself
(or suffer any liquidation or dissolution), or convey, sell, lease, assign,
transfer or otherwise dispose of, all or substantially all of its property,
business or assets, or make any material change in its present method of
conducting business, except:
(a) any Qualified Subsidiary may be merged or consolidated
with or into HCC or any other Qualified Subsidiary; provided, that HCC
or a Qualified Subsidiary shall be the continuing or surviving
corporation;
(b) HCC or any Qualified Subsidiary may be merged or
consolidated with any other Person organized under a jurisdiction of
the United States with assets held primarily in the United States;
provided, that HCC or such Qualified Subsidiary shall be the continuing
or surviving corporation; the Agent is provided with written notice,
and after giving effect thereto no Default or Event of Default would
exist or reasonably be expected to be caused thereby;
(c) any Qualified Subsidiary may sell, lease, assign, transfer
or otherwise dispose of any or all of its assets to HCC or any
Qualified Subsidiary;
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(d) any Unqualified Subsidiary may be merged or consolidated
with or into any other Person and/or may sell, lease, assign, transfer
or otherwise dispose of any of its assets (upon voluntary liquidation
or otherwise) to any other Person provided that, if merged or
consolidated with or into a Qualified Subsidiary, the Qualified
Subsidiary will remain as a "Qualified Subsidiary" after the merger;
and
(e) pursuant to the Operative Documents.
11.6 Limitation on Sale or Lease of Assets. Convey, sell,
lease, assign, transfer or otherwise dispose of any of its property, business or
assets (including, without limitation, receivables and leasehold interests),
whether now owned or hereafter acquired, except:
(a) obsolete or worn out property disposed of in the ordinary
course of business, provided that the aggregate value of obsolete or
worn out natural gas compressors and oil and gas production equipment
disposed of in the ordinary course of business does not exceed
$5,000,000 during any fiscal year of HCC;
(b) the sale of inventory in the ordinary course of business,
provided that if such inventory is comprised of natural gas compressors
or oil and gas production equipment, such natural gas compressors or
oil and gas production equipment were never part of the natural gas
compressors or oil and gas production equipment leased or held for
lease by HCC or any of its Subsidiaries;
(c) the lease by HCC or any of its Subsidiaries as lessor of
natural gas compressors and oil and gas production equipment in the
ordinary course of business under operating leases (which do not
constitute Financing Leases);
(d) the sale or discount without recourse of defaulted
accounts receivable arising in the ordinary course of business in
connection with the compromise or collection thereof;
(e) as permitted by subsection 11.5;
(f) the sale of natural gas compressors and oil and gas
production equipment, other than disposals and sales covered by clauses
(a) and (b) above, provided that the fair market value of natural gas
compressors and oil and gas production equipment sold during the Term
does not exceed ten percent of the aggregate fair market value of all
natural gas compressors and oil and gas production equipment owned by
HCC and its Qualified Subsidiaries; provided further that if the
proceeds are reinvested in natural gas compressors or oil and gas
production equipment to be owned by HCC or its Qualified Subsidiaries
within nine months after the sale of the assets which produced such
proceeds, such proceeds shall not be included for purposes of this
covenant;
(g) the lease by Hanover Land Company or any other Qualified
Subsidiary as lessor of real estate properties to HCC or any Qualified
Subsidiary of
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HCC for use by HCC or such Qualified Subsidiary as the site of its
offices and facilities; and
(h) the sale of natural gas compressors to the Lessor in
connection with the Operative Agreements.
11.7 Limitation on Leases. Permit Consolidated Lease Expense
for any fiscal year of HCC to exceed $10,000,000.
11.8 Limitation on Dividends. Declare or pay any dividend
(other than dividends payable solely in common stock of such Person) on, or make
any payment on account of, or set apart assets for a sinking or other analogous
fund for, the purchase, redemption, defeasance, retirement or other acquisition
of, any shares of any class of Capital Stock of such Person or any warrants or
options to purchase any such Capital Stock, whether now or hereafter
outstanding, or make any other distribution in respect thereof, either directly
or indirectly, whether in cash or property or in obligations of HCC or any
Subsidiary of HCC, except that if no Default or Event of Default exists or would
reasonably be expected to be caused thereby (i) Subsidiaries of HCC may declare
and pay dividends to HCC and other shareholders of such Subsidiaries, (ii) HCC
may repurchase or redeem shares of HCC common stock from its employees and
former employees so long as the aggregate amount of all such repurchases since
the Initial Closing Date does not exceed $7,500,000, (iii) HCC may make open
market repurchases of shares of HCC common stock so long as the aggregate amount
of all such repurchases during the Term does not exceed $25,000,000, (iv) HCC
may declare or pay dividends on and make mandatory stock repurchases (pursuant
to the terms of the applicable certificate of designation) of its preferred
stock, if any, and (v) HCC may declare or pay dividends on shares of HCC common
stock, provided that the aggregate amount of such declarations or payments
pursuant to this clause (v) above does not exceed 25% of the Consolidated Net
Income of HCC for the period (taken as one accounting period) from the beginning
of the first fiscal quarter commencing after the Initial Closing Date to the end
of HCC's most recently ended fiscal quarter for which financial statements have
been delivered to the Agent and the Lenders pursuant to subsection 10.1 at or
prior to the time of such declaration or payment.
11.9 Limitation on Derivatives. Enter into or assume any
obligations with respect to any Derivatives except for Derivatives used by HCC
or any of its Subsidiaries in reducing the interest rate risk exposure of HCC
and its Subsidiaries which have been provided by a Lender under the Corporate
Credit Agreement or the Operative Agreements; provided, that the aggregate
notional amounts of such Derivatives shall not exceed the aggregate amount of
loans outstanding hereunder.
11.10 Limitation on Investments, Loans and Advances. Make any
advance, loan, extension of credit or capital contribution to, or purchase any
stock, bonds, notes, debentures or other securities of or any assets
constituting a business unit of, or make any other investment in (all of the
foregoing being herein collectively referred to as "Investments"), any Person,
except:
(a) extensions of trade credit in the ordinary course of
business;
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(b) Investments in Cash Equivalents;
(c) loans and advances to employees of such Person or its
Subsidiaries for travel, entertainment and relocation expenses in the
ordinary course of business in an aggregate amount for HCC and its
Subsidiaries not to exceed $250,000 at any one time outstanding;
(d) Investments by HCC in its Subsidiaries which are or become
Guarantors and investments by such Subsidiaries which are or become
Guarantors in HCC and in other Subsidiaries of HCC which are or become
Guarantors;
(e) Investments by HCC in Hanover Land Company in an aggregate
amount not to exceed $5,000,000 plus amounts necessary to maintain and
operate the real property and improvements thereon owned by Hanover
Land Company;
(f) Investments in Unqualified Subsidiaries of HCC;
(g) Investments constituting Permitted Business Acquisitions
so long as, after giving effect to the consummation of the transactions
contemplated by each Permitted Business Acquisition and the Loans and
the loans to be made and the Letters of Credit to be issued in
connection with the Corporate Credit Agreement, the sum of (i) the cash
and Cash Equivalents then held by HCC and (ii) an amount equal to the
difference between (A) the aggregate Commitments under the Corporate
Credit Agreement, the aggregate Commitments, and the aggregate Investor
Commitments in effect at such time and (B) the aggregate amount of the
Aggregate Outstanding Extensions of Credit under the Corporate Credit
Agreement, the Available Commitments and the Available Investor
Commitments at such time, equals at least $20,000,000;
(h) Investments or acquisitions by HCC or its Subsidiaries in
up to 50% of the shares of capital stock, partnership interests, joint
venture interests, limited liability company interests or other similar
equity interests in, a Person (other than a Subsidiary), provided that
the aggregate amount of all such investments or acquisitions does not
exceed $25,000,000 in any fiscal year; and
(i) Loans to employees, officers and directors of HCC and its
Subsidiaries to acquire shares of capital stock of HCC not to exceed
$20,000,000.
11.11 Limitation on Optional Payments and Modifications of
Debt Instruments. (i) Make any optional payment or prepayment on or redemption
of any portion of the Shareholder Subordinated Debt or (ii) with respect to any
Indebtedness other than the Shareholder Subordinated Debt, Indebtedness under
the Corporate Credit Agreement or the Operative Agreements, (a) make any
optional payment or prepayment in excess of $10,000,000 during any calendar year
on or redemption of any Indebtedness (other than Indebtedness pursuant to the
Corporate Credit Agreement or the Operative Agreements) or (b) amend, modify or
change, or consent or agree to any amendment, modification or change to any of
the terms of any such Indebtedness (other than any such
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amendment, modification or change which would extend the maturity or reduce the
amount of any payment of principal thereof or which would reduce the rate or
extend the date for payment of interest thereon, or any amendment or waiver
which would render the terms of such Indebtedness less restrictive).
11.12 Transactions with Affiliates. Except for transactions of
a type set forth on Schedule 11.12, enter into any transaction, including,
without limitation, any purchase, sale, lease or exchange of property or the
rendering of any service, with any Affiliate unless such transaction is
otherwise permitted under this Agreement, is in the ordinary course of HCC's or
such Subsidiary's business and is upon fair and reasonable terms no less
favorable to HCC or such Subsidiary, as the case may be, than it would obtain in
a comparable arm's length transaction with a Person not an Affiliate.
11.13 Sale and Leaseback. Except for the transactions
contemplated by the Operative Agreements or of a type set forth on Schedule
11.13, enter into any arrangement with any Person where HCC or any of the
Subsidiaries of HCC is the lessee of real or personal property which has been or
is to be sold or transferred by HCC or such Subsidiary to such Person or to any
other Person to whom funds have been or are to be advanced by such Person on the
security of such property or rental obligations of HCC or such Subsidiary (any
of such arrangements, a "Sale or Leaseback Transaction"), except that (i) HCC
and its Subsidiaries may enter into Financing Leases as lessee for natural gas
compressors and oil and gas production equipment if after giving effect thereto
subsection 11.2 is not contravened and (ii) HCC may enter into Sale and
Leaseback Transactions as lessee for natural gas compressors in connection with
the Operative Agreements.
11.14 Corporate Documents. Amend its Certificate of
Incorporation in any way adverse to the interests of the Agent and the Lenders.
11.15 Fiscal Year. Permit the fiscal year of HCC to end on a
day other than December 31.
11.16 Nature of Business. Engage in any business other than
(a) the leasing, maintenance, purchase, sale and operation of natural gas
compressor units and oil and gas production equipment, (b) the design,
engineering and fabrication of natural gas compressor units, (c) the design,
engineering and fabrication of oil and gas production equipment, (d) the
provision of contract compression and related services and (e) any activities
related thereto which are consistent with past practice and conducted in the
ordinary course of business.
11.17 Unqualified Subsidiaries. Permit any Unqualified
Subsidiary to directly or indirectly own any assets (other than cash or Cash
Equivalents located in bank accounts at Chase) which are located in the United
States of America or any territory thereof.
12. Notices. All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing (including by
facsimile transmission), and, unless otherwise expressly provided herein, shall
be deemed to have been duly given or
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made (a) when delivered by hand, (b) one Business Day after delivery to a
nationally recognized courier service specifying overnight delivery, (c) three
Business Days after being deposited in the mail, certified or registered,
postage prepaid, or (d) in the case of facsimile notice, when sent and receipt
has been confirmed, addressed as follows:
(a) if to the Investor, Agent or any Lender, at its address or
transmission number for notices provided in Section 9.2 of the Credit
Agreement; and
(b) if to any Guarantor, at its address or transmission number
for notices set forth on the signature page below.
The Investor, Agent, each Lender and each Guarantor may change
its address and transmission numbers for notices by notice in the manner
provided in this Section 12.
13. Severability. Any provision of this Guarantee which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
14. Integration. This Guarantee and the other Operative
Agreements represents the agreement of the Guarantors with respect to the
subject matter hereof and there are no promises or representations by the
Investor, Agent or any Lender relative to the subject matter hereof not
reflected herein or in the other Operative Agreements.
15. Amendments in Writing; No Waiver; Cumulative Remedies (a)
None of the terms or provisions of this Guarantee may be waived, amended,
supplemented or otherwise modified except as provided in Section 9.1 of the
Credit Agreement.
(b) Neither the Investor, Agent nor any Lender shall not by
any act (except by a written instrument pursuant to Section 15(a) hereof),
delay, indulgence, omission or otherwise be deemed to have waived any right or
remedy hereunder or to have acquiesced in any Default or Event of Default or in
any breach of any of the terms and conditions hereof. No failure to exercise,
nor any delay in exercising, on the part of the Investor, Agent or any Lender,
any right, power or privilege hereunder shall operate as a waiver thereof. No
single or partial exercise of any right, power or privilege hereunder shall
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. A waiver by the Investor, Agent or any Lender of any
right or remedy hereunder on any one occasion shall not be construed as a bar to
any right or remedy which the Investor, Agent or such Lender would otherwise
have on any future occasion.
(c) The rights and remedies herein provided are cumulative,
may be exercised singly or concurrently and are not exclusive of any other
rights or remedies provided by law.
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16. Section Headings. The section headings used in this
Guarantee are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation hereof.
17. Successors and Assigns. This Guarantee shall be binding
upon the successors and assigns of the Guarantors and shall inure to the benefit
of the Investor, Agent and the Lenders and their successors and assigns.
18. SUBMISSION TO JURISDICTION; WAIVERS. (a) EACH GUARANTOR
HEREBY IRREVOCABLY AND UNCONDITIONALLY:
(i) SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS GUARANTEE AND THE OTHER OPERATIVE
AGREEMENTS TO WHICH IT IS A PARTY, OR FOR RECOGNITION AND ENFORCEMENT
OF ANY JUDGEMENT IN RESPECT THEREOF, TO THE NON-EXCLUSIVE GENERAL
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK, THE COURTS OF THE
UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND
APPELLATE COURTS FROM ANY THEREOF;
(ii) CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE
BROUGHT IN SUCH COURTS AND WAIVES ANY OBJECTION THAT IT MAY NOW OR
HEREAFTER HAVE TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING IN ANY
SUCH COURT OR THAT SUCH ACTION OR PROCEEDING WAS BROUGHT IN AN
INCONVENIENT COURT AND AGREES NOT TO PLEAD OR CLAIM THE SAME;
(iii) AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR
PROCEEDING MAY BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR
CERTIFIED MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE
PREPAID, TO SUCH PERSON AT ITS ADDRESS SET FORTH IN SECTION 12 OR AT
SUCH OTHER ADDRESS OF WHICH THE AGENT SHALL HAVE BEEN NOTIFIED PURSUANT
THERETO;
(iv) AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO
EFFECT SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL
LIMIT THE RIGHT TO XXX IN ANY OTHER JURISDICTION; AND
(v) WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY
RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY LEGAL ACTION OR PROCEEDING
REFERRED TO IN THIS SUBSECTION ANY SPECIAL, EXEMPLARY, PUNITIVE,
INDIRECT OR CONSEQUENTIAL DAMAGES.
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19. GOVERNING LAW. THIS GUARANTEE SHALL BE GOVERNED
BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF
THE STATE OF NEW YORK.
20. Survival of Representations, Warranties, etc. All
representations, warranties, covenants and agreements made herein and in
statements or certificates delivered pursuant hereto shall survive any
investigation or inspection made by or on behalf of the Lessor and shall
continue in full force and effect until all of the obligations of the Guarantors
under this Guaranty shall be fully performed in accordance with the terms
hereof, and until the payment in full of all the Guaranteed Obligations, and
until performance in full of all obligations of HCC in accordance with the terms
and provisions of such agreements.
21. Authority of Agent. Each Guarantor acknowledges that the
rights and responsibilities of the Agent under this Guarantee with respect to
any action taken by the Agent or the exercise or non-exercise by the Agent of
any option, right, request, judgment or other right or remedy provided for
herein or resulting or arising out of this Guarantee shall, as between the
Investor, Agent and the Lenders, be governed by the Credit Agreement and by such
other agreements with respect thereto as may exist from time to time among them,
but, as between the Agent and each Guarantor, the Agent shall be conclusively
presumed to be acting as agent for the Lenders with full and valid authority so
to act or refrain from acting, and no Guarantor shall be under any obligation,
or entitlement, to make any inquiry respecting such authority.
22. Third Party Beneficiaries. Each Guarantor expressly
acknowledges and agrees that each Indemnified Person shall be a third party
beneficiary of this Guaranty.
23. Right of Contribution. Each Guarantor hereby agrees that
to the extent that a Guarantor shall have paid more than its proportionate share
of any payment made hereunder, such Guarantor shall be entitled to seek and
receive contribution from and against any other Guarantor hereunder who has not
paid its proportionate share of such payment. Each Guarantor's right of
contribution shall be subject to the terms and conditions of Section 4 hereof.
The provisions of this Section shall in no respect limit the obligations and
liabilities of any Guarantor to Beneficiaries and each Guarantor shall remain
liable to the Beneficiaries for the full amount guaranteed by such Guarantor
hereunder.
24. WAIVER OF JURY TRIAL. THE GUARANTORS EACH HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS GUARANTY AND FOR ANY COUNTERCLAIM THEREIN.
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IN WITNESS WHEREOF, the undersigned has caused this Guarantee
to be duly executed and delivered by its duly authorized officer as of the day
and year first above written.
HANOVER COMPRESSOR COMPANY
By: /s/ XXXXXX XXXXXXX
----------------------------------
Name: Xxxxxx Xxxxxxx
Title: Treasurer
HANOVER/XXXXX, INC.
By: /s/ XXXXXX XXXXXXX
----------------------------------
Name: Xxxxxx Xxxxxxx
Title: Treasurer
HANOVER MAINTECH, INC.
By: /s/ XXXXXX XXXXXXX
----------------------------------
Name: Xxxxxx Xxxxxxx
Title: Treasurer
HANOVER LAND COMPANY
By: /s/ XXXXXX XXXXXXX
----------------------------------
Name: Xxxxxx Xxxxxxx
Title: Treasurer
Address for Notices for all Guarantors:
00000 Xxxxx Xxxxxxx Xxxxxxx
Xxxxxxx, Xxxxx 00000
Attention: Chief Financial Officer
Telecopy: 000-000-0000
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with a copy to:
Xxxx, Xxxxxx & Xxxxxxxxx
Xxx Xxxxx XxXxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx
Telecopy: 000-000-0000
