Initial Public Offering (IPO): Registration Statement (General Form) — Form S-1
Filing Table of Contents
Document/Exhibit Description Pages Size
1: S-1 Hanover Compressor Company 90 504K
2: EX-2.1 Agreement and Plan of Merger Dated 10/13/95 83 321K
3: EX-3.1 Amended & Restated Certificate of Inc. of Hanover 5 22K
4: EX-3.2 Form of Amended & Restated By-Laws of Hanover 11 41K
5: EX-3.3 Certificate of Amend. of Certificate of Incorp. 2 15K
6: EX-4.1 3rd Amended & Restated Registration Agrmt. 12/5/95 21 74K
14: EX-4.10 Form of Warrant Agreement 19 73K
7: EX-4.3 Stockholders Agreement Dated 1/27/95 21 71K
8: EX-4.4 Amended & Restated Stockholders Agreement 8/7/95 22 91K
9: EX-4.5 Form of Letter Agreement to the Stockholders Agmt. 2 15K
10: EX-4.6 Stockholders Agreement as of 8/7/95 16 70K
11: EX-4.7 Stockholders Agreement as of 12/5/95 18 73K
12: EX-4.8 Pledge Agreement 12/19/95 by Hanover Acquisition 13 47K
13: EX-4.9 2nd Amended & Restated Pledge Agreement 12/19/95 15 55K
15: EX-10.1 2nd Amended & Restated Credit Agreement 12/19/95 114 399K
24: EX-10.10 Hanover Compressor Co. 1996 Employee Stock Options 18 48K
25: EX-10.11 Oem Sales & Purchase Agreement 7 21K
26: EX-10.12 Distribution Agreement 2/23/95 10 46K
27: EX-10.13 Exclusive Distribution Agreement Dated 2/23/95 11 43K
28: EX-10.14 Lease Agreement With Option to Purchase 2/24/95 10 40K
29: EX-10.15 Lease Agreement 12/4/90 W/Hanover & Ricardo Guerra 19 60K
30: EX-10.16 Lease Agreement 3/31/95 W/Hanover & Smith Ind.,Inc 21 73K
31: EX-10.17 Lease Agreement With Option to Purchase 5/8/93 21 65K
32: EX-10.18 Indemnification Agreement Dated 12/5/95 6 28K
33: EX-10.19 Put Agreement Dated 12/5/95 2 15K
16: EX-10.2 Loan Agreement 12/19/95 90 350K
34: EX-10.20 Exchange & Subordinated Loan Agreement 12/23/96 19 49K
17: EX-10.3 Management Fee Letter 11/14/95 6 30K
18: EX-10.4 Hanover Compressor Co. Senior Executive Stock Plan 19 48K
19: EX-10.5 1993 Hanover Compressor Co. Management Stock Plan 18 47K
20: EX-10.6 Hanover Compressor Co. Incentive Option Plan 16 43K
21: EX-10.7 Amend.& Restatement of the Incentive Option Plan 17 42K
22: EX-10.8 Hanover Compressor Co. 1995 Employee Stock Option 18 48K
23: EX-10.9 Hanover Compressor Co. 1995 Management Stock Plan 18 48K
35: EX-11.1 Statement Re Computation of Earnings Per Share 2± 14K
36: EX-23.1 Consent of Price Waterhouse LLP 1 11K
37: EX-23.2 Consent of Arthur Andersen LLP 1 11K
38: EX-27 Financial Data Schedule 1 14K
EX-10.1 — 2nd Amended & Restated Credit Agreement 12/19/95
Exhibit Table of Contents
EXHIBIT 10.1
================================================================================
$90,000,000
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
among
HANOVER COMPRESSOR COMPANY,
CHEMICAL BANK
as AGENT,
and
THE SEVERAL BANKS PARTIES HERETO
Dated as of December 19, 1995
================================================================================
TABLE OF CONTENTS
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SECTION 1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.1 Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.2 Other Definitional Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
2.1 Restructuring and Refinancing of Existing Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
2.2 Revolving Credit Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
2.3 Revolving Credit Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
2.4 Procedure for Revolving Credit Borrowing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 3. INTEREST RATE PROVISIONS, FEES,
CONVERSIONS AND PAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
3.1 Interest Rates and Payments Dates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
3.2 Commitment Fee; Upfront Facility Fee; Other Fees and Compensation . . . . . . . . . . . . . . . . . . . 27
3.3 Termination or Reduction of the Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
3.4 Optional Prepayments and other Repayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
3.5 Conversion and Continuation Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
3.6 Minimum Amounts of Reduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
3.7 Computation of Interest and Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
3.8 Inability to Determine Interest Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
3.9 Pro Rata Treatment and Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
3.10 Illegality. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
3.11 Requirements of Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
3.12 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
3.13 Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 4. LETTERS OF CREDIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
4.1. L/C Commitment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
4.2. Procedure for Issuance of Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
4.3. Fees, Commissions and Other Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
4.4. L/C Participations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
4.5. Reimbursement Obligation of HCC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
4.6. Obligations Absolute . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
4.7. Letter of Credit Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
4.8. Application . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 5. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
5.1 Financial Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
5.2 No Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
5.3 Corporate Existence; Compliance with Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
5.4 Corporate Power; Authorization; Enforceable Obligations . . . . . . . . . . . . . . . . . . . . . . . . 43
5.5 No Legal Bar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
5.6 No Material Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
5.7 No Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
5.8 Ownership of Property; Liens; Leases of Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
5.9 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
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5.10 No Burdensome Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
5.11 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
5.12 Federal Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
5.13 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
5.14 Investment Company Act; Other Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
5.15 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
5.16 Purpose of Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
5.17 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
5.18 Regulation H . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
5.19 Accuracy and Completeness of Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
5.20 Security Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 6. CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
6.1 Conditions to Restructuring of the Existing Revolving Credit Loans
and the Initial Extensions of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
6.2 Conditions to Each Extension of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 7. AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
7.1 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
7.2 Certificates; Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
7.3 Payment of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
7.4 Conduct of Business and Maintenance of Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
7.5 Maintenance of Property; Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
7.6 Inspection of Property; Books and Records; Discussions . . . . . . . . . . . . . . . . . . . . . . . . 59
7.7 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
7.8 Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
7.9 Pledge of After Acquired Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
7.10 Marketing Merger or Dissolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 8. NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
8.1 Financial Condition Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
8.2 Limitation on Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
8.3 Limitation on Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
8.4 Limitation on Guarantee Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
8.5 Limitations on Fundamental Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
8.6 Limitation on Sale or Lease of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
8.7 Limitation on Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
8.8 Limitation on Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
8.9 Limitation on Derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
8.10 Limitation on Investments, Loans and Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
8.11 Limitation on Optional Payments and Modifications of Debt Instruments . . . . . . . . . . . . . . . . 71
8.12 Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
8.13 Sale and Leaseback . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
8.14 Corporate Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
8.15 Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
8.16 Limitation on Negative Pledge Clauses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
8.17 Nature of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
SECTION 9. EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
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SECTION 10. THE AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
10.1 Appointment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
10.2 Delegation of Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
10.3 Exculpatory Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
10.4 Reliance by Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
10.5 Notice of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
10.6 Non-Reliance on Agent and Other Banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
10.7 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
10.8 Agent in Its Individual Capacity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
10.9 Successor Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
SECTION 11. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
11.1 Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
11.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
11.3 No Waiver; Cumulative Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
11.4 Survival of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
11.5 Payment of Expenses and Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
11.6 Successors and Assigns; Participations; Purchasing Banks . . . . . . . . . . . . . . . . . . . . . . . 82
11.7 Adjustments; Set-off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
11.8 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
11.9 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
11.10 Integration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
11.11 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
11.12 Submission To Jurisdiction; Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
11.13 Acknowledgements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
11.14 WAIVERS OF JURY TRIAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
11.15 Usury . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
Schedules
Schedule I Banks and Commitments
Schedule II Intentionally Left Blank
Schedule III Material Transactions
Schedule IV Material Changes
Schedule V Required Consents
Schedule VI Material Litigation
Schedule VII Forms of Compressor and Production
Equipment Leases
Schedule VIII Burdensome Restrictions
Schedule IX Environmental
Schedule X Existing Indebtedness
Schedule XI Existing Liens
Schedule XII Additional Existing Liens
Schedule XIII Affiliate Transactions
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Exhibits
Exhibit A Form of Revolving Credit Note
Exhibit B Collateral Trust Agreement
Exhibit C HCC Pledge Agreement
Exhibit D HCC Security Agreement
Exhibit E MEI Guarantee
Exhibit F MEI Security Agreement
Exhibit G Hanover/Smith Guarantee
Exhibit H Hanover/Smith Security Agreement
Exhibit I Hanover Land Guarantee
Exhibit J Hanover Land Security Agreement
Exhibit K Hanover Acquisition Guarantee
Exhibit L Hanover Acquisition Security Agreement
Exhibit M Hanover Acquisition Pledge Agreement
Exhibit N-1 HCC Oklahoma Mortgage
Exhibit N-2 HCC Texas Mortgage
Exhibit N-3 Hanover/Smith Texas Leasehold Mortgage
Exhibit N-4 Hanover/Smith Texas Mortgage
Exhibit N-5 Hanover Land Texas Mortgage
Exhibit 0-1 Opinion of Neal, Gerber & Eisenberg
Exhibit 0-2 Opinion of Texas Counsel
Exhibit 0-3 Opinion of Louisiana Counsel
Exhibit 0-4 Opinion of Oklahoma Counsel
Exhibit P Form of Assignment and Acceptance
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SECOND AMENDED AND RESTATED CREDIT AGREEMENT, dated as of December
19, 1995 among Hanover Compressor Company, a Delaware corporation ("HCC"), the
several banks and other financial institutions from time to time parties to
this Agreement(the "Banks") and Chemical Bank, a New York banking corporation,
as agent for the Banks hereunder (in such capacity, the "Agent").
W I T N E S S E T H :
WHEREAS, HCC, Hanover Pipeline Company, a Delaware corporation
("HPC"), Hanover Energy Inc., a Texas corporation (predecessor in interest to
Hanover Energy Holding Corporation, a Delaware corporation ("HEHC")), the Banks
and Chemical Bank (successor by merger to Manufacturers Hanover Trust Company),
as agent, were parties to the Credit Agreement, dated as of November 30, 1990
(as amended, supplemented or otherwise modified from time to time prior to the
A&R Closing Date (as defined in subsection 1.1), the "Original Agreement"),
pursuant to which the Banks made (i) revolving credit loans (the "Original
Revolving Credit Loans") to HCC evidenced by a promissory note, dated as of
November 30, 1990 (the "Original Revolving Credit Note"), made by HCC to
Chemical Bank in the original principal amount of $7,600,000, (ii) a term loan
(the "Original HCC Term Loan") to HCC evidenced by a promissory note, dated as
of December 4, 1990 (the "Original HCC Term Note"), made by HCC to Chemical
Bank in the original principal amount of $19,400,000, as amended by the
Endorsement, dated April 10, 1992, thereto and (iii) a term loan (the "Original
HPC Term Loan", collectively, with the Original HCC Term Loans, the "Original
Term Loans") to HPC evidenced by a promissory note, dated as of November 30,
1990 (the "Original HPC Term Note", collectively, with the Original HCC Term
Notes and the Original Revolving Credit Note, the "Original Notes"), made by
HPC to Chemical Bank in the original principal amount of $8,000,000;
WHEREAS, the loans evidenced by the Original Notes were
guaranteed and secured pursuant to the following: (i) the Guarantee (the
"Original HCC Guarantee"), dated as of November 30, 1990, made by HCC in favor
of the Agent for the benefit of the Banks, as amended, supplemented or
otherwise modified from time to time prior to the A&R Closing Date; (ii) the
Pledge Agreement (the "Original HCC Pledge Agreement"), dated as of November
30, 1990, made by HCC in favor of the Agent for the benefit of the Banks, as
amended, supplemented or otherwise modified from time prior to the A&R Closing
Date; (iii) the Security Agreement (the "Original HCC Security Agreement"),
dated as of November 30, 1990, made by HCC in favor of the Agent for the
benefit of the Banks, as amended, supplemented or otherwise modified from time
prior to the A&R Closing Date; (iv) the Guarantee (the "Original HEHC
Guarantee"), dated as of November 30, 1990, made by HEHC in favor of the Agent
for the benefit of the Banks, as amended, supplemented or otherwise
2
modified from time to time prior to the A&R Closing Date; (v) the Pledge
Agreement (the "Original HEHC Pledge Agreement"), dated as of November 30,
1990, made by HEHC in favor of the Agent for the benefit of the Banks, as
amended, supplemented or otherwise modified from time prior to the A&R Closing
Date; (vi) the Guarantee (the "Original HPC Guarantee"), dated as of November
30, 1990, made by HPC in favor of the Agent for the benefit of the Banks, as
amended, supplemented or otherwise modified from time to time prior to the A&R
Closing Date; (vii) the Pledge Agreement (the "Original HPC Pledge Agreement"),
dated as of November 30, 1990, made by HPC in favor of the Agent for the
benefit of the Banks, as amended, supplemented or otherwise modified from time
prior to the A&R Closing Date; (viii) the Security Agreement (the "Original HPC
Security Agreement"), dated as of April 10, 1992, made by HPC in favor of the
Agent for the benefit of the Banks, as amended, supplemented or otherwise
modified from time prior to the A&R Closing Date; (ix) the Guarantee (the
"Original MEI Guarantee"), dated as of April 10, 1992, made by MEI (as defined
in subsection 1.1), in favor of the Agent for the benefit of the Banks, as
amended, supplemented or otherwise modified from time to time prior to the A&R
Closing Date; (x) the Security Agreement (the "Original MEI Security
Agreement"), dated as of April 10, 1992, made by MEI in favor of the Agent for
the benefit of the Banks, as amended, supplemented or otherwise modified from
time prior to the A&R Closing Date; (xi) the Guarantee (the "Original Precision
Guarantee"), dated as of November 30, 1990, made by Precision (as defined in
the subsection 1.1), in favor of the Agent for the benefit of the Banks, as
amended, supplemented or otherwise modified from time to time prior to the A&R
Closing Date; (xii) the Guarantee (the "Original Marketing Guarantee"), dated
as of November 30, 1990, made by Marketing (as defined in subsection 1.1), in
favor of the Agent for the benefit of the Banks, as amended, supplemented or
otherwise modified from time to time prior to the A&R Closing Date and (xiii)
the Security Agreement (the "Original Precision Security Agreement",
collectively with the Original HCC Guarantee, Original HCC Pledge Agreement,
Original HCC Security Agreement, Original HEHC Guarantee, Original HEHC Pledge
Agreement, Original HPC Guarantee, Original HPC Pledge Agreement, Original HPC
Security Agreement, Original MEI Guarantee, Original MEI Security Agreement,
Original Precision Guarantee and the Original Marketing Guarantee, the
"Original Security Documents"), dated as of November 30, 1990, made by
Precision in favor of the Agent for the benefit of the Banks, as amended,
supplemented or otherwise modified from time prior to the A&R Closing Date;
WHEREAS, HCC, the Banks and the Agent amended and restated the
Original Agreement pursuant to the Amended and Restated Credit Agreement, dated
as of June 29, 1993, as amended prior to the date hereof (the "Existing
Agreement"), pursuant to which the parties restructured and increased the loan
facilities made available to HCC under the Original Agreement by, among
3
other things, (i) the Banks making revolving credit loans (the "Existing
Revolving Credit Loans") to HCC evidenced by the Banks accepting delivery of a
promissory note, made payable by HCC to Chemical Bank and a promissory note
made payable by HCC to First Interstate Bank of Texas, N.A. ("First
Interstate"), each dated as of June 29, 1993, as amended by the Endorsements,
dated February 4, 1994 and December 9, 1994, thereto the ("Existing Revolving
Credit Notes") in extension of the Original Revolving Credit Note, (ii) HCC
prepaying the Original Term Loans in full and the Original Revolving Credit
Loans in part or in full, (iii) the Banks making term loans (the "Existing Term
Loans") to HCC evidenced by promissory notes, dated as of February 4, 1994 (the
"Existing Term Notes"), made by HCC to Chemical Bank in the original principal
amount of $8,571,428.57, and to First Interstate in the original principal
amount of $6,428,571.43, (iv) the Banks making B Tranche term loans (the "B
Tranche Loans") to HCC evidenced by promissory notes, dated as of March 13,
1995 (the "B Tranche Notes"), made by HCC to Chemical Bank in the original
principal amount of $5,714,300, and to First Interstate in the original
principal amount of $4,285,700 and (v) the Banks making C Tranche term loans
(the "C Tranche Loans", collectively, with the Existing Revolving Credit Loans,
the Existing Term Loans and the B Tranche Loans, the "Existing Loans") to HCC
evidenced by promissory notes, dated as of April 28, 1995 (the "C Tranche
Notes"), made by HCC to Chemical Bank in the original principal amount of
$2,285,720, and to First Interstate in the original principal amount of
$1,714,280 (the Existing Revolving Credit Note together with the Existing Term
Notes, the B Tranche Notes and the C Tranche Notes are collectively referred to
herein as the "Existing Notes");
WHEREAS, it was a condition precedent to the effectiveness of
the Existing Agreement that HCC shall have amended and restated certain of the
Original Security Documents as described in the next succeeding recital;
WHEREAS, the loans outstanding under the Existing Agreement
and the Existing Notes were guaranteed and secured pursuant to the following:
(i) the Amended and Restated Pledge Agreement (the "Existing HCC Pledge
Agreement"), dated as of June 29, 1993, made by HCC in favor of the Agent for
the benefit of the Banks, as amended, supplemented or otherwise modified from
time to time prior to the date hereof; (ii) the Amended and Restated Security
Agreement (the "Existing HCC Security Agreement") dated as of June 29, 1993,
made by HCC in favor of the Agent for the benefit of the Banks, as amended,
supplemented or otherwise modified from time to time prior to the date hereof;
(iii) the Amended and Restated Pledge Agreement (the "Existing HEHC Pledge
Agreement"), dated as of June 29, 1993, made by HEHC in favor of the Agent for
the benefit of the Banks, as amended, supplemented or otherwise modified from
time to time prior to the date hereof; (iv) the Amended and Restated Guarantee
(the "Existing MEI Guarantee"), dated as of June 29, 1993, made by MEI
4
in favor of the Agent for the benefit of the Banks, as amended, supplemented or
otherwise modified from time to time prior to the date hereof; (v) the Amended
and Restated Security Agreement (the "Existing MEI Security Agreement"), dated
as of June 29, 1993, made by MEI in favor of the Agent for the benefit of the
Banks, as amended, supplemented or otherwise modified from time to time prior
to the date hereof; (vi) the Amended and Restated Guarantee (the "Existing
Precision Guarantee"), dated as of June 29, 1993, made by Precision in favor of
the Agent for the benefit of the Banks as amended, supplemented or otherwise
modified from time to time prior to the date hereof; and (vii) the Amended and
Restated Security Agreement (the "Existing Precision Security Agreement"),
dated as of June 29, 1993, made by Precision in favor of the Agent for the
benefit of the Banks, as amended, supplemented or otherwise modified from time
to time prior to the date hereof; (the Existing HCC Pledge Agreement, Existing
HCC Security Agreement, Existing HEHC Pledge Agreement, Existing MEI Guarantee,
Existing MEI Security Agreement, Existing Precision Guarantee and Existing
Precision Security Agreement are collectively referred to herein as the
"Existing Security Documents").
WHEREAS, HEHC has merged with and into HCC pursuant to the
HEHC Merger Agreement (as defined in subsection 1.1) with HCC as the sole
surviving entity and the security interest granted under the Existing HEHC
Pledge Agreement was released;
WHEREAS, pursuant to that certain Stock Purchase Agreement,
dated as of November 5, 1993, HCC sold all of the issued and outstanding
capital of Precision to Precision Compressor, Inc., and in connection therewith
the Existing Precision Guarantee and the security interest under the Existing
Precision Security Agreement were discharged and released;
WHEREAS, HCC has received (i) $20,000,000 from the issuance of
its common stock to Joint Energy Development Investments Limited Partnership, a
Delaware limited partnership ("JEDI"), (ii) $10,000,000 from the issuance of
its Series B preferred stock to JEDI and (iii) a minimum of $21,000,000 from
the issuance of its Series A preferred stock (collectively, the "Equity
Transactions");
WHEREAS, concurrently with the execution and delivery of this
Agreement, HCC, as borrower, JEDI, as agent for the lenders thereunder and the
financial institutions which are lenders thereunder (the "JEDI Lenders"), are
entering into a Loan Agreement (as amended, supplemented, or otherwise modified
from time to time in accordance with the terms of this Agreement, the "JEDI
Loan Agreement");
WHEREAS, concurrently with the execution and delivery of this
Agreement and the JEDI Loan Agreement, Chemical Bank, as collateral trustee
thereunder, and the Credit Parties, are
5
entering into a Collateral Trust Agreement (as amended, supplemented or
otherwise modified from time to time, the "Collateral Trust Agreement")
substantially in the form of Exhibit B;
WHEREAS, as a result of, among other things, the Equity
Transactions, the JEDI Loan Agreement and the Collateral Trust Agreement, HCC,
the Banks and the Agent desire to restructure the loan facilities made
available to HCC under the Existing Agreement and to revise certain other
provisions of the Existing Agreement and for convenience to restate the
Existing Agreement, as so amended, in its entirety;
NOW THEREFORE, in consideration of the premises and the mutual
covenants as contained herein, the parties hereto agree that on the Closing
Date (as defined in subsection 1.1) the Existing Agreement shall be amended and
restated in its entirety to read as follows:
SECTION 1. DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the following
terms shall have the following meanings:
"A&R Closing Date": June 29, 1993, the closing date of the
Existing Agreement.
"ABR": for any day, a rate per annum (rounded upwards, if
necessary, to the next 1/16 of 1%) equal to the greatest of (a) the
Prime Rate in effect on such day, (b) the Base CD Rate in effect on
such day plus 1% and (c) the Federal Funds Effective Rate in effect on
such day plus 1/2 of 1%. For purposes hereof: "Prime Rate" shall
mean the rate of interest per annum publicly announced from time to
time by the Agent as its prime rate in effect at its principal office
in New York City (the Prime Rate not being intended to be the lowest
rate of interest charged by Chemical Bank in connection with
extensions of credit to debtors); "Base CD Rate" shall mean the sum of
(a) the product of (i) the Three-Month Secondary CD Rate and (ii) a
fraction, the numerator of which is one and the denominator of which
is one minus the C/D Reserve Percentage and (b) the C/D Assessment
Rate; "Three-Month Secondary CD Rate" shall mean, for any day, the
secondary market rate for three-month certificates of deposit
reported as being in effect on such day (or, if such day shall not be
a Business Day, the next preceding Business Day) by the Board of
Governors of the Federal Reserve System (the "Board") through the
public information telephone line of the Federal Reserve Bank of New
York (which rate will, under the current practices of the Board, be
published in Federal Reserve Statistical Release H.15(519) during the
week following such day), or,
6
if such rate shall not be so reported on such day or such next
preceding Business Day, the average of the secondary market quotations
for three-month certificates of deposit of major money center banks in
New York City received at approximately 10:00 A.M., New York City
time, on such day (or, if such day shall not be a Business Day, on the
next preceding Business Day) by the Agent from three New York City
negotiable certificate of deposit dealers of recognized standing
selected by it; and "Federal Funds Effective Rate" shall mean, for any
day, the weighted average of the rates on overnight federal funds
transactions with members of the Federal Reserve System arranged by
federal funds brokers, as published on the next succeeding Business
Day by the Federal Reserve Bank of New York, or, if such rate is not
so published for any day which is a Business Day, the average of the
quotations for the day of such transactions received by the Agent from
three federal funds brokers of recognized standing selected by it. If
for any reason the Agent shall have determined (which determination
shall be conclusive absent manifest error) that it is unable to
ascertain the Base CD Rate or the Federal Funds Effective Rate, or
both, for any reason, including the inability or failure of the Agent
to obtain sufficient quotations in accordance with the terms thereof,
the ABR shall be determined without regard to clause (b) or (c), or
both, of the first sentence of this definition, as appropriate, until
the circumstances giving rise to such inability no longer exist. Any
change in the ABR due to a change in the Prime Rate, the Three-Month
Secondary CD Rate or the Federal Funds Effective Rate shall be
effective as of the opening of business on the effective day of such
change in the Prime Rate, the Three-Month Secondary CD Rate or the
Federal Funds Effective Rate, respectively.
"ABR Loans": Loans the rate of interest applicable to which
is based upon the ABR.
"Affiliate": as to any Person, any other Person (other than a
Subsidiary) which, directly or indirectly, is in control of, is
controlled by, or is under common control with, such Person. For
purposes of this definition, "control" of a Person means the power,
directly or indirectly, either to (a) vote 10% or more of the
securities having ordinary voting power for the election of directors
of such Person or (b) direct or cause the direction of the management
and policies of such Person, whether by contract or otherwise.
"Aggregate Outstanding Extensions of Credit": as to any Bank
at any time, an amount equal to the sum of (a) the aggregate principal
amount of all Loans made by such Bank then outstanding and (b) such
Bank's Commitment Percentage of the L/C Obligations then outstanding.
7
"Agreement": this Second Amended and Restated Credit
Agreement, as amended, supplemented or otherwise modified from time to
time.
"Applicable Margin": for each Loan, the rate per annum set
forth below:
(a) if the Applicable Margin Certificate required pursuant to
subsection 7.2(g) for any fiscal quarter of HCC shows that the
Consolidated Indebtedness Ratio on the last day of such fiscal quarter
was less than or equal to 1.0 to 1, then the Applicable Margin for the
fiscal quarter of HCC immediately succeeding the date such certificate
is delivered shall be (i) with respect to ABR Loans, 0% and (ii) with
respect to Eurodollar Loans, .500%; and
(b) if the Applicable Margin Certificate required pursuant to
subsection 7.2(g) for any fiscal quarter of HCC shows that the
Consolidated Indebtedness Ratio on the last day of such fiscal quarter
was greater than 1.0 to 1 and less than or equal to 2.0 to 1, then the
Applicable Margin for the fiscal quarter of HCC immediately succeeding
the date such certificate is delivered shall be (i) with respect to
ABR Loans, 0% and (ii) with respect to Eurodollar Loans, .750%;
(c) if the Applicable Margin Certificate required pursuant to
subsection 7.2(g) for any fiscal quarter of HCC shows that the
Consolidated Indebtedness Ratio on the last day of such fiscal quarter
was greater than 2.0 to 1 and less than or equal to 3.0 to 1, then the
Applicable Margin for the fiscal quarter of HCC immediately succeeding
the date such certificate is delivered shall be (i) with respect to
ABR Loans, .375% and (ii) with respect to Eurodollar Loans, 1.250%;
and
(d) if the Applicable Margin Certificate required pursuant to
subsection 7.2(g) for any fiscal quarter of HCC shows that the
Consolidated Indebtedness Ratio on the last day of such fiscal quarter
was greater than 3.0 to 1 then the Applicable Margin for the fiscal
quarter of HCC immediately succeeding the date such certificate is
delivered shall be (i) with respect to ABR Loans, .625% and (ii) with
respect to Eurodollar Loans, 1.500%;
provided, that if HCC shall fail to deliver the Applicable Margin
Certificate by the end of the fiscal quarter in which it is required,
the Applicable Margin for the next fiscal quarter shall be as provided
in clause (d) above; provided, further, that the Applicable Margin for
the period from the Closing Date until and including December 31, 1995
shall be, with respect to ABR Loans, 0%, and with respect to
Eurodollar Loans, .750%.
8
"Applicable Margin Certificate": as defined in subsection
7.2(g).
"Application": an application, in such form as the Issuing
Bank may specify from time to time, requesting the Issuing Bank to
open a Letter of Credit.
"Astra": Astra Resources International, Inc., a Texas
corporation.
"Available Commitment": as to any Bank, at any time, an
amount equal to the excess, if any, of (a) such Bank's Commitment over
(b) such Bank's Aggregate Outstanding Extensions of Credit.
"benefitted Bank": as defined in subsection 11.7(a).
"Borrowing Date": any Business Day specified in a notice
pursuant to subsection 2.4, as a date on which HCC requests the Banks
to make Loans hereunder.
"B Tranche Note": as defined in the recitals to this
Agreement.
"Business Day": a day other than a Saturday, Sunday or other
day on which commercial banks in New York City are authorized or
required by law to close.
"Capital Stock": any and all shares, interests,
participations or other equivalents (however designated) of capital
stock of a corporation, any and all equivalent ownership interests in
a Person (other than a corporation) and any and all warrants or
options to purchase any of the foregoing.
"Cash Equivalents": (a) securities with maturities of one
year or less from the date of acquisition issued or fully guaranteed
or insured by the United States Government or any agency thereof, (b)
certificates of deposit and eurodollar time deposits with maturities
of one year or less from the date of acquisition and overnight bank
deposits of any Bank or of any commercial bank having capital and
surplus in excess of $500,000,000, (c) repurchase obligations of any
Bank or of any commercial bank satisfying the requirements of clause
(b) of this definition, having a term of not more than 30 days with
respect to securities issued or fully guaranteed or insured by the
United States Government, (d) commercial paper of a domestic issuer
rated at least A-2 by Standard and Poor's Rating Group ("S&P") or P-2
by Moody's Investors Services, Inc. ("Moody's"), (e) securities with
maturities of one year or less from the date of acquisition issued or
fully guaranteed by any state, commonwealth or territory of the United
States, by any
9
political subdivision or taxing authority of any political subdivision
or taxing authority of any such state, commonwealth or territory or
any foreign government, the securities of which state, commonwealth,
territory, political subdivision, taxing authority or foreign
government (as the case may be) are rated at least A by S&P or A by
Moody's, (f) securities with maturities of one year or less from the
date of acquisition backed by standby letters of credit issued by any
Bank or any commercial bank satisfying the requirements of clause (b)
of this definition or (g) shares of money market mutual or similar
funds which invest exclusively in assets satisfying the requirements
of clauses (a) through (f) of this definition.
"CCI": Contract Compression International Argentina, S.A., an
Argentinean corporation.
"C/D Assessment Rate": for any day the net annual assessment
rate (rounded upwards, if necessary, to the next 1/100 of 1%)
determined by Chemical Bank to be payable on such day to the Federal
Deposit Insurance Corporation or any successor ("FDIC") for FDIC's
insuring time deposits made in Dollars at offices of Chemical Bank in
the United States.
"C/D Reserve Percentage": for any day as applied to any
calculation of the Base CD Rate, that percentage (expressed as a
decimal) which is in effect on such day, as prescribed by the Board
for determining the maximum reserve requirement for a Depositary
Institution (as defined in Regulation D of the Board) in respect of
new non-personal time deposits in Dollars having a maturity of 30 days
or more.
"Chemical": Chemical Bank, a New York banking corporation.
"Closing Date": the date on which all of the conditions
precedent specified in Section 6 shall have been first satisfied.
"Code": the Internal Revenue Code of 1986, as amended from
time to time.
"Collateral Trust Agreement": as defined in the recitals to
this Agreement.
"Collateral Trustee": Chemical, as collateral trustee under
the Collateral Trust Agreement, or its successor in such capacity.
"Commercial Letter of Credit": as defined in subsection
4.1(b)(1)(B).
10
"Commitment": as to any Bank, the obligation of such Bank to
make Loans to and/or issue or participate in Letters of Credit issued
on behalf of HCC hereunder in an aggregate principal and/or face
amount at any one time outstanding not to exceed the amount set forth
opposite such Bank's name on Schedule I, as such amount may be reduced
from time to time in accordance with the terms of this Agreement;
collectively, as to all of the Banks, the "Commitments."
"Commitment Percentage": as to any Bank at any time, the
percentage of the aggregate Commitments then constituted by such
Bank's Commitment.
"Commitment Period": the period from and including the date
hereof to but not including the Final Maturity Date or such earlier
date on which the Commitments shall terminate as provided herein.
"Commonly Controlled Entity": an entity, whether or not
incorporated, which is under common control with HCC within the
meaning of Section 4001(a)(14) of ERISA or is part of a group which
includes HCC and which is treated as a single employer under Section
414 of the Code.
"Consolidated Capitalization": at a particular date, as to
any Person, the sum of (a) Consolidated Net Worth and (b) the amount
of Consolidated Indebtedness at such date.
"Consolidated Earnings Before Interest and Taxes": for any
period, with respect to any Person, the sum of (a) Consolidated Net
Income for such period, (b) all amounts attributable to payments or
provision for taxes measured by income (to the extent that such
amounts have been deducted in determining Consolidated Net Income for
such period) and (c) Consolidated Interest Expense for such period.
"Consolidated EBITDA": for any period, with respect to any
Person, the sum of (a) Consolidated Earnings Before Interest and Taxes
for such Person for such period plus, (b) all amounts attributable to
depreciation and amortization, determined in accordance with GAAP (to
the extent such amounts have been deducted in determining Consolidated
Net Income for such period) plus, (c) all other non-cash expenses for
such period (to the extent such amounts have been deducted in
determining Consolidated Net Income for such period) minus, (d) all
other non-cash income for such period (to the extent such amounts have
been included in determining Consolidated Net Income for such period).
"Consolidated Fixed Charges": for any period as to any
Person, such Person's scheduled principal payments on Indebtedness
during such period (other than scheduled
11
principal payments under revolving credit facilities of such Person
during such period resulting from the maturity of such revolving
credit facilities to the extent such scheduled principal payments have
been extended, renewed, rearranged, or refinanced under revolving
credit facilities maturing beyond such period) plus Consolidated
Interest Expense during such period, plus Consolidated Mandatory
Capital Expenditures during such period, plus scheduled preferred
stock dividend payments during such period, determined on a
consolidated basis in accordance with GAAP.
"Consolidated Indebtedness": at a particular date, as to any
Person, all Indebtedness of such Person and its Subsidiaries other
than Indebtedness in respect of Financing Leases, determined on a
consolidated basis in accordance with GAAP at such date.
"Consolidated Indebtedness Ratio": for any fiscal quarter of
HCC and its Subsidiaries, the ratio of (a) Consolidated Indebtedness
for HCC and its Subsidiaries as of the last day of such fiscal quarter
to (b) Consolidated EBITDA for HCC and its Subsidiaries for the
12-month period ended on the last day of such fiscal quarter as
determined on a consolidated basis in accordance with GAAP.
"Consolidated Interest Expense": for any period, with respect
to any Person, the amount which, in conformity with GAAP, would be set
forth opposite the caption "interest expense" or any like caption
(including, without limitation, imputed interest included in Financing
Lease payments) on a consolidated income statement of such Person and
its Subsidiaries for such period.
"Consolidated Lease Expense": for any period as to any
Person, the aggregate rental obligations of such Person and its
Subsidiaries determined on a consolidated basis payable in respect of
such period under leases of real and/or personal property (net of
income from sub-leases thereof, but including taxes, insurance,
maintenance and similar expenses which the lessee is obligated to pay
under the terms of said leases), whether or not such obligations are
reflected as liabilities or commitments on a consolidated balance
sheet of such Person and its Subsidiaries or in the notes thereto, and
whether or not such leases constitute Financing Leases.
"Consolidated Mandatory Capital Expenditures": for any period
as to any Person, the capital expenditures of such Person made in the
ordinary course of business for the maintenance of equipment which
extends the useful life of such equipment (other than expenditures
made in connection with the initial refurbishing of used equipment
acquired by HCC or its Subsidiaries) and are or should be capitalized
on
12
the balance sheet of such Person determined on a consistent basis in
accordance with GAAP.
"Consolidated Net Income": for any period as to any Person,
the consolidated net income (or loss) of such Person and its
Subsidiaries, determined on a consolidated basis in accordance with
GAAP.
"Consolidated Net Worth": at a particular date, as to any
Person, the amount which would be included under common and preferred
stockholders' equity on a consolidated balance sheet of such Person
and its Subsidiaries determined on a consolidated basis in accordance
with GAAP.
"Contractual Obligation": as to any Person, any provision of
any security issued by such Person or of any agreement, instrument or
other undertaking to which such Person is a party or by which it or
any of its property is bound.
"Credit Parties": the collective reference to (i) HCC, MEI,
Hanover/Smith, Hanover Acquisition and the Real Estate Subsidiary and
(ii) from time to time any other Subsidiary of HCC upon and for so
long as such Subsidiary guarantees the Loans and other obligations of
HCC hereunder and under the Notes, grants a security interest in its
assets to the Collateral Trustee for the ratable benefit of the
holders of the Secured Obligations and the Capital Stock of which has
been pledged to the Collateral Trustee for the ratable benefit of the
holders of the Secured Obligations in each case to secure the Loans
and the other obligations of HCC hereunder and under the Notes and
which guarantees, grant of security interest and pledge of Capital
Stock shall be under documents substantially similar to the
Guarantees, Pledge Agreements and Security Agreements executed on the
Closing Date.
"C Tranche Note": as defined in the recitals to this
Agreement.
"Current Ratio": at a particular date, for HCC and its
Subsidiaries the quotient of the consolidated current assets of HCC
and its Subsidiaries at such time less cash, to the consolidated
current liabilities of HCC and its Subsidiaries at such time less the
current portion of long-term debt (all determined in accordance with
GAAP at such time).
"Deed of Trust": the Deed of Trust and Security Agreement
executed by the Real Estate Subsidiary, dated June 22, 1993 securing
payment of the Real Estate Note.
"Default": any of the events specified in Section 9, whether
or not any requirement for the giving of notice, the
13
lapse of time, or both, or any other condition, has been satisfied.
"Derivatives": any swap, hedge, cap, collar, or similar
arrangement providing for the exchange of risks related to price
changes in any commodity, including money.
"Dollars" and "$": dollars in lawful currency of the United
States of America.
"Environmental Laws": any and all Federal, state, local or
municipal laws, rules, orders, regulations, statutes, ordinances,
codes, decrees or requirements of any Governmental Authority
regulating, relating to or imposing liability or standards of conduct
concerning environmental protection matters, including without
limitation, Hazardous Materials, as now or may at any time hereafter
be in effect.
"Equity Transactions": as defined in the recitals to this
Agreement.
"ERISA": the Employee Retirement Income Security Act of 1974,
as amended from time to time.
"Eurocurrency Reserve Requirements": for any day as applied
to a Eurodollar Loan, the aggregate (without duplication) of the rates
(expressed as a decimal fraction) of reserve requirements in effect on
such day (including, without limitation, basic, supplemental, marginal
and emergency reserves under any regulations of the Board of Governors
of the Federal Reserve System or other Governmental Authority having
jurisdiction with respect thereto) dealing with reserve requirements
prescribed for eurocurrency funding (currently referred to as
"Eurocurrency Liabilities" in Regulation D of such Board) maintained
by a member bank of such System.
"Eurodollar Base Rate": with respect to each day during each
Interest Period pertaining to a Eurodollar Loan, the rate per annum
equal to the rate at which Chemical is offered Dollar deposits at or
about 10:00 A.M., New York City time, two Business Days prior to the
beginning of such Interest Period in the interbank eurodollar market
where the eurodollar and foreign currency and exchange operations in
respect of its Eurodollar Loans are then being conducted for delivery
on the first day of such Interest Period for the number of days
comprised therein and in an amount comparable to the amount of its
Eurodollar Loan to be outstanding during such Interest Period.
"Eurodollar Loans": Loans the rate of interest applicable to
which is based upon the Eurodollar Rate.
14
"Eurodollar Rate": with respect to each day during each
Interest Period pertaining to a Eurodollar Loan, a rate per annum
determined for such day in accordance with the following formula
(rounded upward to the nearest 1/100th of 1%):
Eurodollar Base Rate
----------------------------------------
1.00 - Eurocurrency Reserve Requirements
"Event of Default": any of the events specified in Section 9,
provided that any requirement for the giving of notice, the lapse of
time, or both, or any other condition, has been satisfied.
"Existing Agreement": as defined in the recitals to this
Agreement.
"Existing Loans": as defined in the recitals to this
Agreement.
"Existing Notes": as defined in the recitals to this
Agreement.
"Existing Revolving Credit Loans": as defined in the recitals
to this Agreement.
"Existing Revolving Credit Note": as defined in the recitals
to this Agreement.
"Existing Security Documents": as defined in the recitals to
this Agreement.
"Final Maturity Date": December 18, 1999.
"Financing Lease": any lease of property, real or personal,
the obligations of the lessee in respect of which are required in
accordance with GAAP to be capitalized on a balance sheet of the
lessee.
"First Interstate": as defined in the recitals to this
Agreement.
"GAAP": generally accepted accounting principles in the
United States of America consistent with those utilized in preparing
the audited financial statements referred to in subsection 6.1.
"GKH Entities": as defined in Section 9(k).
"Governmental Authority": any nation or government, any state
or other political subdivision thereof and any entity exercising
executive, legislative, judicial,
15
regulatory or administrative functions of or pertaining to government.
"Guarantee Obligation": as to any Person (the "guaranteeing
person"), any obligation of (a) the guaranteeing person or (b) another
Person (including without limitation, any bank under any letter of
credit) to induce the creation of which the guaranteeing person has
issued a reimbursement, counter indemnity or similar obligation, in
either case guaranteeing or in effect guaranteeing any Indebtedness,
leases, dividends or other obligations (the "primary obligations") of
any other third Person (the "primary obligor") in any manner, whether
directly or indirectly, including, without limitation, any obligation
of the guaranteeing Person, whether or not contingent, (a) to purchase
any such primary obligation or any property constituting direct or
indirect security therefor, (b) to advance or supply funds (i) for the
purchase or payment of any such primary obligation or (ii) to maintain
working capital or equity capital of the primary obligor or otherwise
to maintain the net worth or solvency of the primary obligor, (c) to
purchase property, securities or services primarily for the purpose of
assuring the owner of any such primary obligation of the ability of
the primary obligor to make payment of such primary obligation or (d)
otherwise to assure or hold harmless the owner of any such primary
obligation against loss in respect thereof; provided, however, that
the term Guarantee Obligation shall not include endorsements of
instruments for deposit or collection in the ordinary course of
business. The amount of any Guarantee Obligation of any guaranteeing
person shall be deemed to be the lower of (a) an amount equal to the
stated or determinable amount of the primary obligation in respect of
which such Guarantee Obligation is made and (b) the maximum amount for
which such guaranteeing person may be liable pursuant to the terms of
the instrument embodying such Guarantee Obligation, unless such
primary obligation and the maximum amount for which such guaranteeing
person may be liable are not stated or determinable, in which case the
amount of such Guarantee Obligation shall be such guaranteeing
person's maximum reasonably anticipated liability in respect thereof
as determined by HCC, as the case may be, in good faith.
"Guarantees": collectively, the MEI Guarantee, the
Hanover/Smith Guarantee, the Hanover Acquisition Guarantee, the
Hanover Land Guarantee and such other guarantees of the Loans and the
other obligations of HCC hereunder.
"Guaranty Agreement": as defined in subsection 8.4.
"Hanover Acquisition": Hanover Acquisition Corp., a Texas
corporation.
16
"Hanover Acquisition Guarantee": the Guarantee made by
Hanover Acquisition in favor of the Agent for the benefit of the
Banks, substantially in the form of Exhibit K, as amended,
supplemented or otherwise modified from time to time.
"Hanover Acquisition Pledge Agreement" the Pledge Agreement
made by Hanover Acquisition in favor of the Collateral Trustee for the
benefit of the holders of the Secured Obligations substantially in the
form of Exhibit M, as amended, supplemented or otherwise modified from
time to time.
"Hanover Acquisition Security Agreement": the Security
Agreement made by Hanover Acquisition in favor of the Collateral
Trustee for the benefit of the holders of the Secured Obligations,
substantially in the form of Exhibit L, as amended, supplemented or
otherwise modified from time to time.
"Hanover Land Guarantee": the Guarantee made by the Real
Estate Subsidiary in favor of the Agent for the benefit of the Banks,
substantially in the form of Exhibit I, as amended, supplemented or
otherwise modified from time to time.
"Hanover Land Security Agreement": the Security Agreement
made by the Real Estate Subsidiary in favor of the Collateral Trustee
for the benefit of the holders of the Secured Obligations,
substantially in the form of Exhibit J, as amended, supplemented or
otherwise modified from time to time.
"Hanover Land Texas Mortgage": the Deed of Trust, Security
Agreement, and Fixture Filing made by the Real Estate Subsidiary in
favor of the Collateral Trustee for the benefit of the holders of the
Secured Obligations, substantially in the form of Exhibit N-5, as
amended, supplemented or otherwise modified from time to time.
"Hanover/Smith": Hanover/Smith, Inc., a Delaware corporation.
"Hanover/Smith Guarantee": the Guarantee made by
Hanover/Smith in favor of the Agent for the benefit of the Banks,
substantially in the form of Exhibit G, as amended, supplemented or
otherwise modified from time to time.
"Hanover/Smith Security Agreement": the Security Agreement
made by Hanover/Smith in favor of the Collateral Trustee for the
benefit of the holders of the Secured Obligations, substantially in
the form of Exhibit H, as
17
amended, supplemented or otherwise modified from time to time.
"Hanover/Smith Texas Leasehold Mortgage": the Leasehold Deed
of Trust, Security Agreement, and Fixture Filing made by Hanover/Smith
in favor of the Collateral Trustee for the benefit of the holders of
the Secured Obligations, substantially in the form of Exhibit N-3, as
amended, supplemented or otherwise modified from time to time."
"Hanover/Smith Texas Mortgage": the Deed of Trust, Security
Agreement, and Fixture Filing made by Hanover/Smith in favor of the
Collateral Trustee for the benefit of the holders of the Secured
Obligations, substantially in the form of Exhibit N-4, as amended,
supplemented or otherwise modified from time to time.
"Hanover Venezuela": H.C.C. Compressor de Venezuela, C.A., a
Venezuelan corporation.
"Hazardous Materials": any hazardous materials, hazardous
waste, hazardous constituents, hazardous or toxic substances,
petroleum products (including crude oil or any fraction thereof),
defined or regulated as such in or under any Environmental Law,
including, without limitation, polychlorinated biphenyls.
"HCC Oklahoma Mortgage": the Mortgage, Security Agreement,
and Fixture Filing made by HCC in favor of the Collateral Trustee for
the benefit of the holders of the Secured Obligations, substantially
in the form of Exhibit N-1, as amended, supplemented or otherwise
modified from time to time.
"HCC Pledge Agreement": the Second Amended and Restated
Pledge Agreement made by HCC in favor of the Collateral Trustee for
the benefit of the holders of the Secured Obligations substantially in
the form of Exhibit C, as amended, supplemented or otherwise modified
from time to time.
"HCC Security Agreement": the Second Amended and Restated
Security Agreement made by HCC in favor of the Collateral Trustee for
the benefit of the holders of the Secured Obligations substantially in
the form of Exhibit D, as amended, supplemented or otherwise modified
from time to time.
"HCC Texas Mortgage": the Deed of Trust, Security Agreement,
and Fixture Filing made by HCC in favor of the Collateral Trustee for
the benefit of the holders of the Secured Obligations, substantially
in the form of Exhibit M-2,
18
as amended, supplemented or otherwise modified from time to time.
"HEHC Merger": the merger of HEHC with and into HCC pursuant
to the HEHC Merger Agreement.
"HEHC Merger Agreement": the Agreement and Plan of Merger,
dated as of December 30, 1994, among HCC, HEHC and the stockholders of
HEHC as of such date.
"Houston Real Estate Transaction": the issuance by the Real
Estate Subsidiary of the Real Estate Note in connection with the
purchase of certain real estate properties located in Houston, Texas
as described in the Deed of Trust and the entering into of the Deed of
Trust and the Security Agreement, dated November 22, 1993, among First
Interstate, the Real Estate Subsidiary and HCC.
"Indebtedness": of any Person at any date, (a) all
indebtedness of such Person for borrowed money or for the deferred
purchase price of property or services (other than current liabilities
incurred in the ordinary course of business and payable in accordance
with customary trade practices) or which is evidenced by a note, bond,
debenture or similar instrument, (b) all obligations of such Person
under Financing Leases, (c) all obligations of such Person in respect
of acceptances issued or created for the account of such Person, and
(d) all liabilities secured by any Lien (other than any lien of a type
described in subsection 8.3(b) through (f)) on any property owned by
such Person even though such Person has not assumed or otherwise
become liable for the payment thereof.
"indemnified liabilities": as defined in subsection 11.5.
"Insolvency": with respect to any Multiemployer Plan, the
condition that such Plan is insolvent within the meaning of Section
4245 of ERISA.
"Insolvent": pertaining to a condition of Insolvency.
"Intellectual Property": as defined in subsection 5.9.
"Interest Payment Date": (a) as to any ABR Loan, the last day
of each March, June, September and December to occur while such Loan
is outstanding, (b) as to any Eurodollar Loan having an Interest
Period of three months or less the last day of such Interest Period,
and (c) as to any Eurodollar Loan having an Interest Period longer
than three months, each day which is three months or a whole multiple
thereof, after the first day of such Interest Period and the last day
of such Interest Period.
19
"Interest Period": with respect to any Eurodollar Loan:
(a) initially, the period commencing on the
borrowing or conversion date, as the case may be, with respect
to such Eurodollar Loan and ending one, two, three or six
months thereafter, as selected by HCC in its notice of
borrowing or notice of conversion, as the case may be, given
with respect thereto; and
(b) thereafter, each period commencing on the
last day of the next preceding Interest Period applicable to
such Eurodollar Loan and ending one, two, three or six months
thereafter, as selected by HCC by irrevocable notice to the
Agent not less than three Working Days prior to the last day
of the then current Interest Period with respect thereto;
provided that, all of the foregoing provisions relating to the
Interest Periods are subject to the following:
(i) if an Interest Period pertaining
to a Eurodollar Loan would otherwise end on a day
that is not a Working Day, such Interest Period shall
be extended to the next succeeding Working Day unless
the result of such extension would be to carry such
Interest Period into another calendar month in which
event such Interest Period shall end on the
immediately preceding Working Day;
(ii) any Interest Period that would
otherwise extend beyond the Final Maturity Date shall
end on the Final Maturity Date;
(iii) any Interest Period pertaining to
a Eurodollar Loan that begins on the last Working Day
of a calendar month (or on a day for which there is
no numerically corresponding day in the calendar
month at the end of such Interest Period) shall end
on the last Working Day of a calendar month; and
(iv) HCC shall select Interest Periods
so as not to require a payment or prepayment of any
Eurodollar Loan during an Interest Period for such
Loan.
"Investments": as defined in subsection 8.10.
"Issuing Bank": Chemical, in its capacity as issuer of any
Letter of Credit.
"JEDI": as defined in the recitals to this Agreement.
20
"JEDI Lenders": as defined in the recitals to this Agreement.
"JEDI Loan Agreement": as defined in the recitals to this
Agreement.
"L/C Commitment": $10,000,000.
"L/C Fee Payment Date": the last day of each March, June,
September and December.
"L/C Obligations": at any time, an amount equal to the sum of
(a) the aggregate then undrawn and unexpired amount of the then
outstanding Letters of Credit and (b) the aggregate amount of drawings
under Letters of Credit which have not then been reimbursed pursuant
to subsection 4.5(a).
"L/C Participants": the collective reference to all the Banks
other than the Issuing Bank.
"Letters of Credit": as defined in paragraph 4.1(a).
"Lien": any mortgage, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, lien (statutory or other), or
preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever (including, without
limitation, any conditional sale or other title retention agreement,
any Financing Lease having substantially the same economic effect as
any of the foregoing, and the filing of any financing statement under
the Uniform Commercial Code or comparable law of any jurisdiction in
respect of any of the foregoing).
"Loan": any loan made by any Bank pursuant to this Agreement.
"Loan Documents": this Agreement, the Revolving Credit Notes,
the Applications, the Guarantees and the Security Documents.
"Majority Banks": at any time, Banks the Commitment
Percentages of which aggregate more than 50%.
"Marketing": Hanover Marketing Company, a Texas corporation.
"Material Adverse Effect": a material adverse effect on (a)
the business, operations, property, condition (financial or otherwise)
or prospects of HCC and its Subsidiaries taken as a whole, (b) the
ability of HCC or any of the Subsidiaries of HCC to perform their
respective obligations under this Agreement, the Notes, or the
21
Guarantees, or (c) the validity or enforceability of this Agreement or
any of the Notes or any Application or the rights or remedies of the
Agent, the Collateral Trustee or the Banks hereunder or thereunder.
"MEI": Maintech Enterprises, Inc., a Texas corporation.
"MEI Guarantee": the Second Amended and Restated Guarantee
made by MEI in favor of the Agent for the benefit of the Banks,
substantially in the form of Exhibit E, as amended, supplemented or
otherwise modified form time to time.
"MEI Security Agreement": the Second Amended and Restated
Security Agreement made by MEI in favor of the Collateral Trustee for
the benefit of the holders of the Secured Obligations, substantially
in the form of Exhibit F, as amended, supplemented or otherwise
modified from time to time.
"Mortgages": shall mean (a) the Hanover Land Texas Mortgage,
the Hanover/Smith Texas Leasehold Mortgage, the Hanover/Smith Texas
Mortgage, the HCC Oklahoma Mortgage and the HCC Texas Mortgage and (b)
any present or future deeds of trust, mortgages, or similar agreements
granting mortgage liens on real property in favor of the Collateral
Trustee for the ratable benefit of the holders of the Secured
Obligations substantially in the form of Exhibit N-1.
"Multiemployer Plan": a Plan which is a multiemployer plan as
defined in Section 4001(A)(3) of ERISA.
"Note": any note made by HCC to any Bank pursuant to this
Agreement; collectively the "Notes".
"Participant": as defined in subsection 11.6(b).
"PBGC": the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA.
"Person": an individual, partnership, corporation, business
trust, joint stock company, trust, unincorporated association, joint
venture, Governmental Authority or other entity of whatever nature.
"PGN": Proyetco Gas Natural P.G.N., C.A., a Venezuelan
corporation.
"Plan": at a particular time, any employee benefit plan which
is covered by ERISA and in respect of which HCC, or a Commonly
Controlled Entity is (or, if such plan were terminated at such time,
would under Section 4069 of ERISA
22
be deemed to be) an "employer" as defined in Section 3(5) of ERISA.
"Pledge Agreements": collectively, the HCC Pledge Agreement,
the Hanover Acquisition Pledge Agreement and such other pledge
agreements pursuant to which the holder of a Credit Party's Capital
Stock may pledge such Capital Stock to the Collateral Trustee for the
ratable benefit of the holders of the Secured Obligations.
"Pledged Stock": shall refer to the Capital Stock pledged
pursuant to the Pledge Agreements.
"Precision": Precision Welding & Machine, Inc., a Texas
corporation.
"Pro Forma Balance Sheets": as defined in subsection 5.1(b).
"Properties": as defined in subsection 5.17.
"Purchasing Banks": as defined in subsection 11.6(c).
"Qualified Subsidiary": each Subsidiary of HCC organized
under a jurisdiction of the United States and having assets located
primarily in the United States.
"Real Estate Note": a promissory note, dated June 22, 1993 in
the aggregate amount of $1,868,122.77 payable to Transfield
Corporation and endorsed payable to First Interstate which has been
modified by the Modification Agreement, dated November 22, 1993, among
the Real Estate Subsidiary, HCC and First Interstate, as amended prior
to the date hereof.
"Real Estate Subsidiary": Hanover Land Company, a Texas
corporation, a 100% direct Subsidiary of HCC which shall have no
operations other than (i) the holding, leasing, maintaining and
disposition of certain real estate properties and the improvements
located thereon acquired in connection with the Houston Real Estate
Transaction and (ii) the incurrence of Indebtedness to finance or
refinance the purchase of such real estate properties.
"Register": as defined in subsection 11.6(d).
"Regulation U": Regulation U of the Board of Governors of the
Federal Reserve System.
"Reimbursement Obligation": the obligation of HCC to
reimburse the Issuing Bank pursuant to subsection 4.5(a) for amounts
drawn under Letters of Credit.
23
"Reorganization": with respect to any Multiemployer Plan, the
condition that such plan is in reorganization within the meaning of
Section 4241 of ERISA.
"Reportable Event": any of the events set forth in Section
4043(b) of ERISA, other than those events as to which the thirty day
notice period is waived under subsections .13, .14, .16, .18, .19 or
.20 of PBGC Reg. Section 2615.
"Required Banks": at any time, Banks the Commitment
Percentages of which aggregate at least 60%.
"Requirement of Law": as to any Person, the Certificate of
Incorporation and By-laws or other organizational or governing
documents of such Person, and any law, treaty, rule or regulation or
determination of an arbitrator or a court or other Governmental
Authority, in each case applicable to or binding upon such Person or
any of its property or to which such Person or any of its property is
subject.
"Responsible Officer": the chief executive officer,
president, the executive vice president, treasurer or secretary of the
applicable Credit Party, or, with respect to financial matters, the
chief financial officer or treasurer of the applicable Credit Party.
"Revolving Credit Loans": as defined in subsection 2.2.
"Revolving Credit Notes": as defined in subsection 2.3.
"Secured Obligations": as defined in the Collateral Trust
Agreement.
"Security Agreements": collectively, the HCC Security
Agreement, the MEI Security Agreement, the Hanover/Smith Security
Agreement, the Hanover Acquisition Security Agreement, the Hanover
Land Security Agreement and such other security agreements pursuant to
which a Credit Party may grant a security interest in the assets of
such Credit Party, on substantially the terms set forth in the HCC
Security Agreement, to the Collateral Trustee for the ratable benefit
of the holders of the Secured Obligations.
"Security Documents": collectively, the Collateral Trust
Agreement, the Pledge Agreements, the Security Agreements, the
Mortgages and any other collateral security document from time to time
executed and delivered in connection herewith or therewith.
24
"Single Employer Plan": any Plan which is covered by Title IV
of ERISA, but which is not a Multiemployer Plan.
"Specific Guaranty": as defined in subsection 8.4.
"Standby Letter of Credit": as defined in paragraph
4.1(b)(1)(A).
"Subordinated Debt": shall mean, with respect to HCC, any
unsecured Indebtedness the terms of which provide that such
Indebtedness is subordinate and junior in right of payment to the
payment of all obligations and liabilities of HCC to the Agent and the
Banks hereunder.
"Subsidiary": as to any Person, a corporation, partnership or
other entity of which shares of stock or other ownership interests
having ordinary voting power (other than stock or such other ownership
interests having such power only by reason of the happening of a
contingency) to elect a majority of the board of directors or other
managers of such corporation, partnership of other entity are at the
time owned, or the management of which is otherwise controlled,
directly or indirectly through one or more intermediaries, or both, by
such Person. Unless otherwise qualified, all references to a
"Subsidiary" or to "Subsidiaries" in this Agreement shall refer to a
Subsidiary or Subsidiaries of HCC.
"Tranche": the collective reference to Eurodollar Loans the
Interest Periods with respect to all of which begin on the same date
and end on the same later date (whether or not such Loans shall
originally have been made on the same day).
"Transferee": as defined in subsection 11.6(f).
"Type": as to any Loan, its nature as an ABR Loan or a
Eurodollar Loan.
"Uniform Customs": the Uniform Customs and Practice for
Documentary Credits (1993 Revision), International Chamber of Commerce
Publication No. 500, as the same may be amended from time to time.
"Unqualified Subsidiary": any Subsidiary of HCC other than
Qualified Subsidiaries.
"Working Day": any Business Day on which dealings in foreign
currencies and exchange between banks may be carried on in London,
England.
1.2 Other Definitional Provisions. (a) Unless otherwise
specified therein, all terms defined in this Agreement
25
shall have the defined meanings when used in the Notes or any certificate or
other document made or delivered pursuant hereto.
(b) As used herein and in the Notes, and any certificate or other
document made or delivered pursuant hereto, accounting terms relating to HCC
and its Subsidiaries not defined in subsection 1.1 and accounting terms partly
defined in subsection 1.1, to the extent not defined, shall have the respective
meanings given to them under GAAP.
(c) The words "hereof", "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement, and Section,
subsection, Schedule and Exhibit references are to this Agreement unless
otherwise specified.
(d) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS
2.1 Restructuring and Refinancing of Existing Debt. Subject
to the terms and conditions hereof, the Banks hereby agree to restructure the
terms of payment of the Existing Loans by amending and restating the Existing
Agreement through the execution and delivery of this Agreement and by accepting
delivery of the Revolving Credit Notes on the Closing Date in extension of and
in substitution and exchange for (but not in payment of) the Existing Notes.
Notwithstanding the foregoing, enforcement of the obligations so extended shall
be governed solely by the terms of the Loan Documents. The amount of the
Existing Loans of each Bank shall hereinafter be deemed to be a Revolving
Credit Loan of such Bank under this Agreement. If the conditions precedent
specified in Section 6 are not fully satisfied, the Existing Revolving Credit
Notes, the Existing Agreement and the Existing Security Documents shall remain
in full force and effect and shall not be replaced by the Revolving Credit
Notes, this Agreement and the Security Documents, respectively. Promptly after
the Closing Date, the Agent shall send to HCC the Existing Notes, marked
"extended and continued by the promissory notes, dated as of December 19, 1995,
delivered by Hanover Compressor Company to the Banks".
2.2 Revolving Credit Commitments. (a) Subject to the terms
and conditions hereof, each Bank severally agrees to make revolving credit
loans ("Revolving Credit Loans") to HCC from time to time during the Commitment
Period in an aggregate principal amount at any one time outstanding which, when
added to such Bank's Commitment Percentage of the then outstanding L/C
Obligations, does not exceed the amount of such Bank's Commitment. During the
Commitment Period, HCC may use the
26
Commitments by borrowing, prepaying the Revolving Credit Loans in whole or in
part, and reborrowing, all in accordance with the terms and conditions hereof.
On the Closing Date as specified above, all Existing Loans shall be continued
as Revolving Credit Loans hereunder.
(b) The Revolving Credit Loans may from time to time be (i)
Eurodollar Loans, (ii) ABR Loans or (iii) a combination thereof, as determined
by HCC and notified to the Agent in accordance with subsections 2.4 and 3.5,
provided that no Revolving Credit Loan shall be made as a Eurodollar Loan after
the day that is three months prior to the Final Maturity Date.
2.3 Revolving Credit Notes. The Revolving Credit Loans made
by each Bank shall be evidenced by a promissory note of HCC, substantially in
the form of Exhibit A with appropriate insertions as to payee, date and
principal amount (each, a "Revolving Credit Note"), payable to the order of
such Bank and in a principal amount equal to the lesser of (a) the amount of
the initial Commitment of such Bank and (b) the aggregate unpaid principal
amount of all Revolving Credit Loans made by such Bank. Each Bank is hereby
authorized to record the date, Type and amount of each Revolving Credit Loan
made by such Bank, each continuation thereof, each conversion of all or a
portion thereof to another Type, the date and amount of each payment or
prepayment of principal thereof and, in the case of Eurodollar Loans, the
length of each Interest Period with respect thereto, on the schedule annexed to
and constituting a part of its Revolving Credit Note and any such recordation
shall constitute prima facie evidence of the accuracy of the information so
recorded, provided that the failure to make any such recordation (or any error
in such recordation) shall not affect the obligations of HCC hereunder and
under such Revolving Credit Note. Each Revolving Credit Note shall (i) be
dated the Closing Date, (ii) be stated to mature on the Final Maturity Date and
(iii) provide for the payment of interest in accordance with subsection 3.1.
2.4 Procedure for Revolving Credit Borrowing. HCC may borrow
under the Commitments during the Commitment Period on any Working Day, if all
or any part of the requested Revolving Credit Loans are to be initially
Eurodollar Loans, or on any Business Day, otherwise, provided that HCC shall
give the Agent irrevocable notice (which notice must be received by the Agent
prior to 10:00 A.M., New York City time, (a) three Working Days prior to the
requested Borrowing Date, if all or any part of the requested Revolving Credit
Loans are to be initially Eurodollar Loans, or (b) one Business Day prior to
the requested Borrowing Date, otherwise), specifying (i) the amount to be
borrowed, (ii) the requested Borrowing Date, (iii) whether the borrowing is to
be of Eurodollar Loans, ABR Loans, or a combination thereof and (iv) if the
borrowing is to be entirely or partly of Eurodollar Loans, the amount of such
Type of Loan and the length of the
27
initial Interest Period therefor. Each borrowing under the Commitments shall
be in an amount equal to (x) in the case of ABR Loans, $200,000 or a whole
multiple of $100,000 in excess thereof (or, if the then Available Commitments
are less than $200,000, such lesser amount) and (y) in the case of Eurodollar
Loans, $500,000 or a whole multiple of $100,000 in excess thereof. Upon
receipt of any such notice from HCC, the Agent shall promptly notify each Bank
thereof. Each Bank will make the amount of its pro rata share of each
borrowing available to the Agent for the account of HCC at the office of the
Agent specified in subsection 11.2 prior to 12:00 noon, New York City time, on
the Borrowing Date requested by HCC in funds immediately available to the
Agent. Such borrowing will then be made available to HCC by the Agent
crediting the account of HCC on the books of such office with the aggregate of
the amounts made available to the Agent by the Banks and in like funds as
received by the Agent.
SECTION 3. INTEREST RATE PROVISIONS, FEES, CONVERSIONS AND PAYMENTS
3.1 Interest Rates and Payments Dates. (a) Each Eurodollar
Loan shall bear interest for each day during each Interest Period with respect
thereto at a rate per annum equal to the Eurodollar Rate determined for such
day plus the Applicable Margin.
(b) Each ABR Loan shall bear interest at a rate per annum
equal to ABR plus the Applicable Margin.
(c) If all or a portion of (i) the principal amount of
any Loan or (ii) any interest payable thereon shall not be paid when due
(whether at the stated maturity, by acceleration or otherwise), such overdue
amount shall bear interest at a rate per annum which is (x) in the case of
overdue principal, 2% above the rate that would otherwise be applicable thereto
pursuant to the foregoing provisions of this subsection or (y) in the case of
overdue interest, 2% above the rate described in paragraph (b) of this
subsection, in each case from the date of such non-payment until such amount
is paid in full (as well after as before judgment).
(d) Interest shall be payable in arrears on each Interest
Payment Date, provided that interest accruing pursuant to paragraph (c) of this
subsection shall be payable on demand.
3.2 Commitment Fee; Upfront Facility Fee; Other Fees and
Compensation. (a) HCC agrees to pay to the Agent for the account of each Bank
a commitment fee for the period from and including the first day of the
Commitment Period to the Final Maturity Date, computed at the rate of 0.35% per
annum on the average daily amount of the Available Commitment of such Bank
during the period for which payment is made. Such commitment fee
28
shall be payable quarterly in arrears on the last day of each March, June,
September and December and on the Final Maturity Date or such earlier date as
the Commitments shall terminate as provided herein, commencing on March 31,
1996.
(b) HCC agrees to pay to the Agent for the account of
each Bank an up-front facility fee, computed at the rate of .10% of the
Commitment of such Bank on the Closing Date. Such up-front facility fee shall
be payable on the Closing Date.
(c) HCC agrees to pay to the Agent the fees and other
compensation, in the amounts and on the dates specified in the fee letter
separately agreed to between HCC and the Agent.
3.3 Termination or Reduction of the Commitments. (a) HCC
shall have the right during the Commitment Period, upon not less than five
Business Days' notice to the Agent by HCC to terminate the Commitments or, from
time to time, to reduce the amount of the Commitments, provided that no such
termination or reduction shall be permitted if, after giving effect thereto and
to any prepayments of the Revolving Credit Loans made on the effective date
thereof, the aggregate principal amount of the Revolving Credit Loans then
outstanding, when added to the then outstanding L/C Obligations, would exceed
the Commitments then in effect. Any such reduction shall be in an amount equal
to $100,000 or a whole multiple thereof and shall reduce permanently the
Commitments then in effect.
(b) If HCC or any of its Subsidiaries shall sell any assets
and the proceeds from the sale are required to be paid to the Collateral
Trustee to be held as cash collateral for the benefit of the holders of the
Secured Obligations in accordance with subsection 8.6, HCC must either reinvest
such proceeds 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 such assets or must prepay ratably, based upon outstanding principal
amounts, the outstanding Loans under this Agreement and the other outstanding
secured Indebtedness of the holders of the Secured Obligations which require
such prepayment in the amount of such proceeds.
3.4 Optional Prepayments and other Repayments. (a) HCC may
at any time and from time to time, prepay the Loans, in whole or in part,
without premium or penalty, upon at least three Working Days' irrevocable
notice, in the case of Eurodollar Loans, and one Business Day's irrevocable
notice, in the case of ABR Loans, by HCC to the Agent, specifying the date and
amount of prepayment and whether the prepayment is of Eurodollar Loans, ABR
Loans or a combination thereof, and if of a combination thereof, the amount
allocable to each. If any such prepayment with respect to a Eurodollar Loan is
made on a day other than the last day of an Interest Period, such prepayment
shall be accompanied by any amounts required to be paid pursuant to subsection
3.13.
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Upon receipt of any such notice the Agent shall promptly notify each Bank
thereof. If any such notice is given, the amount specified in such notice
shall be due and payable on the date specified therein. Partial prepayments
shall be in an aggregate principal amount of $200,000 or a whole multiple of
$100,000 in excess thereof.
(b) HCC shall repay at any time, and there shall be due and
payable at such time, such principal amount (together with accrued interest
thereon), if any, of outstanding Revolving Credit Loans as may be necessary so
that, after such repayment, the aggregate unpaid principal amount of Revolving
Credit Loans does not exceed the Commitments in effect at such time after
giving effect to any reduction in the Commitments pursuant to subsection 3.3.
(c) If the Collateral Trustee shall hold as collateral any
proceeds resulting from the sale of any natural gas compressors or oil and gas
production equipment and such proceeds are applied to the Secured Obligations
in accordance with the Collateral Trust Agreement, HCC shall prepay the
outstanding principal amount of the Loans under this Agreement in an amount
equal to the amount of such application allocated to the Agent and the Banks
under the Collateral Trust Agreement. Each prepayment of principal on Loans
pursuant to this subsection 3.4(c) shall be accompanied by payment of all
accrued but unpaid interest on the principal amount prepaid and any amounts
required to be paid pursuant to subsection 3.13 as a result of such prepayment.
All prepayments required pursuant to this subsection 3.4(c) shall be applied to
the Loans ratably in accordance with the outstanding principal amount of each
Loan, and shall be applied to the required payments of principal on each Loan
being prepaid in the inverse order of maturity.
(d) If the Collateral Trustee shall hold as collateral any
proceeds resulting from any business interruption, casualty, or condemnation,
including, without limitation, any business interruption insurance proceeds,
any property insurance proceeds, or any condemnation proceeds, and such
proceeds are applied to the Secured Obligations in accordance with the
Collateral Trust Agreement, HCC shall prepay the outstanding principal amount
of the Loans under this Agreement in an amount equal to the amount of such
application allocated to the Agent and the Banks under the Collateral Trust
Agreement. Each prepayment of principal on Loans pursuant to this subsection
3.4(d) shall be accompanied by payment of all accrued but unpaid interest on
the principal amount prepaid and any amounts required to be paid pursuant to
subsection 3.13 as a result of such prepayment. All prepayments required
pursuant to this subsection 3.4(d) shall be applied to the Loans ratably in
accordance with the outstanding principal amount of each Loan, and shall be
applied to the required payments of principal on each Loan being prepaid in the
inverse order of maturity.
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(e) If during the existence of a Default or Event of Default
the Collateral Trustee shall make any distribution to the Agent or the Banks
under the Collateral Trust Agreement, HCC shall prepay the outstanding
principal amount of the Loans under this Agreement in an amount equal to the
amount of such distribution to the Agent and the Banks under the Collateral
Trust Agreement. Each prepayment of principal on Loans pursuant to this
subsection 3.4(e) shall be accompanied by payment of all accrued but unpaid
interest on the principal amount prepaid and any amounts required to be paid
pursuant to subsection 3.13 as a result of such prepayment. All prepayments
required pursuant to this subsection 3.4(e) shall be applied to the Loans
ratably in accordance with the outstanding principal amount of each Loan, and
shall be applied to the required payments of principal on each Loan being
prepaid in the inverse order of maturity. Each Bank's Commitment shall be
automatically reduced permanently by an amount equal to the amount prepaid to
it by HCC pursuant to the terms of this subsection 3.4(e).
3.5 Conversion and Continuation Options. (a) HCC may elect
from time to time to convert Eurodollar Loans to ABR Loans by giving the Agent
at least two Business Days' prior irrevocable notice of such election, provided
that any such conversion of Eurodollar Loans may only be made on the last day
of an Interest Period with respect thereto. HCC may elect from time to time to
convert ABR Loans to Eurodollar Loans by giving the Agent at least three
Working Days' prior irrevocable notice of such election. Any such notice of
conversion to Eurodollar Loans shall specify the length of the initial Interest
Period or Interest Periods therefor. Upon receipt of any such notice the Agent
shall promptly notify each Bank thereof. All or any part of outstanding
Eurodollar Loans and ABR Rate Loans may be converted as provided herein,
provided that (i) no Loan may be converted into a Eurodollar Loan when any
Event of Default has occurred and is continuing and the Agent or the Required
Banks have determined that such a conversion is not appropriate, (ii) any such
conversion may only be made if, after giving effect thereof, subsection 3.6
shall not have been contravened and (iii) no Loan may be converted into a
Eurodollar Loan after the date that is one month prior to the Final Maturity
Date.
(b) Any Eurodollar Loans may be continued as such upon
the expiration of the then current Interest Period with respect thereto by HCC
giving notice to the Agent, in accordance with the applicable provisions of the
term "Interest Period" set forth in subsection 1.1, of the length of the next
Interest Period to be applicable to such Loans, provided that no Eurodollar
Loan may be continued as such (i) when any Event of Default has occurred and is
continuing and the Agent or the Required Banks have determined that such a
continuation is not appropriate, (ii) if, after giving effect thereto,
subsection 3.6 would be contravened or (iii) after the date that is one month
prior to the Final Maturity Date and provided, further, that if HCC shall fail
to
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give any required notice as described above in this paragraph or if such
continuation is not permitted pursuant to the preceding proviso such Loans
shall be automatically converted to ABR Loans on the last day of such then
expiring Interest Period.
3.6 Minimum Amounts of Reduction. All borrowings,
conversions and continuations of Loans hereunder and all selections of Interest
Periods hereunder shall be in such amounts and be made pursuant to such
elections so that, after giving effect thereto, the aggregate principal amount
of the Loans comprising each Eurodollar Tranche shall be equal to $500,000 or a
whole multiple of $100,000 in excess thereof.
3.7 Computation of Interest and Fees. (a) Commitment fees
and interest on ABR Loans shall be calculated on the basis of a 365- (or 366-,
as the case may be) day year for the actual days elapsed, and interest on
Eurodollar Loans shall be calculated on the basis of a 360 day year for the
actual days elapsed. The Agent shall as soon as practicable notify HCC and the
Banks of each determination of a Eurodollar Rate. Any change in the interest
rate on a Loan resulting from a change in the ABR, the Eurocurrency Reserve
Requirements, the C/D Assessment Rate or the C/D Reserve Percentage shall
become effective as of the opening of business on the day on which such change
becomes effective. The Agent shall as soon as practicable notify HCC and the
Banks of the effective date and the amount of each such change in interest
rate.
(b) Each determination of an interest rate by the Agent
pursuant to any provision of this Agreement shall be conclusive and binding on
HCC and the Banks in the absence of manifest error. The Agent shall, at the
request of the HCC, deliver to HCC a statement showing the quotations used by
the Agent in determining any interest rate pursuant to subsection 3.1(a).
3.8 Inability to Determine Interest Rate. In the event that
prior to the first day of any Interest Period:
(a) the Agent shall have determined (which determination
shall be conclusive and binding upon HCC) that, by reason of
circumstances affecting the relevant market, adequate and reasonable
means do not exist for ascertaining the Eurodollar Rate for such
Interest Period, or
(b) the Agent shall have received notice from the
Majority Banks that the Eurodollar Rate determined or to be determined
for such Interest Period will not adequately and fairly reflect the
costs to such Banks (as conclusively certified by such Banks) of
making or maintaining their affected Loans during such Interest
Period,
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the Agent shall give telex, telecopy or telephonic notice thereof to HCC and
the Banks as soon as practicable thereafter. If such notice is given (x) any
Eurodollar Loans requested to be made on the first day of such Interest Period
shall be made as ABR Loans, (y) any Loans that were to have been converted on
the first day of such Interest Period to Eurodollar Loans shall be converted to
or continued as ABR Loans and (z) any outstanding Eurodollar Loans shall be
converted, on the first day of such Interest Period, to ABR Loans. Until such
notice has been withdrawn by the Agent, no further Eurodollar Loans shall be
made or continued as such, nor shall HCC have the right to convert Loans to
Eurodollar Loans.
3.9 Pro Rata Treatment and Payments. (a) Each borrowing by
HCC from the Banks hereunder, each payment by HCC on account of any commitment
fee hereunder and any reduction of the Commitments of the Banks shall be made
pro rata according to the respective Commitment Percentages of the Banks. Each
payment (including each prepayment) by HCC on account of principal of and
interest on the Loans shall be made pro rata according to the respective
outstanding principal amounts of the Loans then held by the Banks. All
payments (including prepayments) to be made by HCC hereunder and under the
Notes, whether on account of principal, interest, fees or otherwise, shall be
made without set off or counterclaim and shall be made prior to 12:00 Noon, New
York City time, on the due date thereof to the Agent, for the account of the
Banks, at the Agent's office specified in subsection 11.2 in Dollars and in
immediately available funds. The Agent shall distribute such payments to the
Banks promptly upon receipt in like funds as received. If any payment
hereunder (other than payments on the Eurodollar Loans) becomes due and payable
on a day other than a Business Day, such payment shall be extended to the next
succeeding Business Day, and, with respect to payments of principal, interest
thereon shall be payable at the then applicable rate during such extension. If
any payment on a Eurodollar Loan becomes due and payable on a day other than a
Working Day, the maturity thereof shall be extended to the next succeeding
Working Day unless the result of such extension would be to extend such payment
into another calendar month, in which event such payment shall be made on the
immediately preceding Working Day.
(b) Unless the Agent shall have been notified in writing
by any Bank prior to a Borrowing Date that such Bank will not make the amount
that would constitute its Commitment Percentage of the borrowing on such date
available to the Agent, the Agent may assume that such Bank has made such
amount available to the Agent on such Borrowing Date, and the Agent may, in
reliance upon such assumption, make available to HCC a corresponding amount.
If such amount is made available to the Agent on a date after such Borrowing
Date, such Bank shall pay to the Agent on demand an amount equal to the product
of (i) the daily average Federal funds rate during such period as quoted by
33
the Agent, times (ii) the amount of such Bank's Commitment Percentage of such
borrowing, times (iii) a fraction the numerator of which is the number of days
that elapse from and including such Borrowing Date to the date on which such
Bank's Commitment Percentage of such borrowing shall have become immediately
available to the Agent and the denominator of which is 360. A certificate of
the Agent submitted to any Bank with respect to any amounts owing under this
subsection shall be conclusive in the absence of manifest error. If such
Bank's Commitment Percentage of such borrowing is not in fact made available to
the Agent by such Bank within three Business Days of such Borrowing Date, the
Agent shall be entitled to recover such amount with interest thereon at the
rate per annum applicable to ABR Loans hereunder, on demand, from HCC and any
such payment by HCC shall not constitute a waiver of any right or remedy HCC
may have with respect to any such Bank.
3.10 Illegality. Notwithstanding any other provision herein,
if any change in any Requirement of Law or in the interpretation or application
thereof shall make it unlawful for any Bank to make or maintain Eurodollar
Loans as contemplated by this Agreement, (a) the commitment of such Bank
hereunder to make Eurodollar Loans, continue Eurodollar Loans as such and
convert ABR Loans to Eurodollar Loans shall forthwith be canceled and (b) such
Bank's Loans then outstanding as Eurodollar Loans, if any, shall be converted
automatically to ABR Loans on the respective last days of the then current
Interest Periods with respect to such Loans or within such earlier period as
required by law. If any such conversion of a Eurodollar Loan occurs on a day
which is not the last day of the then current Interest Period with respect
thereto, HCC shall pay to such Bank such amounts, if any, as may be required
pursuant to subsection 3.13.
3.11 Requirements of Law. (a) In the event that any change
in any Requirement of Law as in existence on the date hereof or in the
interpretation or application thereof or compliance by any Bank with any
request or directive (whether or not having the force of law) from any central
bank or other Governmental Authority made subsequent to the date hereof:
(i) shall subject any Bank to any tax of any kind whatsoever
with respect to this Agreement, any Note, any Letter of Credit, any
Application or any Eurodollar Loan made by it, or change the basis of
taxation of payments to such Bank in respect thereof (except for taxes
covered by subsection 3.12 and changes in the rate of tax on the
overall net income of such Bank or tax imposed in lieu of net income
taxes);
(ii) shall impose, modify or hold applicable any reserve,
special deposit, compulsory loan or similar requirement against assets
held by, deposits or other liabilities in or for the account of,
advances, loans or
34
other extensions of credit by, or any other acquisition of funds by,
any office of such Bank which is not otherwise included in the
determination of the Eurodollar Rate hereunder; or
(iii) shall impose on such Bank any other condition;
and the result of any of the foregoing is to increase the cost to such Bank, by
an amount which such Bank deems to be material, of making, converting into,
continuing or maintaining Eurodollar Loans or issuing or participating in
Letters of Credit or to reduce any amount receivable hereunder in respect
thereof, then, in any such case, HCC shall promptly pay such Bank, upon its
demand, any additional amounts necessary to compensate such Bank for such
increased cost or reduced amount receivable. If any Bank becomes entitled to
claim any additional amounts pursuant to this subsection, it shall promptly
notify HCC, through the Agent, by delivery of a certificate setting forth the
amounts due and a description of the event by reason of which it has become so
entitled. A certificate as to any additional amounts payable pursuant to this
subsection submitted by such Bank, through the Agent, to HCC shall be
conclusive in the absence of manifest error. This covenant shall survive the
termination of this Agreement and the payment of the Notes and all other
amounts payable hereunder.
(b) In the event that any Bank shall have determined that any
change in any Requirement of Law as in existence on the date hereof regarding
capital adequacy or in the interpretation or application thereof or compliance
by such Bank or any corporation controlling such Bank with any request or
directive regarding capital adequacy (whether or not having the force of law)
from any Governmental Authority made subsequent to the date hereof does or
shall have the effect of reducing the rate of return on such Bank's or such
corporation's capital as a consequence of its obligations hereunder or under
any Letter of Credit to a level below that which such Bank or such corporation
could have achieved but for such change or compliance (taking into
consideration such Bank's or such corporation's policies with respect to
capital adequacy) by an amount deemed by such Bank to be material, then from
time to time, after submission by such Bank to HCC (with a copy to the Agent)
of a written request therefore, HCC shall pay to such Bank such additional
amount or amounts as will compensate such Bank for such reduction.
3.12 Taxes. (a) All payments made by HCC under this
Agreement and the Notes shall be made free and clear of, and without deduction
or withholding for or on account of, any present or future income, stamp or
other taxes, levies, imposts, duties, charges, fees, deductions or
withholdings, now or hereafter imposed, levied, collected, withheld or assessed
by any Governmental Authority, excluding, in the case of the Agent and each
Bank, net income taxes and franchise taxes (imposed in lieu
35
of net income taxes) imposed on the Agent or such Bank, as the case may be, as
a result of a present or former connection between the jurisdiction of the
government or taxing authority imposing such tax and the Agent or such Bank
(excluding a connection arising solely from the Agent or such Bank having
executed, delivered, performed its obligations or received a payment under, or
enforced, this Agreement or the Notes) or any political subdivision or taxing
authority thereof or therein (all such non-excluded taxes, levies, imposts,
duties, charges, fees, deductions and withholdings being hereinafter called
"Taxes"). If any Taxes are required to be withheld from any amounts payable to
the Agent or any Bank hereunder or under the Notes, the amounts so payable to
the Agent or such Bank shall be increased to the extent necessary to yield to
the Agent or such Bank (after payment of all Taxes) interest or any such other
amounts payable hereunder at the rates or in the amounts specified in this
Agreement and the Notes. Whenever any Taxes are payable by HCC, as promptly as
possible thereafter HCC shall send to the Agent for its own account or for the
account of such Bank, as the case may be, a certified copy of an original
official receipt received by HCC showing payment thereof. If HCC fails to pay
any Taxes when due to the appropriate taxing authority or fails to remit to the
Agent the required receipts or other required documentary evidence, HCC shall
indemnify the Agent and the Banks for any incremental taxes, interest or
penalties that may become payable by the Agent or any Bank as a result of any
such failure. The agreements in this subsection shall survive the termination
of this Agreement and the payment of the Notes and all other amounts payable
hereunder. Notwithstanding the foregoing, before making any demand for payment
under this Section 3.12(a) each Bank agrees to use commercially reasonable
efforts (consistent with its internal policy and legal and regulatory
restrictions) to designate a different lender office if the making of such a
designation would avoid the need for, or reduce the amount of, such payments
required under this Section 3.12(a).
(b) Each Bank, including, without limitation, each Purchasing
Bank, that is not incorporated under the laws of the United States of America
or a state thereof agrees that prior to the first Interest Payment Date or, in
the case of a Purchasing Bank, the first Interest Payment Date to occur
subsequent to the date it becomes a party hereto it will deliver to HCC and the
Agent (i) two duly completed copies of United States Internal Revenue Service
Form 1001 or 4224 or successor applicable form, as the case may be, and (ii) an
Internal Revenue Service Form W-8 or W-9 or successor applicable form. Each
such Bank also agrees to deliver to HCC and the Agent two further copies of the
said Form 1001 or 4224 and Form W-8 or W-9, or successor applicable forms or
other manner of certification, as the case may be, on or before the date that
any such form expires or becomes obsolete or after the occurrence of any event
requiring a change in the most recent form previously delivered by it to HCC
and such extensions or renewals thereof as may reasonably be requested by HCC
or the
36
Agent, unless in any such case an event (including, without limitation, any
change in treaty, law or regulation) has occurred prior to the date on which
any such delivery would otherwise be required which renders all such forms
inapplicable or which would prevent such Bank from duly completing and
delivering any such form with respect to it and such Bank so advises HCC and
the Agent. Such Bank shall certify (i) in the case of a Form 1001 or 4224,
that it is entitled to receive payments under this Agreement without deduction
or withholding of any United States federal income taxes and (ii) in the case
of a Form W-8 or W-9, that it is entitled to an exemption from United States
backup withholding tax. Each Bank which fails to provide to HCC in a timely
manner such forms shall reimburse HCC upon demand for any penalties paid by HCC
as a result of any failure of HCC to withhold the required amounts, that are
caused by such Bank's failure to provide the required forms in a timely manner.
3.13 Indemnity. HCC agrees to indemnify each Bank and to
hold each Bank harmless from any loss or expenses which such Bank may sustain
or incur as a consequence of (a) default by HCC in payment when due of the
principal amount of or interest on any Eurodollar Loan, (b) default by HCC in
making a borrowing of, conversion into or continuation of Eurodollar Loans
after HCC has given a notice requesting the same in accordance with the
provisions of this Agreement, (c) default by HCC in making any prepayment after
HCC has given a notice thereof in accordance with the provisions of this
Agreement or (d) the making of a prepayment of Eurodollar Loans on a day which
is not the last day of an Interest Period with respect thereto, including,
without limitation, in each case, any such loss or expense arising from the
reemployment of funds obtained by it or from fees payable to terminate the
deposits from which such funds were obtained. This covenant shall survive the
termination of this Agreement and the payment of the Notes and all other
amounts payable hereunder.
SECTION 4. LETTERS OF CREDIT
4.1. L/C Commitment.
(a) Subject to the terms and conditions hereof, the Issuing
Bank, in reliance on the agreements of the other Banks set forth in subsection
4.4(a), agrees to issue letters of credit ("Letters of Credit") for the account
of HCC on any Business Day during the Commitment Period in such form as may be
approved from time to time by the Issuing Bank; provided that the Issuing Bank
shall have no obligation to issue any Letter of Credit if, after giving effect
to such issuance, (i) the L/C Obligations would exceed the L/C Commitment or
(ii) the Available Commitment would be less than zero.
(b) Each Letter of Credit shall:
37
(i) be denominated in Dollars and shall be either (1) a
standby letter of credit issued to support obligations of HCC (a
"Standby Letter of Credit"), or (2) a commercial letter of credit
issued in respect of the purchase of goods or services by HCC and its
Subsidiaries in the ordinary course of business (a "Commercial Letter
of Credit") and
(ii) expire no later than the Termination Date.
(c) Each Letter of Credit shall be subject to the Uniform
Customs and, to the extent not inconsistent therewith, the laws of the State of
New York.
(d) The Issuing Bank shall not at any time be obligated to
issue any Letter of Credit hereunder if such issuance would conflict with, or
cause the Issuing Bank or any L/C Participant to exceed any limits imposed by,
any applicable Requirement of Law.
4.2. Procedure for Issuance of Letters of Credit.
HCC may from time to time request that the Issuing Bank issue
a Letter of Credit by delivering to the Issuing Bank at its address for notices
specified herein an Application therefor, completed to the satisfaction of the
Issuing Bank, and such other certificates, documents and other papers and
information as the Issuing Bank may request. Upon receipt of any Application,
the Issuing Bank will process such Application and the certificates, documents
and other papers and information delivered to it in connection therewith in
accordance with its customary procedures and shall promptly issue the Letter of
Credit requested thereby (but in no event shall the Issuing Bank be required to
issue any Letter of Credit earlier than three Business Days after its receipt
of the Application therefor and all such other certificates, documents and
other papers and information relating thereto) by issuing the original of such
Letter of Credit to the beneficiary thereof or as otherwise may be agreed by
the Issuing Bank and HCC. The Issuing Bank shall furnish a copy of such Letter
of Credit to HCC promptly following the issuance thereof.
4.3. Fees, Commissions and Other Charges.
(a) HCC shall pay to the Agent, for the account of the
Issuing Bank and the L/C Participants, a fronting fee with respect to each
Commercial Letter of Credit in an amount equal to 1.0% of the face amount of
such Letter of Credit. .125% of such fee shall be payable to the Issuing Bank,
and the remaining .875% of such fee shall be payable to the L/C Participants to
be shared ratably among them in accordance with their respective Commitment
Percentages. Such fronting fee shall be payable in advance on the date of
issuance of each Letter of Credit and shall be nonrefundable.
38
(b) HCC shall pay to the Agent, for the account of the
Issuing Bank and the L/C Participants, a letter of credit commission with
respect to each Standby Letter of Credit, computed for the period from the date
of such payment to the date upon which the next such payment is due hereunder
at the rate of 1.0% per annum, calculated on the basis of a 365 (or 366-, as
the case may be) year, of the aggregate amount available to be drawn under such
Standby Letter of Credit on the date on which such fee is calculated. .125% of
such fee shall be payable to the Issuing Bank, and the remaining .875% of such
fee shall be payable to the L/C Participants to be shared ratably among them in
accordance with their respective Commitment Percentages. Such commissions
shall be payable in advance on the date of issuance of each Letter of Credit
and on each L/C Fee Payment Date to occur thereafter and shall be
nonrefundable.
(c) In addition to the foregoing fees and commissions, HCC
shall pay or reimburse the Issuing Bank for such reasonable, normal and
customary costs and expenses as are actually incurred or charged by the Issuing
Bank in issuing, effecting payment under, amending or otherwise administering
any Letter of Credit.
(d) The Agent shall, promptly following its receipt thereof,
distribute to the Issuing Bank and the L/C Participants all fees and
commissions received by the Agent for their respective accounts pursuant to
this subsection.
4.4. L/C Participations.
(a) The Issuing Bank irrevocably agrees to grant and hereby
grants to each L/C Participant, and, to induce the Issuing Bank to issue
Letters of Credit hereunder, each L/C Participant irrevocably agrees to accept
and purchase and hereby accepts and purchases from the Issuing Bank, on the
terms and conditions hereinafter stated, for such L/C Participant's own account
and risk an undivided interest equal to such L/C Participant's Commitment
Percentage in the Issuing Bank's obligations and rights under each Letter of
Credit issued hereunder and the amount of each draft paid by the Issuing Bank
thereunder. Each L/C Participant unconditionally and irrevocably agrees with
the Issuing Bank that, if a draft is paid under any Letter of Credit for which
the Issuing Bank is not reimbursed in full by HCC in accordance with the terms
of this Agreement, such L/C Participant shall pay to the Issuing Bank upon
demand at the Issuing Bank's address for notices specified herein an amount
equal to such L/C Participant's Commitment Percentage of the amount of such
draft, or any part thereof, which is not so reimbursed.
(b) If any amount required to be paid by any L/C Participant
to the Issuing Bank pursuant to paragraph 4.4(a) in respect of any unreimbursed
portion of any payment made by the Issuing Bank under any Letter of Credit is
paid to the Issuing Bank within three Business Days after the date such payment
is
39
due, such L/C Participant shall pay to the Issuing Bank on demand an amount
equal to the product of (1) such amount, times (2) the daily average Federal
funds rate, as quoted by the Issuing Bank, during the period from and including
the date such payment is required to the date on which such payment is
immediately available to the Issuing Bank, times (3) a fraction the numerator
of which is the number of days that elapse during such period and the
denominator of which is 360. If any such amount required to be paid by any L/C
Participant pursuant to paragraph 4.4(a) is not in fact made available to the
Issuing Bank by such L/C Participant within three Business Days after the date
such payment is due, the Issuing Bank shall be entitled to recover from such
L/C Participant, on demand, such amount with interest thereon calculated from
such due date at the rate per annum applicable to ABR Loans hereunder. A
certificate of the Issuing Bank submitted to any L/C Participant with respect
to any amounts owing under this subsection shall be conclusive in the absence
of manifest error.
(c) Whenever, at any time after the Issuing Bank has made
payment under any Letter of Credit and has received from any L/C Participant
its pro rata share of such payment in accordance with subsection 4.4(a), the
Issuing Bank receives any payment related to such Letter of Credit (whether
directly from HCC or otherwise, including proceeds of collateral applied
thereto by the Issuing Bank), or any payment of interest on account thereof,
the Issuing Bank will distribute to such L/C Participant its pro rata share
thereof; provided, however, that in the event that any such payment received by
the Issuing Bank shall be required to be returned by the Issuing Bank, such L/C
Participant shall return to the Issuing Bank the portion thereof previously
distributed by the Issuing Bank to it.
4.5. Reimbursement Obligation of HCC.
(a) HCC agrees to reimburse the Issuing Bank on each date on
which the Issuing Bank notifies HCC of the date and amount of a draft presented
under any Letter of Credit and paid by the Issuing Bank for the amount of (i)
such draft so paid and (ii) any taxes, fees, charges or other costs or expenses
incurred by the Issuing Bank in connection with such payment. Each such payment
shall be made to the Issuing Bank at its address for notices specified herein
in lawful money of the United States of America and in immediately available
funds.
(b) Interest shall be payable on any and all amounts
remaining unpaid by HCC under this subsection from the date such amounts become
payable (whether at stated maturity, by acceleration or otherwise) until
payment in full at the rate which would be payable on any outstanding ABR Loans
which were then overdue.
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(c) Each drawing under any Letter of Credit shall constitute
a request by HCC to the Agent for a borrowing pursuant to subsection 2.4
(Procedure for Revolving Credit Borrowing) of ABR Loans in the amount of such
drawing. The Borrowing Date with respect to such borrowing shall be the date of
such drawing.
4.6. Obligations Absolute.
(a) HCC's obligations under this Section 4 shall be absolute
and unconditional under any and all circumstances and irrespective of any
set-off, counterclaim or defense to payment which HCC may have or have had
against the Issuing Bank or any beneficiary of a Letter of Credit.
(b) HCC also agrees with the Issuing Bank that the Issuing
Bank shall not be responsible for, and HCC's Reimbursement Obligations under
subsection 4.5(a) shall not be affected by, among other things, (i) the
validity or genuineness of documents or of any endorsements thereon, even
though such documents shall in fact prove to be invalid, fraudulent or forged,
or (ii) any dispute between or among HCC and any beneficiary of any Letter of
Credit or any other party to which such Letter of Credit may be transferred or
(iii) any claims whatsoever of HCC against any beneficiary of such Letter of
Credit or any such transferee.
(c) The Issuing Bank shall not be liable for any error,
omission, interruption or delay in transmission, dispatch or delivery of any
message or advice, however transmitted, in connection with any Letter of
Credit, except for errors or omissions caused by the Issuing Bank's gross
negligence or willful misconduct.
(d) HCC agrees that any action taken or omitted by the
Issuing Bank under or in connection with any Letter of Credit or the related
drafts or documents, if done in the absence of gross negligence of willful
misconduct and in accordance with the standards of care specified in the
Uniform Commercial Code of the State of New York, shall be binding on HCC and
shall not result in any liability of the Issuing Bank to HCC.
4.7. Letter of Credit Payments.
If any draft shall be presented for payment under any Letter
of Credit, the Issuing Bank shall promptly notify HCC of the date and amount
thereof. The responsibility of the Issuing Bank to HCC in connection with any
draft presented for payment under any Letter of Credit shall, in addition to
any payment obligation expressly provided for in such Letter of Credit, be
limited to determining that the documents (including each draft) delivered
under such Letter of Credit in connection with such presentment are in
conformity with such Letter of Credit.
41
4.8. Application.
To the extent that any provision of any Application related to
any Letter of Credit is inconsistent with the provisions of this Section 4, the
provisions of this Section 4 shall apply.
SECTION 5. REPRESENTATIONS AND WARRANTIES
To induce the Banks to enter into this Agreement and to make
the Loans and issue or participate in the Letters of Credit, HCC hereby
represents and warrants to the Agent and each Bank that:
5.1 Financial Condition. (a) The consolidated balance
sheets of HCC and its consolidated Subsidiaries as at December 31, 1994 and
December 31, 1993 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 Bank, are complete and
correct and present fairly 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, 1995, June 30, 1995 and September 30, 1995, the
related unaudited consolidated statements of income and of cash flows for the
three, six and nine-month periods ended on such dates, certified by a
Responsible Officer of HCC, copies of which have heretofore been furnished to
each Bank, are complete and correct and present fairly 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, six and nine-month periods then ended (subject to normal year-end
audit adjustments). The unaudited consolidated balance sheets of HCC and its
consolidated Subsidiaries as at January 31, 1995, February 28, 1995, March 31,
1995, April 30, 1995, May 31, 1995, June 30, 1995, July 31, 1995, August 31,
1995 and September 30, 1995 and the related unaudited consolidated statements
of income and of cash flows for the one month periods ended on such dates,
certified by a Responsible Officer of HCC, copies of which have heretofore been
furnished to each Bank, are complete and correct and present fairly 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 one month periods then ended (subject to normal year-end
audit adjustments).
(b) The pro forma balance sheet of HCC and its consolidated
Subsidiaries (the "Pro Forma Balance Sheet"), certified by the chief financial
officer of HCC as being the unaudited balance sheet of HCC and its consolidated
Subsidiaries
42
as at September 30, 1995 adjusted for the Equity Transactions and any
transactions related thereto, the transactions contemplated by this Agreement
and the transactions contemplated by the JEDI Loan Agreement and as being,
together with the notes thereto, a good faith estimate on a pro forma basis of
the financial position of HCC and its consolidated Subsidiaries as at September
30, 1995 as adjusted as described above assuming that the transactions
specified above had actually occurred at September 30, 1995.
(c) 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 Guaranty Agreement and the Specific Guaranty, neither
HCC nor any of its consolidated Subsidiaries had, at the date of the most
recent balance sheet referred to above, any material Guarantee Obligation,
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 III to this Agreement, during the period from September 30, 1995 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 September 30, 1995.
5.2 No Change. Since December 31, 1994 (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 IV to this Agreement, 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.
5.3 Corporate Existence; Compliance with Law. Each Credit
Party (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
43
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.
5.4 Corporate Power; Authorization; Enforceable Obligations.
Each Credit Party has the corporate power and authority, and the legal right,
to make, deliver and perform the Loan Documents to which it is a party, and
with respect to the Security Documents to which it is a party to grant the
Liens pursuant thereto. HCC has the corporate power and authority, and the
legal right, to borrow hereunder and has taken all necessary corporate action
to authorize the borrowings on the terms and conditions of this Agreement, the
Notes and the Applications. Each Credit Party has taken all necessary
corporate action to authorize the execution, delivery and performance of the
Loan Documents to which it is a party, and with respect to the Security
Documents to which it is a party to grant the Liens pursuant thereto. Except
as disclosed on Schedule V to this Agreement, 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 under contracts the failure to obtain would
not, in the aggregate, reasonably be expected to have a Material Adverse
Effect) is required in connection with the borrowings hereunder or with the
execution, delivery, performance, validity or enforceability of this Agreement,
the Notes, the Applications or any of the other Loan Documents or, with respect
to the Security Documents, the granting of the Liens thereunder. This
Agreement has been, and each Note, each Application and each other Loan
Document will be, duly executed and delivered on behalf of the Credit Parties
party thereto. This Agreement constitutes, and each Note, each Application and
each other Loan Document when executed and delivered will constitute, a legal,
valid and binding obligation of the Credit Parties party thereto enforceable
against such Credit Parties 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).
5.5 No Legal Bar. Assuming receipt of the consents and
authorizations, and the occurrence of the filing and other acts, set forth on
Schedule V to this Agreement, the execution, delivery and performance of this
Agreement, the Applications, the Notes and the other Loan Documents, the
borrowings hereunder and the use of the proceeds thereof will not violate any
Requirement of Law or Contractual Obligation of any Credit 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
44
to any such Requirement of Law or Contractual Obligation, except as
contemplated hereby or thereby.
5.6 No Material Litigation. Except as set forth in Schedule
VI, 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 Credit Party or against any of their respective properties or
revenues (a) with respect to this Agreement, the Notes or the other Loan
Documents or any of the transactions contemplated hereby, or (b) which would
reasonably be expected to have a Material Adverse Effect.
5.7 No Default. None of the Credit Parties 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.
5.8 Ownership of Property; Liens; Leases of Equipment. Each
of the Credit Parties 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 subsection 8.3. None of the Equipment or Inventory
(as defined in any Security Agreement) owned by any Credit Party has been
leased by such Credit Party as lessor, except pursuant to operating leases
(which do not constitute Financing Leases) which are in one of the forms (with
appropriate insertions as to date, amounts, parties and designation of
Equipment or Inventory (as so defined) covered thereby, and other minor
deviations which do not materially alter the terms thereof) annexed hereto as
Schedule VII, as the same may be modified from time to time as set forth in
subsection 8.6(c). None of the natural gas compressors and related equipment
owned by any Credit Party constitutes "fixtures" under the Uniform Commercial
Code or other applicable law of any jurisdiction in which such natural gas
compressors and related equipment are located. As used herein, Equipment or
Inventory leased by a Credit Party under a Financing Lease shall be deemed
"owned" by such Credit Party.
5.9 Intellectual Property. Each Credit Party 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 HCC, 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
45
effectiveness of any such Intellectual Property, nor does HCC 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 Credit Parties
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.
5.10 No Burdensome Restrictions. Except as disclosed on
Schedule VIII, no Requirement of Law or Contractual Obligation of any Credit
Party would reasonably be expected to have a Material Adverse Effect.
5.11 Taxes. Each of the Credit Parties has filed or caused
to be filed all tax returns which, to the knowledge of HCC, 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
Credit Parties, as the case may be); no tax Lien has been filed against the
property of any Credit Party, and, to the knowledge of HCC, no claim is being
asserted, with respect to any such tax, fee or other charge.
5.12 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 Bank or the Agent,
HCC will furnish to the Agent and each Bank a statement to the foregoing effect
in conformity with the requirements of FR Form U-1 referred to in said
Regulation U.
5.13 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
46
representation is made or deemed made, exceed the value of the assets of such
Plan allocable to such accrued benefits. Neither HCC nor any Commonly
Controlled Entity has had a complete or partial withdrawal from any
Multiemployer Plan, and neither HCC nor any Commonly Controlled Entity would
become subject to any liability under ERISA if HCC or any such Commonly
Controlled Entity were to withdraw completely from all Multiemployer Plans as
of the valuation date most closely preceding the date on which this
representation is made or deemed made. No such Multiemployer Plan is in
Reorganization or Insolvent. The present value (determined using actuarial and
other assumptions which are reasonable in respect of the benefits provided and
the employees participating) of the liability of HCC and each Commonly
Controlled Entity for post retirement benefits to be provided to their current
and former employees under Plans which are welfare benefit plans (as defined in
Section 3(1) of ERISA) does not, in the aggregate, exceed the assets under all
such Plans allocable to such benefits.
5.14 Investment Company Act; Other Regulations. None of the
Credit Parties 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 Credit Parties 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 Credit Parties 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.
5.15 Subsidiaries. As of the Closing Date, MEI, the Real
Estate Subsidiary, Hanover/Smith, Marketing, Hanover Acquisition, Astra, CCI,
Hanover Venezuela and PGN constitute all the Subsidiaries of HCC at the date
hereof. The aggregate value of all assets owned by Marketing as of the date
hereof is less than $10,000. In reliance thereon, no guarantee by Marketing or
Lien on any assets thereof is being granted to the holders of the Secured
Obligations on the Closing Date pursuant to the Security Documents. Other than
cash or Cash Equivalents located in bank accounts at Chemical Bank, none of the
assets owned by Hanover Venezuela, PGN, Astra or CCI as of the date hereof are
located within the United States of America or any territory thereof. In
reliance thereon, no guarantee by Hanover Venezuela, PGN, Astra or CCI or Lien
on any assets of any thereof is being granted to the holders of the Secured
Obligations on the Closing Date pursuant to the Security Documents.
5.16 Purpose of Loans. The proceeds of the Loans shall be
used for the working capital and general corporate purposes of HCC and its
Subsidiaries.
47
5.17 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 Credit Parties (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 IX, the Properties do
not contain, and have not previously contained, in, on, or under,
including, without limitation, the soil and groundwater thereunder,
any Hazardous Materials in concentrations which violate Environmental
Laws.
(b) Except as set forth on Schedule IX, the Properties
and all operations and facilities at the Properties are in compliance
with all Environmental Laws, and there is no Hazardous Materials
contamination or violation of any Environmental Law which could
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 IX, none of the
Credit Parties has received any complaint, notice of violation,
alleged violation, investigation or advisory action or of potential
liability or of potential responsibility regarding environmental
protection matters or environmental permit compliance with regard to
the Properties, nor is HCC aware that any Governmental Authority is
contemplating delivering to any Credit Party any such notice.
(d) Hazardous Materials have not been generated, treated,
stored, disposed of, at, on or under any of the Properties, nor have
any Hazardous Materials 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 Credit
Party.
(e) There are no governmental, administrative actions or
judicial proceedings pending or contemplated under any Environmental
Laws to which any Credit Party is or to its knowledge will be named as
a party with respect to the Properties, 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 any of the
Properties.
5.18 Regulation H. None of the Mortgages encumber improved
real property which is located in an area that has been
48
identified by the Secretary of Housing and Urban Development as an area having
special flood hazards and in which flood insurance has been made available
under the National Flood Insurance Act of 1968.
5.19 Accuracy and Completeness of Information. The factual
statements contained in the Loan Documents 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 Banks by any
Credit Party from time to time in connection with this Agreement (in any case
excluding any of the financial statements referred to in Section 5.1(a)
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. As at the date of this Agreement there is no fact known to
any Credit Party which materially and adversely affects, or which would
reasonably be expected to materially adversely affect, the business,
operations, assets, prospects or financial or other condition of HCC and its
Subsidiaries taken as a whole.
5.20 Security Documents. (a) The Pledge Agreements are
effective to create in favor of the Collateral Trustee, for the ratable benefit
of the holders of the Secured Obligations, (i) a legal, valid and enforceable
security interest in Pledged Stock (and the proceeds thereof) the stock
certificates of which have been delivered to the Collateral Trustee and that
the Pledge Agreements constitute fully perfected first Liens on, and security
interests in, all right, title and interest of HCC and Hanover Acquisition in
such Pledged Stock, and in proceeds thereof, superior in right to any other
Person and (ii) with respect to Pledged Stock the stock certificates of which
have not been delivered to the Collateral Trustee prior to the date hereof, a
legal, valid and enforceable security interest in such Pledged Stock (and the
proceeds thereof), and when stock certificates representing such Pledged Stock
are delivered to the Collateral Trustee, the Pledge Agreements shall constitute
fully perfected first Liens on, and security interests in, all right, title and
interest of HCC and Hanover Acquisition in such Pledged Stock and in proceeds
thereof superior in right to any other Person.
(b) The Security Documents are each effective to create in
favor of the Collateral Trustee, for the ratable benefit of the holders of the
Secured Obligations, a legal, valid and enforceable security interest in the
respective collateral described therein and proceeds thereof, and financing
statements in appropriate form have been filed in the offices specified in such
Security Documents, and the other actions required to be
49
taken by all Security Documents have been taken, and the Security Documents
constitute fully perfected, first priority Liens on (except that the Hanover
Land Security Agreement and the Hanover Land Texas Mortgage each constitute a
fully perfected second priority Lien), and security interests in, all right,
title and interest of the Credit Parties in such collateral and the proceeds
thereof superior in right to any other Person (other than with respect to the
Hanover Land Security Agreement and the Hanover Land Texas Mortgage in which
case, inferior to the secured party that holds the first priority Lien) other
than Liens permitted hereby.
SECTION 6. CONDITIONS PRECEDENT
6.1 Conditions to Restructuring of the Existing Revolving
Credit Loans and the Initial Extensions of Credit. The agreement of each Bank
to abide by its obligations under subsection 2.1 and to make the initial
extension of credit requested to be made by it is subject to the satisfaction,
immediately prior to or concurrently therewith on the Closing Date, of the
following conditions precedent:
(a) Agreement, Notes. The Agent shall have received (i)
this Agreement, executed and delivered by a duly authorized officer of
HCC and duly acknowledged and agreed to by each of MEI, Hanover/Smith,
Hanover Acquisition and the Real Estate Subsidiary with a counterpart
for each Bank and (ii) for the account of each Bank, a Note conforming
to the requirements hereof and executed by a duly authorized officer
of HCC.
(b) JEDI Loan Agreement. The Agent shall have received,
with a copy for each Bank, true and correct copies of the JEDI Loan
Agreement and all schedules, opinions, certificates and other
agreements or documents delivered thereunder as requested by the
Agent, each copy certified as to authenticity by a Responsible Officer
of HCC, and each in form and substance reasonably satisfactory to the
Agent and each Bank.
(c) Collateral Trust Agreement. The Agent shall have
received, with a copy for each Bank, the Collateral Trust Agreement,
executed and delivered by a duly authorized officer of each of the
Collateral Trustee and the Credit Parties, together with copies of all
schedules, opinions, certificates, and other agreements or documents
delivered thereunder, each in form and substance reasonably
satisfactory to the Agent and the Banks.
(d) Existing Indebtedness. The Existing Loans shall be
converted into and continued as Revolving Credit Loans hereunder
pursuant to subsection 2.1.
50
(e) Guarantees. The Agent shall have received, with a
copy for each Bank, (i) the MEI Guarantee, executed and delivered by a
duly authorized officer of MEI, (ii) the Hanover/Smith Guarantee,
executed and delivered by a duly authorized officer of Hanover/Smith,
(iii) the Hanover Acquisition Guarantee, executed and delivered by a
duly authorized officer of Hanover Acquisition and (iv) the Hanover
Land Guarantee, executed and delivered by a duly authorized officer of
the Real Estate Subsidiary.
(f) Corporate Proceedings of the Credit Parties. The
Agent shall have received, with a counterpart for each Bank, a copy of
the resolutions, in form and substance satisfactory to the Agent, of
the Board of Directors of each of the Credit Parties authorizing (i)
the execution, delivery and performance of the Loan Documents, and the
granting continuation of the Liens provided for in the Security
Documents to which it is a party, and (ii) in the case of HCC, the
borrowings contemplated hereunder, certified by the Secretary or an
Assistant Secretary of each such Credit Party as of the Closing Date,
which certificate shall state that the resolutions thereby certified
have not been amended, modified, revoked or rescinded and shall be in
form and substance satisfactory to the Agent.
(g) Incumbency Certificates. The Agent shall have
received, with a copy for each Bank, a certificate of the Secretary or
Assistant Secretary of each Credit Party, dated the Closing Date, as
to the incumbency and signature of each of the officers signing each
of the Loan Documents to which it is a party and any other
certificates or other documents delivered in connection therewith,
together with evidence of the incumbency of such Secretary or
Assistant Secretary.
(h) Corporate Documents. The Agent shall have received,
with a counterpart for each Bank, true and complete copies of the
certificate of incorporation and by-laws of each of the Credit
Parties, certified as of the Closing Date as complete and correct
copies thereof by the Secretary or an Assistant Secretary of each such
Credit Party.
(i) No Violation. The consummation of the transactions
contemplated hereby shall not contravene, violate or conflict with,
nor involve the Agent, the Collateral Trustee or any Bank in any
violation of, any Requirement of Law.
(j) Licenses, Permits, etc. All licenses, permits,
exemptions, certificates and other governmental and third party
approvals and consents (including landlords' and other consents)
necessary or advisable in connection with (i) the participation by HCC
and its Subsidiaries in the
51
transactions contemplated by this Agreement or any of the Loan
Documents, (ii) the execution, delivery or performance by HCC and its
Subsidiaries or the validity and enforceability against HCC and its
Subsidiaries of the Loan Documents to which it or they is or are a
party, (iii) the grant by HCC of the Liens created pursuant to the
Security Documents and the validity and enforceability thereof and the
perfection of and the exercise by the Collateral Trustee and the
holders of the Secured Obligations of their rights and remedies
thereunder, and (iv) the continuing operations of HCC and its
Subsidiaries shall have been obtained and be in full force and effect
except to the extent that the failure to obtain or maintain in full
force and effect any such license, permit, exemption, certificate,
approval or consent would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on any of the
matters set forth in clauses (i) through (iv) of this subsection
6.1(j), and all applicable waiting periods shall have expired without
any action being taken or to HCC's knowledge threatened by any
competent authority which would restrain, prevent or otherwise
reasonably be expected to impose adverse conditions on the financing
thereof.
(k) Pledge Agreements; Pledged Stock. The Collateral
Trustee shall have received (i) with a copy for each Bank, each of the
HCC Pledge Agreement and the Hanover Acquisition Pledge Agreement,
executed and delivered by a duly authorized officer of HCC and Hanover
Acquisition, respectively, (ii) stock certificates representing 16,497
shares of common stock of MEI, 1,000 shares of common stock of
Hanover/Smith, 330 shares of common stock of Hanover Venezuela, 100
shares of common stock of Hanover Acquisition, 1000 shares of common
stock of Astra and 1,000 shares of common stock of the Real Estate
Subsidiary, in each case, pledged pursuant to the HCC Pledge Agreement
or the Hanover Acquisition Pledge Agreement, together with undated
stock powers endorsed in blank for each stock certificate representing
such Pledged Stock, and (iii) an acknowledgement and consent executed
by each of MEI, Hanover/Smith, Hanover Venezuela, Hanover Acquisition,
Astra and the Real Estate Subsidiary pursuant to the HCC Pledge
Agreement or the Hanover Acquisition Pledge Agreement. The Pledged
Stock under the Pledge Agreements shall constitute 100% of the issued
and outstanding Capital Stock of each of MEI, Hanover/Smith, Hanover
Acquisition, Astra and the Real Estate Subsidiary, and 66% of the
issued and outstanding Capital Stock of Hanover Venezuela.
(l) Security Agreements. The Agent shall have received,
with a copy for each Bank, each of the HCC Security Agreement, the MEI
Security Agreement, the Hanover/Smith Security Agreement, the Hanover
Acquisition Security Agreement and the Hanover Land Security Agreement
52
executed and delivered by a duly authorized officer of HCC, MEI,
Hanover/Smith, Hanover Acquisition and the Real Estate Subsidiary,
respectively.
(m) Mortgages. The Agent shall have received, with a
copy for each Bank, each of the HCC Oklahoma Mortgage, the HCC Texas
Mortgage, the Hanover/Smith Texas Leasehold Mortgage, the
Hanover/Smith Texas Mortgage and the Hanover Land Texas Mortgage
executed and delivered by a duly authorized officer of the applicable
Credit Party.
(n) Filings and Other Actions. (i) Any documents
(including without limitation financing statements and amendments to
financing statements) required to be filed under any of the Security
Documents in order to create or continue in favor of the Collateral
Trustee, for the ratable benefit of the holders of the Secured
Obligations, a perfected security interest in the collateral
thereunder shall have been properly filed in each office in each
jurisdiction listed in the respective Security Document, and such
filings are the only ones required in order to create in favor of the
Collateral Trustee, for the ratable benefit of the holders of the
Secured Obligations, a perfected Lien in the respective collateral
described therein. Subject to the terms of Section 4(c) of each of
the Security Agreements, the original copies of all chattel paper in
which the Collateral Trustee shall be granted a Lien under the
Security Agreements, including without limitation all leases of
natural gas compressors and oil and gas production equipment by HCC or
any of its Subsidiaries as lessor, shall have been stamped or
otherwise marked with the legend required by Section 5(b) of each of
the Security Agreements.
(ii) All other actions reasonably requested by the Collateral
Trustee for the attachment, perfection and priority of the Liens
granted by the Security Documents shall have been taken, including,
without limitation, the obtaining of consents, acknowledgements and
estoppel certificates from, and filings by, owners or operators of
natural gas pipeline systems, natural gas wells, real property on
which the same are located, and financing parties of any thereof.
The Agent shall have received evidence reasonably satisfactory to it
of such filing, registration, recording or other action and
satisfactory evidence of the payment of any necessary fee, tax or
expenses relating thereto.
(o) Lien Searches. The Agent shall have received, with a
copy for each Bank, the results of a recent Uniform Commercial Code
filings search by a Person satisfactory to the Agent in each of the
jurisdictions and offices in the United States where assets of HCC and
its Subsidiaries are
53
located or recorded, and such search shall reveal no Liens on any of
the assets of HCC or its Subsidiaries, except for Liens permitted
under subsection 8.3.
(p) Insurance. The Agent shall have received evidence
satisfactory to it that each Credit Party has obtained the insurance
policies required by subsection 7.5 and the Security Documents.
(q) Fees and Other Compensation. The Banks, the Agent and
the Collateral Trustee shall have received the fees and other
compensation to be received on the Closing Date referred to in
subsection 3.2(b) and all interest and fees under the Existing
Agreement shall have been paid in full.
(r) Legal Opinions. The Agent shall have received, with a
counterpart for each Bank, the following executed legal opinions:
(i) the executed legal opinion of Neal, Gerber &
Eisenberg, counsel to the Credit Parties, substantially in the
form of Exhibit O-1;
(ii) the executed legal opinion of Jackson &
Walker, special counsel to the Credit Parties in the State of
Texas, substantially in the form of Exhibit O-2;
(iii) the executed legal opinion of Jackson &
Walker, special counsel to the Credit Parties in the State of
Louisiana, substantially in the form of Exhibit O-3; and
(iv) the executed legal opinion of Mock, Schwabe,
Waldo, Elder, Reeves & Bryant, special counsel to the Credit
Parties in the State of Oklahoma, substantially in the form of
Exhibit O-4.
(s) Disclosure. (i) No information shall have been disclosed
to the Banks which is inconsistent with information as of September
30, 1995 disclosed to the Banks and which would reasonably be expected
to have a material adverse effect on the condition (financial or
otherwise), business, assets or operations of HCC and its Subsidiaries
taken as a whole, (ii) no event or events shall have occurred which
separately, or in the aggregate will or, in the reasonable judgment of
the Banks, would reasonably be expected to materially and adversely
affect such condition (financial or otherwise), business, assets,
operations or prospects or the ability of any Credit Party to perform
its respective obligations under the Loan Documents to which it
54
is a party and (iii) there shall have been no material adverse change
in the financial condition, business, operations or prospects of HCC
and its Subsidiaries taken as a whole.
(t) Environmental Report. The Agent shall have received,
with a copy for each Bank, a copy of an environmental report in
respect of the real estate properties owned or leased by HCC and its
Subsidiaries which report has been prepared by environmental
consultants acceptable to the Agent and in form and substance
reasonably satisfactory to the Agent.
(u) Financial Statements. The Agent shall have received,
with a copy for each Bank, (i) audited consolidated financial
statements of HCC and its consolidated Subsidiaries for the two most
recent fiscal years ended prior to the Closing Date as to which such
financial statements are available and (ii) unaudited interim
consolidated financial statements of HCC and its consolidated
Subsidiaries for each fiscal month and quarterly period ended
subsequent to the date of the latest financial statements delivered
pursuant to clause (i) of this paragraph as to which such financial
statements are available, in each case, in form and substance
reasonably satisfactory to the Agent.
(v) Pro Forma Balance Sheet. The Agent shall have received,
with a copy for each Bank, a pro forma consolidated balance sheet of
HCC and its consolidated Subsidiaries as at September 30, 1995,
adjusted to give effect to the consummation of the Equity
Transactions, the transactions contemplated by this Agreement and the
transactions contemplated by the JEDI Loan Agreement, in form and
substance reasonably satisfactory to the Agent.
(w) Business Plan. The Agent shall have received, with a
copy for each Bank, a satisfactory business plan for fiscal year 1996
and a satisfactory written analysis of the business and prospects of
HCC and its consolidated Subsidiaries for the period from the Closing
Date through the Final Maturity Date, in form and substance reasonably
satisfactory to the Agent.
6.2 Conditions to Each Extension of Credit. The agreement of
each Bank to make any extension of credit requested to be made by it on any
date (including, without limitation, its initial extension of credit) is
subject to the satisfaction of the following conditions precedent:
(a) Representations and Warranties. Each of the
representations and warranties made by the Credit Parties in or
pursuant to the Loan Documents shall be true and correct
55
in all material respects on and as of such date as if made on and as
of such date (unless any such representations and warranties
specifically refer to another date).
(b) No Default. No Default or Event of Default shall
have occurred and be continuing on such date or after giving effect to
the extensions of credit requested to be made on such date.
(c) Additional Documents. The Agent shall have received
each additional document, instrument or item of information reasonably
requested by it to further effect the purposes of this Agreement,
including, without limitation, a copy of any debt instrument, security
agreement or other material contract to which any Credit Party may be
a party.
(d) Additional Matters. All corporate and other
proceedings, and all documents, instruments and other legal matters in
connection with the transactions contemplated by this Agreement, the
Security Documents and the JEDI Loan Agreement shall be reasonably
satisfactory in form and substance to the Agent, and the Agent shall
have received such other documents in respect of any aspect or
consequence of the transactions contemplated hereby or thereby as it
shall reasonably request to further effect the purposes of this
Agreement.
Each borrowing by and Letter of Credit issued on behalf of HCC hereunder shall
constitute a representation and warranty by HCC as of the date of such Loan
that the conditions contained in this subsection 6.2 have been satisfied.
SECTION 7. AFFIRMATIVE COVENANTS
HCC hereby agrees that, so long as the Commitments remain in
effect, any Note or any Letter of Credit remains outstanding and unpaid or any
other amount is owing to any Bank or the Agent hereunder, HCC shall and HCC
(except in the case of delivery of financial information, reports and notices)
shall cause each of its Subsidiaries to:
7.1 Financial Statements. Furnish to each Bank:
(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
56
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 Banks;
(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;
(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; and
(d) as soon as available, but in any event not later than 45
days after the end of each month, a copy of the unaudited consolidated
balance sheet of HCC and its consolidated Subsidiaries, as at the end
of such month, and the related unaudited consolidated statements of
income and retained earnings and of cash flows for such month, 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 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).
57
7.2 Certificates; Other Information. Furnish to each Bank:
(a) concurrently with the delivery of the financial
statements referred to in subsection 7.1(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 7.1(a) and 7.1(c), a certificate
of a Responsible Officer stating that, to the best of such Officer's
knowledge, HCC during such period has observed or performed all of its
covenants and other agreements, and satisfied every condition,
contained in this Agreement, in the Notes and the other Loan Documents
to which it is a party to be observed, performed or satisfied by it,
and that such Officer has obtained no knowledge of any Default or
Event of Default except as specified in such certificate;
(c) not later than 45 days following the end of each
fiscal year of HCC, a copy of the projections by HCC of the operating
budget and cash flow budget of HCC and its Subsidiaries for the
succeeding fiscal year, such projections to be accompanied by a
certificate of a Responsible Officer to the effect that such
projections have been prepared 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 such Person'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 7.1(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) as soon as available, but no later than 45 days after
the end of each calendar quarter, an inventory listing, certified by a
Responsible Officer of HCC, setting
58
forth the unit numbers, replacement costs, current rental rates,
horsepower, types of engine and types of cylinders for all natural gas
compressors owned by HCC and its consolidated Subsidiaries as of the
end of such quarter, and such other similar information with respect
to such compressors as the Agent may reasonably request;
(g) 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
(h) promptly, such additional financial and other
information as any Bank may from time to time reasonably request.
7.3 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.
7.4 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 subsection 8.5; 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.
7.5 Maintenance of Property; Insurance; Condemnation. (a)
Keep all property of HCC and its Subsidiaries useful and necessary in their
respective businesses in good working order and condition ordinary wear and
tear and immaterial impairments of value excepted.
(b) Maintain with financially sound and reputable insurance
companies insurance on all property of HCC and its Subsidiaries in at least
such amounts and against at least such risks (but including in any event public
liability, product liability, property damage, and business interruption) as
are usually insured against in the same general geographic area by companies
engaged in the same or a similar business provided that HCC and its
Subsidiaries may self-insure up to $1,000,000 in risks, exclusive of policy
deductibles, in accordance with any
59
self insurance plan reasonably acceptable to the Agent, and furnish to the
Agent, upon written request, full information as to the insurance and
self-insurance carried.
(c) Cause all (i) business interruption insurance and
property insurance to have loss payable clauses endorsed in favor of and made
payable to the Collateral Trustee as its interests may appear, (ii) liability
insurance to name the Collateral Trustee, the Agent, and the Banks as
additional insured, (iii) insurance to have a breach of warranty clause in
favor of the Collateral Trustee, the Agent, and the Banks, (iv) insurance to
provide that no cancellation, material reduction in amount, or material change
in coverage shall be effective until at least 30 days after receipt by the
Collateral Trustee and the Agent of written notice thereof.
(d) Assign and pay to the Collateral Trustee all proceeds of
business interruption, casualty, or condemnation, including business
interruption insurance, property insurance, condemnation awards, proceeds from
actions, and any other proceeds, to be held and applied in accordance with the
Collateral Trust Agreement. With respect to the proceeds of any business
interruption, casualty, or condemnation received by the Collateral Trustee
during any fiscal year of HCC in aggregate amounts equal to or less than
$5,000,000, the Agent shall instruct the Collateral Trustee to disburse the
proceeds to HCC or the other applicable Credit Parties (unless an Event of
Default exists as provided below). With respect to the proceeds of any
business interruption, casualty, or condemnation received by the Collateral
Trustee during any fiscal year of HCC in aggregate amounts exceeding
$5,000,000, the Agent shall instruct the Collateral Trustee to apply the
proceeds in excess of $5,000,000 against the Secured Obligations in accordance
with the Collateral Trust Agreement. If at any time an Event of Default
exists, the Majority Banks may instruct the Agent to direct the Collateral
Trustee to apply any business interruption, casualty, or condemnation proceeds
held by the Collateral Trustee as collateral against the Secured Obligations in
accordance with the Collateral Trust Agreement.
7.6 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 any Bank 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
60
examination or discussion shall unreasonably disrupt normal operations of HCC
or any of its Subsidiaries and any such representatives of the Agent and the
Banks 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 7.6.
7.7 Notices. Promptly give notice to the Agent and each Bank
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 (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 $1,000,000 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 knows thereof: (i) the occurrence or
expected occurrence of any Reportable Event with respect to any Plan,
or any withdrawal from, or the termination, Reorganization or
Insolvency of any Multiemployer Plan or (ii) the institution of
proceedings or the taking of any other action by the PBGC or HCC, any
Commonly Controlled Entity with respect to the termination of any
Single Employer Plan; and
(e) a development or event which has had or would
reasonably be expected to have a Material Adverse Effect.
Each notice pursuant to this subsection shall be accompanied by a statement of
a Responsible Officer setting forth details of the
61
occurrence referred to therein and stating what action HCC proposes to take
with respect thereto.
7.8 Environmental Laws.
(a) Comply in all material respects with, and insure
compliance by all tenants and subtenants, if any, with, all
Environmental Laws and obtain and comply in all material respects with
and maintain, and insure 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 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, the
Banks and the Collateral Trustee, 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) Promptly (and in any case within four months)
after the Closing Date, complete the development of 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 (the "Environmental Program"). The Environmental Program
shall be developed by or with the assistance of a reputable
independent environmental consulting firm reasonably acceptable to the
Agent (an "Environmental Consultant"). A reasonably detailed written
description of the Environmental Program
62
shall be provided to the Agent prior to finalization thereof, after
which, upon the Agent's reasonable request, HCC and the Environmental
Consultant involved shall confer with the Agent or any authorized
representative thereof concerning questions the Agent or such
authorized representative may have about the Environmental Program.
After finalization of the Environmental Program, all reasonable
efforts shall be undertaken to implement it. Within three months of
each anniversary of the Closing Date until all other obligations under
this Agreement are discharged, HCC shall submit to the Agent a written
report, prepared at HCC's expense by HCC's Environmental Consultant,
summarizing such Environmental Consultant's findings regarding: (i)
HCC's implementation of the Environment Program; and (ii) the adequacy
of the Environmental Program, if implemented according to its terms
(the "Annual Environmental Report"). Such findings shall be based on
such investigation after the applicable anniversary of the Closing
Date as the Environmental Consultant, in its professional judgment,
deems necessary to form a reasonable basis for its findings.
(e) Prior to acquiring any ownership interest in real
property, any leasehold interest or other interest in any real
property (other than real property that shall be, and to the knowledge
of HCC and its Qualified Subsidiaries after inquiry, has been, used
only for agricultural, residential, or office purposes) that would be
reasonably expected to give rise to HCC or any of its Qualified
Subsidiaries being found to be an operator subject to liability under
any Environmental Law: (i) obtain a written report by an Environmental
Consultant of the Environmental Consultant's assessment of the
presence or potential presence of significant levels of any hazardous
substances on, under, in, or about the property, or of other
conditions that would be reasonably expected to give rise to
significant liability under or violations of Environmental Law at the
property and which would reasonably be expected to have a Material
Adverse Effect; and (ii) provide the Agent with a copy of such report.
7.9 Pledge of After Acquired Property. If at any time
following the Closing Date HCC or any of its Subsidiaries shall acquire at any
time property of any nature whatsoever which is intended by the terms of the
applicable Security Document to be but is not subject to the Lien created by
the Security Documents, as soon as possible and in no event later than 30 days
after the relevant acquisition date and, to the extent permitted by applicable
law, grant to the Collateral Trustee, for the ratable benefit of the holders of
the Secured Obligations, a first priority Lien on such property pursuant to
documentation in form and substance reasonably satisfactory to the Collateral
Trustee. HCC or such Subsidiary, as the case may be, at its own expense,
63
shall execute, acknowledge and deliver, or cause the execution, acknowledgement
and delivery of, and thereafter register, file or record in an appropriate
governmental office, any document or instrument (including legal opinions,
title insurance, consents and corporate documents) and take all such actions
reasonably deemed by the Collateral Trustee to be necessary or desirable to
ensure the creation, priority and perfection of such Lien. HCC shall cause
each new Qualified Subsidiary of HCC or any Subsidiary thereof created or
acquired after the date hereof, immediately upon such creation or acquisition,
to execute a Security Agreement and a Guarantee, substantially in the forms of
the MEI Security Agreement and the MEI Guarantee, respectively, and HCC shall
execute and deliver a Supplement to the HCC Pledge Agreement with respect to
both new Qualified and Unqualified Subsidiaries (if such Subsidiary is a
corporation) or shall execute and deliver a Partnership Interest Pledge
Agreement in form and substance reasonably satisfactory to the Collateral
Trustee (if such Subsidiary is a partnership), or shall cause the Subsidiary of
HCC which holds the Capital Stock of such new Subsidiary to execute and deliver
a Pledge Agreement, in form and substance reasonably satisfactory to the
Collateral Trustee or a Partnership Interest Pledge Agreement, in form and
substance reasonably satisfactory to the Collateral Trustee, as appropriate,
with respect to such Capital Stock in each case providing for the pledge of
100% (or 66% in the case of Unqualified Subsidiaries) of the issued and
outstanding Capital Stock of such new Subsidiary owned by HCC or any of its
Subsidiaries to the Collateral Trustee for the benefit of the holders of the
Secured Obligations, and, if such new Subsidiary is a corporation, HCC or the
Subsidiary which holds the Capital Stock of such Subsidiary shall deliver to
the Collateral Trustee the stock certificates evidencing such Capital Stock
together with undated stock powers for each such certificate, duly executed in
blank.
7.10 Marketing Merger or Dissolution. As soon as practicable
following the Closing Date but in any event no later than 180 days following
the Closing Date, cause Marketing to be (i) merged with and into HCC, with HCC
being the surviving corporation, or (ii) dissolved.
SECTION 8. NEGATIVE COVENANTS
HCC hereby agrees that, so long as the Commitments remain in
effect, any Note or any Letter of Credit remains outstanding and unpaid or any
other amount is owing to any Bank or the Agent hereunder, HCC shall not, and
shall not permit any of its Subsidiaries to, directly or indirectly:
8.1 Financial Condition Covenants. (a) Maintenance of
Consolidated Indebtedness to Consolidated Capitalization. Permit the ratio
(expressed as a percentage) of Consolidated
64
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%.
(b) Consolidated EBITDA to Consolidated Fixed Charges.
Permit the ratio of Consolidated EBITDA to Consolidated Fixed Charges of HCC
and its Subsidiaries for the four consecutive fiscal quarters of HCC most
recently ended to be less than 1.5 to 1.0.
(c) 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.
8.2 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 Credit Parties under this Agreement and the
other Loan Documents;
(b) Indebtedness of HCC to any of its Subsidiaries (other
than the Real Estate Subsidiary) and of any such Subsidiary which is a
Credit Party to HCC or any other Subsidiary of HCC (other than the
Real Estate Subsidiary);
(c) Indebtedness outstanding on the Closing Date and
listed on Schedule X and all extensions, renewals, replacements,
refinancings and modifications thereof permitted hereunder;
(d) non-recourse Indebtedness of HCC or any of its
Subsidiaries (other than the Real Estate Subsidiary) in an aggregate
amount not to exceed $2,000,000;
(e) Indebtedness in respect of Financing Leases provided
that, after giving effect thereto, subsection 8.7 is not contravened;
(f) Indebtedness in respect of Subordinated Debt, the terms
and conditions of which have been approved in writing by the Required
Banks and all extensions, renewals, replacements, refinancings and
modifications thereof permitted hereunder;
(g) Indebtedness under the JEDI Loan Agreement and all
extensions, renewals, replacements, refinancings and modifications
thereof permitted hereunder, including refinancings of Indebtedness
under the JEDI Loan Agreement by other lenders under other agreements
if the net proceeds thereof are used to prepay Indebtedness under the
JEDI Loan Agreement;
65
(h) Up to $35,000,000 of outstanding Indebtedness of
Unqualified Subsidiaries of HCC; provided that any such Indebtedness
is nonrecourse to HCC and the Qualified Subsidiaries; and
(i) Indebtedness not contemplated by clauses (a)-(h) above
not exceeding $1,500,000 in the aggregate.
8.3 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 created by the Security Documents in favor of
the Collateral Trustee for the benefit of the holders of the Secured
Obligations;
(b) 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;
(c) 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;
(d) pledges or deposits in connection with workers'
compensation, unemployment insurance and other social security
legislation;
(e) 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;
(f) 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;
(g) Liens in existence on the Closing Date listed on
Schedule XI, securing Indebtedness permitted by subsection 8.2(c),
provided that no such Lien is spread to cover any additional property
after the Closing Date and that the amount of Indebtedness secured
thereby is not increased;
66
(h) Liens on (1) natural gas compressors and related
equipment, and usual accessories and improvements and proceeds
thereof, and (2) oil and gas production equipment, in each case, the
acquisition of which were financed with the proceeds of the
Indebtedness permitted by subsection 8.2(e) or (g) 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;
(i) Liens on assets of HCC, MEI, Hanover/Smith, Hanover
Acquisition, and the Real Estate Subsidiary listed on Schedule XII,
provided that no such Lien is spread to cover any additional property
after the Closing Date and that the amount of Indebtedness secured
thereby is not increased;
(j) Liens on the assets of Unqualified Subsidiaries of HCC
securing Indebtedness of such Unqualified Subsidiaries permitted under
Section 8.2(h);
(k) Liens securing Derivatives entered into by HCC and
its Subsidiaries which are permitted hereunder; and
(l) Liens not otherwise permitted in clauses (a)-(k) above
securing Indebtedness not exceeding $1,500,000 in the aggregate.
8.4 Limitation on Guarantee Obligations. Create, incur,
assume or suffer to exist any Guarantee Obligation except:
(a) the Guarantees;
(b) the guarantees of the obligations of HCC under the
JEDI Loan Agreement;
(c) the Guaranty Agreement, dated November 22, 1993, between
HCC and First Interstate, as successor in interest to Transfield
Corporation, as amended (the "Guaranty Agreement");
(d) the Specific Guaranty, dated June 23, 1993, between HCC
and First Interstate, as successor in interest to Transfield
Corporation, as amended (the "Specific Guaranty"); and
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(e) Up to $5 million in the aggregate of Guarantee
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.
8.5 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 (other than the Real Estate
Subsidiary) may be merged or consolidated with or into HCC or any
other Qualified Subsidiary (other than the Real Estate Subsidiary);
provided, that HCC or such Qualified Subsidiary shall be the
continuing or surviving corporation;
(b) HCC or any Qualified Subsidiary (other than the Real
Estate 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 (other than the Real Estate
Subsidiary) may sell, lease, assign, transfer or otherwise dispose of
any or all of its assets (upon voluntary liquidation or otherwise) to
HCC or any Qualified Subsidiary; and
(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.
8.6 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
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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 $2,000,000 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 fabricated by HCC
or any of its Subsidiaries for sale to third parties and 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 (other than
the Real Estate Subsidiary) 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)
which are in one of the forms (with appropriate insertions as to date,
amounts, parties, and designation of leased equipment) attached hereto
as part of Schedule VII, provided that any such form may be modified
with the prior written consent of the Agent and the Required Banks
which consent shall not be unreasonably withheld;
(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 8.5;
(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, the proceeds of which in excess of
$5,000,000 during any fiscal year of HCC are paid to the Collateral
Trustee to be held and applied as cash collateral for the benefit of
the holders of the Secured Obligations in accordance with the terms of
the Collateral Trust Agreement (with respect to any proceeds of the
sale of natural gas compressors and oil and gas production equipment
held as collateral by the Collateral Trustee, unless an Event of
Default exists, the Agent shall instruct the Collateral Trustee to
disburse the proceeds to HCC 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; if such reinvestment is not made,
the Agent shall instruct the Collateral Trustee to apply the proceeds
against the Secured Obligations in accordance with the Collateral
Trust Agreement; and if at any time an Event of Default exists,
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the Majority Banks may instruct the Agent to direct the Collateral
Trustee to apply all proceeds from the sale of natural gas compressors
and oil and gas production equipment against the Secured Obligations
in accordance with the Collateral Trust Agreement); and
(g) the lease by the Real Estate Subsidiary as lessor of real
estate properties to HCC or any Qualified Subsidiary of HCC for use by
HCC or such Qualified Subsidiary as the site of its offices and
facilities.
8.7 Limitation on Leases. Permit Consolidated Lease Expense
for any fiscal year of HCC to exceed $1,100,000.
8.8 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 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 shares of HCC common stock from its employees and
former employees so long as the aggregate amount of all such repurchases since
the date of this Agreement does not exceed $2,500,000, and (iii) HCC may
declare or pay dividends on and make mandatory stock repurchases (pursuant to
the terms of the applicable certificate of designation) of its 6.5% Cumulative
Redeemable Series A Preferred Stock and its 6.5% Cumulative Redeemable
Convertible Series B Preferred Stock.
8.9 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 holder of Secured
Obligations under this Agreement or under the JEDI Loan Agreement; provided,
that the aggregate notional amounts of such Derivatives shall not exceed the
aggregate amount of loans outstanding hereunder and under the JEDI Loan
Agreement.
8.10 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
70
herein collectively referred to as "Investments"), any Person, except:
(a) extensions of trade credit in the ordinary course of
business;
(b) Investments in Cash Equivalents;
(c) loans and advances to employees of such Person or its
Subsidiaries for travel, entertainment and relocation expenses in the
ordinary course of business in an aggregate amount for HCC and its
Subsidiaries not to exceed $250,000 at any one time outstanding;
(d) Investments by HCC in its Subsidiaries which are or
become Credit Parties and investments by such Subsidiaries which are
or become Credit Parties in HCC and in other Subsidiaries of HCC which
are or become Credit Parties;
(e) Investments by HCC in the Real Estate Subsidiary in
an aggregate amount not to exceed $35,000 per month for the sole
purpose of making repayments on Indebtedness permitted by subsection
8.2(d) plus amounts necessary to maintain and operate the real
property and improvements thereon owned by the Real Estate Subsidiary;
(f) Investments in Subsidiaries of HCC which are
organized in a jurisdiction outside of the United States so long as
(i) on or before December 31, 1996, the aggregate Investments in such
foreign Subsidiaries does not exceed 20% of the Consolidated Net Worth
of HCC as of the end of the most recently ended month and the
aggregate Investment in any one country other than the United States
does not exceed 15% of the Consolidated Net Worth of HCC as of the end
of the most recently ended month and (ii) after December 31, 1996, the
aggregate Investments in such foreign Subsidiaries does not exceed 20%
of the Consolidated Net Worth of HCC as of the end of the most
recently ended month and the aggregate Investment in any one country
other than the United States does not exceed 10% of the Consolidated
Net Worth of HCC as of the end of the most recently ended month;
(g) Investments by HCC or its Subsidiaries in assets of a
Person (whether or not constituting a business unit of such Person)
which do not exceed an aggregate of $1,500,000 in any fiscal year; and
(h) Loans to employees, officers and directors of HCC and its
Subsidiaries to acquire shares of capital stock of HCC not to exceed
$5,000,000 with respect to such loans made on or prior to the date
hereof and not to exceed an
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additional $3,000,000 with respect to such loans made after the date
hereof.
8.11 Limitation on Optional Payments and Modifications of
Debt Instruments. (a) Make any optional payment or prepayment in excess of $5
million during any calendar year (other than prepayments covered by the proviso
below) on or redemption of any Indebtedness (other than Indebtedness pursuant
to this Agreement and as provided for in the proviso below) or (b) amend,
modify or change, or consent or agree to any amendment, modification or change
to any of the terms of any such Indebtedness (other than any such amendment,
modification or change which would extend the maturity or reduce the amount of
any payment of principal thereof or which would reduce the rate or extend the
date for payment of interest thereon, or any amendment or waiver which would
render the terms of such Indebtedness less restrictive or as provided for in
the proviso below), including, in the case of the JEDI Loan Agreement, any
increase to the rate of interest, the tenor of loans thereunder, the aggregate
amount of Commitments (as defined in the JEDI Loan Agreement) thereunder, or
any additional negative covenants thereto that would materially prejudice the
rights of the Agent or the Banks hereunder; provided, however, that HCC may
make required prepayments of Indebtedness under the JEDI Loan Agreement, any
prepayments of Indebtedness under the JEDI Loan Agreement during the period
while such Indebtedness may be prepaid and reborrowed thereunder, and any
prepayments of Indebtedness under the JEDI Loan Agreement in connection with
refinancings thereof.
8.12 Transactions with Affiliates. 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, except for transactions of a type set forth on Schedule XIII.
8.13 Sale and Leaseback. Enter into any arrangement with any
Person providing for the leasing by HCC or any of the Subsidiaries of HCC 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, except that HCC and its
Subsidiaries may enter into Financing Leases as lessee for natural gas
compressors if after giving effect thereto subsection 8.2 is not contravened.
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8.14 Corporate Documents. Amend its Certificate of
Incorporation in any way adverse to the interests of the Agent and the Banks.
8.15 Fiscal Year. Permit the fiscal year of HCC to end on a
day other than December 31.
8.16 Limitation on Negative Pledge Clauses. Enter into any
agreement, other than Financing Leases permitted by this Agreement (in which
cases, any prohibition or limitation shall only be effective against the assets
financed thereby), the JEDI Loan Agreement, the Guaranty Agreement and the
Specific Guaranty, with any Person other than the Banks pursuant hereto which
prohibits or limits the ability of HCC or any of the Subsidiaries of HCC (other
than the Real Estate Subsidiary) to create, incur, assume or suffer to exist
any Lien upon any of its property, assets or revenues, whether now owned or
hereafter acquired.
8.17 Nature of Business. Engage in any business other than
(a) the leasing and maintenance of natural gas compressor units, (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.
8.18 Unqualified Subsidiaries. Permit any Unqualified
Subsidiary to directly or indirectly own any assets (other than cash or Cash
Equivalents located in bank accounts at Chemical Bank) which are located in the
United States of America or any territory thereof.
SECTION 9. EVENTS OF DEFAULT
If any of the following events shall occur and be continuing:
(a) HCC shall fail to pay any principal of any Note or
any Reimbursement Obligation when due in accordance with the terms
thereof or hereof; or HCC shall fail to pay any interest on any Note,
or any other amount payable hereunder, within five days after any such
interest or other amount becomes due in accordance with the terms
thereof or hereof; or
(b) Any representation or warranty made or deemed made by
any Credit Party herein or in any other Loan Document or which is
contained in any certificate, document or financial or other statement
furnished at any time under or in connection with this Agreement or
any other Loan Document
73
shall prove to have been incorrect in any material respect on or as of
the date made or deemed made; or
(c) HCC shall default in the observance or performance of
any agreement contained in Section 8 of this Agreement, or any Credit
Party shall default in the observance or performance of any agreement
contained in Section 5 of the Security Agreements or Section 5 of the
Pledge Agreements; or
(d) HCC shall default in the observance or performance of
any other agreement contained in this Agreement (other than as
provided in paragraphs (a) through (c) of this Section 9), or any
Credit Party shall default in the observance of performance of any
other agreement contained in the Security Agreements or the Pledge
Agreements (other than as provided in paragraphs (b) and (c) of this
Section 8) and such default shall continue unremedied for a period of
30 days; or
(e) Any Security Document shall, at any time, cease to be
in full force and effect (unless released by the Collateral Trustee)
or shall be declared null and void, or the validity or enforceability
thereof shall be contested by any Credit Party, or any of the Liens
intended to be created by any Security Document shall cease to be or
shall not be a valid and perfected Lien having the priority
contemplated thereby or any Guarantee or the subordination provisions
under the Subordinated Loan Agreement shall cease for any reason to be
in full force and effect or any Credit Party thereto shall so assert
in writing; or
(f) HCC or any of the Subsidiaries of HCC shall (i)
default in any payment of principal of or interest of any Indebtedness
(other than the Notes) or in the payment of any Guarantee Obligation,
in excess of $2,500,000 in the aggregate, beyond the period of grace
(not to exceed 30 days), if any, provided in the instrument or
agreement under which such Indebtedness or Guarantee Obligation was
created; or (ii) default in the observance or performance of any other
agreement or condition relating to any such Indebtedness or Guarantee
Obligation or contained in any instrument or agreement evidencing,
securing or relating thereto, or any other event shall occur or
condition exist, the effect of which default or other event or
condition is to cause, or to permit the holder or holders of such
Indebtedness or beneficiary or beneficiaries of such Guarantee
Obligation (or a trustee or agent on behalf of such holder or holders
or beneficiary or beneficiaries) to cause, with the giving of notice
if required, such Indebtedness to become due prior to its stated
maturity or such Guarantee Obligation to become payable; or
74
(g) (i) HCC or any of the Subsidiaries of HCC shall
commence any case, proceeding or other action (A) under any existing
or future law of any jurisdiction, domestic or foreign, relating to
bankruptcy, insolvency, reorganization or relief of debtors, seeking
to have an order for relief entered with respect to it, or seeking to
adjudicate it a bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment, winding-up, liquidation, dissolution,
composition or other relief with respect to it or its debts, or (B)
seeking appointment of a receiver, trustee, custodian or other similar
official for it or for all or any substantial part of its assets, or
any of HCC or any of the Subsidiaries of HCC shall make a general
assignment for the benefit of its creditors; or (ii) there shall be
commenced against any of HCC or any of the Subsidiaries of HCC any
case, proceeding or other action of a nature referred to in clause (i)
above which (A) results in the entry of an order for relief or any
such adjudication or appointment or (B) remains undismissed,
undischarged or unbonded for a period of 60 days; or (iii) there shall
be commenced against any of HCC or any of the Subsidiaries of HCC any
case, proceeding or other action seeking issuance of a warrant of
attachment, execution, distraint or similar process against all or any
substantial part of its assets which results in the entry of an order
for any such relief which shall not have been vacated, discharged, or
stayed or bonded pending appeal within 60 days from the entry thereof;
or (iv) any of HCC or any of the Subsidiaries of HCC shall take any
action in furtherance of, or indicating its consent to, approval of,
or acquiescence in, any of the acts set forth in clause (i), (ii), or
(iii) above; or (v) any of HCC or any of the Subsidiaries of HCC shall
generally not, or shall be unable to, or shall admit in writing its
inability to, pay its debts as they become due; or
(h) (i) Any Person shall engage in any non-exempt
"prohibited transaction" (as defined in Section 406 of ERISA or
Section 4975 of the Code) involving any Plan, (ii) any "accumulated
funding deficiency" (as defined in Section 302 of ERISA), whether or
not waived, shall exist with respect to any Plan or any lien shall
arise on the assets of HCC or any Commonly Controlled Entity in favor
of PBGC or a Plan, (iii) a Reportable Event shall occur with respect
to, or proceedings shall commence to have a trustee appointed, or a
trustee shall be appointed, to administer or to terminate, any Single
Employer Plan, which Reportable Event or commencement of proceedings
or appointment of a trustee is, in the reasonable opinion of the
Required Banks, likely to result in the termination of such Plan for
purposes of Title IV of ERISA, (iv) any Single Employer Plan shall
terminate for purposes of Title IV of ERISA, (v) HCC or any Commonly
Controlled Entity shall, or in the reasonable opinion of the Required
Banks is likely to, incur any liability in
75
connection with a withdrawal from, or the Insolvency or Reorganization
of, a Multiemployer Plan or (vi) any other event or condition shall
occur or exist, with respect to a Plan; and in each case in clauses
(i) through (vi) above, such event or condition, together with all
other such events or conditions, if any, could subject HCC or any of
its Subsidiaries to any tax, penalty or other liabilities in the
aggregate material in relation to the business, operations, property
or financial or other condition of HCC and its Subsidiaries taken as a
whole; or
(i) One or more judgments or decrees shall be entered
against HCC or any of the Subsidiaries of HCC involving in the
aggregate a liability (not paid or fully covered by insurance) of
$2,500,000 or more and all such judgments or decrees shall not have
been vacated, discharged, stayed or bonded pending appeal within 60
days from the entry thereof; or
(j) If at any time, HCC or any of the Subsidiaries of HCC
shall become liable for remediation and/or environmental compliance
expenses and/or fines, penalties or other charges which, in the
aggregate, are in excess of $2,500,000;
(k) If at any time GKH Investments, L.P. and GKH Private
Limited (collectively, "GKH Entities") in the aggregate shall own less
than 30% of the issued and outstanding common stock of HCC;
then, and in any such event, (A) if such event is an Event of Default specified
in clause (i) or (ii) of paragraph (g) above with respect to HCC automatically
the Commitments shall immediately terminate and the Loans hereunder (with
accrued interest thereon) and all other amounts owing under this Agreement
(including, without limitation, all amounts of L/C Obligations, whether or not
the beneficiaries of the then outstanding Letters of Credit shall have
presented the documents required thereunder) and the Notes shall immediately
become due and payable, and (B) if such event is any other Event of Default,
either or both of the following actions may be taken: (i) with the consent of
the Required Banks, the Agent may, or upon the request of the Required Banks,
the Agent shall, by notice to HCC declare the Commitments to be terminated
forthwith, whereupon the Commitments shall immediately terminate; and (ii) with
the consent of the Required Banks, the Agent may, or upon the request of the
Required Banks, the Agent shall, by notice of default to HCC declare the Loans
hereunder (with accrued interest thereon) and all other amounts owing under
this Agreement (including, without limitation, all amounts of L/C Obligations,
whether or not the beneficiaries of the then outstanding Letters of Credit
shall have presented the documents required thereunder) and the Notes to be due
and payable forthwith, whereupon the same shall immediately become due and
payable. With respect to all Letters
76
of Credit with respect to which presentment for honor shall not have occurred
at the time of an acceleration pursuant to the preceding paragraph, HCC shall
at such time deposit in a cash collateral account opened by the Agent an amount
equal to the aggregate then undrawn and unexpired amount of such Letters of
Credit. HCC hereby grants to the Agent, for the benefit of the Issuing Bank and
the L/C Participants, and, as set forth below, for the benefit of the holders
of the Secured Obligations under the Collateral Trust Agreement, a security
interest in such cash collateral to secure all obligations of HCC under this
Agreement and the other Loan Documents and to secure all Secured Obligations
under the Collateral Trust Agreement. Amounts held in such cash collateral
account shall be applied by the Agent first to the payment of drafts drawn
under such Letters of Credit, and the unused portion thereof after all such
Letters of Credit shall have expired or been fully drawn upon, if any, shall be
turned over to the Collateral Trustee for application in accordance with the
Collateral Trust Agreement. HCC shall execute and deliver to the Agent, for
the account of the Issuing Bank and the L/C Participants and for the account of
the holders of the Secured Obligations under the Collateral Trust Agreement,
such further documents and instruments as the Agent may request to evidence the
creation and perfection of the within security interest in such cash collateral
account. Except as expressly provided above in this Section, presentment,
demand, protest and all other notices of any kind are hereby expressly waived.
SECTION 10. THE AGENT
10.1 Appointment. Each Bank hereby irrevocably designates
and appoints Chemical as the Agent of such Bank under this Agreement and the
other Loan Documents, and each such Bank irrevocably authorizes Chemical, as
the Agent for such Bank, to take such action on its behalf under the provisions
of this Agreement and the other Loan Documents and to exercise such powers and
perform such duties as are expressly delegated to the Agent by the terms of
this Agreement and the other Loan Documents, together with such other powers as
are reasonably incidental thereto. Notwithstanding any provision to the
contrary elsewhere in this Agreement, the Agent shall not have any duties or
responsibilities, except those expressly set forth herein, or any fiduciary
relationship with any Bank, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or any other Loan Document or otherwise exist against the Agent.
10.2 Delegation of Duties. The Agent may execute any of its
duties under this Agreement and the other Loan Documents by or through agents
or attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Agent shall not be responsible for the
negligence or
77
misconduct of any agents or attorneys in-fact selected by it with reasonable
care.
10.3 Exculpatory Provisions. Neither the Agent nor any of
its officers, directors, employees, agents, attorneys-in-fact or Affiliates
shall be (i) liable for any action lawfully taken or omitted to be taken by it
or such Person under or in connection with this Agreement or any other Loan
Document (except for its or such Person's own gross negligence or willful
misconduct) or (ii) responsible in any manner to any of the Banks for any
recitals, statements, representations or warranties made by any Credit Party or
any officer thereof contained in this Agreement or any other Loan Document or
in any certificate, report, statement or other document referred to or provided
for in, or received by the Agent under or in connection with, this Agreement or
any other Loan Document or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or the Notes or any other Loan
Document or for any failure of any Credit Party to perform its obligations
hereunder or thereunder. The Agent shall not be under any obligation to any
Bank to ascertain or to inquire as to the observance or performance of any of
the agreements contained in, or conditions of, this Agreement or any other Loan
Document, or to inspect the properties, books or records of any Credit Party.
10.4 Reliance by Agent. The Agent shall be entitled to rely,
and shall be fully protected in relying, upon any Note, writing, resolution,
notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy,
telex or teletype message, statement, order or other document or conversation
believed by it to be genuine and correct and to have been signed, sent or made
by the proper Person or Persons and upon advice and statements of legal counsel
(including, without limitation, counsel to any Credit Party), independent
accountants and other experts selected by the Agent. The Agent may deem and
treat the payee of any Note as the owner thereof for all purposes unless a
written notice of assignment, negotiation or transfer thereof shall have been
filed with the Agent. The Agent shall be fully justified in failing or
refusing to take any action under this Agreement or any other Loan Document
unless it shall first receive such advice or concurrence of the Required Banks
as it deems appropriate or it shall first be indemnified to its satisfaction by
the Banks against any and all liability and expense which may be incurred by it
by reason of taking or continuing to take any such action. The Agent shall in
all cases be fully protected in acting, or in refraining from acting, under
this Agreement and the Notes and the other Loan Documents in accordance with a
request of the Required Banks, and such request and any action taken or failure
to act pursuant thereto shall be binding upon all the Banks and all future
holders of the Notes.
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10.5 Notice of Default. The Agent shall not be deemed to
have knowledge or notice of the occurrence of any Default or Event of Default
hereunder unless the Agent has received notice from a Bank or HCC referring to
this Agreement, describing such Default or Event of Default and stating that
such notice is a "notice of default". In the event that the Agent receives
such a notice, the Agent shall give notice thereof to the Banks. The Agent
shall take such action with respect to such Default or Event of Default as
shall be reasonably directed by the Required Banks; provided that unless and
until the Agent shall have received such directions, the Agent may (but shall
not be obligated to) take such action, or refrain from taking such action, with
respect to such Default or Event of Default as it shall deem advisable in the
best interests of the Banks.
10.6 Non-Reliance on Agent and Other Banks. Each Bank
expressly acknowledges that neither the Agent nor any of its officers,
directors, employees, agents, attorneys-in-fact or Affiliates has made any
representations or warranties to it and that no act by the Agent hereinafter
taken, including any review of the affairs of any Credit Party shall be deemed
to constitute any representation or warranty by the Agent to any Bank. Each
Bank represents to the Agent that it has, independently and without reliance
upon the Agent or any other Bank, and based on such documents and information
as it has deemed appropriate, made its own appraisal of and investigation into
the business, operations, property, financial and other condition and
creditworthiness of HCC and each other Credit Party and made its own decision
to make its Loans hereunder and enter into this Agreement. Each Bank also
represents that it will, independently and without reliance upon the Agent or
any other Bank, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit analysis, appraisals
and decisions in taking or not taking action under this Agreement and the other
Loan Documents, and to make such investigation as it deems necessary to inform
itself as to the business, operations, property, financial and other condition
and creditworthiness of HCC and each other Credit Party. Except for notices,
reports and other documents expressly required to be furnished to the Banks by
the Agent hereunder, the Agent shall not have any duty or responsibility to
provide any Bank with any credit or other information concerning the business,
operations, property, condition (financial or otherwise), prospects or
creditworthiness of any Credit Party which may come into the possession of the
Agent or any of its officers, directors, employees, agents, attorneys-in-fact
or Affiliates.
10.7 Indemnification. The Banks agree to indemnify the Agent
in its capacity as such (to the extent not reimbursed by HCC, or the other
Credit Parties and without limiting the obligation of HCC, and each other
Credit Party to do so), ratably according to the respective amounts of their
original Commitments, from and against any and all liabilities,
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obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind whatsoever which may at any time
(including, without limitation, at any time following the payment of the Notes)
be imposed on, incurred by or asserted against the Agent in any way relating to
or arising out of this Agreement, any of the other Loan Documents or any
documents contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby or any action taken or omitted by the Agent
under or in connection with any of the foregoing; provided that no Bank shall
be liable for the payment of any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements resulting solely from the Agent's gross negligence or willful
misconduct. The agreements in this subsection shall survive the payment of the
Notes and all other amounts payable hereunder.
10.8 Agent in Its Individual Capacity. The Agent and its
Affiliates may make loans to, accept deposits from, hold equity securities of,
and generally engage in any kind of business with any Credit Party as though
the Agent were not the Agent hereunder and under the other Loan Documents.
With respect to its Loans made or renewed by it and any Note issued to it and
with respect to any Letter of Credit issued or participated in by it, the Agent
shall have the same rights and powers under this Agreement and the other Loan
Documents as any Bank and may exercise the same as though it were not the
Agent, and the terms "Bank" and "Banks" shall include the Agent in its
individual capacity.
10.9 Successor Agent. The Agent may resign as Agent upon 10
days' notice to the Banks. If the Agent shall resign as Agent under this
Agreement and the other Loan Documents, then the Required Banks shall appoint
from among the Banks a successor agent for the Banks, which successor agent
shall be approved by HCC whereupon such successor agent shall succeed to the
rights, powers and duties of the Agent, and the term "Agent" shall mean such
successor agent effective upon its appointment, and the former Agent's rights,
powers and duties as Agent shall be terminated, without any other or further
act or deed on the part of such former Agent or any of the parties to this
Agreement or any holders of the Notes. After any retiring Agent's resignation
as Agent, the provisions of this subsection shall inure to its benefit as to
any actions taken or omitted to be taken by it while it was Agent under this
Agreement and the other Loan Documents.
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SECTION 11. MISCELLANEOUS
11.1 Amendments and Waivers. Neither this Agreement, any
Note, any other Loan Document, nor any terms hereof or thereof may be amended,
supplemented or modified except in accordance with the provisions of this
subsection. With the written consent of the Required Banks, the Agent, HCC and
any other Credit Party thereto, may, from time to time, enter into written
amendments, supplements or modifications hereto and to the Notes and the other
Loan Documents for the purpose of adding any provisions to this Agreement or
the Notes or the other Loan Documents or changing in any manner the rights of
the Banks or of the Credit Parties party thereto hereunder or thereunder or
waiving, on such terms and conditions as the Agent may specify in such
instrument, any of the requirements of this Agreement or the Notes or the other
Loan Documents or any Default or Event of Default and its consequences;
provided, however, that no such waiver and no such amendment, supplement or
modification shall (a) reduce the amount or extend the maturity of any Note or
any installment thereof, or reduce the rate or extend the time of payment of
interest thereon, or reduce any fee payable to any Bank hereunder, or change
the amount of any Bank's Commitments, in each case without the consent of the
Bank affected thereby, or (b) amend, modify or waive any provision of this
subsection or reduce the percentage specified in the definition of Required
Banks or Majority Banks, or consent to the assignment or transfer by any Credit
Party of any of its rights and obligations under this Agreement and the other
Loan Documents or release any of the Collateral, in each case without the
written consent of all the Banks (except as contemplated by this Agreement or
the Security Documents), or (c) amend, modify or waive any provision of Section
10 without the written consent of the then Agent. Any such waiver and any such
amendment, supplement or modification shall apply equally to each of the Banks
and shall be binding upon each of the Credit Parties, the Banks, the Agent and
all future holders of the Notes. In the case of any waiver, each of the Credit
Parties, the Banks and the Agent shall be restored to their former position and
rights hereunder and under the outstanding Notes and any other Loan Documents,
and any Default or Event of Default waived shall be deemed to be cured and not
continuing; but no such waiver shall extend to any subsequent or other Default
or Event of Default, or impair any right consequent thereon.
11.2 Notices. All notices, requests and demands to or upon
the respective parties hereto to be effective shall be in writing (including by
telecopy, telegraph or telex), and, unless otherwise expressly provided herein,
shall be deemed to have been duly given or made when delivered by hand, or
three days after being deposited in the mail, postage prepaid, or, in the case
of telecopy notice, when received, or, in the case of telegraphic notice, when
delivered to the telegraph company, or, in the case of telex notice, when sent,
answerback received, addressed as
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follows in the case of HCC and the Agent, and as set forth in Schedule I in the
case of the other parties hereto, or to such other address as may be hereafter
notified by the respective parties hereto and any future holders of the Notes:
HCC: Hanover Compressor Company
12001 North Houston-Rosslyn
Houston, Texas 77086
Attention: Chief Financial Officer
Telecopy: (713) 447-8781
The Agent: Chemical Bank
270 Park Avenue
New York, New York 10017
Attention: James Ramage
Telecopy: (212) 270-2625
with a copy to: Chemical Securities Inc.
270 Park Avenue
New York, New York 10017
Attention: Douglas Petno
Telex: 232 337
Telecopy: (212) 270-4892
provided that any notice, request or demand to or upon the Agent or the Banks
pursuant to subsection 2.4, 3.3, 3.4, 3.5 or 3.9 shall not be effective until
received. A copy of any notice, request or demand to or upon any Credit Party
pursuant to this Agreement or any other Loan Document shall also be delivered
to Neal, Gerber & Eisenberg, Two North LaSalle Street, Suite 2200, Chicago,
Illinois 60602, attention: Rick Meller, Esq. (telecopy: (312) 269-1747).
11.3 No Waiver; Cumulative Remedies. No failure to exercise
and no delay in exercising, on the part of the Agent or any Bank, any right,
remedy, power or privilege hereunder shall operate as a waiver thereof; nor
shall any single or partial exercise of any right, remedy, power or privilege
hereunder preclude any other or further exercise thereof or the exercise of any
other right, remedy, power or privilege. The rights, remedies, powers and
privileges herein provided are cumulative and not exclusive of any rights,
remedies, powers and privileges provided by law.
11.4 Survival of Representations and Warranties. All
representations and warranties made hereunder and in any document, certificate
or statement delivered pursuant hereto or in connection herewith shall survive
the execution and delivery of this Agreement and the Notes.
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11.5 Payment of Expenses and Taxes. HCC agrees (a) to pay or
reimburse the Agent/Collateral Trustee for all its reasonable out-of-pocket
costs and expenses incurred in connection with the development, preparation and
execution of, and any amendment, supplement or modification to, this Agreement
and the Notes, the Collateral Trust Agreement and the other Loan Documents and
any other documents prepared in connection herewith or therewith, and the
consummation of the transactions contemplated hereby and thereby, including,
without limitation, the reasonable fees and disbursements of counsel to the
Agent/Collateral Trustee, (b) to pay or reimburse each Bank and the Agent for
all its reasonable costs and expenses incurred in connection with the
enforcement or preservation of any rights under this Agreement, the Notes, the
other Loan Documents and any such other documents, including, without
limitation, reasonable fees and disbursements of counsel to the Agent and to
the several Banks, and (c) to pay, indemnify, and hold each Bank and the Agent
harmless from, any and all recording and filing fees and any and all
liabilities with respect to, or resulting from any delay in paying, stamp,
excise and other taxes, if any, which may be payable or determined to be
payable in connection with the execution and delivery of, or consummation of
any of the transactions contemplated by, or any amendment, supplement or
modification of, or any waiver or consent under or in respect of, this
Agreement, the Notes, the other Loan Documents and any such other documents,
and (d) to pay, indemnify, and hold each Bank, the Agent and the Collateral
Trustee and their respective directors, officers, employees and agents harmless
from and against any and all other liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever with respect to the execution, delivery, enforcement,
performance and administration of this Agreement, the Notes, the other Loan
Documents and any such other documents or the use or the proposed use of
proceeds thereof (all the foregoing, collectively, the "indemnified
liabilities"), provided, that HCC shall not have any obligation hereunder to
the Agent or any Bank with respect to indemnified liabilities arising from (i)
the gross negligence or willful misconduct of the Agent, the Collateral Trustee
or any such Bank, (ii) legal proceedings commenced against the Agent, the
Collateral Trustee or any such Bank by any security holder or creditor thereof
arising out of and based upon rights afforded any such security holder or
creditor solely in its capacity as such, or (iii) legal proceedings commenced
against the Agent, the Collateral Trustee or any such Bank by any other Bank or
by any Transferee (as defined in subsection 11.6). The agreements in this
subsection shall survive repayment of the Notes and all other amounts payable
hereunder and under the other Loan Documents.
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11.6 Successors and Assigns; Participations; Purchasing
Banks.
(a) This Agreement shall be binding upon and inure to the
benefit of HCC, the Banks, the Agent, all future holders of the Notes
and their respective successors and assigns, except that HCC may not
assign or transfer any of its rights or obligations under this
Agreement without the prior written consent of each Bank.
(b) Any Bank may, in the ordinary course of its
commercial banking business and in accordance with applicable law, at
any time sell to one or more banks or other entities ("Participants")
participating interests in any Loan owing to such Bank, any Note held
by such Bank, any Commitment of such Bank or any other interest of
such Bank hereunder and under the other Loan Documents, provided that
each such sale shall be of Loans and Commitments in an aggregate
amount of at least $5,000,000, and provided, further, that no Bank may
so sell its Commitments so that less than $10,000,000 of such
Commitments are held by such Bank without participating interests
therein, unless such Bank (excluding Chemical) so sells 100% of its
Commitments. In the event of any such sale by a Bank of participating
interests to a Participant, such Bank's obligations under this
Agreement to the other parties to this Agreement shall remain
unchanged, such Bank shall remain solely responsible for the
performance thereof, such Bank shall remain the holder of any such
Note for all purposes under this Agreement and the other Loan
Documents, and the Credit Parties and the Agent shall continue to deal
solely and directly with such Bank in connection with such Bank's
rights and obligations under this Agreement and the other Loan
Documents. HCC agrees that if amounts outstanding under this
Agreement and the Notes are due or unpaid, or shall have been declared
or shall have become due and payable upon the occurrence of an Event
of Default, each Participant shall be deemed to have the right of
setoff in respect of its participating interest in amounts owing under
this Agreement and any Note to the same extent as if the amount of its
participating interest were owing directly to it as a Bank under this
Agreement or any Note, provided that such Participant shall only be
entitled to such right of setoff if it shall have agreed in the
agreement pursuant to which it shall have acquired its participating
interest to share with the Banks the proceeds thereof as provided in
subsection 11.7. HCC also agrees that each Participant shall be
entitled to the benefits of subsections 3.9, 3.11, 3.12 and 11.5 with
respect to its participation in the Commitments and the Loans
outstanding from time to time; provided, that no Participant shall be
entitled to receive any greater amount pursuant to such subsections
than the transferor Bank would have been entitled to receive in
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respect of the amount of the participation transferred by such
transferor Bank to such Participant had no such transfer occurred.
(c) Any Bank, in the ordinary course of its commercial
banking business and in accordance with applicable law, at any time
may sell to any Bank or any Affiliate thereof and, with the consent of
HCC and the Agent (which in each case shall not be unreasonably
withheld), to one or more additional banks or financial institutions
("Purchasing Banks") all or any part of the assigning Bank's rights
and obligations under this Agreement, the Notes and the other Loan
Documents pursuant to an Assignment and Acceptance, substantially in
the form of Exhibit P, executed by such Purchasing Bank, such
assigning Bank (and, in the case of a Purchasing Bank that is not then
a Bank or an Affiliate thereof, by HCC and the Agent) and delivered to
the Agent for its acceptance and recording in the Register, provided
that each such sale shall be of Loans and Commitments of an aggregate
amount of at least $5,000,000 and provided, further, that no Bank
party to this Agreement on the date hereof may so sell any of its
initial Commitments hereunder such that such Bank holds directly less
than $10,000,000 of such Commitments unless such Bank (excluding
Chemical) so sells 100% of its Commitments. Such Assignment and
Acceptance shall specify an Effective Date which is not less than five
Business Days after the date of execution thereof. Upon such
execution, delivery, acceptance and recording, from and after the
Effective Date determined pursuant to such Assignment and Acceptance,
(x) the Purchasing Bank thereunder shall be a party hereto and, to the
extent provided in such Assignment and Acceptance, have the rights and
obligations of a Bank hereunder with a Commitment as set forth
therein, and (y) the assigning Bank thereunder shall, to the extent
provided in such Assignment and Acceptance, be released from its
obligations under this Agreement (and, in the case of an Assignment
and Acceptance covering all or the remaining portion of an assigning
Bank's rights and obligations under this Agreement, such assigning
Bank shall cease to be a party hereto). Such Assignment and
Acceptance shall be deemed to amend this Agreement to the extent, and
only to the extent, necessary to reflect the addition of such
Purchasing Bank and the resulting adjustment of Commitment Percentages
arising from the purchase by such Purchasing Bank of all or a portion
of the rights and obligations of such assigning Bank under this
Agreement and the Notes. On or prior to the Effective Date determined
pursuant to such Assignment and Acceptance, HCC, at its own expense,
shall execute and deliver to the Agent in exchange for the surrendered
Note or Notes a new Note or Notes to the order of such Purchasing Bank
in amounts equal to the Commitment assumed by it pursuant to such
Assignment and
85
Acceptance and, if the assigning Bank has retained a Commitment
hereunder, a new Note or Notes to the order of the assigning Bank in
an amount equal to the Commitment retained by it hereunder. Such new
Note or Notes shall be dated the Closing Date and shall otherwise be
in the form of the Note or Notes replaced thereby. The Note or Notes
surrendered by the assigning Bank shall be returned by the Agent to
HCC marked "canceled".
(d) The Agent shall maintain at its address referred to
in subsection 12.2 a copy of each Assignment and Acceptance delivered
to it and a register (the "Register") for the recordation of the names
and addresses of the Banks and the Commitments of, and principal
amount of the Loans owing to, each Bank from time to time. The
entries in the Register shall be conclusive, in the absence of
manifest error, and HCC, the Agent and the Banks may treat each Person
whose name is recorded in the Register as the owner of the Loan
recorded therein for all purposes of this Agreement. The Register
shall be available for inspection by HCC or any Bank at any reasonable
time and from time to time upon reasonable prior notice.
(e) Upon its receipt of an Assignment and Acceptance
executed by a transferor Bank and Purchasing Bank (and, in the case of
a Purchasing Bank that is not then a Bank or an affiliate thereof, by
HCC and the Agent) together with payment to the Agent of a
registration and processing fee of $2,500, the Agent shall (i)
promptly accept such Assignment and Acceptance (ii) on the Effective
Date determined pursuant thereto record the information contained
therein in the Register and give notice of such acceptance and
recordation to the Banks and HCC.
(f) HCC authorizes each Bank to disclose to any
Participant or Purchasing Bank (each, a "Transferee") and any
prospective Transferee any and all financial information in such
Bank's possession concerning any Credit Party and its affiliates which
has been delivered to such Bank by or on behalf of HCC pursuant to
this Agreement or which has been delivered to such Bank by or on
behalf of HCC in connection with such Bank's credit evaluation of the
Credit Parties and their affiliates prior to becoming a party to this
Agreement.
(g) If, pursuant to this subsection, any interest in this
Agreement or any Note is transferred to any Transferee which is
organized under the laws of any jurisdiction other than the United
States or any state thereof, the transferor Bank shall cause such
Transferee, concurrently with the effectiveness of such transfer, (i)
to represent to the transferor Bank (for the benefit of the transferor
Bank, the Agent and HCC) that under applicable law and treaties no
86
taxes will be required to be withheld by the Agent, HCC or the
transferor Bank with respect to any payments to be made to such
Transferee in respect of the Loans, (ii) to furnish to the transferor
Bank (and, in the case of any Purchasing Bank registered in the
Register, the Agent and HCC) either U.S. Internal Revenue Service Form
4224 or U.S. Internal Revenue Service Form 1001 (wherein such
Transferee claims entitlement to complete exemption from U.S. federal
withholding tax on all interest payments hereunder) and (iii) to agree
(for the benefit of the transferor Bank, the Agent and HCC) to provide
the transferor Bank (and, in the case of any Purchasing Bank
registered in the Register, the Agent and HCC) a new Form 4224 or Form
1001 upon the expiration or obsolescence of any previously delivered
form and comparable statements in accordance with applicable U.S.
laws and regulations and amendments duly executed and completed by
such Transferee, and to comply from time to time with all applicable
U.S. laws and regulations with regard to such withholding tax
exemption.
(h) Nothing herein shall prohibit any Bank from pledging
or assigning any Note to any Federal Reserve Bank in accordance with
applicable law.
11.7 Adjustments; Set-off.
(a) If any Bank (a "benefitted Bank") shall at any time
receive any payment of all or part of its Loans or the Reimbursement
Obligations owing to it, or interest thereon, or receive any
collateral in respect thereof (whether voluntarily or involuntarily,
by set-off, pursuant to events or proceedings of the nature referred
to in Section 9(g), or otherwise), in a greater proportion than any
such payment to or collateral received by any other Bank, if any, in
respect of such other Bank's Loans, or interest thereon, such
benefitted Bank shall purchase for cash from the other Banks such
portion of each such other Bank's Loans or the Reimbursement
Obligations owing to it, or shall provide such other Banks with the
benefits of any such collateral, or the proceeds thereof, as shall be
necessary to cause such benefitted Bank to share the excess payment or
benefits of such collateral or proceeds ratably with each of the
Banks; provided, however, that if all or any portion of such excess
payment or benefits is thereafter recovered from such benefitted Bank,
such purchase shall be rescinded, and the purchase price and benefits
returned, to the extent of such recovery, but without interest. HCC
agrees that each Bank so purchasing a portion of another Bank's Loans
may exercise all rights of payment (including, without limitation,
rights of set-off) with respect to such portion as fully as if such
Bank were the direct holder of such portion.
87
(b) In addition to any rights and remedies of the Banks
provided by law, each Bank shall have the right, without prior notice
to HCC, any such notice being expressly waived by HCC to the extent
permitted by applicable law, upon any amount becoming due and payable
by HCC hereunder or under the Notes (whether at the stated maturity,
by acceleration or otherwise) to set-off and appropriate and apply
against such amount any and all deposits (general or special, time or
demand, provisional or final), in any currency, and any other credits,
indebtedness or claims, in any currency, in each case whether direct
or indirect, absolute or contingent, matured or unmatured, at any time
held or owing by such Bank to or for the credit or the account of HCC.
Each Bank agrees promptly to notify HCC, the Agent and the Collateral
Trustee after any such set-off and application made by such Bank,
provided that the failure to give such notice shall not affect the
validity of such set-off and application.
11.8 Counterparts. This Agreement may be executed by one or
more of the parties to this Agreement on any number of separate counterparts,
and all of said counterparts taken together shall be deemed to constitute one
and the same instrument. A set of the copies of this Agreement signed by all
the parties shall be lodged with HCC and the Agent.
11.9 Severability. Any provision of this Agreement 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.
11.10 Integration. This Agreement represents the agreement
of HCC, the Agent and the Banks with respect to the subject matter hereof, and
there are no promises, undertakings, representations or warranties by the Agent
or any Bank relative to subject matter hereof not expressly set forth or
referred to herein or in the other Loan Documents and the fee letter referred
to in subsection 3.2.
11.11 GOVERNING LAW. THIS AGREEMENT AND THE NOTES AND THE
RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT AND THE NOTES SHALL
BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF
THE STATE OF NEW YORK.
11.12 Submission To Jurisdiction; Waivers. HCC hereby
irrevocably and unconditionally:
(a) submits for itself and its property in any legal
action or proceeding relating to this Agreement and the
88
other Loan Documents 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;
(b) 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;
(c) 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 subsection 11.2 or
at such other address of which the Agent shall have been notified
pursuant thereto;
(d) 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 sue in any other jurisdiction; and
(e) 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 or consequential damages.
11.13 Acknowledgements. HCC hereby acknowledges that:
(a) it has been advised by counsel in the negotiation,
execution and delivery of this Agreement and the Notes and the other
Loan Documents;
(b) neither the Agent nor any Bank has any fiduciary
relationship to any Credit Party, and the relationship between Agent
and Banks, on one hand, and HCC, on the other hand, is solely that of
debtor and creditor; and
(c) no joint venture exists among the Banks or among any
Credit Party and the Banks.
11.14 WAIVERS OF JURY TRIAL. EACH OF HCC, THE AGENT AND THE
BANKS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL
ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR THE NOTES OR ANY OTHER LOAN
DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
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11.15 Usury. It is expressly stipulated and agreed to be the
intent of HCC, the Agent and the Banks at all times to comply with the
applicable law governing the maximum rate or amount of interest payable on or
in connection with the Notes and the Loans. If the applicable law is ever
judicially interpreted so as to render usurious any amount or compensation
called for under this Agreement or any of the Notes or any of the other Loan
Documents, or contracted for, charged, taken, reserved or received with respect
to any of the Loans, or if acceleration of the maturity of any of the Notes,
any prepayment by HCC, or any other circumstance whatsoever, results in the
Banks, or any of them, having been paid any interest in excess of that
permitted by applicable law, then it is the express intent of HCC, the Agent
and the Banks that all excess amounts theretofore collected by the Banks be
credited on the principal balances of the Notes (or, if the Notes have been or
would thereby be paid in full, refunded to HCC), and the provisions of such
Note or Notes and the other applicable Loan Documents immediately be deemed
reformed and the amounts thereafter collectible hereunder and thereunder
reduced, without the necessity of the execution of any new document, so as to
comply with the applicable law, but so as to permit the recovery of the fullest
amount otherwise called for hereunder and thereunder. The right to accelerate
the maturity of any or all of the Notes does not include the right to
accelerate any interest which has not otherwise accrued on the date of such
acceleration, and the Banks do not intend to collect any unearned interest in
the event of acceleration. All sums or other compensation paid or agreed to be
paid to the Banks for the use, forbearance or detention of the indebtedness
evidenced hereby or by the Notes shall, to the extent permitted by applicable
law, be amortized, prorated, allocated and spread with respect to all of the
Notes throughout the full term of such indebtedness until payment in full of
all such indebtedness so that the rate or amount of interest on account of such
indebtedness under all of the Notes does not exceed the Maximum Lawful Rate or
maximum amount of interest permitted under applicable law. The term "Maximum
Lawful Rate" as used herein as to any Bank means the maximum non-usurious rate
of interest which may be lawfully contracted for, charged, taken, reserved, or
received by such Bank from HCC in connection with the Loans evidenced hereby
under applicable law. The provisions of this Section 12.15 shall control all
agreements between HCC and the Banks.
90
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered in New York, New York by their
proper and duly authorized officers as of the day and year first above written.
HANOVER COMPRESSOR COMPANY
By
---------------------------------
Name:
Title:
CHEMICAL BANK,
as Agent and as a Bank
By
---------------------------------
Name:
Title:
FIRST INTERSTATE BANK OF TEXAS, N.A.,
By
---------------------------------
Name:
Title:
THE BANK OF NOVA SCOTIA
By
---------------------------------
Name:
Title:
91
CREDIT LYONNAIS NEW YORK BRANCH
By
---------------------------------
Name:
Title:
CREDIT LYONNAIS CAYMAN ISLAND BRANCH
By
---------------------------------
Name:
Title:
Acknowledged and agreed to
as of the date hereof:
MAINTECH ENTERPRISES, INC.
By
-------------------------------
Name:
Title:
HANOVER/SMITH, INC.
By
-------------------------------
Name:
Title:
HANOVER ACQUISITION CORP.
By
-------------------------------
Name:
Title:
HANOVER LAND COMPANY
By
-------------------------------
Name:
Title:
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HANOVER COMPRESSOR COMPANY
SECOND AMENDED AND RESTATED CREDIT AGREEMENT DISCLOSURE SCHEDULES
GENERAL COMMENTS WITH RESPECT TO HCC DISCLOSURE SCHEDULE:
While HCC has endeavored to identify under each Schedule and (by way
of enumeration or cross reference) the particular items relevant thereto, items
listed under one Schedule may be relevant to another Schedule. Accordingly,
items listed under each Schedule are hereby incorporated by reference in each
other Schedule, but only to the extent relevant to such other Schedule.
Capitalized terms used herein and not otherwise defined have the
meanings ascribed to them in the Agreement.
Schedule I
BANKS AND COMMITMENTS
[Download Table]
Name and Address Commitment
of Bank Percentage Commitment
---------------- ---------- ----------
Chemical Bank 33.33% $30,000,000
270 Park Avenue
New York, New York 10017
Attention: James Ramage
Telecopy: (212) 270-2625
with a copy to:
Chemical Securities Inc.
270 Park Avenue
New York, New York 10017
Attention: Douglas Petno
Telex: 232 337
Telecopy: (212) 270-4892
First Interstate Bank 22.22% $20,000,000
of Texas, N.A.
Post Oak Office
P.O. Box 4401
1300 Post Oak Blvd., 2nd Floor
Houston, Texas 77210-4401
Attention: Theodore Nowak
Telecopy: (713) 599-8752
The Bank of Nova Scotia 22.22% $20,000,000
600 Peachtree Street Northeast,
Suite 2700
Atlanta, Georgia 30308
Attention: Claude Ashby
Telecopy: (404) 888-8998
With a copy to:
The Bank of Nova Scotia
1100 Louisiana, Suite 3000
Houston, Texas 77002
Attention: Mike Nepveux
Telecopy: (713) 752-2425
Credit Lyonnais 22.22% $20,000,000
1000 Louisiana, Suite 5360
Houston, Texas 77002
Attention: Dianne Scott
Telecopy: (713) 751-0307
Total: ----- -----------
100% $90,000,000
2
SCHEDULE II FINANCIAL STATEMENTS
INTENTIONALLY LEFT BLANK.
3
SCHEDULE III MATERIAL TRANSACTIONS
1. Effective December 6, 1995, pursuant to that certain Agreement and
Plan of Merger, dated as of October 13, 1995 (the "Merger Agreement"),
between Astra Resources Compression, Inc., a Texas corporation ("Astra
Compression"), and its parent corporation, Astra Resources, Inc., a
Kansas corporation ("Astra"), on the one hand, and HCC and its wholly
owned subsidiary, Hanover Acquisition Corp., a Texas corporation
("HAC"), on the other hand, HAC merged with and into Astra Compression
and HCC thereby acquired all of the issued and outstanding capital
stock of Astra Compression (the "Astra Merger").
2. Effective as of October 31, 1995, Combustion Control Corporation
("CCC"), a corporation formerly under common control with HCC, merged
with and into HCC pursuant to that certain Agreement and Plan of
Merger, dated as of October 31, 1995, by and among HCC, CCC and the
former stockholders of CCC, pursuant to which HCC issued to the former
stockholders of CCC an aggregate of 338.43 shares of the common stock,
$.001 par value (the "Common Stock"), of HCC.
3. Pursuant to that certain Purchase Agreement, dated as of November 1,
1995 (the "Purchase Agreement"), among HCC, Dakota Services, Inc., and
Oklahoma corporation ("Dakota"), and Buttonwood Petroleum, Inc., an
Oklahoma corporation ("Buttonwood"), HCC purchased from Dakota assets
consisting of 27 natural gas compressors and two motor vehicles for an
aggregate purchase price of $1,375,000, plus interest on such amount
from November 1, 1995 to November 30, 1995 at the rate of 10% per
annum. HCC also agreed pursuant to the Purchase Agreement to enter
into that certain Gas Compressor Equipment Master Rental and Servicing
Agreement, dated as of November 1, 1995, between HCC and Buttonwood.
4. HCC has executed a Letter of Intent dated November 9, 1995 with
respect to the purchase by HCC of the combination office/fabrication
facility and surrounding four acres of land located in Victoria,
Texas, which facility and property are currently leased by HCC.
5. HCC is currently involved in negotiations regarding the possible
purchase by HCC of a 5.9 acre tract of land adjacent to the property
owned by the Real Estate Subsidiary located at 12001 North Houston
Rosslyn in Houston, Texas.
4
SCHEDULE IV MATERIAL CHANGES
1. On March 16, 1995, HCC repurchased 156.40 shares of the Common Stock
from its former employee, John Rowland at a purchase price equal to
$1,100 per share, which shares are currently held by HCC as treasury
shares.
2. In connection with the Termination, Release and Independent Contractor
Agreement, dated as of June 30, 1995, between HCC and Cullen Spitzer,
Mr. Spitzer exercised options to purchase 42 shares of Common Stock,
which shares were immediately repurchased by HCC for $1,100 per share
and are currently held by HCC as treasury shares.
5
SCHEDULE V REQUIRED CONSENTS
1. The consent of First Interstate is required in connection with the
Real Estate Note and the Deed of Trust, as well as under the Guaranty
Agreement, and under the Specific Guaranty.
2. Landlord's lien waivers are required pursuant to the terms of the
Agreement with respect to the following leased properties:
302 Commercial Parkway, Broussard, Louisiana 70518
8193 Lonetree Road, Victoria, Texas 77905
204 Michael Place, Longview, Texas 75603
1300 W. Murray, Farmington, New Mexico 87401
12001 N. Houston Rosslyn, Houston, Texas 77086
Rt. 2 Box 179, Alleyton, Texas 78935
3. A consent to leasehold mortgage is required with respect to the leased
property located at Rt. 2 Box 179, Alleyton, Texas 78935.
4. Any and all UCC-1s and UCC-3s to be filed pursuant to and in
connection with the Agreement and Security Documents.
5. Resolutions of the Board of Directors of each Credit Party authorizing
and approving the transactions contemplated by the Agreement and the
Security Documents.
6
SCHEDULE VI MATERIAL LITIGATION
The following items are provided solely for information purposes. None of the
items in this Schedule VI, nor any aggregation thereof, are reasonably expected
to have a Material Adverse Effect, and none is or is intended to be an
exception to the representations and warranties in Section 5.6 of the
Agreement.
1. HCC is in the process of being audited by the State of Texas with
respect to sales tax matters. No audit report has been received to
date. In this regard, please see the attached letter dated May 4,
1995 from the Texas Comptroller of Public Accounts to HCC.
2. HCC is presently negotiating an indemnification claim and
responsibility for certain clean up costs under the Asset Purchase
Agreement pursuant to which HCC sold the Sutton Gas Plant. HCC expects
that its liability in connection with such claim will not exceed
$110,000.
3. HCC has received notice from Zapata Corporation ("Zapata") that Zapata
has reserved its rights under a Confidentiality Agreement among HCC,
Zapata and Zapata's subsidiary, Energy Industries ("EI"), dated as of
May 23, 1995, regarding the hiring by HCC of certain former employees
of EI allegedly through the use of non-public information.
4. Astra Compression (n/k/a HAC) was recently audited by the State of
Louisiana for 1992, 1993 and 1994 sales taxes, resulting in a final
assessment of $158,792.07, of which $39,642.95 constitutes interest on
amounts found to be due. Astra Compression has filed an appeal
regarding the audit and is awaiting a final audit report with respect
thereto. Astra has agreed to indemnify HCC with respect to any such
tax liability.
5. Astra Compression (n/k/a HAC) received notices of audit from each of
(i) Parish of Terrebonne, Louisiana, Sales Tax and Use Department,
pursuant to a letter dated November 3, 1995, a copy of which is
attached to this Schedule VI, and (ii) Jefferson Davis Parish,
Louisiana, School Board, Sales Tax and Use Department, pursuant to a
letter dated November 1, 1995, a copy of which is attached to this
Schedule VI. Astra has agreed to indemnify HCC with respect to any
such tax liability.
6. See the attached letter from Swantner & Gordon, insurance agent for
HCC.
7
SCHEDULE VII FORMS OF COMPRESSOR AND PRODUCTION EQUIPMENT LEASES
See attached forms of compressor and production equipment leases.
8
SCHEDULE VIII BURDENSOME RESTRICTIONS
1. See the Real Estate Note and the Deed of Trust.
2. Letter Agreement, dated November 22, 1993, between First Interstate,
the Real Estate Subsidiary and HCC.
3. Guaranty Agreement.
4. Specific Guaranty.
5. HCC and its Subsidiaries are subject to certain negative covenants
pursuant to Article 5 of the JEDI Loan Agreement.
9
SCHEDULE IX ENVIRONMENTAL
The following items are provided solely for informational purposes. None of
the items in this Schedule IX, nor any aggregation thereof, are reasonably
expected to have a Material Adverse Effect, and none is or is intended to be an
exception to the representations and warranties in Section 5.17 of the
Agreement.
In addition, with respect to Section 5.17(c) and (e), no matter has been
disclosed in writing to the Agent and the Banks that, individually or in the
aggregate, are reasonably expected to have a Material Adverse Effect, or that
is or is intended to be an exception to those representations and warranties.
5.17(a):
1. Regarding HCC's Oklahoma City facility, the Tank Closure Report, dated
February 3, 1992, prepared by Transok, Inc. indicates several small
areas with hydrocarbon stains and possible area with elevated levels
of metals. In addition, a report regarding the facility prepared on
behalf of HCC by GeoMonitoring Services ("Geo") advised that these
soils should be removed. HCC is planning an expansion at this
facility and will remove these soils during this project.
2. Regarding certain facilities operated by Hanover Pipeline Company
("HPC"), a former subsidiary of HCC which has since been merged into
HCC, Geo prepared a Limited Site Assessment in April 1991, as well as
February 13, 1992 Report of Findings for Phase II Site Investigation
regarding the El Dorado pipeline operations. Such documents indicate
that each of the stations associated with the pipeline system had oil
stained areas associated with compressor lubrication oil and
associated equipment leaks near or adjoining the compressors and the
facility tankage. Geo recommended using bioremediation to reduce
hydrocarbon levels to less than 500 ppm in the soils. HPC retained
Environmental Consultants and Contractors, Inc. ("ECC") to conduct
this work. ECC completed approximately one-half of the stations;
however, continued soil remediation was necessary to achieve the 500
ppm of hydrocarbon levels in the soils. HCC subsequently took over
this work and the project is approximately 70% complete and is still
under way. HCC has approached the present operator to obtain a
release and for them to complete the remaining work. Additionally,
the Sutton station had a fill area where trash, paper, filters, engine
parts, and similar items were stored. The existing operator continued
this operation. After the landowner complained, HCC removed its
materials and disposed this material. The present operator has
reportedly removed its waste materials.
10
3. Regarding the Houston facility owned by the Real Estate Subsidiary,
Environmental Management Services prepared that certain Transfield
Corporation Facility Closure Report, dated June 4, 1993. In addition,
Geo identified approximately 20 areas where residual sand blasting
materials, oil stained soils and/or areas with elevated levels of zinc
in the soils. The agreement relative to the transfer of the property
required Transfield (seller) to remediate these areas and prepare a
closure plan addressing the zinc levels in the soils, obtain Texas
Natural Resource Conservation Commission ("TNRCC") approval of the
zinc area and certify closure. Transfield's consultant (Environmental
Management Consultants) completed these items.
4. HCC is currently implementing a Site Remediation and Clean Up Proposal
(the "SRCUP"), dated March 15, 1995, regarding real property located
in Columbus, Texas with respect to which HCC acquired a lease and
purchase option pursuant to the February 1995 acquisition by HCC of
substantially all of the assets of Smith Industries, Incorporated,
presently being operated as Hanover/Smith, Inc.
5. Lagoon at East Bernard facility was formerly the sit of a solid waste
landfill. HCC does not have documentation on remediation efforts
conducted by owners and operators prior to Astra Compression.
5.17(b):
1. HCC has yet to determine whether the requirements for obtaining an
Environmental Protection Agency ("EPA") Identification Number and
filing a TNRCC Notice of Registration (NOR) are required at its
Houston, Texas and Columbus, Texas facilities. At present, HCC is
utilizing a temporary EPA Identification Number and non-site specific
TNRCC registration and waste code numbers with respect to such
facilities.
2. HCC has yet to determine if painting and/or sand blasting operations
at its Houston, Texas and Columbus, Texas facilities will require a
TNRCC NOR, as well as whether such activities would require air
permitting or if such activities properly call for standard exemption
requests.
3. HCC has yet to determine whether its Houston facility requires an EPA
stormwater permit application and runoff testing.
4. HCC has yet to determine the necessity of a Spill Contingency Plan for
its Lafayette, Louisiana facility regarding chemicals and wastes
managed on-site.
11
5. HCC has yet to determine the necessity of a Spill Contingency Plan for
its Midland, Texas facility regarding chemicals and wastes managed
on-site.
6. In addition, an underground storage tank ("UST") exists at the
Oklahoma City facility, which UST has not been registered with any
state or federal agency.
7. Most HCC facilities (including but not limited to Houston, Columbus,
Lafayette, Fort Smith, Oklahoma City, Longview, Midland, and Victoria)
have sumps which are typically associated with cleaning, painting,
ballasting, testing and fabrication operations. Although HCC does not
believe any sumps operated at their facilities are USTs as defined
under the EPA definition under the Resource Conservation and Recovery
Act, these sumps could require state registration or the filing of
NORs with the appropriate state or federal agency.
8. HCC is preparing a Spill Prevention Control and Countermeasure Plan
("SPCC Plan") for the tankage at its Houston facility which will
include up-grading some secondary containment systems.
9. HCC may not be in compliance with all waste disposal and state
registration requirements at its Houston, Texas; Columbus, Texas; and
Lafayette, Louisiana facilities.
10. HCC is presently evaluating the adequacy of the spill plan presently
in place at its Columbus, Texas facility.
11. Geo has completed a site inspection of HCC's Victoria, Texas facility
and is preparing a SPCC plan for such facility. The TNRCC NOR with
respect to the facility require minor updates to be completed by HCC
personnel.
12. Regarding certain assets and facilities acquired pursuant to the Astra
Merger:
a. The following lube oil/antifreeze storage tanks are above
1,100 gallon capacity and therefore may require permitting:
Deweyville, Louisiana (8,000 gallon); Lafayette, Louisiana
(8,000 gallon); Wilburton, Oklahoma (2 at 8,800 gallon, 2 at
2,000 gallon); East Bernard, Texas (8,000 gallon); Refugio,
Texas (6,000 gallon, 4,000 gallon, and 2,000 gallon); Sterling
City, Texas.
b. Potable water at East Bernard facility may need to be tested
and certified.
12
c. Underground Separator at East Bernard facility may need to be
registered as a UST with possible overflow discharge, as it
sometimes has overflow discharge.
d. East Bernard facility requires a spill control and contingency
planing document for the above ground 8,000 gallon tank.
e. HCC yet to determine whether stormwater permits are required
for the lagoons at the East Bernard facility.
5.17(c):
1. HCC is presently negotiating an indemnification claim and
responsibility for certain clean up costs under the Asset Purchase
Agreement pursuant to which HCC sold the Sutton Gas Plant.
13
SCHEDULE X EXISTING INDEBTEDNESS
1. Indebtedness of the Real Estate Subsidiary pursuant to the Real Estate
Note and the Deed of Trust. As of October 31, 1995, $1,485,000 of the
principal amount of the Real Estate Note was outstanding.
2. Indebtedness of HCC and MEI pursuant to the Existing Agreement and the
Existing Security Documents.
3. Indebtedness of the Credit Parties pursuant to the Agreement, the JEDI
Loan Agreement and the Security Documents.
4. See the Indebtedness related to Liens described in Schedule XII
hereof.
5. HCC leases a box at Texas Stadium pursuant to a long term lease at an
annual cost of approximately $65,000. The outstanding balance of such
lease as of October 31, 1995 was $528,000.
6. HCC leases six natural gas compression units from GE Capital Corp.
The aggregate outstanding balance under such capitalized leases as of
October 31, 1995 was $2,236,000.
7. Indebtedness of HCC to Chemical in connection with the issuance by
Chemical of an Irrevocable Documentary Letter of Credit No. T 249029
in favor of National Bank of Egypt in the amount of $230,111.00.
14
SCHEDULE XI EXISTING LIENS
1. See description of the Real Estate Note and related documents set
forth in Schedule X hereof. Payment of the Real Estate Note is
secured by the Deed of Trust and guaranteed by HCC pursuant to the
Guaranty Agreement and the Specific Guaranty.
2. Liens in favor of the Agent granted pursuant to the Existing Agreement
and the Existing Security Documents.
3. Liens in favor of the Collateral Trustee pursuant to the Agreement,
the JEDI Loan Agreement and the Security Documents.
15
SCHEDULE XII ADDITIONAL EXISTING LIENS
1. Letter Agreement dated March 8, 1995 between Ward Petroleum ("Ward")
and HCC (the "Alliance Agreement").**
2. Letter Agreement dated January 12, 1995 between HCC, CBC Compression,
Anson Company and MB Oilfield Services.**
3. Exclusive Distribution Agreement dated February 23, 1995 between HCC
and Uniglam Resources, Ltd.**
4. The natural gas compression units listed on the Exhibit attached to
this Schedule XII are subject to purchase options in accordance with
the terms of the respective lease pursuant to which HCC leases each
such unit to third parties.
5. Lien evidenced by Financing Statement No. 95-105634 filed with the
Secretary of State of Texas listing Southwestern Bell
Telecommunications ("Southwestern Bell") as secured party and
Hanover/Smith, Inc. as debtor filed pursuant to the purchase by
Hanover/Smith, Inc. of a telephone system from Southwestern Bell.
6. Lien evidenced by Financing Statement No. 90-232325 filed with the
Secretary of State of Texas listing Commercial Equipment Leasing
Company as secured party and MEI as debtor with respect to certain
computer equipment.
7. Lien evidenced by Financing Statement No. 91-035417 filed with the
Secretary of State of Texas listing Commercial Equipment Leasing
Company as secured party and MEI as debtor with respect to certain
computer equipment.
8. Lien evidenced by Financing Statement No 92-091733 filed with the
Secretary of State of Texas listing Waukesha Engine Division, Dresser
Industries, Inc. ("Waukesha") as secured party and MEI as debtor with
respect to certain equipment purchased from Waukesha by MEI from time
to time.
** HCC does not believe that this agreement constitutes a Lien on its property
and such agreement is set forth above for informational purposes only.
16
SCHEDULE XIII AFFILIATE TRANSACTIONS
1. A special committee of the Board of Directors of HCC has agreed to the
payment of a fee by HCC to GKH Partners, L.P. not to exceed 0.75% of
the net equity value of HCC as of the date of any "sale" of HCC (e.g.
a sale of all or substantially all of HCC's assets or capital stock, a
recapitalization, restructuring or liquidation of HCC, or any
transaction resulting in GKH Investments, L.P. owning less than 25% of
HCC).
2. Ted Collins, Jr., a director and minority stockholder of HCC, controls
a corporation which owns a 50% interest in a joint venture to which
HCC leases compressors pursuant to a long-term lease.
3. James Hanna, a director of HCC and a principal in certain entities
which own Capital Stock of HCC, is the President of Hanna Oil and Gas
Company, to which HCC leases compressors pursuant to month-to-month
leases.
4. HCC is party to the Alliance Agreement. L.O. Ward, the President of
Ward, owns shares of the 6.5% Cumulative Redeemable Convertible Series
B Preferred Stock of HCC, and shares of Common Stock are owned by
members of Mr. Ward's family as well as a revocable trust established
by Mr. Ward.
5. HCC has entered into an agreement with Kurt Wind and Glen Wind,
existing stockholders of HCC, for the purchase by each of them of 15
shares of Common Stock at $1,100 per share, along with options for
each to purchase 75 additional shares of Common Stock at $1.00 per
share. In connection with such purchases, HCC has agreed to make
loans to Messrs. Wind and Wind, the repayment of which will be secured
by the pledge by each of them of all of his shares of Common Stock.
6. In connection with the sale of HCC of shares of its Common Stock to
certain of its employees in 1993 and 1995, HCC made loans to certain
employees who purchased shares of Common Stock pursuant thereto, the
repayment of which is secured by the pledge by each such
employee-stockholder of all of his or her shares of Common Stock.
Similarly, in connection with the purchase by Walter Rode of shares of
Common Stock on September 8, 1995, HCC made a loan to Mr. Rode, the
repayment of which is secured by the pledge by Mr. Rode of all of his
shares of Common Stock. Such loans remain outstanding as of the date
hereof and will remain in force and be payable in accordance with
their respective terms.
7. HCC has agreed to pay Robert Furgason (a director of HCC) an annual
director's fee equal to $15,000, plus $2,500 per Board meeting
attended in person by Mr. Furgason, subject to an annual cap of
$20,000.
17
8. Directors of HCC are entitled to reimbursement for expenses incurred
in connection with their attendance at Board meetings.
9. HCC has agreed to reimburse GKH for expenses incurred by GKH in
connection with services performed by GKH for or on behalf of HCC and
its Subsidiaries.
10. Fernando Gutierrez, an outside Director of CCI, an Argentine
subsidiary of HCC, is an employee of TIPSA, S.A., an Argentine
corporation ("TIPSA") and the parent corporation of San Enrique, S.A.,
an Argentine corporation ("San Enrique"). CCI and San Enrique are
party to that certain Agreement of Understanding, dated as of December
30, 1992, pursuant to which CCI and San Enrique agree to participate
jointly in the marketing of gas compression services in Argentina, and
the operation and maintenance of related equipment.
11. HCC currently leases a combination office/fabrication facility located
in Victoria, Texas from Luis Guerra, an officer of HCC. The letter of
intent regarding the purchase of the Victoria facility described in
Schedule III is with Mr. Guerra.
Dates Referenced Herein and Documents Incorporated by Reference
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