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EXHIBIT 10.5
SECURITY AGREEMENT
SECURITY AGREEMENT, dated as of July 22, 1998, made by HANOVER
EQUIPMENT TRUST 1998A, a Delaware business trust (the "Borrower"), in favor of
THE CHASE MANHATTAN BANK, as Agent (in such capacity, the "Agent") for the
Lenders parties to the Credit Agreement, dated as of the date hereof (as
amended, supplemented or otherwise modified from time to time, the "Credit
Agreement"), among the Borrower, the Agent and such Lenders.
Preliminary Statement
A. Pursuant to the Credit Agreement, the Lenders have
severally agreed to make Loans to the Borrower upon the terms and subject to
the conditions set forth therein; and
B. It is a condition precedent to the obligation of the
Lenders to make their respective Loans to the Borrower under the Credit
Agreement that the Borrower shall have executed and delivered this Security
Agreement to the Agent for the ratable benefit of the Lenders.
NOW, THEREFORE, in consideration of the premises and to induce
the Agent and the Lenders to enter into the Credit Agreement and to induce the
Lenders to make their respective Loans to the Borrower, the Borrower hereby
agrees with the Agent, for the ratable benefit of the Lenders, as follows:
1. Defined Terms.
1.1 Definitions . Unless otherwise defined herein, capitalized
terms used herein shall have the respective meanings, and this Agreement shall
be interpreted in accordance with the rules of usage, set forth in Annex A
attached to the Participation Agreement dated as of the date hereof among the
Lessee, the Borrower, the Investor, the Trust Company, the Agent and the
Lenders, and the following terms shall have the following meanings:
"Agreement": this Security Agreement, as the same may be
amended, supplemented or otherwise modified from time to time.
"Code": the Uniform Commercial Code as from time to time in
effect in the State of New York.
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"Collateral": as defined in Section .
"Equipment": the equipment set forth on Schedule 1 annexed
hereto, and all other tangible personal property now or hereafter
acquired by the Borrower, together with any and all accessions,
additions, improvements, substitutions and replacements thereto and
therefor.
"Obligations": shall mean the Guaranteed Obligations.
"Proceeds": as defined in the Code.
2. Grant of Security Interest. As collateral security for the prompt
and complete payment and performance when due (whether at the stated maturity,
by acceleration or otherwise) of the Obligations, the Borrower hereby grants to
the Agent for the ratable benefit of the Lenders a security interest in all of
its respective right, title and interest, whether the same be goods, fixtures,
equipment, general intangibles, accounts or chattel paper, in and to (a) the
Equipment, (b) rights and interests of Borrower as Lessor pursuant to the Lease,
(c) the proceeds of the Houston Pipeline Purchase Option, (d) all books and
records pertaining to the foregoing, (e) all warranties and guarantees given by
any Person with respect to any of the foregoing, as well as all chooses in
action, claims, and causes of action arising from any breach thereof, and (f) to
the extent not otherwise included, all Proceeds and products of the foregoing,
in each case whether now existing or hereafter acquired (collectively, the
"Collateral"), subject to the rights of the Lessee, as Lessee under the Lease,
so long as no Lease Event of Default has occurred and is continuing.
3. Representations and Warranties.
3.1 Equipment . The Borrower hereby represents and warrants that, the
Equipment will be kept at the locations listed on Schedule 1 subject only to the
Lessee's rights to relocate the Equipment as provided for in the Operative
Agreements.
3.2 Chief Executive Office . The Borrower hereby represents and
warrants that the Borrower's chief place of business, chief executive office and
office where the documents, accounts and records related to the Collateral are
kept is located at 0000 Xxxxx Xxxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxx 00000.
3.3 Farm Products . The Borrower hereby represents and warrants that
none of the Collateral constitutes, or is the Proceeds of, Farm Products.
4. Covenants. From and after the date of this Agreement until the
Obligations shall have been paid in full and the Commitments shall have expired
or otherwise been terminated:
4.1 Further Documentation . At any time and from time to time, upon the
written request of the Agent, and at the sole expense of the Borrower, the
Borrower will promptly and duly execute and deliver such further instruments and
documents and take such further
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actions as the Agent may reasonably request for the purpose of obtaining or
preserving the full benefits of this Agreement and of the rights and powers
herein granted, including, without limitation, the filing of any financing or
continuation statements under the Uniform Commercial Code in effect in any
jurisdiction with respect to the security interests created hereby.
4.2 Changes in Locations . 20. Except with respect to the rights of the
Lessee under the Operative Agreements, the Borrower will not permit any of the
Equipment to be kept at a location other than those listed on Schedule 1; and
(b) The Borrower will not change the location of its chief executive
offices from that specified in Section 3.2.
4.3 Change in Name. The Borrower will not change its name, identity or
structure to such an extent that any financing statement filed by the Agent in
connection with this Agreement would become seriously misleading, unless they
shall have given the Agent at least 30 days' prior written notice of such
change.
4.4 Further Identification of Collateral . The Borrower will cause the
Lessee to furnish to the Agent from time to time statements and schedules
further identifying and describing the Collateral and its location and such
other reports in connection with the Collateral as the Agent may reasonably
request, all in reasonable detail.
5. Remedies.
5.1 Code Remedies . If a Credit Agreement Event of Default shall occur
and be continuing, the Agent, on behalf of the Lenders, may exercise, in
addition to all other rights and remedies granted to them in this Agreement and
in any other instrument or agreement securing, evidencing or relating to the
Obligations, all rights and remedies of a secured party under the Code. Without
limiting the generality of the foregoing, the Agent, without demand of
performance or other demand, presentment, protest, advertisement or notice of
any kind (except any notice required by law or as referred to below) to or upon
the Borrower, the Lessee or any other Person (all and each of which demands,
defenses, advertisements and notices are hereby waived to the extent permitted
by law), may in such circumstances forthwith collect, receive, appropriate and
realize upon the Collateral, or any part thereof, and/or may forthwith sell,
lease, assign, give an option or options to purchase, or otherwise dispose of
and deliver the Collateral or any part thereof (or contract to do any of the
foregoing), in one or more parcels at public or private sale or sales, at any
exchange, broker's board or office of the Agent or any Lender or elsewhere upon
such terms and conditions as it may deem advisable and at such prices as it may
deem best, for cash or on credit or for future delivery without assumption of
any credit risk, but subject to the rights of the Lessee under the Lease so long
as no Lease Event of Default shall have occurred and be continuing. The Agent or
any Lender shall have the right upon any such public sale or sales, and, to the
extent permitted by law, upon any such private sale or sales, to purchase the
whole or any part of the Collateral so sold, free of any right or equity of
redemption in the Borrower, which right or equity is hereby waived or released
to the extent permitted by
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law. The Borrower further agrees, at the Agent's request, to assemble the
Collateral and make it available to the Agent at places which the Agent shall
reasonably select. The Agent shall apply the net proceeds of any action taken
by it pursuant to this subsection, after deducting all reasonable costs and
expenses of every kind incurred in connection therewith or incidental to the
care or safekeeping of any of the Collateral or in any way relating to the
Collateral or the rights of the Agent and the Lenders hereunder, including,
without limitation, reasonable attorneys' fees and disbursements, to the
payment in whole or in part of the Obligations, in accordance with Section 8.2
of the Credit Agreement, and only after such application and after the payment
by the Agent of any other amount required by any provision of law, including,
without limitation, Section 9-504(1)(c) of the Code, need the Agent account for
the surplus, if any, to the Borrower. To the extent permitted by applicable
law, the Borrower waives all claims, damages and demands it may acquire against
the Agent or any Lender arising out of the exercise by them of any rights
hereunder. If any notice of a proposed sale or other disposition of Collateral
shall be required by law, such notice shall be deemed reasonable and proper if
given at least 10 days before such sale or other disposition. The Agent agrees
that if it shall proceed to foreclose the Lien of this Agreement, it shall, to
the extent that it is entitled to do so hereunder and under the other Operative
Agreements, and is not then stayed or prevented from doing so by law or
otherwise, proceed (to the extent it has not already done so) to exercise one
or more of the significant possessory remedies referred to in the Lease (as it
shall determine in its sole good faith discretion).
6. Agent's Appointment as Attorney-in-Fact; Agent's Performance of
Obligations.
6.1 Powers . The Borrower hereby irrevocably constitutes and appoints
the Agent and any officer or agent thereof, with full power of substitution, as
its true and lawful attorney-in-fact with full irrevocable power and authority
in the place and stead of the Borrower and in the name of the Borrower or in its
own name, for the purpose of carrying out the terms of this Agreement, to take
any and all appropriate action and to execute any and all documents and
instruments which may be necessary or desirable to accomplish the purposes of
this Agreement, and, without limiting the generality of the foregoing, the
Borrower hereby gives the Agent the power and right, on behalf of the Borrower,
without notice to or assent by the Borrower, to do any or all of the following:
(a) pay or discharge taxes and Liens levied or placed on or
threatened against the Collateral, effect any repairs or any insurance called
for by the terms of the Lease and pay all or any part of the premiums therefor
and the costs thereof;
(b) execute, in connection with any sale provided for in
Section 5.1, any indorsements, assignments or other instruments of conveyance or
transfer with respect to the Collateral; and
(c)(1) sign and indorse any invoices, freight or express
bills, bills of lading, storage or warehouse receipts, drafts against debtors,
assignments, verifications, notices and other documents in connection with any
of the Collateral; 32. commence and prosecute any suits, actions or proceedings
at law or in equity in any court of
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competent jurisdiction to collect the Collateral or any portion thereof and to
enforce any other right in respect of any Collateral; 33. defend any suit,
action or proceeding brought against the Borrower with respect to any
Collateral; 34. settle, compromise or adjust any such suit, action or
proceeding and, in connection therewith, to give such discharges or releases as
the Agent may deem appropriate; and 35. generally, sell, transfer, pledge and
make any agreement with respect to or otherwise deal with any of the Collateral
as fully and completely as though the Agent were the absolute owner thereof for
all purposes, and do, at the Agent's option and the Borrower's expense, at any
time, or from time to time, all acts and things which the Agent deems necessary
to protect, preserve or realize upon the Collateral and the Agent's and the
Lenders' security interests therein and to effect the intent of this Agreement,
all as fully and effectively as the Borrower might do.
Anything in this subsection to the contrary notwithstanding, the Agent
agrees that it will not exercise any rights under the power of attorney provided
for in this subsection unless a Credit Agreement Event of Default shall have
occurred and be continuing.
6.2 Performance by Agent of Borrower's Obligations . If the Borrower
fails to perform or comply with any of its agreements contained herein, the
Agent, at its option, but without any obligation so to do, may perform or
comply, or otherwise cause performance or compliance, with such agreement.
6.3 Borrower's Reimbursement Obligation . The expenses of the Agent
incurred in connection with actions undertaken as provided in this Section,
together with interest thereon after a Credit Agreement Event of Default at the
Overdue Rate from the date of payment by the Agent to the date reimbursed by the
Borrower, shall be payable by the Borrower to the Agent on demand.
6.4 Ratification; Power Coupled With An Interest . All powers,
authorizations and agencies contained in this Agreement are coupled with an
interest and are irrevocable until this Agreement is terminated and the security
interests created hereby are released.
7. Duty of Agent. The Agent's sole duty with respect to the custody,
safekeeping and physical preservation of the Collateral in its possession, under
Section 9-207 of the Code or otherwise to the extent permitted by law, shall be
to deal with it in the same manner as the Agent deals with similar property for
its own account. Neither the Agent, any Lender nor any of their respective
officers, directors, employees or agents shall be liable for failure to demand,
collect or realize upon any of the Collateral or for any delay in doing so or
shall be under any obligation to sell or otherwise dispose of any Collateral
upon the request of the Borrower or any other Person or to take any other action
whatsoever with regard to the Collateral or any part thereof. The powers
conferred on the Agent and the Lenders hereunder are solely to protect the
Agent's and the Lenders' interests in the Collateral and shall not impose any
duty upon the Agent or any Lender to exercise any such powers. Neither the
Agent, the Lenders nor any of their officers, directors, employees or agents
shall be responsible to the Borrower for any act or failure to
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act hereunder, except for the negligence or willful misconduct of the Agent,
any Lender or any of their officers, directors, employees or agents.
8. Execution of Financing Statements. Pursuant to and to the extent
permitted by Section 9-402 of the Code, the Borrower authorizes the Agent to
file financing statements with respect to the Collateral without the signature
of the Borrower in such form and in such filing offices as the Agent reasonably
determines appropriate to perfect the security interests of the Agent under this
Agreement. A carbon, photographic or other reproduction of this Agreement shall
be sufficient as a financing statement for filing in any jurisdiction.
9. Authority of Agent. The Borrower acknowledges that the rights and
responsibilities of the Agent under this Agreement with respect to any action
taken by the Agent or the exercise or non-exercise by the Agent of any request,
judgment or other right or remedy provided for herein or resulting or arising
out of this Agreement shall, as between the Agent and the Lenders, be governed
by the Credit Agreement and by such other agreements with respect thereto as may
exist from time to time among them, but, as between the Agent and the Borrower,
the Agent shall be conclusively presumed to be acting as agent for the Lenders
with full and valid authority so to act or refrain from acting, and the Borrower
shall not be under any obligation, or entitlement, to make any inquiry
respecting such authority.
10. Notices. Unless otherwise specifically provided herein, all
notices, requests and demands required or permitted by the terms hereof to be
given to any person shall be given pursuant to and in accordance with Section
13.3 of the Participation Agreement.
11. 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.
12. Amendments in Writing; Cumulative Remedies.
12.1 Amendments in Writing . None of the terms or provisions of this
Agreement may be waived, amended, supplemented or otherwise modified except by a
written instrument executed by the Borrower and the Agent, provided that any
provision of this Agreement imposing obligations on the Borrower may be waived
by the Agent in a written instrument executed by the Agent.
12.2 Remedies Cumulative . The rights and remedies herein provided are
cumulative, may be exercised singly or concurrently and are not exclusive of any
other rights or remedies provided by law.
13. Section Headings. The Section headings used in this Agreement are
for convenience of reference only and are not to affect the construction hereof
or be taken into consideration in the interpretation hereof.
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14. Successors and Assigns. This Agreement shall be binding upon the
successors and assigns the Borrower and shall inure to the benefit of the Agent
and the Lenders and their successors and permitted assigns.
15. Governing Law. This Agreement shall be governed by, and construed
and interpreted in accordance with, the law of the State of New York.
16. Obligations Are Without Recourse. Anything in this Agreement to
the contrary notwithstanding, the Borrower's liability hereunder shall be
limited as provided in Section 9.17 of the Credit Agreement.
17. Counterparts. This Agreement may be executed in any number
of separate counterparts, each of which shall be an original, but all of which
shall together constitute one and the same instrument.
IN WITNESS WHEREOF, the undersigned has caused this Security Agreement
to be duly executed and delivered as of the date first above written.
HANOVER EQUIPMENT TRUST 1998A
By: Wilmington Trust Company, not
individually but solely as trustee
By: /s/ XXXXXX X. XXXXXXXXX
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Name: Xxxxxx X. XxxXxxxxx
Title: Assistant Vice President
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SCHEDULE 1
EQUIPMENT
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JOINDER OF LESSEE
HANOVER COMPRESSOR COMPANY, a Delaware corporation ("Lessee")
hereby joins in the Security Agreement dated as of July 22, 1998 made by HANOVER
EQUIPMENT TRUST 1998A, as the Borrower in favor of The Chase Manhattan Bank, as
the Agent for the Lenders (the "Security Agreement") in order to, and HEREBY
GRANTS TO THE AGENT FOR THE RATABLE BENEFIT OF THE LENDERS A SECURITY INTEREST
IN all of its right, title and interest, if any, in and to the Collateral for
the purpose of securing the Obligations. Lessee acknowledges and agrees that,
upon the occurrence of a Credit Agreement Event of Default and subject to the
terms of the Lease, the Agent on behalf of the Lenders shall have the right to
exercise any and all of its remedies hereunder as against the Collateral.
Lessee agrees that if Lessee has any right, title, estate or
interest in the Collateral, Lessee is to that extent a guarantor or surety for
the benefit of the Agent and the Lenders. In such event, Lessee expressly agrees
that the rights of the Agent and the Lenders shall in no way be affected or
impaired by reason of the occurrence of any of the following events: (i) the
waiver by the Agent or the Lenders of the performance or observance by the
Borrower, Lessee or any other party of any terms of the Operative Agreements;
(ii) the extension, in whole or in part, of the time for payment by the Borrower
of any sums owing or payable under the Operative Agreements; (iii) any failure,
delay or inability of the Agent or the Lenders in enforcing any remedies or any
other provisions under the Operative Agreements; (iv) the occurrence of any
event described in Section 7.1(1) of the Credit Agreement; or (v) the inability
of the Borrower to perform (or the release of the Borrower's performance) under
the Operative Agreements due to any Legal Requirement. Notwithstanding the
foregoing, Lessee shall not have any personal liability under this Security
Agreement and Joinder in excess of its personal liability under the Guaranty and
the other Operative Agreements.
This Joinder shall be considered part of the Security
Agreement to which it is attached, and all references in the Operative
Agreements to the Security Agreement shall mean the Security Agreement together
with this Joinder.
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All capitalized terms used herein and not otherwise defined
herein shall have the meaning ascribed to such terms in the Security Agreement.
This Joinder has been duly executed by Lessee as of July 22,
1998.
HANOVER COMPRESSOR COMPANY
By:/s/ XXXXXX X. XXXXXXXXX
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Name: Xxxxxx X. XxxXxxxxx
Title: Assistant Vice President
