Exhibit 10.67
SECURITY AGREEMENT
SECURITY AGREEMENT, dated as of August 31, 2001, made by HANOVER
EQUIPMENT TRUST 2001A, a Delaware business trust (the "Lessor"), in favor of
WILMINGTON TRUST FSB, as Collateral Agent (in such capacity, the "Collateral
Agent") under the Indenture dated as of the date hereof (as amended,
supplemented or otherwise modified from time to time, the "Indenture") among the
Lessor, Indenture Trustee and the Subsidiary Guarantors, and under the
Participation Agreement (as defined below), for the first priority benefit of
the Securityholders and the second priority benefit of the Certificate Holders.
Preliminary Statement
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A. Pursuant to the Indenture, the Securityholders have agreed to make
an advance to the Lessor in an aggregate amount not to exceed $300,000,000 upon
the terms and subject to the conditions set forth therein, to be evidenced by
the Securities issued by the Lessor under the Indenture.
B. Pursuant to the Trust Agreement and the Participation Agreement,
the Certificate Holders have agreed to make the Certificate Holder Contribution
to the Lessor in an aggregate amount not to exceed $9,300,000, upon the terms
and subject to the conditions set forth therein, to be evidenced by the
Certificates issued by the Lessor under the Trust Agreement.
C. It is a condition, among others, to the obligations of the
Securityholders to purchase the Securities and the Certificate Holders to make
the Certificate Holder Contribution to the Lessor that the Lessor shall have
executed and delivered this Security Agreement for the ratable benefit of,
first, the Securityholders and, thereafter, the Certificate Holders, as provided
in the Indenture.
NOW, THEREFORE, in consideration of the premises and to induce the
Indenture Trustee to enter the Indenture and the Securityholders to purchase the
Securities and the Certificate Holders to make the Certificate Holder
Contributions to Lessor, the Lessor hereby agrees with the Collateral Agent, for
the ratable benefit of first, the Securityholders and, thereafter, the
Certificate Holders, 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
Lessor, the Certificate Holders, the Guarantors, the Indenture Trustee, the
Collateral Agent and the Trust Company, and the following terms shall have the
following meanings:
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"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 Delaware.
"Collateral": as defined in Section 2.
"Equipment": the equipment set forth on Schedule 1 annexed hereto,
any Replacement Equipment which is made subject to the Lien granted by this
Agreement pursuant to a Security Agreement Supplement, and all other tangible
personal property now or hereafter acquired by the Lessor, 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.
"Security Agreement Supplement": the form attached as Exhibit A.
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 Lessor hereby grants to the
Collateral Agent for the ratable benefit of, first, the Securityholders, and
thereafter, the Certificate Holders, 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 the Lessor pursuant to the Lease, the
rents thereunder and the Hanover Guarantee, (c) all books and records pertaining
to the foregoing, (d) all warranties and guarantees given by any Person with
respect to any of the foregoing, as well as all choses in action, claims, and
causes of action arising from any breach thereof, and (e) 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 under the Lease, so long as no Lease Event
of Default has occurred and is continuing.
3. Representations and Warranties.
3.1. Equipment. The Lessor 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, etc. The Lessor hereby represents and
warrants that (i) the Lessor'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 ▇▇▇▇▇▇ Square North, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: Corporate Trust Administration, (ii) the
Lessor is organized in the State of Delaware, (iii) the Lessor's legal name is
Hanover Equipment Trust 2001A and (iv) the Lessor is organized as a Delaware
business trust.
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3.3. Farm Products. The Lessor 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:
4.1. Further Documentation. At any time and from time to time, upon the
written request of the Collateral Agent, and at the sole expense of the Lessor,
the Lessor will promptly and duly execute and deliver such further instruments
and documents and take such further actions as the Collateral 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. (a) Except with respect to the rights of the
Lessee under the Operative Agreements, the Lessor will not permit any of the
Equipment to be kept at a location other than those listed on Schedule 1; and
(b) The Lessor will not change the location of its chief executive
offices from that specified in Section 3.2.
4.3. Change in Name, etc. The Lessor will not change its name, identity,
type of organization or structure, unless the Lessor shall have given the
Collateral Agent at least 30 days' prior written notice of such change.
4.4. Equipment Modifications and Improvements. In the event any
modifications or additions are made the title to which becomes vested in the
Lessor, such modifications or additions shall be deemed to be a part of the
Equipment and covered by the security interest of the Security Documents. Any of
the modifications or additions which were constructed by or on behalf of the
Lessor shall be deemed to be a part of the Equipment and covered by the security
interest of the Security Documents.
5. Remedies.
5.1. Code Remedies. If an Indenture Event of Default shall occur and be
continuing, the Collateral Agent, on behalf of the Securityholders and the
Certificate Holders, 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 Collateral 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 Lessor, 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 Collateral Agent or any Securityholder or Certificate
Holder or elsewhere
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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
Collateral Agent and/or any Securityholder and/or Certificate Holder 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 Lessor,
which right or equity is hereby waived or released to the extent permitted by
law. Subject to the Lessee's rights under the Lease, if any, the Lessor further
agrees, at the Collateral Agent's request, to assemble the Collateral and make
it available to the Collateral Agent at places that the Collateral Agent shall
reasonably select. The Collateral 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 Collateral Agent, the Securityholders and
the Certificate Holders hereunder, including, without limitation, reasonable
attorneys' fees and disbursements, to the payment in whole or in part of the
Obligations, in accordance with Section 7.13 of the Indenture, and only after
such application and after the payment by the Collateral Agent of any other
amount required by any provision of law, including, without limitation, Section
9-615(a) of the Code, need the Collateral Agent account for the surplus, if any,
to the Lessor. To the extent permitted by applicable law, the Lessor waives all
claims, damages and demands it may acquire against the Collateral Agent or any
Securityholder or Certificate Holder 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
Collateral 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. Collateral Agent's Appointment as Attorney-in-Fact; Collateral
Agent's Performance of Obligations.
6.1. Powers. The Lessor hereby irrevocably constitutes and appoints the
Collateral 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 Lessor and in the name of the
Lessor 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 Lessor hereby gives the Collateral Agent the power and right, on
behalf of the Lessor, without notice to or assent by the Lessor, 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;
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(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) 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; (2) commence and prosecute any suits, actions or proceedings at
law or in equity in any court of competent jurisdiction to collect the
Collateral or any portion thereof and to enforce any other right in respect
of any Collateral; (3) defend any suit, action or proceeding brought
against the Lessor with respect to any Collateral; (4) settle, compromise
or adjust any such suit, action or proceeding and, in connection therewith,
to give such discharges or releases as the Collateral Agent may deem
appropriate; and (5) 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 Collateral Agent were the absolute owner
thereof for all purposes, and do, at the Collateral Agent's option and the
Lessor's expense, at any time, or from time to time, all acts and things
which the Collateral Agent deems necessary to protect, preserve or realize
upon the Collateral and the Collateral Agent's and the Securityholders' and
Collateral Holders' security interests therein and to effect the intent of
this Agreement, all as fully and effectively as the Lessor might do.
Anything in this subsection to the contrary notwithstanding, the Collateral
Agent agrees that it will not exercise any rights under the power of attorney
provided for in this subsection unless a Indenture Event of Default shall have
occurred and be continuing.
6.2. Performance by Collateral Agent of Lessor's Obligations. If the
Lessor fails to perform or comply with any of its agreements contained herein,
the Collateral 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. Lessor's Reimbursement Obligation. The expenses of the Collateral
Agent incurred in connection with actions undertaken as provided in this
Section, together with interest thereon after an Indenture Event of Default at
the Overdue Rate from the date of payment by the Collateral Agent to the date
reimbursed by the Lessor, shall be payable by the Lessor to the Collateral 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 Collateral Agent. The Collateral 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 Collateral
Agent deals with similar property for its own account. None of the Collateral
Agent, any Securityholder, any Certificate Holder 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 Lessor or any other Person or to take any other
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action whatsoever with regard to the Collateral or any part thereof. The powers
conferred on the Collateral Agent, the Securityholders and the Certificate
Holders hereunder are solely to protect the Collateral Agent's, the
Securityholders' and the Certificate Holders' interests in the Collateral and
shall not impose any duty upon the Collateral Agent, any Securityholder or any
Certificate Holder to exercise any such powers. None of the Collateral Agent,
the Securityholders, the Certificate Holders nor any of their officers,
directors, employees or agents shall be responsible to the Lessor for any act or
failure to act hereunder, except for the negligence or willful misconduct of the
Collateral Agent, any Securityholder, any Certificate Holder or any of their
officers, directors, employees or agents.
8. Execution of Financing Statements. Pursuant to and to the extent
permitted by Section 9-502 of the Code, the Lessor authorizes the Collateral
Agent to file financing statements with respect to the Collateral without the
signature of the Lessor in such form and in such filing offices as the
Collateral Agent reasonably determines appropriate to perfect the security
interests of the Collateral Agent under this Agreement.
9. Authority of Collateral Agent. The Lessor acknowledges that the
rights and responsibilities of the Collateral Agent under this Agreement with
respect to any action taken by the Collateral Agent or the exercise or
non-exercise by the Collateral 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 Collateral Agent and the Securityholders and the Certificate
Holders, be governed by the Indenture, the Participation Agreement and by such
other agreements with respect thereto as may exist from time to time among them,
but, as between the Collateral Agent and the Lessor, the Collateral Agent shall
be conclusively presumed to be acting as agent for the Securityholders and the
Certificate Holders with full and valid authority so to act or refrain from
acting, and the Lessor 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 14.3 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 Lessor and the Collateral Agent, provided
that any provision of this Agreement imposing obligations on the Lessor may be
waived by the Collateral Agent in a written instrument executed by the
Collateral 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
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provided by law. The failure of the Collateral Agent to exercise the rights
granted hereunder upon any Indenture Event of Default shall not constitute a
waiver of any such right upon the continuation or reoccurrence of any such
Indenture Event of Default.
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.
14. Successors and Assigns. This Agreement shall be binding upon the
successors and assigns the Lessor and shall inure to the benefit of the
Collateral Agent, the Securityholders, the Certificate Holders 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 DELAWARE.
16. Obligations Are Without Recourse. Anything in this Agreement to the
contrary notwithstanding, the Lessor's liability hereunder shall be limited as
provided in Section 9.8 of the Indenture.
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 2001A
By: Wilmington Trust Company, not
individually but solely as Trustee
By: ____________________________
Name:
Title:
Schedule 1
EQUIPMENT
EXHIBIT A
SECURITY AGREEMENT SUPPLEMENT NO. __
THIS SECURITY AGREEMENT SUPPLEMENT NO. _ (the "Security Agreement
Supplement") dated as of _________ __, 2001, to the Security Agreement, dated as
of _________ __, 2001 (as the same may be further amended, supplemented or
otherwise modified from time to time, the "Security Agreement") made by HANOVER
EQUIPMENT TRUST 2001A, a Delaware business trust, (the "Lessor"), in favor of
WILMINGTON TRUST FSB, as Collateral Agent (in such capacity, the "Collateral
Agent") under the Indenture dated as of the date hereof (as amended,
supplemented or otherwise modified from time to time, the "Indenture") among the
Lessor, Indenture Trustee and the Subsidiary Guarantors, and under the
Participation Agreement (as defined below), for the first priority benefit of
the Securityholders and the second priority benefit of the Certificate Holders
WHEREAS, the Lessor has previously executed and delivered the Security
Agreement to grant to the Collateral Agent, for the ratable benefit of, first,
the Securityholders and, thereafter, the Certificate Holders, a security
interest in the collateral described therein; and
WHEREAS, pursuant to the Security Agreement, the Lessor has agreed to
execute and deliver this Security Agreement Supplement No. _ for the ratable
benefit of the Securityholders and the Certificate Holders.
NOW, THEREFORE, in consideration of the premises and to induce the
Securityholders to make their respective Advances to the Lessor and the
Certificate Holders to make the Certificate Holder Contribution to Lessor, the
Lessor hereby agrees with the Collateral Agent, for the ratable benefit of,
first, the Securityholders and, thereafter, the Certificate Holders, as follows:
1. Definitions; Rules of Usage. For purposes of this Security Agreement
Supplement, capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to them in the Security Agreement.
2. Grant of Security Interest in the Replacement Equipment. As collateral
security, in addition to that referred to in the Security Agreement, for the
prompt and complete payment and performance when due (whether at the stated
maturity, by acceleration or otherwise) of the Obligations, the Lessor hereby
grants to the Collateral Agent for the ratable benefit of, first, the
Securityholders and, thereafter, the Certificate Holders, 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 listed on Schedule I hereto (the "Replacement Equipment"), (b)
rights and interests of the Lessor pursuant to Lease Supplement No. _, (c) all
books and records pertaining to the foregoing, (d) all warranties and guarantees
given by any Person with respect to any of the foregoing, as well as all choses
in action, claims, and causes of action arising from any breach thereof, and (e)
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 under the
Lease, so long as no Lease Event of Default has occurred and is continuing.
Effective upon the execution and delivery of this Security Agreement Supplement
by the Lessor, the Replacement
Equipment shall be subject to the terms and provisions of the Security Agreement
and shall be deemed to constitute Equipment for all purposes with respect to the
Security Agreement.
3. Ratification. Except as specifically modified hereby, the terms and
provisions of the Security Agreement are hereby ratified and confirmed and
remain in full force and effect.
4. GOVERNING LAW. THIS SECURITY AGREEMENT SUPPLEMENT HAS BEEN DELIVERED
IN, AND SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THIS STATE OF DELAWARE APPLICABLE TO AGREEMENTS MADE AND TO BE
PERFORMED ENTIRELY WITHIN SUCH STATE.
5. Counterpart Execution. This Security Agreement Supplement may be
executed in any number of counterparts and by each of the parties hereto in
separate counterparts, all such counterparts together constituting but one and
the same instrument.
IN WITNESS WHEREOF, the undersigned has caused this Security Agreement
Supplement No. _ be duly executed and delivered as of the date first above
written.
HANOVER EQUIPMENT TRUST 2001A
By: Wilmington Trust Company, not in its
individual capacity but solely as
Trustee
By: ___________________________
Name:
Title:
JOINDER OF LESSEE
HANOVER COMPRESSION LIMITED PARTNERSHIP, a Delaware corporation
("Lessee") hereby joins in the Security Agreement dated as of August 31, 2001
made by HANOVER EQUIPMENT TRUST 2001A, as the Lessor in favor of WILMINGTON
TRUST FSB, as the Collateral Agent for, first, the Securityholders, and
thereafter, the Certificate Holders (the "Security Agreement") in order to, and
HEREBY GRANTS TO THE COLLATERAL AGENT FOR THE RATABLE BENEFIT OF FIRST, THE
SECURITYHOLDERS AND, THEREAFTER, THE CERTIFICATE HOLDERS, A SECURITY INTEREST IN
all of its right, title and interest, if any, in and to the Collateral for the
purpose of securing the Guaranteed Obligations. Lessee acknowledges and agrees
that, upon the occurrence of an Indenture Event of Default and subject to the
terms of the Lease, the Collateral Agent on behalf of, first, the
Securityholders and, thereafter, the Certificate Holders, shall have the right
to exercise any and all of its remedies hereunder as against the Collateral.
Lessee expressly agrees that the rights of the Collateral Agent, the
Securityholders and the Certificate Holders under the Security Agreement shall
in no way be affected or impaired by reason of the occurrence of any of the
following events: (i) the waiver by the Collateral Agent, the Securityholders or
the Certificate Holders of the performance or observance by the Lessor, 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 Lessor of any sums owing or
payable under the Operative Agreements; (iii) any failure, delay or inability of
the Collateral Agent, the Securityholders or the Certificate Holders in
enforcing any remedies or any other provisions under the Operative Agreements;
(iv) the occurrence of any event described in Section 5.1 of the Indenture; or
(v) the inability of the Lessor to perform (or the release of the Lessor'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.
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 August 31, 2001.
HANOVER COMPRESSION LIMITED PARTNERSHIP
By: ____________________________
Name:
Title: