<PAGE>

                                                                     Exhibit 4.4

================================================================================

                             Dated: June 20, 1995

                       CONFIDENTIAL OFFERING MEMORANDUM

                          HANOVER COMPRESSOR COMPANY

               Up to 250 shares of Common Stock, $.001 par value
                           $5,500 Minimum Investment

================================================================================

     All of the 250 shares (the "Shares") of common stock, $.001 par value (the
"Common Stock"), offered hereby are being sold by Hanover Compressor Company, a
Delaware corporation (the "Company"). The Shares are being offered only to
certain directors and employees of the Company and its subsidiaries and are
offered together with options to purchase shares which will be granted to
investors. See "The Offering."

     There has been no public market for the Common Stock, and no such public
market is anticipated to exist in the foreseeable future. See "Determination of
Offering Price" for a discussion of the factors considered in determining the
offering price.

     See "Risk Factors" for a discussion of certain factors that should be
considered in evaluating an investment in the Common Stock.

 THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
        EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS
        THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
            COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
                  OFFERING MEMORANDUM. ANY REPRESENTATION TO
                      THE CONTRARY IS A CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
=======================================================================================================
                                                              Fees and              Proceeds to the
                                Offering Price (1)         Commissions (2)            Company (2)
-------------------------------------------------------------------------------------------------------
<S>                             <C>                        <C>                      <C>
Per Share.....................  $    1,100                   $  0.00                $    1,100
-------------------------------------------------------------------------------------------------------
Maximum Total.................  $  275,000                   $  0.00                $  275,000
=======================================================================================================
</TABLE>

(1) Payable in cash upon subscription (except for shares to be purchased with
    proceeds of loans made by the Company). The minimum purchase per investor is
    five Shares (for a total of $5,500), not including Shares purchased with the
    proceeds of four year loans to be made by the Company, and the maximum
    aggregate purchase by all investors is 250 Shares (for a total of $275,000),
    including Shares purchased with the proceeds of four year loans to be made
    by the Company. See "The Offering." Notwithstanding the foregoing, the
    Company, in its sole discretion, may accept smaller subscriptions, subject
    to applicable securities laws. See "Plan of Offering."

(2) The Shares are being offered directly by the Company which will pay no
    commissions but will utilize a portion of the proceeds to pay legal,
    accounting and other expenses of the offering estimated to be $25,000.

THIS OFFERING MEMORANDUM CONSTITUTES AN OFFER ONLY IF A NAME APPEARS IN THE
SPACE BELOW MARKED "NAME OF OFFEREE" AND CONSTITUTES AN OFFER ONLY TO SUCH NAMED
OFFEREE.


Name of Offeree:                                  Memorandum Number:

             TIME SECURITIES INVOLVE A SIGNIFICANT DEGREE OF RISK

                                       1
<PAGE>

                                  __________

     THIS MEMORANDUM IS SUBMITTED IN CONNECTION WITH THE OFFERING OF THESE
SECURITIES PURSUANT TO SECTION 4(2) OF THE SECURITIES ACT OF 1933, AS AMENDED
(THE `SECURITIES ACT'), REGULATION D AND/OR SECTION 701 PROMULGATED UNDER THE
SECURITIES ACT AND PURSUANT TO AVAILABLE EXEMPTIONS UNDER STATE SECURITIES LAWS,
AND MAY NOT BE REPRODUCED OR USED FOR ANY OTHER PURPOSE. ANY ACTION CONTRARY TO
THESE RESTRICTIONS MAY INVOLVE A VIOLATION OF CERTAIN FEDERAL OR STATE
SECURITIES LAWS.

                                  __________

     THE COMPANY HAS AGREED TO MAKE AVAILABLE, PRIOR TO THE CONSUMMATION OF THE
TRANSACTIONS CONTEMPLATED HEREIN, TO EACH OFFEREE OF COMMON STOCK OR HIS
REPRESENTATIVE(S) OR BOTH, THE OPPORTUNITY TO ASK QUESTIONS OF, AND RECEIVE
ANSWERS FROM IT OR ANY PERSON ACTING ON ITS BEHALF CONCERNING THE TERMS AND
CONDITIONS OF THIS OFFERING, AND TO OBTAIN ANY ADDITIONAL INFORMATION, TO THE
EXTENT IT POSSESSES SUCH INFORMATION OR CAN ACQUIRE IT WITHOUT UNREASONABLE
EFFORT OR EXPENSE, NECESSARY TO VERIFY THE ACCURACY OF THE INFORMATION SET FORTH
HEREIN.

                                  __________

     PROSPECTIVE INVESTORS ARE NOT TO CONSTRUE THE CONTENTS OF THIS MEMORANDUM
OR ANY PRIOR OR SUBSEQUENT COMMUNICATION FROM THE COMPANY, ITS AFFILIATES,
DIRECTORS, OFFICERS AND EMPLOYEES OR ANY PROFESSIONAL ASSOCIATED WITH THIS
OFFERING AS LEGAL OR TAX ADVICE. EACH INVESTOR SHOULD CONSULT HIS OWN PERSONAL
COUNSEL, ACCOUNTANT AND OTHER ADVISERS AS TO LEGAL, TAX, ECONOMIC AND RELATED
MATTERS CONCERNING THE INVESTMENT DESCRIBED HEREIN AND ITS SUITABILITY FOR HIM.

                                  __________

     NO DISTRIBUTION OF THIS MEMORANDUM IN WHOLE OR IN PART, OR THE DISCLOSURE
OF ANY OF ITS CONTENTS. IS PERMITTED UNLESS AUTHORIZED. EXCEPT FOR INFORMATION
CONTAINED HEREIN OR AUTHORIZED BY THE COMPANY, NO OFFERING LITERATURE OR
ADVERTISING IN WHATEVER FORM SHALL BE EMPLOYED IN THE OFFERING OF THE SHARES. NO
PERSON HAS BEEN AUTHORIZED TO MAKE REPRESENTATIONS, OR GIVE ANY INFORMATION,
WITH RESPECT TO THE SHARES, EXCEPT THE INFORMATION CONTAINED HEREIN AND IN THE
SUMMARY OF THE OFFERING PREPARED BY THE COMPANY.

                                  __________

     INVESTMENT IN THE COMMON STOCK IS SUITABLE ONLY FOR INVESTORS WHO MEET THE
SUITABILITY STANDARDS DESCRIBED UNDER "THE OFFERING -- SUITABILITY."

                                      ii
<PAGE>

                                  __________

     THE COMMON STOCK OFFERED HEREBY MAY NOT BE TRANSFERRED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT OR AN EXEMPTION FROM REGISTRATION.

                                  __________

     THIS MEMORANDUM DOES NOT CONSTITUTE AN OFFER OR SOLICITATION TO ANYONE IN
ANY STATE OR IN ANY OTHER JURISDICTION IN WHICH SUCH AN OFFER OR SOLICITATION IS
NOT AUTHORIZED.

                                  __________

     THE COMPANY WILL NOT BE REQUIRED TO DELIVER AN ANNUAL REPORT TO
STOCKHOLDERS PURSUANT TO THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.
HOWEVER, THE COMPANY INTENDS TO FURNISH ITS STOCKHOLDERS ANNUALLY WITH A COPY OF
THE COMPANY'S AUDITED FINANCIAL STATEMENTS.

                                  __________

FOR LOUISIANA RESIDENTS ONLY:


     THE SHARES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OR THE
LOUISIANA SECURITIES LAWS. THE SHARES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY
NOT BE SOLD OR TRANSFERRED FOR VALUE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
OF THEM UNDER THE SECURITIES ACT AND/OR THE LOUISIANA SECURITIES LAWS OR AN
OPINION OF COUNSEL TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER
SUCH ACT OR LAWS.

                                  __________

FOR TEXAS RESIDENTS ONLY:


     THE SHARES HAVE NOT BEEN REGISTERED UNDER THE TEXAS SECURITIES ACT, AS
AMENDED (THE "TEXAS ACT"), AND ARE OFFERED AND SOLD PURSUANT TO AN EXEMPTION
THEREFROM. THE SHARES CANNOT BE SOLD OR TRANSFERRED EXCEPT IN -A TRANSACTION
WHICH IS EXEMPT UNDER THE TEXAS ACT, OR PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE TEXAS ACT OR IN A TRANSACTION WHICH IS OTHERWISE IN
COMPLIANCE WITH THE TEXAS ACT.

                                  __________

     THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE
AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES
ACT AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR
EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR
THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.

                                      iii
<PAGE>

                       CONFIDENTIAL OFFERING MEMORANDUM
                          HANOVER COMPRESSOR COMPANY

                               TABLE OF CONTENTS
                               -----------------
<TABLE>
<CAPTION>
                                                                                         PAGE
                                                                                         ----
<S>                                                                                      <C>
SUMMARY OF THE OFFERING................................................................   1

THE COMPANY............................................................................   1

THE OFFERING...........................................................................   1

FEDERAL INCOME TAX CONSEQUENCES........................................................   6

RISK FACTORS...........................................................................   9

DETERMINATION OF OFFERING PRICE........................................................  15

PLAN OF OFFERING.......................................................................  15

USE OF PROCEEDS........................................................................  16

DILUTION...............................................................................  16

CAPITALIZATION.........................................................................  17

DIVIDEND POLICY........................................................................  18

SELECTED FINANCIAL INFORMATION.........................................................  19

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
  AND RESULTS OF OPERATIONS............................................................  19

BUSINESS...............................................................................  21

MANAGEMENT.............................................................................  30

PRINCIPAL STOCKHOLDERS.................................................................  37

DESCRIPTION OF CERTAIN INDEBTEDNESS....................................................  40

DESCRIPTION OF CAPITAL STOCK...........................................................  42

ADDITIONAL INFORMATION.................................................................  44
</TABLE>

                                      iv
<PAGE>

EXHIBITS:
--------

Exhibit A   -   Subscription Agreement
Exhibit B   -   Stockholders' Agreement
Exhibit C   -   Form of Loan Agreement
Exhibit D   -   Form of Four Year Note
Exhibit E   -   Form of Pledge Agreement
Exhibit F   -   Form of 1995 Management Stock Option Plan
Exhibit G   -   Form of Option Agreement under 1995 Management Stock Option Plan

                                       v
<PAGE>

                            SUMMARY OF THE OFFERING

     The following summary is qualified in its entirety by the more detailed
information appearing elsewhere in this Offering Memorandum and the Exhibits
attached hereto. Prospective investors of the Shares should carefully consider
the factors set forth under "Risk Factors."

                                  The Company

     The Company was organized in October 1990 for the purpose of acquiring,
manufacturing,' selling, leasing, maintaining and refurbishing compressors
utilized by the natural gas industry. For a more detailed description of the
Company's business, see "Business."

                                 The Offering

Shares of Common Stock offered:    250, including Shares to be acquired for cash
                                   out of the subscribing offeree's own funds or
                                   by delivery of a four year note, but not
                                   including shares which may be acquired
                                   pursuant to options granted under the
                                   Management Option Plan. See "The Offering."

Shares of Common Stock
outstanding after the offering:    83,956.19, not including (i) shares issuable
                                   upon exercise of options and (ii) 156.40
                                   shares of Common Stock which were repurchased
                                   by the Company as of March 16, 1995.

Use of Proceeds:                   All of the net proceeds of this offering will
                                   be used for general corporate purposes,
                                   including working capital.

     The Company reserves the right to withdraw this offering and return all
subscriptions or modify this offering at any time during the term of this
offering. Subscriptions for Shares may be accepted or rejected by the Company in
its sole discretion. All cash received by the Company in respect of
subscriptions for the Shares (the "Funds") shall be promptly deposited in an
interest bearing, segregated account and such Funds may be invested in treasury
bills or other cash equivalents, as determined in the sole and absolute
discretion of the Company. If acceptable subscriptions for a minimum of an
aggregate of 100 Shares are received by the Company on or before June 26, 1995
or such later date as the Company in its sole discretion may determine without
consent of or notice to the offerees. but in no event later than July 7, 1995
("the Termination Date"), all subscriptions will be transferred from the
segregated bank account to the Company, together with all interest, if any,
earned thereon. The minimum subscription per subscribing offeree is five Shares
(not including any Shares to be acquired pursuant to a four year loan made by
the Company) for an aggregate of $5,500; however, the Company in its sole
discretion may accept subscriptions for a lesser number of Shares, subject to
applicable securities laws. In the event all conditions have not been satisfied
in full prior to the Termination Date or the Company withdraws this offering,
this offering will be terminated and all Funds will be returned to subscribing
offerees with a pro rata share of interest earned thereon, if any, calculated on
                --------
the basis of the amount of Funds invested by each subscribing offeree and the
length of time interest on such Funds was earned. See "Plan of Offering."

                                       1
<PAGE>

                         Summary Financial Information

     See "Selected Financial Information" for a summary of certain relevant
financial information.

                                 Risk Factors

     For a discussion of certain factors that should be considered in evaluating
an investment in the Shares, including, among others, (i) the Company's limited
operating history, (ii) the short terms of compressor leases and the possible
inability of the Company to re-lease its compressors, (iii) competition, (iv)
factors regarding the natural gas compressor leasing industry, (v) potential
liability and insurance, (vi) environmental liability risks, (vii) governmental
regulation, (viii) restrictions imposed by the terms of the Company's
indebtedness and the effect of a default thereunder, (ix) dependence upon
internally generated funds and the contemplated offering of Preferred Stock to
certain investors subsequent to this offering, (x) limited preemptive rights,
(xi) no public market for the Common Stock and restrictions on transferability,
(xii) dividends, (xiii) control by principal stockholders, (xiv) capital demands
due to recent expansion activity, (xv) dilution and (xvi) Federal income task
risks, see "Risk Factors."

                                       2
<PAGE>

                                  THE COMPANY

     Hanover Compressor Company is a corporation organized under the laws of the
State of Delaware. The principal executive office of the Company is located at
12001 North Houston Rosslyn, Houston, Texas 77086, and the Company's telephone
number is (713) 447-8787.

                                 THE OFFERING

     This offering is made only to certain directors and employees of the
Company and its subsidiaries for the purpose of providing such persons with the
opportunity to obtain an equity interest in the Company. The Company reserves
the right to withdraw this offering and return all subscriptions or make non-
material modifications to the offering at any time during the term of the
offering. All Funds shall be promptly deposited in an interest bearing,
segregated account and such Funds may be invested in treasury bills or other
cash equivalents, as determined in the sole and absolute discretion of the
Company. Funds deposited in the segregated account may not be withdrawn by
subscribers unless the offering terminates as described herein. The deposit of
Funds in such account does not constitute acceptance of all or any portion of
any offeree's subscription by the Company.

General

     Subject to adjustment for over subscription, each offeree may subscribe to
purchase for cash as many of the Shares as such offeree may desire. Upon such
subscription, the Company will, at the request and option of each subscribing
offeree, loan (the "Four Year Loan") such subscribing offeree sufficient funds,
on a full recourse and secured basis, to purchase two additional Shares (all
such Shares hereinafter the "Loan Shares") for each Share subscribed for
hereunder for cash (the "Cash Shares"). See "- The Four Year Loan." For each
Share acquired by a subscribing offeree hereunder, the Company will grant such
subscribing offeree an option to purchase one-third of one share of Common Stock
pursuant to the terms of the 1995 Management Stock Option Plan, substantially in
the form attached hereto as Exhibit F (the "Management Option Plan"). The
                            ---------
exercise price for such options will be $1,100 per share (subject to adjustment
for stock splits, stock dividends and other similar events as described in the
Management Option Plan). See "- Options - Management Option Plan."

     Offerees who desire to subscribe for Shares will be required to become
parties to the Supplemental Stockholders' Agreement attached hereto as Exhibit B
                                                                       ---------
(the "Stockholders' Agreement"). The Stockholders' Agreement restricts the sale
of Common Stock held by the parties thereto and provides for, among other
things, (i) the right of Investors (as hereinafter defined) to participate in a
sale by GKH Partners, L.P., a Delaware limited partnership ("Partners"), -and
GKH Investments, L.P., a Delaware limited partnership (together with Partners,
"GKH"), of at least 50% of the Common Stock owned by GKH, (ii) the right of GKH
to require all Investors to sell their stock in certain transactions for the
same consideration to be received by GKH and (iii) the right of the Company or
its affiliates to purchase all of an Investor's Common Stock upon the
termination of such Investor's employment with the Company and its subsidiaries
and affiliates. The purchase price for such stock varies depending on the
circumstances and, in cases where an Investor is terminated for cause or
voluntarily terminates his employment without good reason (each as more fully
defined in the Stockholders' Agreement), such purchase price may be
substantially below the fair market value of such Common Stock. See "--
Stockholders' Agreement."

     The maximum aggregate number of shares which may be subscribed for pursuant
to this offering is 250, which number does not include any shares of Common
Stock to be issued upon exercise of

                                       1
<PAGE>

options granted under the Management Option Plan. If the offerees subscribe for
more than such number of shares of Common Stock, each offeree's subscription
will be reduced proportionately based on the relationship between the number of
shares subscribed for by such offeree and the aggregate number of shares
subscribed for by all offerees.

     For information regarding the method of subscribing for Shares, see "Plan
of Offering" and the Subscription Agreement attached hereto as Exhibit A (the
                                                               ---------
"Subscription Agreement").

Suitability

     Investment in the Shares offered hereby involves a significant degree of
risk. See "Risk Factors."  This offering is a private offering made only by
delivery of a copy of this Offering Memorandum to the director or employee of
the Company or its subsidiaries whose name appears hereon. The Shares have not
been registered under the Securities Act, or any applicable state securities
laws. The Shares are being offered pursuant to one or more exemptions from the
registration requirements of the Securities Act, including the exemption
afforded by Section 4(2) thereof, Regulation D and/or Section 701 promulgated
thereunder, and pursuant to available exemptions under state securities laws,
only to certain directors and employees for investment only. Each person who
subscribes for Shares and whose subscription is accepted by the Company (each an
"Investor," collectively, the "Investors") will be required to represent that he
is acquiring the Shares for his own account, for investment, and without any
intention of making a distribution or resale thereof, either in whole or in
part. The Shares may not be resold or transferred except in accordance with the
provisions of the Securities Act, the rules and regulations thereunder, any
applicable state securities laws and the terms and conditions of the
Stockholders' Agreement. As a result of the foregoing, investment in the Shares
is suitable only for persons of adequate financial means apart from their
investment in the Shares, and who have no need for liquidity with respect to
such investment.

     Offerees; who desire to subscribe for Shares should read and discuss with
their advisors this Offering Memorandum, the Subscription Agreement, the
Stockholders' Agreement, the Loan Agreement (as defined below), the Four Year
Note (as defined below), the Pledge Agreement (as defined below), the Management
Option Plan and the other documents relative to the foregoing regarding the
appropriateness of an investment in the Shares. The desirability of an
investment in the Common Stock depends upon a number of factors including, among
others, (i) the factors set forth under the caption "Risk Factors," (ii) the
nature of the Company's business, (iii) the possibility of a decline in value of
the 'Common Stock, (iv) the various restrictions on transferability of the
Common Stock, including those contained in the Stockholders' Agreement, and the
present essential illiquidity of the investment, (v) the desirability to the
offeree of a long-term investment, (vi) the likelihood that the Company will not
pay dividends on the Common Stock in the foreseeable future and the likelihood
of restrictions imposed on the Company's ability to pay dividends under the
terms of the agreements governing the Company's senior secured indebtedness and
the Preferred Stock Issuance (as defined below), (vii) the control of the
Company by its principal stockholders, (viii) the relationship between such
offeree's investment (including the investment pursuant to the Four Year Loan)
and such offerees' net worth, (ix) the employment goals of the offeree and the
right of the Company to purchase such offeree's Common Stock upon the
termination of his employment with the Company, in some instances at a purchase
price equal to or less than the offeree's cost thereof, even if such cost is
less than the fair market value of such Common Stock, and (x) other relevant
personal circumstances of each offeree.

                                       2
<PAGE>

The Four Year Loan

     Each Investor may, but is not required to, request from the Company a Four
Year Loan to purchase the Loan Shares. Inasmuch as the Four Year Loan will be
made on a full recourse and secured basis, each Investor should consider
carefully the additional risk that he or she will undertake by obtaining the
Four Year Loan to purchase Shares.

     The Four Year Loan will bear interest at the prime rate as announced from
time to time by Chemical Bank ("Prime Rate"), will be made pursuant to a loan
agreement substantially in the form of Exhibit C hereto (the "Loan Agreement"),
                                       ---------
evidenced by a secured promissory note substantially in the form of Exhibit D
                                                                    ---------
hereto (the "Four Year Note"). Any amount of principal and/or accrued interest
on the Four Year Note which is not paid when due will bear interest at the Prime
Rate plus 2 %, except that upon the failure to make the required payments
following (i) the sale of Common Stock or receipt by the Investor of dividends
on Common Stock, (ii) termination for Cause (as defined below) and (iii)
voluntary termination without Good Reason (as defined below), the outstanding
principal and accrued and unpaid interest will bear interest at 15 % per annum,
compounded monthly, or the highest rate of interest allowable under applicable
law, whichever is less. Interest on the Four Year Note will be payable in cash
annually on December 31 (each an "Interest Payment Date") to the extent of 66.7
% of the accrued interest to such date (the "Minimum Interest Payment"), and all
accrued interest which is not paid as of an Interest Payment Date will be
automatically added to the principal amount of the Four Year Note.  Each Minimum
Interest Payment must be paid to the extent of bonus payments, if any, less an
allowance equal to 33.3% of such bonus payment for federal and state income tax
(the "Net Bonus"), paid to the Investor by the Company on or before each
Interest Payment Date (including amounts paid in such calendar year which relate
to a previous calendar year and were not taken into consideration in such prior
calendar year), provided that nothing herein or in the Loan Agreement or the
Four Year Note shall create any obligation on the part of the Company to pay any
bonus. In the event the Net Bonus is insufficient to pay the Minimum Interest
Payment, the Investor shall be required to pay the difference between such Net
Bonus and the Minimum Interest Payment. The Company will have the right to
withhold from the Investor all or any portion of a Net Bonus payable by the
Investor in respect of interest under the Four Year Loan, which amounts will be
deemed to have been paid to the Investor and subsequently repaid by the Investor
to the Company. All principal and accrued and unpaid interest will be due upon
maturity, which will be 48 months from the date of the Loan Agreement, provided
that such date may be accelerated upon the occurrence of an Event of Default (as
defined below) or under other circumstances more fully described in the Loan
Agreement and the Four Year Note.

     The Four Year Note will be secured by a pledge of (i) all of the shares and
rights to acquire shares of Common Stock owned by the Investor as of the date of
the Four Year Loan, or which are acquired by the Investor subsequent to the date
of the Four Year Loan and (ii) all proceeds received by an Investor thereon,
including dividends and additional shares received in stock distributions, all
as more fully set forth in the pledge agreement attached hereto as Exhibit E
                                                                   ---------
(the "Pledge Agreement"). The Four Year Note will provide for mandatory
prepayment upon and to the extent of dividends or other distributions paid to
the Investor on the Common Stock and proceeds from the sale of the Common Stock,
and upon termination of the Investor's employment by the Investor without Good
Reason (as defined below) or by the Company for Cause (as defined below).

     The Four Year Note, the Loan Agreement, the Pledge Agreement and any other
documents that are executed in connection therewith (collectively, the "Loan
Documents") will be assignable by the Company to any of its affiliates,
including GKH, or to any third party financial institution or commercial

                                       3
<PAGE>

lender to which the Company is or becomes indebted. The Loan Documents cannot be
assigned by an Investor without the Company's prior written consent.

     "Cause," when capitalized and with reference to the termination of the
Investor's employment with the Company, means (i) the commission of an act of
fraud, embezzlement or willful breach of a fiduciary duty to the Company
(including the unauthorized disclosure of confidential or proprietary material
information of the Company), (ii) a conviction (or a plea of nolo conteridere in
                                                             ---- -----------
lieu thereof) for a felony or a crime involving fraud, dishonesty or moral
turpitude, (iii) willful misconduct as an employee of the Company, (iv) the
willful failure to render services to the Company in accordance with such
Investor's employment, which failure amounts to a material neglect of his duties
to the Company or (v) substantial dependence, as determined by the Board of
Directors of the Company (the "Board"), on alcohol or any controlled substance.

     "Good Reason," when capitalized, means, with reference to the voluntary
termination of the Investor's employment with the Company by the Investor, where
such termination (i) promptly follows a material reduction of such Investor's
duties and responsibilities or a permanent change in such Investor's duties and
responsibilities which are materially inconsistent with the type of duties and
responsibilities of such Investor then in effect, (ii) promptly follows a
material reduction in annual base salary (without regard to bonus compensation,
if any), (iii) promptly follows a material reduction in such Investor's employee
benefits (without regard to bonus compensation, if any) if such reduction
results in such Investor receiving benefits which are, in the aggregate,
materially less than the benefits received by other comparable employees of the
Company generally or (iv) the Board otherwise determines that a voluntary
termination by such Investor is for "Good Reason" under the circumstances then
prevailing.

     An "Event of Default". when capitalized and with reference to the Four Year
Loan includes, without limitation, (i) the failure to pay principal or interest
when due, which failure has continued for 10 days after written notice from the
Company, (ii) any representation or warranty contained in the Loan Documents or
the Subscription Agreement being incorrect in any material respect on or as of
the date made or deemed made, (iii) the default with respect to any covenant
contained in the Loan Documents, which default is not curable by the Investor
or. if curable, has continued uncured for 10 days after written notice from the
Company, (iv) the failure of the Investor to make any payment when due under, or
other default of the Investor which permits acceleration of, any other material
indebtedness of the Investor and (v) the occurrence of certain bankruptcy-
related events with respect to the Investor which continue for 60 days or are
otherwise consented to by the Investor.

Options

Management Option Plan

     For each share of Common Stock acquired by an Investor hereunder, the
Company will grant such Investor an option to purchase one-third of one share of
Common Stock (subject to adjustment for stock splits, stock dividends and other
similar events as described in the Management Option Plan) at a purchase price
of $1,100 per share. Such options will vest ratably over a five year period
beginning on the first anniversary of the Management Option Plan (subject to (i)
acceleration upon termination of employment due to death or permanent disability
and upon the occurrence of a Capital Event (as defined in the Management Option
Plan) and (ii) forfeiture upon termination for Cause) and be governed by the
terms of the Management Option Plan and individual option agreements (the
"Management Option Agreements") between the Company and each Investor, forms of
which are attached hereto as Exhibits F and G, respectively. The term of the
                             ---------- -----
options will be 10 years, subject to a limited exercise period for

                                       4
<PAGE>

vested options in the event of the termination of employment of the Investor
(other than for Cause). An option may not be exercised during any period in
which the Investor is in default under the terms of any loan or other obligation
that the Investor may have to the Company. The shares of Common Stock acquired
upon exercise of the options will be subject to the terms of the Stockholders'
Agreement. Options may not be transferred other than by will or the laws of
descent and distribution, and during the lifetime of an Investor, such options
may be exercised only by the Investor. The options granted under the Management
Option Plan are nonstatutory options and are not intended to qualify as
"incentive stock options" under Section 422 of the Internal Revenue Code of
1986, as amended (the "Code"), and each Investor should consult his tax advisors
for information regarding the tax treatment of such options.

     Pursuant to the Management Option Agreements, each Investor will agree that
he will not during the term of such agreement and for a period of one year
thereafter, (i) compete with any business of the Company or its subsidiaries or
affiliates and (ii) without the Company's express written consent, disclose to
persons outside the Company confidential information concerning the Company or
any of its subsidiaries or affiliates.

Stockholders' Agreement

     As a condition to the acceptance by the Company of a subscribing offeree's
subscription for Shares, such subscribing offeree is required to become a party
to the Stockholders' Agreement. The summary of the Stockholders' Agreement set
forth below is not intended to be a complete recitation of the provisions
thereof, and each offeree should read and understand all the provisions of the
Stockholders' Agreement before making a determination whether to invest in the
Shares.

Restrictions on Transfer

     The Stockholders' Agreement contains substantial restrictions on the
disposition of an Investor Common Stock. In general, an Investor will be
permitted to transfer some or all shares of his Common Stock to affiliates,
including certain relatives and controlled entities, provided each affiliate
agrees to bound by the terms of the Stockholders' Agreement. An Investor will
also be permitted to transfer a (but not less than all) of his shares of Common
Stock to a bona fide third party purchaser if such purchaser agrees to be bound
by the terms of the Stockholders' Agreement, but only after such Common Stock is
offered first to the Company and then to GKH on the same terms as offered to the
bona fide third patty purchaser. The Investor will be required to comply with
certain mechanical provisions regarding such transfer, including (i) timely
notice to the Company and GKH of their respective rig of refusal and (ii)
consummation of any transfer within a specified period.

Rights to Compel Disposition

     GKH will have the right to compel each Investor to dispose of all of his
shares of Common Stock and make certain representations with respect to his
ownership of such Common Stock in the event G seeks to transfer all, but not
less than all, of its Common Stock. If GKH exercises its right to compel the
disposition of the Investors' Common Stock, the consideration for such Common
Stock will be the same per share consideration on the same terms to be received
by GKH for its shares of Common Stock.

Rights of Inclusion

     Each Investor will have the right to sell his Common Stock on the same
terms as GKH in a transaction pursuant to which GKH sells at least 50% of the
outstanding Common Stock of the Company

                                       5
<PAGE>

then owned by GKH. Investors who desire to participate in such sale will be
required to deliver notice on a timely basis and comply with other mechanical
provisions in connection with such transfer.

Preemptive Rights

     Although Delaware law does not generally provide for preemptive rights, in
the event the Company offers an existing stockholder who is party to the
Stockholders' Agreement the opportunity to purchase additional shares of Common
Stock, the other parties to the Stockholders' Agreement will have the right to
acquire their respective pro rata share of such Common Stock on the same terms
                         --- ----
and conditions offered to such stockholder, except that such right shall not
apply to (i) shares issuable in connection with a merger, acquisition or similar
transaction, (ii) shares issuable upon the exercise of any options, warrants or
other convertible securities or (iii) shares offered by the Company to employees
and directors of the Company.

Transfers upon Termination

     The Company will have the right to purchase all of the Common Stock of an
Investor in the event such Investor ceases to be an employee of the Company or
any of its subsidiaries or affiliates. The purchase price for such Common Stock
will be (i) in the event such Investor's employment is terminated for Cause, the
lower of the Investor's cost for his Common Stock on a share by share basis and
80% of fair market value thereof, (ii) in the event such employment is
voluntarily terminated without Good Reason, the lower of cost and fair market
value and (iii) in the event such Investor's employment is terminated by death,
retirement, permanent disability, without Cause or voluntarily with Good Reason,
the fair market value of such Common Stock. The purchase price for such Common
Stock will be payable (a) in cash (and/or by the delivery of a term note with
the shortest term permissible if required by any agreement to which the Company
is then subject) if such Investor's employment is terminated with Good Reason or
upon death, retirement, permanent disability or without Cause, or voluntarily
without Good Reason more than three years after the date of the Stockholders'
Agreement, and (b) by delivery of a seven year term note if such employment is
terminated for Cause, or voluntarily without Good Reason on or prior to the
third anniversary of the Stockholders' Agreement. Any note delivered in
connection with the foregoing will bear interest. payable annually, at the Prime
Rate.

     Cost, fair market value. retirement. permanent disability and voluntary
termination are each defined in the Stockholders' Agreement.

                        FEDERAL INCOME TAX CONSEQUENCES

     THE DISCUSSION SET FORTH BELOW PROVIDES GENERAL INFORMATION AS TO CERTAIN
ANTICIPATED FEDERAL INCOME TAX CONSEQUENCES ASSOCIATED WITH SUBSCRIPTION FOR THE
SHARES AND OPTIONS HEREUNDER. EACH INVESTOR SHOULD CONSULT HIS TAX ADVISOR AS TO
THE SPECIFIC TAX CONSEQUENCES OF HIS SUBSCRIPTION, INCLUDING THE APPLICATION OF
POSSIBLE OF STATE AND LOCAL TAX LAWS.

Restricted Stock

     Code Section 83 governs transfers of property to persons (whether employees
or independent contractors) in exchange for services. Under that section, a
person receiving property as compensation for services must report (as
compensation income) the excess of the fair market value of the property

                                       6
<PAGE>

received over the amount paid in exchange therefor (such excess referred to
herein as "In-Kind Compensation").

     In determining when a recipient of In-Kind Compensation must report income
attributable thereto, Code Section 83(a) provides that the value of such In-Kind
Compensation (without regard to any restriction other than a restriction which
by its terms will never lapse) is includible in the recipient's income at the
first time that the recipient's rights in the property are substantially vested.
For such purposes, property is considered to be substantially vested when it is
either (a) transferable or (b) not subject to a substantial risk of forfeiture.
A substantial risk of forfeiture is generally considered to exist when the
recipient's rights to the property are predicated upon the future performance of
services or upon the occurrence of a condition related to the transfer. Further,
an interest in restricted property is transferable only if the subsequent
transferee's rights in the property are not subject to a substantial risk of
forfeiture.

     Alternatively, Code Section 83(b) provides each recipient of In-Kind
Compensation the ability to include such amounts in income in the year in which
he receives them, rather than the year in which the In-Kind Compensation becomes
substantially vested. Under that section, a taxpayer may elect, within 30 days
of the transfer of property, to include in income the value of any In-Kind
Compensation (as determined without regard to the restrictions thereon).
Taxpayers who include In-Kind Compensation in income under Code Section 83(b)
but later forfeit the property received are denied a deduction for any portion
of the In-Kind Compensation reported by the taxpayer.

     Once includible in the income of the recipient, In-Kind Compensation is
considered payment of wages subject to withholding of income tax and deposits
pursuant to the Federal Insurance Contributions Act (FICA). Upon the subsequent
sale of the transferred stock or other property, the taxpayer will recognize
income to the extent that the amounts realized on sale exceed the sum of (a) the
amount includible in his income under Code Section 83 and (b) the amount paid
for the property.

     Offerees who desire to subscribe for Shares will be required to become
parties to the Stockholders' Agreement. Pursuant to the Stockholders' Agreement,
each Investor may be required, in the event his employment terminates for Cause
or without Good Reason, to sell his Shares back to the Company for an amount
equal to the lower of (a) cost or (b) a percentage (either 100% or 80%) of fair
market value. Any transferee of an Investor nay be required to sell the
transferred Shares to the Company upon similar terms in the event that the
Investor's employment is terminated for Cause or without Good Reason. Such
restrictions lapse with respect to any Investor on the earliest to occur of (a)
the Investor's death, retirement, permanent disability, or involuntary
termination of employment without Cause, (b) the Investor's voluntary
termination of employment with Good Reason, or (c) the failure of the Company to
exercise its rights to purchase the Investor's Shares in a timely fashion
following the termination of his employment for Cause or without Good Reason
(each such event referred to as a "Lapse Event"). See "The Offering -
Stockholders' Agreement."

     The Company believes that, in light of various provisions of the
Stockholders' Agreement, each Investor subscribing for Shares hereunder will
acquire such Shares subject to a substantial risk of forfeiture. Further, the
Company believes that the Shares subscribed for hereunder are not transferable
within the meaning of Code Section 83. As such, to the extent that the fair
market value of any Share exceeds the amount paid therefor, no Investor should
be required to include in income the In-Kind Compensation attributable thereto
until the restrictions lapse at the occurrence of a Lapse Event. Nevertheless,
any Investor may elect, under Code Section 83(b), to include the value of the
In-Kind Compensation in the year in which he purchases Shares pursuant to this
Offering.

                                       7
<PAGE>

Stock Options

     Taxpayers receiving compensatory, nonstatutory stock options (i.e., options
other than "qualified options" taxable under Code Section 421) generally do not
recognize income as a result of the grant of such options. Unless the granted
options have a readily ascertainable fair market value within the meaning of
Code Section 83 as of the date of grant, the taxpayer realizes income only on
the date he exercises or disposes of such options. At that time, he realizes
compensation income equal to the difference between the market value of the
stock and the price paid to acquire and exercise the option. However, where the
optionee's rights in the property transferred pursuant to the exercise of such
option are not substantially vested (within the meaning of Code Section 83), the
optionee does not realize income until the first time that his rights in that
property become substantially vested. See "- Restricted Stock."

     When an option is not regularly traded on an established market, it does
not have a readily ascertainable market value unless its value can be determined
with "reasonable accuracy." For such purposes, the value of an option cannot be
determined with reasonable accuracy unless all of the following conditions
exist:

     (i)   The option is transferable;
     (ii)  The option is exercisable immediately in full;
     (iii) The option is not subject to any restriction or condition which has a
           significant effect upon its value; and
     (iv)  The value of the option privilege is readily ascertainable.

     For each Share Stock acquired by an Investor hereunder, the Company will
grant such Investor an option to purchase one-third of one sham of Common Stock
(subject to certain adjustments) at a purchase price of $ 1, 100 per share. Such
options will vest ratably over a five-year period commencing on the first
anniversary of the Management Option Plan. will be nontransferable (except by
will or the laws of descent and distribution) and, during the life of the
Investor, may be exercised solely by the Investor. See "The Offering - Options -
Management Option Plan." Once exercised, the shares of Common Stock acquired
pursuant to such exercise will become subject to the Stockholders' Agreement,
including its restrictions and repurchase rights vested in the Company. The
options will not be actively traded on an established market as of the date the
Company grants them.

     The Company believes that, since the options are neither exercisable
immediately in full nor transferable (except at death), the value of options may
not be determined with reasonable accuracy. As the options should not have a
readily ascertainable market value within the meaning of Code Section 83, the
Company believes that they should not be compensation income to the optionee on
the date of grant (notwithstanding that their value may later become readily
ascertainable). Further, since the property acquired pursuant to the exercise of
such options (i.e., shares of Common Stock) will be subject to the Stockholders'
Agreement, the Company believes that an Investor exercising an option granted
hereunder will acquire property in which his rights are not substantially vested
within the meaning of Code Section 83. Accordingly, the Company believes that an
Investor should not have compensation income until the date that the
restrictions on the Common Stock acquired pursuant to such exercise lapse (i.e.,
at the occurrence of a Lapse Event under the Stockholders' Agreement). At that
time, the Investor should recognize compensation income in an amount equal to
the excess of the market value of the stock as of such date over the price paid
to exercise and acquire the applicable option. Any Investor may, however, choose
to accelerate the recognition of income to the date he exercises an option
provided he makes the election under Code Section 83(b).

                                       8
<PAGE>

                                 RISK FACTORS

     Investors should consider the specific factors set forth below as well as
the other information set forth in this Offering Memorandum. The following is
not necessarily a comprehensive list of all of the possible risk factors
associated with an investment in the Common Stock.

Limited Operating History

     The Company's products are well-established in the marketplace, and the
Company has experienced net profits in three of its four full fiscal years of
operation. However, there can be no assurance that the Company will remain
profitable in the future. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."

Short Lease Terms; Possible Inability to Re-lease Compressors

     The Company has historically leased its compressors under leases with an
average fixed term of six months and which continue thereafter on a month to
month basis. Historically, lessees have renewed their leases on a month to month
basis for an average -period of 24 months. Based on the average cost of new
compressors and the average lease price, the Company generally does not recoup
its investment in the compressors until after its receipt of at least 48 months
of lease payments. Accordingly, the Company assumes substantial risk of not
recovering its entire investment in the equipment it purchases. Although the
Company has historically been successful in re-leasing units in its inventory,
there can be no assurance that the Company will continue to be able to do so or
that a substantial portion of its lessees will not terminate their leases at
approximately the same time, thereby causing an adverse accumulation of unleased
compressors in the Company's inventory. The inability of the Company to lease a
substantial portion of its compressors for any reason would have a material
adverse effect upon the Company's financial condition and its results of
operations. See "Business."

Competition

     The natural gas compression industry and the oil and gas production
equipment business are highly competitive. The Company competes with several
large national and international companies which, like the Company, offer a wide
range of compressors and production equipment for purchase or lease. There can
be no assurance that such competitors will not substantially increase the
resources devoted to the development and marketing of products competitive with
those of the Company or that new competitors will not enter the industry. See
"Business - Competition."

Natural Gas Compressor Industry Considerations

     The Company's profitability is, in part, dependent upon the current demand
for natural gas. Natural gas demand, aided by competitive pricing and interstate
pipeline deregulation, has increased at a rate of approximately 2% per year from
1986 through 1994. The Company's management estimates that demand for Gas
compression has increased approximately 10 % per year during this time frame.
This increase is a result of increased production from lower reservoir-pressured
areas and the increased amount of coal-seam and tight-gas drilling in certain
geographic areas.

     Depressed natural gas prices tend to decrease efforts to discover and
develop new natural gas reserves domestically. This places a greater reliance
upon older, developed reserves which requires additional compression to deliver
the remaining natural gas to market. A significant decline in the price

                                       9
<PAGE>

of natural gas could result in the widespread failure of independent producers
and increased pricing pressure for compressor rental companies. This would have
a material adverse effect on the Company's financial condition and results of
operations. See "Business."

Potential Liability and Insurance

     Natural gas operations are subject to certain risks, including explosions,
uncontrollable flows of gas or well fluids, fires, pollution and other
environmental risks. These risks could expose the Company to substantial
liability for injury and loss of life, property damage, pollution and other
environmental damages, and consequential damages, if such damages resulted from
an alleged compressor defect or from the Company's negligence in maintaining,
servicing or refurbishing its compressors.

     Although the Company has obtained certain insurance, no assurance can be
given that such insurance is adequate to cover the Company's operations, will be
generally available in the future or, if available, that premiums will be
commercially justifiable. If the Company were to incur a substantial liability
and such damages were not covered by insurance or were in excess of policy
limits, or if the Company were to incur such liability at a time when it is no
longer able to obtain liability insurance, its financial condition could be
materially adversely affected. The Company, consistent with industry trends, may
find it difficult to obtain adequate insurance coverage against possible
liabilities that may be incurred in connection with the conduct of its business.
There can be no assurance that all possible types of liabilities that may be
incurred by the Company will be covered by its insurance or that the dollar
amount of such liabilities will not exceed the Company's policy limits. A
partially or completely uninsured claim, if successful and of sufficient
magnitude, could have a material adverse effect on the Company audits financial
condition.

Environmental Liability Risks

     In addition to liability which may arise as a result of an alleged
compressor defect or alleged Company negligence, if environmental damage is
found to have occurred as a result of the Company's operating activities, the
Company could incur substantial liability. In such event, the Company could be
liable for all costs of remediation, as well as certain other costs. Under the
Comprehensive Response, Compensation and Liability Act ("CERCLA"), the Company
may also be liable for all costs of remediation of any property of which it is
deemed to be the owner or operator. Various Preliminary Environmental (Phase 1)
Site Assessments were conducted in 1990 and 1991 with respect to certain
properties owned or operated by the Company and its subsidiaries. Such
assessments identified potential sources of ground contamination. Although
remediation efforts have been undertaken by the previous owners, no assurances
can be given that such remediation efforts will be successful or that the
Company will not incur costs in remediating such contamination or discover
additional sources of enumerated contamination. In addition, pursuant to the HPC
Merger (as defined below), the Company acquired certain potential environmental
liabilities estimated at December 31, 1992 to be between $139,000 and $200,000.
See "Business - Company History" for a description of the HPC Merger.

     In June 1993, a Phase I and Phase H Environmental Assessment was conducted
on the Company's 20 acre headquarters/fabrication facility in Houston, which
Assessment indicated that such site has minimal apparent risk with respect to
environmental liability. In addition, the company maintains a professionally
designed Spill Prevention Control and Countermeasure Plan (the "SPCC Plan") with
respect to its Fort Smith, Arkansas maintenance facility, which is designed to
prevent oil spills and waste releases and to describe protocols for immediate
coordination of necessary activities to minimize any harmful effects should a
spill or other release occur. Although the Fort Smith facility does not
routinely

                                      10
<PAGE>

generate hazardous waste, the SPCC Plan includes waste release measures given
that during an oil spill event, certain characteristic hazardous waste from
spill residue may be generated. Moreover, the Company is currently implementing
a Site Remediation and Clean Up Proposal regarding real property located in
Columbus, Texas with respect to which the Company acquired a lease and purchase
option pursuant to the February 1995 acquisition by the Company of substantially
all of the assets of Smith Industries, Incorporated. See "Business- Company
History."

Governmental Regulation

     The Company is subject to various federal, state and local laws and
regulatory standards in the areas of safety, health and the environment,
including regulations regarding emission controls. The Company believes that it
is in substantial compliance with such laws and regulations and that the phasing
in of emission controls and other known standards at the rate currently
contemplated by such laws and regulations will not have a material adverse
effect on the Company's financial condition or results of operations. However,
various state and federal agencies from time to time consider adopting new laws
and regulations or amending existing laws and regulations regarding
environmental protection. While the Company may be able to pass on the
additional costs of complying with such laws, there can be no assurances that
attempts to do so would be successful. Accordingly, new laws Or regulations or
amendments to existing laws or regulations could require the Company to
undertake significant capital expenditures and could otherwise have a material
adverse effect on the Company's financial condition and results of operations.

Restrictions Imposed by the Terms of the Company's Indebtedness; Effect of
Default

     The terms of the Company's existing credit agreement dated June 29, 1993,
as amended (the "Credit Agreement") among the Company, Chemical Bank, as agent,
and the other banks party thereto impose a variety of restrictions on the
Company's operations, including, without limitation, limiting the Company's
ability to incur additional indebtedness, grant or suffer liens or other
encumbrances on its property, make investments, loans or advances except under
certain enumerated circumstances, make capital expenditures above specified
levels, enter into sale/leaseback arrangements as a seller/lessee, dispose of
its assets or extend guarantees. Such restrictions may limit the Company's
ability to exploit fully certain business opportunities. In addition, under the
terms of the Credit Agreement, the Company may not declare or pay any dividend
or make any payment for the purchase, redemption or acquisition of any shares of
Common Stock other than repurchases of Common Stock from employees of the
Company which do not exceed an aggregate of $1,500,000. In addition, the failure
of the Company to maintain certain financial ratios may cause the Company to be
in default under the agreements governing its indebtedness and such default, if
uncured, may ultimately entitle its creditors to foreclose on all of the assets
of the Company. See "Description of Certain Indebtedness."

Dependence on Internally Generated Funds; Capital Needs

     The compressor leasing business and the oil and gas production equipment
business in which the AW Company is involved are capital intensive businesses,
and the inability of the Company to continue to have access to sufficient
capital could have a material adverse effect on the Company's ability to finance
compressor purchases and production equipment materials purchases arid, thus,
maintain its future leasing revenues and profitability. Company growth has
historically been financed through (i) sales of Common Stock, including the sale
of approximately $15,000,000 of Common Stock to certain executive officers and
then existing stockholders of the Company in 1992 (the "1992 Offering"), the
sale of approximately $2,500,000 of Common Stock to certain members of the
Company's management in

                                      11
<PAGE>

1993 (the "1993 Offering") and the sale of approximately $16,000,000 of Common
Stock to GICH in 1993, (ii) internally generated funds and (iii) borrowings
under the Credit Agreement, which provides for a revolving credit facility with
a commitment of $35,000,000 and three term loans in the original principal
amounts of $15,000,000 (the "Original Term Loan"), $10,000,000 (the "B Tranche
Loan") and $4,000,000 (the "C Tranche Loan"), respectively. In addition, on June
6, 1995, the Company borrowed $12,000,000 (the "Subordinated Loan") from GKH and
an affiliate of certain existing stockholders of the Company pursuant to the
terms of a Subordinated Loan Agreement (the "Subordinated Loan Agreement"). The
Subordinated Loan is, by its terms, subordinate and junior in right of payment
to the obligations of the Company under the Credit Agreement.

     It is currently contemplated that subsequent to this offering, the Company
will issue new equity most likely in the form of (i) approximately $30,000,000
of Preferred Stock to investors with warrants to purchase new shares of Common
Stock (the *Preferred Stock Issuance") and (ii) additional Common Stock to
certain members of management of the Company and its subsidiaries, although the
Company reserves the right in its sole discretion to amend or cancel such
offerings. See *Description of Certain Indebtedness." However, the consummation
of such transactions are not a condition to the consummation of this offering
and there can be no assurance that any or all of such transactions will be
consummated.

     In addition, although the Company believes that it will have sufficient
capital resources based on internally generated funds, the amounts available
under the Credit Agreement, the Subordinated Loan, the proceeds of the Preferred
Stock Issuance and other proposed private placements of equity to fund its
anticipated capital needs for at least the next 5 years, there can be no
assurance that the Company will meet its projected earnings and that sufficient
cash flow will be generated. Failure to generate sufficient cash flow together
with the absence of alternative sources of capital could have a material adverse
effect on the financial condition, operations and expected growth of the
Company. See "Management's Discussion of and Analysis of Financial Condition and
Results of Operations."

Limited Preemptive Rights

     Although Delaware law does not generally provide for preemptive rights, in
the event the Company offers any party to the Stockholders' Agreement the
opportunity to purchase additional shares of Common Stock, all other parties to
the Stockholders' Agreement will have the right to acquire their respective pro
                                                                            ---
rata share of such Common Stock on the same term and conditions offered to such
----
other stockholder, except that such right shall not apply to (i) shares issuable
in connection with a merger, acquisition or similar transaction, (ii) shares
issuable upon the exercise of any options, warrants or other convertible
securities or (iii) shares offered by the Company to employees and directors of
the Company. See "The Offering - Stockholders' Agreement - Preemptive Rights"
and "Description of Capital Stock." Similarly, subject to these same exceptions,
the parties to the 1993 Stockholders' Agreement (as defined below) would have
the right to purchase a pro rata amount of Common Stock if the Company were to
                        --- ----
offer any party to the 1993 Stockholders' Agreement the right to purchase
additional shares of Common Stock. In addition, in the event the Company sells
or otherwise issues any shares of Common Stock to GKH, the non-GKH parties to
the Gale Force Stockholders' Agreement (as defined below) will have the right to
acquire their respective pro rata amount of Common Stock on the same terms and
                         --- ----
conditions as such Common Stock is sold or otherwise issued to GKH. See
"Principal Stockholders -Stockholders' Agreements - 1993 Stockholders'
Agreement;" and "  -- Gale Force Stockholders' Agreement."

                                      12
<PAGE>

No Public Market for Common Stock; Restriction on Transferability

     Each subscribing offeree will be required to represent that he is
purchasing the Shares for investment purposes for his own account but not with a
view to resale or distribution. There is no public market for the Shares, and an
Investor's ability to transfer his Common Stock will be significantly restricted
by the terms of the Stockholders' Agreement. In addition, the Stockholders'
Agreement (i) gives GKH the right to cause all Investors to sell their Common
Stock in certain transactions and (ii) gives the Company or certain of its
affiliates the right, but not the obligation, to purchase all of the Common
Stock of an Investor upon the termination of such Investor's employment with the
Company. The purchase price for such stock varies depending on the circumstances
and, in cases where an Investor is terminated for Cause or voluntarily
terminates his employment without Good Reason, such purchase price may be
substantially below the fair market value of such Common Stock. See "The
Offering - Stockholders' Agreement." Any potential Investor must be able and
willing to bear the risk of his investment for an indefinite period.

Dividends

     The Company has never paid cash dividends on its Common Stock and does not
anticipate paying any cash dividends in the foreseeable future. In addition, the
ability of the Company to pay dividends will be limited by the terms of the
Credit Agreement, the Subordinated Loan Agreement and the contemplated Preferred
Stock Issuance. See "Description of Certain Indebtedness."

Control by Principal Stockholders

     Prior to the consummation of this offering, approximately 79% of the
Company's outstanding Common Stock (not including shares issuable pursuant to
existing option programs) was owned by GKH. Subsequent to this offering, GKH
will continue to own a majority of the Common Stock of the Company. By
maintaining such majority ownership, GKH will continue to have the power to
determine the policies of the Company and its subsidiaries, the persons
constituting the directors and officers thereof (subject to the terms of (i) the
1993 Stockholders' Agreement, (ii) the Gale Force Stockholders' Agreement, (iii)
the Hanna Stockholders' Agreement and (iv) the HEHC Stockholders' Agreement) and
the outcome of various corporate actions requiring stockholder approval (subject
to the terms of the HEHC Stockholders' Agreement). See "Principal Stockholders -
Stockholders' Agreements" for a description of these agreements.

Recent Expansion Activity

     Through its acquisition of the production equipment business of Smith
Industries, Incorporated (the "Smith Business;" See "Business - Company
History"), the Company substantially expanded its oil and gas production
equipment fabrication operations. The Company is now in the process of
integrating the Smith Business into its current operations. Given the size of
this acquisition, there can be no assurance that the integration will be
successful or that additional capital will not be required to operate the
Company's oil and gas production equipment business. In addition, the Company
has also made certain other acquisitions, which management believes will enhance
the Company's competitive position in the natural gas compression industry,
which is generally experiencing a considerable amount of consolidation. See
"Business - Company History." However, there can be no assurance that such
acquisitions will bring the desired results.

                                      13
<PAGE>

Dilution

     Assuming all of the Shares are issued, the value of the Shares purchased
pursuant to this offering will be subject to immediate dilution in the net
tangible book value of $455.55 per Share from the adjusted net tangible book
value as of March 31, 1995.

Federal Income Tax Risks

     The following discussion summarizes certain federal income tax risks
associated with an investment in the Shares and the exercise of options acquired
therewith. As the following does not purport to be a complete discussion of all
relevant tax issues, prospective investors should consult their own tax advisors
for advice regarding the impact of a subscription for Shares and options upon
their individual tax positions, including the application of state and local
income tax law, if any.

Treatment of Compensation Income, Receipt of Shares

     The Company believes that. as a result of the Company's repurchase rights
under the Stockholders' Agreement, each Investor's rights in the Shares acquired
hereunder should not be considered "substantially vested" within the meaning of
Code Section 83. Accordingly, the Company believes that no Investor should
realize compensation income at the time of such subscription, notwithstanding
that the fair market value of the Shares acquired exceeds the Investor's
purchase price therefor. No assurance can be given however that the Internal
Revenue Service ("IRS") will consider the provisions of the Stockholders'
Agreement to be sufficient to render such Shares nontransferable and each
Investor's rights therein to be subject to a substantial risk of forfeiture
within the meaning of Code Section 83. Further, no assurance can be given that a
court of competent jurisdiction would agree with the conclusions of the Company.
In the event that the IRS considers the provisions of the Stockholders'
Agreement to be insufficient for such purpose, it will consider each Investor to
have compensation income (as of the date he acquires Shares) in an amount equal
to the difference between the fair market value of such Shares and the
Investor's purchase price. Each Investor may thus be required to pay federal
income and FICA tax on such income, plus interest and penalties as applicable.
Further, the Company may be required to pay federal unemployment and other taxes
on the compensation deemed to be transferred to each Investor, plus interest and
penalties as applicable, which tax may indirectly effect the value of each
Investor's Shares.

Treatment of Compensation Income, Receipt of Options

     The Company also believes that the Company's repurchase rights render the
rights of any Investor in shares of Common Stock acquired pursuant to the
exercise of any option not to be substantially vested within the meaning of Code
Section 83. No assurance can be given however that the IRS (or any court) would
agree that an Investor acquiring Common Stock pursuant to the exercise of any
option is subject to a substantial risk of forfeiture with respect to such Stock
and such Stock is nontransferable under Section 83 of the Code. As such, an
Investor exercising options granted hereunder may realize compensation income at
the date he exercises an option in an amount equal to the difference between the
fair market value of the Common Stock on that date over the price paid to
exercise and acquire the applicable option. An Investor may thus be required to
pay federal income and FICA tax (and interest and penalties, as applicable) with
respect to such compensation income. Similarly, the Company may be required to
pay federal unemployment and other taxes (including penalties and interest)
which payment may indirectly effect the value of each Investor's Common Stock.

                                      14
<PAGE>

Election under Code Section 83(b)

     Any Investor may make an election to include amounts in income on the date
he acquires shares of Common Stock (whether ' at subscription the exercise of
any option granted hereunder). Electing Investors will thus not recognize
additional compensation income upon the occurrence of a Lapse Event under the
Stockholders' Agreement. However, since each electing Investor accelerates the
recognition of income from the time at which the Company believes it would
otherwise be first recognizable (i.e., the date of any Lapse Event), each
electing Investor must bear certain market risks associated with the value of
his Shares. If the value of an electing Investor's Shares does not exceed the
value of such Shares on the date that the Investor acquired them, such electing
Investor will have included amounts in income which would not have otherwise
have been includible had he not made the election under Code Section 83(b). Such
electing Investor will not be entitled to deduct any amounts attributable to
that income acceleration.

     Further, in the event that an electing Investor is required to sell Shares
of Common Stock back to the Company (e.g., pursuant to the exercise of the
Company's rights to repurchase such Shares in the Stockholders' Agreement), that
Investor will not be allowed any deduction for any portion of the basis in such
Shares that he acquired as a result of a Section 83(b) election.

                        DETERMINATION OF OFFERING PRICE

     The offering price of $1,100 per Share was determined solely by the Board
based on a number of factors, including the date of the Company's hiring of the
offerees and a comparison of the Company's 1994 and projected 1995 financial
performance to the financial performance and corresponding per share market
multiples of a select group of public companies involved in the natural gas
compressor leasing and fabrication and energy services industries. By virtue of
the nature of this offering, the offering price was not determined pursuant to
arm's length negotiations with a third party, and there can be no assurance that
such price is indicative of the fair market value of the Shares.

                               PLAN OF OFFERING

     The minimum purchase per subscribing offeree is five Shares (excluding
Shares to be acquired by delivery of a Four Year Note) for a minimum aggregate
purchase price of $5,500, provided that the Company, in its sole discretion and
subject to applicable securities laws, may accept smaller subscriptions. The
minimum aggregate purchase for all Investors is 100 Shares (excluding Shares to
be purchased by delivery of a Four Year Note) for a minimum aggregate purchase
price of $110,000. The Company reserves the right (i) to reject any subscription
for any reason and (ii) to make non-material modifications to or terminate this
offering at any time for any reason.

     Each offeree who desires to subscribe for Shares must (i) on or before
Monday, June 26, 1995, call Curtis Bedrich (at 713-447-8787) to communicate the
number of Cash Shares and Loan Shares for which such offeree desires to
subscribe and (ii) prior to Friday, June 30, 1995, execute and return to the
Company, c/o Curtis Bedrich, (a) one copy and one extra signature page of the
Subscription Agreement included herewith (including Schedule A attached
thereto), and (b) one copy and one extra signature page of the Stockholders'
Agreement included herewith (including the spousal consent, if applicable).

     Upon oral confirmation of the number and type of Shares subscribed for by a
subscribing offeree, the Company will prepare and distribute for execution to
such subscribing offeree (i) one execution copy of each of the Loan Agreement
and Four Year Note, if applicable, (ii) two copies of the

                                      15
<PAGE>

Pledge Agreement, if applicable, (iii) two copies of the Management Option
Agreement, (iv) an assignment separate from certificate, if the subscribing
offeree has requested a Four Year Loan and (v) an IRS Form W-9. In addition to
the Subscription Agreement and the Stockholders' Agreement previously delivered,
each subscribing offeree must then, prior to July 7. 1995, return to the
Company, c/o Curtis Bedrich, to the extent applicable, (i) the executed Loan
Agreement and Four Year Note, (ii) two executed counterparts of the Pledge
Agreement. (iii) two executed counterparts of the Management Option Agreement,
(iv) the assignment separate from certificate, executed in blank, (v) the fully
completed and executed Form W-9 and (vi) if applicable. a check in an amount
equal to the product of (a) the number of Cash Shares subscribed for and (b)
$1.100.

     The foregoing deadlines are summarized as follows:

<TABLE>
<CAPTION>
========================================================================================================
Event                                                    Deadline
-----                                                    --------
--------------------------------------------------------------------------------------------------------
<S>                                                      <C>
Orally contact Curtis Bedrich (at 713-447-8787) to       Monday, June 26
indicate the number of shares you wish to subscribe
for
--------------------------------------------------------------------------------------------------------
Deliver one executed copy and one extra executed         Friday, June 30
counterpart of (i) the Subscription Agreement
(including Schedule A attached thereto) and (ii) the
Stockholders' Agreement (including the spousal
consent, if applicable)
--------------------------------------------------------------------------------------------------------
Deliver, as applicable, (i) one copy of each of the      Friday, July 7
Loan Agreement and Four Year Note, (ii) one executed     NOTE:  These documents will be delivered to
copy and one extra executed counterpart of the Pledge    you Wednesday, June 28 if you orally contact
Agreement, (iii) one executed copy and one extra         Curtis Bedrich with your subscription by
executed counterpart of the Management Option            Monday, June 26.
Agreement, (iv) an assignment separate from
certificate executed in blank and (v) and IRS Form W-9
========================================================================================================
</TABLE>

     All Funds shall be promptly deposited in an interest bearing, segregated
account and such Funds may be invested in treasury bills or other cash
equivalents, as determined in the sole and absolute discretion of the Company.
If acceptable subscriptions for a minimum of an aggregate of 100 Shares are
received by the Company on or before June 30, 1995, or such later time as
determined in the sole and absolute discretion of the Company without notice to
or consent of the offerees, but in no event later than the Termination Date, all
Funds will be transferred from the segregated bank account to the Company,
together with all interest, if any, earned thereon. In the event such condition
has not been satisfied on or before the Termination Date or this offering is
withdrawn by the Company, this offering will be terminated and all Funds will be
returned to the subscribing offerees with a pro rata share of interest earned
thereon, calculated on the basis of the amount of Funds invested by each
subscribing offeree and the length of time interest on such Funds was earned.

                                USE OF PROCEEDS

     Assuming all of the Shares are issued. the net proceeds of the offering,
estimated to be $275,000, will be used for general corporate purposes. including
working capital.

                                   DILUTION

     As of March 31, 1995, the Company had adjusted net tangible book value
(defined as total stockholders' equity less goodwill) of $53,931,805, or $643.09
per share of Common Stock. Adjusted net

                                      16
<PAGE>

tangible book value per share of Common Stock is determined by dividing the
actual net tangible book value by the number of shares of its Common Stock and
treating all such Common Stock as having been issued for cash which would have
been outstanding as of March 31, 1995. After giving effect to the sale of the
Shares and the application by the Company of the estimated net proceeds
therefrom as described in "Use of Proceeds," the pro forma net tangible book
value of the Company as of March 31, 1995 would have been $54,206,805, or
$644.45 per share of Common Stock. This value represents an immediate increase
in the adjusted net tangible book value of $1.36 per share of Common Stock to
the current shareholders and an immediate dilution in net tangible book value of
$455.55 per Share to purchasers of the Shares. Dilution per share is determined
by subtracting the pro forma adjusted net tangible book value per share of
Common Stock after the completion of this offering from the per share price paid
by purchasers of the Shares. The following table (1) illustrates this per share
dilution:

<TABLE>
     <S>                                                                                     <C>
     Price per share pursuant to this offering.............................................. $1,100.00

          Adjusted net tangible book value per share as of March 31, 1995....... $  643.09
          Increase in adjusted net tangible book value per share
          attributable to the offering(2)....................................... $    1.36

     Pro forma adjusted net tangible book value per share after this offering............... $  644.45

     Dilution per share to purchasers of the Shares......................................... $  455.55
</TABLE>

(1)  Assumes that all of the Shares are subscribed for and excludes shares of
     Common Stock reserved for issuance pursuant to options which have
     previously been granted to certain members of management. To the extent
     such options are exercised, the value of Shares purchased by investors may
     be subject to further dilution. See "Capitalization," "The Offering - Stock
     Options" and "Description of Capital Stock- Options."

(2)  Does not reduce stockholders' equity for the aggregate amount of all Four
     Year Loans.

     The following table sets forth as of March 31, 1995 (calculated on the same
basis as the preceding paragraph and rounded for purposes of this presentation)
the number of shares of Common Stock purchased from the Company, the value of
the total consideration received, the average price per share paid by the
existing shareholders of the Company and the price per share to be paid by
Investors:

<TABLE>
<CAPTION>
=========================================================================================================================
                                              Shares Purchased                 Total Consideration           Avg. Price
--------------------------------------------------------------------------------------------------------
                                                                                                                Per
                                            Number              %              Amount             %            Share
                                            ------             ---             ------            ---           -----
-------------------------------------------------------------------------------------------------------------------------
<S>                                         <C>                <C>             <C>               <C>         <C>
Existing stockholders                         83,863              99.7           $58,088,390        99.5       $  692.66
-------------------------------------------------------------------------------------------------------------------------
Investors                                        250               0.3               275,000         0.5        1,100.00
-------------------------------------------------------------------------------------------------------------------------
Total                                         84,113             100.0           $58,363,390       100.0       $  693.87
=========================================================================================================================
</TABLE>

                                CAPITALIZATION

     The following table sets forth the total capitalization of the Company as
of March 31, 1995 and as adjusted to reflect the consummation of this offering
(assuming all 250 Shares are subscribed for) after the anticipated application
of the estimated net proceeds therefrom.

                                      17
<PAGE>

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------
                                                                                                      As Adjusted for
                                                                               Actual                  the Offering
<S>                                                                            <C>                    <C>
-------------------------------------------------------------------------------------------------------------------------
Current installments of long-term debt(1)..............................        $  3,125,000              $  3,125,000
-------------------------------------------------------------------------------------------------------------------------
Long-term debt, less current portions(1)...............................          59,522,647                59,522,647
-------------------------------------------------------------------------------------------------------------------------
Stockholders' Equity:
-------------------------------------------------------------------------------------------------------------------------
   Preferred Stock, $.01 par value, 100,000 shares authorized, 0
   shares issued and outstanding.......................................                  --                        --
-------------------------------------------------------------------------------------------------------------------------
   Common Stock, $.001 par value, 200,000 shares authorized,
   83,862.59 issued and outstanding, 84,112.59 issued and
   outstanding after the offering(2)...................................                  84                        84
-------------------------------------------------------------------------------------------------------------------------

Additional paid-in capital.............................................          50,830,570                51,105,570
-------------------------------------------------------------------------------------------------------------------------
Retained earnings......................................................           5,367,843                 5,367,843
-------------------------------------------------------------------------------------------------------------------------
Less:
-------------------------------------------------------------------------------------------------------------------------
   Notes receivable from officers and employees for purchase of
   Common Stock........................................................          (2,094,652)               (2,277,985)
-------------------------------------------------------------------------------------------------------------------------
   156.40 Treasury shares, at cost.....................................            (172,040)                 (172,040)
   Net stockholders' equity............................................          53,931,805                54,023,472
          Total capitalization.........................................         116,579,452               116,671,119
=========================================================================================================================
</TABLE>

(1)  See Note 4 of the Notes to the consolidated financial statements of the
     Company.

(2)  Includes 156.40 treasury shares. but excludes an aggregate of 5,162.89
     shares of Common Stock subject to options previously granted to executive
     officers and other members of management of the Company pursuant to the
     1992 Stock Plan, the 1993 Option Plan and the Senior Executive Plan (see
     "Management - Options"). and all options to be granted to Investors
     pursuant to the Management Option Plan.

                                DIVIDEND POLICY

     The Company has not paid dividends since its inception. The Company
currently intends to retain all earnings, if any, to fund the expansion of its
business and therefore does not anticipate paying any dividends on the Common
Stock in the foreseeable future. In addition, the ability of the Company to pay
dividends is limited by the term of the Credit Agreement and the Subordinated
Loan Agreement, and may be further limited by the terms of the contemplated
Preferred Stock Issuance.

                                      18
<PAGE>

                        SELECTED FINANCIAL INFORMATION

     The selected financial data presented below for the years ended December
31, 1994 and 1993 is derived from the audited financial statements of the
Company. The selected financial data set forth below as of March 31, 1995 and
March 31, 1994 were derived from the Company's unaudited financial statements.
Interim results are not necessarily indicative of the results for the full year.
The data set forth herein should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Company's financial statements and notes thereto.

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------
                                                                             Three Months   Three Months
                                                                                 Ended          Ended
                                                  Year Ended    Year Ended     March 31,      March 31,
                                                 December 31,  December 31,      1995           1994
State of Income Data                                 1994          1993       (unaudited)    (unaudited)
--------------------                                 ----          ----       -----------    -----------
---------------------------------------------------------------------------------------------------------
<S>                                              <C>           <C>           <C>            <C>
Revenues:
---------------------------------------------------------------------------------------------------------
  Leasing and Maintenance......................   $32,024,912   $25,722,662   $10,082,116     $7,302,325
---------------------------------------------------------------------------------------------------------
  Compressor Packaging.........................    16,201,887    14,034,275     6,047,896      1,256,348
---------------------------------------------------------------------------------------------------------
  Production Equipment.........................     7,271,641     3,178,386     2,707,137      1,000,826
---------------------------------------------------------------------------------------------------------
  Other........................................       581,526       411,298        72,569         26,311
---------------------------------------------------------------------------------------------------------
    Total revenues.............................    56,079,966    43,346,621    18,909,718      9,585,810
---------------------------------------------------------------------------------------------------------
Cost and expenses:
---------------------------------------------------------------------------------------------------------
  Leasing and Maintenance......................    11,077,891     9,739,248     3,633,852      2,592,651
---------------------------------------------------------------------------------------------------------
  Compressor packaging.........................    13,732,736    12,130,915     4,861,195      1,282,072
---------------------------------------------------------------------------------------------------------
  Production Equipment.........................     5,798,521     2,671,178     2,321,440        813,913
---------------------------------------------------------------------------------------------------------
  Selling, general and administrative expenses.     8,427,020     7,413,158     2,813,918      1,685,291
---------------------------------------------------------------------------------------------------------
  Depreciation and amortization................     8,108,596     5,757,381     2,619,086      1,729,779
---------------------------------------------------------------------------------------------------------
  Interest expense.............................     2,027,414     1,366,297       997,597        342,053
---------------------------------------------------------------------------------------------------------
    Total costs and expenses...................    49,102,178    39,078,177    17,247,088      8,445,759
---------------------------------------------------------------------------------------------------------
Income before income taxes.....................     6,977,788     4,268,444     1,662,630      1,140,051
---------------------------------------------------------------------------------------------------------
Income tax expense.............................     2,590,000     1,597,000       616,627        444,240
---------------------------------------------------------------------------------------------------------
Net income.....................................   $ 4,387,788   $ 2,671,444   $1,046,0003     $  695,811
=========================================================================================================
</TABLE>

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------
                                                                                          March 31, 1995
Balance Sheet Data                                  December 31, 1994  December 31, 1993    (unaudited)
------------------                                  -----------------  -----------------    -----------
---------------------------------------------------------------------------------------------------------
<S>                                                 <C>                <C>                <C>
Total current assets................................     $ 21,484,358        $10,696,270    $ 29,294,767
---------------------------------------------------------------------------------------------------------
Net property, plant and equipment...................       88,391,054         61,722,508     105,724,104
---------------------------------------------------------------------------------------------------------
Other assets........................................        4,738,740          4,360,547       6,314,837
---------------------------------------------------------------------------------------------------------
                                                          114,614,152         76,779,325     141,333,708
---------------------------------------------------------------------------------------------------------
Total current liabilities...........................       20,489,078          9,734,146      20,516,518
---------------------------------------------------------------------------------------------------------
Long-term debt and other liabilities................       42,792,233         20,100,126      66,885,385
---------------------------------------------------------------------------------------------------------
Stockholders' equity................................       51,332,841         46,945,053      53,931,805
---------------------------------------------------------------------------------------------------------
                                                         $114,614,152        $76,779,325    $141,333,708
=========================================================================================================
</TABLE>


    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
                                   OPERATIONS

General

     The Company's primary operations consist of three business segments. The
principal segment consists of the leasing and maintenance of the Company's
natural gas compressor units ("Leasing and

                                      19

<PAGE>

Maintenance"), and the other segments consist of the design, engineering and
fabrication of natural gas compressor units ("Compressor Packaging") and the
design, engineering and fabrication of oil and gas production equipment
("Production Equipment"). See "Business - Operations."

     The Company commenced operations during the latter part of 1990 with the
acquisition of three regional compression leasing companies. In addition, a
compression leasing and fabricating operation was acquired in July, 1991. A
machine shop operation acquired by the Company in 1990, Precision Welding &
Machine, Inc., a Texas corporation ("PWMI"), was sold by the Company in November
1993. See "Business - Company History." The compression rental fleet has been
expanded significantly since the Company's inception, and amounted to 926 units
aggregating 258,979 horsepower at March 31., 1995. This growth has been funded
by a combination of internally generated cash flow, bank financing and
additional equity in the form of Common Stock sold to the Company's management
group and existing shareholders in 1992 and 1993, as well as the commencement of
Production Equipment activities in 1993. As discussed elsewhere herein, the
operation of the Production Equipment segment has been significantly enhanced by
the Smith Acquisition. See "Business - Company History."

Liquidity and Capital Resources

     Earnings before depreciation and amortization and income taxes amounted to
$15.1 million during 1994. Other significant sources of funds during 1994 were
amounts available under the Credit Agreement. Significant uses of funds included
the repayment of debt under the Credit Agreement and net capital expenditures
aggregating $31.8 million during 1994.

     The financing necessary to support the Company's historical operations has
principally been provided from borrowings under the Credit Agreement and sales
of Common Stock.

     For a discussion of the Company's anticipated capital expenditures for the
next two years, see "Business - Business Strategy."

     Historically, inflation has not had a significant impact on the operations
of the Company.

Results of Operations

Year ended December 31, 1994 compared to year ended December 31, 1993

Revenues

     Revenues from Leasing and Maintenance increased by $6.3 million, or 25%,
from $25.7 million in 1993 to $32.0 million in 1994. This increase resulted
primarily from the addition of 168 compression units, aggregating 84,060
horsepower, to the compressor rental fleet. Monthly horsepower utilization of
94% to 96% during 1994 was consistently in excess of the industry average.

     Revenues from Compressor Packaging increased by $2.2 million, or 15%, from
$14.0 million in 1993 to $16.2 million in 1994. This increase resulted from an
increase in the volume of Compressor Packaging during 1994 following the move in
August, 1993, to an expanded fabrication facility. Compressor Packaging
operations generated operating profit (earnings before depreciation and
amortization expense and interest expense) of $1,270,000 during 1994, as
compared to $814,000 during 1993.

                                      20
<PAGE>

     Revenues from Production Equipment increased by $4.1 million, or 129%, from
$3.2 million in 1993 to $7.3 million in 1994. This increase resulted from an
increase in the volume of production equipment fabrication as well as 1994 being
the first full year for production equipment packaging, the operations of which
commenced in March, 1993. Production Equipment operations resulted in an
operating profit (earnings before depreciation and amortization expense and
interest expense) of $364,000 during 1994, as compared to an operating loss of
$130,000 during 1993.

Expenses

     Leasing and Maintenance expenses increased by $1.3 million, or 13%, from
$9.7 million in 1993 to $11.0 million in 1994. *This increase resulted from
additions to the compressor rental fleet as reflected by a 25% increase in
Leasing and Maintenance revenue.

     Costs and expenses of Compressor Packaging increased by $1.6 million, or
13%, from $12.1 million in 1993 to $13.7 million in 1994. This increase is
attributable to the increase in Compressor Packaging operations.

     Costs and expenses of Production Equipment increased by $3.1 million, or
117%, from $2.7 million in 1993 to $5.8 million in 1994. This increase resulted
from an increase in the volume of production equipment fabrication and the
inclusion of a full year of operations in 1994.

     Selling, general and administrative expenses increased by $1.0 million, or
14% from $7.4 million in 1993 to $8.4 million in 1994. This increase resulted
from the expanded level of activity in each of the Company's business segments.

     Depreciation and amortization increased $2.3 million, or 41%, from $5.8
million in 1993 to $8.1 million in 1994. This increase resulted from additions
to the rental fleet and other capital expenditures which aggregated $31.8
million during 1994.

     Interest expense increased $700,000, or 56%, from $1.3 million in 1993 to
$2.0 million in 1994 as a result of borrowings under the Credit Agreement which
was utilized to finance additions to the compressor rental fleet.

     The Company's effective income tax rate approximates the statutory income
tax rate during 1994 and 1993. Accordingly, the $1.0 million increase, or 62%,
from $1.6 million in 1993 to $2.6 million in 1994 results from a comparable 63%
increase in income before income taxes from 1993 to 1994.

                                   BUSINESS

Company History

     The Company was incorporated in Delaware in October 1990 as a majority-
owned subsidiary of Hanover Energy Inc., a Texas corporation ("HEI"). In
November and December 1990, the Company acquired all of the capital stock of
Guerra Engineering, Inc., a Texas corporation ("GEI"), Energy Recovery Systems,
Inc., a Texas corporation ("ERSI"), and PVIMI, and substantially all of the
assets of C&B Compression Sales and Service, Inc., a Louisiana corporation
("C&B"), which acquisitions were accounted for using the purchase method of
accounting.

                                      21
<PAGE>

     In May 1991, HEI was acquired by Hanover Energy Holding Corporation, a
Delaware corporation ("HEHC"), the principal stockholders of which were GKH.

     In July 1991, HEHC acquired all of the common stock of Maintech
Enterprises, Inc., a Texas corporation ("MEI"), through a subsidiary created
solely for that purpose. Such subsidiary was subsequently merged into MEI, and
HEHC contributed the stock of MEI to the Company in April 1992 in connection
with the refinancing of the Company's then current senior credit facility. As a
result of the acquisition of MEI, the Company acquired a 50% interest in a joint
venture, the operations of which consisted of leasing natural gas compressor
units. The remaining interest in the joint venture was acquired by the Company
effective April 1, 1993 and the joint venture was liquidated shortly thereafter.

     Effective December 31, 1992, HEI merged into HEHC, and as a result thereof,
the Company became a direct majority-owned subsidiary of HEHC. Also effective as
of December 31, 1992, GEI and ERSI merged into the Company and. as a result
thereof, the separate existence of GEI and ERSI ceased and all of their
respective assets and liabilities became vested in the Company.

     On June 24, 1993, Hanover Pipeline Company, a Delaware corporation and a
wholly-owned subsidiary of HEHC ("HPC), was merged with and into the Company
(the "HPC Merger"). - Pursuant to the HPC Merger, the Company issued to HEHC
2,381. 11 shares of Common Stock. HPC's assets consisted of 16 natural gas
compressors. HPC had certain potential environmental liabilities estimated at
December 31, 1992 to be between $139,000 and $200,000; however, pursuant to the
merger agreement, HEHC agreed to indemnify the Company for any diminution in
value to the HPC common stock caused by the incurrence by HPC of any
environmental liability.

     On October 7, 1993, the Company acquired all of the issued and outstanding
stock of Hanna Compressor Group, Inc., an Arkansas corporation ("Hanna
Compressor"), from Hanna Investment Group, an Arkansas general partnership
("HIG"), in exchange for 1,875 shares of Common Stock (the "Hanna Acquisition").
Hanna Compressor's assets consisted of (i) six natural gas compressor units,
(ii) a 4,000 foot combination division office and maintenance facility situated
on five acres of land in Pocola, Oklahoma and (iii) cash. In connection with the
Hanna Acquisition, the Company, HEHC, GKH and HIG entered into the Hanna
Stockholders' Agreement. See "Principal Stockholders - Stockholders' Agreements
- Hanna Stockholders' Agreement." Effective as of February 9, 1994, Hanna
Compressor was merged into the Company and, as a result thereof, the separate
existence of Hanna Compressor ceased and all of its assets and liabilities
became vested in the Company.

     On November 5, 1993, the Company sold all of the issued and outstanding
capital stock of PWMI to a corporation (the "PWMl Purchaser") controlled by two
former employees of PWMI (the "PWMI Employees") for a purchase price equal to
$500,000. The purchase price was paid in the form of two secured promissory
notes, one in the principal amount of $475,000 and the other in the principal
amount of $25,000, each of which bear interest at 8% per annum. The $475,000
note has a ten year amortization, and is payable to the Company in equal monthly
installments of principal and interest beginning on December 1, 1993, with the
entire outstanding balance due and payable December 1, 1996. The PWMI Purchaser
has missed a number of payments under the promissory notes, and the Company and
the PWMI Purchaser are currently in the process of negotiating a new payment
schedule under the notes. The obligations of the PWMI Purchaser under the notes
are guaranteed jointly and severally by the PWMI Employees, which guarantee is
secured by a pledge to the Company of the PWMI capital stock, as well as a
security interest in certain assets of PWMI.

                                      22
<PAGE>

     On January 27, 1995. HEHC was merged with and into the Company (the "HEHC
Merger") and, as a result thereof, the separate existence of HEHC ceased and all
of its assets and liabilities became vested in the Company. Pursuant to the HEHC
Merger, the Company issued to the stockholders of HEHC in the aggregate 59,053.
11 shares of Common Stock, which was equal to the number of shares of Common
Stock owned by HEHC immediately prior to the HEHC Merger. In connection
therewith, the Company, GKH and the other stockholders of HEHC immediately prior
to the Merger entered into the HEHC Stockholders' Agreement. See "Principal
Stockholders - Stockholders' Agreements - HEHC Stockholders' Agreement" for a
discussion of the term of the HEHC Stockholders' Agreement. In addition, each
former stockholder of HEHC agreed to indemnify the Company for (i) the breach or
inaccuracy of any representation or warranty made by HEHC or such stockholder
under the HEHC Merger Agreement and (ii) the breach or default of any agreement
by HEHC or such stockholder under the HEHC Merger Agreement, payable in shares
of Common Stock issued in the HEHC Merger.

     Effective as of January 1, 1995, the Company acquired from CBC Compression,
an Oklahoma general partnership ("CBC"), 40 natural gas compressor units and
certain related equipment for a purchase price of $3,025,000 plus five percent
of rental amounts (exclusive of sales tax, freight and installation charges)
received by the Company under the related Master Gas Compression Agreement
described below. Pursuant to an agreement (the 'Master Gas Compression
Agreement") with AnSon Company, a sister partnership of CBC ("AnSon"), the
Company agreed to lease the 40 compressors back to AnSon, along with at least 25
additional compressors, for an initial term of 24 months. The Master Gas
Compression Agreement is scheduled to continue for an additional 24-month period
beyond the initial 24-month period; however, the rental price during such period
has not been established. AnSon, CBC and the Company have also entered into a
48-month "most favored vendor" relationship whereby AnSon and CBC have agreed to
purchase or lease production equipment from the Company so long as the Company's
price is equal to or less than other bidders. Similarly, the Company has agreed
to retain trucking services from MB Oilfield Service (an affiliate of CBC and
AnSon) during such 48-month period so long as MB Oilfield Service's price is not
higher than other bidders for such services.

     Effective as of February 1, 1995, the Company purchased from Gale Force
Compression Services, Inc. ("Gale Force") 107 natural gas compressors, certain
furniture, fixtures, equipment and other fixed assets, vehicles, the name "Gale
Force", and equipment leases for an aggregate purchase price of $9,782,800 plus
1, 150 shares of Common Stock (the "Gale Force Acquisition"). The compressors
are located primarily in Oklahoma and most are currently leased by the Company
pursuant to leases transferred in the sale. Concurrently with the Gale Force
Acquisition, the Company entered into a four year alliance agreement with Ward
Petroleum, an affiliate of Gale Force, for gas compression services to be
provided by the Company. In connection with the Gale Force Acquisition, the
Company, GKH and those persons who acquired Common Stock pursuant to the
transaction entered into the Gale Force Stockholders' Agreement. See "Principal
Stockholders - Stockholders' Agreements - Gale Force Stockholders' Agreement"
for a discussion of the terms of the Gale Force Stockholders' Agreement. Also in
connection with this transaction, the Company entered into an employment
agreement with Alan D. Lavenue, a Gale Force affiliate, for a two year term.

     On February 24, 1995, the Company, through its wholly-owned subsidiary,
Hanover/Smith, Inc. ("Hanover/Smith"), acquired (the "Smith Acquisition")
substantially all of the operating assets of the oil and V6 gas production
equipment division of Smith Industries, Incorporated, a Delaware corporation
("Smith"), which has been in the fabrication of oil and gas production equipment
industry since its inception in 1927. The assets acquired include real property
located in Corpus Christi, Texas, a lease and purchase option on real property
located in Columbus, Texas. manufacturing equipment used in the fabrication of
oil and gas production equipment, vehicles. inventory, the name "Smith
Industries" and

                                      23
<PAGE>

Smith's logo. Smith filed for protection under the United States Bankruptcy
Code, 11 U.S.C. (S)101 et seq., in May 1994, in the United States Bankruptcy
                       -- ----
Court for the Southern District of Texas, Houston Division, in a Case styled In
Re: Smith Industries, Incorporated, No. 94-43705-H3-1 1. The Bankruptcy Court
approved the necessary orders authorizing the acquisition. The total acquisition
price after various credits and adjustments was $2,595,714. The oil and gas
production equipment operations of Smith acquired by Hanover/Smith have been
consolidated with the existing oil and gas production equipment fabricating
operations of the Company and will operate as Hanover/Smith.

Industry

     Natural gas compressors generally do not suffer significant technological
obsolescence, so that the useful life of a compressor is based primarily on its
mechanical integrity. The useful life of a compressor may also be extended by
refurbishing or overhauling the compressor at regular intervals of approximately
five to six years. Refurbished or overhauled compressors may be leased at prices
substantially similar to new compressors.

     The gas compressor industry services both independent producers and major
integrated natural gas producers, as well as pipeline, gas processing and
gathering and transmission companies, and is substantially dependent on the
natural gas industry. The Company believes that independent producers currently
account for a substantial portion of the natural gas industry. The Company also
believes that independent gas producers are now accounting for an increasing
portion of the natural gas produced in the United States relative to that
produced by major integrated energy producers and that independent producers are
more likely to lease compressors from third parties such as the Company as a
result of restraints on their ability to make the large capital expenditures
necessary to purchase compressors. In addition, many major gas producers are
directing their capital investments overseas and allowing their U.S. capital
base to decline, thus resulting in further increased demand for rental
compressors. Moreover, the market for contract compression services has been
expanding as gas producers and pipeline companies strive to lower operating
costs and improve efficiency by outsourcing their gas handling requirements.

     The Company believes that the market for natural gas compressors is driven
by a variety of factors, including, without limitation, (i) the demand for
natural gas, (ii) the age of particular gas wells, (iii) the relative price of
natural gas to the price of oil or other alternative energy sources and (iv) the
season. All other things being equal, the gas compression industry is generally
benefited by either an increase in gas prices, which generally results in the
development of new wells, fields and pipeline systems and a corresponding
increase in demand for compression, or, up to a point, by a decrease in natural
gas prices, which results in outsourcing by independent producers and an
increase in the need for leased compression. Increases in the age of natural gas
wells also has a positive impact on the gas compression industry since older
wells generally experience a decline in their reservoir pressure and require
compressors to increase their productivity. In contrast, a number of factors
would potentially have an adverse effect on the gas compressor industry. See
"Risk Factors - Natural Gas Compressor Industry Considerations."

     Conversely, all other things being equal, a relative decrease in the price
of oil or other energy sources as compared to natural gas generally will have an
adverse effect on the natural gas compression industry since such circumstances
encourage energy users to switch from natural gas to alternative fuel sources
thereby decreasing demand for natural gas.

                                      24
<PAGE>

     The Company believes that the natural gas compressor industry is also
affected by seasonality, with the highest demand for compression in winter
months when natural gas is in greater demand. As a result of such seasonality,
the Company generally experiences slightly decreased revenues for its Leasing
and Maintenance segment during the months of May through August.

     In addition, the Company believes that as environmental considerations
become more important due 'to the Federal Clean Air Act and related legislative
and social considerations, natural gas, as a cleaner burning fuel than either
oil or coal, will nuke up a greater share of the domestic energy market.
However, there can be no assurance that such increased use of natural gas will
come to pass.

Market Position

Leasing and Maintenance

     The Company believes that the market for the leasing of natural gas
compressors may be distinguished from the market for the sale of natural gas
compressors since the decision to lease a compressor is generally made prior to
a customer's entrance into the marketplace. Generally, lessees are customers who
anticipate only a short term need for the compressor which is substantially less
than the estimated useful life of the unit or customers who are unable to or
otherwise choose not to internally finance the purchase of such units.

     The Company believes that the natural gas compressor leasing industry may
be divided into categories based on the compressor horsepower and that market
share of the participants in the industry may be determined based on either (i)
the number of units leased by such participants or (ii) the total horsepower
leased by such participants.

     The Company's compressor fleet as of March 31, 1995 was divided by
horsepower as follows:

<TABLE>
<CAPTION>
     ----------------------------------------------------------------
                                     Units          Total Horsepower
     Category (by Horsepower)     (% of Fleet)        (% of fleet)
     ------------------------     ------------       --------------
     ----------------------------------------------------------------
     <S>                          <C>                <C>
     0 - 44                        86     (9%)         2,573     (1%)
     ----------------------------------------------------------------
     45 - 60                       93    (10%)         5,272     (2%)
     ----------------------------------------------------------------
     61 - 100                     177    (19%)        14,342     (6%)
     ----------------------------------------------------------------
     101 - 200                    224    (24%)        31,557    (12%)
     ----------------------------------------------------------------
     201 - 500                    183    (20%)        56,505    (22%)
     ----------------------------------------------------------------
     501 - 800                     79     (9%)        51,322    (20%)
     ----------------------------------------------------------------
     801 - 1100                    45     (5%)        43,247    (16%)
     ----------------------------------------------------------------
     1100+                         39     (4%)        54,161    (21%)
                                   --     ----        ------    -----
     ----------------------------------------------------------------
     TOTAL                        926   (100%)       258,979   (100%)
     ----------------------------------------------------------------
</TABLE>

     Based on industry statistics, the Company believes that the U.S. natural
gas compressor leasing industry is a highly fragmented business nude up of in
excess of 50 companies aggregating approximately 2,200,000 horsepower. Based on
information available to the Company, the Company believes that it is the fourth
largest compressor leasing company in the U.S. based on total units and the
third largest compressor leasing company in the U.S. based on total operating
horsepower.

                                      25
<PAGE>

Compressor Packaging

     The Compressor Packaging business, carried on primarily through MEI,
competes with other manufacturers of compressor units. The Compressor Packaging
business is dominated by a few major competitors, several of whom also compete
with the Company in the compressor leasing business. Although sufficient
information is not available to definitively estimate the Company's relative
position in the Compressor Packaging market, management believes that the
Company is the seventh largest Compressor Packaging company in the U.S. based on
estimated 1994 revenues of the Company's competitors in such business.

Production Equipment

     The Production Equipment business is a highly fragmented business with
approximately five substantial competitors. The Company believes that, with the
Smith Acquisition, it is among the top five major competitors in the business.

Business Strategy

     The Company's primary focus will be continued expansion of the compression
rental fleet. Anticipated levels of capital expenditures, from internally
generated cash flow and bank financing, relating to the rental fleet amount to
approximately $27 million during 1995 and $17 million during 1996. If the
Company is successful in raising the additional growth capital which it
anticipates during 1995, management estimates that capital expenditures related
to the rental fleet will amount to approximately $37 million and $36 million
during 1995 and 1996, respectively. The rental fleet consisted of 926 units
aggregating 258,979 horsepower at March 31, 1995. With the level of capital
expenditures contemplated, assuming the additional growth capital is raised,
management believes that the Company's rental fleet should grow to approximately
300,000 horsepower by year end 1995. In addition, the contribution of the
Production Equipment segment is expected to increase, both in terms of revenues
and operating income, in light of the Smith Acquisition. However, there can be
no assurances that the above projections will actually be met.

     The Company does not anticipate making any significant expenditures for
product research and development inasmuch as the Company's Leasing and
Maintenance, Compressor Packaging and Production Equipment segments do not
generally require such expenditures.

Operations

     The following tables show (i) the revenues and operating profit (loss) for
each of the years ended December 31, 1994 and December 31, 1993 and for the
periods ended March 31, 1995 and March 3 1, 1994 and (ii) the assets of the
Company for the years ended December 31, 1994 and December 31, 1993 and the
period ended March 31, 1995, in each case for each of the Leasing and
Maintenance segment, the Compressor Packaging segment, the Production Equipment
segment and the Company's other revenue sources:

                                      26
<PAGE>

<TABLE>
<CAPTION>
========================================================================================================================
                                           Year Ended            Year Ended            Period Ended         Period Ended
                                           December 31,          December 31,            March 31,            March 31,
                                              1994                   1993                   1995                 1994
                                              ----                   ----                   ----                 ----
------------------------------------------------------------------------------------------------------------------------
<S>                                       <C>                    <C>                    <C>                 <C>
Revenues:
------------------------------------------------------------------------------------------------------------------------
  Leasing and Maintenance                 $32,024,912            $25,722,662            $10,082,116           47,302,325
------------------------------------------------------------------------------------------------------------------------
  Compressor Packaging                     16,201,887             14,034,275             76,047,896            1,256,348
------------------------------------------------------------------------------------------------------------------------
  Production Equipment                      7,271,641              3,178,386              2,707,137            1,000,826
------------------------------------------------------------------------------------------------------------------------
  Other                                       582,526                411,298                 72,569               26,311
------------------------------------------------------------------------------------------------------------------------
    TOTAL REVENUES                        $56,079,966            $43,346,621            $18,909,718          $ 9,585,810
------------------------------------------------------------------------------------------------------------------------
Operating profit (loss)(1):
------------------------------------------------------------------------------------------------------------------------
  Leasing and Maintenance                 $17,070,138            $12,775,114            $ 5,412,878          $ 3,815,685
------------------------------------------------------------------------------------------------------------------------
  Compressor Packaging                      1,270,314                813,868                823,316             (179,635)
------------------------------------------------------------------------------------------------------------------------
  Production Equipment                        363,851               (130,492)              (422,067)              (1,018)
------------------------------------------------------------------------------------------------------------------------
  Other (2)                                (1,590,505)            (2,066,368)              (534,814)            (423,149)
------------------------------------------------------------------------------------------------------------------------
  TOTAL OPERATING PROFIT                  $17,113,798            $11,392,122            $ 5,279,313          $ 3,211,883
========================================================================================================================
</TABLE>

(1)  Determined by subtracting expenses from revenues for each segment and
     adding back the corresponding portion of depreciation and amortization
     expense and interest expense.

(2)  Consists primarily of corporate administrative expenses.

<TABLE>
<CAPTION>
=============================================================================================================
                                            Year Ended                Year Ended              Period Ended
                                         December 31, 1994        December 31, 1993          March 31, 1995
                                         -----------------        -----------------          --------------
-------------------------------------------------------------------------------------------------------------
<S>                                      <C>                      <C>                       <C>
Assets:
-------------------------------------------------------------------------------------------------------------
  Leasing and Maintenance                     $100,428,593              $70,807,541            $121,731,913
-------------------------------------------------------------------------------------------------------------
  Compressor Packaging                           8,453,184                3,535,761               9,630,371
-------------------------------------------------------------------------------------------------------------
  Production Equipment                           5,562,940                2,140,545               8,876,132
-------------------------------------------------------------------------------------------------------------
  Other                                            169,435                  295,478               1,095,292
-------------------------------------------------------------------------------------------------------------
     TOTAL ASSETS                             $114,614,152              $76,779,325            $141,333,708
=============================================================================================================
</TABLE>

Leasing and Maintenance

     The Company provides natural gas compression equipment, on a rental basis,
primarily to natural gas production and transmission companies. These rental
units are utilized to compress natural gas when the reservoir pressure for a
natural gas field is less than the pressure for the natural gas pipeline
transporting the gas. The Company also provides maintenance of customer-owned
compressor units as well as compressor parts sales to third parties.

     As of March 31, 1995, the Company's gas compressor fleet consisted of 926
units, ranging from 25 to 3,000 horsepower, of which 94% of available horsepower
and 92% of the available units were being utilized. Leases for the compressor
units provide for fixed monthly payments for an average term of approximately
six months and continue thereafter on a monthly basis. Based on the Company's
historical operations, the Company estimates that the terms of its leases have
extended for an average of approximately 24 months.

     Although natural gas compressors generally do not suffer significant
technological obsolescence, they do require routine maintenance and periodic
refurbishing to prolong their useful life. In general, the Company anticipates
refurbishing its compressor units approximately every five to six years.

                                      27
<PAGE>

     The Company's compressor leasing activities are located in Texas, Oklahoma,
Arkansas, Louisiana, New Mexico, Mississippi, Alabama, Kansas and offshore Gulf
of Mexico, and the Company is considering expansion into international markets.
In this regard, the Company presently leases a gas compressor to a company in
Trinidad pursuant to a 24-month lease which provides for payments of $7,800 per
month and two 12-month extension periods. In addition, the Company currently
owns four compressors under lease with Corpoven, S.A., the Venezuelan natural
gas company.

Compressor Packaging

     The Company's Compressor Packaging segment, operated primarily through MEI,
designs, engineers and assembles compression units for sale to third parties as
well as for placement in its compressor fleet. In general, units to be sold to
third parties are assembled according to such customer's specifications and sold
on a turnkey basis. Components for such compressor units are acquired from third
party suppliers. At March 31, 1995, backlog of fabrication of compressor units
amounted to $6.1 million.

Production Equipment

     The Company designs and fabricates a broad range of oil and gas production
equipment designed to heat, separate, dehydrate and measure crude oil and
natural gas. The product line includes line heaters, oil and gas separators,
glycol dehydration units and skid mounted production packages designed for both
onshore and offshore production facilities. At March 31, 1995, backlog of
production equipment fabrication amounted to $3.6 million.

Customers

     No amounts received from any individual customer equaled more than 10% of
the Company's consolidated revenues during 1993 or 1994.

Competition

Leasing and Maintenance

     The natural gas compressor leasing business is highly competitive. Overall,
the Company experiences considerable competition from larger companies with
significantly greater financial resources and, on a regional basis, several
smaller companies compete directly with the Company. Based on information
available to the Company, the Company ranks among the top four companies
providing compressor units on a rental basis based on the number of units and
among the top three based on total available horsepower. See "- Market
Position."

     The Company believes that it competes in the Leasing and Maintenance
segment on the basis of price, customer service, including the availability of
personnel in remote locations, flexibility in meeting customer needs and quality
and reliability of its compressors. Although the Company believes that it is
competitive in terms of price and quality, it also focuses on customer service
and flexibility in meeting customer needs.

Compressor Packaging

     The Company believes that it competes in the Compressor Packaging segment
based on price and quality and that the Company is competitive in both areas.

                                      28
<PAGE>

Production Equipment

     The Company believes that it competes in the Compressor Packaging segment
based on price and quality and that the Company is competitive in both areas.
Competition in the Production Equipment segment is also based on the ability to
service customers' needs. The Company believes that with the Smith Acquisition,
it is among the top five major competitors in the Production Equipment market.

Employees

     As of March 31, 1995, the Company employed approximately 398 people, of
which 15 were administrative, 18 were sales, 84 were Compressor Packaging, 110
were Production Equipment and 171 in field service locations. No employees are
represented by labor unions, and the Company believes that its relations with
its employees is satisfactory.

Insurance

     Natural gas operations are subject to certain risks, including explosions,
uncontrollable flows of gas or well fluids, fires, pollution and other
environmental risks. These risks could expose the Company to substantial
liability for injury and loss of life, property damage, pollution and other
environmental damages, and consequential damages, if such damages resulted from
a compressor defect or from the Company's negligence in maintaining, servicing
or refurbishing its compressors.

     The Company believes that is has obtained adequate insurance to cover such
risks; however, no assurance can be given that such insurance will be adequate
to cover the Company's operations in the event the Company incurs liability in
excess of anticipated potential levels or that such insurance will be generally
available in the future or, if available, that premiums will be commercially
reasonable. See "Risk Factors - Potential Liability and Insurance."

Properties and Assets

     As of March 31, 1995, the Company's rental fleet consisted of 926
compressor units, 6 of which are leased and the remainder of which are owned by
the Company, with a total of 258,979 horsepower and an average of 280
horsepower. The Company also owns those assets acquired in the Gale Force
Acquisition and the Smith Acquisition. See 'Business - Company History."

     The Company owns its corporate offices in Houston, Texas, which are housed
in a combination corporate office and compressor fabrication facility consisting
of approximately 190,000 square feet plant capacity located on twenty acres.
This facility is anticipated to provide the Company with sufficient space and
capacity for at least the next three years. The Company also owns (i) a 6,400
square foot combination office and maintenance shop located on two acres in
Oklahoma City, Oklahoma, (ii) a 4,000 foot combination division office and
maintenance facility situated on five acres of land in Pocola, Oklahoma, (iii)
its maintenance facilities in Midland, Texas and Fort Smith, Arkansas, (iv) real
property located in Corpus Christi,-Texas and (v) a lease and purchase option
regarding the 212,000 square feet manufacturing facility located on 83 acres in
Columbus, Texas. In addition, the Company leases its fill maintenance facilities
in Victoria, Texas and Lafayette, Louisiana under ten-year leases.

                                      29
<PAGE>

Litigation

     The Company is not a party to any litigation that, in the judgment of
management, would have a material adverse effect on the Company's operations or
financial condition if adversely determined.

Governmental Regulation

     The Company is subject to various federal and state laws and regulations
relating to environmental protection, including regulations regarding emission
controls. The Company believes that it is in substantial compliance with such
laws and regulations and that the phasing in of emission controls and other
known standards at the rate currently contemplated by such laws and regulations
will not have a material adverse effect on the Company's financial condition or
results of operations. However, various state and federal agencies from tune to
time consider adopting new laws and regulations or amending existing laws and
regulations regarding environmental protection. While the Company may be able to
pass on the additional costs of complying with such laws, there can be no
assurance that attempts to do so would be successful. Accordingly, new laws or
regulations or amendments to existing laws or regulations could require the
Company to undertake significant capital expenditures and could otherwise have a
material adverse effect on the Company's financial condition and results of
operations.

     From time to time since President Clinton took office, his administration
has proposed various taxes with respect to the energy industry, none of which
have been enacted and all of which have received significant scrutiny from
various industry lobbyists. At the present time, given the uncertainties
regarding the proposed taxes, including the uncertainties regarding the terms
which the proposed taxes might ultimately contain and the industries and persons
who may ultimately be subject to any such tax, it is not possible to determine
whether any such tax will have a material adverse effect on the Company.

                                  MANAGEMENT

Directors and Executive Officers

     The directors and executive officers of the Company are set forth below.
Positions with the Company include positions with the Company's predecessors.
All directors hold office until the annual meeting of the stockholders following
their election or until their successors are duly elected and qualified.
Officers are appointed by and serve at the discretion of the Board.

--------------------------------------------------------------------------
Name                        Age     Position
----                        ---     --------
Michael A. O'Connor          60     Chairman of the Board; Director
--------------------------------------------------------------------------
Michael J. McGhan            40     President and Chief Executive Officer;
                                    Director
--------------------------------------------------------------------------
Curtis Bedrich               52     Chief Financial Officer and Treasurer
--------------------------------------------------------------------------
William S. Goldbert          37     Executive Vice President; Director
--------------------------------------------------------------------------
Charles d. Erwin             35     Vice President, Sales
--------------------------------------------------------------------------
William C. Bryant            42     Vice President, Sales-Mid Continent
--------------------------------------------------------------------------
Maxwell C. McDonald          47     Vice President, Sales-Southeast
--------------------------------------------------------------------------
Cullen Spitzer               34     Vice President, Sales-South Texas
--------------------------------------------------------------------------
Luis Guerra                  43     Vice President, Operations-South Texas
--------------------------------------------------------------------------
Joe Bradford                 36     Vice President, Operations-Western
                                    Division
--------------------------------------------------------------------------
Richard S. Meller            37     Secretary
--------------------------------------------------------------------------
Jeri Howell                  42     Assistant Secretary
--------------------------------------------------------------------------

                                      30
<PAGE>

--------------------------------------------------
Ted Collins, Jr.             56         Director
--------------------------------------------------
Robert Wasielewski           30         Director
--------------------------------------------------
Melvyn N. Klein              53         Director
--------------------------------------------------
Alvin V. Shoemaker           56         Director
--------------------------------------------------
James Hanna                  61         Director
--------------------------------------------------
Andrew Richards              33         Director
--------------------------------------------------
Robert R. Furgason           59         Director
--------------------------------------------------

     Michael O'Connor has served as Chairman of the Board and a director of the
Company since January 1992. Prior thereto, Mr. O'Connor served as president of
Gas Compressors Inc. from 1965 through 1986 and was a private investor from
January 1, 1987 through January 1, 1992. Mr. O'Connor also serves as a director
of certain affiliates of the Company.

     Michael J. McGhan has served as President and Chief Executive Officer of
the Company since October 1991 and served as Chief Operating Officer of the
Company from December 1990 through October 1991. Mr. McGhan has served as a
director of the Company since March, 1992. Prior thereto, Mr. McGhan was sales
manager of Energy Industries, Inc. ("Ell"). Mr. McGhan has been involved in the
gas compression industry for 16 years. Mr. McGhan also serves as a director of
other affiliates of the Company.

     Curtis Bedrich has served as Chief Financial Officer and Treasurer of the
Company since November 199 1. Mr. Bedrich served as Vice President of Adobe
Resources Corporation from 1980 until 1991. Mr. Bedrich has been involved in the
oil and gas industry for 17 years.

     William S. Goldberg has served as Executive Vice President and director of
the Company since May 1991. Mr. Goldberg has been employed by GKH since 1988 and
has served as Managing Director of GKH since June 1990. Mr. Goldberg also serves
as a director of certain affiliates of the Company.

     Charles D. Erwin has served as a Vice President of the Company since
October 1990 and served as a sales representative of Ell from 1985 until October
1990. Mr. Erwin has been involved in the gas compression industry for 10 years.

     William C. Bryant has served as a Vice President of the Company since
October 1990 and served as a sales representative of EII from 1988 until October
1990. Mr. Bryant has been involved in the gas compression industry for 20 years.

     Maxwell C. McDonald has served as a Vice President of the Company since
December 1990 and served as President of C&B from 1985 until its acquisition by
the Company in 1990. Mr. McDonald has been involved in the gas compression
industry for 22 years.

     Cullen Spitzer has served as a Vice President of the Company since July
1991 and served as President of MEI from 1982 until its acquisition by the
Company in July 1991. Mr. Spitzer has been involved in the gas compression
industry for 14 years. Mr. Spitzer has informed the Company that he will resign
from his position as Vice President effective as of June 30, 1995.

     Luis Guerra has served as a Vice President of the Company since December
1990. Prior thereto, Mr. Guerra was a principal stockholder and Vice President
of GEL Mr. Guerra has been involved in the gas compression industry for 20
years.

                                      31
<PAGE>

     Joe Bradford has served as a Vice President of the Company since March 1993
and served as Operations Manager from January 1, 1991 until March 1993. Mr.
Bradford served as mechanic supervisor of HEI from 1987 until January 1991. Mr.
Bradford has been involved in the oil and gas industry for 20 years.

     Richard S. Meller has served as Secretary of the Company since October
1991.

     Jeri Howell has served as Assistant Secretary of the Company since May 15,
1995.

     Ted Collins, Jr. has served as a director of the Company since April 1992.
Mr. Collins is the President of Collins & Ware Properties, Inc., a natural gas
producer. Mr. Collins has 35 years of experience in the oil and gas industry.

     Robert Wasielewski has served as a director of the Company since May 15,
1995. Mr. Wasielewski has served as an Associate of GKH since October 1991.
Prior to that time, Mr. Wasielewski was a Vice President of Citicorp's leveraged
capital division. Mr. Wasielewski also serves as a director of certain
affiliates of the Company.

     Melvyn N. Klein has served as a director of the Company since May 1991. Mr.
Klein is the sole stockholder of a corporation which is a general partner of GKH
Partners, L.P. Mr. Klein has been an attorney and counselor-at-law since 1968.
Mr. Klein serves as a director of Bayou Steel Corporation, Itel Corporation,
Santa Fe Energy Resources. Inc., Savoy Pictures Entertainment, Inc. and certain
privately held companies. Mr. Klein is also a principal of Questor Partners
Fund, L.P.

     Alvin V. Shoemaker has served as a director of the Company since May 1991
and has been a private investor since his retirement as chairman of the board of
The First Boston Corporation in January 1989.

     James Hanna has served as a director of the Company since May 15, 1995. Mr.
Hanna is the President of Hanna Oil and Gas Company. and a director of the
Independent Petroleum Association of America and the Merchants National Bank of
Fort Smith, Arkansas. Mr. Hanna has 35 years of experience in the oil and gas
industry.

     Andrew Richards has served as a director of the Company since May 15, 1995.
Mr. Richards is also a Vice President of William E. Simon & Sons, a private
investment company based in Morristown, New Jersey, where he oversees
investments in the specialty food, oil and gas, and maritime shipping
industries. Prior to joining William E. Simon & Sons, Mr. Richards was an
Executive Staff Member of the Presidential Task Force on Market Mechanisms, the
Presidential commission appointed by Ronald Reagan to investigate the 1987 Wall
Street crash. Prior to that, Mr. Richards was a financial analyst in corporate
finance at PaineWebber, Inc., specializing in initial public offerings.

     Robert R. Furgason has served as a director of the Company since May 15,
1995. Mr. Furgason is the President of Texas A&M University - Corpus Christi,
and has held a series of faculty and administrative positions at various
universities. Mr. Furgason is the former President of the Accreditation Board
for Engineering and Technology Board of Directors, and also serves on a number
of other accreditation and policy boards.

                                      32
<PAGE>

Compensation of Directors

     Non-employee directors of the Company generally do not receive any
compensation for serving on the Board but are entitled to reimbursement for
expenses incurred in connection with their attendance at Board meetings. The
foregoing notwithstanding, the Company has agreed to pay Mr. Furgason 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.

Options

1992 Stock Plan

     In April 1992, the Board adopted the Company's Stock Compensation Plan (the
"1992 Stock Plan"), which provides for the granting of options to executive
officers, directors, employees or advisors of the Company. The 1992 Stock Plan
permits the Board to issue options with respect to a maximum of 15 % of the
total shares of Common Stock outstanding, computed on a fully diluted basis and
including shares which are issuable under the 1992 Stock Plan, at the time of
the grant of an option. As of March 31, 1995, options with respect to 1;065
shares of Common Stock were outstanding, 670.5 of which were presently vested,
and the remainder of which will generally vest ratably over the next two years.
214.5 of such options are exercisable at SLOO per share and 850.5 are
exercisable at $725 per share. Options granted under the 1992 Stock Plan are
nonstatutory options and are not classified as "incentive stock options" within
the meaning of Section 422 of the Code.

     The exercise price for additional options which may be granted under the
1992 Stock Plan would be determined by a committee appointed by the Board (the
"Committee"), which Committee is currently comprised of the members of the
Board, and nay be less than the fair market value of the Common Stock on the
date of grant. Other than the maximum number of shares available under the 1992
Stock Plan, there is no minimum or maximum number of shares that may be granted
to any person. Options granted under the 1992 Stock Plan generally expire within
a specified number of days of the termination of employment of an optionee who
is an employee. Options granted under the 1992 Stock Plan fully vest and become
exercisable for a specified number of days upon the death or permanent
disability of the optionee and are forfeited upon the termination for cause of
the optionee. In addition, options granted under the 1992 Stock Plan My vest and
become exercisable upon the occurrence of a change in control accompanied by a
constructive termination of employment of such optionee, all as more fully
described in the 1992 Stock Plan.

     Options may not be transferred other than by will or the laws of descent
and distribution, and during the lifetime of an optionee may be exercised only
the optionee. The term of each option granted under the 1992 Stock Plan may not
exceed fifteen years from the date the option is granted. Options may become
exercisable in whole at grant or in installments over time, as determined by the
Committee. Under the terms of the 1992 Stock Plan, payment upon the exercise of
an option may be in cash, by delivery of shares of Common Stock with a fair
market value equal to the aggregate exercise price or, if the optionee's stock
option agreement so provides, by delivery of a promissory note with such terms
as the Committee may approve.

     The acceleration of options in the event of a change of control could be
seen as an anti takeover provision and may have the effect of discouraging a
proposal for merger or other efforts to purchase or sell control of the Company.

                                      33
<PAGE>

1993 Option Plan

     In connection with the 1993 Offering, the Board adopted the 1993 Management
Stock Option Plan (the "1993 Option Plan") pursuant to which members of the
Company's management who purchased Common Stock in the 1993 Offering were issued
options to purchase one-third of one share of Common Stock at a purchase price
of $725 per share (subject to adjustment for stock splits, stock dividends and
other similar events) for each share of Common Stock owned by such persons or
purchased by such persons in the 1993 Offering. Such options vest ratably over a
five year period which began on June 23, 1993 and are governed by the terms of
the 1993 Option Plan and individual option agreements (the "1993 Option
Agreements"). As of March 31, 1995, options with respect to 1,514 shares of
Common Stock were outstanding, and options with respect to 302.80 were presently
vested. Other than with respect to the applicable exercise price and the actual
vesting and expiration dates, the 1993 Option Plan and the 1993 Option
Agreements are substantially the same as the Management Option Plan and the
Management Option Agreements, respectively.

Senior Executive Plan

     In connection with the 1993 Offering, Messrs. O'Connor and McGhan were
granted options pursuant to the Company's Senior Executive Stock Option Plan
(the "Senior Executive Plan") to purchase up to 1,291.95 and 645.97 shares of
Common Stock, respectively, at an exercise price of $833.75 per share (subject
to adjustment for stock splits, stock dividends and similar events). Such
options vest ratably over a seven year period which began on June 29, 1993 and
will fully vest upon an optionee's death or permanent disability or upon the
occurrence of a Capital Event (as defined in the Senior Executive Plan)
resulting in a compounded annual return of 20% actually realized on the shares
of Common Stock purchased in the 1993 Offering. In addition, on May 15, 1995,
Messrs. McGhan and Bedrich were granted 215.32 and 430.65 options respectively,
under the Senior Executive Plan. Such options have the same terms as those
issued to Messrs. O'Connor and McGhan in connection with the 1993 Offering,
except that such options will vest ratably over a seven year period which began
on May 15, 1995.

     Options granted under the Senior Executive Plan generally expire within a
specified number of days of the termination of employment of an optionee, and
such options will be forfeited upon the termination for Cause of an optionee.
The term of each option may not exceed 10 years from the date the option is
granted. Options may not be transferred other than by will or the laws of
descent and distribution, and during the lifetime of an optionee may be
exercised only by the optionee. Options granted under the Senior Executive Plan
are nonstatutory options and are not classified as "incentive stock options"
within the meaning of Section 422 of the Code.

     Pursuant to the agreements executed in connection with the grant of options
under the Senior Executive Plan, each of Messrs. O'Connor, McGhan and Bedrich
agreed that he will not during the term of such agreement and for a period of
one year thereafter, (i) compete with any business of the Company and (ii)
without the Company's consent, disclose to persons outside the Company
confidential information concerning the Company.

Incentive Option Plan

     In connection with the 1993 Offering, the Board adopted the Company's
Incentive Option Plan (the "Incentive Option Plan"), participation in which is
open to members of management who participated in the 1993 Offering and who are
employed by the Company or any of its subsidiaries or

                                      34
<PAGE>

affiliates at the time of a Capital Event (as defined below) (each a "1993
Eligible Participant"). Given that the options which may be issued under the
Incentive Option Plan are based on the actual return realized by the controlling
stockholder, the Company plans to replace the Incentive Option Plan with a
another option plan which would include the 1993 Eligible Participants. However,
the Investors will not be eligible to participate in the Incentive Option Plan,
except to the extent of their pro rata participation, if any, in the 1993
Offering. Nonetheless, a brief description of the Incentive Option Plan follows.

     Pursuant to the Incentive Option Plan as presently constituted, the Company
may grant 1993 Eligible Participants who are employees of the Company or any of
its subsidiaries or affiliates and who own shares of Common Stock at the time of
a Capital Event (as defined in the Incentive Option Plan) options to acquire a
specified percentage of the shares of outstanding Common Stock (determined on a
fully diluted basis) based on the actual return realized by the controlling
stockholder upon (i) the disposition (other than to affiliates) by GKH of at
least 50% of its Common Stock, (ii) the date all or substantially all of the
assets or property of the Company are sold, leased or otherwise transferred to
an unrelated third party, (iii) the effective date of a merger or consolidation
in which the Company, any of its subsidiaries or any affiliate of the Company is
not the surviving entity or the surviving entity is not controlled by GKH or
(iv) the dissolution or liquidation of the Company (the first occurrence of the
events set forth in items (i) through (iv) is referred to herein as the "Capital
Event").

     The options granted under the Incentive Option Plan would be nonstatutory
options - and the exercise price for such options would be $725 per share. The
options would vest fully upon the occurrence of the Capital Event. Each.
participant in the Incentive Option Plan will receive a pro rata share of the
total options actually issued pursuant to the Incentive Option Plan (the
"Incentive Option Plan Shares") determined by multiplying the Incentive Option
Plan Shares by a fraction, the numerator of which is equal to the lesser of (i)
the number of shares of Common Stock subscribed for by such 1993 Eligible
Participant pursuant to the 1993 Offering or (ii) the number of shares of Common
Stock owned by the 1993 Eligible Participant at the time of the Capital Event
and the denominator of which is equal to the total number of shares of Common
Stock subscribed for by all 1993 Eligible Participants pursuant to the 1993
Offering. 1993 Eligible Participants who cease to be employed by the Company for
any reason prior to a Capital Event or who cease to own shares of Common Stock
would not be eligible to participate in the Incentive Option Plan.

     Options granted under the Incentive Option Plan generally would expire
within a specified number of days of the termination of employment of an
optionee. Options may not be transferred other than by will or the laws of
descent and distribution, and during the lifetime of an optionee may be
exercised only by the optionee. The term of each option granted under the
Incentive Option Plan may not exceed 10 years from the date the option is
granted.

Summary Compensation Table

     The following table sets forth the total compensation that was awarded to,
earned by or paid to Michael J. McGhan (the chief executive officer of the
Company), and Michael O'Connor, Curtis Bedrich, A61 Maxwell McDonald and Cullen
Spitzer (who has informed the Company that he will resign from his position as a
Vice President of the Company effective as of June 30, 1995) (the four other
most highly paid executive officers) as a group during the year ended December
31, 1994.

                                      35
<PAGE>

<TABLE>
<CAPTION>
=======================================================================================================
                                                                      Long Term
                                                                     Compensation
                                          Annual Compensation           Awards             All Other
                                       Salary             Bonus      Option Grants     Compensation (1)
                                      --------          ---------    -------------     ----------------
-------------------------------------------------------------------------------------------------------
<S>                                   <C>               <C>          <C>               <C>
CEO and four other most highly
 compensated executive officers....   $500,000           $361,650          --               $3,680
=======================================================================================================
</TABLE>

(1)  Consisting of life insurance premiums.

Option Grants in Last Fiscal Year

     No options were granted in the during the year ended December 31, 1994. The
Company has not, to date, granted any stock appreciation rights.

Fiscal Year End Option Values

     Shown below is information with respect to unexercised options to purchase
Common Stock in effect in 1994, all of which were granted pursuant to the
existing option plans of the Company as described in this Offering Memorandum.
See "Management - Options." None of such options have been exercised.

<TABLE>
<CAPTION>
=======================================================================================================
                                       Number of Unexercised Options  Value of Unexercised in-the-Money
                                             December 31, 1994         Options at December 31, 1994(1)
                                       -----------------------------   -------------------------------

                                       Exercisable     Unexercisable    Exercisable      Unexercisable
                                       -----------     -------------    -----------      -------------
-------------------------------------------------------------------------------------------------------
<S>                                    <C>             <C>              <C>              <C>
CEO and four other most highly
 compensated executive officers......   1,103.43          2,904.49       $585,315         $2,113,244
=======================================================================================================
</TABLE>

Employment Contracts and Other Agreements

     In connection with the Company's acquisition of the capital stock of MEI in
1992, the Company entered into an employment agreement with Cullen Spitzer which
by its terms expires in July 1996. However, Mr. Spitzer has informed the Company
that he will resign from his position as a Vice President of the Company
effective as of June 30, 1995.

     In connection with the Gale Force Acquisition, the Company entered into an
employment agreement with Alan D. Lavenue for a two year term.

Compensation Committee and Insider Participation

     The Compensation Committee of the Board consists of Messrs. Goldberg,
Shoemaker, O'Connor and Furgason. All decisions with respect to compensation are
made by the Board after consideration of the advice of the Compensation
Committee. From time to time, Mr. McGhan will participate in the deliberations
regarding compensation of the other executive officers of the Company.

Certain Relationships and Related Transactions

     GKH and certain other stockholders of the Company own substantially all of
the common stock of Combustion Control Corporation, a Delaware corporation
("Combustion"). Combustion is in the

                                      36
<PAGE>

business of refurbishing existing natural gas compressors to bring them into
compliance with certain environmental emissions regulations. On March 21, 1995,
the Company borrowed $500,000 from Combustion in order to fund certain working
capital needs. The loan is evidenced by a demand promissory note of the Company
payable to the order of Combustion. In addition, it is presently contemplated
that Combustion will be merged into the Company.

     Mr. Collins, one of the Company's directors and minority stockholders,
controls a corporation which owns a 50% interest in a joint venture to which the
Company leases compressors pursuant to a long-term lease which provides for
monthly payments of $89,900.

     Mr. Hanna, one of the Company's directors and minority stockholders, is the
President of Hanna Oil and Gas Company, to which the Company leases compressors
pursuant to month-to-month leases which provide for aggregate monthly payments
of $29.600.

                            PRINCIPAL STOCKHOLDERS

Principal Stockholders

     The following table sets forth certain information regarding the beneficial
ownership of the Common Stock of the Company as of March 31, 1995 (i) by each
person who is known by the Company to own beneficially mom than 5 % of any class
of the outstanding Common Stock, (ii) by each director and the chief executive
officer and the four other most highly compensated executive officers of the
Company and (iii) by all of the Company's directors and executive officers as a
group.

<TABLE>
<CAPTION>
===================================================================================================
                                           Stock Beneficially                  Percentage of Stock
     Name of Person or Group                     Owned                        Beneficially Owned(1)
     -----------------------                     -----                        ---------------------
---------------------------------------------------------------------------------------------------
<S>                                        <C>                                <C>
GKH Investments, L.P. (2)                      63,809.93                               76.23%
---------------------------------------------------------------------------------------------------
Ted Collins, Jr.                                     855                               1.021%
---------------------------------------------------------------------------------------------------
William S. Goldberg(3)                                --                                  --
---------------------------------------------------------------------------------------------------
Robert Wasielewski                                    --                                  --
---------------------------------------------------------------------------------------------------
Melvyn N. Klein(4)                                     -                                  --
---------------------------------------------------------------------------------------------------
Michael J. McGhan                                 528.02                                   *
---------------------------------------------------------------------------------------------------
Michael A. O'Connor                             1,843.16                               2.201%
---------------------------------------------------------------------------------------------------
Alvin V. Shoemaker(5)                           1,622.09                               1.937%
---------------------------------------------------------------------------------------------------
Maxwell C. McDonald                               754.94                                   *
---------------------------------------------------------------------------------------------------
Curtis Bedrich                                    439.87                                   *
---------------------------------------------------------------------------------------------------
Cullen Spitzer(6)                                     --                                  --
---------------------------------------------------------------------------------------------------
James Hanna                                        1,875                                2.24%
---------------------------------------------------------------------------------------------------
Andrew Richards                                       --                                  --
---------------------------------------------------------------------------------------------------
Robert A. Furgason                                    --                                  --
---------------------------------------------------------------------------------------------------
All directors and officers as a                 7,918.08                                9.46%
 group(7)
===================================================================================================
</TABLE>

*Represents less than 1% of the outstanding Common Stock.

(1)  There are 156.40 treasury shares issued, which shares were not counted as
     outstanding in calculating the beneficial ownership percentages.

                                      37
<PAGE>

(2)  Does not include 2,410.49 shares of Common Stock (2.879% of the outstanding
     shares) owned by GKH Partners, L.P.. a Delaware limited partnership, as
     nominee for GKH Private Limited, a Singapore corporation. GKH Partners.
     L.P. is the general partner of GKH Investments, L.P.

(3)  Does not include 254.11 shares of Common Stock (less than I % of the
     outstanding shares) owned by Mr. Goldberg's wife, Nancy K. Goldberg, not
     individually, but solely as trustee of the Nancy K. Goldberg Declaration of
     Trust. Mr. Goldberg disclaims beneficial ownership of such shares.

(4)  Mr. Klein, who is a director of the Company, is the sole stockholder of a
     corporation which is a general partner of GKH Partners, L.P. Mr. Klein
     disclaims beneficial ownership of all shares owned by GKH Partners, L.P.
     and GKH Investments, L.P. and such shares are not included in the number of
     shares owned by Mr. Klein or by all directors and officers as a group.

(5)  Mr. Shoemaker disclaims beneficial ownership of shares owned indirectly by
     his affiliates.

(6)  Does not include 116.04 shares of Common Stock (less than 1% of the
     outstanding shares) owned by Mr. Spitzer as trustee of the Cullen Spitzer
     Family Trust. Mr. Spitzer disclaims beneficial ownership of such shares.
     Mr. Spitzer has informed the Company that he will resign from his position
     as a Vice President of the Company effective as of June 30, 1995.

(7)  Does not include shares owned by all directors and officers as a group or
     their affiliates for which such directors and officers disclaim beneficial
     ownership.

Stockholders' Agreements

1992 Stockholders' Agreement

     In connection with the 1992 Offering, the persons participating therein,
the Company, HEI, GKH and certain other present and former stockholders of the
Company entered into that certain Stockholders' Agreement dated April 10, 1992
(the "1992 Stockholders' Agreement"). The 1992 Stockholders' Agreement restricts
the sale of Common Stock held by the parties thereto and provides for, among
other things, (i) the right of first refusal of the Company and the right of
second refusal of the other parties thereto with respect to any proposed
transfer of Common Stock (except transfers to affiliates) by a party thereto
other than GKH, (ii) the right of the parties thereto who own a majority of the
shares of Common Stock held by all parties thereto to compel the other parties
thereto to sell their Common Stock upon the sale by such majority of all of
their Common Stock and (iii) the right of each party thereto to participate in
the sale by one or more parties thereto of more than 50% of the outstanding
Common Stock held by all parties thereto. The 1992 Stockholders' Agreement does
not contain provisions regarding the ability of the Company to redeem all of a
stockholder's Common Stock upon the termination of his employment with the
Company.

     Upon consummation of the 1993 Offering, certain persons who purchased
Common Stock pursuant thereto entered into that certain -1993 Stockholders
Agreement (the "1993 Stockholders' Agreement") which substantially superseded
the 1992 Stockholders' Agreement as among the Company and each person who
executed the 1993 Stockholders' Agreement. However, the 1992 Stockholders'
Agreement remains in full force and effect as among the parties thereto which
still own shares of Common Stock. See "- 1993 Stockholders' Agreement."

                                      38
<PAGE>

1993 Stockholders' Agreement

     In connection with the 1993 Offering, certain of the persons participating
therein, the Company, HEHC and GKH entered into the 1993 Stockholders'
Agreement. The terms of 1993 Stockholders' Agreement are substantially the same
as the Stockholders' Agreement, except that there is no right of second refusal
in GKH with respect to transfers of Common Stock to bona fide third party
purchasers. See "The Offering - Stockholders' Agreement."

Hanna Stockholders' Agreement

     In connection with the Hanna Acquisition, the Company, GKH, HEHC and HIG
entered into that certain Supplemental Stockholders' Agreement dated as of
October 8, 1993 (the "Hanna Stockholders' Agreement"). The Hanna Stockholders'
Agreement restricts the sale of Common Stock held by the parties thereto and
provides for, among other things, (i) the right of first refusal of the Company
with respect to any proposed transfer of Common Stock (except transfers to
affiliates by HIG), (ii) the right of GKH to compel HIG to sell its Common Stock
upon the sale by GKH of all of its Common Stock and (iii) the right of HIG to
participate in the sale by GKH of more than fifty percent of the outstanding
Common Stock then owned by GKH. The Hanna Stockholders' Agreement. would
terminate six months after 10% or more of the issued and outstanding Common
Stock is listed on a nationally recognized exchange or quoted on the National
Association of Securities Dealers Automated Quotation System ("NASDAQ").

HEHC Stockholders' Agreement

     In connection with the HEHC Merger, the Company, GKH and the other former
stockholders of HEHC (the "HEHC Stockholders") entered into that certain
Supplemental Stockholders' Agreement dated as of January 27, 1995 (the "HEHC
Stockholders' Agreement"). The HEHC Stockholders' Agreement restricts the sale
of Common Stock held by the parties thereto (subject to certain exceptions for
dispositions pursuant to an effective registration statement under the
Securities Act or pursuant to any public distribution pursuant to Rule 144 of
the Securities Act, and except for dispositions of Common Stock by GKH to its
partners) and provides for, among other things, (i) the right of first refusal
of GKH with respect to any proposed transfer of Common Stock (except transfers
to affiliates) by an HEHC Stockholder, (ii) the right of GKH to compel the HEHC
Stockholders to sell their Common Stock upon the sale by GKH of all of its
Common Stock and (iii) the right of each HEHC Stockholder to participate in the
sale by GKH of any or all of its Common Stock. Ime HEHC Stockholders' Agreement
also contains provisions regarding the right of the HEHC Stockholders to
designate a maximum of two members of the Board (the "HEHC Designees"), as well
as a requirement that such HEHC Designees approve certain transactions and acts
engaged in by the Company. Each party to the HEHC Stockholders' Agreement also
agrees to notify the Board if it or any of its affiliates engages in or makes an
investment in any business or entity competitive with the business then being
conducted by the Company or any subsidiary thereof. The HEHC Stockholders'
Agreement would terminate upon the consummation of a publicly registered
offering of twenty-five percent or more of the Common Stock. The parties to the
HEHC Stockholders' Agreement are also parties to the Amended and Restated
Registration Rights Agreement. See "- Registration Rights Agreement."

Gale Force Stockholders' Agreement

     In connection with the Gale Force Acquisition, the Company, GKH, and
certain persons who acquired Common Stock pursuant to the Gale Force Acquisition
(the "Gale Force Stockholders") entered

                                      39
<PAGE>

into that certain Supplemental Stockholders' Agreement, dated as of March 8,
1995 (the "Gale Force Stockholders' Agreement"). like Gale Force Stockholders'
Agreement restricts the sale of Common Stock held by the parties thereto and
provides for, among other things, (i) the right of first refusal of the Company
and the right of second refusal of GKH with respect to any proposed transfer of
Common Stock (except transfers to affiliates) by a Gale Force Stockholder, (ii)
the right of GKH to compel the Gale Force Stockholders to sell their Common
Stock upon the sale by GKH of all of its Common Stock and (iii) the right of
each Gale Force Stockholder to participate in the sale by (a) GKH of more than
fifty percent of the outstanding Common Stock then owned by GKH or (b) by GKH
and other stockholders of the Company of more than fifty percent of the
outstanding Common Stock of the Company. The Gale Force Stockholders' Agreement
also contains provisions whereby the Gale Force Stockholders agree to vote their
shares in order to ensure the election to the Board of Messrs. O'Connor and
McGhan and such other individuals as nominated by GKH. In addition, in the event
the Company offers GKH the opportunity to purchase additional shares of Common
Stock, the Gale Force Stockholders will have the right to acquire their
respective pro rata share of such Common Stock on the same terms and conditions
offered to GKH. The Gale Force Stockholders' Agreement will terminate upon ten
percent or more of the Company's Common Stock being listed on a nationally
recognized exchange or quoted on the NASDAQ. The parties to the Gale Force
Stockholders' Agreement are also parties to the Amended and Restated
Registration Rights Agreement. See "- Registration Rights Agreement."

Registration Rights Agreement

     The Company, GKR and the other parties to the HEHC Stockholders' Agreement
and the Gale Force Stockholders' Agreement (GKH and such stockholders,
hereinafter "Holders") are party to that certain Amended and Restated
Registration Rights Agreement, dated as of March 8, 1995 (the "Registration
Rights Agreement"). The Registration Rights Agreement generally provides that in
the event the Company proposes to register under the Securities Act shares of
its capital stock or any other securities, then upon the request of those
Holders owning in the aggregate at least 5 % of the Common Stock or derivatives
thereof (the "Registrable Securities") then held by all of the Holders, the
Company must use its reasonable best efforts to cause the Registrable Securities
so requested by the Holders to be included in the applicable registration
statement. The Company is generally not obligated to include a particular
Holder's Registrable Securities in more than one registration, and the Holders'
right to have their Registrable Securities so included is limited in the event
and to the extent that the managing underwriter(s) of the registration in
question are of the opinion that the inclusion of the number of Registrable
Securities held by Holders requesting inclusion in the applicable registration
statement would materially interfere with the underwriters' ability to
effectuate the registration and sale of securities proposed to be offered and
sold pursuant to such registration statement. The Company agrees to pay all
registration expenses in connection with registrations of Registrable Securities
effected pursuant to the Registration Rights Agreement; however, all fees and
expenses relating to the distribution of such Registrable Securities are borne
by the Company and each Holder RM rata based on the number of Registrable
Securities included in the registration for the account of the Company and each
Holder.

                      DESCRIPTION OF CERTAIN INDEBTEDNESS

     The following summaries relate to (i) certain provisions of the Credit
Agreement, (ii) certain provisions of the Subordinated Loan Agreement and (iii)
the anticipated terms of the Preferred Stock Issuance. The summary of the
provisions relating to the Credit Agreement and the Subordinated Loan Agreement
do not purport to be complete and are qualified in their entirety by reference
to the relevant agreements (including all amendments) relating thereto, copies
of which are available for review at the principal offices of the Company. The
summary of the terms of the Preferred Stock Issuance is based on

                                      40
<PAGE>

the anticipated terms thereof. The Company reserves the right in its sole and
absolute discretion without notice to or consent of any Investor to accept
changes to such proposed terms without affecting this offering.

The Credit Agreement

     Pursuant to the Credit Agreement the Company has borrowed $15,000,000 under
the Original Term Loan, of which $12,750,000 was outstanding as of March 31,
1995, and $10,000,000 and $4,000,000 under the B Tranche Loan and the C Tranche
Loan, respectively, all of which was outstanding as of March 31, 1995. The
Original Term Loan bears interest at a rate equal to LIBOR plus 1.25%, and the B
Tranche Loan bears interest at a rate equal to LIBOR plus 2.0%, and such Loans
mature (absent acceleration) on December 31, 1998 and March 31, 2001,
respectively. In addition to the Term Loans, the Credit Agreement provides for a
five year reducing commitment revolving credit facility (the "Revolver") which
provides for an initial maximum commitment of $35,000,000. Amounts outstanding
under the Revolver bear interest at a rate equal to LIBOR plus 1.0% and the
Revolver matures (absent acceleration) on December 31, 1999. As of March 31,
1995, $35,000,000 was outstanding under the Revolver.

     The Credit Agreement contains certain restrictive covenants that impose
limitations (subject to certain exceptions) on the Company, including, among
others, limitations with respect to (i) maintaining certain ratios, including
ratios with respect to (a) consolidated indebtedness to consolidated
capitalization, (b) consolidated earnings before income tax, depreciation and
amortization to consolidated interest expense and (c) current assets to current
liabilities, (ii) incurring additional indebtedness, (iii) creating, incurring
assuming or suffering to exist any mortgage, pledge, lien or other encumbrance
or security interest, (iv) creating, incurring, assuming or suffering to exist
any guarantee or similar obligation, (v) effecting certain fundamental changes,
including any merger or sale of all or substantially all of the Company's
assets, (vi) selling any of the Company's assets except in the ordinary course
of business or as otherwise permitted, (vii) increasing lease expense in excess
of certain limits, (viii) declaring or paying dividends, (ix) making capital
expenditures in excess of certain prescribed limits, (x) making any advance,
loan or similar investment in any person, (xi) making optional payments or
prepayments or amending the terms of any indebtedness, (xii) entering into any
transaction with affiliates, (xiii) the sale and leaseback of any of the
Company's real or personal property, (xiv) change the Company's fiscal year and
(xv) entering into any agreement which prohibits the Company from creating liens
or other restrictions on its assets.

     The Credit Agreement contains certain default provisions, including, among
others, (i) failure of the Company to pay any principal or interest thereunder
when due, (ii) breach by the Company or any of its subsidiaries or affiliates
which are parties to the Credit Agreement of any representation or warranty made
therein or in the other documents contemplated thereby, (iii) default by the
Company or any of its subsidiaries in the observance or performance of any
covenant or agreement contained therein or in the other documents contemplated
thereby, (iv) cessation of the security agreement and related documents kW
executed thereunder to be in full force and effect, (v) default by the Company
or any of its subsidiaries in the payment of any indebtedness or guarantee in
excess of $1,000,000, which default remains in effect for 30 days, or any other
breach under agreements with respect to such indebtedness or guarantees which
causes such indebtedness or guarantee to be accelerated, (vi) occurrence of
certain bankruptcy related events, (vii) occurrence of certain events related to
ERISA obligations, (viii) entering of one or more judgements or decrees against
the Company or any of its subsidiaries involving an aggregate liability of
$1,000,000 or more, (ix) the incurrence by the Company or any of its
subsidiaries of liability for remediation or environmental compliance (or
penalty with respect thereto) in excess of

                                      41
<PAGE>

$1,000,000 and (x) the cessation of GKH to own directly or indirectly 45 % of
the issued and outstanding Common Stock of the Company.

The Subordinated Loan Agreement

     Pursuant to the terms of the Subordinated Loan Agreement, the Company has
borrowed $12,000,000 on an unsecured basis, all of which was drawn down as of
June 6, 1995. The Subordinated Loan bears interest at the Prime Rate plus 5%,
matures (absent acceleration) on March 31, 2002 and is subject to mandatory
prepayment under certain specified circumstances.

     The Subordinated Loan Agreement incorporates the restrictive covenants of
the Credit Agreement by reference and contains default provisions similar to
those in the Credit Agreement.

     The Subordinated Loan Agreement, by its terms, provides that any payments
due to the subordinated lenders thereunder are subordinate and junior to the
rights of the lender under the Credit Agreement.

Preferred Stock Issuance

     It is presently anticipated that the Company will raise new equity capital,
most likely through the issuance of one or more series of Preferred Stock (the
"Preferred Stock") which may under certain circumstances be redeemable and/or
convertible or carry with it warrants to purchase newly issued shares of Common
Stock, although the Company reserves the right, in its sole discretion, to amend
or cancel such offering. Negotiations are presently under way to establish the
economic and other substantive terms of the Preferred Stock, including
redemption, conversion, dividends, approval rights over certain corporate
actions, related warrants and "piggy-back" registration rights with respect to
the Common Stock underlying the Preferred Stock and warrants. It is expected
that all holders of the Preferred Stock would be required to enter into a
stockholders agreement with the Company, containing, among other provisions,
certain restrictions on transfer and disposition.

                         DESCRIPTION OF CAPITAL STOCK

     The authorized capital stock of the Company consists of 200,000 shares of
Common Stock and 100,000 shares of Preferred Stock, $.01 par value per share
("Preferred Stock"). Assuming all Shares are subscribed for, the Company
anticipates that 83,956.19 shares of Common Stock and no shares of Preferred
Stock will be issued and outstanding (not including 156.40 treasury shares held
by the Company) and an additional 19,723.24 shares of Common Stock will be
reserved for issuance pursuant to options, exclusive of options which may be
granted under the Incentive Option Plan.

     The following summary description relating to the capital stock does not
purport to be complete. For a detailed description, reference is made to the
Certificate of Incorporation of the Company, as amended (the "Certificate").
which is available at the Company for review.

Common Stock

     As of March 31, 1995, there were 83,706.19 shares of Common Stock
outstanding held of record by 51 stockholders (not including 156.40 treasury
shares held by the Company). The holders of Common Stock are entitled to one
vote for each share held of record on all matters submitted to a vote of the
stockholders. Subject to preferential rights with respect to Preferred Stock
which may be issued, holders

                                      42
<PAGE>

of Common Stock are entitled to receive ratably such dividends as may be
declared by the Board out of legally available funds. In the event of a
liquidation, dissolution, sale or winding up of the Company, holders of Common
Stock are entitled to share ratably in all assets remaining after payment of
liabilities and satisfaction of preferential rights and have no rights to
convert their Common Stock into any other securities. Holders of Common Stock
have no preemptive or subscription rights unless (i) they are a party to the
Gale Force Stockholders' Agreement, (ii) they are a party to the 1993
Stockholders' Agreement or (iii) they become a party to the Stockholders'
Agreement, and then only to the extent provided in each such agreement. See
"Principal Stockholders - Stockholders' Agreements" and "The Offering -
Stockholders' Agreement - Preemptive Rights." There are no redemption or
conversion rights with respect to any shares of Common Stock. The outstanding
shares of Common Stock are, and the Common Stock to be outstanding upon
completion of the offering will be, fully paid and nonassessable.

Preferred Stock

     The Company currently has no shares of Preferred Stock outstanding. The
Board has the authority to cause the Company to issue without any further vote
or action by the stockholders, up to the authorized number of shares of
Preferred Stock in one or more series, to designate the number of shares
constituting any series, and to fix the rights, preferences, privileges. and
restrictions thereof, including dividend rights, conversion rights, voting
rights, rights and terms of redemption, redemption price or prices and
liquidation preferences of such series. The Company is currently contemplating
issuing shares of Preferred Stock subsequent to this offering in accordance with
the Preferred Stock Issuance. See "Description of Certain Indebtedness -
Preferred Stock Issuance."

Options

     The Company currently has outstanding options to purchase 214.5 shares of
Common Stock at $1.00 per share. All such options were issued to certain
executive officers in connection with the 1992 Stock Plan. The options expire at
various times in 2007.

     The Company currently has outstanding options to purchase 2,364.5 shares of
Common Stock at $725 per share. Of these options, 850.5 were issued to certain
executive officers in connection with the 1992 Stock Plan, and 1,514 were issued
to certain members of the Company's management in connection with the 1993
Option Plan. The options issued pursuant to the 1992 Stock Plan expire at
various times in 2007, and the options issued pursuant to the 1993 Option Plan
expire on June 29, 2003.

     The Company currently has outstanding options to purchase 2,583.89 shares
of Common Stock at $833.75 per share. All such options were issued to certain
executive officers in connection with the Senior Executive Plan. 1,937.92 of
such options will expire June 29, 2003 and 645.97 of such options will expire
May 15, 2005.

     As long as the options remain unexercised and outstanding, the holders
thereof will have the opportunity to profit from an increase in the value of the
Common Stock, if any, without assuming the risk of ownership.

Special Provisions of the Certificate of Incorporation and Delaware Law

Limitation of Director Liability

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     Section 102(b)(7) of the Delaware General Corporation Law ("Section
102(b)") authorizes corporations to limit or eliminate the personal liability of
directors to corporations and their stockholders for monetary damages for breach
of directors' fiduciary duty of care. Although Section 102(b) does not change
directors' duty of care, it enables corporations to limit available relief to
equitable remedies such as injunction or rescission. The Company's Certificate
of Incorporation limits the liability of directors to the Company or its
stockholders (in their capacity as directors but not in their capacity as
officers) to the fullest extent permitted by Section 102(b). Specifically,
directors of the Company will not be personally liable for monetary damages for
breach of a director's fiduciary duty as a director, except for liability (i)
for any breach of the director's duty of loyalty to the Company or its
stockholders (H) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) for unlawful
payments of dividends or unlawful stock repurchases or redemptions as provided
in Section 174 of the Delaware General Corporation Law or (iv) for any
transaction from which the director derived an improper personal benefit.

Indemnification


     To the maximum extent permitted by law, the Company's Certificate of
Incorporation and Bylaws provide for mandatory indemnification of directors and
permit indemnification of officers, employees and agents of the Company against
all expense, liability and loss to which they may become subject or which they
may incur as a result of being or having been a director, officer, employee or
agent of the Company. In addition, the Company must advance or reimburse
directors, and may advance or reimburse officers, employees and agents for
expenses incurred by them in connection with indemnifiable claims.

                            ADDITIONAL INFORMATION

     The Company intends to supply its stockholders on an annual basis with a
copy of its audited financial statements.

     Each prospective investor and/or his purchaser or other representatives are
hereby granted access to, and are invited to review, all materials available to
the Company relating to this offering or anything set forth in this Offering
Memorandum.

     The Company will answer all inquiries from prospective investors or their
representatives relating to the transactions contemplated hereunder and will
afford prospective investors and their representatives the opportunity to obtain
any additional information (to the extent that the Company possesses such
information or can acquire it without unreasonable effort or expense) necessary
to verify the accuracy of the information set forth in this Offering Memorandum.

     Each prospective investor should use this opportunity to communicate
directly with his own legal counsel, accountants and other professional advisors
who can help the prospective investor evaluate the merits and risks of a
purchase of the Shares and the tax and legal aspects thereof.

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