<PAGE>

                                                                   EXHIBIT 10.13

                                                                  EXECUTION COPY

                                 THIRD AMENDMENT

          THIRD AMENDMENT, dated as of March 13, 2000 (this "Amendment"), to (i)
the Participation Agreement, dated as of June 15, 1999 (as the same may be
amended, supplemented or otherwise modified from time to time, the
"Participation Agreement"), among Hanover Compression Inc., a Delaware
corporation ("HCC" and the "Lessee"), Hanover Equipment Trust 1999A (the
"Lessor"), Societe Generale Financial Corporation and FBTC Leasing Corp., Inc.
(the "Investors"), the lenders parties thereto (the "Lenders") and The Chase
Manhattan Bank, a New York banking corporation, as the agent for the Lenders
(the "Agent"), (ii) the Credit Agreement, as defined in the Participation
Agreement (the "Credit Agreement").

                              W I T N E S S E T H:

          WHEREAS, (i) the Lenders have agreed to make, and have made, loans and
(ii) the Investors have agreed to make, and have made, investments to the Lessor
in order for the Lessor to acquire the Equipment and to pay other Equipment
Acquisition Costs;

          WHEREAS, HCC has requested that the Investors, Agent and the Required
Lenders (i) amend certain definitions and covenants in the Participation
Agreement and Credit Agreement and (ii) amend and restate the Guarantee, dated
as of June 15, 1999, among Hanover Compressor Company ("Holdings"), HCC and
certain subsidiaries of Holdings (the "Existing Guarantee") so as to permit HCC
to enter into transactions involving the New Equipment Lease Transactions; and

          WHEREAS, the Investors, Agent and the Required Lenders are agreeable
to the requested amendments, but only on the terms and subject to the conditions
set forth herein; and

          WHEREAS, Holdings, HCC and the New Guarantors have agreed to execute
and deliver the Amended and Restated Guarantee to the Agent and the Lessor, for
the ratable benefit of the Lenders and the Investors;

          NOW THEREFORE, in consideration of the premises herein contained and
for other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties hereto hereby agree as follows:

          I.      Defined Terms. As used in this Amendment, terms defined in the
preamble hereof and the recitals hereto are used herein as so defined, terms
defined in either Participation Agreement are used herein as therein defined and
the following terms shall have the following meanings:

<PAGE>

                                                                               2

          "Amended and Restated Guarantee" shall mean the Amended and Restated
     Guarantee, dated as of March 13, 2000, among Holdings, HCC and the New
     Guarantors, substantially in the form of Exhibit A hereto.

          "New Equipment Lease Transactions" shall mean the transactions
     contemplated under the New Equipment Lease Documents, as further described
     in the term sheet attached as Annex A hereto.

          "New Equipment Lease Documents" shall mean (i) the Participation
     Agreement, dated as of March 13, 2000 (the "New Participation Agreement"),
     among Hanover Compression Inc., a Delaware corporation, Hanover Equipment
     Trust 2000A, First Union National Bank and Scotiabanc Inc., as investors,
     the lenders parties thereto and The Chase Manhattan Bank, a New York
     banking corporation, as the agent for the lenders thereunder and (ii) the
     other "Operative Documents" as defined in the New Participation Agreement.

          "New Guarantors" shall mean Hanover Compressor Limited Holdings, LLC,
     Hanover Maintech Limited Partnership, Hanover/Smith Limited Partnership,
     Hanover Land Limited Partnership, Hanover Maintech Limited Partnership.

          II.     Amendments to the Participation Agreement.

          1.      Amendment to Annex A (Rules of Usage). Annex A to the
Participation Agreement is hereby amended by deleting it in its entirety and
substituting in place thereof Annex B as attached hereto.

          2.      Addition of Annex B (Pricing Grid). The Participation
Agreement is hereby amended by adding Annex C hereto as Annex B thereto.

          III.    Amendments to the Credit Agreement.

          1.      Sections 9.5 though 9.17 (a) Sections 9.5 through 9.8 to the
Credit Agreement are hereby amended by deleting them in their entirety and
substituting in place thereof the following:

          "9.5 Successors and Assigns; Participations; Purchasing Lenders. (a)
     This Agreement shall be binding upon and inure to the benefit of the
     Borrower, the Lenders, the Agent, all future holders of the Loans and their
     respective successors and assigns, except that the Borrower may not assign
     or transfer any of its rights or obligations under this Agreement without
     the prior written consent of each Lender.

          (b)  Any Lender may, in the ordinary course of its commercial
     banking business and in accordance with applicable law, at any time sell to
     one or more banks or other entities ('Participants') participating
     interests in any Loan owing to such Lender, any Commitment of such Lender
     or any other interest of such Lender hereunder and under the other
     Operative Agreements, provided that each such sale shall be of Loans and
     Commitments in an aggregate amount of at least $5,000,000, and provided,
     further, that

<PAGE>

                                                                               3

     no Lender may so sell its Commitments so that less than $5,000,000 of such
     Commitments are held by such Lender without participating interests
     therein, unless such Lender (excluding Chase) so sells 100% of its
     Commitments. In the event of any such sale by a Lender of participating
     interests to a Participant, such Lender's obligations under this Agreement
     to the other parties to this Agreement shall remain unchanged, such Lender
     shall remain solely responsible for the performance thereof, such Lender
     shall remain the holder of any such Loan for all purposes under this
     Agreement and the other Operative Agreements, and the Guarantors and the
     Agent shall continue to deal solely and directly with such Lender in
     connection with such Lender's rights and obligations under this Agreement
     and the other Operative Agreements. The Borrower agrees that if amounts
     outstanding under this Agreement and the Loans are due or unpaid, or shall
     have been declared or shall have become due and payable upon the occurrence
     of a Credit Agreement Event of Default, each Participant shall be deemed to
     have the right of setoff in respect of its participating interest in
     amounts owing under this Agreement to the same extent as if the amount of
     its participating interest were owing directly to it as a Lender under this
     Agreement, provided that such Participant shall only be entitled to such
     right of setoff if it shall have agreed in the agreement pursuant to which
     it shall have acquired its participating interest to share with the Lenders
     the proceeds thereof as provided in subsection 9.6. The Borrower also
     agrees that each Participant shall be entitled to the benefits of
     subsections 2.13, 2.14 and 2.15 with respect to its participation in the
     Commitments and the Loans outstanding from time to time; provided, that no
     Participant shall be entitled to receive any greater amount pursuant to
     such subsections than the transferor Lender would have been entitled to
     receive in respect of the amount of the participation transferred by such
     transferor Lender to such Participant had no such transfer occurred.

          (c)  Any Lender, in the ordinary course of its commercial banking
     business and in accordance with applicable law, at any time may sell to any
     Lender or any Affiliate thereof and, with the consent of the Borrower and
     the Agent (which in each case shall not be unreasonably withheld), to one
     or more additional banks or financial institutions ('Purchasing Lenders')
     all or any part of the assigning Lender's rights and obligations under this
     Agreement and the other Operative Agreements pursuant to an Assignment and
     Acceptance, substantially in the form of Exhibit B, executed by such
     Purchasing Lender, such assigning Lender (and, in the case of a Purchasing
     Lender that is not then a Lender or an Affiliate thereof, by the Borrower
     and the Agent) and delivered to the Agent for its acceptance and recording
     in the Register, provided that each such sale shall be of Loans and
     Commitments of an aggregate amount of at least $5,000,000 and provided,
     further, that no Lender party to this Agreement on the date hereof may so
     sell any of its initial Commitments hereunder such that such Lender holds
     directly less than $5,000,000 of such Commitments unless such Lender
     (excluding Chase) so sells 100% of its Commitments. Any such assignment
     shall be ratable as between the Tranche A Loans and Tranche B Loans. Such
     Assignment and Acceptance shall specify an Effective Date which is not less
     than five Business Days after the date of execution thereof. Upon such
     execution, delivery, acceptance and recording, from and after the Effective
     Date determined pursuant to such Assignment and Acceptance, (x) the
     Purchasing Lender thereunder shall be a party hereto and, to the extent
     provided in such Assignment and Acceptance, have the rights and obligations
     of a Lender hereunder with a Commitment

<PAGE>

                                                                               4

     and/or Loans as set forth therein, and (y) the assigning Lender thereunder
     shall, to the extent provided in such Assignment and Acceptance, be
     released from its obligations under this Agreement (and, in the case of an
     Assignment and Acceptance covering all or the remaining portion of an
     assigning Lender's rights and obligations under this Agreement, such
     assigning Lender shall cease to be a party hereto). Such Assignment and
     Acceptance shall be deemed to amend this Agreement to the extent, and only
     to the extent, necessary to reflect the addition of such Purchasing Lender
     and the resulting adjustment of Commitment Percentages arising from the
     purchase by such Purchasing Lender of all or a portion of the rights and
     obligations of such assigning Lender under this Agreement.

          (d)  The Agent shall, on behalf of the Borrower, maintain at its
     address referred to in subsection 9.2 a copy of each Assignment and
     Acceptance delivered to it and a register (the 'Register') for the
     recordation of the names and addresses of the Lenders and the Commitment
     of, and the principal amount of the Loans owing to, each Lender from time
     to time. The entries in the Register shall be conclusive, in the absence of
     manifest error, and the Borrower, the Agent and the Lenders shall treat
     each Person whose name is recorded in the Register as the owner of the
     Loans and any Notes evidencing the Loans recorded therein for all purposes
     of this Agreement. Any assignment of any Loan, whether or not evidenced by
     a Note, shall be effective only upon appropriate entries with respect
     thereto being made in the Register (and each Note shall expressly so
     provide). Any assignment or transfer of all or part of a Loan evidenced by
     a Note shall be registered on the Register only upon surrender for
     registration of assignment or transfer of the Note evidencing such Loan,
     accompanied by a duly executed Assignment and Acceptance, and thereupon one
     or more new Notes shall be issued to the designated Assignee.

          (e)  Upon its receipt of an Assignment and Acceptance executed by a
     transferor Lender and Purchasing Lender (and, in the case of a Purchasing
     Lender that is not then a Lender or an affiliate thereof, by the Borrower
     and the Agent) together with payment to the Agent of a registration and
     processing fee of $3,500, the Agent shall (i) promptly accept such
     Assignment and Acceptance (ii) on the Effective Date determined pursuant
     thereto record the information contained therein in the Register and give
     notice of such acceptance and recordation to the Lenders and HCC.

          (f)  For avoidance of doubt, the parties to this Agreement acknowledge
     that the provisions of this Section 9.5 concerning assignments of Loans and
     Notes relate only to absolute assignments and that such provisions do not
     prohibit assignments creating security interests, including any pledge or
     assignment by a Lender of any Loan or Note to any Federal Reserve Bank in
     accordance with applicable law.

          (g)  The Borrower, upon receipt of written notice from the relevant
     Lender, agrees to issue Notes to any Lender requiring Notes to facilitate
     transactions of the type described in paragraph (f) above.

          (h)  Holdings and the Borrower authorize each Lender to disclose to
     any Participant or Purchasing Lender (each, a 'Transferee') and any
     prospective Transferee any and all financial information in such Lender's
     possession concerning any Guarantor

<PAGE>

                                                                               5

     and its affiliates which has been delivered to such Lender by or on behalf
     of Holdings or the Borrower pursuant to this Agreement or which has been
     delivered to such Lender by or on behalf of Holdings or the Borrower in
     connection with such Lender's credit evaluation of the Guarantors and their
     affiliates prior to becoming a party to this Agreement.

          (i)  If, pursuant to this subsection, any interest in this Agreement
     or any Note is transferred to any Transferee which is organized under the
     laws of any jurisdiction other than the United States or any state thereof,
     the transferor Lender shall cause such Transferee, concurrently with the
     effectiveness of such transfer, (i) to represent to the transferor Lender
     (for the benefit of the transferor Lender, the Agent and the Borrower) that
     under applicable law and treaties no taxes will be required to be withheld
     by the Administrative Agent, the Borrower or the transferor Lender with
     respect to any payments to be made to such Transferee in respect of the
     Loans, (ii) to furnish to the transferor Lender (and, in the case of any
     Purchasing Lender registered in the Register, the Agent and the Borrower)
     either U.S. Internal Revenue Service Form 4224 or U.S. Internal Revenue
     Service Form 1001 (wherein such Transferee claims entitlement to complete
     exemption from U.S. federal withholding tax on all interest payments
     hereunder) and (iii) to agree (for the benefit of the transferor Lender,
     the Agent and the Borrower) to provide the transferor Lender (and, in the
     case of any Purchasing Lender registered in the Register, the Agent and the
     Borrower) a new Form 4224 or Form 1001 upon the expiration or obsolescence
     of any previously delivered form and comparable statements in accordance
     with applicable U.S. laws and regulations and amendments duly executed and
     completed by such Transferee, and to comply from time to time with all
     applicable U.S. laws and regulations with regard to such withholding tax
     exemption.

          (j)  Nothing herein shall prohibit any Lender from pledging or
     assigning any Note to any Federal Reserve Lender in accordance with
     applicable law.".

                  (b) Section 9.9 through 9.17 to the Credit Agreement are
hereby amended by renumbering them as Sections 9.6 through 9.14 respectively.

          IV.     General.

          3.      Effectiveness. This Amendment shall become effective upon
fulfillment of the following conditions precedent: (a) The Agent shall have
received duly executed copies of this Amendment from HCC, acknowledged and
agreed to by each of Holdings and the New Guarantors, (b) The Agent shall have
received, with a copy for each Lender, the Amended and Restated Guarantee,
executed and delivered by duly authorized officers of Holdings and each New
Guarantor, (c) the Agent shall have received duly executed copies of this
Amendment from the Required Lenders and the Investors under the Participation
Agreement, (d) no Default or Event of Default shall have occurred and be
continuing on the date hereof after giving effect to this Amendment and (e) the
Agent shall have received duly executed copies of the New Equipment Lease
Documents.

          4.      Representations and Warranties. Holdings, The Borrower and
each of the New Guarantors hereby represents and warrants that the
representations and warranties contained

<PAGE>

                                                                               6

in the Participation Agreements and the Operative Agreements (as defined in the
Participation Agreement) (except those which expressly speak as of a certain
date) will be, after giving effect to this Amendment, true and correct in all
material respects, as if made on and as of the date hereof.

          5.      Continuing Effect of Participation Agreements and Operative
Agreements. This Amendment shall not constitute an amendment or waiver of any
other provision of either the Participation Agreement or the Operative
Agreements (as defined in the Participation Agreement) not expressly referred to
herein and shall not be construed as a waiver or consent to any further or
future action on the part of HCC, Holdings, the Lessor, or New Guarantors that
would require a waiver or consent of the Agent and/or the Lenders. Except as
expressly amended hereby, the provisions of the Participation Agreement and the
Operative Agreements (as defined in the Participation Agreement) are and shall
remain in full force and effect.

          6.      Counterparts. This Amendment may be executed in counterparts
and all of the said counterparts taken together shall be deemed to constitute
one and the same instrument. Delivery of an executed signature page of this
Amendment by facsimile transmission shall be effective as delivery of a manually
executed counterpart hereof.

          7.      GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

          8.      Expenses. Holdings and HCC agree to pay or reimburse the Agent
for all of its reasonable out-of-pocket costs and expenses incurred in
connection with the preparation, negotiation and execution of this Amendment,
including, without limitation, the fees and disbursements of counsel to the
Agent.

<PAGE>

     IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed by their respective officers thereunto duly authorized as of the
day and year first above written.

                                        HANOVER COMPRESSION INC. (formerly
                                        known as Hanover Compressor Company),
                                        as Lessee and as a Guarantor


                                        By: /s/ Curtis Bedrich
                                           ----------------------------
                                           Name:  Curtis Bedrich
                                           Title: Treasurer


                                        HANOVER EQUIPMENT TRUST 1999A

                                        By: Wilmington Trust Company, not
                                            individually but solely as Trustee


                                        By:
                                           -----------------------------
                                           Name:
                                           Title:

<PAGE>

     IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed by their respective officers thereunto duly authorized as of the
day and year first above written.

                                        HANOVER COMPRESSION INC. (formerly
                                        known as Hanover Compressor Company),
                                        as Lessee and as a Guarantor


                                        By:
                                           ----------------------------
                                           Name:
                                           Title:


                                        HANOVER EQUIPMENT TRUST 1999A

                                        By: Wilmington Trust Company, not
                                            individually but solely as Trustee


                                        By: /s/ Anita E. Dallago
                                           -----------------------------
                                           Name:  Anita E. Dallago
                                           Title: Administrative Account Manager

<PAGE>

Acknowledged and agreed to
as of the date hereof:


HANOVER COMPRESSOR COMPANY,
as a Guarantor


By: /s/ Curtis Bedrich
   ------------------------------
   Name:  Curtis Bedrich
   Title: Treasurer

HANOVER COMPRESSOR LIMITED HOLDINGS, LLC,
as a Guarantor

by Hanover General Holdings, Inc.
as sole member


By: /s/ Curtis Bedrich
   ------------------------------
   Name:  Curtis Bedrich
   Title: Treasurer


HANOVER MAINTECH LIMITED PARTNERSHIP,
as a Guarantor

by Hanover General Holdings, Inc.,
as general partner


By: /s/ Curtis Bedrich
   ------------------------------
   Name:  Curtis Bedrich
   Title: Treasurer

HANOVER/SMITH LIMITED PARTNERSHIP,
as a Guarantor

by Hanover General Holdings, Inc.,
as general partner


By: /s/ Curtis Bedrich
   ------------------------------
   Name:  Curtis Bedrich
   Title: Treasurer

<PAGE>

HANOVER LAND LIMITED PARTNERSHIP,
as a Guarantor

by Hanover General Holdings, Inc.,
general partner


By: /s/ Curtis Bedrich
   ---------------------------------
   Name:  Curtis Bedrich
   Title: Treasurer

<PAGE>

                                SOCIETE GENERALE, SOUTHWEST AGENCY, as a
                                Lender


                                By: /s/ Mark A. Cox
                                   --------------------------------
                                   Name:  Mark A. Cox
                                   Title: Director
                                          Head of Houston Office

<PAGE>

                                        SUNTRUST BANK, ATLANTA, as a Lender


                                        By: /s/ John A. Fields, Jr.
                                           -------------------------------
                                           Name:  John A. Fields, Jr.
                                           Title: Managing Director

<PAGE>

                                        THE INDUSTRIAL BANK OF JAPAN, LTD.,
                                        NEW YORK BRANCH, as a Lender


                                        By: /s/ Michael N. Oakes
                                           ---------------------------------
                                           Name:  Michael N. Oakes
                                           Title: Senior Vice President,
                                                  Houston Office

<PAGE>

                                        BANK ONE, N.A. (formerly known as The
                                        First National Bank of Chicago),
                                        as a Lender


                                        By: /s/ Karen Patterson
                                           -------------------------------
                                           Name:  Karen Patterson
                                           Title: First Vice President

<PAGE>

                                        DG BANK DEUTSCHE GENOSSENSCHAFTSBANK
                                        AG, as a Lender


                                        By: /s/ Mark K. Connelly
                                           ---------------------------------
                                           Name:  Mark K. Connelly
                                           Title: Vice President


                                        By: /s/ Richard W. Wilbert
                                           ---------------------------------
                                           Name:  Richard W. Wilbert
                                           Title: Vice President

<PAGE>

                                        CREDIT LYONNAIS NEW YORK BRANCH,
                                        as a Lender


                                        By: /s/ [Illegible]
                                           ---------------------------------
                                           Name:   [Illegible]
                                           Title:  [Illegible]

<PAGE>

                                        COMERICA BANK, as a Lender


                                        By: /s/ T. Bancroft Mattei
                                           ----------------------------------
                                           Name:  T. Bancroft Mattei
                                           Title: Account Officer

<PAGE>


                              BANKERS TRUST COMPANY, as a Lender

                              By:  /s/ Marcus M. Tarkington
                                 ---------------------------------
                                 Name:  Marcus M. Tarkington
                                 Title: Principal

<PAGE>


                              FUJI BANK, LIMITED, as a Lender

                              By: /s/ Toru Maeda
                                  ---------------------------------
                                  Name:  Toru Maeda
                                  Title: Executive Vice President and
                                           General Manager

<PAGE>


                              PARIBAS, as a Lender


                              By: /s/ [Illegible]
                                  ------------------------------------
                                  Name:  [Illegible]
                                  Title: Vice President


                              By: /s/ Betsy Jocher
                                  -------------------------------------
                                  Name:  Betsy Jocher
                                  Title: Vice President

<PAGE>


                              BANK OF SCOTLAND, as a Lender


                              By: /s/ Joseph Fratus
                                  --------------------------------
                                  Name:  Joseph Fratus
                                  Title: Asst. Vice President

<PAGE>


                              THE BANK OF NOVA SCOTIA, as a Lender


                              By: /s/ N. Bell
                                 ------------------------------
                                 Name:  N. Bell
                                 Title: Assistant Agent

<PAGE>


                              ABN AMRO BANK N.V., as a Lender

                              By: /s/ [Illegible]
                                 ------------------------------
                                 Name:  [Illegible]
                                 Title: Vice President


                              By: /s/ Brandi Lippincott
                                 ------------------------------
                                 Name:  Brandi Lippincott
                                 Title: Assistant Vice President

<PAGE>

                              FBTC LEASING CORP., as an Investor

                              By: /s/ Victor Mora
                                 ------------------------------
                                 Name:  Victor Mora
                                 Title: Vice President

<PAGE>

                              SOCIETE GENERALE FINANCIAL CORPORATION,
                              as an Investor

                              By: /s/ [Illegible]
                                 ------------------------------
                                 Name:  [Illegible]
                                 Title: [Illegible]

<PAGE>

                              THE CHASE MANHATTAN BANK, as Agent and Lender


                              By: /s/ Peter M. Ling
                                 ------------------------------
                                 Name:  Peter M. Ling
                                 Title: Vice President

<PAGE>

                              WELLS FARGO BANK (TEXAS) N.A., as a Lender


                              By: /s/ Joseph P. Maxwell
                                 ------------------------------
                                 Name:  Joseph P. Maxwell
                                 Title: Vice President

<PAGE>

                              WILMINGTON TRUST COMPANY, in its individual
                              capacity, only to the extent expressly set forth
                              herein


                              By: /s/ Anita E. Dallago
                                 ------------------------------
                                 Name:  Anita E. Dallago
                                 Title: Administrative Account Manager

<PAGE>


                                     ANNEX A

                 DESCRIPTION OF NEW EQUIPMENT LEASE TRANSACTIONS

<PAGE>

                                                                      ANNEX B TO
                                                                 THIRD AMENDMENT

                         RULES OF USAGE AND DEFINITIONS

                                 Rules of Usage

          The following rules of usage shall apply to this Annex A and the
Operative Agreements (and each appendix, schedule, exhibit and annex to the
foregoing) unless otherwise required by the context or unless otherwise defined
therein:

          (a)     Except as otherwise expressly provided, any definitions
     defined herein or in any other document shall be equally applicable to the
     singular and plural forms of the terms defined.

          (b)     Except as otherwise expressly provided, references in any
     document to articles, sections, paragraphs, clauses, annexes, appendices,
     schedules or exhibits are references to articles, sections, paragraphs,
     clauses, annexes, appendices, schedules or exhibits in or to such document.

          (c)     The headings, subheadings and table of contents used in any
     document are solely for convenience of reference and shall not constitute a
     part of any such document nor shall they affect the meaning, construction
     or effect of any provision thereof.

          (d)     References to any Person shall include such Person, its
     successors and permitted assigns and transferees.

          (e)     Except as otherwise expressly provided, reference to any
     agreement means such agreement as amended, modified, extended or
     supplemented from time to time in accordance with the applicable provisions
     thereof.

          (f)     Except as otherwise expressly provided, references to any law
     includes any amendment or modification to such law and any rules or
     regulations issued thereunder or any law enacted in substitution or
     replacement therefor.

          (g)     When used in any document, words such as "hereunder",
     "hereto", "hereof" and "herein" and other words of like import shall,
     unless the context clearly indicates to the contrary, refer to the whole of
     the applicable document and not to any particular article, section,
     subsection, paragraph or clause thereof.

<PAGE>

                                                                               2

          (h)     References to "including" means including without limiting the
     generality of any description preceding such term and for purposes hereof
     the rule of ejusdem generis shall not be applicable to limit a general
     statement, followed by or referable to an enumeration of specific matters,
     to matters similar to those specifically mentioned.

          (i)     Each of the parties to the Operative Agreements and their
     counsel have reviewed and revised, or requested revisions to, the Operative
     Agreements, and the usual rule of construction that any ambiguities are to
     be resolved against the drafting party shall be inapplicable in the
     construing and interpretation of the Operative Agreements and any
     amendments or exhibits thereto.

          (j)     For purposes of determining compliance with the covenants
contained in Subsection 10.1 and 11.1 of the Guarantee, the term "Holdings"
shall be deemed a reference to HCC for any period which is prior to December 9,
1999, covered by such covenants.

                                   Definitions

          "ABR" shall mean, for any day, a rate per annum (rounded upwards, if
     necessary, to the next 1/16 of 1%) equal to the greatest of (a) the Prime
     Rate in effect on such day, (b) the Base CD Rate in effect on such day plus
     1% and (c) the Federal Funds Effective Rate in effect on such day plus 1/2
     of 1%. For purposes hereof: "Prime Rate" shall mean the rate of interest
     per annum publicly announced from time to time by Chase as its prime rate
     in effect at its principal office in New York City (the Prime Rate not
     being intended to be the lowest rate of interest charged by Chase in
     connection with extensions of credit to debtors); "Base CD Rate" shall mean
     the sum of (a) the product of (i) the Three-Month Secondary CD Rate and
     (ii) a fraction, the numerator of which is one and the denominator of which
     is one minus the C/D Reserve Percentage and (b) the C/D Assessment Rate;
     "Three-Month Secondary CD Rate" shall mean, for any day, the secondary
     market rate for three-month certificates of deposit reported as being in
     effect on such day (or, if such day shall not be a Business Day, the next
     preceding Business Day) by the Board of Governors of the Federal Reserve
     System (the "Board") through the public information telephone line of the
     Federal Reserve Bank of New York (which rate will, under the current
     practices of the Board, be published in Federal Reserve Statistical Release
     H.15(519) during the week following such day), or, if such rate shall not
     be so reported on such day or such next preceding Business Day, the average
     of the secondary market quotations for three-month certificates of deposit
     of major money center banks in New York City received at approximately
     10:00 A.M., New York City time, on such day (or, if such day shall not be a
     Business Day, on the next preceding Business Day) by the Agent from three
     New York City negotiable certificate of deposit dealers of recognized
     standing selected by it; and "Federal Funds Effective Rate" shall mean, for
     any day, the

<PAGE>

                                                                               3

     weighted average of the rates on overnight federal funds transactions with
     members of the Federal Reserve System arranged by federal funds brokers, as
     published on the next succeeding Business Day by the Federal Reserve Lender
     of New York, or, if such rate is not so published for any day which is a
     Business Day, the average of the quotations for the day of such
     transactions received by the Agent from three federal funds brokers of
     recognized standing selected by it. If for any reason the Agent shall have
     determined (which determination shall be conclusive absent manifest error)
     that it is unable to ascertain the Base CD Rate or the Federal Funds
     Effective Rate, or both, for any reason, including the inability or failure
     of the Agent to obtain sufficient quotations in accordance with the terms
     thereof, the ABR shall be determined without regard to clause (b) or (c),
     or both, of the first sentence of this definition, as appropriate, until
     the circumstances giving rise to such inability no longer exist. Any change
     in the ABR due to a change in the Prime Rate, the Three-Month Secondary CD
     Rate or the Federal Funds Effective Rate shall be effective as of the
     opening of business on the effective day of such change in the Prime Rate,
     the Three-Month Secondary CD Rate or the Federal Funds Effective Rate,
     respectively.

          "ABR Loans" shall mean Loans the rate of interest applicable to which
     is based upon the ABR.

          "Acceleration" shall have the meaning set forth in Section 6.1 of the
     Credit Agreement.

          "Account" shall have the meaning set forth in Section 8.1(a) of the
     Credit Agreement.

          "Adjustment Date" as defined in the Pricing Grid.

          "Adjusted EBITDA Companies" shall mean Holdings and each of its
     wholly-owned Subsidiaries which (i) is organized under a jurisdiction of
     the United States, Canada and any other country approved by Required
     Lenders and (ii) has at least 90% of its assets located in any such
     jurisdiction or which derives at least 90% of its revenues from such
     jurisdiction, in each case, at the time the applicable calculation is being
     made for purposes of subsection 11.1(c).

          "Advance" shall mean an advance of Loans by the Lenders and an advance
     of the Investor Contribution by the Investors, in each case pursuant to
     Section 5.2 of the Participation Agreement to pay Equipment Acquisition
     Costs.

          "Affiliate" shall mean, as to any Person, any other Person (other than
     a Subsidiary) which, directly or indirectly, is in control of, is
     controlled by, or is under

<PAGE>

                                                                               4

     common control with, such Person; provided, however, that in no case shall
     the Trust Company be considered to be an Affiliate of any of the Trustee,
     the Trust, the Agent or the Investors, nor shall any of the Trustee, Trust,
     Agent or Investors be considered to be an Affiliate of the Trust Company.
     For purposes of this definition, "control" of a Person means the power,
     directly or indirectly, either to (a) vote 30% or more of the securities
     having ordinary voting power for the election of directors of such Person
     or (b) direct or cause the direction of the management and policies of such
     Person, whether by contract or otherwise.

          "After Tax Basis" shall mean, with respect to any payment to be
     received, the amount of such payment increased so that, after deduction of
     the amount of all taxes required to be paid by the recipient (less any tax
     savings realized and the present value of any tax savings projected to be
     realized by the recipient as a result of the payment of the indemnified
     amount) with respect to the receipt by the recipient of such amounts, such
     increased payment (as so reduced) is equal to the payment otherwise
     required to be made.

          "Agent" shall mean The Chase Manhattan Bank, a New York banking
     corporation, as the agent for the Lenders under the Credit Agreement and
     the other Operative Agreements, or any successor agent appointed in
     accordance with the terms of the Credit Agreement.

          "Aggregate Tranche A Percentage" shall mean, as of any date of
     determination, a fraction, expressed as a percentage, equal to the sum of
     the aggregate of the Maximum Residual Guarantee Amounts with respect to
     each piece of Equipment as of such date divided by the aggregate of the
     Tranche A/B Equipment Cost of each of the pieces of Equipment as of such
     date.

          "Applicable Commitment Fee Rate" shall mean, for each day, the rate
     per annum determined pursuant to the Pricing Grid.

          "Applicable Margin" shall mean, for each day, the rate per annum
     determined pursuant to the Pricing Grid.

          "Applicable Margin Certificate" shall have the meaning set forth in
     Section 10.2(f) of the Guarantee.

          "Appraisal" shall mean, with respect to the Equipment, an appraisal,
     ordered by the Agent, prepared by a reputable independent appraiser
     acceptable to the Agent, of such Equipment, which complies with all
     applicable Legal Requirements and is otherwise in a form satisfactory to
     Agent. The appraisal shall state an estimate of the value thereof at the
     end of the Term and may cover more than one piece of Equipment.

<PAGE>

                                                                               5

          "Appraisal Procedure" shall have the meaning given such term in
     Section 21.4 of the Lease.

          "Arranger" shall mean Chase Securities Inc.

          "Assignment and Acceptance" shall have the meaning set forth in
     Section 9.7 of the Credit Agreement.

          "Assignment of Lease" shall mean the collective reference to the
     Assignment of Leases, Rents and Guarantee dated as of the Initial Closing
     Date from the Lessor to the Agent for the benefit of the Lenders and each
     Supplement to Assignment of Leases dated as of each Equipment Closing Date,
     as each may be amended, supplemented or otherwise modified from time to
     time in accordance with the terms thereof or of any other Operative
     Agreement.

          "Available Commitment" shall mean, as to any Lender at any time, an
     amount equal to the excess, if any, of (a) the amount of such Lender's
     Commitment over (b) the aggregate principal amount of all Loans made by
     such Lender then outstanding.

          "Available Investor Commitment" shall mean at any time, an amount
     equal to the excess, if any, of (a) the amount of Investor Commitment over
     (b) the aggregate amount of all Investor Contributions made by the
     Investors as of such date.

          "Basic Rent" shall mean, the sum of (i) the Tranche A Basic Rent, (ii)
     the Tranche B Basic Rent and (iii) the Investor Yield, calculated as of the
     applicable date on which Basic Rent is due.

          "Basic Term" shall mean for each piece of Equipment, the period
     commencing on the Equipment Closing Date for such Equipment and ending on
     the Maturity Date.

          "Benefitted Lender" shall have the meaning set forth in Section 9.9 of
     the Credit Agreement.

          "Bill of Sale" shall have the meaning set forth in Section 6.2(b) of
     the Participation Agreement.

          "Borrower" shall mean Lessor, in its capacity of borrower under the
     Credit Agreement.

<PAGE>

                                                                               6

          "Borrowing Date" shall mean any Business Day specified in a
     Requisition as a date on which the Borrower requests the Lenders to make
     Loans under the Credit Agreement.

          "Business Day" shall mean any day other than a Saturday, Sunday or
     other day on which commercial banks in New York City are authorized or
     required by law to close, and in the case of a Eurodollar Loan, any day on
     which dealings in U.S. dollar deposits are carried on in the interbank
     Eurodollar market and on which commercial banks are open for domestic and
     international business in New York and London.

          "Capital Stock" shall mean any and all shares, interests,
     participations or other equivalents (however designated) of capital stock
     of a corporation, any and all equivalent ownership interests in a Person
     (other than a corporation) and any and all warrants or options to purchase
     any of the foregoing.

          "Capitalized Lease Obligations" shall mean all obligations under
     capital leases of any Person, in each case taken at the amount thereof
     accounted for as liabilities in accordance with GAAP.

          "Cash Equivalents" shall mean (a) securities with maturities of one
     year or less from the date of acquisition issued or fully guaranteed or
     insured by the United States Government or any agency thereof, (b)
     certificates of deposit and eurodollar time deposits with maturities of one
     year or less from the date of acquisition and overnight bank deposits of
     any Lender or of any commercial bank having capital and surplus in excess
     of $500,000,000, (c) repurchase obligations of any Lender or of any
     commercial bank satisfying the requirements of clause (b) of this
     definition, having a term of not more than 30 days with respect to
     securities issued or fully guaranteed or insured by the United States
     Government, (d) commercial paper of a domestic issuer rated at least A-2 by
     Standard and Poor's Rating Group ("S&P") or P-2 by Moody's Investors
     Services, Inc. ("Moody's"), (e) securities with maturities of one year or
     less from the date of acquisition issued or fully guaranteed by any state,
     commonwealth or territory of the United States, by any political
     subdivision or taxing authority of any political subdivision or taxing
     authority of any such state, commonwealth or territory or any foreign
     government, the securities of which state, commonwealth, territory,
     political subdivision, taxing authority or foreign government (as the case
     may be) are rated at least A by S&P or A by Moody's, (f) securities with
     maturities of one year or less from the date of acquisition backed by
     standby letters of credit issued by any Lender or any commercial bank
     satisfying the requirements of clause (b) of this definition or (g) shares
     of money market mutual or similar funds which invest exclusively in assets
     satisfying the requirements of clauses (a) through (f) of this definition.

<PAGE>

                                                                               7

          "Casualty" shall mean any damage or destruction of all or any portion
     of a piece of Equipment as a result of fire or other casualty.

          "C/D Assessment Rate" shall mean for any day the net annual assessment
     rate (rounded upwards, if necessary, to the next 1/100 of 1%) determined by
     Chase to be payable on such day to the Federal Deposit Insurance
     Corporation or any successor ("FDIC") for FDIC's insuring time deposits
     made in Dollars at offices of Chase in the United States.

          "C/D Reserve Percentage" shall mean for any day as applied to any
     calculation of the Base CD Rate, that percentage (expressed as a decimal)
     which is in effect on such day, as prescribed by the Board for determining
     the maximum reserve requirement for a Depositary Institution (as defined in
     Regulation D of the Board) in respect of new non-personal time deposits in
     Dollars having a maturity of 30 days or more.

          "CERCLA" shall mean the Comprehensive Environmental Response,
     Compensation, and Liability Act of-1980, 42 U.S.C. Sections 9601 et seq.,
     as amended by the Superfund Amendments and Reauthorization Act of 1986, and
     all rules and regulations thereunder.

          "Certificate" shall mean a certificate issued pursuant to the Trust
     Agreement to evidence an investment in the beneficial ownership of the
     Trust Estate, and shall include any certificate issued in exchange therefor
     or replacement thereof.

          "Chase" shall mean The Chase Manhattan Bank, a New York banking
     corporation.

          "Claims" shall mean any and all actions, suits, penalties, claims and
     demands and reasonable out-of-pocket liabilities, losses, costs and
     expenses (including, without limitation, reasonable attorney's fees and
     expenses) of any nature whatsoever.

          "Closing Date" shall mean the Initial Closing Date and each Equipment
     Closing Date.

          "Code" shall mean the Internal Revenue Code of 1986, as amended from
     time to time, or any successor statute thereto.

          "Collateral" shall mean all assets of the Lessor, now owned or
     hereafter acquired, upon which a Lien is purported to be created by the
     Security Documents.

<PAGE>

                                                                               8

          "Collicut" shall mean Collicut Hanover Compression Co., a Nova Scotia
     unlimited liability company.

          "Commitment" shall mean, as to any Lender, the obligation of such
     Lender to make Loans to the Borrower under the Credit Agreement in an
     aggregate principal amount at any one time outstanding not to exceed the
     amount set forth opposite such Lender's name on Schedule 1.1 of the Credit
     Agreement.

          "Commitment Fee" shall mean, on each Commitment Fee Payment Date, an
     amount equal to the product of (i) the Available Commitment on such
     Commitment Fee Payment Date times (ii) the Applicable Commitment Fee Rate.

          "Commitment Fee Payment Date" shall mean the last day of each March,
     June, September and December during the Commitment Period and the last
     Business Day of the Commitment Period or such earlier date as the
     Commitments shall terminate as provided in the Credit Agreement.

          "Commitment Percentage" shall mean, as to any Lender at any time, the
     percentage which such Lender's Commitment then constitutes of the aggregate
     Commitments (or, at any time after the Commitments shall have expired or
     terminated, the percentage which the aggregate principal amount of such
     Lender's Loans then outstanding constitutes of the aggregate principal
     amount of the Loans then outstanding).

          "Commitment Period" shall mean the period from and including the
     Initial Closing Date to but not including the earlier of (i) the first
     anniversary of the Initial Closing Date and (ii) the date on which an
     Acceleration occurs.

          "Commonly Controlled Entity" shall mean an entity, whether or not
     incorporated, which is under common control with HCC within the meaning of
     Section 4001 (a)(14) of ERISA or is part of a group which includes HCC and
     which is treated as a single employer under Section 414 of the Code.

          "Condemnation" shall mean any taking or sale of the use, access, or
     title to any piece of Equipment or any part thereof, wholly or partially
     (temporarily or permanently), by or on account of any actual eminent domain
     proceeding or other taking of action by any Person having the power of
     eminent domain.

          "Consent to Assignment" shall mean the collective reference to the
     Lessee's Consent to Assignment dated as of the Initial Closing Date from
     the Lessee and the Guarantors to the Agent with respect to the Assignment
     of Leases, as amended,

<PAGE>

                                                                               9

     supplemented or otherwise modified from lime to time in accordance with the
     terms thereof or of any other Operative Agreement.

          "Consolidated Adjusted EBITDA" shall mean, for any period, the sum of
     Consolidated EBITDA for the Adjusted EBITDA Companies.

          "Consolidated Capitalization" shall mean, at a particular date, as to
     any Person, the sum of (a) Consolidated Net Worth and (b) the amount of
     Consolidated Indebtedness at such date.

          "Consolidated Earnings Before Interest and Taxes" shall mean, for any
     period, with respect to any Person, the sum of (a) Consolidated Net Income
     for such period, (b) all amounts attributable to provision for taxes
     measured by income (to the extent that such amounts have been deducted in
     determining Consolidated Net Income for such period) and (c) Consolidated
     Interest Expense for such period (to the extent that such amounts have been
     deducted in determining Consolidated Net Income for such period).

          "Consolidated EBITDA" shall mean, for any period, with respect to any
     Person, the sum of (a) Consolidated Earnings Before Interest and Taxes for
     such Person for such period plus, (b) all amounts attributable to
     depreciation and amortization, determined in accordance with GAAP (to the
     extent such amounts have been deducted in determining Consolidated Earnings
     Before Interest and Taxes for such period) plus, (c) all amounts classified
     as extraordinary charges for such period (to the extent such amounts have
     been deducted in determining Consolidated Earnings Before Interest and
     Taxes for such period) minus, (d) all amounts classified as extraordinary
     income for such period (to the extent such amounts have been included in
     determining Consolidated Earnings Before Interest and Taxes for such
     period).

          "Consolidated Indebtedness" shall mean, at a particular date, as to
     any Person, all Indebtedness of such Person and its Subsidiaries other than
     Indebtedness in respect of Financing Leases, determined on a consolidated
     basis in accordance with GAAP at such date.

          "Consolidated Indebtedness Ratio" shall have the meaning set forth in
     Section 11.l(d) of the Guarantee.

          "Consolidated Interest Expense" shall mean, for any period, with
     respect to any Person, the amount which, in conformity with GAAP, would be
     set forth opposite the caption "interest expense" or any like caption
     (including, without limitation, imputed interest included in Financing
     Lease payments) on a consolidated income statement of such Person and its
     Subsidiaries for such period, plus, to the extent not so included,

<PAGE>

                                                                              10

     payments by such Person and its Subsidiaries under the Equipment Leases
     attributable to (i) interest payments under the Equipment Lease Tranche A
     Loans and Equipment Lease Tranche B Loans and (ii) the yield to the
     Equipment Investors in connection with the Equipment Lease Transactions.

          "Consolidated Lease Expense" shall mean, for any period as to any
     Person, the aggregate rental obligations of such Person and its
     Subsidiaries determined on a consolidated basis payable in respect of such
     period under leases of real and/or personal property (net of income from
     sub-leases thereof, but including taxes, insurance, maintenance and similar
     expenses which the lessee is obligated to pay under the terms of said
     leases), whether or not such obligations are reflected as liabilities or
     commitments on a consolidated balance sheet of such Person and its
     Subsidiaries or in the notes thereto, and whether or not such leases
     constitute Financing Leases, but excluding obligations of such Person and
     its Subsidiaries with respect to the Equipment Leases.

          "Consolidated Net Income" shall mean, for any period as to any Person,
     the consolidated net income (or loss) of such Person and its Subsidiaries,
     determined on a consolidated basis in accordance with GAAP, provided that
     for purposes of determining Consolidated Net Income, payments under
     Equipment Leases attributable to (i) Equipment Lease Tranche A Loans and
     Equipment Lease Tranche B Loans and (ii) the yield to the Equipment
     Investors in connection with the Equipment Lease Transactions shall be
     considered interest expense.

          "Consolidated Net Worth" shall mean, at a particular date, as to any
     Person, the amount which could be included under stockholders' equity on a
     consolidated balance sheet of such Person and its Subsidiaries determined
     on a consolidated basis in accordance with GAAP.

          "Contractual Obligation" shall mean, as to any Person, any provision
     of any security issued by such Person or of any agreement, instrument or
     other undertaking to which such Person is a parry or by which it or any of
     its property is bound.

          "Corporate Credit Agreement" means that Credit Agreement among HCC,
     Agent and the several banks from time to time parties thereto dated as of
     December 15, 1997, as amended and restated through March 13, 2000, and as
     it may be further amended, modified, or supplemented from time-to-time.

          "Corporate Guarantees" shall mean, collectively, that certain
     Subsidiaries' Guarantee and Parent Guarantee made by the Guarantors
     pursuant to the Corporate Credit Agreement and such other guarantees of the
     loans and the other obligations of HCC under the Corporate Credit
     Agreement.

<PAGE>

                                                                              11

          "Credit Agreement" shall mean the Credit Agreement dated as of the
     Initial Closing Date among the Lessor, the Agent and the Lenders, as
     amended, supplemented or otherwise modified from time to time in accordance
     with the terms thereof or of any other Operative Agreement.

          "Credit Agreement Default" shall mean any event or condition which,
     with the lapse of time or the giving of notice, or both, would constitute a
     Credit Agreement Event of Default.

          "Credit Agreement Event of Default" shall have the meaning set forth
     in Section 6.1 of the Credit Agreement.

          "Credit Documents" shall mean the Credit Agreement, the Notes, the
     Guarantee, the Lease and the Security Documents.

          "Current Ratio" shall mean, at a particular date, as to any Person and
     its Subsidiaries, the quotient of the consolidated current assets of such
     Person and its Subsidiaries at such time, to the consolidated current
     liabilities of such Person and its Subsidiaries at such time less the
     current portion of long-term debt (all determined in accordance with GAAP
     at such time), provided that for purposes of calculating the Current Ratio,
     current liabilities of such Person and its Subsidiaries which are then
     accrued but unpaid with respect to the Equipment Lease Tranche A Loans
     shall be included as current liabilities of such Person.

          "Default" shall mean any event or condition which, with the lapse of
     time or the giving of notice, or both, would constitute an Event of
     Default.

          "Derivatives" shall mean, any swap, hedge, cap, collar, or similar
     arrangement providing for the exchange of risks related to price changes in
     any commodity, including money.

          "Disposition": with respect to any property, any sale, lease, sale and
     leaseback, assignment, conveyance, transfer or other disposition thereof.
     The terms "Dispose" and "Disposed of" shall have correlative meanings.

          "Dollars" and "$" shall mean dollars in lawful currency of the United
     States of America.

          "Effective Date" shall have the meaning set forth in the Assignment
     and Acceptance.

<PAGE>

                                                                              12

          "Environmental Claim" shall mean any claim, notice of claim,
     complaint, notice of violation, letter, or other assertion or inquiry of
     any kind concerning any asserted or actual violation of or liability under
     any Environmental Law or any asserted or actual violation or liability
     relating to any Hazardous Substance.

          "Environmental Law" shall mean any and all Federal, state, local or
     municipal laws, rules, orders, regulations, statutes, ordinances, codes,
     decrees or requirements of any Governmental Authority regulating, relating
     to or imposing liability or standards of conduct concerning environmental
     protection matters, including without limitation, Hazardous Substances, as
     now or may at any time hereafter be in effect.

          "Environmental Violation" shall mean any activity, occurrence or
     condition that violates or results in non-compliance with any applicable
     Environmental Laws or results in a written complaint or other written claim
     from a Governmental Authority with respect to any Environmental Laws.

          "Equipment" shall mean natural gas compressors used in gas and oil
     field gathering, transmission and processing activities that are acquired
     by the Lessor and then leased by the Lessor to Lessee pursuant to the terms
     of the Operative Agreements.

          "Equipment Acquisition Costs" shall mean all costs and expenses
     incurred in connection with the acquisition of any Equipment, including all
     reasonable professional fees and other soft costs incurred in connection
     therewith, Transaction Expenses and other pre-closing and closing costs
     incurred by Lessee in connection with the transactions contemplated by the
     Operative Agreements.

          "Equipment Closing Certificate" shall mean a certificate executed by a
     Responsible Officer of the Lessee certifying (i) the Tranche A Percentage
     for the particular piece of Equipment and (ii) the Aggregate Tranche A
     Percentage for all Equipment after giving effect to the acquisition of the
     particular piece of Equipment substantially in the form attached as Exhibit
     F to the Participation Agreement.

          "Equipment Closing Date" shall mean each date on which the Lessor
     purchases any piece of Equipment.

          "Equipment Cost" shall mean with respect to a piece of Equipment the
     aggregate amount of the Tranche A/B Equipment Cost allocated to such piece
     of Equipment pursuant to the Credit Agreement, plus the Investor Equipment
     Cost for such piece of Equipment.

<PAGE>

                                                                              13

     "Equipment Guarantees" shall mean (i) the Guarantee dated as of July 22,
     1998 (as amended, supplemented or otherwise modified from time to time),
     made by Holdings. HCC, Hanover/Smith, HMI, Hanover Land Company, in favor
     of Hanover Equipment Trust 1998A and The Chase Manhattan Bank, as agent,
     (ii) the Guarantee dated as of June 15, 1999 (as amended, supplemented or
     otherwise modified from time to time), made by Holdings, HCC,
     Hanover/Smith, HMI, Hanover Land Company, in favor of Hanover Equipment
     Trust 1999A and The Chase Manhattan Bank, as agent and (iii) the Guarantee
     dated as of March 13, 2000 (as amended, supplemented or otherwise modified
     from time to time), made by Holdings, HCC and certain of their Subsidiaries
     listed on the signature pages thereto, in favor of Hanover Equipment Trust
     2000 A and The Chase Manhattan Bank, as agent.

          "Equipment Lease Credit Agreements" shall mean (i) the Credit
     Agreement dated as of July 23, 1998 (as amended, supplemented or otherwise
     modified from time to time), among Hanover Equipment Trust 1998A, as
     borrower, the several lenders from time to time parties thereto and The
     Chase Manhattan Bank, as agent, (ii) the Credit Agreement dated as of June
     15, 1999 (as amended, supplemented or otherwise modified from time to
     time), among Hanover Equipment Trust 1999A, as borrower, the several
     lenders from time to time parties thereto, the managing agents thereto and
     The Chase Manhattan Bank, as agent and (iii) the Credit Agreement dated as
     of March 13, 2000 (as amended, supplemented or otherwise modified from time
     to time), among Hanover Equipment Trust 2000A, as borrower, the several
     lenders from time to time parties thereto, Industrial Bank of Japan, LTD.,
     as syndication agent, the Bank of Nova Scotia, as documentation agent and
     The Chase Manhattan Bank, as agent.

          "Equipment Lease Participation Agreements" shall mean (i) the
     Participation Agreement dated July 22, 1998 (as amended, supplemented or
     otherwise modified from time to time), among HCC, Hanover Equipment Trust
     1998A, Societe Generale Financial Corporation, as investor, The Chase
     Manhattan Bank, as agent, and the lenders parties thereto, (ii) the
     Participation Agreement dated June 15, 1999 (as amended, supplemented or
     otherwise modified from time to time), among HCC, Hanover Equipment Trust
     1999A, Societe Generale Financial Corporation and FBTC Leasing Corp., as
     investors, the managing agents thereto, The Chase Manhattan Bank, as agent,
     and the lenders parties thereto and (iii) the Participation Agreement dated
     March 13, 2000 (as amended, supplemented or otherwise modified from time to
     time), among HCC, Hanover Equipment Trust 2000A, First Union National Bank
     and Scotiabanc Inc., as investors, Industrial Bank of Japan, LTD., as
     syndication agent, the Bank of Nova Scotia, as documentation agent, The
     Chase Manhattan Bank, as agent, and the lenders parties thereto.

<PAGE>

                                                                              14

          "Equipment Lease Tranche A Loans" shall mean the loans to be made
     pursuant to each Equipment Lease Credit Agreement and identified as the
     "Tranche A Loans" in Schedule 1.1 of each of the Equipment Lease Credit
     Agreements.

          "Equipment Lease Tranche B Loans" shall mean the loans to be made
     pursuant to each Equipment Lease Credit Agreement and identified as the
     "Tranche B Loans" in Schedule 1.1 of each of the Equipment Lease Credit
     Agreements.

          "Equipment Lease Transactions" shall mean the transactions whereby HCC
     leases natural gas compressors from the Lessors as described in each of the
     Equipment Lease Participation Agreements and any Operative Document (as
     defined in such Equipment Lease Participation Agreements).

          "Equipment Leases": (i) the Lease dated as of July 23, 1998 (as
     amended, supplemented or otherwise modified from time to time), between
     Hanover Equipment Trust 1998A, as lessor, and HCC, as lessee, (ii) the
     Lease dated as of June 15, 1999 (as amended, supplemented or otherwise
     modified from time to time), between Hanover Equipment Trust 1999A, as
     lessor, and HCC, as lessee, and (iii) the Lease dated as of March 13, 2000
     (as amended, supplemented or otherwise modified from time to time), between
     Hanover Equipment Trust 2000A, as lessor, and HCC, as lessee.

          "Equipment Investors" means the parties that hold the beneficial
     interest in the respective Equipment Lessors.

          "Equipment Lessors" means the lessors under the Equipment Leases.

          "ERISA" shall mean the Employee Retirement Income Security Act of
     1974, as amended from time to time.

          "ERISA Affiliate" shall mean each entity required to be aggregated
     with the Lessee pursuant to the requirements of Section 414(b) or (c) of
     the Code.

          "Eurocurrency Reserve Requirements" shall mean for any day as applied
     to a Eurodollar Loan, the aggregate (without duplication) of the rates
     (expressed as a decimal fraction) of reserve requirements in effect on such
     day (including, without limitation, basic, supplemental, marginal and
     emergency reserves under any regulations of the Board or other Governmental
     Authority having jurisdiction with respect thereto) dealing with reserve
     requirements prescribed for eurocurrency funding (currently referred to as
     "Eurocurrency Liabilities" in Regulation D of the Board) maintained by a
     member bank of the Federal Reserve System.

<PAGE>

                                                                              15

          "Eurodollar Base Rate" shall mean, with respect to each day during
     each Interest Period pertaining to a Eurodollar Loan, the rate per annum
     equal to the rate at which Chase is offered Dollar deposits at or about
     10:00 A.M., New York City time, two Business Days prior to the beginning of
     such Interest Period in the interbank eurodollar market where the
     eurodollar and foreign currency and exchange operations in respect of its
     Eurodollar Loans are then being conducted for delivery on the first day of
     such Interest Period for the number of days comprised therein and in an
     amount comparable to the amount of its Eurodollar Loan to be outstanding
     during such Interest Period.

          "Eurodollar Loans" shall mean Loans the rate of interest applicable to
     which is based upon the Eurodollar Rate.

          "Eurodollar Rate" shall mean with respect to each day during each
     Interest Period pertaining to a Eurodollar Loan, a rate per annum
     determined for such day in accordance with the following formula (rounded
     upward to the nearest 1/100th of 1%):

                              Eurodollar Base Rate
                    -----------------------------------------
                    1.00 - Eurocurrency Reserve Requirements

          "Eurodollar Tranche" shall mean the collective reference to Eurodollar
     Loans the then current Interest Periods with respect to all of which begin
     on the same date and end on the same later date (whether or not such Loans
     shall originally have been made on the same day).

          "Event of Default" shall mean a Lease Event of Default or a Credit
     Agreement Event of Default.

          "Excepted Payments" shall mean:

               (a)    all indemnity payments (including indemnity payments made
          pursuant to Section 12 of the Participation Agreement), to which the
          Lessor, Trust Company or the Investors are entitled;

               (b)    any amounts (other than Basic Rent, Termination Value, or
          Purchase Option Price) payable under any Operative Agreement to
          reimburse the Lessor, the Trust Company, the Investors, or any of
          their respective Affiliates (including the reasonable expenses of the
          Trust Company and the Investors incurred in connection with any such
          payment) for performing or complying with any of the obligations of
          Lessee under and as permitted by any Operative Agreement;

<PAGE>

                                                                              16

               (c)    any amount payable to the Investors by any transferee of
          the interest of the Investors as the purchase price of the Investors'
          interest in the Trust Estate (or a portion thereof);

               (d)    any insurance proceeds (or payments with respect to risks
          self- insured or policy deductibles) under liability policies with
          respect to the Equipment other than such proceeds or payments payable
          to the Lessee or the Agent;

               (e)    any insurance proceeds under policies maintained by the
          Lessor, Trust Company or the Investors;

               (f)    Transaction Expenses or other amounts or expenses paid or
          payable to or for the benefit of the Trust Company or the Investors;

               (g)    all right, title and interest of the Investors or the
          Lessor to any Equipment, any portion thereof or any other property to
          the extent any of the foregoing has been released from the Liens of
          the Security Agreement and the Assignment of Lease pursuant to the
          terms thereof and not otherwise purchased by the Lessee or a third
          party pursuant to the terms of the Lease;

               (h)    any payments in respect of interest to the extent
          attributable to payments referred to in clauses (a) through (g) above;
          and

               (i)    any rights of the Investors, the Trust Company or the
     Lessor to demand, collect, sue for or otherwise receive and enforce payment
     of any of the foregoing amounts.

          "Excepted Rights" shall mean the rights retained by the Lessor
     pursuant to Section 8.3(i) of the Credit Agreement and all right, title and
     interest of the Lessor in the Shared Rights.

          "Excess Sales Proceeds" shall have the meaning given to such term in
     Section 8.l(b)(iii) of the Credit Agreement.

          "Exculpated Persons" shall have the meaning set forth in Section 9.17
     of the Credit Agreement.

          "Expiration Date" shall mean the final day of the Term.

<PAGE>

                                                                              17

          "Fair Market Sales Value" shall mean the amount, which in any event
     shall not be less than zero, that would be paid in cash in an arm's-length
     transaction between an informed and willing purchaser and an informed and
     willing seller, neither of whom is under any compulsion to purchase or
     sell, respectively, for the ownership of any piece of Equipment. Fair
     Market Sales Value shall be determined based on the assumption that, except
     for purposes of Section 21.3 of the Lease, any piece of Equipment is in the
     condition and state of repair required under Section 10.1 of the Lease and
     that the Lessee is in compliance with the other requirements of the
     Operative Agreements.

          "Fee Letter" shall mean the Fee Letter dated May 11, 1999 from Chase
     and Chase Securities Inc. to HCC.

          "Financing Lease" shall mean any lease of property, real or personal,
     the obligations of the lessee in respect of which are required in
     accordance with GAAP to be capitalized on a balance sheet of the lessee,
     and excluding all obligations with respect to the Equipment Leases.

          "GAAP" means generally accepted accounting principles in the United
     States of America consistent with those used in preparing the audited
     financial statements referred to in Section 10.1 of the Guarantee.

          "Governmental Action" shall mean all permits, authorizations,
     registrations, consents, approvals, waivers, exceptions, variances, orders,
     judgments, written interpretations, decrees, licenses, exemptions,
     publications, filings, notices to and declarations of or with, or required
     by, any Governmental Authority, or required by any Legal Requirement, and
     shall include, without limitation, all environmental and operating permits
     and licenses that are required for the full use and operation of the
     Equipment.

          "Governmental Authority" shall mean any nation or government, any
     state or other political subdivision thereof and any entity exercising
     executive, legislative, judicial, regulatory or administrative functions of
     or pertaining to government.

          "Guarantee" shall mean the Guarantee dated as of the Initial Closing
     Date from the Guarantors to the Agent for the benefit of the Lenders and to
     the Lessor for the benefit of the Investors, as the same may be amended,
     supplemented or otherwise modified from time to time in accordance with the
     terms thereof or of any other Operative Agreement.

          "Guaranteed Obligations" shall have the meaning specified in Section
     l(b) of the Guarantee.

<PAGE>

                                                                              18

          "Guarantee Obligation" means as to any Person (the "guaranteeing
     person"), any obligation of (a) the guaranteeing person or (b) another
     Person (including without limitation, any bank under any letter of credit)
     to induce the creation of which the guaranteeing person has issued a
     reimbursement, counter indemnity or similar obligation, in either case
     guaranteeing or in effect guaranteeing any Indebtedness, leases, dividends
     or other obligations (the "primary obligations") of any other third Person
     (the "primary obligor") in any manner, whether directly or indirectly,
     including, without limitation, any obligation of the guaranteeing person,
     whether or not contingent, (a) to purchase any such primary obligation or
     any property constituting direct or indirect security therefor, (b) to
     advance or supply funds (i) for the purchase or payment of any such primary
     obligation or (ii) to maintain working capital or equity capital of the
     primary obligor or otherwise to maintain the net worth or solvency of the
     primary obligor, (c) to purchase property, securities or services primarily
     for the purpose of assuring the owner of any such primary obligation of the
     ability of the primary obligor to make payment of such primary obligation
     or (d) otherwise to assure or hold harmless the owner of any such primary
     obligation against loss in respect thereof; provided, however, that the
     term Guarantor Obligation shall not include endorsements of instruments for
     deposit or collection in the ordinary course of business. The amount of any
     Guarantor Obligation of any guaranteeing person shall be deemed to be the
     lower of (a) an amount equal to the stated or determinable amount of the
     primary obligation in respect of which such Guarantor Obligation is made
     and (b) the maximum amount for which such guaranteeing person may be liable
     pursuant to the terms of the instrument embodying such Guarantor
     Obligation, unless such primary obligation and the maximum amount for which
     such guaranteeing person may be liable are not stated or determinable, in
     which case the amount of such Guarantor Obligation shall be such
     guaranteeing person's maximum reasonably anticipated liability in respect
     thereof as determined by HCC, in good faith.

          "Guarantors" shall mean collectively, Lessee, Holdings, Hanover
     Compressor Limited Holdings, LLC, Hanover Maintech Limited Partnership,
     Hanover/Smith Limited Partnership, Hanover Land Limited Partnership,
     Hanover Maintech Limited Partnership.

          "HCC" shall mean Hanover Compression Inc., a Delaware corporation, or
     its assigns or successors.

          "Hazardous Substance" shall mean any hazardous materials, hazardous
     waste, hazardous constituents, hazardous or toxic substances, petroleum
     products (including crude oil or any fraction thereof), defined or
     regulated as such in or under any Environmental Law, including, without
     limitation, polychlorinated biphenyls.

          "HMS" shall mean Hanover Measurement Services Company, L.P., a
     Delaware limited partnership, and its successors and assigns.

<PAGE>

                                                                              19

          "HMS Entities" shall mean HMS, Meter Acquisition Company LP, LLLP, a
     Delaware limited liability partnership, Hanover Measurement, LLC, a
     Delaware limited liability company, HCC Holdings, Inc., a Delaware
     corporation and Hanover MAC, LLC, a Delaware limited liability company.

          "HMS Transactions" shall mean the transactions described in the Common
     Agreement, dated as of September 30, 1999, by and among Meter Acquisition
     Company LP, LLLP, Hanover Measurement Services Company, L.P., HPL, Hanover
     MAC, LLC, HCC Holdings, Inc., Barclays Bank PLC, as agent and arranger,
     Credit Lyonnais New York Branch, as syndication agent and the other parties
     thereto.

          "Holdings" shall mean Hanover Compressor Company, a Delaware
     corporation, the parent company of HCC.

          "HPL" shall mean Houston Pipe Line Company, a Delaware corporation,
     and its successors and assigns.

          "Impositions" shall mean, except to the extent described in the
     following sentence, any and all liabilities, losses, expenses and costs of
     any kind whatsoever for fees, taxes, levies, imposts, duties, charges,
     assessments or withholdings ("Taxes") (including (i) real and personal
     property taxes, including personal property taxes on any property covered
     by the Lease that is classified by Governmental Authorities as personal
     property, and real estate or ad valorem taxes in the nature of property
     taxes; (ii) sales taxes, use taxes and other similar taxes (including rent
     taxes and intangibles taxes); (iii) any excise taxes; (iv) real estate
     transfer taxes, conveyance taxes, stamp taxes and documentary recording
     taxes and fees; (v) taxes that are or are in the nature of franchise,
     income, value added, privilege and doing business taxes, license and
     registration fees; and (vi) assessments on the Equipment), and in each case
     all interest, additions to tax and penalties thereon, which at any time
     prior to, during or with respect to the Term or in respect of any period
     for which the Lessee shall be obligated to pay Supplemental Rent, may be
     levied, assessed or imposed by any Federal, state, city, county or local
     authority upon or with respect to (a) the Equipment or any part thereof or
     interest therein; (b) the purchase, sale, leasing, financing, refinancing,
     demolition, construction, renovation, substitution, subleasing, assignment,
     control, condition, occupancy, servicing, maintenance, repair, ownership,
     possession, activity conducted on, delivery, insuring, use, operation,
     improvement, transfer of title, return or other disposition of the
     Equipment or any part thereof or interest therein; (c) the Notes or other
     indebtedness with respect to the Equipment or any part thereof or interest
     therein; (d) the rentals, receipts or earnings arising from the Equipment
     or any part thereof or interest therein; (e) the Operative Agreements or
     any payment made or accrued pursuant thereto; (f) the income or other
     proceeds received with respect to the Equipment or any part thereof or
     interest therein

<PAGE>

                                                                              20

     upon the sale or disposition thereof; (g) any contract relating to the
     construction or renovation of the Equipment; (h) the issuance of the Notes;
     or (i) otherwise in connection with the transactions contemplated by the
     Operative Agreements.

          The term "Imposition" shall not mean or include:

                    (i) Taxes and impositions (other than Taxes that are, or are
          in the nature of, sales, use, rental, value added, transfer or
          property taxes) that are imposed on a Tax Indemnitee by the United
          States federal government that are based on or measured by the gross
          or net income (including taxes based on capital gains and minimum
          taxes) of such Person; provided that this clause (i) shall not be
          interpreted to prevent a payment from being made on an After Tax Basis
          if such payment is otherwise required to be so made;

                    (ii) Taxes and impositions (other than Taxes that are, or
          are in the nature of, sales, use, rental, value added, transfer or
          property taxes) that are imposed by any state or local jurisdiction or
          taxing authority within any state or local jurisdiction and that are
          based upon or measured by the gross or net income or gross or net
          receipts from rental (including any minimum taxes, withholding taxes
          or taxes on or measured by capital, net worth, excess profits or items
          of tax preference or taxes that are capital stock, franchise or doing
          business taxes) except that this clause (ii) shall not apply to (and
          thus shall not exclude) any such Taxes imposed on a Tax Indemnitee by
          a state (or any local taxing authority thereof or therein) where the
          Equipment is located, possessed or used under the Lease unless the Tax
          Indemnitee was subject to such tax in such jurisdiction without regard
          to the transaction contemplated by the Operative Agreements; provided
          that this clause (ii) shall not be interpreted to prevent a payment
          from being made on an After Tax Basis if such payment is otherwise
          required to be so made;

                    (iii) any interest or penalties imposed on a Tax Indemnitee
          as a result of the failure of such Tax Indemnitee to file any return
          or report timely and in the form prescribed by law or to pay any Tax
          or imposition; provided that this clause (iii) shall not apply (x) if
          such interest or penalties arise as a result of a position taken (or
          requested to be taken) by the Lessee in a contest controlled by the
          Lessee under Section 12.2(g) of the Participation Agreement or (y) to
          any such interest or penalties that result from such Tax Indemnitee's
          complying with the reporting procedures set forth in Section 12.2(d)
          of the Participation Agreement;

                    (iv) any Taxes or impositions imposed on the Lessor that are
          a result of the Lessor not being considered a "United States person"
          as defined in Section 7701(a)(30) of the Code;

<PAGE>

                                                                              21

                    (v) any Taxes which are imposed on a Tax Indemnitee solely
          as a result of the gross negligence or willful misconduct of such Tax
          Indemnitee itself (as opposed to gross negligence or willful
          misconduct imputed to such Tax Indemnitee), but not Taxes imposed as a
          result of ordinary negligence of such Tax Indemnitee;

                    (vi) any Taxes or impositions imposed upon the Lessor with
          respect to any voluntary transfer, sale, financing or other voluntary
          disposition by the Lessor (other than a transfer contemplated and
          permitted by the Operative Agreements, including any transfer in
          connection with (1) the exercise by the Lessee of its Purchase Option,
          (2) the occurrence of a Lease Event of Default or a Credit Agreement
          Event of Default, or (3) a Casualty or Condemnation affecting the
          Equipment) of any interest in the Equipment or any interest in, or
          created pursuant to, the Operative Agreements) or any voluntary
          transfer of any interest in the Lessor (other than in connection with
          the existence of a Lease Event of Default or a Credit Agreement Event
          of Default or any involuntary transfer of any of the foregoing
          interests resulting from the bankruptcy or insolvency of the Lessor
          (other than in connection with the existence of a Lease Event of
          Default or a Credit Agreement Event of Default;

                    (vii) any gift, or inheritance, taxes;

                    (viii) Taxes imposed on the Tax Indemnitee or any person who
          is a "disqualified person", within the meaning of Section 4975(e)(2)
          of the Code, or a "party in interest", within the meaning of Section
          3(14) of ERISA, by virtue of such person's relationship to the Tax
          Indemnitee as the result of any prohibited transaction, within the
          meaning of Section 406 of ERISA or Section 4975(c)(1) of the Code,
          involving the exercise of discretion or control by such Tax
          Indemnitee; or

                    (ix) Taxes on, with respect to or measured by any trustee
          fees for services rendered as trustee of the Trust.

     Any Tax or imposition excluded from the defined term "Imposition" in any
     one of the foregoing clauses (i) through (vii) shall not be construed as
     constituting an Imposition by any provision of any other of the
     aforementioned clauses.

          "Indebtedness" shall mean, of any Person at any date, (a) all
     indebtedness of such Person for borrowed money or for the deferred purchase
     price of property or services (other than current liabilities incurred in
     the ordinary course of business and payable in

<PAGE>

                                                                              22

     accordance with customary trade practices) or which is evidenced by a note,
     bond, debenture or similar instrument, (b) all obligations of such Person
     under Financing Leases, (c) all obligations of such Person in respect of
     acceptances issued or created for the account of such Person and (d) all
     liabilities secured by any Lien (other than any lien of a type described in
     subsection 8.3(a) through (j)) on any property owned by such Person even
     though it has not assumed or otherwise become liable for the payment
     thereof, provided that all obligations of such Person with respect to
     Equipment Lease Tranche A Loans shall be considered Indebtedness of such
     Person.

          "Indemnified Person" shall mean the Trust Company, in its individual
     and its trust capacity, the Agent, the Lessor, the Investors, the Lenders
     and their respective successors, assigns, directors, shareholders,
     partners, officers, employees, agents and Affiliates.

          "Initial Closing Date" shall mean June 15, 1999.

          "Insolvent" shall mean, with respect to any Multiemployer Plan, the
     condition that such Plan is insolvent within the meaning of Section 4245 of
     ERISA.

          "Insurance Requirements" shall mean all terms and conditions of any
     insurance policy required by the Lease to be maintained by the Lessee and
     all requirements of the issuer of any such policy.

          "Interest Period" shall mean, with respect to any Eurodollar Loan:

               (a)    initially, the period commencing on the borrowing or
          conversion date, as the case may be, with respect to such Eurodollar
          Loan and ending one, two, three or six months thereafter, as selected
          by the Borrower in its notice of borrowing or notice of conversion, as
          the case may be, given with respect thereto: and

               (b)    thereafter, each period commencing on the last day of the
          immediately preceding Interest Period applicable to such Eurodollar
          Loan and ending one, two, three or six months thereafter, as selected
          by the Borrower by irrevocable notice to the Agent not less than three
          Business Days prior to the last day of the then current Interest
          Period with respect thereto;

     provided that, the foregoing provisions relating to Interest Periods are
     subject to the following:

                   (i) if any Interest Period pertaining to a Eurodollar Loan
          would otherwise end on a day that is not a Business Day, such Interest
          Period shall be

<PAGE>

                                                                              23

          extended to the next succeeding Business Day unless the result of such
          extension would be to carry such Interest Period into another calendar
          month in which event such Interest Period shall end on the immediately
          preceding Business Day;

                   (ii) any Interest Period that would otherwise extend beyond
          the Maturity Date shall end on the Maturity Date;

                   (iii) any Interest Period that begins on the last Business
          Day of a calendar month (or on a day for which there is no numerically
          corresponding day in the calendar month at the end of such Interest
          Period) shall end on the last Business Day of a calendar month; and

                   (iv) Borrower shall select Interest Periods so as not to
          require a payment or prepayment of any Eurodollar Loan during an
          Interest Period for such Loan.

          "Investment Company Act" shall mean the Investment Company Act of
     1940, as amended, together with the rules and regulations promulgated
     thereunder.

          "Investments" shall have the meaning specified in Section 11.10 of
     the Guarantee.

          "Investors" shall mean Societe General Financial Corporation, a
     Delaware corporation and FBTC Leasing Corp., a New York corporation.

          "Investor Commitment" shall mean $6,000,000.

          "Investor Commitment Fee" shall mean, on each Commitment Fee Payment
     Date, an amount equal to the product of (i) the Available Investor
     Commitment on such Commitment Fee Payment Date times (ii) the Applicable
     Commitment Fee Rate

          "Investor Contribution" shall have the meaning specified in Section
     2.1 of the Participation Agreement.

          "Investor Equipment Cost" shall mean with respect to a piece of
     Equipment an amount equal to the Investor Contribution attributable to such
     Equipment outstanding from time to time, if any.

          "Investor Yield" shall mean an amount, as of any Payment Date,
     sufficient to provide the Investors with an annual pre-tax yield on the
     Investor Contribution of 325 basis points in excess of (i) the highest
     Eurodollar Rate applicable to any then outstanding

<PAGE>

                                                                              24

     Eurodollar Tranche or (ii) if no Eurodollar Tranche is then outstanding,
     the rate of interest per annum on any then outstanding ABR Loan.

          "L/C Obligations" shall mean, at any time, an amount equal to the sum
     of (a) the aggregate then undrawn and unexpired amount of the then
     outstanding Letters of Credit and (b) the aggregate amount of drawings
     under Letters of Credit which have not then been reimbursed pursuant to
     subsection 4.5(a) of the Corporate Credit Agreement.

          "Lease" shall mean the lease dated as of the Initial Closing Date
     between the Lessor and the Lessee, together with any Lease Supplements
     thereto, as amended, supplemented or otherwise modified from time to time
     in accordance with the terms thereof or of any other Operative Agreement.

          "Lease Default" shall mean any event or condition which, with the
     lapse of time or the giving of notice, or both, would constitute a Lease
     Event of Default.

          "Lease Event of Default" shall have the meaning given to such term in
     Section 17.1 of the Lease.

          "Lease Secured Obligations" shall have the meaning set forth in
     Section 28.1 of the Lease.

          "Lease Supplement" shall mean each Lease Supplement substantially in
     the form of Exhibit A to the Lease together with all attachments and
     schedules thereto, as such Lease Supplement may be supplemented, amended or
     modified from time to time.

          "Legal Requirements" shall mean all Federal, state, county, municipal
     and other governmental statutes, laws, rules, orders, regulations,
     ordinances, judgments, decrees and injunctions affecting any Equipment or
     the use or alteration thereof, whether now or hereafter enacted and in
     force, including any that require repairs, modifications or alterations in
     or to any Equipment or in any way limit the use and enjoyment thereof and
     any that may relate to Environmental Laws, and all permits, certificates of
     occupancy, licenses, authorizations and regulations relating thereto, and
     all covenants, agreements, restrictions and encumbrances contained in any
     instruments which are either of record or known to the Lessee affecting any
     Equipment.

          "Lender Financing Statements" shall mean UCC financing statements
     appropriately completed and executed by the Lessor, as debtor, for filing
     in the appropriate state (and, where required by the UCC, county) offices
     in the State in which each piece of Equipment is located in order to
     perfect a security interest in favor of the

<PAGE>

                                                                              25

     Agent in the Equipment, as the same may be supplemented, amended or
     modified from time to time.

          "Lenders" shall mean the several banks and other financial
     institutions from time to time party to the Credit Agreement.

          "Lessee" shall mean Hanover Compressor Company, a Delaware
     corporation, as lessee under the Lease or its successor and assigns.

          "Lessor" shall mean Hanover Equipment Trust 1999A, a Delaware business
     trust or its successor and assigns.

          "Lessor Financing Statements" shall mean UCC financing statements
     appropriately completed and executed by the Lessee, as debtor, for filing
     in the appropriate (state and, where required by the UCC, county) offices
     in the State in which each piece of Equipment is located in order to
     protect the Lessor's interest under the Lease as a security agreement, as
     the same may be supplemented, amended or modified from time to time, as the
     same shall be assigned to the Agent pursuant to appropriate UCC financing
     statements.

          "Lessor Lien" shall mean any Lien, true lease or sublease or
     disposition of title arising as a result of (a) any claim against the
     Lessor, the Trust Company, the Investors or any Affiliate of the Lessor,
     the Trust Company and/or the Investors, not resulting from the transactions
     contemplated by the Operative Agreements, (b) any act or omission of the
     Lessor, the Trust Company, the Investors or any Affiliate of the Lessor,
     the Trust Company and/or the Investors, which is not required by the
     Operative Agreements or is in violation of any of the terms of the
     Operative Agreements, (c) any claim against the Lessor, the Trust Company,
     the Investors or any Affiliate of the Lessor, the Trust Company and/or the
     Investors, with respect to Taxes or Transaction Expenses against which the
     Lessee is not required to indemnify the Lessor, the Trust Company, the
     Investors or any Affiliate of the Lessor, the Trust Company and/or the
     Investors, pursuant to the Participation Agreement or (d) any claim against
     the Lessor arising out of any transfer by the Lessor of all or any portion
     of the interest of the Lessor in the Equipment, the Trust Estate or the
     Operative Agreements other than the transfer of title to or possession of
     the Equipment by the Lessor pursuant to and in accordance with the Lease,
     the Credit Agreement or the Participation Agreement or pursuant to the
     exercise of the remedies set forth in Section 17 of the Lease.

          "Letters of Credit" shall have the meaning set forth in paragraph
     4.1(a) of the Corporate Credit Agreement.

<PAGE>

                                                                              26

          "Lien" shall mean any mortgage, pledge, hypothecation, assignment,
     deposit arrangement, encumbrance, lien (statutory or other), or preference,
     priority or other security agreement or preferential arrangement of any
     kind or nature whatsoever (including, without limitation, any conditional
     sale or other title retention agreement, any Financing Lease having
     substantially the same economic effect as any of the foregoing, and the
     filing of any financing statement under the Uniform Commercial Code or
     comparable law of any jurisdiction in respect of any of the foregoing).

          "Limited Deficiency Amount" shall mean, with respect to each piece of
     Equipment, the amount equal to the sum of the Termination Value with
     respect to such piece of Equipment on each Payment Date less the Maximum
     Residual Guarantee Amount as of such date with respect to such piece of
     Equipment.

          "Loan Year" shall mean a period of time from the Initial Closing Date
     or any anniversary of the Initial Closing Date to the immediately
     succeeding anniversary of the Initial Closing Date.

          "Loans" shall have the meaning set forth in Section 2.l(a) of the
     Credit Agreement.

          "MAC" shall mean Meter Acquisition Company LP, LLLP, a Delaware
     registered limited liability limited partnership, and its successors and
     assigns.

          "Managing Agents" shall mean the institutions listed on Schedule 1 to
     the Participation Agreement or Schedule 2 to the Credit Agreement.

          "Marketing Period" shall mean, if the Lessee has not given the
     Maturity Date Election Notice in accordance with Section 20.2 of the
     Lease, the period commencing on the date six months prior to the Maturity
     Date and ending on the Maturity Date.

          "Marketing Period Equity Return" shall mean the total of all amounts
     received by the Lessor or the Investors during the Marketing Period with
     respect to the Lessee's payment of the Purchase Option Price or the
     proceeds of any sale of a piece of Equipment pursuant to Section 21 of the
     Lease; provided that "Marketing Period Equity Return" shall in no event
     include any payment made by the Lessee in respect of Investor Yield.

          "Material Adverse Effect" shall mean a material adverse effect on (a)
     the business, operations, property or condition (financial or otherwise) of
     HCC and its Subsidiaries taken as a whole, (b) the ability of HCC or any of
     the Subsidiaries of HCC to perform their respective obligations under the
     Operative Agreements to which each is a

<PAGE>

                                                                              27

     party, or (c) the validity or enforceability of any of the Operative
     Agreements to which each is a party or the rights or remedies of the Agent
     or the Lenders thereunder.

          "Material Subsidiary" shall mean, at any particular date, each
     Subsidiary of HCC for which the aggregate value of all assets owned by such
     Subsidiary is greater than $5,000,000.

          "Maturity Date" shall mean the day immediately preceding the fifth
     anniversary of the Initial Closing Date.

          "Maturity Date Election Notice" shall have the meaning set forth in
     Section 20.2 of the Lease.

          "Maturity Date Purchase Option" shall mean the Lessee's option to
     purchase all of the Equipment on the Maturity Date in accordance with
     Section 20.2 of the Lease.

          "Maximum Purchase Option Amount" shall mean 75% of the highest
     Termination Value of all Equipment owned by the Lessor at any one time
     during the period from the first anniversary of the Initial Closing Date to
     6 months prior to the Maturity Date.

          "Maximum Residual Guarantee Amount" for each piece of Equipment at any
     time shall mean an amount equal to the product of (x) the Tranche A/B
     Equipment Cost in respect of such Equipment at such time and (y) the
     Tranche A Percentage in respect of such Equipment.

          "Modifications" shall have the meaning set forth in Section 11.1(a)
     of the Lease.

          "Multiemployer Plan" shall mean a Plan which is a multiemployer plan
     as defined in Section 4001(a)(3) of ERISA.

          "Net Proceeds" shall mean all amounts paid in connection with any
     Casualty or Condemnation, and all interest earned thereon, less the expense
     of claiming and collecting such amounts, including all reasonable costs and
     expenses in connection therewith for which the Agent or Lessor are entitled
     to be reimbursed pursuant to the Lease.

          "Net Sale Proceeds Shortfall" shall mean the amount by which the
     proceeds of a sale of a piece of Equipment described in Section 21.1 of
     the Lease (net of all expenses of sale) are less than the Limited
     Deficiency Amount for such Equipment.

<PAGE>

                                                                              28

          "Non-Excluded Taxes" shall have the meaning set forth in Section
     2.15(a) of the Credit Agreement.

          "Non-Recourse Indebtedness" shall mean Indebtedness (i) as to which
     neither HCC nor any of its Qualified Subsidiaries (a) provides any
     guarantee or credit support of any kind (including any undertaking,
     guarantee, indemnity, agreement or instrument that would constitute
     Indebtedness), or (b) is directly or indirectly liable (as guarantor or
     otherwise) and (ii) the explicit terms of which provide that there is no
     recourse against any of the assets of HCC or its Qualified Subsidiaries
     (other than the Capital Stock of an Unqualified Subsidiary) or that
     recourse is limited to assets which do not include the assets of HCC or its
     Qualified Subsidiaries (other than the Capital Stock of an Unqualified
     Subsidiary).

          "Notes" shall mean the collective reference to the Tranche A Notes and
     the Tranche B Notes.

          "Obligations" shall mean the collective reference to (i) the unpaid
     principal of and interest on the Notes and all other obligations and
     liabilities of the Borrower to the Agent or the Lenders (including interest
     accruing at the then applicable rate provided in the Credit Agreement after
     the maturity of the Loans and interest accruing at the then applicable rate
     provided in the Credit Agreement after the filing of any petition in
     bankruptcy, or the commencement of any insolvency, reorganization or like
     proceeding, relating to the Borrower, whether or not a claim for
     post-filing or post-petition interest is allowed in such proceeding),
     whether direct or indirect, absolute or contingent, due or to become due,
     now existing or hereafter incurred, which may arise under, out of, or in
     connection with, the Credit Agreement, the Notes, the other Credit
     Documents or any other document made, delivered or given in connection
     therewith, whether on account of principal, interest, reimbursement
     obligations, fees, indemnities, costs, expenses or otherwise (including all
     reasonable fees and disbursements of counsel to the Agent or to the Lenders
     that are required to be paid by the Borrower pursuant to the terms of the
     Credit Agreement or any other Credit Document), (ii) all amounts payable by
     the Lessee under any of the Operative Agreements (including indemnities and
     Commitment Fees) to the Agent and/or the Lenders and the Lessor and (iii)
     all amounts owing by the Lessee to the Investors in respect of accrued and
     unpaid Investor Yield and outstanding fundings of the Investor
     Contribution.

          "Officer's Certificate" shall mean a certificate signed by any
     individual holding the office of secretary, vice president or higher, which
     certificate shall certify as true and correct the subject matter being
     certified to in such certificate.

<PAGE>

                                                                              29

          "Operative Agreements" shall mean the following:

          (a)      the Participation Agreement;
          (b)      the Notes;
          (c)      the Lease and each Lease Supplement;
          (d)      the Assignment of Lease;
          (e)      the Credit Agreement;
          (f)      the Security Agreement;
          (g)      the UCC Financing Statements;
          (h)      the Guarantee;
          (i)      the Requisitions; and
          (j)      the Trust Agreement.

          "Overdue Interest" shall mean any interest payable pursuant to Section
     2.8(c) of the Credit Agreement.

          "Overdue Rate" shall mean (i) with respect to Tranche A Basic Rent,
     Tranche B Basic Rent and any other amount owed under or with respect to the
     Credit Agreement or the Security Documents, the rate set forth in Section
     2.8(c)(ii)(y) of the Credit Agreement, (ii) with respect to Investor Yield
     the rate set forth in Section 2.8(c)(ii)(y) of the Credit Agreement and
     (iii) with respect to the Investor Contribution and any other amount, the
     amount referred to in Section 2.8(c)(ii)(x) of the Credit Agreement.

          "Participant" shall have the meaning set forth in Section 9.6 of the
     Credit Agreement.

          "Participation Agreement" shall mean the Participation Agreement dated
     as of the Initial Closing Date among the Lessee, the Lessor, the Investors,
     the Agent and the Lenders, as it may be amended, supplemented or otherwise
     modified from time to time in accordance with the terms thereof or of any
     other Operative Agreement.

          "Payment Date" shall mean each Specified Interest Payment Date and any
     other date on which a payment is otherwise due under the terms of the
     Credit Agreement or, if all amounts due under the Credit Agreement have
     been paid in full and the Credit Agreement has been terminated, the first
     Business Day of each calendar month during the Term.

          "PBGC" shall mean the Pension Benefit Guaranty Corporation established
     pursuant to Subtitle A of Title IV of ERISA.

<PAGE>

                                                                              30

          "Permitted Business Acquisition" shall mean the formation of a new
     Subsidiary or any acquisition of all or substantially all the assets of, or
     50% or more of the shares of capital stock, partnership interests, joint
     venture interests, limited liability company interests or other similar
     equity interests in, or the acquisition of any compression and/or oil and
     gas production equipment assets of, a Person or division or line of
     business of a Person (or any subsequent investment made in a Person
     previously acquired in a Permitted Business Acquisition), if immediately
     after giving effect thereto: (a) no Default or Event of Default shall have
     occurred and be continuing or would result therefrom, (b) all transactions
     related thereto shall be consummated in accordance with applicable laws,
     (c) such acquired or newly formed corporation, partnership, association or
     other business entity shall be a Subsidiary and all actions required to be
     taken, if any, with respect to such acquired or newly formed Subsidiary
     under Section 10.9 of the Guarantee shall have been taken, (d)(i) HCC
     shall be in compliance, on a pro forma basis after giving effect to such
     acquisition or formation, with the covenants contained in Section 11.1 of
     the Guarantee recomputed as at the last day of the most recently ended
     fiscal quarter of HCC as if such acquisition had occurred on the first day
     of each relevant period for testing such compliance, and HCC shall have
     delivered to the Agent an Officers' Certificate to such effect, together
     with all relevant financial information for such Person or assets and (ii)
     any acquired or newly formed Subsidiary shall not be liable for any
     Indebtedness or Guarantor Obligations (except for Indebtedness and
     Guarantor Obligations permitted by Sections 11.2 and 11.4 of the
     Guarantee), (e) any acquired or newly formed Subsidiary (including
     Subsidiaries thereof) shall not have (except for Indebtedness and Guarantor
     Obligations permitted by Sections 11.2 and 11.4 of the Guarantee) any
     material liabilities (contingent or otherwise), including, without
     limitation, liabilities under Environmental Laws and liabilities with
     respect to any Plan, and HCC shall have delivered to the Agent a
     certificate, signed by a Responsible Officer, that to the best of such
     officer's knowledge, no such material liabilities exist.

          "Permitted Exceptions" shall mean (i) Liens of the types described in
     clauses (i), (ii), (iv) and (v) of the definition of Permitted Liens; (ii)
     Liens for Taxes not yet due; (iii) Lessor Liens and (iv) all non-monetary
     encumbrances, exceptions, restrictions, easements, rights of way,
     servitudes, encroachments and irregularities in title, other than Liens
     which, in the reasonable assessment of the Agent, materially impair the use
     of the Equipment for its intended purpose.

          "Permitted Liens" shall mean (i) the respective rights and interests
     of the parties to the Operative Agreements as provided in the Operative
     Agreements; (ii) the rights of any sublessee or assignee under a sublease
     or an assignment or a compressor management agreement expressly permitted
     by the terms of the Lease; (iii) Liens for Taxes that either are not yet
     due or are being contested in accordance with the provisions of Section
     12.2 of the Participation Agreement; (iv) Liens arising by operation of
     law, materialmen's,

<PAGE>

                                                                              31

     mechanics', workmen's, repairmen's, employees', warehousemen's and other
     like Liens in connection with any Modifications or arising in the ordinary
     course of business for amounts that either are not more than 30 days past
     due or are being diligently contested in good faith by appropriate
     proceedings, so long as such proceedings satisfy the conditions for the
     continuation of proceedings to contest Taxes set forth in Section 12.2(g)
     of the Participation Agreement; (v) Liens of any of the types referred to
     in clause (iv) above that have been bonded for not less than the full
     amount in dispute (or as to which other security arrangements satisfactory
     to the Lessor have been made), which bonding (or arrangements) shall comply
     with applicable Legal Requirements, and shall have effectively stayed any
     execution or enforcement of such Liens; (vi) Liens arising out of judgments
     or awards with respect to which appeals or other proceedings for review are
     being prosecuted in good faith and for the payment of which adequate
     reserves have been provided as required by GAAP or other appropriate
     provisions have been made, so long as such proceedings have the effect of
     staying the execution of such judgments or awards and satisfy the
     conditions for the continuation of proceedings to contest Taxes set forth
     in Section 12.2 of the Participation Agreement; (vii) Permitted
     Exceptions; and (viii) Lessor Liens.

          "Person" shall mean any individual, corporation, partnership, joint
     venture, association, joint-stock company, limited liability company,
     trust, unincorporated organization, governmental authority or any other
     entity.

          "Plan" shall mean at a particular time, any employee benefit plan
     which is covered by ERISA and in respect of which Lessee, or a Commonly
     Controlled Entity is (or, if such plan were terminated at such time, would
     under Section 4069 of ERISA be deemed to be) an "employer" as defined in
     Section 3(5) of ERISA.

          "Pricing Grid" means the pricing grid attached to the Participation
     Agreement as Annex B.

          "Properties" shall have the meaning set forth in Section 9.15 of the
     Guarantee.

          "Purchase Notice" shall have the meaning set forth in Section 20.1 of
     the Lease.

          "Purchase Option" shall have the meaning set forth in Section 20.1 of
     the Lease.

          "Purchase Option Price" shall have the meaning set forth in Section
     20.1 of the Lease.

          "Purchasing Lender" shall have the meaning specified in Section 9.7(a)
     of the Credit Agreement.

<PAGE>

                                                                              32

          "Qualified Subsidiary" shall mean each Subsidiary of the Lessee
     organized under a jurisdiction of the United States and having assets
     located primarily in the United States.

          "Register" shall have the meaning set forth in Section 9.8(a) of the
     Credit Agreement.

          "Release" shall mean any release, pumping, pouring, emptying,
     injecting, escaping, leaching, dumping, seepage, spill, leak, flow,
     discharge, disposal or emission of a Hazardous Substance.

          "Rent" shall mean, collectively, the Basic Rent and the Supplemental
     Rent, in each case payable under the Lease.

          "Reorganization" shall mean, with respect to any Multiemployer Plan,
     the condition that such plan is in reorganization within the meaning of
     Section 4241 of ERISA.

          "Replacement Equipment" shall have the meaning set forth in Section 30
     of the Lease.

          "Replacement Equipment Closing Date" shall mean each date on which the
     Lessee substitutes Equipment with Replacement Equipment pursuant to Section
     30 of the Lease.

          "Reportable Event" shall mean any of the events set forth in Section
     4043(c) of ERISA, other than those events as to which the thirty day notice
     period is waived by the PBGC.

          "Required Lenders" shall mean, at any time, the Lenders the Commitment
     Percentages of which aggregate at least 51%.

          "Requirement of Law" shall mean, as to any Person, the Certificate of
     Incorporation, By-Laws, Articles of Association or other organizational or
     governing documents of such Person, and any law, treaty, rule or regulation
     or determination of an arbitrator or a court or other Governmental
     Authority, in each case applicable to or binding upon such Person or any of
     its property or to which such Person or any of its property is subject.

          "Requisition" shall have the meaning set forth in Section 5.2(a) of
     the Participation Agreement.

<PAGE>

                                                                              33

          "Responsible Officer" shall mean the chief executive officer,
     president, the executive vice president, treasurer or secretary of any
     Person, or, with respect to financial matters, the chief financial officer
     or treasurer of the applicable Person.

          "Restructuring" shall mean both (i) the restructuring of HCC and the
     creation of Holdings as the corporate parent of HCC effective on December
     9, 1999 pursuant to Section 251(g) of the Delaware General Corporation Law,
     and (ii) the merger of HCC into a newly formed limited partnership which is
     a Subsidiary of Holdings (such partnership to be the surviving entity of
     such merger).

          "Sale and Leaseback Transaction" shall have the meaning ascribed to it
     in subsection 11.13 of the Guarantee.

          "Scheduled Interest Payment Date" shall mean (a) as to any ABR Loan,
     the last day of each March, June, September and December to occur while
     such Loan is outstanding and the Maturity Date, (b) as to any Eurodollar
     Loan having an Interest Period of three months or less, the last day of
     such Interest Period and (c) as to any Eurodollar Loan having an Interest
     Period longer than three months, each day which is three months or a whole
     multiple thereof, after the first day of such Interest Period and the last
     day of such Interest Period.

          "Securities Act" shall mean the Securities Act of 1933, as amended,
     together with the rules and regulations promulgated thereunder.

          "Security Agreement" shall mean that certain Security Agreement dated
     as of the Initial Closing Date, made by the Lessor in favor of the Agent,
     as amended, supplemented or otherwise modified from time to time.

          "Security Documents" shall mean the collective reference to the
     Security Agreement, the Lease, the Assignment of Lease and all other
     security documents hereafter delivered to the Agent granting a Lien on any
     asset or assets of any Person to secure the obligations and liabilities of
     the Lessor under the Credit Agreement and/or under any of the other Credit
     Documents or to secure any guarantee of any such obligations and
     liabilities.

          "Shared Rights" shall mean the rights retained by the Lessor, but not
     to the exclusion of the Agent, pursuant to Section 8.3(ii) of the Credit
     Agreement.

          "Shareholder Subordinated Debt" shall mean all Subordinated Debt of
     the HCC under the Shareholder Subordinated Loan Agreement.

<PAGE>

                                                                              34

          "Shareholder Subordinated Loan Agreement" shall mean the Exchange and
     Subordinated Loan Agreement, dated as of December 23, 1996, between HCC and
     the lenders parties thereto, as amended, supplemented or otherwise modified
     from time to time.

          "Significant Casualty" shall mean a Casualty that in the reasonable,
     good faith judgment of the Lessee (as evidenced by an Officer's
     Certificate) either (a) renders the related Equipment unsuitable for
     continued use for its intended purpose immediately prior to such Casualty
     or (b) is so substantial in nature that restoration of such Equipment to
     substantially its condition as existed immediately prior to such Casualty
     would be impracticable or impossible.

          "Significant Condemnation" shall mean a Condemnation that in the
     reasonable, good faith judgment of the Lessee (as evidenced by an Officer's
     Certificate) either (a) renders the Equipment unsuitable for continued use
     for its intended purpose immediately prior to such Condemnation or (b) is
     such that restoration of such Equipment to substantially its condition as
     existed immediately prior to such Condemnation would be impracticable or
     impossible.

          "Single Employer Plan" shall mean any Plan which is covered by Title
     IV of ERISA, but which is not a Multiemployer Plan.

          "Specified Interest Payment Date" shall mean (a) any Scheduled
     Interest Payment Date and (b) any date on which interest is payable
     pursuant to Section 2.8(d)(ii) of the Credit Agreement in connection with
     any prepayment of the Loans.

          "Statutory Reserves" shall mean a fraction (expressed as a decimal),
     the numerator of which is the number one and the denominator of which is
     the number one minus the aggregate of the maximum reserve percentages
     (including any marginal, special, emergency or supplemental reserves)
     expressed as a decimal established by the Board and any other banking
     authority to which the Agent is subject for new negotiable nonpersonal time
     deposits in dollars of over $100,000 with maturities approximately equal to
     the applicable Interest Period. Statutory Reserves shall be adjusted
     automatically on and as of the effective date of any change in any reserve
     percentage.

          "Subordinated Debt" shall mean, as to any Person, any unsecured
     Indebtedness (including, with respect to HCC, the Shareholder Subordinated
     Debt, and, with respect to Holdings, the TIDES Debentures) the terms of
     which provide that such Indebtedness is subordinate and junior in right of
     payment to the payment of all obligations and liabilities of such Person to
     the Administrative Agent and the Lenders hereunder; provided, that

<PAGE>

                                                                              35

     prior to an Event of Default, Holdings and any Subsidiary may make
     regularly scheduled interest payments in respect of such Indebtedness.

          "Subordinated Guarantee Obligation": as to any Person, any unsecured
     Guarantee Obligation the terms of which provide that such Guarantee
     Obligation is subordinate and junior in right to the payment of all the
     obligations and liabilities of such Person to the Agent and the Lenders.

          "Subsidiary" shall mean as to any Person, a corporation, partnership
     or other entity of which shares of stock or other ownership interests
     having ordinary voting power (other than stock or such other ownership
     interests having such power only by reason of the happening of a
     contingency) to elect a majority of the board of directors or other
     managers of such corporation, partnership of other entity are at the time
     owned, or the management of which is otherwise controlled, directly or
     indirectly through one or more intermediaries, or both, by such Person.
     Unless otherwise qualified, all references to a "Subsidiary" or to
     "Subsidiaries" in any of the Operative Agreements shall refer to a
     Subsidiary or Subsidiaries of Holdings.

          "Supplement to Assignment of Lease" shall mean each Supplement to
     Assignment of Lease substantially in the form of Exhibit G to the
     Participation Agreement together with all attachments and schedules
     thereto, as the same may be supplemented, amended or modified from time to
     time.

          "Supplemental Rent" shall mean all amounts, liabilities and
     obligations (other than Basic Rent) which Lessee assumes or agrees to pay
     to Lessor or any other Person under the Lease or under any of the other
     Operative Agreements (other than the Guarantee made by the Guarantors in
     favor of the Agent).

          "Tax Indemnitee" shall mean the Lessor, the Investors, the Trust
     Company, the Agent, each Lender and their Affiliates, successors, assignees
     and assigns.

          "Taxes" shall have the meaning set forth in the definition of
     Impositions.

          "Term" shall mean the Basic Term.

          "Termination Date" shall have the meaning set forth in Section 16.2(a)
     of the Lease.

          "Termination Notice" shall have the meaning set forth in Section
     16.1(a) of the Lease.

<PAGE>

                                                                              36

          "Termination Value" shall mean with respect to all Equipment, as of
     any determination date, an amount equal to the sum of (i) the aggregate
     outstanding principal of the Notes, accrued and unpaid interest on the
     Notes and any other amounts due under the Credit Agreement, plus (ii) the
     aggregate outstanding amount of the Investor Contributions and all accrued
     amounts due on account of the Investor Yield plus (iii) all other amounts
     due and owing to the Investors, Agent or Lenders under any Operative
     Agreements. "Termination Value" with respect to a particular piece of
     Equipment shall mean an amount equal to the product of the Termination
     Value of all the Equipment times a fraction, the numerator of which is the
     Equipment Cost allocable to the particular piece of Equipment in question
     and the denominator of which is the aggregate Equipment Cost for all
     Equipment.

          "TIDES" shall mean the Term Income Deferrable Equity Securities
     (TIDES) (SM) issued pursuant to the TIDES Declaration of Trust.

          "TIDES Declaration of Trust" shall mean the Amended and Restated
     Declaration of Trust, dated as of December 15, 1999, by Holdings, the
     holders of interests in the Trust from time to time and the trustees
     thereof.

          "TIDES Debentures" shall mean the unsecured debentures junior and
     subordinate in right of payment to all the obligations and liabilities of
     Holdings issued pursuant to the TIDES Indenture.

          "TIDES Guarantees" means (i) the Preferred Securities Guarantee
     Agreement, dated as of December 15, 1999, between Holdings and Wilmington
     Trust Company, as guarantee trustee, and the Common Securities Guarantee
     Agreement, dated as of December 15, 1999, by Holdings.

          "TIDES Indenture" shall mean the Indenture, dated as of December 15,
     1999, between Holdings and Wilmington Trust Company, as trustee thereunder.

          "TIDES Trust" shall mean Hanover Compressor Capital Trust, a Delaware
     business trust, and its successors and assigns.

          "Total Condemnation" shall mean a Condemnation that involves a taking
     of Lessor's entire title to a piece of Equipment.

          "Tranche A Basic Rent" shall mean the interest due on the Tranche A
     Loans on any Specified Interest Payment Date pursuant to the Credit
     Agreement (but not including interest on overdue amounts under Section
     2.8(c) of the Credit Agreement or otherwise).

<PAGE>

                                                                              37

          "Tranche A Loan" shall have the meaning set forth in Section 2.3(b) of
     the Credit Agreement.

          "Tranche A Note" shall have the meaning set forth in Section 2.2 of
     the Credit Agreement.

          "Tranche A Percentage" shall mean, with respect to a piece of
     Equipment, upon the date on which the Borrower first borrows any Loans in
     connection with the payment of Tranche A/B Equipment Cost for such piece of
     Equipment, the maximum percentage of the Tranche A/B Equipment Cost in
     respect of such piece of Equipment which may be allocated to Tranche A
     Loans as of such date without causing the Lease to be treated as a capital
     lease for the purposes of Statement of Financial Accounting Standards
     (SFAS) No. 13, as determined in good faith by the Lessee and certified to
     the Agent in accordance with the terms of the Participation Agreement;
     provided, however, in no event shall such percentage be less than 82.45% of
     Equipment Costs. The Tranche A Percentage for a piece of Equipment, as
     determined upon the date on which the Borrower first borrows any Loans in
     connection with the payment of Tranche A/B Equipment Cost for such piece of
     Equipment, shall be the Tranche A Percentage for such piece of Equipment at
     all times thereafter.

          "Tranche A/B Equipment Cost" shall mean, with respect to each piece of
     Equipment at any date of determination, an amount equal to (a) the
     aggregate principal amount of Loans made on or prior to such date with
     respect to such piece of Equipment minus (b) the aggregate amount of
     prepayments of the Loans allocated to reduce the Tranche A/B Equipment Cost
     of such piece of Equipment pursuant to Section 2.5(d) of the Credit
     Agreement.

          "Tranche B Basic Rent" shall mean the scheduled interest due on the
     Tranche B Loans on any Payment Date pursuant to the Credit Agreement (but
     not including interest on overdue amounts under Section 2.8(c) of the
     Credit Agreement or otherwise).

          "Tranche B Deficit" shall have the meaning specified in Section 9.2 of
     the Participation Agreement.

          "Tranche B Loan" shall have the meaning set forth in Section 2.3(b) of
     the Credit Agreement.

          "Tranche B Note" shall have the meaning set forth in Section 2.2 of
     the Credit Agreement.

          "Tranche B Percentage" shall mean 100% minus the Tranche A Percentage.

<PAGE>

                                                                              38

          "Transaction Expenses" shall mean:

               (a)     the reasonable out-of-pocket expenses, disbursement or
          cost of Agent and Arranger incurred in connection with the
          consummation of the transactions contemplated by the Operative
          Agreements;

               (b)     the reasonable fees and reasonable out-of-pocket expenses
          of the Trust Company in connection with the transactions contemplated
          by the Operative Agreements, including, without limitation, the
          initial and annual Trust Company's fee and all reasonable fees and
          reasonable out-of pocket expenses of the Trust Company and any
          necessary co-trustees (including reasonable counsel fees and expenses)
          or any successor trustee, for acting as trustee under the Trust
          Agreement;

               (c)     the fee payable to Arranger in connection with the
          transactions contemplated by the Operative Agreements;

               (d)     any and all Taxes (to the extent provided in Section 11.2
          of the Participation Agreement) and fees incurred in recording or
          filing any Operative Agreement or any other transaction document, any
          bill of sale, security agreement, notice or financing statement with
          any public office, registry or governmental agency in connection with
          the transactions contemplated by the Operative Agreements;

               (e)     any brokers' fees (with respect to brokers retained by or
          with the prior consent of HCC) and any and all stamp, transfer and
          other similar taxes, fees and excises, if any, including any interest
          and penalties, which are payable in connection with the acquisition of
          any piece of Equipment;

               (f)     all reasonable out-of-pocket costs and expenses incurred
          in connection with the enforcement or preservation of any rights under
          the Operative Agreements, including, without limitation, the
          reasonable fees and disbursements of counsel to the Agent, each Lender
          and the Investors;

               (g)     all reasonable out-of-pocket costs and expenses incurred
          in connection with any amendment, supplement or modification to the
          Operative Agreements requested by the Lessee or any Guarantors and any
          other documents prepared in connection therewith, and the consummation
          and administration of the transactions contemplated thereby,
          including, without limitation, the reasonable fees and disbursements
          of counsel to the Agent and the Investors; and

<PAGE>

                                                                              39

               (h)     all reasonable out-of-pocket costs and expenses incurred
          by the Lessor, the Lessee, the Investors or the Agent in connection
          with any purchase of the Equipment by the Lessee pursuant to the
          Lease.

          "Transferee" shall have the meaning set forth in Section 2.12 of the
     Credit Agreement.

          "Trust" shall mean the Lessor.

          "Trustee" shall have the meaning set forth in the Trust Agreement.

          "Trust Agreement" shall mean the Trust Agreement dated as of the
     Initial Closing Date between the Investors and the Trust Company as
     amended, supplemented and otherwise modified from time to time in
     accordance with the terms thereof and of any other Operative Agreement.

          "Trust Company" shall mean Wilmington Trust Company, in its individual
     capacity, and any successor trustee under the Trust Agreement in its
     individual capacity.

          "Trust Estate" shall have the meaning set forth in the Trust
     Agreement.

          "Type" shall mean, as to any Loan, its nature as an ABR Loan or a
     Eurodollar Loan.

          "UCC Financing Statements" shall mean collectively the Lender
     Financing Statements and the Lessor Financing Statements.

          "Uniform Commercial Code" and "UCC" shall mean the Uniform Commercial
     Code as in effect in any applicable jurisdiction.

          "Unperfected Jurisdiction" shall mean any jurisdiction for which the
     Agent has not received evidence in form and substance satisfactory to it
     that all filings, recordings, registrations and other actions, including
     the filing of duly executed Lessee Financing Statements and Lessor
     Financing Statements, necessary to perfect the Liens created by the
     Security Documents, have been completed for such jurisdiction (other than
     filings or other actions required pursuant to Subsection 8.8 of the
     Participation Agreement).

          "Unqualified Subsidiary" shall mean any Subsidiary of the Lessee other
     than Qualified Subsidiaries.

<PAGE>

                                                                              40

          "Wear and Tear Payment" shall have the meaning set forth in Section
     2.5(b) of the Credit Agreement.

<PAGE>

                                                                         ANNEX C

                                  PRICING GRID

                             Participation Agreement

                                                                  Applicable
   Consolidated        Applicable Margin-  Applicable Margin-     Commitment
Indebtedness Ratio     Eurocurrency Loans   Base  Rate Loans       Fee Rate
---------------------  ------------------  ------------------  ---------------
    *4.0 to 1.0                 1.75%          .750%                 .375%

  **4.0 to 1.0 and
    *3.0 to 1.0                 1.75%          .750%                 .375%

  **3.0 to 1.0 and
    *2.0 to 1.0                 1.50%          .500%                 .300%

  **2.0 to 1.0 and
    *1.0 to 1.0                 1.25%          .500%                 .300%

    **l.0 to 1.0                1.00%             0%                 .250%

Changes in the Applicable Margin or in the Applicable Commitment Fee Rate
resulting from changes in the Consolidated Indebtedness Ratio shall become
effective on each date which is the start of the succeeding fiscal quarter
(each, an "Adjustment Date") for which an Applicable Margin Certificate of
Holdings is delivered to the Lenders pursuant to Section 10.2(f) of the
Guarantee (but in any event not later than the 45th day after the end of each of
each quarter of each fiscal year) and shall remain in effect until the next
change to be effected pursuant to this paragraph. If any Applicable Margin
Certificate referred to above is not delivered within the time periods specified
above, then the Consolidated Indebtedness Ratio as at the end of the fiscal
period that would have been covered thereby shall for the purposes of this
definition be deemed to be greater than 4.0 to 1.0. In addition, at all times
while an Event of Default shall have occurred and be continuing, the highest
rate set forth in each column of the Pricing Grid shall apply. Each
determination of the Consolidated Indebtedness Ratio pursuant to this Pricing
Grid shall be made for the periods and in the manner contemplated by Section
11.1(d) of the Guarantee.

*  Greater Than
** Less Than or equal to