<PAGE>

                                                                   Exhibit 10.66

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


                             PARTICIPATION AGREEMENT

                                      among

                    HANOVER COMPRESSION LIMITED PARTNERSHIP,
                                   as Lessee,

                         HANOVER EQUIPMENT TRUST 2001A,
                           a Delaware business trust,
                                   as Lessor,

                      GENERAL ELECTRIC CAPITAL CORPORATION,
                             as Certificate Holders,

                    HANOVER COMPRESSION LIMITED PARTNERSHIP,
                           HANOVER COMPRESSOR COMPANY,
                    HANOVER APPLIED PROCESS SOLUTIONS, INC.,
                       EUREKA ENERGY LIMITED PARTNERSHIP,
                    HANOVER ACQUISITION LIMITED PARTNERSHIP,
                    HANOVER COMPRESSOR LIMITED HOLDINGS LLC,
                        HANOVER LAND LIMITED PARTNERSHIP,
                      HANOVER MAINTECH LIMITED PARTNERSHIP,
                       HANOVER/SMITH LIMITED PARTNERSHIP,
                      HANOVER OEC COMPRESSION CORPORATION,
                      PRODUCTION OPERATORS CORPORATION, and
                           PRODUCTION OPERATORS, INC.
                                 as Guarantors,

                                       and

                              WILMINGTON TRUST FSB
                              as Indenture Trustee,
                      Collateral Agent under the Indenture,
  and in its individual capacity, only to the extent expressly set forth herein

                                       and

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

                         ------------------------------

                           Dated as of August 31, 2001

                         ------------------------------


================================================================================
<PAGE>

                                TABLE OF CONTENTS

                                                                            Page
                                                                            ----

                          SECTION 1. SALE OF SECURITIES

1.1      Authorization and Issuance of Securities............................ 1
         ----------------------------------------
1.2      Sale and Purchase of Securities..................................... 1
         -------------------------------

                   SECTION 2. CERTIFICATE HOLDER CONTRIBUTION

2.1      Certificate Holder Contribution..................................... 2
         -------------------------------
2.2      Prepayment of the Certificates...................................... 2
         ------------------------------

                     SECTION 3. SUMMARY OF THE TRANSACTIONS

3.1      Operative Agreements................................................ 2
         --------------------
3.2      Equipment Purchase and Lease........................................ 2
         ----------------------------

                SECTION 4. THE CLOSING OF THE LEASE TRANSACTIONS

4.1      Release Date........................................................ 2
         ------------
4.2      Trust Company Authorization......................................... 2
         ---------------------------

                          SECTION 5. FUNDING OF ADVANCE

5.1      General............................................................. 3
         -------
5.2      Procedures for Funding.............................................. 3
         ----------------------

                SECTION 6. CONDITIONS OF THE RELEASE AND ADVANCE

6.1      General Conditions to the Release of the Certificate Holder
         -----------------------------------------------------------
         Contributions and the Proceeds of the Securities.................... 3
         ------------------------------------------------

                    SECTION 7. REPRESENTATIONS AND WARRANTIES

7.1      Representations and Warranties of the Indenture Trustee, the
         ------------------------------------------------------------
         Collateral Agent, and Wilmington Trust FSB.......................... 6
         ------------------------------------------
7.2      Representations and Warranties of Lessor............................ 7
         ----------------------------------------
7.3      Representations and Warranties of the Trust Company.................10
         ---------------------------------------------------
7.4      Representations and Warranties of the Lessee and the Guarantors.....11
         ---------------------------------------------------------------

                     SECTION 8. PAYMENT OF CERTAIN EXPENSES

8.1      Transaction Expenses................................................16
         --------------------
8.2      Brokers' Fees and Stamp Taxes.......................................16
         -----------------------------
8.3      Certain Fees and Expenses...........................................16
         -------------------------
8.4      Continuous Perfection of Security Interests.........................17
         -------------------------------------------
8.5      Oklahoma Equipment Subleases........................................17
         ----------------------------
8.6      Operative Agreements and Related Obligations........................17
         --------------------------------------------

              SECTION 9. COVENANTS OF THE LESSEE AND THE GUARANTORS

9.1      Limitation on Indebtedness..........................................17
         --------------------------
9.2      Limitation on Layering..............................................21
         ----------------------
9.3      Limitation on Restricted Payments...................................21
         ---------------------------------
9.4      Limitation on Liens.................................................24
         -------------------
9.5      Limitation on Restrictions on Distributions from Restricted
         -----------------------------------------------------------
         Subsidiaries........................................................24
         ------------
9.6      Limitation on Sales of Assets and Subsidiary Stock..................25
         --------------------------------------------------
9.7      Limitation on Affiliate Transactions................................26
         ------------------------------------
9.8      Limitation on Sale of Capital Stock of Restricted Subsidiaries......27
         --------------------------------------------------------------

                                      -i-
<PAGE>

9.9      SEC Reports and Available Information...............................27
         -------------------------------------
9.10     Merger and Consolidation............................................27
         ------------------------
9.11     Future Subsidiary Guarantors........................................29
         ----------------------------
9.12     Changes in Name, Jurisdiction of Incorporation, etc.................29
         ---------------------------------------------------

                   SECTION 10. OTHER COVENANTS AND AGREEMENTS

10.1     Covenants of the Trust, the Certificate Holders, Indenture Trustee
         ------------------------------------------------------------------
         and the Trust Company...............................................29
         ---------------------
10.2     Amendment of Certain Documents......................................31
         ------------------------------
10.3     Proceeds of Casualty................................................31
         --------------------
10.4     Income Tax Reporting................................................31
         --------------------
10.5     Financial Statements and Other Information..........................32
         ------------------------------------------
10.6     Financial Reporting.................................................32
         -------------------
10.7     Appraisal...........................................................32
         ---------

                           SECTION 11. LESSEE'S RIGHTS

11.1     Rights of Lessee Regarding the Indenture............................33
         ----------------------------------------
11.2     Agent for Acquisition of Equipment..................................35
         ----------------------------------

                        SECTION 12. TRANSFER OF INTEREST

12.1     Restrictions on Transfer............................................35
         ------------------------
12.2     Effect of Transfer..................................................35

                           SECTION 13. INDEMNIFICATION

13.1     General Indemnity...................................................36
         -----------------
13.2     General Tax Indemnity...............................................37
         ---------------------
13.3     Entity Tax Indemnity................................................41
         --------------------

                            SECTION 14. MISCELLANEOUS

14.1     Survival of Agreements..............................................41
         ----------------------
14.2     No Broker, etc......................................................41
         ---------------
14.3     Notices.............................................................41
         -------
14.4     Counterparts........................................................43
         ------------
14.5     Amendments and Termination..........................................43
         --------------------------
14.6     Headings, etc.......................................................43
         --------------
14.7     Parties in Interest.................................................43
         -------------------
14.8     GOVERNING LAW.......................................................44
         -------------
14.9     Severability........................................................44
         ------------
14.10    Liability Limited...................................................44
         -----------------
14.11    Rights of Lessee....................................................44
         ----------------
14.12    Further Assurances..................................................44
         ------------------
14.13    Successors and Assigns..............................................45
         ----------------------
14.14    No Representation or Warranty.......................................45
         -----------------------------
14.15    Highest Lawful Rate.................................................45
         -------------------
14.16    Waiver..............................................................46
         ------
14.17    Integration.........................................................46
         -----------
14.18    Obligations of Guarantors...........................................46
         -------------------------

                                      -ii-
<PAGE>

Annex A         Rules of Usage and Definitions

Exhibits
--------

Exhibit A       Form of Requisition
Exhibit B       Form of Opinions

Schedules
---------

Schedule 9.7(b)


                                     -iii-
<PAGE>

         PARTICIPATION AGREEMENT dated as of August 31, 2001 (this "Agreement"),
among HANOVER COMPRESSION LIMITED PARTNERSHIP, a Delaware limited partnership
and a wholly owned subsidiary of Hanover (the "Lessee"); HANOVER EQUIPMENT TRUST
2001A, a Delaware business trust (the "Trust" or the "Lessor"), GENERAL ELECTRIC
CAPITAL CORPORATION, as Certificate Holders (the "Certificate Holders"), HANOVER
COMPRESSION LIMITED PARTNERSHIP, a Delaware limited partnership, HANOVER
COMPRESSOR COMPANY, a Delaware corporation ("Hanover" or "Holdings"), HANOVER
APPLIED PROCESS SOLUTIONS, INC., a Delaware corporation, EUREKA ENERGY LIMITED
PARTNERSHIP, a Delaware limited partnership, HANOVER ACQUISITION LIMITED
PARTNERSHIP, a Delaware limited partnership, HANOVER COMPRESSOR LIMITED HOLDINGS
LLC, a Delaware limited liability company, HANOVER LAND LIMITED PARTNERSHIP, a
Delaware limited partnership, HANOVER MAINTECH LIMITED PARTNERSHIP, a Delaware
limited partnership, HANOVER/SMITH LIMITED PARTNERSHIP, a Delaware limited
partnership, HANOVER OEC COMPRESSION CORPORATION, an Oklahoma corporation,
PRODUCTION OPERATORS CORPORATION, a Delaware corporation, and PRODUCTION
OPERATORS, INC., a Delaware corporation, as Guarantors (collectively, together
with the Lessee and Hanover, the "Guarantors"), WILMINGTON TRUST FSB, as
indenture trustee for the Securityholders (the "Indenture Trustee") and as
collateral agent for the Securityholders and the Certificate Holders (the
"Collateral Agent"), and in its individual capacity only to the extent expressly
set forth herein (in its individual capacity, "Wilmington Trust FSB"), and
WILMINGTON TRUST COMPANY (the "Trust Company") in its individual capacity only
to the extent expressly set forth herein. Capitalized terms used but not
otherwise defined in this Agreement shall have the meanings set forth in Annex A
hereto.


                              Preliminary Statement
                              ---------------------

         In consideration of the mutual agreements herein contained and other
good and valuable consideration, receipt of which is hereby acknowledged, the
parties hereto hereby agree as follows:


                          SECTION 1. SALE OF SECURITIES

         1.1   Authorization and Issuance of Securities. On the Closing Date,
the Lessor authorized the issuance and sale of $300,000,000 aggregate principal
amount of the Securities. The Securities were issued pursuant to, are entitled
to the benefits of, and are governed by, the Indenture and secured by a first
priority security interest in the Equipment pursuant to the Security Documents.

         1.2   Sale and Purchase of Securities. Pursuant to the terms and
conditions of the Purchase Agreement and in reliance on the representations and
warranties contained therein and in this Agreement, the Initial Purchasers have
purchased Securities in an aggregate principal amount of $300,000,000.
<PAGE>

                                                                               2


                   SECTION 2. CERTIFICATE HOLDER CONTRIBUTION

         2.1   Certificate Holder Contribution. On the Closing Date, the
Certificate Holders made an investment in the Lessor (a "Certificate Holder
Contribution") in an amount equal to $9,300,000. The Lessor shall use the
Certificate Holder Contribution to pay a portion of the Equipment Costs
simultaneously and pro rata with the proceeds of the Securities.

         2.2   Prepayment of the Certificates. The Lessor shall prepay the
Certificate Holder Contribution in accordance with Section 5.1 of the Indenture
in connection with the exercise by the Lessee of its right to direct the Lessor
to prepay the Securities.


                     SECTION 3. SUMMARY OF THE TRANSACTIONS

         3.1   Operative Agreements. (a) On the Closing Date, (i) the applicable
parties thereto shall have executed the Indenture, the Securities, the Trust
Agreement, the Certificates and the Escrow Agreement, (ii) the Securities and
the Certificates shall have been issued, and (iii) the proceeds of the
Securities and Certificate Holder Contribution shall have been deposited in the
Escrow.

         (b)   On the Release Date, each of the applicable parties thereto shall
execute and deliver this Agreement, the Lease, the Security Agreement, the
Hanover Guarantee, the Assignment of Lease, the Consent to Assignment, and such
other documents, instruments, certificates and opinions of counsel as agreed to
by the parties hereto.

         3.2   Equipment Purchase and Lease. On the Release Date and subject to
the terms and conditions of this Agreement and the Indenture (i) the Lessor will
use the Escrowed Funds to purchase all right, title and interest in and to each
Unit of Equipment on the Release Date and (ii) the Lessor will simultaneously
lease all of its right, title and interest in the Equipment to the Lessee by
executing and delivering the Lease.


                SECTION 4. THE CLOSING OF THE LEASE TRANSACTIONS

         4.1   Release Date. All documents and instruments required to be
delivered on the Release Date shall be delivered at the offices of Simpson
Thacher & Bartlett, 425 Lexington Avenue, New York, New York, or at such other
location as may be determined by the Initial Purchasers.

         4.2   Trust Company Authorization. The Certificate Holders agree that,
with respect to the Release Date, the satisfaction or waiver of the conditions
contained in Section 6 hereof shall constitute authorization and direction by
the Certificate Holders to the Trustee, without further act, to take on behalf
of the Lessor the actions specified in Section 2.1 of the Trust Agreement.
<PAGE>

                                                                               3

                          SECTION 5. FUNDING OF ADVANCE

         5.1   General. To the extent funds have been made available to the
Lessor from proceeds of the Securities and Certificate Holder Contributions and,
if the Escrow Agreement is executed and delivered, are released from the 2001A
Escrow Account, the Lessor will (i) acquire the Equipment in accordance with the
terms of this Agreement and the other Operative Agreements; (ii) on behalf of
the Lessee, pay Transaction Expenses; and (iii) pay all other Equipment Costs.

         5.2   Procedures for Funding. (a) On the Release Date, the Lessee shall
deliver to the Certificate Holders and the Indenture Trustee, a requisition (the
"Requisition"), appropriately completed, in the form of Exhibit A hereto.

         (b)   The Requisition shall (i) be irrevocable; and (ii) request funds
for the payment of Equipment Costs.


                SECTION 6. CONDITIONS OF THE RELEASE AND ADVANCE

         6.1   General Conditions to the Release of the Certificate Holder
Contributions and the Proceeds of the Securities. If the Escrow Agreement is
executed and delivered, the agreement of the Initial Purchasers and each
Certificate Holder to have the proceeds of the Securities and the Certificate
Holder Contribution released from the 2001A Escrow Account on the Release Date
to the Lessor to pay Equipment Costs is subject to the satisfaction of or waiver
by the Certificate Holders and the Initial Purchasers, immediately prior to or
concurrently with the making of such release, of the following conditions
precedent:

               (a)    Operative Agreements. Each of the Operative Agreements
         entered into on the Closing Date and the Release Date shall have been
         duly authorized, executed, acknowledged and delivered by the parties
         thereto and shall be in full force and effect, and no event of default
         thereunder or default under Section 17.1(i) or (ii) of the Lease shall
         exist (both before and after giving effect to the transactions
         contemplated by the Operative Agreements), and the Initial Purchasers,
         the Indenture Trustee, the Trust Company, the Certificate Holders and
         Lessee each shall have received a fully executed copy of each of the
         Operative Agreements (other than the Securities of which the Indenture
         Trustee shall have received the originals thereof and the Certificates
         of which each Certificate Holder shall have received its original
         thereof);

               (b)    Taxes. All taxes, fees and other charges in connection
         with the execution, delivery, and, where applicable, recording, filing
         and registration of the Operative Agreements shall have been paid or
         provisions for such payment shall have been made to the reasonable
         satisfaction of the Indenture Trustee and the Certificate Holders;

               (c)    Governmental Approvals. All necessary Governmental
         Approvals, in each case required by any law or regulation enacted,
         imposed or adopted on the date hereof shall have been obtained or made
         and be in full force and effect;
<PAGE>

                                                                               4

               (d)    Insurance. The Indenture Trustee, the Initial Purchasers
         and the Certificate Holders shall have received evidence in form and
         substance reasonably satisfactory to them that all of the requirements
         of Section 14 of the Lease shall have been satisfied (which evidence
         shall include a report from a reputable insurance broker certifying
         that all such requirements have been satisfied);

               (e)    Legal Requirements. The transactions contemplated by the
         Operative Agreements do not and will not violate in any respect any
         Legal Requirements that would reasonably be expected to have a Material
         Adverse Effect and do not and will not subject the Indenture Trustee,
         any Initial Purchaser, the Trust Company, the Certificate Holders or
         the Lessee to any adverse regulatory prohibitions or constraints;

               (f)    Corporate Proceedings of the Lessee and Each Guarantor. On
         the Release Date, the Indenture Trustee, the Initial Purchasers and the
         Certificate Holders shall have received a copy of the resolutions or
         minutes of the Board of Directors of the Lessee and each Guarantor
         authorizing the execution, delivery and performance of this Agreement,
         the Hanover Guarantee and the other Operative Agreements to which it is
         a party, certified by the Secretary or an Assistant Secretary of the
         Lessee or of such Guarantor as of the Release Date, which certificate
         shall state that the resolutions or minutes thereby certified have not
         been amended, modified, revoked or rescinded;

               (g)    Lessee and Guarantor Incumbency Certificate. On the
         Release Date, the Indenture Trustee, the Initial Purchasers and the
         Certificate Holders shall have received a certificate of the Lessee and
         each Guarantor, dated the Release Date, as to the incumbency and
         signature of the officers of the Lessee and each Guarantor executing
         any Operative Agreement reasonably satisfactory in form and substance
         to the Initial Purchasers and the Certificate Holders, executed by the
         President or any Vice President and the Secretary or any Assistant
         Secretary of the Lessee or of such Guarantor with true and complete
         copies of their respective certificates of incorporation and by-laws
         attached;

               (h)    Corporate Proceedings of the Trust Company and Wilmington
         Trust FSB. On the Release Date, the Initial Purchasers, the Certificate
         Holders and the Lessee shall have received a copy of the resolutions,
         in form and substance reasonably satisfactory to the Initial
         Purchasers, Certificate Holders and the Lessee, of the Board of
         Directors of the Trust Company and of the Board of Directors of
         Wilmington Trust FSB, in each case authorizing the execution, delivery
         and performance of the Operative Agreements to which it is a party,
         certified by the Secretary or an Assistant Secretary of the Trust
         Company as of the Release Date, which certificate shall state that the
         resolutions thereby certified have not been amended, modified, revoked
         or rescinded;

               (i)    Trust Company and Wilmington Trust FSB Incumbency
         Certificate. On the Release Date, the Initial Purchasers, the
         Certificate Holders and the Lessee shall have received a certificate of
         the Trust Company, and a certificate of Wilmington Trust FSB, in each
         case dated the Release Date, as to the incumbency and signature of the
         officers of the Trust Company or Wilmington Trust FSB, as applicable,
         executing any Operative Agreement, executed by the President or any
         Vice President, Assistant Vice President, or a duly authorized Trust
         Officer or Wilmington Trust FSB, as applicable, and
<PAGE>

                                                                               5

         the Secretary or any Assistant Secretary of the Trust Company or
         Wilmington Trust FSB, as applicable;

               (j)    Consents, Licenses and Approvals. All consents,
         authorizations and filings required in order to allow Lessee and the
         Guarantors to consummate the transaction contemplated by this Agreement
         shall have been obtained and be in full force and effect, except to the
         extent the failure to obtain or maintain any such consent,
         authorization or filing would not individually or in the aggregate have
         a Material Adverse Effect;

               (k)    Legal Opinions. (i) The Indenture Trustee, the Lessee, the
         Guarantors, the Certificate Holders and the Initial Purchasers shall
         have received the executed legal opinion of Latham & Watkins, counsel
         to the Lessee and the Guarantors substantially in the form set forth in
         Exhibit B-1 hereto;

                      (ii)   The Indenture Trustee, the Lessee, the
                  Guarantors, the Certificate Holders and the Initial Purchasers
                  shall have received the executed legal opinion of Morris,
                  James, Hitchens & Williams, counsel to the Trust, the Trust
                  Company, and Wilmington Trust FSB, substantially in the form
                  set forth in Exhibit B-2 hereto;

                      (iii)  The Indenture Trustee, the Lessee, the
                  Certificate Holders, the Trust Company and the Initial
                  Purchasers shall have received the executed legal opinion of
                  local counsel to the Lessee in the following states: Texas,
                  Louisiana, New Mexico, Wyoming, Oklahoma, Colorado, and
                  Arkansas, substantially in the form of Exhibit B-3 hereto.

               (l)    Actions to Perfect Liens. The Indenture Trustee shall have
         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 or, in the opinion of the Collateral
         Agent or the Certificate Holders, desirable to perfect the Liens
         created by the Security Documents shall have been completed or shall be
         completed promptly thereafter;

               (m)    Lien Searches. By the Release Date, the Indenture Trustee
         and the Certificate Holders shall have received the results of recent
         searches by a Person reasonably satisfactory to the Initial Purchasers
         and the Certificate Holders, of the Uniform Commercial Code, judgment
         and tax lien filings which may have been filed (i) in each State in
         which any Equipment is located with respect to personal property of the
         Lessee and the owners of the Equipment immediately prior to the date
         hereof and (ii) the state of organization of Lessee and such owners,
         and the results of such search shall be satisfactory to the Initial
         Purchasers and the Certificate Holders;

               (n)    Representations and Warranties. The representations and
         warranties of the Lessor, the Lessee, the Initial Purchaser, the
         Certificate Holders and the Guarantors contained herein and in each of
         the other Operative Agreements shall be true and correct
<PAGE>

                                                                               6

         in all material respects on and as of the Release Date as if made on
         and as of the Release Date (unless such representations and warranties
         specifically refer to another date);

               (o)    Performance of Operative Agreements. The parties hereto
         (other than the Initial Purchaser or the Certificate Holders) shall
         have performed in all material respects their respective agreements
         contained herein and in the other Operative Agreements on or prior to
         the Release Date (to the extent required to be performed prior to the
         Release Date);

               (p)    Default. There shall not have occurred and be continuing
         any Default or Event of Default and no Default or Event of Default will
         have occurred after giving effect to the Advance requested by the
         Requisition.

               (q)    Requisition. The Indenture Trustee and the Certificate
         Holders shall have received a fully completed executed counterpart of
         the Requisition dated as of the Release Date;

               (r)    Bill of Sale. There shall have been delivered to the
         Lessor, a bill of sale (the "Bill of Sale"), in form and substance
         reasonably acceptable to the Indenture Trustee and the Certificate
         Holders, with respect to the Equipment, conveying title to the
         Equipment to the Lessor, subject only to the Permitted Exceptions;

               (s)    Title. The Lessor shall have good and valid title to the
         Equipment on the Release Date subject only to the Permitted Exceptions,
         and the Lessor shall have granted the security interest pursuant to the
         Security Agreement with respect to the Equipment; and

               (t)    Appraisal. The Initial Purchasers and the Certificate
         Holders shall have received an Appraisal of the Equipment and such
         Appraisal shall be in form and substance acceptable to the Initial
         Purchasers and the Certificate Holders.


                    SECTION 7. REPRESENTATIONS AND WARRANTIES

         7.1   Representations and Warranties of the Indenture Trustee, the
Collateral Agent, and Wilmington Trust FSB. Wilmington Trust FSB, in its
individual capacity and in its capacity as Indenture Trustee and Collateral
Agent, hereby represents and warrants to each of the other parties hereto as of
the Release Date as follows:

               (a)    Due Organization, etc. It is a federal savings bank duly
         organized and validly existing and in good standing and has the power
         and authority to enter into and perform its obligations under the
         Indenture and the other Operative Agreements to which it is or will be
         a party, and has the corporate power and authority to act as the
         Indenture Trustee and Collateral Agent under the Indenture and the
         other Operative Agreements to which it is or will be a party and to
         enter into and perform the obligations under each of the other
         Operative Agreements to which it is or will be a party and each other
         agreement, instrument and document to be executed and delivered by it
         in connection
<PAGE>

                                                                               7

         with or as contemplated by each such Operative Agreement to which it is
         or will be a party.

               (b)    Authorization; No Conflict. The execution, delivery and
         performance of each Operative Agreement to which it is a party, either
         in its individual capacity or as Indenture Trustee or Collateral Agent,
         have been duly authorized by all necessary action on its part and
         neither the execution and delivery thereof, nor the consummation of the
         transactions contemplated thereby, nor compliance by it with any of the
         terms and provisions thereof (i) does or will require any approval or
         consent of any Person, (ii) does or will contravene any Legal
         Requirement applicable to or binding on it as of the date hereof, (iii)
         does or will contravene or result in any breach of or constitute any
         default under, or result in the creation of any Lien upon any of its
         property under, its leases, organizational documents or by-laws, or any
         indenture, mortgage, chattel mortgage, deed of trust, conditional sales
         contract, bank loan or credit agreement or other agreement or
         instrument to which it is a party or by which it or its properties may
         be bound or affected or (iv) does or will require any Governmental
         Action by any Governmental Authority governing its banking or trust
         powers.

               (c)    Enforceability, etc. Each Operative Agreement to which it
         is a party has been duly executed and delivered by it and constitutes a
         legal, valid and binding obligation enforceable against it in
         accordance with the terms thereof except as enforceability may be
         limited by applicable bankruptcy, insolvency, fraudulent conveyance,
         reorganization, moratorium and other similar laws relating to or
         affecting the enforcement of creditors' rights generally and by general
         equitable principles (whether enforcement is sought by proceedings in
         equity or at law).

               (d)    Litigation. No litigation, investigation or proceeding of
         or before any arbitrator or Governmental Authority is pending or, to
         the knowledge of Wilmington Trust FSB, threatened by or against
         Wilmington Trust FSB with respect to any of the Operative Agreements or
         any of the transactions contemplated hereby or thereby.

         7.2   Representations and Warranties of Lessor. Lessor represents and
warrants to each of the other parties hereto as of the Release Date as follows:

               (a)    Due Organization, etc. Lessor is a duly organized and
         validly existing business trust in good standing under the laws of the
         State of Delaware and has the power and authority to carry on its
         business as now conducted and to enter into and perform its obligations
         under this Agreement, each Operative Agreement to which it is a party
         and each other agreement, instrument and document executed and
         delivered by it on the Closing Date or the Release Date in connection
         with or as contemplated by each such Operative Agreement.

               (b)    Authorization; No Conflict. The execution, delivery and
         performance of each Operative Agreement to which it is a party has been
         duly authorized by all necessary action on its part and neither the
         execution and delivery thereof by the Lessor, nor the consummation of
         the transactions contemplated thereby by the Lessor, nor compliance by
         it with any of the terms and provisions thereof (i) requires or will
         require
<PAGE>

                                                                               8


         any approval of (which approval has not been obtained) any Person, (ii)
         contravenes or will contravene any Legal Requirement applicable to or
         binding on it as of the date hereof, (iii) does or will contravene or
         result in any breach of or constitute any default under, or result in
         the creation of any Lessor Lien upon the Equipment or the Trust
         Agreement, any indenture, mortgage, chattel mortgage, deed of trust,
         conditional sales contract, bank loan or credit agreement or other
         agreement or instrument to which it or its properties may be bound or
         (iv) does or will require any Governmental Action by any Governmental
         Authority.

               (c)    Enforceability, etc. Each Operative Agreement to which it
         is a party has been duly executed and delivered by it and constitutes,
         or upon execution and delivery will constitute, a legal, valid and
         binding obligation enforceable against it in accordance with the terms
         thereof except as enforceability may be limited by applicable
         bankruptcy, insolvency, fraudulent conveyance, reorganization,
         moratorium and other similar laws affecting the enforcement of
         creditors' rights generally and by general equitable principles
         (whether enforcement is sought by proceedings in equity or at law).

               (d)    Litigation. No litigation, investigation or proceeding of
         or before any arbitrator or Governmental Authority is pending or
         threatened by or against the Lessor (a) with respect to any of the
         Operative Agreements or any of the transactions contemplated hereby or
         thereby, or (b) which would reasonably be expected to have a material
         adverse effect on the assets, liabilities, operations, business or
         financial condition of the Lessor.

               (e)    Assignment. Lessor has not assigned or transferred any of
         its right, title or interest in or under the Lease, any other Operative
         Agreement or any Equipment, except in accordance with the other
         Operative Agreements.

               (f)    No Default. The Lessor is not in default under or with
         respect to any of its Contractual Obligations or the Trust Agreement or
         other organizational documents in any respect which would reasonably be
         expected to have a material adverse effect on the assets, liabilities,
         operations, business or financial condition of the Lessor. No Default
         or Event of Default attributable to it has occurred and is continuing.

               (g)    Use of Proceeds. The proceeds from the issuance and sale
         of the Securities and the Certificate Holder Contributions shall be
         applied by the Lessor solely in accordance with the provisions of the
         Operative Agreements.

               (h)    Chief Place of Business; Identity. The Lessor's chief
         place of business, chief executive office and office where the
         documents, accounts and records relating to the transactions
         contemplated by this Agreement and each other Operative Agreement are
         kept are located at 1100 North Market Street, Wilmington, Delaware
         19890-0001. Lessor's correct and complete legal name is "Hanover
         Equipment Trust 2001A". Lessor's type of organization (as that term is
         defined in Article 9 of the UCC) is a Delaware business trust, and
         Lessor's organizational number is 3421490.

               (i)    Federal Reserve Regulations. The Lessor is not engaged
         principally in, and does not have as one of its most important
         activities, the business of extending
<PAGE>

                                                                               9

         credit for the purpose of purchasing or carrying any margin stock
         (within the meaning of Regulation U of the Board), and no part of the
         proceeds from the issuance and sale of the Securities and the
         Certificate Holder Contribution will be used by it, directly or
         indirectly, to purchase or carry any margin stock (within the meaning
         of Regulation U of the Board) or to extend credit to others for the
         purpose of purchasing or carrying any such margin stock (within the
         meaning of Regulation U of the Board) or for any purpose that violates,
         or is inconsistent with, the provisions of Regulations of the Board,
         including but not limited to, T, U or X of the Board.

               (j)    Investment and Holding Company Status. The Lessor is not
         (i) an "investment company" as defined in, or subject to regulation
         under the Investment Company Act of 1940 or (ii) a "holding company" as
         defined in, or subject to regulation under, the Public Utility Holding
         Company Act of 1935.

               (k)    Securities Act. Neither the Lessor nor any Person
         authorized by the Lessor to act on its behalf has offered or sold any
         interest in the Equipment or the Securities, or in any similar security
         or interest relating to the Equipment, or in any security the offering
         of which for the purposes of the Securities Act would be deemed to be
         part of the same offering as the offering of the aforementioned
         securities to, or solicited any offer to acquire any of the same from,
         any Person other than, in the case of the Securities, the Indenture
         Trustee, and neither the Lessor nor any Person authorized by the Lessor
         to act on its behalf will take any action which would subject the
         issuance or sale of any interest in the Equipment or the Securities to
         the provisions of Section 5 of the Securities Act or require the
         qualification of any Operative Agreement under the Trust Indenture Act
         of 1939, as amended except as expressly set forth in the Operative
         Agreements.

               (l)    Lessor Liens. The Equipment is free and clear of all
         Lessor Liens.

               (m)    Representations and Warranties; No Default. The
         representations and warranties of the Lessor set forth herein and in
         each of the other Operative Agreements are true and correct in all
         respects. The Lessor is in compliance with its respective obligations
         under the Operative Agreements. No Default or Event of Default will
         occur under any of the Operative Agreements as a result of, or after
         giving effect to, the Advance requested by the Requisition on the
         Release Date.

               (n)    Conditions Precedent in Operative Agreements. All
         conditions precedent contained in this Agreement and in the other
         Operative Agreements to be satisfied by Lessor relating to the
         acquisition of the Equipment by the Lessor have been satisfied in full
         or waived by the Initial Purchasers and the Certificate Holders.

               (o)    Available Information. So long as any of the Securities
         are "restricted securities" within the meaning of Rule 144(a)(3) under
         the Act, the Lessor will, during any period in which the Lessee is not
         subject to and in compliance with Section 13 or 15(d) of the Exchange
         Act or the Lessee is not exempt from such reporting requirements
         pursuant to and in compliance with Rule 12g3-2(b) under the Exchange
         Act, provide to each holder of such restricted securities and to each
         prospective purchaser (as designated
<PAGE>

                                                                              10

         by such holder) of such restricted securities, upon the request of such
         holder or prospective purchaser, any information required to be
         provided by Rule 144A(d)(4) under the Act. This covenant is intended to
         be for the benefit of the holders, and the prospective purchasers
         designated by such holders, from time to time of such restricted
         securities.

         7.3   Representations and Warranties of the Trust Company. The Trust
Company represents and warrants to each of the other parties hereto as of the
Release Date as follows:

               (a)    Due Organization, etc. It is a Delaware banking
         corporation duly organized and validly existing and in good standing
         under the laws of the State of Delaware and has the power and authority
         to enter into and perform its obligations under the Trust Agreement and
         has the corporate power and authority to act as the trustee under the
         Trust Agreement and to enter into and perform the obligations under
         each of the other Operative Agreements to which Trust Company or the
         Trust, as the case may be, is or will be a party and each other
         agreement, instrument and document to be executed and delivered by it
         on or before the Closing Date or the Release Date in connection with or
         as contemplated by each such Operative Agreement to which the Trust
         Company or the Trust, as the case may be, is or will be a party.

               (b)    Authorization; No Conflict. The execution, delivery and
         performance of each Operative Agreement to which it is a party, either
         in its individual capacity or (assuming due authorization, execution
         and delivery of the Trust Agreement by the Certificate Holders) as the
         trustee for Lessor, as the case may be, has been duly authorized by all
         necessary action on its part and neither the execution and delivery
         thereof, nor the consummation of the transactions contemplated thereby,
         nor compliance by it with any of the terms and provisions thereof (i)
         does or will require any approval or consent of any Person, (ii) does
         or will contravene any current United States federal law, governmental
         rule or regulation relating to its banking or trust powers, (iii) does
         or will contravene or result in any breach of or constitute any default
         under, or result in the creation of any Lien upon any of its property
         under, its charter or by-laws, or any indenture, mortgage, chattel
         mortgage, deed of trust, conditional sales contract, bank loan or
         credit agreement or other agreement or instrument to which it is a
         party or by which it or its properties may be bound or affected or (iv)
         does or will require any Governmental Action by any Governmental
         Authority of the State of Delaware or the United States governing its
         banking or trust powers.

               (c)    Trust Agreement Enforceability, etc. The Trust Agreement
         and, assuming the Trust Agreement is the legal, valid and binding
         obligation of the Certificate Holders, each other Operative Agreement
         to which Trust Company is a party have been, or on or before the
         Release Date will be, duly executed and delivered by Trust Company or
         the Trust, as the case may be, and the Trust Agreement and each such
         other Operative Agreement to the extent entered into by the Trust
         Company constitutes, or upon execution and delivery will constitute, a
         legal, valid and binding obligation enforceable against Trust Company
         in accordance with the terms thereof except as enforceability may be
         limited by applicable bankruptcy, insolvency, reorganization,
         moratorium or similar
<PAGE>

                                                                              11

         laws affecting the enforcement of creditors' rights generally and by
         general equitable principles (whether enforcement is sought by
         proceedings in equity or at law).

               (d)    Litigation. No litigation, investigation or proceeding of
         or before any arbitrator or Governmental Authority is pending or
         threatened by or against the Trust Company with respect to any of the
         Operative Agreements or any of the transactions contemplated hereby or
         thereby.

               (e)    Liens. The Trust Estate is free and clear of Lessor Liens
         attributable to the Trust Company, and there are no Liens affecting the
         title of the Trust to the Equipment or resulting from any act or claim
         against the Trust Company arising out of any event or condition not
         related to the ownership, leasing use or operation of the Equipment or
         any other transaction contemplated by this Agreement or any of the
         other Operative Agreements, including any Lien resulting from the
         nonpayment by the Trust Company of any Taxes imposed or measured by its
         net income.

         7.4   Representations and Warranties of the Lessee and the Guarantors.
The Lessee and each of the Guarantors jointly and severally represent and
warrant to the Lessor, the Indenture Trustee, the Initial Purchasers, the Trust
Company and each Certificate Holder as of the Release Date as follows:

               (a)    Organization; Powers. Each of the Lessee and the
         Guarantors (i) is duly organized, validly existing and in good standing
         under the laws of the jurisdiction of its organization, (ii) has all
         requisite power and authority to own its property and assets and to
         carry on its business as now conducted and as proposed to be conducted,
         (iii) is qualified to do business in every jurisdiction where such
         qualification is required, except where the failure so to qualify would
         not result in a Material Adverse Effect, and (iv) has the power and
         authority to execute, deliver and perform its obligations under each of
         the Operative Agreements and each other agreement or instrument
         contemplated thereby to which it is or will be a party;

               (b)    Authorization. The execution, delivery and performance by
         each of the Lessee and the Guarantors of each of the Operative
         Agreements to which it is a party (a) have been duly authorized by all
         requisite action, including, if required, stockholder action on the
         part of the Lessee and each of the Guarantors and (b) will not (i)
         violate (A) any provision of law, statute, rule or regulation, or of
         the certificate or articles of incorporation or other constitutive
         documents or by-laws of the Lessee or such Guarantor, (B) any order of
         any Governmental Authority or (C) any provision of any indenture,
         agreement or other instrument to which the Lessee or such Guarantor is
         a party or by which it or any of its property is or may be bound, (ii)
         be in conflict with, result in a breach of or constitute (alone or with
         notice or lapse of time or both) a default under any such indenture,
         agreement or other instrument or (iii) result in the creation or
         imposition of any Lien upon or with respect to any property or assets
         now owned or hereafter acquired by the Lessee or such Guarantor, except
         in accordance with the Operative Agreements;
<PAGE>

                                                                              12

               (c)    Enforceability, etc. Each Operative Agreement to which the
         Lessee and each of the Guarantors is a party has been duly executed and
         delivered by the Lessee and each of the Guarantors and constitutes a
         legal, valid and binding obligation of the Lessee and each of the
         Guarantors enforceable against the Lessee or such Guarantor in
         accordance with its terms, except as such enforceability may be limited
         by the effects of applicable bankruptcy, insolvency, fraudulent
         conveyance, reorganization, moratorium and other similar laws relating
         to or affecting creditors' rights generally or general equitable
         principles (whether considered in a proceeding in equity or at law);

               (d)    Governmental Approvals. No action, consent or approval of,
         registration or filing with or any other action by any Governmental
         Authority is or will be required by the Lessee or any of the Guarantors
         in connection with the sale, leasing or financing of the Equipment,
         except such as have been made or obtained and are in full force and
         effect;

               (e)    Financial Statements. Hanover has heretofore furnished to
         the Indenture Trustee, the Initial Purchasers and the Certificate
         Holders the consolidated balance sheets and statements of income and
         cash flow of Hanover, as of and for the fiscal year ended December 31,
         2000, accompanied by a certificate of a financial officer of Hanover.
         Such financial statements present fairly the financial condition and
         results of operations of Hanover and its consolidated subsidiaries as
         of such dates and for such periods. Such financial statements were
         prepared in accordance with GAAP applied on a consistent basis;

               (f)    Offering Memorandum. The Lessee and the Guarantors have
         delivered to each Securityholder, through the Initial Purchasers, and
         to each Certificate Holder a copy of an Offering Memorandum, dated
         August 16, 2001 (the "Offering Memorandum"), relating to the
         transactions contemplated hereby;

               (g)    No Material Adverse Change. There has been no adverse
         change in the business, assets, property or condition, financial or
         otherwise, of the Lessee or any of the Guarantors (not in the ordinary
         course of business) since March 31, 2001 and neither Hanover nor any of
         its subsidiaries has sustained since March 31, 2001 any loss or
         interference with its business from fire, explosion, flood or other
         calamity, whether or not covered by insurance, or from any labor
         dispute or court or governmental action, order or decree, otherwise
         than as set forth or contemplated in the Disclosure Documents, other
         than any such adverse change or loss or interference which is
         immaterial;

               (h)    Title to Assets. Each of the Lessee and the Guarantors has
         good and marketable title to, or valid leasehold interests in, all its
         properties and assets. All such properties and assets, if any, that
         constitute the Trust Estate are free and clear of Liens, other than
         Liens expressly permitted by any of the Operative Agreements;

               (i)    Litigation. There are not any actions, suits or
         proceedings at law or in equity or by or before any Governmental
         Authority now pending or, to the knowledge of the Lessee and the
         Guarantors, threatened against or affecting the Lessee or any business,
         property or rights of the Lessee or the Guarantors (x) which involve
         any Operative
<PAGE>

                                                                              13

         Agreements or the transactions contemplated hereby or (y) which could
         reasonably be anticipated to have a Material Adverse Effect except as
         set forth in Disclosure Documents;

               (j)    Compliance with Laws. Neither the Lessee nor any Guarantor
         is in violation of any law, rule or regulation, or in default with
         respect to any judgment, writ, injunction or decree, of any
         Governmental Authority, where such violation or default could
         reasonably be anticipated to result in a Material Adverse Effect;

               (k)    Agreements. Neither the Lessee nor any Guarantor is a
         party to any agreement or instrument or subject to any corporate or
         other restriction that has resulted or could reasonably be anticipated
         to result in a Material Adverse Effect except as set forth in the
         Disclosure Documents;

               (l)    No Defaults. Neither the Lessee nor any Guarantor is in
         default in any manner under any provision of any indenture or other
         agreement or instrument evidencing Indebtedness, or any other material
         agreement or instrument to which it is a party or by which it or any of
         its properties or assets are or may be bound, except where such default
         could reasonably be anticipated to not result in a Material Adverse
         Effect. No Default or Event of Default will occur under any of the
         Operative Agreements as a result of, or after giving effect to, the
         Advance requested by a Requisition;

               (m)    Federal Reserve Regulations. Neither the Lessee nor any
         Guarantor is engaged principally, or as one of its important
         activities, in the business of extending credit for the purpose of
         purchasing or carrying margin stock (within the meaning of Regulation U
         of the Board);

               (n)    Investment Company Act; Public Utility Holding Company
         Act. Neither the Lessee nor any Guarantor is (i) an "investment
         company" as defined in, or subject to regulation under, the Investment
         Company Act or (ii) a "holding company" as defined in, or subject to
         regulation under, the Public Utility Holding Company Act of 1935;

               (o)    No Material Misstatements. No information, report,
         financial statement, exhibit or schedule furnished by or on behalf of
         the Lessee or any Guarantor to the Indenture Trustee or any Initial
         Purchaser or Certificate Holder in connection with the negotiation of
         any Operative Agreement or included therein or delivered pursuant
         thereto (including, without limitation, the Offering Memorandum)
         contains any misstatement of fact or omits to state any fact necessary
         to make the statements therein, in the light of the circumstances under
         which they were made, not misleading, except for any such untrue
         statement or omission which would make such statements misleading only
         in immaterial respects;

               (p)    Employee Benefit Plans. Each of the Lessee and the
         Guarantors is in compliance in all material respects with the
         applicable provisions of ERISA and the regulations and published
         interpretations thereunder. No Reportable Event has occurred as to
         which the Lessee or any Guarantor was required to file a report with
         the PBGC, and
<PAGE>

                                                                              14

         the present value of all benefit liabilities under each Plan (based on
         those assumptions used to fund such Plan) did not, as of the last
         annual valuation date applicable thereto, exceed by more than
         $5,000,000 the value of the assets of such Plan. Neither the Lessee nor
         any Guarantor has incurred any withdrawal liability under Title IV of
         ERISA which remains unpaid and that could result in a Material Adverse
         Effect. Neither the Lessee nor any Guarantor has received any
         notification that any Multiemployer Plan is in reorganization or has
         been terminated within the meaning of Title IV of ERISA, and, to the
         best knowledge of the Lessee and each Guarantor, no Multiemployer Plan
         is reasonably expected to be in reorganization or to be terminated,
         where such reorganization or termination has resulted or could
         reasonably be expected to result, through increases in the
         contributions required to be made to such Plan or otherwise, in a
         Material Adverse Effect;

               (q)    Environmental Matters.

                      (i)    The Equipment does not contain any Hazardous
                  Substances in amounts or concentrations which (i) constitute a
                  material violation of , or (ii) would reasonably be expected
                  to give rise to material liability under any Environmental
                  Law.

                      (ii)   The Equipment is in compliance in all material
                  respects with all applicable Environmental Laws.

                      (iii)  Neither the Lessee nor any Guarantor has received
                  any notice of violation, alleged violation, non-compliance,
                  liability or potential liability regarding any material
                  non-compliance with Environmental Laws with regard to the
                  Equipment, nor does the Lessee or any Guarantor have knowledge
                  that any such notice will be received or is being threatened.

                      (iv)   Hazardous Substances have not been transported or
                  discharged from the Equipment so as to create a material
                  violation of any Environment Law, nor have any Hazardous
                  Substances been generated, created or used with respect to the
                  Equipment so as to create a material violation of any
                  applicable Environmental Law.

                      (v)    No judicial proceeding or governmental or
                  administrative action is pending or, to the best knowledge of
                  the Lessee, threatened, under any Environmental Law to which
                  the Lessee or any Guarantor is or, to Lessee's knowledge, will
                  be named as a party with respect to the Equipment, nor are
                  there any consent decrees or other decrees, consent orders,
                  administrative orders or other orders, or other administrative
                  or judicial requirements outstanding under any Environmental
                  Law with respect to the Equipment.

                      (vi)   There has been no release or threat of release of
                  Hazardous Substances at or from the Equipment, or arising from
                  or related to the operations of the Lessee or any Guarantor in
                  connection with the Equipment, in violation of,
<PAGE>

                                                                              15

                  or in amounts or in a manner that would reasonably be expected
                  to give rise to any material liability, under any
                  Environmental Laws.

               (r)    Insurance. The Lessee and the Guarantors have obtained
         insurance coverage covering the Equipment which meets the requirements
         of the Lease before commencing repairs or modifications, as the case
         may be, and such coverage is in full force and effect;

               (s)    Representations and Warranties. The representations and
         warranties of each of the Lessee and the Guarantors set forth herein
         and in each of the other Operative Agreements, as applicable, are true
         and correct in all respects. Each of the Lessee and the Guarantors is
         in compliance with its obligations under the Operative Agreements and
         there exists no Default or Event of Default;

               (t)    UCC Filings. On the Release Date, the UCC Financing
         Statements with respect to the Equipment will be filed (or deposited
         with the Collateral Agent for filing) with the appropriate Governmental
         Authorities;

               (u)    Priority of Liens. Upon proper filing on the Release Date,
         the Security Documents will constitute a valid and perfected first lien
         on each Unit of Equipment in an amount not less than the Equipment Cost
         with respect to such Equipment, subject only to the Permitted
         Exceptions;

               (v)    Legal Requirements. Each Unit of Equipment complies in all
         material respects with all Legal Requirements (including all
         Environmental Laws);

               (w)    Consents, etc. All consents, licenses and permits required
         by all Legal Requirements for operation of each Unit of Equipment have
         been obtained and are in full force and effect;

               (x)    Title to the Equipment. Upon the acquisition of each Unit
         of Equipment on the Release Date, the Lessor will have good and
         marketable title to the Equipment, subject in each case only to the
         Permitted Exceptions;

               (y)    Location of the Equipment. Each Unit of Equipment being
         acquired on the Release Date is located within the United States or on
         lands covered by leases under the exclusive jurisdiction of the United
         States of America pursuant to the Outer Continental Shelf Lands Act, as
         amended, 43 U.S.C.ss.ss.1331, et seq. (1986);

               (z)    Conditions Precedent in Operative Agreements. All
         conditions precedent contained in this Agreement and in the other
         Operative Agreements relating to the acquisition of a Unit of Equipment
         by the Lessor have been satisfied in full in all material respects or
         waived by the Initial Purchasers and the Certificate Holders;

               (aa)   Hart-Scott-Rodino. The acquisition of the Equipment being
         acquired by Lessor on the Release Date does not conflict with, violate,
         or require the consent of any governmental entity, under the
         Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.
<PAGE>

                                                                              16

               (bb)   Available Information. So long as any of the Securities
         are "restricted securities" within the meaning of Rule 144(a)(3) under
         the Act, each of the Lessee and the Guarantors will, during any period
         in which the Lessee or such Guarantor is not subject to and in
         compliance with Section 13 or 15(d) of the Exchange Act or the Lessee
         or such Guarantor is not exempt from such reporting requirements
         pursuant to and in compliance with Rule 12g3-2(b) under the Exchange
         Act, provide to each holder of such restricted securities and to each
         prospective purchaser (as designated by such holder) of such restricted
         securities, upon the request of such holder or prospective purchaser,
         any information required to be provided by Rule 144A(d)(4) under the
         Act. This covenant is intended to be for the benefit of the holders,
         and the prospective purchasers designated by such holders, from time to
         time of such restricted securities.


                     SECTION 8. PAYMENT OF CERTAIN EXPENSES

         The Lessee agrees, for the benefit of the Certificate Holders, the
Initial Purchasers, the Trust Company, the Lessor and the Indenture Trustee.

         8.1   Transaction Expenses. On the Release Date, pay, or cause to be
paid, all reasonable fees, expenses and disbursements of one counsel to each of
the Lessor, the Trust Company, the Indenture Trustee, the Initial Purchasers and
the Certificate Holders in connection with the transactions contemplated by the
Operative Agreements and incurred in connection with the Closing Date and the
Release Date, including all Transaction Expenses, and all other reasonable
expenses in connection with the Closing Date and the Release Date, including all
expenses relating to all fees, taxes and expenses for the recording,
registration and filing of documents.

         8.2   Brokers' Fees and Stamp Taxes. Pay or cause to be paid brokers'
fees with respect to brokers retained by or with the prior written consent of
Lessee 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 transactions contemplated by this Agreement and the other
Operative Agreements.

         8.3   Certain Fees and Expenses. Pay or cause to be paid in a timely
manner (i) the initial and annual fee and all reasonable expenses of the Trust
Company and the Indenture Trustee and any necessary co-trustees (including
reasonable counsel fees and expenses) or any successor owner trustee, for acting
as trustee under the Trust Agreement and the Indenture, (ii) all reasonable
costs and expenses incurred by the Lessee, the Indenture Trustee, the
Certificate Holders, the Initial Purchasers, the Trust Company or the Lessor in
entering into any future amendments or supplements with respect to any of the
Operative Agreements, whether or not such amendments or supplements are
ultimately entered into, or giving or withholding of waivers of consents hereto
or thereto, which have been requested by the Lessee, (iii) all reasonable costs
and expenses incurred by the Lessor, the Lessee, the Certificate Holders, the
Initial Purchasers, or the Trust Company in connection with any purchase of any
Equipment by the Lessee pursuant to Section 20 of the Lease, and (iv) the costs
and expenses incurred by any Initial Purchaser, Certificate Holder or
Securityholder in enforcing or defending (or determining whether or how to
enforce or defend) any rights under this Agreement, the Certificates or any
other Operative
<PAGE>

                                                                              17

Agreement, or in responding to any subpoena or other legal process or informal
investigative demand issued to such Initial Purchaser or Certificate Holder or
Securityholders in connection with this Agreement or any other Operative
Agreement, or by reason of being a holder of any Security or Certificate.

         8.4   Continuous Perfection of Security Interests. Lessee shall, and
shall cause Lessor to, make all filing, recordings, registrations and take such
actions, including, without limitation, the filing of duly executed Lessee
Financing Statements and Lessor Financing Statements, necessary to insure that
the Security Documents create a perfected first priority Lien (subject to
Permitted Exceptions) to secure the Securities and the Certificates and that
Lessor complies with Sections 3.5, 3.6 and 3.9 of the Indenture. If the
Officer's Certificate required to be delivered by Lessee pursuant to Section
10.3(b) of the Lease shall indicate that any of the Equipment has been
relocated, then Lessee will provide to the Indenture Trustee, together with the
Officer's Certificate, evidence that all filings, recordings, registrations and
other actions, including the filing of duly executed Lessee Financing Statements
and Lessor Financing Statements, necessary or desirable to perfect the Liens
granted by the Security Documents shall have been completed.

         8.5   Oklahoma Equipment Subleases. With respect to any leases or other
agreements entered into by Lessee with respect to Equipment located in the State
of Oklahoma ("Oklahoma Subleases"), Lessee shall, by November 30, 2001 (or
within 90 days of the date any Oklahoma Sublease is subsequently entered into),
undertake to file, in accordance with 60 Okla. Stat. 1991 " 319. et. Seq., the
original Oklahoma Sublease instrument or a true copy thereof in the chattel
mortgage records of the office of the county clerk in the county where the
Equipment is located and provide the Collateral Agent with reasonably
satisfactory evidence of Lessee's compliance with this Section 8.5.

         8.6   Operative Agreements and Related Obligations. Pay, before the due
date thereof, all costs, fees, indemnities, expenses and other amounts (other
than principal and interest on the Securities, except to the extent the same is
payable pursuant to the Lease) required to be paid by the Lessor under any
Operative Agreement.


              SECTION 9. COVENANTS OF THE LESSEE AND THE GUARANTORS

         Each of Hanover, the Lessee and the other Guarantors hereby agrees that
so long as this Agreement in is effect:

         9.1   Limitation on Indebtedness. (a) Hanover will not, and will not
permit any of its Restricted Subsidiaries to, Incur any Indebtedness; provided,
however, that Hanover, the Subsidiary Guarantors and the Restricted Subsidiaries
may Incur Indebtedness if on the date of the Incurrence: (1) the Consolidated
Coverage Ratio for Hanover and its Restricted Subsidiaries is at least 2.25 to
1.00; and (2) no Default or Event of Default has occurred or is continuing or
would occur as a consequence of Incurring the Indebtedness and the application
of the proceeds thereof.
<PAGE>

                                                                              18

               (b)    Section 9.1(a) will not prohibit the incurrence of the
         following Indebtedness:

               (i)    Indebtedness of Hanover and its Subsidiaries Incurred
         pursuant to the Senior Credit Agreement together with the principal
         component of amounts outstanding under Qualified Receivables
         Transactions in an aggregate amount not to exceed $400.0 million at any
         time outstanding, less the aggregate principal amount of repayments
         with the proceeds from Asset Dispositions pursuant to the provisions of
         Section 9.6 and the Guarantees of the Restricted Subsidiaries in
         respect of the Indebtedness Incurred pursuant to the Senior Credit
         Agreement;

               (ii)   the Lease, the 2001B Lease, the Hanover Guarantee and the
         2001B Guarantee;

               (iii)  Indebtedness of Hanover owing to and held by any
         Wholly-Owned Subsidiary (other than a Receivables Entity) or
         Indebtedness of a Restricted Subsidiary owing to and held by Hanover or
         any Wholly-Owned Subsidiary (other than a Receivables Entity);
         provided, however,

               (A)    if Hanover is the obligor on such Indebtedness, such
                      Indebtedness is expressly subordinated to the prior
                      payment in full in cash of all obligations with respect to
                      the Lease and the Hanover Guarantee; and

               (B)    (i)    any subsequent issuance or transfer of Capital
                      Stock or any other event which results in any such
                      Indebtedness being beneficially held by a Person other
                      than Hanover, or a Wholly-Owned Subsidiary (other than a
                      Receivables Entity) of Hanover; and

                      (ii)   any sale or other transfer of any such Indebtedness
                      to a Person other than Hanover, or a Wholly-Owned
                      Subsidiary (other than a Receivables Entity) of Hanover
                      shall be deemed, in each case, to constitute an Incurrence
                      of such Indebtedness by Hanover or such Subsidiary, as the
                      case may be;

               (iv)   Indebtedness represented by (A) the Securities, (B) any
         Indebtedness (other than the Indebtedness described in clauses (i),
         (ii), (iii), (vi), (viii), (ix) and (x)) outstanding on the Issue Date,
         (C) Indebtedness of Production Operators Corporation or any of its
         subsidiaries in existence as of the Issue Date and (D) any Refinancing
         Indebtedness Incurred in respect of any Indebtedness described in this
         clause (iv) or clause (v) or Incurred pursuant to Section 9.1(a);

               (v)    Indebtedness of a Restricted Subsidiary Incurred and
         outstanding on the date on which such Restricted Subsidiary was
         acquired by Hanover (other than Indebtedness Incurred (A) to provide
         all or any portion of the funds utilized to consummate the transaction
         or series of related transactions
<PAGE>

                                                                              19

         pursuant to which such Restricted Subsidiary became a Restricted
         Subsidiary or was otherwise acquired by Hanover or (B) otherwise in
         connection with, or in contemplation of, such acquisition); provided,
         however, that at the time such Restricted Subsidiary is acquired by
         Hanover would have been able to Incur $1.00 of additional Indebtedness
         pursuant to Section 9.1(a) after giving effect to the Incurrence of
         such Indebtedness pursuant to this clause (v);

               (vi)   Indebtedness under Currency Agreements and Interest Rate
         Agreements; provided that in the case of Currency Agreements and
         Interest Rate Agreements, such Currency Agreements and Interest Rate
         Agreements are entered into for bona fide hedging purposes of Hanover
         or its Restricted Subsidiaries (as determined in good faith by the
         Board of Directors or senior management of Hanover) and substantially
         correspond in terms of notional amount, duration, currencies and
         interest rates, as applicable, to Indebtedness of Hanover or its
         Restricted Subsidiaries on customary terms entered into in the ordinary
         course of business and Incurred without violation of the terms of this
         Agreement;

               (vii)  the Incurrence by Hanover or any of its Restricted
         Subsidiaries of Indebtedness represented by Capitalized Lease
         Obligations, mortgage financings or purchase money obligations with
         respect to assets other than Capital Stock or other Investments, in
         each case Incurred for the purpose of financing all or any part of the
         purchase price or cost of construction or improvements of property used
         in the business of Hanover or such Restricted Subsidiary, in an
         aggregate principal amount not to exceed $75.0 million at any time
         outstanding (it being understood that any Indebtedness Incurred
         pursuant to this clause (vii) shall cease to be deemed to be Incurred
         or outstanding for purposes hereof but shall be deemed Incurred for
         purposes of Section 9.1(a) from and after the first date on which
         Hanover or its Restricted Subsidiaries could have Incurred such
         Indebtedness under Section 9.1(a) without reliance on this clause
         (vii));

               (viii) Indebtedness Incurred in respect of workers' compensation
         claims, self-insurance obligations, performance, surety and similar
         bonds and completion guarantees provided by Hanover or a Restricted
         Subsidiary in the ordinary course of business;

               (ix)   Indebtedness arising from agreements of Hanover or a
         Restricted Subsidiary providing for indemnification, adjustment of
         purchase price or similar obligations, in each case, Incurred or
         assumed in connection with the disposition of any business, assets or
         Capital Stock of a Restricted Subsidiary;

               (x)    Indebtedness arising from the honoring by a bank or other
         financial institution of a check, draft or similar instrument (except
         in the case of daylight overdrafts) drawn against insufficient funds in
         the ordinary course of business, provided, however, that such
         Indebtedness is extinguished within five business days of Incurrence;
         and
<PAGE>

                                                                              20

               (xi)   in addition to the items referred to in clauses (i)
         through (x) above, Indebtedness of Hanover and its Restricted
         Subsidiaries in an aggregate outstanding principal amount which, when
         taken together with the principal amount of all other Indebtedness
         Incurred pursuant to this clause (xi) and then outstanding, will not
         exceed $75.0 million (it being understood that any Indebtedness
         Incurred pursuant to this clause (xi) shall cease to be deemed to be
         Incurred or outstanding for purposes hereof but shall be deemed
         Incurred for purposes of Section 9.1(a) from and after the first date
         on which Hanover or its Restricted Subsidiaries could have Incurred
         such Indebtedness under Section 9.1(a) without reliance on this clause
         (xi)).

               (c)    For purposes of determining compliance with, and the
outstanding principal amount of any particular Indebtedness Incurred pursuant to
and in compliance with, this Section 9.1:

               (1)    (A) Indebtedness permitted by Section 9.1 need not be
                      permitted solely by reference to one provision permitting
                      such Indebtedness but may be permitted in part by one such
                      provision and in part by one or more other provisions of
                      Section 9.1 permitting such Indebtedness and (B) in the
                      event that Indebtedness meets the criteria of more than
                      one of the types of Indebtedness described in Section
                      9.1(a) or (b), Hanover, in its sole discretion, will
                      classify such item of Indebtedness and only be required to
                      include the amount and type of such Indebtedness in one of
                      such clauses; and

               (2)    the amount of Indebtedness issued at a price that is less
                      than the principal amount thereof will be equal to the
                      amount of the liability in respect thereof determined in
                      accordance with GAAP.

Accrual of interest, accrual of dividends, the accretion of accreted value, the
payment of interest in the form of additional Indebtedness and the payment of
dividends in the form of additional shares of Preferred Stock will not be deemed
to be an incurrence of Indebtedness for purposes of this Section 9.1. The amount
of any Indebtedness outstanding as of any date shall be (i) the accreted value
of the Indebtedness in the case of any Indebtedness issued with original issue
discount and (ii) the principal amount or liquidation preference thereof,
together with any interest thereon that is more than 30 days past due, in the
case of any other Indebtedness.

               (d)    Hanover will not permit any of its Unrestricted
Subsidiaries to Incur any Indebtedness or issue any shares of Disqualified
Stock, other than Non-Recourse Debt. If at any time an Unrestricted Subsidiary
becomes a Restricted Subsidiary, any Indebtedness of such Subsidiary shall be
deemed to be Incurred by a Restricted Subsidiary of Hanover as of such date
(and, if such Indebtedness is not permitted to be Incurred as of such date under
this Section 9.1, Hanover shall be in Default of this Section 9.1).

               (e)    For purposes of determining compliance with any U.S.
dollar-denominated restriction on the Incurrence of Indebtedness, the U.S.
dollar-equivalent principal amount of Indebtedness denominated in a foreign
currency shall be calculated based on the
<PAGE>

                                                                              21

relevant currency exchange rate in effect on the date such Indebtedness was
Incurred, in the case of term Indebtedness, or first committed, in the case of
revolving credit Indebtedness; provided that if such Indebtedness is Incurred to
refinance other Indebtedness denominated in a foreign currency, and such
refinancing would cause the applicable U.S. dollar-denominated restriction to be
exceeded if calculated at the relevant currency exchange rate in effect on the
date of such refinancing, such U.S. dollar-dominated restriction shall be deemed
not to have been exceeded so long as the principal amount of such Refinancing
Indebtedness does not exceed the principal amount of such Indebtedness being
refinanced. Notwithstanding any other provision of this Section 9.1, the maximum
amount of Indebtedness that Hanover may incur pursuant to this Section 9.1 shall
not be deemed to be exceeded solely as a result of fluctuations in the exchange
rate of currencies. The principal amount of any Indebtedness incurred to
refinance other Indebtedness, if Incurred in a different currency from the
Indebtedness being refinanced, shall be calculated based on the currency
exchange rate applicable to the currencies in which such Refinancing
Indebtedness is denominated that is in effect on the date of such refinancing.

         9.2   Limitation on Layering. Hanover will not Incur any Indebtedness
if such Indebtedness is subordinate or junior in ranking in any respect to any
Senior Indebtedness unless such Indebtedness is Senior Subordinated Indebtedness
or is contractually subordinated in right of payment to Senior Subordinated
Indebtedness. Neither the Lessee nor any other Subsidiary Guarantor will Incur
any Indebtedness if such Indebtedness is contractually subordinate or junior in
ranking in any respect to any Guarantor Senior Indebtedness of such Subsidiary
Guarantor unless such Indebtedness is Guarantor Senior Subordinated Indebtedness
of such Subsidiary Guarantor or is contractually subordinated in right of
payment to Guarantor Senior Subordinated Indebtedness of such Subsidiary
Guarantor.

         9.3   Limitation on Restricted Payments. (a) Hanover will not, and will
not permit any of its Restricted Subsidiaries, directly or indirectly, to (i)
declare or pay any dividend or make any distribution on or in respect of its
Capital Stock (including any payment in connection with any merger or
consolidation involving Hanover or any of its Restricted Subsidiaries) except
(A) dividends or distributions payable in Capital Stock of Hanover (other than
Disqualified Stock) or in options, warrants or other rights to purchase such
Capital Stock; and (B) dividends or distributions payable to Hanover or a
Restricted Subsidiary (and if such Restricted Subsidiary is not a Wholly-Owned
Subsidiary, to its other holders of common Capital Stock on a pro rata basis);
(ii) purchase, redeem, retire or otherwise acquire for value any Capital Stock
of Hanover or any direct or indirect parent of Hanover held by Persons other
than Hanover or a Restricted Subsidiary of Hanover (other than in exchange for
Capital Stock of Hanover (other than Disqualified Stock)); (iii) purchase,
repurchase, redeem, defease or otherwise acquire or retire for value, prior to
scheduled maturity, scheduled repayment or scheduled sinking fund payment, any
Subordinated Obligations or Guarantor Subordinated Obligations (other than the
purchase, repurchase or other acquisition of Subordinated Obligations or
Guarantor Subordinated Obligations purchased in anticipation of satisfying a
sinking fund obligation, principal installment or final maturity, in each case
due within one year of the date of purchase, repurchase or acquisition); or (iv)
make any Restricted Investment in any Person; (any such dividend, distribution,
purchase, redemption, repurchase, defeasance, other acquisition, retirement or
Restricted Investment referred to in clauses (i) through (iv) shall be referred
to herein as a "Restricted Payment"), if at the time Hanover or such Restricted
Subsidiary makes such Restricted Payment:
<PAGE>

                                                                              22

               (1)    a Default shall have occurred and be continuing (or would
         result therefrom); or

               (2)    Hanover is not able to incur an additional $1.00 of
         Indebtedness pursuant to Section 9.1(a) after giving effect, on a pro
         forma basis, to such Restricted Payment; or

               (3)    the aggregate amount of such Restricted Payment and all
         other Restricted Payments declared or made subsequent to the Issue Date
         would exceed the sum of (A) 50% of Consolidated Net Income for the
         period (treated as one accounting period) from the Issue Date to the
         end of the most recent fiscal quarter ending prior to the date of such
         Restricted Payment for which financial statements are in existence (or,
         in case such Consolidated Net Income is a deficit, minus 100% of such
         deficit); (B) the aggregate Net Cash Proceeds received by Hanover from
         the issue or sale of its Capital Stock (other than Disqualified Stock)
         or other capital contributions subsequent to the Issue Date (other than
         Net Cash Proceeds received from an issuance or sale of such Capital
         Stock to a Subsidiary of Hanover or an employee stock ownership plan,
         option plan or similar trust to the extent such sale to an employee
         stock ownership plan, option plan or similar trust is financed by loans
         from or guaranteed by Hanover or any Restricted Subsidiary unless such
         loans have been repaid with cash on or prior to the date of
         determination); (C) the amount by which Indebtedness of Hanover is
         reduced on Hanover's balance sheet upon the conversion or exchange
         (other than by a Subsidiary of Hanover) subsequent to the Issue Date of
         any Indebtedness of Hanover convertible or exchangeable for Capital
         Stock (other than Disqualified Stock) of Hanover (less the amount of
         any cash, or other property, distributed by Hanover upon such
         conversion or exchange); (D) the amount equal to the net reduction in
         Restricted Investments made by Hanover or any of its Restricted
         Subsidiaries in any Person resulting from (x) repurchases or
         redemptions of such Restricted Investments by such Person, proceeds
         realized upon the sale of such Restricted Investment to an unaffiliated
         purchaser, repayments of loans or advances or other transfers of assets
         (including by way of dividend or distribution) by such Person to
         Hanover or any Restricted Subsidiary of Hanover; or (y) the
         redesignation of Unrestricted Subsidiaries as Restricted Subsidiaries
         (valued in each case as provided in the definition of "Investment") not
         to exceed, in the case of any Unrestricted Subsidiary, the amount of
         Investments previously made by Hanover or any Restricted Subsidiary in
         such Unrestricted Subsidiary, which amount in each case under this
         clause (D) was included in the calculation of the amount of Restricted
         Payments; provided, however, that no amount will be included under this
         clause (D) to the extent it is already included in Consolidated Net
         Income; and (E) $75.0 million.

               (b)    The provisions of Section 9.3(a) will not prohibit (1) any
         purchase or redemption of Capital Stock or Subordinated Obligations of
         Hanover made by exchange for, or out of the proceeds of the
         substantially concurrent sale of, Capital Stock of Hanover (other than
         Disqualified Stock and other than Capital Stock issued or sold to a
         Subsidiary or an employee stock ownership plan or similar trust to the
         extent such sale to an employee stock ownership plan or similar trust
         is financed by loans from or Guaranteed by Hanover or any Restricted
         Subsidiary unless such loans have been repaid with cash on or prior to
         the date of determination); provided, however, that such purchase or
         redemption will be excluded in subsequent calculations of the amount of
         Restricted
<PAGE>

                                                                              23

         Payments; (2) any purchase or redemption of Subordinated Obligations of
         Hanover made by exchange for, or out of the proceeds of the
         substantially concurrent sale of, Subordinated Obligations of Hanover
         that qualifies as Refinancing Indebtedness; provided, however, that
         such purchase or redemption will be excluded in subsequent calculations
         of the amount of Restricted Payments; (3) so long as no Default or
         Event of Default has occurred and is continuing, any purchase or
         redemption of Subordinated Obligations from Net Available Cash to the
         extent permitted under Section 9.6; provided, however, that such
         purchase or redemption will be excluded in subsequent calculations of
         the amount of Restricted Payments; (4) dividends paid within 60 days
         after the date of declaration if at such date of declaration such
         dividend would have complied with this Section 9.3; provided, however,
         that such dividends will be included in subsequent calculations of the
         amount of Restricted Payments; (5) so long as no Default or Event of
         Default has occurred and is continuing, (A) the purchase, redemption or
         other acquisition, cancellation or retirement for value of Capital
         Stock, or options, warrants, equity appreciation rights or other rights
         to purchase or acquire Capital Stock of Hanover or any Restricted
         Subsidiary of Hanover or any parent of Hanover held by any existing or
         former directors, employees or management of Hanover or any Subsidiary
         of Hanover or their assigns, estates or heirs, in each case in
         connection with the repurchase provisions under employee or director
         stock option or stock purchase agreements or other agreements to
         compensate management employees or directors; provided that such
         redemptions or repurchases pursuant to this clause will not exceed
         $25.0 million in the aggregate during any calendar year; provided,
         however, that the amount of any such repurchase or redemption will be
         included in subsequent calculations of the amount of Restricted
         Payments; and (B) loans or advances to employees or directors of
         Hanover or any Subsidiary of Hanover the proceeds of which are used to
         purchase Capital Stock of Hanover, in an aggregate amount not in excess
         of $25.0 million at any one time outstanding; provided, however that
         the amount of such loans and advances will be included in subsequent
         calculations of the amount of Restricted Payments; (6) repurchases of
         Capital Stock deemed to occur upon the exercise of stock options if
         such Capital Stock represents a portion of the exercise price thereof;
         provided, however, that such repurchases will be excluded from
         subsequent calculations of the amount of Restricted Payments; and (7)
         payments under the Subordinated Acquisition Note permitted by the
         subordination provisions contained therein, which permit repayment only
         upon an issuance of equity by Hanover or upon a change of control at
         Hanover.

         The amount of all Restricted Payments (other than cash) shall be the
fair market value on the date of such Restricted Payment of the asset(s) or
securities proposed to be paid, transferred or issued by Hanover or such
Restricted Subsidiary, as the case may be, pursuant to such Restricted Payment.
The fair market value of any cash Restricted Payment shall be its face amount
and any non-cash Restricted Payment shall be determined conclusively by the
Board of Directors of Hanover acting in good faith whose resolution with respect
thereto shall be delivered to the Indenture Trustee (with a copy to the Lessor),
such determination to be based upon an opinion or appraisal issued by an
accounting, appraisal or investment banking firm of national standing if such
fair market value is estimated to exceed $10.0 million. Not later than the date
of making any Restricted Payment, Hanover shall deliver to the Indenture Trustee
(with a copy to the Lessor) an Officers' Certificate stating that such
Restricted Payment is permitted
<PAGE>

                                                                              24

and setting forth the basis upon which the calculations required by the covenant
"Restricted Payments" were computed, together with a copy of any fairness
opinion or appraisal required by this Agreement.

         9.4   Limitation on Liens. Hanover will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly, create, incur or suffer
to exist any Lien (other than Permitted Liens) upon any of its, or any such
Restricted Subsidiary's, property or assets (including Capital Stock), whether
owned on the date of this Agreement or acquired after the date hereof, securing
any Senior Subordinated Indebtedness, Subordinated Obligations, Guarantor Senior
Subordinated Indebtedness or Guarantor Subordinated Obligations, unless
contemporaneously with the Incurrence of the Liens effective provision is made
to secure the Hanover Guarantee equally and ratably with (or prior to in the
case of Liens with respect to Subordinated Obligations or Guarantor Subordinated
Obligations, as the case may be) the Indebtedness secured by such Lien for so
long as such Indebtedness is so secured.

         9.5   Limitation on Restrictions on Distributions from Restricted
Subsidiaries. Hanover will not, and will not permit any Restricted Subsidiary
to, create or otherwise cause or permit to exist or become effective any
consensual encumbrance or consensual restriction on the ability of any
Restricted Subsidiary to (1) pay dividends or make any other distributions on
its Capital Stock or pay any Indebtedness or other obligations owed to Hanover
or any Restricted Subsidiary; (2) make any loans or advances to Hanover or any
Restricted Subsidiary; or (3) transfer any of its property or assets to Hanover
or any Restricted Subsidiary. The preceding provisions will not prohibit (i) any
encumbrance or restriction pursuant to an agreement in effect at or entered into
on the date of this Agreement, including, without limitation, this Agreement,
the 2001B Participation Agreement and the Senior Credit Agreement in effect on
such date; (ii) any encumbrance or restriction with respect to a Restricted
Subsidiary pursuant to an agreement relating to any Indebtedness Incurred by a
Restricted Subsidiary on or before the date on which such Restricted Subsidiary
was acquired by Hanover (other than Indebtedness Incurred as consideration in,
or to provide all or any portion of the funds utilized to consummate, the
transaction or series of related transactions pursuant to which such Restricted
Subsidiary became a Restricted Subsidiary or was acquired by Hanover or in
contemplation of the transaction) and outstanding on such date; (iii) any
encumbrance or restriction with respect to a Restricted Subsidiary pursuant to
an agreement effecting a refunding, replacement or refinancing of Indebtedness
Incurred pursuant to an agreement referred to in Section 9.5(i) or (ii) or this
clause (iii) or contained in any amendment to an agreement referred to in
Section 9.5(i) or (ii) or this clause (iii); provided, however, that the
encumbrances and restrictions with respect to such Restricted Subsidiary
contained in any such agreement or amendment are no less favorable in any
material respect to the Holders of the Securities than the encumbrances and
restrictions contained in such agreements referred to in Section 9.5(i) or (ii)
on the Issue Date or the date such Restricted Subsidiary became a Restricted
Subsidiary, whichever is applicable; (iv) in the case of clause (3) of this
Section 9.5, any encumbrance or restriction (a) that restricts in a customary
manner the subletting, assignment or transfer of any property or asset that is
subject to a lease, license or similar contract, or the assignment or transfer
of any such lease, license or other contract; (b) contained in mortgages,
pledges or other security agreements permitted under this Agreement securing
Indebtedness of Hanover or a Restricted Subsidiary to the extent such
encumbrances or restrictions restrict the transfer of the property subject to
such mortgages, pledges or other security agreements; or (c) pursuant to
customary provisions restricting
<PAGE>

                                                                              25


dispositions of real property interests set forth in any reciprocal easement
agreements of Hanover or any Restricted Subsidiary; (v) purchase money
obligations for property acquired in the ordinary course of business that impose
encumbrances or restrictions of the nature described in clause (3) of this
Section 9.5 on the property so acquired; (vi) any Purchase Money Note or other
Indebtedness or contractual requirements incurred with respect to a Qualified
Receivables Transaction relating exclusively to a Receivables Entity that, in
the good faith determination of the Board of Directors, are necessary to effect
such Qualified Receivables Transaction; (vii) any restriction with respect to a
Restricted Subsidiary (or any of its property or assets) imposed pursuant to an
agreement entered into for the direct or indirect sale or disposition of all or
substantially all the Capital Stock or assets of such Restricted Subsidiary (or
the property or assets that are subject to such restriction) pending the closing
of such sale or disposition; and (viii) encumbrances or restrictions arising or
existing by reason of applicable law or any applicable rule, regulation or
order.

         9.6   Limitation on Sales of Assets and Subsidiary Stock. (a) Hanover
will not, and will not permit any of its Restricted Subsidiaries to, make any
Asset Disposition unless (1) Hanover or such Restricted Subsidiary, as the case
may be, receives consideration at the time of such Asset Disposition at least
equal to the fair market value, as determined in good faith by the Board of
Directors (including as to the value of all non-cash consideration), of the
shares and assets subject to such Asset Disposition; (2) at least 80% of the
consideration from such Asset Disposition received by Hanover or such Restricted
Subsidiary, as the case may be, is in the form of cash or Cash Equivalents; and
(3) an amount equal to 100% of the Net Available Cash from such Asset
Disposition is applied by Hanover or such Restricted Subsidiary, as the case may
be, (A) first, to the extent Hanover or any Restricted Subsidiary, as the case
may be, elects (or is required by the terms of any Senior Indebtedness) to
prepay, repay or purchase Senior Indebtedness or Indebtedness (other than any
Preferred Stock or Guarantor Subordinated Obligation) of a Restricted Subsidiary
that is a Subsidiary Guarantor (in each case other than Indebtedness owed to
Hanover or an Affiliate of Hanover); provided, however, that, in connection with
any prepayment, repayment or purchase of Indebtedness pursuant to this clause
(A), Hanover or such Restricted Subsidiary will retire such Indebtedness and
will cause the related commitment (if any) to be permanently reduced in an
amount equal to the principal amount so prepaid, repaid or purchased; and (B)
second, to the extent of the balance of such Net Available Cash after
application in accordance with clause (A), to the extent Hanover or such
Restricted Subsidiary elects to invest in Additional Assets within 360 days from
the later of the date of such Asset Disposition or the receipt of such Net
Available Cash.

         (b)   Any Net Available Cash from Asset Dispositions that is not
applied or invested as provided in Section 9.6(a) will be deemed to constitute
"Excess Proceeds." On the 361st day after an Asset Disposition, if the aggregate
amount of Excess Proceeds exceeds $25.0 million, Hanover will notify the Lessor
and the 2001B Lessor that it will, upon notice by the Indenture Trustee and/or
the 2001B Indenture Trustee, cause the Lessee to purchase Equipment having a
Termination Value and/or a 2001B Termination Value equal to or less than such
excess amount. Concurrently with the repurchase, if any, of the Securities
described in Section 3.3 of the Indenture, (A) the Lessee will purchase the
amount of Equipment, at such Equipment's Termination Value necessary to generate
sufficient proceeds for the Lessor to prepay a proportionate amount of the
Certificates and (B) the Lessee will make a payment of Supplemental Rent to the
Lessor sufficient for the Lessor to pay any accrued and unpaid interest
<PAGE>

                                                                              26

on the Securities being repurchased and Certificate Holder Yield on the
Certificates being prepaid, as well as any applicable redemption premium. Using
the proceeds from the Equipment purchase by the Lessee, if any, the Lessor shall
promptly comply with the procedures set forth under Section 3.3 of the
Indenture.

         For the purposes of this Section 9.6, the following will be deemed to
be cash:

               (i)    the assumption by the transferee of Senior Indebtedness of
         Hanover or Indebtedness (other than Guarantor Senior Subordinated
         Indebtedness, Guarantor Subordinated Obligations or Preferred Stock) of
         any Restricted Subsidiary of Hanover and the release of Hanover or such
         Restricted Subsidiary from all liability on such Senior Indebtedness or
         Indebtedness in connection with such Asset Disposition (in which case
         Hanover will, without further action, be deemed to have applied such
         deemed cash to Indebtedness in accordance with Section 9.6(a)(3)(A)
         above); and

               (ii)   securities, notes or other obligations received by
         Hanover or any Restricted Subsidiary of Hanover from the transferee
         that are promptly converted by Hanover or such Restricted Subsidiary
         into cash.

         9.7   Limitation on Affiliate Transactions. (a) Hanover will not, and
will not permit any of its Restricted Subsidiaries to, directly or indirectly,
enter into or conduct any transaction (including the purchase, sale, lease or
exchange of any property or the rendering of any service) with any Affiliate of
Hanover (an "Affiliate Transaction") unless (i) the terms of such Affiliate
Transaction are no less favorable to Hanover or such Restricted Subsidiary, as
the case may be, than those that could be obtained in a comparable transaction
at the time of such transaction in arm's-length dealings with a Person who is
not such an Affiliate; (ii) in the event such Affiliate Transaction involves an
aggregate amount in excess of $10.0 million, the terms of such transaction have
been approved by a majority of the members of the Board of Directors of Hanover
and by a majority of the members of such Board having no personal stake in such
transaction, if any (and such majority or majorities, as the case may be,
determines that such Affiliate Transaction satisfies the criteria in Section
9.7(a)(i)); and (iii) in the event such Affiliate Transaction involves an
aggregate amount in excess of $25.0 million, Hanover has received a written
opinion from an independent investment banking firm of nationally recognized
standing that such Affiliate Transaction is not materially less favorable than
those that might reasonably have been obtained in a comparable transaction at
such time on an arms-length basis from a Person that is not an Affiliate.

         (b)   Section 9.7(a) will not apply to (i) transactions among Hanover,
the Lessee, the Lessor and the Guarantors under the Operative Agreements and
transactions pursuant to the 2001B Operative Agreements; (ii) any Restricted
Payment (other than a Restricted Investment) permitted to be made pursuant to
Section 9.3; (iii) any issuance of securities, or other payments, awards or
grants in cash, securities or otherwise pursuant to, or the funding of,
employment arrangements, stock options and stock ownership plans and other
reasonable fees, compensation, benefits and indemnities paid or entered into by
Hanover or its Restricted Subsidiaries in the ordinary course of business to or
with officers, directors or employees of Hanover and its Restricted
Subsidiaries; (iv) loans or advances to employees and consultants in
<PAGE>

                                                                              27

the ordinary course of business of Hanover or any of its Restricted Subsidiaries
in an amount not to exceed $5.0 million in the aggregate during any calendar
year; (v) any transaction between Hanover and a Restricted Subsidiary (other
than a Receivables Entity) or between Restricted Subsidiaries (other than a
Receivables Entity); (vi) the payment of reasonable and customary fees paid to,
and indemnity provided on behalf of, officers, directors or employees of Hanover
or any Restricted Subsidiary of Hanover; (vii) the performance of obligations of
Hanover or any of its Restricted Subsidiaries under the terms of any agreement
to which Hanover or any of its Restricted Subsidiaries is a party on the Issue
Date and identified on Schedule 9.7(b) hereto, as these agreements may be
amended, modified or supplemented from time to time; provided, however, that any
future amendment, modification or supplement entered into after the Issue Date
will be permitted to the extent that its terms are not more disadvantageous in
its entirety to the Holders of the Securities than the terms of the agreements
in effect on the Issue Date; (viii) sales or other transfers or dispositions of
accounts receivable and other related assets customarily transferred in an asset
securitization transaction involving accounts receivable to a Receivables Entity
in a Qualified Receivables Transaction, and acquisitions of Permitted
Investments in connection with a Qualified Receivables Transaction; and (ix)
transactions with joint venture partners in an amount not to exceed $10.0
million in the aggregate during any calendar year.

         9.8   Limitation on Sale of Capital Stock of Restricted Subsidiaries.
Hanover will not, and will not permit any of its Restricted Subsidiaries to,
transfer, convey, sell, lease or otherwise dispose of any Voting Stock of any
Restricted Subsidiary or issue any Voting Stock of any Restricted Subsidiary
(other than, if necessary, shares of its Voting Stock constituting directors'
qualifying shares) to any Person except (1) to Hanover or a Wholly-Owned
Subsidiary other than a Receivables Entity; or (2) in compliance with Section
9.6 and, immediately after giving effect to such issuance or sale, such
Restricted Subsidiary would continue to be a Restricted Subsidiary.

         Notwithstanding the preceding paragraph, Hanover may sell all the
Voting Stock of a Restricted Subsidiary as long as Hanover complies with the
terms of Section 9.6.

         9.9   SEC Reports and Available Information. Notwithstanding that
Hanover may not be subject to the reporting requirements of Section 13 or 15(d)
of the Exchange Act, to the extent permitted by the Exchange Act, Hanover will
file with the Commission, and provide the Indenture Trustee with, the annual
reports and the information, documents and other reports (or copies of such
portions of any of the foregoing as the Commission may by rules and regulations
prescribe) that are specified in Sections 13 and 15(d) of the Exchange Act
within the time periods specified therein. In the event that Hanover is not
permitted to file such reports, documents and information with the Commission
pursuant to the Exchange Act, Hanover will nevertheless provide such Exchange
Act information to the Indenture Trustee as if Hanover were subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Act within the
time periods specified therein.

         9.10  Merger and Consolidation. Hanover will not consolidate with or
merge with or into, or convey, transfer or lease all or substantially all its
assets to, any Person, unless:

               (i)    the resulting, surviving or transferee Person (the
         "Successor Company") will be a corporation, partnership, trust or
         limited liability company
<PAGE>

                                                                              28


         organized and existing under the laws of the United States of America,
         any State of the United States or the District of Columbia and the
         Successor Company (if not Hanover) will expressly assume, by an
         assumption agreement supplemental to this Agreement, executed by the
         Successor Company and delivered to the Indenture Trustee, in form
         satisfactory to the Indenture Trustee, all the obligations of Hanover
         under the Hanover Guarantee and this Agreement;

               (ii)   immediately after giving effect to such transaction (and
         treating any Indebtedness that becomes an obligation of the Successor
         Company or any Subsidiary of the Successor Company as a result of such
         transaction as having been Incurred by the Successor Company or such
         Subsidiary at the time of such transaction), no Default or Event of
         Default shall have occurred and be continuing;

               (iii)  immediately after giving effect to such transaction, the
         Successor Company would be able to Incur at least an additional $1.00
         of Indebtedness pursuant to Section 9.1(a); and

               (iv)   Hanover shall have delivered to the Indenture Trustee an
         Officers' Certificate and an Opinion of Counsel, each stating that such
         consolidation, merger or transfer and such assumption agreement (if
         any) comply with this Agreement.

         For purposes of this Section 9.10, the sale, lease, conveyance,
assignment, transfer, or other disposition of all or substantially all of the
properties and assets of one or more Subsidiaries of Hanover, which properties
and assets, if held by Hanover instead of such Subsidiaries, would constitute
all or substantially all of the properties and assets of Hanover on a
consolidated basis, shall be deemed to be the transfer of all or substantially
all of the properties and assets of Hanover; provided, however, that a
Sale/Leaseback Transaction involving all or substantially all of the properties
and assets of Hanover or of one or more Subsidiaries of Hanover, which
properties and assets, if held by Hanover instead of such Subsidiaries, would
constitute all or substantially all of the properties and assets of Hanover on a
consolidated basis, shall not be deemed to be the transfer of all or
substantially all of the properties and assets of Hanover; and provided,
further, that such Sale/Leaseback Transaction shall be subject to the covenants
under Sections 9.1 and 9.6.

         The Successor Company will succeed to, and be substituted for, and may
exercise every right and power of, Hanover under this Agreement, but, in the
case of a lease of all or substantially all its assets, Hanover will not be
released from the obligation to pay the principal of and interest on the
Securities pursuant to the Hanover Guarantee.

         Notwithstanding clause (iii) of the first sentence of this Section
9.10, (x) any Restricted Subsidiary of Hanover may consolidate with, merge into
or transfer all or part of its properties and assets to Hanover and (y) Hanover
may merge with an Affiliate incorporated solely for the purpose of
reincorporating Hanover in another jurisdiction to realize tax or other
benefits.
<PAGE>

                                                                              29

         9.11  Future Subsidiary Guarantors. After the Issue Date, Hanover will
cause each Restricted Subsidiary (other than a Foreign Subsidiary or a
Receivables Entity) that (i) becomes, or upon its creation or acquisition by
Hanover or one or more of its Restricted Subsidiaries is, a Material Subsidiary
and (ii) becomes a guarantor under the Senior Credit Agreement, to execute and
deliver to the Collateral Agent, promptly thereafter, a Hanover Guarantee
pursuant to which such Subsidiary Guarantor will become a Hanover Guarantor.

         9.12  Changes in Name, Jurisdiction of Incorporation, etc. Lessee shall
give prompt prior notice to the Collateral Agent if it shall change its name in
any way, change its jurisdiction of organization or change its type of
organization or its organizational number.


                   SECTION 10. OTHER COVENANTS AND AGREEMENTS

         10.1  Covenants of the Trust, the Certificate Holders, Indenture
Trustee and the Trust Company. Each of the parties hereby agrees that so long as
this Agreement is in effect:

               (a)    Discharge of Liens. Each of the Certificate Holders, the
         Trust, Indenture Trustee, the Collateral Agent, Wilmington Trust FSB,
         in its individual capacity, and the Trust Company, in its individual
         capacity, will not create or permit to exist at any time, and will, at
         its own cost and expense, promptly take such action as may be necessary
         or reasonably requested by Lessee duly to discharge, or to cause to be
         discharged, all Lessor Liens on the Equipment attributable to it or any
         of its Affiliates; provided, however, that the Certificate Holders, the
         Trust, Indenture Trustee, the Collateral Agent, Wilmington Trust FSB
         and the Trust Company shall not be required to so discharge any such
         Lessor Lien while the same is being contested in good faith by
         appropriate proceedings diligently prosecuted so long as such
         proceedings shall not cause Lessee or any other party hereto to be in
         default under any of the Operative Agreements and shall not involve any
         material danger of impairment of the Liens of the Security Documents or
         of the sale, forfeiture or loss of, and shall not materially interfere
         with the use or disposition of, the Equipment or title thereto or any
         interest therein or the payment of Rent.

               (b)    Trust Agreement. Without prejudice to any right under the
         Trust Agreement of the Trust Company to resign, or the Certificate
         Holders' right under the Trust Agreement to remove the institution
         acting as Indenture Trustee, each of the Certificate Holders and the
         Trust Company hereby agrees with the Lessee and the Indenture Trustee
         (i) not to terminate or revoke the trust created by the Trust Agreement
         except as permitted by the Trust Agreement, (ii) not to amend,
         supplement, terminate or revoke or otherwise modify any provision of
         the Trust Agreement without the prior written consent of any party
         adversely affected by such amendment and in any event with prior notice
         to the Lessee and (iii) to comply with all of the terms of the Trust
         Agreement, the nonperformance of which would adversely affect the
         Lessee or Indenture Trustee. The Trust Company will provide each party
         hereto with a copy of any amendment to the Trust Agreement promptly,
         and in any event within 30 days, after such amendment is effective.
<PAGE>

                                                                              30

               (c)    Successor Trust Company. The Trust Company or any
         successor may resign or be removed by both Certificate Holders as owner
         trustee, a successor owner trustee may be appointed, and a corporation
         may become the owner trustee under the Trust Agreement, only in
         accordance with the provisions of Section 8 of the Trust Agreement and
         with the consent of the Lessee, which consent shall not be unreasonably
         withheld or delayed.

               (d)    Indebtedness; Other Business. The Trust shall not contract
         for, create, incur or assume any indebtedness, or enter into any
         business or other activity, or hold title to any assets other than
         pursuant to or under the Operative Agreements.

               (e)    No Violation. Neither the Certificate Holders nor the
         Trust Company will instruct the Trust to take any action in violation
         of the terms of any Operative Agreement.

               (f)    No Voluntary Bankruptcy. Neither the Certificate Holders
         nor the Trust shall (i) commence, consent to, approve of or acquiesce
         to any case, proceeding or other action under any existing or future
         law of any jurisdiction, domestic or foreign, relating to bankruptcy,
         insolvency, reorganization, arrangement, winding-up, liquidation,
         dissolution, composition or other relief with respect to it or its
         debts, or (ii) seek appointment of a receiver, trustee, custodian or
         other similar official for it or for all or any substantial part of its
         assets, or make a general assignment for the benefit of its creditors;
         and neither the Certificate Holders nor the Trust shall take any action
         in furtherance of, or indicating its consent to, approval of, or
         acquiescence in, any of the acts set forth in this paragraph.

               (g)    Changes in Name, Jurisdiction of Incorporation, etc. The
         Trust shall give prompt prior notice to the Lessee and the Collateral
         Agent if it shall change its name in any way, change its jurisdiction
         of organization or change its type of organization or its
         organizational number.

               (h)    Amendments. Provided that no Lease Event of Default is
         continuing, none of the Trust Company, the Lessor, the Indenture
         Trustee or the Certificate Holders shall consent to or permit any
         amendment, supplement, waiver or other modification of the terms and
         provisions of the Indenture, the Securities or the Security Documents
         which would reasonably be expected to adversely impact the Lessee, in
         each case without the prior written consent of the Lessee.

               (i)    Disposition of Assets. The Trust shall not convey, sell,
         lease, assign, transfer or otherwise dispose of any of its property,
         business or assets (including, without limitation, its right, title and
         interest in, to and under the Operative Agreements and the Equipment),
         whether now owned or hereafter acquired, except to the extent expressly
         authorized by the Operative Agreements.

               (j)    Compliance with Operative Agreements. It shall at all
         times observe and perform all of the covenants, conditions and
         obligations required to be performed by it under each Operative
         Agreement to which it is a party.
<PAGE>

                                                                              31

               (k)    Tax Reporting. No party hereto other than the Lessee will
         file (or permit to be filed) any tax return taking the position that
         such party (or its affiliates) is the owner of the Equipment for
         federal, state or foreign or local tax purposes.

               (l)    Use of Proceeds. The Lessor shall only use the proceeds of
         the Securities and the Certificate Holder Contribution for payment of
         Equipment Costs and Transaction Expenses.

               (m)    Cooperation. The Lessor and the Indenture Trustee will, at
         Lessee's expense, cooperate with Lessee to insure compliance with
         Lessee's obligations with respect to all necessary filings required of
         Lessee under the Operative Agreements.

               (n)    Appointment of the Wilmington Trust FSB as Collateral
         Agent. The Certificate Holders hereby appoint Wilmington Trust FSB, or
         any successor Indenture Trustee, to act as Collateral Agent pursuant to
         the terms of Article XII of the Indenture.

         10.2  Amendment of Certain Documents. The Indenture Trustee and the
Collateral Agent, each for itself and on behalf of the Initial Purchasers, the
Securityholders and the Certificate Holders, hereby agrees for the benefit of
the Lessor and the Certificate Holders that it will not amend, alter or
otherwise modify, or consent to any amendment, alteration or modification of,
the Lease (including the definitions of any terms used in such document) without
the prior written consent of the Lessor and all of the Certificate Holders, as
the case may be, if such amendment, alteration or modification would materially
adversely affect the interests of the Lessor or the Certificate Holders.
Provisions requiring consent, include any amendment, alteration or modification
that would release the Lessee from any of its obligations in respect of the
payment of Basic Rent, Supplemental Rent, Termination Value, the Final Rent
Payment, the Purchase Option Price, the Equity Proceeds Purchase Price, the
Control Purchase Price, the Excess Proceeds Purchase Price, the Expiration
Purchase Price or any other payments in respect of the Equipment as set forth in
the Lease, or reduce the amount of, or change the time or manner of payment of,
obligations of the Lessee as set forth in the Lease, or create or impose any
obligation on the part of the Trust or the Certificate Holders under the Lease,
or extend or shorten the duration of the Term, or modify the provisions of this
Section 10.2.

         10.3  Proceeds of Casualty. Subject to Section 15 of the Lease, the
Lessor agrees, for the benefit of the Indenture Trustee and the Certificate
Holders, that if at any time the Lessor receives any proceeds as a result,
directly or indirectly, of any Casualty or Condemnation with respect to the
Equipment which the Lessor is entitled to retain and hold in accordance with the
terms of the Lease, the Lessor agrees that it will promptly deposit such amounts
in an account with the Collateral Agent. The Lessor and the Certificate Holders
also agree that they will execute and deliver such documents and instruments as
the Collateral Agent may reasonably request in order to grant the Collateral
Agent, for the benefit of the Securityholders and Certificate Holders, a valid
and perfected, first priority security interest in such proceeds.

         10.4  Income Tax Reporting. The Trust Company and the Lessee each agree
that they will file all federal, state, local and foreign income tax returns
consistently with the intention described in Section 7.1(a)(ii) of the Lease and
will take no position for such purposes inconsistent with that intent.
<PAGE>

                                                                              32

         10.5  Financial Statements and Other Information. For so long as any
Security or Certificate remains outstanding, each of the Lessee and the
Guarantors shall make available, upon request, to any holder of a Security or
Certificate and any prospective purchaser to whom such Security or Certificate
may be offered or sold by such holder the information required to allow the
resale of such Security or Certificate pursuant to Rule 144A of the 1933 Act
Regulations and shall further amend or supplement the Offering Memorandum as
required to satisfy Rule 144A(d)(4)(ii).

         10.6  Financial Reporting. Hanover and the Lessee shall deliver to the
Indenture Trustee and the Lessor:

               (a)    As soon as available and in any event within sixty (60)
         days after the end of each quarterly fiscal period of each fiscal year
         of Hanover, consolidated statements of income and cash flow of Hanover
         and its consolidated subsidiaries, if any, for such period and for the
         period from the beginning of the respective fiscal year to the end of
         such period, and the related consolidated balance sheet as at the end
         of such period, setting forth in each case in comparative form the
         corresponding consolidated figures for the corresponding period in the
         preceding fiscal year, accompanied by a certificate of a financial
         officer of Hanover, which certificate shall state that said financial
         statements fairly present the consolidated financial condition and
         results of operations of Hanover and its consolidated subsidiaries in
         accordance with generally accepted accounting principles, consistently
         applied, as at the end of, and for, such period.

               (b)    As soon as available and in any event within one hundred
         twenty (120) days after the end of each fiscal year of Hanover
         consolidated statements of income, shareholders' equity and cash flow
         of Hanover and its consolidated subsidiaries, if any, for such year and
         the related consolidated balance sheet as at the end of such year,
         setting forth in each case in comparative form the corresponding
         consolidated figures for the preceding fiscal year, and accompanied, in
         the case of said consolidated statements and balance sheet, by an
         opinion thereon of independent certified public accountants of
         recognized national standing, which opinion shall state that said
         consolidated financial statements fairly present the consolidated
         financial condition and results of operations of Hanover and its
         consolidated subsidiaries, if any, in accordance with generally
         accepted accounting principles, consistently applied, as at the end of,
         and for, such fiscal year.

         The Indenture Trustee shall be under no obligation to analyze or make
any review of any certificates, documents, information, certifications,
statements or reports received by it hereunder, but shall hold any such
documents delivered to it solely for the benefit of, and review by, the
Securityholders. The Indenture Trustee shall have no duty to request copies of
any such documents which are required to be furnished to it hereunder.

         10.7  Appraisal. The Lessee agrees that on or prior to any Replacement
Equipment Closing Date, and upon the written request of the Indenture Trustee or
the Required Holders, the Lessee shall provide to the Collateral Agent and the
Certificate Holders an Appraisal of the Replacement Equipment, such Appraisal in
form and substance satisfactory to the Collateral Agent and all of the
Certificate Holders; provided that the Lessee is not required to provide more
than one such Appraisal in any twelve month period; provided further, that
<PAGE>

                                                                              33

notwithstanding anything in this Section 10.7 to the contrary, if the aggregate
value of (i) the Replacement Equipment relating to a prospective Replacement
Equipment Closing Date and (ii) any Replacement Equipment acquired subsequent to
the latest Replacement Equipment Closing Date relating to which the Lessee
delivered an Appraisal, is equal to or greater than 10% of the aggregate value
of the Equipment, then the Lessee shall provide to the Indenture Trustee and the
Certificate Holders an Appraisal of all Replacement Equipment acquired or to be
acquired since the latest Appraisal and such Appraisal shall include valuations
of the Equipment replaced or being replaced by the Replacement Equipment that is
the subject of such Appraisal.


                           SECTION 11. LESSEE'S RIGHTS

         11.1  Rights of Lessee Regarding the Indenture. (a) Notwithstanding
anything to the contrary contained herein or in the other Operative Documents,
the Indenture Trustee, the Collateral Agent, the Trust Company, the Certificate
Holders, the Lessee and the Lessor hereby agree that:

               (i)    the Lessee shall receive copies of all notices delivered
         to the Lessor under the Indenture and the other Operative Agreements,
         and all notices delivered to the Trustee under the Trust Agreement, and
         such notices shall not be effective until received by Lessee;

               (ii)   the Lessee shall have the right to give notice of
         redemption or purchase of the Securities in accordance with the terms
         of the Indenture and the terms of the Securities, provided that if the
         Lessee shall give notice of redemption or purchase of the Securities,
         the Lessee shall purchase from the Lessor, in accordance with the terms
         of the Lease, Equipment having a Termination Value equal to or less
         than the principal amount of the Securities to be redeemed or purchased
         and the pro rata portion of the Certificate Holder Contribution to be
         repaid and shall pay Supplemental Rent sufficient to pay any other
         amounts due on the Securities to be redeemed or purchased pursuant to
         the Indenture and the terms of the Securities and a pro rata portion of
         the Certificate Holder Contributions to be repaid;

               (iii)  the Lessee shall have the right to cure, to the extent
         susceptible to a cure, any Default of the Lessor under the Indenture or
         any of the other Operative Agreements within the cure periods provided
         to the Lessor therein;

               (iv)   the Lessee shall have the right to remove the Indenture
         Trustee pursuant to Section 7.8 of the Indenture on behalf of and in
         lieu of Lessor to the extent Lessor has the right to remove the
         Indenture Trustee under such Section 7.8;

               (v)    so long as no Lease Event of Default has occurred and is
         continuing, the Lessee shall have the right to approve any successor
         Indenture Trustee pursuant to Sections 7.8 of the Indenture, such
         approval not to be unreasonably withheld, conditioned or delayed;
<PAGE>

                                                                              34

               (vi)   the Lessee shall have the right to request the release
         (and documents reasonably necessary to evidence such release ) of any
         Unit from the Lien of any Security Document in accordance with Section
         11.2(d) of the Indenture;

               (vii)  so long as no Lease Event of Default shall have occurred
         and be continuing (or if a Lease Event of Default shall have occurred
         and is continuing, if Lessee has timely delivered a Purchase Notice or
         Substitution Notice and the purchase or substitution thereby would cure
         such Lease Lease Event of Default), without limiting the foregoing
         clauses (i) through (vi), and in addition thereto, (A) the Lessor shall
         not exercise any right under the Indenture without giving the Lessee at
         least fifteen (15) Business Days' prior written notice (or such shorter
         period as may be required but in no case less than five (5) Business
         Days) and, following such notice, the Lessor shall take such action, or
         forbear from taking such action, as the Lessee shall direct and (B) the
         Lessee shall have the right to exercise any other right of the Lessor
         under the Indenture upon not less than two (2) Business Days' prior
         written notice from the Lessee to the Lessor;

               (viii) the Lessee shall have the right to enforce its rights
         to receive any payments due to Lessee pursuant to the Indenture and any
         other Operative Agreement;

               (ix)   the Lessee shall have the right to perform on behalf and
         in lieu of the Lessor any or all of the obligations of Lessor under
         paragraphs 1, 2, 3, 4 and 8 of the Exchange and Registration Rights
         Agreement; and

               (x)    without limiting the generality of the foregoing clause
         (ix), and in addition thereto, (A) the Lessor shall not exercise any
         right under the Exchange and Registration Rights Agreement without
         giving the Lessee at least ten (10) Business Days' prior written notice
         (or such shorter period as may be required but in no case less than
         three (3) Business Days) and, following such notice, the Lessor shall
         take such action, or forbear from taking such action, as the Lessee
         shall direct and (B) the Lessee shall have the right to exercise any
         other right of the Lessor under the Exchange and Registration Rights
         Agreement upon not less than two (2) Business Days' prior written
         notice from the Lessee to the Lessor.

               (b)    Restriction on Lessor's Rights. So long as no Lease Event
of Default shall have occurred and be continuing, the Lessor will not take any
action with respect to matters as to which the Lessee is authorized, pursuant to
this Section 11.1, to act, and Lessor shall not take any discretionary or
voluntary or other action not expressly required to be taken pursuant to the
terms of the Indenture or the Securities in each case, without the prior written
consent of the Lessee.

               (c)    Trust Agreement. Without prejudice to any right under the
Trust Agreement of the Trust Company to resign, or the Certificate Holders'
right under the Trust Agreement to remove the institution acting as Indenture
Trustee, each of the Certificate Holders and the Trust Company hereby agrees
with the Lessee and the Indenture Trustee (i) not to
<PAGE>

                                                                              35

terminate or revoke the trust created by the Trust Agreement except as permitted
by the Trust Agreement, and (ii) not to amend, supplement, terminate or revoke
or otherwise modify any provision of the Trust Agreement without the prior
written consent of any party adversely affected by such amendment and in any
event with prior notice to the Lessee.

         11.2  Agent for Acquisition of Equipment. Provided no Lease Default or
Lease Event of Default has occurred or is continuing, the Lessor appoints the
Lessee as its agent to receive the proceeds from the sale of the Securities and
Certificates and to use the same to purchase the Equipment in the name of the
Lessor provided that the Lessee shall have no right or power to cause the Lessor
to assume any liability, indemnity or other obligation with respect to such
purchase.


                        SECTION 12. TRANSFER OF INTEREST

         12.1  Restrictions on Transfer. None of the Certificate Holders may,
directly or indirectly, assign, convey or otherwise transfer any of its right,
title or interest in or to the Trust Estate or the Trust Agreement without the
consent of the Indenture Trustee and the Lessee, which consent shall not be
unreasonably withheld, conditioned or delayed, except as may be required by law
or unless the proposed transferee is a Permitted Transferee (as defined below).
Any transfer by a Certificate Holder as above provided, shall be effected
pursuant to the Trust Agreement. As used herein, a "Permitted Transferee" shall
mean any of (a) a financial institution with a combined capital, surplus and
undivided profits of at least $100,000,000 determined in accordance with GAAP,
(b) any subsidiary of such financial institution if such financial institution
furnishes to Lessor, Indenture Trustee and Lessee a support agreement of a
direct or indirect parent meeting the requirements set forth in clause (a) of
this Section 12.1, in form and substance reasonably satisfactory to Lessee and
Indenture Trustee, and (c) any Affiliate of the transferring Certificate Holder,
provided that if such Affiliate does not meet the requirement set forth in
clause (a) of this Section 12.1, such transferring Certificate Holder (or an
Affiliate of such Certificate Holder meeting the requirements set forth in
clause (a) of this Section 12.1) shall remain secondarily liable for all of the
obligations of the Permitted Transferee and furnish to Lessor, Indenture Trustee
and Lessee a support agreement in form and substance reasonably satisfactory to
Lessee and Indenture Trustee. Each transfer pursuant to this Section 12.1 shall
be subject to the conditions that (i) the transferee has the requisite power and
authority to enter into and carry out the transactions contemplated hereby, (ii)
the transferee enters into an agreement, in form and substance reasonably
satisfactory to Indenture Trustee and Lessee, whereby such transferee confirms
that it shall be a party to this Agreement and the Trust Agreement, and agrees
to be bound by the terms thereof, (iii) such transfer does not violate any Legal
Requirements, and (iv) Lessee and Indenture Trustee shall have received an
opinion of counsel, in form and substance reasonably satisfactory to Lessee and
Indenture Trustee, opining as to such matters incident to such a transfer as
such person may reasonably request. Notwithstanding the provisions of Section
13.2, in the event of a transfer by a Certificate Holder under this Section
12.1, the Lessee shall not be liable under Section 13.2 for any increased
liability for Impositions arising solely as a result of such transfer.

         12.2  Effect of Transfer. From and after any transfer effected in
accordance with this Section 12, the transferor shall be released, to the extent
of such transfer, from its
<PAGE>

                                                                              36

liability hereunder and under the other documents to which it is a party in
respect of obligations to be performed on or after the date of such transfer;
provided, however, that any transferor Certificate Holder shall remain liable
under the Trust Agreement to the extent that the transferee Certificate Holder
shall not have assumed the obligations of the transferor Certificate Holder
thereunder. Upon any transfer by a Certificate Holders as above provided, any
such transferee shall assume the obligations of the same entity, and the Lessor
or such Certificate Holder, as the case may be, and shall be deemed the "same
entity", as the case may be, for all purposes of such documents and each
reference herein to the transferor shall thereafter be deemed a reference to
such transferee for all purposes, except as provided in the preceding sentence.
Notwithstanding any transfer of all or a portion of the transferor's interest as
provided in this Section 12, the transferor shall be entitled to all benefits
accrued and all rights vested prior to such transfer including rights to
indemnification under any such document.


                           SECTION 13. INDEMNIFICATION

         13.1  General Indemnity. The Lessee hereby assumes liability for and
agrees to defend, indemnify and hold harmless each Indemnified Person on an
After Tax Basis from and against any Claims which may be imposed on, incurred by
or asserted against an Indemnified Person in any way relating to or arising out
of (a) the financing, refinancing, purchase, acceptance, rejection, ownership,
design, delivery, acceptance, nondelivery, leasing, subleasing, possession, use,
operation, repair, modification, transportation, condition, sale, return,
repossession (whether by summary proceedings or otherwise), or any other
disposition of the Equipment or any part thereof; (b) any latent or other
defects in any Unit of Equipment whether or not discoverable by an Indemnified
Person or the Lessee; (c) a violation of Environmental Laws, Environmental
Claims or other loss of or damage relating to the Equipment; (d) the Operative
Agreements, or any transaction contemplated thereby; (e) any breach by the
Lessee of any of its representations or warranties under the Operative
Agreements or failure by the Lessee to perform or observe any covenant or
agreement to be performed by it under any of the Operative Agreements; and (f)
personal injury, death or property damage relating to the Equipment, including
Claims based on strict liability in tort; but in any event excluding (v) Claims
to the extent such Claims arise solely out of the gross negligence or willful
misconduct of such Indemnified Person, (w) Claims to the extent such Claims
arise solely out of events occurring after Lessee's discharge of all its
obligations under the Lease or (x) any Taxes including any Claim (or any portion
of a Claim) made upon an Indemnified Person by a third party that at its origin
is based upon a Tax (other than amounts necessary to make any payments hereunder
on an After Tax Basis, where the Lessee is otherwise specifically required to
make such payments on an After Tax Basis), (y) legal proceedings commenced
against an Indemnified Person by any security holder or creditor solely in its
capacity as such, or (z) legal proceedings commenced against an Indemnified
Person by any other Indemnified Person or by any transferee of an Indemnified
Person. The Lessee shall be entitled to control, and shall assume full
responsibility for the defense of any Claim; provided, however, that the Trust,
the Trust Company, the Indenture Trustee and the Certificate Holders named in
such Claim, may each retain separate counsel at the expense of the Lessee in the
event of and to the extent of an actual conflict or a potential conflict. The
Lessee and each Indemnified Person agree to give each other prompt written
notice of any Claim hereby indemnified against but the giving of any such notice
<PAGE>

                                                                              37

by an Indemnified Person shall not be a condition to the Lessee's obligations
under this Section 13.1, except only as and to the extent failure to give such
notice materially prejudices Lessee's rights hereunder or with respect to the
defense or settlement of such Claim. After an Indemnified Person has been fully
indemnified for a Claim pursuant to this Section 13.1, and so long as no Lease
Event of Default shall have occurred and be continuing, the Lessee shall be
subrogated to any right of such Indemnified Person with respect to such Claim.
So long as no Lease Event of Default shall have occurred and be continuing (or
if or Lease Event of Default shall have occurred and is continuing, if Lessee
has timely delivered a Purchase Notice or Substitution Notice and the purchase
or substitution thereby would cure such Lease Event of Default), none of the
Indemnified Persons shall settle a Claim without the prior written consent of
the Lessee, which consent shall not be unreasonably withheld, conditioned or
delayed. Any claims in respect of loss of value of or nonpayment of principal of
or interest on the Securities or other amounts payable in respect thereof shall
be subordinated in right of payment to the prior payment of Guarantor Senior
Indebtedness of the Lessee to the same extent as the Lessee's payment
obligations under the Lease are subordinated to prior payments of such Guarantor
Senior Indebtedness, mutatis mutandis.

         13.2  General Tax Indemnity. (a) The Lessee shall pay and assume
liability for, and does hereby agree to indemnify, protect and defend the
Equipment and all Tax Indemnitees, and hold them harmless against, all
Impositions on an After Tax Basis.

               (b)    Provided that no Default or Event of Default has occurred
         and is continuing, if any Tax Indemnitee obtains a refund or a
         reduction in a liability (but only if such reduction relates to a Tax
         not otherwise indemnifiable hereunder and has not been taken into
         account in determining the amount of a payment on an After Tax Basis)
         as a result of any Imposition paid or reimbursed by the Lessee (in
         whole or in part), such Tax Indemnitee shall promptly pay to the Lessee
         the lesser of (x) the amount of such refund or reduction in liability
         and (y) the amount previously so paid or advanced by the Lessee, in
         each case net of reasonable expenses not already paid or reimbursed by
         the Lessee.

               (c)    (i) Subject to the terms of Section 13.2(g), the Lessee
         shall pay or cause to be paid all Impositions directly to the taxing
         authorities where feasible and otherwise to the Tax Indemnitee, as
         appropriate, and the Lessee shall at its own expense, upon such Tax
         Indemnitee's reasonable request, furnish to such Tax Indemnitee copies
         of official receipts or other satisfactory proof evidencing such
         payment.

                      (ii)   In the case of Impositions for which no contest
                  is conducted pursuant to Section 13.2(g) and which the Lessee
                  pays directly to the taxing authorities, the Lessee shall pay
                  such Impositions prior to the latest time permitted by the
                  relevant taxing authority for timely payment. In the case of
                  Impositions for which the Lessee reimburses a Tax Indemnitee,
                  the Lessee shall do so within twenty (20) days after receipt
                  by the Lessee of demand by such Tax Indemnitee describing in
                  reasonable detail the nature of the Imposition and the basis
                  for the demand (including the computation of the amount
                  payable), but in no event shall the Lessee be required to pay
                  such reimbursement prior to 15 days before the latest time
                  permitted by the relevant taxing authority for timely payment.
                  In the case of Impositions for which a contest is conducted
                  pursuant to Section 13.2(g), the
<PAGE>

                                                                              38

                  Lessee shall pay such Impositions or reimburse such Tax
                  Indemnitee for such Impositions, to the extent not previously
                  paid or reimbursed pursuant to subsection (a), prior to the
                  latest time permitted by the relevant taxing authority for
                  timely payment after conclusion of all contests under Section
                  13.2(g).

                      (iii)  Impositions imposed with respect to a Unit of
                  Equipment for a billing period during which the Lease expires
                  or terminates with respect to such Equipment (unless the
                  Lessee has exercised the Purchase Option with respect to the
                  Equipment) shall be adjusted and prorated on a daily basis
                  between the Lessee and the Lessor, whether or not such
                  Imposition is imposed before or after such expiration or
                  termination and each party shall pay or reimburse the other
                  for each party's pro rata share thereof.

                      (iv)   At the Lessee's request, the amount of any
                  indemnification payment by the Lessee pursuant to subsection
                  (a) shall be verified and certified by an independent public
                  accounting firm mutually acceptable to the Lessee and the Tax
                  Indemnitee. The fees and expenses of such independent public
                  accounting firm shall be paid by the Lessee unless such
                  verification shall result in an adjustment in the Lessee's
                  favor of 10% or more of the payment as computed by such Tax
                  Indemnitee, in which case such fee shall be paid by such Tax
                  Indemnitee.

               (d)    The Lessee shall be responsible for preparing and filing
         any real and personal property or ad valorem tax returns in respect of
         the Equipment. In case any other report or tax return shall be required
         to be made with respect to any obligations of the Lessee under or
         arising out of subsection (a) and of which the Lessee has knowledge,
         the Lessee, at its sole cost and expense, shall notify the relevant Tax
         Indemnitee of such requirement and (except if such Tax Indemnitee
         notifies the Lessee that such Person intends to file such report or
         return) (A) to the extent required or permitted by and consistent with
         Legal Requirements, make and file in its own name such return,
         statement or report; and (B) in the case of any other such return,
         statement or report required to be made in the name of such Tax
         Indemnitee, advise such Tax Indemnitee of such fact and prepare such
         return, statement or report for filing by such Tax Indemnitee or, where
         such return, statement or report shall be required to reflect items in
         addition to any obligations of the Lessee under or arising out of
         subsection (a), provide such Tax Indemnitee at the Lessee's expense
         with information sufficient to permit such return, statement or report
         to be properly made with respect to any obligations of the Lessee under
         or arising out of subsection (a). Such Tax Indemnitee shall, upon the
         Lessee's request and at the Lessee's expense, provide any data
         maintained by such Tax Indemnitee (and not otherwise within the control
         of the Lessee) with respect to the Equipment which the Lessee may
         reasonably require to prepare any required tax returns or reports;

               (e)    If as a result of the payment or reimbursement by the
         Lessee of any expenses of a Tax Indemnitee or the payment of any
         Transaction Expenses incurred in connection with the transactions
         contemplated by the Operative Agreements, any Tax Indemnitee, shall
         suffer a net increase in any federal, state or local income tax
         liability, the Lessee shall indemnify such Tax Indemnitees (without
         duplication of any indemnification required by subsection (a)) on an
         After Tax Basis for the amount of such
<PAGE>

                                                                              39

         increase. The calculation of any such net increase shall take into
         account any current or future tax savings realized or reasonably
         expected to be realized by such Tax Indemnitees, in respect thereof, as
         well as any interest, penalties and additions to tax payable by such
         Tax Indemnitees, in respect thereof;

               (f)    As between the Lessee and the Lessor, the Lessee shall be
         responsible for, and the Lessee shall indemnify and hold harmless the
         Trust Company in its individual capacity and as the Lessor (without
         duplication of any indemnification required by subsection (a)) on an
         After Tax Basis against, any obligation for United States withholding
         taxes imposed in respect of the interest payable on the Securities (to
         the extent that the Securities are determined not to be debt for income
         tax purposes) or the Certificates to the extent, but only to the
         extent, Lessor has actually paid funds to a taxing authority with
         respect to such withholding taxes (and, if the Lessor receives a demand
         for such payment from any taxing authority, the Lessee shall discharge
         such demand on behalf of the Lessor);

               (g)    (i) If a written claim is made against any Tax Indemnitee
         or if any proceeding shall be commenced against such Tax Indemnitee
         (including a written notice of such proceeding), for any Impositions,
         such Tax Indemnitee shall promptly notify Lessee in writing and shall
         not take action with respect to such claim or proceeding without the
         consent of Lessee for thirty (30) days after the receipt of such notice
         by Lessee; provided, that, in the case of any such claim or proceeding,
         if action shall be required by law or regulation to be taken prior to
         the end of such 30-day period, such Tax Indemnitee shall, in such
         notice to Lessee, inform Lessee, and no action shall be taken with
         respect to such claim or proceeding without the consent of Lessee
         before the end of such shorter period; provided, further, that the
         failure of such Tax Indemnitee to give the notices referred to this
         sentence shall not diminish Lessee's obligation hereunder except to the
         extent such failure materially adversely affects Lessee in contesting
         all or part of such claim.

                      (ii)   If, within thirty (30) days of receipt of such
                  notice from the Tax Indemnitee (or such shorter period as the
                  Tax Indemnitee has noticed Lessee is required by law or
                  regulation for the Tax Indemnitee to commence such contest),
                  Lessee shall request in writing that such Tax Indemnitee
                  contest such Imposition, the Tax Indemnitee shall, at the
                  expense of Lessee, in good faith conduct and control such
                  contest (including, without limitation, by pursuit of appeals)
                  relating to the validity, applicability or amount of such
                  Impositions (provided, however, that (A) if such contest can
                  be pursued independently from any other proceeding involving a
                  tax liability of such Tax Indemnitee, the Tax Indemnitee, at
                  Lessee's request, shall allow Lessee to conduct and control
                  such contest and (B) in the case of any contest that Lessee is
                  not entitled to control, the Tax Indemnitee may request Lessee
                  to conduct and control such contest if possible or permissible
                  under applicable law or regulation) by, in the sole discretion
                  of the Person conducting and controlling such contest, (1)
                  resisting payment thereof, (2) not paying the same except
                  under protest, if protest is necessary and proper, (3) if the
                  payment be made, using reasonable efforts to obtain a refund
                  thereof in
<PAGE>

                                                                              40

                  appropriate administrative and judicial proceedings, or (4)
                  taking such other action as is reasonably requested by Lessee
                  from time to time.

                      (iii)  The party controlling any contest shall consult in
                  good faith with the non-controlling party and shall keep the
                  non-controlling party reasonably informed as to the conduct of
                  such contest; provided that all decisions ultimately shall be
                  made in the sole discretion of the controlling party. The
                  parties agree that an Tax Indemnitee may at any time decline
                  to take further action with respect to the contest of any
                  Imposition and may settle such contest if such Tax Indemnitee
                  shall waive its rights to any indemnity from Lessee that
                  otherwise would be payable in respect of such claim (and any
                  future claim by any taxing authority with respect to other
                  taxable periods that is based, in whole or in part, upon the
                  resolution of such claim) and shall pay to Lessee any amount
                  previously paid or advanced by Lessee pursuant to this Section
                  13.2 by way of indemnification or advance for the payment of
                  an Imposition, and no other then future liability of the
                  Lessee is likely with respect to such Imposition.

                      (iv)   Notwithstanding the foregoing provisions of this
                  Section 13.2, a Tax Indemnitee shall not be required to take
                  any action and Lessee shall not be permitted to contest any
                  Impositions in its own name or that of the Tax Indemnitee
                  unless (A) Lessee shall have agreed to pay and shall pay to
                  such Tax Indemnitee on demand and on an After Tax Basis all
                  reasonable costs, losses and expenses that such Tax Indemnitee
                  actually incurs in connection with contesting such
                  Impositions, including, without limitation, all reasonable
                  legal, accounting and investigatory fees and disbursements,
                  (B) in the case of a claim that must be pursued in the name of
                  an Tax Indemnitee (or an Affiliate thereof), the amount of the
                  potential indemnity (taking into account all similar or
                  logically related claims that have been or could be raised in
                  any audit involving such Tax Indemnitee for which Lessee may
                  be liable to pay an indemnity under this Section 13.2) is more
                  than $25,000, unless the pursuit of such contest is in a
                  manner mutually satisfactory to the Tax Indemnitee and the
                  Lessee, but in no event shall such right prevent the Lessee
                  from prosecuting or continuing such contest, (C) the Tax
                  Indemnitee shall have reasonably determined that the action to
                  be taken will not result in any material danger of sale,
                  forfeiture or loss of any Unit of Equipment, or any part
                  thereof or interest therein, will not interfere with the
                  payment of Rent, and will not result in risk of criminal
                  liability, (D) if such contest shall involve the payment of
                  the Imposition prior to the contest, Lessee shall provide to
                  the Tax Indemnitee an interest-free advance in an amount equal
                  to the Imposition that the Tax Indemnitee is required to pay
                  (with no additional net after-tax cost to such Tax
                  Indemnitee), (E) in the case of a claim that must be pursued
                  in the name of an Tax Indemnitee (or an Affiliate thereof),
                  Lessee shall have provided to such Tax Indemnitee an opinion
                  of independent tax counsel selected by the Lessee and
                  reasonably satisfactory to such Tax Indemnitee stating that a
                  reasonable basis exists to contest such claim (or, in the case
                  of an appeal of an adverse determination, an opinion of such
                  counsel to the effect that there is substantial authority for
                  the position asserted in such appeal) and (F) no Event of
                  Default shall have occurred and be continuing. In no event
                  shall a Tax Indemnitee be
<PAGE>

                                                                              41

                  required to appeal an adverse judicial determination to the
                  United State Supreme Court. In addition, a Tax Indemnitee
                  shall not be required to contest any claim in its name (or
                  that of an Affiliate) if the subject matter thereof shall be
                  of a continuing nature and shall have previously been decided
                  adversely by a court of competent jurisdiction pursuant to the
                  contest provisions of this Section 13.2, unless there shall
                  have been a change in law (or interpretation thereof) and the
                  shall Tax Indemnitee have received, at the Lessee's expense,
                  an opinion of independent tax counsel selected by the Lessee
                  and reasonably acceptable to the Tax Indemnitee stating that
                  as a result of such change in law (or interpretation thereof),
                  it is more likely than not that the Tax Indemnitee will
                  prevail in such contest.

         13.3  Entity Tax Indemnity. Notwithstanding anything in this Section 13
to the contrary, the Lessee shall indemnify and hold harmless, on an After Tax
Basis, the Lessor for any and all Taxes based on or measured by the net income
of the Lessor.


                            SECTION 14. MISCELLANEOUS

         14.1  Survival of Agreements. The representations, warranties,
covenants, indemnities and agreements of the parties provided for in the
Operative Agreements, and the parties' obligations under any and all thereof,
shall survive the execution and delivery of this Agreement, the transfer of the
Equipment to the Trust, any disposition of any interest of the Trust in the
Equipment or any interest of the Certificate Holders in the Trust, the payment
of the Securities and any disposition thereof and shall be and continue in
effect notwithstanding any investigation made by any party and the fact that any
party may waive compliance with any of the other terms, provisions or conditions
of any of the Operative Agreements. Except as otherwise expressly set forth
herein or in other Operative Agreements, the indemnities of the parties provided
for in the Operative Agreements shall survive the expiration or termination of
any thereof.

         14.2  No Broker, etc. Each of the parties hereto represents to the
others that it has not retained or employed any broker, finder or financial
adviser to act on its behalf in connection with this Agreement, nor has it
authorized any broker, finder or financial adviser retained or employed by any
other Person so to act, except for the Arranger, the fees of which shall be paid
by the Lessee in accordance with the Fee Letter. Any party who is in breach of
this representation shall indemnify and hold the other parties harmless from and
against any liability arising out of such breach of this representation.

         14.3  Notices. All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing (including by
facsimile transmission), and, unless otherwise expressly provided herein, shall
be deemed to have been duly given or made (a) when delivered by hand, (b) one
Business Day after delivery to a nationally recognized courier service
specifying overnight delivery, (c) three Business Days after being deposited in
the mail, certified or registered, postage prepaid, or (d) in the case of
facsimile notice, when sent and receipt has been confirmed, addressed as follows
in the case of the Lessee, the Trust, the Trust Company, the Indenture Trustee,
the Collateral Agent and Wilmington Trust FSB:
<PAGE>

                                                                              42

         If to the Lessee, to it at:         Hanover Compression Limited
                                             Partnership
                                             12001 North Houston Rosslyn
                                             Houston, Texas 77806
                                             Attention: Chief Financial Officer
                                             Telecopy No.: 281-447-8781

                                             with a copy to:

                                             Latham & Watkins
                                             Sears Tower, Suite 5800
                                             233 South Wacker Drive
                                             Chicago, Illinois 60606
                                             Attention: Richard S. Meller and
                                             Michael A. Pucker
                                             Telecopy No.: 312-993-9767

         If to the Trust, to it at:          Hanover Equipment Trust 2001A
                                             c/o Wilmington Trust Company
                                             1100 North Market Street
                                             Wilmington, Delaware 19890
                                             Attention: Corporate Trust
                                             Administration
                                             Telecopy No.: 302-651-8882

         If to the Certificate Holders,
         to them at:                         General Electric Capital
                                             Corporation
                                             401 Merrit Seven, Suite 23
                                             Norwalk, Connecticut 06851-1177
                                             Attention: Peter DiBiasi
                                             Telecopy No.: 203-229-1989

                                             with a copy to:

                                             Ober, Kaler, Grimes & Shriver
                                             A Professional Corporation
                                             120 E. Baltimore Street
                                             Baltimore, Maryland 21202
                                             Attention: Alan J. Mogol, Esq.
                                             Telecopy No.: 410-547-0699

         If to the Trust Company, to it at:  Wilmington Trust Company
                                             1100 North Market Street
                                             Wilmington, Delaware 19890
                                             Attention: Corporate Trust
                                             Administration
                                             Telecopy No.: 302-651-8882

         If to Indenture Trustee, to it at:  Wilmington Trust FSB
                                             1100 North Market Street
<PAGE>

                                                                              43

                                             Wilmington, Delaware 19890
                                             Attention: Corporate Trust
                                             Administration
                                             Telecopy No.: 302-651-8882

                                             with a copy to:


                                             Wilmington Trust FSB
                                             3773 Howard Hughes Parkway
                                             Suite 300N
                                             Las Vegas, Nevada 89190
                                             Attention:
                                             Telecopy No.:

         If to Collateral Agent:             Same as for Indenture Trustee

         If to Wilmington Trust FSB          Same as for Indenture Trustee

From time to time any party may designate a new address for purposes of notice
hereunder by notice to each of the other parties hereto.

         14.4  Counterparts. This Agreement may be executed by the parties
hereto in separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together constitute but
one and the same instrument.

         14.5  Amendments and Termination. Neither this Agreement nor any of the
terms hereof may be terminated, amended, supplemented, waived or modified
without the written agreement and consent of, the Indenture Trustee acting on
behalf of the Required Holders and any other party against which the enforcement
of the termination, amendment, supplement, waiver or modification shall be
sought. In the case of the Indenture Trustee, the actions of the Indenture
Trustee shall be governed by the provisions of Article IX of the Indenture. The
consent of the Certificate Holders, the Lessor, the Trust Company, the
Collateral Agent and the Indenture Trustee shall only be required if such
amendment, supplement, waiver or modification would materially adversely affect
their respective interests under the Participation Agreement and in any event
the Certificate Holders, the Lessor, the Trust Company and the Collateral Agent
shall have no right of consent with respect to any amendment, supplement, waiver
or modification to Section 9 hereof.

         14.6  Headings, etc. The Table of Contents and headings of the various
Sections and Subsections of this Agreement are for convenience of reference only
and shall not modify, define, expand or limit any of the terms or provisions
hereof.

         14.7  Parties in Interest. Except as expressly provided herein, none of
the provisions of this Agreement are intended for the benefit of any Person
except the parties hereto.
<PAGE>

                                                                              44

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

         14.9  Severability. Any provision of this Agreement that is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.

         14.10 Liability Limited. The Lessee, the Indenture Trustee, the
Securityholders and the Certificate Holders each acknowledge and agree that the
Trust Company is (except as otherwise expressly provided herein or therein)
entering into this Agreement and the other Operative Agreements to which it is a
party (other than the Trust Agreement), solely in its capacity as trustee under
the Trust Agreement, Indenture Trustee and Collateral Agent under the Indenture,
and not in its individual capacity and that Trust Company shall not be liable or
accountable under any circumstances whatsoever in its individual capacity for or
on account of any statements, representations, warranties, covenants or
obligations stated to be those of the Trust, except for its own gross negligence
or willful misconduct and as otherwise expressly provided herein or in the other
Operative Agreements.

         14.11 Rights of Lessee. Notwithstanding any provision of the Operative
Agreements, if at any time all obligations (i) of the Trust under the Securities
and Indenture and the Security Documents and (ii) of the Lessee under the
Operative Agreements have in each case been satisfied or discharged in full,
then the Lessee shall be entitled to (a) terminate the Lease (to the extent not
previously terminated) and (b) receive all amounts then held under the Operative
Agreements and all proceeds with respect to the Equipment. Upon the fulfillment
of the obligations contained in clauses (i) and (ii) above, the Lessor shall
transfer to the Lessee all of its right, title and interest in and to the
Equipment (to the extent not previously transferred to the Lessee in accordance
with the Lease) by means of a bill of sale, without representation or warranty,
and other such documents and acts as Lessee may reasonably request, all at
Lessee's expense, and any amounts or proceeds referred to in the foregoing
clause (b) shall be paid over to the Lessee.

         14.12 Further Assurances. The parties hereto shall promptly cause to be
taken, executed, acknowledged or delivered, at the sole expense of the Lessee
(other than with respect to the removal of Lessor Liens), all such further acts,
conveyances, documents and assurances as any of the other parties may from time
to time reasonably request in order to carry out and effectuate the intent and
purposes of this Agreement, the other Operative Agreements and the transactions
contemplated hereby and thereby (including, without limitation, the preparation,
execution and filing of any and all Uniform Commercial Code financing statements
and other filings or registrations which the parties hereto may from time to
time request to be filed or effected). The Lessee, at its own expense, shall
take such action as may be reasonably requested in order to maintain and protect
all security interests provided for hereunder or under any other Operative
Agreement.
<PAGE>

                                                                              45

         14.13 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns.

         14.14 No Representation or Warranty. Nothing contained herein, in any
other Operative Agreement or in any other materials delivered to the Lessee in
connection with the transactions contemplated hereby or thereby shall be deemed
a representation or warranty by the Indenture Trustee or the Arranger or any of
their Affiliates as to the proper accounting treatment or tax treatment that
should be afforded to the Lease and the Lessor's ownership of the Equipment and
the Indenture Trustee expressly disclaims any representation or warranty with
respect to such matters.

         14.15 Highest Lawful Rate. It is the intention of the parties hereto
conform strictly to applicable usury laws and, anything herein to the contrary
notwithstanding, the obligations of the Lessee, the Lessor or the Certificate
Holders or any other party under any Operative Agreement, shall be subject to
the limitation that payments of interest or of other amounts constituting
interest shall not be required to the extent that receipt thereof would be in
excess of the Highest Lawful Rate, or otherwise contrary to provisions of law
applicable to the recipient limiting rates of interest which may be charged or
collected by the recipient. Accordingly, if the transactions or the amount paid
or otherwise agreed to be paid for the use, forbearance or detention of money
under this Agreement, the Lease and any other Operative Agreement would exceed
the Highest Lawful Rate or otherwise be usurious with respect to the recipient
of any such amount, then, in that event, notwithstanding anything to the
contrary in this Agreement, the Lease or any other Operative Agreement, it is
agreed as follows as to the recipient of any such amount:

               (a)    the provisions of this Section 14.15 shall govern and
         control over any other provision in this Agreement, the Lease and any
         other Operative Agreement and each provision set forth therein is
         hereby so limited;

               (b)    the aggregate of all consideration which constitutes
         interest that is contracted for, charged or received under this
         Agreement, the Lease, or any other Operative Agreement shall under no
         circumstances exceed the maximum amount of interest allowed by any
         Requirement of Law (such maximum lawful interest rate, if any, with
         respect to such Lender herein called the "Highest Lawful Rate"), and
         all amounts owed under this Agreement, the Lease and any other
         Operative Agreement shall be held subject to reduction and (i) the
         amount of interest which would otherwise be payable to the recipient
         hereunder and under the Lease, the Loan Documents and any other
         Operative Agreement, shall be automatically reduced to the amount
         allowed under any Requirement of Law and (ii) any unearned interest
         paid in excess of the Highest Lawful Rate shall be credited to the
         payor by the recipient (or, if such consideration shall have been paid
         in full, refunded to the payee);

               (c)    all sums paid, or agreed to be paid for the use,
         forbearance and detention of the money under this Agreement, the Lease,
         or any other Operative Agreement shall, to the extent permitted by any
         Requirement of Law, be amortized, prorated, allocated and spread
         throughout the full term of such indebtedness until
<PAGE>

                                                                              46

         payment in full so that the actual rate of interest is uniform
         throughout the full term thereof; and

               (d)    if at any time the interest, together with any other fees,
         late charges and other sums payable pursuant to or in connection with
         this Agreement, the Lease, and any other Operative Agreement executed
         in connection herewith or therewith, and deemed interest under any
         Requirement of Law exceeds that amount which would have accrued at the
         Highest Lawful Rate, the amount of interest and any such fees, charges
         and sums to accrue to the recipient of such interest, fees, charges and
         sums pursuant to the Operative Agreement shall be limited,
         notwithstanding anything to the contrary in the Operative Agreement to
         that amount which would have accrued at the Highest Lawful Rate for the
         recipient, but any subsequent reductions, as applicable, shall not
         reduce the interest to accrue pursuant to the Operative Agreement below
         the recipient's Highest Lawful Rate until the total amount of interest
         payable to the recipient (including all consideration which constitutes
         interest) equals the amount of interest which would have been payable
         to the recipient (including all consideration which constitutes
         interest), plus the amount of fees which would have been received but
         for the effect of this Section 14.15.

         14.16 Waiver . EACH PARTY HERETO FOR THE BENEFIT OF THE PARTIES HERETO
AND THE GUARANTORS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE EXTENT
NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY LEGAL
ACTION OR PROCEEDING PURSUANT TO THE OPERATIVE AGREEMENTS ANY SPECIAL,
EXEMPLARY, PUNITIVE, INDIRECT OR CONSEQUENTIAL DAMAGES.

         14.17 Integration. This Agreement, together with the other Operative
Agreements, represents the entire agreement of the parties hereto to the subject
matter of this Agreement and the Operative Agreements, and there are no
promises, undertakings, representations, warranties or agreements by any party
hereto relative to the subject matter of this Agreement and the Operative
Agreements that are not expressly set forth in this Agreement or the other
Operative Agreements.

         14.18 Obligations of Guarantors. The obligations of each Guarantor
under this Agreement shall be subordinated in right of payment to the prior
payment of Senior Indebtedness and Guarantor Senior Indebtedness of such
Guarantor to the same extent as such Guarantor's payment obligations under the
Hanover Guarantee are subordinated to prior payment of Senior Indebtedness and
Guarantor Senior Indebtedness, mutatis mutandis.
<PAGE>

                                                                              47

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

                                       HANOVER COMPRESSION LIMITED PARTNERSHIP,
                                       as Lessee and a Guarantor


                                       By: ____________________________________
                                           Name:
                                           Title:


                                       HANOVER EQUIPMENT TRUST 2001A


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


                                           By: ______________________________
                                               Name:
                                               Title:


                                       GENERAL ELECTRIC CAPITAL
                                       CORPORATION, as Certificate Holder


                                       By: ____________________________________
                                           Name:
                                           Title:


                                       HANOVER COMPRESSOR COMPANY, as
                                       Guarantor


                                       By: ____________________________________
                                           Name:
                                           Title:


                                       HANOVER APPLIED PROCESS SOLUTIONS,
                                       INC., as Guarantor


                                       By: ____________________________________
                                           Name:
                                           Title:
<PAGE>

                                                                              48

                                       EUREKA ENERGY LIMITED PARTNERSHIP,
                                       as Guarantor


                                       By: ____________________________________
                                           Name:
                                           Title:


                                       HANOVER ACQUISITION LIMITED
                                       PARTNERSHIP, as Guarantor


                                       By: ____________________________________
                                           Name:
                                           Title:


                                       HANOVER COMPRESSOR LIMITED
                                       HOLDINGS LLC, as Guarantor


                                       By: ____________________________________
                                           Name:
                                           Title:


                                       HANOVER LAND LIMITED
                                       PARTNERSHIP, as Guarantor


                                       By: ____________________________________
                                           Name:
                                           Title:


                                       HANOVER MAINTECH LIMITED PARTNERSHIP,
                                       as Guarantor


                                       By: ____________________________________
                                           Name:
                                           Title:
<PAGE>

                                                                              49

                                       HANOVER/SMITH LIMITED PARTNERSHIP,
                                       as Guarantor


                                       By: ____________________________________
                                           Name:
                                           Title:


                                       HANOVER OEC COMPRESSION
                                       CORPORATION, as Guarantor


                                       By: ____________________________________
                                           Name:
                                           Title:


                                       PRODUCTION OPERATORS CORPORATION,
                                       as Guarantor


                                       By: ____________________________________
                                           Name:
                                           Title:


                                       PRODUCTION OPERATORS, INC., as Guarantor


                                       By: ____________________________________
                                           Name:
                                           Title:


                                       WILMINGTON TRUST FSB, as Indenture
                                       Trustee for the Securityholders, as
                                       Collateral Agent for the Securityholders
                                       and the Certificate Holders, and in its
                                       individual capacity only to the extent
                                       expressly set forth herein


                                       By: ____________________________________
                                           Name:
                                           Title:
<PAGE>

                                                                              50

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


                                       By: ____________________________________
                                           Name:
                                           Title: