<PAGE>

                                                                   Exhibit 10.72

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

                             PARTICIPATION AGREEMENT

                                      among

                    HANOVER COMPRESSION LIMITED PARTNERSHIP,
                                   as Lessee,

                         HANOVER EQUIPMENT TRUST 2001B,
                           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>
<CAPTION>
                                TABLE OF CONTENTS

                                                                                          Page
                                                                                          ----
<S>  <C>     <C>                                                                          <C>
                   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

</TABLE>
                                      -i-
<PAGE>

<TABLE>
<CAPTION>
                                                                                          Page
                                                                                          ----
<S>  <C>     <C>                                                                          <C>
      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
</TABLE>
                                             -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 2001B, 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 $250,000,000 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 $250,000,000.
<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 $7,750,000. 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 2001B
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 2001B 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. (1) 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 2001B".
         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. (b) 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 2001A Lease, the Hanover Guarantee and
               the 2001A 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
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                                                                              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. (c) 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 2001A 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. (d)
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 2001A Lessor that it will, upon notice by the Indenture Trustee and/or
the 2001A Indenture Trustee, cause the Lessee to purchase Equipment having a
Termination Value and/or a 2001A 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. (e) 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 2001A 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 2001B
                                       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>

          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 2001B


                                    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>

                                    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>


                                    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>


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


                                    By: ________________________________________
                                        Name:
                                        Title: