Document:

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                                                                    EXHIBIT 10.2

                        FORM OF SUBSIDIARIES' GUARANTEE

     SUBSIDIARIES' GUARANTEE, dated as of March 13, 2000, made by each of the
corporations that are signatories hereto (the "Guarantors"), in favor of THE
                                               ----------
CHASE MANHATTAN BANK, as agent (in such capacity, the "Administrative Agent")
                                                       --------------------
for the lenders (the "Lenders") parties to the Credit Agreement, dated as of
                      -------
December 15, 1997 as amended and restated through March 8, 2000, (as amended,
supplemented or otherwise modified from time to time, the "Credit Agreement"),
                                                           ----------------
among Hanover Compressor Company, a Delaware corporation (the "Borrower"), the
                                                               --------
Lenders and the Administrative Agent.

                             W I T N E S S E T H:
                             - - - - - - - - - -

     WHEREAS, pursuant to the Credit Agreement, the Lenders have severally
agreed to make Loans to the Borrower upon the terms and subject to the
conditions set forth therein, to be evidenced by the Notes issued by the
Borrower under the Credit Agreement;

     WHEREAS, each Guarantor is a Qualified Subsidiary of the Borrower;

     WHEREAS, the proceeds of the Loans will be used in part to enable the
Borrower to make valuable transfers (as determined as provided herein) to some
of the Guarantors in connection with the operation of their respective
businesses;

     WHEREAS, it is a condition precedent to the obligation of the Lenders to
amend and restate the Credit Agreement and to make their respective Loans to the
Borrower under the Credit Agreement that the Guarantors shall have executed and
delivered this Guarantee to the Administrative Agent for the ratable benefit of
the Lenders.

     NOW, THEREFORE, in consideration of the premises and to induce the
Administrative Agent and the Lenders to amend and restate the Credit Agreement
and to induce the Lenders to make their respective loans to the Borrower under
the Credit Agreement, the Guarantors hereby agree with the Administrative Agent,
for the ratable benefit of the Lenders, as follows:

     1    Defined Terms. (a) Unless otherwise defined herein, terms defined in
          -------------
the Credit Agreement and used herein shall have the meanings given to them in
the Credit Agreement.

     (a)  As used herein, "Obligations" means the collective reference to the
                           -----------
unpaid principal of and interest on any outstanding Loans and all other
obligations and liabilities of the Borrower to the Administrative Agent or the
Lenders (including, without limitation, interest accruing at the then applicable
rate provided in the Credit Agreement after the maturity of the Loans and
interest accruing at the then applicable rate provided in the Credit Agreement
after the filing of any petition in bankruptcy, or the commencement of any
insolvency, reorganization or like proceeding, relating to the Borrower, whether
or not a claim for post-filing or post-petition
<PAGE>

interest is allowed in such proceeding), whether direct or indirect, absolute or
contingent, due or to become due, now existing or hereafter incurred, which may
arise under, out of, or in connection with, the Credit Agreement, the Notes, the
Letters of Credit, the other Loan Documents or any other document made,
delivered or given in connection therewith, whether on account of principal,
interest, reimbursement obligations, fees, indemnities, costs, expenses or
otherwise (including, without limitation, all fees and disbursements of counsel
to the Administrative Agent or to the Lenders that are required to be paid by
the Borrower or the Guarantor pursuant to the terms of the Credit Agreement or
this Agreement or any other Loan Document).

     (b)  The words "hereof," "herein" and "hereunder" and words of similar
import when used in this Guarantee shall refer to this Guarantee as a whole and
not to any particular provision of this Guarantee, and section and paragraph
references are to this Guarantee unless otherwise specified.

     (c)  The meanings given to terms defined herein shall be equally applicable
to both the singular and plural forms of such terms.

     2    Guarantee (a) Subject to the provisions of paragraph 2(b), each of the
          ---------
Guarantors hereby, jointly and severally, unconditionally and irrevocably,
guarantees to the Administrative Agent, for the ratable benefit of the Lenders
and their respective successors, indorsees, transferees and assigns, the prompt
and complete payment and performance by the Borrower when due (whether at the
stated maturity, by acceleration or otherwise) of the Obligations.

     (a)  Anything herein or in any other Loan Document to the contrary
notwithstanding, the maximum liability of each Guarantor hereunder and under the
other Loan Documents shall in no event exceed the amount which can be guaranteed
by such Guarantor under applicable federal and state laws relating to the
insolvency of debtors.

     (b)  Each Guarantor further agrees to pay any and all expenses (including,
without limitation, all fees and disbursements of counsel) which may be paid or
incurred by the Administrative Agent or any Lender in enforcing, or obtaining
advice of counsel in respect of, any rights with respect to, or collecting, any
or all of the Obligations and/or enforcing any rights with respect to, or
collecting against, such Guarantor under this Guarantee. This Guarantee shall
remain in full force and effect until the Obligations are paid in full and the
Commitments are terminated, notwithstanding that from time to time prior thereto
the Borrower may be free from any Obligations.

     (c)  Each Guarantor agrees that the Obligations may at any time and from
time to time exceed the amount of the liability of such Guarantor hereunder
without impairing this Guarantee or affecting the rights and remedies of the
Administrative Agent or any Lender hereunder.

     (d)  No payment or payments made by the Borrower, any of the Guarantors,
any other guarantor or any other Person or received or collected by the
Administrative Agent or any Lender from the Borrower, any of the Guarantors, any
other guarantor or any other Person by virtue of any action or proceeding or any
set-off or appropriation or application at any time or from time to time in
reduction of or in payment of the Obligations shall be deemed to modify, reduce,
release or otherwise affect the liability of any Guarantor hereunder which
shall, notwithstanding any such payment or payments other than payments made by
such Guarantor in
<PAGE>

respect of the Obligations or payments received or collected from such Guarantor
in respect of the Obligations, remain liable for the Obligations up to the
maximum liability of such Guarantor hereunder until the Obligations are paid in
full and the Commitments are terminated.

     3    Right of Contribution. Each Guarantor hereby agrees that to the extent
          ---------------------
that a Guarantor shall have paid more than its proportionate share of any
payment made hereunder, such Guarantor shall be entitled to seek and receive
contribution from and against any other Guarantor hereunder who has not paid its
proportionate share of such payment. Each Guarantor's right of contribution
shall be subject to the terms and conditions of Section 5 hereof. The provisions
of this Section shall in no respect limit the obligations and liabilities of any
Guarantor to the Administrative Agent and the Lenders, and each Guarantor shall
remain liable to the Administrative Agent and the Lenders for the full amount
guaranteed by such Guarantor hereunder.

     4    Right of Set-off. Upon the occurrence of any Event of Default, each
          ----------------
Guarantor hereby irrevocably authorizes each Lender at any time and from time to
time without notice to such Guarantor or any other Guarantor, any such notice
being expressly waived by each Guarantor, to set-off and appropriate and apply
any and all deposits (general or special, time or demand, provisional or final),
in any currency, and any other credits, indebtedness or claims, in any currency,
in each case whether direct or indirect, absolute or contingent, matured or
unmatured, at any time held or owing by such Lender to or for the credit or the
account of such Guarantor, or any part thereof in such amounts as such Lender
may elect, against and on account of the obligations and liabilities of such
Guarantor to such Lender hereunder and claims of every nature and description of
such Lender against such Guarantor, in any currency, whether arising hereunder,
under the Credit Agreement, any Note, any Letter of Credit or any Loan Document,
as such Lender may elect, whether or not the Administrative Agent or any Lender
has made any demand for payment and although such obligations, liabilities and
claims may be contingent or unmatured.  The Administrative Agent and each Lender
shall notify such Guarantor promptly of any such set-off and the application
made by the Administrative Agent or such Lender, provided that the failure to
                                                 --------
give such notice shall not affect the validity of such set-off and application.
The rights of the Administrative Agent and each Lender under this Section are in
addition to other rights and remedies (including, without limitation, other
rights of set-off) which the Administrative Agent or such Lender may have.

     5    No Subrogation. Notwithstanding any payment or payments made by any of
          --------------
the Guarantors hereunder or any set-off or application of funds of any of the
Guarantors by any Lender, no Guarantor shall be entitled to be subrogated to any
of the rights of the Administrative Agent or any Lender against the Borrower or
any other Guarantor or any collateral security or guarantee or right of offset
held by any Lender for the payment of the Obligations, nor shall any Guarantor
seek or be entitled to seek any contribution or reimbursement from the Borrower
or any other Guarantor in respect of payments made by such Guarantor hereunder,
until all amounts owing to the Administrative Agent and the Lenders by the
Borrower on account of the Obligations are paid in full and the Commitments are
terminated. If any amount shall be paid to any Guarantor on account of such
subrogation rights at any time when all of the Obligations shall not have been
paid in full, such amount shall be held by such Guarantor in trust for the
Administrative Agent and the Lenders, segregated from other funds of such
Guarantor, and shall, forthwith upon receipt by such Guarantor, be turned over
to the Administrative Agent in the exact form received by such Guarantor (duly
indorsed by such Guarantor to the Administrative
<PAGE>

Agent, if required), to be applied against the Obligations, whether matured or
unmatured, in such order as the Administrative Agent may determine.

     6    Amendments, etc. with respect to the Obligations; Waiver of Rights.
          ------------------------------------------------------------------
Each Guarantor shall remain obligated hereunder notwithstanding that, without
any reservation of rights against any Guarantor and without notice to or further
assent by any Guarantor, any demand for payment of any of the Obligations made
by the Administrative Agent or any Lender may be rescinded by such party and any
of the Obligations continued, and the Obligations, or the liability of any other
party upon or for any part thereof, or any collateral security or guarantee
therefor or right of offset with respect thereto, may, from time to time, in
whole or in part, be renewed, extended, amended, modified, accelerated,
compromised, waived, surrendered or released by the Administrative Agent or any
Lender, and the Credit Agreement, the Notes and the other Loan Documents and any
other documents executed and delivered in connection therewith may be amended,
modified, supplemented or terminated, in whole or in part, as the Administrative
Agent (or the Required Lenders, as the case may be) may deem advisable from time
to time, and any collateral security, guarantee or right of offset at any time
held by the Administrative Agent or any Lender for the payment of the
Obligations may be sold, exchanged, waived, surrendered or released. Neither the
Administrative Agent nor any Lender shall have any obligation to protect,
secure, perfect or insure any Lien at any time held by it as security for the
Obligations or for this Guarantee or any property subject thereto. When making
any demand hereunder against any of the Guarantors, the Administrative Agent or
any Lender may, but shall be under no obligation to, make a similar demand on
the Borrower or any other Guarantor or guarantor, and any failure by the
Administrative Agent or any Lender to make any such demand or to collect any
payments from the Borrower or any such other Guarantor or guarantor or any
release of the Borrower or such other Guarantor or guarantor shall not relieve
any of the Guarantors in respect of which a demand or collection is not made or
any of the Guarantors not so released of their several obligations or
liabilities hereunder, and shall not impair or affect the rights and remedies,
express or implied, or as a matter of law, of the Administrative Agent or any
Lender against any of the Guarantors. For the purposes hereof "demand" shall
include the commencement and continuance of any legal proceedings.

     7    Guarantee Absolute and Unconditional. Each Guarantor waives any and
          ------------------------------------
all notice of the creation, renewal, extension or accrual of any of the
Obligations and notice of or proof of reliance by the Administrative Agent or
any Lender upon this Guarantee or acceptance of this Guarantee, the Obligations,
and any of them, shall conclusively be deemed to have been created, contracted
or incurred, or renewed, extended, amended or waived, in reliance upon this
Guarantee; and all dealings between the Borrower and any of the Guarantors, on
the one hand, and the Administrative Agent and the Lenders, on the other hand,
likewise shall be conclusively presumed to have been had or consummated in
reliance upon this Guarantee. Each Guarantor waives diligence, presentment,
protest, demand for payment and notice of default or nonpayment to or upon the
Borrower or any of the Guarantors with respect to the Obligations. Each
Guarantor understands and agrees that this Guarantee shall be construed as a
continuing, absolute and unconditional guarantee of payment without regard to
(a) the validity, regularity or enforceability of the Credit Agreement, any Note
or any other Loan Document, any of the Obligations or any other collateral
security therefor or guarantee or right of offset with respect thereto at any
time or from time to time held by the Administrative Agent or any Lender (b) any
defense, set-off or counterclaim (other than a defense of payment or
performance) which may at any time be available to or be asserted by the
Borrower against the Administrative Agent or any Lender, or (c) any other
circumstance whatsoever (with or without notice to or knowledge of the
<PAGE>

Borrower or such Guarantor) which constitutes, or might be construed to
constitute, an equitable or legal discharge of the Borrower for the Obligations,
or of such Guarantor under this Guarantee, in bankruptcy or in any other
instance. When pursuing its rights and remedies hereunder against any Guarantor,
the Administrative Agent and any Lender may, but shall be under no obligation
to, pursue such rights and remedies as it may have against the Borrower or any
other Person or against any collateral security or guarantee for the Obligations
or any right of offset with respect thereto, and any failure by the
Administrative Agent or any Lender to pursue such other rights or remedies or to
collect any payments from the Borrower or any such other Person or to realize
upon any such collateral security or guarantee or to exercise any such right of
offset, or any release of the Borrower or any such other Person or any such
collateral security, guarantee or right of offset, shall not relieve such
Guarantor of any liability hereunder, and shall not impair or affect the rights
and remedies, whether express, implied or available as a matter of law, of the
Administrative Agent and the Lenders against such Guarantor. This Guarantee
shall remain in full force and effect and be binding in accordance with and to
the extent of its terms upon each Guarantor and the successors and assigns
thereof, and shall inure to the benefit of the Administrative Agent and the
Lenders, and their respective successors, indorsees, transferees and assigns,
until all the Obligations and the obligations of each Guarantor under this
Guarantee shall have been satisfied by payment in full and the Commitments shall
be terminated, notwithstanding that from time to time during the term of the
Credit Agreement the Borrower may be free from any Obligations.

     8    Reinstatement. This Guarantee shall continue to be effective, or be
          -------------
reinstated, as the case may be, if at any time payment, or any part thereof, of
any of the Obligations is rescinded or must otherwise be restored or returned by
the Administrative Agent or any Lender upon the insolvency, bankruptcy,
dissolution, liquidation or reorganization of the Borrower or any Guarantor, or
upon or as a result of the appointment of a receiver, intervenor or conservator
of, or trustee or similar officer for, the Borrower or any Guarantor or any
substantial part of its property, or otherwise, all as though such payments had
not been made.

     9    Payments. Each Guarantor hereby guarantees that payments hereunder
          --------
will be paid to the Administrative Agent without set-off or counterclaim in U.S.
Dollars at the office of the Administrative Agent located at 270 Park Avenue,
New York, New York 10017.

     10   Representations and Warranties. Each Guarantor hereby represents and
          ------------------------------
warrants that:

     (a)  it is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has the
corporate power and authority and the legal right to own and operate its
property, to lease the property it operates and to conduct the business in which
it is currently engaged;

     (b)  it has the corporate power and authority and the legal right to
execute and deliver, and to perform its obligations under, this Guarantee, and
has taken all necessary corporate action to authorize its execution, delivery
and performance of this Guarantee;

     (c)  this Guarantee constitutes a legal, valid and binding obligation of
such Guarantor enforceable in accordance with its terms, except as affected by
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting
<PAGE>

the enforcement of creditors' rights generally, general equitable principles and
an implied covenant of good faith and fair dealing;

     (d)  the execution, delivery and performance of this Guarantee will not
violate any provision of any Requirement of Law or Contractual Obligation of
such Guarantor and will not result in or require the creation or imposition of
any Lien on any of the properties or revenues of such Guarantor pursuant to any
Requirement of Law or Contractual Obligation of the Guarantor;

     (e)  no consent or authorization of, filing with, or other act by or in
respect of, any arbitrator or Governmental Authority and no consent of any other
Person (including, without limitation, any stockholder or creditor of such
Guarantor) is required in connection with the execution, delivery, performance,
validity or enforceability of this Guarantee;

     (f)  no litigation, investigation or proceeding of or before any arbitrator
or Governmental Authority is pending or, to the knowledge of such Guarantor,
threatened by or against such Guarantor or against any of its properties or
revenues with respect to this Guarantee or any of the transactions contemplated
hereby, which would reasonably be expected to have a material adverse effect on
the business, operations, property or financial or other condition of such
Guarantor.

     11   Authority of Administrative Agent. Each Guarantor acknowledges that
          ---------------------------------
the rights and responsibilities of the Administrative Agent under this Guarantee
with respect to any action taken by the Administrative Agent or the exercise or
non-exercise by the Administrative Agent of any option, right, request, judgment
or other right or remedy provided for herein or resulting or arising out of this
Guarantee shall, as between the Administrative Agent and the Lenders, be
governed by the Credit Agreement and by such other agreements with respect
thereto as may exist from time to time among them, but, as between the
Administrative Agent and such Guarantor, the Administrative Agent shall be
conclusively presumed to be acting as agent for the Lenders with full and valid
authority so to act or refrain from acting, and no Guarantor shall be under any
obligation, or entitlement, to make any inquiry respecting such authority.

     12   Notices. All notices, requests and demands to or upon the
          -------
Administrative Agent, any Lender or any Guarantor to be effective shall be in
writing (or by telex, fax or similar electronic transfer confirmed in writing)
and shall be deemed to have been duly given or made when delivered by hand or if
by overnight courier service, when received or if given by mail, when deposited
in the mails by certified mail, return receipt requested, or if by telex, fax or
similar electronic transfer, when sent and receipt has been confirmed, addressed
as follows:

     (a)  if to the Administrative Agent or any Lender, at its address or
transmission number for notices provided in subsection 11.2 of the Credit
Agreement; and

     (b)  if to any Guarantor, at its address or transmission number for notices
set forth under its signature below.

     The Administrative Agent, each Lender and each Guarantor may change its
address and transmission numbers for notices by notice in the manner provided in
this Section.

     13   Counterparts. This Guarantee may be executed by one or more of the
          ------------
Guarantors on any number of separate counterparts, and all of said counterparts
taken together shall be deemed
<PAGE>

to constitute one and the same instrument. A set of the counterparts of this
Guarantee signed by all the Guarantors shall be lodged with the Administrative
Agent.

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

     15   Integration. This Guarantee represents the agreement of each Guarantor
          -----------
with respect to the subject matter hereof and there are no promises or
representations by the Administrative Agent or any Lender relative to the
subject matter hereof not reflected herein.

     16   Amendments in Writing; No Waiver; Cumulative Remedies. (a) None of the
          -----------------------------------------------------
terms or provisions of this Guarantee may be waived, amended, supplemented or
otherwise modified except by a written instrument executed by each Guarantor and
the Administrative Agent, provided that any provision of this Guarantee may be
                          --------
waived by the Administrative Agent and the Lenders in a letter or agreement
executed by the Administrative Agent or by telex or facsimile transmission from
the Administrative Agent.

     (a)  Neither the Administrative Agent nor any Lender shall by any act
(except by a written instrument pursuant to paragraph 16.(a) hereof), delay,
indulgence, omission or otherwise be deemed to have waived any right or remedy
hereunder or to have acquiesced in any Default or Event of Default or in any
breach of any of the terms and conditions hereof. No failure to exercise, nor
any delay in exercising, on the part of the Administrative Agent or any Lender,
any right, power or privilege hereunder shall operate as a waiver thereof. No
single or partial exercise of any right, power or privilege hereunder shall
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. A waiver by the Administrative Agent or any Lender of
any right or remedy hereunder on any one occasion shall not be construed as a
bar to any right or remedy which the Administrative Agent or such Lender would
otherwise have on any future occasion.

     (b)  The rights and remedies herein provided are cumulative, may be
exercised singly or concurrently and are not exclusive of any other rights or
remedies provided by law.

     17   Section Headings. The section headings used in this Guarantee are for
          ----------------
convenience of reference only and are not to affect the construction hereof or
be taken into consideration in the interpretation hereof.

     18   Successors and Assigns. This Guarantee shall be binding upon the
          ----------------------
successors and assigns of each Guarantor and shall inure to the benefit of the
Administrative Agent and the Lenders and their successors and assigns.

     19   Governing Law. This Guarantee shall be governed by, and construed and
          -------------
interpreted in accordance with, the law of the State of New York.
<PAGE>

          IN WITNESS WHEREOF, each of the undersigned has caused this Guarantee
to be duly executed and delivered by its duly authorized officer as of the day
and year first above written.

                                        HANOVER GENERAL HOLDINGS, INC.

                                        By: _________________________________

                                        Name:

                                        Title:
<PAGE>

HANOVER COMPRESSOR LIMITED HOLDINGS, LLC

by Hanover General Holdings, Inc.,
as sole member

By: _____________________________
    Name:
    Title:
<PAGE>

                                        HANOVER MAINTECH LIMITED PARTNERSHIP

                                        by Hanover General Holdings, Inc.,
                                        as general partner

                                        By:  _____________________________
                                             Name:
                                             Title:
<PAGE>

                                        HANOVER/SMITH LIMITED PARTNERSHIP

                                        by Hanover General Holdings, Inc.,
                                        as general partner

                                        By:  _____________________________
                                             Name:
                                             Title:
<PAGE>

                                        HANOVER LAND LIMITED PARTNERSHIP

                                        by Hanover General Holdings, Inc.,
                                        general partner

                                        By:  _____________________________
                                             Name:
                                             Title:
<PAGE>

                                                                       EXHIBIT C
                                                                       ---------

                                    FORM OF
                           ASSIGNMENT AND ACCEPTANCE

          Reference is made to the Amended and Restated Credit Agreement, dated
as of March 13, 2000 (as further amended, supplemented or otherwise modified
from time to time, the "Credit Agreement"), among Hanover Compressor Company, a
                        ----------------
Delaware corporation ("Holdings"), Hanover Compression Inc., a Delaware
                       --------
corporation ("HCC"), the several lenders and other financial institutions from
              ---
time to time parties thereto (the "Lenders") and The Chase Manhattan Bank, a New
                                   -------
York banking corporation, as Administrative Agent for the Lenders (in such
capacity, the "Administrative Agent").  Unless otherwise defined herein, terms
               --------------------
defined in the Credit Agreement and used herein shall have the meanings given to
them in the Credit Agreement.

          The Assignor identified on Schedule l hereto (the "Assignor") and the
                                                             --------
Assignee identified on Schedule l hereto (the "Assignee") agree as follows:
                                               --------

          1.   The Assignor hereby irrevocably sells and assigns to the Assignee
without recourse to the Assignor, and the Assignee hereby irrevocably purchases
and assumes from the Assignor without recourse to the Assignor, as of the
Effective Date (as defined below), the interest described in Schedule 1 hereto
(the "Assigned Interest") in and to the Assignor's rights and obligations under
      -----------------
the Credit Agreement with respect to those credit facilities contained in the
Credit Agreement as are set forth on Schedule 1 hereto (individually, an
"Assigned Facility"; collectively, the "Assigned Facilities"), in a principal
------------------                      -------------------
amount for each Assigned Facility as set forth on Schedule 1 hereto.

          2.   The Assignor (a) makes no representation or warranty and assumes
no responsibility with respect to any statements, warranties or representations
made in or in connection with the Credit Agreement or with respect to the
execution, legality, validity, enforceability, genuineness, sufficiency or value
of the Credit Agreement, any other Loan Document or any other instrument or
document furnished pursuant thereto, other than that the Assignor has not
created any adverse claim upon the interest being assigned by it hereunder and
that such interest is free and clear of any such adverse claim; (b) makes no
representation or warranty and assumes no responsibility with respect to the
financial condition of HCC, any of its Subsidiaries or any other obligor or the
performance or observance by HCC, any of its Subsidiaries or any other obligor
of any of their respective obligations under the Credit Agreement or any other
Loan Document or any other instrument or document furnished pursuant hereto or
thereto; and (c) attaches any Notes held by it evidencing the Assigned
Facilities and (i) requests that the Administrative Agent, upon request by the
Assignee, exchange the attached Notes for a new Note or Notes payable to the
Assignee and (ii) if the Assignor has retained any interest in the Assigned
Facility, requests that the Administrative Agent exchange the attached Notes for
a new Note or Notes payable to the Assignor, in each case in amounts which
reflect the assignment being made hereby (and after giving effect to any other
assignments which have become effective on the Effective Date).

          3.   The Assignee (a) represents and warrants that it is legally
authorized to enter into this Assignment and Acceptance; (b) confirms that it
has received a copy of the Credit
<PAGE>

Agreement, together with copies of the financial statements delivered pursuant
to subsection 5.1 thereof and such other documents and information as it has
deemed appropriate to make its own credit analysis and decision to enter into
this Assignment and Acceptance; (c) agrees that it will, independently and
without reliance upon the Assignor, the Administrative Agent or any other Lender
and based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action
under the Credit Agreement, the other Loan Documents or any other instrument or
document furnished pursuant hereto or thereto; (d) appoints and authorizes the
Administrative Agent to take such action as agent on its behalf and to exercise
such powers and discretion under the Credit Agreement, the other Loan Documents
or any other instrument or document furnished pursuant hereto or thereto as are
delegated to the Administrative Agent by the terms thereof, together with such
powers as are incidental thereto; and (e) agrees that it will be bound by the
provisions of the Credit Agreement and will perform in accordance with its terms
all the obligations which by the terms of the Credit Agreement are required to
be performed by it as a Lender including, if it is organized under the laws of a
jurisdiction outside the United States, its obligation pursuant to subsection
3.12(b) of the Credit Agreement.

          4.   The effective date of this Assignment and Acceptance shall be the
Effective Date of Assignment described in Schedule 1 hereto (the "Effective
                                                                  ---------
Date").  Following the execution of this Assignment and Acceptance, it will be
----
delivered to the Administrative Agent for acceptance by it and recording by the
Administrative Agent pursuant to the Credit Agreement, effective as of the
Effective Date (which shall not, unless otherwise agreed to by the
Administrative Agent, be earlier than five Business Days after the date of such
acceptance and recording by the Administrative Agent).

          5.   Upon such acceptance and recording, from and after the Effective
Date, the Administrative Agent shall make all payments in respect of the
Assigned Interest (including payments of principal, interest, fees and other
amounts) to the Assignor for amounts which have accrued to the Effective Date
and to the Assignee for amounts which have accrued subsequent to the Effective
Date.  The Assignor and the Assignee shall make all appropriate adjustments in
payments by the Administrative Agent for periods prior to the Effective Date or
with respect to the making of this assignment directly between themselves.

          6.   From and after the Effective Date, (a) the Assignee shall be a
party to the Credit Agreement and, to the extent provided in this Assignment and
Acceptance, have the rights and obligations of a Lender thereunder and under the
other Loan Documents and shall be bound by the provisions thereof and (b) the
Assignor shall, to the extent provided in this Assignment and Acceptance,
relinquish its rights and be released from its obligations under the Credit
Agreement.

          7.   This Assignment and Acceptance shall be governed by and construed
in accordance with the laws of the State of New York.

          IN WITNESS WHEREOF, the parties hereto have caused this Assignment and
Acceptance to be executed as of the date first above written by their respective
duly authorized officers on Schedule 1 hereto.
<PAGE>

                                   Schedule 1
                          to Assignment and Acceptance

Name of Assignor: _______________________

Name of Assignee: _______________________

Effective Date of Assignment: _________________

  ____________________  __________________   __________________________________

   Credit               Principal            Commitment Percentage Assigned/1/
   Facility Assigned    Amount Assigned

                          $_______                     __._______%

________________________________________     __________________________________

  [Name of Assignee]                       [Name of Assignor]

  By:                                      By:
     Title:                                  Title:
     ___________________________________     __________________________________

  Accepted:                                Consented To:

 THE CHASE MANHATTAN BANK, as              HANOVER COMPRESSOR COMPANY
 Administrative Agent

 By:                                       By:
   Title:                                    Title:

________________

/1/  Calculate the Commitment Percentage that is assigned to at least 15 decimal
 -   places and show as a percentage of the aggregate commitments of all
     Lenders.
<PAGE>

                                                                       EXHIBIT D
                                                                       ---------

                           FORM OF HOLDINGS GUARANTEE

     HOLDINGS GUARANTEE, dated as of December 9, 1999, made by HANOVER
COMPRESSOR COMPANY (the "Guarantor"), in favor of THE CHASE MANHATTAN BANK, as
                         ---------
agent (in such capacity, the "Administrative Agent") for the lenders (the
                              --------------------
"Lenders") parties to the Credit Agreement, dated as of December 15, 1997, (as
--------
amended, supplemented or otherwise modified from time to time, the "Credit
                                                                    ------
Agreement"), among the Guarantor, Hanover Compression Inc. (formerly known as
---------
Hanover Compressor Company), a Delaware corporation (the "Borrower"), the
                                                          --------
Lenders and the Administrative Agent.

                              W I T N E S S E T H:
                              -------------------

     WHEREAS, pursuant to the Credit Agreement, the Lenders have severally
agreed to make Loans to the Borrower upon the terms and subject to the
conditions set forth therein, to be evidenced by the Notes issued by the
Borrower under the Credit Agreement;

     WHEREAS, upon the effectiveness of the TIDES Amendment, the Guarantor, a
newly formed subsidiary of the Borrower, will become the parent company of the
Borrower;

     WHEREAS, it is a condition precedent to the obligation of the Lenders to
continue to make their respective Loans to the Borrower under the Credit
Agreement that the Guarantor shall have executed and delivered this Guarantee to
the Administrative Agent for the ratable benefit of the Lenders.

     NOW, THEREFORE, in consideration of the premises and to induce the
Administrative Agent and the Lenders to enter into the Credit Agreement and to
induce the Lenders to make their respective loans to the Borrower under the
Credit Agreement, the Guarantor hereby agrees with the Administrative Agent, for
the ratable benefit of the Lenders, as follows:

     1.   Defined Terms. (a) Unless otherwise defined herein, terms defined
          -------------
in the Credit Agreement and used herein shall have the meanings given to them in
the Credit Agreement.

     (a)  As used herein, "Obligations" means the collective reference to the
                           -----------
unpaid principal of and interest on the Notes and all other obligations and
liabilities of the Borrower to the Administrative Agent or the Lenders
(including, without limitation, interest accruing at the then applicable rate
provided in the Credit Agreement after the maturity of the Loans and interest
accruing at the then applicable rate provided in the Credit Agreement after the
filing of any petition in bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding, relating to the Borrower, whether or not a
claim for post-filing or post-petition interest is allowed in such proceeding),
whether direct or indirect, absolute or contingent, due or to become due, now
existing or hereafter incurred, which may arise under, out of, or in connection
with, the Credit Agreement, the Notes, the Letters of Credit, the other Loan
Documents or any other document made, delivered or given in connection
therewith, whether on
<PAGE>

account of principal, interest, reimbursement obligations, fees, indemnities,
costs, expenses or otherwise (including, without limitation, all fees and
disbursements of counsel to the Administrative Agent or to the Lenders that are
required to be paid by the Borrower or the Guarantor pursuant to the terms of
the Credit Agreement or this Agreement or any other Loan Document).

     (b)  The words "hereof," "herein" and "hereunder" and words of similar
import when used in this Guarantee shall refer to this Guarantee as a whole and
not to any particular provision of this Guarantee, and section and paragraph
references are to this Guarantee unless otherwise specified.

     (c)  The meanings given to terms defined herein shall be equally applicable
to both the singular and plural forms of such terms.

     2.   Guarantee. (a) Subject to the provisions of paragraph 2(b), the
          ---------
Guarantor hereby, unconditionally and irrevocably, guarantees to the
Administrative Agent, for the ratable benefit of the Lenders and their
respective successors, indorsees, transferees and assigns, the prompt and
complete payment and performance by the Borrower when due (whether at the stated
maturity, by acceleration or otherwise) of the Obligations.

     (a)  Anything herein or in any other Loan Document to the contrary
notwithstanding, the maximum liability of the Guarantor hereunder and under the
other Loan Documents shall in no event exceed the amount which can be guaranteed
by the Guarantor under applicable federal and state laws relating to the
insolvency of debtors.

     (b)  The Guarantor further agrees to pay any and all expenses (including,
without limitation, all fees and disbursements of counsel) which may be paid or
incurred by the Administrative Agent or any Lender in enforcing, or obtaining
advice of counsel in respect of, any rights with respect to, or collecting, any
or all of the Obligations and/or enforcing any rights with respect to, or
collecting against, the Guarantor under this Guarantee.  This Guarantee shall
remain in full force and effect until the Obligations are paid in full and the
Commitments are terminated, notwithstanding that from time to time prior thereto
the Borrower may be free from any Obligations.

     (c)  The Guarantor agrees that the Obligations may at any time and from
time to time exceed the amount of the liability of the Guarantor hereunder
without impairing this Guarantee or affecting the rights and remedies of the
Administrative Agent or any Lender hereunder.

     (d)  No payment or payments made by the Borrower, the Guarantor, any other
guarantor or any other Person or received or collected by the Administrative
Agent or any Lender from the Borrower, the Guarantors, any other guarantor or
any other Person by virtue of any action or proceeding or any set-off or
appropriation or application at any time or from time to time in reduction of or
in payment of the Obligations shall be deemed to modify, reduce, release or
otherwise affect the liability of the Guarantor hereunder which shall,
notwithstanding any such payment or payments other than payments made by the
Guarantor in respect of the Obligations or payments received or collected from
the Guarantor in respect of the Obligations, remain liable
<PAGE>

for the Obligations up to the maximum liability of the Guarantor hereunder until
the Obligations are paid in full and the Commitments are terminated.

     3.   Right of Set-off. Upon the occurrence of any Event of Default, the
          ----------------
Guarantor hereby irrevocably authorizes each Lender at any time and from time to
time without notice to such Guarantor, any such notice being expressly waived by
the Guarantor, to set-off and appropriate and apply any and all deposits
(general or special, time or demand, provisional or final), in any currency, and
any other credits, indebtedness or claims, in any currency, in each case whether
direct or indirect, absolute or contingent, matured or unmatured, at any time
held or owing by such Lender to or for the credit or the account of such
Guarantor, or any part thereof in such amounts as such Lender may elect, against
and on account of the obligations and liabilities of such Guarantor to such
Lender hereunder and claims of every nature and description of such Lender
against such Guarantor, in any currency, whether arising hereunder, under the
Credit Agreement, any Note, any Letter of Credit or any Loan Document, as such
Lender may elect, whether or not the Administrative Agent or any Lender has made
any demand for payment and although such obligations, liabilities and claims may
be contingent or unmatured.  The Administrative Agent and each Lender shall
notify such Guarantor promptly of any such set-off and the application made by
the Administrative Agent or such Lender, provided that the failure to give such
                                         --------
notice shall not affect the validity of such set-off and application.  The
rights of the Administrative Agent and each Lender under this Section are in
addition to other rights and remedies (including, without limitation, other
rights of set-off) which the Administrative Agent or such Lender may have.

     4.   No Subrogation.  Notwithstanding any payment or payments made by the
          --------------
Guarantor hereunder or any set-off or application of funds of the Guarantor by
any Lender, the Guarantor shall not be entitled to be subrogated to any of the
rights of the Administrative Agent or any Lender against the Borrower or any
collateral security or guarantee or right of offset held by any Lender for the
payment of the Obligations, nor shall the Guarantor seek or be entitled to seek
any contribution or reimbursement from the Borrower or any other guarantor in
respect of payments made by such Guarantor hereunder, until all amounts owing to
the Administrative Agent and the Lenders by the Borrower on account of the
Obligations are paid in full and the Commitments are terminated.  If any amount
shall be paid to the Guarantor on account of such subrogation rights at any time
when all of the Obligations shall not have been paid in full, such amount shall
be held by such Guarantor in trust for the Administrative Agent and the Lenders,
segregated from other funds of such Guarantor, and shall, forthwith upon receipt
by such Guarantor, be turned over to the Administrative Agent in the exact form
received by such Guarantor (duly indorsed by such Guarantor to the
Administrative Agent, if required), to be applied against the Obligations,
whether matured or unmatured, in such order as the Administrative Agent may
determine.

     5.   Amendments, etc. with respect to the Obligations; Waiver of Rights.
          ------------------------------------------------------------------
The Guarantor shall remain obligated hereunder notwithstanding that, without any
reservation of rights against the Guarantor and without notice to or further
assent by the Guarantor, any demand for payment of any of the Obligations made
by the Administrative Agent or any Lender may be rescinded by such party and any
of the Obligations continued, and the Obligations, or the liability of any other
party upon or for any part thereof, or any collateral security or guarantee
therefor or right of offset with respect thereto, may, from time to time, in
whole or in part, be renewed, extended, amended, modified, accelerated,
compromised, waived, surrendered or released by the
<PAGE>

Administrative Agent or any Lender, and the Credit Agreement, the Notes and the
other Loan Documents and any other documents executed and delivered in
connection therewith may be amended, modified, supplemented or terminated, in
whole or in part, as the Administrative Agent (or the Required Lenders, as the
case may be) may deem advisable from time to time, and any collateral security,
guarantee or right of offset at any time held by the Administrative Agent or any
Lender for the payment of the Obligations may be sold, exchanged, waived,
surrendered or released. Neither the Administrative Agent nor any Lender shall
have any obligation to protect, secure, perfect or insure any Lien at any time
held by it as security for the Obligations or for this Guarantee or any property
subject thereto. When making any demand hereunder against the Guarantor, the
Administrative Agent or any Lender may, but shall be under no obligation to,
make a similar demand on the Borrower or the Guarantor or guarantor, and any
failure by the Administrative Agent or any Lender to make any such demand or to
collect any payments from the Borrower or any such other guarantor or any
release of the Borrower or such other guarantor shall not relieve the Guarantor
in respect of which a demand or collection is not made or the Guarantor not so
released of its several obligations or liabilities hereunder, and shall not
impair or affect the rights and remedies, express or implied, or as a matter of
law, of the Administrative Agent or any Lender against the Guarantor. For the
purposes hereof "demand" shall include the commencement and continuance of any
legal proceedings.

     6.   Guarantee Absolute and Unconditional. The Guarantor waives any and
          ------------------------------------
all notice of the creation, renewal, extension or accrual of any of the
Obligations and notice of or proof of reliance by the Administrative Agent or
any Lender upon this Guarantee or acceptance of this Guarantee, the Obligations,
and any of them, shall conclusively be deemed to have been created, contracted
or incurred, or renewed, extended, amended or waived, in reliance upon this
Guarantee; and all dealings between the Borrower and the Guarantor, on the one
hand, and the Administrative Agent and the Lenders, on the other hand, likewise
shall be conclusively presumed to have been had or consummated in reliance upon
this Guarantee.  The Guarantor waives diligence, presentment, protest, demand
for payment and notice of default or nonpayment to or upon the Borrower or the
Guarantor with respect to the Obligations.  The Guarantor understands and agrees
that this Guarantee shall be construed as a continuing, absolute and
unconditional guarantee of payment without regard to (a) the validity,
regularity or enforceability of the Credit Agreement, any Note or any other Loan
Document, any of the Obligations or any other collateral security therefor or
guarantee or right of offset with respect thereto at any time or from time to
time held by the Administrative Agent or any Lender (b) any defense, set-off or
counterclaim (other than a defense of payment or performance) which may at any
time be available to or be asserted by the Borrower against the Administrative
Agent or any Lender, or (c) any other circumstance whatsoever (with or without
notice to or knowledge of the Borrower or such Guarantor) which constitutes, or
might be construed to constitute, an equitable or legal discharge of the
Borrower for the Obligations, or of such Guarantor under this Guarantee, in
bankruptcy or in any other instance.  When pursuing its rights and remedies
hereunder against the Guarantor, the Administrative Agent and any Lender may,
but shall be under no obligation to, pursue such rights and remedies as it may
have against the Borrower or any other Person or against any collateral security
or guarantee for the Obligations or any right of offset with respect thereto,
and any failure by the Administrative Agent or any Lender to pursue such other
rights or remedies or to collect any payments from the Borrower or any such
other Person or to realize upon any such collateral security or guarantee or to
exercise any such right of offset, or any release of the Borrower or any such
other Person or any such collateral security, guarantee or
<PAGE>

right of offset, shall not relieve such Guarantor of any liability hereunder,
and shall not impair or affect the rights and remedies, whether express, implied
or available as a matter of law, of the Administrative Agent and the Lenders
against such Guarantor. This Guarantee shall remain in full force and effect and
be binding in accordance with and to the extent of its terms upon the Guarantor
and its successors and assigns, and shall inure to the benefit of the
Administrative Agent and the Lenders, and their respective successors,
indorsees, transferees and assigns, until all the Obligations and the
obligations of the Guarantor under this Guarantee shall have been satisfied by
payment in full and the Commitments shall be terminated, notwithstanding that
from time to time during the term of the Credit Agreement the Borrower may be
free from any Obligations.

     7.   Reinstatement. This Guarantee shall continue to be effective, or be
          -------------
reinstated, as the case may be, if at any time payment, or any part thereof, of
any of the Obligations is rescinded or must otherwise be restored or returned by
the Administrative Agent or any Lender upon the insolvency, bankruptcy,
dissolution, liquidation or reorganization of the Borrower or the Guarantor, or
upon or as a result of the appointment of a receiver, intervenor or conservator
of, or trustee or similar officer for, the Borrower or the Guarantor or any
substantial part of its property, or otherwise, all as though such payments had
not been made.

     8.   Payments. The Guarantor hereby guarantees that payments hereunder
          --------
will be paid to the Administrative Agent without set-off or counterclaim in U.S.
Dollars at the office of the Administrative Agent located at 270 Park Avenue,
New York, New York 10017.

     9.   Representations and Warranties. The Guarantor hereby represents and
          ------------------------------
warrants that:

     (a)  it is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has the
corporate power and authority and the legal right to own and operate its
property, to lease the property it operates and to conduct the business in which
it is currently engaged;

     (b)  it has the corporate power and authority and the legal right to
execute and deliver, and to perform its obligations under, this Guarantee, and
has taken all necessary corporate action to authorize its execution, delivery
and performance of this Guarantee;

     (c)  this Guarantee constitutes a legal, valid and binding obligation of
such Guarantor enforceable in accordance with its terms, except as affected by
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting the enforcement of creditors' rights
generally, general equitable principles and an implied covenant of good faith
and fair dealing;

     (d)  the execution, delivery and performance of this Guarantee will not
violate any provision of any Requirement of Law or Contractual Obligation of
such Guarantor and will not result in or require the creation or imposition of
any Lien on any of the properties or revenues of such Guarantor pursuant to any
Requirement of Law or Contractual Obligation of the Guarantor;

     (e)  no consent or authorization of, filing with, or other act by or in
respect of, any arbitrator or Governmental Authority and no consent of any other
Person (including, without
<PAGE>

limitation, any stockholder or creditor of such Guarantor) is required in
connection with the execution, delivery, performance, validity or enforceability
of this Guarantee;

     (f)  no litigation, investigation or proceeding of or before any arbitrator
or Governmental Authority is pending or, to the knowledge of such Guarantor,
threatened by or against such Guarantor or against any of its properties or
revenues with respect to this Guarantee or any of the transactions contemplated
hereby, which would reasonably be expected to have a material adverse effect on
the business, operations, property or financial or other condition of such
Guarantor.

     10.  Authority of Administrative Agent. The Guarantor acknowledges that
          ---------------------------------
the rights and responsibilities of the Administrative Agent under this Guarantee
with respect to any action taken by the Administrative Agent or the exercise or
non-exercise by the Administrative Agent of any option, right, request, judgment
or other right or remedy provided for herein or resulting or arising out of this
Guarantee shall, as between the Administrative Agent and the Lenders, be
governed by the Credit Agreement and by such other agreements with respect
thereto as may exist from time to time among them, but, as between the
Administrative Agent and such Guarantor, the Administrative Agent shall be
conclusively presumed to be acting as agent for the Lenders with full and valid
authority so to act or refrain from acting, and the Guarantor shall not be under
any obligation, or entitlement, to make any inquiry respecting such authority.

     11.  Notices. All notices, requests and demands to or upon the
          -------
Administrative Agent, any Lender or the Guarantor to be effective shall be in
writing (or by telex, fax or similar electronic transfer confirmed in writing)
and shall be deemed to have been duly given or made when delivered by hand or if
by overnight courier service, when received or if given by mail, when deposited
in the mails by certified mail, return receipt requested, or if by telex, fax or
similar electronic transfer, when sent and receipt has been confirmed, addressed
as follows:

     (a)  if to the Administrative Agent or any Lender, at its address or
transmission number for notices provided in subsection 11.2 of the Credit
Agreement; and

     (b)  if to the Guarantor, at its address or transmission number for notices
set forth under its signature below.

     The Administrative Agent, each Lender and the Guarantor may change its
address and transmission numbers for notices by notice in the manner provided in
this Section.

     12.  Counterparts. This Guarantee may be executed by the Guarantor on any
          ------------
number of separate counterparts, and all of said counterparts taken together
shall be deemed to constitute one and the same instrument.  A set of the
counterparts of this Guarantee signed by the Guarantor shall be lodged with the
Administrative Agent.

     13.  Severability. Any provision of this Guarantee which is prohibited or
          ------------
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
<PAGE>

     14.  Integration. This Guarantee represents the agreement of the Guarantor
          -----------
with respect to the subject matter hereof and there are no promises or
representations by the Administrative Agent or any Lender relative to the
subject matter hereof not reflected herein.

     15.  Amendments in Writing; No Waiver; Cumulative Remedies. (a) None of
          -----------------------------------------------------
the terms or provisions of this Guarantee may be waived, amended, supplemented
or otherwise modified except by a written instrument executed by the Guarantor
and the Administrative Agent, provided that any provision of this Guarantee may
                              --------
be waived by the Administrative Agent and the Lenders in a letter or agreement
executed by the Administrative Agent or by telex or facsimile transmission from
the Administrative Agent.

     (a)  Neither the Administrative Agent nor any Lender shall by any act
(except by a written instrument pursuant to paragraph 15(a) hereof), delay,
indulgence, omission or otherwise be deemed to have waived any right or remedy
hereunder or to have acquiesced in any Default or Event of Default or in any
breach of any of the terms and conditions hereof. No failure to exercise, nor
any delay in exercising, on the part of the Administrative Agent or any Lender,
any right, power or privilege hereunder shall operate as a waiver thereof. No
single or partial exercise of any right, power or privilege hereunder shall
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. A waiver by the Administrative Agent or any Lender of
any right or remedy hereunder on any one occasion shall not be construed as a
bar to any right or remedy which the Administrative Agent or such Lender would
otherwise have on any future occasion.

     (b)  The rights and remedies herein provided are cumulative, may be
exercised singly or concurrently and are not exclusive of any other rights or
remedies provided by law.

     16.  Section Headings. The section headings used in this Guarantee are
          ----------------
for convenience of reference only and are not to affect the construction hereof
or be taken into consideration in the interpretation hereof.

     17.  Successors and Assigns. This Guarantee shall be binding upon the
          ----------------------
successors and assigns of the Guarantor and shall inure to the benefit of the
Administrative Agent and the Lenders and their successors and assigns.

     18.  Governing Law. This Guarantee shall be governed by, and construed
          -------------
and interpreted in accordance with, the law of the State of New York.
<PAGE>

          IN WITNESS WHEREOF, the undersigned has caused this Guarantee to be
duly executed and delivered by its duly authorized officer as of the day and
year first above written.

                                      HANOVER COMPRESSOR COMPANY

                                      By:___________________________
                                         Name:
                                         Title:

                                      Address for Notices:
                                      12001 North Houston Rosslyn
                                      Suite 350
                                      Houston, Texas 77086
                                      Attn: Chief Financial Officer
                                      Fax: 281-447-8781<PAGE>

                                                                   EXHIBIT 10.53

                           ASSET PURCHASE AGREEMENT
                           ------------------------

        THIS ASSET PURCHASE AGREEMENT (herein designated "Agreement") is made on
                                                          ---------
July 10, 2000 by and among Hanover Compression Inc., a Delaware corporation
("Purchaser"), and Stewart & Stevenson Services, Inc., a Texas corporation
  ---------
("S&S"), Stewart & Stevenson Power, Inc., a Delaware corporation ("Power") and
  ---
PAMCO Services International, Inc., a Delaware corporation ("PSI"). S&S, Power
                                                             ---
and PSI together are referred to as Sellers, BUT SHALL BE EFFECTIVE July 1, 2000
(the "Effective Date")

        WHEREAS, Purchaser desires to acquire, and Sellers desire to transfer
to Purchaser, certain assets relating to the natural gas compression leasing
business of Sellers upon the terms of this Agreement.

        NOW, THEREFORE, the terms of this Agreement are as follows:

                               ARTICLE 1 GENERAL

         Section  1.1 Definitions.   Unless otherwise stated in this Agreement,
                      -----------
the following capitalized terms have the following meanings:

         "Assets":                 is defined in Section 2.1.

         "Assumed Liabilities":    is defined in Section 2.7.

         "Atel Lease":             is defined in Section 2.1(k).

         "Business":               means the natural gas compression
                                   leasing business of Sellers.

         "Cash Consideration":     is defined in Section 2.2(a).

         "Casper Facility":        is defined in Section 2.1(d).

         "Closing":                is defined in Section 2.4.

         "COBRA":                  means the requirements of Part 6 of
                                   Subtitle B of Title I of ERISA and Code
                                   Section 4980B.

         "Code":                   means the Internal Revenue Code of 1986, as
                                   amended.
<PAGE>

         "Contracts":              is defined in Section 3.15.

         "Employee Benefit
            Plan":                 means any (a) deferred compensation or
                                   retirement bonus, stock option or similar
                                   plan or arrangement, (b) defined contribution
                                   retirement plan or arrangement which is an
                                   Employee Pension Benefit Plan, (c) defined
                                   benefit retirement plan or arrangement which
                                   is an Employee Pension Benefit Plan, (d)
                                   Multiemployer Plan, (e) Employee Welfare
                                   Benefit Plan or (f) fringe benefit plan or
                                   program.

         "Employee Pension
            Benefit Plan":         has the meaning set forth in ERISA Sec. 3(2),
                                   but excludes a Multiemployer Plan.

         "Employee Welfare
            Benefit Plan":         has the meaning set forth in ERISA Sec. 3(1).

         "Environmental, Health
            And Safety
            Requirements":         shall mean all federal, state, local and
                                   foreign statutes, regulations, ordinances and
                                   other provisions having the force or effect
                                   of law, all judicial and administrative
                                   orders and determinations, all contractual
                                   obligations and all common law concerning
                                   public health and safety, worker health and
                                   safety, and pollution or protection of the
                                   environment, including without limitation all
                                   those relating to the presence, use,
                                   production, generation, handling,
                                   transportation, treatment, storage, disposal,
                                   distribution, labeling, testing, processing,
                                   discharge, release, threatened release,
                                   control, or cleanup of any hazardous
                                   materials, substances or wastes, chemical
                                   substances or mixtures, pesticides,
                                   pollutants, contaminants, toxic chemicals,
                                   petroleum products or byproducts, asbestos,
                                   polychlorinated biphenyls, noise or
                                   radiation, each as amended and as now in
                                   effect.

         "ERISA":                  means the Employee Retirement Income Security
                                   Act of 1974, as amended.

         "Excluded Assets":        is defined in Section 2.6.

                                      -2-
<PAGE>

         "ERISA Affiliate":        means each entity which is treated as a
                                   single employer with a Person for purposes of
                                   Code Section 414.

         "Fixed Assets":           is defined in Section 2.1(e).

         "Governmental Body":      means any court or any federal, state,
                                   municipal or other governmental department
                                   commission board, bureau, agency or
                                   instrumentality, domestic or foreign.

         "Gruner Agreement":       means the Employment Agreement dated March
                                   30, 1998, between PSI and Richard Gruner.

         "Inventory and
            Equipment":            is defined in Section 2.1(g).

         "IRS":                    means the Internal Revenue Service.

         "Known" or
          "Knowledge":             Whenever a statement regarding the existence
                                   or absence of facts in this Agreement is
                                   qualified such as "to the Knowledge of" or
                                   "Known by", it is intended by the parties
                                   hereto that the only information to be
                                   attributed to such party is information (i)
                                   in the case of Sellers, actually known to (a)
                                   any current executive officer of PSI
                                   including Jim Ingram, John Doster, and
                                   Lawrence Wilson, or (b) Frank Pool, Doug
                                   Queen or Richard Gruner or (ii) in the case
                                   of Purchaser, actually known to any current
                                   executive officer of Purchaser, and unless
                                   otherwise specifically provided in this
                                   Agreement, no party hereto is represented to
                                   have made a separate or special investigation
                                   or inquiry in connection with this Agreement
                                   to determine the existence or absence of
                                   facts in any statement qualified by phrases
                                   such as "Known by" or "to the Knowledge of."

         "Lien":                   collectively means all mortgages, deeds of
                                   trust, liens, security interests, pledges,
                                   leases, conditional sale contracts, claims,
                                   rights of first refusal, options, charges,
                                   liabilities, obligations, agreements,
                                   privileges, reservations, restrictions and
                                   other encumbrances of any kind or nature.

                                      -3-
<PAGE>

         "Material Adverse
            Effect":              means a material adverse effect on the
                                  Business or on the Sellers' ability to
                                  consummate the transactions contemplated by
                                  this Agreement.

         "Multiemployer
            Plan"                 has the meaning set forth in Section 3(37) of
                                  ERISA.

         "Non-Competition
           Agreement":            means the Non-Competition Agreement to be
                                  delivered by PSI and S&S to Purchaser at the
                                  Closing in the form attached as Exhibit 2.12.

         "Order":                 means any order, writ, injunction, decree,
                                  judgment, or a determination of any court or
                                  other Governmental Body.

         "Packaging
           Commitment":           means the Packaging Commitment to be delivered
                                  by Purchaser to S&S at Closing in the form
                                  attached hereto as Exhibit 2.10.

         "Parts Alliance":        means the Parts Alliance to be delivered by
                                  Purchaser to S&S at the Closing in the form
                                  attached hereto as Exhibit 2.11.

         "PBGC":                  means the Pension Benefit Guaranty
                                  Corporation.

         "Permits":               means all permits, authorizations,
                                  certificates, approvals, registrations,
                                  variances, exemptions, franchises, privileges,
                                  immunities, grants, ordinances, licenses,
                                  concessions, and other rights of every kind
                                  and character (i) under any (1) federal, state
                                  or foreign statute, ordinance or regulation,
                                  (2) Order or (3) contract with any
                                  Governmental Body or (ii) granted by any
                                  Governmental Body.

         "Person":                means any individual, partnership, joint
                                  venture, corporation, limited liability
                                  company, bank, trust, unincorporated
                                  organization, or Governmental Body.

         "Promissory Note":       is defined in Section 2.2(a).

         "PSI-Owned Fleet":       is defined in Section 2.1(a).

                                      -4-
<PAGE>

         "Receivables":            is defined in Section 2.1(l).

         "Records":                means all of the books, records, papers and
                                   instruments of whatever nature and wherever
                                   located that relate to the Assets or the
                                   Business (excluding minute books, accounting
                                   books and records and corporate records of
                                   PSI), including, but not limited to, all
                                   records and files relating to notes and
                                   accounts receivable that are included in the
                                   Assets, contracts, maintenance records,
                                   inventory records, environmental records and
                                   reports and copies of sales and property Tax
                                   records and copies of rental records.

         "S&S Owned Fleet":        is defined in Section 2.1(c).

         "Taxes":                  means any federal, state, local or foreign
                                   income, sales, excise, real or personal
                                   property or other taxes, assessments, fees,
                                   levies, imposts, duties, or other charges of
                                   any nature whatsoever, including, but not
                                   limited to, interest, additions to tax and
                                   penalties thereon imposed by any law, rule or
                                   regulation.

         "Units In-Production":    is defined in Section 2.1(b).

                          ARTICLE 2 PURCHASE AND SALE

          Section 2.1 Purchase and Sale. Sellers agree to sell, transfer, convey
                      -----------------
and deliver to Purchaser at the Closing (as defined in Section 2.4 hereof)
except as otherwise provided herein, the following assets (collectively referred
to as "Assets"), free and clear of all Liens:
       ------

         (a)    PSI Owned Fleet - PSI's owned compressor rental fleet (the "PSI-
                                                                            ---
                Owned Fleet") consisting of those 160 particular natural gas
                -----------
                compressor units listed and described in Exhibit 2.1(a) together
                with all forms of written information relating to the operation,
                performance, maintenance, repair and/or upkeep of such
                compressors;

         (b)    Units In-Production - those compressor packages scheduled for or
                in production carried on the books of S&S or PSI as of the
                Closing Date as the case may be (the "Units In-Production")
                                                      -------------------
                consisting of those 11 particular natural gas compressor
                packages listed and described in Exhibit 2.1(b) together with
                all forms of written information relating to the operation,
                performance, maintenance, repair and/or upkeep of such
                compressors;

                                      -5-
<PAGE>

         (c)   S&S Owned Fleet - those compressor packages owned and operated by
               S&S business units other than PSI (the "S&S-Owned Fleet")
                                                       ---------------
               consisting of those 6 particular natural gas compressor packages
               listed and described in Exhibit 2.1(c) together with all forms of
               written information relating to the operation, performance,
               maintenance, repair and/or upkeep of such compressors;

         (d)   Casper Facility - the PSI facility in Casper, Wyoming ("Casper
                                                                       ------
               Facility") consisting of real property and all improvements
               --------
               thereon located at 1010 Falcon Street, Mills, Wyoming 82644 and
               described in Exhibit 2.1(d);

         (e)   Fixed Assets - all furniture, fixtures, displays, equipment,
               leasehold improvements, signage, and all other tangible personal
               property of Sellers located at the Casper Facility (including all
               supplies), all of which are itemized on Exhibit 2.1(e) (herein
               collectively designated "Fixed Assets");
                                        ------------

         (f)   Trade Name - all of Sellers' rights and titles in and to the
               following trade name:

                                     "PSI"

         (g)   Inventory and Equipment - all of Sellers' service and spare parts
               inventory and equipment relating to the Business or the Assets,
               all of which are itemized on Exhibit 2.1(g) (herein collectively
               designated ("Inventory and Equipment");
                            -----------------------

         (h)   Contracts - all equipment leases and other contracts relating to
               the Business and the Gruner Agreement all of which are included
               in the "Contracts" as defined in Section 3.15 and all of which
                       ---------
               are described on Exhibit 2.1(h) attached hereto;

         (i)   Records and Files - all original Records;

         (j)   Vehicles - the rolling stock of PSI which is identified on
               Exhibit 2.1(j) attached hereto;

         (k)   Atel Lease - that certain lease (the "Atel Lease") with Atel
                                                     ----------
               Finance Corporation ("Atel"), subject to the provisions of
                                     ----
               Section 2.13; and

         (l)   Notes and Accounts Receivable - all original promissory notes and
               accounts receivable on the books of Sellers relating to the
               Business or the Assets on the Closing Date (the "Receivables") as
                                                                -----------
               described on Exhibit 2.1(i).

         Section 2.2  Cash Consideration.
                      ------------------

         (a)   Purchaser agrees to pay and deliver to Sellers Sixty Million
               Dollars ($60,000,000), subject to adjustment as provided herein,
               payable (a) $45,000,000 by wire transfer

                                      -6-
<PAGE>

               of immediately available federal funds at the Closing, and (b)
               $15,000,000.00 evidenced by a non-interest bearing promissory
               note, payable to Sellers in the form attached hereto as Exhibit
               2.2 (the "Promissory Note") (the "Cash Consideration"). Sellers
                         ---------------         ------------------
               shall provide Purchaser with an allocation of the Cash
               Consideration prior to Closing.

         (b)   The parties agree that the Cash Consideration excludes any and
               all Transfer Taxes required to be collected by Sellers arising
               from the sale of the Assets. For this purpose, "Transfer Taxes"
                                                               --------------
               means any sales, use, excise, docket, filing, recording and
               similar Taxes, but excludes Property Taxes (defined below).
               Purchaser shall be responsible for the payment of any and all
               Transfer Taxes arising from the contemplated transaction. To the
               extent permitted by applicable laws, Purchaser shall remit such
               taxes directly to the appropriate taxing authority and shall
               provide S&S with evidence of such payment.

         (c)   The liability ad valorem Taxes, or real or personal property
               Taxes and similar obligations attributable to the Assets
               ("Property Taxes") with respect to the year in which Closing
                 --------------
               occurs shall be apportioned as of the date of Closing between
               Sellers and Purchaser. Purchaser shall be responsible for payment
               to the appropriate Tax authorities of all Property Taxes relating
               to the year in which Closing occurs which are due and payable
               after the Closing. At the Closing, Sellers shall pay Purchaser
               (or reduce Purchaser's obligation to pay the Cash Consideration
               by) an amount equal to the estimate, based on current assessed
               value and estimated tax rates, of Sellers' liability for Property
               Taxes. Within a reasonable time after payment by Purchaser of
               such Property Taxes, Purchaser shall deliver to Sellers a final
               accounting for such Property Taxes and Purchaser shall pay to
               Sellers, or Sellers shall pay to Purchaser, as the case may be,
               the difference between the actual and estimated Property Taxes.

         (d)   The Promissory Note will be paid without set off monthly on a pro
               rata basis by horsepower as the compressor packages comprising
               the PSI-Owned Fleet and/or Units In-Production, as the case may
               be, that are not under lease on the Closing Date are placed into
               service or sold after the Closing Date, with one-half of the
               principal amount of the Promissory Note due no later than six (6)
               months after the Closing and the other one-half of the principal
               amount of the Promissory Note due no later than nine (9) months
               after the Closing.

         Section 2.3 Adjustments to Cash Consideration.
                     ---------------------------------

         (a)   To the extent the total rated horsepower at Closing (based on
               mutually agreed upon horsepower ratings) of the PSI-Owned Fleet,
               the Units In-Production and the S&S-Owned Fleet is more or less
               than 103,422 horsepower, the Promissory Note shall be increased
               or decreased by an aggregate amount of $550.00 per horsepower.

                                      -7-
<PAGE>

     (b)  The portion of the Cash Consideration paid in cash at Closing will
          also be adjusted on a dollar-for-dollar basis to the extent that the
          value of the Receivables at Closing is greater or less than
          $1,000,000.00.

     (c)  Sellers and Purchaser acknowledge and agree that the total rated
          horsepower of the PSI-Owned Fleet, the Units In-Productions and the
          S&S Owned-Fleet may not be readily determinable because of sales and
          pending sales by Sellers of units a part of the PSI-Owned Fleet, the
          Units In-Production and the S&S Owned-Fleet prior to Closing. Sellers
          and Purchaser acknowledge and agree that within forty-five (45) days
          after Closing they will mutually agree as to the total number of units
          and the aggregate total rated horsepower of the PSI Owned-Fleet, the
          Units In-Productions and S&S Owned-Fleet as of the Closing and, if
          necessary, adjust the Promissory Note as per the provisions of Section
          2.3(a) to reflect the correct Cash Consideration.

     Section 2.4    Closing. The closing ("Closing") of the purchase and sale of
                    -------                -------
the Assets shall take place at the offices of Sellers at 10:00 a.m. on the later
of (a) July 10, 2000, or (b) the second business day following fulfillment of
all conditions precedent to Closing in Article 5 hereof (herein designated
"Closing Date"), or at such other place, time and date as the parties hereto
 ------------
mutually agree.

     Section 2.5    Instruments of Transfer and Assumption. At the Closing,
                    --------------------------------------
Sellers shall deliver to Purchaser good and sufficient instruments of transfer,
assignment and conveyance transferring complete, good and marketable title to
the Assets to Purchaser. Such instruments shall be substantially in the form of
Exhibit 2.5 or such other form as is reasonably satisfactory to Purchaser.
Sellers shall assign to Purchaser any existing manufacturers' warranties
relating to the Assets at the Closing including, without limitation, any
relating to the Atel Lease.

     Section 2.6    Excluded Assets. Purchaser shall not buy and does not agree
                    ---------------
to pay for any asset of Sellers other than those included in the Assets, such
assets being the "Excluded Assets." It is specifically acknowledged that the
                  ---------------
Assets do not include (i) Sellers' cash on hand or in bank accounts on the
Closing Date, (ii) any asset of Sellers unrelated to the Business, (iii) the
PAMCO trade name or any name that includes "PAMCO", (iv) minute books,
accounting books and records and other corporate records of PSI which do not
constitute Records, and (v) the network server, router, server back-up tapes,
emergency repair disks or nontransferable licensed software.

     Section 2.7    Assumption of Certain Specific Liabilities. At the Closing,
                    ------------------------------------------
Purchaser shall assume and agree to pay or discharge when due the following
obligations and liabilities of Sellers:

     (a)  all Sellers' obligations and liabilities arising or accruing on or
          after the Closing Date under the Contracts and under the Atel Lease
          (subject to the provisions of Sections 2.8 and 2.12); and

                                      -8-
<PAGE>

     (b)  ad valorem taxes for the calendar year in which Closing occurs for the
          real and personal property of Sellers included in the Assets (subject
          to the proration of such ad valorem taxes at Closing).

     Purchaser shall not assume and does not agree to pay or discharge any other
debt, obligation or liability of Sellers. The parties expressly agree that
Sellers shall remain liable for (i) all of the contracts, agreements,
commitments and undertakings of Sellers not included in the Contracts or
otherwise expressly assumed by Purchaser pursuant to this Agreement (ii) all
obligations under the Contracts to the extent such obligations arose or accrued
before Closing, (iii) accounts payable, (iv) notes or other debt instruments,
(v) obligations for goods purchased that have not been paid for, or any other
fixed or contingent obligations. Sellers expressly agree to pay all of their
trade accounts payable, accrued expenses, debt and any other liabilities in the
due course of the Business through the Closing Date.

     The debts, liabilities and obligations to be assumed by Purchaser under
this Section 2.7 are herein designated the "Assumed Liabilities." The assumption
                                            -------------------
by Purchaser of the Assumed Liabilities shall not enlarge any rights or remedies
of any third parties under any contracts or arrangements with Sellers, except to
the extent the other parties to such contracts become able to enforce such
contracts against Purchaser.

     Section 2.8    Employees. Purchaser will hire any or all employees of PSI
                    ---------
who pass Purchaser's pre-employment test and screening on the Closing Date.
Sellers will pay and, jointly and severally, will remain liable for any
severance benefits and other accrued benefits or obligations owing to any
employee or independent contractor of either Seller including without
limitation, obligations under the Workers Adjustment and Retraining Notification
Act, all payroll obligations, and all unused vacation or sick leave benefits.
Notwithstanding anything herein to the contrary Purchaser shall have no
obligation with respect to the incentive compensation provisions of the
agreement between PSI and Richard Gruner relating to the acquisition of
Compression Specialties, Inc. Sellers shall be responsible for providing
continuation coverage as required by COBRA under a group health plan maintained
by Sellers or an affiliates of Sellers, to employees and other qualified
beneficiaries under COBRA with respect to such employees, who have a COBRA
qualifying event (due to termination of employment with Seller or otherwise)
prior to or in connection with the transactions contemplated by this Agreement
(the "Continuees").
      ----------
     Section 2.9    Packaging Commitment. At the Closing, Purchaser shall
                    --------------------
execute and deliver to S&S the Packaging Commitment.

     Section 2.10   Parts Alliance. At the Closing, Purchaser shall execute and
                    --------------
deliver to S&S the Parts Alliance.

     Section 2.11   Non-Competition Agreement. At the Closing PSI and S&S shall
                    -------------------------
execute and deliver the Non-Competition Agreement.

                                      -9-
<PAGE>

     Section 2.12   Atel Lease Assignment. If the consent of Atel to Purchaser's
                    ---------------------
assumption of the Atel Lease is required and cannot be obtained on terms
acceptable to S&S and Purchaser prior to Closing, then in such event Purchaser
shall enter into a written sublease of the equipment subject to the Atel Lease
at the Closing on terms and conditions identical in all respects to the terms of
the Atel Lease. Furthermore, if S&S cannot obtain Atel's consent to the
assignment at Closing of the Atel Lease to Purchaser on terms reasonably
acceptable to S&S and Purchaser prior to Closing, then Purchaser will execute
instruments and documents necessary to sublease the Atel Compressors from S&S
for the remainder of the Atel Lease term on terms identical to the terms of the
Atel Lease, including any rights to purchase the Atel Compressors at the end of
the Atel Lease. In no event shall Purchaser be obligated to pay any fee,
premium, extraordinary charge or expense attributable to assignment to or
sublease by Purchaser of the Atel Lease.

     Section 2.13   Casper Facility.
                    ---------------

     (a)  Prior to Closing, Sellers shall deliver to Purchaser a commitment for
          title insurance ("Title Commitment") for the Casper Facility. At the
                            ----------------
          Closing, Sellers shall provide Purchaser an Owner's Policy of Title
          Insurance, subject to the standard printed exceptions and all matters
          shown of record as of the date hereof. Sellers shall use their good
          faith efforts to cure any defects in title identified by Purchaser
          from the Title Commitment. Sellers shall provide Purchaser an updated
          survey of the Casper Facility, reasonably satisfactory to Purchaser
          and the title company providing the Owner's Policy of Title Insurance,
          if required by the title company.

     (b)  At the Closing, Sellers shall (i) deliver to Purchaser a Special
          Warranty Deed relating to the Casper Facility executed and
          acknowledged by Sellers conveying the Casper Facility to Purchaser,
          subject to the terms and provisions therein; (ii) deliver to Purchaser
          a FIRPTA Affidavit duly executed by S&S in the form attached hereto as
          Exhibit 2.13(b); (iii) deliver to Purchaser such evidence as
          Purchaser's counsel may reasonably require authorizing the execution
          and delivery of all documents required to be executed by Sellers, and
          the consummation of the transactions contemplated herein; (iv) join
          with Purchaser in the execution of a Closing Statement relating to the
          sale of the Casper Facility; and (v) execute such other necessary
          documents to effectuate the sale and transfer of the Casper Facility.

     Section 2.14   Bulk Sales Law. The parties acknowledge that this Agreement
                    --------------
does not require them to comply with or avail themselves of any safe harbor
provided in any bulk transfer provisions of the Uniform Commercial Code (or any
similar law) of any state in which the Assets are located or the Business is
conducted. Sellers jointly and severally agree to and do hereby indemnify and
hold Purchaser harmless from and against all claims, losses, demands, damages,
liabilities, costs and expenses resulting from or relating to non-compliance by
Purchaser or Seller with the bulk transfer provisions of any applicable Uniform
Commercial Code (or any similar law) in connection with the sale and transfer of
the Assets to Purchaser.

                                      -10-
<PAGE>

     Section 2.15   Operation of Assets During Interim Period. Purchaser and
                    -----------------------------------------
Sellers acknowledge and agree that from the Effective Date of this Agreement
through Closing ("Interim Period"), all revenues generated by or associated with
the Assets shall accrue for the benefit of Purchaser less any reasonable,
ordinary and necessary costs associated with the maintenance, operation or
repair of the Assets. Sellers agrees that they will, within forty-five (45) days
of Closing, provide Purchaser with an accounting of all revenues and expenses
associated with the Assets during the Interim Period. To the extent that any
amounts are due and owing to either Sellers or Purchaser as a result of
operations of the Assets during the Interim Period, an appropriate adjustment
will be made to the Promissory Note.

        ARTICLE 3 REPRESENTATIONS, WARRANTIES AND COVENANTS OF SELLERS

     Sellers, jointly and severally, hereby represent, warrant and covenant to
Purchaser as follows, all of which covenants, representations and warranties
shall be true and correct as of the date hereof and as of the Closing Date:

     Section 3.1    Incorporation and Good Standing. Each of Sellers is a
                    -------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the state of its incorporation and has the corporate power and authority to
own, use and operate its properties and to carry on its business and to own and
operate the Assets.

     Section 3.2    Ownership. PSI is a wholly-owned subsidiary of S&S.
                    ---------

     Section 3.3    Authorization and Capacity to Enter Agreement. Each of
                    ---------------------------------------------
Sellers has all requisite power, authority and capacity to enter into and
perform this Agreement and the other contracts or documents contemplated herein,
including without limitation the Non-Competition Agreement, the Packaging
Commitment and the Parts Alliance, (hereinafter designated "Ancillary
                                                            ---------
Documents"), and this Agreement and the Ancillary Documents will constitute
---------
valid and binding legal obligations of Sellers enforceable against each in
accordance with the respective terms thereof, subject to (i) the fact that
equitable remedies, including the remedies of specific performance and
injunction, may only be granted in the discretion of a court, and (ii)
bankruptcy, insolvency, moratorium, reorganization or other laws relating to or
affecting the enforcement of creditors' rights generally.

     Section 3.4    Litigation. There are no actions, suits, proceedings,
                    ----------
arbitrations or investigations pending or, to the Knowledge of Sellers,
threatened, which could have a material adverse effect on the Assets or the
transactions contemplated by this Agreement at law or in equity, before or by
any arbitrator or any Governmental Body nor, to the Knowledge of Sellers, do any
facts exist which might result in any such action, suit, proceeding, arbitration
or investigation.

                                      -11-
<PAGE>

     Section 3.5    Compliance with Instruments. Entering into and performing
                    ---------------------------
this Agreement and/or the Ancillary Documents, and the transfer of the Assets:
(a) does not or will not constitute or result in the violation, breach or
default of or under, or is not or will not be contrary to, (1) the terms or
provisions of the certificates of incorporation or bylaws (as amended) of
Sellers, or any currently effective resolution passed by the directors or
stockholders of Sellers, or (2) the terms of any indenture, agreement (written
or oral), instrument, license, Permit, understanding or other obligation or
restriction to which S&S or PSI is a party or by which S&S or PSI or the Assets
is or may be bound; (b) does not or will not trigger, cause or result in the
termination or revocation of any indenture, agreement (written or oral),
instrument, license, Permit or understanding to which S&S or PSI is a party or
by which S&S or PSI is bound; (c) does not or will not release, discharge, limit
or lessen any right of S&S or PSI; or (d) does not or will not result in the
creation of any Lien on any of the Assets.

     Section 3.6    Other Obligations. Except as described on Exhibit 3.6,
                    -----------------
neither Seller is under obligation, contractual, legal or otherwise, which has
not been satisfied prior to the date hereof (a) to notify any Person of (i) the
transfer of the Assets, or (ii) the making or performance of this Agreement or
the Ancillary Documents; (b) to observe any waiting period or similar delay
prior to (i) transferring the Assets, or (ii) making or performing this
Agreement or the Ancillary Documents; or (c) to request or obtain the consent of
any Person to (i) transfer the Assets, or (ii) make or perform this Agreement or
the Ancillary Documents.

     Section 3.7    No Other Agreements. No Person has any agreement, option,
                    -------------------
understanding or commitment, or any right or privilege (whether by law or
contractual) capable of becoming an agreement, option or commitment for the
purchase, assignment, license or exercise of any of the rights, benefits or use
of any of the Assets. Neither Seller has granted any special or general power of
attorney to any Person that will or could continue in effect after the Closing
Date that might affect the ownership, operation or other aspect of any of the
Assets.

     Section 3.8    Taxes. To the Knowledge of the Sellers, there are no
                    -----
federal, state or local Tax Liens filed against Sellers and encumbering any of
the Assets, and none of the Sellers is aware of any facts which might result in
the filing of any such Tax Lien.

     Section 3.9    Disclosure. To the Knowledge of Sellers, no representation
                    ----------
or information of Sellers contained in this Agreement, the Ancillary Documents,
the various Exhibits attached hereto or any other information or statements
previously furnished by Sellers pursuant hereto contains or shall contain any
untrue statement of a material fact or omits or shall omit any material fact
necessary to make the information contained therein and herein not misleading.
There is no fact Known to Sellers which has specific application to the Assets
(other than general economic or industry conditions) and which could have a
material adverse effect or, so far as Sellers can reasonably foresee, materially
threaten, the Assets that has not been set forth in this Agreement.

     Section 3.10   Broker's or Finder's Fees. All negotiations relative to this
                    -------------------------
Agreement, the Ancillary Documents and the transactions contemplated herein
have been carried on by Sellers and

                                      -12-
<PAGE>

their counsel directly with Purchaser and its counsel, without the intervention
of any other Person in such manner as to give rise to any valid claim against
any of the parties hereto for a brokerage commission, finder's fee or similar
payment other than Simmons & Company International. Sellers shall be fully and
solely responsible for payment of any amounts due to Simmons & Company
International in connection with this Agreement and the transactions
contemplated hereby.

     Section 3.11   Title to Properties; Absence of Liens. Sellers have
                    -------------------------------------
complete, good and marketable title to all of the Assets, free and clear of all
Liens. Sellers have a right to use all the Assets without payment to, or
interference from, any other party, and have not received any notice of conflict
with the asserted rights of others and, except with respect to the Atel Lease
and that certain lease from Stewart & Stevenson de las Americas-Colombia, Ltda
to Hocal, such right to so use the Assets is freely transferable to Purchaser.

     Section 3.12   Bankruptcy or Insolvency. Neither Seller has committed an
                    ------------------------
act of bankruptcy, is insolvent, has proposed a compromise or arrangement to its
creditors generally, has had any petition or receiving order in bankruptcy filed
against it, has made a voluntary assignment in bankruptcy, has taken any
proceeding with respect to a compromise or arrangement with creditors, has taken
any proceeding to have itself declared bankrupt or to be wound up, has taken any
proceeding to have a receiver appointed for any part of its assets, has had any
creditor take possession of its assets, nor has had any execution, charging
order, levy or distress warrant become enforceable or become levied upon any of
its assets.

     Section 3.13   Health, Safety or Environmental Matters. Except as set forth
                    ---------------------------------------
on Exhibit 3.13:

          (a)       Each of the Sellers has complied and is in compliance in all
                    material respects with all Environmental, Health, and Safety
                    Requirements in connection with the Assets and the Business.

          (b)       Without limiting the generality of the foregoing, each of
                    the Sellers has obtained and complied with, and is in
                    compliance with, all material permits, licenses and other
                    authorizations that are required pursuant to Environmental,
                    Health, and Safety Requirements for the occupation of its
                    facilities used in connection with the Assets or the
                    Business and the operation of the Business.

          (c)       None of the Sellers has received any written or oral notice,
                    report or other information regarding any actual or alleged
                    violation of Environmental, Health, and Safety Requirements,
                    or any liabilities or potential liabilities (whether
                    accrued, absolute, contingent, unliquidated or otherwise),
                    including any investigatory, remedial or corrective
                    obligations, relating to any of them in connection with the
                    Business and the Assets or facilities used

                                      -13-
<PAGE>

                    or useful in connection with the Business arising under
                    Environmental, Health, and Safety Requirements.

          (d)       None of the following exists at the Casper Facility (1)
                    underground storage tanks, (2) asbestos-containing material
                    in any form or condition, (3) materials or equipment
                    containing polychlorinated biphenyls, or (4) landfills,
                    surface impoundments, or disposal areas.

          (e)       None of the Sellers has treated, stored, disposed of,
                    arranged for or permitted the disposal of, transported,
                    handled, or released any substance, including without
                    limitation any hazardous substance, or owned or operated any
                    property or facility used or useful in connection with the
                    Business in a manner that has given or would give rise to
                    liabilities, including any liability for response costs,
                    corrective action costs, personal injury, property damage,
                    natural resources damages or attorney fees, pursuant to the
                    Comprehensive Environmental Response, Compensation and
                    Liability Act of 1980, as amended ("CERCLA"), the Solid
                    Waste Disposal Act, as amended ("SWDA") or any other
                    Environmental, Health, and Safety Requirements.

          (f)       None of the Sellers has, either expressly or by operation of
                    law, assumed or undertaken any liability, including without
                    limitation any obligation for corrective or remedial action,
                    of any other Person relating to Environmental, Health, and
                    Safety Requirements in connection with the Business or the
                    Assets.

     Section 3.14   Employees. Attached hereto as Exhibit 3.14 is a list of the
                    ---------
names and annual or hourly rates of compensation of each full or part time
employee of PSI and any employee of S&S whose work relates primarily to the
Business as of ________________, 2000, and all bonuses paid or payable to such
employees for the calendar year ended December 31, 1999, and for the period from
January 1, 2000, to the date hereof. Sellers are in compliance with all
applicable Federal and state laws relating to employment and wages and hours
with respect to such employees and are not engaged in any unfair labor practice
with respect to any such employees. Sellers are not a party to or bound by any
collective bargaining agreement with respect to such employees, and have not
experienced any strikes, grievances, claims of unfair labor practices, or other
collective bargaining disputes. Sellers have not committed any unfair labor
practices. Sellers have no Knowledge of any organizational effort presently
being made or threatened by or on behalf of any labor union with respect to
employees of Sellers whose work relates to the Business.

     Section 3.15   Contracts. Exhibit 2.1(h) includes all material or
                    ---------
significant contracts to which S&S or PSI is a party which relate to the Assets,
including, without limitation, compressor leases and the Atel Lease (herein
designated "Contracts"). There are no Liens which might affect
            ---------

                                      -14-
<PAGE>

title to, or exclusive possession and use of, or any other right of Sellers to
the benefit of, any or all of Sellers' contractual rights or benefits with
regard to the Contracts. Neither S&S nor PSI is in default or breach of any
obligation under the Contracts, and neither Seller has any Knowledge of any
facts which, after notice or lapse of time, or both, would constitute such a
default or breach. Each of the Contracts is valid, enforceable and in good
standing and in full force and effect without amendment thereto (except for
written amendments referenced in Exhibit 2.1(h) attached hereto), and Sellers
are, and Purchaser will be, after the Closing, entitled to all benefits
thereunder. None of the Sellers has any Knowledge of any party to any of the
Contracts having an intention to terminate, whether by notice or breach, any of
the Contracts. None of the Sellers has any Knowledge that any party to any of
the Contracts is in default or breach of any of such party's obligations
thereunder.

     Section 3.16   Compliance with Laws. The Business is not in violation of
                    --------------------
or in default with respect to, or in alleged violation of or alleged default
with respect to, any applicable law or any applicable rule, regulation, permit
or order of any governmental body, or any ordinances in any material respect.
Sellers are in full legal compliance in all material respects with any and all
legal requirements pertinent to the Assets or operation of the Business. Sellers
are not delinquent with respect to any report required to be filed with any
Governmental Body relating to the Business or the Assets. Sellers hold all
material licenses and permits as are necessary to carry on the Business as
currently conducted, and such licenses and permits are in full force and effect
and have been and are being fully complied with by Sellers in all material
respects.

     Section 3.17   Assets Comprise Entire Business. The Assets comprise all of
                    -------------------------------
the material assets used in the Business, except the Excluded Assets.

     Section 3.18   Material Adverse Change. Since May 22, 2000, there has been
                    -----------------------
no Material Adverse Change in the Business. Since May 22, 2000, Sellers have:

     (a)  conducted the operations of the Business in the ordinary course;

     (b)  not entered into any material transaction or contract relating to the
          Business, or amended or terminated any material transaction or
          contract, except normal transactions or contracts consistent in nature
          and scope with prior practices and entered into in the ordinary course
          of business of the Business;

     (c)  not mortgaged, sold, transferred, distributed or otherwise disposed of
          any of the Assets, except in the ordinary course of business;

     (d)  not experienced any damage, destruction or loss to any of the Assets
          except in the ordinary course of business and except to the extent
          that any such Assets damaged, destroyed or losses have been repaired
          or replaced;

                                      -15-
<PAGE>

     (e)  not made or agreed to make any capital expenditures for additions to
          property or equipment relating to the Business; and

     (f)  not granted credit to any customer relating to the Business on terms
          materially more favorable than terms on which credit has been extended
          to such customer in the past nor materially changed the terms of any
          credit previously extended relating to the Business.

     Section 3.19   Condition of Assets. S&S and PSI do not make and hereby
                    -------------------
expressly disclaim any and all express or implied warranties as to the condition
of the Assets or regarding whether the Assets are fit for a particular purpose
or free from defects.

     Section 3.20   Employee Benefits.
                    -----------------

     (a)  Exhibit 3.20 lists each Employee Benefit Plan that PSI or an ERISA
          Affiliate maintains, participates in, or contributes to for the
          benefit of any of the employees who are listed on Exhibit 3.14.

          (i)       Each such Employee Benefit Plan (and each related trust,
                    insurance contract, other employee benefit provider contract
                    or fund) complies in form and in operation in all respects
                    with the applicable requirements of ERISA, the Code, other
                    applicable laws (including regulations and rulings
                    thereunder) and with its terms.

          (ii)      All required reports and notices or descriptions required by
                    ERISA, the Code or any other applicable laws, have been
                    timely filed or timely distributed to plan participants with
                    respect to each such Employee Benefit Plan.

          (iii)     Except as set forth on Exhibit 3.20 all contributions
                    (including all employer contributions, employee
                    contributions and employee salary reduction contributions)
                    which are due have been timely paid to each such Employee
                    Benefit Plan which is an Employee Pension Benefit Plan and
                    all contributions for any period ending on or before the
                    Closing Date which are not yet due have been paid to each
                    such Employee Pension Benefit Plan or they are disclosed on
                    Exhibit 3.20. All premiums or other payments for all periods
                    ending on or before the Closing Date have been timely paid
                    with respect to each such Employee Benefit Plan which is an
                    Employee Welfare Benefit Plan, or they are disclosed on
                    Exhibit 3.20.

          (iv)      Each such Employee Benefit Plan which is an Employee Pension
                    Benefit Plan and intended to be qualified under the Code has
                    received a determination letter from the IRS to the effect
                    that it meets the requirements

                                      -16-
<PAGE>

                    of Code Section 401(a) as amended by the Tax Reform Act of
                    1986 and subsequent legislation for which the remedial
                    amendment period (as defined by regulations and rulings of
                    the IRS) has expired.

     (b)  With respect to each Employee Benefit Plan that PSI or an ERISA
          Affiliate maintains or has ever maintained or to which it contributes
          or has ever contributed or has ever been required to contribute:

          (i)       PSI or an ERISA Affiliate has no liability (known or
                    unknown, asserted or unasserted) for breach of fiduciary
                    duty or any other failure to act or comply in connection
                    with the administration or investment of the assets of any
                    such Employee Benefit Plan. No action, suit, proceeding,
                    hearing, or investigation with respect to the administration
                    or the investment of the assets of any such Employee Benefit
                    Plan (other than routine claims for benefits) is pending or
                    threatened. Sellers have no knowledge of any basis for any
                    such action, suit, proceeding, hearing or investigation.

          (ii)      PSI or an ERISA Affiliate has not contributed or nor has it
                    been required to contribute to any Multiemployer Plan and it
                    has no direct or indirect liability under any Multiemployer
                    Plan nor has it incurred or reasonably expects to incur any
                    direct or indirect liability under or by operation of Title
                    IV of ERISA. Neither PSI nor any ERISA Affiliate has ever
                    maintained, contributed to or been required to contribute to
                    any Employee Pension Benefit Plan which is or was subject to
                    Title IV of ERISA or Section 412 of the Code.

          (iii)     PSI or an ERISA Affiliate does not provide or have an
                    obligation to provide post-employment medical, life or other
                    welfare benefits to any employees or former employees,
                    exclusive of any obligations imposed by COBRA.

     Section 3.21   Receivables. Except to the extent and in the amounts
                    -----------
specifically set forth on Exhibit 3.21 the Receivables, whether current or
noncurrent, are derived from bona fide sales or leases of products or provision
of services.

     Section 3.22   Labor Matters. With respect to the Business, Sellers are
                    -------------
in compliance in all respects with all applicable foreign, federal, state,
provincial and local laws, rules or regulations relating to the employment of
labor, including those relating to salaries, wages, hours, collective
bargaining, affirmative action and the payment and withholding of Taxes. With
respect to the Business, Sellers have no common law employees (as defined by the
Code and its related regulations) who have been treated or labeled as
"independent contractors."

     Section 3.23   Insurance. Exhibit 3.23 attached hereto contains a list of
                    ---------
all policies of insurance maintained as of the date of this Agreement by Sellers
with respect to any of the Assets.

                                      -17-
<PAGE>

The insurance policies described in Exhibit 3.23 provide adequate coverage (less
deductibles) against the risk involved in the operation of the Businesses. The
Sellers have received no notice from any insurance carrier of the intention of
such carrier to discontinue any such insurance coverage.

     Section 3.24   Customers. Exhibit 3.24 attached hereto sets forth a correct
                    ---------
list of the names and last known addresses, and most telephone numbers of all
the Persons who rented natural gas compressors from a Seller during the fiscal
year ended December 31, 1999 and during the period from January 1, 2000 through
the date hereof, and also shows the number of units and horsepower of the
equipment rented to each such customer as of the Closing Date. Except to the
extent set forth in Exhibit 3.24, since May 22, 2000 there has not been any
Material Adverse Change in the business relationship of the Sellers with any
Person named in Exhibit 3.24.

     Section 3.25   Intellectual Property. No Seller has any Knowledge of any
                    ---------------------
claim or has any reason to believe that any Seller is or may be infringing upon
or otherwise acting adversely to the rights of any Person under or in respect of
any patents, copyright, trade name, trademark or similar intangible right used
or useful in connection with the Business or the Assets. None of the Sellers is
obligated or under any liability whatever to make any payments by way of
royalties, fees or otherwise to any owner or licensee of, or any other claimant
to, any such patent, copyright, trade name, trademark or similar intangible
right. All copyrights, patents, trade names and trademarks of the Sellers
relating to the Business or the Assets are listed on Exhibit 3.25.

     Section 3.26   Casper Facility
                    ---------------

     With respect to the Casper Facility:

     (a)  S&S is not a "foreign person" as defined in Section 1445(f)(3) of the
          Internal Revenue Code.

     (b)  S&S is the sole legal and equitable owner of good, marketable, and
          insurable fee simple title to the Casper Facility and will convey such
          fee simple title to Purchaser at Closing free and clear of all
          options, rights, covenants, easements, liens, encumbrances, and other
          rights in favor of third parties.

     (c)  S&S or PSI is the sole owner of good title to all fixtures and
          personalty associated with the Casper Facility, free and clear of all
          liens, security interests, financing statements, encumbrances, and
          rights in favor of third parties.

     (d)  The Casper Facility is not subject to any outstanding agreements of
          sale, or any options, liens, or other rights of third parties to
          acquire any interest therein. The Casper Facility is not subject to
          any ground lease or other lease.

     (e)  To the Knowledge of the Sellers, there are no public plans or
          proposals for changes in road grade, access, or other governmental or
          private improvements which would

                                      -18-
<PAGE>

          affect the Casper Facility or result in any assessment against the
          Casper Facility; to the Knowledge of the Sellers, no ordinance
          authorizing improvements, the cost of which might be assessed against
          Purchaser or the Casper Facility, is in effect or under consideration;
          to the Knowledge of Sellers, there is no tax proceeding pending for
          the reduction or increase of the assessed tax valuation of the Casper
          Facility or any portion thereof.

     (f)  There are no unpaid assessments for public improvements against the
          Casper Facility; the Casper Facility is not subject to assessments for
          any street paving or curbing heretofore installed; sewer, water, gas,
          telephone and electric lines adequate to service the Casper Facility
          are located on, or in dedicated easements immediately adjacent to, the
          Casper Facility; and there are no unpaid assessments or charges for
          the installation of such utilities or for making connection thereto.

     (g)  There are no unpaid claims against any portion of the Casper Facility
          for or on account of work done, materials furnished, or utilities
          supplied to the Casper Facility. There are no contracts or agreements
          for the performance of work or the furnishing of materials to any
          portion of the Casper Facility which have not been fully performed and
          paid for, and releases of all liens therefor recorded. There are no
          unpaid pay-back agreements, utility debt service expenses, or other
          charges or expenses applicable to the Casper Facility.

     (h)  No condemnation proceedings, eminent domain proceedings, or similar
          actions or proceedings are now pending or, to the Knowledge of the
          Sellers, threatened against the Casper Facility.

     (i)  To the Knowledge of the Sellers, the Casper Facility was built in
          conformity with all applicable building and zoning laws, rules, codes,
          and regulations and none of such laws, rules, codes, or regulations
          are violated by the current condition, use, or operation of the Casper
          Facility. The certificate of occupancy of the Casper Facility is not
          violated by the current structure or use of the Casper Facility.

     (j)  To its Knowledge, PSI has obtained all permits, certificates,
          authorizations, approvals, consents, waivers, and variances that are
          required to use, own, occupy, maintain, and operate the Casper
          Facility. Sellers have not received any notice, nor are Sellers aware,
          of the violation of any applicable building, zoning, or other
          government or governmental agency, or any private restrictions, with
          respect to the use, ownership, occupancy, maintenance, operation, or
          condition of the Casper Facility or any portion thereof, or requiring
          any repairs or alterations to the Property or any portion thereof.

                                      -19-
<PAGE>

     (k)  Except as set forth in Exhibit 3.26, no underground improvements,
          including, but not limited to, treatment or storage tanks, sumps, or
          water, gas, or oil wells located on the Casper Facility.

     (l)  To the Knowledge of the Sellers, there is not constructed, place,
          deposited, stored, disposed of, nor located on the Casper Facility any
          polychlorinated biphenyls (PCBs) nor transformers, capacitors,
          ballasts, or other equipment which contains dielectric fluid
          containing PCBs.

     (m)  To the Knowledge of the Sellers, there is not constructed, place,
          deposited, stored, disposed of, nor located on the Casper Facility any
          insulating material containing urea formaldehyde.

       ARTICLE 4 REPRESENTATIONS, WARRANTIES AND COVENANTS OF PURCHASER

     Purchaser hereby represents, warrants and covenants to Sellers as follows,
all of which covenants, representations and warranties shall be true and correct
as of the date hereof and as of the Closing Date:

     Section 4.1    Authorization and Capacity to Enter Agreement. Purchaser has
                    ---------------------------------------------
all requisite power, authority and capacity to enter into and perform this
Agreement and the Ancillary Documents, and this Agreement and Ancillary
Documents will constitute valid and binding legal obligations of Purchaser
enforceable against Purchaser in accordance with the respective terms thereof,
subject to (a) the fact that equitable remedies, including the remedies of
specific performance and injunction, may only be granted in the discretion of a
court, and (b) bankruptcy, insolvency, moratorium, reorganization or other laws
relating to or affecting the enforcement of creditors' rights generally.

     Section 4.2    Litigation. There are no actions, suits, proceedings,
                    ----------
arbitrations or investigations pending or, to the Knowledge of Purchaser,
threatened which could have a material adverse effect on the transactions
contemplated by this Agreement or on Purchaser such that they may cause
Purchaser to be unable to consummate the transactions contemplated herein, at
law or in equity, before any arbitrator or any Governmental Body nor, to the
Knowledge of Purchaser, do any facts exist which might result in any such
action, suit, proceeding, arbitration or investigation.

     Section 4.3    Compliance with Instruments. Entering into and performing
                    ---------------------------
this Agreement and the Ancillary Documents, and the purchase of the Assets does
not or will not constitute or result in the violation, breach or default of or
under, or is not or will not be contrary to, (a) the terms or provisions of the
certificate of incorporation or bylaws of Purchaser or any currently effective
resolution passed by the directors or stockholders of Purchaser, or (b) the
terms

                                      -20-
<PAGE>

of any indenture, agreement (written or oral), instrument, license, Permit,
understanding or other obligation or restriction to which Purchaser is a party
by which Purchaser is bound.

     Section 4.4    Other Obligations. Other than as described on Exhibit 4.4,
                    -----------------
Purchaser is not under any obligation, contractual or otherwise, which has not
been satisfied prior to the date hereof, (a) to notify any Person of (i)
Purchaser's purchase of the Assets, or (ii) Purchaser making or performing this
Agreement or the Ancillary Documents; (b) to observe any waiting period or
similar delay prior to (i) the transfer of the Assets to Purchaser, or (ii)
making or performing this Agreement or the Ancillary Documents; or (c) to
request or obtain the consent of any Person to (i) the transfer of the Assets to
Purchaser, or (ii) the making or performing this Agreement or the Ancillary
Documents.

     Section 4.5    Broker's or Finder's Fees. All negotiations relative to
                    -------------------------
this Agreement, the Ancillary Documents and transactions contemplated hereby
have been carried on by Purchaser and its counsel directly with Sellers and
their counsel, without the intervention of any Person in any such manner as to
give rise to any valid claim against any of the parties hereto for a brokerage
commission, finder's fee or similar payment.

          ARTICLE 5  ACTIONS AND MATTERS IN CONTEMPLATION OF CLOSING

     Section 5.1    Conditions Precedent to Obligations of Sellers. Unless
                    ----------------------------------------------
waived (in whole or in part) in writing by Sellers, the obligations of Sellers
hereunder are subject to the fulfillment, prior to or on the Closing Date, of
each of the following conditions precedent by Purchaser:

     Section 5.1.1  No Errors. The representations and warranties of
                    ---------
     Purchaser in Article 4 hereof shall be deemed to have been made again on
     the Closing Date and must be then true and correct in all material
     respects; provided that those representation and warranties that are
     qualified by materiality shall be true and correct in all respects.

     Section 5.1.2  Compliance With Agreement. All of the terms and conditions
                    -------------------------
     of this Agreement to be complied with and performed by Purchaser on or
     before the Closing Date shall have been complied with and performed.

     Section 5.1.3  Litigation. There shall not have been instituted or
                    ----------
     threatened any legal proceeding by any third party seeking to prohibit the
     consummation of the transactions contemplated hereby or to obtain damages
     from Sellers with respect thereto, or to otherwise void this Agreement or
     any of the Ancillary Documents or any of such transactions. None of the
     parties hereto shall be prohibited by any Order from consummating the
     transactions contemplated hereby, and no action or proceeding shall then be
     pending which questions the validity of this Agreement, any of the
     Ancillary Documents, the transactions contemplated hereby, or any action
     which has been taken by

                                      -21-
<PAGE>

     any of the parties in connection herewith or in connection with the
     transactions contemplated hereby.

     Section 5.1.4 Delivery of Documents. Purchaser shall have made, executed
                   ---------------------
     and delivered any and all documents or instruments as Sellers may
     reasonably request in form and substance satisfactory to Sellers and their
     legal counsel (including, but not limited to, certificate of resolutions
     and incumbency, etc.).

     Section 5.1.5 Approval of Legal Matters by Sellers' Counsel. The validity
                   ---------------------------------------------
     or legality of all actions, proceedings, instruments and documents required
     to carry out this Agreement or which are incidental thereto, and all other
     related legal matters, shall have been approved by Sellers' legal counsel,
     and there shall have been furnished to such counsel by Purchaser
     resolutions of the directors of Purchaser approving the transaction
     contemplated by this Agreement.

     Section 5.1.6 Hart-Scott Rodino. The Closing is conditioned upon expiration
                   -----------------
     of the waiting period pursuant to the Hart-Scott-Rodino Antitrust
     Improvements Act of 1976, as amended ("HSR Act"), without any action by any
                                            -------
     Governmental Body to prevent the consummation of the Closing, and other
     governmental approval, as required.

     Section 5.1.7 Delivery of Ancillary Agreements. Purchaser shall have
                   --------------------------------
     executed and delivered the Parts Alliance and the Packaging Commitment.

     Section 5.1.8 Approvals. S&S's board of directors shall have approved the
                   ---------
     consummation of the transactions contemplated hereby.

     Section 5.2 Conditions Precedent to Obligations of Purchaser. Unless
                 ------------------------------------------------
waived, in whole or in part, in writing by Purchaser, the obligations of
Purchaser hereunder are subject to the fulfillment, prior to or at the Closing
of each of the following conditions precedent by Sellers:

     Section 5.2.1 No Material Errors or Breach of Covenants. The
                   -----------------------------------------
     representations and warranties of Sellers in Article 3 hereof shall be
     deemed to have been made again on the Closing Date and must then be true
     and correct in all material respects, subject to any changes contemplated
     by this Agreement; provided that those representation and warranties that
     are qualified by materiality shall be true and correct in all respects.

     Section 5.2.2 Compliance With Agreement. All of the terms and conditions of
                   -------------------------
     this Agreement to be complied with and performed by Sellers on or before
     the Closing Date shall have been complied with and performed.

     Section 5.2.3 Approval of Legal Matters by Purchaser's Counsel. The
                   ------------------------------------------------
     validity or legality of all actions, proceedings, instruments and documents
     required to carry out this Agreement or which are incidental thereto, and
     all other related legal matters, shall have

                                      -22-
<PAGE>

     been approved by Purchaser's legal counsel, and there shall have been
     furnished to such counsel by Sellers a certified copy of Sellers'
     certificates of incorporation and bylaws, each as amended; resolutions of
     the directors of Sellers approving the transaction contemplated by this
     Agreement; and resolutions of the shareholder of PSI approving the
     transaction contemplated by this Agreement.

     Section 5.2.4 Delivery of Documents. Sellers shall have made, executed and
                   ---------------------
     delivered the following documents in form and substance satisfactory to
     Purchaser and Purchaser's legal counsel: instruments of transfer in
     accordance with Section 2.5, attached hereto, certificates of incumbency
     for officers of Sellers and of the directors of Sellers and estoppel
     certificates from Sellers' lessees, landlords or others as requested by
     Purchaser, and any other documents or instruments as Purchaser may
     reasonably request.

     Section 5.2.5 Litigation. There shall not have been instituted or
                   ----------
     threatened by any third party any legal proceeding seeking to prohibit the
     consummation of the transactions contemplated hereby or to obtain damages
     from Purchaser with respect to such transactions or to otherwise void this
     Agreement or any of the Ancillary Documents or any of such transactions.
     Purchaser shall not be prohibited by any Order from consummating the
     transactions contemplated hereby, and no action or proceeding shall then be
     pending against Purchaser which questions the validity of this Agreement,
     any of the Ancillary Documents, the transactions contemplated hereby, or
     any action which has been taken by any of the parties in connection
     herewith or in connection with the transactions contemplated hereby.

     Section 5.2.6 Lien Searches. On or before June 15, 2000 Purchaser shall
                   -------------
     have obtained copies of searches of the Secretary of State offices and each
     county where the Assets are located with respect to UCC financing
     statements, deeds of trust or any other liens or encumbrances on file. All
     such liens and encumbrances shall have been released prior to Closing.

     Section 5.2.7 Hart-Scott Rodino. The Closing is conditioned upon expiration
                   -----------------
     of the waiting period pursuant to the HSR Act without any action by any
     governmental Body to prevent the consummation of the Closing, and other
     governmental approval, as required.

     Section 5.2.8 Delivery of Ancillary Agreements. Sellers shall have executed
                   --------------------------------
     and delivered the NonCompetition Agreement.

     Section 5.2.9 Approvals. The approvals described on Exhibit 5.2.9 shall
                   ---------
     have been obtained.

     Section 5.3   Best Efforts to Satisfy Conditions. Sellers shall use its
                   ----------------------------------
best efforts to cause the conditions precedent to the obligations of Purchaser
contained in Section 5.2 to be satisfied to the extent that satisfaction of such
conditions is in the control of Sellers and Purchaser shall use

                                      -23-
<PAGE>

its best efforts to cause the conditions precedent to the obligations of Sellers
contained in Section 5.1 to be satisfied to the extent that the satisfaction of
such conditions is in the control of Purchaser.

                  ARTICLE 6 CLOSING AND POST-CLOSING MATTERS

     Section 6.1 Nature and Survival of Representations and Warranties. All
                 -----------------------------------------------------
representations and warranties made in this Agreement shall be deemed to be
material, and shall be deemed to have been relied upon by the party to whom such
warranties or representations are given or made, as a material inducement to
enter into and close this Agreement and to consummate the transfer of the
Assets, notwithstanding any inspection made by such party. All representations
and warranties of the parties made in this Agreement shall survive the Closing
and all inspections, examinations or audits on behalf of the parties.

     Section 6.2 Indemnification. (a) Purchaser, on the one hand, and Sellers,
                 ---------------
jointly and severally, on the other hand, (herein designated "Indemnifying
                                                              ------------
Party") each hereby agrees to indemnify, defend and hold harmless the other
-----
(hereinafter severally designated "Indemnified Party") against and in respect of
                                   -----------------
any and all Indemnified Damages that result to Indemnified Party from (i) any
breach of any representation or warranty made by or on behalf of the
Indemnifying Party in or pursuant to this Agreement or any of the Ancillary
Documents, and/or (ii) any breach or default in the performance by the
Indemnifying Party of any of the obligations to be performed by the Indemnifying
Party hereunder, with respect to Purchaser, any liabilities or obligations
relating to the Assets and arising out of or relating to the time after the
Closing. The term "Indemnified Damages" means any and all claims, actions,
                   -------------------
demands, losses, costs, expenses, liabilities, penalties, and other damages,
including without limitation, reasonable attorneys' fees and other costs and
expenses reasonably incurred in investigating or attempting to avoid same, in
opposing the imposition of the same, and/or in enforcing the indemnities
hereunder. The Indemnifying Party shall obtain the prior written consent of the
Indemnified Party, which shall not be unreasonably withheld, conditioned or
delayed before ceasing to defend against such claim or entering into any
settlement, adjustment, or compromise of such claim unless such settlement,
adjustment, or compromise involves only the payment of monetary consideration by
the Indemnifying Party and does not involve any admission of fact or require any
agreement that might have an adverse effect on the future business or operations
of the Indemnified Party or which might reasonably prejudice the Indemnified
Party in subsequent or other litigation. The Indemnifying Party shall reimburse
the Indemnified Party on demand for any payment made or damages sustained by the
Indemnified Party at any time after the Closing Date, whether based upon the
judgment of any court of competent jurisdiction, pursuant to a bona fide
compromise or settlement of claims, demands or actions, or otherwise in respect
of any Indemnified Damages. The Indemnified Party agrees that promptly upon
receipt by the Indemnified Party of notice of any demand, assertion, claim,
action, or proceeding, judicial or otherwise, with respect to any matter as to
which the Indemnifying Party has agreed to indemnify the Indemnified Party, the
Indemnified Party will give prompt written notice thereof to the Indemnifying
Party, together, in each instance,

                                      -24-
<PAGE>

with a statement of such information respecting such demand, assertion, claim,
action, or proceeding as the Indemnified Party shall then possess.

     (b)  Sellers will have no liability for indemnification or otherwise
hereunder unless on or before the date one (1) year following the Closing Date,
Purchaser notifies Sellers of a claim specifying the factual basis of such claim
in reasonable detail to the extent then known by Purchaser.

     (c)  Sellers will have no liability for indemnification or otherwise
hereunder until the total amount of all Indemnified Damages with respect to such
matters exceeds $300,000, subsequent to which Purchaser shall be entitled to
full indemnification for all Indemnified Damages in excess of the first $300,000
incurred. Notwithstanding anything to the contrary herein, the maximum liability
of Sellers hereunder shall not exceed $15,000,000, except (i) to the extent of
any Indemnified Damages arising out of the breach of Section 3.13 or the breach
of any other covenant, representation or warranty in this Agreement relating to
health, safety, or environmental matters, the maximum liability of the Sellers
hereunder shall be increased to $25,000,000, and (ii) to the extent of any
Indemnified Damages arising out of the breach of Section 3.11, the maximum
liability of the Sellers shall be increased to $56,882,100.

     Section 6.3 Termination of Agreement. This Agreement may, by written notice
                 ------------------------
given at or prior to Closing in the manner hereinafter provided, be terminated
or abandoned:

     (a)  by either party if the Closing does not occur on or before September
          30, 2000;

     (b)  by Purchaser if a material default or breach (which remains uncured
          for 30 days after receipt of written notice thereof) is made by
          Sellers with respect to the due and timely performance of Sellers'
          covenants, representations, warranties, and agreements contained
          herein; or

     (c)  by Sellers if a material default or breach (which remains uncured for
          30 days after receipt of written notice thereof) is made by Purchaser
          with respect to the due and timely performance of any of Purchaser's
          covenants, representations, warranties and agreements contained
          herein; or

     (d)  by mutual consent of the parties.

     In the event this Agreement is terminated pursuant to Section 6.3(b) or
(c), after such termination the non-breaching party shall continue to have any
and all rights to which it would otherwise be entitled in law or equity with
respect to the default or breach of the other party giving rise to such
termination.

     Section 6.4 Environmental Matters. Sellers shall provide to Purchaser a
                 ---------------------
title commitment and a Phase II environmental survey on the Casper Facility. If
the title commitment

                                      -25-
<PAGE>

reveals a defect which would prohibit Sellers from transferring good and
marketable title to the Casper Facility to Purchaser, Sellers shall have a right
until Closing Date to cure said defect, or agree to an amendment to this
Agreement to reduce the Cash Consideration. With respect to the Phase II
environmental inspection, Sellers shall employ a regionally known third party
firm and shall reasonably instruct such firm upon the method of such inspection
for the Casper Facility. If required by law, Sellers shall promptly remediate
each such matter of environmental concern. Sellers, jointly and severally, shall
each indemnify and do hereby hold harmless Purchaser, its shareholders,
officers, directors, employees and agents from and against any Indemnified
Damages arising out of or relating to such matters of environmental concern.
Such indemnity shall not relate to any damage to the environment caused by the
Assets after the Closing Date. This indemnity shall be governed by Section 6.2
hereof.

     Section 6.5  Obligations After Closing.
                  -------------------------

     (a)  Purchaser shall use its good faith efforts as soon as practicable
          after Closing to obtain leases for any compressors in the PSI-Owned
          Fleet or Units In-Production that are not under lease on the Closing
          Date.

     (b)  For the purposes of the adjustment of the Cash Consideration in
          Section 2.3, S&S or its affiliates shall be obligated to complete and
          deliver to Purchaser the Units In-Production in the normal course of
          business as soon as reasonably practicable after the Closing Date
          without additional consideration except for the cost of any changes
          directed by Purchaser.

     (c)  After the Closing, without further consideration, Sellers and
          Purchaser shall each execute and deliver such further instruments and
          documents as either party shall reasonably request to consummate the
          transactions contemplated by this Agreement and the Ancillary
          Agreements and to perfect Purchaser's title to the Assets.

     Section 6.7 Collection of Receivables. Purchaser shall use reasonable
                 -------------------------
efforts to collect the Receivables after Closing. Purchaser may in its
discretion by written notice to Sellers given at least 120 and not more than 180
days following Closing assign to Sellers any Receivables and related Records
which remain uncollected at such time. The next payment on the Promissory Note
due after such notice shall be reduced by the uncollected amount so assigned.
Purchaser agrees to cooperate with Sellers' efforts to collect such assigned
Receivables.

                         ARTICLE 7 INTERIM OPERATIONS

     Section 7.1 Interim Operations of the Business. During the period from the
                 ----------------------------------
date of this Agreement to the Closing Date or the earlier termination of this
Agreement, Sellers will conduct the Business only in the ordinary and normal
course consistent with past practice, will make no material changes in the
operations of the Business and will not, unless Purchaser gives its prior
written approval: (a) sell, pledge, dispose of, hypothecate or encumber, or
agree to sell,

                                      -26-
<PAGE>

pledge, dispose of, hypothecate or encumber, any of the Assets of the Business,
or negotiate with or solicit any interest from any third party with respect to
same, except in the ordinary course of business, or authorize or make any
capital expenditures relating to the Business; (b) acquire (by merger,
consolidation, or acquisition of stock or assets) any corporation, partnership
or other business organization or division thereof which is engaged in the
Business; (c) permit to lapse or expire without renewal any present policies of
insurance relating to the Assets; (d) enter into any contract or agreement
relating to the Assets, without Purchaser's prior consent, such consent not to
be unreasonably withheld, maintain or cause or permit to be maintained any of
the Assets in a manner below industry standards or permit any of the Assets to
remain in a state of repair that is below industry standards, (f) agree or
commit to any of the foregoing; or (g) take any action which would cause any of
the representations and warranties of Sellers contained herein not to be true
and correct at any time. Furthermore, during the period from the date of this
Agreement to the Closing Date or the earlier termination of this Agreement, PSI
shall conduct its business in the ordinary and usual course, and will not (a)
acquire any material additional assets other than parts and components necessary
to complete the Units In-Production, without Purchaser's prior consent, or (b)
increase the compensation of any employee or hire additional employees except in
the ordinary course of business in accordance with past practice. Further, S&S
and PSI will use reasonable efforts in the ordinary course the Business to
preserve and keep intact the employee work force relating to the Business, and
to preserve for Purchaser the goodwill of the customers having business
relations with PSI.

     Section 7.2 Confidentiality and Non-Solicitation. No public disclosure
                 ------------------------------------
or publicity concerning the transactions contemplated hereby will be made
without the prior approval of Purchaser and S&S, except that a party, after
prior consultation with the other, may make any public disclosure that it in
good faith believes is required by law. Furthermore, PSI and S&S acknowledge
that Purchaser will expend a significant amount of time and money in its pursuit
of this transaction. In consideration thereof, PSI and S&S hereby agree that
from the date of the execution of this Agreement through the Closing or any
termination of this Agreement, PSI, S&S and their respective affiliates,
employees and representatives will deal exclusively with Purchaser in connection
with the sale of PSI, such that neither PSI, S&S nor their respective
affiliates, employees and representatives will, directly or indirectly, without
Purchaser's prior written consent, solicit, encourage or initiate any offer or
proposal from, or engage in any discussions with, or provide any information to,
any corporation, partnership, person or other entity or group, other than
Purchaser and its affiliates, employees and representatives, concerning any
transaction involving the sale of any stock, debt or assets of PSI (other than
sales of product in the ordinary course of business) or a merger, consolidation,
liquidation, recapitalization, refinancing, investment or similar transaction
involving PSI (all such transactions being referred to herein as "Acquisition
Transactions"), nor shall PSI or S&S accept any proposal with respect to any
Acquisition Transaction. If PSI or S&S receive any proposal with respect to any
Acquisition Transaction, it shall immediately communicate to Purchaser the terms
of such proposal (including a copy thereof). The Confidentiality Agreement dated
on or about December 3, 1999 between S&S and Purchaser shall continue to be in
full force and effect.

                                      -27-
<PAGE>

     Section 7.3  Appropriate Action; Consents; Filings.
                  -------------------------------------

     (a)  The parties hereto shall use all reasonable efforts to (i) take, or
          cause to be taken, all appropriate action, and do, or cause to be
          done, all things necessary, proper or advisable under applicable laws
          or otherwise to consummate and make effective the transactions
          contemplated by this Agreement as promptly as practicable, (ii) obtain
          from any Governmental Body any consents, licenses, permits, waivers,
          approvals, authorizations or orders required to be obtained or made in
          connection with the authorization, execution and delivery of this
          Agreement and the consummation of the transactions, contemplated
          herein, and (iii) make all necessary filings, and thereafter make any
          other required submissions, with respect to this Agreement required
          under (A) the Securities Act of 1933, as amended, and the Securities
          Exchange Act of 1934, as amended, and any other applicable U.S.
          federal, provincial or state securities laws, (B) the HSR Act and
          shall share equally all filing fees required in connection with the
          HSR Act filing, and (C) any other applicable law; provided, however,
          that the parties shall cooperate with each other in connection with
          the making of all such filings, including providing copies of all such
          documents to the non-filing party and its advisors prior to filing
          and, if requested, to accept all reasonable additions, deletions or
          changes suggested in connection therewith. The parties shall furnish
          to each other all information required for any application or other
          filing to be made pursuant to the rules and regulations of any
          applicable law in connection with the transactions contemplated by
          this Agreement. Purchaser and S&S agree diligently to prepare and file
          all information requested or required.

     (b)  The parties shall give (or shall cause their respective affiliates to
          give) any notices to third parties, and use, all reasonable efforts to
          obtain any third party consents, (i) necessary to consummate the
          transactions contemplated in this Agreement, or (ii) required under
          agreements to which the parties are a party or to which they are
          bound.

     Section 7.4 Update Disclosure; Breaches. From and after the date of this
                 ---------------------------
Agreement until the Closing, the Sellers on the one hand, and Purchaser on the
other hand, shall promptly notify the other by written update to the Exhibits of
(i) the occurrence or non-occurrence of any event the occurrence or non-
occurrence of which would be likely to cause any condition to the obligations of
any party to effect the transactions contemplated by this Agreement not to be
satisfied, or (ii) the failure of a party to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it pursuant
to this Agreement which would be likely to result in any condition to the
obligations of any party to effect the transactions contemplated by this
Agreement not to be satisfied; provided, however, that the delivery of any
notice pursuant to this Section 7.4 shall not be deemed to cure any breach of
any representation or warranty requiring disclosure of such matter prior to the
date of this Agreement, or otherwise limit or affect the remedies available
hereunder to the party receiving such notice.

                                      -28-
<PAGE>

                            ARTICLE 8 MISCELLANEOUS

     Section 8.1    Amendment. This Agreement may not be amended or modified
                    ---------
orally. This Agreement may be amended or modified at any time and in all
respects by an instrument in writing executed by the parties hereto.

     Section 8.2    Assignment. Neither this Agreement nor any right created
                    ----------
hereby shall be assignable, nor shall any or all of the obligations created
hereby be delegable, provided, however, that Purchaser may assign any or al of
its rights hereunder to a wholly-owned subsidiary.

     Section 8.3    Notices. Whenever any notice ("Notice") is required or
                    -------                        ------
provided to be given pursuant to the provisions of this Agreement, such Notice
must be in writing. If the Notice is sent by telecopier, it must be properly
addressed, reflecting the telecopier telephone number of the addressee(s), and
must be transmitted by a telecopier which produces a dated message completed
confirmation. If the Notice is sent by other than telecopier, the Notice must be
enclosed in a sealed wrapper, properly addressed, and either (i) delivered to
and receipted for by a messenger service, with instructions for delivery on the
same day or the next day which is not a Saturday, Sunday, or legal holiday, or
(ii) deposited with the domestic mail service of the United States Postal
Service at a post office or official depository under the care and custody of
the United States Postal Service with sufficient postage prepaid, sent by United
States registered or certified first class mail, return receipt requested. The
addresses and telecopier telephone numbers to which any Notice is to be sent are
as follows:

if to Sellers to:                     Mr. Frank Pool, Jr.
                                      Stewart & Stevenson Services, Inc.
                                      4516 Harrisburg
                                      Houston, Texas 77011
                                      Telephone number: 713.923.0301
                                      Telecopier number: 713.923.0319

with a copy to:                       Legal Department
                                      Stewart & Stevenson Services, Inc.
                                      2707 North Loop West
                                      Houston, Texas 77008
                                      Telephone number: 713.868.7700
                                      Telecopier number: 713.868.7692

                                      -29-
<PAGE>

if to Purchaser, to:                  Hanover Compressor Company
                                      12001 N. Houston Rosslyn
                                      Houston, Texas  77086
                                      Telephone number: 713.447.8787
                                      Telecopier number: 713.447.8781
                                      Attention:  Michael J. McGhan

with a copy to:                       James F. Stephenson, Jr.
                                      Stephenson & Snokhous
                                      4544 Post Oak Place, Suite 378
                                      Houston, Texas  77027
                                      Telephone number:  713.629.9494
                                      Telecopier number:  713.629.9606

or to such other telecopier telephone number or address within the continental
United States as any addressee(s) shall specify in writing, which change of
telecopier telephone number or address, in order to be effective, must actually
have been received not fewer than ten (10) days prior to the giving of any such
Notice. Any Notice sent by telecopier shall be timely given if transmitted by
telecopier on or before 11:59 p.m. of the date the Notice is to be given; any
Notice sent by messenger service shall be timely given if receipted for by such
messenger service on or before 11:59 p.m., on the date the Notice is to be
given; any Notice sent by mail shall be timely given if deposited with the
domestic mail service of the United States Postal Service on or before 11:59
p.m., two (2) days prior to the date the Notice is to be given. Any Notice sent
in accordance with the preceding sentence shall be deemed to have been received
on the next day after the sending of the Notice by telecopier; on the next day
after the receipt for the Notice by a messenger service; or on the date of the
first attempted delivery of the mailed Notice, as shown on the United States
Postal Service's return receipt. Notwithstanding any other provision of this
Section 8.3 to the contrary, any Notice shall be effective from and after the
date actually received by an addressee, however addressed or delivered.

     Section 8.4    Headings. Headings contained in this Agreement are for
                    --------
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.

     Section 8.5    Counterpart Execution. This Agreement may be executed in two
                    ---------------------
or more counterparts or originals, each of which shall be deemed an original of
one and the same document, but all of which together shall constitute but one
and the same instrument.

     Section 8.6    Parties in Interest. All the terms and provisions of this
                    -------------------
Agreement shall be binding upon, inure to the benefit of, and be enforceable by
the parties hereto as well as their respective successors and permitted assigns.

                                      -30-
<PAGE>

     Section 8.7    Integrated Agreement. This Agreement constitutes the entire
                    --------------------
agreement between the parties hereto, and there are no agreements,
understandings, restrictions, warranties or representations between the parties
other than those set forth herein or herein provided for.

     Section 8.8    Choice of Law. It is the intention of the parties that the
                    -------------
laws of Texas (other than the choice of law provisions thereof) should govern
the validity of this Agreement, the construction of its terms, and the
interpretation of the rights and duties of the parties.

     Section 8.9    Attorneys' Fees to Prevailing Party. If any action at law or
                    -----------------------------------
in equity is necessary to enforce the provisions of this Agreement, the
prevailing party shall be reimbursed by the other party for all reasonable
attorneys' fees, costs, and necessary disbursements incurred by the prevailing
party in enforcing this Agreement, in addition to any and all other relief to
which such prevailing party may be entitled.

     Section 8.10   Exhibits. Each of the Exhibits referenced in this Agreement
                    --------
have been attached to this Agreement and are hereby incorporated herein for all
purposes as though fully set forth.

     Section 8.11   Expenses of Transaction. Sellers and Purchaser, each having
                    -----------------------
been represented by their own respective legal counsel, shall pay the fees and
expenses of the legal counsel and any broker who represented them or it in
negotiating and preparing this Agreement and the Ancillary Documents and in
closing the transaction contemplated hereby.

     Section 8.12   Risk of Loss. Pending the Closing, Sellers shall bear all
                    ------------
risk of loss, theft, damage, destruction of, or any other harm whatsoever that
may occur to the Assets.

     IN WITNESS WHEREOF, the parties have executed this Agreement the day and
year first written above.

                                          PAMCO SERVICES INTERNATIONAL, INC.

                                          By:_________________________________
                                          Name: ______________________________
                                          Title: _____________________________

                                          STEWART & STEVENSON POWER, INC.

                                          By: ________________________________
                                          Name: ______________________________
                                          Title: _____________________________

                                      -31-
<PAGE>

                                          STEWART & STEVENSON SERVICES, INC.

                                          By:_________________________________
                                          Name: ______________________________
                                          Title: _____________________________

                                          HANOVER COMPRESSION INC.

                                          By:_________________________________
                                          Name: ______________________________
                                          Title: _____________________________

                                      -32-
<PAGE>

                               Index to Exhibits

Exhibit
-------

2.1(a)  PSI owned Fleet

2.1(b)  Units-in-Production

2.1(c)  S&S Owned Fleet

2.1(d)  Casper Facility

2.1(e)  Fixed Assets (Casper Facility)

2.1(g)  Inventory and Equipment

2.1(h)  Contracts

2.1(j)  Vehicles

2.1(i)  Notes and Accounts Receivable

2.2     Form of Promissory Note

2.5     Form of Instruments of Transfer and Assumption and Assignment of
        Warranties

2.10    Form of Packaging Commitment

2.11    Form of Parts Alliance

2.12    Form of Non-Competition Agreement

2.13(b) FIRPTA Affidavit

3.6     Sellers' Other Obligations

3.13    Health, Safety or Environmental Matters

3.14    Employees and Compensation

3.20    Employee Benefits

3.21    Exceptions to Receivables Representation

3.23    Insurance

3.24    Customers

3.25    Intellectual Property

3.26    Disclosures - Casper Facility

4.4     Purchaser's Other Obligations

5.2.9   Approvals

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