Document:

EXHIBIT 10.7

 Exhibit 10.7 
  
 CONSTRUCTION AGREEMENT 
  
 THIS AGREEMENT made and entered into on June 10, 2003, by and between TURN-KEY FINANCIAL BUILDERS, INC. (hereinafter referred to as CONTRACTOR) and CITIZENS NATIONAL BANK
(hereinafter referred to as OWNER). 
  
 WITNESSETH: 
  
 That the CONTRACTOR, for the consideration hereinafter
fully set out, hereby agrees with the OWNER as follows: 
  

	1.	That the CONTRACTOR shall furnish all the materials and perform all of the work in the manner and form as provided in the General Conditions of the Contract, Accepted Proposal and
Drawings and Specifications. 

  

	2.	That the CONTRACTOR shall commence the work to be performed under this Agreement as soon as practicable after Contract has been signed and shall fully complete all work hereunder
within as short a time as conditions affecting the work will permit. 

  

	3.	The OWNER hereby agrees to pay the CONTRACTOR for the faithful performance of this Agreement, subject to additional and deductions as provided for in the Specifications or Proposal,
as follows: 

  
 The full sum of: Nine Hundred
Forty Three Thousand Nine Hundred Sixty Four Dollars ($943,964). 
  

	4.	On or before the tenth of each calendar month, OWNER shall make partial payment to the CONTRACTOR on the basis of a properly prepared estimate of the work performed during the
preceding calendar month by CONTRACTOR, less ten percent (10%) of the amount of such estimate, which is to be retained by OWNER until all work has been performed strictly in accordance with this Agreement and until such work has been accepted by
OWNER. 

  

	5.	Upon the submission by CONTRACTOR of evidence satisfactory to OWNER that all payrolls, material bills, and other costs incurred by CONTRACTOR in connection with the construction of
the wok having been paid in full, final payment on account of this Agreement shall be made within ten (10) days after the completion by CONTRACTOR of all work covered by the Agreement and the acceptance of such work by OWNER.

  

	6.	CONTRACTOR shall furnish all labor, tools, materials, equipment, transportation, insurance, and incidental items that are required to do all the work that is called for in the plans
and specifications, and Form of Proposal. 

  

	7.	All Change Orders for work not covered in the original plans and specifications will be performed at cost plus 15% profit and overhead. 

 Citizens National Bank 
 Construction Agreement 
 Page Two 
  
 IN WITNESS WHEREOF the parties hereto
have executed this Agreement on the day and date first above written in duplicate originals, each of which shall be deemed on original contract. 
  

	 ATTEST:
	 	 TURN-KEY FINANCIAL BUILDERS, INC.

			
	 June 20, 2003
 DATE
	 	 BY:
	 	 /s/ Robert L. Rowland

	 	 	 	 Robert L. Rowland, President

			
	 August 20, 2003
 DATE
	 	 BY:
	 	 /s/ Douglas A. Chesson

	 	 	 	 Douglas A. Chesson

	 	 	 	 	 President – Citizens National Bank<PAGE>
                                                                    EXHIBIT 10.1

                          UNITED STATES DISTRICT COURT
                           SOUTHERN DISTRICT OF TEXAS
                                HOUSTON DIVISION

PIRELLI ARMSTRONG TIRE                          |    Civil Action No.
CORPORATION RETIREE MEDICAL                     |    H-02-0410
BENEFITS TRUST, et al., On Behalf of            |    (Consolidated)
Themselves and All Others Similarly Situated,   |    Hon. Vanessa D. Gilmore
                                                |
                             Plaintiffs,        |    CLASS ACTION
                                                |
     vs.                                        |
                                                |
HANOVER COMPRESSOR COMPANY, et al.              |
                                                |
                                                |
                             Defendants.        |
                                                |
-------------------------------------------------

                     STIPULATION AND AGREEMENT OF SETTLEMENT

        This Stipulation and Agreement of Settlement dated as of October 23,
2003, (this "Stipulation") is made and entered into by and among the Settling
Parties, by and through their counsel of record in the Settling Actions. This
Stipulation is intended by the Settling Parties to fully, finally and forever
resolve, discharge and settle the Released Claims on and subject to the terms
and conditions set forth herein. All capitalized terms shall have the meanings
given to such terms in Section 1 below.

                                    RECITALS

        WHEREAS, on or after February 4, 2002, putative securities class action
lawsuits were filed by the plaintiffs named below on behalf of themselves and
all others similarly situated in the United States District Court for the
Southern District of Texas (the "Federal Court"), entitled

<PAGE>

Pirelli Armstrong Tire Corp. Retiree Medical Benefits Trust, et al. v. Hanover
Compressor Co., et al., Case No. H-02-0410, McBride v. Hanover Compressor Co.,
Case No. H02-0431, Koch v. Hanover Compressor Co., Case No. H-02-0441, Schneider
v. Hanover Compressor Co., Case No. H-02-0491, Goldstein v. Hanover Compressor
Co., Case No. H-02-0526, Noyes v. Hanover Compressor Co., No. H-02-0574, Rocha
v. Hanover Compressor Co., Case No. 02-0594, Peck v. Hanover Compressor Co.,
Case No. H-02-0627, Mueller v. Hanover Compressor Co., Case No. H-02-0652,
Langhoff v. Hanover Compressor Co., Case No. H-02-0764, Fox v. Hanover
Compressor Co., Case No. H-02-0815, Rosen v. Goldberg, Case No. H-02-0959,
Detectives Endowment v. Hanover Compressor Co., Case No. H-02-1016, Montag v.
Hanover Compressor Co., Case No. H-02-1030 and Anderson v. Hanover Compressor
Co., Case No. H-02-2306 (collectively, the "Securities Actions" were filed by
the "Securities Plaintiff Class");

        WHEREAS, by Order dated March 28, 2002, the Federal Court consolidated
the Securities Actions under the caption Pirelli Armstrong Tire Corp. Retiree
Medical Benefits Trust, et al. v. Hanover Compressor Co., et al. (the
"Consolidated Securities Action");

        WHEREAS, by Order dated January 6, 2003, the Federal Court appointed
Pirelli Armstrong Tire, Retiree Medical Benefits Trust, Plumbers & Steamfitters,
Local 137 Pension Fund, O. Bryant Lewis, 720 Capital Management, LLC and
Specialists DPM as lead plaintiffs (the "Lead Plaintiffs") and appointed Milberg
Weiss Bershad Hynes & Lerach LLP ("Milberg Weiss") as lead counsel (the "Lead
Counsel") in the Consolidated Securities Action;

        WHEREAS, on and after April 10, 2002, the following derivative actions
were filed in or removed to the Federal Court: Koch v. O'Connor, et al., Case
No. H-02-1332, Carranza v. O'Connor, et al., Case No. H-02-1430, Steves v.
O'Connor, et al., Case No. H-02-1527, Hensley v. McGann, et al., Case No.
H-02-2994, Harbor Finance Partners v. McGhan, et al., Case No.

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H-02-0761, (the "Federal Derivative Actions") and on February 15, 2002, an
additional derivative action was filed in the Delaware Chancery Court: Coffelt
Family, LLC v. O'Connor (the "State Derivative Action"), et al., No. CA 19410
(collectively, the "Derivative Actions" and the plaintiffs in the Derivative
Actions are the "Settling Derivative Plaintiffs");

        WHEREAS, on August 19, 2002 and August 26, 2002, the Federal Derivative
Actions were consolidated into the Harbor Finance Partners action (the
"Consolidated Derivative Action");

        WHEREAS, on January 23, 2003, Lead Plaintiff entered into tolling
agreements with each of GKH Investments, L.P., GKH Partners, L.P., Joe C.
Bradford, Curtis Bedrich, Goldman, Sachs & Co., Michael A. O'Connor, William S.
Goldberg, Charles D. Erwin, Ted Collins, Jr., Robert R. Furgason, Rene J. Huck,
Melvyn N. Klein, Alvin V. Shoemaker and Victor Grijalva, pursuant to which the
statute of limitations was tolled with respect to certain claims (the "Tolling
Agreements");

        WHEREAS, on or after March 26, 2003, putative class actions alleging
violations of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") were filed in the Federal Court by or on behalf of the plaintiffs on
behalf of themselves and all others similarly situated (the "ERISA Plaintiffs"):
Kirkley v. Hanover Co., et al., Case No. H-03-1155, Angleopoulos v. Hanover
Compressor Co., et al., Case No. H-03-1064 and Freeman v. Hanover Compressor
Co., et al., Case No. H-3-1095 (collectively, the "ERISA Actions");

        WHEREAS, certain of the Settling Parties, through their respective
counsel, entered into a memorandum of understanding, dated May 12, 2003;

        WHEREAS, certain Settling Parties, including the plaintiffs in the
Angleopoulos and Freeman actions, who were not parties to the memorandum of
understanding that was entered

                                        3

<PAGE>

into on May 12, 2003, through their counsel, entered into a first amended
memorandum of understanding dated July 18, 2003;

        WHEREAS, Michael O'Connor passed away on July 23, 2003 and Karen L.
O'Connor has been appointed as the Independent Executrix of his Estate in Case
No. 41710-2 in the County Court at Law No. 2 of Nueces County, Texas;

        WHEREAS, by Order dated August 1, 2003, the Federal Court consolidated
the ERISA Actions into the Consolidated Securities Action for purposes of
settlement;

        WHEREAS, the Settling Parties, including the plaintiff in the Harbor
Finance Partners action (the only Settling Plaintiff who did not enter into the
July 18, 2003 first amended memorandum of understanding) entered into a Second
Amended and Restated Memorandum of Understanding, dated October 13, 2003 (the
"MOU");

        WHEREAS, on September 5, 2003, Lead Plaintiffs, on behalf of themselves
and all others similarly situated, filed an Amended Complaint against PwC,
Hanover, Michael McGhan, William S. Goldberg and Michael A. O'Connor (the
"Consolidated Federal Securities Complaint");

        WHEREAS, by Order dated October 2, 2003 the Federal Court consolidated
the Consolidated Derivative Actions into the Consolidated Securities Action;

         WHEREAS, on October 9, 2003 the ERISA Plaintiffs filed an Amended
Consolidated Complaint for Breach of Fiduciary Duty and Violation of ERISA
Disclosure Requirements in the Federal Court;

         WHEREAS, Settling Plaintiffs, through their respective counsel, have
conducted and completed extensive research, discovery and investigation during
the prosecution of the Settling Actions, including without limitation: (1)
inspection and analysis of tens of thousands of pages

                                        4

<PAGE>

of documents produced by Settling Defendants; (2) review of Hanover's public
filings, press releases and other public statements; (3) interviews of numerous
Hanover officers and employees; and (4) consultation with accounting and damages
consultants;

        WHEREAS, Settling Parties have engaged in substantial arm's length
negotiations in an effort to resolve all claims that have been or could be
asserted in the Settling Actions, including conducting numerous meetings and
telephone conferences where the terms of the agreements detailed herein were
extensively debated and negotiated;

        WHEREAS, Settling Plaintiffs, through their respective counsel, have
carefully considered and evaluated, inter alia, the relevant legal authorities
and evidence to support the claims asserted against the Settling Defendants, the
likelihood of prevailing on those claims, the Settling Defendants' respective
abilities to pay any judgment obtained in light of their current financial
condition, and the likely appeals and subsequent proceedings necessary if the
Settling Plaintiffs did prevail against the Settling Defendants, and have
concluded that the Settlement set forth herein is in the best interests of the
Settling Plaintiffs;

        WHEREAS, the Settling Defendants have denied and continue to deny that
they have liability as a result of any and all allegations contained in the
Settling Actions, and are entering into the Settlement in order to eliminate the
burden, distractions, expense and uncertainty of further litigation;

        WHEREAS, the Settling Parties and their counsel believe that the terms
and conditions contained in this Stipulation are fair, reasonable and adequate;
and

        WHEREAS, the Settling Parties and their counsel agree that these
Recitals are an integral part of this Stipulation and constitute binding
representations by the applicable Settling Parties and their counsel.

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<PAGE>

        NOW, THEREFORE, IT IS HEREBY STIPULATED AND AGREED by and among the
Settling Parties that, subject to Federal Court approval and the satisfaction of
the conditions of Settlement as set forth herein, each of the Released Claims
shall be finally and fully compromised, settled and released, and each of the
Settling Actions shall be dismissed with prejudice, as to all Settling Parties,
upon and subject to the terms and conditions of this Stipulation, as follows:

1.      DEFINITIONS

        As used in the Stipulation the following terms have the meanings
specified below:

                1.1.    "Actions" means the Consolidated Securities Action, the
        Derivative Actions and the ERISA Actions.

                1.2.    "Authorized Claimants" means the Authorized ERISA
        Claimants and the Authorized Securities Claimants.

                1.3.    "Authorized ERISA Claimant" means any member of the
        ERISA Plaintiff Class, or such Class Member's successor in interest, who
        files or on whose behalf is filed a timely, valid Proof of Claim and
        whose claim for recovery is allowed pursuant to the terms of the ERISA
        Settlement.

                1.4.    "Authorized Securities Claimant" means any member of the
        Securities Plaintiff Class who files or on whose behalf is filed a
        timely, valid Proof of Claim and whose claim for recovery is allowed
        pursuant to the terms of the Securities Settlement.

                1.5.    "Change of Control" means the (i) sale, lease or
        exchange of all or substantially all of Hanover's assets to any Person
        (other than a Person wholly owned, directly or indirectly, by Hanover),
        (ii) consummation of a merger, consolidation, recapitalization,
        reorganization or other similar transaction involving Hanover, other
        than

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<PAGE>

        one in which more than 50% of the total voting power of the surviving
        entity outstanding immediately after such transaction is beneficially
        owned by the holders of the outstanding voting securities of Hanover
        immediately prior to such transaction, with the voting power of each
        such continuing holder relative to all such continuing holders not
        substantially altered in the transaction, (iii) dissolution or
        liquidation of Hanover, or (iv) the acquisition or gain by any Person,
        including a "group" as contemplated by Section 13(d)(3) of the Exchange
        Act, of ownership or control (including, without limitation, power to
        vote) of more than 50% of the outstanding shares of Hanover's voting
        stock (based upon voting power).

                1.6.    "Claims Administrator" means the firm of Gilardi &
        Company.

                1.7.    "Class Period" means the period beginning on May 4, 1999
        and ending on December 23, 2002 (inclusive).

                1.8.    "Code" means the Internal Revenue Code of 1986, as
        amended.

                1.9.    "Consolidated Derivative Action" has the meaning
        assigned to such term in the Recitals hereof.

                1.10.   "Consolidated Federal Securities Complaint" has the
        meaning assigned to such term in the Recitals hereof.

                1.11.   "Consolidated Securities Action" has the meaning
        assigned to such term in the Recitals hereof.

                1.12.   "Derivative Actions" has the meaning assigned to such
        term in the Recitals hereof.

                1.13.   "Derivative Releases" has the meaning assigned to such
        term in Section 3.9.

                                        7

<PAGE>

                1.14.   "Derivative Settlement" means the settlement of the
        Derivative Actions on and subject to the terms and conditions set forth
        in this Stipulation.

                1.15.   "Derivative Settlement Fund" means the payments from the
        Securities Settlement Cash Fund and the Securities Settlement Stock Fund
        that are contemplated by Section 3.6.

                1.16.   "Effective Date" means, with respect to each Settling
        Action, the date of completion of the following: (i) entry of an Order
        and Final Judgment, which approves in all material respects (x) the
        dismissal of the claims that have been or could be asserted in such
        Settling Action and (y) the releases and bar orders provided for in the
        Stipulation with respect to such Settling Action, and (ii) either (x)
        expiration of the time to appeal or otherwise seek review of the Order
        and Final Judgment which approves, in all material respects, the
        settlement of such Settling Action as provided herein, without any
        appeal having been taken or review sought, or (y) if an appeal is taken
        or review sought, the expiration of five (5) days after an appeal or
        review shall have been dismissed or finally determined by the highest
        court before which appeal or review is sought and which affirms the
        material terms of such appealed settlement and/or an Order and Final
        Judgment and is not subject to further judicial review: provided,
        however, that any award of attorneys' fees or costs shall not be
        considered a material provision of the Order and Final Judgment and any
        appeal of any such award shall not delay the Effective Date and any
        modification as a result of such appeal shall not be considered a
        modification of a material term.

                1.17.   "ERISA" has the meaning assigned to such term in the
        Recitals hereof.

                                        8

<PAGE>

                1.18.   "ERISA Actions" has the meaning assigned to such term in
        the Recitals hereof.

                1.19.   "ERISA Plaintiff Class" means each and every Person who
        was a participant in the Plan and who, at any time during the Class
        Period, purchased and/or held Hanover Securities in their accounts in
        the Plan, and all Persons who hold or held Securities in the Plan as
        beneficiaries of any such participants.

                1.20.   "ERISA Plaintiffs" has the meaning assigned to such term
        in the Recitals hereof.

                1.21.   "ERISA Plan of Allocation" means the terms and
        procedures for allocating the ERISA Settlement Fund among, and
        distributing it to Authorized ERISA Claimants as set forth in the
        Notice, or as otherwise approved by the Federal Court.

                1.22.   "ERISA Releases" has the meaning assigned to such term
        in Section 4.9.

                1.23.   "ERISA Settlement" means the settlement of the ERISA
        Actions on and subject to the terms and conditions set forth in this
        Stipulation.

                1.24.   "ERISA Settlement Fund" has the meaning assigned to such
        term in Section 4.2.

                1.25.   "Escrow Agent" means Milberg Weiss, in its capacity as
        escrow agent with respect to the Settlement Fund.

                1.26.   "Escrow Fund" means the escrow funds on deposit with
        Milberg Weiss, as escrow agent pursuant to the Escrow Agreement dated
        May 29, 2003, between Milberg Weiss, as escrow agent, and Hanover.

                1.27.   "Exchange Act" means the Securities Exchange Act of
        1934, as amended.

                                        9

<PAGE>

                1.28.   "Federal Court" has the meaning assigned to such term in
        the Recitals hereof.

                1.29.   "Federal Derivative Actions" has the meaning assigned to
        such term in the Recitals hereof.

                1.30.   "FED. R. CIV. P. 23" means Federal Rule of Civil
        Procedure 23.

                1.31.   "Fee and Expense Award" means the fees and expenses
        awarded to Lead Counsel and Settling ERISA Plaintiffs' Counsel and, to
        the extent approved by the Federal Court, the feeagreed to be paid to
        the Settling Derivative Plaintiffs' Counsel as set forth in sections 3.6
        and 3.7 hereof.

                1.32.   "Final" means no longer subject to further appeal or
        review, whether by exhaustion of any possible appeal, lapse of time or
        otherwise.

                1.33.   "GKH" means GKH Partners, L.P., GKH Investments, L.P.,
        GKH Private Limited, HGW Associates, L.P., DWL Lumber Corp. and JAKK
        Holding Corp.

                1.34.   "GKH Settlement Shares" means two million five hundred
        thousand (2,500,000) shares of Hanover Common Stock to be paid to the
        Settlement Fund by GKH Partners, L.P. and GKH Investments, L.P., as
        provided in Sections 2.2 and 2.7.

                1.35.   "Governance Term Sheet" means the Corporate Governance
        Settlement Term Sheet, attached hereto as Exhibit A.

                1.36.   "Hanover" means Hanover Compressor Company, a Delaware
        corporation.

                1.37.   "Hanover Common Stock" means the common stock, par value
        $.001 per share, of Hanover.

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                1.38.   "Hanover Securities" means Hanover Common Stock and any
        other Hanover equity or debt security or option related to the forgoing.

                1.39.   "Hanover Settlement Shares" means two million five
        hundred thousand (2,500,000) shares of Hanover Common Stock, which may
        be newly issued shares, other than and in addition to the GKH Settlement
        Shares, to be paid by Hanover to the Settlement Fund as provided in
        Section 2.7.

                1.40.   "Hanover Shareholders" means all record owners of
        Hanover Common Stock as of May 12, 2003.

                1.41.   "Lead Counsel" has the meaning assigned to such term in
        the Recitals hereof.

                1.42.   "Lead Plaintiffs" has the meaning assigned to such term
        in the Recitals hereof.

                1.43.   "Letter Agreement" means that certain letter agreement,
        dated May 12, 2003, by and between Hanover and GKH and certain of its
        Related Persons, which sets forth certain agreements relating to the
        settlement of the Actions.

                1.44.   "Michael A. O'Connor" means Michael A. O'Connor and his
        heirs, assigns, legatees, and devisees, the Estate of Michael A.
        O'Connor, Deceased, and Karen L. O'Connor as the Independent Executrix
        of the Estate of Michael A. O'Connor, Deceased.

                1.45.   "Milberg Weiss" has the meaning assigned to such term in
        the Recitals hereof.

                1.46.   "MOU" has the meaning assigned to such term in the
        Recitals hereof.

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                1.47.   "Non-Settled Action" has the meaning assigned to such
        term in Section 10.3.

                1.48.   "Note" means the unsecured promissory note, in
        substantially the form attached hereto as Exhibit B, to be contributed
        to the Settlement Fund by Hanover pursuant to Section 2.7.

                1.49.   "Notice" means any or all of the notices concerning the
        Settlement Hearings, in substantially the forms of the individual
        notices attached hereto as Exhibits C, D, and E and the summary notices
        attached hereto as Exhibits F, G and H.

                1.50.   "Order and Final Judgment" means an order and final
        judgment in substantially the forms attached hereto as Exhibits I, J,
        and K.

                1.51.   "Person" means a natural person, individual,
        corporation, partnership, limited partnership, limited liability
        partnership, limited liability company, association, joint venture,
        joint stock company, estate, legal representative, trust, unincorporated
        association, government or any political subdivision or agency thereof,
        any business or legal entity, and any spouse, heir, legatee, executor,
        administrator, predecessor, successor, representative or assign of any
        of the foregoing.

                1.52.   "Plan" means the Hanover Companies Retirement Savings
        Plan.

                1.53.   "Preliminary Order" has the meaning assigned to such
        term in Section 8.1, in substantially the forms attached hereto as
        Exhibits L, M and N.

                1.54.   "Proof of Claim" means the Proof of Claim and Substitute
        Form W-9, in substantially the form attached hereto as Exhibit O, which
        will be mailed to the Securities Plaintiff Class together with the
        Notice.

                1.55.   "PwC" means PricewaterhouseCoopers LLP.

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<PAGE>

                1.56.   "Related Persons" means, with respect to any Person,
        such Person's present and former parent entities, subsidiaries (direct
        or indirect) and affiliates, and each of their respective present and
        former shareholders, general partners, limited partners, affiliates,
        divisions, joint ventures, partnerships, officers, directors, employees,
        agents, representatives, attorneys, insurers, excess insurers, experts,
        advisors, investment advisors, underwriters, fiduciaries, trustees,
        auditors, accountants, representatives, spouses and immediate family
        members, and the predecessors, heirs, legatees, successors, assigns,
        agents, executors, devisees, personal representatives, attorneys,
        advisors and administrators of any of them, and the predecessors,
        successors, and assigns of each of the foregoing, and any other Person
        in which any such Person has or had a controlling interest or which is
        or was related to or affiliated with such Person, and any trust of which
        such Person is the settlor or which is for the benefit of such Person or
        member(s) of his or her family; provided, however, that PwC, its
        partners and employees are excluded from this definition and shall not
        be deemed to be a Related Person of any Settling Party.

                1.57.   "Released Claims" means the Released Securities Claims,
        the Released Derivative Claims and the Released ERISA Claims.

                1.58.   "Released Derivative Claims" has the meaning assigned to
        such term in Section 3.9.

                1.59.   "Released Derivative Parties" means the Settling
        Derivative Defendants, the Plan, GKH, and Schlumberger, and each of
        their respective Related Persons.

                1.60.   "Released ERISA Claims" has the meaning assigned to such
        term in Section 4.9.

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<PAGE>

                1.61.   "Released ERISA Parties" means the Settling ERISA
        Defendants, Karen L. O'Connor, as the Independent Executrix of the
        Estate of Michael A. O'Connor, Deceased, GKH, and Schlumberger, and each
        of their respective Related Persons, the Plan, and any Person who was or
        could be deemed a fiduciary of the Plan during the Class Period.

                1.62.   "Released Securities Claims" has the meaning assigned to
        such term in Section 2.13.

                1.63.   "Released Securities Parties" means the Settling
        Securities Defendants, the Plan, Karen L. O'Connor, as the Independent
        Executrix of the Estate of Michael A. O'Connor, Deceased, Schlumberger,
        and GKH, and each of their respective Related Persons.

                1.64.   "Schlumberger" means Schlumberger Technology
        Corporation, Schlumberger Oilfield Holdings Limited, and Schlumberger
        Surenco S.A.

                1.65.   "Securities Act" means the Securities Act of 1933, as
        amended.

                1.66.   "Securities Actions" has the meaning assigned to such
        term in the Recitals hereof.

                1.67.   "Securities Plaintiff Class" means all Persons who
        purchased Hanover Securities during the Class Period (including
        participants in the Plan who, during the Class Period, purchased Hanover
        Securities in their accounts in the Plan or acquired Hanover Securities
        through employer matching contributions) other than (a) those
        individuals who were officers and/or directors of Hanover during the
        Class Period and (i) their affiliates and (ii) members of their
        immediate families, (b) officers and/or directors of Hanover at the
        Effective Date and (i) their affiliates and (ii) members of their

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<PAGE>

        immediate families, (c) the Settling Securities Defendants and (i) their
        affiliates and (ii) members of their immediate families, (d)
        Schlumberger and its subsidiaries, (e) GKH and its subsidiaries and
        affiliates, and (f) the Plan.

                1.68.   "Securities Plan of Allocation" means the terms and
        procedures for allocating the Settlement Fund among, and distributing it
        to, Authorized Securities Claimants as set forth in the Notice, or such
        other Plan of Allocation as the Federal Court shall approve.

               1.69.   "Securities Releases" has the meaning assigned to such
        term in Section 2.13.

                1.70.   "Securities Settlement" means the settlement of the
        Consolidated Securities Action on and subject to the terms and
        conditions set forth in this Stipulation.

                1.71.   "Securities Settlement Cash Fund" has the meaning
        assigned to such term in Section 2.7.

                1.72.   "Securities Settlement Fund" means the Securities
        Settlement Cash Fund, the Securities Settlement Stock Fund, and the
        Securities Settlement Note Fund together with any interest and earnings
        thereon, after deducting the Derivative Settlement Fund and the ERISA
        Settlement Fund.

                1.73.   "Securities Settlement Note Fund" has the meaning
        assigned to such term in Section 2.7.

                1.74.   "Securities Settlement Stock Fund" has the meaning
        assigned to such term in Section 2.7.

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<PAGE>

                1.75.   "Settlement" means the consummation of the events and
        transactions that will fully effectuate the Securities Settlement, the
        ERISA Settlement, and the Derivative Settlement.

                1.76.   "Settlement Fund" means the cash and other property in
        the Securities Settlement Fund, the ERISA Settlement Fund and the
        Derivative Settlement Fund.

                1.77.   "Settlement Hearing" means the hearing or hearings at
        which the Federal Court will review the adequacy, fairness, and
        reasonableness of the settlement.

                1.78.   "Settlement Shares" means the GKH Settlement Shares and
        the Hanover Settlement Shares.

                1.79.   "Settling Action" means each of the Consolidated
        Securities Action, the Derivative Actions and the ERISA Actions.

                1.80.   "Settling Defendants" means the Settling Securities
        Defendants, the Settling Derivative Defendants and the Settling ERISA
        Defendants.

                1.81.   "Settling Defendants' Counsel" means the Settling
        Derivative Defendants' Counsel, Settling ERISA Defendants' Counsel and
        the Settling Securities Defendants' Counsel.

                1.82.   "Settling Derivative Defendants" means Michael A.
        O'Connor, William S. Goldberg, Melvyn N. Klein, Michael J. McGhan, Ted
        Collins, Jr., Robert R. Furgason, Rene J. Huck, Alvin V. Shoemaker,
        Victor E. Grijalva, Gordon T. Hall, I. Jon Brumley, Charles D. Erwin,
        and Hanover.

                1.83.   "Settling Derivative Defendants' Counsel" means Katten,
        Muchin, Zavis & Rosenman, Dechert LLP, Beck, Redden & Secrest, Smyser,
        Kaplan & Veselka, LLP,

                                       16

<PAGE>

        Wright & Brown, LLP, Orgain Bell & Tucker, LLP, Skadden, Arps, Slate,
        Meagher & Flom, LLP, and Hughes Hubbard & Reed LLP.

                1.84.   "Settling Derivative Parties" means the Derivative
        Plaintiffs and the Settling Derivative Defendants.

                1.85.   "Settling Derivative Plaintiffs" has the meaning
        assigned to such term in the Recitals hereof.

                1.86.   "Settling Derivative Plaintiffs' Counsel" means Scott &
        Scott, LLC, Reich & Binstock, Maricic & Goldstein, LLP, Robbins, Umeda &
        Fink, LLP, Schubert & Reed LLP, Emerson Poynter LLP, The Brualdi Law
        Firm, and Joseph A. McDermott, III.

                1.87.   "Settling ERISA Defendants" means Hanover, Michael J.
        McGhan, William S. Goldberg, and Michael A. O'Connor.

                1.88.   "Settling ERISA Defendants' Counsel" means Beck Redden &
        Secrest, Wright & Brown, LLP, Orgain Bell & Tucker, LLP, Katten, Muchin,
        Zavis, & Rosenman, and Hughes Hubbard & Reed LLP.

                1.89.   "Settling ERISA Parties" means the Settling ERISA
        Plaintiff Class and the Settling ERISA Defendants.

                1.90.   "Settling ERISA Plaintiff Class" means each and every
        member of the ERISA Plaintiff Class.

                1.91.   "Settling ERISA Plaintiffs' Counsel" means the Baskin
        Law Firm, Hoeffner & Bilek, L.L.P., Schiffrin & Barroway LLP, and
        Brodsky & Smith, LLC.

                1.92.   "Settling Parties" means the Settling Securities
        Parties, the Settling Derivative Parties and the Settling ERISA Parties.

                                       17

<PAGE>

                1.93.   "Settling Plaintiffs" means the members of the Settling
        Securities Plaintiff Class, the Settling Derivative Plaintiffs and the
        members of the Settling ERISA Plaintiff Class.

                1.94.   "Settling Plaintiffs' Counsel" means Lead Counsel,
        Settling Derivative Plaintiffs' Counsel and Settling ERISA Plaintiffs'
        Counsel.

                1.95.   "Settling Securities Defendants" means Hanover, Michael
        J. McGhan, William S. Goldberg, Michael A. O'Connor, Charles D. Erwin
        and GKH.

                1.96.   "Settling Securities Defendants' Counsel" means Hughes
        Hubbard & Reed LLP, Katten Muchin Zavis & Rosenman, Dechert LLP, Beck
        Redden & Secrest, Paul Weiss Rifkind, Wharton & Garrison LLP, and Wright
        & Brown, LLP, Orgain Bell & Tucker, LLP.

                1.97.   "Settling Securities Parties" means the Settling
        Securities Plaintiff Class and the Settling Securities Defendants.

                1.98.   "Settling Securities Plaintiff Class" or "Settling
        Securities Plaintiffs" means each and every member of the Securities
        Plaintiff Class other than those Persons who timely and validly exclude
        themselves from participating in the Securities Settlement.

                1.99.   "State Derivative Action" has the meaning assigned to
        such term in the Recitals hereof.

                1.100.  "Stipulation" means this Stipulation and Agreement of
        Settlement.

                1.101.  "Supplemental Securities Agreement" means that certain
        confidential Supplemental Securities Agreement, provided for in Section
        2.15,, by and among the

                                       18

<PAGE>

        Settling Securities Parties, providing certain additional terms upon
        which Hanover may terminate this Stipulation.

                1.102.  "Taxes" has the meaning assigned to such term in Section
        7.3.

                1.103.  "Tax Expenses" has the meaning assigned to such term in
        Section 7.3

                1.104.  "Tolling Agreement" has the meaning assigned to such
        term in the Recitals hereof.

                1.105.  "Transfer Agent" means the firm of Mellon Shareholder
        Services.

                1.106.  "Unknown Claims" means, with respect to a Settling
        Party, any and all claims which such Settling Party does not know or
        suspect to exist in his, her or its favor at the time such Settling
        Party releases such claims which, if known by him, her or it, might or
        would have affected his, her or its decision not to object to such
        release or not to exclude himself, herself or itself from becoming a
        Class Member.

2.      SETTLEMENT OF CONSOLIDATED SECURITIES ACTION

                2.1.    Settling Securities Defendants' Denial of Liability. The
        Settling Securities Defendants have denied, and continue to deny, that
        they have any liability as a result of any and all allegations that have
        been or could be made in the Consolidated Securities Action. The
        Settling Securities Defendants are entering into the Securities
        Settlement in order to eliminate the burden, distraction, expense and
        uncertainty of further litigation.

                2.2.    GKH's Contribution and Settlement of Any and All
        Remaining Claims. GKH has entered into the Securities Settlement and GKH
        Partners, L.P. and GKH Investments, L.P., have agreed to pay two million
        five hundred thousand (2,500,000) shares of Hanover Common Stock to
        settle all potential liability it might have in connection with the
        Consolidated Securities Action.

                                       19

<PAGE>

                2.3.    Corporate Governance. Hanover will implement the
        corporate governance enhancements, which were the subject of substantial
        negotiation by and among the Settling Parties and the Settling Parties'
        Counsel, in the time periods and in the manner contemplated by the
        Governance Term Sheet.

                2.4.    Payment to Authorized Securities Claimants. The
        Securities Settlement Fund shall be distributed by or at the direction
        of the Claims Administrator to the Authorized Securities Claimants in
        the Consolidated Securities Action in accordance with the Securities
        Plan of Allocation.

                2.5.    Securities Notice. The Claims Administrator, appointed
        and subject to the supervision and direction of the Federal Court, shall
        be responsible for providing individual notice to the Securities
        Plaintiff Class, in substantially the form as attached hereto as Exhibit
        C, providing for an opt-out time period of no less than forty (40) days
        from the date the Notice is mailed, and as otherwise directed by the
        Federal Court, as well as any other required or appropriate notice to be
        made by publication or otherwise.

                2.6.    Reliance Upon Own Knowledge. Lead Plaintiffs expressly
        represent and warrant that, in entering into the Securities Settlement,
        they relied upon their own knowledge and investigation (including the
        knowledge of and investigation performed by Lead Counsel), and not upon
        any promise, representation, warranty or other statement made by or on
        behalf of any of the Settling Securities Defendants or their Related
        Persons not expressly contained in this Stipulation.

                2.7.    Securities Settlement Fund. The following consideration
        will be or has been paid to the Securities Settlement Fund in connection
        with the Securities Settlement:

                                       20

<PAGE>

                        (a)     Cash. Hanover has contributed twenty-nine
                million five hundred thousand dollars ($29,500,000) into the
                Escrow Fund which, with interest and earnings thereon, and such
                other amounts as are contributed to the Securities Settlement
                Cash Fund pursuant to the terms of this subsection (a) shall
                constitute the "Securities Settlement Cash Fund" as of the date
                hereof and shall be held by the Escrow Agent pursuant to the
                terms of this Stipulation. Hanover shall make an additional
                deposit of cash into the Securities Settlement Cash Fund in an
                amount equal to three million dollars ($3,000,000) within five
                (5) business days after a Change of Control, but only if either
                the Change of Control or the shareholder approval of such Change
                of Control occurs prior to the end of the twelve (12) months
                following the Order and Final Judgment approving the Securities
                Settlement.

                        (b)     Settlement Shares. Within (i) five (5) business
                days after the Effective Date, Hanover shall deliver to the
                Escrow Agent the Hanover Settlement Shares and, (ii) thirty (30)
                business days after the Effective Date, GKH Partners, L.P. and
                GKH Investments, L.P., shall deliver to the Escrow Agent the GKH
                Settlement Shares (collectively, the "Securities Settlement
                Stock Fund"). The Settlement Shares shall be registered under
                the Securities Act or exempt from registration under the
                Securities Act. All costs, including those of the Transfer
                Agent, incurred in issuing and distributing the Settlement
                Shares to the Authorized Securities Claimants pursuant hereto
                shall be borne by Hanover. The total number of Settlement Shares
                to be contributed into the Securities Settlement Stock Fund will
                be adjusted by Hanover's Board of Directors in its good faith

                                       21

<PAGE>

                judgment to reflect any changes to Hanover Common Stock due to
                stock splits, stock dividends or reverse stock splits occurring
                after May 12, 2003 and prior to the date of delivery to the
                Escrow Agent.

                        (c)     Note. Within thirty (30) business days after the
                Effective Date, Hanover shall deliver the Note to the Escrow
                Agent. Such note and all proceeds therefrom shall constitute the
                "Securities Settlement Note Fund."

                2.8.    Cost of Notice. Lead Counsel may withdraw an amount of
        cash up to one hundred thousand dollars ($100,000) from the Securities
        Settlement Cash Fund to pay actual costs incurred in connection with
        providing the Notice required by Section 2.5.

                2.9.    Procedure with Respect to the Settlement Shares.

                        (a)     Distribution to Lead Counsel. No earlier than
                five (5) business days after the Effective Date, the Escrow
                Agent, if requested by Lead Counsel, shall take such actions as
                are necessary and appropriate to ensure the issuance by Hanover
                of share certificates representing the Hanover Settlement Shares
                to be delivered to plaintiffs' counsel as directed by the Fee
                and Expense Award entered as part of the Securities Settlement.

                        (b)     Distribution to Authorized Securities Claimants.
                Upon notice from the Claims Administrator that the Claims
                Administrator's process has been complete, the Escrow Agent
                shall tender to Hanover the certificates evidencing the
                remaining Hanover Settlement Shares and the GKH Settlement
                Shares (with any necessary endorsements) and request that
                Hanover (or its designee) issue share certificates as directed
                by the Claims Administrator and consistent with this Stipulation
                and orders of the Federal Court.

                                       22

<PAGE>

                        (c)     Fractional Shares. The Claims Administrator
                shall be directed that no fractional Settlement Shares will be
                distributed or allocated to or on behalf of any Person. In
                addition, the Settlement Fund may liquidate Settlement Shares to
                pay Taxes incurred by the Settlement Fund.

                2.10.   Rights With Respect to the Settlement Shares. Ten (10)
        days before the date of the Settlement Hearing for the Securities
        Settlement, Hanover shall provide Lead Counsel with (a) the written
        opinion of outside counsel that the Hanover Settlement Shares, when
        issued in accordance with this Stipulation, will be validly issued,
        fully paid and non-assessable and (b) either (i) the written opinion of
        outside counsel or (ii) a no-action letter from the Securities and
        Exchange Commission, addressed to either Hughes Hubbard & Reed LLP or
        Hanover, substantially to the effect that (A) the Hanover Settlement
        Shares will be issued in compliance with the registration requirements
        of Section 5 of the Securities Act or will be issued in reliance upon an
        exemption therefrom and (B) the Hanover Settlement Shares will not be
        deemed to be "restricted securities" within the meaning of Rule
        144(a)(3) promulgated under the Securities Act (except that affiliates
        of Hanover, before or after the Effective Date, may be required to sell
        such shares in accordance with Rule 144 promulgated under the Securities
        Act).

                2.11.   Attorneys' Fees. Lead Counsel may apply to the Federal
        Court for an award of attorneys' fees and reimbursement of all expenses
        incurred on behalf of the Securities Plaintiff Class. Such fees and
        expenses, and interest thereon, shall be payable solely out of the
        Securities Settlement Fund and shall be deducted therefrom prior to the
        distribution thereof to the Settling Securities Plaintiff Class.
        Following entry of any order

                                       23

<PAGE>

        by the Federal Court approving any fees and expenses to Lead Counsel,
        Lead Counsel may withdraw from the Securities Settlement Fund the fees
        and expenses so awarded; provided, however, that (a) prior to the
        Effective Date, such withdrawal must be cash only from the Securities
        Settlement Cash Fund and, (b) in the event that the order approving the
        fees and expenses so awarded is reversed or modified on appeal, Lead
        Counsel shall, within five (5) business days of the date which the fees
        and expenses award is modified or reversed, refund to the Securities
        Settlement Fund the fees and expenses previously distributed in full or
        in any amount consistent with such reversal or modification, plus
        interest thereon at the rate earned on the Securities Settlement Cash
        Fund through the date of such refund.

                2.12.   Conditions. The Securities Settlement shall terminate
        and be of no further force or effect if any of the conditions in Section
        5.1 and 5.3 or any of the conditions set forth below are not satisfied
        or, with respect to the conditions in Section 2.12(b), (c), and (d),
        waived by Hanover:

                        (a)     the funding of the Securities Settlement Fund as
                provided above;

                        (b)     Hanover's failure to exercise its termination
                rights, if any, under the Supplemental Securities Settlement
                Agreement;

                        (c)     preliminary approval by the Federal Court of the
                Settlement; and

                        (d)     the Order and Final Judgment entered by the
                Federal Court, approving the Securities Settlement and providing
                for the Securities Releases and the bar order provided for in
                Section 2.14, becoming Final.

                2.13.   Securities Releases. Upon the Effective Date, the
        Settling Securities Plaintiff Class, and each of their respective
        successors, predecessors, assigns, attorneys

                                       24

<PAGE>

        (including Lead Counsel), heirs, representatives, administrators,
        executors, devisees, legatees, and estates, release and forever
        discharge any and all claims, rights and causes of action, direct and
        derivative, whether based on federal, state, local, statutory or common
        law or any other law, rule or regulation, including, without limitation,
        Unknown Claims, claims under ERISA and claims under federal and state
        securities laws, that have been, could have been, or in the future might
        be or could be asserted in any form and in any forum against any of the
        Released Securities Parties that exist, could have existed, or may arise
        in connection with or that relate to both (i) the purchase or sale or
        holding of any Hanover Securities and (ii) any of the transactions
        (including the registration of securities and any failure to deliver
        prospectuses) matters or occurrences, or representations or omissions
        involved, set forth, referred to, or which relate in any way to the
        facts or allegations contained in or which could have been contained in
        the Consolidated Securities Action (including all such claims which
        arise under state or federal securities laws and accrued or are based on
        acts or omissions occurring during or prior to the end of the Class
        Period) (the "Released Securities Claims").

                Upon the Effective Date, the Settling Securities Defendants and
        each of their respective successors, predecessors, assigns, attorneys
        (including Settling Securities Defendants' Counsel), heirs,
        representatives, legatees, administrators, devisees, executors and
        estates release and forever discharge any and all claims, rights and
        causes of action, whether based on federal, state, local, statutory or
        common law or any other law, rule or regulation, and whether known or
        unknown, that have been, could have been, or in the future might be
        asserted in any form or forum against any member of the Settling
        Securities Plaintiff Class or Lead Counsel that exist, could have
        existed, or may arise in

                                       25

<PAGE>

        connection with or that relate to the institution, prosecution or
        settlement of any and all claims asserted in the Consolidated Securities
        Action, including, but not limited to, any action for costs or
        attorneys' fees.

                The releases contained in this Section (the "Securities
        Releases") shall apply to each and every member of the Settling
        Securities Plaintiff Class and their counsel, including Lead Counsel,
        each and every Released Securities Party and each and every Settling
        Securities Defendants' Counsel, and the respective successors and
        assigns of any of the foregoing, whether directly or indirectly,
        representatively, derivatively or in any other capacity. The Securities
        Releases shall not apply to and are not intended to release any claims
        of the members of the Settling Securities Plaintiff Class against PwC or
        its partners or employees, including the claims asserted in the
        Consolidated Federal Securities Complaint.

                The Securities Releases also apply to Unknown Claims, and the
        Settling Securities Parties, Settling Securities Defendants' Counsel and
        Lead Counsel agree to waive the benefits of Section 1542 of the
        California Civil Code (and the benefits of any other law (including
        principles of common law) of any state or territory or other
        jurisdiction of the United States or of any jurisdiction outside of the
        United States that is similar, comparable or equivalent to Section 1542
        of the California Civil Code), which provides:

                A general release does not extend to claims which the creditor
                does not know or suspect to exist in his favor at the time of
                executing the release, which if known by him must have
                materially affected his settlement with the debtor.

                Each of the Settling Securities Parties, Lead Counsel and
        Settling Securities Defendants' Counsel acknowledges that the foregoing
        waiver was separately bargained for and is a material term of the
        Securities Settlement.

                                       26

<PAGE>

                2.14.   Securities Bar Order. The Order and Final Judgment shall
        include a bar order permanently and forever barring and enjoining all
        Persons, specifically including but not limited to PwC, other than those
        Persons that timely and properly exclude themselves from the Settling
        Securities Plaintiff Class, from filing, commencing, instituting,
        prosecuting or maintaining, either directly, indirectly,
        representatively or in any other capacity, any claim, counterclaim,
        cross-claim, third-party claim or other action against any of the
        Released Securities Parties arising out of, based upon or relating to
        the transactions and occurrences referred to in the facts and
        allegations contained in the Consolidated Securities Action, including
        without limitation any claim or action seeking indemnification or
        contribution, however denominated, and any claim or action, whether
        legal or equitable in nature, known or unknown, foreseen or unforeseen,
        accrued or unaccrued, matured or unmatured, or for damages or permitted
        costs and expenses (including attorneys' fees). All such claims and
        actions are hereby extinguished, discharged, satisfied and
        unenforceable.

                Such order shall include a provision that a Final verdict or
        judgment against PwC shall be reduced (up to the amount of such verdict
        or judgment) by the greater of: (a) an amount that corresponds to the
        percentage of responsibility of the Released Securities Parties for the
        liability at issue; or (b) the amount paid to settle the Consolidated
        Securities Action pursuant to this Stipulation. Such order shall also
        prohibit any member of the Settling Securities Plaintiff Class from
        settling any claim against PwC without also obtaining from PwC a release
        running in favor of every Released Securities Party that is at least as
        broad as the Securities Release; provided, however that this bar order
        shall not

                                       27

<PAGE>

        apply to any indemnification obligations owed by Hanover under its
        by-laws or Articles of Incorporation to the other Settling Defendants.

                2.15.   Supplemental Securities Agreement. Within ten (10)
        business days after the date hereof, Lead Counsel and Hughes Hubbard &
        Reed LLP shall enter into a Supplemental Securities Agreement providing
        for the termination of the Securities Settlement at the sole election of
        Hanover, in the exercise of its absolute discretion, in the event that,
        after the execution of the Stipulation, members of the Securities
        Plaintiff Class owning a specified percentage of Hanover Securities
        purchased during the Class Period deliver timely and otherwise valid
        requests for exclusion from the Securities Plaintiff Class or initiate
        actions regarding, or assert any of, the Released Claims against one or
        more of the Settling Securities Defendants. The Supplemental Securities
        Agreement shall be held confidential in accordance with its terms.

                2.16.   Reimbursement of Lead Plaintiffs. The Lead Plaintiffs
        may seek Federal Court approval of such amounts as allowed by Section
        21D of the Exchange Act.

3.      SETTLEMENT OF CONSOLIDATED DERIVATIVE ACTION

                3.1.    Settling Derivative Defendants' Denial of Liability. The
        Settling Derivative Defendants have denied, and continue to deny, that
        they have any liability as a result of any and all allegations that have
        been or could be made in the Derivative Actions. The Settling Derivative
        Defendants are entering into the Derivative Settlement in order to
        eliminate the burden, distraction, expense and uncertainty of further
        litigation.

                3.2.    Reliance Upon Own Knowledge. The Settling Derivative
        Plaintiffs expressly represent and warrant that, in entering into the
        Derivative Settlement, they relied upon their own knowledge and
        investigation (including the knowledge of and

                                       28

<PAGE>

        investigation performed by counsel), and not upon any promise,
        representation, warranty or other statement made by or on behalf of any
        of the Settling Derivative Defendants or their Related Persons not
        expressly contained in this Stipulation.

                3.3.    Corporate Governance. Hanover will implement the
        corporate governance enhancements, which were the subject of substantial
        negotiation by and among the Settling Parties and the Settling
        Derivative Plaintiffs' Counsel, in the time periods and in the manner
        contemplated by the Governance Term Sheet.

                3.4.    Role of Settling Derivative Plaintiffs' Counsel.
        Settling Derivative Plaintiffs, through Settling Derivative Plaintiffs'
        Counsel, were material participants in the settlement negotiations
        relating to the Derivative Actions and were a substantial factor in
        obtaining the following benefits for Hanover:

                        (a)     payment of at least twenty six million six
                hundred fifty thousand dollars ($26,650,000) by Hanover's
                insurance carriers toward the Settlement;

                        (b)     contribution of the GKH Settlement Shares into
                the Securities Settlement Stock Fund; and

                        (c)     substantial corporate governance enhancements as
                detailed in the Governance Term Sheet.

                3.5.    Derivative Notice. Settling Derivative Plaintiff's
        Counsel shall be responsible for printing and mailing appropriate
        court-directed individual notice to the shareholders of Hanover entitled
        to receive such notice, substantially in the form of Exhibit D, as well
        as any other required or appropriate notice to be made by publication or
        otherwise.

                                       29

<PAGE>

                3.6.    Payments. Within three (3) business days after
        preliminary approval of the Derivative Settlement, Hanover shall pay
        seventy five thousand dollars ($75,000) to counsel for the plaintiffs in
        the derivative action, Koch v. O'Connor, et al., as payment for
        providing the Notice required by Section 3.5. Within three (3) business
        days after the entry of the Order and Final Judgment, Hanover shall
        contribute seven hundred thousand dollars ($700,000) to the Securities
        Settlement Cash Fund. Thereafter, provided that the Court has approved
        such a fee and expense award, seventy five thousand (75,000) shares of
        Hanover Common Stock from the Securities Settlement Stock Fund and seven
        hundred thousand dollars ($700,000) (which shall be deemed to have been
        contributed by Hanover's directors and officers insurance carriers)
        withdrawn from the Securities Settlement Cash Fund shall be paid to
        Settling Derivative Plaintiffs' Counsel, of which three hundred thousand
        dollars ($300,000) shall be allocated and paid to The Brualdi Law Firm.

                3.7.    Attorneys' Fees. In the event that the order approving
        the fee and expenses so awarded is reversed or modified on appeal, and
        in the event that any Settling Derivative Plaintiffs' Counsel has
        received payment, such counsel shall, within five (5) business days of
        the date which the fee and expense award is modified or reversed, refund
        to the Derivative Settlement Fund the fees and expenses previously
        received by them in full or in any amount consistent with such reversal
        or modification, plus interest thereon at the rate earned on the
        Securities Settlement Cash Fund through the date of such refund. Lead
        Counsel shall refund, within ten (10) business days of any modification
        or reversal of a fee or expense award, any fees and expenses received,

                                       30

<PAGE>

        which are required to be but are not refunded, by any Settling
        Derivative Plaintiffs' Counsel as directed above.

                3.8.    Conditions. The Derivative Settlement shall terminate
        and be of no further force or effect if any of the conditions in Section
        5.1 and 5.3, or any of the conditions set forth below, are not satisfied
        or, with respect to the conditions in Section 3.8 (a), (b), and (d),
        waived by Hanover:

                        (a)     dismissal with prejudice of the State Derivative
                Action without additional consideration;

                        (b)     preliminary approval of the Derivative
                Settlement by the Federal Court;

                        (c)     payment of any fee and expense award to Settling
                Derivative Plaintiffs' Counsel directed by the Federal Court;
                and

                        (d)     the Order and Final Judgment by the Federal
                Court, approving the Derivative Settlement and providing for the
                Derivative Releases and bar order provided for in Section 3.10,
                becoming Final.

                3.9.    Derivative Releases. Upon the Effective Date, the
        Settling Derivative Plaintiffs, Hanover, and Hanover Shareholders, and
        each of their respective successors, predecessors, assigns, attorneys
        (including Settling Derivative Plaintiffs' Counsel), heirs,
        representatives, legatees, devisees, administrators, executors, and
        estates, release and forever discharge any and all claims, rights and
        causes of action, whether based on federal, state, local, statutory or
        common law or any other law, rule or regulation, including, without
        limitation, Unknown Claims and claims under ERISA, Delaware statutory
        and common law, federal and state securities laws and claims under any
        law

                                       31

<PAGE>

        governing fiduciaries or the duties of fiduciaries, that have been,
        could have been, or in the future might be or could be asserted in any
        form and in any forum by Settling Derivative Plaintiffs or Hanover
        Shareholders against any of the Released Derivative Parties on behalf of
        Hanover that exist, could have existed, or may arise in connection with
        or that relate to the transactions (including the registration of
        securities and any failure to deliver prospectuses), matters or
        occurrences, or representations or omissions involved, set forth,
        referred to, or which relate in any way to the facts or allegations
        contained in or which could have been contained in the Derivative
        Actions, (including, but not limited to, breach of any duty owed to
        Hanover, including the duty of care, loyalty and good faith) (the
        "Released Derivative Claims").

                Upon the Effective Date, the Settling Derivative Defendants and
        each of their respective successors, predecessors, assigns, attorneys
        (including Settling Derivative Defendants' Counsel), heirs,
        representatives, administrators, legatees, devisees, executors and
        estates, release and forever discharge any and all claims, rights and
        cause of action, whether based on federal, state, local, statutory or
        common law or any other law, rule or regulation, and whether known or
        unknown, that have been, could have been, or in the future might be
        asserted in any form or forum against any of the Settling Derivative
        Plaintiffs or any of the Settling Derivative Plaintiffs' Counsel in the
        Derivative Actions in connection with or that exist, could have existed,
        or may arise in connection with or relate to the institution,
        prosecution or settlement of any and all claims asserted in the
        Derivative Actions, including, but not limited to, any action for costs
        or attorneys' fees.

                The releases contained in this Section (the "Derivative
        Releases") shall apply to Hanover, each and every one of the Hanover
        Shareholders, the Settling Derivative

                                       32

<PAGE>

        Plaintiffs, each and every Settling Derivative Plaintiffs' Counsel, each
        and every Released Derivative Party and each and every Settling
        Derivative Defendants' Counsel, and the respective successors and
        assigns of any of the foregoing, whether directly or indirectly,
        representatively, derivatively or in any other capacity.

                The Derivative Releases apply to all claims, including Unknown
        Claims, and the Settling Derivative Plaintiffs, Settling Derivative
        Plaintiffs' Counsel, Settling Derivative Defendants and Settling
        Derivative Defendants' Counsel agree to waive the benefits of Section
        1542 of the California Civil Code (and the benefits of any other law
        (including any principle of common law) of any state or territory or
        other jurisdiction of the United States or of any jurisdiction outside
        of the United States that is similar, comparable or equivalent to
        Section 1542 of the California Civil Code), which provides:

                A general release does not extend to claims which the creditor
                does not know or suspect to exist in his favor at the time of
                executing the release, which if known by him must have
                materially affected his settlement with the debtor.

                Each Settling Derivative Plaintiff, Settling Derivative
        Plaintiffs' Counsel, Settling Derivative Defendants and Settling
        Derivative Defendants' Counsel acknowledges that the foregoing waiver
        was separately bargained for and is a material term of the Derivative
        Settlement.

                3.10.   Derivative Bar Order. The Order and Final Judgment shall
        include a bar order permanently and forever barring and enjoining all
        Persons, specifically including but not limited to PwC, from filing,
        commencing, instituting, prosecuting or maintaining, either directly,
        indirectly, representatively or in any other capacity, any claim,
        counterclaim, cross-claim, third-party claim or other action against any
        of the Released Derivative Parties arising out of, based upon or
        relating to the transactions and

                                       33

<PAGE>

        occurrences referred to in the facts and allegations contained in the
        Derivative Actions, including without limitation any claim or action
        seeking indemnification or contribution, however denominated, and any
        claim or action, whether legal or equitable in nature, known or unknown,
        foreseen or unforeseen, matured or unmatured, accrued or unaccrued, or
        for damages or permitted costs and expenses (including attorneys' fees).
        All such claims and actions are hereby extinguished, discharged,
        satisfied and unenforceable.

                Such order shall include a provision that a final verdict or
        judgment against a defendant other than a Released Derivative Party in
        the Settling Derivative Action or in any other action arising out of,
        based upon or relating to the transactions and occurrences referred to
        in the complaints in the Derivative Actions shall be reduced (up to the
        amount of such verdict or judgment) by the greater of: (a) an amount
        that corresponds to the percentage of responsibility of the Released
        Derivative Parties for the liability at issue; or (b) the amount paid to
        plaintiffs by the Released Derivative Parties in respect of the
        liability at issue. Such order shall also prohibit any Settling
        Derivative Plaintiff from settling any claim against PwC without also
        obtaining from PwC a release running in favor of every Released
        Derivative Party that is at least as broad as the Derivative Release,
        provided, however that this bar order shall not apply to any
        indemnification obligations owed by Hanover under its by-laws or
        Articles of Incorporation to the other Settling Defendants.

4.      SETTLEMENT OF ERISA ACTIONS

                4.1.    Settling ERISA Defendants' Denial of Liability. The
        Settling ERISA Defendants have denied, and continue to deny, that they
        have liability as a result of any

                                       34

<PAGE>

        and all allegations that have been or could be made in the ERISA
        Actions. The Settling ERISA Defendants are entering into the ERISA
        Settlement in order to eliminate the burden, distraction, expense and
        uncertainty of further litigation.

                4.2.    ERISA Settlement Fund. The Escrow Agent shall allocate
        an amount (the "ERISA Settlement Fund") equal to one million seven
        hundred seventy five thousand dollars ($1,775,000) in cash from the
        Securities Settlement Cash Fund, plus interest earned thereon, to fund
        payments relating to the ERISA Settlement.

                4.3.    Settled Claims. The ERISA Settlement contemplated herein
        shall be a settlement both of the claims made on a class action basis
        and a settlement of the claims made to or on behalf of the Plan.Reliance
        Upon Own Knowledge. The ERISA Plaintiffs expressly represent and warrant
        that, in entering into this ERISA Settlement, they relied upon their own
        knowledge and investigation (including the knowledge of and
        investigation performed by Settling ERISA Plaintiffs' Counsel), and not
        upon any promise, representation, warranty or other statement made by or
        on behalf of any of the Settling ERISA Defendants or their Related
        Persons not expressly contained in this Stipulation.

                4.4.    Structural and Equitable Relief. Each participant in, or
        beneficiary under, the Plan shall have the right to direct the
        investment of his or her employer contribution to the Plan, upon the
        vesting thereof, in the same manner and among the same investment
        alternatives as are available for the investment of employee
        contributions to the Plan (provided, however, that the employer
        contributions may continue to be made in the form of Hanover Common
        Stock).

                                       35

<PAGE>

                4.5.    Attorneys' Fees. Settling ERISA Plaintiffs' Counsel may
        apply to the Federal Court for an award of attorneys' fees and
        reimbursement of all expenses incurred by them on behalf of the Settling
        ERISA Plaintiff Class. Such fees and expenses, and interest thereon,
        shall be payable out of the ERISA Settlement Fund and shall be deducted
        from the ERISA Settlement Fund prior to the distribution thereof to the
        Plan. Following entry of any order by the Federal Court approving afees
        and expenses to Settling ERISA Plaintiffs' Counsel, Lead Counsel may
        withdraw from the ERISA Settlement Fund, and allocate the fees and
        expenses so awarded, provided, however that in the event that the order
        approving the fee and expenses so awarded is reversed or modified on
        appeal, and in the event that any Settling ERISA Plaintiffs' Counsel has
        received payment, such counsel shall, within five (5) business days of
        the date which the fee and expense award is modified or reversed, refund
        to the ERISA Settlement Fund the fees and expenses previously received
        by them in full or in any amount consistent with such reversal or
        modification, plus interest thereon at the rate earned on the Securities
        Settlement Cash Fund through the date of such refund. Lead Counsel shall
        refund, within ten (10) business days of any modification or reversal of
        a fee or expense award, any fee and expense amount discussed above which
        is not refunded by any Settling ERISA Plaintiffs' Counsel as directed
        above.

                4.6.    Award to Named ERISA Plaintiff. The named plaintiff in
        Kirkley v. Hanover, et al., Case No. H-03-1155, will submit to the
        Federal Court an application for an award, in recognition of his
        services, not to exceed two thousand five hundred dollars ($2,500),
        which award shall be withdrawn from the ERISA Settlement Fund portion of

                                       36

<PAGE>

        the Securities Settlement Cash Fund. Such award, if approved, shall be
        paid from the ERISA Settlement Fund prior to distribution of the balance
        thereof to the Plan.

                4.7.    Notice. The Claims Administrator shall be responsible
        for providing the Notice to the members of the Settling ERISA Plaintiff
        Class, substantially in the form of Exhibit E, as well as any other
        required or appropriate notice to be made by publication or otherwise,
        all costs of which shall be paid by the Plan or Hanover.

                4.8.    Conditions. The ERISA Settlement shall terminate and be
        of no further force or effect if any of the conditions in Section 5.1
        and 5.3, or any of the conditions set forth below, are not satisfied or,
        with respect to the conditions in Section 4.8 (c) and (d), waived by
        Hanover:

                        (a)     the funding of the ERISA Settlement Fund as
                provided herein;

                        (b)     the implementation of the structural and
                equitable relief contemplated in Section 4.4 above;

                        (c)     preliminary approval by the Federal Court of the
                ERISA Settlement except with respect to attorneys' fees; and

                        (d)     The Order and Final Judgment by the Federal
                Court, approving the ERISA Settlement and providing for the
                ERISA Releases and bar order provided for in Section 4.10
                becoming Final.

                4.9.    ERISA Releases. Upon the Effective Date the Settling
        ERISA Plaintiff Class (and each of their respective successors,
        predecessors, assigns, attorneys (including Settling ERISA Plaintiffs'
        Counsel) heirs, representatives, administrators, legatees, devisees,
        executors and estates release and forever discharge any and all claims,
        rights and causes of action, whether based on federal, state, local,
        statutory or common law or

                                       37

<PAGE>

        any other law, rule or regulation, including Unknown Claims, that have
        been, could have been, or in the future might be or could be asserted in
        any form or forum against any of the Released ERISA Parties in
        connection with or that exist, could have existed, or may arise as to
        the transactions, matters or occurrences, representations or omissions,
        involved, set forth, referred to, or which relate in any way to the
        facts of and allegations contained in the ERISA Actions including, but
        not limited to, claims for negligence, gross negligence, professional
        negligence, breach of duty of care and/or breach of duty of loyalty
        and/or breach of duty of candor, fraud, breach of fiduciary duty,
        mismanagement, corporate waste, malpractice, breach of contract,
        negligent or willful misrepresentation, and violations of ERISA or other
        state or federal statutes, rules or regulations, provided, however, that
        the releases shall be limited to matters pertaining to the Plan that
        were or could have been prosecuted on a Plan-wide or Class-wide basis
        (the "Released ERISA Claims").

                Upon the Effective Date, the Settling ERISA Defendants and GKH
        and each of their respective successors, predecessors, assigns,
        attorneys (including Settling ERISA Defendants' Counsel), heirs,
        representatives, administrators, legatees, devisees, executors and
        estates release and forever discharge any and all claims, rights and
        cause of action, whether based on federal, state, local, statutory or
        common law or any other law, rule or regulation, and whether known or
        unknown, that have been, could have been, or in the future might be
        asserted in any form or forum against any member of the Settling ERISA
        Plaintiff Class or any of the Settling ERISA Plaintiffs' Counsel in the
        Settling ERISA Actions in connection with or that exist, could have
        existed, or may arise as to the

                                       38

<PAGE>

        institution, prosecution or settlement of any and all claims asserted in
        the Settling ERISA Actions, including, but not limited to, any action
        for costs or attorneys' fees.

                The releases contained in this Section (the "ERISA Releases")
        shall apply to each and every member of the Settling ERISA Plaintiff
        Class, each and every Settling ERISA Plaintiffs' Counsel, each and every
        Released ERISA Party and each and every Settling ERISA Defendants'
        Counsel, and the respective successors and assigns of any of the
        foregoing, whether directly or indirectly, representatively,
        derivatively or in any other capacity.

                The ERISA Releases apply to all claims, including Unknown
        Claims, and the Settling ERISA Plaintiff Class, Settling ERISA
        Plaintiffs' Counsel, Settling ERISA Defendants and Settling ERISA
        Defendants' Counsel agree to waive the benefits of Section 1542 of the
        California Civil Code (and the benefits of any other law (including any
        principle of common law) of any state or territory or other jurisdiction
        of the United States or of any jurisdiction outside of the United States
        that is similar, comparable or equivalent to Section 1542 of the
        California Civil Code), which provides:

                A general release does not extend to claims which the creditor
                does not know or suspect to exist in his favor at the time of
                executing the release, which if known by him must have
                materially affected his settlement with the debtor.

                Each member of the Settling ERISA Plaintiff Class, Settling
        ERISA Plaintiffs' Counsel, Settling ERISA Defendants and Settling ERISA
        Defendants' Counsel acknowledges that the foregoing waiver was
        separately bargained for and is a material term of the ERISA Settlement.

                4.10.   ERISA Bar Order. The Order and Final Judgment shall
        include a bar order permanently and forever barring and enjoining all
        Persons, specifically including

                                       39

<PAGE>

        but not limited to PwC, from filing, commencing, instituting,
        prosecuting or maintaining, either directly, indirectly,
        representatively or in any other capacity, any claim, counterclaim,
        cross-claim, third-party claim or other action against any of the
        Released ERISA Parties arising out of, based upon or relating to the
        transactions and occurrences referred to in the facts and allegations
        contained in the ERISA Actions, including without limitation any claim
        or action seeking indemnification and/or contribution, however
        denominated, and any claim or action whether legal or equitable in
        nature, known or unknown, foreseen or unforeseen, matured or unmatured,
        accrued or unaccrued, or for damages or permitted costs and expenses
        (including attorneys' fees). All such claims and actions are hereby
        extinguished, discharged, satisfied and unenforceable.

                Such order shall include a provision that a Final verdict or
        judgment against a defendant other than a Released ERISA Party in any of
        the ERISA Actions or in any other action arising out of, based upon or
        relating to the transactions and occurrences referred to in the
        complaints in the ERISA Actions shall be reduced (up to the amount of
        such verdict or judgment) by the greater of: (a) an amount that
        corresponds to the percentage of responsibility of the Released ERISA
        Parties for the liability at issue; or (b) the amount paid to plaintiffs
        by the Released ERISA Parties in respect of the liability at issue. Such
        order shall also prohibit the Settling ERISA Plaintiff Class and the
        Settling ERISA Plaintiffs' Counsel from settling any claim against a
        Non-Settling Defendant without also obtaining from such Non-Settling
        ERISA Defendant a release running in favor of every Released ERISA Party
        that is at least as broad as the ERISA Release, provided, however that
        this bar order shall not apply to any indemnification obligations

                                       40

<PAGE>

        owed by Hanover under its by-laws or Articles of Incorporation to the
        other Settling Defendants.

                4.11.   Payment to Authorized ERISA Claimants. The ERISA
        Settlement Fund shall be distributed by the Claims Administrator to the
        Plan for redistribution to Authorized ERISA Claimants, both in
        accordance with the ERISA Plan of Allocation.

5.      ADDITIONAL CONDITIONS TO EFFECTIVENESS OF THE SETTLEMENT

                5.1.    Approval. Hanover shall have obtained such consents,
        waivers and approvals from its banks and other lenders as it deems
        necessary in connection with the Settlement, all of which Hanover shall
        seek in good faith.

                5.2.    Performance by GKH. GKH shall have performed all
        obligations to be performed by it as provided in this Stipulation and in
        the Letter Agreement.

                5.3.    Cross-Contingency. In the event that the Federal Court
        does not approve all of the Securities Settlement, the ERISA Settlement,
        and the Derivative Settlement, Hanover may, in its sole discretion,
        terminate any or all of the (1) Securities Settlement, (2) Derivative
        Settlement, and (3) ERISA Settlement, provided, however, that nothing
        herein shall inhibit Hanover from consummating any of the Securities
        Settlement, Derivative Settlement, or ERISA Settlement despite the
        disapproval of any of such Settlements.

                5.4.    Performance by Hanover. Hanover shall have performed all
        obligations to be performed by it on or prior to the Effective Date as
        provided in this Stipulation and in the Letter Agreement.

                                       41

<PAGE>

6.      ESCROW MATTERS

                6.1.    Appointment of Escrow Agent. Pursuant to the terms
        hereof, Milberg Weiss is hereby appointed the Escrow Agent and Milberg
        Weiss accepts the duties and obligations of the Escrow Agent set forth
        herein.

                6.2.    Investment of Settlement Fund. The Escrow Agent shall
        invest the Securities Settlement Cash Fund in instruments backed by the
        full faith and credit of the United States Government with a maturity of
        not more than 90 days, and reinvest the proceeds of such instruments in
        the same manner as they mature, and may deposit a portion of the cash
        portion of the Securities Settlement Cash Fund into an interest bearing
        account in which the funds held therein are at all times fully insured
        by the Federal Deposit Insurance Corporation (or any successor thereto).

                6.3.    Distribution of Settlement Fund. The Settlement Fund
        shall be distributed (or the instruments in which the Securities
        Settlement Cash Fund is invested distributed) by the Escrow Agent only
        at such time or times and in such manner as is expressly set forth
        herein or as otherwise authorized or directed by the Federal Court.

                6.4.    Concerning the Escrow Agent. The Escrow Agent further
        covenants and agrees with the Settling Defendants that:

                        (a)     Except as is otherwise agreed by the Settling
                Defendants and the Escrow Agent, the Escrow Agent shall not
                invest any funds held hereunder except as directed pursuant to
                this Stipulation. Uninvested funds held hereunder shall not earn
                or accrue interest.

                        (b)     This Stipulation (including the Note) sets forth
                certain duties of Milberg Weiss in its capacity as the Escrow
                Agent, but does not relieve Milberg

                                       42

<PAGE>

                Weiss of, and Milberg Weiss remains obligated to comply with,
                its obligations as Lead Counsel or otherwise that may be
                contained elsewhere in this Stipulation or any other agreement
                entered into between the Settling Defendants and Lead Counsel
                (or their respective representatives or counsel).

                        (c)     To induce the Escrow Agent to act as such
                hereunder, the Escrow Agent shall be entitled to rely, if it is
                acting in good faith, upon any order, judgment, certification,
                demand, notice, instrument or other writing delivered to it
                hereunder without being required to determine the authenticity
                or the correctness of any fact stated therein or the propriety
                or validity or the service thereof. The Escrow Agent may, if it
                is acting in good faith, act in reliance upon any instrument or
                signature believed by it to be genuine and may assume that any
                person purporting to give receipt or advice or make any
                statement or execute any document in connection with the
                provisions hereof has been duly authorized to do so.

                        (d)     Except and to the extent Lead Counsel is
                otherwise permitted to make a withdrawal to pay counsel fees and
                expenses pursuant to this Stipulation, the Escrow Agent does not
                have any beneficial interest in the Settlement Fund, but is
                serving as escrow holder only and having only possession thereof
                subject to the terms hereof, and the Escrow Agent shall not be
                entitled to any fees or other compensation for, or reimbursement
                for any expenses incurred in connection with, the services to be
                rendered by the Escrow Agent hereunder.

                        (e)     Until the Effective Date, the Escrow Agent (and
                any successor Escrow Agent) may be removed or may resign only
                upon the execution by the

                                       43

<PAGE>

                Settling Defendants and the Escrow Agent of an instrument to
                that effect. Upon the removal or resignation of the Escrow Agent
                in accordance with the foregoing sentence, the Escrow Agent (and
                any successor Escrow Agent) shall deliver the Settlement Fund to
                any successor Escrow Agent designated in writing or, if no such
                successor is so designated, to the Federal Court, whereupon the
                Escrow Agent shall be discharged of and from any and all
                obligations under this Section 6.

                        (f)     In the event of any disagreement between the
                Settling Parties resulting in adverse claims or demands being
                made in connection with the Settlement Fund, or in the event
                that the Escrow Agent in good faith is in doubt as to what
                action it should take hereunder, the Escrow Agent shall be
                entitled to retain the Settlement Fund until the Escrow Agent
                shall have received (i) a Final non-appealable order of the
                Federal Court directing delivery of the Settlement Fund or (ii)
                a written agreement executed by the Escrow Agent and the
                Settling Defendants directing delivery of the Settlement Fund,
                in which event the Escrow Agent shall disburse the Settlement
                Fund in accordance with such order or agreement.

7.      TAX MATTERS

                7.1.    Qualified Settlement Fund. The Settling Parties and the
        Escrow Agent agree that the Settlement Fund and all of its constituent
        parts (including the Securities Settlement Cash Fund, the Securities
        Settlement Note Fund, and the Securities Settlement Stock Fund), shall
        be a "qualified settlement fund" within the meaning of Treas. Reg. Sec.
        1.468B-1 at all times after preliminary approval of this Stipulation by
        the Federal

                                       44

<PAGE>

        Court, it being agreed that preliminary approval of this Stipulation
        shall constitute Federal Court approval of the establishment of the
        Settlement Fund and all of its constituent parts (including the
        Securities Settlement Cash Fund, the Securities Settlement Note Fund and
        the Securities Settlement Stock Fund). In addition, the Escrow Agent
        shall, if and only if Hanover so requests, timely make such elections as
        necessary or advisable to carry out the provisions of this Section 7.1,
        including a "relation-back election" (as defined in Treas. Reg. Sec.
        1.468B-1). Such elections shall be made in compliance with the
        procedures and requirements contained in the applicable regulations. It
        shall be the responsibility of the Escrow Agent to timely and properly
        prepare and deliver the necessary documentation for signature by all
        necessary parties and thereafter to cause the appropriate filing to
        occur.

                7.2.    Returns. For the purpose of Section 468B of the Code,
        and the regulations promulgated thereunder, the "administrator" shall be
        the Escrow Agent. The Escrow Agent shall timely and properly file all
        informational and other tax returns necessary or advisable with respect
        to the Settlement Fund (including without limitation the returns
        described in Treas. Reg. Sec. 1.468B-2(k)).

                7.3.    Taxes. All (i) taxes (including any estimated taxes,
        interest, penalties or additions to tax) arising with respect to the
        income earned by the Settlement Fund, including any taxes that may be
        imposed upon the Settlement Fund, Settling Defendants or Settling
        Defendants' Counsel with respect to any income earned by the Settlement
        Fund for any period during which the Settlement Fund does not qualify as
        a "qualified settlement fund" for federal or state income tax purposes
        ("Taxes"), and (ii) expenses and costs incurred in connection with the
        operation and implementation of this Section 7.3

                                       45

<PAGE>

        (including, without limitation, expenses of tax attorneys and/or
        accountants and mailing and distribution costs and expenses relating to
        filing (or failing to file) the returns described in this Article 7
        ("Tax Expenses"), shall be paid out of the Settlement Fund. Settling
        Defendants and Settling Defendants' Counsel shall have no liability or
        responsibility for Taxes or Tax Expenses. The Escrow Agent hereby
        indemnifies and holds harmless each of the Settling Defendants and
        Settling Defendants' Counsel for any and all Taxes and Tax Expenses
        (including, without limitation, Taxes payable by reason of any such
        indemnification). Further, Taxes and Tax Expenses shall be treated as
        and considered to be, a cost of administration of the Settlement Fund
        and shall be timely paid by the Escrow Agent out of the Settlement Fund
        without prior order from the Federal Court and the Escrow Agent shall be
        obligated (notwithstanding anything herein to the contrary) to withhold
        from distribution to the Authorized Claimants any funds necessary to pay
        such amounts including the establishment of adequate reserves for any
        Taxes and Tax Expenses (as well as any amounts that may be required to
        be withheld under Treas. Reg. Sec. 1.468B-2(1)(2); neither Settling
        Defendants nor Settling Defendants' Counsel are responsible nor shall
        they have any liability therefore. The Settling Parties shall cooperate
        with the Escrow Agent, each other, and their tax attorneys and
        accountants to the extent reasonably necessary to carry out the
        provisions of this Article 7.

8.      PRELIMINARY ORDER AND SETTLEMENT HEARING

                8.1.    Application for Preliminary Order. Within five (5)
        business days after the execution and delivery of this Stipulation by
        all parties hereto, the Settling Parties shall submit this Stipulation
        together with its Exhibits to the Federal Court and shall apply for
        entry of an order, requesting, inter alia, the preliminary approval of
        the Settlement,

                                       46

<PAGE>

        certification of relevant claims for settlement purposes, and approval
        for the mailing and publication of the Notices (the "Preliminary
        Order").

9.      ADMINISTRATION AND CALCULATION OF CLAIMS, FINAL AWARDS, AND SUPERVISION
        AND DISTRIBUTION OF SECURITIES SETTLEMENT FUND AND ERISA SETTLEMENT FUND

                9.1.    Administration of the Settlement Fund. The Claims
        Administrator, appointed and subject to such supervision and direction
        of the Federal Court, shall administer and calculate the claims
        submitted by or on behalf of Settling Plaintiffs and shall oversee
        distribution of the Settlement Fund to the Authorized Claimants or, as
        applicable, to the Plan for redistribution to the Authorized Claimants.

                9.2.    Distribution of the ERISA Settlement Fund. Distribution
        of the ERISA Settlement Fund shall be applied as follows:

                        (a)     to pay the Taxes and Tax Expenses described in
                Article 7 hereof to the extent allocable to the ERISA
                Settlement;

                        (b)     to pay Settling ERISA Plaintiffs' Counsel
                attorneys' fees and expenses, if and to the extent allowed by
                the Federal Court, and as otherwise provided in this
                Stipulation;

                        (c)     to pay all the costs and expenses of the Claims
                Administrator reasonably and actually incurred in connection
                with discharging its responsibilities in connection with the
                process of distributing the ERISA Settlement Fund to Authorized
                ERISA Claimants, and paying escrow fees and costs allocable to
                the ERISA Settlement Fund, if any;

                        (d)     to pay the named plaintiff in Kirkley v.
                Hanover, et al., Case No. H-03-1155, two thousand five hundred
                dollars ($2,500), if such award is approved by the Federal
                Court; and

                                       47

<PAGE>

                        (e)     to distribute the ERISA Settlement Fund (after
                deducting costs and expenses allowed pursuant to Section 9.2(a),
                (b), (c), and (d)) to Authorized ERISA Claimants as allowed by
                the ERISA Plan of Allocation.

                9.3.    Distribution of the Securities Settlement Fund. The
        Securities Settlement Fund shall be applied as follows:

                        (a)     to pay the Taxes and Tax Expenses described in
                Article 7 hereof to the extent allocable to the Securities
                Settlement;

                        (b)     to pay Lead Counsel attorneys' fees and
                expenses, if and to the extent allowed by the Federal Court, and
                as otherwise provided in this Stipulation;

                        (c)     to pay all the costs and expenses reasonably and
                actually incurred in connection with providing Notice to and
                locating Securities Plaintiff Class, soliciting claims of
                Securities Plaintiff Class, assisting with the filing of claims,
                administering and distributing the Securities Settlement Fund to
                Authorized Securities Claimants, processing proofs of claim and
                release forms and paying escrow fees and costs allocable to the
                Securities Settlement Fund, if any; and

                        (d)     to distribute the Settlement Fund (after
                deducting costs and expenses allowed pursuant to Section 9.3(a),
                (b) and (c)) to Authorized Securities Claimants as allowed by
                the Securities Plan of Allocation.

                9.4.    Distribution of Remaining Balance of Securities
        Settlement Fund. The Securities Settlement Fund shall be distributed to
        the Authorized Claimants substantially in accordance with the Securities
        Plan of Allocation. However, if there is any balance remaining in the
        Securities Settlement Fund (whether by reason of tax refunds, uncashed
        checks or otherwise) after the later of (a) twenty four (24) months
        after the Effective Date

                                       48

<PAGE>

        or (b) twelve (12) months after the cancellation or maturity of the
        Note, Lead Counsel shall reallocate such balance among the Authorized
        Securities Claimants in an equitable and economic fashion. Thereafter,
        any balance which still remains in the Securities Settlement Fund shall
        be donated to an appropriate non-profit organization or distributed as
        may be ordered by the Federal Court consistent with the terms of this
        Stipulation.

                9.5.    Responsibility of Administration. Settling Defendants'
        Counsel shall not have any responsibility for, interest in, or liability
        whatsoever with respect to, (i) the investment, distribution or
        administration of the Settlement Fund (or losses incurred as a result
        thereof), (ii) the determination or administration of the Securities
        Plan of Allocation or the ERISA Plan of Allocation, (iii) the
        solicitation or calculation of Proofs of Claim from any Authorized
        Claimant, or (iv) the payment or withholding of Taxes, or any losses
        incurred in connection with or by the Settlement Fund.

                9.6.    Release of Liability for Distributions. No Person shall
        have any claim against any Settling Party, their counsel or any of their
        Related Persons based on the distributions made in accordance with this
        Stipulation or further orders of the Federal Court.

                9.7.    Claims by Persons Who Are Both Settling Securities
        Plaintiffs and Settling ERISA Plaintiff Class Members. Settling ERISA
        Class members who by virtue of their holdings in the Plan are also
        Settling Securities Plaintiffs shall have submitted on their behalf by
        the Plan Proofs of Claims for such holdings in connection with both the
        Securities and ERISA Settlements. Distributions in response to such
        Proofs of Claim shall be as described in the Securities Plan of
        Allocation and the ERISA Plan of Allocation, respectively.

                                       49

<PAGE>

                9.8.    Certain Obligations of the Plan, the Claims
        Administrator, and Hanover.

                        (a)     Submission of Information to Claims
                Administrator. The Plan shall timely submit to the Claims
                Administrator all available information concerning the holdings
                of and transactions in Hanover Securities in the Plan by members
                of the Settling ERISA Plaintiff Class as may be required in
                connection with submission of a Proof of Claim for participation
                in the Securities Settlement and the ERISA Settlement. Such
                submissions shall be deemed for all purposes to be Proofs of
                Claim submitted by the Settling ERISA Plaintiff Class members
                with respect to such holdings for participation in the
                Securities Settlement and the ERISA Settlement.

                        (b)     Actions by Claims Administrator. The Claims
                Administrator will process the information provided by the Plan
                as described in Section 9.8(a) above and calculate the
                distributions in cash and Hanover Common Stock due to each
                member of the Settling ERISA Plaintiff Class from the ERISA
                Settlement Fund and the Securities Settlement Fund, all
                deductions from such funds required under this Stipulation
                having been made. The Claims Administrator will provide the
                results of such calculations to the Plan and will transfer or
                cause to be transferred to the Plan an aggregate amount of cash
                and Hanover Common Stock equal to the sum of cash and Hanover
                Common Stock that it has calculated are due to each of the
                Settling ERISA Class Members.

                        (c)     Distribution of Settlement Proceeds. All
                proceeds from the ERISA Settlement and the Securities Settlement
                distributed by or at the direction of the Claims Administrator
                to the Plan pursuant to Section 9.8(b) above shall be

                                       50

<PAGE>

                redistributed by the Plan to the members of the Settling ERISA
                Plaintiff Class on a pass-through basis within thirty (30) days
                of the later of the receipt of the funds and the information
                specifying the distribution to be made to each member of the
                Settling ERISA Plaintiff Class. Such redistribution shall
                correspond in amount and kind with the calculations provided by
                the Claims Administrator. The Plan shall make all
                redistributions of proceeds of the ERISA Settlement that it
                receives directly to the Plan accounts of members of the
                Settling ERISA Plaintiff Class who have such accounts or, to the
                extent and in the manner permitted by law, to any other account
                which such members may specify. The Plan and/or Hanover shall
                cause to be discharged all of the Plan's reporting obligations
                under federal or state tax laws or ERISA in respect of its
                redistribution of such proceeds. The Plan shall bear the costs
                and expenses attributable to discharging all of its obligations
                under this Stipulation. Any proceeds that cannot be
                redistributed by the Plan upon the exercise of reasonable
                efforts or as otherwise required by law shall be converted into
                cash and, subject to the requirements of law, shall be used
                first to pay costs associated with the redistribution of
                proceeds and thereafter shall become the property of the Plan.
                Any unrecovered costs to the Plan of effecting the
                redistribution of proceeds shall be borne by Hanover.

                        (d)     Implementation of Plan's Obligations. Hanover
                will cause the Plan to undertake the obligations imposed on it
                hereunder.

                                       51

<PAGE>

10.     TERMINATION

                10.1.   Termination of the Stipulation. In the event that the
        Stipulation is terminated or cancelled, for any reason, within ten (10)
        business days after written notification of such event is sent by
        Hanover to the Escrow Agent, (a) the Securities Settlement Cash Fund
        (including accrued interest), net of any reasonable and actual costs
        incurred for notice expenses, shall be refunded by the Escrow Agent to
        Hanover, (b) the Note (if issued) shall be cancelled and returned by the
        Escrow Agent to Hanover, (c) the Hanover Settlement Shares (if
        previously delivered) shall be returned by the Escrow Agent to Hanover,
        and (d) the GKH Settlement Shares (if previously delivered) shall be
        returned by the Escrow Agent to GKH. At the request of Hanover, the
        Escrow Agent or its designee shall apply for any Tax refund owed to the
        Securities Settlement Cash Fund and pay the proceeds, after deduction of
        any fees or expenses incurred in connection with such application(s) for
        refund, to Hanover.

                10.2.   Restoration in Event of Termination. In the event that
        the Settlement is terminated or cancelled, for any reason, the Settling
        Parties shall be restored to their respective positions in the Settling
        Actions as of May 11, 2003. In such event, the terms and provisions of
        this Stipulation shall have no further force and effect with respect to
        the Settling Parties and shall not be used in any of the Actions, and
        any judgment or order entered by the Federal Court in accordance with
        the terms of the Stipulation shall be treated as vacated, nunc pro tunc.
        No order of the Federal Court or modification or reversal on appeal of
        any order of the Federal Court concerning any Plan of Allocation or the
        amount of any attorneys' fee and expense award approved by the Federal
        Court shall constitute grounds for cancellation or termination of the
        Stipulation.

                                       52

<PAGE>

                10.3.   Partial Settlement. Without limiting the generality of
        Sections 10.1 and 10.2, if one or more of the Securities Settlement,
        ERISA Settlement, or Derivative Settlement is or are terminated as
        contemplated by this Stipulation (each, a "Non-Settled Action"), but any
        of such settlements is consummated as contemplated by this Stipulation,
        then (a) that portion of the Settlement Fund, less any reasonable and
        actual cost of Notice, as relates to the Non-Settled Actions shall be
        refunded and returned in a like manner as contemplated by Section 10.1
        above and (b) the Settling Parties in the Non-Settled Actions shall be
        restored to their respective positions in the Non-Settled Actions in a
        like manner as contemplated by Section 10.2 above.

11.     MISCELLANEOUS PROVISIONS

                11.1.   Cooperation of Settling Parties. The Settling Parties
        (a) acknowledge that it is their intent to consummate the Settlement and
        (b) agree to cooperate to the extent reasonably necessary to effectuate
        and implement all terms and conditions of this Stipulation and to
        exercise their commercially reasonable efforts to accomplish the
        foregoing terms and conditions of this Stipulation and to consummate the
        transactions contemplated hereby.

                11.2.   Acknowledgment of Adequate Consideration. The Settling
        Parties acknowledge, represent and warrant to each other that the mutual
        releases and payments hereunder are such that each of the Settling
        Parties is to receive adequate consideration for the consideration
        given.

                11.3.   No Admissions. Neither this Stipulation nor the
        Settlement, nor any act performed or document executed pursuant to or in
        furtherance of this Stipulation or the Settlement (a) is or may be
        deemed to be or may be used as an admission of, or evidence

                                       53

<PAGE>

        of, the validity of any Released Claim, or of any wrongdoing or
        liability of the Settling Defendants or any of their Related Persons;
        (b) is or may be deemed to be or may be used as an admission of, or
        evidence of, any fault or omission of any of the Settling Defendants or
        any of their Related Persons in any civil, criminal or administrative
        proceeding in any court, administrative agency or other tribunal; or (c)
        is or may be alleged or mentioned so as to contravene clause (a) above
        in any litigation or other action unrelated to the enforcement of this
        Stipulation. Settling Defendants may file this Stipulation or any
        judgment or order of the Federal Court related hereto in any action that
        may be brought against them in order to support a defense or
        counterclaim based on principles of res judicata, collateral estoppel,
        release, good faith settlement, judgment bar or reduction or any other
        theory of claim preclusion or issue preclusion or similar defense or
        counterclaim. The Order and Final Judgment in the Securities Settlement,
        the Derivative Settlement, and the ERISA Settlement will contain a
        statement that, during the course of the litigation, the Settling
        Parties and the Settling Parties' Counsel complied with the requirements
        of Federal Rule of Civil Procedure 11.

                11.4.   Confidentiality Agreements. All agreements made and
        orders entered during the course of the negotiations relating to the
        confidentiality of information shall survive this Stipulation and the
        Settlement.

                11.5.   Exhibits. All of the Exhibits to this Stipulation are
        material and integral parts hereof and are fully incorporated herein by
        this reference.

                11.6.   Costs. Except as otherwise expressly provided herein,
        the Settling Parties shall bear their own costs.

                                       54

<PAGE>

                11.7.   Entire Agreement. This Stipulation, the May 2003
        Supplemental Agreement between GKH and Hanover, the Supplemental
        Securities Agreement, the Escrow Agreement, and all documents executed
        pursuant hereto constitute the entire agreement between the parties with
        respect to the settlement of the Actions and supersede any and all prior
        negotiations, discussions, agreements or undertakings, whether oral or
        written, with respect to the settlement of the Actions including, but
        not limited to, the MOU.

                11.8.   Counterparts. The Stipulation may be executed in one or
        more counterparts and all such counterparts together shall be deemed to
        be one and the same instrument.

                11.9.   Binding Effect. This Stipulation shall be binding upon,
        and inure to the benefit of, the Released Securities Parties, the
        Released Derivative Parties, the Released ERISA Parties, the Settling
        Parties and each of their respective Related Persons. This Stipulation
        is not intended, and shall not be construed, to create rights in or
        confer benefits on any other Persons, and there shall not be any third
        party beneficiaries hereto except as expressly provided hereby with
        respect to such aforementioned Persons who are not parties hereto.

                11.10.  Judicial Enforcement. The Federal Court shall retain
        jurisdiction with respect to implementation and enforcement of the terms
        of the Stipulation and the Settlement, and the Settling Parties submit
        to the jurisdiction of the Federal Court for purposes of implementing
        and enforcing the terms of the Stipulation and Settlement.

                11.11.  Choice of Law. This Stipulation shall be governed by the
        laws of the State of Texas, excluding its choice of law provisions.

                                       55

<PAGE>

                11.12.  Warrant of Authority. Each counsel or other Person
        executing the Stipulation or any of its Exhibits on behalf of any party
        hereto hereby warrants that such Person has the full authority to do so.

                11.13.  Waiver of Breach. The Settling Parties may not waive or
        vary any right hereunder except by an express written waiver or
        variation. Any failure to exercise or any delay in exercising any of
        such rights, or any partial or defective exercise of such rights, shall
        not operate as a waiver or variation of that or any other such right.
        The waiver by one Settling Party of any breach of this Stipulation by
        another Settling Party shall not be deemed a waiver of any other prior
        or subsequent breach of this Stipulation.

                11.14.  Fair Construction. This Stipulation shall not be
        construed more strictly against one party than another merely by virtue
        of the fact that it, or any part of it, may have been prepared by
        counsel for one of the parties, it being recognized that it is the
        result of arm's-length negotiations between the parties and all parties
        have contributed substantially and materially to the preparation of this
        Stipulation.

                11.15.  No Assignment of Claims. Each member of the Settling
        Securities Plaintiff Class and the Settling ERISA Plaintiff Class, and
        each Settling Derivative Plaintiff hereby represents and warrants that
        it has not assigned any rights, claims or causes of action that were
        asserted or could have been asserted in connection with, under, or
        arising out of any of the claims being settled or released herein,
        provided, however, that nothing contained in this Stipulation should
        prevent any member of the Settling Securities Plaintiff Class from
        assigning his, her, or its right to distributions from the Settlement
        Fund.

                                       56

<PAGE>

                11.16.  Totality of Releases and Bar Orders. For the avoidance
        of doubt, the Settling Parties hereby acknowledge and agree that, if the
        Settlement is consummated in all material respects, (i) the Securities
        Release, Derivative Release and ERISA Release shall operate together
        with duplication and without exclusion of any Released Claim and (ii)
        the bar orders contemplated by Sections 2.14, 3.10 and 4.10 shall
        operate together with duplication and without exclusion of any matter
        discussed therein.

                11.17.  Tolling Agreements Void. The Tolling Agreements shall be
        void upon the Effective Date of the Securities Settlement.

                11.18.  No Compensation Necessary as a Result of Losses. The
        Settling Plaintiffs and the Settling Plaintiffs' Counsel acknowledge
        that the Settlement Fund may suffer losses as a result of investment of
        the Securities Settlement Cash Fund or fluctuations in value of the
        Settlement Shares (including fluctuations and resulting losses before
        the Settlement Shares are contributed to the Securities Settlement Stock
        Fund), or the Note, and they agree that none of the Settling Defendants
        or the Settling Defendants' Counsel is liable for or has any obligation
        to compensate for, or restore to the Settlement Fund or the Settling
        Plaintiffs or the Settling Plaintiffs' Counsel, any such losses or value
        fluctuations, and further agree that any such losses or fluctuations in
        value shall be at the risk of the Settling Plaintiffs and the Settling
        Plaintiffs' Counsel.

                11.19.  Assignment of Agreement. Milberg Weiss shall not assign
        any of its rights or obligations under this Stipulation (including any
        rights and obligations as Lead Counsel or Escrow Agent) without the
        prior written consent of Hanover, and any attempted transfer or
        assignment in violation of this provision shall be null and void;
        provided, however, that Milberg Weiss may, without consent, but with
        prior written

                                       57

<PAGE>

        notice to Hanover, assign any such rights or obligations to a single
        entity formed as a result of a reorganization of Milberg Weiss as long
        as such assignee assumes all of the obligations of Milberg Weiss under
        this Stipulation and Milberg Weiss and each of its partners, as Milberg
        Weiss and its partners existed on May 12, 2003, are jointly and
        severally liable with the assignee for all such obligations.

                11.20.  Facsimile Signatures. Any signature to this Stipulation,
        to the extent signed and delivered by means of a facsimile machine,
        shall be treated in all manners and respects as an original signature
        and shall be considered to have the same binding legal effect as if it
        were the original signed version thereof delivered in person. At the
        request of a Settling Party to this Stipulation, any other Settling
        Party to this Stipulation so executing and delivering this document by
        means of a facsimile machine shall reexecute original forms thereof and
        deliver them to the requesting party. No party to this Stipulation shall
        raise the use of a facsimile machine to deliver a signature or the fact
        that any signature or agreement was transmitted or communicated through
        the use of a facsimile machine as a defense to the formation or
        enforceability of this Stipulation and each such Person forever waives
        any such defense.

                                       58

<PAGE>

                The Settling Parties have caused this Stipulation to be duly
        executed and delivered by their counsel of record:

/s/ Kevin T. Abikoff                       Date: 10/13/03
--------------------
Kevin T. Abikoff
HUGHES HUBBARD & REED LLP
1775 I Street, N.W.
Washington, D.C.  20006-2401
Telephone:  202-721-4600
Facsimile:  202-721-4646

Counsel for Defendant Hanover Compressor
Company

/s/ Darren J. Robbins                      Date: 10/22/03
---------------------
Darren J. Robbins
Randall Steinmeyer
Amber L. Eck
MILBERG WEISS BERSHAD HYNES & LERACH LLP
401 B Street, Suite 1700
San Diego, CA  92101
Telephone:  619-231-1058
Facsimile:  619-231-7423

Counsel for Lead Plaintiffs Pirelli Armstrong Tire,
Retiree Medical Benefits Trust, Plumbers &
Steamfitters, Local 137 Pension Fund, O. Bryant
Lewis, 720 Capital Management, LLC and
Specialists DPM

                                       59

<PAGE>

/s/ Richard B. Brualdi                     Date: 10/23/03
-----------------------
Richard B. Brualdi
Kevin T. O'Brien
THE BRUALDI LAW FIRM
29 Broadway, Suite 1515
New York, New York 10006
Telephone: 212-952-0602
Facsimile: 212-785-1618

Counsel for Plaintiff Harbor Finance Partners

/s/ Paul T. Warner                         Date: 10/22/03
-------------------
Paul T. Warner
REICH & BINSTOCK
4265 San Felipe, Suite 1000
Houston, TX 77027
Telephone: 713-622-7271
Facsimile: 713-623-8724

Counsel for Plaintiffs Roger Koch, Henry Carranza and William Steves

/s/ David M. Goldstein                     Date: 10/23/03
-----------------------
David M. Goldstein
MARICIC & GOLDSTEIN, LLP
10535 Foothill Blvd., Suite 300
Rancho Cucamongo, CA  91729
Telephone: 909-945-9549
Facsimile: 909-980-5525

Counsel for Plaintiff William Steves

/s/ Neil Rothstein                         Date: 10/22/03
--------------------
Neil Rothstein
SCOTT & SCOTT, LLC
P.O. Box 192
108 Norwich Avenue
Colchester, CT 06415
Telephone: 1-800-404-7770
Facsimile: 1-860-537-4432

                                       60

<PAGE>

Counsel for Plaintiff
Henry Carranza

/s/ Brian J. Robbins                       Date: 10/22/03
---------------------
Brian J. Robbins
ROBBINS UMEDA & FINK, LLP
1010 Second Avenue, Suite 2360
San Diego, CA 92101
Telephone: 619-525-3990
Facsimile: 619-525-3991

Counsel for Plaintiff
Roger Koch

/s/ Robert Schubert                        Date: 10/22/03
--------------------
Robert Schubert
SCHUBERT & REED LLP
Two Embarcadero Center
Suite 1660
San Francisco, CA  94111
Telephone: 415-788-4220
Facsimile: 415-788-0161

Counsel for Plaintiff
John B. Hensley, Jr.

/s/ John G. Emerson                        Date: 10/23/03
-------------------
John G. Emerson
Scott E. Poynter
EMERSON POYNTER LLP
P.O Box 164810
Little Rock, AR 72216-4810
Little Rock, AR 72202-5094
Telephone: 501-907-2555
Facsimile: 501-907-2556

Counsel for Plaintiff
Coffelt Family LLC

                                       61

<PAGE>

/s/ James Baskin                           Date: 10/22/03
----------------
James Baskin
BASKIN LAW FIRM
300 W. 6th Street, Suite 1950
Austin, TX  78701
Telephone: 512-381-6300
Facsimile: 512-322-9280

Counsel for Plaintiff
Henry Duncan Kirkley

/s/ Thomas Bilek                           Date: 10/23/03
------------------
Thomas Bilek
HOEFFNER & BILEK, L.L.P.
440 Louisiana Ste., 720
Houston, TX  77002
Telephone: 713-227-7720
Facsimile: 713-227-9404

Counsel for Plaintiffs
Ann Angleopoulos and Joyce Freeman

/s/ Robert B. Weiser                       Date: 10/23/03
-----------------------
Andrew L. Barroway
Robert B. Weiser
Eric L. Zager
SCHIFFRIN & BARROWAY
Three Bala Plaza East, Suite 400
Bala Cynwyd, PA  19004
Telephone: 610-667-7706
Facsimile: 610-667-7056

Counsel for Plaintiff
Ann Angleopoulos

                                       62

<PAGE>

/s/ Evan Smith                             Date: 10/23/03
----------------
Evan Smith
BRODSKY & SMITH, LLC
240 Mineola Boulevard
Mineola, New York 11501
Telephone: 516-741-4977
Facsimile: 610-667-9029

Counsel for Plaintiff
Joyce Freeman

/s/ Pamela G. Smith                        Date: 10/23/03
-------------------
Pamela G. Smith
David H Kistenbroker
KATTEN MUCHIN ZAVIS &
ROSENMAN
525 West Monroe, Suite 1600
Chicago, IL 60661-3693
Telephone: 312-902-5200
Facsimile: 312-577-4770

Counsel for Defendant William S. Goldberg

/s/ Edward B. Horahan, III                 Date: 10/23/03
---------------------------
Edward B. Horahan, III
DECHERT LLP
1775 I Street, N.W.
Washington, DC 20006-2401
Telephone: 202-261-3300
Facsimile: 202-261-3333

Counsel for Defendant Charles D. Erwin

                                       63

<PAGE>

/s/ Eric J.R. Nichols                      Date: 10/23/03
----------------------
Eric J.R. Nichols
BECK REDDEN & SECREST
One Houston Center
1221 McKinney St., Suite 4500
Houston, TX 77010-2010
Telephone: 713-951-3701
Facsimile: 713-951-3720

Counsel for Defendant Michael J. McGhan

/s/ Craig Smyser                           Date: 10/22/03
------------------
Craig Smyser

SMYSER KAPLAN & VESELKA, L.L.P.
Bank of America Center
700 Louisiana Street, Suite 2300
Houston, TX 77002
Telephone: 713-221-2300
Facsimile: 713-221-2320

Counsel for Defendants Melvyn N. Klein, Ted
Collins, Jr., Robert R. Furgason,
Rene J. Huck and Alvin V. Shoemaker

/s/ Harvey G. Brown, Jr.                   Date: 10/24/03
------------------------
Harvey G. Brown, Jr.
WRIGHT & BROWN, LLP
Three Riverway, Suite 1660
Houston, TX 77057
Telephone: 713-572-4321
Facsimile: 713-572-4320

Counsel for Karen L. O'Connor  and the Estate of Michael A. O'Connor,
Deceased

                                       64

<PAGE>

/s/ Steven J. Rothschild                   Date: 10/23/03
-------------------------
Steven J. Rothschild
SKADDEN, ARPS, SLATE, MEAGHER
& FLOM LLP
One Rodney Square, PO Box 636
Wilmington, DE 19801
Telephone: 302-651-3000
Facsimile: 302-651-3001

Counsel for Defendants Victor E. Grijalva, Gordon
T. Hall and I. Jon Brumley

/s/ Richard A. Rosen                       Date: 10/23/03
--------------------
Richard A. Rosen
PAUL, WEISS, RIFKIND, WHARTON & GARRISON LLP
1285 Avenue of the Americas
New York, NY 10019-6064
Telephone: 212-373-3000
Facsimile: 212-757-3990

Counsel for GKH

                                       65

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