CREDIT AGREEMENT among

EX-10.1 7 dex101.htm SENIOR CREDIT AGREEMENT Senior Credit Agreement

EXHIBIT 10.1

CREDIT AGREEMENT

among

HANOVER COMPRESSOR COMPANY,

HANOVER COMPRESSION LIMITED PARTNERSHIP,

BANK ONE, NA

as SYNDICATION AGENT

JPMORGAN CHASE BANK

as ADMINISTRATIVE AGENT

and

THE SEVERAL LENDERS PARTIES HERETO

Dated as of December 15, 2003

J.P. MORGAN SECURITIES INC. and

BANC ONE CAPITAL MARKETS, INC., as

CO-LEAD ARRANGERS

TABLE OF CONTENTS

		Page
SECTION 1. DEFINITIONS		1

1.1 Defined Terms.		1

1.2 Other Definitional Provisions		24

SECTION 2. AMOUNT AND TERMS OF COMMITMENTS		24

2.1 Revolving Credit Commitments		24

2.2 Procedure for Revolving Credit Borrowing		25

2.3 Increase of Commitments		25

SECTION 3. INTEREST RATE PROVISIONS, FEES, CONVERSIONS AND PAYMENTS		26

3.1 Interest Rates and Payments Dates		26

3.2 Commitment Fee; Other Fees and Compensation		26

3.3 Termination or Reduction of the Commitments		27

3.4 Repayment of Loans; Optional Prepayments and other Repayments		27

3.5 Conversion and Continuation Options		27

3.6 Minimum Amounts		28

3.7 Computation of Interest and Fees		28

3.8 Inability to Determine Interest Rate		28

3.9 Pro Rata Treatment and Payments		29

3.10 Illegality		30

3.11 Requirements of Law		30

3.12 Taxes		31

3.13 Indemnity		33

3.14 Replacement of Lenders		33

3.15 Change of Lending Office		33

SECTION 4. LETTERS OF CREDIT		34

4.1 L/C Commitment		34

4.2 Procedure for Issuance of Letters of Credit		34

4.3 Fees, Commissions and Other Charges		34

4.4 L/C Participations		35

4.5 Reimbursement Obligation of HCLP		36

4.6 Obligations Absolute		36

4.7 Letter of Credit Payments		37

4.8 Application		37

4.9 Letters of Credit Denominated in Available Foreign Currencies		37

4.10 Change in Law; Availability of Foreign Currencies		37

SECTION 5. REPRESENTATIONS AND WARRANTIES		37

5.1 Financial Condition		37

5.2 No Change		38

5.3 Corporate Existence; Compliance with Law		38

5.4 Corporate Power; Authorization; Enforceable Obligations		39

5.5 No Legal Bar		39

5.6 No Material Litigation		39

5.7 No Default		39

5.8 Ownership of Property; Liens; Leases of Equipment		39

5.9 Intellectual Property		39

5.10 Taxes		40

5.11 Federal Regulations		40

5.12 ERISA		40

5.13 Investment Company Act; Other Regulations		41

5.14 Subsidiaries		41

5.15 Purpose of Loans		41

5.16 Environmental Matters		41

5.17 Accuracy and Completeness of Information		42

5.18 Senior Indebtedness		42

5.19 Security Documents		42

5.20 Regulation H		43

SECTION 6. CONDITIONS PRECEDENT		43

6.1 Conditions to Each Extension of Credit		43

6.2 Conditions to Initial Extension of Credit		43

SECTION 7. AFFIRMATIVE COVENANTS		45

7.1 Financial Statements		45

7.2 Certificates; Other Information		46

7.3 Payment of Obligations		47

7.4 Conduct of Business and Maintenance of Existence		47

7.5 Maintenance of Property; Insurance		47

7.6 Inspection of Property; Books and Records; Discussions		47

7.7 Notices		48

7.8 Environmental Laws		48

7.9 Additional Collateral, etc.		49

SECTION 8. NEGATIVE COVENANTS		50

8.1 Financial Condition Covenants		50

8.2 Limitation on Indebtedness		51

8.3 Limitation on Liens		52

8.4 Limitation on Guarantee Obligations		54

iii

8.5 Limitations on Fundamental Changes		55

8.6 Limitation on Sale or Lease of Assets		56

8.7 Limitation on Leases		57

8.8 Limitation on Dividends		57

8.9 Limitation on Derivatives		58

8.10 Limitation on Investments, Loans and Advances		58

8.11 Limitation on Optional Payments and Modifications of Debt Instruments		60

8.12 Transactions with Affiliates		61

8.13 Sale and Leaseback		61

8.14 Corporate Documents		61

8.15 Fiscal Year		61

8.16 Nature of Business		61

8.17 Unqualified Subsidiaries		62

8.18 Negative Pledge Clauses.		62

8.19 Clauses Restricting Subsidiary Distributions		62

SECTION 9. EVENTS OF DEFAULT		62

SECTION 10. THE ADMINISTRATIVE AGENT		65

10.1 Appointment		65

10.2 Delegation of Duties		66

10.3 Exculpatory Provisions		66

10.4 Reliance by Administrative Agent		66

10.5 Notice of Default		66

10.6 Non-Reliance on Administrative Agent and Other Lenders		66

10.7 Indemnification		67

10.8 Administrative Agent in Its Individual Capacity		67

10.9 Successor Administrative Agent		67

SECTION 11. MISCELLANEOUS		68

11.1 Amendments and Waivers		68

11.2 Notices		68

11.3 No Waiver; Cumulative Remedies		69

11.4 Survival of Representations and Warranties		69

11.5 Payment of Expenses and Taxes		69

11.6 Successors and Assigns; Participations and Assignments		70

11.7 Adjustments; Set-off		72

11.8 Counterparts		73

11.9 Severability		73

11.10 Integration		73

11.11 GOVERNING LAW		74

11.12 Submission To Jurisdiction; Waivers		74

11.13 Acknowledgments		74

11.14 WAIVERS OF JURY TRIAL		74

11.15 Judgment		74

11.16 Usury		75

11.17 Conflicts		75

11.18 Releases of Guarantees and Liens.		75

11.19 Confidentiality.		76

Annexes
A		Pricing Grid
B		Existing Letters of Credit

Schedules

Schedule 1.1A		Lenders and Commitments
Schedule 1.1B		Mortaged Property
Schedule 5.2		Material Changes
Schedule 5.4		Required Consents
Schedule 5.14		Subsidiaries
Schedule 5.16		Environmental Matters
Schedule 5.19(a)		UCC Filing Jurisdictions
Schedule 5.19(b)		Mortgage Filing Jurisdictions
Schedule 8.2(c)		Existing Indebtedness
Schedule 8.3(l)		Existing Liens
Schedule 8.6(h)		Lease of Assets
Schedule 8.6(i)		Asset Sales
Schedule 8.10A		Investments
Schedule 8.10B		Permitted Business Acquisitions
Schedule 8.12		Affiliate Transactions
Schedule 8.13		Sale and Leaseback Transactions

Exhibits

Exhibit A		Form of Revolving Credit Note
Exhibit B		Subsidiaries’ Guarantee
Exhibit C		Form of Assignment and Assumption
Exhibit D		Hanover Guarantee
Exhibit E		Form of Guarantee and Collateral Agreement
Exhibit F		Form of Mortgage

CREDIT AGREEMENT, dated as of December 15, 2003 (as amended, supplemented or otherwise modified from time to time, this “Agreement”), among Hanover Compressor Company, a Delaware corporation (“Hanover”), Hanover Compression Limited Partnership (formerly known as Hanover Compression Inc., “HCLP”), Bank One, NA, as syndication agent, the several banks and other financial institutions from time to time parties to this Agreement (the “Lenders”) and JPMorgan Chase Bank, a New York banking corporation, as agent for the Lenders hereunder (in such capacity, the “Administrative Agent”).

W I T N E S S E T H :

WHEREAS, Hanover and HCLP are parties to the Credit Agreement, dated as of December 15, 1997, as amended and restated through January 31, 2003 (as heretofore amended, supplemented or otherwise modified, the “Existing Credit Agreement”), with the several banks and other financial institutions from time to time parties thereto and JPMorgan Chase Bank, as administrative agent; and

WHEREAS, Hanover and HCLP have requested that the Existing Credit Agreement be terminated and replaced with a new credit facility as set forth herein;

NOW, THEREFORE, in consideration of the premises and the mutual agreements contained herein, the parties hereto agree as follows:

SECTION 1. DEFINITIONS

1.1 Defined Terms.

As used in this Agreement, the following terms shall have the following meanings:

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

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

“ABR Loans”: Loans the rate of interest applicable to which is based upon the ABR.

“Adjustment Date”: as defined in the Pricing Grid.

“Adjusted EBITDAR Companies”: HCLP and each of its wholly-owned Subsidiaries which (i) is organized under a jurisdiction of the United States, Canada, the United Kingdom and any other country approved by the Required Lenders and (ii) has at least 90% of its assets located in any such jurisdiction or which derives at least 90% of its revenues from such jurisdiction, in each case, at the time the applicable calculation is being made for purposes of Section 8.1.

“Administrative Agent”: as defined in the preamble.

“Affiliate”: as to any Person, any other Person (other than a Subsidiary) which, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person. For purposes of this definition, “control” of a Person means the power, directly or indirectly, either to (a) vote 30% or more of the securities having ordinary voting power for the election of directors of such Person or (b) direct or cause the direction of the management and policies of such Person, whether by contract or otherwise.

“Agents”: the collective reference to the Administrative Agent and the Syndication Agent.

“Agreement Currency”: as defined in subsection 11.15(b).

“Aggregate Outstanding Extensions of Credit”: as to any Lender at any time, an amount equal to the sum of (a) the aggregate principal amount of all Loans made by such Lender then outstanding and (b) such Lender’s Commitment Percentage of the L/C Obligations then outstanding.

“Agreement”: as defined in the preamble.

“Applicable Margin”: for each day, the rate per annum determined pursuant to the Pricing Grid.

“Applicable Margin Certificate”: as defined in subsection 7.2(f).

“Application”: an application, in such form as the Issuing Lender may reasonably specify from time to time, requesting the Issuing Lender to issue a Letter of Credit.

“Assignee”: as defined in subsection 11.6(b).

“Assignment and Assumption”: an Assignment and Assumption, substantially in the form of Exhibit C.

“Available Commitment”: as to any Lender, at any time, an amount equal to the excess, if any, of (a) such Lender’s Commitment over (b) such Lender’s Aggregate Outstanding Extensions of Credit.

“Available Foreign Currencies”: Canadian Dollar, euro, Japanese Yen, Pound Sterling and Italian Lira and such other currency as is acceptable to the relevant Issuing Lender.

“Benefitted Lender”: as defined in subsection 11.7(a).

“BOCM”: Banc One Capital Markets, Inc.

“Borrowing Date”: any Business Day specified in a notice pursuant to Section 2.2, as a date on which HCLP requests the Lenders to make Loans hereunder.

“Business Day”: a day other than a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to close.

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

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

“Cayman Note”: that certain Non-Recourse Promissory Note, dated as of May 14, 2003, in the original principal amount of $58,425,333.33, executed by Hanover Cayman Limited and payable to the order of Schlumberger Surenco S.A.

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

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

“Closing Date”: the date on which all the conditions precedent specified in Section 6.2 shall have been satisfied.

“Code”: the Internal Revenue Code of 1986, as amended from time to time.

“Co-Lead Arrangers”: the collective reference to JPMorgan and BOCM.

“Collateral”: all property of Hanover and its Subsidiaries, now owned or hereafter acquired, upon which a Lien is purported to be created by any Security Document.

“Commercial Letter of Credit”: as defined in subsection 4.1(b)(i).

“Commitment”: as to any Lender, the obligation of such Lender to make Loans to and/or issue or participate in Letters of Credit issued on behalf of HCLP hereunder in an aggregate principal and/or stated amount at any one time outstanding not to exceed the amount set forth opposite such Lender’s name on Schedule 1.1A, as such amount may be reduced or increased from time to time in accordance with the terms of this Agreement; collectively, as to all of the Lenders, the “Commitments”.

“Commitment Fee Rate”: 0.625%.

“Commitment Increase Notice”: as defined in subsection 2.3(a).

“Commitment Increase Supplement”: as defined in subsection 2.3(c).

“Commitment Percentage”: as to any Lender at any time, the percentage of the aggregate Commitments then constituted by such Lender’s Commitment.

“Commitment Period”: the period from and including the date hereof to but not including the Final Maturity Date or such earlier date on which the Commitments shall terminate as provided herein.

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

“Conduit Lender”: any special purpose corporation organized and administered by any Lender for the purpose of making Loans otherwise required to be made by such Lender and designated by such Lender in a written instrument; provided, that the designation by any Lender of a Conduit Lender shall not relieve the designating Lender of any of its obligations to fund a Loan under this Agreement if, for any reason, its Conduit Lender fails to fund any such Loan, and the designating Lender (and not the Conduit Lender) shall have the sole right and responsibility to deliver all consents and waivers required or requested under this Agreement with respect to its Conduit Lender, and provided, further, that no Conduit Lender shall (a) be entitled to receive any greater amount pursuant to Section 3.11, 3.12, 3.13 or 11.5 than the designating Lender would have been entitled to receive in respect of the extensions of credit made by such Conduit Lender or (b) be deemed to have any Commitment.

“Consolidated Adjusted EBITDAR”: for any period, the sum of Consolidated EBITDAR for the Adjusted EBITDAR Companies.

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

“Consolidated EBITDA”: for any period, with respect to any Person, the sum of, without duplication, (a) Consolidated Earnings Before Interest and Taxes for such Person for such period plus (b) all amounts attributable to depreciation and amortization, determined in accordance with GAAP (to the extent such amounts have been deducted in determining Consolidated Earnings Before Interest and Taxes for such period) plus (c) all amounts classified as extraordinary charges for such period (to the extent such amounts have been deducted in determining Consolidated Earnings Before Interest and Taxes for such period) plus (d) Designated Distributions (as such term is hereinafter defined) plus (e) any non-recurring non-cash expenses or losses (including, non-cash currency charges) (to the extent such amounts have been deducted in determining Consolidated Earnings Before Interest and Taxes for such period) plus (f) any non-recurring non-cash expenses or losses attributable to the Securities Litigation Settlement (to the extent such amounts have been deducted in determining Consolidated Earnings Before Interest and Taxes for such period), and minus (a) any increase in Consolidated Earnings Before Interest and Taxes to the extent that such increase is a result of the actions underlying the charges referred to in clause (e) above subsequent to the fiscal quarter in which the relevant non-cash expenses or losses were reflected as a charge in the statement of Consolidated Earnings Before Interest and Taxes, all as determined on a consolidated basis and (b) all amounts classified as extraordinary income for such period (to the extent such amounts have been included in determining Consolidated Earnings Before Interest and Taxes for such period); provided, that, if during such period such Person shall have made a Material Acquisition, Consolidated EBITDA for such period shall be calculated after giving pro forma effect to such Material Acquisition as if such Material Acquisition had occurred on the first day of such period; provided, further, that, the foregoing proviso shall have effect only if the Agent has been furnished with unaudited, or, if available, audited, consolidated financial statements of the acquired property for such period, such financial statements to include the balance sheet and statements of income and cash flows reflecting the historical performance of the acquired property for such period to the extent applicable. As used in this definition, “Material Acquisition” means any acquisition of property or series of related acquisitions of property that (a) constitutes assets or constitutes all or substantially all of the equity interests of a Person and (b) involves the payment of consideration of at least $15,000,000.

In calculating Consolidated EBITDA, the financial performance of Joint Ventures, Unrestricted Subsidiaries and Unqualified Subsidiaries that have any Non-Recourse Indebtedness outstanding shall be disregarded except as provided in clause (d) above, with respect to “Designated Distributions”, which shall mean cash dividends and cash payments with respect to intercompany Indebtedness, in each case received by Hanover or any Restricted Subsidiary from any Joint Venture or from any Unrestricted Subsidiary or Unqualified Subsidiary that has any Non-Recourse Indebtedness outstanding (to the extent such amounts have been deducted in determining Consolidated Earnings Before Interest and Taxes for such period).

“Consolidated EBITDAR”: with respect to any period, Consolidated EBITDA for such period plus the Consolidated Lease Expense of a Person for such period.

“Consolidated Indebtedness”: at a particular date, as to any Person, the sum of (without duplication) (a) all Indebtedness of such Person and its Subsidiaries determined on a consolidated basis in accordance with GAAP, excluding (i) Indebtedness in respect of Financing Leases, (ii) for purposes of subsections 8.1(b) and (c) only, Non-Recourse Indebtedness and the Tranche B Balance Sheet Loans and (iii) intercompany Indebtedness payable by HCLP and/or any of its Subsidiaries to Hanover, plus (b) (i) Guarantee Obligations of such Person and its Subsidiaries in respect of Indebtedness of any other Person (other than in respect of the Tranche B Balance Sheet Loans) and (ii) the Equipment Lease Tranche A Loans.

“Consolidated Intangibles”: at any time, all amounts included in Consolidated Net Worth of any Person at such time which, in accordance with GAAP, would be classified as intangible assets on a consolidated balance sheet of such Person and its Subsidiaries, including, without limitation, goodwill (other than negative goodwill), including (but without duplication) any amounts (however designated on the balance sheet) representing the cost of acquisitions in excess of underlying net tangible assets, and patents, trademarks, copyrights and other intangibles.

“Consolidated Interest Expense”: for any period, with respect to any Person, the amount which, in conformity with GAAP, would be set forth opposite the caption “interest expense” or any like caption (including, without limitation, imputed interest included in Financing Lease payments) on a consolidated income statement of such Person and its Subsidiaries for such period (excluding any amount attributable to non-cash expenses arising from the unwinding, early termination or ineffective hedge accounting treatment of any hedge or swap arrangement relating to the Equipment Lease Transactions consummated pursuant to the 2000A Participation Agreement and the 2000B Participation Agreement), plus, (a) to the extent not so included, payments by such Person and its Subsidiaries under the Equipment Leases attributable to (i) interest payments under the Equipment Lease Tranche A Loans and Equipment Lease Tranche B Loans and (ii) the yield to the Investors in connection with the Equipment Lease Transactions and minus, (b) to the extent so included (i) interest on Non-Recourse Indebtedness (to the extent that the same would otherwise be included in Consolidated Interest Expense) and (ii) for purposes of calculating the ratio in Section 8.1(d) only, payment in kind of interest on each of the Hanover Zero Coupon Subordinated Notes, the Cayman Note, the Note (as such term is defined in the Securities Litigation Settlement) and the TIDES or the TIDES Debentures and any Refinancing Indebtedness incurred in respect thereof.

“Consolidated Leverage Ratio”: as defined in subsection 8.1(c).

“Consolidated Lease Expense”: for any period as to any Person, the aggregate rental obligations of such Person and its Subsidiaries determined on a consolidated basis payable in respect of such period under leases of real and/or personal property (net of income from sub-leases

thereof, but including taxes, insurance, maintenance and similar expenses which the lessee is obligated to pay under the terms of said leases), whether or not such obligations are reflected as liabilities or commitments on a consolidated balance sheet of such Person and its Subsidiaries or in the notes thereto, and whether or not such leases constitute Financing Leases, but excluding obligations of such Person and its Subsidiaries with respect to the Equipment Leases.

“Consolidated Net Income”: for any period as to any Person, the consolidated net income (or loss) of such Person and its Subsidiaries, determined on a consolidated basis in accordance with GAAP, provided that for purposes of determining Consolidated Net Income, (a) payments under Equipment Leases attributable to (i) Equipment Lease Tranche A Loans and Equipment Lease Tranche B Loans and (ii) the yield to the Investors in connection with the Equipment Lease Transactions shall, in each case, be considered interest expense and (b) the effects of marking to market any portion of the expenses attributable to the Securities Litigation Settlement shall be disregarded.

“Consolidated Net Worth”: at a particular date, as to any Person, the amount which would be included under stockholders’ equity on a consolidated balance sheet of such Person and its Subsidiaries determined on a consolidated basis in accordance with GAAP.

“Consolidated Senior Indebtedness”: at a particular date, as to any Person, Consolidated Indebtedness of such Person and its Subsidiaries other than (i) the 2001A Lease Guarantee, (ii) the 2001B Lease Guarantee, (iii) the 2003 Notes Subordinated Guarantee, and (iv) any unsecured subordinated debt or any subordinated guarantees not included in clauses (i)-(iii) above and otherwise permitted herein.

“Consolidated Tangible Net Worth”: at any date, an amount equal to Consolidated Net Worth at such date less Consolidated Intangibles at such date; provided, that for purposes of Section 8.1(a), this definition will not include (a) the writedown of any of the Equipment Lease Transactions coming on-balance sheet on or after July 1, 2003 or (b) the effects of marking to market any portion of the expenses attributable to the Securities Litigation Settlement.

“Contractual Obligation”: as to any Person, any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound.

“Credit Parties”: the collective reference to (i) Hanover, HCLP and the Subsidiary Guarantors, (ii) from time to time any other Subsidiary of Hanover for so long as such Subsidiary guarantees the Loans and other obligations of HCLP hereunder and under the Notes, and which guarantees shall be under documents substantially similar to the Guarantees executed on the Closing Date, (iii) any Subsidiary of Hanover that executes the Guarantee and Collateral Agreement as of the Closing Date and (iv) from time to time any other Subsidiary of Hanover for so long as such Subsidiary grants security interests in any or all of its assets under documents substantially similar to the Guarantee and Collateral Agreement executed on the Closing Date.

“Default”: any of the events specified in Section 9, whether or not any requirement for the giving of notice, the lapse of time, or both, or any other condition, has been satisfied.

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

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

“Dollar Equivalent”: with respect to an amount denominated in any currency other than Dollars, the equivalent in Dollars of such amount determined at the Exchange Rate on the date of determination of such equivalent. In making any determination of the Dollar Equivalent for purposes of calculating the amount of Loans to be borrowed from the respective Lenders on any Borrowing Date, the Administrative Agent shall use the relevant Exchange Rate in effect on the date on which the interest rate for such Loans is determined pursuant to the provisions of this Agreement and the other Loan Documents.

“Dollars” and “$”: dollars in lawful currency of the United States of America.

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

“Equipment Lease Credit Agreements”: (i) the Credit Agreement dated as of March 13, 2000 (as amended, supplemented or otherwise modified from time to time), among Hanover Equipment Trust 2000A, as borrower, the several lenders from time to time parties thereto, Industrial Bank of Japan, LTD., as syndication agent, The Bank of Nova Scotia, as documentation agent and The Chase Manhattan Bank, as agent, (ii) the Credit Agreement dated as of October 27, 2000 (as amended, supplemented or otherwise modified from time to time), among Hanover Equipment Trust 2000B, as borrower, the several lenders from time to time parties thereto, National Westminster Bank PLC, as managing agent, Citibank, N.A., Credit Suisse First Boston and The Industrial Bank of Japan, Ltd., as co-agents and The Chase Manhattan Bank, as agent, (iii) the 2001A Equipment Lease Securities, (iv) the 2001B Equipment Lease Securities, (v) the Indenture, dated as of August 30, 2001, among Hanover Equipment Trust 2001A, the guarantors party thereto and the initial purchasers named therein, (vi) the Indenture, dated as of August 30, 2001, among Hanover Equipment Trust 2001B, the guarantors party thereto and Wilmington Trust FSB, as indenture trustee and (vii) any Credit Agreement or Indenture, in connection with and dated as of the date of an Additional Participation Agreement (as amended, supplemented or otherwise modified from time to time), among a Delaware business trust, as borrower, and the several lenders from time to time parties thereto.

“Equipment Lease Guarantees”: (i) the Guarantee dated as of March 13, 2000 (as amended, supplemented or otherwise modified from time to time, the “2000A Lease Guarantee”), made by Hanover, HCLP and certain of their subsidiaries listed on the signature pages thereto, in favor of Hanover Equipment Trust 2000A, The Chase Manhattan Bank, as agent, and certain lenders and investors, (ii) the Guarantee dated as of October 27, 2000 (as amended, supplemented or otherwise modified from time to time, the “2000B Lease Guarantee”), made by Hanover, HCLP and certain of their subsidiaries listed on the signature pages thereto, in favor of Hanover Equipment Trust 2000B, The Chase Manhattan Bank, as agent, and certain lenders and investors, (iii) the Guarantee dated as of August 31, 2001 (as amended, supplemented or otherwise modified from time to time, the “2001A Lease Guarantee”), made by Hanover, HCLP and certain of their subsidiaries listed on the signature pages thereto, in favor of Hanover Equipment Trust 2001A, The Chase Manhattan Bank, as agent, and certain lenders and investors, (iv) the Guarantee dated as of August 31, 2001 (as amended, supplemented or otherwise modified from time to time, the

“2001B Lease Guarantee”), made by Hanover, HCLP and certain of their subsidiaries listed on the signature pages thereto, in favor of Hanover Equipment Trust 2001B, The Chase Manhattan Bank, as agent, and certain lenders and investors and (v) any Guarantee in connection with and dated as of the date of an Additional Participation Agreement (as amended, supplemented or otherwise modified from time to time), to be made by Hanover, HCLP and certain of their subsidiaries that will be listed on the signature pages thereto, in favor of a Delaware business trust, the agent and certain Lenders and investors.

“Equipment Lease Participation Agreements”: (i) the Participation Agreement dated March 13, 2000 (as amended, supplemented or otherwise modified from time to time, the “2000A Participation Agreement”), among HCLP, Hanover Equipment Trust 2000A, First Union National Bank and Scotiabanc Inc., as investors, Industrial Bank of Japan, LTD., as syndication agent, The Bank of Nova Scotia, as documentation agent, The Chase Manhattan Bank, as agent, and the lenders parties thereto, (ii) the Participation Agreement dated as of October 27, 2000 (as amended, supplemented or otherwise modified from time to time, the “2000B Participation Agreement”), among HCLP, Hanover Equipment Trust 2000B, Bank Hapoalim B.M. and FBTC Leasing Corp., as investors, The Chase Manhattan Bank, as agent, and the lenders parties thereto, (iii) the Participation Agreement dated as of August 31, 2001 (as amended, supplemented or otherwise modified from time to time, the “2001A Participation Agreement”), among HCLP, Hanover Equipment Trust 2001A, General Electric Capital Corporation as investor, The Chase Manhattan Bank, as agent, and the lenders parties thereto, and (iv) the Participation Agreement dated as of August 31, 2001 (as amended, supplemented or otherwise modified from time to time, the “2001B Participation Agreement”), among HCLP, Hanover Equipment Trust 2001B, General Electric Capital Corporation as investor, The Chase Manhattan Bank, as agent, and the lenders parties thereto.

“Equipment Lease Refinancing”: as defined in subsection 8.2(o).

“Equipment Lease Tranche A Loans”: the collective reference to: (a) for the 2000A Synthetic Lease and the 2000B Synthetic Lease, the loans to be made pursuant to each Equipment Lease Credit Agreement and identified as the “Tranche A Loans” in Schedule 1.1 of each of the Equipment Lease Credit Agreements, (b) for the 2001A Synthetic Lease, the Tranche A Portion of the 2001A Equipment Lease Transaction, (c) for the 2001B Synthetic Lease, the Tranche A Portion of the 2001B Equipment Lease Transaction and (d) for any Additional Lease, either (i) the loans to be made pursuant to such Equipment Lease Credit Agreement and identified as the “Tranche A Loans” in Schedule 1.1 of such Equipment Lease Credit Agreement or (ii) the “Tranche A Portion” of such Equipment Lease Transaction.

“Equipment Lease Tranche B Loans”: the collective reference to: (a) for the 2000A Synthetic Lease and the 2000B Synthetic Lease, the loans to be made pursuant to each Equipment Lease Credit Agreement and identified as the “Tranche B Loans” in Schedule 1.1 of each of the Equipment Lease Credit Agreements, (b) for the 2001A Synthetic Lease, the Tranche B portion of the 2001A Equipment Lease Securities, (c) for the 2001B Synthetic Lease, the Tranche B portion of the 2001B Equipment Lease Securities and (d) for any Additional Lease, either (i) the loans to be made pursuant to such Equipment Lease Credit Agreement and identified as the “Tranche B Loans” in Schedule 1.1 of such Equipment Lease Credit Agreement or (ii) the “Tranche B Portion” of such Equipment Lease Transaction.

“Equipment Lease Transactions”: the transactions whereby HCLP leases natural gas compressors from the Lessors as described in each of the Equipment Lease Participation Agreements and any Operative Document (as defined in such Equipment Lease Participation Agreements).

“Equipment Leases”: (i) the Lease dated as of March 13, 2000 (as amended, supplemented or otherwise modified from time to time), between Hanover Equipment Trust 2000A, as lessor, and HCLP, as lessee (the “2000A Synthetic Lease”), (ii) the Lease dated as of October 27, 2000 (as amended, supplemented or otherwise modified from time to time), between Hanover Equipment Trust 2000B, as lessor, and HCLP, as lessee (the “2000B Synthetic Lease”), (iii) the Lease dated as of August 31, 2001 (as amended, supplemented or otherwise modified from time to time), between Hanover Equipment Trust 2001A, as lessor, and HCLP, as lessee (the “2001A Synthetic Lease”), (iv) the Lease dated as of August 31, 2001 (as amended, supplemented or otherwise modified from time to time), between Hanover Equipment Trust 2001B, as lessor, and HCLP, as lessee (the “2001B Synthetic Lease”) and (v) any Lease in connection with and dated as of the date of any Additional Participation Agreement (as amended, supplemented or otherwise modified from time to time), between a Delaware business trust, as lessor, and HCLP, as lessee (the “Additional Lease”).

“ERISA”: the Employee Retirement Income Security Act of 1974, as amended from time to time.

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

“Eurodollar Base Rate”: with respect to each day during each Interest Period pertaining to a Eurodollar Loan, the rate per annum determined on the basis of the rate for deposits in Dollars for a period equal to such Interest Period commencing on the first day of such Interest Period appearing on Page 3750 of the Telerate screen as of 11:00 A.M., London time, two Business Days prior to the beginning of such Interest Period. In the event that such rate does not appear on Page 3750 of the Telerate screen (or otherwise on such screen), the “Eurodollar Base Rate” shall be determined by reference to such other comparable publicly available service for displaying eurodollar rates as may be selected by the Administrative Agent or, in the absence of such availability, by reference to the rate at which the Administrative Agent is offered Dollar deposits at or about 11:00 A.M., New York City time, two Business Days prior to the beginning of such Interest Period in the interbank eurodollar market where its eurodollar and foreign currency and exchange operations are then being conducted for delivery on the first day of such Interest Period for the number of days comprised therein.

“Eurodollar Loans”: Loans the rate of interest applicable to which is based upon the Eurodollar Rate.

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

Eurodollar Base Rate

1.00 - Eurocurrency Reserve Requirements

“Event of Default”: any of the events specified in Section 9, provided that any requirement for the giving of notice, the lapse of time, or both, or any other condition, has been satisfied.

“Exchange Act” as defined in subsection 9(k).

“Exchange Rate”: with respect to any non-Dollar currency on any date, the rate at which such currency may be exchanged into Dollars, as set forth on such date on the relevant Reuters currency page at or about 11:00 A.M., London time, on such date. In the event that such rate does not appear on any Reuters currency page, the “Exchange Rate” with respect to such non-Dollar currency shall be determined by reference to such other publicly available service for displaying exchange rates as may be agreed upon by the Administrative Agent and HCLP or, in the absence of such agreement, such “Exchange Rate” shall instead be the Administrative Agent’s spot rate of exchange in the interbank market where its foreign currency exchange operations in respect of such non-Dollar currency are then being conducted, at or about 10:00 A.M., local time, on such date for the purchase of Dollars with such non-Dollar currency, for delivery two Business Days later; provided, that if at the time of any such determination, no such spot rate can reasonably be quoted, the Administrative Agent may use any reasonable method as it deems applicable to determine such rate, and such determination shall be conclusive absent manifest error.

“Excluded Unqualified Subsidiary”: any Unqualified Subsidiary not organized under a jurisdiction of the United States in respect of which either (a) the pledge of all of the Capital Stock of such Subsidiary as Collateral or (b) the guaranteeing by such Subsidiary of the Obligations, or the pledging of assets by such Subsidiary to secure the Obligations, would, in the good faith judgment of Hanover, result in adverse tax consequences to Hanover; provided, that notwithstanding the foregoing, Hanover Cayman Limited and Production Operators Cayman Inc. shall be deemed to be Excluded Unqualified Subsidiaries.

“Existing Credit Agreement”: as defined in the recitals hereto.

“Existing Issuing Lender”: JPMorgan Chase Bank, as issuer of the Existing Letters of Credit.

“Existing Letter of Credit”: each letter of credit issued under the Existing Credit Agreement that (a) was issued for the account of HCLP under the Existing Credit Agreement, (b) is outstanding on the Closing Date and (c) is listed on Annex B.

“Final Maturity Date”: December 29, 2006.

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

“GAAP”: generally accepted accounting principles in the United States of America consistent with those utilized in preparing the audited financial statements referred to in Section 7.1.

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

“Guarantee and Collateral Agreement”: the Guarantee and Collateral Agreement to be executed and delivered by Hanover, HCLP and each Subsidiary Guarantor, substantially in the form of Exhibit E, as the same may be amended, supplemented or otherwise modified from time to time.

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

“Guarantees”: collectively, the Subsidiaries’ Guarantee, the Hanover Guarantee and any other guarantees of the Loans and the other obligations of HCLP hereunder.

“Guarantor”: a Guarantor under any of the Synthetic Guarantees or this Agreement.

“Hanover”: as defined in the preamble.

“Hanover Convertible Notes”: senior unsecured convertible notes to be offered and issued by Hanover on or before the Closing Date in an aggregate principal amount not to exceed $150,000,000, which shall be unguaranteed and the terms and conditions of which shall be in form and substance reasonably satisfactory to the Co-Lead Arrangers.

“Hanover Guarantee”: the Guarantee made by Hanover in favor of the Administrative Agent for the benefits of the Lenders, substantially in the form of Exhibit D, as amended, supplemented or otherwise modified from time to time.

“Hanover Zero Coupon Subordinated Notes”: zero coupon subordinated notes to be offered and issued by Hanover on or before the Closing Date in an aggregate principal amount not to exceed $262,621,810, which shall be unguaranteed and the terms and conditions of which shall be in form and substance reasonably satisfactory to the Co-Lead Arrangers.

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

“HCLP”: as defined in the preamble; HCLP may also be referred to herein as the “Borrower”.

“HMS”: Hanover Measurement Services Company, L.P., a Delaware limited partnership, and its successors and assigns.

“HMS Entities”: HMS, Meter Acquisition Company LP, a Delaware limited liability partnership, Hanover Measurement, LLC, a Delaware limited liability company, HCC Holdings, Inc., a Delaware corporation and Hanover MAC, LLC, a Delaware limited liability company.

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

“HPL”: Houston Pipe Line Company, a Delaware corporation, and its successors and assigns.

“Indebtedness”: of any Person at any date, (a) all indebtedness of such Person for borrowed money or for the deferred purchase price of property or services (other than current liabilities incurred in the ordinary course of business and payable in accordance with customary trade practices) or which is evidenced by a note, bond, debenture or similar instrument, (b) all obligations of such Person under Financing Leases, (c) all obligations of such Person in respect of acceptances issued or created for the account of such Person, (d) all liabilities secured by any Lien (other than any Lien permitted under Section 8.3) on any property owned by such Person even though it has not assumed or otherwise become liable for the payment thereof, provided that all obligations of such Person with respect to Equipment Lease Tranche A Loans shall be considered Indebtedness of such Person and (e) the aggregate drawable amount of letters of credit issued for the account of such Person provided, that solely for the purposes of Section 8.1 and calculating the Pricing Grid, the definition of “Indebtedness” shall not include Performance Letters of Credit. For purposes of clarification, the obligations with respect to the Equipment Leases shall not be deemed to constitute Indebtedness under the preceding clause (d) solely by virtue of the grant by HCLP thereunder of a Lien on its interest in the Equipment subject to such Equipment Lease to secure HCLP’s and the Guarantor’s obligations in connection therewith.

“indemnified liabilities”: as defined in Section 11.5.

“Insolvency”: with respect to any Multiemployer Plan, the condition that such Plan is insolvent within the meaning of Section 4245 of ERISA.

“Insolvent”: pertaining to a condition of Insolvency.

“Intellectual Property”: as defined in Section 5.9.

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

“Interest Period”: with respect to any Eurodollar Loan:

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

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

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

(i) if an Interest Period pertaining to a Eurodollar Loan would otherwise end on a day that is not a Working Day, such Interest Period shall be extended to the next succeeding Working Day unless the result of such extension would be to carry such Interest Period into another calendar month in which event such Interest Period shall end on the immediately preceding Working Day;

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

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

(iv) HCLP shall select Interest Periods so as not to require a payment or prepayment of any Eurodollar Loan during an Interest Period for such Loan; provided, that, HCLP may pay or prepay any Eurodollar Loan during an Interest period so long as it reimburses the Administrative Agent and each Lender for any breakage costs incurred in connection therewith pursuant to Section 3.13.

“Investments”: as defined in Section 8.10.

“Investors”: the parties that hold the beneficial interest in the respective Lessors.

“Issuing Lender”: the Existing Issuing Lender, JPMorgan Chase Bank or any other Lender (with such Lender’s consent), as applicable, in its capacity as issuer of any Letter of Credit.

“Joint Venture”: any Person in which Hanover or one or more Subsidiaries own equity interests representing 1% or more but 50% or less of the aggregate equity interests of such Person.

“JPMorgan”: J.P. Morgan Securities Inc.

“Judgment Currency”: as defined in subsection 11.15(b).

“L/C Commitment”: $150,000,000. For the purposes of calculating the available amount of the L/C Commitment, the Existing Letters of Credit shall be treated as being issued and outstanding under this Agreement.

“L/C Fee Payment Date”: the last day of each March, June, September and December.

“L/C Obligations”: at any time, an amount equal to the sum of (a) the aggregate then undrawn and unexpired amount of the then outstanding Letters of Credit issued in Dollars, (b) the aggregate then undrawn and unexpired Dollar Equivalent of the then outstanding Letters of Credit issued in any Available Foreign Currency and (c) the aggregate amount of drawings under Letters of Credit which have not then been reimbursed pursuant to Section 4.5.

“L/C Participants”: the collective reference to all the Lenders other than the Issuing Lender.

“Lenders”: as defined in the preamble.

“Lessors”: the lessors under the Equipment Leases.

“Letters of Credit”: as defined in subsection 4.1(a).

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

“Loan”: any loan made by any Lender pursuant to this Agreement.

“Loan Documents”: this Agreement, the Security Documents, the Applications, the Guarantees and any amendment, waiver, supplement or other modification to any of the foregoing.

“MAC”: Meter Acquisition Company LP, a Delaware registered limited liability limited partnership, and its successors and assigns.

“Material Adverse Effect”: a material adverse effect on (a) the business, operations, property or condition (financial or otherwise) of Hanover and its Subsidiaries taken as a whole, (b) the ability of Hanover or any of the Subsidiaries of Hanover to perform their respective obligations under this Agreement or the other Loan Documents, or (c) the validity or enforceability of this Agreement or any of the other Loan Documents or the rights or remedies of the Administrative Agent or the Lenders hereunder or thereunder.

“Material Subsidiary”: at any particular date, each Subsidiary of Hanover for which the aggregate value of all assets owned by such Subsidiary is greater than $5,000,000.

“Mortgaged Properties”: the real properties listed on Schedule 1.1B, as to which the Administrative Agent for the benefit of the Lenders shall be granted a Lien pursuant to the Mortgages.

“Mortgages”: each of the mortgages and deeds of trust made by any Credit Party in favor of, or for the benefit of, the Administrative Agent for the benefit of the Lenders, substantially in the form of Exhibit F (with such changes thereto as shall be advisable under the law of the jurisdiction in which such mortgage or deed of trust is to be recorded), as the same may be amended, supplemented or otherwise modified from time to time.

“Multiemployer Plan”: a Plan which is a multiemployer plan as defined in Section 4001(a)(3) of ERISA.

“Net Unqualified Subsidiary Investments”: Investments in Unqualified Subsidiaries (whether existing, newly formed, or acquired) made by Hanover and its Qualified Subsidiaries pursuant to the provisions of subsection 8.10(e) hereof. In order to calculate the “net” amount of a particular Net Unqualified Subsidiary Investment that is to be included in the amounts in the second column of the table set forth in subsection 8.10(e), the following formula shall be used: (a) the Dollar amount of cash and Cash Equivalents plus the net book value (in Dollars) of other assets that, in each case, constitute such Net Unqualified Subsidiary Investment, less, to the extent that the result of such deduction would be zero or a positive number, (b) the net amount (in Dollars, with the value of property other than cash and Cash Equivalents being the net book value thereof) of the dividends, distributions, loan repayments and other amounts (representing a return on capital) received by Hanover and its Qualified Subsidiaries from Unqualified Subsidiaries for the time period from the Closing Date through the date of which such calculation is made, provided that the amounts deducted pursuant to the foregoing clause (b) shall not include any amounts that have previously been deducted in calculating the “net” amount of any other Net Unqualified Subsidiary Investment.

“New Lender”: as defined in subsection 2.3(b).

“New Lender Supplement”: as defined in subsection 2.3(b).

“Non-Excluded Taxes”: as defined in subsection 3.12(a).

“Non-Recourse Indebtedness”: (i) Indebtedness of Unqualified Subsidiaries (a) as to which neither Hanover nor any of its Qualified Subsidiaries (x) provides any guarantee or credit support of any kind (including any undertaking, guarantee, indemnity, agreement or instrument that would constitute Indebtedness) other than Permitted Credit Support, or (y) other than with respect to Permitted Credit Support, is directly or indirectly liable (as guarantor or otherwise) and (b) the explicit terms of which provide that, other than with respect to Permitted Credit Support, there is no recourse against any of the assets of Hanover or its Qualified Subsidiaries (other than the Capital Stock of an Unqualified Subsidiary) or that, other than with respect to Permitted Credit Support, recourse is limited to assets which do not include the assets of Hanover or its Qualified Subsidiaries (other than the Capital Stock of an Unqualified Subsidiary) or (ii)

Indebtedness of Unqualified Subsidiaries incurred solely to finance the acquisition or construction of specific property that is acquired after the Closing Date; provided, that payment of such Indebtedness is expressly stated to be recourse solely to such specified property and the proceeds thereof and such Indebtedness is incurred contemporaneously with the acquisition or construction of such property.

“Non-U.S. Lender”: as defined in subsection 3.12(d).

“Note”: any promissory note made by HCLP to any Lender pursuant to this Agreement, as amended, supplemented or otherwise modified from time to time; collectively the “Notes”.

“Obligations”: the unpaid principal of and interest on (including interest accruing after the maturity of the Loans and Reimbursement Obligations and interest accruing after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to HCLP, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding) the Loans and all other obligations and liabilities of HCLP to the Administrative Agent or to any Lender, whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, which may arise under, out of, or in connection with, this Agreement, any other Loan Document, the Letters of Credit or any other document made, delivered or given in connection herewith or therewith, whether on account of principal, interest, reimbursement obligations, fees, indemnities, costs, expenses (including all fees, charges and disbursements of counsel to the Administrative Agent or to any Lender that are required to be paid by HCLP pursuant hereto) or otherwise.

“Offered Increase Amount” as defined in subsection 2.3(a).

“Other Taxes”: any and all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies arising from any payment made hereunder or from the execution, delivery or enforcement of, or otherwise with respect to, this Agreement or any other Loan Document.

“Participant”: as defined in subsection 11.6(c).

“PBGC”: the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA (or any successor).

“Performance Letter of Credit”: any Letter of Credit issued to support contractual obligations for supply, service or construction contracts, including, but not limited to, bid, performance, advance payment, warranty, retention, availability and defects liability obligations.

“Permitted Business Acquisition”: the formation of a new Qualified Subsidiary or any acquisition of all or substantially all the assets of, or 50% or more of the shares of capital stock, partnership interests, joint venture interests, limited liability company interests or other similar equity interests in, or the acquisition of any compression and/or oil and gas production equipment assets of, a Person or division or line of business of a Person (or any subsequent investment made in a Person previously acquired in a Permitted Business Acquisition), if immediately after giving effect thereto: (a) no Default or Event of Default shall have occurred and be continuing or would result therefrom, (b) all transactions related thereto shall be consummated in accordance with applicable laws, (c) such acquired or newly formed corporation, partnership, association or other business entity shall be a Qualified Subsidiary and all actions required to be taken, if any, with respect to such acquired or newly formed Qualified Subsidiary under the Loan Documents shall

have been taken, (d)(i) Hanover shall be in compliance, on a pro forma basis after giving effect to such acquisition or formation, with the covenants contained in Section 8.1 computed as at the last day of the fiscal quarter most recently ended prior to delivery of the certificate required pursuant to this clause (i), and Hanover shall have delivered to the Administrative Agent an officers’ certificate to such effect concurrently with the delivery of each certificate of a Responsible Officer pursuant to subsection 7.2(b) hereof, together with all relevant financial information for such Person or assets and (ii) any acquired or newly formed Qualified Subsidiary shall not be liable for any Indebtedness or Guarantee Obligations (except for Indebtedness and Guarantee Obligations permitted by Sections 8.2 and 8.4), and (e) any acquired or newly formed Qualified Subsidiary (including Subsidiaries thereof) shall not have (except for Indebtedness and Guarantee Obligations permitted by Sections 8.2 and 8.4) any material liabilities (contingent or otherwise), including, without limitation, liabilities under Environmental Laws and liabilities with respect to any Plan, and HCLP shall have delivered to the Administrative Agent, concurrently with the delivery of each certificate of a Responsible Officer pursuant to subsection 7.2(b) hereof, a certificate, signed by a Responsible Officer, that to the best of such officer’s knowledge, no such material liabilities exist. Notwithstanding the foregoing, Investments by Unqualified Subsidiaries of Hanover in Qualified Subsidiaries of Hanover (whether existing, newly formed or acquired) shall be governed by subsection 8.10(f) hereof. The Lenders acknowledge that (a) the equity investments and advances listed on Schedule 8.10B constitute Permitted Business Acquisitions, and (b) to the extent that any such equity investments or advances listed on such Schedule 8.10B constitute Indebtedness, the creation, incurrence, assumption or sufferance to exist of such Indebtedness is in compliance with the provisions of Section 8.2 hereof.

“Permitted Credit Support”: a guarantee or other credit support provided by Hanover or any of its Qualified Subsidiaries as to the Non-Recourse Indebtedness of Unqualified Subsidiaries to the extent that (x) such guarantee or other credit support is included as “Indebtedness” of Hanover or such Qualified Subsidiary for the purposes of Section 8.2 hereof or as “Guarantee Obligations” of Hanover or such Qualified Subsidiary for the purposes of Section 8.4 hereof, and (y) the creation, incurrence and existence of such “Indebtedness” or “Guarantee Obligations” by Hanover or such Qualified Subsidiary is permitted by the provisions of section 8.2 or Section 8.4 hereof, respectively.

“Permitted International Reorganization”: a restructuring of Hanover’s international operations pursuant to which (a) Hanover or one of its wholly-owned Subsidiaries may form one or more holding companies, which shall be organized under the laws of a jurisdiction outside of the United States, (b) the equity interests in existing Hanover’s Unqualified Subsidiaries may be conveyed, sold or otherwise transferred to such newly-formed holding companies, and/or (c) certain existing intercompany debt of such Unqualified Subsidiaries may be converted to equity.

“Person”: an individual, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture, Governmental Authority or other entity of whatever nature.

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

“POC”: the collective reference to Production Operators Corporation, a Delaware corporation, and its direct and indirect subsidiaries and joint ventures in which it directly or indirectly owns an interest, which have been acquired by Hanover and its Subsidiaries.

“Pricing Grid”: the pricing grid attached hereto as Annex A.

“Pro Forma Balance Sheet”: as defined in subsection 5.1(a).

“Properties”: as defined in Section 5.16.

“Qualified Subsidiary”: each Subsidiary of Hanover organized under a jurisdiction of the United States and having assets located primarily in the United States.

“Refinancing Indebtedness”: any Indebtedness that exists (with respect to any amendments, modifications or supplements thereof) or that is incurred to refund, refinance, replace, exchange, renew, repay, extend, modify, amend or supplement (including pursuant to any defeasance or discharge mechanism) (collectively, “refinance”, “refinances” and “refinanced” shall have a correlative meaning) any other specified Indebtedness, including any Indebtedness that refinances Refinancing Indebtedness, provided, however, that:

(i)

if the Stated Maturity (as such term is hereinafter defined) of the Indebtedness being refinanced is earlier than the Final Maturity Date, the Refinancing Indebtedness has a Stated Maturity no earlier than the Stated Maturity of the Indebtedness being refinanced or (b) if the Stated Maturity of the Indebtedness being refinanced is later than the Final Maturity Date, the Refinancing Indebtedness has a Stated Maturity of at least 91 days later than the Final Maturity Date;

(ii)

the Refinancing Indebtedness has an Average Life (as such term is hereinafter defined) at the time such Refinancing Indebtedness is incurred equal to or greater than the Average Life of the Indebtedness being refinanced;

(iii)

such Refinancing Indebtedness is incurred in an aggregate principal amount (or if issued with original issue discount, an aggregate issue price) that is equal to or less than the sum of the aggregate principal amount (or if issued with original issue discount, the aggregate accreted value) then outstanding of the Indebtedness being refinanced (plus, without duplication, any additional Indebtedness incurred to pay interest or premiums required by instruments governing such existing Indebtedness and fees incurred in connection therewith);

(iv)

if the Indebtedness being refinanced is subordinated in right of payment to any of the Obligations, such Refinancing Indebtedness is subordinated in right of payment to such Obligations on terms at least as favorable to the Lenders as those contained in the documentation governing the Indebtedness that is being refinanced;

(v)

after giving effect to the incurrence of such Refinancing Indebtedness, no Default or Event of Default would exist hereunder;

(vi)

the obligor(s) of such Refinancing Indebtedness shall be no different than the obligors of the Indebtedness being refinanced provided, that notwithstanding the foregoing, Hanover shall be permitted to become the obligor of Refinancing Indebtedness in which HCLP or any of its Subsidiaries was the prior obligor;

(vii)

the terms and conditions of such Refinancing Indebtedness shall be no less favorable in any material respect than the terms and conditions of the Indebtedness being refinanced; and

(viii)

the security interest(s) granted in connection with such Refinancing Indebtedness, if any, shall not cover more collateral, in any material respect, than the security interest(s), if any, granted in connection with the Indebtedness being refinanced.

As used in this definition the term “Stated Maturity” means, with respect to any Indebtedness, the date specified in the documents or instruments evidencing such Indebtedness as the fixed date on which the payment of principal of such Indebtedness is due and payable, including pursuant to any mandatory prepayment or redemption provision, but shall not include any contingent obligations to repay, prepay, redeem or repurchase any such principal prior to the date originally scheduled for the payment thereof. As used in this definition, the term “Average Life” means, as of the date of determination, with respect to any Indebtedness, the quotient obtained by dividing (a) the sum of the products of the numbers of years from the date of determination to the dates of each successive scheduled principal payment of such Indebtedness multiplied by the amount of such payment by (b) the sum of all such payments.

“Register”: as defined in subsection 11.6(b).

“Regulation U”: Regulation U of the Board of Governors of the Federal Reserve System.

“Reimbursement Obligation”: the obligation of HCLP to reimburse the Issuing Lender pursuant to subsection 4.5(a) for amounts drawn under Letters of Credit.

“Reorganization”: with respect to any Multiemployer Plan, the condition that such plan is in reorganization within the meaning of Section 4241 of ERISA.

“Reportable Event”: any of the events set forth in Section 4043(l) of ERISA, other than those events as to which the thirty day notice period is waived by the PBGC.

“Required Lenders”: at any time, Lenders the Commitment Percentages of which aggregate more than 50%.

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

“Responsible Officer”: the chief executive officer, president, the executive vice president, treasurer or secretary of the applicable Credit Party, or, with respect to financial matters, the chief financial officer or treasurer of the applicable Credit Party; provided, for the purposes of Section 7.7(a), the term “Responsible Officer” shall also include any vice president, the general counsel and all attorneys working under the supervision of the general counsel.

“Restricted Payments”: as defined in Section 8.8.

“Revolving Credit Loans”: as defined in Section 2.1.

“Sale and Leaseback Transaction”: as defined in Section 8.13.

“SEC”: the Securities and Exchange Commission.

“Securities Litigation Settlement”: that certain settlement agreement, dated as of May 12, 2003, entered into by Hanover and the other parties thereto pursuant to which certain securities class action litigation and other litigation described therein is to be settled, together with any other documents executed by Hanover and/or any of its Subsidiaries in connection therewith so long as such documents do not result in a material increase of the obligations of Hanover and its Subsidiaries under the Securities Litigation Settlement.

“Security Documents”: the collective reference to the Guarantee and Collateral Agreement, the Mortgages and all other security documents hereafter delivered to the Administrative Agent or any collateral agent therefore granting a Lien on any property of any Person to secure the obligations and liabilities of any Credit Party under any Loan Document.

“Single Employer Plan”: any Plan which is covered by Title IV of ERISA, but which is not a Multiemployer Plan.

“Standby Letter of Credit”: as defined in paragraph 4.1(b)(i).

“Subordinated Debt”: as to any Person, any unsecured Indebtedness (including, with respect to HCLP, the 2001A Lease Guarantee, the 2001B Lease Guarantee and the 2003 Notes Subordinated Guarantee, and, with respect to Hanover, the TIDES Debentures and the Hanover Zero Coupon Subordinated Notes) the terms of which provide that such Indebtedness is subordinate and junior in right of payment to the payment of all obligations and liabilities of such Person to the Administrative Agent and the Lenders hereunder; provided, that prior to an Event of Default, Hanover and any Subsidiary may make regularly scheduled interest payments in respect of such Indebtedness.

“Subordinated Guarantee Obligation”: as to any Person, any unsecured Guarantee Obligation the terms of which provide that such Guarantee Obligation is subordinate and junior in right to the payment of the HCLP Obligations and the Guarantor Obligations (as each such term is defined in the Guarantee and Collateral Agreement).

“Subsidiaries’ Guarantee”: the Subsidiaries’ Guarantee made by certain Subsidiaries of Hanover in favor of the Administrative Agent for the benefit of the Lenders, substantially in the form of Exhibit B, as amended, supplemented or otherwise modified from time to time.

“Subsidiary”: as to any Person, a corporation, partnership or other entity of which shares of stock or other ownership interests having ordinary voting power (other than stock or such other ownership interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation, partnership or other entity are at the time owned, or the management of which is otherwise controlled, directly or indirectly through one or more intermediaries, or both, by such Person. Unless otherwise qualified (i) all references to a “Subsidiary” or to “Subsidiaries” in this Agreement shall refer to a Subsidiary or Subsidiaries of Hanover and (ii) all references to a “Subsidiary” or to “Subsidiaries” in this Agreement shall exclude Unrestricted Subsidiaries unless Unrestricted Subsidiaries are expressly included.

“Subsidiary Guarantor”: each Subsidiary which is a party to a Guarantee.

“Synthetic Guarantee”: any of the 2000A Lease Guarantee and the 2000B Lease Guarantee.

“TIDES”: the Term Income Deferrable Equity Securities (TIDES) issued pursuant to the TIDES Declaration of Trust.

“TIDES Declaration of Trust”: the Amended and Restated Declaration of Trust, dated as of December 15, 1999, by Hanover, the holders of interests in the Trust from time to time and the trustees thereof.

“TIDES Debentures”: the unsecured debentures junior and subordinate in right of payment to all the obligations and liabilities of Hanover issued pursuant to the TIDES Indenture.

“TIDES Guarantees”: (i) the Preferred Securities Guarantee Agreement, dated as of December 15, 1999, between Hanover and Wilmington Trust Company, as guarantee trustee, and (ii) the Common Securities Guarantee Agreement, dated as of December 15, 1999, by Hanover.

“TIDES Indenture”: the Indenture, dated as of December 15, 1999, between Hanover and Wilmington Trust Company, as trustee thereunder.

“TIDES Trust”: Hanover Compressor Capital Trust, a Delaware business trust, and its successors and assigns.

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

“Tranche A Portion of the 2001A Equipment Lease Transaction”: the product of (i) 75.01% and (ii) the aggregate outstanding principal amount of the 2001A Equipment Lease Securities.

“Tranche A Portion of the 2001B Equipment Lease Transaction”: the product of (i) 67.90% and (ii) the aggregate outstanding principal amount of the 2001B Equipment Lease Securities.

“Tranche B Balance Sheet Loans”: any Obligations of Hanover and its Subsidiaries under the Equipment Lease Tranche B Loans or the Investor Contributions (as defined in each of the Participation Agreements) that are required to be reflected as Indebtedness on the consolidated balance sheet of Hanover.

“1999 Synthetic Lease”: the Lease dated as of June 15, 1999 (as amended, supplemented or otherwise modified from time to time), between Hanover Equipment Trust 1999A, as lessor, and HCLP, as lessee.

“2001A Equipment Lease Securities”: as defined in the definition of “2001A Equipment Lease Transaction”.

“2001B Equipment Lease Securities”: as defined in the definition of “2001B Equipment Lease Transaction”.

“2001A Equipment Lease Transaction”: the synthetic lease financing consummated on August 31, 2001 pursuant to the 2001A Participation Agreement

“2001B Equipment Lease Transaction”: the synthetic lease financing consummated on August 31, 2001 pursuant to the 2001B Participation Agreement.

“2003 Notes”: the senior, unsecured notes to be offered and issued by Hanover on or before the Closing Date in an aggregate principal amount not to exceed $275,000,000, which may be guaranteed on a subordinated basis by the Borrower and which shall be in form and substance satisfactory to the Co-Lead Arrangers, provided that any net proceeds received from the issuance of the 2003 Notes in excess of $200,000,000 shall be used to prepay the 2000A Synthetic Lease and/or the 2000B Synthetic Lease.

“2003 Notes Subordinated Guarantee”: the guarantee of HCLP of the 2003 Notes, and any Refinancing Indebtedness in respect thereof; provided, that such guarantee shall be subordinated to HCLP’s obligations under the Loan Documents in form and substance satisfactory to the Co-Lead Arrangers.

“2008 Notes”: the 4.75% Convertible Senior Notes due 2008 issued by Hanover in an aggregate principal amount of $192,000,000.

“Type”: as to any Loan, its nature as an ABR Loan or a Eurodollar Loan.

“Uniform Customs”: the Uniform Customs and Practice for Documentary Credits (1993 Revision), International Chamber of Commerce Publication No. 500, as the same may be amended, revised or replaced from time to time.

“Unqualified Subsidiary”: any Subsidiary of Hanover other than Qualified Subsidiaries.

“Unrestricted Subsidiary”: (i) any Subsidiary of HCLP that exists on the Closing Date and is so designated as an Unrestricted Subsidiary by HCLP in writing to the Administrative Agent, (ii) any Subsidiary of HCLP that at the time of determination shall be an Unrestricted Subsidiary (as designated by the Board of Directors of HCLP, as provided below), and (iii) any Subsidiary of an Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary of HCLP (including any newly acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary if all of the following conditions apply and continue to apply following such designation: (a) neither HCLP nor any of its Subsidiaries (other than another Unrestricted Subsidiary) provides credit support for Indebtedness or other obligations of such Unrestricted Subsidiary (including any undertaking, agreement or instrument evidencing such Indebtedness or obligations) except as permitted by Section 8.10 and (b) the Investments by HCLP or the Restricted Subsidiaries in such Subsidiary made on or prior to the date of designation of such Subsidiary as an Unrestricted Subsidiary shall not violate the provisions described under Section 8.10 and such Unrestricted Subsidiary is not party to any agreement, contract, arrangement or understanding at such time with HCLP or any other Subsidiary (other than another Unrestricted Subsidiary) of HCLP unless the terms of any such agreement, contract, arrangement or understanding are no less favorable to HCLP or such other Subsidiary than those that might be obtained at the time from Persons who are not Affiliates of HCLP or, in the event such condition is not satisfied, the value of such agreement, contract, arrangement or understanding to such Unrestricted Subsidiary shall be deemed an Investment. Any such designation by the Board of Directors shall be evidenced to the Administrative Agent by filing with the Administrative Agent a resolution of the Board of Directors of HCLP giving effect to such designation and an officer’s

certificate certifying that such designation complies with the foregoing conditions and any Investment by HCLP in such Unrestricted Subsidiary shall be deemed the making of an Investment on the date of designation in an amount equal to the greater of (1) the net book value of such Investment or (2) the fair market value of such Investment as determined in good faith by the Board of Directors (and evidenced by a resolution of the Board of Directors). The Board of Directors may designate any Unrestricted Subsidiary as a Subsidiary; provided (i) that, if such Unrestricted Subsidiary has any Indebtedness, immediately after giving effect to such designation, no Default or Event of Default would result, and (ii) that all Indebtedness of such Subsidiary shall be deemed to be incurred on the date such Unrestricted Subsidiary becomes a Subsidiary. Unrestricted Subsidiaries shall be deemed to be Affiliates of Hanover, HCLP and their Subsidiaries. Any Subsidiary of an Unrestricted Subsidiary shall also be deemed to be an Unrestricted Subsidiary. Any Subsidiary of Hanover that is not an Unrestricted Subsidiary shall be a “Restricted Subsidiary”. As used in this definition, the term “Board of Directors” shall include any committees that the Board of Directors has authorized to deal with Unrestricted Subsidiaries.

“Wells Fargo Credit Agreement”: the Credit Agreement, dated as of September 23, 1997 (as amended, supplemented or otherwise modified from time to time), among Hanover and Wells Fargo Bank (Texas), National Association, together with any Refinancing Indebtedness incurred in respect thereof

“Wells Fargo Term Note”: that certain Term Note, dated as of September 23, 1997, in the original principal amount of $5,000,000, executed by Hanover and payable to the order of Wells Fargo Bank (Texas), National Association, together with any Refinancing Indebtedness incurred in respect thereof.

“Working Day”: any Business Day on which dealings in foreign currencies and exchange between banks may be carried on in London, England.

1.2 Other Definitional Provisions. (a) Unless otherwise specified therein, all terms defined in this Agreement shall have the defined meanings when used in the Notes or any certificate or other document made or delivered pursuant hereto.

(b) As used herein and in the Notes, and any certificate or other document made or delivered pursuant hereto, accounting terms relating to Hanover and its Subsidiaries not defined in Section 1.1 and accounting terms partly defined in Section 1.1, to the extent not defined, shall have the respective meanings given to them under GAAP.

(c) The words “hereof”, “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Section, subsection, Schedule and Exhibit references are to this Agreement unless otherwise specified.

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

SECTION 2. AMOUNT AND TERMS OF COMMITMENTS

2.1 Revolving Credit Commitments. (a) Subject to the terms and conditions hereof, each Lender severally agrees to make revolving credit loans (the “Revolving Credit Loans”) to HCLP from time to time during the Commitment Period in an aggregate principal amount at any one time

outstanding which, when added to such Lender’s Commitment Percentage of the then outstanding L/C Obligations, does not exceed the amount of such Lender’s Commitment. During the Commitment Period, HCLP may use the Commitments by borrowing, prepaying the Revolving Credit Loans in whole or in part, and reborrowing, all in accordance with the terms and conditions hereof.

(b) The Revolving Credit Loans may from time to time be (i) Eurodollar Loans, (ii) ABR Loans or (iii) a combination thereof, as determined by HCLP and notified to the Administrative Agent in accordance with Sections 2.2 and 3.5; provided, that no Revolving Credit Loan shall be made as a Eurodollar Loan after the day that is one month prior to the Final Maturity Date.

2.2 Procedure for Revolving Credit Borrowing. HCLP may borrow under the Commitments during the Commitment Period on any Working Day, if all or any part of the requested Revolving Credit Loans are to be initially Eurodollar Loans, or on any Business Day, otherwise; provided, that HCLP shall give the Administrative Agent irrevocable notice (which notice must be received by the Administrative Agent prior to 11:00 A.M., New York City time, (a) three Working Days prior to the requested Borrowing Date, if all or any part of the requested Revolving Credit Loans are to be initially Eurodollar Loans, or (b) on the requested Borrowing Date, otherwise), specifying (i) the amount to be borrowed, (ii) the requested Borrowing Date, (iii) whether the borrowing is to be of Eurodollar Loans, ABR Loans, or a combination thereof, and (iv) if the borrowing is to be entirely or partly of Eurodollar Loans, the amount of such Type of Loan and the length of the initial Interest Period therefor. Each borrowing under the Commitments shall be in an amount equal to (x) in the case of ABR Loans, $200,000 or a whole multiple of $100,000 in excess thereof (or, if the then Available Commitments are less than $200,000, such lesser amount) and (y) in the case of Eurodollar Loans, $500,000 or a whole multiple of $100,000 in excess thereof. Upon receipt of any such notice from HCLP, the Administrative Agent shall promptly notify each Lender thereof. Each Lender will make the amount of its pro rata share of each borrowing available to the Administrative Agent for the account of HCLP at the office of the Administrative Agent specified in Section 11.2 prior to 12:00 noon, New York City time, on the Borrowing Date requested by HCLP in funds immediately available to the Administrative Agent. Such borrowing will then be made available to HCLP by the Administrative Agent crediting the account of HCLP on the books of such office with the aggregate of the amounts made available to the Administrative Agent by the Lenders and in like funds as received by the Administrative Agent.

2.3 Increase of Commitments. (a) HCLP shall have the right to increase the Commitments from time to time pursuant to this Section 2.3 (subject to the restrictions of subsection 2.3(d) below) as long as no Default or Event of Default has occurred and is continuing. In the event that HCLP wishes to increase the aggregate Commitments at any time, it shall notify the Administrative Agent in writing of the amount (the “Offered Increase Amount”) of such proposed increase (such notice, a “Commitment Increase Notice”); provided, that the aggregate amount of any such increase in Commitments shall be at least $10,000,000. HCLP may, at its election, (i) offer one or more of the Lenders the opportunity to participate in all or a portion of the Offered Increase Amount pursuant to paragraph (c) below and/or (ii) with the consent of the Administrative Agent (which consent shall not be unreasonably withheld or delayed), offer one or more additional banks, financial institutions or other entities the opportunity to participate in all or a portion of the Offered Increase Amount pursuant to paragraph (b) below. Each Commitment Increase Notice shall specify which Lenders and/or banks, financial institutions or other entities HCLP desires to participate in such Commitment increase. HCLP or, if requested by HCLP, the Administrative Agent, will notify such Lenders and/or banks, financial institutions or other entities of such offer.

(b) Any additional bank, financial institution or other entity which HCLP selects to offer participation in the increased Commitments and which elects to become a party to this Agreement and provide a Commitment in an amount so offered and accepted by it pursuant to subsection 2.3(a)(ii)

shall execute a New Lender Supplement (in the form specified by the Administrative Agent, each a “New Lender Supplement”) with HCLP and the Administrative Agent, whereupon such bank, financial institution or other entity (herein called a “New Lender”) shall become a Lender for all purposes and to the same extent as if originally a party hereto and shall be bound by and entitled to the benefits of this Agreement, and Schedule 1.1A shall be deemed to be amended to add the name and Commitment of such New Lender, provided that the Commitment of any such new Lender shall be in an amount not less than $5,000,000, provided further that on the effective date of such New Lender Supplement, there shall be no outstanding Eurodollar Loans hereunder or, if any Eurodollar Loans would be outstanding on the effective date of any such New Lender Supplement, HCLP shall either (x) convert such Eurodollar Loans to ABR Loans, or (y) prepay, in accordance with the provisions of Section 3.4, such Eurodollar Loans immediately prior to such New Lender Supplement becoming effective (subject, in either case, to the payment provisions hereof).

(c) Any Lender which accepts an offer to it by HCLP to increase its Commitment pursuant to subsection 2.3(a)(ii) shall, in each case, execute a Commitment Increase Supplement (in the form specified by the Administrative Agent, each a “Commitment Increase Supplement”) with HCLP and the Administrative Agent whereupon such Lender shall be bound by and entitled to the benefits of this Agreement with respect to the full amount of its Commitment as so increased, and Schedule 1.1A shall be deemed to be amended to so increase the Commitment of such Lender.

(d) Notwithstanding anything to the contrary in this Section 2.3 (i) in no event shall any transaction effected pursuant to this Section 2.3 cause the aggregate Commitments hereunder to exceed $375,000,000 and (ii) no Lender shall have any obligation to increase its Commitment unless it agrees to do so in its sole discretion.

SECTION 3. INTEREST RATE PROVISIONS, FEES,

CONVERSIONS AND PAYMENTS

3.1 Interest Rates and Payments Dates. (a) Each Eurodollar Loan shall bear interest for each day during each Interest Period with respect thereto at a rate per annum equal to the Eurodollar Rate determined for such day plus the Applicable Margin.

(b) Each ABR Loan shall bear interest at a rate per annum equal to ABR plus the Applicable Margin.

(c) If all or a portion of (i) the principal amount of any Loan or (ii) any interest payable thereon shall not be paid when due (whether at the stated maturity, by acceleration or otherwise), such overdue amount shall bear interest at a rate per annum which is (x) in the case of overdue principal, 2% above the rate that would otherwise be applicable thereto pursuant to the foregoing provisions of this subsection or (y) in the case of overdue interest, to the extent permitted by law, 2% above the rate described in paragraph (b) of this Section, in each case from the date of such non-payment until such amount is paid in full (as well after as before judgment).

(d) Interest shall be payable in arrears on each Interest Payment Date;, provided, that interest accruing pursuant to paragraph (c) of this Section shall be payable on demand.

3.2 Commitment Fee; Other Fees and Compensation. (a) HCLP agrees to pay to the Administrative Agent for the account of each Lender a commitment fee for the period from and including the first day of the Commitment Period to the Final Maturity Date, computed at the rate per annum equal to the Commitment Fee Rate on the average daily amount of the Available Commitment of such Lender during the period for which payment is made. Such commitment fee shall be payable quarterly in arrears on the last day of each March, June, September and December and on the Final Maturity Date or such earlier date as the Commitments shall terminate as provided herein.

(b) HCLP agrees to pay to the Administrative Agent the fees and other compensation, in the amounts and on the dates specified in the fee letter separately agreed to between HCLP and the Administrative Agent.

3.3 Termination or Reduction of the Commitments. HCLP shall have the right during the Commitment Period, upon not less than five Business Days’ notice to the Administrative Agent by HCLP to terminate the Commitments or, from time to time, to reduce the amount of the Commitments, provided that no such termination or reduction shall be permitted if, after giving effect thereto and to any prepayments of the Revolving Credit Loans made on the effective date thereof, the aggregate principal amount of the Revolving Credit Loans then outstanding, when added to the then outstanding L/C Obligations, would exceed the Commitments then in effect. Any such reduction shall be in an amount equal to $100,000 or a whole multiple thereof and shall reduce permanently the Commitments then in effect.

3.4 Repayment of Loans; Optional Prepayments and other Repayments. (a) HCLP hereby unconditionally promises to pay to the Administrative Agent for the account of each Lender the then unpaid principal amount of the Loans and L/C Obligations on the Final Maturity Date.

(b) HCLP may, at any time and from time to time, prepay the Loans in whole or in part, without premium or penalty upon at least three Working Days’ irrevocable notice, in the case of Eurodollar Loans, and one Business Day’s irrevocable notice, in the case of ABR Loans, by HCLP to the Administrative Agent, specifying the date and amount of prepayment and whether the prepayment is of Eurodollar Loans, ABR Loans or a combination thereof, and if of a combination thereof, the amount allocable to each. If any such prepayment with respect to a Eurodollar Loan is made on a day other than the last day of an Interest Period, such prepayment shall be accompanied by any amounts required to be paid pursuant to Section 3.13. Upon receipt of any such notice the Administrative Agent shall promptly notify each Lender thereof. If any such notice is given, the amount specified in such notice shall be due and payable on the date specified therein. Partial prepayments shall be in an aggregate principal amount of $200,000 or a whole multiple of $100,000 in excess thereof.

(c) HCLP shall repay at any time, and there shall be due and payable at such time, such principal amount (together with accrued interest thereon), if any, of outstanding Revolving Credit Loans as may be necessary so that, after such repayment, the aggregate unpaid principal amount of Revolving Credit Loans does not exceed the Commitments in effect at such time after giving effect to any reduction in the Commitments pursuant to Section 3.3.

(d) (i) If, at any time during the Commitment Period, for any reason the Aggregate Outstanding Extensions of Credit exceeds the Commitments then in effect, HCLP shall, without notice or demand, immediately prepay the Revolving Credit Loans, terminate or reduce Letters of Credit and/or repay Reimbursement Obligations in an amount equal to such excess.

(ii) If, at any time during the Commitment Period, for any reason the aggregate L/C Obligations of all Lenders exceed 105% of the L/C Commitment then in effect, HCLP shall, without notice or demand, immediately terminate or reduce the Letters of Credit and/or repay the Reimbursement Obligations in an amount equal to such excess.

3.5 Conversion and Continuation Options. (a) HCLP may elect from time to time to convert Eurodollar Loans to ABR Loans by giving the Administrative Agent at least one Business Days’

prior irrevocable notice of such election; provided, that any such conversion of Eurodollar Loans may only be made on the last day of an Interest Period with respect thereto. HCLP may elect from time to time to convert ABR Loans to Eurodollar Loans by giving the Administrative Agent at least three Working Days’ prior irrevocable notice of such election. Any such notice of conversion to Eurodollar Loans shall specify the length of the initial Interest Period or Interest Periods therefor. Upon receipt of any such notice the Administrative Agent shall promptly notify each Lender thereof. All or any part of outstanding Eurodollar Loans and ABR Rate Loans may be converted as provided herein; provided, that (i) no Loan may be converted into a Eurodollar Loan when any Event of Default has occurred and is continuing and the Administrative Agent has determined that such a conversion is not appropriate, (ii) any such conversion may only be made if, after giving effect thereof, Section 3.6 shall not have been contravened and (iii) no Loan may be converted into a Eurodollar Loan after the date that is one month prior to the Final Maturity Date.

(b) Any Eurodollar Loans may be continued as such upon the expiration of the then current Interest Period with respect thereto by HCLP giving notice to the Administrative Agent, in accordance with the applicable provisions of the term “Interest Period” set forth in Section 1.1, of the length of the next Interest Period to be applicable to such Loans, provided that no Eurodollar Loan may be continued as such (i) when any Event of Default has occurred and is continuing and the Administrative Agent has determined that such a continuation is not appropriate, (ii) if, after giving effect thereto, Section 3.6 would be contravened or (iii) after the date that is one month prior to the Final Maturity Date and provided, further, that if HCLP shall fail to give any required notice as described above in this paragraph or if such continuation is not permitted pursuant to the preceding proviso such Loans shall be automatically converted to ABR Loans on the last day of such then expiring Interest Period.

3.6 Minimum Amounts. All borrowings, conversions and continuations of Loans hereunder and all selections of Interest Periods hereunder shall be in such amounts and be made pursuant to such elections so that, after giving effect thereto, the aggregate principal amount of the Loans comprising each Eurodollar Tranche shall be equal to $500,000 or a whole multiple of $100,000 in excess thereof.

3.7 Computation of Interest and Fees. (a) Commitment fees and interest on ABR Loans shall be calculated on the basis of a 365- (or 366-, as the case may be) day year for the actual days elapsed, and interest on Eurodollar Loans shall be calculated on the basis of a 360 day year for the actual days elapsed. The Administrative Agent shall as soon as practicable notify HCLP and the Lenders of each determination of a Eurodollar Rate. Any change in the interest rate on a Loan resulting from a change in the ABR, the Eurocurrency Reserve Requirements, the C/D Assessment Rate or the C/D Reserve Percentage shall become effective as of the opening of business on the day on which such change becomes effective. The Administrative Agent shall as soon as practicable notify HCLP and the Lenders of the effective date and the amount of each such change in interest rate.

(b) Each determination of an interest rate by the Administrative Agent pursuant to any provision of this Agreement shall be conclusive and binding on HCLP and the Lenders in the absence of manifest error. The Administrative Agent shall, at the request of HCLP, deliver to HCLP a statement showing the quotations used by the Administrative Agent in determining any interest rate pursuant to subsection 3.1(a) and, with respect to determinations of the ABR based on the Federal Funds Effective rate or the Base CD rate, subsection 3.1(b).

3.8 Inability to Determine Interest Rate. In the event that prior to the first day of any Interest Period:

(a) the Administrative Agent shall have determined (which determination shall be conclusive and binding upon HCLP absent manifest error) that, by reason of circumstances affecting the relevant market, adequate and reasonable means do not exist for ascertaining the Eurodollar Rate for such Interest Period, or

(b) the Administrative Agent shall have received notice from the Required Lenders that the Eurodollar Rate determined or to be determined for such Interest Period will not adequately and fairly reflect the costs to such Lenders (as conclusively certified by such Lenders) of making or maintaining their affected Loans during such Interest Period,

the Administrative Agent shall give telecopy or telephonic notice thereof to HCLP and the Lenders as soon as practicable thereafter. If such notice is given (x) any Eurodollar Loans requested to be made on the first day of such Interest Period shall be made as ABR Loans, (y) any Loans that were to have been converted on the first day of such Interest Period to Eurodollar Loans shall be converted to or continued as ABR Loans and (z) any outstanding Eurodollar Loans shall be converted, on the first day of such Interest Period, to ABR Loans. Until such notice has been withdrawn by the Administrative Agent, no further Eurodollar Loans shall be made or continued as such, nor shall HCLP have the right to convert Loans to Eurodollar Loans.

3.9 Pro Rata Treatment and Payments. (a) Each borrowing by HCLP from the Lenders hereunder, each payment by HCLP on account of any commitment fee hereunder and any reduction of the Commitments of the Lenders shall be made pro rata according to the respective Commitment Percentages of the Lenders. Each payment (including each prepayment) by HCLP on account of principal of and interest on the Loans shall be made pro rata according to the respective outstanding principal amounts of the Loans then held by the Lenders. All payments (including prepayments) to be made by HCLP hereunder, whether on account of principal, interest, fees or otherwise, shall be made without set off or counterclaim and shall be made prior to 12:00 Noon, New York City time, on the due date thereof to the Administrative Agent, for the account of the Lenders, at the Administrative Agent’s office specified in Section 11.2 in Dollars and in immediately available funds. The Administrative Agent shall distribute such payments to the Lenders promptly upon receipt in like funds as received. If any payment hereunder (other than payments on the Eurodollar Loans) becomes due and payable on a day other than a Business Day, such payment shall be extended to the next succeeding Business Day, and, with respect to payments of principal, interest thereon shall be payable at the then applicable rate during such extension. If any payment on a Eurodollar Loan becomes due and payable on a day other than a Working Day, the maturity thereof shall be extended to the next succeeding Working Day unless the result of such extension would be to extend such payment into another calendar month, in which event such payment shall be made on the immediately preceding Working Day.

(b) Unless the Administrative Agent shall have been notified in writing by any Lender prior to a Borrowing Date that such Lender will not make the amount that would constitute its Commitment Percentage of the borrowing on such date available to the Administrative Agent, the Administrative Agent may assume that such Lender has made such amount available to the Administrative Agent on such Borrowing Date, and the Administrative Agent may, in reliance upon such assumption, make available to HCLP a corresponding amount. If such amount is made available to the Administrative Agent on a date after such Borrowing Date, such Lender shall pay to the Administrative Agent on demand an amount equal to the product of (i) the daily average Federal funds rate during such period as quoted by the Administrative Agent, times (ii) the amount of such Lender’s Commitment Percentage of such borrowing, times (iii) a fraction the numerator of which is the number of days that elapse from and including such Borrowing Date to the date on which such Lender’s Commitment Percentage of such borrowing shall have become immediately available to the Administrative Agent and the denominator of which is 360. A certificate of the Administrative Agent submitted to any Lender with

respect to any amounts owing under this subsection shall be conclusive in the absence of manifest error. If such Lender’s Commitment Percentage of such borrowing is not in fact made available to the Administrative Agent by such Lender within three Business Days of such Borrowing Date, the Administrative Agent shall be entitled to recover such amount with interest thereon at the rate per annum applicable to such Loan, on demand, from HCLP and any such payment by HCLP shall not constitute a waiver of any right or remedy HCLP may have with respect to any such Lender.

3.10 Illegality. Notwithstanding any other provision herein, if any change in any Requirement of Law or in the interpretation or application thereof shall make it unlawful for any Lender to make or maintain Eurodollar Loans as contemplated by this Agreement, (a) the commitment of such Lender hereunder to make Eurodollar Loans, continue Eurodollar Loans as such and convert ABR Loans to Eurodollar Loans shall forthwith be canceled and (b) such Lender’s Loans then outstanding as Eurodollar Loans, if any, shall be converted automatically to ABR Loans on the respective last days of the then current Interest Periods with respect to such Loans or within such earlier period as required by law. If any such conversion of a Eurodollar Loan occurs on a day which is not the last day of the then current Interest Period with respect thereto, HCLP shall pay to such Lender such amounts, if any, as may be required pursuant to Section 3.13.

3.11 Requirements of Law. (a) In the event that any change in any Requirement of Law as in existence on the date hereof or in the interpretation or application thereof or compliance by any Lender with any request or directive (whether or not having the force of law) from any central bank or other Governmental Authority made subsequent to the date hereof:

(i) shall subject any Lender to any tax of any kind whatsoever with respect to this Agreement, any Note, any Letter of Credit, any Application or any Eurodollar Loan made by it, or change the basis of taxation of payments to such Lender in respect thereof (except for taxes covered by Section 3.12 and changes in the rate of tax on the overall net income of such Lender or tax imposed in lieu of net income taxes);

(ii) shall impose, modify or hold applicable any reserve, special deposit, compulsory loan or similar requirement against assets held by, deposits or other liabilities in or for the account of, advances, loans or other extensions of credit by, or any other acquisition of funds by, any office of such Lender which is not otherwise included in the determination of the Eurodollar Rate hereunder; or

(iii) shall impose on such Lender any other condition;

and the result of any of the foregoing is to increase the cost to such Lender, by an amount which such Lender deems to be material, of making, converting into, continuing or maintaining Eurodollar Loans or issuing or participating in Letters of Credit, or to reduce any amount receivable hereunder in respect thereof, then, in any such case, HCLP shall promptly pay such Lender, upon its demand, any additional amounts necessary to compensate such Lender for such increased cost or reduced amount receivable. If any Lender becomes entitled to claim any additional amounts pursuant to this Section, it shall promptly notify HCLP, through the Administrative Agent, by delivery of a certificate setting forth the amounts due and a description of the event by reason of which it has become so entitled. A certificate as to any additional amounts payable pursuant to this Section submitted by such Lender, through the Administrative Agent, to HCLP shall be conclusive in the absence of manifest error.

(b) In the event that any Lender shall have determined that the adoption after the date hereof of or any change in any Requirement of Law as in existence on the date hereof regarding capital adequacy or in the interpretation or application thereof or compliance by such Lender or any corporation

controlling such Lender with any request or directive regarding capital adequacy (whether or not having the force of law) from any Governmental Authority made subsequent to the date hereof shall have the effect of reducing the rate of return on such Lender’s or such corporation’s capital as a consequence of its obligations hereunder or under or in respect of any Letter of Credit to a level below that which such Lender or such corporation could have achieved but for such adoption, change or compliance (taking into consideration such Lender’s or such corporation’s policies with respect to capital adequacy) by an amount deemed by such Lender to be material, then from time to time, after submission by such Lender to HCLP (with a copy to the Administrative Agent) of a written request therefor, HCLP shall pay to such Lender such additional amount or amounts as will compensate such Lender or such corporation for such reduction.

(c) Notwithstanding anything to the contrary in this Section, HCLP shall not be required to compensate a Lender pursuant to this Section for any amounts incurred more than nine months prior to the date that such Lender notifies HCLP of such Lender’s intention to claim compensation therefor; provided that, if the circumstances giving rise to such claim have a retroactive effect, then such nine-month period shall be extended to include the period of such retroactive effect. The obligations of HCLP pursuant to this Section shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder.

3.12 Taxes. (a) All payments made by HCLP under this Agreement shall be made free and clear of, and without deduction or withholding for or on account of, any present or future income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now or hereafter imposed, levied, collected, withheld or assessed by any Governmental Authority, excluding net income taxes and franchise taxes (imposed in lieu of net income taxes) imposed on the Administrative Agent or any Lender as a result of a present or former connection between the Administrative Agent or such Lender and the jurisdiction of the Governmental Authority imposing such tax or any political subdivision or taxing authority thereof or therein (other than any such connection arising solely from the Administrative Agent or such Lender having executed, delivered or performed its obligations or received a payment under, or enforced, this Agreement or any other Loan Document). If any such non-excluded taxes, levies, imposts, duties, charges, fees, deductions or withholdings (“Non-Excluded Taxes”) or Other Taxes are required to be withheld from any amounts payable to the Administrative Agent or any Lender hereunder, the amounts so payable to the Administrative Agent or such Lender shall be increased to the extent necessary to yield to the Administrative Agent or such Lender (after payment of all Non-Excluded Taxes and Other Taxes) interest or any such other amounts payable hereunder at the rates or in the amounts specified in this Agreement, provided, however, that HCLP shall not be required to increase any such amounts payable to any Lender with respect to any Non-Excluded Taxes (i) that are attributable to such Lender’s failure to comply with the requirements of paragraph (d) or (e) of this Section or (ii) that are United States withholding taxes imposed on amounts payable to such Lender at the time such Lender becomes a party to this Agreement, except to the extent that such Lender’s assignor (if any) was entitled, at the time of assignment, to receive additional amounts from HCLP with respect to such Non-Excluded Taxes pursuant to this paragraph.

(b) In addition, HCLP shall pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law.

(c) Whenever any Non-Excluded Taxes or Other Taxes are payable by HCLP, as promptly as possible thereafter HCLP shall send to the Administrative Agent for its own account or for the account of the relevant Lender, as the case may be, a certified copy of an original official receipt received by HCLP showing payment thereof. If HCLP fails to pay any Non-Excluded Taxes or Other Taxes when due to the appropriate taxing authority or fails to remit to the Administrative Agent the required receipts or other required documentary evidence, HCLP shall indemnify the Administrative

Agent and the Lenders for any incremental taxes, interest or penalties that may become payable by the Administrative Agent or any Lender as a result of any such failure unless such failure was caused by the gross negligence or willful misconduct of the Administrative Agent or such Lender.

(d) Each Lender (or Transferee) that is not a “U.S. Person” as defined in Section 7701(a)(30) of the Code (a “Non-U.S. Lender”) shall deliver to HCLP and the Administrative Agent (or, in the case of a Participant, to the Lender from which the related participation shall have been purchased) two copies of either U.S. Internal Revenue Service Form W-8BEN or Form W-8ECI, or, in the case of a Non-U.S. Lender claiming exemption from U.S. federal withholding tax under Section 871(h) or 881(c) of the Code with respect to payments of “portfolio interest”, a statement substantially in the form of Exhibit H and a Form W-8BEN, or any subsequent versions thereof or successors thereto, properly completed and duly executed by such Non-U.S. Lender claiming complete exemption from, or a reduced rate of, U.S. federal withholding tax on all payments by HCLP under this Agreement and the other Loan Documents. Such forms shall be delivered by each Non-U.S. Lender on or before the date it becomes a party to this Agreement (or, in the case of any Participant, on or before the date such Participant purchases the related participation). In addition, each Non-U.S. Lender shall deliver such forms promptly upon the obsolescence or invalidity of any form previously delivered by such Non-U.S. Lender. Each Non-U.S. Lender shall promptly notify HCLP at any time it determines that it is no longer in a position to provide any previously delivered certificate to HCLP (or any other form of certification adopted by the U.S. taxing authorities for such purpose). Notwithstanding any other provision of this paragraph, a Non-U.S. Lender shall not be required to deliver any form pursuant to this paragraph that such Non-U.S. Lender is not legally able to deliver.

(e) A Lender that is entitled to an exemption from or reduction of non-U.S. withholding tax under the law of the jurisdiction in which HCLP is located, or any treaty to which such jurisdiction is a party, with respect to payments under this Agreement shall deliver to HCLP (with a copy to the Administrative Agent), at the time or times prescribed by applicable law or reasonably requested by HCLP, such properly completed and executed documentation prescribed by applicable law as will permit such payments to be made without withholding or at a reduced rate, provided that such Lender is legally entitled to complete, execute and deliver such documentation and in such Lender’s judgment such completion, execution or submission would not materially prejudice the legal position of such Lender.

(f) If the Administrative Agent or any Lender determines, in its sole discretion, that it has received a refund of any Non-Excluded Taxes or Other Taxes as to which it has been indemnified by HCLP or with respect to which HCLP has paid additional amounts pursuant to this Section 3.12, it shall pay over such refund to HCLP (but only to the extent of indemnity payments made, or additional amounts paid, by HCLP under this Section 3.12 with respect to the Non-Excluded Taxes or Other Taxes giving rise to such refund), net of all out-of-pocket expenses of the Administrative Agent or such Lender and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund); provided, that HCLP, upon the request of the Administrative Agent or such Lender, agrees to repay the amount paid over to HCLP (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to the Administrative Agent or such Lender in the event the Administrative Agent or such Lender is required to repay such refund to such Governmental Authority. This paragraph shall not be construed to require the Administrative Agent or any Lender to make available its tax returns (or any other information relating to its taxes which it deems confidential) to HCLP or any other Person.

(g) The agreements in this Section shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder.

3.13 Indemnity. HCLP agrees to indemnify each Lender and to hold each Lender harmless from any reasonable loss or expenses which such Lender may sustain or incur as a consequence of (a) default by HCLP in payment when due of the principal amount of or interest on any Eurodollar Loan, (b) default by HCLP in making a borrowing of, conversion into or continuation of Eurodollar Loans after HCLP has given a notice requesting the same in accordance with the provisions of this Agreement, (c) default by HCLP in making any prepayment after HCLP has given a notice thereof in accordance with the provisions of this Agreement or (d) conversion of or the making of a prepayment of Eurodollar Loans on a day which is not the last day of an Interest Period with respect thereto, including, without limitation, in each case, any such loss or expense arising from the reemployment of funds obtained by it or from fees payable to terminate the deposits from which such funds were obtained. Such indemnification may include an amount equal to the excess, if any, of (i) the amount of interest that would have accrued on the amount so prepaid, or not so borrowed, converted or continued, for the period from the date of such prepayment or of such failure to borrow, convert or continue to the last day of such Interest Period (or, in the case of a failure to borrow, convert or continue, the Interest Period that would have commenced on the date of such failure) in each case at the applicable rate of interest for such Loans provided for herein (excluding, however, the Applicable Margin included therein, if any) over (ii) the amount of interest (as reasonably determined by such Lender) that would have accrued to such Lender on such amount by placing such amount on deposit for a comparable period with leading banks in the interbank eurodollar market. A certificate as to any amounts payable pursuant to this Section submitted to HCLP by any Lender shall be conclusive in the absence of manifest error. This covenant shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder.

3.14 Replacement of Lenders. If any Lender requests compensation under Section 3.11, or if HCLP is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 3.12, or if any Lender defaults in its obligation to fund Loans hereunder, then HCLP may, at its sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in Section 11.6), all its interests, rights and obligations under this Agreement to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that (i) HCLP shall have received the prior written consent of the Administrative Agent, which consent shall not unreasonably be withheld or delayed, (ii) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans and participations in Letters of Credit, accrued interest thereon, accrued fees and all other amounts payable to it hereunder, from the assignee (to the extent of such outstanding principal and accrued interest and fees) or HCLP (in the case of all other amounts) and (iii) in the case of any such assignment resulting from a claim for compensation under Section 3.11 or payments required to be made pursuant to Section 3.12, such assignment will result in a reduction in such compensation or payments. A Lender shall not be required to make any such assignment and delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling HCLP to require such assignment and delegation cease to apply.

3.15 Change of Lending Office. Each Lender agrees that, upon the occurrence of any event giving rise to the operation of Section 3.11 or 3.12(a) with respect to such Lender, it will, if requested by HCLP, use reasonable efforts (subject to overall policy considerations of such Lender) to designate another lending office for any Loans affected by such event with the object of avoiding the consequences of such event; provided, that such designation is made on terms that, in the sole judgment of such Lender, cause such Lender and its lending office(s) to suffer no economic, legal or regulatory disadvantage, and provided, further, that nothing in this Section shall affect or postpone any of the obligations of HCLP or the rights of any Lender pursuant to Section 3.11 or 3.12(a).

SECTION 4. LETTERS OF CREDIT

4.1 L/C Commitment. (a) Prior to the Closing Date, the Existing Issuing Lender has issued the Existing Letters of Credit which, from and after the Closing Date, shall constitute Letters of Credit issued hereunder. Subject to the terms and conditions hereof, the Issuing Lender, in reliance on the agreements of the other Lenders set forth in subsection 4.4(a), agrees to issue letters of credit (the letters of credit issued on and after the Closing Date pursuant to this Section 4, together with the Existing Letters of Credit, collectively, the “Letters of Credit”) for the account of HCLP on any Business Day during the Commitment Period in such form as may be approved from time to time by the Issuing Lender; provided, that the Issuing Lender shall have no obligation to issue any Letter of Credit if, after giving effect to such issuance, the L/C Obligations would exceed the L/C Commitment or the Available Commitment.

(b) Each Letter of Credit shall:

(i) be denominated in Dollars or any Available Foreign Currency and shall be either (A) a standby letter of credit issued to support obligations of HCLP or its Subsidiaries (a “Standby Letter of Credit”), or (B) a commercial letter of credit issued in respect of the purchase of goods or services by HCLP and its Subsidiaries in the ordinary course of business (a “Commercial Letter of Credit”) and

(ii) expire at or prior to the close of business on the date that is five Business Days prior to the Final Maturity Date.

(c) Each Letter of Credit shall be subject to the Uniform Customs and, to the extent not inconsistent therewith, the laws of the State of New York.

(d) The Issuing Lender shall not at any time be obligated to issue any Letter of Credit hereunder if such issuance would conflict with, or cause the Issuing Lender or any L/C Participant to exceed any limits imposed by, any applicable Requirement of Law.

(e) Each Issuing Lender shall from time to time provide the Administrative Agent with information reasonably requested by the Administrative Agent with respect to each Letter of Credit issued by such Issuing Lender, including stated amount, currency, beneficiary and expiry date.

4.2 Procedure for Issuance of Letters of Credit. HCLP may from time to time request that the Issuing Lender issue a Letter of Credit by delivering to the Issuing Lender, with a copy to the Administrative Agent, at their respective addresses for notices specified herein an Application therefor, completed to the satisfaction of the Issuing Lender, and such other certificates, documents and other papers and information as the Issuing Lender may reasonably request. Upon receipt of any Application, the Issuing Lender will process such Application and the certificates, documents and other papers and information delivered to it in connection therewith in accordance with its customary procedures and shall promptly issue the Letter of Credit requested thereby (but in no event shall the Issuing Lender be required to issue any Letter of Credit earlier than three Business Days after its receipt of the Application therefor and all such other certificates, documents and other papers and information relating thereto) by issuing the original of such Letter of Credit to the beneficiary thereof or as otherwise may be agreed by the Issuing Lender and HCLP. The Issuing Lender shall furnish a copy of such Letter of Credit to HCLP and the Administrative Agent promptly following the issuance thereof.

4.3 Fees, Commissions and Other Charges. (a) HCLP shall pay to the Administrative Agent, for the account of the Issuing Lender and the L/C Participants, a letter of credit commission with respect to each Letter of Credit, computed for the period from the date such Letter of Credit is issued to

the date upon which the next such payment is due hereunder at the rate per annum equal to the Applicable Margin in effect from time to time for Eurodollar Loans, calculated on the basis of a 365 (or 366-, as the case may be) day year, of the daily aggregate amount available to be drawn under such Letter of Credit for the period covered by such payment. In addition, HCLP shall pay to the Issuer a fronting fee in the amount equal to 0.20% of the face amount of such Letter of Credit. Such commissions shall be payable in arrears on each L/C Fee Payment Date (and the Final Maturity Date) and shall be nonrefundable. Such commissions with respect to each Letter of Credit denominated in an Available Foreign Currency shall be paid in Dollars, and for purposes of calculating the amount of such commissions applicable to each Letter of Credit denominated in an Available Foreign Currency, the face amount of such Letter of Credit shall be the Dollar Equivalent of such amount calculated at the Exchange Rate as of the relevant L/C Fee Payment Date.

(b) In addition to the foregoing fees and commissions, HCLP shall pay or reimburse the Issuing Lender for such reasonable, normal and customary costs and expenses as are actually incurred or charged by the Issuing Lender in issuing, effecting payment under, amending or otherwise administering any Letter of Credit.

(c) The Administrative Agent shall, promptly following its receipt thereof, distribute to the Issuing Lender and the L/C Participants all fees and commissions received by the Administrative Agent for their respective accounts pursuant to this Section.

4.4 L/C Participations. (a) The Issuing Lender irrevocably agrees to grant and hereby grants to each L/C Participant, and, to induce the Issuing Lender to issue Letters of Credit hereunder, each L/C Participant irrevocably agrees to accept and purchase and hereby accepts and purchases from the Issuing Lender, on the terms and conditions hereinafter stated, for such L/C Participant’s own account and risk an undivided interest equal to such L/C Participant’s Commitment Percentage in the Issuing Lender’s obligations and rights under each Letter of Credit issued hereunder and the amount of each draft paid by the Issuing Lender thereunder. Each L/C Participant unconditionally and irrevocably agrees with the Issuing Lender that, if a draft is paid under any Letter of Credit for which the Issuing Lender is not reimbursed in full by HCLP in accordance with the terms of this Agreement, such L/C Participant shall pay to the Issuing Lender upon demand at the Issuing Lender’s address for notices specified herein an amount in Dollars equal to such L/C Participant’s Commitment Percentage of the amount of the Dollar Equivalent of such draft (calculated on the date such draft is paid by the Issuing Lender), or any part thereof, which is not so reimbursed.

(b) If any amount required to be paid by any L/C Participant to the Issuing Lender pursuant to paragraph 4.4(a) in respect of any unreimbursed portion of any payment made by the Issuing Lender under any Letter of Credit is paid to the Issuing Lender within three Business Days after the date such payment is due, such L/C Participant shall pay to the Issuing Lender on demand an amount equal to the product of (1) such amount, times (2) the daily average Federal funds rate, as quoted by the Issuing Lender, during the period from and including the date such payment is required to the date on which such payment is immediately available to the Issuing Lender, times (3) a fraction the numerator of which is the number of days that elapse during such period and the denominator of which is 360. If any such amount required to be paid by any L/C Participant pursuant to paragraph 4.4(a) is not in fact made available to the Issuing Lender by such L/C Participant within three Business Days after the date such payment is due, the Issuing Lender shall be entitled to recover from such L/C Participant, on demand, such amount with interest thereon calculated from such due date at the rate per annum applicable to ABR Loans hereunder. A certificate of the Issuing Lender submitted to any L/C Participant with respect to any amounts owing under this subsection shall be conclusive in the absence of manifest error.

(c) Whenever, at any time after the Issuing Lender has made payment under any Letter of Credit and has received from any L/C Participant its pro rata share of such payment in accordance with subsection 4.4(a), the Issuing Lender receives any payment related to such Letter of Credit (whether directly from HCLP or otherwise), or any payment of interest on account thereof, the Issuing Lender will distribute to such L/C Participant its pro rata share thereof; provided, however, that in the event that any such payment received by the Issuing Lender shall be required to be returned by the Issuing Lender, such L/C Participant shall return to the Issuing Lender the portion thereof previously distributed by the Issuing Lender to it.

4.5 Reimbursement Obligation of HCLP. (a) HCLP agrees to reimburse the Issuing Lender on each date on which the Issuing Lender notifies HCLP of the date and amount of a draft presented under any Letter of Credit and paid by the Issuing Lender for the amount of (i) such draft so paid and (ii) any taxes, fees, charges or other costs or expenses reasonably incurred by the Issuing Lender in connection with such payment. Each such payment shall be made to the Issuing Lender at its address for notices specified herein in Dollars and in immediately available funds. Such reimbursement may be made pursuant to a borrowing pursuant to subsection 4.5(c).

(b) Interest shall be payable on any and all amounts remaining unpaid by HCLP under this subsection from the date such amounts become payable (whether at stated maturity, by acceleration or otherwise) until payment in full at the rate which would be payable on any outstanding ABR Loans which were then overdue.

(c) Each drawing under any Letter of Credit shall constitute a request by HCLP to the Administrative Agent for a borrowing pursuant to Section 2.4 (Procedure for Revolving Credit Borrowing) of ABR Loans in the amount of such drawing. The Borrowing Date with respect to such borrowing shall be the date of such drawing.

4.6 Obligations Absolute. (a) HCLP’s obligations under this Section 4 shall be absolute and unconditional under any and all circumstances and irrespective of any set-off, counterclaim or defense to payment which HCLP may have or have had against the Issuing Lender or any beneficiary of a Letter of Credit.

(b) HCLP also agrees with the Issuing Lender that the Issuing Lender shall not be responsible for, and HCLP’s Reimbursement Obligations under subsection 4.5(a) shall not be affected by, among other things, (i) the validity or genuineness of documents or of any endorsements thereon, even though such documents shall in fact prove to be invalid, fraudulent or forged, or (ii) any dispute between or among HCLP and any beneficiary of any Letter of Credit or any other party to which such Letter of Credit may be transferred or (iii) any claims whatsoever of HCLP against any beneficiary of such Letter of Credit or any such transferee.

(c) The Issuing Lender shall not be liable for any error, omission, interruption or delay in transmission, dispatch or delivery of any message or advice, however transmitted, in connection with any Letter of Credit, except for errors or omissions caused by the Issuing Lender’s gross negligence or willful misconduct.

(d) HCLP agrees that any action taken or omitted by the Issuing Lender under or in connection with any Letter of Credit or the related drafts or documents, if done in the absence of gross negligence or willful misconduct and in accordance with the standards of care specified in the Uniform Commercial Code of the State of New York, shall be binding on HCLP and shall not result in any liability of the Issuing Lender to HCLP.

4.7 Letter of Credit Payments. If any draft shall be presented for payment under any Letter of Credit, the Issuing Lender shall promptly notify HCLP of the date and amount thereof. The responsibility of the Issuing Lender to HCLP in connection with any draft presented for payment under any Letter of Credit shall, in addition to any payment obligation expressly provided for in such Letter of Credit, be limited to determining that the documents (including each draft) delivered under such Letter of Credit in connection with such presentment are in conformity with such Letter of Credit.

4.8 Application. To the extent that any provision of any Application related to any Letter of Credit is inconsistent with the provisions of this Section 4, the provisions of this Section 4 shall apply.

4.9 Letters of Credit Denominated in Available Foreign Currencies. Notwithstanding any other provision of this Section 4, in the event that any Letter of Credit is denominated in any currency other than Dollars, the amount of the Reimbursement Obligation of HCLP pursuant to Section 4.5 in respect of such Letter of Credit shall bear interest as provided in Section 4.5 with respect to amounts owing in Dollars; provided, that (i) the interest rate on such amounts shall be the rate reasonably determined by the relevant Issuing Lender to be the equivalent rate, in respect of the relevant non-Dollar currency, to the applicable rate provided in Section 4.5 with respect to amounts denominated in Dollars and (ii) if HCLP fails to pay any such Reimbursement Obligation required by Section 4.5 on or prior to the third Business Day following the date of the drawing to which such Reimbursement Obligation relates, then, on the fourth Business Day following such date of drawing, the relevant Issuing Lender, in cooperation with the Administrative Agent, shall determine the Dollar Equivalent of the amount of such Reimbursement Obligation, and HCLP’s obligation in respect of such Reimbursement Obligation shall be converted to such Dollar Equivalent, with interest thereon as provided in Section 4.5 (provided, that if the Application in respect of such Letter of Credit provides for conversion of such amount into Dollars on any earlier date or at any other conversion rate, the provisions of such Application shall control with respect to such conversion).

4.10 Change in Law; Availability of Foreign Currencies. Notwithstanding any other provision of this Agreement, if, after the date hereof, (a) any change in law shall make it unlawful for any Issuing Lender to issue Letters of Credit denominated in an Available Foreign Currency, or (b) there shall have occurred any change in national or international financial, political or economic conditions (including the imposition of or any change in exchange controls) or currency exchange rates that would make it impracticable for any Issuing Lender to issue Letters of Credit denominated in such Available Foreign Currency for the account of HCLP, then by prompt written notice thereof to HCLP and to the Administrative Agent (which notice shall be withdrawn whenever such circumstances no longer exist), such Issuing Lender may declare that Letters of Credit will not thereafter be issued by it in the affected Available Foreign Currency or Available Foreign Currencies, whereupon the affected Available Foreign Currency or Available Foreign Currencies shall be deemed (for the duration of such declaration) not to constitute an Available Foreign Currency for purposes of the issuance of Letters of Credit by such Issuing Lender.

SECTION 5. REPRESENTATIONS AND WARRANTIES

To induce the Agents and the Lenders to enter into this Agreement and to make Loans and issue or participate in the Letters of Credit, Hanover and HCLP hereby jointly and severally represent and warrant to the Administrative Agent and each Lender that:

5.1 Financial Condition. (a) The unaudited pro forma consolidated balance sheet of Hanover and its consolidated Subsidiaries as at September 30, 2003 (the “Pro Forma Balance Sheet”),

copies of which have heretofore been furnished to each Lender, has been prepared giving effect (as if such events had occurred on such date) to (i) the Loans to be made and the 2003 Notes and the Hanover Convertible Notes to be issued on the Closing Date and the use of proceeds thereof, (ii) the termination of the 1999 Synthetic Lease and the Existing Credit Agreement and (iii) the payment of fees and expenses in connection with the foregoing. The Pro Forma Balance Sheet has been prepared based on the best information available to Hanover as of the date of delivery thereof, and presents fairly in all material respects on a pro forma basis the estimated financial position of Hanover and its consolidated Subsidiaries as at September 30, 2003, assuming that the events specified in the preceding sentence had actually occurred at such date.

(b) The audited consolidated balance sheets of Hanover and its consolidated Subsidiaries as at December 31, 2001 and December 31, 2002, and the related consolidated statements of income and of cash flows for the fiscal years ended on such dates, reported on by and accompanied by an unqualified report from PricewaterhouseCoopers LLP, present fairly in all material respects the consolidated financial conditions of Hanover and its consolidated Subsidiaries as at such date, and the consolidated results of its operations and its consolidated cash flows for the fiscal years then ended. The unaudited consolidated balance sheet of Hanover and its consolidated Subsidiaries as at September 30, 2003, and the related unaudited consolidated statements of income and cash flows for the nine-month period ended on such date, present fairly in all material respects the consolidated financial conditions of Hanover and its consolidated Subsidiaries, as at such date, and the consolidated results of its operations and its consolidated cash flows for the nine-month period then ended (subject to normal year-end audit adjustments). All such financial statements, including the related schedules and notes thereto, have been prepared in accordance with GAAP applied consistently throughout the periods involved (except as approved by the aforementioned firm of accountants and disclosed therein). Hanover, HCLP and its Subsidiaries do not have any material Guarantee Obligations, contingent liabilities and liabilities for taxes, or any long-term leases or unusual forward or long-term commitments, including any interest rate or foreign currency swap or exchange transaction or other obligation in respect of derivatives, that are not reflected in the most recent financial statements referred to in this paragraph. During the period from September 30, 2003 to and including the date hereof there has been no Disposition by Hanover or any of its Subsidiaries, as applicable, of any material part of their business or property (other than to Hanover or any of its Subsidiaries).

5.2 No Change. Since September 30, 2003 (a) there has been no development or event nor any prospective development or event, which has had or would reasonably be expected to have a Material Adverse Effect and (b) except as disclosed on Schedule 5.2 to this Agreement, as of the date of this Agreement, no dividends or other distributions have been declared, paid or made upon the Capital Stock of Hanover or HCLP nor has any of the Capital Stock of Hanover or HCLP been redeemed, retired, purchased or otherwise acquired for value by Hanover or any of its respective Subsidiaries.

5.3 Corporate Existence; Compliance with Law. Each Credit Party (a) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (b) has the corporate power and authority, and the legal right, to own and operate its property, to lease the property it operates as lessee and to conduct the business in which it is currently engaged, (c) is duly qualified as a foreign corporation and in good standing under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification, except where the failure to be so qualified or (with respect to any Credit Party other than Hanover and HCLP) in good standing would not reasonably be expected to have a Material Adverse Effect, and (d) is in compliance with all Requirements of Law except to the extent that the failure to comply therewith would not, in the aggregate, reasonably be expected to have a Material Adverse Effect.

5.4 Corporate Power; Authorization; Enforceable Obligations. Each Credit Party has the corporate power and authority, and the legal right, to make, deliver and perform the Loan Documents to which it is a party. HCLP has the corporate power and authority, and the legal right, to borrow hereunder and has taken all necessary corporate action to authorize the borrowings on the terms and conditions of this Agreement and the Applications. Each Credit Party has taken all necessary corporate action to authorize the execution, delivery and performance of the Loan Documents to which it is a party. No consent or authorization of, filing with or other act by or in respect of, any Governmental Authority or any other Person (other than consents or authorizations the failure to obtain would not, in the aggregate, reasonably be expected to have a Material Adverse Effect) is required in connection with the borrowings hereunder or with the execution, delivery, performance, validity or enforceability of this Agreement, the Applications or any of the other Loan Documents, except consents, authorizations, filings and notices described in Schedule 5.4, which consents, authorizations, filings and notices have been obtained or made and are in full force and effect. This Agreement has been, and, each Application and each other Loan Document will be, duly executed and delivered on behalf of the Credit Parties party thereto. This Agreement constitutes, and each Note, each Application and each other Loan Document when executed and delivered will constitute, a legal, valid and binding obligation of the Credit Parties party thereto enforceable against such Credit Parties in accordance with their respective terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law).

5.5 No Legal Bar. The execution, delivery and performance of this Agreement, the Applications, and the other Loan Documents, the borrowings hereunder and the use of the proceeds thereof will not violate any Requirement of Law or Contractual Obligation of any Credit Party thereto and will not result in, or require, the creation or imposition of any Lien on any of their respective properties or revenues pursuant to any such Requirement of Law or Contractual Obligation, except as contemplated hereby or thereby and except to the extent any such violation or creation or imposition of a Lien would not reasonably be expected to have a Material Adverse Effect.

5.6 No Material Litigation. Except as set forth in HCLP’s Form 10-Q, filed with respect to the period ending September 30, 2003, no litigation, investigation or proceeding of or before any arbitrator or Governmental Authority is pending or, to the knowledge of Hanover or HCLP, threatened by or against any Credit Party or against any of their respective properties or revenues (a) with respect to this Agreement, or the other Loan Documents or any of the transactions contemplated hereby, or (b) which would reasonably be expected to have a Material Adverse Effect.

5.7 No Default. None of the Credit Parties nor any of their respective Subsidiaries is in default under or with respect to any of their respective Contractual Obligations in any respect which if not cured would reasonably be expected to have a Material Adverse Effect. No Default or Event of Default has occurred and is continuing.

5.8 Ownership of Property; Liens; Leases of Equipment. Each of the Credit Parties has good record and indefeasible title in fee simple (except for exceptions to title as will not in the aggregate materially interfere with the present or contemplated use of the property affected thereby) to, or a valid leasehold interest in, all its real property, and good title to all its other property, and none of such property is subject to any Lien except as permitted by Section 8.3. As used herein, Equipment or Inventory leased by a Credit Party under a Financing Lease shall be deemed “owned” by such Credit Party.

5.9 Intellectual Property. Each Credit Party owns, or is licensed to use, all trademarks, tradenames, trade secrets, copyrights, technology, know-how and processes necessary for the conduct of its business as currently conducted except for those the failure to own or license which would not

reasonably be expected to have a Material Adverse Effect (the “Intellectual Property”). To the knowledge of Hanover or HCLP, no claim has been asserted and is pending by any Person challenging or questioning the use of any such Intellectual Property or the validity or effectiveness of any such Intellectual Property, nor does Hanover or HCLP know of any valid basis for any such claim, which, in each case, would reasonably be expected to have a Material Adverse Effect. The use of such Intellectual Property by the Credit Parties does not infringe on the rights of any Person, except for such claims and infringements that, in the aggregate, would not reasonably be expected to have a Material Adverse Effect.

5.10 Taxes. Each of the Credit Parties has filed or caused to be filed all tax returns which, to the knowledge of Hanover and HCLP, are required to be filed and has paid all taxes shown to be due and payable on said returns or on any assessments made against it or any of its property and all other taxes, fees or other charges imposed on it or any of its property by any Governmental Authority (other than any the amount or validity of which are currently being contested in good faith by appropriate proceedings and with respect to which reserves in conformity with GAAP have been provided on the books of any of the Credit Parties, as the case may be); no tax Lien has been filed against the property of any Credit Party, and, to the knowledge of Hanover and HCLP, no claim is being asserted, with respect to any such tax, fee or other charge, except, in each case, for Governmental Authorities outside of the United States, Canada or the European Union, where the failure to file or cause to be filed such tax returns, the failure to pay such taxes, assessments, fees or other charges, the existence of such tax Liens, or the assertion of such claims would not reasonably be expected to result in a Material Adverse Effect.

5.11 Federal Regulations. No part of the proceeds of any Loans will be used for “purchasing” or “carrying” any “margin stock” within the respective meanings of each of the quoted terms under Regulation U of the Board of Governors of the Federal Reserve System as now and from time to time hereafter in effect or for any purpose which violates the provisions of the Regulations of such Board of Governors. If requested by any Lender or the Administrative Agent, HCLP will furnish to the Administrative Agent and each Lender a statement to the foregoing effect in conformity with the requirements of FR Form U-1 referred to in said Regulation U.

5.12 ERISA. Neither a Reportable Event nor an “accumulated funding deficiency” (within the meaning of Section 412 of the Code or Section 302 of ERISA) has occurred during the five-year period prior to the date on which this representation is made or deemed made with respect to any Plan, and each Plan has complied in all material respects with the applicable provisions of ERISA and the Code. No termination of a Single Employer Plan has occurred and no Lien in favor of the PBGC or a Plan has arisen during the five-year period prior to the date on which this representation is deemed made. The present value of all accrued benefits under each Single Employer Plan maintained by HCLP, or any Commonly Controlled Entity (based on those assumptions used to fund such Plans) did not, as of the last annual valuation date prior to the date on which this representation is made or deemed made, exceed the value of the assets of such Plan allocable to such accrued benefits by a material amount. Neither HCLP nor any Commonly Controlled Entity has had a complete or partial withdrawal from any Multiemployer Plan, and neither HCLP nor any Commonly Controlled Entity would become subject to any material liability under ERISA if HCLP or any such Commonly Controlled Entity were to withdraw completely from all Multiemployer Plans as of the valuation date most closely preceding the date on which this representation is made or deemed made. No such Multiemployer Plan is in Reorganization or Insolvent. The present value (determined using actuarial and other assumptions which are reasonable in respect of the benefits provided and the employees participating) of the liability of HCLP and each Commonly Controlled Entity for post retirement benefits to be provided to their current and former employees under Plans which are welfare benefit plans (as defined in Section 3(1) of ERISA) does not, in the aggregate, exceed the assets under all such Plans allocable to such benefits by a material amount.

5.13 Investment Company Act; Other Regulations. None of the Credit Parties is an “investment company”, or a company “controlled” by an “investment company”, within the meaning of the Investment Company Act of 1940, as amended. None of the Credit Parties is subject to regulation under any Federal or State statute or regulation which limits its ability to incur Indebtedness or change rates or change tariffs. None of the Credit Parties are “holding companies” or “subsidiary companies” of a “holding company” or a “subsidiary company” of a “holding company” within the meaning of the Public Utility Holding Company Act of 1935, as amended.

5.14 Subsidiaries. As of the Closing Date, Hanover has no Subsidiaries other than as set forth on Schedule 5.14. Except if a Credit Party, other than cash or Cash Equivalents, substantially all tangible assets owned by any Unqualified Subsidiary as of the date hereof are located within jurisdictions other than the United States of America or any territory thereof.

5.15 Purpose of Loans. The proceeds of the Loans shall be used for the working capital and general corporate purposes of HCLP and its Subsidiaries, including the refinancing of the Existing Credit Agreement.

5.16 Environmental Matters. Each of the representations and warranties set forth in paragraphs (a) through (e) of this Section is true and correct with respect to each parcel of real property owned or operated by any of the Credit Parties (the “Properties”), except to the extent that the facts and circumstances giving rise to any such failure to be so true and correct would not reasonably be expected to have a Material Adverse Effect:

(a) Except as set forth on Schedule 5.16, the Properties do not contain, and have not previously contained, in, on, or under, including, without limitation, the soil and groundwater thereunder, any Hazardous Materials in concentrations which violate Environmental Laws.

(b) Except as set forth on Schedule 5.16, the Properties and all operations and facilities at the Properties are in compliance with all Environmental Laws, and there is no Hazardous Materials contamination or violation of any Environmental Law which would reasonably be expected to interfere with the continued operation of any of the Properties or impair the fair saleable value of any thereof.

(c) Except as set forth on Schedule 5.16, none of the Credit Parties has received any complaint, notice of violation, alleged violation, investigation or advisory action or of potential liability or of potential responsibility regarding environmental protection matters or environmental permit compliance with regard to the Properties which has not been resolved, nor is HCLP aware that any Governmental Authority is contemplating delivering to any Credit Party any such notice.

(d) Hazardous Materials have not been generated, treated, stored, disposed of, at, on or under any of the Properties in concentrations that violate Environmental Laws, nor have any Hazardous Materials been transferred to any other location, in violation of any Environmental Laws from the Properties or as a result of the sale or lease of any equipment or inventory of any Credit Party.

(e) There are no governmental, administrative actions or judicial proceedings pending or contemplated under any Environmental Laws to which any Credit Party is or to HCLP’s knowledge will be named as a party with respect to the Properties, nor to HCLP’s knowledge are there any consent decrees or other decrees, consent orders, administrative orders or other orders, or other administrative or judicial requirements outstanding under any Environmental Law with respect to any of the Properties.

5.17 Accuracy and Completeness of Information. The factual statements contained in the Loan Documents and each other agreement, instrument, certificate and document related thereto and any other certificates or documents furnished or to be furnished to the Administrative Agent or the Lenders by any Credit Party from time to time in connection with this Agreement (in any case excluding any of the financial statements referred to in Section 5.1(a) hereof), taken as a whole, and taking into consideration all corrections or substituted documents, do not and will not, as of the date when made, contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained therein not misleading in light of the circumstances in which the same were made, all except as otherwise qualified herein; provided, that any financial information with respect to Hanover’s or HCLP’s projections furnished to the Administrative Agent and/or the Lenders were prepared in good faith on the basis of the assumptions stated therein, which assumptions were believed by Hanover or Hanover (as the case may be) to be reasonable in all material respects at the time made.

5.18 Senior Indebtedness. The obligations of Hanover under the Hanover Guarantee constitute “Senior Indebtedness” or “Senior Debt” under the (i) if applicable, terms of the Hanover Zero Coupon Subordinated Notes, (ii) if applicable, the documentation for the 2001A Equipment Lease Transaction and (iii) if applicable, the documentation for the 2001B Equipment Lease Transaction. The Obligations of HCLP constitute “Senior Indebtedness” or “Guarantor Senior Indebtedness” (i) if applicable, under the documentation for the 2001A Equipment Lease Transaction and (ii) if applicable, under the documentation for the 2001B Equipment Lease Transaction. The obligations of each Subsidiary under the Guarantees constitute “Guarantor Senior Indebtedness” under the documentation relating to the 2001A Equipment Lease Transaction (if applicable) and to the 2001B Equipment Lease Transaction (if applicable). From and after the date the 2003 Notes are issued, the obligations of HCLP under the Guarantees will constitute “Guarantor Senior Indebtedness” under the 2003 Notes Subordinated Guarantee.

5.19 Security Documents. (a) The Guarantee and Collateral Agreement is effective to create in favor of the Administrative Agent, for the benefit of the Lenders, a legal, valid and enforceable security interest in the Collateral described therein and proceeds thereof. In the case of the Pledged Stock described in Part II.A. of Schedule 4 to the Guarantee and Collateral Agreement, when stock certificates representing such Pledged Stock are delivered to the Administrative Agent, and in the case of the other Collateral described in the Guarantee and Collateral Agreement, when financing statements and other filings specified on Schedule 5.19(a) in appropriate form are filed in the offices specified on Schedule 5.19(a), the Guarantee and Collateral Agreement shall constitute a fully perfected Lien on, and security interest in, all right, title and interest of the Credit Parties in such Collateral and the proceeds thereof, as security for the Obligations (as defined in the Guarantee and Collateral Agreement) to the extent that the aforementioned Lien on the Collateral can be perfected through the filing of UCC financing statements or through the delivery of Pledged Stock and Pledged Notes, in each case prior and superior in right to any other Person (except, in the case of Collateral other than Pledged Stock and Pledged Notes, Liens permitted by Section 8.3).

(b) Each of the Mortgages is effective to create in favor of the Administrative Agent, for the benefit of the Lenders, a legal, valid and enforceable Lien on the Mortgaged Properties described therein and proceeds thereof, and when the Mortgages are filed in the offices specified on Schedule 5.19(b), each such Mortgage shall constitute a fully perfected Lien on, and security interest in, all right, title and interest of the Credit Parties in the Mortgaged Properties and the proceeds thereof, as security for the Obligations (as defined in the relevant Mortgage), in each case prior and superior in right to any other Person (except as permitted by such Mortgage). Schedule 1.1B lists, as of the Closing Date,

each parcel of owned real property and each leasehold interest in real property located in the United States and held by Hanover or any of its Subsidiaries that has a value, in the reasonable opinion of HCLP, in excess of $1,000,000 provided that no Mortgage will be taken on each of (i) the 825 South Loop West, Houston, Texas property or (ii) the 11250 Tanner Road, Houston, Texas property, unless such property is not disposed of within one year of the Closing Date.

5.20 Regulation H. Except with respect to the improved real property located at (i) 2019 Highway 135, Kilgore, TX, and (ii) 301 Cummings Avenue, Pocola, OK, no Mortgage encumbers improved real property that is located in an area that has been identified by the Secretary of Housing and Urban Development as an area having special flood hazards and in which flood insurance has been made available under the National Flood Insurance Act of 1968.

SECTION 6. CONDITIONS PRECEDENT

6.1 Conditions to Each Extension of Credit. The agreement of each Lender to make any extension of credit requested to be made by it on any date is subject to the satisfaction of the following conditions precedent:

(a) Representations and Warranties. Each of the representations and warranties made by the Credit Parties in or pursuant to the Loan Documents shall be true and correct in all material respects on and as of such date as if made on and as of such date (unless any such representations and warranties specifically refer to another date).

(b) No Default. No Default or Event of Default shall have occurred and be continuing on such date or after giving effect to the extensions of credit requested to be made on such date.

(c) Additional Documents. The Administrative Agent shall have received each additional document, instrument or item of information reasonably requested by it to further effect the purposes of this Agreement, including, without limitation, a copy of any debt instrument, security agreement or other material contract to which any Credit Party may be a party.

(d) Additional Matters. All corporate and other proceedings, and all documents, instruments and other legal matters in connection with the transactions contemplated by this Agreement shall be reasonably satisfactory in form and substance to the Administrative Agent, and the Administrative Agent shall have received such other documents in respect of any aspect or consequence of the transactions contemplated hereby or thereby as it shall reasonably request to further effect the purposes of this Agreement.

Each borrowing by and Letter of Credit issued on behalf of HCLP hereunder shall constitute a representation and warranty by HCLP as of the date of such Loan that the conditions contained in this Section 6.1 have been satisfied.

6.2 Conditions to Initial Extension of Credit. The Closing Date shall be the date of satisfaction of the following conditions precedent:

(a) Agreement; Consents. The Administrative Agent shall have executed this Agreement and shall have received counterparts hereof executed by Hanover, HCLP and the Lenders, and duly acknowledged and agreed to by each of the Subsidiary Guarantors. The Administrative Agent shall have received the Guarantee and Collateral Agreement, the Hanover Guarantee and the Subsidiaries’ Guarantee executed by each Credit Party thereto.

(b) Fees. The Lenders, the Co-Lead Arrangers and the Administrative Agent shall have received all fees required to be paid, and all expenses for which invoices have been presented (including reasonable fees, disbursements and other charges of counsel to the Agents), on or before the Closing Date.

(c) Termination of Existing Credit Agreement. The Administrative Agent shall have received satisfactory evidence that the Existing Credit Agreement shall have been terminated and all amounts thereunder shall have been paid in full.

(d) Termination of 1999 Synthetic Lease. The Administrative Agent shall have received satisfactory evidence that the 1999 Synthetic Lease (and the credit agreement, participation agreement and guarantee relating thereto) shall have been terminated and all amounts thereunder shall have been paid in full with the proceeds of the 2003 Notes and the Hanover Convertible Notes, and satisfactory arrangements shall have been made for the termination of all Liens granted in connection therewith.

(e) Equipment Lease Amendments. The 2000A Lease Guarantee and the 2000B Lease Guarantee shall have been amended, in form and substance reasonably satisfactory to the Administrative Agent.

(f) Proceeds from the 2003 Notes and the Hanover Convertible Notes. Hanover shall have received net proceeds of at least $275,000,000 from the issuance of (i) the 2003 Notes and (ii) the Hanover Convertible Notes. The minimum amount of net proceeds raised from the issuance of the Hanover Convertible Notes pursuant to clause (ii) above shall be no less than $75,000,000.

(g) Resolutions. The Administrative Agent shall have received, with a counterpart for each Lender, a copy of the resolutions, in form and substance satisfactory to the Administrative Agent, of the Board of Directors of each Credit Party authorizing the execution of this Agreement and the performance of HCLP’s obligations hereunder and any borrowings hereunder from time to time, certified by the Secretary or an Assistant Secretary of each such Credit Party, as of the Closing Date, which certificate shall state that the resolutions thereby certified have not been amended, modified, revoked or rescinded as of the date of such certificate.

(h) Incumbency Certificate. The Administrative Agent shall have received, to the extent that it has not previously received, a certificate of the Secretary or Assistant Secretary of each Credit Party, dated the Closing Date, as to the authority, incumbency and signature of each of the officers signing this Agreement, and any other instrument or document delivered by such Credit Party in connection herewith, together with evidence of the incumbency of such Secretary or Assistant Secretary.

(i) Pledged Stock; Stock Powers; Pledged Notes. The Administrative Agent shall have received (i) the certificates representing the shares of Capital Stock pledged pursuant to the Guarantee and Collateral Agreement and identified on Part II.A. of Schedule 4 thereto, together with an undated stock power for each such certificate executed in blank by a duly authorized officer of the pledgor thereof and (ii) each promissory note (if any) pledged to the Administrative Agent pursuant to the Guarantee and Collateral Agreement endorsed (without recourse) in blank (or accompanied by an executed transfer form in blank) by the pledgor thereof.

Notwithstanding the foregoing, the conditions contained in paragraph (i) above with respect to (and only with respect to) the pledge of the Capital Stock of Unqualified Subsidiaries may be satisfied within ninety (90) days of the Closing Date. The failure of Hanover and HCLP to satisfy such conditions by that date shall be deemed to be a violation of Section 8 for purposes of Section 9.

(j) Filings, Registrations and Recordings. Each document (including any Uniform Commercial Code financing statement) required by the Security Documents or under law or reasonably requested by the Administrative Agent to be filed, registered or recorded in order to create in favor of the Administrative Agent, for the benefit of the Lenders, a perfected Lien on the Collateral described therein, prior and superior in right to any other Person (other than with respect to Liens expressly permitted by Section 8.3), shall be in proper form for filing, registration or recordation.

(k) Mortgages, etc. (i) The Administrative Agent shall have received a Mortgage with respect to each Mortgaged Property, executed and delivered by a duly authorized officer of each party thereto.

(ii) If requested by the Administrative Agent, the Administrative Agent shall have received (A) a policy of flood insurance that (1) covers any parcel of improved real property that is encumbered by any Mortgage (2) is written in an amount not less than the outstanding principal amount of the indebtedness secured by such Mortgage that is reasonably allocable to such real property or the maximum limit of coverage made available with respect to the particular type of property under the National Flood Insurance Act of 1968, whichever is less, and (3) has a term ending not earlier than the maturity of the Indebtedness secured by such Mortgage and (B) confirmation that HCLP has received the notice required pursuant to Section 208.25(i) of Regulation H of the Board of Governors of the Federal Reserve System.

(l) Legal Opinions. The Administrative Agent shall have received such executed legal opinions of HCLP and Hanover which the Administrative Agent shall reasonably request.

SECTION 7. AFFIRMATIVE COVENANTS

Hanover hereby agrees that, so long as the Commitments remain in effect, any Note or any Letter of Credit remains outstanding and unpaid or any other amount is owing to any Lender or the Administrative Agent hereunder, Hanover shall and Hanover (except in the case of delivery of financial information, reports, certificates and notices) shall cause each of its Subsidiaries to:

7.1 Financial Statements. Furnish to each Lender or post on Hanover’s website (with notice of such posting being provided by Hanover to the Administrative Agent):

(a) as soon as available for distribution to shareholders and creditors generally, but in any event within 90 days (provided that, to the extent an extension is granted by the SEC, up to 15 additional days may be taken) after the end of each fiscal year of Hanover, a copy of the consolidated balance sheet of Hanover and its consolidated Subsidiaries and the related consolidating balance sheet schedule each as at the end of such year and the related consolidated statement of income of Hanover and consolidating schedule of income and consolidated statement of owner’s equity and of cash flows for such year, setting forth in each case in comparative form the figures for the previous year (provided, that such consolidating statements shall not include statements of owner’s equity or cash flows and will not set forth in comparative form the figures for the previous year but will include a column for the consolidated balance sheet

and consolidated statement of income of HCLP and its subsidiaries), the consolidated financial statements of Hanover shall be reported on without a “going concern” or like qualification or exception, or qualification arising out of the scope of the audit, by PricewaterhouseCoopers or other independent certified public accountants of nationally recognized standing not unacceptable to the Required Lenders; and

(b) as soon as available, but in any event not later than 45 days (provided that, to the extent an extension is granted by the SEC, up to 5 additional days may be taken) after the end of each of the first three quarterly periods of each fiscal year of Hanover, the unaudited consolidated balance sheet of Hanover and its consolidated Subsidiaries and the related consolidating balance sheet schedule of Hanover and its Subsidiaries, each as at the end of such quarter, and the related unaudited consolidated statements of income and cash flows of Hanover and its consolidated Subsidiaries and the related consolidating schedule of income and consolidated cash flows of Hanover and its Subsidiaries, for such quarter and the portion of the fiscal year through the end of such quarter, setting forth in each case in comparative form the figures for the corresponding period of the previous year (provided, that such consolidating statements shall not include statements of cash flows and will not set forth in comparative form the figures for the previous year but will include a column for the consolidated balance sheet and consolidated statement of income of HCLP and its subsidiaries), certified by a Responsible Officer as being fairly stated in all material respects when considered in relation to the consolidated financial statements of Hanover and its consolidated Subsidiaries or the consolidated financial statements of HCLP and its Subsidiaries, as applicable, (subject to normal year-end audit adjustments), and setting forth in the consolidated balance sheet, statement of income or cash flows a comparative of the figures for such periods as shown on the consolidated budgets of Hanover for such year;

all such financial statements to be complete and correct in all material respects and to be prepared in reasonable detail and in accordance with GAAP applied consistently throughout the periods reflected therein and with prior periods (except as approved by such accountants or officer, as the case may be, and disclosed therein).

7.2 Certificates; Other Information. Furnish to each Lender (or, in the case of clause (d), post on Hanover’s website, with notice thereof being given by Hanover to the Administrative Agent):

(a) concurrently with the delivery of the financial statements referred to in subsection 7.1(a), a certificate of the independent certified public accountants reporting on such financial statements stating that in making the examination necessary therefor no knowledge was obtained of any Default or Event of Default, except as specified in such certificate;

(b) concurrently with the delivery of the financial statements referred to in subsections 7.1(a) and 7.1(b), a certificate of a Responsible Officer (i) stating that, to the best of such Officer’s knowledge, Hanover during such period has observed or performed all of its covenants and other agreements, and satisfied every material condition, contained in this Agreement and the other Loan Documents to which it is a party to be observed, performed or satisfied by it, and that such Officer has obtained no knowledge of any Default or Event of Default except as specified in such certificate, such certificate to include the original total dollar amount of any Equipment True Leases (as such term is defined in the definition of “Equipment Lease Participation Agreements”) and (ii) setting forth calculations showing compliance with Sections 8.1, 8.2(f), (g), (q) and (s), 8.3(t), 8.6(g) and (k), 8.7 and 8.10(c), (e), (g), (h), (i) and (m);

(c) not later than 45 days (provided that, to the extent an extension is granted by the SEC, up to 5 additional days may be taken) following the end of each fiscal year of Hanover, a copy of the projections by Hanover of the operating budget and cash flow budget of Hanover and its Subsidiaries for the succeeding fiscal year, such projections to be accompanied by a certificate of a Responsible Officer to the effect that such projections have been prepared on the basis of reasonable assumptions and that such Officer has no reason to believe they are incorrect or misleading in any material respect;

(d) (i) within five days after the same are sent, copies of all financial statements and reports which Hanover, if at such time any class of such Person’s securities are held by the public, sends to its stockholders generally, or, if otherwise, such financial statements and reports as are made generally available to the public, and (ii) within five days after the same are filed, copies of all financial statements and reports which HCLP may make to, or file with, the Securities and Exchange Commission or any successor or analogous Governmental Authority;

(e) within 45 days (provided that, to the extent an extension is granted by the SEC, up to 5 additional days may be taken) after the end of each quarter in each fiscal year of Hanover, a certificate of the principal financial officer of Hanover showing both the Applicable Margin for the next quarter and the detailed computations necessary to calculate the Applicable Margin (an “Applicable Margin Certificate”) and setting forth the aggregate drawable amount of outstanding Letters of Credit issued under this Agreement and the aggregate drawable amount of other letters of credit issued for the account of HCLP or its Subsidiaries, in each case as of the last day of the immediately preceding quarter; and

(f) promptly, such additional financial and other information as any Lender may from time to time reasonably request.

7.3 Payment of Obligations. Pay, discharge or otherwise satisfy at or before maturity or before they become delinquent, as the case may be, all its material obligations of whatever nature, except where the amount or validity thereof is currently being contested in good faith by appropriate proceedings and reserves in conformity with GAAP with respect thereto have been provided on the books of Hanover or any Subsidiary of Hanover, as the case may be.

7.4 Conduct of Business and Maintenance of Existence. Continue to engage in business of the same general type as now conducted by it and preserve, renew and keep in full force and effect its corporate existence and take all reasonable action to maintain all material rights, privileges and franchises necessary or desirable in the normal conduct of its business except as otherwise permitted pursuant to Section 8.5; comply with all Contractual Obligations and Requirements of Law except to the extent that failure to comply therewith would not, in the aggregate, reasonably be expected to have a Material Adverse Effect.

7.5 Maintenance of Property; Insurance. (a) Keep and maintain all property material to the conduct of its business in accordance with prudent industry practice in all material respects, ordinary wear and tear excepted, and (b) maintain, with financially sound and reputable insurance companies, insurance in such amounts and against such risks as are customarily maintained by companies engaged in the same or similar businesses operating in the same or similar locations.

7.6 Inspection of Property; Books and Records; Discussions. Keep proper books of records and account in which full, true and correct entries in conformity with GAAP and all Requirements of Law shall be made of all dealings and transactions in relation to its business and activities; and permit representatives of any Lender to visit and inspect any of its properties and examine and make abstracts

from any of its books and records at any reasonable time and as often as may reasonably be desired and to discuss the business, operations, properties and financial and other condition of Hanover and Subsidiaries of Hanover with officers and employees of Hanover and Subsidiaries of Hanover and with its independent certified public accountants; provided, however, that no such visit, inspection or examination or discussion shall unreasonably disrupt or interfere with normal operations of Hanover or any of its Subsidiaries and any such representatives of the Administrative Agent and the Lenders shall be accompanied by a Responsible Officer of Hanover. No failure to comply with any request for the exercise of rights hereunder shall be cause for any Event of Default unless such request is submitted in writing to Hanover with reference to this Section 7.6.

7.7 Notices. Promptly give notice to the Administrative Agent and each Lender of:

(a) the occurrence of any Default or Event of Default of which any Responsible Officer of Hanover or HCLP has actual knowledge;

(b) any (i) default or event of default by Hanover or any of its Subsidiaries under or with respect to any of their respective Contractual Obligations in any respect which, if not cured, would reasonably be expected to have a Material Adverse Effect, or to Hanover’s knowledge any default or event of default by any third party under or with respect to any Contractual Obligation of said third party with Hanover or any of its Subsidiaries in a respect which, if not cured, would reasonably be expected to have a Material Adverse Effect (ii) litigation, investigation or proceeding of which Hanover has actual knowledge which may exist at any time between Hanover or any Subsidiary of Hanover and any Governmental Authority, which in either case, would reasonably be expected to have a Material Adverse Effect;

(c) any litigation or proceeding affecting Hanover or any Subsidiary of Hanover of which Hanover has actual knowledge in which the amount involved is $5,000,000 or more and not covered by insurance or in which injunctive or similar relief is sought and which, in each case, if adversely determined would reasonably be expected to have a Material Adverse Effect;

(d) the following events, as soon as possible and in any event within 30 days after Hanover or any of its Subsidiaries has actual knowledge thereof: (i) the occurrence or expected occurrence of any Reportable Event with respect to any Plan, a failure to make any required contribution to a Plan, the creation of any Lien in favor of the PGBC or a Plan, or any withdrawal from, or the termination, Reorganization or Insolvency of any Multiemployer Plan or (ii) the institution of proceedings or the taking of any other action by the PBGC, Hanover, HCLP or any Commonly Controlled Entity with respect to the withdrawal from, or the termination, Reorganization or Insolvency of any Plan (other than pursuant to Section 4041(b) of ERISA); and

(e) a development or event which has had or would reasonably be expected to have a Material Adverse Effect.

Each notice pursuant to this Section shall be accompanied by a statement of a Responsible Officer setting forth details of the occurrence referred to therein and stating what action Hanover proposes to take with respect thereto.

7.8 Environmental Laws. Comply in all material respects with, and undertake all reasonable efforts to ensure material compliance by all tenants and subtenants, if any, with, all Environmental Laws and obtain and comply in all material respects with and maintain, and undertake all reasonable efforts to ensure that all tenants and subtenants obtain and comply in all material respects with and maintain, any and all licenses, approvals, registrations or permits required by Environmental Laws, and upon discovery of any material non-compliance, undertake all reasonable efforts to attain full material compliance;

(a) Conduct and complete all investigations, studies, sampling and testing, and all remedial, removal and other actions required under Environmental Laws and promptly comply in all material respects with all lawful orders and directives of all Governmental Authorities respecting Environmental Laws, except, in each case, to the extent that the failure to so conduct, complete or take such actions, or to comply with such orders and directives, would not in the aggregate reasonably be expected to have a Material Adverse Effect;

(b) Defend, indemnify and hold harmless the Administrative Agent and the Lenders, and their respective employees, agents, officers and directors, from and against any claims, demands, penalties, fines, liabilities, settlements, damages, costs and expenses of whatever kind or nature known or unknown, contingent or otherwise, arising out of, or in any way relating to the violation of or noncompliance with any Environmental Laws applicable to the real property owned or operated by Hanover or any Subsidiary of Hanover, or any orders, requirements or demands of Governmental Authorities related thereto, including, without limitation, reasonable attorney’s and consultant’s fees, investigation and laboratory fees, court costs and litigation expenses, except to the extent that any of the foregoing arise out of the gross negligence or willful misconduct of the party seeking indemnification therefor; and

(c) Maintain a program to identify and promote substantial compliance with and to minimize prudently any material liabilities or material potential liabilities under any Environmental Law that may affect Hanover or any of its Qualified Subsidiaries.

7.9 Additional Collateral, etc. (a) With respect to any new Subsidiary (other than an Excluded Unqualified Subsidiary) created or acquired after the Closing Date by Hanover or any of its Qualified Subsidiaries (which, for the purposes of this paragraph (b), shall include any existing Subsidiary that ceases to be an Excluded Unqualified Subsidiary), promptly (i) execute and deliver to the Administrative Agent such amendments to the Guarantee and Collateral Agreement as the Administrative Agent deems necessary or advisable to grant to the Administrative Agent, for the benefit of the Lenders, a perfected first priority security interest in the Capital Stock of such new Subsidiary that is owned by Hanover or any of its Subsidiaries, (ii) if requested by the Administrative Agent or the Required Lenders, deliver to the Administrative Agent the certificates representing such Capital Stock, together with undated stock powers, in blank, executed and delivered by a duly authorized officer of Hanover or the relevant Subsidiary, and (iii) cause such new Subsidiary (A) to become a party to the Guarantee and Collateral Agreement and (B) to take such actions necessary or advisable to grant to the Administrative Agent for the benefit of the Lenders a perfected first priority security interest in the Collateral described in the Guarantee and Collateral Agreement with respect to such new Subsidiary, including the filing of Uniform Commercial Code financing statements in such jurisdictions as may be required by the Guarantee and Collateral Agreement or by law or as may be requested by the Administrative Agent. The parties hereto acknowledge that the Guarantee and Collateral Agreement provides that each such Subsidiary shall be required to pledge its assets as provided therein but shall not be required to guarantee payment of obligations pursuant thereto unless (i) such Subsidiary guarantees payment of all or any portion of the Guaranteed Obligations, as defined in the 2001A Participation Agreement and the 2001B Participation Agreement, or (ii) such Subsidiary is requested to become a guarantor by the Administrative Agent or the Required Lenders.

(b) With respect to any new Excluded Unqualified Subsidiary created or acquired after the Closing Date by Hanover or any Subsidiary, promptly, and with respect to any Excluded Unqualified Subsidiary identified as a Post-Closing Pledged Subsidiary in the Guarantee and Collateral Agreement,

within ninety (90) days of the Closing Date (or within an additional time period not to exceed one hundred and eighty (180) days from the Closing Date, so long as Hanover and its Subsidiaries are diligently attempting to satisfy their obligations under this clause (b)), (i) execute and deliver to the Administrative Agent such amendments to the Guarantee and Collateral Agreement as the Administrative Agent deems necessary or advisable to grant to the Administrative Agent, for the benefit of the Lenders, a perfected first priority security interest in the Capital Stock of such new Subsidiary that is owned by Hanover or any Subsidiary that is not an Excluded Unqualified Subsidiary (provided that in no event shall (a) more than 66% of the total outstanding voting Capital Stock of any such new Subsidiary be required to be so pledged and (b) the Capital Stock of Subsidiaries not directly owned by Hanover, HCLP or any Qualified Subsidiary be required to be pledged), and (ii) if requested by the Administrative Agent or the Required Lenders, deliver to the Administrative Agent the certificates representing such Capital Stock, together with undated stock powers, in blank, executed and delivered by a duly authorized officer of Hanover or the relevant Subsidiary, and take such other action as may be necessary or, in the opinion of the Administrative Agent, desirable to perfect the Administrative Agent’s security interest therein. Until the obligations set forth in this clause (b) with respect to each Post-Closing Pledged Subsidiary (as defined in the Guarantee and Collateral Agreement) shall have been satisfied, the negative covenants contained in Section 8.2, 8.3, 8.4, 8.8, 8.9, 8.10 and 8.13 of this Agreement shall be observed or performed by and in respect of such Post-Closing Pledged Subsidiary without regard to any exceptions stated therein other than those consistent with ordinary course of business practices of, and in respect of, such Post-Closing Pledged Subsidiary on the Closing Date, and the failure to satisfy such obligations when due shall be deemed a violation of Section 8 for purposes of Section 9.

(c) With respect to any fee interest in any real property located in the United States having a book value (together with improvements thereof) of at least $1,000,000 acquired after the Closing Date by Hanover or any Subsidiary (other than (x) any such real property subject to a Lien expressly permitted by Section 8.3(p) and (y) real property acquired by any Excluded Unqualified Subsidiary), promptly (i) execute and deliver a first priority Mortgage, in favor of the Administrative Agent, for the benefit of the Lenders, covering such real property, (ii) if requested by the Administrative Agent, provide the Lenders with (x) title and extended coverage insurance covering such real property in an amount at least equal to the purchase price of such real property (or such other amount as shall be reasonably specified by the Administrative Agent) as well as a current ALTA survey thereof, together with a surveyor’s certificate and (y) any consents or estoppels reasonably deemed necessary or advisable by the Administrative Agent in connection with such Mortgage, each of the foregoing in form and substance reasonably satisfactory to the Administrative Agent and (iii) if requested by the Administrative Agent, deliver to the Administrative Agent legal opinions relating to the matters described above, which opinions shall be in form and substance, and from counsel, reasonably satisfactory to the Administrative Agent.

SECTION 8. NEGATIVE COVENANTS

Hanover hereby agrees that, so long as the Commitments remain in effect, any Note or any Letter of Credit remains outstanding and unpaid or any other amount is owing to any Lender or the Administrative Agent hereunder, Hanover shall not, and shall not permit any of its Subsidiaries to, directly or indirectly:

8.1 Financial Condition Covenants. (a) Minimum Consolidated Tangible Net Worth. Permit Consolidated Tangible Net Worth of HCLP to be less than $702,129,000.

(b) Consolidated Senior Indebtedness to Consolidated Adjusted EBITDAR. Permit the ratio of Consolidated Senior Indebtedness of HCLP to Consolidated Adjusted EBITDAR of HCLP for the four consecutive fiscal quarters of HCLP most recently ended to be greater than 3.75 to 1.0.

(c) Consolidated Indebtedness to Consolidated EBITDAR. Permit the ratio of Consolidated Indebtedness of HCLP to Consolidated EBITDAR of HCLP for the four consecutive fiscal quarters of HCLP ending with any fiscal quarter set forth below (the “Consolidated Leverage Ratio”) to be greater than the ratio set forth below opposite such fiscal quarter:

Fiscal Quarter Ending		Ratio
September 30, 2003 through September 30, 2005		4.25 to 1.0
December 31, 2005 through March 31, 2006		4.00 to 1.0
June 30, 2006 and thereafter		3.75 to 1.0

(d) Interest Coverage Ratio. Permit the ratio of Consolidated EBITDAR of Hanover to Consolidated Interest Expense of Hanover for the period of four consecutive fiscal quarters of Hanover most recently ended to be less than 2.25 to 1.0.

8.2 Limitation on Indebtedness. Create, incur, assume or suffer to exist any Indebtedness, except:

(a) Indebtedness in respect of the Loans, and other obligations of the Credit Parties under this Agreement and the other Loan Documents;

(b) Indebtedness of Hanover or HCLP to any of its Subsidiaries and of any such Subsidiary which is a Credit Party to HCLP or any other Subsidiary of HCLP;

(c) Indebtedness outstanding as of the Closing Date and listed on Schedule 8.2(c) and any Refinancing Indebtedness incurred in respect thereof;

(d) Indebtedness in respect of Financing Leases; provided that, after giving effect thereto, Section 8.7 is not contravened;

(e) Indebtedness in respect of Subordinated Debt, the terms and conditions of which have been approved in writing by the Agents and any Refinancing Indebtedness incurred in respect thereof;

(f) Non-Recourse Indebtedness of Unqualified Subsidiaries in an aggregate amount not to exceed $50,000,000 at any time, less the Dollar amount of any Permitted Credit Support that is included in the calculation of any other exception to this Section 8.2 or, with respect to any Permitted Credit Support constituting a Guarantee Obligation, in the calculation of any of the exceptions to Section 8.4;

(g) Indebtedness of a Person which becomes a Subsidiary after the date hereof in an aggregate principal amount not exceeding as to Hanover and its Subsidiaries $20,000,000 at any time outstanding, provided that (i) such indebtedness existed at the time such Person became a Subsidiary and was not created in anticipation thereof and (ii) immediately after giving effect to the acquisition of such Person by Hanover or any of its Subsidiaries no Default or Event of Default shall have occurred and be continuing;

(h) Indebtedness in respect of Equipment Lease Tranche A Loans and any Refinancing Indebtedness incurred in respect thereof;

(i) Indebtedness in respect of the 2008 Notes and any Refinancing Indebtedness incurred in respect thereof;

(j) Indebtedness of Hanover evidenced by the Hanover Zero Coupon Subordinated Notes and any Refinancing Indebtedness incurred in respect thereof;

(k) Indebtedness of Hanover in respect of the 2003 Notes in an aggregate principal amount not to exceed $275,000,000 (provided that any net proceeds received from the issuance of the 2003 Notes in excess of $200,000,000 shall be used to prepay the 2000A Synthetic Lease and/or the 2000B Synthetic Lease) and any Refinancing Indebtedness incurred in respect thereof;

(l) Guarantee Obligations permitted by Section 8.4;

(m) Indebtedness of Hanover evidenced by the Hanover Convertible Notes in an aggregate principal amount not to exceed $150,000,000 and any Refinancing Indebtedness incurred in respect thereof;

(n) Indebtedness of Hanover or HCLP in an aggregate principal amount not to exceed the amount required to repurchase the Equipment subject to an Equipment Lease (described in clause (i), (ii) or (iii) of the definition thereof) pursuant to the purchase option set forth in Section 20 of such Equipment Lease, provided that the proceeds of such Indebtedness are used solely to purchase such Equipment pursuant to such purchase option (the “Equipment Lease Refinancing”);

(o) Investments permitted to be made pursuant to Section 8.10 in the form of Indebtedness;

(p) to the extent constituting Indebtedness, obligations under Derivatives permitted under Section 8.9; and

(q) Indebtedness secured by Liens permitted by subsection 8.3(s) in an aggregate principal amount not to exceed $25,000,000 at any one time outstanding;

(r) Indebtedness assumed by HCLP or any of its Subsidiaries pursuant to the Permitted International Reorganization and any Refinancing Indebtedness incurred in respect thereof; and

(s) unsecured Indebtedness not otherwise permitted by clauses (a)-(r) above not exceeding $40,000,000 in the aggregate at any time outstanding.

8.3 Limitation on Liens. Create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired, except for:

(a) Liens for taxes, assessments, governmental charges or levies (but excluding judgment Liens) not yet due or which are being contested in good faith by appropriate proceedings, provided that adequate reserves with respect thereto are maintained on the books of Hanover or any Subsidiary of Hanover, as the case may be, in conformity with GAAP;

(b) carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s, landlord’s or other like Liens arising in the ordinary course of business which are not overdue for a period of more than 60 days or which are being contested in good faith by appropriate proceedings;

(c) pledges or deposits in connection with workers’ compensation, unemployment insurance and other social security legislation and deposits securing liability to insurance carriers under insurance or self insurance arrangements;

(d) deposits to secure the performance of bids, trade contracts (other than for borrowed money), leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business;

(e) immaterial irregularities in title, easements, rights-of-way, restrictions and other similar encumbrances incurred in the ordinary course of business which, in the aggregate, are not substantial in amount and which do not in any case materially detract from the value of the property subject thereto or materially interfere with the ordinary conduct of the business of Hanover or any of its Subsidiaries;

(f) leases or subleases granted to third Persons not interfering in any material respect with the business of Hanover or any of its Subsidiaries;

(g) Liens arising from UCC financing statements regarding leases permitted by this Agreement or the Equipment Leases;

(h) any interest or title of a lessor or sublessor under any lease permitted by this Agreement or the Equipment Leases;

(i) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of custom duties in connection with the importation of goods so long as such Liens attach only to the imported goods;

(j) Liens arising out of consignment or similar arrangements for the sale of goods entered into by Hanover or any of its Subsidiaries in the ordinary course of business;

(k) Liens created pursuant to Financing Leases permitted pursuant to Section 8.2(d);

(l) Liens in existence on the Closing Date listed on Schedule 8.3(l), securing Indebtedness permitted by subsection 8.2(c) including any Refinancing Indebtedness incurred in respect thereof, provided that no such Lien is spread to cover any additional property after the Closing Date;

(m) Liens on (i) natural gas compressors and related equipment, and usual accessories and improvements and proceeds thereof, and (ii) oil and gas production equipment, in each case, the acquisition of which were financed with the proceeds of the Indebtedness permitted by subsection 8.2(d) and which secures only such Indebtedness, provided that any such Lien is placed upon such natural gas compressor or related equipment or such oil and gas production equipment at the time of the acquisition of such natural gas compressors or related equipment or such oil and gas production equipment by Hanover or any of its Subsidiaries and the Lien extends to no other property, and provided, further, that no such Lien is spread to cover any additional property after the date such Lien attaches and that the amount of Indebtedness secured thereby is not increased;

(n) Liens on the assets of Unqualified Subsidiaries of Hanover securing Indebtedness of such Unqualified Subsidiaries permitted under subsection 8.2(f);

(o) Liens securing Derivatives entered into by Hanover and its Subsidiaries with a lender under this Agreement or the Equipment Lease Transactions and which are permitted under Section 8.9;

(p) Liens on the property or assets of a Person which becomes a Subsidiary after the date hereof securing Indebtedness permitted by subsection 8.2(g), provided that (i) such Liens existed at the time such Person became a Subsidiary and were not created in anticipation thereof, (ii) any such Lien is not spread to cover any property or assets of such Person after the time such Person becomes a Subsidiary, and (iii) the amount of Indebtedness secured thereby is not increased;

(q) Liens that arise in connection with the Equipment Lease Transactions;

(r) Liens created pursuant to the Security Documents;

(s) Liens securing Indebtedness of HCLP or any other Subsidiary incurred pursuant to Section 8.2(r) to finance the acquisition of fixed or capital assets, provided that (i) such Liens shall be created substantially simultaneously with the acquisition of such fixed or capital assets, (ii) such Liens do not at any time encumber any property other than the property financed by such Indebtedness and (iii) the amount of Indebtedness secured thereby is not increased;

(t) Liens not otherwise permitted in clauses (a)-(s) above securing Indebtedness not exceeding $2,500,000 in the aggregate;

(u) judgment Liens against Hanover or any of its Subsidiaries involving in the aggregate a liability (not paid or fully covered by insurance) of less than $5,000,000 in the aggregate; and

(v) Liens on the property or assets of POC securing Indebtedness permitted by Section 8.2; provided that (i) such Liens existed at the time POC became a Subsidiary and were not created in anticipation thereof, (ii) any such Lien is not spread to cover any property or assets of POC after the time POC becomes a Subsidiary, and (iii) the amount of Indebtedness, Guarantee Obligations and other obligations secured thereby is not increased.

8.4 Limitation on Guarantee Obligations. Create, incur, assume or suffer to exist any Guarantee Obligation except:

(a) the Guarantees and the Equipment Lease Guarantees, and any Refinancing Indebtedness incurred in respect thereof;

(b) up to $5,000,000 in the aggregate of Guarantee Obligations of HCLP or any of its Subsidiaries in connection with indebtedness incurred by customers of HCLP or any of its Subsidiaries; provided, that the proceeds of any such indebtedness shall be used by such customers to purchase natural gas compressors or oil and gas production equipment from HCLP or any of its Subsidiaries;

(c) Guarantee Obligations (in respect of obligations not constituting Indebtedness) arising under agreements entered into by HCLP or any of its Subsidiaries in the ordinary course of business;

(d) guarantees in respect of Indebtedness (other than Subordinated Debt and the 2003 Notes) permitted under this Agreement;

(e) Guarantee Obligations of Hanover and any of its Subsidiaries arising pursuant to the Equipment Lease Transactions, and any Refinancing Indebtedness incurred in respect thereof;

(f) the Guarantor Obligations of HCLP in the nature of a guarantee or indemnification for, in each case, performance obligations (and not Indebtedness) as contemplated by the HMS Transactions;

(g) the Subordinated Guarantee Obligations of Hanover arising under the TIDES Guarantees, and any Refinancing Indebtedness incurred in respect thereof;

(h) the 2003 Notes Subordinated Guarantee; and

(i) Guarantee Obligations of Hanover and any of its Subsidiaries arising pursuant to the Equipment Lease Refinancing, and any Refinancing Indebtedness incurred in respect thereof.

Notwithstanding the foregoing, Subsidiaries of Hanover may not provide Guarantee Obligations in respect of the 2008 Notes (or any permitted refinancing thereof), the Hanover Convertible Notes, the Hanover Zero Coupon Subordinated Notes or other indebtedness issued by Hanover (other than the 2003 Notes and any Refinancing Indebtedness incurred in respect thereof, the guarantees of which shall be subordinated to the Obligations).

8.5 Limitations on Fundamental Changes. Enter into any merger, consolidation or amalgamation, or liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution), or convey, sell, lease, assign, transfer or otherwise dispose of, all or substantially all of its property, business or assets, or make any material change in its present method of conducting business, except:

(a) any Subsidiary may be merged or consolidated with or into any Qualified Subsidiary; provided, that a Qualified Subsidiary shall be the continuing or surviving corporation;

(b) Hanover or any Qualified Subsidiary may be merged or consolidated with any other Person organized under a jurisdiction of the United States with assets held primarily in the United States; provided, that Hanover or such Qualified Subsidiary shall be the continuing or surviving corporation, the Administrative Agent is provided with written notice, and after giving effect thereto no Default or Event of Default would exist or reasonably be expected to be caused thereby and provided, further, that Hanover may not merge with or consolidate into any Subsidiary;

(c) any Qualified Subsidiary may sell, lease, assign, transfer or otherwise dispose of any or all of its assets to any Qualified Subsidiary;

(d) any Unqualified Subsidiary may be merged or consolidated with or into any other Person other than Hanover and/or may sell, lease, assign, transfer or otherwise dispose of any of its assets (upon voluntary liquidation or otherwise) to any other Person other than Hanover provided that, if merged or consolidated with or into a Qualified Subsidiary, the Qualified Subsidiary will remain as a ‘Qualified Subsidiary’ after the merger;

(e) pursuant to the Equipment Lease Transactions;

(f) the TIDES Trust may wind up or dissolve itself (or suffer a liquidation or dissolution), or convey, assign, transfer or otherwise dispose of, all or substantially all of its property, business or assets, as contemplated by the TIDES Declaration of Trust;

(g) any of the HMS Entities may wind up, dissolve (or suffer a liquidation or dissolution), or convey, assign, transfer or otherwise dispose of, all or substantially all of its property, business or assets;

(h) any merger, consolidation, amalgamation, liquidation, winding up, dissolution, conveyance, sale, lease, assignment, transfer, disposition or material change undertaken pursuant to the Permitted International Reorganization;

(i) any Qualified or Unqualified Subsidiary that sells, leases, assigns, transfers or otherwise disposes of substantially all of its assets in accordance with the provisions of clauses (c) or (d) above may then dissolve, liquidate or be wound up; and

(j) any merger, consolidation, amalgamation, liquidation, winding up, dissolution, conveyance, sale, lease, assignment, transfer, disposition or material change that is undertaken in a series of steps and that, after giving effect to all such steps, would be permitted under one or more of clauses (a) through (j) above.

8.6 Limitation on Sale or Lease of Assets. Convey, sell, lease, assign, transfer or otherwise dispose of any of its property, business or assets (including, without limitation, receivables and leasehold interests), whether now owned or hereafter acquired, except:

(a) sales, transfers or other Dispositions of personal property in the ordinary course of business when, in the reasonable judgment of Hanover, such property is no longer used or useful in the conduct of its business or the business of its Subsidiaries, provided that the aggregate value of obsolete or worn out natural gas compressors and oil and gas production equipment disposed of in the ordinary course of business does not exceed $40,000,000 during any fiscal year of Hanover;

(b) the sale of inventory and other similar assets in the ordinary course of business, provided that if such inventory is comprised of natural gas compressors or oil and gas production equipment, such natural gas compressors or oil and gas production equipment were never part of the natural gas compressors or oil and gas production equipment leased or held for lease by HCLP or any of its Subsidiaries;

(c) the lease or sublease by HCLP or any of its Subsidiaries as lessor of equipment in the ordinary course of business under operating leases (which do not constitute Financing Leases);

(d) the sale or discount without recourse of defaulted accounts receivable arising in the ordinary course of business in connection with the compromise or collection thereof;

(e) as permitted by Section 8.5 and Section 8.10;

(f) the sale of natural gas compressors and oil and gas production equipment, other than disposals and sales covered by clauses (a) and (b) above, provided that the fair market value of natural gas compressors and oil and gas production equipment sold during the term of this Agreement does not exceed ten percent of the aggregate fair market value of all natural gas compressors and oil and gas production equipment owned by HCLP and its Qualified Subsidiaries; provided further that if the proceeds are reinvested in natural gas compressors or oil and gas production equipment to be owned by HCLP or its Qualified Subsidiaries within nine months after the sale of the assets which produced such proceeds, such proceeds shall not be included for purposes of this covenant;

(g) the sale or exchange of natural gas compressors to the Lessor in connection with the Equipment Lease Transactions; and provided (i) that each such sale or exchange is for fair market value and (ii) the aggregate fair market value of natural gas compressors so sold or exchanged after the Closing Date does not exceed $65,000,000 per fiscal year;

(h) the lease of assets as listed on Schedule 8.6(h);

(i) asset sales made on or after the Closing Date consisting of sales of assets described on Schedule 8.6(i) hereto for fair market value;

(j) pursuant to the Permitted International Reorganization; and

(k) the Disposition of other property having a fair market value not to exceed $5,000,000 in the aggregate for any fiscal year of HCLP.

8.7 Limitation on Leases. Permit Consolidated Lease Expense for any fiscal year of Hanover to exceed $20,000,000, except to the extent any such excess results from expenses relating to any Equipment True Leases.

8.8 Limitation on Dividends. Declare or pay any dividend (other than dividends payable solely in common stock of such Person or in options, warrants or rights to purchase such common stock) on, or make any payment on account of, or set apart assets for a sinking or other analogous fund for, the purchase, redemption, defeasance, retirement or other acquisition of, any shares of any class of Capital Stock of such Person or any warrants or options to purchase any such Stock, whether now or hereafter outstanding, or make any other distribution in respect thereof, either directly or indirectly, whether in cash or property or in obligations of Hanover or any Subsidiary of Hanover (collectively, “Restricted Payments”), except that if no Default or Event of Default exists or would reasonably be expected to be caused thereby (i) Subsidiaries of Hanover may declare and pay dividends to Hanover (to the extent necessary to pay interest on, or redeem, the TIDES Debentures and any Refinancing Indebtedness incurred in respect thereof or to cover operating expenses of Hanover) and other shareholders of such Subsidiaries and the TIDES Trust may redeem the TIDES as contemplated by the TIDES Declaration of Trust and any Refinancing Indebtedness incurred in respect thereof, (ii) Hanover may repurchase or redeem shares of Hanover common stock from its employees and former employees so long as the aggregate amount of all such repurchases since the Closing Date does not exceed $7,500,000, (iii) Subsidiaries of Hanover may declare and pay dividends, or make distributions, to Hanover to the extent necessary to allow Hanover to pay scheduled interest on the 2008 Notes and any Refinancing Indebtedness incurred in respect thereof, (iv) Subsidiaries of Hanover may declare and pay dividends, or make distributions, to Hanover to the extent necessary to allow Hanover to pay interest when due on (or, after the conversion of such notes, to the extent necessary to allow Hanover to make required dividend payments on such converted Capital Stock; provided, that in no event shall such dividend payments exceed the amount of interest payments that would have been otherwise required on

the Hanover Convertible Notes assuming no conversion had occurred) the Hanover Convertible Notes and any Refinancing Indebtedness incurred in respect thereof, (v) Subsidiaries of Hanover may declare and pay dividends, or make distributions, to Hanover to the extent necessary to allow Hanover to pay interest when due on the 2003 Notes and any Refinancing Indebtedness incurred in respect thereof, and (vi) any Subsidiary may make Restricted Payments to HCLP or to any Subsidiary of HCLP.

8.9 Limitation on Derivatives. Enter into or assume any obligations with respect to any Derivatives except for (i) Derivatives used by Hanover or any of its Subsidiaries in managing the interest rate risk exposure, commodity risk exposure or foreign currency risk exposure of Hanover and its Subsidiaries; provided, that the aggregate amounts of the Derivatives permitted by this clause (i) shall not exceed the aggregate amount of Indebtedness outstanding under this Agreement and the Equipment Lease Transactions and (ii) existing Derivatives of POC (so long as such Derivatives exist at the time POC became a Subsidiary and were not created in anticipation thereof); provided, further, that Derivatives entered into pursuant to clause (i) or (ii) above must be entered into for non-speculative purposes. For the purposes of clause (i), (x) in the case of Derivatives for managing interest rate risk or foreign exchange risk, the “amount” thereof shall be the aggregate notional amounts, and (y) in the case of Derivatives for managing commodity risk exposure, the “amount” thereof shall be the aggregate net amounts (including any net termination payments) required to be paid to counterparties thereunder.

8.10 Limitation on Investments, Loans and Advances. Make any advance, loan, extension of credit or capital contribution to, or purchase any stock, bonds, notes, debentures or other securities of or any assets constituting a business unit of, sell or contribute personal property or other assets to, or make any other investment in (all of the foregoing being herein collectively referred to as “Investments”), any Person, except:

(a) extensions of trade credit in the ordinary course of business;

(b) Investments in Cash Equivalents;

(c) loans and advances to employees of such Person or its Subsidiaries for travel, entertainment and relocation expenses in the ordinary course of business in an aggregate amount for Hanover and its Subsidiaries not to exceed $1,000,000 at any one time outstanding;

(d) Investments by Hanover in its Subsidiaries which are or become Credit Parties and investments by such Subsidiaries which are or become Credit Parties in other Subsidiaries of Hanover which are or become Credit Parties;

(e) Net Unqualified Subsidiary Investments not to exceed, in the aggregate, for each time period specified in the table set forth below, the cumulative amount specified in such table, provided that (i) at the time of each such Net Unqualified Subsidiary Investment, no Default or Event of Default shall have occurred and be continuing or result from such Net Unqualified Subsidiary Investment, (ii) all transactions related to such Net Unqualified Subsidiary Investment shall be consummated in accordance with applicable law, (iii) with respect to any acquired or newly formed Unqualified Subsidiary relating to such Net Unqualified Subsidiary Investment, such acquired or newly formed Unqualified Subsidiary shall take all actions required to be taken, if any, with respect to such acquired or newly formed Unqualified Subsidiary under the Loan Documents, (iv) Hanover shall be in compliance, on a pro forma basis after giving effect to such Net Unqualified Subsidiary Investment, with the covenants contained in Section 8.1 computed as at the last day of the fiscal quarter most recently ended prior to the delivery of the certificate required pursuant to this clause (iv), and Hanover shall have delivered to the Administrative Agent an officer’s certificate to such effect concurrently with the delivery of each certificate of a

Responsible Officer pursuant to Section 7.2(b) hereof, together with all relevant financial information with respect to such Net Unqualified Subsidiary Investment, and (v) after giving effect to the consummation of the transactions contemplated by such Net Unqualified Subsidiary Investment, the Loans to be made and the Letters of Credit to be issued hereunder, the sum of (A) the cash and Cash Equivalents (to the extent such cash and Cash Equivalents are free of any Liens other than customary bankers’ liens, the Liens created pursuant to the Security Documents and other Liens that are expressly permitted to exist pursuant to the provisions of the Security Documents) then held by Hanover and its Qualified Subsidiaries and (B) the Available Commitments of all the Lenders hereunder equals at least $60,000,000. In the table set forth below, the column headed “Aggregate Dollar amount of cash and net book value of other assets” refers to the aggregate U.S. Dollar amount of cash and Cash Equivalents and (in the case of property and assets other than cash and Cash Equivalents) the net book value of such property and other assets that, in each case, are transferred, contributed, sold or otherwise conveyed by Hanover and its Qualified Subsidiaries to such Unqualified Subsidiaries of Hanover as Net Unqualified Subsidiary Investments during each time period as indicated. For the avoidance of doubt, (I) the amounts specified in the second column of the table set forth below are “cumulative” amounts (by way of example, for the table below, during the time period beginning on the Closing Date and ending on December 31, 2003, Net Unqualified Subsidiary Investments of up to $25,000,000 may be made, and, during the time period beginning on the Closing Date and ending on the Final Maturity Date, Unqualified Subsidiary Investments of up to $200,000,000 may be made), and (II) the Investments listed in Schedule 8.10A shall not be included in the amounts in the second column of the table set forth below:

Time Period	Aggregate Dollar amount of cash and net book value of other assets
Closing Date through Dec. 31, 2003	$	25,000,000
Closing Date through Dec. 31, 2004	$	75,000,000
Closing date through Dec. 31, 2005	$	150,000,000
Closing Date through the Final Maturity Date	$	200,000,000

(f) Investments by Unqualified Subsidiaries of Hanover in other Unqualified Subsidiaries of Hanover (whether existing, newly formed or acquired) or in Qualified Subsidiaries (whether existing, newly formed or acquired) of Hanover provided that (i) at the time of each such Investment, no Default or Event of Default shall have occurred and be continuing or result from such Investment, (ii) all transactions related to such Investment shall be consummated in accordance with applicable law, (iii) any such acquired or newly formed Subsidiary shall take all actions required to be taken, if any, with respect to such acquired or newly formed Subsidiary under the Loan Documents, and (iv) Hanover shall be in compliance, on a pro forma basis after giving effect to such Investment, with the covenants contained in Section 8.1 computed as at the last day of the fiscal quarter most recently ended prior to the delivery of the certificate required pursuant to this clause (iv), and Hanover shall have delivered to the Administrative Agent an officer’s certificate to such effect concurrently with the delivery of each certificate of a Responsible Officer pursuant to Section 7.2(b) hereof, together with all relevant financial information with respect to such Investment;

(g) Investments constituting Permitted Business Acquisitions so long as, (a) after giving effect to the consummation of the transactions contemplated by each Permitted Business Acquisition, the Loans to be made and the Letters of Credit to be issued hereunder, the sum of (i) the cash and Cash Equivalents (to the extent such cash and Cash Equivalents are free of any Liens other than customary bankers’ liens, the Liens created pursuant to the Security Documents and other Liens that are expressly permitted to exist pursuant to the provisions of the Security Documents) then held by Hanover and its Qualified Subsidiaries and (ii) the Available Commitments of all the Lenders hereunder at such time equals at least $60,000,000 and (b) the aggregate amount of Investments constituting Permitted Business Acquisitions for any fiscal year shall not exceed $25,000,000 in the aggregate;

(h) Investments or acquisitions by Hanover or its Subsidiaries in (i) up to 50% of the shares of capital stock, partnership interests, joint venture interests, limited liability company interests or other similar equity interests in, a Person (other than a Subsidiary), or (ii) loans or advances to a Person (other than a Subsidiary), provided that (a) after giving effect to the consummation of the transactions contemplated by each such Investment or acquisition, the Loans to be made and the Letters of Credit to be issued hereunder, the sum of (x) the cash and Cash Equivalents (to the extent such cash and Cash Equivalents are free of any Liens other than customary bankers’ liens, the Liens created pursuant to the Security Documents and other Liens that are expressly permitted to exist pursuant to the provisions of the Security Documents) then held by Hanover and its Qualified Subsidiaries and (y) the Available Commitments of all the Lenders hereunder at such time equals at least $60,000,000 and (b) the aggregate amount of all such loans, advances, investments or acquisitions does not exceed $25,000,000 in any fiscal year;

(i) Loans to employees, officers and directors of Hanover and its Subsidiaries to acquire shares of capital stock of Hanover not to exceed $8,000,000;

(j) the purchase by the TIDES Trust of the TIDES Debentures, as contemplated under the TIDES Declaration of Trust;

(k) (i) Investments in POC’s Joint Ventures existing on the date of consummation of the POC Acquisition and (ii) Investments in POC’s Joint Ventures pursuant to commitments existing at the time of the POC Acquisition in an aggregate amount not to exceed $10,000,000;

(l) Investments in Unqualified Subsidiaries listed in Schedule 8.10A;

(m) Investments in Unrestricted Subsidiaries in an aggregate amount not to exceed $1,000,000 at any one time; and

(n) Investments undertaken pursuant to the Permitted International Reorganization.

8.11 Limitation on Optional Payments and Modifications of Debt Instruments. (i) Make any optional payment or optional prepayment on or optional redemption, optional purchase or optional defeasance of any portion of the Hanover Zero Coupon Subordinated Notes or any Refinancing Indebtedness incurred in respect thereof (other than an Offset Prepayment, as such term is defined in the Indenture related to the Hanover Zero Coupon Subordinated Notes), the 2008 Notes or any Refinancing Indebtedness incurred in respect thereof (other than scheduled cash interest payments), the Hanover Convertible Notes or any Refinancing Indebtedness incurred in respect thereof (other than scheduled cash interest payments), the 2003 Notes or any Refinancing Indebtedness incurred in respect thereof (other than scheduled cash interest payments), the 2001A Equipment Lease Securities or any Refinancing Indebtedness incurred in respect thereof (other than scheduled cash interest payments, subject to

applicable subordination provisions), the 2001B Equipment Lease Securities or any Refinancing Indebtedness incurred in respect thereof (other than scheduled cash interest payments, subject to applicable subordination provisions), lease and guarantee payments in respect of the 2001A Equipment Lease Transaction or any Refinancing Indebtedness incurred in respect thereof (other than scheduled lease payments, subject to applicable subordination provisions), and lease and guarantee payments in respect of the 2001B Equipment Lease Transaction or any Refinancing Indebtedness incurred in respect thereof (other than scheduled lease payments, subject to applicable subordination provisions), (ii) make any optional payment or optional prepayment in excess of $10,000,000 during any calendar year on or redemption of any Indebtedness or Guarantee Obligations other than (a) as permitted in clause (i) above, or (b) any optional payment, prepayment or redemption of any Indebtedness or Guarantee Obligations pursuant to the Equipment Lease Transactions (other than the 2001A Equipment Lease Transaction and the 2001B Equipment Lease Transaction or any Refinancing Indebtedness incurred in respect thereof) or (iii) amend, modify or change, or consent or agree to any amendment, modification or change to any of the terms of any Indebtedness or Guarantee Obligations other than in connection with any Refinancing Indebtedness that is permitted to be incurred (or exists) pursuant to the provisions of Section 8.2.

8.12 Transactions with Affiliates. Except for the transactions of a type set forth on Schedule 8.12, enter into any transaction, including, without limitation, any purchase, sale, lease or exchange of property or the rendering of any service, with any Affiliate unless such transaction is otherwise permitted under this Agreement, is in the ordinary course of Hanover’s or such Subsidiary’s business and is upon fair and reasonable terms no less favorable to Hanover or such Subsidiary, as the case may be, than it would obtain in a comparable arm’s length transaction with a Person not an Affiliate.

8.13 Sale and Leaseback. Except for the transactions of a type set forth on Schedule 8.13, enter into any arrangement with any Person where Hanover or any of the Subsidiaries of Hanover is the lessee of real or personal property which has been or is to be sold or transferred by Hanover or such Subsidiary to such Person or to any other Person to whom funds have been or are to be advanced by such Person on the security of such property or rental obligations of Hanover or such Subsidiary (any of such arrangements, a “Sale and Leaseback Transaction”), except that (i) HCLP and its Subsidiaries may enter into Financing Leases as lessee for natural gas compressors and oil and gas production equipment if after giving effect thereto Section 8.2 is not contravened and (ii) HCLP may enter into Sale and Leaseback Transactions as lessee for natural gas compressors in connection with the Equipment Lease Transactions.

8.14 Corporate Documents. Amend its Certificate of Incorporation in any way adverse to the interests of the Administrative Agent and the Lenders.

8.15 Fiscal Year. Permit the fiscal year of Hanover to end on a day other than December 31.

8.16 Nature of Business. (A) In the case of any Subsidiary, engage in any business other than (a) the leasing, maintenance, purchase, sale and operation of natural gas compressor units and oil and gas production equipment, (b) the design, engineering and fabrication of natural gas compressor units, (c) the design, engineering and fabrication of oil and gas production equipment, desalinization plants and other related equipment, (d) the provision of contract compression and related services, (e) the provision of gas metering services as contemplated under the HMS Transactions, (f) the provision of gas measurement and related services, (g) the design, engineering, fabrication, maintenance, leasing, purchase and sale of 0- to 50-megawatt skid-mounted, engine-driven generators, together with services related thereto and (h) any activities related thereto which are consistent with past practice and conducted in the ordinary course of business; and (B) in the case of Hanover, notwithstanding anything to the contrary contained herein, engage in any business other than (i) the direct or indirect ownership of HCLP together with any activities related thereto, (ii) the performance of its obligations under the Loan Documents,

(iii) the performance of its obligations under the 2008 Notes, the 2003 Notes, the Hanover Convertible Notes or the Hanover Zero Coupon Subordinated Notes and, in each case, any Refinancing Indebtedness incurred in respect thereof, (iv) the performance of its obligations in connection with the TIDES, including, without limitation, its obligations under the TIDES Indenture, the TIDES Guarantees and the TIDES Declaration of Trust, (v) the performance of its obligations under the documents executed in connection with the Wells Fargo Term Note, (vi) the formation and ownership of Subsidiaries for the purpose of making acquisitions to the extent permitted under the Loan Documents, (vii) the refinancing of the 2008 Notes, (viii) any actions required by law or the rules of any securities exchange on which its securities are listed and/or traded, and (ix) any other actions that Hanover is expressly permitted to take pursuant to the provisions of the Loan Documents.

8.17 Unqualified Subsidiaries. Permit any Unqualified Subsidiary to directly or indirectly own any material assets (other than cash or Cash Equivalents located in bank accounts) which are located in the United States of America or any territory thereof.

8.18 Negative Pledge Clauses. Enter into or suffer to exist or become effective any agreement that prohibits or limits the ability of Hanover or any Subsidiary of Hanover to create, incur, assume or suffer to exist any Lien upon any of its property or revenues, whether now owned or hereafter acquired, to secure its obligations under the Loan Documents to which it is a party other than (a) this Agreement and the other Loan Documents, (b) the Equipment Lease Transactions, (c) any agreements governing any purchase money Liens or capital lease obligations otherwise permitted hereby (in which case, any prohibition or limitation shall only be effective against the assets financed thereby), (d) the Wells Fargo Credit Agreement, (e) agreements entered into by Subsidiaries not directly owned by Hanover, HCLP or any Qualified Subsidiary, (f) agreements entered into by Unqualified Subsidiaries with respect to Non-Recourse Indebtedness and (g) with respect to property or revenues that do not constitute Collateral (as such term is defined in the Guarantee and Collateral Agreement), negative pledges covering property or revenues with a de minimis value; provided, that, notwithstanding Section 9, any negative pledge clauses covering properties or revenues that do not constitute Collateral may be cured within ninety (90) days.

8.19 Clauses Restricting Subsidiary Distributions. Enter into or suffer to exist or become effective any consensual encumbrance or restriction on the ability of any Subsidiary of Hanover to (a) make Restricted Payments in respect of any Capital Stock of such Subsidiary held by, or pay any Indebtedness owed to, Hanover or any other Subsidiary of Hanover, (b) make loans or advances to, or other Investments in, Hanover or any other Subsidiary of Hanover or (c) transfer any of its assets to Hanover or any other Subsidiary of Hanover, except for (i) such encumbrances or restrictions existing under or by reason of (x) any restrictions existing under the Loan Documents and the Equipment Lease Participation Agreements and (y) any restrictions with respect to a Subsidiary imposed pursuant to an agreement that has been entered into in connection with the Disposition of all or substantially all of the Capital Stock or assets of such Subsidiary, (ii) encumbrances or restrictions which do not adversely affect the ability of Hanover and its Subsidiaries to repay the Loans hereunder, (iii) agreements entered into by Subsidiaries not directly owned by Hanover, HCLP or any Qualified Subsidiary and (iv) agreements entered into by Unqualified Subsidiaries with respect to Non-Recourse Indebtedness.

SECTION 9. EVENTS OF DEFAULT

If any of the following events shall occur and be continuing:

(a) HCLP shall fail to pay any principal of any Note or any Reimbursement Obligation when due in accordance with the terms thereof or hereof; or HCLP shall fail to pay any interest on any Note, or any other amount payable hereunder, within five days after any such interest or other amount becomes due in accordance with the terms thereof or hereof; or

(b) Any representation or warranty made or deemed made by any Credit Party herein or in any other Loan Document or which is contained in any certificate, document or financial or other statement furnished at any time under or in connection with this Agreement or any other Loan Document shall prove to have been incorrect in any material respect on or as of the date made or deemed made; or

(c) (i) Hanover shall default in the observance or performance of any agreement contained in Section 8 of this Agreement; or (ii) an “Event of Default” under and as defined in any Mortgage shall have occurred and be continuing; or

(d) Hanover shall default in the observance or performance of any other agreement contained in this Agreement or any other Loan Document (other than as provided in paragraphs (a) through (c) of this Section 9) and such default shall continue unremedied for a period of 30 days after the earlier of (i) a Responsible Officer of either Hanover or HCLP obtains actual knowledge thereof, or (ii) written notice thereof shall have been given to Hanover or HCLP by any Lender, any Issuing Bank or the Administrative Agent; or

(e) The Subsidiaries’ Guarantee, the Hanover Guarantee or any of the Security Documents shall, at any time, cease to be in full force and effect (unless released by the Administrative Agent or any collateral agent therefor) or shall be declared null and void, or the validity or enforceability thereof shall be contested by any Credit Party or any Lien created by any of the Security Document shall cease to be enforceable and of the same effect and priority purported to be created thereby; or

(f) Hanover or any of the Subsidiaries of Hanover shall (i) default in any payment of principal of or interest of any Indebtedness (including any Guarantee Obligation, but excluding the Loans) or in the payment of any Guarantee Obligation, in excess of $5,000,000 in the aggregate, beyond the period of grace (not to exceed 30 days), if any, provided in the instrument or agreement under which such Indebtedness or Guarantee Obligation was created; or (ii) default in the observance or performance of any other agreement or condition relating to any such Indebtedness or Guarantee Obligation in excess of $5,000,000 or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event shall occur or condition exist, the effect of which default or other event or condition is to cause, or to permit the holder or holders of such Indebtedness or beneficiary or beneficiaries of such Guarantee Obligation (or a trustee or agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause, with the giving of notice if required, such Indebtedness to become due prior to its stated maturity or such Guarantee Obligation to become payable; or

(g) (i) Hanover or any Material Subsidiary shall commence any case, proceeding or other action (A) under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts, or (B) seeking appointment of a receiver, trustee, custodian or other similar official for it or for all or any substantial part of its assets, or any of Hanover or any Material Subsidiary shall make a general assignment for the benefit of its creditors; or (ii) there shall be commenced against any of Hanover or any Material Subsidiary any case, proceeding or other action of a nature referred to in clause (i) above which (A) results in the

entry of an order for relief or any such adjudication or appointment or (B) remains undismissed, undischarged or unbonded for a period of 60 days; or (iii) there shall be commenced against any of Hanover or any Material Subsidiary any case, proceeding or other action seeking issuance of a warrant of attachment, execution, distraint or similar process against all or any substantial part of its assets which results in the entry of an order for any such relief which shall not have been vacated, discharged, or stayed or bonded pending appeal within 60 days from the entry thereof; or (iv) any of Hanover or any Material Subsidiary shall take any action for the purpose of effecting its consent to, approval of, or acquiescence in, any of the acts set forth in clause (i), (ii), or (iii) above; or (v) any of Hanover or any Material Subsidiary shall generally not, or shall admit in writing its inability to, pay its debts as they become due; or

(h) (i) Any Person shall engage in any non-exempt “prohibited transaction” (as defined in Section 406 of ERISA or Section 4975 of the Code) involving any Plan, (ii) any “accumulated funding deficiency” (as defined in Section 302 of ERISA), whether or not waived, shall exist with respect to any Plan or any Lien shall arise on the assets of HCLP or any Commonly Controlled Entity in favor of PBGC or a Plan, (iii) a Reportable Event shall occur with respect to, or proceedings shall commence to have a trustee appointed, or a trustee shall be appointed, to administer or to terminate, any Single Employer Plan, which Reportable Event or commencement of proceedings or appointment of a trustee is, in the reasonable opinion of the Required Lenders, likely to result in the termination of such Plan for purposes of Title IV of ERISA, (iv) any Single Employer Plan shall terminate for purposes of Title IV of ERISA, (v) HCLP or any Commonly Controlled Entity shall, or in the reasonable opinion of the Required Lenders is likely to, incur any liability in connection with a withdrawal from, or the Insolvency or Reorganization of, a Multiemployer Plan or (vi) any other event or condition shall occur or exist, with respect to a Plan; and in each case in clauses (i) through (vi) above, such event or condition, together with all other such events or conditions, if any, could reasonably be expected to have a Material Adverse Effect;

(i) One or more judgments or decrees shall be entered against Hanover or any its Subsidiaries involving in the aggregate a liability (not paid or fully covered by insurance) of $5,000,000 or more and all such judgments or decrees shall not have been vacated, discharged, stayed or bonded pending appeal within 60 days from the entry thereof;

(j) If at any time, Hanover or any of its Subsidiaries shall become liable for remediation and/or environmental compliance expenses and/or fines, penalties or other charges which, in the aggregate, are in excess of $5,000,000; or

(k) (i) A “change of control” (however denominated) with respect to Hanover or HCLP shall have occurred under, or for purposes of, the 2001A Equipment Lease Securities, the 2001B Equipment Lease Securities, the Hanover Convertible Notes, the 2003 Notes, the 2008 Notes (or any refinancing thereof) or the Hanover Zero Coupon Subordinated Notes; (ii) any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), shall become, or obtain rights (whether by means or warrants, options or otherwise) to become, the “beneficial owner” (as defined in Rules 13(d)-3 and 13(d)-5 under the Exchange Act), directly or indirectly, of more than 35% of the outstanding common stock of Hanover; or (iii) Hanover shall cease to own and control, beneficially, 100% of each class of outstanding Capital Stock of HCLP free and clear of all Liens (except Liens created by the Guarantee and Collateral Agreement); or

(l) the obligations of Hanover and its Subsidiaries, if any, under the 2003 Notes Subordinated Guarantee, the Hanover Zero Coupon Subordinated Notes, the lease related to the

2001A Equipment Lease Transaction, the lease related to the 2001B Equipment Lease Transaction or any guarantees thereof shall cease, for any reason, to be validly subordinated to the Obligations or the obligations of the Guarantors under the Guarantees, as the case may be, as provided in the applicable documentation, or any Credit Party, Affiliate of a Credit Party, trustee or holders (representing at least 30% of any series of such subordinated obligations) shall so assert in writing);

then, and in any such event, (A) if such event is an Event of Default specified in clause (i) or (ii) of paragraph (g) above with respect to HCLP or Hanover, the Commitments shall immediately terminate automatically and the Loans hereunder (with accrued interest thereon) and all other amounts owing under this Agreement (including, without limitation, all amounts of L/C Obligations, whether or not the beneficiaries of the then outstanding Letters of Credit shall have presented the documents required thereunder) shall immediately become due and payable, and (B) if such event is any other Event of Default, either or both of the following actions may be taken: (i) with the consent of the Required Lenders, the Administrative Agent may, or upon the request of the Required Lenders, the Administrative Agent shall, by notice to HCLP declare the Commitments to be terminated forthwith, whereupon the Commitments shall immediately terminate; and (ii) with the consent of the Required Lenders, the Administrative Agent may, or upon the request of the Required Lenders, the Administrative Agent shall, by notice of default to HCLP declare the Loans hereunder (with accrued interest thereon) and all other amounts owing under this Agreement (including, without limitation, all amounts of L/C Obligations, whether or not the beneficiaries of the then outstanding Letters of Credit shall have presented the documents required thereunder) to be due and payable forthwith, whereupon the same shall immediately become due and payable. With respect to all Letters of Credit with respect to which presentment for honor shall not have occurred at the time of an acceleration pursuant to the preceding sentence, HCLP shall at such time deposit in a cash collateral account opened by the Administrative Agent an amount equal to the aggregate then undrawn and unexpired amount of such Letters of Credit. HCLP hereby grants to the Administrative Agent, for the benefit of the Issuing Lender and the L/C Participants, a security interest in such cash collateral to secure all obligations of HCLP under this Agreement and the other Loan Documents. Amounts held in such cash collateral account shall be applied by the Administrative Agent first to the payment of drafts drawn under such Letters of Credit. HCLP shall execute and deliver to the Administrative Agent, for the account of the Issuing Lender and the L/C Participants, such further documents and instruments as the Administrative Agent may reasonably request to evidence the creation and perfection of the within security interest in such cash collateral account. Except as expressly provided above in this Section, presentment, demand, protest and all other notices of any kind are hereby expressly waived.

SECTION 10. THE ADMINISTRATIVE AGENT

10.1 Appointment. Each Lender hereby irrevocably designates and appoints JPMorgan Chase Bank as the Administrative Agent of such Lender under this Agreement and the other Loan Documents, and each such Lender irrevocably authorizes JPMorgan Chase Bank, as the Administrative Agent for such Lender, to take such action on its behalf under the provisions of this Agreement and the other Loan Documents and to exercise such powers and perform such duties as are expressly delegated to the Administrative Agent by the terms of this Agreement and the other Loan Documents, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere in this Agreement, the Administrative Agent shall not have any duties or responsibilities, except those expressly set forth herein, or any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against the Administrative Agent.

10.2 Delegation of Duties. The Administrative Agent may execute any of its duties under this Agreement and the other Loan Documents by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Administrative Agent shall not be responsible for the negligence or misconduct of any agents or attorneys in-fact selected by it with reasonable care.

10.3 Exculpatory Provisions. Neither the Administrative Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates shall be (i) liable for any action lawfully taken or omitted to be taken by it or such Person under or in connection with this Agreement or any other Loan Document (except for its or such Person’s own gross negligence or willful misconduct) or (ii) responsible in any manner to any of the Lenders for any recitals, statements, representations or warranties made by any Credit Party or any officer thereof contained in this Agreement or any other Loan Document or in any certificate, report, statement or other document referred to or provided for in, or received by the Administrative Agent under or in connection with, this Agreement or any other Loan Document or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan Document or for any failure of any Credit Party to perform its obligations hereunder or thereunder. The Administrative Agent shall not be under any obligation to any Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Loan Document, or to inspect the properties, books or records of any Credit Party.

10.4 Reliance by Administrative Agent. The Administrative Agent shall be entitled to rely, and shall be fully protected in relying, upon any Note, writing, resolution, notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype message, statement, order or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to any Credit Party), independent accountants and other experts selected by the Administrative Agent. The Administrative Agent may deem and treat the payee of any Note as the owner thereof for all purposes unless a written notice of assignment, negotiation or transfer thereof shall have been filed with the Administrative Agent. The Administrative Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Loan Document unless it shall first receive such advice or concurrence of the Required Lenders as it deems appropriate or it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement and the other Loan Documents in accordance with a request of the Required Lenders, and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders and all future holders of the Loans.

10.5 Notice of Default. The Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default hereunder unless the Administrative Agent has received notice from a Lender or HCLP referring to this Agreement, describing such Default or Event of Default and stating that such notice is a “notice of default”. In the event that the Administrative Agent receives such a notice, the Administrative Agent shall give notice thereof to the Lenders. The Administrative Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Required Lenders; provided that unless and until the Administrative Agent shall have received such directions, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interests of the Lenders.

10.6 Non-Reliance on Administrative Agent and Other Lenders. Each Lender expressly acknowledges that neither the Administrative Agent nor any of its officers, directors, employees, agents,

attorneys-in-fact or Affiliates has made any representations or warranties to it and that no act by the Administrative Agent hereinafter taken, including any review of the affairs of any Credit Party shall be deemed to constitute any representation or warranty by the Administrative Agent to any Lender. Each Lender represents to the Administrative Agent that it has, independently and without reliance upon the Administrative Agent or any other Lender, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, financial and other condition and creditworthiness of HCLP and each other Credit Party and made its own decision to make its Loans hereunder and enter into this Agreement. Each Lender also represents that it will, independently and without reliance upon the Administrative Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and creditworthiness of HCLP and each other Credit Party. Except for notices, reports and other documents expressly required to be furnished to the Lenders by the Administrative Agent hereunder, the Administrative Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, operations, property, condition (financial or otherwise), prospects or creditworthiness of any Credit Party which may come into the possession of the Administrative Agent or any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates.

10.7 Indemnification. The Lenders agree to indemnify the Administrative Agent in its capacity as such (to the extent not reimbursed by HCLP or the other Credit Parties and without limiting the obligation of HCLP and each other Credit Party to do so), ratably according to the respective amounts of their original Commitments, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever which may at any time (including, without limitation, at any time following the payment of the Loans) be imposed on, incurred by or asserted against the Administrative Agent in any way relating to or arising out of this Agreement, any of the other Loan Documents or any documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any action taken or omitted by the Administrative Agent under or in connection with any of the foregoing; provided that no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting solely from the Administrative Agent’s gross negligence or willful misconduct. The agreements in this Section shall survive the payment of the Loans and all other amounts payable hereunder.

10.8 Administrative Agent in Its Individual Capacity. The Administrative Agent and its Affiliates may make loans to, accept deposits from, hold equity securities of, and generally engage in any kind of business with any Credit Party as though the Administrative Agent were not the Administrative Agent hereunder and under the other Loan Documents. With respect to its Loans made or renewed by it and any Note issued to it and with respect to any Letter of Credit issued or participated in by it, the Administrative Agent shall have the same rights and powers under this Agreement and the other Loan Documents as any Lender and may exercise the same as though it were not the Administrative Agent, and the terms “Lender” and “Lenders” shall include the Administrative Agent in its individual capacity.

10.9 Successor Administrative Agent. The Administrative Agent may resign as Administrative Agent upon 10 days’ notice to the Lenders. If the Administrative Agent shall resign as Administrative Agent under this Agreement and the other Loan Documents, then the Required Lenders shall appoint from among the Lenders a successor agent for the Lenders, which successor agent shall be subject to the approval of HCLP. Upon receipt of such approval from HCLP, such successor agent shall succeed to the rights, powers and duties of the Administrative Agent, and the term “Administrative Agent” shall mean such successor agent effective upon its appointment, and the former Administrative

Agent’s rights, powers and duties as Administrative Agent shall be terminated, without any other or further act or deed on the part of such former Administrative Agent or any of the parties to this Agreement or any holders of the Notes. After any retiring Administrative Agent’s resignation as Administrative Agent, the provisions of this Section shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement and the other Loan Documents.

SECTION 11. MISCELLANEOUS

11.1 Amendments and Waivers. Neither this Agreement, any other Loan Document, nor any terms hereof or thereof may be amended, supplemented or modified except in accordance with the provisions of this Section. With the written consent of the Required Lenders, the Administrative Agent, HCLP and any other Credit Party thereto, may, from time to time, enter into written amendments, supplements or modifications hereto and to the other Loan Documents for the purpose of adding any provisions to this Agreement or the other Loan Documents or changing in any manner the rights of the Lenders or of the Credit Parties party thereto hereunder or thereunder or waiving, on such terms and conditions as the Administrative Agent may specify in such instrument, any of the requirements of this Agreement or the other Loan Documents or any Default or Event of Default and its consequences; provided, however, that no such waiver and no such amendment, supplement or modification shall (a) reduce the amount or extend the maturity of any Loan or any installment thereof, or reduce the rate or extend the time of payment of interest thereon, or reduce any fee payable to any Lender hereunder, or change the amount of any Lender’s Commitments, in each case without the consent of the Lender affected thereby, or (b) amend, modify or waive any provision of this Section or reduce the percentage specified in the definition of Required Lenders, or consent to the assignment or transfer by any Credit Party of any of its rights and obligations under this Agreement and the other Loan Documents or release all or substantially all of the Collateral or release all of substantially all of the Guarantors from their obligations under either the Guarantee and Collateral Agreement, in each case without the written consent of all the Lenders (except as contemplated by this Agreement), or (c) amend, modify or waive any provision of Section 10 without the written consent of the then Administrative Agent. Any such waiver and any such amendment, supplement or modification shall apply equally to each of the Lenders and shall be binding upon each of the Credit Parties, the Lenders, the Administrative Agent and all future holders of the Loans. In the case of any waiver, each of the Credit Parties, the Lenders and the Administrative Agent shall be restored to their former position and rights hereunder and under any other Loan Documents, and any Default or Event of Default waived shall be deemed to be cured and not continuing; but no such waiver shall extend to any subsequent or other Default or Event of Default, or impair any right consequent thereon.

11.2 Notices. All notices, requests and demands to or upon the respective parties hereto to be effective shall be in writing (including by telecopy), and, unless otherwise expressly provided herein, shall be deemed to have been duly given or made when delivered by hand, or three days after being deposited in the mail, postage prepaid, or, in the case of telecopy notice or overnight courier service, when received, addressed as follows in the case of Hanover, HCLP and the Administrative Agent, and as set forth in Schedule 1.1A in the case of the other parties hereto, or to such other address as may be hereafter notified by the respective parties hereto:

Hanover and HCLP:

Hanover Compressor Company

12001 North Houston-Rosslyn

Houston, Texas 77086

Attention: Chief Financial Officer

Telecopy: (713) 447-8781

The Administrative Agent:

JPMorgan Chase Bank

Loan and Agency Services Group

1111 Fannin, 10th Floor

Houston, TX 77002

Attention: Janene English

Telephone: (713) 750-2501

Telecopy: (713) 427-6307

with a copy to:

JPMorgan Chase Bank

600 Travis St., 20th Floor

Houston, TX 77002

Attention: June Brand

Telephone: (713) 216-4327

Telecopy: (713) 216-4117

Notices and other communications to the Lenders hereunder may be delivered or furnished by electronic communications pursuant to procedures approved by the Administrative Agent; provided that the foregoing shall not apply to notices pursuant to Section 2 unless otherwise agreed by the Administrative Agent and the applicable Lender. The Administrative Agent or HCLP may, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it; provided that approval of such procedures may be limited to particular notices or communications.

11.3 No Waiver; Cumulative Remedies. No failure to exercise and no delay in exercising, on the part of the Administrative Agent or any Lender, any right, remedy, power or privilege hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law.

11.4 Survival of Representations and Warranties. All representations and warranties made hereunder and in any document, certificate or statement delivered pursuant hereto or in connection herewith shall survive the execution and delivery of this Agreement and the making of the Loans and other extensions of credit hereunder.

11.5 Payment of Expenses and Taxes. HCLP agrees (a) to pay or reimburse the Administrative Agent for all its reasonable out-of-pocket costs and expenses incurred in connection with the development, preparation and execution of, and any amendment, supplement or modification to, this Agreement, the other Loan Documents and any other documents prepared in connection herewith or therewith, and the consummation of the transactions contemplated hereby and thereby, including, without limitation, the reasonable fees and disbursements of counsel to the Administrative Agent, (b) to pay or reimburse each Lender and the Administrative Agent for all its reasonable costs and expenses incurred in connection with the enforcement or preservation of any rights under this Agreement, the other Loan Documents and any such other documents, including, without limitation, reasonable fees and disbursements of counsel to the Administrative Agent and to the several Lenders, and (c) to pay, indemnify, and hold each Lender and the Administrative Agent harmless from, any and all recording and filing fees and any and all liabilities with respect to, or resulting from any delay in paying, stamp, excise and other taxes, if any, which may be payable or determined to be payable in connection with the execution and delivery of, or consummation of any of the transactions contemplated by, or any

amendment, supplement or modification of, or any waiver or consent under or in respect of, this Agreement, the other Loan Documents and any such other documents, and (d) to pay, indemnify, and hold each Lender and the Administrative Agent and their respective directors, officers, employees and agents harmless from and against any and all other liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever with respect to the execution, delivery, enforcement, performance and administration of this Agreement, the Notes, the other Loan Documents and any such other documents or the use or the proposed use of proceeds thereof (all the foregoing, collectively, the “indemnified liabilities”); provided, that HCLP shall not have any obligation hereunder to the Administrative Agent or any Lender with respect to indemnified liabilities arising from (i) the gross negligence or willful misconduct of the Administrative Agent or any such Lender, (ii) legal proceedings commenced against the Administrative Agent or any such Lender by any security holder or creditor thereof arising out of and based upon rights afforded any such security holder or creditor solely in its capacity as such, or (iii) legal proceedings commenced against the Administrative Agent or any such Lender by any other Lender or by any Transferee (as defined in Section 11.6). The agreements in this Section shall survive repayment of the Loans and all other amounts payable hereunder and under the other Loan Documents.

11.6 Successors and Assigns; Participations and Assignments. (a) This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby (including any affiliate of the Issuing Lender that issues any Letter of Credit), except that (i) HCLP may not assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of each Lender (and any attempted assignment or transfer by HCLP without such consent shall be null and void) and (ii) no Lender may assign or otherwise transfer its rights or obligations hereunder except in accordance with this Section.

(b) (i) Subject to the conditions set forth in paragraph (b)(ii) below, any Lender may assign to one or more assignees (each, an “Assignee”) all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitments and the Loans at the time owing to it) with the prior written consent (such consent not to be unreasonably withheld) of:

(A) HCLP, provided that no consent of HCLP shall be required for an assignment to a Lender, an affiliate of a Lender, an Approved Fund (as defined below) or, if an Event of Default has occurred and is continuing, any other Person; and

(B) the Administrative Agent, provided that no consent of the Administrative Agent shall be required for an assignment of any Commitment to an assignee that is a Lender with a Commitment immediately prior to giving effect to such assignment.

(ii) Assignments shall be subject to the following additional conditions:

(A) except in the case of an assignment to a Lender, an affiliate of a Lender or an Approved Fund or an assignment of the entire remaining amount of the assigning Lender’s Commitment, the amount of the Commitment of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Assumption with respect to such assignment is delivered to the Administrative Agent) shall not be less than $5,000,000 unless each of HCLP and the Administrative Agent otherwise consent, provided that (1) no such consent of HCLP shall be required if an Event of Default has occurred and is continuing and (2) such amounts shall be aggregated in respect of each Lender and its affiliates or Approved Funds, if any;

(B) the parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Assumption, together with a processing and recordation fee of $3,500; and

(C) the Assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an administrative questionnaire.

For the purposes of this Section 11.6, the terms “Approved Fund” has the following meaning:

“Approved Fund” means any Person (other than a natural person) that is engaged in making, purchasing, holding or investing in bank loans and similar extensions of credit in the ordinary course of its business and that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender.

(iii) Subject to acceptance and recording thereof pursuant to paragraph (b)(iv) below, from and after the effective date specified in each Assignment and Assumption the Assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all of the assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 3.13, 3.14, 3.15 and 11.5). Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this Section 11.6 shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with paragraph (c) of this Section.

(iv) The Administrative Agent, acting for this purpose as an agent of HCLP, shall maintain at one of its offices a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitments of, and principal amount of the Loans and L/C Obligations owing to, each Lender pursuant to the terms hereof from time to time (the “Register”). The entries in the Register shall be conclusive, and HCLP, the Administrative Agent, the Issuing Lender and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary.

(v) Upon its receipt of a duly completed Assignment and Assumption executed by an assigning Lender and an Assignee, the Assignee’s completed administrative questionnaire (unless the Assignee shall already be a Lender hereunder), the processing and recordation fee referred to in paragraph (b) of this Section and any written consent to such assignment required by paragraph (b) of this Section, the Administrative Agent shall accept such Assignment and Assumption and record the information contained therein in the Register. No assignment shall be effective for purposes of this Agreement unless it has been recorded in the Register as provided in this paragraph.

(c) (i) Any Lender may, without the consent of HCLP or the Administrative Agent, sell participations to one or more banks or other entities (a “Participant”) in all or a portion of such Lender’s rights and obligations under this Agreement (including all or a portion of its Commitments and the Loans owing to it); provided that (A) such Lender’s obligations under this Agreement shall remain unchanged, (B) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (C) HCLP, the Administrative Agent, the Issuing Lender and the other Lenders shall continue to deal solely and directly with such Lender in connection with such

Lender’s rights and obligations under this Agreement. Any agreement pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver that (1) requires the consent of each Lender directly affected thereby pursuant to the proviso to the second sentence of Section 11.1 and (2) directly affects such Participant. Subject to paragraph (c)(ii) of this Section, HCLP agrees that each Participant shall be entitled to the benefits of Sections 3.11, 3.12 and 3.13 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (b) of this Section. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 11.7(b) as though it were a Lender, provided such Participant shall be subject to Section 11.7(a) as though it were a Lender.

(ii) A Participant shall not be entitled to receive any greater payment under Section 3.11, 3.12 or 3.13 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with HCLP’s prior written consent. Any Participant that is a Non-U.S. Lender shall not be entitled to the benefits of Section 3.12 unless such Participant complies with Section 3.12(d).

(d) Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank, and this Section shall not apply to any such pledge or assignment of a security interest; provided that no such pledge or assignment of a security interest shall release a Lender from any of its obligations hereunder or substitute any such pledgee or Assignee for such Lender as a party hereto.

(e) HCLP, upon receipt of written notice from the relevant Lender, agrees to issue Notes to any Lender requiring Notes to facilitate transactions of the type described in paragraph (d) above.

(f) Notwithstanding the foregoing, any Conduit Lender may assign any or all of the Loans it may have funded hereunder to its designating Lender without the consent of HCLP or the Administrative Agent and without regard to the limitations set forth in Section 11.6(b). Each of Hanover, HCLP, each Lender and the Administrative Agent hereby confirms that it will not institute against a Conduit Lender or join any other Person in instituting against a Conduit Lender any bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding under any state bankruptcy or similar law, for one year and one day after the payment in full of the latest maturing commercial paper note issued by such Conduit Lender; provided, however, that each Lender designating any Conduit Lender hereby agrees to indemnify, save and hold harmless each other party hereto for any loss, cost, damage or expense arising out of its inability to institute such a proceeding against such Conduit Lender during such period of forbearance.

11.7 Adjustments; Set-off. (a) If any Lender (a “Benefitted Lender”) shall at any time receive any payment of all or part of its Loans or the Reimbursement Obligations owing to it, or interest thereon, or receive any collateral in respect thereof (whether voluntarily or involuntarily, by set-off, pursuant to events or proceedings of the nature referred to in Section 9(g), or otherwise), in a greater proportion than any such payment to or collateral received by any other Lender, if any, in respect of such other Lender’s Loans or Reimbursement Obligations, or interest thereon, such benefitted Lender shall purchase for cash from the other Lenders such portion of each such other Lender’s Loans or the Reimbursement Obligations owing to it, or shall provide such other Lenders with the benefits of any such collateral, or the proceeds thereof, as shall be necessary to cause such benefitted Lender to share the excess payment or benefits of such collateral or proceeds ratably with each of the Lenders; provided,

however, that if all or any portion of such excess payment or benefits is thereafter recovered from such benefitted Lender, such purchase shall be rescinded, and the purchase price and benefits returned, to the extent of such recovery, but without interest. HCLP agrees that each Lender so purchasing a portion of another Lender’s Loans may exercise all rights of payment (including, without limitation, rights of set-off) with respect to such portion as fully as if such Lender were the direct holder of such portion.

(b) In addition to any rights and remedies of the Lenders provided by law, each Lender shall have the right, without prior notice to HCLP, any such notice being expressly waived by HCLP to the extent permitted by applicable law, upon any amount becoming due and payable by HCLP hereunder (whether at the stated maturity, by acceleration or otherwise) to set-off and appropriate and apply against such amount any and all deposits (general or special, time or demand, provisional or final), in any currency, and any other credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by such Lender to or for the credit or the account of HCLP. Each Lender agrees promptly to notify HCLP, the Administrative Agent after any such set-off and application made by such Lender, provided that the failure to give such notice shall not affect the validity of such set-off and application.

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

11.8 Counterparts. This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. A set of the copies of this Agreement signed by all the parties shall be lodged with HCLP and the Administrative Agent.

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

11.10 Integration. This Agreement represents the agreement of Hanover, HCLP, the Administrative Agent and the Lenders with respect to the subject matter hereof, and there are no promises, undertakings, representations or warranties by the Administrative Agent or any Lender relative to subject matter hereof not expressly set forth or referred to herein or in the other Loan Documents and the fee letter referred to in Section 3.2.

11.11 GOVERNING LAW. THIS AGREEMENT AND THE NOTES AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

11.12 Submission To Jurisdiction; Waivers. Each of Hanover and HCLP hereby irrevocably and unconditionally:

(a) submits for itself and its property in any legal action or proceeding relating to this Agreement and the other Loan Documents to which it is a party, or for recognition and enforcement of any judgment in respect thereof, to the non-exclusive general jurisdiction of the courts of the State of New York, the courts of the United States of America for the Southern District of New York, and appellate courts from any thereof;

(b) consents that any such action or proceeding may be brought in such courts and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same;

(c) agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to such Person at its address set forth in Section 11.2 or at such other address of which the Administrative Agent shall have been notified pursuant thereto;

(d) agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law or shall limit the right to sue in any other jurisdiction; and

(e) waives, to the maximum extent not prohibited by law, any right it may have to claim or recover in any legal action or proceeding referred to in this Agreement any special, exemplary, punitive or consequential damages.

11.13 Acknowledgments. Each of Hanover and HCLP hereby acknowledge that:

(a) it has been advised by counsel in the negotiation, execution and delivery of this Agreement and the other Loan Documents;

(b) neither the Administrative Agent nor any Lender has any fiduciary relationship to any Credit Party, and the relationship between Administrative Agent and Lenders, on one hand, and Hanover and HCLP, on the other hand, is solely that of debtor and creditor; and

11.14 WAIVERS OF JURY TRIAL. EACH OF HANOVER, HCLP, THE ADMINISTRATIVE AGENT AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR THE NOTES OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.

11.15 Judgment. (a) If for the purpose of obtaining judgment in any court it is necessary to convert a sum due hereunder in one currency into another currency, the parties hereto agree,

to the fullest extent that they may effectively do so, that the rate of exchange used shall be that at which in accordance with normal banking procedures the Administrative Agent could purchase the first currency with such other currency in the city in which it normally conducts its foreign exchange operation for the first currency on the Business Day preceding the day on which final judgment is given.

(b) The obligation of HCLP in respect of any sum due from it to any Lender hereunder shall, notwithstanding any judgment in a currency (the “Judgment Currency”) other than that in which such sum is denominated in accordance with the applicable provisions of this Agreement (the “Agreement Currency”), be discharged only to the extent that on the Business Day following receipt by such Lender of any sum adjudged to be so due in the Judgment Currency such Lender may in accordance with normal banking procedures purchase the Agreement Currency with the Judgment Currency; if the amount of Agreement Currency so purchased is less than the sum originally due to such Lender in the Agreement Currency, HCLP agrees notwithstanding any such judgment to indemnify such Lender against such loss, and if the amount of the Agreement Currency so purchased exceeds the sum originally due to any Lender, such Lender agrees to remit to HCLP such excess.

11.16 Usury. It is expressly stipulated and agreed to be the intent of Hanover, HCLP, the Administrative Agent and the Lenders at all times to comply with the applicable law governing the maximum rate or amount of interest payable on or in connection with the Loans. If the applicable law is ever judicially interpreted so as to render usurious any amount or compensation called for under this Agreement or any of the other Loan Documents, or contracted for, charged, taken, reserved or received with respect to any of the Loans, or if acceleration of the maturity of any of the Loans, any prepayment by HCLP, or any other circumstance whatsoever, results in the Lenders, or any of them, having been paid any interest in excess of that permitted by applicable law, then it is the express intent of HCLP, the Administrative Agent and the Lenders that all excess amounts theretofore collected by the Lenders be credited on the principal balances of the Loans (or, if the Loans have been or would thereby be paid in full, refunded to HCLP), and the other applicable Loan Documents immediately be deemed reformed and the amounts thereafter collectible hereunder and thereunder reduced, without the necessity of the execution of any new document, so as to comply with the applicable law, but so as to permit the recovery of the fullest amount otherwise called for hereunder and thereunder. The right to accelerate the maturity of any or all of the Loans does not include the right to accelerate any interest which has not otherwise accrued on the date of such acceleration, and the Lenders do not intend to collect any unearned interest in the event of acceleration. All sums or other compensation paid or agreed to be paid to the Lenders for the use, forbearance or detention of the indebtedness evidenced hereby shall, to the extent permitted by applicable law, be amortized, prorated, allocated and spread with respect to all of the Loans throughout the full term of such indebtedness until payment in full of all such indebtedness so that the rate or amount of interest on account of such indebtedness under all of the Loans does not exceed the Maximum Lawful Rate or maximum amount of interest permitted under applicable law. The term “Maximum Lawful Rate” as used herein as to any Lender means the maximum non-usurious rate of interest which may be lawfully contracted for, charged, taken, reserved, or received by such Lender from HCLP in connection with the Loans evidenced hereby under applicable law. The provisions of this Section 11.15 shall control all agreements between HCLP and the Lenders.

11.17 Conflicts. In the event that there exists a conflict between provisions in this Agreement and provisions in any other Loan Document, the provisions of this Agreement shall control.

11.18 Releases of Guarantees and Liens. (a) Notwithstanding anything to the contrary contained herein or in any other Loan Document, the Administrative Agent is hereby irrevocably authorized by each Lender (without requirement of notice to or consent of any Lender except as expressly required by Section 11.1) to take any action requested by Hanover having the effect of releasing any

Collateral or guarantee obligations (i) to the extent necessary to permit consummation of any transaction not prohibited by any Loan Document or that has been consented to in accordance with Subsection 11.1 or (ii) under the circumstances described in paragraph (b) below.

(b) At such time as the Loans, the Reimbursement Obligations and the other obligations under the Loan Documents shall have been paid in full, the Commitments have been terminated and no Letters of Credit shall be outstanding, the Collateral shall be released from the Liens created by the Security Documents, and the Security Documents and all obligations (other than those expressly stated to survive such termination) of the Administrative Agent and each Credit Party under the Security Documents shall terminate, all without delivery of any instrument or performance of any act by any Person.

11.19 Confidentiality. Each of the Administrative Agent and the Lenders agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its and its Affiliates’ directors, officers, employees and agents, including accountants, legal counsel and other advisors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (b) to the extent requested by any regulatory authority, (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (d) to any other party to this Agreement, (e) in connection with the exercise of any remedies hereunder or any suit, action or proceeding relating to this Agreement or the enforcement of rights hereunder, (f) subject to an agreement containing provisions substantially the same as those of this Section, to (i) any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement or (ii) any actual or prospective counterparty (or its advisors) to any swap or derivative transaction relating to Hanover or any of is Subsidiaries and its respective obligations, (g) with the consent of Hanover or any of is Subsidiaries or (h) to the extent such Information (i) becomes publicly available other than as a result of a breach of this Section or (ii) becomes available to the Administrative Agent or any Lender on a nonconfidential basis from a source other than Hanover or any of its Subsidiaries. For the purposes of this Section, “Information” means all information received from Hanover or any of its Subsidiaries relating to Hanover or its business, other than any such information that is available to the Administrative Agent or any Lender on a nonconfidential basis prior to disclosure by Hanover or any of its Subsidiaries. Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information. Notwithstanding anything herein to the contrary, any party to this Agreement (and any employee, representative, or other agent of any party to this Agreement) may disclose to any and all persons, without limitation of any kind, the tax treatment and tax structure of the transactions contemplated by this Agreement and all materials of any kind (including tax opinions or other tax analyses) that are provided to it relating only to such tax treatment and tax structure. However, any such information relating to the tax treatment or tax structure is required to be kept confidential to the extent necessary to comply with any applicable federal or state securities laws.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered by their duly authorized officers as of the date first written above.

HANOVER COMPRESSOR COMPANY

By:		/s/ John E. Jackson
Name: John E. Jackson
Title: Senior Vice President and Chief Financial Officer

HANOVER COMPRESSION LIMITED PARTNERSHIP

By:		/s/ John E. Jackson
Name: John E. Jackson
Title: Senior Vice President and Chief Financial Officer

JPMORGAN CHASE BANK, as Administrative Agent and as a Lender

By:		/s/ Russell A. Johnson
Name: Russell A. Johnson
Title: Vice President

Acknowledged and agreed to

as of the date hereof:

ENERGY TRANSFER – HANOVER VENTURES L.P.
GULF COAST DISMANTLING, INC.
HANOVER ASIA, INC.
HANOVER AUSTRALIA, L.L.C.
HANOVER COLOMBIA LEASING LLC
HANOVER COMPRESSED NATURAL GAS SERVICES, LLC
HANOVER COMPRESSOR NIGERIA, INC.
HANOVER COMPRESSION GENERAL HOLDINGS, LLC
HANOVER ECUADOR L.L.C.
HANOVER GENERAL ENERGY TRANSFER, LLC
HANOVER IDR, INC.
HANOVER LIMITED ENERGY TRANSFER, LLC
HANOVER MEASUREMENT, LLC
HANOVER PARTNERS NIGERIA LLC
HANOVER POWER, LLC
HANOVER POWER (GATES), LLC
HANOVER SPE, L.L.C.
HANOVER/TRINIDAD, L.L.C.
HC CAYMAN LLC
HC LEASING, INC.
HCC HOLDINGS, INC.
HCL COLOMBIA, INC.
KOG, INC.
NIGERIAN LEASING, LLC
SOUTHWEST INDUSTRIES, INC.

By:		/s/ John E. Jackson
		Name: John E. Jackson
		Title: Vice President and Treasurer


HANOVER HL HOLDINGS, LLC HANOVER HL, LLC

By:		/s/ Victoria L. Garrett
		Name: Victoria L. Garrett
		Title: Manager

ANNEX A

PRICING GRID

Revolving Credit Facility

Consolidated Leverage Ratio	Applicable Margin- Eurodollar Loans		Applicable Margin- Base Rate Loans
>4.0 to 1.0	3.50	%	2.50	%
£4.0 to 1.0 and >3.0 to 1.0	3.00	%	2.00	%
£3.0 to 1.0 and >2.0 to 1.0	2.75	%	1.75	%
£2.0 to 1.0	2.50	%	1.50	%

Changes in the Applicable Margin resulting from changes in the Consolidated Leverage Ratio shall become effective on each date which is the start of the succeeding fiscal quarter (each, an “Adjustment Date”) for which an Applicable Margin Certificate of Hanover is delivered to the Lenders pursuant to Section 7.2(f) (but in any event not later than the 45th day after the end of each of each quarter of each fiscal year) and shall remain in effect until the next change to be effected pursuant to this paragraph. If any Applicable Margin Certificate referred to above is not delivered within the time periods specified above, then the Consolidated Leverage Ratio as at the end of the fiscal period that would have been covered thereby shall for the purposes of this definition be deemed to be greater than 4.0 to 1.0. In addition, at all times while an Event of Default shall have occurred and be continuing, the highest rate set forth in each column of the Pricing Grid shall apply. Each determination of the Consolidated Leverage Ratio pursuant to this Pricing Grid shall be made for the periods and in the manner contemplated by Section 8.1(c).

ANNEX B

EXISTING LETTERS OF CREDIT *

LC Number	Expiration	Amount
P200359	11/15/04	$	83,242.00
P201169	07/11/04		34,355.00
P201738	06/30/04		4,000,000.00
P203852	02/28/04		50,487.00
P205023	02/13/04		2,124,386.84
P205945	09/30/04		795,000.00
P205992	09/28/04		1,505,000.00
P211388	01/31/04		2,326,920.00
P212764	01/30/04		186,875.00
P215543	02/12/04		63,000.00
P216377	08/10/04		150,000.00
P229481	09/03/04		59,174.00
P229927	11/16/04		194,478.00
P230918	10/15/04		140,000.00
P230950	01/31/04		5,043,835.34
P231688	05/19/04		400,000.00
P231732	10/15/04		59,558.60
P233143	12/31/03		100,000.00
P233203	12/31/03		10,124,025.00
P234141	03/01/04		197,245.32
P234809	04/23/04		6,750,000.00
P235795	06/01/04		190,000.00
P236209	06/15/04		439,400.00
P236970	08/02/04		457,708.16
P237502	05/16/04		3,000,000.00
P237906	01/03/04		169,400.00
P237972	11/25/04		162,795.03
P237973	01/20/04		233,200.00
P237974	11/15/04		212,000.00
P238562	05/01/04		293,251.90
P238651	07/02/04		215,458.32
P238653	07/02/04		56,390.40
P238962	07/30/04		77,084.30
P238997	01/20/04		308,337.20
P239571	06/30/04		310,000.00
P240209	04/26/04		834,060.00
P240211	04/26/04		779,560.00
P240356	02/21/04		80,728.58
P240371	02/21/04		565,100.06
P240403	01/08/04		381,952.55
P241242	09/22/04		12,000,000.00
P241358	04/10/04		40,000.00
P241391	01/24/04		250,000.00
P242089	03/28/04		75,000.00
P242249	01/30/04		23,061.64
P242595	11/24/04		169,400.00
P242798	11/24/04		61,700.00
P243416	05/07/04		3,000,000.00
P293592	07/08/04		853,272.00
P295860	08/29/04		170,937.00
6216617	03/20/04		3,324.00
6216995	05/16/04		103,877.00
6216996	05/16/04		120,875.00
6218434	01/31/04		2,456,600.00
6218929	07/17/04		308,303.00
6220220	09/11/04		123,185.00
6220434	07/17/04		21,406.00
6220900	08/29/04		152,385.00
6221340	01/01/04		2,500,000.00
6221457	10/30/04		2,518,300.00
6221868	01/14/04		182,417.00
6224509	05/07/04		101,833.80
6225289	11/01/04		5,150,000.00
6227294	06/17/04		112,267.00

*	Outstanding Letters of Credit total $73,652,152.04 at Closing.