8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of report (Date of earliest event reported): October 1, 2004

HANOVER COMPRESSOR COMPANY

(Exact Name of Registrant as Specified in its Charter)

Delaware
(State or Other Jurisdiction of Incorporation) 1-13071
(Commission File Number) 76-0625124
(IRS Employer Identification No.)

12001 North Houston Rosslyn
Houston, Texas
(Address of Principal Executive Offices) 77086
(Zip Code)

Registrant’s telephone number, including area code: (281) 447-8787

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4 (c) under the Exchange Act (17 CFR 240.13e-4(c))

TABLE OF CONTENTS

Employment Letter

Item 1.01. Entry into a Material Definitive Agreement

The disclosure under Item 5.02 of this report is also responsive to Item 1.01 hereof and is incorporated herein by reference.

Item 5.02. Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers.

     On October 1, 2004, the Board of Directors of Hanover Compressor Company unanimously elected John E. Jackson as President and Chief Executive Officer. Mr. Jackson will replace Chad C. Deaton, who has decided to resign from the positions of President, Chief Executive Officer and director of the company which he has held since August 2002 in order to join Baker Hughes, Inc. as its Chairman and Chief Executive Officer. Mr. Jackson’s appointment and Mr. Deaton’s resignation will be effective on October 25, 2004.

     John E. Jackson, 46, has served as Senior Vice President and Chief Financial Officer of Hanover Compressor Company since February 2002 and as a director of the company since July 2004. Prior to joining Hanover, Mr. Jackson served as Vice President and Chief Financial Officer of Duke Energy Field Services, a joint venture of Duke Energy and Phillips Petroleum that is one of the nation’s largest producers and marketers of natural gas liquids. Mr. Jackson joined Duke Energy Field Services as Vice President and Controller in April 1999 and was named Chief Financial Officer in February 2001. Prior to joining Duke Energy Field Services, Mr. Jackson served in a variety of treasury, controller and accounting positions at Union Pacific Resources between June 1981 and April 1999.

     We have entered into an agreement with Mr. Jackson pursuant to which he is entitled to receive an annual base salary of $540,000 for the remainder of 2004 and for 2005. Mr. Jackson is also eligible to receive an annual bonus up to 100% of his annual base salary based upon his personal performance and the performance of the company as determined by the Board of Directors of the company. In addition, Mr. Jackson received 100,000 shares of restricted stock issued under the Hanover Compressor Company 2003 Stock Incentive Plan that vest annually in one-fourth increments beginning on October 1, 2005.

     In the event Mr. Jackson is terminated without cause, he will be entitled to receive, among other benefits, a severance payment equal to one times his annual base salary. In the event (1) Mr. Jackson is terminated without cause or (2) Mr. Jackson terminates his employment for certain reason, and in either case such termination of his employment occurs within twelve months of a change of control of Hanover Compressor Company, Mr. Jackson will be entitled to receive, among other benefits, a severance payment equal to three times the sum of his annual base salary and target bonus which was in effect immediately prior to the change of control of Hanover Compressor Company and acceleration of vesting of all long-term incentives as well as the company match in his 401(k) Plan.

Item 9.01 Financial Statements and Exhibits.

     (a) Financial Statements of Businesses Acquired.

Not applicable.

     (b) Pro Forma Financial Information.

Not applicable.

     (c) Exhibits.

Number	Description of Exhibit
10.1	Employment Letter with John E. Jackson dated October 5, 2004

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	HANOVER COMPRESSOR COMPANY
Date: October 6, 2004	By:	/s/ Gary M. Wilson
	Name:	Gary M. Wilson
	Title:	Senior Vice President, General Counsel and Secretary

EXHIBIT INDEX

Number	Description of Exhibit
10.1	Employment Letter with John E. Jackson dated October 5, 2004

EX-10.1

EXHIBIT 10.1

October 5, 2004

Mr. John E. Jackson
62 North Knights Gate Circle
Cypress, Texas 77382

Dear John:

This letter summarizes Hanover Compressor Company’s offer to you to serve as the Company’s President and Chief Executive Officer (“President and CEO”) in Hanover’s corporate office in Houston, Texas. In this role, you will report to the Company’s board of directors.

As a current employee, certain of the benefits offered and conditions of employment are already familiar to you but are repeated herein for completeness and clarity. As Hanover’s President and CEO, your compensation and the other terms and conditions of employment are set by the Company’s board of directors. Initial compensation for this position is as follows.

Base Salary:	$540,000.00 annual base salary for the remainder of 2004, on a pro-rata basis, and for 2005 ($20,769.23 per pay period for 26 pay periods per full year).
Bonus Opportunity:	0 – 100% of annual base salary to be paid annually based upon personal performance as well as Company performance, and as determined by the Company’s board of directors.
Stock Option Program:	As of the date hereof, the Company is granting to you 100,000 restricted shares of Company common stock, which will vest at the rate of 25% per year over a four-year period and will otherwise be subject to the provisions of the 2003 Stock Incentive Plan. In addition, provided that you remain continually employed by the Company in a role substantially similar to that described herein, you will be given the full opportunity to participate in the stock,

October 5, 2004 Page 2
	incentive, retirement and other plans offered to the most senior officers of the Company.
Severance:	The Company will make an immediate lump sum severance payment to you equal to three times the sum of your annual base salary and target bonus which was in effect immediately before the “Change of Control”, if within the first twelve months following a “Change of Control” of the Company (i) you terminate your employment with the Company for “Good Reason” or (ii) the Company terminates your employment without “Cause”. Otherwise, the Company will make a severance payment to you equal to one times your annual base salary, payable in 24 equal monthly installments, if the Company terminates your employment without “Cause” at any time other than the first twelve month period immediately following a “Change of Control”. In either of these circumstances, the Company shall also reimburse you for your COBRA premiums, paid to continue your current health benefits, for a period of up to eighteen months.
	Please note, however, that this agreement will not obligate the Company to make any severance payment to you in the event that (i) you resign or voluntarily terminate your employment with the Company for any reason, other than “Good Reason” within the first twelve months following a “Change of Control”, (ii) your employment ends due to your death or inability to perform the essential requirements of the job, with or without reasonable accommodation, due to disability, or (iii) you are terminated for “Cause”. Additionally, in the event that the Company subsequently implements employment contracts for its executive managers that contain Change of Control-related severance provisions more favorable to managers than that described above, you will be offered similar protections.
	These commitments regarding your severance are contingent upon, and are in consideration for your continued compliance with your post-termination obligations, including the Cooperation, Confidential Information and Non-competition and Non-solicitation provisions, which are addressed below.
	For purposes of this letter agreement, the terms “Change of Control” and “Cause” will have the same definition as used in the Company’s 2003 Stock Incentive Plan under the terms “Corporate Change” and “Cause,” respectively, and are incorporated herein by reference. Moreover, voluntary termination of employment for “Good Reason” shall be defined as any situation within the first twelve months following a “Change in Control” of the Company in which your termination of employment with the Company (i)

October 5, 2004 Page 3
	promptly follows a material reduction of your duties and responsibilities or a permanent change in your duties and responsibilities which are materially inconsistent with the type of duties and responsibilities then in effect or your title, (ii) promptly follows a reduction in your annual base salary (without regard to bonus compensation, if any) or a reduction in your annual bonus opportunity as set forth in this letter (it is acknowledged that a reduction in the actual amount of your bonus from year to year as a result of the criteria addressed above will not be considered a reduction in bonus opportunity), (iii) promptly follows a material reduction in your employee benefits (without regard to bonus compensation, if any) if such reduction results in you receiving benefits which are, in the aggregate, materially less than the benefits received by other comparable employees of the Company generally, (iv) promptly follows a material failure by the Company to comply with the terms of this letter or to pay any compensation when due, but only after you provide notice to the Company of such failure and the Company has reasonable opportunity to cure, or (v) the Board otherwise determines that a voluntary termination by you is for “Good Reason” under the circumstances then prevailing.
Benefits & Vacation:	As a full time employee, you are also eligible to participate in the various benefit programs offered by the Company. You will be entitled to up to four weeks of vacation per year.
Cooperation:	We ask that you agree to act at all times in a manner consistent with the interests of Hanover Compressor Company and it affiliated entities with respect to our shareholders, customers, employees, agents, and lenders. Neither you nor the Company will defame or disparage each other. You further agree that should your employment end, you will provide reasonable cooperation to the Company in response to reasonable requests made by the Company for information or assistance, including but not limited to, participating upon reasonable notice in conferences and meetings, providing documents or information, aiding in the analysis of documents, or complying with any other reasonable requests by the Company including execution of any agreements that are reasonably necessary.
Confidential Information:	During your employment you will be given access to information relating to the business and affairs of Hanover Compressor Company and its affiliated entities, including, without limitation, trade secrets, designs, technology, processes, data, techniques,

October 5, 2004 Page 4
	inventions (whether patentable or not), works of authorship, formulas, business and development plans, customer lists, software programs and subroutines, source and object code, algorithms, terms of compensation and personnel assessments of employees, information regarding the Company’s facilities, processes, operating procedures, financial data, purchasing practices, marketing, management procedures, books and records, employee or personnel data, contractual arrangements or proposals, properties and business affairs of the Hanover entities, as well as the Company’s business plans and budgets, information concerning the Company’s actual or anticipated business, research or development, and may receive information in confidence by or for any of the Hanover entities from any other person (collectively “Confidential Information”). We ask that you agree that you will not, at any time, directly or indirectly, for any reason whatsoever, with or without cause, except in the appropriate course of Company business or unless pursuant to a lawful subpoena, disclose or disseminate any Confidential Information to any person or entity, nor will you use any Confidential Information in competing with Hanover Compressor Company or its affiliated entities in any manner. It is expressly understood that the Confidential Information covered by this paragraph includes only information that is confidential or proprietary information of one or more of the Hanover entities and therefore does not include information which is generally available to the public.
Non-competition and Non-solicitation:	We also request that you agree that in exchange for your compensation and other consideration, as well as the Company’s providing you access to its Confidential Information, for a two (2) year period following your termination from employment with the Company for any reason, you will not directly or indirectly on behalf of yourself or any other person(s), company, partnership, corporation, or business of whatever nature compete with the Company or its affiliated entities, which includes your promise not to: (i) engage in, carry on, or have a financial interest in (in any capacity whatsoever, including, without limitation, as an officer, director, shareholder, owner, partner, joint venturer, manager, advisor, employee, independent contractor or consultant) any entity that competes with the business of Hanover Compressor Company or its affiliated entities; (ii) induce or attempt to influence any employee, agent, consultant or independent contractor of Hanover Compressor Company or its affiliated entities to terminate work or employment with the Company, or otherwise adversely interfere with or affect the business relationship between them; or (iii) divert, take, solicit and/or accept

October 5, 2004 Page 5
	the business of any entity that is or has been a customer of Hanover Compressor Company or its affiliated entities, or any potential customer of Hanover Compressor Company or affiliated entities. This agreement shall apply regardless of whether your employment terminates under circumstances which entitle you to receive the severance payments described above. If you breach the foregoing covenants, the Company shall be no longer obligated to provide you severance payments or continued reimbursement for health care benefits; however, this shall not prohibit the Company in any way from pursuing or obtaining other or additional remedies at law or at equity. These non-competition and non-solicitation provisions will control over any other non-competition or related agreements in the Company’s plans and policies, including the stock option agreement and/or plan.
Injunctive Relief:	Please also agree that the covenants set forth herein pertaining to Cooperation, Confidential Information and Non-competition and Non-solicitation impose a reasonable restraint in light of the activities and business of the Company. Because of the difficulty of measuring economic loss to the Company as a result of the breach of any of these covenants and because of the immediate and irreparable damage that could be caused to the Company for which it would have no other adequate remedy, in the event of an alleged breach any of these covenants, the covenants may be enforced by the Company by injunctions, restraining orders, and other equitable actions.
Start Date:	Your new position with the Company will become effective on October 25, 2004.
Dispute Resolution:	Any controversy or claim arising out of or relating to your employment, separation from, and/or affiliation with the Company, except for those pertaining to the Cooperation, Confidential Information, and Non-competition and Non-solicitation provisions above, shall be resolved by arbitration in accordance with the Employment Dispute Resolution Rules of the American Arbitration Association, and judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction. In reaching his or her decision, the arbitrator shall have no authority to change or modify any provision of this Agreement.
Choice of Law:	This Agreement is made and shall be enforced pursuant to the laws of the State of Texas in Houston.

October 5, 2004 Page 6
Entire Agreement:	This letter contains the entire agreement between you and the Company concerning the subject matter hereof and supersedes any prior or contemporaneous agreements between you and the Company, and cannot be changed, modified, or amended without a written agreement signed by the Company and you.
Successors and Assigns:	This agreement shall be binding upon you, your heirs, successors, and assigns and the Company and its successors and assigns. The Company may assign its rights, duties and obligations under this agreement. However, your rights, duties and obligations are personal and therefore shall not be transferred or assigned by you to another.

Your acceptance of this offer can be confirmed by signing the acceptance below and returning a copy to my attention.

We are very pleased to extend this offer to you.

Sincerely,

Hanover Compressor Company

By:	/s/ Victor E. Grijalva
	Name: Victor E. Grijalva
	Title: Chairman of the Board
Accepted:	/s/ John E. Jackson	Date: October 5, 2004
	John E. Jackson