8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 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): March 15, 2007

HANOVER COMPRESSOR COMPANY

(Exact Name of Registrant as Specified in Its Charter)

Delaware
(State or Other Jurisdiction of
Incorporation or Organization) 001-13071
                    
(Commission
File Number) 76-0625124
(I.R.S. 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

Not Applicable.
(Former name or former address, if changed since last report)

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 (see General Instruction A.2. below):

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

	Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
	Item 9.01 Financial Statements and Exhibits.
SIGNATURES
EXHIBIT INDEX
Retention Bonus Plan
Form of Retention Bonus Award Letter

Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

     On March 15, 2007, the Management Development and Compensation Committee (the “Compensation Committee”) of the Board of Directors (the “Board”) of Hanover Compressor Company (the “Company”), approved increases to the base salary of the following executive officers, except for John E. Jackson which the Board approved, each of such increases to be effective as of April 1, 2007:

		Amount of
Officer	Title	Increase		New Salary
John E. Jackson	President and Chief Executive Officer; Director	$	35,000	$	600,000
Brian A. Matusek	Senior Vice President — Western Hemisphere	$	30,000	$	340,000
Norman A. Mckay	Senior Vice President — Eastern Hemisphere	$	30,000	$	340,000
Gary M. Wilson	Senior Vice President, General Counsel and Secretary	$	25,000	$	335,000
Lee E. Beckelman	Senior Vice President and Chief Financial Officer	$	30,000	$	330,000
Steven W. Muck	Vice President — Global Human Resources and Health, Safety and Environment	$	20,000	$	270,000
Stephen P. York	Vice President — Investor Relations and Technology	$	12,000	$	212,000
Peter G. Schreck	Vice President — Treasurer	$	12,000	$	210,000
Anita H. Colglazier	Vice President — Controller	$	15,000	$	200,000

Retention Bonus Plan

     Additionally, on March 15, 2007, the Compensation Committee approved the adoption of a Retention Bonus Plan (the “Retention Plan”) for key employees, including certain executive officers, to provide such employees with an incentive to continue employment with the Company in light of the proposed merger with Universal Compression Holdings, Inc. Participants in the Retention Plan will receive a retention bonus (the “Retention Bonus”), which bonus is not necessarily the same for each participant, upon continuing employment with the Company until March 31, 2008 (the “Key Date”). If a participant's employment with the Company is terminated prior to the Key Date by reason of death, disability or termination by the Company without cause, the participant is entitled to his or her Retention Bonus within ten days of such event. The Retention Plan administrator, as designated by the Compensation Committee, is empowered to select and approve participants, determine the amount of the Retention Bonus for each participant, and to interpret and administer the Retention Plan.

     The foregoing description of the Retention Plan does not purport to be complete and is qualified in its entirety by reference to the full text of the Retention Plan filed as Exhibit 10.1. Participants will receive a Retention Bonus Award Letter setting forth their Retention Bonus and Key Date, a form of which is filed as Exhibit 10.2.

     Subject to the terms of the Retention Plan, the Retention Bonus amounts for executive officers will be as follows:

		Estimated
		Retention
Officer	Title	Bonus
John E. Jackson	President and Chief Executive Officer; Director	$	0
Brian A. Matusek	Senior Vice President — Western Hemisphere	$	0
Norman A. Mckay	Senior Vice President — Eastern Hemisphere	$	310,000
Gary M. Wilson	Senior Vice President, General Counsel and Secretary	$	310,000
Lee E. Beckelman	Senior Vice President and Chief Financial Officer	$	0
Steven W. Muck	Vice President — Global Human Resources and Health, Safety and Environment	$	250,000
Stephen P. York	Vice President — Investor Relations and Technology	$	200,000
Peter G. Schreck	Vice President — Treasurer	$	0
Anita H. Colglazier	Vice President — Controller	$	150,000

Item 9.01 Financial Statements and Exhibits.

(c) Exhibits

Exhibit No.	Description
10.1*	Retention Bonus Plan
10.2*	Form of Retention Bonus Award Letter

* Filed herewith

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: March 21, 2007	By:	/s/ Suzanne B. Kean
		Name:	Suzanne B. Kean
		Title:	Vice President and Deputy General Counsel

EXHIBIT INDEX

Exhibit No.	Description
10.1	Retention Bonus Plan
10.2	Form of Retention Bonus Award Letter

EX-10.1

EXHIBIT 10.1

HANOVER COMPRESSOR COMPANY
RETENTION BONUS PLAN

ARTICLE 1
ESTABLISHMENT AND PURPOSE

     Hanover Compressor Company (the “Company”) has established this retention bonus plan for select employees, known as the Hanover Compressor Company Retention Bonus Plan (the “Plan”). The primary purpose of the Plan is to provide a significant incentive for employees to remain employed with the Company in light of a potential merger with Universal Compression Holdings, Inc., a Delaware Corporation.

ARTICLE 2
DEFINITIONS

     Whenever used in this Plan, the following terms shall have the meanings set forth below and, when the meaning is intended, the initial letter of the word is capitalized:

(a)	“Administrator” means the person or persons appointed by the Compensation Committee of the Board of Directors of the Company to administer the Plan.
(b)	“Affiliate” means any corporation, partnership, limited liability company or partnership, association, trust or other organization which, directly or indirectly, controls, is controlled by, or is under common control with, the Company. For purposes of the preceding sentence, “control” (including, with correlative meanings, the terms “controlled by” and “under common control with”), as used with respect to any entity or organization, shall mean the possession, directly or indirectly, of the power (i) to vote more than 50% of the securities having ordinary voting power for the election of directors of the controlled entity or organization, or (ii) to direct or cause the direction of management and policies of the controlled entity or organization, whether through the ownership of voting securities or by contract or otherwise.
(c)	“Company” means Hanover Compressor Company, a Delaware corporation.
(d)	“Cause” means (i) the commission by a Participant of an act of fraud, embezzlement or willful breach of a fiduciary duty to the Company or an Affiliate (including the unauthorized disclosure of confidential or proprietary material information of the Company or an Affiliate), (ii) a conviction of a Participant (or a plea of nolo contendere in lieu thereof) for a felony or a crime involving fraud, dishonesty or moral turpitude, (iii) willful failure of a Participant to follow the written directions of the chief executive officer of the Company, Company management, or the Board of Directors, in the case of executive officers of the Company, when such directions are consistent with the Participant’s customary duties and

	responsibilities and where such refusal has continued for more than 10 days following written notice; (iv) willful misconduct as an employee of the Company or an Affiliate which includes the Participant’s failure to adhere to P.R.I.D.E., the Company’s Guide to Ethical Business Conduct; (v) willful failure of a Participant to render services to the Company or an Affiliate in accordance with his employment arrangement, which failure amounts to a material neglect of his duties to the Company or an Affiliate or (vi) substantial dependence, as determined by the Administrator, on any drug, immediate precursor or other substance listed on Schedule IV of the Federal Comprehensive Drug Abuse Prevention and Control Act of 1970, as amended, as determined in the sole discretion of the Administrator. With respect to any Participant residing outside of the United States, the Administrator may revise the definition of “Cause” as appropriate to conform to the laws of the applicable non-U.S. jurisdiction.
(e)	“Disability” means any physical or mental condition for which the Participant would be eligible to receive long-term disability benefits under the Company’s long-term disability plan. With respect to any Participant residing outside of the United States, the Administrator may revise the definition of “Disability” as appropriate to conform to the laws of the applicable non-U.S. jurisdiction.
(f)	“Internal Revenue Code” means the Internal Revenue Code of 1986, as amended.
(g)	“Key Date” means the date through which a Participant must remain in continuous employment with the Company in order to be entitled to a Retention Bonus under the Plan as determined under Section 5.2 and set forth on the Participant’s Retention Bonus Award Letter.
(h)	“Participant” means an employee of the Company selected by the Administrator who has been provided a Retention Bonus Award Letter that specifies the details of the employee’s participation in the Plan.
(i)	“Retention Bonus” means the amount described in Section 5.1 and specifically set forth on the Participant’s Retention Bonus Award Letter.
(j)	“Retention Bonus Award Letter” means the letter provided by the Administrator to each Participant that sets forth the Retention Bonus and Key Date applicable to the Retention Bonus, as described in Section 5.1.
(k)	“Successor” shall mean any person, firm, corporation, or business entity which at any time, whether by merger, purchase, or otherwise, acquires all or substantially all of the assets, stock or business of the Company.

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ARTICLE 3
ADMINISTRATION

     3.1 Administration of the Plan. The Plan shall be administered by the Administrator.

     3.2 Authority of the Administrator. Subject to the provisions herein, the Administrator shall have full power and authority to select and approve Participants; to determine the amount of the Retention Bonus opportunity (which need not be the same for each Participant); to determine the terms and conditions of each individual’s participation in a manner consistent with the provisions of the Plan; to establish Key Dates and strategic, financial, and/or operational goals as described in Section 5.2; to determine whether any strategic, financial, and/or operational goals have been met; to interpret, in its sole discretion, the Plan and any agreement or instrument entered into under the Plan; to establish, amend, rescind, or waive rules and regulations for the Plan’s administration; and in general to have the full power to make all other determinations which may be necessary or advisable for the administration of the Plan, to the extent consistent with the provisions of the Plan.

     3.3 Decision of Administrator Final. Subject to applicable law, any interpretation of the provisions of the Plan and any decision on any matter within the discretion of the Administrator made by the Administrator in good faith shall be final and conclusive and binding on all persons.

     3.4 Interested Administrator. If an Administrator is also a Participant in the Plan, he may not decide or determine any matter or question concerning his benefits unless such decision or determination could be made by him under the Plan if he were not the Administrator.

ARTICLE 4
PARTICIPATION

     The Administrator shall identify which employees of the Company shall participate in the Plan. As soon is practicable following selection by the Administrator, each selected employee shall be provided with a Retention Bonus Award Letter which shall describe the terms and conditions of each individual’s participation in the Plan. A selected employee shall become a Participant in the Plan as of such time as the selected employee is provided with his or her Retention Bonus Award Letter.

ARTICLE 5
RETENTION BONUS OPPORTUNITY

     5.1 Establishment of Retention Bonus Amount. The Administrator shall establish a Retention Bonus amount for each Participant, which need not be the same for each Participant. Each Retention Bonus amount may be stated as a dollar amount or as a percentage of the Participant’s annual rate of base salary then in effect, and shall represent the amount of cash that can be earned by the Participant under the Plan. Each Participant’s Retention Bonus amount shall be communicated to such Participant in the form of a Retention Bonus Award Letter provided to such Participant by the Administrator.

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     5.2 Establishment of Key Date. Subject to Section 6.1, each Participant must remain in continuous employment with the Company (and any Successor) through and including such Participant’s Key Date in order to be entitled to receive a Retention Bonus under this Plan. The Administrator in its sole discretion shall establish the Key Date for each Participant, which need not be the same for each Participant. The Key Date may be based on (i) a fixed date, (ii) a number of days occurring after a strategic, financial, and/or operational goal as determined in the sole discretion of the Administrator, or (iii) such other criteria as determined in the sole discretion of the Administrator.

     5.3 Payment of Retention Bonus. Subject to Section 6.1, any Retention Bonus payable under this Plan shall be paid to the Participant (or the Participant’s beneficiary, as the case may be) as a single lump sum within ten (10) days after such Participant’s Key Date.

     5.4 Withholding for Taxes. Notwithstanding any other provisions of the Plan, the Company may withhold from any payment to be made under the Plan such amount or amounts as may be required for purposes of complying with the tax withholding provisions of the Internal Revenue Code or any applicable federal, state, local or foreign laws, and in the case of expatriate employees, the withholding required under the Company’s expatriate program, or such other amount or amounts as are agreed to by the Participant.

ARTICLE 6
TERMINATION OF EMPLOYMENT

     6.1 Termination Due to Death, Disability, or Termination Without Cause. Notwithstanding anything in this Plan to the contrary, in the event a Participant’s employment with the Company is terminated prior to a Participant’s Key Date by reason of death, Disability, or termination by the Company without Cause, such Participant (or the Participant’s beneficiary in the case of death) shall receive a distribution of the Retention Bonus within ten (10) days of such event.

     6.2 Termination For Other Reasons. In the event a Participant’s employment with the Company is terminated for any reason not described in Section 6.1 prior to such Participant’s Key Date, all rights of such Participant to any Retention Bonus under the Plan shall be forfeited.

     6.3 Employment with Successors. For purposes of this Plan, employment with any Successor will be considered employment with the Company.

     6.4 Compliance with Section 409A. The Company shall take all steps as it deems necessary or advisable to make sure the Plan and any distributions thereunder comply at all times with Section 409A of the Internal Revenue Code.

ARTICLE 7
BENEFICIARY

     Any amounts that may be payable under the Plan upon a Participant’s death shall be payable to the Participant’s surviving spouse, if any, and if not, the estate of the Participant.

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ARTICLE 8
RIGHTS OF PARTICIPANTS

     8.1 No Employment or Benefit Guaranty. None of the establishment of the Plan, the receipt of a Retention Bonus Award Letter, any modification or amendment thereof, or the payment of any benefits shall be construed as giving to any Participant or other person any legal or equitable right against the Company or the Administrator except as provided herein. Under no circumstances shall the maintenance of this Plan constitute a contract of employment or shall the terms of employment of any Participant be modified or in any way affected hereby. Accordingly, neither participation in the Plan nor the payment of a Retention Bonus amount shall be held or construed to give any Participant a right to be retained in the employ of the Company or any Successor or Affiliate.

     8.2 No Assignment of Rights. The rights or interests of a Participant under this Plan shall not be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, charge, garnishment, executive or levy of any kind, either voluntarily or involuntarily, and any attempt to anticipate, alienate, sell, transfer, assign, pledge, encumber, charge, garnish, execute on, levy or otherwise dispose of any right to an amount payable hereunder shall be void. No Retention Bonus amount shall be in any manner subject to the debts, contracts, liabilities, engagements, or torts of any Participant.

     8.3 No Funding. All payments to be made hereunder shall be paid from the general assets of the Company, and no special or separate fund shall be established and no segregation of assets shall be made to assure payment of such amounts. No Participants shall have any right, title, or interest whatsoever in or to any amounts under the Plan prior to receipt. Nothing contained in the Plan, an no action taken pursuant to its provisions, shall create or be construed to create a trust or fund of any kind, or a fiduciary relationship between the Company and any other person. The rights of any Participant or beneficiary to any amounts hereunder shall be no greater than those of an unsecured general creditor of the Company.

ARTICLE 9
MISCELLANEOUS PROVISIONS

     9.1 Amendment and Termination. The Company reserves the right to amend or terminate the Plan, in whole or in part, at any time. Except as provided in the Plan, no amendment or termination of this Plan shall adversely affect the rights of any Participant to his Retention Bonus.

     9.2 Headings. The headings of the various Articles and Sections in the Plan are solely for convenience and shall not be relied upon in construing any provisions hereof. Any reference to a Section shall refer to a Section of the Plan unless specified otherwise.

     9.3 Evidence. Evidence required of anyone under the Plan shall be signed, made or presented by the proper party or parties and may be by certificate, affidavit, document or other information which the person acting thereon considers pertinent and reliable.

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     9.4 Gender and Number. Words denoting the masculine gender shall include the feminine and neuter genders, the singular shall include the plural and the plural shall include the singular wherever required by the context.

     9.5 Applicable Law. The Plan shall be construed in accordance with the laws of the State of Delaware, without regard to its conflicts of laws doctrine, except to the extent preempted by Federal law.

     9.6 Severability. Whenever possible, each provision of the Plan shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of the Plan is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or any other jurisdiction, and the Plan shall be reformed, construed and enforced in such jurisdiction so as to best give effect to the intent of the Company under the Plan.

     9.7 Effective Date. This Plan shall be effective as of March 19, 2007.

     9.8 Successors. This Plan may be assigned or transferred to, and shall be binding upon and shall inure to the benefit of, any Successor and any such Successor shall be deemed substituted for all purposes for the “Company” under the terms of this Plan.

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EX-10.2

EXHIBIT 10.2

Confidential Correspondence

March 19, 2007

First last

Dear first:

As you know, Hanover Compressor Company (our “Company” or “Hanover”) has signed a merger agreement with Universal Compression Holdings, Inc. Under the terms of the merger agreement, both companies will be combined in a merger of equals to create a new company. While the merger is still subject to regulatory and shareholder approval, we remain optimistic that these approvals will be granted and the merger will close some time in the third quarter of 2007.

We recognize that the next few months will create uncertainty for you regarding your future employment. However, as a key employee, your participation in Hanover’s continuing operations during this process as well as your contributions to the process itself will be critical to enable Hanover to successfully consummate the merger. To encourage you to stay employed with the Company during this period and to motivate you to use your best efforts while we move forward with the merger, we are offering you the opportunity to earn a “Retention Bonus” equal to $******. To earn the Retention Bonus, you must satisfy the terms and conditions set forth in this Retention Bonus Award Letter and the Hanover Compressor Company Retention Bonus Plan (the “Retention Plan”) enclosed with this letter and continue to be employed by the Company or its successor on your Key Date. If you do so, the Retention Bonus shall be paid to you in a single lump sum within 10 days of your Key Date. For these purposes, your “Key Date” will be March 31, 2008. If you terminate employment with the Company or its successor prior to the Key Date, you will forfeit your right to receive the Retention Bonus. However, if the reason for such termination is: death, Disability, or involuntary termination by the Company (or its successor) for reasons other than “Cause”, as these terms are defined in the Retention Plan, then you will be entitled to an accelerated payment of your Retention Bonus within 10 days of such event.

You agree to treat both the terms of this Retention Bonus Award Letter and your receipt of a Retention Bonus Award Letter as confidential, and further agree to not discuss with peers, supervisors or other Hanover employees. If you have any questions concerning your Retention Bonus Award Letter or the Retention Plan, please direct those questions to Steve Muck, Vice President Global Human Resources and HSE.

The Company shall have the exclusive authority to interpret, in its sole discretion, all provisions of this Retention Bonus Award Letter, including, without limitation, the authority to: (i) interpret the meaning of any and all terms (defined or otherwise) contained or referred to in this letter and the Retention Plan; and (ii) take any and all such other actions it deems necessary or advisable for the proper operation and/or administration of the subject matter described in this letter. Any payments to you shall be subject to applicable federal, state, and local tax withholdings, and in the case of expatriate employees, any withholding required under the Company’s expatriate program, or such other withholdings as you agree to. Capitalized terms used but not defined in this Retention Bonus Award Letter have the meanings set forth in the Retention Plan.

The letter is not a contract of employment or an agreement of employment for a definite term. Except where otherwise required under applicable law, your employment remains an employment terminable at will by either party at any time and for any reason or no reason. This letter may not be amended or modified except through a written amendment signed by the Company (or its successor) and you.

This letter is governed by and subject to the terms of the Retention Plan. In the event of a discrepancy between the terms of this letter and the Retention Plan, the Retention Plan document shall govern.

If you understand and agree to the above, please sign below and return to Steve Muck, Vice President — Global Human Resources and HSE, by the end of the business day on March 30, 2007. I look forward to working with you during this exciting time. If you have any questions, please call me.

	Sincerely,
	Steve Muck
	Vice President Global Human Resources and HSE
ACCEPTED and AGREED:
Date:

Enclosure — Retention Plan

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