Exhibit 10.3

First Amendment
to the
Hanover Compressor Company
1999 Stock Option Plan

     WHEREAS, Hanover Compressor Company (the “Company”) maintains the Hanover
Compressor Company 1999 Stock Option Plan (the “Plan”) for the purpose of
granting Awards thereunder to eligible employees of the Company and its
Affiliates; and

     WHEREAS, Section 16 of the Plan provides that the Compensation Committee of
the Board of Directors of the Company may amend the Plan;

     NOW, THEREFORE, the Plan is hereby amended effective as of July 8, 2005, as
follows:

   1.   Section 2.03, Change in Control, is deleted and replaced in its entirety
with the following:

“Change in Control shall mean

     (i) The acquisition by any individual, entity or group (within the meaning
of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”)) (a “Person”) of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of forty percent (40%)
or more of either (A) the then outstanding shares of common stock of the Company
(the “Outstanding Company Common Stock”) or (B) the combined voting power of the
then outstanding voting securities of the Company entitled to vote generally in
the election of directors (the “Outstanding Company Voting Securities”);
provided, however, that for purposes of this subsection (i), any acquisition by
any Person pursuant to a transaction which complies with clause (A) of
subsection (iii) of this definition shall not constitute a Change in Control; or

     (ii) Individuals, who, as of the date hereof, constitute the Board (the
“Incumbent Board”) cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming a director subsequent to
the date hereof whose election, or nomination for election by the Company’s
stockholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered for purposes of this
definition as though such individual was a member of the Incumbent Board, but
excluding, for these purposes, any such individual whose initial assumption of
office occurs as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than the
Board; or

 

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     (iii) The consummation of a reorganization, merger or consolidation of the
Company or sale, lease or other disposition of all or substantially all of the
assets of the Company and its subsidiaries, taken as a whole (other than to an
entity wholly owned, directly or indirectly, by the Company) (a “Corporate
Transaction”), in each case, unless, following such Corporate Transaction,
(A) all or substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior to such Corporate
Transaction beneficially own, directly or indirectly, more than sixty percent
(60%) of, respectively, the then outstanding shares of common stock and the
combined voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the corporation
resulting from such Corporate Transaction (including a corporation which as a
result of such transaction owns the Company or all or substantially all of the
Company’s assets either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership, immediately prior to such
Corporate Transaction, of the Outstanding Company Common Stock and the
Outstanding Company Voting Securities, as the case may be, and (B) at least a
majority of the members of the board of directors of the corporation resulting
from such Corporate Transaction were members of the Incumbent Board at the time
of the execution of the initial agreement, or of the action of the Board,
providing for such Corporate Transaction.

Notwithstanding the foregoing, with respect to any Award that is subject to
Section 409A of the Code, for purposes of accelerating payment of such Award a
“Change in Control” shall mean a change in ownership or effective control of the
corporation, or in the ownership of a substantial portion of the assets of the
corporation, as set forth in the regulations and other guidance issued under
Section 409A of the Code.”

  2.   Section 8 is amended by adding thereto the following:

     “Notwithstanding the vesting schedule contained herein or in the
Participant’s agreement to the contrary, if a Participant’s Termination of
Employment is due to his or her death, Disability or Retirement, all Options of
such Participant then outstanding shall immediately become exercisable in full.
As used herein, “Retirement” means a Termination of Employment, other than due
to Cause, death or Disability, on or after the Participant’s reaching (i) age 65
or (ii) age 55 and terminating with the written consent of the Committee.”

  3.   Section 9 is amended to read as follows:

     “Notwithstanding the provisions of Section 8 or anything contained in a
Participant’s agreement to the contrary, effective upon a Change in Control (or
at such earlier time as the Committee may provide) all Options then outstanding
shall immediately become exercisable in full and the Company shall have the
right to acquire from Participants their Options by payment of the difference

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between the price per share of Common Stock established in the Change in Control
and the Option Price.”

     All terms used herein that are defined in the Plan shall have the same
meanings given to such terms in the Plan, except as otherwise expressly provided
herein.

     Except as amended and modified hereby, the Plan shall continue in full
force and effect and the Plan and this instrument shall be read, taken and
construed as one and the same instrument.

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