<PAGE>
                                                                   EXHIBIT 10.74


                                                              February 27, 2004



VIA HAND DELIVERY

Mark S. Berg
Senior Vice President and General Counsel
Hanover Compressor Company
12001 North Houston Rosslyn
Houston, Texas 77086

         Re: Separation Agreement and General Release (the "Agreement")

Dear Mark:

     This letter sets forth the agreement between you and Hanover Compressor
Company ("Hanover" or the "Company") in connection with your determination to
leave the Company and cease to serve as Senior Vice President, General Counsel,
and Secretary of the Company.

1.   Preamble:

     a.   On behalf of Hanover's Board of Directors, I wish to express our
          appreciation for the professionalism, leadership, and focus with which
          you performed your responsibilities including your great efforts in
          helping bring about the successful resolution of our shareholder
          litigation and a successful settlement with the Securities and
          Exchange Commission.

     b.   Hanover acknowledges that as Senior Vice President, General Counsel,
          and Secretary, you provided invaluable services to Hanover at a
          critical time in the Company's history and that Hanover has benefited
          from your services.

     c.   Hanover acknowledges that because of these services, the Company will
          continue to benefit in the future.

     d.   Hanover acknowledges that you have determined that it is in your best
          interest to resign from Hanover and that your resignation from Hanover
          is voluntary.

     e.   Hanover's Board of Directors wishes you the best of luck in your
          future endeavors.
<PAGE>
Mark S. Berg
February 27, 2004
Page 2


2.   Separation Date: Your employment with the Company will cease on March 31,
     2004 (the "Separation Date") or such other date as you and the Company
     shall mutually agree.

3.   Payments and Compensation:

     a.   2003 Bonus Payment: In exchange for your past performance, Hanover
          will pay you a Bonus for 2003 in the amount of $260,100 (which is 85%
          of your base salary ("Base Salary") of $306,000).

     b.   In consideration of this Agreement becoming effective, Hanover will:

          i.   pay to you in a lump sum $351,900 (which is 115% of your Base
               Salary);

          ii.  provide to you health insurance benefits for you and your family
               substantially similar to those benefits provided to you at the
               Separation Date and at the cost to you incurred at the Separation
               Date until the earlier of (1) one year following the Separation
               Date, or (2) the date you are given an opportunity to receive
               substantially similar health insurance from a new employer;
               provided that such benefits can be modified if Hanover modifies
               its health plan or plans for similarly covered active employees;
               provided further that the Company shall give to you the
               opportunity to obtain benefits through COBRA after the expiration
               of the benefits provided for in this paragraph.

          iii. reimburse appropriate outstanding requests for expense
               reimbursements, as well as any reasonable and appropriate
               reimbursement requests made after the Separation Date which shall
               be paid promptly after receipt; and

          iv.  correct any errors in past pay checks (including payment of any
               funds owing) and to make appropriate corrections to your W-2
               form.

     c.   All Payments set forth in this Paragraph shall be made on or before
          the Separation Date except as provided in subparagraph (b)(iii)
          hereof.

     d.   After your Separation Date you shall no longer be eligible to
          participate in or accumulate any credit under any provision of any
          Hanover retirement plan.
<PAGE>
Mark S. Berg
February 27, 2004
Page 3


4.   For a period of six (6) months or such shorter period as you may, in good
     faith, elect (if, for example, you become employed elsewhere), you will be
     available to provide consulting services to Hanover at such reasonable
     times and in such reasonable, incidental amounts as you and Hanover shall
     mutually agree at no cost to Hanover beyond the payments set out above in
     Paragraph 3, above; provided that should Hanover require more than
     incidental amounts of time, as agreed between you and Hanover, you and
     Hanover shall mutually agree on further compensation for your services in
     addition to the payments described above.

5.   Without the prior written consent of Hanover, except to the extent required
     by an order of a court having competent jurisdiction or under subpoena from
     an appropriate government agency, you shall continue to comply with
     Hanover's policies regarding confidential information and, moreover, shall
     not disclose any trade secrets, customer lists, marketing plans and related
     information, management organization and related information (including
     data and other information related to members of the Board and management),
     operating policies and manuals, business plans and related information,
     financial records and information or other commercial, business or
     technical information related to Hanover or its subsidiaries and affiliates
     to any third person unless such information has been previously disclosed
     to the public by Hanover or has become public knowledge other than by a
     breach of this Agreement. In the event you become self-employed or enter
     into a joint employment arrangement, you shall not use any such information
     for such business.

6.   The terms and provisions of your previous employment agreement with Hanover
     shall be null and void.

7.   Except as otherwise provided herein, no equipment or materials or property
     owned by Hanover or you shall be transferred between you and Hanover. You
     agree that, on or prior to the Separation Date, you will return or
     relinquish all Hanover credit cards, computers (including all files saved
     thereon), office space, furniture, equipment, files (except publicly
     available information or documents that formed the basis of such
     information), books, and other company equipment, materials or property in
     your possession. You are entitled to all of your personal property that is
     currently on Hanover premises, including office furniture and furnishings,
     and Hanover agrees to return and relinquish the same.

8.   In partial exchange for the consideration provided for in this Agreement,
     you for yourself, and your heirs, executors, administrators and assigns
     (collectively, the "Releasors") forever waive, release and discharge
     Hanover and its parent, subsidiaries, affiliates, successors and assigns,
     past and present officers, directors, employees and agents, and any
     fiduciaries of any employee benefit plan or policy
<PAGE>
Mark S. Berg
February 27, 2004
Page 4

     of Hanover (collectively, the "Releasees"), from any and all claims,
     demands, causes of actions, fees and liabilities and expenses (inclusive of
     attorneys' fees) of any kind whatsoever, whether known or unknown, which
     you ever had or now have against the Releasees by reason of any actual or
     alleged act, omission, transaction, practice, conduct, occurrence, or other
     matter up to and including the date of your execution of this Agreement,
     including, but not limited to (a) any claims under Title VII of the Civil
     Rights Act of 1964, as amended, 42 U.S.C. Sections 1981, 1985 & 1986, the
     Age Discrimination in Employment Act (ADEA), as amended, the Americans with
     Disabilities Act, the Family and Medical Leave Act, the Employee Retirement
     Income Security Act of 1974, the Civil Rights Act of 1991, as amended,
     and/or any other Federal, state or local law (statutory or decisional),
     regulation, or ordinance, and (b) any tort and/or contract claims,
     including any claims of wrongful discharge, defamation, emotional distress,
     nonphysical injury, personal injury or sickness or other harm. This release
     does not apply to obligations undertaken by this Agreement or under the
     terms and conditions of any employee benefit plan (including any plan under
     which you have been afforded stock options and/or restricted stock) program
     or arrangement (other than any such plan, program or arrangement providing
     severance benefits) in which you are a participant or are eligible to
     participant in on the separation date.

9.   Hanover forever waives, releases and discharges you and your heirs,
     executors, administrators and assigns from any and all claims, demands,
     causes of actions, fees and liabilities and expenses (inclusive of
     attorneys' fees) of any kind whatsoever, whether known or unknown, which
     Hanover ever had or now has against you by reason of any actual or alleged
     act, omission, transaction, practice, conduct, occurrence, or other matter
     up to and including the date of execution of this Agreement, including, but
     not limited to (a) any Federal, state or local law (statutory or
     decisional), regulation, or ordinance, and (b) any tort and/or contract
     claims. This release does not apply to obligations undertaken by this
     Agreement.

10.  The above release in Paragraph 8 notwithstanding, it is expressly agreed
     that (i) you are entitled to receive and are not releasing and do not
     release or waive any right to indemnification to the fullest extent
     permitted by Delaware law with respect to all activities undertaken by you
     for Hanover and its subsidiaries and affiliates (including, but not limited
     to, your service as an officer and/or director of Hanover or its
     subsidiaries or affiliates and your service on the management committee of
     Hanover Measurement Services Company, L.P.) and (ii) to the extent that
     Hanover (or any successor to Hanover) maintains coverage for directors and
     officers, you shall be covered for acts undertaken by you on behalf of
     Hanover and its affiliates and subsidiaries prior to your Separation Date.
<PAGE>
Mark S. Berg
February 27, 2004
Page 5


11.  You agree, that until December 31, 2004, you will not provide services as
     an employee consultant, advisor, partner or member of any entity whose
     primary business is directly competitive with that of the Hanover's or any
     subsidiary of Hanover ("Competitor") with regard to the natural gas
     services business ("Competitive Services"); provided, however, that this
     covenant will not (a) restrict you from providing services to any
     Competitor if such services are provided to a line of business of the
     Competitor that is not Competitive Services; (b) not prohibit you from
     entering into the private practice of law or providing legal services to a
     Competitor so long as in connection with the provision of such services you
     do not disclose or otherwise use any confidential or proprietary
     information of Hanover (as defined in paragraph 5, above); or (c) restrict
     your ability to arrange or provide financing or investments through
     third-parties (other than in connection with direct competitors of the
     Company) that relate to or involve Competitive Services. Hanover will have
     all rights and remedies available to it at law and in equity to assure your
     compliance with this covenant and to remedy any breach thereof.

12.  You agree to pay federal and state taxes, if any, that you are required by
     law to pay with respect to this Agreement. If you fail to pay any required
     taxes with respect to this Agreement, you agree to indemnify and hold
     Hanover harmless from any claims, demands, deficiencies, levies,
     assessments, penalties or recoveries by any government or entity against
     you for any amounts claimed due on account of your failure to pay any
     required taxes with respect to the amounts designated in this Agreement.

13.  You acknowledge that you have been advised by Hanover to consult an
     attorney before signing this Agreement and that you have executed this
     Agreement with the waivers and releases set forth above, after having had
     the opportunity to consult with an attorney and after having had the
     opportunity to consider the terms of this Agreement for twenty-one (21)
     days after such terms were proposed to you, provided that nothing contained
     herein shall prevent you from signing this Agreement within 21 days of when
     these terms were proposed to you. You further acknowledge that: you have
     read this Agreement in its entirety; you understand all of its terms; you
     knowingly and voluntarily assent to all of the terms and conditions
     contained herein including, without limitation, the waivers and releases;
     you are executing this Agreement, including the waivers and releases, in
     exchange for consideration in addition to anything of value to which you
     are already entitled; you are not waiving or releasing rights or claims
     that may arise after your execution of this Agreement; and that you
     understand that the waivers and releases in this Agreement is being
     requested in connection with the cessation of your employment with Hanover
     and in exchange for your receipt of consideration to which you otherwise
     would not be entitled.
<PAGE>
Mark S. Berg
February 27, 2004
Page 6


14.  This Agreement, including the waivers and releases contained herein, shall
     become effective the eighth (8th) day following your execution of this
     Agreement and you may at any time prior to the effective date revoke this
     Agreement by giving written notice of such revocation to Chad C. Deaton.

15.  Both you and Hanover acknowledge that material to the inducement to enter
     into this Agreement are the waivers and releases and the covenants set
     forth herein.

16.  If any provision of this Agreement is determined by a court of competent
     jurisdiction not to be enforceable in the manner set forth in this
     Agreement, Hanover and you agree that it is the intention of the parties
     that such provision should be enforceable to the maximum extent possible
     under applicable law and that such provision shall be reformed to make it
     enforceable in accordance with the intent of the parties.

17.  This Agreement shall be binding upon and inure to the benefit of the heirs,
     trustees, executors, administrators, successors and assigns of the
     respective parties. This Agreement may be executed in one or more
     counterparts, each of which shall be deemed an original but all of which
     shall constitute the same instrument.

18.  This Agreement shall be governed by and subject to the laws of the State of
     Texas without giving effect to conflict of law rules.

19.  You understand that Hanover's obligations to make payments hereunder are
     unfunded and that claims for payments by you or any beneficiary shall be
     those of a general, unsecured creditor. The payments provided hereunder
     shall be subject to withholding in accordance with applicable federal,
     state, or local law.

20.  Prior to the date of this agreement, Hanover and you have agreed to a press
     release which is attached. Hanover will not make any public disclosure
     regarding you or your employment with the Company without providing you a
     chance to comment on any such disclosure. You will not make any public
     disclosure regarding Hanover or your employment with Hanover without
     providing the Company a chance to comment on any such disclosure.

21.  This Agreement contains a complete statement of all the arrangements
     between you and Hanover with respect to your employment and the cessation
     of your employment. This Agreement may not be changed orally. No other
     promises or agreements shall be binding unless in writing and signed by
     Hanover and you. Further, this Agreement supercedes and extinguishes any
     prior understandings or written or oral agreements between the parties
     including, but not limited to your
<PAGE>
Mark S. Berg
February 27, 2004
Page 7


     employment agreement. There have been no promises between the parties
     beyond those reflected in this Agreement.


        Except as otherwise specifically provided herein, notices and other
communications provided for herein shall be in writing and shall be hand
delivered or mailed.
<PAGE>
Mark S. Berg
February 27, 2004
Page 8


     If this letter correctly sets forth our agreement, please execute a
counterpart copy where indicated below.



                                                Sincerely yours,


                                           Hanover Compressor Company


                                           By: /s/ Chad C. Deaton
                                              ----------------------------------
                                           Chad C. Deaton
                                           President and Chief Executive Officer

                                           Dated: February 27, 2004
                                                 -------------------------------


   ACCEPTED AND AGREED TO

/s/ Mark S. Berg
-----------------------------
Mark S. Berg


Dated: February 27, 2004
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