**Exhibit 10.1**
**PROMISSORY NOTE AND INDENTURE**   $6,650,000 April 21, 2004 Houston, Texas
     For value received, the undersigned, Hanover Compressor Company, aDelaware corporation (the “Company”), promises to pay to the order of the lawfirm of Milberg Weiss Bershad Hynes & Lerach LLP, or its successor(s), as andsolely in the capacity of escrow agent (the “Escrow Agent”) with respect to theSettlement Fund as defined in that certain Stipulation and Agreement ofSettlement, dated as of October 23, 2003, entered into in connection with CivilAction No. H-02-0410 (Consolidated) of the United States District Court for theSouthern District of Texas, Houston Division (the “Stipulation”), at itsoffices at 401 B Street, Suite 1700, San Diego, California, or at such otherplace as may be designated in writing by the Escrow Agent, in lawful money ofthe United States of America and in immediately available funds, the principalsum of Six Million Six Hundred Fifty Thousand Dollars ($6,650,000.00), togetherwith interest thereon at an effective annual yield of five percent (5%) fromFebruary 6, 2004 (the date of final approval of the Stipulation by the FederalCourt), on March 31, 2007 (the “Maturity Date”), on the terms and subject tothe conditions contained herein. Interest under this Note shall be calculatedon the basis of a 365-day year for the actual number of days elapsed.
     This is the Note referred to in the Stipulation. The Escrow Agent agreesto apply the proceeds of this Note, if any, as provided in Section 9.3 of theStipulation. Initially capitalized terms used but not otherwise defined hereinshall have the meanings ascribed to them in the Stipulation. If there is anyinconsistency between the Stipulation and this Note, the terms of this Noteshall govern.
     This Note is a general, unsecured obligation of the Company.
     Each of the Company and the Escrow Agent represents and warrants that thisNote is intended to constitute an “indenture” as defined in, and for purposesof, the Trust Indenture Act of 1939, as amended (the “TIA”). This Note is notqualified, or subject to qualification, under the TIA, and the Escrow Agent isnot required to be eligible as a trustee for purposes of the TIA. Theprovisions of Sections 315(a), (c) and (d) of the TIA are incorporated byreference herein and the Escrow Agent agrees to be bound by such provisions asif it were a “trustee” as such term is used therein
     **This Note is not negotiable and is not otherwise transferable, divisibleor assignable. Any purported negotiation of this Note and any purportedtransfer, division or assignment of this Note shall be null and void*****ab initio*****.**
     If a Change of Control occurs prior to the Maturity Date and the Change ofControl Price (as defined below) is (x) $12.25 or more, this Note shall beimmediately extinguished and cancelled, and shall no longer evidence anobligation of the Company, or (y) less than $12.25, the entire outstandingprincipal amount of this Note and all accrued but unpaid interest hereundershall be due and payable thirty (30) days following the Change of Control.
 

 

     “Change of Control Price” means the Closing Price Per Share on the lastBusiness Day (as defined below) immediately prior to a Change of Control, withall appropriate adjustments made, by and in the good faith judgment of theCompany’s Board of Directors, to reflect stock splits, reverse stock splits,stock dividends, reclassifications, mergers and reorganizations occurring afterMay 12, 2003 (but prior to the date of the Change of Control).
     “Closing Price Per Share” means, with respect to the Hanover Common Stock,for any Business Day, (i) the last reported sale price regular way (or if noclosing sale price is reported, the average of the bid and ask prices or, ifmore than one in either case, the average of the average bid and average askprices) on such date as reported in the composite transactions for theprincipal United States securities exchange on which the Hanover Common Stockis traded or, (ii) if the Hanover Common Stock is not listed or admitted totrading on any United States securities exchange or quoted on the NasdaqNational Market, the average of the closing bid prices in the over-the-countermarket as furnished by any Nasdaq National Market member firm selected fromtime to time by the Company for that purpose.
     If, before the Maturity Date, the stockholders of the Company approve atransaction the consummation of which would be a Change of Control, but suchconsummation does not occur prior to the Maturity Date, the Company’sobligation to make payment hereunder shall be suspended for a period not toexceed sixty (60) days, during which period interest shall continue to accrueat the annual rate of five percent (5%). If a Change of Control occurs priorto the expiration of such sixty-day period and the Change of Control Price is$12.25 or more, this Note shall be extinguished and cancelled and shall nolonger evidence an obligation of the Company; otherwise, the entire outstandingprincipal amount of this Note and all accrued but unpaid interest hereundershall be immediately due and payable upon expiration of such sixty-day period.
     If at any time prior to the Maturity Date and after the earlier of (x)March 31, 2004 and (y) the first distribution to the Settling SecuritiesPlaintiffs from the Settlement Fund, the average Closing Price Per Share equalsor exceeds $12.25, with all appropriate adjustments made by and in the goodfaith judgment of the Company’s Board of Directors to reflect stock splits,reverse stock splits, stock dividends, reclassifications, mergers andreorganizations occurring after May 12, 2003, for any 15 consecutive tradingdays, this Note shall be extinguished and cancelled and shall no longerevidence an obligation of the Company.
     The Company shall give prompt written notice to the Escrow Agent, in formand substance reasonable to allow the Escrow Agent to carry out its dutieshereunder, following any Change of Control, stockholder approval of atransaction that would be a Change of Control, adjustment made pursuant to theimmediately preceding paragraph and the Company’s calculation, certified by itschief financial officer, of the applicable Change of Control Price or averageClosing Price Per Share. Any failure by the Company to comply with theobligations imposed on it by this paragraph shall be a default, entitling theEscrow Agent to such remedies as the Federal Court may deem just and equitableunder the circumstances.
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     If payment on this Note becomes due and payable on a day other than aBusiness Day,the maturity hereof shall be extended to the immediately following Business Dayand interest shall continue to accrue during such extension. “Business Day”means any day other than a Saturday or Sunday or any other day on which banksin Houston, Texas are authorized or required by law, order or proclamation tobe closed for business.
     The Company and the Escrow Agent each irrevocably agree that all claims inrespect of any action or proceeding arising out of or relating to this Note arerelated to the Actions referred to in the Stipulation, which are pending beforethe Federal Court and, therefore, irrevocably submit to the jurisdiction ofsuch court in any such action or proceeding arising out of or relating to thisNote, and the Company and the Escrow Agent hereby each irrevocably agree thatthe sole and exclusive venue for the resolution of any such claims in any suchaction or proceeding shall be in such court.
     All rights and obligations hereunder shall be governed by the laws of theState of Texas, without giving effect to principles of conflict of laws thatwould result in the application of the laws of any other jurisdiction.      HANOVER COMPRESSOR COMPANY