Document:

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                                                                    EXHIBIT 4.12

                           HANOVER COMPRESSOR COMPANY

                             SUBSCRIPTION AGREEMENT

     SUBSCRIPTION AGREEMENT (this "Agreement") dated as of May 29, 1996, between
Hanover Compressor Company, a Delaware corporation (the "Company"), and the
individual named on the signature page hereof under the heading "PURCHASER"
("Purchaser").

                              W I T N E S S E T H:

     WHEREAS, Purchaser desires to subscribe for and purchase from the Company,
and the Company desires to issue and to sell to Purchaser (i) for cash out of
Purchaser's own funds, the number of shares (the "Cash Shares") of common stock,
$.001 par value ("Common Stock"), of the Company set forth next to the heading
"Cash Shares" on Schedule A attached hereto, and (ii) out of the proceeds of a
four year loan (a "Four Year Loan") to be made to Purchaser by the Company in
accordance with the terms of a loan agreement (the "Loan Agreement") and a
secured promissory note (the "Four Year Note"), each substantially in the form
attached as Exhibits C and D, respectively, to the Confidential Offering
Memorandum dated March 21, 1996 (the "Memorandum"), previously delivered to
Purchaser, the number of shares (the "Four Year Loan Shares") set forth next to
the heading "Four Year Loan Shares" on Schedule, in each case upon the terms
and conditions hereinafter set forth. The Four Year Loan Shares and the Cash
Shares are sometimes collectively referred to herein as the "Shares";

     WHEREAS, this Agreement is one of several agreements, including, without
limitation those agreements and instruments attached as Exhibits to the
Memorandum ("Other Purchaser Agreements") being entered into concurrently
herewith by the Company and Purchaser in connection with the offering (the
"Offering") of the Shares to Purchaser; and

     WHEREAS, the Offering shall be made pursuant to terms and conditions
substantially similar to those set forth in the Memorandum with the exception
that (i) options ("Options") to acquire shares of Common Stock being offered to
Purchaser in connection with Purchaser's subscription of the Shares hereunder
are not being offered pursuant to the 1996 Employee Stock Option Plan of the
Company or any other stock option plan of the Company and (ii) the offering
price of Common Stock hereunder is $1,598.25 per share and (iii) and the
exercise price of the Options hereunder is $1,598.25 per share.

     NOW, THEREFORE, in consideration of the foregoing, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby acknowledge, agree and understand the
following:

          1. Subscription. Subject only to the provisions of Section 7 hereof,
     Purchaser hereby irrevocably subscribes for the Shares under terms and
     conditions set forth herein. The
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     purchase price (the "Purchase Price") for each Share shall be $1,598.25.
     The parties agree that notwithstanding anything herein to the contrary, the
     Company reserves the absolute right (i) to reject Purchaser's subscription
     for any reason and (ii) to terminate or modify the Offering at any time for
     any reason.

          2. The Closing. The closing of the purchase and sale of the Shares
     (the "Closing") shall take place at the principal offices of the Company,
     12001 North Houston Rosslyn, Houston, Texas 77086 at 10:00 a.m., Houston
     time on Monday, June 17, 1996, or (i) at such later date or time as the
     Company in its sole discretion may determine without the consent of or
     notice to Purchaser, but in no event later than June 30, 1996 (the
     "Termination Date") and (ii) at such other place as shall be agreed upon by
     the parties hereto. The date of the Closing is sometimes hereinafter
     referred to as the "Closing Date."

        3.  Deliveries by Purchaser.

        (a) Stockholders' Agreement. Concurrently with Purchaser's execution and
delivery of this Agreement, Purchaser shall deliver to the Company two executed
counterparts to that certain Amended and Restated Stockholders' Agreement, dated
as of August 7, 1995, among the Company, GKH Partners, L.P., GKH Investments,
L.P. and the other stockholders of the Company parties thereto (the
"Stockholders' Agreement"), attached to the Memorandum as Exhibit B;

        (b) Additional Deliveries. At or prior to the Closing, upon the terms
and subject to the conditions of this Agreement, Purchaser shall execute where
appropriate and deliver to the Company:

                (i) a certified or bank cashier's check in the amount of the
        aggregate Purchase Price for the Cash Shares;

                (ii) to the extent any of the Shares subscribed for pursuant to
        this Agreement are Four Year Loan Shares:

                        (A)  two executed counterparts of the Loan Agreement;

                        (B) a duly executed Four Year Note in an original
                principal amount equal to the aggregate Purchase Price for all
                such Four Year Loan Shares to be funded by the proceeds of the
                Four Year Note and subscribed for by Purchaser pursuant to this
                Agreement;

                        (C) two executed counterparts of that certain pledge
                agreement (the "Pledge Agreement") between Purchaser and the
                Company effecting a pledge of all of the shares of Common Stock
                of the Company owned or thereafter acquired by Purchaser,
                substantially in the form attached to the Memorandum as Exhibit
                E; and

                        (D) a stock power with respect to the Shares (the "Stock
                Power") duly executed in blank;

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                (iii) two executed counterparts of that certain stock option
        agreement (the "Option Agreement") between Purchaser and the Company,
        substantially in the form attached to the Memorandum as Exhibit F;

                (iv) a fully completed and executed  IRS Form W-9;

                (v) two executed counterparts of this Agreement (including a
        fully completed Schedule A, notary page and Spousal Consent (if
        applicable)); and

                (vi) two executed counterparts of the letter agreement relating
        to the Stockholders I Agreement, attached to the Memorandum as Exhibit
        H.

        4. Deliveries by the Company. At the Closing, upon the terms and subject
to the conditions of this Agreement, the Company shall deliver to Purchaser a
certificate or certificates representing the Shares duly executed and
authenticated by the Company; provided, however, that if any portion of the
Shares are being purchased with the proceeds of a Four Year Loan, the Company
shall retain possession of all of the Shares in accordance with the terms of the
Pledge Agreement. Following the Closing, the Company shall deliver to Purchaser
a fully executed copy of this Agreement and the Other Purchaser Agreements
(other than the Four Year Note).

        5. Representations and Warranties of Purchaser. Purchaser hereby
represents and warrants to the Company as follows:

                (a) Investment Intention No Resales. Purchaser is acquiring the
        Shares for investment solely for his own account and not with a view to,
        or for resale in connection with, the distribution or other disposition
        thereof. Purchaser agrees and acknowledges that all dispositions of the
        Shares by Purchaser (other than involuntary transfers) will comply with
        the provisions of this Agreement, the Stockholders' Agreement and the
        Pledge Agreement and applicable provisions of state and federal
        securities laws.

                (b) Certain Information Not Material. Purchaser has not received
        individualized information relative to the compensation of the
        management of the Company, which information is acknowledged by
        Purchaser as not being material to Purchaser in forming a basis for
        making an investment in the Shares or for any other purpose in
        connection herewith.

                (c) Shares Unregistered. Purchaser acknowledges and represents
        that he has been advised by the Company that:

                        (i) the offer and sale of the Shares have not been
                registered under the Securities Act of 1933, as amended (the
                "Securities Act"), or any state securities laws;

                        (ii) the Shares must be held indefinitely and Purchaser
                must continue to bear the economic risk of the investment in the
                Shares unless the offer and sale of such Shares is
                subsequently registered under the Securities Act and all
                applicable state securities laws or an exemption from such
                registration is available to the Purchaser with respect to the
                Shares;

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                        (iii) there is no established market for the Shares and
                it is not anticipated that there will be any public market for
                the Shares in the foreseeable future;

                        (iv) the Company is under no obligation to register the
                Shares under the Securities Act on behalf of Purchaser, to
                assist Purchaser in complying with any exemption from
                registration or to consent to the transfer of the Shares;

                        (v) Rule 144 promulgated under the Securities Act may
                not be presently available with respect to the sale of any
                securities of the Company, and the Company has made no covenant
                to make such Rule available;

                        (vi) when and if the Shares may be disposed of without
                registration under the Securities Act in reliance on Rule 144,
                such disposition may be made only in limited amounts in
                accordance with the terms and conditions of such Rule;

                        (vii) a restrictive legend in the form set forth in
                Section 6(f) hereof shall be placed on the certificates
                representing the Shares; and

                        (viii) a notation shall be made in the appropriate
                records of the Company indicating that the Shares are subject to
                restrictions on transfer and appropriate stoptransfer
                instructions will be issued with respect to the Shares.

                (d)  Additional Investment Representations.

                        (i) Purchaser has carefully reviewed, is familiar with
                and understands the Memorandum, the Other Purchaser Agreements
                and the other documents, records and information, if any,
                requested by Purchaser or otherwise supplied by the Company in
                connection with the Offering and further understands that
                certain information set forth in the Memorandum is inapplicable
                to the Offering hereunder including, without limitation, certain
                information regarding the offering price of shares of Common
                Stock and the exercise price of Options and all provisions
                therein regarding the 1996 Employee Stock Option Plan;

                        (ii) Purchaser acknowledges that (w) the company has
                previously conducted an offering of its Common Stock pursuant to
                the terms and conditions set forth in the Memorandum (the 111996
                Offering"), (x) certain terms and conditions of the Offering are
                different than those which governed the 1996 Offering, (y) the
                Purchase Price at which the Shares are being offered to
                Purchaser is different than the purchase price offered to
                offerees of the 1996 Offering and (z) to the extent Purchaser is
                granted Options, such options shall not be granted to Purchaser
                pursuant to the Company 1996 Employee Stock Option Plan (the
                1996 Plan"), and accordingly, Purchaser shall have no right to
                participate in the 1996 Plan, any reference to the 1996 Plan in
                the Memorandum, including any reference to Purchaser becoming a
                party to a Stock Option Agreement under the 1996 Plan, being
                inapplicable to the Offering;

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                        (iii) All documents, records and information pertaining
                to an investment in the Company which have been requested by
                Purchaser have been made available or delivered to Purchaser,
                except to the extent otherwise addressed in the Memorandum;

                        (iv) Purchaser is fully familiar with the business and
                operations of the Company and has had an opportunity to ask
                questions of and receive answers from the Company concerning the
                terms and conditions of Purchaser's investment and the financial
                condition, operations and prospects of the Company;

                        (v) No oral or written statement, printed material or
                inducement given or made by the Company or any of the Company's
                affiliates is contrary to the information contained in this
                Agreement, the Memorandum or the Other Purchaser Agreements, and
                Purchaser acknowledges and agrees that in making Purchaser's
                decision to purchase the Shares, Purchaser has relied solely on
                such documents and the independent investigations made by
                Purchaser and, to the extent believed by Purchaser to be
                appropriate, Purchaser's representatives, including Purchaser's
                own professional, financial, legal, tax and other advisors;

                        (vi) Purchaser acknowledges that the Company, in
                reliance upon certain federal and state securities law
                exemptions, has provided Purchaser with less or different
                information than Purchaser would have received if an information
                memorandum complying with Rule 502(b)(2) of Regulation D
                promulgated pursuant to the Securities Act had been prepared and
                made available to Purchaser or if the Shares had been registered
                pursuant to the Securities Act. The foregoing notwithstanding,
                the information provided to Purchaser is sufficient to allow
                Purchaser to make a knowledgeable and informed decision
                regarding Purchaser's investment in the Shares;

                        (vii) Purchaser (A) has adequate means of providing for
                Purchaser's current financial needs and possible personal
                contingencies and has no need for liquidity in Purchaser's
                investment in the Shares, (B) can bear the economic risk of
                losing Purchaser's entire investment in the Shares, (C) has such
                knowledge and experience in financial matters that Purchaser is
                capable of evaluating the relative risks and merits of
                Purchaser's purchase of the Shares, (D) is familiar with the
                nature of, and risks attendant to, Purchaser's purchase of the
                Shares, and (E) has determined that the purchase of the Shares
                is consistent with Purchaser's financial objectives;

                        (viii) Purchaser realizes that Purchaser may not be able
                to sell or dispose of the Shares even in the event of a personal
                emergency. Purchaser's overall commitment to investments which
                are not readily marketable (including Purchaser's investment in
                the Shares) is not disproportionate to Purchaser's net worth;

                        (ix) The address set forth on the signature page hereof
                is Purchaser's true and correct residence, and Purchaser has no
                present intention of becoming a domiciliary of any other state
                or jurisdiction;

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                        (x) Purchaser has no reason to anticipate any change in
                Purchaser's circumstances, financial or otherwise, which may
                cause or require any sale or disposition by Purchaser of any of
                the Shares;

                        (xi) Each of this Agreement and the Other Purchaser
                Agreements has been duly and validly executed and delivered by
                Purchaser and each constitutes the valid and binding obligation
                of Purchaser enforceable against Purchaser, Purchaser's
                successors and assigns, including, but not limited to,
                Purchaser's estate and Purchaser's spouse, in accordance with
                its terms;

                        (xii) Assuming the due execution and delivery of each of
                this Agreement and the Other Purchaser Agreements (to which the
                Company is a party) by the Company, each of this Agreement and
                the Other Purchaser Agreements is a valid and binding obligation
                of the Purchaser, enforceable against the Purchaser in
                accordance with its terms, except as such enforcement may be
                subject to (A) bankruptcy, insolvency, reorganization,
                moratorium or other similar laws now or hereafter in effect
                relating to creditors rights generally and (B) general
                principles of equity (regardless of whether such enforcement is
                considered in a proceeding in equity or at law); and

                        (xiii) The Company has not guaranteed, represented or
                warranted to Purchaser either that (A) the Company will be
                profitable or that Purchaser will realize profits as a result of
                his investment in the Shares or (B) the past performance or
                experience on the part of any officer, director, stockholder,
                employee, agent, representative or affiliate thereof, or any
                employee, agent, representative or affiliate of the Company will
                in any way indicate the predictable results of ownership of the
                Shares.

                (e)  Residence-Specific Representations.

                (i) If Purchaser is a resident of the State of Texas, the
        aggregate Purchase Price for the Shares subscribed for by Purchaser
        hereunder does not exceed 20% of Purchaser's net worth (or joint net
        worth with Purchaser's spouse, if applicable) as of the date hereof; and

                (ii) If Purchaser is a resident of the State of Louisiana, the
        aggregate Purchase Price for the Shares subscribed for by Purchaser
        hereunder does not exceed 25% of Purchaser's net worth (or joint net
        worth with Purchaser's spouse, if applicable) as of the date hereof.

        6. Representations and Warranties of the Company. The Company represents
and warrants to Purchaser as follows:

                (a) Organization; Qualification. The Company is a corporation
        duly organized, validly existing and in good standing under the laws of
        the State of Delaware. The Company is duly qualified and in good
        standing as a foreign corporation and is licensed, admitted or approved
        to do business as a foreign corporation in each jurisdiction wherein the
        character of the properties owned or held by it under lease, or the
        nature of the business

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        conducted by it, makes such qualification necessary, except where the
        failure to so qualify would not have a material adverse effect on the
        Company, and would not have any adverse effect on the enforceability of
        this Agreement.

                (b) Authority. The Company has the requisite corporate power and
        authority and full legal right to enter into this Agreement and the
        Other Purchaser Agreements to which it is a party, to perform, observe
        and comply with all of its agreements and obligations hereunder and
        thereunder and to issue the Shares to Purchaser.

                (c) Due Authorization. The execution and delivery by the Company
        of this Agreement and the Other Purchaser Agreements to which it is a
        party, the performance by it of all of its agreements and obligations
        under this Agreement and the Other Purchaser Agreements to which it is a
        party, and the issuance of the Shares, have been duly authorized by all
        necessary corporate action on the part of the Company.

                (d) Binding Obligation. Each of this Agreement and the Other
        Purchaser Agreements to which the Company is a party has been duly and
        validly executed and delivered by the Company and, assuming the due
        execution and delivery of each such document by Purchaser, is a valid
        and binding obligation of the Company, enforceable against the Company
        in accordance with its terms, except as such enforcement may be subject
        to (i) bankruptcy, insolvency, reorganization, moratorium or other
        similar laws now or hereafter in effect relating to creditors' rights
        generally and (ii) general principles of equity (regardless of whether
        such enforcement is considered in a proceeding in equity or at law).

                (e) Capitalization. At the Closing Date, the authorized capital
        stock of the Company will consist of 500,000 shares of Common Stock and
        200,000 shares of preferred stock. No other class or series of capital
        stock of the Company is authorized. All of the outstanding shares of
        Common Stock, including the Shares, will, at the time of issuance, have
        been duly authorized and issued and, upon receipt by the Company of the
        Purchase Price for the Shares subscribed for hereunder, the Shares will
        be fully paid and nonassessable. There are no pre-emptive rights
        relating to the capital stock of the Company other than those granted
        pursuant to (i) the Stockholders' Agreement, (ii) that certain
        Stockholders' Agreement, dated as of March 8, 1995, among the Company
        and certain of its stockholders, (iii) that certain Stockholders'
        Agreement, dated as of August 7, 1995, among the Company, Joint Energy
        Development Investments Limited Partnership and certain other
        stockholders of the Company and (iv) that certain Stockholders'
        Agreement, dated as of December 6, 1995, among the Company and certain
        of its stockholders.

                (f) Legend. Each certificate representing the Shares shall bear
        a legend substantially to the following effect:

                THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
                OF 1933, AS AMENDED, AND MAY NOT BE OFFERED, SOLD OR OTHERWISE
                TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED
                UNDER SUCH ACT, OR UNLESS SUCH OFFER, SALE, TRANSFER, PLEDGE OR
                HYPOTHECATION IS EXEMPT FROM REGISTRATION OR IS OTHERWISE IN
                COMPLIANCE WITH SUCH ACT. THE TRANSFERABILITY OF THIS SECURITY
                IS ALSO SUBJECT TO RESTRICTIONS CONTAINED IN A STOCKHOLDERS
                AGREEMENT WHICH AGREEMENT THE COMPANY WILL FURNISH TO THE HOLDER
                OF THIS SECURITY UPON REQUEST.

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                A STATEMENT SUMMARIZING THE VOTING POWERS, DESIGNATIONS,
                PREFERENCES, LIMITATIONS, RESTRICTIONS AND RELATIVE RIGHTS OF
                THE VARIOUS CLASSES OF STOCK OR SERIES THEREOF MAY BE OBTAINED
                BY THE STOCKHOLDERS OF THE COMPANY, WITHOUT CHARGE, FROM THE
                PRINCIPAL OFFICES OF THE COMPANY.

        7. Conditions to Obligations of Purchaser. The obligation of Purchaser
to consummate the transactions contemplated by this Agreement shall be subject
to the satisfaction (or waiver by the Purchaser) on or prior to the Closing Date
of the following conditions:

                (a) Performance of Obligations. The Company shall have performed
        and complied in all material respects with all obligations and
        agreements required to be performed and complied with by it hereunder on
        or prior to the Closing Date;

                (b) Representations and Warranties. The representations and
        warranties of the company contained in this Agreement shall be true and
        correct in all material respects as of the Closing Date as if made as of
        such date;

                (c) Loans. The Company shall have made available to Purchaser at
        the Closing, as a loan (or loans), that portion of the Purchase Price
        attributable to the Four Year Loan Shares subscribed for hereunder as
        agreed to by Purchaser and the Company; and

                (d) Section 4 Obligations. The Company shall have fully complied
        with all of its obligations under the first sentence of Section 4
        hereof.

        8. Conditions to obligations of the Company. The obligation of the
Company to consummate the transactions contemplated by this Agreement shall be
subject to the satisfaction (or waiver by the Company) on or prior to the
Closing Date of the following conditions:

                (a) Performance of Obligations. Purchaser shall have performed
        and complied in all material respects with all obligations and
        agreements required to be performed and complied with by Purchaser
        hereunder on or prior to the Closing Date;

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                (b) Representations and Warranties. The representations and
        warranties of Purchaser contained in this Agreement shall be true and
        correct in all material respects as of the Closing Date as if made as of
        such date;

                (c) Offering. The offering shall not have been terminated by the
        Company; and

                (d) Section 3(b) Obligations. Purchaser shall have fully
        complied with all of its obligations under Section 3(b) hereof.

        9.  Indemnification.

        (a) Indemnification of the Company and the Company Affiliates. From and
after the date hereof, Purchaser shall indemnify and hold harmless the Company
and its predecessors, successors, officers, directors, employees,
representatives, agents and affiliates (collectively, the "Indemnitees") from
and against any loss, damage or expense, including, without limitation,
reasonable attorneys' and consultants' fees, disbursements and expenses,
suffered by any one or more of the Indemnitees arising out of or resulting from
any inaccuracy in or breach of any of the representations, warranties, covenants
or agreements made by Purchaser herein.

        (b) Indemnification of Purchaser. From and after the date hereof, the
Company shall indemnify and hold harmless Purchaser from and against any loss,
damage or expense, including, without limitation, reasonable attorneys' and
consultants' fees, disbursements and expenses suffered by Purchaser arising out
of or resulting from any inaccuracy in or breach of any of the representations,
warranties, covenants or agreements made by the company herein. The foregoing
notwithstanding, the Company's obligation to indemnify Purchaser under this
Section 9 (b) shall not exceed the Purchase Price.

        (c) Procedure for Claims. Within thirty days after obtaining written
notice of any claim or demand which has given rise to, or could reasonably give
rise to, a claim for indemnification hereunder, the party seeking
indemnification shall give written notice of such claim ("Notice of Claim") to
the other party. Failure to give such notice by the party seeking
indemnification within said thirty-day period shall not relieve the indemnifying
party of its obligations hereunder, unless and only to the extent that the
failure to so notify the indemnifying party actually results in damage or
prejudice to such indemnifying party. The Notice of Claim shall set forth a
brief description of the facts giving rise to such claim and the amount (or a
reasonable estimate) of the loss, damage or expense suffered, or which may be
suffered, by the party seeking indemnification.

     Upon receiving the Notice of Claim, the indemnifying party shall resist,
settle or otherwise dispose of such claim in such manner as it shall deem
appropriate, including the employment of counsel, and shall be responsible for
the payment of all expenses, including the reasonable fees and expenses of such
counsel. The indemnified party shall have the right to employ separate counsel
in any such action and to participate in or assume the defense thereof, but the
fees and expenses of such counsel shall be at the indemnified party's expense
unless (i)

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the employment has been specifically authorized by the indemnifying party in
writing, (ii) the indemnifying party has failed to assume the defense and employ
counsel in a timely manner or (iii) the named parties to any action (including
any impleaded parties) include both Purchaser and the Company, and the
indemnified party has been advised by such counsel that representation of the
Company and the Purchaser by the same counsel would be inappropriate under
applicable standards of professional conduct due to actual or potential
differing interests between them (in which case, if the indemnified party
notifies the indemnifying party in writing that the indemnified party elects to
employ separate counsel at the expense of the indemnifying party, the
indemnifying party shall have neither the right nor the obligation to assume the
defense of such action on behalf of the indemnified party).

        (d) Third Party Beneficiaries. Nothing contained in this Section 9 shall
confer any rights upon, or inure to the benefit of, any third party other than
those parties specified in Sections 9(a) and 9(b) above, it being understood
that such specified parties, to the extent not actually parties hereto, shall be
third party beneficiaries.

        10.  Miscellaneous.

        (a) Notices. All notices, offers or other communications required or
permitted to be given pursuant to this Agreement shall be in writing and shall
be considered as properly given or made on the earliest to occur of (i) personal
delivery, (ii) two days after being delivered to a nationally recognized
overnight mail delivery or courier service, (iii) five days after being mailed
by certified mail, return receipt requested, postage prepaid, or (iv) delivery
by prepaid telegram or facsimile transmission (with written confirmation of
receipt). All notices given or made pursuant hereto shall be addressed to the
Company at its principal office and to Purchaser at his address appearing on the
signature page hereof under the heading "PURCHASER". The address of any party
hereto may be changed by a notice in writing given in accordance with the
provisions hereof.

        (b) Effect and Interpretation. This Agreement shall be construed in
accordance with and governed by the laws of the State of Delaware without regard
to the conflicts of laws provisions thereof.

        (c) Entire Agreement. This Agreement, the Memorandum (to the extent
qualified by Section 5(d)(ii) hereof) and the Other Purchase Agreements and any
Exhibits or Schedules attached hereto or thereto, which documents are
incorporated herein by this reference, constitute the entire agreement between
the parties hereto with respect to the subject matter hereof and may be amended
only by a writing executed by all parties hereto. This Agreement and the other
documents and instruments specified in this section 10(c) and the information
contained herein and therein expressly supersede all understandings and
agreements of the parties, whether written or oral, between the parties with
respect to the subject matter hereof.

        (d) Successors. This Agreement and all the terms and provisions hereof
shall be binding upon and shall inure to the benefit of the parties hereto, and
their respective heirs, legal representatives, permitted successors and
permitted assigns.

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        (e) Pronouns and Headings. As used herein, all pronouns shall include
the masculine, feminine, neuter, singular and plural wherever the context and
facts require such construction. The descriptive headings in the sections of
this Agreement are inserted for convenience of reference only and shall not
control or affect the meaning or construction of any of the provisions hereof.

        (f) Severability. If any provision of this Agreement is held by a court
of competent jurisdiction to be invalid, illegal or unenforceable, such
provision shall be severed and enforced to the extent possible or modified in
such a way as to make it enforceable, and the invalidity, illegality or
unenforceability thereof shall not affect the validity, legality or
enforceability of the remaining provisions of this Agreement.

        (g) Certain Tax Matters. Under section 1445(e) of the Internal Revenue
Code of 1986, as amended, a corporation, partnership, trust or estate must
withhold tax with respect to certain transfers of property if a holder of the
interest in the entity is a foreign person. To inform the Company that no
withholding is required with respect to any of the Shares, Purchaser hereby
certifies as follows: (1) Purchaser is not a nonresident alien for purposes of
U.S. income taxation; (2) Purchaser's social security number is as set forth on
the signature page hereto; and (3) Purchaser's home address is as set forth an
the signature page hereto. Purchaser understands under penalties of perjury that
this certification may be disclosed to the Internal Revenue Service and that any
false statement Purchaser has made herein could be punished by fine,
imprisonment or both. Purchaser has completed and submitted herewith a Form W-9
relative to Purchaser's taxpayer identification number and other matters and
does hereby represent and warrant that such form is complete, true and correct.

        (h) Counterparts. This Agreement may be executed simultaneously in one
or more counterparts each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

        (i) Assignment. This Agreement and the rights and obligations of the
parties hereunder may be assigned or otherwise delegated by the Company, but
may not be assigned by Purchaser without the Company's prior written consent,
which consent may be withheld in the Company's sole discretion.

        (j) Consent of Spouse; Insertion in Will. Purchaser, if married, or, if
currently unmarried, upon Purchaser's marriage, agrees to obtain the consent and
approval of Purchaser's spouse to all of the terms and provisions of this
Agreement by the execution hereof by such spouse. Purchaser agrees to insert in
Purchaser's last will and testament, or other similar instrument, or to execute
a codicil thereto, directing and authorizing Purchaser's personal
representatives to fulfill and comply with the provisions hereof.

        (k) Effectiveness; Termination. In the event this Agreement is
terminated for any reason, the parties hereto shall have no further obligations
to each other, except that in the event of a complete or partial performance of
the terms hereof which occurs prior to any termination hereof, (i) Purchaser
shall promptly return to the Company all certificates in his

                                      11
<PAGE>

possession representing the Shares, if any, and (ii) the Company shall promptly
refund the Purchase Price to Purchaser, if and to the extent paid.

                  (REMINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                      12
<PAGE>

     IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.

                         THE COMPANY:

                         HANOVER COMPRESSOR COMPANY, a
                         Delaware corporation

                         By:  _______________________________________
                              Curtis A. Bedrich
                              Chief Financial Officer and Treasurer

                                      13
<PAGE>

                            PURCHASER SIGNATURE PAGE

                            PURCHASER:

                            __________________________________________
                            Donald M. DeVille

                            Social Security No. ______________________

                            Home Address:

                            __________________________________________

                            __________________________________________

                            __________________________________________

                                SPOUSAL CONSENT

     The undersigned, the spouse of Purchaser who is a party to the foregoing
Subscription Agreement, hereby consents to the execution of the foregoing
Subscription Agreement pursuant to the offering and the consummation of the
transactions contemplated thereby by his or her spouse, and to the extent the
undersigned has acquired or hereafter acquires an interest in and to the
property and subject matter of the Subscription Agreement, hereby agrees to be
bound by the terms of such Subscription Agreement.

Date: ___________________________     _______________________________
                                      _______________________________
                                      Print Name:

                                      14
<PAGE>

                            PURCHASER SIGNATURE PAGE

                            PURCHASER:

                            __________________________________________
                            Donald M. DeVille

                            Social Security No. ______________________

                            Home Address:

                            __________________________________________

                            __________________________________________

                            __________________________________________

                                SPOUSAL CONSENT

     The undersigned, the spouse of Purchaser who is a party to the foregoing
Subscription Agreement, hereby consents to the execution of the foregoing
Subscription Agreement pursuant to the offering and the consummation of the
transactions contemplated thereby by his or her spouse, and to the extent the
undersigned has acquired or hereafter acquires an interest in and to the
property and subject matter of the Subscription Agreement, hereby agrees to be
bound by the terms of such Subscription Agreement.

Date: ____________________    ________________________________

                              Print Name: ____________________

                                      15
<PAGE>

                                  NOTARY PAGE

STATE OF ____________)
                     )
COUNTY OF ___________)

     I, ________________ a Notary Public in and for said County, in the State
aforesaid, do hereby certify that ____________________________ appeared before
me this day in person, and acknowledged and swore that he signed, sealed, and
delivered the said instrument as his respective free and voluntary act and deed
for the uses and purposes therein set forth, and that the statements contained
therein are true.

     Given an under my hand and notarial seal as of the 11 day of
______________, 1996.

My Commission expires:

___________________________       ______________________________
                                  Notary Public

                                      16
<PAGE>

                                   SCHEDULE A

                             Shares Subscribed For
================================================================================
   TYPE OF SHARE                NUMBER OF SHARES              CONSIDERATION
--------------------------------------------------------------------------------
Cash Shares                            63                      $100,689.75
--------------------------------------------------------------------------------
Four-Year Loan Shares                 126                      $201,379.50
--------------------------------------------------------------------------------
Total                                 189                      $302,069.25
================================================================================

                                      17<PAGE>

                                                                    EXHIBIT 4.13

                            1997 STOCK PURCHASE PLAN

      1.  PURPOSE

          The Hanover 1997 Stock Purchase Plan (the "Plan") is intended to
promote the long-term growth and financial success of Hanover Compressor Company
(the "Company") in the interests of the Company and its stockholders and to
strengthen the link between management and stockholders by:

          .  providing officers, directors, consultants and employees of the
             Company and its Subsidiaries (as hereinafter defined) with an
             opportunity to significantly increase their ownership of Common
             Stock (as hereinafter defined) coupled with incentive awards based
             in part on the performance of the Common Stock relative to the
             Index Stocks (as hereinafter defined) and the increase in the
             earnings of the Company, and

          .  providing this opportunity in a manner that places these
             individuals at risk in the event of poor Company performance.

      2.  DEFINITIONS

          Except where the content otherwise indicates, the following
definitions apply:

          "Agreement" means the written agreement entered into between the
Company and a Participant to carry out the Plan with respect to the Participant
concerning a particular Purchase Award in accordance with the Plan's terms and
conditions. The Agreements need not be identical and shall be in the form
approved by the Committee.

          "Average Market Price" of a Security means, for a given period, the
sum of the Market Prices of such Security for each Trading Day in the relevant
period divided by the number of Trading Days in such period.

          "Board" means Board of Directors of the Company.

          "Cause" means (i) the commission by such Participant of an act of
fraud, embezzlement or willful breach of a fiduciary duty to the Company
(including the unauthorized disclosure of confidential or proprietary material
information of the Company), (ii) a conviction of such 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 directive of the chief executive officer of the Company or the Board
in the case of executive officers of the Company, (iv) willful misconduct as an
employee of the Company, (v) the willful failure of such Participant to render
services to the Company in accordance with his employment or consulting
arrangement, which failure amounts to a material neglect of his duties to the
Company or (vi) substantial dependence, as determined by the Board, on alcohol
or any drug,
<PAGE>

immediate precursor or other substance listed in Schedule I-V of
the Federal Comprehensive Drug Abuse Prevention and Control Act of 1970, as
amended, as determined in the sole discretion of the Committee.

          "Change of Control" means the occurrence of any one of the following
events:

          (a) any (A) consolidation or merger of the Company in which the
     Company is not the continuing or surviving corporation or which
     contemplates that all or substantially all of the business and/or assets of
     the Company shall be controlled by another corporation or (B) a
     recapitalization (including an exchange of Company equity securities by the
     holders thereof), in either case, in which any "Person" (as such term is
     used in Sections 13(d) and 14(d)(2) of the Exchange Act), other than the
     Controlling Shareholders, becomes the beneficial owner (within the meaning
     of Rule 13d-3 promulgated under the Exchange Act) of securities of the
     Company representing more than 50% of the combined voting power of the
     Company's then outstanding securities ordinarily having the right to vote
     in the election of directors;

          (b) any sale, lease, exchange or transfer (in one transaction or
     series of related transactions) of all or substantially all of the assets
     of the Company and its Subsidiaries;

          (c) approval by the shareholders of the Company of any plan or
     proposal for the liquidation or dissolution of the Company, unless such
     plan or proposal is abandoned within 60 days following such approval; or

          (d) any "Person" (as such term is used in Sections 13(d) and 14(d)(2)
     of the Exchange Act), other than the Controlling Shareholders, shall become
     the beneficial owner of securities of the Company representing more than
     50% of the combined voting power of the Company's then outstanding
     securities ordinarily having the right to vote in the election of
     directors.

          "Code" means the Internal Revenue Code of 1986, as amended.

          "Commission" means the Securities and Exchange Commission.

          "Committee" means the Compensation Committee of the Board or such
other committee of the Board, composed of not less than two persons who qualify
as disinterested persons" as defined in Rule 16b-3(c)(2), as promulgated by the
Commission under the 1934 Act, or any successor definition adopted by the
Commission, and as outside directors" within the meaning of Section 162(m) of
the Code.

          "Committee Certification" means with respect to the Earnings Incentive
Award, the certificate of the Committee that the Earnings Return Percentage is
at least 15% or higher, and with respect to the Shareholder Return Incentive
Award, the certification of the Committee as to the Comparative Performance
Percentile and that the Company is in the 75th Comparative Performance
Percentile or higher. The Committee shall meet to determine such certification
not later than the 60th day following the end of the Final Plan Year with
respect to such Participant

                                       2
<PAGE>

or, in the case of a Change of Control, not later than the later of (i) the 60th
day following the Final Plan Year or (ii) the 30th day following the Change of
Control.

          "Common Stock" means the Common Stock, $.001 par value per share, of
the Company.

          "Comparative Performance Percentile" shall be calculated by (i)
calculating the Total Shareholder Return of each Index Stock; (ii) ranking the
Index Stocks according to Total Shareholder Return, (iii) ranking the Company
amongst such Index Stocks according to the Total Shareholder Return of the
Company, (iv) dividing (x) that number of Index Stocks with lower Total
Shareholder Returns than the Total Shareholder Return of the Company by (y) the
number of Index Stocks plus 1, and (v) multiplying such quotient by 100.

          "Controlling Stockholders" means GKH Investments, L.P., GKH Partners,
L.P., and the partners therein.

          "Designated Award Amount" means, on any date, the original Purchase
Price plus the Interest Spread.

          "Designated Payment Date" means the date designated by the Company for
payment of a Shareholder Performance Award, which date shall be not more than
thirty (30) days following the Committee Certification with respect to such
Performance Award and in any event no later than the September 1 following the
Final Plan Year or, in the case of a Change of Control, no later than sixty (60)
days following the Change of Control.

          "Disability" means being entitled to disability benefits under the
terms of the Company's long term disability plan.

          "Earnings Incentive Award" means the amount of cash, if any, payable
to the Participant calculated pursuant to Section 8(b).

          "Earnings Return Percentage" is the increase in the compounded annual
growth of EBITDA expressed as a percentage from the Initial Measurement Period
through the Final Measurement Period calculated on a monthly basis.

          "EBITDA" means earnings of the Company determined before interest,
taxes, depreciation and amortization.

          "Effective Date" means the date the Plan is approved by the
stockholders of the Company.

          "Final Plan Year" means the earliest of (i) the Plan Year containing
the fourth anniversary of the Participant's Purchase Date, (ii) the Plan Year in
which such Participant's Termination of Service occurs, or (iii) the last
completed Plan Year prior to a Change of Control.

          "Final Measurement Period" means the Plan Quarter containing the
fourth anniversary of the Participant's Purchase Date; provided, however, that
(i) for purposes of

                                       3
<PAGE>

Section 8(e)(ii), the Final Measurement Period shall mean the last completed
Plan Quarter prior to the date of such Participant's Termination of Service and
(ii) for purposes of Section 8(f), the Final Measurement Period shall mean the
average of the ten (10) Trading Days ending on the 10th Trading Day prior to the
date of the Change of Control.

          "Index Stock" means the common stock of any corporation (other than
the Company) included in the Market Index on each Trading Day during the Initial
Measurement Period and the Final Measurement Period.

          "Initial Measurement Period" means, with respect to each Participant,
the last completed Plan Quarter prior to such Participant's Purchase Date,
except that for those Participants whose Purchase Date occurs prior to September
1, 1997, the Initial Measurement Period shall mean July 1, 1997.

          "Interest Rate" means the "applicable federal rate" in effect on the
Purchase Date for loans with a maturity of four years, with interest compounded
annually, as determined by Section 1274(d) of the Code, compounded annually.

          "Interest Spread" means, at the time of determination, interest
accrued at the Interest Rate on the Purchase Price.

          "Market Index" shall mean those companies set forth on Exhibit A.

          "Market Price" with respect to a given Security shall mean, for any
given date (or in the event such date is not a Trading Day with respect to such
Security, the last Trading Day prior to such date), the closing sale price of
such Security on such date, as reported as the New York Stock Exchange-Composite
Transactions for such day in The Wall Street Journal, mid-west edition, or, if
such Security is not listed on such exchange, as reported on the principal
national securities exchange or national automated stock quotation system on
which such Security is traded or quoted. In the event an Index Stock ceases to
exist by merger or otherwise, or ceases to be traded on a securities exchange or
national automated stock quotation system, the Market Price for such Index Stock
shall be calculated through the date such Index Stock ceased to exist or be so
traded and then adjusted by the mean increase or decrease in price for the Index
Stocks on the Market Index which remain traded on a securities exchange or
national automated stock quotation system.

          "1934 Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated by the Commission thereunder.

          "Participant" means each eligible employee of the Company or any of
its Subsidiaries who is designated by the Committee to receive a Purchase Award.

          "Performance Award" means the opportunity to receive cash incentive
payments pursuant to Section 8.

                                       4
<PAGE>

          "Performance Period" means, with respect to each Purchase Award, the
period of time beginning on the date set forth in the Agreement with respect to
such Purchase Award and ending on the last day of the Plan Quarter containing
the fourth anniversary of the Purchase Date.

          "Plan Quarter" means any of the three month periods beginning on
January 1, April 1, July 1, or October 1 of any year.

          "Plan Year" means the twelve-month period commencing each July 1 and
ending the following June 30.

          "Purchase Award" means an award to a Participant permitting such
Participant to purchase shares of Common Stock pursuant to Section 6 at the
Purchase Price, together with related Purchase Loan and Performance Award rights
upon exercise of the Purchase Award.

          "Purchase Date" means the date a Participant purchases shares of
Common Stock pursuant to a Purchase Award.

          "Purchase Loan" means an extension of credit to the Participant by the
Company evidenced by the Purchase Note and secured by a pledge of the shares of
Common Stock purchased by the Participant under the Plan or subsequently
acquired by the Participant through exercise of options granted to the
Participant pursuant to the Stock Option Plan.

          "Purchase Note" means a full recourse promissory note including the
terms set forth in Section 7(a).

          "Purchase Price" of the Common Stock.

               (a) If shares of Common Stock are listed or admitted to unlisted
     trading privileges on any national or regional securities exchange, the
     last reported sale price, regular way, on the composite tape of that
     exchange on the day the Purchase Price is to be determined;

               (b) If the Common Stock is not listed or admitted to unlisted
     trading privileges as provided in paragraph (a), and if sales prices for
     shares of Common Stock are reported by the National Association of
     Securities Dealers, Inc. Automated Quotations, Inc. National Market System
     ("NASDAQ System"), then the last sale price for Common Stock reported as of
     the close of business on the day the Purchase Price is to be determined, or
     if no such sale takes place on that day, the average of the high bid and
     low asked prices so reported; if Common Stock is not traded on that day,
     the next preceding day on which such stock was traded; or

               (c) If trading of the Common Stock is not reported by the NASDAQ
     System or on a stock exchange, the Purchase Price will be determined by the
     Committee in its discretion based upon the best available data.

                                       5
<PAGE>

          "Retirement" means the date the Participant retires from the Company
on or after attaining age [_______].

          "Security" shall mean the Common Stock or an Index Stock.

          "Shareholder Return Incentive Award" means the amount of cash, if any,
payable to the Participant calculated pursuant to Section 8(c).

          "Stock option Plan" means the Hanover Compressor Company 1997 Stock
Option Plan.

          "Subsidiary" means a corporation (or partnership, joint venture or
other enterprise) of which the Company owns or controls, directly or indirectly,
50% or more of the outstanding shares of stock normally entitled to vote for the
election of directors (or comparable equity participation and voting power).

          "Tax Rate" means, at the time of determination, the maximum marginal
effective combined federal and state tax rates on ordinary income or capital
gains, as the ease may be, to which such individual is subject.

          "Termination of Service" means,

               (a) with respect to an employee when the employee's employment
     relationship with the Company and all of its Subsidiaries is terminated,
     regardless of any severance arrangements. A transfer from the Company to a
     Subsidiary or affiliate, or vice versa is not a termination of employment
     for purposes of this Plan;

               (b) with respect to a consultant when the consultant's consulting
     relationship with the Company is terminated either due to the termination
     of any consulting agreement, or otherwise, regardless of the fact that no
     employment relationship exists;

               (c) with respect to an officer or director when such individual
     is no longer serving as an officer or director of the Company, as a
     consultant to or employee of the Company and any of its Subsidiaries.

          "Total Purchase Price" means, with respect to each Participant, the
Purchase Price multiplied by the number of shares of Common Stock purchased
pursuant to the Purchase Award.

          "Total Shareholder Return" on a Security shall be calculated by (i)
assuming that one share of such Security is purchased on the Purchase Date at
the Average Market Price of such Security during the Initial Measurement Period,
(ii) assuming that additional shares (or fractions of shares) of such Security
are purchased upon the payment of dividends or other distributions to holders of
such Security on the initial share of such Security and on shares accumulated
through the assumed reinvestment of dividends and other distributions at a price

                                       6
<PAGE>

equal to the Market Price of such Security on the date such dividends or
distributions are paid, (iii) calculating the number of shares (including
fractions of shares) of such Security that would be accumulated over the
Performance Period (or such shorter period as provided in the Plan), adjusting,
as necessary, for any stock split or similar events, (iv) multiplying the number
of shares of such Security (including fractions of shares) determined in clause
(iii) by the Average Market Price during the Final Measurement Period, and (v)
determining the annual compound rate of growth during the Performance Period (or
such shorter period) based upon the value determined in clause W and the value
determined in clause (iv) for such Security calculated in each case on a monthly
basis. To the extent any noncash dividend or distribution is made to holders of
a Security, the Committee shall, in its sole discretion, determine the fair
market value of such dividend or distribution, which amount shall be assumed to
be reinvested in the manner provided in clause (ii) above.

          "Trading Day" means, with respect to a Security, a day on which such
Security is publicly traded.

      3.  SHARES SUBJECT TO THE PLAN

          The aggregate number of shares of Common Stock that may be issued
under the Plan and granted as options under the Stock Option Plan shall not
exceed 1,365,062 shares and no Participant shall be awarded a Purchase Award
with respect to more than 60,000 shares; provided, however, that in the event
that at any time after the Effective Date a stock dividend, stock split,
recapitalization, merger, consolidation, or other change in capitalization, or a
sale by the Company of all or part of its assets, or any separation from the
Company, including any spin-off or other distribution to stockholders other than
an ordinary cash dividend, results in (a) the outstanding shares of Common
Stock, or any securities exchanged therefor or received in their place, being
exchanged for a different number or class of shares of stock or other securities
of the Company, or for shares of stock or other Securities of any other
corporation; or (b) new, different or additional shares or other securities of
the Company or of any other corporation being received by the holders of
outstanding shares of Common Stock, then the total number of shares of Common
Stock authorized under this Plan, and the maximum number of shares with respect
to which a Purchase Award may be awarded to a participant, shall be
appropriately adjusted by the Committee in its discretion. Shares of Common
Stock that have been included in a Purchase Award but not purchased by a
Participant on the Purchase Date may again be available for award under the Plan
or as options under the Stock Option Plan.

      4.  TERM OF THE PLAN

          The Plan shall become effective upon the approval by the stockholders
of the Company. Prior to the Effective Date, the Committee may, in its
discretion, grant or authorize the making of Purchase Awards under the Plan as
if the Effective Date had occurred, provided that the exercise of Purchase
Awards so granted or made shall be expressly subject to the occurrence of the
Effective Date. The Plan shall be terminated on June 30, 2001; provided, that
Performance Awards and Purchase Loans outstanding as of such date shall not be
affected or impaired by the termination of the Plan.

                                       7
<PAGE>

      5.  ELIGIBLE PARTICIPANTS

          All officers, directors and consultants of the Company and other key
employees of the Company and its Subsidiaries who, in the opinion of the
Committee, can materially influence the long-term performance of the Company
and/or its Subsidiaries are eligible to receive a Purchase Award. The Committee
shall have the power and complete discretion to select those eligible employees
who are to receive Purchase Awards.

      6.  STOCK PURCHASE

          (a) Grant of Purchase Award. The number of shares of Common Stock
     purchasable under a Purchase Award for any Participant and the Purchase
     Date shall be determined by the Committee. The Committee shall, with
     respect to each Purchase Award, give written notice prior to the Purchase
     Date to each Participant receiving such Purchase Award stating (i) the
     maximum and minimum number (which numbers may be identical) of shares of
     Common Stock that may be purchased under the Purchase Award, (ii) the
     Purchase Date and (iii) the Interest Rate and other terms pertaining to the
     Purchase Loan.

          (b) Exercise of Purchase Award. A Participant shall exercise a
     Purchase Award by delivering to the Company on or prior to the Purchase
     Date M a notice stating the number of shares (not less than the minimum
     number and not more than the maximum number specified in the Purchase
     Award) such Participant elects to purchase on the Purchase Date, and (ii)
     an executed Agreement, Purchase Note and any other documents required
     pursuant to the Plan, or in lieu of a Purchase Note, a Participant may
     deliver cash in the amount of the Total Purchase Price for the shares of
     Common Stock purchased pursuant to the Purchase Award. Any Participant who
     does not elect to purchase at least the minimum number of shares under the
     Purchase Award on or prior to the Purchase Date shall forfeit any rights
     under the Plan with respect to such Purchase Award, including, without
     limitation, any right to receive a Purchase Loan or Performance Award
     related to such Purchase Award.

          (c) Closing Time. The exercise of the Purchase Award, the delivery of
     the Total Purchase Price and the issuance by the Company of the Common
     Stock purchased pursuant to the Purchase Award shall be effective at 1:00
     p.m., central time, on the Purchase Date (the Closing Time). After the
     Closing Time, such Participant shall be deemed a stockholder of the Company
     and shall be entitled (i) to dividends and distributions on such Common
     Stock owned or pledged, (ii) to exercise all voting rights with respect to
     the Common Stock, and (iii) subject to the terms of the Plan, the
     Agreement, the Purchase Loan and related documents, to transfer the Common
     Stock. Notwithstanding anything herein to the contrary, the Committee shall
     have the absolute right, in its sole discretion, to revoke any Purchase
     Award, including, without limitation, any right to receive a Purchase Loan
     or Performance Award related to such Purchase Award, prior to the Closing
     Time.

                                       8
<PAGE>

      7.  LOAN PROVISIONS

          (a) General. At the election of the Participant, the Company shall
     extend a Purchase Loan to a Participant upon exercise of a Purchase Award
     subject to the terms and conditions set forth in this Section 7. The
     original principal amount of the Purchase Loan shall be equal to the Total
     Purchase Price. Such Purchase Loan shall be evidenced by the Purchase Note
     with full recourse against the maker. The obligations of each Participant
     under a Purchase Note shall be unconditional and absolute and, without
     limiting the generality of the foregoing, shall not be released, discharged
     or otherwise affected by any change in the existence, structure or
     ownership of the Company, or any insolvency, bankruptcy, reorganization or
     other similar proceeding affecting the Company or its assets or the market
     value of the Common Stock or any resulting release or discharge of any
     obligation of the Company or the existence of any claim, set-off or other
     rights which any Participant may have at any time against the Company or
     any other person, whether in connection with the Plan or with any unrelated
     transactions, provided that nothing herein shall prevent the assertion of
     any such claim by separate suit or counterclaim.

          Notwithstanding anything to the contrary in this Section 7, the
Company shall not be required to make any Purchase Loan to a Participant if the
making of such Purchase Loan will M cause the Company to violate any covenant or
similar provision in any indenture, loan agreement or other agreement, or (ii)
violate any applicable federal, state or local law, provided, that the failure
to make such Purchase Loan shall be deemed to revoke the exercise of the related
Purchase Award unless the Participant pays the Total Purchase Price in cash.

          (b) Security. Payment of the Purchase Note shall be secured by a
     pledge of all of the shares of Common Stock acquired by the Participant
     upon the exercise of the Purchase Award to which the Purchase Loan relates
     or subsequently acquired by the Participant through exercise of options
     granted to the Participant pursuant to the Stock Option Plan. The
     Participant shall effect such pledge by delivering to the Company (i) the
     certificate or certificates for the shares of Common Stock, accompanied by
     a duly executed stock power in blank, (ii) a properly executed stock pledge
     agreement, and (iii) such other documents as may be required by the
     Committee. Prior to payment in full of the outstanding balance on the
     Purchase Note (including accrued and unpaid interest), no shares of Common
     Stock or other collateral pledged to the Company under the stock pledge
     agreement shall be transferable by the Participant. A transfer of a
     Participant's shares of Common Stock to a revocable trust as to which the
     Participant retains voting and investment power (which powers of
     revocation, voting and investment may be shared with the Participant's
     spouse) or a transfer to joint ownership with such Participant's spouse
     shall not be deemed a transfer for purposes of this Section 7(b) or Section
     8(c), although such shares shall remain pledged to secure the Purchase Loan
     pursuant to Section 7(b) and, solely for the purposes of this Plan, shall
     be deemed to be owned by the Participant.

                                       9
<PAGE>

          (c) Interest. Interest on the principal balance of the Purchase Loan
     will accrue annually, in arrears, at the Interest Rate. Except as provided
     in subsections (e), (f), (g) and (h) of this Section 7, M accrued interest
     shall not be payable during the Performance Period but shall be added to
     the principal balance of the Purchase Loan and (ii) interest that accrues
     after the end of the Performance Period shall be paid annually in arrears.

          (d) Term. The term of the Purchase Loan for any Participant shall
     begin on such Participant's Purchase Date and, subject to prepayment as
     provided in subsections (e), (f), (g) and (h) of this Section 7, have a
     final maturity date on the last day of the Plan Quarter containing the
     fourth anniversary of the Purchase Date at which time the principal balance
     of the Purchase Loan (including accrued but unpaid interest) outstanding
     after the prepayment pursuant to Section 7(e)(ii) following the end of the
     Performance Period, if any (the `Remaining Balance"), shall be immediately
     due and payable.

          (e) Prepayment obligations Other than Termination of Service or Change
     of Control.

              (i) Dividends and Distributions. To the extent the Participant
     receives cash dividends or other distributions paid in cash on Common Stock
     purchased under the Plan, the Participant shall prepay the Purchase Loan by
     the full pre-tax amount, net of any required tax withholding on such
     dividends or other distribution, of such dividend or distribution received
     within ten (10) days of receipt.

              (ii) Performance Award. To the extent the Participant receives any
     Earnings Incentive Award or Shareholder Return Incentive Award prior to the
     earliest of (i) Termination of Service due to death or Disability, (ii) a
     Change of Control or (iii) the end of the Performance Period, the
     Participant shall immediately prepay the Purchase Loan by the full pre-tax
     amount of such award upon receipt thereof. In the event the Participant
     receives any Earnings Incentive Award or Shareholder Return Incentive Award
     after the earliest of M Termination of Service due to death or Disability,
     (ii) a Change of Control or (iii) the end of the Performance Period, the
     Participant shall immediately prepay the Purchase Loan by the full after-
     tax amount of such award upon receipt thereof, based upon the Tax Rate.

              (iii) Optional Prepayments. The Participant may prepay all or any
     portion of the Purchase Loan at any time without penalty.

              (iv) Application of Prepayments. All prepayments made to the
     Company pursuant to this Section 7(e) shall first be applied to pay accrued
     interest on the Purchase Loan and then to reduce the principal balance due
     on the Purchase Loan.

          (f) Prepayment obligations for Termination of Service During the
     Performance Period.

                                       10
<PAGE>

              (i) other Termination of Service. Except as provided in Section
     7(h), in the event of a Participant's Termination of Service for any
     reason, except death or Disability, prior to the end of the Performance
     Period except following a Change of Control, any outstanding balance
     (including accrued and unpaid interest) of the Purchase Loan shall be due
     and payable immediately upon such Termination of Service.

              (ii) Death or Disability. Except as provided in Section 7(h), in
     the event a Participant's Termination of Service during the Performance
     Period due to death or Disability, any outstanding balance (including
     accrued and unpaid interest) of the Purchase Loan shall be due and payable
     upon the Designated Payment Date.

          (g) Prepayment Upon a Change of Control During the Performance Period.
     Upon a Change of Control prior to the earlier of the Participant's
     Termination of Service or the end of the Performance Period, any
     outstanding balance (including accrued and unpaid interest) of the
     Participant's Purchase Loan (subject to any prepayments pursuant to Section
     7(e)) shall become due and payable upon of the date of such Change of
     Control. Interest on the unpaid principal balance of such Purchase Loan
     during such three-year period shall accrue at the Interest Rate and shall
     be payable annually, in arrears, on each such anniversary.

          (h) Prepayment obligations for Termination of Service for Cause. Upon
     a Termination of Service for Cause following the end of the Performance
     Period, any outstanding balance on the Purchase Loan (including any accrued
     and unpaid interest) shall become immediately due and payable.

     8. PERFORMANCE AWARD, PAYMENT OF EARNINGS INCENTIVE AWARD AND SHAREHOLDER
        RETURN INCENTIVE AWARD

          (a) Performance Award. The Company shall extend a Performance Award to
     a Participant upon exercise of a Purchase Award, subject to the terms and
     conditions set forth in this Section 8. The maximum amount payable to any
     Participant pursuant to a Performance Award consisting of an Earnings
     Incentive Award and a Shareholder Return Incentive Award shall equal the
     Designated Award Amount at the time such cash award payments are made.
     Notwithstanding any provision of the Plan to the contrary, no Performance
     Award is payable under this Section 8 unless there has been a Committee
     Certification with respect to such Earnings Incentive Award or Shareholder
     Return Incentive Award.

          (b) Earnings Incentive Award. The Earnings Incentive Award with
     respect to any Purchase Award shall equal 50% of the Designated Award
     Amount on the Designated Payment Date, multiplied by the Earnings Incentive
     Award Percentage, subject to the Committee Certification. Except as set
     forth in Section 8(e) the portion of the Earnings Incentive Award earned as
     a percentage of the Designated Award Amount at the time such Earnings
     Incentive Award is made pursuant to Section 8(e) will vary in accordance
     with Table A that follows:

                                       11
<PAGE>

                                    TABLE A

                       EARNINGS INCENTIVE AWARD SCHEDULE

                                            Earnings Incentive Award Percentage
Earnings Return Percentage                           Award Percentage
--------------------------                  -----------------------------------
Below 15%.................................................   0%

30% or more............................................... 100%

Payments for performance between the listed percentages will be interpolated on
a straight-line basis.

          (c) Shareholder Return Incentive Award. The Shareholder Return
     Incentive Award with respect to a particular Purchase Award shall equal 50%
     of the Designated Award Amount on the Designated Payment Date, multiplied
     by the Shareholder Incentive Percentage, subject to the Committee
     Certification. Except as set forth in Section 8(e), the portion of the
     Shareholder Return Incentive Award earned as a percentage of the Designated
     Loan Amount at the time such Shareholder Return Incentive Award is made
     pursuant to Section 8(e) will vary in accordance with Table B that follows:

                                    TABLE B

                  SHAREHOLDER RETURN INCENTIVE AWARD SCHEDULE

Comparative Performance Percentile              Shareholder Incentive Percentage
----------------------------------              --------------------------------
          Below 75th.........................................   0%

          100th.............................................. 100%

Payments for performance between the listed percentiles will be interpolated on
a straight-line basis.

          (d) Timing of Payment. Payment of any Earnings Incentive Award and/or
     Shareholder Return Incentive Award shall be made on the Designated Payment
     Date following the earliest of the end of the Performance Period, a
     Termination of service due to death or Disability or a Change of Control;
     provided, however, that any payment of a Earnings Incentive Award and/or
     Shareholder Return Incentive Award shall be applied to prepay the Purchase
     Loan in accordance with Section 7(e)(ii).

          (e)  Treatment of a Termination of Service.

               (i) Upon a Termination of Service prior to the end of the
     Performance Period for any reason except death, Disability, or Retirement a
     Participant shall not be entitled to receive any Earnings Incentive Award
     nor any Shareholder Return Incentive Award.

                                       12
<PAGE>

               (ii) In the event of a Termination of Service prior to the end of
     the Performance Period due to death, Disability, or Retirement the
     Participant will be entitled to a potential payment under the Participant's
     Earnings Incentive Award based on the Earnings Return Percentage and
     Shareholder Return Incentive Award based on the Comparative Performance
     Percentile both as measured from the Initial measurement Period through and
     including the Final Measurement Period.

          (f) Change of Control. Upon a Change of Control of the Company prior
     to the Termination of Service of a Participant, the Participant shall be
     entitled to the right to receive a potential Earnings Incentive Award
     and/or shareholder Return Incentive Award based upon the Earnings Return
     and Comparative Performance Percentile as measured from the Initial
     Measurement Period through and including the Final Measurement Period.

     9.  PLAN ADMINISTRATION

          The Plan shall be administered by the Committee. If at any time no
Committee shall be in office, the functions of the Committee specified in the
Plan shall be exercised by the "disinterested directors" on the Board (as
defined in Rule 16b-3 (c) (2) under the 1934 Act) who are also "outside
directors" within the meaning of Section 162(m) of the Code. Subject to the
provisions of the Plan, the Committee shall interpret the Plan and make such
rules as it deems necessary for the proper administration of the Plan, shall
make all other determinations necessary or advisable for the administration of
the Plan and shall correct any defect or supply any omission or reconcile any
inconsistency in the Plan in the manner and to the extent that the Committee
deems desirable to carry the Plan into effect. Performance Awards under Section
8 are intended to qualify as performance-based compensation within the meaning
of Section 162(m) of the Code, and these provisions shall be interpreted
accordingly. Among other things, the Committee shall have the authority, subject
to the terms of the Plan, to determine (i) the individuals to whom the Purchase
Awards are granted, (ii) the time or times the Purchase Awards are granted,
(iii) the Purchase Dates for such Purchase Awards, (iv) the basis for any
Termination of Service, including whether or not it was for Cause, Disability or
otherwise (which determination shall be reasonable), (v) the calculation of
Total shareholder Return, (vi) the Comparative Performance Percentile, (vii) the
calculation of Earnings Return, (viii) the Committee Certification, and (ix) the
forms, terms and provisions of the Agreement and any other documents under the
Plan. Any action taken or determination made by the Committee pursuant to this
paragraph and the other paragraphs of the Plan in which the Committee is given
discretion shall be final and conclusive on all parties. The act or
determination of a majority of the Committee shall be deemed to be the act or
determination of the entire Committee. The Committee may consult with counsel,
who may be counsel to the Company, and such other advisors as the Committee may
deem necessary and/or desirable, and the members of the Committee shall not
incur any liability for any action taken in good faith in reliance upon the
advice of counsel or any other advisor.

                                       13
<PAGE>

     10.  AMENDMENT AND DISCONTINUANCE OF THE PLAN

          The Board, upon the recommendation of the Committee, may amend,
suspend or terminate the Plan at any time, subject to the provisions of this
Section 10. No amendment, suspension or termination of the Plan may cause the
Plan to fail to meet the requirements of Rule 16b-3 promulgated under the 1934
Act, or such successor rule as may hereinafter be in effect, or Section 162(m)
of the Code or may, without the consent of the Participant, adversely affect
such Participant's rights under the Plan in any material respect. In addition,
no such amendment shall be made without the approval of the Company's
stockholders to the extent such approval is required by Rule 16b-3, law or
agreement.

     11.  MISCELLANEOUS PROVISIONS

          (a) Unsecured Status of Claim. Participants and their beneficiaries,
     heirs, successors and assigns shall have no legal or equitable rights,
     interests or claims in any specific property or assets of the Company. No
     assets of the Company shall be held under any trust for the benefit of
     Participants, their beneficiaries, heirs, successors or assigns, or held in
     any way as collateral security for the fulfillment of the Company's
     obligations under the Plan.

          Any and all of the Company's assets shall be, and shall remain, the
general unpledged and unrestricted assets of the Company as they relate to this
Plan. The Company's obligations under the Plan shall be merely that of an
unfunded and unsecured promise of the Company to pay employee compensation
benefits in the future.

          (b) Employment Not Guaranteed. Nothing contained in the Plan nor any
     related Agreement nor any action taken in the administration of the Plan
     shall be construed as a contract of employment or as giving a Participant
     any right to be retained in the Service of the Company.

          (c) Nonassignability. Except as specifically provided herein, no
     person shall have any right to commute, sell, assign, transfer, pledge,
     anticipate, mortgage or otherwise encumber, hypothecate or convey in
     advance of actual receipt any Performance Award, if any, payable under the
     Plan, or any part thereof, or any interest therein, which are, and all
     rights to which are, expressly declared to be unassignable and
     nontransferable. No portion of the amounts payable shall, prior to actual
     payment, be subject to seizure, attachment, lien or sequestration for the
     payment of any debts, judgments, alimony or separate maintenance owed by a
     Participant or any other person, nor be transferable by operation of law in
     the event of the Participant's or any other person's bankruptcy or
     insolvency. Any such transfer or attempted transfer in violation of the
     preceding provisions shall be considered null and void. In addition, no
     derivative security (as defined in Rule 16a-l(c), as promulgated by the
     Commission under the 1934 Act, or any successor definition adopted by the
     Commission) issued under the Plan shall be transferable by a Participant
     (to the extent transferable under the Plan) other than by will or the laws
     of descent and distribution or pursuant to a qualified domestic relations

                                       14
<PAGE>

     order as defined by the Code, or Title I of the Employee Retirement Income
     Securities Act of 1974 or the rules promulgated thereunder.

          (d) Separability, Validity. This Plan is intended to qualify under
     Rule 16b-3 of the 1934 Act. If any of the terms or provisions of this Plan
     conflict with the requirements of Rule 16b-3, then such terms and
     provisions shall be deemed inoperative to the extent they so conflict with
     such requirements. In the event that any provision of the Plan or any
     related Agreement is held to be invalid, void or unenforceable, the same
     shall not affect, in any respect whatsoever, the validity of any other
     provision of the Plan or any related Agreement.

          (e) Withholding Tax. The Company shall withhold from all benefits due
     under the Plan an amount sufficient to satisfy any federal, state and local
     tax withholding requirements.

          (f) Applicable Law. The Plan and any related Agreements shall be
     governed in accordance with the laws of the State of Delaware without
     regard to the application of the conflicts of law provisions thereof. The
     obligation of the Company with respect to the grant and exercise of
     Purchase Awards shall be subject to all applicable laws rules and
     regulations and such approvals by any governmental agencies as may be
     required, including, without limitation, the effectiveness of any
     registration statement required under the Securities Act of 1933, as
     amended, and the rules and regulations of any securities exchange on which
     the Common Stock may be listed.

          (g) Inurement of Rights and obligations. The rights and obligations
     under the Plan and any related Agreements shall inure to the benefit of,
     and shall be, binding upon, the Company, its successors and assigns, and
     the Participants and their beneficiaries.

          (h) Notice. All notices and other communications required or permitted
     to be given under this Plan shall be in writing and shall be deemed to have
     been duly given if delivered personally or mailed first class, postage
     prepaid, as follows: (A) if to the Company - at its principal business
     address to the attention of the Secretary; (B) if to any Participant - at
     the last address of the Participant known to the sender at the time the
     notice or other communication is sent.

          (i) Exclusion from Pension and Other Benefit Plan Computation. By
     exercise of a Purchase Award, each Participant shall be deemed to have
     agreed that such Purchase Award and any Service Incentive Award and
     Shareholder Return Incentive Award payable under Section 8 hereof, as
     applicable, is special incentive compensation that will not be taken into
     account, in any manner, as salary, compensation or bonus in determining the
     amount of any payment under any pension, retirement or other employee
     benefit plan of the Company or any of its Subsidiaries. In addition, each
     beneficiary of a deceased Participant shall be deemed to have agreed that
     such Purchase Award and any Service Incentive Award and Shareholder Return
     Incentive Award, as applicable, will not affect the amount of any life
     insurance coverage, if any, provided by the Company or any

                                       15
<PAGE>

     of its Subsidiaries on the life of the Participant which is payable to such
     beneficiary under any life insurance plan covering employees of the Company
     or any of its Subsidiaries.

                                       16

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