This Separation
Agreement (this “Agreement”) is between Harvest Natural
Resources, Inc. a Delaware corporation (the “Company”),
and Steve W. Tholen (“Employee”) and is dated as of the
latest date set forth beside the signatures of the parties at the
end of this Agreement.
WHEREAS, Employee
and the Company are parties to an Amended and Restated Employment
Agreement effective as of September 12, 2005 (the
“Employment Agreement”);
WHEREAS,
Employee’s employment with the Company will end on
May 31, 2008; and
WHEREAS, the
Company and Employee desire to reach agreement as to the terms of
Employee’s separation from employment;
NOW, THEREFORE, in
consideration for the payments and benefits provided to Employee
and the agreement and covenants of Employee and the Company as
provided below this Agreement is made.
1. Separation Date . Employee’s
separation date from the Company shall be May 31, 2008 (the
“Separation Date”). Employee and the Company waive any
requirement of a termination notice under the Employment Agreement.
Employee’s employment with the Company shall terminate on the
close of business on the Separation Date.
2. Termination of Employment Agreement;
Continuation of Covenants . Employee and the Company agree that
Employee’s employment with the Company shall terminate on the
Separation Date. This termination of employment is by mutual
agreement of Employee and the Company, and Sections 4(a),
4(b), 4(c) and 4(j) of the Employment Agreement shall not apply
with respect to Employee’s termination of employment on the
Separation Date. Employee acknowledges, agrees and affirms that the
covenants of Employee in Section 5 of the Employment Agreement
including, without limitation, in respect of property of the
Company, trade secrets, confidential information and
non-competition continue to apply after the Separation Date in
accordance with the terms of the Employment Agreement. Employee
further acknowledges and agrees that the benefits provided to
Employee in this Separation Agreement provide additional and
sufficient consideration for such covenants.
3. Consulting Agreement . Upon execution
of this Agreement, the Company and Employee shall execute and
deliver a Consulting Agreement substantially in the form as set
forth in Exhibit A hereto.
4. Bonus . The Company shall make lump
sum bonus payment to Employee of $260,000 on the date that is six
months following the date of the Employee’s Separation From
Service. For purposes of this Agreement “Separation From
Service” has the meaning ascribed to that term in section
409A of the Internal Revenue Code of 1986, as amended (the
“Code”) and the rules and regulations issued thereunder
by the Department of Treasury and the Internal Revenue
Service.
5. Stock Options . Employee has been
granted the stock options listed in Exhibit B attached
hereto (the “Options”). Notwithstanding any provision
in the Employment Agreement or the stock option agreements
pertaining to the Options to the contrary, after the termination of
his employment on the Separation Date, (i) with respect to
those Options granted prior to January 1, 2006, Employee shall
have until the tenth anniversary of the dates of the grants of the
Options to exercise his rights with respect to those Options, and
(ii) with respect to those Options granted on or after
January 1, 2006, all remaining unvested options will vest on
the Separation Date and Employee shall have until 5:00 p.m. on
May 31, 2010 to exercise his rights with respect to those
Options (whether the options vested prior to or on the Separation
Date). Except as modified by this Separation Agreement, all
exercises of the Options must be in accordance with and pursuant to
the terms of the applicable option plans and option agreements. The
Company shall take any and all further actions necessary or
reasonably requested by Employee to effect the foregoing, and to
confirm Employee’s ability to exercise the Options in
accordance with the provisions of this paragraph 5, without regard
to the termination of his position as an employee of the
Company.
6. Restricted Stock . Employee has been
awarded the restricted stock listed in Exhibit B
attached hereto (the “Restricted Stock”).
Notwithstanding any provision in the Employment Agreement or the
restricted stock agreements pertaining to the Restricted Stock to
the contrary, the Restriction Period (as defined in the applicable
long term incentive plans) will lapse on the Separation Date, and a
certificate or certificates for the Restricted Stock, less any
shares retained to meet withholding requirements, will be delivered
to Employee within 30 days after the Separation Date. The
Company shall take any and all further actions necessary or
reasonably requested by Employee to permit the Restricted Stock to
vest in accordance with the provisions of this paragraph 6, without
regard to the termination of his position as an employee of the
Company.
7. Continuation Benefits . The Employee
shall be entitled to elect COBRA continuation coverage under the
Company’s group medical and dental program for 18 months
for himself and his dependents at no expense to the Employee.
Except for those welfare benefits expressly provided to Employee
under this paragraph 7, except as specified in paragraph 9, from
and after the Separation Date Employee shall have no right to any
other welfare benefits including, without limitation, short term
disability, long term disability and accidental death and
dismemberment.
8. Other Compensation and Benefits .
After Employee’s termination of employment on the Separation
Date, Employee shall have no further rights under Section 3 of
the Employment Agreement, other than Section 3(g) (regarding
reimbursement of expenses in the performance of services under the
Employment Agreement) and Section 3(i) regarding the right to
indemnification under the Company’s bylaws). Without limiting
the generality of the foregoing sentence, after Employee’s
termination of employment on the Separation Date, (a) Employee
shall not be entitled to the payment of any bonus based on the
Company’s performance contract guidelines and
(b) Employee shall be paid for any accrued and
unused
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vacation time
as of the Separation Date in accordance with the Company’s
standard policy.
9. Change of
Control Benefits .
a.
If a Change of Control occurs prior to the Separation Date or
within 240 days after the Separation Date, then, in addition
to the benefits accruing to Employee under this Separation
Agreement and notwithstanding any other provision in this
Separation Agreement, (i) on the later of the date of the
Change of Control or the date that is six months following the date
of Employee’s Separation From Service, the Company shall pay
to Employee the Bonus Amount, (ii) until the second
anniversary of the date of the Change of Control, the Company shall
continue to provide Employee and Employee’s dependents with
the same level of life, disability, accident, dental and health
insurance coverages Employee and Employee’s dependents were
receiving immediately before the Separation Date, (iii) on the
later of the date of the Change of Control or the date that is six
months following the date of Employee’s Separation From
Service, the Company shall pay to Employee, an amount equal to
$520,000, (iv) any outstanding Options shall become fully
vested and exercisable, and the restriction period on the
Restricted Stock will continue and will lapse as if Employee
remained in the employ of the Company, and (v) the Company
will pay Employee, an additional amount such that the net amount
retained by Employee pursuant to the benefits described in clauses
(i), (iii) and (iv) of this paragraph 9(a), after any
excise tax imposed under Section 4999 of the Code shall be
equal to the amount that Employee would have received pursuant to
those benefits before payment of such excise tax.
b.
For purposes of this Agreement, the term “Bonus Amount”
means twice the amount of the higher of (i) the highest annual
bonus earned by Employee for the last three fiscal years ending
prior to the Separation Date and (ii) (A) the target bonus
percentage, if any, as established by the Company’s Board of
Directors for the fiscal year in which the Change of Control occurs
multiplied by (B) $260,000.
c.
For purposes of this Agreement, a “Change of Control”
means the occurrence of any of the following:
(1) the
acquisition by any individual, entity or group (within the meaning
of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act
of 1934) (a “Covered Person”) of beneficial ownership
(within the meaning of rule 13d-3 promulgated under the Securities
Exchange Act of 1934) of 50 percent or more of the combined
voting power of the then outstanding voting securities of the
Company entitled to vote generally in the election of directors
(the “Voting Securities”); provided, however, that for
purposes of this subsection (1) of this paragraph 9(c) the
following acquisitions shall not constitute a Change of Control:
(i) any acquisition by the Company, (ii) any acquisition
by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any entity controlled by the Company,
or (iii) any acquisition by any entity pursuant to a
transaction which complied with clauses (i), (ii) and
(iii) of subsection (3) of this paragraph 9(c);
or
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(2) individuals
who, as of the date of this Agreement, constitute the board of
directors of the Company (the “Incumbent Board”) cease
for any reason to constitute at least a majority of the board of
directors of the Company; provided, however, that any individual
becoming a director after the date of this Separation Agreement
whose election, or nomination for election by the Company’s
stockholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered
as though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of an actual or threatened
election contest with respect to the election or removal of
directors; or
(3) the
consummation of a reorganization, merger or consolidation or sale
of the Company, or a disposition of at least 50 percent of the
assets of the Company including goodwill (a “Business
Combination”), provided, however, that for purposes of this
subsection (3) of this paragraph 9(c), a Business Combination
will not constitute a change of control if, following such Business
Combination, (i) all or substantially all of the individuals
and entities who were the beneficial owners, respectively, of the
Company’s voting securities immediately prior to such
Business Combination beneficially own, directly or indirectly, more
than 50 percent of the ownership interests of the entity
resulting from such Business Combination (including without
limitation an entity which as a result of such transaction owns the
Company or all or substantially all of the Company’s assets
either directly or through one or more subsidiaries or other
affiliated entities) in substantially the same proportions as their
ownership immediately prior to such Business Combination,
(ii) no Covered Person (excluding any employee benefit plan
(or related trust) of the Company or such entity resulting from
such Business Combination) beneficially owns, directly or
indirectly, 50 percent or more of, respectively, the ownership
interests in the entity resulting from such Business Combination,
except to the extent that such ownership existed prior to the
Business Combination, and (iii) at least a majority of the
members of the board of directors of the entity resulting from such
Business Combination were members of the Incumbent Board at the
time of the execution of the initial agreement, or of the action of
the board of directors of the Company, providing for such Business
Combination. For this purpose any individual who becomes a director
after the date of this Agreement, and whose election or nomination
for election by the Company’s stockholders, was approved by a
vote of at least a majority of the directors then comprising the
Incumbent Board shall be considered as though such individual were
a member of the Incumbent Board, but excluding, for this purpose,
any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to
the election or removal of directors.
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d.
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If
the dental, accident or health insurance benefits specified in
paragraph 9(a) are not provided through an arrangement that is
fully insured by a third party the following provisions shall apply
to the reimbursement of such benefits. The benefits eligible for
reimbursement shall be the benefits that were available
to
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Employee and
his dependents under the provisions of the Company’s group
medical, accident and dental benefits plans as in effect
immediately prior to the earlier of the Separation Date or the date
on which the Change of Control occurs. Employee shall be eligible
for reimbursement for covered medical, accident and dental expenses
incurred during the period commencing on the date of the Change of
Control and ending on the second anniversary of the date of the
Change of Control. The amount of medical, accident and dental
expenses eligible for reimbursement provided during
Employee’s taxable year will not affect the expenses eligible
for reimbursement in any other taxable year (with the exception of
applicable lifetime maximums specified in the plans). The Company
shall reimburse an eligible medical, accident or dental expense on
or before the last day of Employee’s taxable year following
the taxable year in which the expense was incurred.
Employee’s right to reimbursement is not subject to
liquidation or exchange for another benefit.
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e.
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Any
tax gross-up payment due pursuant to paragraph 9(a) shall be made
by the Company by April 15 of Employee’s taxable year
next following Employee’s taxable year in which Employee
remits the related taxes to the Internal Revenue
Service.
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a.
All applicable withholding, including but not limited to federal,
state and Social Security taxes, and any applicable garnishment,
liens or other attachments, shall be deducted from all amounts
payable or stock distributable to Employee.
b.
Employee shall comply with applicable securities laws, as they
relate to securities of the Company owned by him, from and after
the Separation Date.
11. Effect on Other Agreements . The
Employment Agreement shall not terminate and shall govern the terms
of Employee’s employment with the Company until the
Separation Date. To the extent (and only to the extent) applicable,
this Agreement shall be deemed to be an amendment and novation to
the Employment Agreement. Employee acknowledges the value of the
matters described in this Agreement and agrees that those matters
are adequate consideration for such amendment and novation. After
the Separation Date, to the extent (and only to the extent) there
is a conflict between this Agreement and the Employment Agreement,
the provisions of this Agreement shall govern. Provisions of the
Employment Agreement that do not conflict with the provisions of
this Agreement shall continue in full force and effect. Without
limiting the foregoing provisions of this paragraph 11, the
miscellaneous provisions contained in Section 6 of the
Employment Agreement shall apply to this Agreement. If
Employee’s employment with the Company is terminated before
the Separation Date, the provisions of the Employment Agreement
shall prevail, without giving effect to the provisions of this
Agreement, and this Agreement shall terminate upon any such
termination of employment. The Indemnification Agreement between
the Company and Employee shall not terminate on the Separation Date
and shall
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continue to be
effective as to all periods during which Employee has served as an
officer of the Company.
a.
Employee hereby releases any and all claims of any kind that he may
have against the Company and its subsidiaries, affiliates, and any
of its or their directors, officers, employees, or agents (in this
paragraph 12, collectively “the Company”) that arise
from any events occurring on or before the date on which this
Agreement is executed by Employee. Employee waives any and all
rights that he might have to bring any suit, charge, or demand of
any kind against the Company for claims that he is releasing. The
claims that Employee is releasing include, but are not limited to
(i) all claims arising under federal, state, or local laws
prohibiting discrimination based upon age, race, sex, religion,
disability, national origin, or any other basis; (ii) any
claims for “wrongful discharge”, breach of contract, or
other legal restrictions on the Company’s right to control or
terminate the employment of its employees; (iii) all claims
under any tort or contract theory, including but not limited to
infliction of emotional distress, harassment, libel, slander,
fraud, misrepresentation, or invasion of privacy; (iv) all
claims, including but not limited to claims for retaliation,
arising under common law or any federal, state, or local statute,
including but not limited to federal laws prohibiting
discrimination based upon age, race, sex, religion, disability,
national origin or any other basis, such as those arising under the
Civil Rights Act of 1964, the Age Discrimination in Employment Act,
the Americans with Disabilities Act, the Equal Pay Act of 1963, the
1978 Pregnancy Discrimination, the Rehabilitation Act of 1973, or
any state counterparts to such acts; and (v) all claims for
discharge, demotion, suspension, threats, harassment or
discrimination under the Sarbanes-Oxley Act of 2002. The
re
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