Exhibit 10.8
SEPARATION AGREEMENT
     This Separation Agreement (this “Agreement”) is between Harvest Natural
Resources, Inc. a Delaware corporation (the “Company”), and Kurt A. Nelson
(“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 February 10, 2006 (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 $200,000
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.

 

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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 $400,000,
(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) $200,000.
     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.

  d. 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.

  e. 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.

10. General.
     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.
12. Release.
     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 release contained in this paragraph 12 does not waive claims
arising under this Agreement for indemnification for acts within the scope of
employment as a result of Employee being a director, officer, employee or agent
of the Company or of any other corporation or any partnership, joint venture,
trust or other enterprise for which Employee served as such at the request of
the Company.
     b. Employee understands that the release contained in this paragraph 12(b)
specifically waives all claims arising under any statute, regulation or
contract, or under common law, which are based on events occurring at any time
before the signing of this Agreement; (ii) does not waive rights or claims based
on events occurring after the signing of this Agreement; (iii) includes the
future consequences of events that occurred before the signing of this
Separation Agreement; and (iv) includes all possible claims, including without
limitation those of which Employee is not currently aware or that Employee does
not now suspect to exist.

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     13. Miscellaneous.
     a. Successors; Binding Agreement. In addition to any obligations imposed by
law upon any successor to the Company, the Company will require any successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place.
     b. Enforceability by Beneficiaries. This Agreement shall inure to the
benefit of and be enforceable by Employee’s personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees and
legatees. If Employee shall die while any amount is payable to the Employee
hereunder, all such amounts, unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement to the executors, personal
representatives or administrators of the Employee’s estate.
     c. Amendment. No amendment to this Separation Agreement shall be effective
unless it is in writing and signed by the Company and by Employee.
     d. Invalidity. If any part of this Agreement is held by a court of
competent jurisdiction to be invalid or otherwise unenforceable, the remaining
part shall be unaffected and shall continue in full force and effect, and the
invalid or otherwise unenforceable part shall be deemed not to be part of this
Agreement.
     e. Governing Law. This Separation Agreement shall be construed in
accordance with the laws of the State of Texas.

              Date:                     , 2008   HARVEST NATURAL RESOURCES, INC.
   
 
           
 
  By:        
 
           
 
  Title:        
 
           
 
           
Date:                     , 2008
                     
 
  KURT A. NELSON    

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EXHIBIT A TO SEPARATION AGREEMENT BETWEEN
HARVEST NATURAL RESOURCES, INC. AND KURT A. NELSON
CONSULTING AGREEMENT
     This Consulting Agreement (this Agreement”) is between Harvest Natural
Resources, Inc., a Delaware corporation (the “Company”), and Kurt A. Nelson
(“Consultant”), and is dated on the latest date set forth beside the signatures
of the parties at the end of this Agreement.
RECITALS:
     The Company desires to engage Consultant to render consulting services;
     The Company and Consultant wish to memorialize the terms and conditions
upon which Consultant is engaged to provide consulting services to the Company;
and
     The Company and Consultant anticipate that the level of services Consultant
will perform for the Company after May 31, 2008 will permanently decrease to no
more than 20 percent of the average level of services performed by Consultant
for the Company over the 36-month period immediately preceding June 1, 2008.
     NOW, THEREFORE, the parties hereto, intending to be legally bound, agree as
follows:

1.   SERVICES AND NATURE OF RELATIONSHIP

     1.1 Engagement. The Company hereby retains Consultant and Consultant hereby
accepts such appointment and agrees to perform the services covered by this
Agreement with all due skill and care on the terms and conditions set forth in
this Agreement. Consultant’s services shall be provided in connection with such
assignments as the Company may make from time to time within the area of
Consultant’s expertise.
     1.2 Reporting Relationship and Assignment. Consultant shall report to the
President and Chief Executive Officer of the Company or his or the Company’s
designees.
     1.3 Method of Performing Services. Consultant, as an independent
contractor, shall determine the method, details, and means of performing any
services furnished pursuant to this Agreement, but the services contemplated
herein shall meet the approval of the Company. Consultant will devote sufficient
time, attention and energies to the business and interests of the Company and
diligently and to the best of his ability perform such duties incident to this
Agreement, and perform such other duties as requested commensurate with the
terms of this Agreement.
     1.4 Compliance With Law and Company Policy. Consultant represents that he
is familiar with the safety and health rules of the Company and its
subsidiaries. Consultant shall comply with all applicable safety and health
rules, and policies, procedures and codes of conduct of the Company and its
subsidiaries, together with all applicable federal, state or local safety and
health laws, rules, regulations or orders in which the Company and its
subsidiaries do business.

 

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     Consultant acknowledges that he has been provided copies of, and has read
and understands the Company’s Code of Business Conduct and Ethics (the “Code”)
and the Company’s Compliance Manual, and Consultant agrees:
               (a) to comply with all policies of the Company and its
subsidiaries, including, without limitation, the Code and the Compliance Manual;
               (b) to comply with all applicable laws and regulations,
including, without limitation, the laws and regulations of the United States and
Venezuela; and
               (c) to promptly report as provided in the Code any violation or
suspected violation of any law, regulation or Company policy.
     This clause will not require the Company to police Consultant’s compliance
with the Code, laws, regulations or company policies and shall not impose any
obligation on the part of the Company or its affiliates under such laws,
regulations or Company policies. Nothing contained in this provision shall be
interpreted as enlarging the legal duty of the Company or its affiliates to
Consultant or alter the status of Consultant as set forth in this Agreement.
     The preceding paragraphs of this provision are agreed to by both the
Company and Consultant to be of the highest importance. A breach or violation of
any of the terms of this provision by Consultant will be considered to be a
material breach of this Agreement.
     1.5 No Authority to Bind. Consultant shall have no authority to obligate
the Company in any manner whatsoever in the absence of specific prior written
authority from the President and Chief Executive Officer of the Company
permitting Consultant to do so, including without limitation incurring expenses
or entering into contracts.
     1.6 Status as Independent Consultant. Consultant acknowledges and agrees
that, in performing services pursuant to this Agreement, Consultant shall be
serving as an independent contractor. Consultant agrees that Consultant is not
and will not become an employee of the Company or any of its subsidiaries while
this Agreement is in effect. Consultant agrees that the provision of services
pursuant to this Agreement will not entitle Consultant to any rights or benefits
afforded to the employees of the Company and its subsidiaries, including such
benefits as worker’s compensation insurance, health insurance, sick leave,
retirement benefits or any other employment benefit. Consultant agrees that the
indemnification provisions of Section 5.1 shall apply to any claims relating to
the subject matter of this Section 1.5.
     1.7 Payment of Taxes. Consultant agrees that he is solely responsible for
paying when due all income taxes, including estimated taxes, as a result of or
in connection with the compensation paid by the Company to Consultant for
services rendered under this Agreement. The Company shall issue applicable U.S.
or other tax forms or reports to Consultant with respect to the compensation
paid pursuant to this Agreement. Consultant hereby indemnifies, and undertakes
to defend the Company and hold it free and harmless from and against any demands
or claims for any taxes, interest or penalties assessed by any taxing authority
with respect to sums paid to Consultant pursuant to this Agreement.

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2.   TERM AND TERMINATION

     2.1 Term. This Agreement shall become effective on June 1, 2008. The term
of this Agreement shall commence on June 1, 2008, and shall continue through
May 31, 2009 (the “Term”).
     2.2 Termination. This Agreement may be terminated by either party at any
time for material breach by the other party, upon ten (10) days written notice,
if the breaching party has failed to remedy the breach leading to the
termination during that ten (10) day period.

3.   FEES AND EXPENSES

     The Company shall compensate Consultant for services rendered pursuant to
this Agreement as follows:
     3.1 Rates. The Company agrees to compensate Consultant for services
provided pursuant to this Agreement at the rate of $200 per hour of service
rendered under this Agreement, except when providing services requiring travel
outside of Houston, in which case the rate will be $2,000 per day including
travel time.
     3.2 Expense Reimbursements. The Company agrees to reimburse Consultant for
reasonable business expenses incurred by Consultant in performing services
pursuant to this Agreement; provided, however, that Consultant shall have
furnished the Company promptly with receipts or other documentation concerning
any reimbursable business expenses.
     3.3 Timing of Payments. Consultant shall provide the Company with a
statement describing his services and indicating the number of hours (or, in the
case of travel outside of Houston, the number of days) of service he has
provided under this Agreement in each calendar month within ten (10) days after
the end of that calendar month. The Company shall pay Consultant the amount
shown on any such statement within thirty (30) days after receipt. Payments to
Consultant for reimbursement for expenses incurred shall be made within thirty
(30) days after the Company’s receipt of an expense statement.
4. ADDITIONAL COVENANTS BY CONSULTANT
     4.1 Property of the Company.
          4.1.1 Consultant covenants and agrees that upon the termination of
this Agreement for any reason or, if earlier, upon the Company’s request, he
shall promptly return all Property which had been entrusted or made available to
Consultant by the Company.
          4.1.2 The term “Property” shall mean all records, files, memoranda,
reports, price lists, drawing, plans, sketches, keys, codes, computer hardware
and software and other property of any kind or description prepared, used or
possessed by Consultant during the term of this Agreement relating to the
Company or its business, operations or prospects (and any duplicates of any such
property) together with any and all information, ideas, concepts, discoveries,
and inventions and the like conceived, made, developed or acquired at any time
by

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Consultant individually or with others during the term of this Agreement
relating to the Company or its business, operations or prospects.
     4.2 Confidential Information. Except as required in the performance of
Consultant’s obligations hereunder, or otherwise specifically required by law,
or with the prior written consent of the Company on a case-by-case basis,
Consultant shall hold confidential and shall not in any manner disclose, use for
personal benefit, or directly or indirectly use for the benefit of any other
person, Confidential Information (defined below) that has come or shall
hereafter come into Consultant’s possession. Consultant recognizes the
importance to the Company of protecting its Confidential Information without
regard to the passage of time, and further recognizes that this restriction
shall continue in full force and effect during the Term of this Agreement and
for a period of five (5) years after the end of the Term, except as to
Confidential Information which constitutes a trade secret, in which case the
restriction shall continue so long as such information remains a trade secret.
No later than the end of the Term of this Agreement, Consultant shall return to
the Company, without making and retaining copies thereof, all documents,
records, computer information, maps and charts and other repositories containing
Confidential Information. Consultant shall also return Confidential Information
to the Company promptly following its usefulness in performing its consulting
services. As used in this Agreement, the term “Confidential Information” shall
mean all information of a confidential or non-public nature concerning the
Company or any of its affiliates existing or proposed business activities,
including without limitation, geological, geophysical and seismic data and
interpretations, computer analysis, maps, charts, reports, results of
operations, proposed methods of operation, gas plant designs, specifications or
processes, financial information, information with respect to parties with whom
the Company or its affiliates has or intends to have business relationships and
similar information.
     4.3 Ownership. Consultant agrees that all processes, technologies, computer
analysis, discoveries and inventions whether new or enhanced and expanded,
whether patentable or not, conceived, developed, invented or made by Consultant
during the Term of this Agreement which grew out of Consultant’s work for the
Company shall belong to the Company and not to Consultant. Consultant shall not
contribute or publish articles based upon the results of the services performed
under this Agreement unless such articles are approved in advance by the
Company.
     4.4 Conflict of Interest and FCPA. Consultant covenants and agrees that
Consultant and his personnel and their immediate family will not receive and has
not received any payments, gifts or promises and Consultant will not engage in
any employment or business enterprises that in any way conflict with its ability
to provide services for, or conflict with the interests of, the Company or its
affiliates under this Agreement. Consultant shall make all reasonable efforts
consistent with the terms of this Agreement to prevent occurrences of and
eliminate conditions which could result in a conflict with the best interest of
the Company and its affiliates. Consultant shall make all reasonable efforts to
prevent conflicts of interest from arising out of relationships between
Consultant, his agents or his employees, on the one hand, and agents or
employees of the Company or its affiliates, on the other hand.
     Consultant shall not make any payments, loans, gifts or of anything of
value or promises or offers of payments, loans, gifts or of anything of value,
directly or indirectly, to or for the use

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or benefit of any official or employee of any government, political party or
candidate for political office or to any other person for the purpose of
obtaining or retaining business, or if Consultant knows, or has reason to
believe, that any part of such payments, loans or gifts, or promise or offer,
would violate the laws or regulations of any country, including, without
limitation, Venezuela and the United States, having jurisdiction over Consultant
or the Company or its affiliates.
     By signing this Agreement, Consultant acknowledges that he has not made any
payments, loans, gifts or of anything of value, or promises of payments, loans,
gifts or of anything of value to or for the use or benefit of any official or
employee of any government, political party or candidate for political office or
to any other person for the purpose of obtaining or retaining business, or which
would violate the laws or regulations of any country, including, without
limitation, Venezuela and the United States, having jurisdiction over Consultant
or the Company or its affiliates.
     4.5 Reasonable and Continuing Obligations. Consultant agrees that
Consultant’s obligations under Section 4 are obligations which will continue
beyond the date this Agreement terminates and that such obligations are
reasonable and necessary to protect the Company’s legitimate business interests.
The Company additionally shall have the right to take such other action as the
Company deems necessary or appropriate to compel compliance with the provisions
of this Section 4 (including, without limitation, seeking a court order for
specific performance).

5.   GENERAL PROVISIONS

     5.1 Indemnities. CONSULTANT RECOGNIZES THAT INTERNATIONAL ACTIVITIES,
INCLUDING ON-SITE WORK AND TRAVEL INVOLVE A HIGH DEGREE OF RISK, WHICH RISK
CONSULTANT ALONE ASSUMES AS PART OF THE CONSIDERATION FOR HIS COMPENSATION.
CONSULTANT HEREBY AGREES TO RELEASE, DEFEND, INDEMNIFY AND HOLD THE COMPANY AND
ITS AFFILIATES, CONTRACTORS AND SUBCONTRACTORS AND ALL OF THEIR RESPECTIVE
DIRECTORS, OFFICERS, EMPLOYEES, REPRESENTATIVES, AGENTS, LICENSEES AND INVITEES
(HEREINAFTER REFERRED TO COLLECTIVELY AS THE “COMPANY GROUP”) HARMLESS FROM AND
AGAINST ANY AND ALL LOSS, COST, DAMAGE OR EXPENSE OF EVERY KIND AND NATURE
(INCLUDING, WITHOUT LIMITATION, FINES, PENALTIES, REMEDIAL OBLIGATIONS, TAXES,
COURT COSTS AND EXPENSES AND REASONABLE ATTORNEYS’ FEES INCLUDING ATTORNEYS’
FEES INCURRED IN THE ENFORCEMENT OF THIS INDEMNITY CLAUSE) (HEREINAFTER REFERRED
COLLECTIVELY AS “INDEMNIFIABLE CLAIMS”) ARISING OUT OF BODILY INJURY (INCLUDING,
WITHOUT LIMITATION, SICKNESS TO OR DEATH OF PERSONS AND LOSSES THEREFROM TO
RELATIVES OR DEPENDENTS) TO CONSULTANT, LOSS OR DESTRUCTION OF PROPERTY OR
INTERESTS IN PROPERTY OF CONSULTANT, OR IN ANY MANNER CAUSED BY, RESULTING FROM,
INCIDENT TO, CONNECTED WITH OR ARISING OUT OF PERFORMANCE OF THE SERVICES
HEREUNDER WHETHER OR NOT RESULTING IN WHOLE OR IN PART FROM THE SOLE,
CONCURRENT, OR COMPARATIVE NEGLIGENCE, OR STRICT LIABILITY OF THE COMPANY GROUP,
OR DEFECT IN THE PREMISES, EQUIPMENT, OR TOOLS OWNED, OPERATED OR CONTROLLED BY
THE COMPANY

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GROUP. THIS INDEMNIFICATION AND RELEASE SHALL BE BINDING UPON THE HEIRS, NEXT OF
KIN, BENEFICIARIES, ASSIGNS, EXECUTORS AND ADMINISTRATORS OR OTHER PERSONAL
REPRESENTATIVES OF CONSULTANT. THE COMPANY HEREBY AGREES TO RELEASE, DEFEND,
INDEMNIFY AND HOLD THE CONSULTANT HARMLESS FROM AND AGAINST ANY AND ALL
INDEMNIFIABLE CLAIMS ARISING OUT OF BODILY INJURY (INCLUDING SICKNESS TO OR
DEATH OF PERSONS AND LOSSES THEREFROM TO RELATIVES OR DEPENDENTS) TO THE COMPANY
GROUP, OR LOSS OR DESTRUCTION OF PROPERTY OR INTERESTS IN PROPERTY OF THE
COMPANY GROUP, IN ANY MANNER CAUSED BY, RESULTING FROM, INCIDENT TO, CONNECTED
WITH OR ARISING OUT OF PERFORMANCE OF THE SERVICES HEREUNDER WHETHER OR NOT
RESULTING IN WHOLE OR IN PART FROM THE SOLE, CONCURRENT, OR COMPARATIVE
NEGLIGENCE, OR STRICT LIABILITY OF THE CONSULTANT, OR DEFECT IN THE PREMISES,
EQUIPMENT, OR TOOLS OWNED, OPERATED OR CONTROLLED BY THE CONSULTANT.
     5.2 Notice. Notices and all other communications shall be in writing and
shall be deemed to have been duly given when personally delivered or when mailed
by United States registered or certified mail. Notices to the Company shall be
sent to 1177 Enclave Parkway, Suite 300, Houston, Texas 77077. Notices and
communications to Consultant shall be sent to the Consultant’s address provided
above. Either party may change its/his address by providing notice to the other
party consistent with the terms of this section.
     5.3 Assignment/Subcontracting. This Agreement, and all duties and
obligations hereunder are personal in nature, and Consultant shall not assign
this Agreement, or any portion hereof, voluntarily or involuntarily by operation
of law, or enter into any subcontract for the performance of any services under
this Agreement, or any portion thereof, without the Company’s prior written
approval. If the Company consents to a subcontract hereunder, Consultant shall
assume full responsibility for the acts or omissions of subcontractors. The
Company may assign this Agreement (1) to any affiliate of the Company, (2) to
any person who agrees in writing to be bound by the terms of this Agreement or
(3) upon written notice to and written consent by Consultant, which written
consent shall not be unreasonably withheld.
     5.4 Audit. The Company, or its designated representative, shall have the
right to inspect and audit Consultant’s books, records and all associated
documents to ensure compliance with the terms and conditions of this Agreement.
Consultant agrees to maintain such books, records and associated documents for a
period of two (2) years from the end of the calendar year in which such costs
were invoiced and to make such books, records and associated documents available
to the Company at all reasonable times within such period and for so long
thereafter as any dispute existing as of the expiration of such period remains
unresolved. The Company may photocopy or reproduce any such books and records.
     5.5 Governing Law. This Agreement and all matters relating to the meaning,
validity or enforceability thereof and the performance of the services hereunder
shall be governed by the laws of the State of Texas, exclusive of its conflict
of laws rule.

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     5.6 Arbitration. SUBJECT TO THE PROVISIONS OF SECTION 4.5 OF THIS
AGREEMENT, ANY UNRESOLVED DISPUTE OR CONTROVERSY BETWEEN CONSULTANT AND THE
COMPANY ARISING UNDER OR IN CONNECTION WITH THIS AGREEMENT SHALL BE SETTLED
EXCLUSIVELY BY ARBITRATION, CONDUCTED BEFORE A SINGLE ARBITRATOR IN ACCORDANCE
WITH THE RULES OF THE AMERICAN ARBITRATION ASSOCIATION THEN IN EFFECT. THE
ARBITRATOR SHALL NOT HAVE THE AUTHORITY TO ADD TO, DETRACT FROM, OR MODIFY ANY
PROVISION HEREOF. A DECISION BY THE ARBITRATOR SHALL BE IN WRITING AND WILL BE
FINAL AND BINDING. JUDGMENT MAY BE ENTERED ON THE ARBITRATOR’S AWARD IN ANY
COURT HAVING JURISDICTION. THE ARBITRATION PROCEEDING SHALL BE HELD IN HOUSTON,
TEXAS.
     5.7 Drugs, Deadly Weapons and Searches. Consultant shall abide by the
following Company policy regarding drugs, deadly weapons and alcohol:
               (a) Using, possessing, or being under the influence of alcoholic
beverages, illegal drugs, narcotics, or other controlled substances, and
unauthorized drugs for which a person does not have a current prescription,
while on the Company’s Premises, is prohibited. Possession of deadly weapons or
explosives while on the Company’s Premises is prohibited.
               (b) The term “the Company’s Premises” is used in its broadest
sense to include all work locations, buildings, structures and all other
facilities owned or controlled by the Company or one of its affiliated companies
or otherwise being utilized for the business of the Company or any of its
affiliates.
               (c) Violation of this Company policy will be cause for immediate
removal from the Company’s Premises, and termination as a material breach under
this Agreement.
     5.8 Computer Facilities. If required for Consultant to perform services
under this Agreement, Consultant will have access to certain parts of the
computer facilities and programs of the Company and its affiliates. Consultant
agrees that such access shall be subject to the following conditions:
               (a) Access to computers of the Company and its affiliates shall
be made only in the manner prescribed by a Company representative. Access shall
be made using only terminals owned or controlled by the Company and its
affiliates and only by Consultant.
               (b) Any user identification code provided by the Company or its
affiliates shall be used solely for access to the computers for conduct of the
services for the Company or its affiliates and only by Consultant.
               (c) Consultant shall not access software or data on the computer
system of the Company and its affiliates other than Consultant’s software or
data without the Company’s prior written consent.

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               (d) If Consultant should accidentally or inadvertently access any
software of the Company and its affiliates or data which Consultant is not
authorized to access, then Consultant shall immediately inform the Company and
shall deliver to the Company or destroy as the Company may advise any tangible
materials (and all copies thereof) resulting from such improper access.
               (e) The Company or its affiliates may copy, use, disclose,
distribute, dispose of or destroy anything placed on computer systems of the
Company or any of its affiliates by Consultant.
     5.9 Entire Agreement and Modification. This Agreement supersedes any and
all agreements, either oral or written, between the parties with respect to the
rendering of consulting services by Consultant for the Company, and contains all
representations, covenants and agreements between the parties with respect to
the rendering of such services by Consultant. Any modification of this Agreement
will be effective only if it is in writing and signed by the party to be
charged.
     5.10 Severability. If any term, provision, covenant or condition of this
Agreement shall be or become illegal, null, void or against public policy, or
shall be held by an arbitrator to be illegal, null or void or against public
policy, the remaining provisions of this Agreement shall remain in full force
and effect and shall not be affected, impaired or invalidated thereby. The term,
provision, covenant or condition that is so invalidated, voided or held to be
unenforceable shall be modified or changed by the parties to the extent possible
to carry out the intentions and directives set forth in this Agreement.
     5.11 Successors and Assigns. Except as restricted herein, this Agreement
shall be binding on and shall inure to the benefit of the parties and their
respective heirs, legal representatives, successors and permitted assigns.
     5.12 Waiver. No waiver of any provision or consent to any action shall
constitute a waiver of any other provision or consent to any other action,
whether or not similar. No waiver or consent shall constitute a continuing
waiver or consent or commit a party to provide a waiver in the future except to
the extent specifically set forth in writing. Any waiver given by a party shall
be null and void if the party requesting such waiver has not provided a full and
complete disclosure of all material facts relevant to the waiver requested. No
waiver shall be binding unless executed in writing by the party making the
waiver.

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     IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date(s) set forth below.

              Date:                      , 2008   HARVEST NATURAL RESOURCES,
INC.    
 
           
 
  By        
 
           
 
  Title:        
 
           
 
           
Date:                      , 2008
                     
 
  KURT A. NELSON    

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EXHIBIT B TO SEPARATION AGREEMENT BETWEEN
HARVEST NATURAL RESOURCES, INC. AND KURT A. NELSON
Options:

                              Grant   Exercise   Number   Expiration Plan   Date
  Price   of Options   Date
2001
    11-14-01     $ 1.550       50,000       11-14-11  
2001
    2-20-03       6.100       20,000       2-20-13  
2004
    5-26-04       13.010       8,000       5-26-14  
2004
    3-4-05       12.795       10,000       3-4-15  
2004
    3-2-06       9.605       20,000       3-2-16  
2006
    2-27-07       9.625       55,000       2-27-14  

Restricted Stock:

                  Grant   Number Plan   Date   of Shares
2004
    3-2-06       3,000  
2006
    2-27-07       20,000  

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