EXHIBIT 10.1
EMPLOYMENT AGREEMENT
This Employment Agreement (“Employment Agreement”), effective February 10, 2006
is between Harvest Natural Resources, Inc. (the “Company”) and Kurt A. Nelson, a
resident of Texas, (“Employee”), the terms and conditions of which are as
follows:
     WHEREAS, the Company and Employee entered into an amended and restated
employment agreement effective February 20, 2003 (the “Amended Employment
Agreement”);
     WHEREAS, the Company wishes to provide Employee with certain additional
benefits and the Company and Employee wish to change the benefits described in
the Amended Employment Agreement provided to Employee in the event of a Change
of Control;
     WHEREAS, the Company and Employee acknowledge that if Employee’s employment
with the Company terminates for any reason, Employee may inevitably disclose
trade secrets of, and other proprietary and confidential information about, the
Company’s business, operations and prospects; and
     WHEREAS, Employee wishes to enter into this Employment Agreement to receive
the benefit of the provisions contained in it;
     NOW THEREFORE, for good and valuable consideration, the sufficiency and
receipt of which are acknowledged, the Company and Employee agree as follows:

1.   TERM OF EMPLOYMENT.

Subject to the terms and conditions set forth in this Employment Agreement, the
Company agrees to employ Employee and Employee agrees to be employed by the
Company for the term which started on November 12, 2001 and ends on May 31,
2006. On May 31, 2006, and on each anniversary thereafter (an “Extension Date”)
the term of this Employment Agreement shall automatically be extended for a
one-year period unless and until either party has given written notice to the
other at least one year before any Extension Date that it or he wishes to
terminate this Employment Agreement as of such Extension Date.

2.   POSITION AND DUTIES.

  (a)   Position. Subject to annual election by the Company’s Board of
Directors, Employee’s position shall be Vice President-Controller of Harvest
Natural Resources, Inc.     (b)   Duties and Responsibilities. Employee’s duties
and responsibilities initially shall be those normally associated with
Employee’s position, plus any additional duties and responsibilities the Company
initially may assign orally or in writing to Employee. Employee shall undertake
to perform all Employee’s duties and responsibilities for the Company and its
affiliates in good faith and on a full-time basis and shall at all times act in
the course of Employee’s employment under this

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      Employment Agreement in the best interest of the Company and Company’s
affiliates.     (c)   The Company’s Right to Change Position or Duties. Subject
to the terms of this Employment Agreement, the Company shall have the right, to
the extent the Company from time to time reasonably deems necessary or
appropriate, to change Employee’s position, or to expand or reduce Employee’s
duties and responsibilities.

3.   COMPENSATION AND BENEFITS.

  (a)   Base Salary. During the term of this Employment Agreement, Employee’
yearly base salary shall be not less than $170,000 US, which yearly base salary
shall be payable from the Company’s Houston offices to Employee in accordance
with the Company’s standard payroll practices and policies, and shall be subject
to such withholdings as required by U.S. Federal law and the State of Texas, or
as otherwise permissible under such practices or policies. The Company shall
annually review Employee’s base salary.     (b)   Annual Bonus. Employee shall
be eligible for such annual bonus as may be determined by the Human Resources
Committee of the Company’s Board of Directors and the Company’s Board of
Directors, which bonus shall be based on Employee’s performance under the
guidelines adopted by the Company, the Company’s overall performance and any
special circumstances the Human Resources Committee and the Company’s Board of
Directors deem appropriate. Any such bonus is to be determined at the discretion
of the Company’s Human Resources Committee and the Company’s Board of Directors.
Employee acknowledges that the Company is not obligated to award him any bonus
in any year.     (c)   Special Bonus. Concurrently with the execution and
delivery of this Employment Agreement by the Company, the Company is paying
Employee a special bonus of $25,000.     (d)   Employee Benefit Plans. Employee
shall be eligible to participate in the employee benefit plans, programs and
policies maintained by the Company for similarly situated employees in
accordance with the terms and conditions to participate in such plans, programs,
and policies as in effect from time to time.     (e)   Stock Options and
Restricted Stock. Previously Employee has been granted certain stock options and
restricted stock pursuant to the Company’s long-term incentive plans. Except as
provided in Section 4(a), this Employment Agreement neither increases nor
decreases the number of stock options and shares of restricted stock previously
granted, nor does it change the terms under which they were granted.     (f)  
Vacation. Employee shall be entitled to four (4) weeks annual vacation.

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  (g)   Expenses. The Company shall pay or reimburse Employee for all reasonable
expenses actually incurred or paid by Employee in the performance of his
services hereunder upon the presentation of expense statements or vouchers or
such other supporting information as the Company may reasonably require of
Employee.     (h)   Office Facilities and Services. Employee shall be accorded
such benefits and support services, including without limitation, office
facilities, administrative assistant, communications, and such other perquisites
as would normally be accorded by a corporation of the size and at the stage of
development in the industry in which the Company is, to its Vice
President-Controller.     (i)   Indemnification. Employee shall be entitled to
the benefit of the indemnification provisions contained in the bylaws of the
Company as the same may be amended.

4.   TERMINATION OF EMPLOYMENT.

  (a)   Termination By The Company Other Than For Cause Or Disability, Or By
Employee For Good Reason.

  (1)   The Company shall have the right to terminate Employee’s employment
other than for Cause at any time, and Employee shall have the right to quit or
resign for Good Reason at any time.     (2)   If (a) the Company or its
successors terminate Employee’s employment with the Company other than (i) for
Cause or (ii) pursuant to a notice of termination delivered in accordance with
Section 1 of this Employment Agreement or (b) Employee resigns for Good Reason,
then (v) the Company shall pay to Employee within thirty (30) days after the
termination or resignation an amount equal to twenty-four months of Employee’s
base salary as in effect immediately before Employee’s termination of employment
or resignation, (w) the Company shall pay to Employee within thirty (30) days
after the termination or resignation an amount equal to twenty-four months of
the maximum contribution the Company may make for Employee under the Company’s
401(k) profit sharing plan as in effect immediately before Employee’s
termination of employment or resignation, (x) any outstanding stock option(s)
granted by the Company to Employee shall become fully vested and shall remain
exercisable for twelve (12) months following Employee’s termination pursuant to
this Section 4(a)(2), or the tenth anniversary of the date(s) of the grant(s)
specified in the relevant option agreement(s), whichever is the shorter period,
(y) the restriction period on restricted shares of stock granted by the Company
to Employee will continue and will lapse as if Employee had continued in the
employ of the Company and a certificate(s) representing such shares will be
delivered to Employee within thirty (30) days after the end of the applicable
restriction period, and (z) Employee shall be reimbursed for up to $20,000 of
outplacement services with an outplacement service approved by the Company.

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  (3)   If the termination or resignation described in Section 4(a)(2) occurs
within 730 days after or 240 days before a Change of Control, then (s) the
Company shall pay to Employee, within thirty (30) days after the termination of
employment or resignation an amount equal to twenty-four months of Employee’s
base salary as in effect immediately before Employee’s termination of employment
or resignation, (t) the Company shall pay to Employee, within thirty (30) days
after the later to occur of the termination, resignation or Change of Control,
the Bonus Amount, (u) the Company shall pay to Employee within thirty (30) days
after the termination or resignation an amount equal to twenty-four months of
the maximum contribution the Company may make for Employee under the Company’s
401(k) profit sharing plan as in effect immediately before Employee’s
termination of employment or resignation, (v) any outstanding stock option(s)
granted by the Company to Employee shall become fully vested and shall remain
exercisable for twelve (12) months following Employee’s termination or
resignation, or the tenth anniversary of the date(s) of the grant(s) specified
in the relevant option agreement(s), whichever is the shorter period, (w) the
restriction period on restricted shares of stock granted by the Company to
Employee will continue and will lapse as if Employee had continued in the employ
of the Company and a certificate(s) representing such shares will be delivered
to Employee within thirty (30) days after the end of the applicable restriction
period, (x) Employee shall be reimbursed for up to $20,000 of outplacement
services with an outplacement service approved by the Company, (y) for a period
of twenty-four months following the later to occur of the termination,
resignation or 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 benefits Employee and Employee’s dependents were
receiving immediately before Employee’s termination or resignation, and (z) the
Company will pay Employee, within thirty (30) days after the later to occur of
the termination, resignation or Change of Control, an additional amount such
that the net amount retained by Employee pursuant to the benefits described in
this Section 4(a)(3) after any excise tax imposed under Section 4999 of the
Internal Revenue Code of 1986, as amended from time to time, shall be equal to
the amount that Employee would have received pursuant to those benefits before
payment of any such excise tax.     (4)   If the Company or its successors
terminate Employee’s employment with the Company pursuant to a notice of
termination delivered in accordance with Section 1 of this Employment Agreement
within 730 days after or 240 days before a Change of Control, then (s) the
Company shall pay to Employee, within thirty (30) days after the later to occur
of the termination or Change of Control an amount equal to twenty-four months of
Employee’s base salary as in effect immediately before Employee’s termination of
employment, (t) the Company shall pay to Employee, within thirty (30) days after
the later to occur of the termination or Change

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      of Control, the Bonus Amount, (u) the Company shall pay to Employee within
thirty (30) days after the later to occur of the termination or Change of
Control, an amount equal to twenty-four months of the maximum contribution the
Company may make for Employee under the Company’s 401(k) profit sharing plan as
in effect immediately before Employee’s termination of employment, (v) any
outstanding stock option(s) granted by the Company to Employee shall become
fully vested and shall remain exercisable for twelve (12) months following the
later to occur of Employee’s termination or Change of Control, or the tenth
anniversary of the date(s) of the grant(s) specified in the relevant option
agreement(s), whichever is the shorter period, (w) the restriction period on
restricted shares of stock granted by the Company to Employee will continue and
will lapse as if Employee had continued in the employ of the Company and a
certificate(s) representing such shares will be delivered to Employee within
thirty (30) days after the end of the applicable restriction period,
(x) Employee shall be reimbursed for up to $20,000 of outplacement services with
an outplacement service approved by the Company, (y) for a period of twenty-four
months following the later to occur of Employee’s termination or 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 benefits Employee and Employee’s dependents were receiving immediately
before Employee’s termination, and (z) the Company shall pay to Employee, within
thirty (30) days after the later to occur of the termination or Change of
Control, an additional amount such that the net amount retained by Employee
pursuant to the benefits described in this Section 4(a)(4) after any excise tax
imposed under Section 4999 of the Internal Revenue Code of 1986, as amended from
time to time, shall be equal to the amount that Employee would have received
pursuant to such benefits before payment of any such excise tax.

  (b)   Termination By The Company For Cause, Or By Employee Other Than For Good
Reason.

  (1)   The Company shall have the right to terminate Employee’s employment at
any time for Cause, and Employee shall have the right to quit or resign at any
time other than for Good Reason.     (2)   If the Company terminates Employee’s
employment for Cause or pursuant to a notice of termination delivered in
accordance with Section 1 of this Employment Agreement that is not delivered
within 730 days after or 240 days before a Change of Control, or Employee quits
or resigns other than for Good Reason, the Company’s only obligation to Employee
under this Employment Agreement shall be to pay Employee’s base salary
(including accrued vacation) actually earned up to the date Employee’s
employment terminates.

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  (c)   Termination for Disability or Death.

  (1)   The Company shall have the right to terminate Employee’s employment on
or after the date Employee has a Disability, and Employee’s employment shall
terminate at Employee’s death.     (2)   If Employee’s employment terminates
under this Section 4(c), the Company shall pay Employee or, if Employee dies,
Employee’s estate the amount provided for under Section 4(a)(2)(v) and, in
addition, Employee or, if Employee dies, Employee’s estate shall be entitled to
the provisions of Sections 4(a)(2)(w), (x) and (y) with respect to the Company’s
401(k) profit sharing plan, Employee’s stock options and Employee’s restricted
stock.

  (d)   Bonus Amount. 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 termination date, and (ii) (A) the target bonus
percentage as established by the Company’s Board of Directors for the fiscal
year in which the Change of Control occurs, multiplied by (B) Employee’s annual
base salary for that fiscal year (whether or not paid or accrued for the full
year at the time of Employee’s termination or resignation.     (e)   Cause. The
term “Cause” shall mean (1) Employee’s final conviction of a felony by a trial
court, (2) Employee’s material breach of this Employment Agreement or
(3) Employee’s material violation of any policy or code of conduct of the
Company, all as reasonably determined by the Company.     (f)   Good Reason. The
term “Good Reason” shall mean any of the following, unless Employee shall have
given his express written consent thereto: (1) a material breach of the terms
and conditions of this Employment Agreement by the Company which remains
uncorrected for thirty (30) days after Employee delivers written notice of such
breach to the Company; (2) failure to maintain or reelect Employee to the
position described in Section 2(a); (3) a significant reduction of Employee’s
duties, position or responsibilities relative to Employee’s duties, position or
responsibilities in effect immediately prior to such reduction, unless Employee
is provided with comparable duties and responsibilities; (4) a substantial
reduction, without good business reasons, of the facilities and perquisites
available to Employee immediately prior to such reduction; (5) a reduction by
the Company of Employee’s monthly base salary in effect immediately prior to
such reduction; (6) the Company fails to continue Employee’s participation in
any bonus, incentive, profit sharing, performance, savings, retirement or
pension policy, plan, program or arrangement on substantially the same or better
basis, both in terms of the amount of benefits provided to Employee and the
level of Employee’ s participation, relative to other participants, (7) the
relocation of Employee more than fifty (50) miles from the location of the
Company’s principal office on the date hereof; or (8) the failure of

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the Company to obtain a satisfactory agreement from a successor to assume and
agree to perform this Employment Agreement as contemplated by Section 6(d).

  (g)   Disability. Employee shall have a “disability” under this Employment
Agreement on the date the Company receives written notice from a physician
selected by the Company that Employee no longer can perform one or more of the
essential functions of Employee’s job even with reasonable accommodation.    
(h)   Change of Control. 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 Section 4(g) 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 Section 4(g); or     (2)   individuals who, as of the
date of this Employment 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 Employment 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, together with its subsidiaries, including goodwill (a “Business
Combination”), provided, however, that for purposes of this subsection (3), a
Business Combination will not constitute a change of control if the following
three requirements are satisfied:

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      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 assets of the Company, together with
its subsidiaries, 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 its
subsidiaries 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 Employment 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.

  (i)   Benefits. Employee shall have the right to receive any benefits payable
under the Company’s employee benefits plans, programs and policies (other than
the Company’s Policy for Termination and Separation of Employment (the
“Severance Plan”)) which Employee otherwise has a non-forfeitable right to
receive under the terms of such plans, programs and policies (other than
severance benefits) independent of Employee’s rights under this Employment
Agreement upon a termination of employment in addition to any other benefits
under this Section 4 without regard to the reason for such termination of
employment. Employee acknowledges and agrees that until the termination of this
Employment Agreement, he shall not be entitled to participate in the Severance
Plan.     (j)   Notice of Termination. Any termination by the Company or by
Employee for any reason shall be communicated by a notice of termination to the
other party hereto and shall be given in accordance with Section 6(a). Such
notice shall state the specific termination provision in this Employment
Agreement relied upon, and

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      shall set forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination under the provision so indicated.

  (k)   No Mitigation. Employee shall not be required to mitigate the amount of
any severance payment contemplated by this Employment Agreement, nor shall any
such payment be reduced by any earnings that Employee may receive from any other
source.     (l)   Stock Award Agreements. In the event of a conflict adverse to
Employee between the terms of this Employment Agreement and the terms of any
agreement granting Employee stock options or restricted stock, the terms of this
Employment Agreement shall govern.

5.   COVENANTS BY EMPLOYEE

  (a)   Property of the Company.

  (1)   Employee covenants and agrees that upon the termination of Employee’s
employment for any reason or, if earlier, upon the Company’s request, Employee
shall promptly return all Property which had been entrusted or made available to
Employee by the Company or any of its subsidiaries.     (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 Employee
during Employee’s employment by the Company (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 Employee individually or with others during Employee’s employment which
relate to the business, products or services of the Company or any of its
subsidiaries.

  (b)   Trade Secrets.

  (1)   In consideration for the promises made in Section 5(d) of this
Employment Agreement, the Company promises that it shall provide and make
available to Employee certain confidential, proprietary information and trade
secrets.     (2)   Employee covenants and agrees that Employee shall hold in a
fiduciary capacity for the benefit of the Company and each of its affiliates,
and shall not directly or indirectly use or disclose, any Trade Secret that
Employee may have acquired pursuant to Section 5(b)(1) above during the term of
Employee’s employment by the Company for so long as such information remains a
trade secret.

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  (3)   The term “Trade Secret” shall mean information, including, but not
limited to, technical or non-technical data, a formula, a patent, a compilation,
a program, a device, a method, a technique, a drawing, a process, financial
data, financial plans, product plans, or that: (a) derives economic value,
actual or potential, from not being generally known to, and not being generally
readily ascertainable by proper means by other persons who can obtain economic
value from its disclosures or use, and (b) is the subject of reasonable efforts
by the Company and its affiliates to maintain its secrecy.     (4)   This
Section 5(b) is intended to provide rights to the Company and its subsidiaries
which are in addition to those rights the Company and its subsidiaries have
under the common law or applicable statutes for the protection of trade secrets.

  (c)   Confidential Information.

  (1)   Employee covenants and agrees while employed under this Employment
Agreement and thereafter during the Restricted Period he shall hold in a
fiduciary capacity for the benefit of the Company and each of its affiliates,
and shall not directly or indirectly use or disclose, any of the Company’s or
the Company’s affiliates’ Confidential or Proprietary Information that Employee
may have acquired (whether or not developed or compiled by Employee and whether
or not Employee is authorized to have access to such information) during the
term of, and in the course of, or as a result of Employee’s employment by the
Company or its affiliates.     (2)   The term “Confidential or Proprietary
Information” shall mean any secret, confidential or proprietary information of
the Company or an affiliate (not otherwise included in the definition of a Trade
Secret under this Employment Agreement) that has not become generally available
to the public by the act of one who has the right to disclose such information
without violation of any right of the Company or its affiliates.

  (d)   Non-Competition. During the period of Employee’s employment with the
Company and thereafter during the Restricted Period, Employee covenants and
agrees that, in connection with the business operations and prospective
interests of the Company on the date of Employee’s termination as an employee of
the Company, which prospective interests are disclosed to Employee prior to or
on the date of Employee’s termination as an employee of the Company, he shall
not, directly or indirectly, own any interest in, manage, control, participate
in, consult with, render services for, or in any manner engage in any businesses
in competition with the Company or materially adverse to the Company (unless the
Company’s Board of Directors shall have authorized such activity and the Company
shall have consented thereto in writing). Investments in less than 5% of the
outstanding securities of any class of the Company subject to the reporting
requirements of Section 13 or Section 15(d) of the Securities Exchange Act of

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      1934, as amended, shall not be prohibited by this section. For purposes of
this Section 5(d), the term “Company” shall include Harvest Natural Resources,
Inc. and any of its affiliates or subsidiaries or any company in which it is a
minority shareholder or a joint venture partner. For purposes of this
Section 5(d), the term “businesses” shall mean any enterprise, commercial
venture, or project involving oil and gas exploration or production activities
in the same geographic areas as the Company’s activities during the period of
Employee’s employment.         Further, during the period of Employee’s
employment with the Company and thereafter during the Restricted Period,
Employee covenants and agrees that he will not directly or indirectly through
another entity induce or otherwise attempt to influence any employee of the
Company to leave the Company’s employment or in any way interfere with the
relationship between the Company and any employee thereof. Further, Employee
will not induce or attempt to induce any customer, supplier, licensee, joint
venture partner, shareholder, licensor or other business relation of the Company
to cease doing business with the Company or in any way interfere with the
relationship between any such customer, supplier, licensee, joint venture
partner, shareholder, licensor or business relation of the Company.         If
(i) pursuant to the arbitration process described in Section 6(c) of this
Employment Agreement (or such other process as to which the Company and Employee
may agree upon in writing), it is determined that Employee has violated the
provisions of this Section 5(d), and (ii) Employee has received a payment from
the Company pursuant to Section 4(a)(2)(v), Section 4(a)(3)(s),
Section 4(a)(3)(t), Section 4(a)(4)(s) or Section 4(a)(4)(t) of this Employment
Agreement (the “Lump Sum Severance Amount”), then, in addition to any other
remedies that the Company may have, Employee shall be obligated, and hereby
agrees, to pay the Company, as liquidated damages, an amount (but not less than
zero) equal to the product of (x) the Lump Sum Severance Amount and (y) a
fraction whose numerator is the excess of twenty-four (24) over the number of
calendar months that have elapsed since the last day of Employee’s termination
of employment under Section 4 of this Employment Agreement and whose denominator
is twenty-four (24).

  (e)   Employment Restriction – Conflict of Interest. Employee covenants and
agrees that he will not receive and has not received any payments, gifts or
promises and Employee will not engage in any employment or business enterprises
that in any way conflict with his service and the interests of the Company or
its affiliates. In addition, Employee agrees to comply with the laws or
regulations of any country, including, without limitation, the United States of
America, having jurisdiction over Employee, the Company or any of the Company’s
subsidiaries.         Employee shall not make any payments, loans, gifts or
promises or offers of payments, loans or gifts, directly or indirectly, to or
for the use or benefit of any official or employee of any government or to any
other person if Employee knows, or has reason to believe, that any part of such
payments, loans or gifts, or

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      promise or offer, would violate the laws or regulations of any country,
including, without limitation, the United States of America, having jurisdiction
over Employee, the Company or any of the Company’s subsidiaries.         By
signing this Employment Agreement, Employee acknowledges that he has not made
and will not make any payments, loans, gifts, promises of payments, loans or
gifts to or for the use or benefit of any official or employee of any government
or to any other person which would violate the laws or regulations of any
country, including, without limitation, the United States of America, having
jurisdiction over Employee, the Company or any of the Company’s subsidiaries.

  (f)   Restricted Period. The term “Restricted Period” shall mean the two-year
period which starts on the date Employee’s employment terminates with the
Company without regard to whether such termination comes before or after the end
of the term of this Employment Agreement.     (g)   Reasonable and Continuing
Obligations. Employee agrees that Employee’s obligations under this Section 5
are obligations which will continue beyond the date Employee’s employment
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 5.

6.   MISCELLANEOUS.

  (a)   Notices. 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 Employee shall be sent to Employee’s home address as indicated
by the records of the Company.     (b)   No Waiver. Except for the notice
described in Section 4(f), no failure by either the Company or Employee at any
time to give notice of any breach by the other of, or to require compliance
with, any condition or provision of this Employment Agreement shall be deemed a
waiver of any provisions or condition of this Employment Agreement     (c)  
Arbitration and Governing Law. ANY UNRESOLVED DISPUTE OR CONTROVERSY BETWEEN
EMPLOYEE AND THE COMPANY ARISING UNDER OR IN CONNECTION WITH THIS EMPLOYMENT
AGREEMENT SHALL BE SETTLED EXCLUSIVELY BY ARBITRATION, CONDUCTED IN ACCORDANCE
WITH THE RULES OF THE AMERICAN ARBITRATION ASSOCIATION THEN IN EFFECT. THE
COMPANY WILL BEAR THE ADMINISTRATIVE COSTS OF ANY ARBITRATION UNDER THIS
EMPLOYMENT AGREEMENT, INCLUDING THE ARBITRATOR’S FEES.

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      THE ARBITRATOR SHALL NOT HAVE THE AUTHORITY TO ADD TO, DETRACT FROM, OR
MODIFY ANY PROVISION HEREOF. THE ARBITRATOR SHALL HAVE THE AUTHORITY TO ORDER
REMEDIES WHICH EMPLOYEE COULD OBTAIN IN A COURT OF COMPETENT JURISDICTION. 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, UNITED
STATES OF AMERICA. NOTWITHSTANDING THE FOREGOING, THE COMPANY SHALL BE ENTITLED
TO SEEK INJUNCTIVE OR OTHER EQUITABLE RELIEF FROM ANY COURT OF COMPETENT
JURISDICTION, WITHOUT THE NEED TO RESORT TO ARBITRATION IN THE EVENT THAT
EMPLOYEE VIOLATES SECTIONS 5(b), 5(c), 5(d) OR 5(e) OF THIS EMPLOYMENT
AGREEMENT. THIS AGREEMENT SHALL IN ALL RESPECTS BE CONSTRUED ACCORDING TO THE
LAWS OF THE STATE OF TEXAS.     (d)   Assignment by Company; Meaning of
“Company”. This Employment Agreement shall be binding upon and inure to the
benefit of the Company and any successor to all or substantially all of the
business or assets of the Company. The Company may assign this Employment
Agreement to any affiliate or successor, and no such assignment shall be treated
as a termination of Employee’s employment under this Employment Agreement;
provided, however, that in the case of an assignment to an affiliate, the
Company shall not be relieved of its obligations under this Employment
Agreement. The Company will require any successor corporation (whether direct or
indirect, and whether by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Company to expressly assume
and to agree to perform this Employment Agreement in the same manner and to the
same extent as the Company, as if no such succession had taken place. Failure of
the Company to obtain such assumption and agreement prior to the effectiveness
of any such succession shall be a material breach of this Employment Agreement.
As used in this Employment Agreement, “Company” shall mean the Company as
hereinbefore defined and any successor to its business or assets as aforesaid
which assumes and agrees to perform this Employment Agreement by operation of
law, or otherwise.     (e)   Assignment by Employee. Employee’s rights and
obligations under this Employment Agreement are personal, and they shall not be
assigned or transferred without the Company’s prior written consent.     (f)  
Other Agreements. With the exception of any of the Company’s stock option plans
(and related agreements), restricted stock plan (and related agreements) and
incentive plans, and the guidelines referred to in Section 3(b), this Employment
Agreement replaces and merges any and all previous agreements and understandings
regarding all the terms and conditions of Employee’s employment relationship
with the Company, and this Employment Agreement constitutes the

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      entire agreement of the Company and Employee with respect to such terms
and conditions.

  (g)   Amendment. No amendment to this Employment Agreement shall be effective
unless it is in writing and signed by the Company and by Employee.     (h)  
Invalidity. If any provision of this Employment Agreement is held to be invalid,
illegal or otherwise unenforceable, the remaining provisions shall be unaffected
and shall continue in full force and effect, and there shall be deemed
substituted for the provision at issue a valid, legal and enforceable provision
as similar as possible to the provision at issue.     (i)   Enforceability by
Beneficiaries. This Employment Agreement shall inure to the benefit of and be
enforceable by the parties hereto and their respective heirs, legal or personal
representatives and successors and if Employee should die while any amount would
still be payable to him hereunder if he had continued to live, all such amounts
shall be paid in accordance with the terms of this Employment Agreement to
Employee’s devisee, legatee or other designee or, if there is no such designee,
to his estate.     (j)   Reimbursement of Certain Expenses. To the extent
Employee shall prevail in any arbitration proceeding pursuant to Section 6(c) to
resolve any dispute or controversy between Employee and the Company arising
under or in connection with this Employment Agreement, then the Company shall
reimburse Employee, or pay on Employee’s behalf, all of Employee’s reasonable
expenses, including without limitation attorneys’ fees, incurred by Employee in
connection with the arbitration.

7.   NOVATION.

This Employment Agreement is a novation to the Amended and Restated Employment
Agreement between the Company and Employee effective February 20, 2003, which is
hereby extinguished. As consideration for this novation, Employee acknowledges
the value of the matters described in the recitals to this Employment Agreement
and the other terms of this Employment Agreement and agrees that they are
adequate to make the novation binding in all respects.
     IN WITNESS WHEREOF, the Company and Employee have executed this Employment
Agreement in multiple originals to be effective as set out above.

                      HARVEST NATURAL RESOURCES, INC.       KURT A. NELSON    
 
                   
By:
          By:        
 
                   
 
       James A. Edmiston                
 
       President and Chief Executive Officer                

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