exv10w28



 





Exhibit 10.28




SEPARATION AGREEMENT




     This Separation Agreement (this “Agreement”) is between Harvest Natural Resources, Inc. a
Delaware corporation (the “Company”), and Byron A. Dunn (“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 26, 2005 (the “Employment Agreement”);



     WHEREAS, Employee’s employment with the Company will end on [November 16], 2007; 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.





     a. Employee’s separation date from the Company shall be [November 16], 2007 (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.





     a. 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. Bonus.





     a. The Company shall make a lump sum bonus payment to Employee of $240,000 on the date
that is six months following the date of 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.



 









 





4. Stock Options.





     a. Employee has been granted certain stock options during his term of employment.
Notwithstanding any provision in the Employment Agreement or the Stock Option Agreements,
Employee shall forfeit any and all rights to those options except for the stock options
listed in Exhibit A attached hereto (the options listed on Exhibit A are
hereafter referred to as “Options”). Notwithstanding any provision in the Employment
Agreement or the stock option agreements pertaining to the Options to the contrary,
Employee’s rights, if any, to exercise the Options shall not expire prior to November 17,
2008. Following the Separation Date, the Options shall continue to vest in accordance with
their terms in the same manner as if Employee had continued in the employ of the Company.
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 4, without regard to the
termination of his position as an employee of the Company. Nothing contained in this
Separation Agreement shall be deemed to accelerate or otherwise alter the vesting schedule
for the Options.



5. Restricted Stock.





     a. Employee has been awarded the restricted stock listed in Exhibit A 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 tax 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 5, without regard to the termination of his
position as an employee of the Company.



6. Continuation Benefits.





     a. After Employee’s termination of employment on the Separation Date, the Company will
reimburse for up to $20,000 of outplacement services with an outplacement service approved
by the Company up to 12 months from the Separation Date. Any reimbursement shall be made by
the Company promptly but in no event later than December 31, 2010. Except for those welfare
benefits expressly provided to Employee under this paragraph 6, except as specified in
paragraph 8, from and after the Separation Date Employee shall have no right to any other
welfare benefits including, without limitation, health, dental, short term disability, long
term disability and accidental death and dismemberment coverages.



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7. Other Compensation and Benefits.





     a. 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(f)
(regarding reimbursement of expenses in the performance of services under the Employment
Agreement) and Section 3(h) regarding the right to indemnification under the Company’s
bylaws). All such expense reimbursements shall be made in accordance with the Company’s
expense reimbursement policy. 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 vacation time as of the Separation
Date in accordance with the Company’s standard policy.



8. 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
$480,000, (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 8(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) $240,000.




     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)



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(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 8(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 8(c);
or




     (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 8(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



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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
8(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 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 8(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.





9. General.





     a. All applicable tax withholdings, including but not limited to withholdings for
federal, state and Social Security taxes, 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.



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10. Effect on Other Agreements.





     a. 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 10, the provisions contained in Section 5 (other
than Section 5(b)(1)) and 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 continue to be effective as to all periods during
which Employee has served as an officer of the Company.



11. Release.





     a. Payment of the benefits described in this Agreement is contingent upon Employee’s
executing and returning this Release Agreement to the Company. Employee may take up to 21
days to consider this Release Agreement prior to executing it. Furthermore, Employee has a
seven-day period after executing this Release Agreement during which he may revoke his
consent to the Agreement, and this Release Agreement will not become effective or
enforceable until such revocation period has expired. 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 11,
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 (“ADEA”), the Americans with Disabilities Act, the Equal Pay Act of 1963, the
1978



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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 11 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 11(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.




     c. The foregoing waiver and release of claims under the ADEA may be revoked by Employee
within the seven-day period commencing with the day after the date of the full execution of
this Release Agreement, and the release of any claims under the ADEA will not become
effective until the seven-day revocation period has expired. To exercise this right of
revocation, Employee must notify the General Counsel of Harvest Natural Resources, Inc.,
1177 Enclave Parkway, Suite 300, Houston, TX 77077, in writing before the expiration of the
seven-day revocation period.



12. 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.



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     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. No Knowledge of Legal Violations. Except to the extent previously disclosed
to the Company’s General Counsel, if applicable, Employee represents that he has no
information or knowledge of any legal irregularity, violation, or alleged violation of any
law, regulation, statute, or ordinance of any kind resulting from the operations of the
Company or any entity affiliated with the Company.




     f. Governing Law. This Separation Agreement shall be construed in accordance
with the laws of the State of Texas.



	 	 	 	 	 
	Date:                     , 2007	 	HARVEST NATURAL RESOURCES, INC.
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	Title:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	Date:                     , 2007
	 	 	 	 
	 	 	 
	 	 	BYRON A. DUNN







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EXHIBIT A TO SEPARATION AGREEMENT




BETWEEN HARVEST NATURAL RESOURCES, INC. AND BYRON A. DUNN




Options:




	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Grant	 	Exercise	 	Number	 	Expiration
	Plan	 	Date	 	Price	 	of Options	 	Date
	2004

	 	5-21-04
	 	$	12.68	 	 	 	5,000	 	 	5-21-14	
	2004

	 	5-19-05
	 	 	9.995	 	 	 	5,000	 	 	5-19-15	
	2004

	 	9-26-05
	 	 	10.905	 	 	 	*225,000	 	 	9-26-15	
	2004

	 	  3-2-06
	 	 	9.605	 	 	 	55,000	 	 	3-2-16	
	2006

	 	2-27-07
	 	 	9.625	 	 	 	**50,000	 	 	2-27-14	






Restricted Stock:




	 	 	 	 	 	 	 
	 	 	Grant	 	Number
	Plan	 	Date	 	of Shares
	2004

	 	5-21-04
	 	 	10,300	 
	2004

	 	5-19-05
	 	 	3,000	 
	2004

	 	  3-2-06
	 	 	5,000	 
	2006

	 	2-27-07
	 	 	30,000	 








 




			
	*	 	These Options vest as to one-third of the shares subject to the Options on the later to occur of
(i) September 25, 2006 and (ii) the date on which the average of the stock price for ten
consecutive trading days is greater than $20.00 per share. The Options shall vest as to one-third
of the shares subject to the Options on September 25, 2007 and September, 2008, subject to the same
$20.00 per share condition specified in the applicable option agreement.
	 
	**	 	These 50,000 options represent one-half of a two year grant awarded 2-27-07 for 100,000
options.