Document:

exv10w4

 

Exhibit 10.4

AMENDMENT

TO THE

HOUSTON EXPLORATION COMPANY

DEFERRED COMPENSATION PLAN

FOR

NON-EMPLOYEE DIRECTORS

     The Houston Exploration Company (the “Company”) wishes to amend the Houston Exploration
Company Deferred Compensation Plan for Non-Employee Directors (the “Plan”) to freeze the Plan as of
December 31, 2004 with respect to the value of participants’ Plan accounts as of December 31, 2004
and any deemed earnings or losses thereon accruing after December 31, 2004. The purpose of this
Amendment is to permit Plan participants to enjoy a grandfathering exemption from section 409A of
the Internal Revenue Code of 1986, as amended, as provided under the American Jobs Creation Act of
2004 and the authoritative guidance issued thereunder (“AJCA”). No modification, whether in the
form of a Plan amendment, the exercise of any discretionary authority under the Plan, or otherwise,
may be made to the Plan which constitutes a “material modification” under AJCA, and any attempt to
do so will be void and without effect.

     Accordingly, effective December 31, 2004, the Plan is amended as follows:

     1.     A new Section 3.2 is added to read as follows:

               3.2     FREEZE OF PARTICIPATION. Notwithstanding any other provision of this Plan, no
individual shall become a Participant in this Plan after December 31, 2004.

     2.     The following sentence is added to the end of Section 4.1:

               “Notwithstanding any other provision of this Plan, no Compensation deferrals shall be deferred
under this Plan after December 31, 2004.”

     3.     The following sentence is added to the end of Section 5.4:

               “Any such amendment and/or any other election taken with respect to the Plan that constitutes
a “material modification” of the Plan as defined in the American Jobs Creation Act of 2004, and the
authoritative guidance issued thereunder, shall be void and without effect.”

     IN WITNESS WHEREOF, the Company has caused this Amendment to be executed effective as of
December 31, 2004.

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	ATTEST/WITNESS:	 	 	 	THE HOUSTON EXPLORATION COMPANY
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	By:	  /s/ Liz Melton	 	 	 	By:	 /s/ Roger B. Rice
	 	 	 	 	 	 	 
	Print Name:  Liz Melton	 	 	 	Print Name:	 Roger B. Rice
	 	 	 	 	 	 	 	 	Title:	 	  Vice President
	 	 	 	 	 	 	 	 	Date:	 	  4/26/05exv10w5

 

Exhibit 10.5

THE HOUSTON EXPLORATION COMPANY

POST-2004, AJCA COMPLIANT

DEFERRED COMPENSATION PLAN

FOR

NON-EMPLOYEE DIRECTORS

 

 

THE HOUSTON EXPLORATION COMPANY

POST-2004, AJCA COMPLIANT

DEFERRED COMPENSATION PLAN

FOR

NON-EMPLOYEE DIRECTORS

Table of Contents

	 	 	 	 	 
	 	 	 	 	Page
	Section 1
	 	Definitions 	 	1
	 
	 	 	 	 
	Section 2
	 	Administration 	 	4
	 
	 	 	 	 
	Section 3
	 	Participants 	 	4
	 
	 	 	 	 
	Section 4
	 	Benefits 	 	5
	 
	 	 	 	 
	Section 5
	 	General Provisions 	 	11

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THE HOUSTON EXPLORATION COMPANY

POST-2004, AJCA COMPLIANT

DEFERRED COMPENSATION PLAN

FOR

NON-EMPLOYEE DIRECTORS

PREAMBLE

     WHEREAS, The Houston Exploration Company (the “Company”) desires to establish The Houston
Exploration Company, Post-2004, AJCA Compliant Deferred Compensation Plan For Non-Employee
Directors (the “Plan”) to assist the Company in attracting and retaining highly qualified
individuals to serve as members of the Company’s Board of Directors by permitting them to defer all
or part of their annual retainer and meeting fees; and

     WHEREAS, the Plan is intended to provide deferred compensation benefits taxable pursuant to
section 451 of the Internal Revenue Code of 1986, as amended (the “Code”), and to comply with the
requirements of section 409A of the Code, as added by the American Jobs Creation Act of 2004, and
the Treasury regulations or any other authoritative guidance issued thereunder (“Section 409A”).

     NOW, THEREFORE, the Company does hereby adopt the Plan as set forth herein, effective as of
January 1, 2005.

SECTION 1

DEFINITIONS

        For purposes of the Plan, the following terms shall have the meanings indicated:

	1.1	 	Account means a ledger Account as provided in Section 4.2.
	 
	1.2	 	Beneficiary means the person(s) designated by a Participant, on an Election Form
provided by the Company and filed with the Company’s Human Resources Department, to receive
benefits from the Plan in the event of the Participant’s death. A Participant may change his
or her beneficiary designation at any time; provided, however, no such designation or change

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	 	 	in designation shall be effective until received by the Company during the
Participant’s life. If no designated Beneficiary survives the Participant,
the Beneficiary shall be the Participant’s surviving spouse or, if none,
his or her estate.
	 
	1.3	 	Board means the Board of Directors of the Company.
	 
	1.4	 	Code means the Internal Revenue Code of 1986 and the regulations thereunder, as
amended from time to time.
	 
	1.5	 	Committee means the Compensation Committee of the Board.
	 
	1.6	 	Common Stock means the common stock, par value $.01 per share, of the Company.
	 
	1.7	 	Company means The Houston Exploration Company.
	 
	1.8	 	Compensation means, with respect to a Plan Year, the Participant’s annual retainer
for such Plan Year and any meeting fees for each regular and special meeting and any committee
meeting attended by the Participant during the applicable Plan Year.
	 
	1.9	 	Effective Date means the effective date of the Plan, which shall be January 1, 2005.
	 
	1.10	 	Election Form means the form or forms on which a Participant elects to defer
Compensation hereunder, and/or on which the Participant makes certain other designations
required thereon.
	 
	1.11	 	Exchange Act means the Securities Exchange Act of 1934, as amended.
	 
	1.12	 	Fair Market Value, means as of any date, (a) the closing sale price of the Common
Stock on that date (or, if there was no sale on such date, the next preceding date on which
there was such a sale) on the principal securities exchange on which the Common Stock is
listed; or (b) if the Common Stock is not listed on a securities exchange, the closing sale
price of the Common Stock on that date (or, if there was no sale on such date, the next
preceding date on which there was such a sale) as reported on the NYSE; or (c) if the Common
Stock is not 

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	 	 	listed on the NYSE, the average of the high and low bid quotations for the Stock
on that date as reported by the National Quotation Bureau Incorporated; or (d) if none of the foregoing
is applicable, an amount at the election of the Committee equal to (x) the average between
the closing bid and ask prices per share of Common Stock on the last preceding date on which
those prices were reported or (y) an amount as determined by the Committee in its sole
discretion.

	1.13	 	Non-Employee Director means a member of the Board who is not also an employee of the
Company or a subsidiary thereof.
	 
	1.14	 	Participant means each Non-Employee Director who elects to participate in the Plan in
accordance with Section 3.
	 
	1.15	 	Payment Date means the date of the Participant’s Termination or, if elected on an
Election Form pursuant to Section 4.5, the date following such Termination Date on which
payment of the Participant’s Account is to be made or begin.
	 
	1.16	 	Phantom Stock means a phantom share of Common Stock. A Participant shall not possess
any rights of a stockholder of the Company with respect to a share of Phantom Stock.
	 
	1.17	 	Plan means this, The Houston Exploration Company, Post-2004, AJCA Compliant Deferred
Compensation Plan For Non-Employee Directors, as it may be amended from time to time.
	 
	1.18	 	Plan Year means the calendar year.
	 
	1.19	 	Pre-2005 Plan means The Houston Exploration Company Deferred Compensation Plan for
Non-Employee Directors.
	 
	1.20	 	Section 409A means Code section 409A and the Treasury regulations or other
authoritative guidance issued thereunder.

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	1.21	 	Section 16(b) means Section 16(b) of the Exchange Act, and all rules promulgated
thereunder.
	 
	1.22	 	Specified Employee means, except as may otherwise be required by Section 409A, a “key
employee” as defined in Code section 416(i) (without regard to paragraph (5) thereof) as an
individual who, at any time during the Plan Year, is (1) an officer of the Company having an
annual compensation greater than one hundred thirty-five thousand dollars ($135,000) for 2005
(indexed for inflation in future years); (ii) a five-percent (5%) owner of the Company; or
(iii) a one-percent (1%) owner of the Company having an annual compensation from the Company
of more than one hundred fifty thousand dollars ($150,000).
	 
	1.23	 	Termination means a Participant’s ceasing to be a member of the Board; provided that
a Termination shall not include any event that does not qualify as a “separation from
service”, within the meaning of Section 409A.

SECTION 2

ADMINISTRATION

	2.1	 	Compensation Committee. The Plan shall be administered by the Committee. The
Committee shall have the complete authority and power to interpret the Plan, prescribe, amend
and rescind rules relating to its administration, determine eligible Participants, determine a
Participant’s (or Beneficiary’s) right to a payment and the amount of such payment, and to
take all other actions necessary or desirable for the administration of the Plan. All actions
and decisions of the Committee shall be final and binding upon all Participants and
Beneficiaries.

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SECTION 3

ELIGIBILITY AND PARTICIPATION

	3.1	 	Participation. Each person who is a Non-Employee Director shall be eligible to
become a Participant.

	3.2	 	Termination of Participation. Notwithstanding anything in the Plan to the contrary,
to the extent permitted under Section 409A, the Company, in its sole discretion, may (i)
permit one or more Participants during the 2005 calendar year to terminate participation under
the Plan and receive payment of the amounts subject to termination, or (ii) require one or
more Participants during the 2005 calendar year to terminate participation under the Plan and
receive payment of the amounts subject to termination. Notwithstanding anything herein to the
contrary, any amounts subject to such termination shall be paid as a lump sum as soon as
practicable following the date of such termination and shall be includible in the income of
the Participant in the 2005 calendar year.

SECTION 4

BENEFITS

	4.1	 	Voluntary Deferrals. Before the beginning of each Plan Year (or, with respect to an
individual who first becomes a Non-Employee Director during a Plan Year, within 30 days of the
date on which he or she becomes a Non-Employee Director), each Non-Employee Director may elect
on an Election Form to have the payment of all or a portion of his or her Compensation for
that Plan Year (or, if applicable, the remainder of the Plan Year) deferred until his or her
Payment Date. The election shall be irrevocable and shall be made on an Election Form
prescribed by the Company, which shall govern the amount deferred, and, with respect to the
Participant’s initial Election Form, the timing and form of its payment pursuant to Section
4.5 following the Participant’s Termination and the initial investment of the Participant’s
Account for such deferred Compensation pending its payment. A 

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	 	 	Participant’s deferral election
shall apply to Compensation earned during that specified Plan Year or partial Plan Year, as
the case may be, and for all Compensation earned in subsequent Plan Years, unless the election is changed by the Participant prior to the beginning of such
Plan Year. Notwithstanding the foregoing, a Participant may change the manner in which the
Participant’s Account is to be paid on Termination pursuant to Section 4.5 by filing a new
Election Form with the Company, provided such new election will not be given effect unless
it meets the requirements set forth in Section 4.5. Once a Plan Year commences, a
Participant may not change or revoke the Participant’s deferral election for that Plan Year,
except as may be expressly permitted under Section 409A and by the Company (for example, for
2005 only, a Participant may terminate participation in the Plan or cancel his or her
deferral election under the Plan at any time during the 2005 calendar year). If a
Non-Employee Director has not made a deferral election with respect to a Plan Year, the
Compensation payable to him or her for that Plan Year shall be paid in accordance with the
Company’s normal practices.

	4.2	 	Accounts. The Company shall establish a ledger or notional account (the “Account”)
for each Non-Employee Director who has elected to defer payment of all or part of his or her
Compensation for the purpose of reflecting the Company’s obligation to pay to the Participant
(or the Participant’s Beneficiary) the amount credited to such Account as specified pursuant
to Section 4.5.
	 
	4.3	 	Investment of Accounts. Unless, and to the extent, a Participant elects to invest
all or a specified portion of his or her Account in shares of Phantom Stock as provided below,
each Account shall automatically accrue interest on the amount credited to such Account from
the date such amount is credited to the Account through the date of its distribution. Such

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	 	 	interest shall be credited to the Account at the end of each calendar quarter or at such other
times as may be determined by the Committee. The Committee shall determine, in its sole
discretion, the rate of interest to be credited periodically to the Accounts, which may not be
less than the
prime rate of interest from time to time as reported in The Wall Street Journal; provided
that any change in such rate may only be given effect prospectively.

     In lieu of having his or her Account credited with interest, a Participant may direct
that all or a specified percentage of his or her deferred Compensation be invested in shares
of Phantom Stock. In such event, the Participant’s Account shall be credited with whole and
fractional shares of Phantom Stock periodically as of the dates of the deferrals, and with
phantom dividends with respect to the Phantom Stock, which shall be credited as being
reinvested in additional shares of Phantom Stock. All credits and debits of the Phantom
Stock to an Account shall be made based on the Fair Market Value per share of the Common
Stock on the applicable date. Notwithstanding the foregoing, however, if the Company’s
Common Stock ceases to be readily tradeable on a national securities market, effective
therewith all then elections under the Plan to invest in shares of Phantom Stock, including
elections with respect to existing Account balances, shall be automatically canceled and all
deferrals and Account balances after such date shall be credited with interest as provided
above.

	4.4	 	Change in Investment Elections. Each Participant may elect at any time or times, in
a manner provided by the Company, to change the investment of his or her future deferrals
and/or the current investment of his or her Account between shares of Phantom Stock and
deferred cash credited with interest. Such election change shall be given effect when
received by the Company provided such transaction will be an exempt “discretionary
transaction” for purposes of Rule 16b-3.

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	4.5	 	Payment of Accounts. In connection with a Participant’s commencement of
participation in the Plan, a Participant may separately elect on an Election Form the timing
and manner in which payment (or commencement of payment) of his or her Account will be made.

     (i) Timing of Payment. Subject to Section 409A, a Participant may elect on his
or her initial Election Form to receive (or commence to receive) his or her Account upon the
later of the Participant’s Termination or a January 1 specified following such Termination,
but not later than the fifth (5th) January 1 subsequent to such Termination (the
“Payment Date”); provided, however, that if any authoritative guidance is issued by the
Internal Revenue Service which would render this Section (in particular, its
post-Termination payment commencement feature) impermissible under Section 409A, this
Section shall become inoperative and distributions to Participants hereunder shall
automatically be made (or commence) on the Participant’s Termination.

     Notwithstanding the foregoing, any Participant who is a Specified Employee shall not be
entitled to receive payment (or commencement of payment) of his or her Account under this
Section prior to the date which is six (6) months after the date or his or her Termination
(or, if earlier, his or her death).

     If a Participant fails to designate properly the timing of payment of his or her
Account under the Plan, such payment will be made on the Participant’s Termination (or, with
respect to a Specified Employee, six (6) months after his or her Termination (or, if
earlier, his or her death)).

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     Subject to Section 4.6, a Participant shall be permitted to change his or her
above-described election regarding his or her Payment Date by submitting a new Election Form
to the Company, provided that any such Election Form (a) is submitted at least twelve (12)
months prior to the Participant’s Payment Date, and (b) as required by Section 409A,
provides for a new Payment Date which is at least five (5) full calendar years from the
Participant’s previously scheduled Payment Date.

     (ii) Manner of Payment. On his or her initial Election Form, a Participant may
elect to have an amount in cash equal to the balance then credited to his or her Account
paid (or commence to be paid) upon his or her Payment Date as follows:

     (a) in a lump sum payment; or

     (b) in substantially equal annual installments over a period selected by the
Participant, not to exceed 10.

     To the extent shares of Phantom Stock are credited to the Account, “substantially
equal” shall be determined by reference to the number of such shares, not their value. If a
Participant fails to designate properly the form of payment of his or her Account, such
Account will be paid in a lump sum.

     Subject to Section 4.6, a Participant shall be permitted to change his or her
above-described election regarding the form of payment of his or her Account by submitting a
new Election Form to the Company, provided that any such Election Form (A) is submitted at
least twelve (12) months prior to the Participant’s Payment Date, and (B) as required by
Section 409A, provides for a new Payment Date which is at least five (5) full calendar years
from the Participant’s previously scheduled Payment Date.

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     As permitted by Section 409A, payment of Accounts shall commence or be made on or as
soon as reasonably practical following the Participant’s Payment Date.

     (iii) Payment Upon Death. Notwithstanding the foregoing, upon a Participant’s
death, the balance then credited to the Participant’s Account shall be paid in a lump sum to
the Participant’s Beneficiary upon (or, as permitted by Section 409A, as soon as
reasonably practical following) the Participant’s death.

	4.6	 	2005 Transition/Permitted Accelerations/Prohibited Acceleration/Distribution Timing.
Notwithstanding the preceding, as permitted under the transition rules of Internal Revenue
Service Notice 2005-1, the Company may permit Participants during the 2005 calendar year to
make new distribution elections to comply with Section 409A with respect to any amounts
credited hereunder prior to such new elections (e.g., to elect by no later than December 31,
2005 the timing and form of payments of their Accounts, notwithstanding that such election
will not have been at the time the Participant commenced participation in the Plan). Further,
the Company, in its discretion, may accelerate payments under the Plan to the extent permitted
in Q&A 15 of Internal Revenue Service Notice 2005-1. However, notwithstanding anything in the
Plan to the contrary, no provision of the Plan shall be followed if following the provision
would result in the acceleration of the time or schedule of any payment from the Plan as would
require immediate income tax to Participants based on the law in effect at the time the
distribution is to be made, including Section 409A. In addition, if the timing of any
distribution election would result in any tax or other penalty (other than ordinarily payable
Federal, state or local income or payroll taxes), which tax or penalty can be avoided by
payment of the distribution at a later time, then the distribution 

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	 	 	shall be made (or commence, as the case may be) on (or as soon as practicable after) the first date on which such
distributions can be made (or commence) without such tax or penalty.

SECTION 5

GENERAL PROVISIONS

	5.1	 	Unfunded Obligation. The amounts to be paid to Participants pursuant to this Plan
are unfunded obligations of the Company. The Company is not required to segregate any monies
from its general funds, to create any trusts, or to make any special deposits with respect to
this obligation. Title to and beneficial ownership of any investments, including trust
investments, which the Company may make to fulfill this obligation shall at all times remain
in the Company. Any investments and the creation or maintenance of any trust or notional
accounts shall not create or constitute a trust or a fiduciary relationship between the
Committee or the Company and a Participant, or otherwise create any vested or beneficial
interest in any Participant or his or her Beneficiary or his or her creditors in any assets of
the Company whatsoever. The Participants (and Beneficiaries) shall have no claim against the
Company for any changes in the value of any Accounts and shall be general unsecured creditors
of the Company with respect to any payment due under this Plan.

	5.2	 	Incapacity of Participant or Beneficiary. If the Committee finds that any
Participant or Beneficiary to whom a payment is payable under the Plan is under a legal
disability, any payment due (unless a prior claim therefore shall have been made by a duly
appointed legal representative) at the discretion of the Committee, may be paid to the spouse,
child, parent or brother or sister of such Participant or Beneficiary. Any such payment shall
be a complete discharge of the obligations of the Company under the provisions of the Plan.

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	5.3	 	Nonassignment. The right of a Participant or Beneficiary to the payment of any
amounts under the Plan may not be assigned, transferred, pledged or encumbered in any manner
nor
shall such right or other interests be subject to attachment, garnishment, execution or
other legal process.

	5.4	 	Termination and Amendment. Subject to Section 409A, the Board may from time to time
amend or terminate the Plan, in whole or in part, and if the Plan is suspended or terminated,
the Board may reinstate any or all of its provisions. The Committee may also amend the Plan;
provided, however, it may not terminate the Plan or substantially increase the obligations of
the Company under the Plan (provided, however, that the addition of new phantom investments
with respect to the Accounts shall not be deemed an increase in the obligations of the Company
under the Plan). No amendment or termination of the Plan may impair the right of a
Participant or his or her Beneficiary to receive the benefit accrued hereunder prior to the
effective date of such amendment, suspension or termination. Following termination, the full
amount of each Participant’s Account shall become distributable to him or her only when Plan
benefits otherwise become due hereunder

	5.5	 	Changes in Law Affecting Taxability. This Section shall become operative upon the
enactment of any change in applicable statutory law or the promulgation by the Internal
Revenue Service of a final regulation or other pronouncement having the force of law, which
statutory law, as changed, or final regulation or pronouncement, as promulgated, would cause
any Participant to include in his or her federal gross income amounts accrued by the
Participant under the Plan on a date (an “Early Taxation Event”) prior to the date on which
such amounts are made available to him or her hereunder; provided, however, that no portion of
this Section shall become operative to the extent that portion would result in a violation of

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	 	 	Section 409A (e.g., by causing an impermissible distribution under Section 409A, or would
result in pre-2005 deferrals made under the Pre-2005 Plan becoming subject to Section 409A).

     (i) Affected Right or Feature Nullified. Notwithstanding any other Section of
this Plan to the contrary (but subject to subsection (ii), below), as of an Early Taxation
Event, the feature or features of this Plan that would cause the Early Taxation Event shall
be null and void, to the extent, and only to the extent, required to prevent the Participant
from being required to include in his or her federal gross income amounts accrued by the
Participant under the Plan prior to the date on which such amounts are made available to him
or her hereunder. If only a portion of a Participant’s Account is impacted by the change in
the law, then only such portion shall be subject to this Section, with the remainder of the
Account not so affected being subject to such rights and features as if the law were not
changed. If the law only impacts Participants who have a certain status with respect to the
Company, then only such Participants shall be subject to this Section.

     (ii) Tax Distribution. If an Early Taxation Event is earlier than the date on
which the statute, regulation or pronouncement giving rise to the Early Taxation Event is
enacted or promulgated, as applicable (i.e., if the change in the law is retroactive), there
shall be distributed to each Participant, as soon as practicable following such date of
enactment or promulgation, the amounts that became taxable on the Early Taxation Event.

	5.6	 	Compliance with Securities Laws. It is the intention of the Company that, so long as
any of the Company’s equity securities are registered pursuant to Section 12(b) or 12(g) of
the Exchange Act, this Plan shall be operated in compliance with Section 16(b).

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	5.7	 	Applicable Law. Except to the extent preempted by applicable federal law, the Plan
shall be construed and governed in accordance with the laws of the State of Texas.

	5.8	 	Aggregation of Employers. To the extent required under Section 409A, if the Company
is a member of a controlled group of corporations or a group of trades or business under
common control (as described in Code sections 414(b) or (c)), all members of the group shall
be treated as a single employer for purposes of whether there has occurred a Termination
hereunder and for any other purposes under the Plan as Section 409A shall require.

	5.9	 	Section 409A Compliance. Notwithstanding anything in the Plan to the contrary, (i)
this Plan may be amended in accordance with Section 5.4 at any time, retroactively if
required, to the extent required to conform the Plan to Section 409A, (ii) no provision of the
Plan shall be followed to the extent that following such provision would result in a violation
of Section 409A, and (iii) no election made by a Participant hereunder, and no change to a
previous election, shall be followed to the extent that following such election or change
could violate any of the requirements of Section 409A, resulting in early taxation and
penalties.

     IN WITNESS WHEREOF, the Company has caused this Plan to be executed effective as of January 1,
2005.

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	ATTEST/WITNESS:	 	 	 	THE HOUSTON EXPLORATION COMPANY
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	By:	  /s/ Liz Melton	 	 	 	By:	 /s/ Roger B. Rice
	 	 	 	 	 	 	 
	Print Name:  Liz Melton	 	 	 	Print Name:	 Roger B. Rice
	 	 	 	 	 	 	 	 	Title:	 	  Vice President
	 	 	 	 	 	 	 	 	Date:	 	  4/26/05

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