Employment Agreement - Joanne C. Hresko

Exhibit 10.3

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (this " Agreement" ) is dated as of February 10, 2005 (the " Effective Date" ), and is entered into by and between THE HOUSTON EXPLORATION COMPANY, a Delaware corporation (the " Company" ), and JOANNE HRESKO (the " Executive" ).

WITNESSETH:

WHEREAS, the Company and the Executive wish to enter in this Agreement setting forth the terms and conditions of the Executive' s employment with the Company.

NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and the Executive hereby agree as follows:

1. Employment and Term of Employment. Subject to the terms and conditions of this Agreement, the Company hereby agrees to employ the Executive, and the Executive hereby agrees to serve the Company as Vice President and General Manager Onshore for a term (the " Term of Employment" ) beginning on the Effective Date and ending on the Expiration Date (defined below). As used herein, " Expiration Date" means the third anniversary of the Effective Date, provided that on the first anniversary of the Effective Date and on each subsequent anniversary of the Effective Date (such first anniversary date and each such subsequent anniversary date being referred to as a " Renewal Date" ), the Expiration Date shall be automatically extended one additional year unless, not less than ninety (90) days prior to the relevant Renewal Date, (i) either party shall have given written notice to the other that no such automatic extension shall occur after the date of such notice or (ii) either party shall have given a Notice of Termination to the other pursuant to Section 7 hereof. Notwithstanding the foregoing, if either party gives a valid Notice of Termination pursuant to Section 7 hereof, the Term of Employment shall not extend beyond the termination date specified in such Notice of Termination.

2. Scope of Employment.

(a) During the Term of Employment, the Executive agrees to (i) serve as Vice President and General Manager Onshore of the Company (or in such other position of equal or greater authority) and shall have and may exercise all the powers, duties and functions as are normal and customary to such positions and that are consistent with the responsibilities set forth with respect to such positions in the Company' s bylaws and (ii) perform such other duties not inconsistent with her position as are assigned to her, from time to time, by the Company. During the Term of Employment, the Executive shall devote substantially all of her business time, attention, skill and efforts to the faithful performance of her duties hereunder. Subject to Section 6, the foregoing shall not be construed to prevent the Executive from making investments in businesses or enterprises

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so long as such investments do not require any services on the part of the Executive in the operation of such business or enterprises of a nature or magnitude that would interfere materially with the performance of her duties hereunder.

(b) During the Term of Employment, the Executive agrees to serve, if elected, as an officer or director of any subsidiary or affiliate of the Company so long as such service is commensurate with the Executive' s duties and responsibilities to the Company.

(c) The Executive' s place of employment hereunder shall be at the Company' s principal executive offices in the greater Houston, Texas metropolitan area. Moreover, the Company agrees that it will provide immunity and indemnity for the Executive to the fullest extent allowed by law, that if necessary it will amend its certificate of incorporation and bylaws to so provide, and that it will obtain errors and omissions insurance in the amount of no less than Ten Million Dollars ($10,000,000) naming the Executive as an additional insured.

3. Compensation. During the Term of Employment, in consideration of the Executive' s services hereunder, including, without limitation, service as an officer or director of the Company or of any subsidiary or affiliate thereof, and in consideration of the Executive' s covenants regarding confidentiality in Section 5 hereof and noncompetition in Section 6 hereof, the Executive shall receive the following compensation:

(a) Base Salary. The Executive shall be paid a base salary at the rate of Two Hundred and Fifteen Thousand Dollars ($215,000 per year) (the " Base Salary" ) (payable at such regular intervals as other employees of the Company are compensated in accordance with the Company' s employment practices), which amount shall be subject to review annually by the Board of Directors of the Company (the " Board" ) or the Compensation Committee of the Board (the " Compensation Committee" ) and may be adjusted at its discretion, provided that such Base Salary may not be reduced at any time.

(b) Target Bonus. During the Term of Employment, the Executive shall also be entitled to an annual target bonus equal to fifty-five percent (55%) of the Executive' s Base Salary (the " Target Bonus" ) upon the achievement of pre-established performance goals set by the Board or the Compensation Committee of the Board. Any such bonus shall be paid at such times as the Company customarily pays bonuses and shall be paid consistent with Company policies.

4. Additional Compensation and Benefits.

(a) As additional compensation for the Executive' s services under this Agreement, the Executive' s covenants regarding confidentiality in Section 5 hereof and noncompetition in Section 6 hereof, during the Term of Employment, the Company agrees to provide the Executive with such other benefits as it provides to its employees from time to time and subject to the eligibility provisions of any such employee benefit plans and policies. Executive shall be eligible for leave or vacation time (not less than five (5) weeks per year).

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(b) The Executive is authorized to incur reasonable business expenses for promoting the business and reputation of the Company, including (without limitation) reasonable expenditures for travel, lodging, club memberships, meals and client, patron, customer and/or business associate entertainment. The Company shall reimburse within thirty (30) days the Executive for reasonable expenses incurred by the Executive in furtherance of the Company' s business, provided that such expenses are incurred in accordance with the Company' s policies and upon presentation of documentation in accordance with expense reimbursement policies of the Company as they may exist from time to time, and submission to the Company of adequate documentation in accordance with federal income tax regulations and administrative pronouncements.

(c) During the Term of Employment, the Company shall pay to Executive an automobile allowance of Seven Hundred Dollars ($700) per month.

5. Confidentiality and Other Matters.

(a) Confidentiality. The Executive shall hold in a fiduciary capacity for the benefit of the Company all maps, data, reports, including results of exploration, drilling, drill cores, cuttings, and other samples, and other information relating to the business of the Company which comes into the possession of the Executive during the Term of Employment (such information being collectively referred to herein as the " Confidential Information" ). During the Term of Employment and after termination of the Executive' s employment hereunder, the Executive agrees: (i) to take all such precautions as may be reasonably necessary to prevent the disclosure to any third party of any of the Confidential Information; (ii) not to use for the Executive' s own benefit any of the Confidential Information; and (iii) not to aid any other person or entity in the use of the Confidential Information in competition with the Company, provided that nothing in this Agreement shall prohibit the Executive from disclosing or using any Confidential Information (A) in the performance of her duties hereunder, (B) as required by applicable law, (C) in connection with the enforcement of her rights under this Agreement or any other agreement with the Company, (D) in connection with the defense or settlement of any claim, suit or action brought or threatened against the Executive by or in the right of the Company or (E) with the prior written consent of the Board. Notwithstanding any provision contained herein to the contrary, the term " Confidential Information" shall not be deemed to include any general knowledge, skills or experience acquired by the Executive or any knowledge or information known or available to the public in general. The Executive further agrees that, if requested by the Company in writing at any time within ninety (90) days after termination of her employment for any reason, she will surrender to the Company all Confidential Information, and any copies thereof, in her possession and agrees that all such materials, and copies thereof, are at all times the property of the Company. Notwithstanding the foregoing, the Executive shall be permitted to retain copies of, or have access to, all such Confidential Information relating to any disagreement, dispute or litigation (pending or threatened) involving the Executive.

(b) Remedies. For purposes of this Section 5, the " Company" shall be defined as the Company and its affiliated companies including (without limitation) its

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successors and assigns and its subsidiaries and each of their respective successors and assigns. In the event of a breach or threatened breach by the Executive of the provisions of this Section 5, the Company shall be entitled to an injunction restraining the Executive from violating such provisions without the necessity of posting a bond therefor. Nothing herein shall be construed as prohibiting the Company from pursuing any other remedies available to it at law or in equity. Except as specifically set forth herein, the parties agree that the provisions of this Section 5 shall survive the earlier termination of the Executive' s employment with the Company, as the continuation of this covenant is necessary for the protection of the Company.

6. Noncompetition.

(a) Noncompetition Activities. The Executive acknowledges that the nature of the employment under this Agreement is such as will bring the Executive in personal contact with patrons or customers of the Company and will enable her to acquire valuable information as to the nature and character of the business of the Company, thereby enabling her, by engaging in a competing business in her own behalf, or for another, to take advantage of such knowledge and thereby gain an unfair advantage. Accordingly, the Executive covenants and agrees that she will not, without the prior written consent of the Company during the Term of Employment and for the period of one year thereafter, engage directly or indirectly for himself, or as an agent, representative, officer, director or employee of others, in the exploration for or production of oil and gas in Louisiana, Texas, Arkansas, Oklahoma, Colorado, North Dakota, South Dakota and the coastal area of the Gulf of Mexico from the Mexican border to the eastern boarder of Louisiana provided, that, the foregoing restriction shall not apply at any time if the Executive' s employment is terminated during the Term of Employment by the Executive for Good Reason (defined in Section 7 hereof) or by the Company for any reason other than Cause (defined in Section 7 hereof) and, provided further, that nothing in this Agreement shall prohibit the Executive from acquiring or holding any issue of stock or securities of any entity registered under Section 12 of the Securities and Exchange Act of 1934 (as amended), listed on a national securities exchange or quoted on the automated quotation system of the National Association of Securities Dealers, Inc. so long as the Executive is not deemed to be an " affiliate" of such entity as such term is used in paragraphs (c) and (d) of Rule 145 under the Securities Act of 1933 (as amended).

(b) Scope. In the event that the provisions of this Section 6 should ever be deemed to exceed the time, geographic or activity related limitations permitted by applicable law, then such provisions shall be reformed to the maximum time, geographic or activity related limitations permitted by applicable law. In the event of a breach or threatened breach by the Executive of the provisions of this Section 6, the Company shall be entitled to an injunction restraining the Executive from violating such provisions without the necessity of posting a bond therefor. Nothing herein shall be construed as prohibiting the Company from pursuing any other remedies available to it at law or in equity. Except as specifically set forth herein, the parties agree that this Section 6 shall remain in effect for its full term notwithstanding the earlier termination of the Executive' s employment with the Company, as the continuation of this covenant is necessary for the protection of the Company. For purposes of this Section 6, the " Company" shall be

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defined as the Company and its affiliated companies, including (without limitation) its successors and assigns and its subsidiaries and each of their respective successors and assigns.

7. Termination.

(a) General. The Executive' s employment hereunder shall automatically terminate on the earlier of her death or the Expiration Date. The Executive may, at any time prior to the Expiration Date, terminate her employment hereunder for any reason by delivering a Notice of Termination (defined below) to the Board. The Company m ...