Employment Agreement - Steven L Mueller

EXHIBIT 10.32


EMPLOYMENT AGREEMENT


THIS EMPLOYMENT AGREEMENT (this "AGREEMENT") is dated as of October 22, 2001 (the "EFFECTIVE DATE"), and is entered into by and between THE HOUSTON EXPLORATION COMPANY, a Delaware corporation (the "COMPANY"), and Steven L. Mueller (the "EXECUTIVE").


WITNESSETH:


WHEREAS, the Company desires to employ the Executive upon the terms and conditions and in the capacities set forth herein; and


WHEREAS, the Company and the Executive desire to enter into this Agreement according to the terms and conditions contained herein.


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 Senior Vice President and General Manager-Onshore Division 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 Senior Vice President and General Manager-Onshore Division of
the Company 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 by-laws and (ii) perform such other duties
not inconsistent with his position as are assigned to him, from time to
time, by the Board of Directors of the Company (the "BOARD"). During
the Term of Employment, the Executive shall (i) report directly and
exclusively to the President and Chief Executive Officer and (ii)
devote substantially all of his business time, attention, skill and
efforts to the faithful performance of his duties hereunder. Subject to
Section 6, the foregoing shall not be construed to prevent the
Executive from making investments in businesses or enterprises 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
his 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.


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(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 a salary at the rate of Two Hundred Thirty Thousand Dollars ($230,000) per year (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 and may be adjusted at its discretion, provided that such salary may not be reduced at any time. In addition, the Executive shall be entitled to participate in such bonus, incentive compensation or other programs as are created or approved by the Board from time to time, including, but not limited to, the benefits described on EXHIBIT A attached hereto.


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 the non-cash benefits being provided by the Company
to its other officers and key employees as they may exist from time to
time, including, but not limited to, the benefits described on EXHIBIT
A attached hereto. Such benefits shall include leave or vacation time
(not less than five (5) weeks per year), medical and dental insurance,
life insurance and other health care benefits, retirement and
disability benefits as may hereafter be provided by the Company in
accordance with its policies as well as any stock option plan or
similar employee benefit program for which key executives are or shall
become eligible. The Executive's participation in each employee benefit
plan or program provided to officers or other senior executives of the
Company in general shall be at least as favorable to the Executive as
the most highly benefited employee thereunder.


(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
the Executive an automobile allowance of Seven Hundred Dollars ($700)
per month. The Board shall review the amount of such monthly allowance
at least annually and may increase the same at any time as the Board
deems appropriate.


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


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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 his duties hereunder, (B) as required by applicable law,
(C) in connection with the enforcement of his 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 his employment for any
reason, he will surrender to the Company all Confidential Information,
and any copies thereof, in his 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 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 him to acquire valuable information as to the
nature and character of the business of the Company, thereby enabling
him, by engaging in a competing business in his own behalf, or for
another, to take advantage of such knowledge and thereby gain an unfair
advantage. Accordingly, the Executive covenants and agrees that he will
not, without the prior written consent of the Company during the Term
of Employment, engage directly or indirectly for himself, or as an
agent, representative, officer, director or employee of others, in the
exploration for or production of hydrocarbons in waters offshore from
the States of Texas and 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


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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
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 his death or the Expiration
Date. The Executive may, at any time prior to the Expiration Date,
terminate his employment hereunder for any reason by delivering a
Notice of Termination (defined below) to the Board. The Company may, at
any time prior to the Expiration Date, terminate the Executive's
employment hereunder for any reason by delivering a Notice of
Termination to the Executive, provided that in no event shall the
Company be entitled to terminate the Executive's employment prior to
the Expiration Date unless the Board shall duly adopt, by the
affirmative vote of a least a majority of the entire membership of the
Board, a resolution authorizing such termination and stating whether
such termination is for Cause (defined below). The giving of a notice
pursuant to clause (i) of the proviso contained in the penultimate
sentence of Section 1 hereof shall not be deemed a termination of the
Executive's employment by the party giving such notice. As used in this
Agreement, "NOTICE OF TERMINATION" means a notice in writing purporting
to terminate the Executive's employment in accordance with this Section
7, which notice shall (i) specify the effective date of such
termination (not prior to the date of such notice) and (ii) in the case
of a termination by the Company for Cause or Disability or a
termination by the Executive for Good Reason or Disability, set forth
in reasonable detail the reason for such termination and the facts and
circumstances claimed to provide a basis for such termination.


(b) Automatic Termination on Expiration Date. In the event the
Executive's employment hereunder shall automatically terminate on the
Expiration Date for any reason other than death, the Executive shall
only be entitled to receive (i) all unpaid compensation accrued as of
the termination date pursuant to Section 3 hereof, (ii) all unused
vacation time accrued by the Executive as of the termination date,
(iii) all amounts owing to the Executive under Sections 4(b) and 4(c)
hereof and (iv) those benefits under Section 4 which are required under
the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), or other laws. The amounts described in clauses (i), (ii)
and (iii) of the foregoing sentence shall be paid to the Executive in a
lump sum payment promptly after the Expiration Date.


(c) Termination by Company for Cause. If the Company
terminates the Executive's employment for Cause, the Executive shall
only be entitled to receive the compensation and other payments
described in paragraph (b) above, such compensation and other payments
to be paid as if the Executive's employment had automatically
terminated without the giving of any Notice of Termination. As used in
this Agreement, "CAUSE" shall mean (i) any material failure of the
Executive to perform his duties specified in Section 2 of this
Agreement (other than any such failure resulting from the Executive's
incapacity due to illness or other disability) after written notice of
such failure has been given to the Executive by the Board and such
fail ...