-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, E1fufODuFb1/HKVMMcxHgoA/jQVCURiGubZ4z34Gc8UkTLn1n2o1UJ0EqzFxZycO whHjaHbH/Frl0qMQsfvRYA== 0000902664-06-001709.txt : 20060622 0000902664-06-001709.hdr.sgml : 20060622 20060622165334 ACCESSION NUMBER: 0000902664-06-001709 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 20060622 DATE AS OF CHANGE: 20060622 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: JANA PARTNERS LLC CENTRAL INDEX KEY: 0001159159 IRS NUMBER: 000000000 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: JANA PARTNERS LLC STREET 2: 536 PACIFIC AVENUE CITY: SAN FRANCISCO STATE: CA ZIP: 94133 BUSINESS PHONE: 2125935955 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: HOUSTON EXPLORATION CO CENTRAL INDEX KEY: 0001015293 STANDARD INDUSTRIAL CLASSIFICATION: OIL AND GAS FIELD EXPLORATION SERVICES [1382] IRS NUMBER: 222674487 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-48519 FILM NUMBER: 06920232 BUSINESS ADDRESS: STREET 1: 1100 LOUISIANA STREET STREET 2: SUITE 2000 CITY: HOUSTON STATE: TX ZIP: 77002-5219 BUSINESS PHONE: 713-830-6800 MAIL ADDRESS: STREET 1: 1100 LOUISIANA STREET STREET 2: SUITE 2000 CITY: HOUSTON STATE: TX ZIP: 77002-5219 SC 13D/A 1 sc13da.txt HOUSTON EXPLORATION CO UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------- SCHEDULE 13D Under the Securities Exchange Act of 1934 (Amendment No. 9)* THE HOUSTON EXPLORATION COMPANY - -------------------------------------------------------------------------------- (Name of Issuer) Common Stock, $0.01 Par Value - -------------------------------------------------------------------------------- (Title of Class of Securities) 442120101 - -------------------------------------------------------------------------------- (CUSIP Number) Marc Weingarten, Esq. Schulte Roth & Zabel LLP 919 Third Avenue New York, New York 10022 (212) 756-2000 - -------------------------------------------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) June 22, 2006 - -------------------------------------------------------------------------------- (Date of Event which Requires Filing of This Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box. [ ] NOTE: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Rule 13d-7 for other parties to whom copies are to be sent. (Continued on following pages) (Page 1 of 5 Pages) - -------------------------- * The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). - ------------------------------ -------------------- CUSIP NO. 442120101 SCHEDULE 13D PAGE 2 OF 5 PAGES - ------------------------------ -------------------- - ------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY) JANA PARTNERS LLC - ------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ] (b) [ ] - ------------------------------------------------------------------------------- 3 SEC USE ONLY - ------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* AF - ------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDING IS REQUIRED PURSUANT TO ITEM 2(d) or 2(e) [ ] - ------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - ------------------------------------------------------------------------------- 7 SOLE VOTING POWER 3,733,600 --------------------------------------------------------- NUMBER OF 8 SHARED VOTING POWER SHARES BENEFICIALLY -0- OWNED BY --------------------------------------------------------- EACH 9 SOLE DISPOSITIVE POWER REPORTING PERSON WITH 3,733,600 --------------------------------------------------------- 10 SHARED DISPOSITIVE POWER -0- - ------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH PERSON 3,733,600 - ------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ] - ------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 12.8% - ------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* IA - ------------------------------------------------------------------------------- * SEE INSTRUCTIONS BEFORE FILLING OUT! - ------------------------------ -------------------- CUSIP NO. 442120101 SCHEDULE 13D PAGE 3 OF 5 PAGES - ------------------------------ -------------------- The Schedule 13D filed on February 21, 2006 by Jana Partners LLC, a Delaware limited liability company (the "Reporting Person"), relating to the shares ("Shares") of common stock, $0.01 par value, of The Houston Exploration Company (the "Issuer"), as previously amended by Amendment No. 1 to the Schedule 13D filed on April 17, 2006, Amendment No. 2 to the Schedule 13D filed on April 24, 2006, Amendment No. 3 to the Schedule 13D filed on April 28, 2006, Amendment No. 4 to the Schedule 13D filed on May 3, 2006, Amendment No. 5 to the Schedule 13D filed on May 16, 2006, Amendment No. 6 to the Schedule 13D filed on June 2, 2006, Amendment No. 7 to the Schedule 13D filed on June 7, 2006 and Amendment No. 8 to the Schedule 13D filed on June 12, 2006, is hereby further amended as set forth below by this Amendment No. 9 to the Schedule 13D. Item 3. Source and Amount of Funds or Other Consideration. Item 3 of the Schedule 13D is hereby amended and restated as follows: As of the date of this filing, the Reporting Person may be deemed the beneficial owner of 3,733,600 Shares. The aggregate purchase price of the Shares owned beneficially by the Reporting Person is approximately $210,847,516. Such Shares were acquired with investment funds in accounts under management. Item 4. Purpose of Transaction. Item 4 of the Schedule 13D is hereby amended by the addition of the following: On June 22, 2006, the Reporting Person sent a letter to the Issuer following up on its previously stated offer to purchase the Issuer for $62 per share in cash and additionally offering to enter into a standstill and confidentiality agreement with the Issuer in exchange for being allowed to begin immediate due diligence, which the Reporting Person noted may cause it to increase its offer price. The Reporting Person noted in the letter that over ten days have passed since its offer was made and additionally informed the Issuer of the Reporting Person's belief that it would evidence bad faith and a disregard for its duties were the Issuer's Board of Directors to use this period to pursue the type of acquisitions which the Reporting Person has previously stated will generate less value for shareholders than other alternatives. A copy of the press release with this letter is attached hereto as Exhibit K and is incorporated herein by reference. A copy of the proposed draft standstill and confidentiality agreement is attached hereto as Exhibit L and is incorporated herein by reference. Additionally, on June 22, 2006, on behalf of the Reporting Person, the Reporting Person's counsel sent a letter to the Issuer's counsel noting that most of the books and records requested under Delaware law by the Reporting Person (the "Demand"), particularly those relating to what the Reporting Person believes is the failure of the Issuer's Board of Directors to pursue maximum value for shareholders, have not yet been provided to the Reporting Person, and reiterating the Reporting Person's demand such books and records. The Reporting Person also requested that if the Issuer's counsel believes that any of the list of objections it has cited to the Reporting Person's books and records request apply specifically to a particular request, the Issuer's counsel so specify so that such claims can be evaluated. The Reporting Person's counsel also noted the Reporting Person's belief that the following questions were raised by the Issuer's counsel's initial response to the books and records request: (1) Why did the Issuer state in its 10-K for fiscal 2005 that it maintains an office in Alabama when, as it has now informed the Reporting Person, this office is paid for by the Reporting Person's Chairman and CEO personally? (2) Because the Issuer's counsel stated in its response to the Demand that Mr. Hargett pays personally for all non-business related travel, yet did not state whether travel to the Alabama "office" is considered non-business travel, the Reporting Person would like clarification as to how this travel is classified. (3) The Issuer's counsel stated in its response to - ------------------------------ -------------------- CUSIP NO. 442120101 SCHEDULE 13D PAGE 4 OF 5 PAGES - ------------------------------ -------------------- the Demand that the payments made pursuant to the overriding royalty interests given to certain employees of the Issuer have been fully disclosed, yet no recent disclosure regarding the amount of such payments made to former employees, including former CEO James Floyd, appears to have been made, and therefore the Reporting Person has requested that such information be made available. A copy of the letter to the Issuer's counsel is attached hereto as Exhibit M and is incorporated herein by reference. Item 5. Interest in Securities of the Company. Paragraphs (a), (b) and (c) of Item 5 of the Schedule 13D are hereby amended and restated as follows: (a) The aggregate percentage of Shares reported to be beneficially owned by the Reporting Person is based upon 29,092,280 Shares outstanding, which is the total number of Shares outstanding as of May 9, 2006 as reported in the Issuer's quarterly report for the quarter ended March 31, 2006. As of the close of business on June 21, 2006, the Reporting Person may be deemed to beneficially own 3,733,600 Shares constituting approximately 12.8% of the Shares outstanding. (b) The Reporting Person has sole voting and dispositive powers over the 3,733,600 Shares reported herein, which powers are exercised by the Principals. (c) The following transactions in the Shares were effected by the Reporting Person since the most recent filing of Schedule 13D. All of the transactions in the Shares were effected in open market purchases on the NYSE through various brokerage entities. Date of Shares Purchased Price Per Transaction (Sold) Share ($) - --------------------------------------------------------------------------- 6/15/2006 75,000 $57.23 - --------------------------------------------------------------------------- 6/16/2006 75,000 $56.83 - --------------------------------------------------------------------------- Item 7. MATERIAL TO BE FILED AS EXHIBITS Item 7 of the Schedule 13D is hereby amended by the addition of the following: 11. Exhibit K - Press release with letter to the Issuer, dated June 22, 2006. 12. Exhibit L - Draft standstill and confidentiality agreement. 13. Exhibit M - Letter to the Issuer's counsel, dated June 22, 2006. - ------------------------------ -------------------- CUSIP NO. 442120101 SCHEDULE 13D PAGE 5 OF 5 PAGES - ------------------------------ -------------------- SIGNATURES After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Dated: June 22, 2006 JANA PARTNERS LLC BY: /s/ Barry Rosenstein ------------------------------------- Name: Barry Rosenstein Title: Managing Partner BY: /s/ Gary Claar ------------------------------------- Name: Gary Claar Title: Managing Director EX-99 2 exhibit_k.txt EXHIBIT K - PRESS RELEASE FOR IMMEDIATE RELEASE For more information contact JANA Partners LLC at (212) 692-7696 JANA PARTNERS CALLS ON HOUSTON EXPLORATION TO BEGIN DIRECT DISCUSSIONS ON JANA'S ACQUISITION OFFER NEW YORK, NEW YORK - JUNE 22, 2006 - JANA Partners LLC ("JANA") today called on the Board of Directors of The Houston Exploration Company (the "Company") (NYSE - - THX) to move forward on JANA's offer to purchase the Company for $62 per share in cash. In a letter sent today to the Board, JANA offered to enter into a standstill and confidentiality agreement with the Company in exchange for being allowed to begin immediate due diligence, which JANA noted could cause it to arrive at an even higher offer price than $62 per share. Since making its offer on June 12, 2006, JANA has increased its ownership position in the Company and is currently its largest shareholder, with approximately 12.8% of the Company's outstanding shares. JANA Managing Partner Barry Rosenstein noted in today's letter that during this time the Board had yet to make any inquiries or attempts to begin discussions regarding JANA's offer. "While this communications barrier has given us no choice but to address the Board publicly, our preference is to acquire the Company on a negotiated basis through direct discussions with the Board," Mr. Rosenstein wrote today. "To that end, we hereby inform you that we are willing to enter into a customary standstill and confidentiality agreement in exchange for the opportunity to begin immediate due diligence on the Company. We believe this diligence could be completed promptly and may of course lead us to an even higher offer price than $62 per share" A proposed standstill and confidentiality agreement was provided by JANA to the Board together with today's letter. The full text of JANA's letter is attached as an exhibit to this press release. BACKGROUND On June 12, 2006, following repeated attempts to engage the Board in substantive discussions regarding the maximization of shareholder value, JANA offered to purchase Houston Exploration for $62 per share. While subject to due diligence and the negotiation of customary documentation, JANA's offer is not subject to any financing condition. JANA, a Delaware limited liability company, holds the Company's common stock in various accounts under its management and control. *** ATTACHMENT: FULL TEXT OF JUNE 22, 2006 LETTER FROM JANA PARTNERS LLC TO THE BOARD OF DIRECTORS OF THE HOUSTON EXPLORATION COMPANY June 22, 2006 The Board of Directors The Houston Exploration Company 1100 Louisiana Street, Suite 2000 Houston, Texas 77002 Attention: William G. Hargett, Chairman, CEO & President VIA FACSIMILE AND OVERNIGHT DELIVERY Gentlemen, It has been ten days since JANA Partners LLC ("we" or "us") offered to purchase The Houston Exploration Company (the "Company") for $62 per share. We have continued to increase our ownership position since making our offer and as of last Friday became the largest shareholder of the Company with 12.8% of the shares outstanding. Yet in this time we have not received any inquiries or attempts to begin discussions regarding our offer from the Board of Directors (the "Board") or its advisers. This silence is of course consistent with the Board's response to our many private and public attempts to begin a substantive dialogue. In fact, contrary to what we understand management has suggested to other parties, we have not had private discussions with the Company despite our numerous efforts including individual calls to each member of the Board. While this communications barrier has given us no choice but to address the Board publicly, our preference is to acquire the Company on a negotiated basis through direct discussions with the Board. To that end, we hereby inform you that we are willing to enter into a customary standstill and confidentiality agreement (a proposed draft of which is attached hereto) in exchange for the opportunity to begin immediate due diligence on the Company. We believe this diligence could be completed promptly and may of course lead us to an even higher offer price than $62 per share. Separately, in our experience silence from the Board usually indicates an attempt to follow a predetermined path without regard to shareholder value. We therefore also wish to put the Board on clear notice that it would evidence tremendous bad faith and a disregard for their duties in our opinion were they to use this period, which the Board has staked out for consideration of the Company's future, to silently pursue overpriced acquisitions. We remain prepared to take all necessary action, including holding directors personally liable if warranted and taking all appropriate action to prevent such transactions, should the Board do so. We look forward to the Board's timely response to this proposal. Sincerely, /s/ Barry Rosenstein - -------------------------- Barry Rosenstein JANA Partners LLC Managing Partner EX-99 3 exhibit_l.txt EXHIBIT L - LETTER [PROPOSED CONFIDENTIALITY & STANDSTILL AGREEMENT FROM JANA PARTNERS LLC TO THE HOUSTON EXPLORATION COMPANY] June __, 2006 JANA Partners LLC 200 Park Avenue Suite 3300 New York, NY 10166 Dear Sirs: JANA Partners LLC ("JANA" or "You") have expressed an interest in a negotiated acquisition of The Houston Exploration Company (the "Company"). In connection with your analysis of a negotiated transaction with the Company (a "Transaction"), you have requested certain oral and written information concerning the Company from directors, officers, employees, representatives and/or agents of the Company (the Company's "Representatives"). All such information furnished to you or your Representatives (as defined below) by or on behalf of the Company (irrespective of the form of communication and whether such information is so furnished before, on or after the date hereof), and all analyses, compilations, data, studies, notes, interpretations, memoranda or other documents prepared by you or your Representatives containing or based in whole or in part on any such furnished information are collectively referred to herein as the "Information." In consideration of furnishing you with the Information, the Company requests your agreement to the following: 1. The Information will be used solely for the purpose of evaluating a Transaction. The Information will be kept strictly confidential and will not be disclosed by you or your Representatives, except (a) as required in the opinion of your counsel by applicable law, regulation or legal process, and only after compliance with Section 2 below, and (b) that you may disclose the Information or portions thereof to those of your members, officers and employees and representatives of your legal, accounting and financial advisors and potential sources of financing for the Transaction (note however that JANA's acquisition proposal is not and will not be subject to a financing contingency) (the persons to whom such disclosure is permissible being collectively referred to herein as your "Representatives") who need to know such information for the purpose of evaluating such Transaction; PROVIDED, that your Representatives (i) are informed of the confidential and proprietary nature of the Information and (ii) agree to be bound by and perform this agreement. You agree to be responsible for any breach of this agreement by your Representatives who are your members, officers, employees or affiliates (it being understood that such responsibility shall be in addition to and not by way of limitation of any right or remedy the Company may have against such Representatives with respect to any such breach). 2. If you or any of your Representatives become legally compelled (including by deposition, interrogatory, request for documents, subpoena, civil investigative demand or similar process) to disclose any of the Information or the information referred to in the introductory paragraph and Section 1 above, you shall provide the Company with prompt prior written notice of such requirement so that the Company may seek a protective order or other appropriate remedy. If such protective order or other remedy is not obtained, you and your Representatives agree to disclose only that portion of the Information which you are advised by opinion of counsel is legally required to be disclosed and to take all reasonable steps to preserve the confidentiality of the Information and the information referred to in the introductory paragraph and Section 1 above. 3. The term "Information" does not include any information which (i) at the time of disclosure or thereafter is generally available to the public (other than as a result of a disclosure directly or indirectly by you or your Representatives in violation hereof), (ii) is or becomes available to you on a nonconfidential basis from a source other than the Company or its advisors, provided that, to your knowledge, such source was not prohibited from disclosing such information to you by a legal, contractual or fiduciary obligation owed to the Company or (iii) you can establish is already in your possession (other than information furnished by or on behalf of the Company). 4. You will keep a record of the Information furnished to you and of the location of any Information. If at any time the Company so directs (whether or not you determine to pursue a Transaction), you and your Representatives will, at your expense, promptly return to the Company or, at the Company's sole option, destroy, all Information and all copies, extracts or other reproductions in whole or in part thereof, provided, however, that you may choose to destroy all copies of any analyses, compilations, studies or other documents prepared by you or for your use containing or reflecting Information. Compliance by you and your Representatives with any direction of the Company or election by you to destroy Information pursuant to this Section 4 shall be certified in writing to the Company by your authorized officer supervising such destruction. Notwithstanding the return or destruction of the Information, you and your Representatives will continue to be bound by your confidentiality and other obligations hereunder. 5. You agree that, until the earlier of (i) 60 days from the date hereof and (ii) the cessation of discussions regarding a Transaction pursuant to a written notice from either party to this agreement (the "Standstill Period"), neither you nor any of your affiliates will acquire directly or indirectly, by purchase or otherwise, any additional securities of the Company or announce or launch a tender offer for any securities of the Company. You also agree that, during the Standstill Period, neither you nor any of your affiliates will request the Company or its advisors, directly or indirectly, to (1) amend or waive any provision of this paragraph (including this sentence) or (2) otherwise consent to any action inconsistent with any provision of this paragraph (including this sentence). 6. The Company agrees that, during the Standstill Period, it will not enter into any agreement for the acquisition or disposition of assets that would, in the reasonable opinion of the Company's counsel, require the filing of a Form 8-K under the Securities Exchange Act of 1934. 7. You understand and acknowledge that neither the Company nor any of its Representatives is making any representation or warranty, express or implied, as to the accuracy or completeness of the Information, and neither the Company nor any of its Representatives will have any liability to you or any other person resulting from your use of the Information absent a definitive agreement regarding a Transaction (a "Definitive Agreement"). Only those representations or warranties that are made to you in a Definitive Agreement, when, as, and if it is executed, and subject to such limitations and restrictions as may be specified in such Definitive Agreement, will have any legal effect. The term "Definitive Agreement" does not include an executed letter of intent or any other preliminary written agreement, nor does it include any written or oral acceptance of any offer or bid on your part. 8. You understand and agree that no contract or agreement providing for a Transaction shall be deemed to exist unless and until a Definitive Agreement has been executed and delivered, and you hereby waive, in advance, any claims (including breach of contract) in connection with a Transaction unless and until you shall have entered into a Definitive Agreement. You also agree that unless and until a Definitive Agreement between the Company and you with respect to a Transaction has been executed and delivered, neither the Company nor any of its stockholders, affiliates or Representatives has any legal obligation of any kind whatsoever with respect to such Transaction by virtue of this agreement or any other written or oral expression with respect to such Transaction except, in the case of this agreement, for the matters specifically agreed to herein. Neither this paragraph nor any other provision in this agreement can be waived, amended or assigned except by written consent of the Company, which consent shall specifically refer to this paragraph (or such other provision) and explicitly make such waiver or amendment. 9. You hereby acknowledge that you are aware, and that you will advise your Representatives, that the United States securities laws may prohibit any person who has material, nonpublic information concerning the matters which are the subject of this agreement from purchasing or selling securities of a company which may be a party to a transaction of the type contemplated by this agreement or from communicating such information to any other person under circumstances in which it is reasonably foreseeable that such person is likely to purchase or sell such securities. 10. You agree that money damages would not be a sufficient remedy for any breach of this agreement by you and that the Company shall be entitled to seek equitable relief, including injunction and specific performance, in the event of any such breach, in addition to all other remedies available to the Company at law or in equity. You further agree to waive, and to use your best efforts to cause your members, officers, employees and agents to waive, any requirement for the securing or posting of any bond in connection with such remedy. 11. The parties hereby irrevocably and unconditionally consent to submit to the exclusive jurisdiction of the courts of the Southern District of New York and of the United States of America located in the Southern District of New York for any actions, suits or proceedings arising out of or relating to this agreement and the transactions contemplated hereby (and the parties agree not to commence any action, suit or proceeding relating thereto except in such courts), and further agree that service of any process, summons, notice or document by U.S. registered mail to the respective addresses set forth above shall be effective service of process for any action, suit or proceeding brought against the parties in any such court. The parties hereby irrevocably and unconditionally waive any objection to the laying of venue of any action, suit or proceeding arising out of this agreement or the transactions contemplated hereby, in the courts of the Southern District of New York or the United States of America located in the Southern District of New York, and hereby further irrevocably and unconditionally waive and agree not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum. 12. You agree that no failure or delay by the Company in exercising any right, power or privilege hereunder will operate as a waiver thereof, nor will any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any right, power or privilege hereunder. 13. If any provision of this agreement is found to violate any statute, regulation, rule, order or decree of any governmental authority, court, agency or exchange, such invalidity shall not be deemed to affect any other provision hereof or the validity of the remainder of this agreement, and such invalid provision shall be deemed deleted herefrom to the minimum extent necessary to cure such violation. 14. This agreement is for the benefit of the Company and its directors, officers, employees, representatives and agents and their respective successors and assigns and will be governed by and construed in accordance with the laws of the State of New York without regard to the conflicts of law principles thereof. This agreement shall terminate on the one year anniversary of the date hereof. If you agree with the foregoing, please sign and return a copy of this letter, which will constitute our agreement with respect to the subject matter of this letter. Very truly yours, THE HOUSTON EXPLORATION COMPANY By: ----------------------------------- Name: Title: CONFIRMED AND AGREED as of the date first above written: JANA PARTNERS LLC By: ------------------------------- Name: Title: EX-99 4 exhibit_m.txt EXHIBIT M - LETTER June 22, 2006 VIA FACSIMILE and FIRST CLASS MAIL - ---------------- David J. Teklits, Esq. Morris, Nichols, Arsht & Tunnell LLP 1201 North Market Street P.O. Box 1347 Wilmington, Delaware 19899-1347 Re: Request to Inspect Books and Records of The Houston Exploration Company ----------------------------------------------------- Dear Mr. Teklits: We are in receipt of your June 8 response (the "Response"), on behalf of The Houston Exploration Company (the "Company"), to the demand by our client, JANA Master Fund, Ltd. ("JANA"), to inspect certain books and records of the Company pursuant to Section 220 of the Delaware General Corporation Law. As indicated in my letter to you last week, we believe the Response was deficient in that substantially all of the materials JANA requested in seeking to confirm whether the Board breached its fiduciary duties, as appears to it to be the case, have not been made available. We request again, on behalf of JANA, that the materials it requested be made available, or if any of the litany of possible objections at the end of the Response apply specifically to any of its requests, that such specific objections be made clear so that they may be evaluated. With respect to time limitations for the materials requested, please use January 1, 2002 as the starting point for such requests. Furthermore, JANA has the following additional questions raised by your response: 1. Why did the Company state in its 10-K for 2005 that it maintains an office in Alabama when, as it now informs us, this office is paid for by Mr. Hargett personally and thus is not an office of the Company? David J. Teklits, Esq. June 22, 2006 Page 2 2. The Response states that Mr. Hargett pays personally for all non-business related travel, yet does not state whether travel to the Alabama "office" is considered non-business travel. Please clarify. 3. The Response states that the payments made pursuant to the overriding royalty interests given to certain employees of the Company have been fully disclosed. Yet we see no disclosure regarding the amount of such payments made to former employees, including former CEO James Floyd. Please advise as to where in the Company's public filings such disclosure was made. We would appreciate your prompt response. Sincerely yours, /s/ Marc Weingarten ----------------------------- Marc Weingarten -----END PRIVACY-ENHANCED MESSAGE-----