EXHIBIT 10.6
STOCK UNIT AWARD AGREEMENT
This Stock Unit Award Agreement (this “Agreement”) is made by and between
Harvest Natural Resources, Inc., a Delaware corporation (the “Company”), and
James A. Edmiston III (the “Executive”) as of the 2nd day of March, 2006 (the
“Grant Date”).
Whereas, the Company desires to grant to the Executive the stock unit award
specified herein (the “Award”), subject to the terms and conditions of this
Agreement; and
Whereas, the Award is a “stock value right” as that term is defined in Treasury
Regulation § 31.3121(v)(2)-1(b)(4)(ii); and
Whereas, the Executive desires to have the opportunity to hold the Award,
subject to the terms and conditions of this Agreement;
Now, therefore, in consideration of the premises, mutual covenants and
agreements contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto,
intending to be legally bound hereby, agree as follows:

1.   Grant of Stock Unit Award. Effective as of the Grant Date, the Company
hereby awards to the Executive 10,000 Stock Units. A “Stock Unit” is a right to
receive on the Payment Date, after vesting thereof, a cash amount equal to the
excess of (a) the Fair Market Value of one share of the Stock on the Valuation
Date over (b) 100 percent of the Fair Market Value of one share of the Stock on
March 2, 2006. For purposes of this Agreement the “Fair Market Value of one
share of the Stock” means the average of the high and low trading prices per
share of the Stock for the applicable date as reported by the New York Stock
Exchange or the principal stock exchange on which the Stock is then traded. The
Stock Units that are awarded hereby to the Executive shall be subject to the
prohibitions and restrictions set forth herein with respect to the sale or other
disposition of such Stock Units and the obligation to forfeit and surrender such
Stock Units to the Company (the “Forfeiture Restrictions”). In accepting the
award of Stock Units set forth in this Agreement the Executive accepts and
agrees to be bound by all the terms and conditions of this Agreement.

2.   Definitions. For purposes of this Agreement, the following terms shall have
the meanings indicated below:

  (a)   “Affiliate” means an Entity that is required to be treated as a single
employer together with the Company for certain benefit plan purposes under
section 414 of the Code.     (b)   “Board” means the Board of Directors or other
governing body of the Company or its direct or indirect parent.     (c)  
“Change of Control” means the occurrence of any of the following events:

  (i)   the acquisition by any individual, Entity or group (within the meaning
of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934) (a

 

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      “Covered Person”) of beneficial ownership (within the meaning of rule
13d-3 promulgated under the Securities Exchange Act of 1934) of 50 percent or
more of the combined voting power of the then outstanding voting securities of
the Company entitled to vote generally in the election of directors (the “Voting
Securities”); provided, however, that for purposes of this subsection (i) of
this Section 2(c) the following acquisitions shall not constitute a Change of
Control: (i) any acquisition by the Company, (ii) any acquisition by any
employee benefit plan (or related trust) sponsored or maintained by the Company
or any Entity controlled by the Company, or (iii) any acquisition by any Entity
pursuant to a transaction which complied with clauses (A), (B) and (C) of
subsection (iii) of this Section 2(c); or

  (ii)   individuals who, as of the date of this Agreement, constitute the Board
(the “Incumbent Board”) cease for any reason to constitute at least a majority
of the Board; provided, however, that any individual becoming a director after
the date of this Agreement whose election, or nomination for election by the
Company’s stockholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors; or     (iii)   the consummation of a reorganization,
merger or consolidation or sale of the Company, or a disposition of at least
50 percent of the assets of the Company including goodwill (a “Business
Combination”), provided, however, that for purposes of this subsection (iii), a
Business Combination will not constitute a change of control if the following
three requirements are satisfied: following such Business Combination, (A) all
or substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Company’s Voting Securities immediately prior to
such Business Combination beneficially own, directly or indirectly, more than
50 percent of the ownership interests of the Entity resulting from such Business
Combination (including, without limitation, an Entity which as a result of such
transaction owns the Company or all or substantially all of the Company’s assets
either directly or through one or more subsidiaries or other affiliated
entities) in substantially the same proportions as their ownership immediately
prior to such Business Combination, (B) no Covered Person (excluding any
employee benefit plan (or related trust) of the Company or such Entity resulting
from such Business Combination) beneficially owns, directly or indirectly, 50
percent or more of, respectively, the ownership interests in the Entity
resulting from such Business Combination, except to the extent that such
ownership existed prior to the Business Combination, and (C) at least a majority
of the members of the board of directors of the Entity resulting

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      from such Business Combination were members of the Incumbent Board at the
time of the execution of the initial agreement, or of the action of the Board,
providing for such Business Combination. For this purpose any individual who
becomes a director after the date of this Agreement, and whose election or
nomination for election by the Company’s stockholders, was approved by a vote of
at least a majority of the directors then comprising the Incumbent Board shall
be considered as though such individual were a member of the Incumbent Board,
but excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of an actual or threatened election contest with
respect to the election or removal of directors.

  (d)   “Code” means the Internal Revenue Code of 1986, as amended.     (e)  
“Disability” means the Executive no longer can perform one or more of the
essential functions of the Executive’s job even with reasonable accommodation
and a physician selected by the Company has confirmed such condition exists and
has reported his findings to the Company in a written notice received by the
Company.     (f)   “Entity” means any corporation, partnership, association,
joint-stock company, limited liability company, trust, unincorporated
organization or other business Entity.     (g)   “Forfeiture Restrictions” means
any prohibitions and restrictions set forth herein with respect to the sale or
other disposition of Stock Units issued to the Executive hereunder and the
obligation to forfeit and surrender such Stock Units to the Company.     (h)  
“Payment Date” means the earliest of (i) March 1, 2016, (ii) six months after
the date the Executive incurs a Section 409A Separation From Service with
respect to the Company, (iii) the date the Company incurs a Section 409A Change
of Control, or (iv) the date of the death of the Executive.     (i)  
“Section 409A” means section 409A of the Code and the rules and regulations
issued thereunder by the Department of Treasury and the Internal Revenue
Service.     (j)   “Section 409A Change of Control” means a change in the
ownership or effective control of the Company or in the ownership of a
substantial portion of the assets of the Company within the meaning of
Section 409A.     (k)   “Section 409A Separation from Service” means a
separation from service from the Company within the meaning of Section 409A.    
(l)   “Stock” means the Company’s common stock, par value $0.01 per share.

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  (m)   “Valuation Date” means the last day immediately preceding the Payment
Date on which sales of the Stock are reported by the principal stock exchange on
which the Stock is then traded.

3.   Transfer Restrictions. The Stock Units granted hereby may not be sold,
assigned, pledged, exchanged, hypothecated or otherwise transferred, encumbered
or disposed of (other than by will or the applicable laws of descent and
distribution). Any such attempted sale, assignment, pledge, exchange,
hypothecation, transfer, encumbrance or disposition in violation of this
Agreement shall be void and the Company shall not be bound thereby.

4.   Vesting. The Stock Units that are granted hereby shall be subject to
Forfeiture Restrictions. The Forfeiture Restrictions shall lapse as to the Stock
Units that are granted hereby in accordance with the provisions of subsections
(a) through (c) of this Section 4.

  (a)   Generally. The Forfeiture Restrictions shall lapse as to the Stock Units
that are granted hereby in accordance with the following schedule provided that
the Executive’s employment with the Company and all of its Affiliates has not
terminated prior to the applicable lapse date:

  (i)   the Forfeiture Restrictions shall lapse as to one-third of the Stock
Units subject to this Agreement after March 2, 2007;     (ii)   the Forfeiture
Restrictions shall lapse as to an additional one-third of the Stock Units
subject to this Agreement after March 2, 2008;     (iii)   the Forfeiture
Restrictions shall lapse as to the remaining one-third of the Stock Units
subject to this Agreement after March 2, 2009.

If the Executive’s employment relationship with the Company and all of its
Affiliates terminates before the applicable lapse date set forth in this
subsection (a), except as otherwise specified in subsections (b) or (c) below,
the Forfeiture Restrictions then applicable to the Stock Units shall not lapse
and all the Stock Units then subject to the Forfeiture Restrictions shall be
forfeited to the Company upon such termination of the Executive’s employment
relationship.

  (b)   Death or Disability. Notwithstanding any provisions of Section 4(a) to
the contrary, in the event the Executive’s employment relationship with the
Company and all of its Affiliates is terminated due to the death or Disability
of the Executive prior to the expiration of the term of this Agreement, the
Forfeiture Restrictions shall lapse as to the Stock Units that are granted
hereby on the date of such termination of the Executive’s employment
relationship due to death or Disability.     (c)   Change of Control.
Notwithstanding any provisions of Section 4(a) to the contrary, in the event the
Executive’s employment relationship with the Company and all of its Affiliates
is terminated within 730 days after or 240 days before a Change of Control, the
Forfeiture Restrictions shall lapse as to the Stock Units

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      that are granted hereby on the date the Executive’s employment
relationship with the Company and all of its Affiliates is terminated.

5.   Time of Payment under the Award. To the extent the Forfeiture Restrictions
lapse with respect to the Stock Units granted hereby on or before the Payment
Date the Company shall pay to the Executive on the Payment Date the amount
payable with respect to the Stock Units for which the Forfeiture Restrictions
have lapsed.

6.   Term. This Agreement and the Executive’s rights hereunder shall terminate
at 5:00 p.m. (Central Time) on March 2, 2016.

7.   Tax Withholding. The Company shall be entitled to deduct from the amounts
payable to the Executive (or other person validly exercising the Award) under
this Agreement and any other compensation payable by the Company to the
Executive any sums required by federal, state or local tax law to be withheld
with respect to any payment made by the Company to the Executive under this
Agreement. The Company shall have no obligation with respect to payment of the
Award until the Company or an Affiliate has received payment sufficient to cover
all minimum tax withholding amounts due with respect to the Award. Neither the
Company nor any Affiliate shall be obligated to advise the Executive of the
existence of the tax or the amount which it will be required to withhold.

8.   Capital Adjustments and Reorganizations.

  (a)   The existence of the Stock Units shall not affect in any way the right
or power of the Company to make or authorize any adjustment, recapitalization,
reorganization or other change in its capital structure or its business, engage
in any merger or consolidation, issue any debt or equity securities, dissolve or
liquidate, or sell, lease, exchange or otherwise dispose of all or any part of
its assets or business, or engage in any other corporate act or proceeding.    
(b)   If the Company shall effect a subdivision or consolidation of the Stock or
other capital readjustment, the payment of a stock dividend with respect to the
Stock, or other increase or reduction of the number of shares of the Stock
outstanding, without receiving compensation therefor in money, services or
property, then the number of Stock Units awarded under this Agreement shall be
appropriately adjusted in the same manner as if the Executive was the holder of
an equivalent number of shares of the Stock immediately prior to the event
requiring the adjustment.

9.   Employment Relationship. For purposes of this Agreement, the Executive
shall be considered to be in the employment of the Company as long as the
Executive has an employment relationship with the Company. The Board shall
determine any questions as to whether and when there has been a termination of
such employment relationship, and the cause of such termination, under the Plan
and the Board’s determination shall be final and binding on all persons.

10.   Not an Employment Agreement. This Agreement is not an employment
agreement, and no provision of this Agreement shall be construed or interpreted
to create an employment

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    relationship between the Executive and the Company or any of its Affiliates
or guarantee the right to remain employed by the Company or any of its
Affiliates for any specified term.

11.   Notices. Any notice, instruction, authorization, request or demand
required hereunder shall be in writing, and shall be delivered either by
personal delivery, by telegram, telex, telecopy or similar facsimile means, by
certified or registered mail, return receipt requested, or by courier or
delivery service, addressed to the Company at the Company’s principal business
office address and to the Executive at the Executive’s residential address
indicated beneath the Executive’s signature on the execution page of this
Agreement, or at such other address and number as a party shall have previously
designated by written notice given to the other party in the manner hereinabove
set forth. Notices shall be deemed given when received, if sent by facsimile
means (confirmation of such receipt by confirmed facsimile transmission being
deemed receipt of communications sent by facsimile means); and when delivered
(or upon the date of attempted delivery where delivery is refused), if
hand-delivered, sent by express courier or delivery service, or sent by
certified or registered mail, return receipt requested.

12.   Amendment and Waiver. Except as otherwise provided herein, this Agreement
may be amended, modified or superseded only by written instrument executed by
the Company and the Executive. Only a written instrument executed and delivered
by the party waiving compliance hereof shall waive any of the terms or
conditions of this Agreement. Any waiver granted by the Company shall be
effective only if executed and delivered by a duly authorized executive officer
of the Company other than the Executive. The failure of any party at any time or
times to require performance of any provisions hereof shall in no manner effect
the right to enforce the same. No waiver by any party of any term or condition,
or the breach of any term or condition contained in this Agreement, in one or
more instances, shall be construed as a continuing waiver of any such condition
or breach, a waiver of any other condition, or the breach of any other term or
condition.

13.   Governing Law and Severability. This Agreement shall be governed by the
laws of the State of Texas without regard to its conflicts of law provisions.
The invalidity of any provision of this Agreement shall not affect any other
provision of this Agreement, which shall remain in full force and effect.

14.   Successors and Assigns. Subject to the limitations which this Agreement
imposes upon the transferability of the Stock Units granted hereby, this
Agreement shall bind, be enforceable by and inure to the benefit of the Company
and its successors and assigns, and to the Executive, the Executive’s permitted
assigns and upon the Executive’s death, the Executive’s estate and beneficiaries
thereof (whether by will or the laws of descent and distribution), executors,
administrators, agents, legal and personal representatives.

15.   Counterparts. This Agreement may be executed in two or more counterparts,
each of which shall be an original for all purposes but all of which taken
together shall constitute but one and the same instrument.

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In Witness Whereof, the Company has caused this Agreement to be duly executed by
an officer thereunto duly authorized, and the Executive has executed this
Agreement, all as of the date first above written.

            HARVEST NATURAL RESOURCES, INC.
      By:         Title:        

            EXECUTIVE:
            James A. Edmiston III        Address:                          

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