Exhibit 10.3
EMPLOYEE STOCK OPTION AGREEMENT
     THIS EMPLOYEE STOCK OPTION AGREEMENT (the “Agreement”) is made and entered
into effective the      day of      , 200   , by and between PETROHAWK ENERGY
CORPORATION, a Delaware corporation (the “Company”), and           (“Employee”).
     WHEREAS, to carry out the purposes of the Company’s Second Amended and
Restated 2004 Employee Incentive Plan (the “Plan”), the Company desires to
afford Employee the opportunity to purchase shares of the common stock of the
Company (“Stock”).
     NOW THEREFORE, in consideration of the mutual agreements and other matters
set forth herein and in the Plan, the Company and Employee hereby agree as
follows:
     1. Grant of Option. The Company hereby grants to Employee the right and
option (“Option”) to purchase all or any part of an aggregate of      shares of
Stock, on the terms and conditions set forth herein and in the Plan, which Plan
is incorporated herein by reference. This Option is intended to constitute an
Incentive Stock Option, within the meaning of 422(b) of the Internal Revenue
Code of 1986, as amended (the “Code”); except that to the extent that the
aggregate Fair Market Value of Stock (determined at the time the Option is
granted) with respect to which Incentive Stock Options are exercisable for the
first time by Employee during any calendar year under all incentive stock option
plans of the Company and its parent and subsidiary corporations exceeds One
Hundred Thousand Dollars ($100,000), such excess Incentive Stock Options shall
be treated as Non-Statutory Stock Options.
     2. Purchase Price. The purchase price of Stock purchased pursuant to the
exercise of this Option shall be $     per share, which has been determined to
be the Fair Market Value of the Stock. For all purposes of this Agreement, Fair
Market Value of Stock shall be determined in accordance with the provisions of
the Plan.
     3. Vesting of Option. The Option granted hereunder shall vest as follows:

  (a)   the option to purchase           shares of Stock is vested and
exercisable as of           , 200   ;     (b)   the option to purchase
          shares of Stock is vested and exercisable as of           , 200   ;  
  (c)   the option to purchase           shares of Stock is vested and
exercisable as of           , 200  .

     Subject to the earlier expiration of this Option as herein provided, this
Option may be exercised by written notice to the Company at is principal
executive office addressed to the attention of its chief executive officer. This
Option must be exercised on or before January 11, 2016 or it will expire
worthless.

 

--------------------------------------------------------------------------------

 

     The shares of Stock that are the subject of the Option are shares of Stock
as presently constituted, but if, and whenever, prior to the expiration of an
Option theretofore granted, the Company shall effect a subdivision or
consolidation of shares of Stock or the payment of a stock dividend on Stock
without receipt of consideration by the Company, the number of shares of Stock
with respect to which such Option may thereafter be exercised (a) in the event
of an increase in the number of outstanding shares of Stock shall be
proportionately increased, and the purchase price per share shall be
proportionately reduced, and (b) in the event of a reduction in the number of
outstanding shares of Stock shall be proportionately reduced, and the purchase
price per share shall be proportionately increased.
     If the Company recapitalizes and/or reclassifies its capital stock, the
number and class of shares of Stock covered by an Option theretofore granted
shall be adjusted as provided in the Plan.
     4. Transferability: This Option is not transferable or assignable other
than by will or the laws of descent and distribution or pursuant to a qualified
domestic relations order (as defined by Section 414(p) of the Code). If an
Incentive Stock Option is transferred pursuant to a qualified domestic relations
order, the Option shall cease to qualify as an Incentive Stock option as of the
date of such transfer. The Committee (defined hereafter) may authorize the
transfer of all or a portion of the Non-Statutory Stock Options subject to the
terms of the Plan. The Non-Statutory Stock Option shall be exercisable by the
transferee only to the extent, and for the periods, specified in paragraphs 3
and 5 of this Agreement.
     No transfer by will, trust, or by the laws of descent and distribution
shall be effective to bind the Company unless the Compensation Committee of the
board of directors of the Company or other such committee as the Board shall
appoint to administer the Plan as permitted by the Plan (collectively herein the
“Committee”) has been furnished with a copy of the deceased Employee’s
enforceable will, trust or such other evidence as the Committee deems necessary
to establish the validity of the transfer. Any attempted transfer in violation
of this provision shall be void and ineffective.
     5. Exercise of Option. This Option may be exercised only by Employee during
Employee’s lifetime while Employee remains an employee of the Company and will
terminate and cease to be exercisable upon Employee’s termination of employment
with the Company for any reason, except that:

  (a)   If Employee’s employment with the Company terminates by reason of
disability within the meaning of section 22(e)(3) of the Code, this Option may
be exercised in full (whether or not the option is fully vested) by Employee (or
Employee’s estate or the person who acquires this Option by will or the laws of
descent and distribution or otherwise by reason of death of Employee) but only
within such period of time ending on the earlier of (i) the date that is one
(1) year following

2

--------------------------------------------------------------------------------

 

      such termination or (ii) the expiration of the term of the Option as set
forth in the Agreement.     (b)   If Employee dies while in employ of the
Company, Employee’s estate, or the person who acquires this Option by will or
the laws of descent and distribution or otherwise by reason of the death of
Employee, may exercise Employee’s Option in full (whether or not the Option is
fully vested) but only within such period of time ending on the earlier of
(i) the date that is one (1) year following Employee’s death or (ii) the
expiration of the term of the Option as set forth in the Agreement.     (c)   If
Employee is terminated without Cause, Employee may exercise Employee’s Option
but only within such period of time ending on the earlier of (i) the date that
is three months following the termination of such person’s employment or
(ii) the expiration of the term of the Option as set forth in the Agreement. For
purposes of this Agreement, “Cause” shall mean Employee’s gross negligence or
willful misconduct in performance of the duties of Employee’s employment, or
Employee’s final conviction of a felony or of a misdemeanor involving moral
turpitude.     (d)   If Employee voluntarily terminates employment with the
Company, Employee may exercise Employee’s Option on the earlier of (i) the date
that is three months following termination of such person’s employment or
(ii) the expiration of the term of the Option as set forth in the Agreement, IF
AND ONLY IF, the Company provides written consent to Employee providing that
Employee may exercise the Option during such period.

     The purchase price upon exercise of any Option shall be payable to the
Company in full either: (a) in cash or its equivalent, or (b) subject to prior
approval by the Committee in its discretion, by tendering previously acquired
shares of Stock having an aggregate Fair Market Value at the time of exercise
equal to the total purchase price (provided that the shares of Stock tendered
have been held by Employee for at least six (6) months prior to their tender to
satisfy the option price), or (c) subject to prior approval by the Committee in
its discretion, by withholding shares of Stock which otherwise would be acquired
on exercise having an aggregate Fair Market Value at the time of exercise equal
to the total purchase price, or (d) subject to prior approval by the Committee
in its discretion, by a combination of (a), (b), and (c) above. Any payment in
shares of Stock shall be effected as provided for in the Plan. The Committee, in
its discretion, also may allow the purchase price to be paid with such other
consideration as shall constitute lawful consideration for the issuance of
shares of Stock (including, without limitation, effecting a “cashless exercise,”
as defined in the Plan, with a broker of the Option), subject to applicable
securities law restrictions and tax withholdings, or by any other means which
the Committee determines to be consistent with the Plan’s purpose and applicable
law.
     As soon as practicable after receipt of a written notification of exercise
and full payment, the Company shall deliver, or cause to be delivered, to or on
behalf of Employee, in the name of

3

--------------------------------------------------------------------------------

 

Employee or other appropriate recipient, share certificates for the number of
shares of Stock purchased under the Option. Unless and until such certificates
have been issued by the Company to Employee, Employee (or other person permitted
to exercise this Option in the event of Employee’s death) shall not be or have
any rights or privileges of a stockholder of the Company with respect to the
shares acquirable upon an exercise of this Option.
     6. Withholding of Tax. To the extent that the exercise of this Option or
the disposition of shares of Stock acquired by exercise of this Option results
in compensation income to Employee for federal or state income tax purposes,
Employee shall deliver to the Company at the time of such exercise or
disposition such amount of money or shares of Stock as the Company may require
to meet its obligation under applicable tax laws or regulations, and, if
Employee fails to do so, the Company is authorized to withhold from any cash or
Stock remuneration then or thereafter payable to Employee any tax required to be
withheld by reason of such resulting compensation income. Upon an exercise of
this Option, the Company is further authorized in its discretion to satisfy any
such withholding requirement out of any cash or shares of Stock distributable to
Employee upon such exercise.
     Except as may otherwise be permitted by the Code, in the event of a
permitted transfer of a Non-Statutory Stock Option hereunder, Employee shall
remain subject to withholding taxes upon exercise. In addition, the Company
shall have no obligation to provide any notices to the transferee including, for
example, notice of the termination of a stock option following Employee’s
termination of employment.
     7. Securities Laws. Employee agrees that the shares of Stock which Employee
may acquire by exercising this Option will not be sold or otherwise disposed of
in any manner which would constitute a violation of any applicable securities
laws, whether federal or state. Employee also agrees (i) that the certificates
representing the shares of Stock purchased under this Option may bear such
legend or legends as the Committee deems appropriate in order to assure
compliance with applicable securities laws, and (ii) that the Company may refuse
to register the transfer of such shares of Stock purchased under this Option on
the stock transfer records of the Company if such proposed transfer would, in
the opinion of counsel satisfactory to the Company, constitute a violation of
any applicable securities laws and (iii) that the Company may give related
instructions to its transfer agent, if any, to stop registration of the transfer
of the shares of Stock purchased under this Option.
     8. Employment Relationship. For the purposes of this Agreement, Employee
shall be considered to be in employment of the Company as long as Employee
remains an employee of either the Company or a parent or subsidiary corporation
(as defined in Section 424 of the Code) of the Company, or a corporation or a
parent or subsidiary of such corporation assuming or substituting a new option
for this Option. Nothing contained in this Agreement shall confer upon Employee
the right to continue in the employ of the Company or its parent or subsidiary
or any other corporation affiliated with the Company, or interfere in any way
with the rights of the Company or its parent or subsidiaries or any other
corporation affiliated with the Company to terminate Employee’s employment. Any
question as to whether and when there has been a

4

--------------------------------------------------------------------------------

 

termination of such employment, and the cause for such termination, shall be
determined by the Committee and its determination shall be final.
     9. Representations and Warranties of Employee. The Employee represents and
warrants to the Company as follows:

  (a)   The Employee has received a copy of the Plan and has read and
understands the terms of the Plan and this Agreement, and agrees to be bound by
their terms and conditions. The Employee acknowledges that there may be adverse
tax consequences related to the Options and their vesting and exercise, and that
Employee should consult a tax advisor prior to such time.     (b)   The Employee
agrees to sign such additional documentation as may reasonably required from
time to time by the Company in connection with this Agreement.

     10. Binding Effect. This Agreement shall be binding upon and inure to the
benefit of any successors to the Company and all persons lawfully claiming under
Employee.
     11. Governing Laws. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware.
     12. Modification. This Agreement may not be modified except in writing
signed by the parties hereto or their respective successors and permitted
assigns.
     13. Headings. The headings of paragraphs in this Agreement are for
convenience of reference only, do not constitute a part of this Agreement, and
shall not be deemed to limit or alter any of the provisions of this Agreement.
     14. Defined Terms. Except as otherwise provided in this Agreement, or
unless the context clearly indicates otherwise, capitalized terms used but not
defined in this Agreement have the definitions as provided in the Plan. In the
event of a conflict or inconsistency between the discretionary terms and
provisions of the Plan and the provisions of this Agreement, this Agreement
shall govern and control.
[remainder of page intentionally left blank]

5

--------------------------------------------------------------------------------

 

     IN WITNESS WHEREOF, the Company has caused this Agreement to be duly
executed, by its officer thereunto duly authorized, and Employee has executed
this Agreement, all as of the day and year first above written.

                  PETROHAWK ENERGY CORPORATION    
 
           
 
  By:        
 
           
 
  Name:        
 
           
 
  Title:        
 
           

             
 
  EMPLOYEE        
 
                     
 
  Printed Name:        
 
           

6