Exhibit 10.3
HARVEST NATURAL RESOURCES
Employee Restricted Stock Agreement
          Agreement (the “Agreement”) made at Houston, Texas, USA, as of May 7,
2007, by and between HARVEST NATURAL RESOURCES, INC. (the “Company”) and Keith
L. Head (the “Grantee”).
     1.  Definitions:

  (a)   “AWARD” means, individually or collectively, a grant under this
Agreement of Restricted Stock, subject to the terms and provisions of this
Agreement.     (b)   “BOARD” OR “BOARD OF DIRECTORS” shall mean the Board of
Directors of the Company.     (c)   “CODE” shall mean the Internal Revenue Code
of 1986, as amended from time to time.     (d)   “COMMITTEE” shall mean the
Human Resources Committee of the Board of Directors, or, if there is no Human
Resources Committee, the committee designated by the non-employee members of the
Board of Directors to administer the Company’s long-term incentive plans.    
(e)   “EMPLOYEE” shall mean any person employed by the Company or a Subsidiary
on a full-time salaried basis. The term “Employee” shall not include a person
hired as an independent contractor, leased employee, consultant or a person
otherwise designated by the Company at the time of hire as not eligible to
participate in this Agreement.     (f)   “RESTRICTED STOCK” shall mean Stock
which is issued pursuant to Paragraph 2. of this Agreement.     (g)   “STOCK”
shall mean the common stock of the Company.     (h)   “SUBSIDIARY” shall mean
any corporation or similar legal entity (other than the Company) in which the
Company or a Subsidiary of the Company owns fifty percent (50%) or more of the
total combined voting power of all classes of stock, or such lesser amount of
ownership determined by the Committee.     (i)   “TOTAL DISABILITY” and “TOTALLY
DISABLED” shall normally have such meaning as that defined under the Company’s
group insurance plan covering total disability and determinations of Total
Disability normally shall be made by the insurance company providing such
coverage on the date on which the Employee, whether or not eligible for benefits
under such insurance plan, becomes Totally Disabled. In the absence of such
insurance plan or in the event the individual is a Director or Consultant, the
Committee shall make such determination.

 

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     It is hereby agreed as follows:

  2.   Grant of Stock; Consideration. The Company hereby grants (the “Grant”)
the Grantee 20,000 shares of Stock of the Company’s Common Stock, par value
$0.01 per share (the “Restricted Shares”). The Grant granted hereunder is not
intended to constitute “performance based compensation” as that term is used in
Section 162(m) of the Code.

The Grantee shall be required to pay no consideration for the Grant, except for
his agreement to serve as an employee of the Company or any Subsidiary and other
agreements set forth herein.

  3.   Incorporation of Agreement. Notwithstanding anything to the contrary in
this Agreement, if and for so long as Grantee is subject to an Employment
Agreement with the Company, then the terms of the Employment Agreement will
govern the early expiration of the Grant including, without limitation, vesting
and expiration dates. In the event of any conflict between the Employment
Agreement and this Agreement, the terms of the Employment Agreement shall
govern.     4.   Restriction Period. Subject to all of the terms and conditions
of this Agreement, including the lapse of restrictions in the event of a Change
of Control, the period during which the restrictions set forth in this Agreement
shall apply to the Restricted Shares shall commence on May 7, 2007 and end on
May 6, 2010 (the “Restriction Period”). At the end of the Restriction Period,
all restrictions under this Agreement applicable to the Restricted Stock shall
lapse, and, subject to paragraph 7 of this Agreement, a stock certificate for
the number of shares of Common Stock equal to the number of Restricted Shares
shall be delivered to the Grantee, the Grantee’s beneficiary or the Grantee’s
estate, whichever is applicable at the time of delivery.     5.   Restrictions.
The Restricted Stock will be represented by a Stock certificate registered in
the name of the Grantee. Such certificate, accompanied by a separate
duly-endorsed stock power, shall be deposited with the Company. The Grantee
shall be entitled to receive dividends during the Restriction Period and shall
have the right to vote such Restricted Stock and all other stockholder’s rights,
with the exception that (i) the Grantee will not be entitled to delivery of the
Stock certificate during the Restriction Period, (ii) the Company will retain
custody of the Restricted Stock during the Restriction Period, (iii) none of the
Restricted Stock may be sold, transferred, assigned, pledged or otherwise
encumbered or disposed of during the Restriction Period and (iv) all of the
Restricted Stock shall be forfeited and all of the Grantee’s rights to such
Restricted Stock shall terminate without further obligation on the part of the
Company unless the Grantee remains in the continuous employ of the Company or a
Subsidiary during the Restriction Period.

If, prior to the date on which the Restriction Period ends and applicable
restrictions lapse, the Grantee’s employment with the Company is terminated for
any reason except Total Disability, death, and layoff with benefits under a
Company severance plan, any

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Restricted Stock shall be canceled and all rights there under shall cease. If
reason for termination is Total Disability, death, or layoff with severance
benefits, the Restriction Period will continue and applicable restrictions will
lapse as if the Employee had continued employment with the Company.

  6.   Non-Transferability. The Grant shall not be transferable to any third
party by the Grantee otherwise than by will or the laws of descent and
distribution.     7.   Compliance with Laws and Regulations. The obligation of
the Company to deliver Restricted Shares is conditioned upon compliance by the
Grantee and by the Company with all applicable laws and regulations, including
regulations of federal and state agencies. If requested by the Company, the
Grantee shall provide to the Company, as a condition to the delivery of any
certificates representing Restricted Shares, appropriate evidence, satisfactory
in form and substance to the Company, that he is acquiring the Restricted Shares
for investment and not with a view to the distribution of the Restricted Shares
or any interest in the Restricted Shares, and a representation to the effect
that the Grantee shall make no sale or other disposition of the Restricted
Shares unless (i) the Company shall have received an opinion of counsel
satisfactory to it in form and substance that such sale or other disposition may
be made without compliance with registration or other applicable requirements of
federal and state laws and regulations, and (ii) all steps required to comply
with such laws and regulations in connection with the sale or other disposition
of the Restricted Shares have been taken and all necessary approvals have been
received. The certificates representing the Restricted Shares may bear an
appropriate legend giving notice that the Shares have not been registered under
the Securities Act of 1933 (the “Act”) and are “Restricted Securities” as that
term is defined in Rule 144 under the Act and, further, giving notice of the
foregoing restrictions on transfer of the Restricted Shares, and any other
restrictive legend deemed necessary or appropriate by the Committee.     8.  
Tax Withholding. Upon lapse of the restrictions applicable to the Restricted
Stock (or if you make the election under Section 83 (b) of the Code to be taxed
immediately upon the award of such shares), you must arrange for the payment to
the Company of applicable withholding taxes promptly after you have been
notified of the amount due by the Company. If no election is made under
Section 83 (b) of the Code, you must pay such withholding taxes or have
Restricted Stock withheld to pay such withholding taxes upon the lapse of
restrictions applicable to the Restricted Stock.     9.   Administration.

  a.   The Committee. This Agreement shall be administered by the Committee.
Subject to such approvals and other authority as the Board may reserve to itself
from time to time, the Committee shall, consistent with the provisions of the
Agreement, from time to time establish such rules and regulations and appoint
such agents as it deems appropriate for the proper administration of this
Agreement, and make such determinations under, and such interpretations of, and

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      take such steps in connection with this Agreement as it deems necessary or
advisable.     b.   Authority of the Committee. Subject to the provisions
herein, the Committee shall have the full power to construe and interpret this
Agreement and to amend the terms and conditions of this Agreement to the extent
such terms and conditions are within the sole discretion of the Committee;
provided, however, that no amendments shall, without the consent of the Grantee,
alter or impact any rights or obligations under this Agreement.     c.  
Decisions Binding. All determinations and decisions of the Committee as to any
disputed question arising under this Agreement, including questions of
construction and interpretation, shall be final, binding and conclusive upon all
parties. The Grantee hereby agrees to be bound by all decisions and
determinations of the Committee.

  10.   Adjustment Upon Changes In Stock. The number of shares granted as
Restricted Stock, shall be adjusted proportionately, and any other appropriate
adjustments shall be made, for any increase or decrease in the total number of
issued and outstanding Stock (or change in kind) resulting from any change in
the Stock through a merger, consolidation, reorganization, recapitalization,
subdivision or consolidation of shares or other capital adjustment or the
payment of a stock dividend or other increase or decrease (or change in kind) in
such shares. In the event of any such adjustment, fractional shares shall be
eliminated.     11.   Change in Control. Notwithstanding anything to the
contrary in this Agreement, in the event of a Change in Control, during the
Restriction Period, all restrictions imposed hereunder on such Restricted Stock
shall lapse effective as of the date of the Change in Control.

For purposes of this Agreement, a “Change in Control” means the occurrence of
any of the following:

  a.   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 “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 Paragraph 11
the following acquisitions shall not constitute a Change in 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 (i), (ii) and (iii) of subsection (c) of
this Paragraph 11; or

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  b.   Individuals who, as of the date of this Agreement, constitute the board
of directors of the Company (the “Incumbent Board”) cease for any reason to
constitute at least a majority of the board of directors of the Company;
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     c.   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 (c), a
Business Combination will not constitute a change in control if the following
three requirements are satisfied:

following such Business Combination, (i) 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, (ii) 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 (iii) at least a majority of the members of the board
of directors of the entity resulting 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 of directors of the Company, providing for such
Business Combination. For this purpose any individual who becomes a director
after the date of the Plan, 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

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an actual or threatened election contest with respect to the election or removal
of directors.

  12.   Transfer of Employment. Transfer of employment between the Company and a
Subsidiary shall not constitute termination of employment or service for the
purpose of this Agreement. Whether any leave of absence shall constitute
termination of employment for the purposes of this Agreement shall be determined
in each case by the Committee.     13.   Governing Law. This Agreement shall be
governed and construed in accordance with the laws of Texas, except to the
extent that federal law applies.     14.   Grantee Bound by this Agreement. The
Grantee hereby acknowledges receipt of this Agreement and agrees to be bound by
all the terms and provisions thereof (as presently in effect or hereafter
amended), and by all decisions and determinations of the Committee.     15.  
Binding Effect: Integration: No Other Rights Created. This Agreement shall be
binding upon the heirs, executors, administrators and successors of the parties.
This Agreement constitutes the entire agreement between the parties with respect
to the Grant, and supersedes any prior agreements or documents with respect to
the Grant. No amendment, alteration, suspension, discontinuation or termination
of this Agreement which may impose any additional obligation upon the Company or
impair the rights of the Grantee with respect to the Grant shall be valid unless
in each instance such amendment, alteration, suspension, discontinuation or
termination is expressed in a written instrument duly executed in the name and
on behalf of the Company and by the Grantee. Neither this Agreement nor the
grant of the Grant shall constitute an employment agreement, nor shall either
confer upon the Grantee any right with respect to his continued status with the
Company.

(Signature page follows)

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            HARVEST NATURAL RESOURCES, INC.
      BY:   /s/ James A. Edmiston         James A. Edmiston          TITLE:
President and CEO        GRANTEE:
      /s/ Keith L. Head       Keith L. Head        DATE: June 6, 2007     

ELECTION (FOR U.S. CITIZENS ONLY):
As permitted under Section 83 (b) of the Internal Revenue Code of 1986, as
amended, I intend to make the following irrevocable election:

o    I intend to make the election permitted under Section 83 (b) of the
Internal Revenue Code of 1986, as amended, to be taxed immediately on the award
of the Restricted Shares. I understand the consequences and procedures for
making this election, and I understand that it is my responsibility to file the
election with the Internal Revenue Service.   þ    I do not intend to make the
election permitted under Section 83 (b) of the Internal Revenue Code of 1986, as
amended, and will be taxed upon the lapse of restrictions applicable to the
Restricted Shares.

                  /s/ Keith L. Head       Keith L. Head   

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