Exhibit 10.7
2000 ISO NO. _________________
CONTINENTAL RESOURCES, INC.
2000 STOCK OPTION PLAN
INCENTIVE STOCK OPTION AGREEMENT
Participant
Name:_________________________ Grant Date:____________________________
Vesting Schedule
Shares Subject to Percent of Stock
Incentive Stock Option: _______ Exercise Dates Option Exercisable
Expiration Date: __________, 2010 _____________, 2001 20%
_____________, 2002 40%
Option Price:__________________ _____________, 2003 60%
_____________, 2004 80%
_____________, 2005 100%
INCENTIVE STOCK OPTION AGREEMENT
UNDER 2000 CONTINENTAL RESOURCES, INC.
STOCK OPTION PLAN
THIS INCENTIVE STOCK OPTION AGREEMENT (the "Option Agreement"), made as of
the grant date set forth on the cover page of this Option Agreement (the "Cover
Page") at Enid, Oklahoma by and between the participant named on the Cover Page
(the "Participant") and CONTINENTAL RESOURCES, INC. (the "Company"):
W I T N E S S E T H:
WHEREAS, the Participant is an employee of the Company or a Subsidiary of
the Company and it is important to the Company that the Participant be
encouraged to remain in the employ of the Company; and
WHEREAS, in recognition of such facts, the Company desires to provide to
the Participant an opportunity to purchase shares of the common stock of the
Company, as hereinafter provided, pursuant to the "Continental Resources, Inc.
2000 Stock Option Plan" (the "Plan"), a copy of which has been provided to the
Participant; and
WHEREAS, any capitalized terms used but not defined herein have the same
meanings given them in the Plan.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set
forth and for good and valuable consideration, the Participant and the Company
hereby agree as follows:
Section 1. Grant of ISO Option. The Company hereby grants to the
Participant an incentive stock option (the "ISO Option") intended to qualify
under Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"),
to purchase all or any part of the number of shares of its common stock, par
value $1.00 (the "Stock") set forth on the Cover Page, under and subject to the
terms and conditions of this Option Agreement and the Plan which is incorporated
herein by reference and made a part hereof for all purposes. The purchase price
for each share to be purchased hereunder shall be the option price set forth on
the Cover Page (the "ISO Price").
Section 2. Times of Exercise of ISO Option. After, and only after, the
conditions of Section 9 hereof have been satisfied and the Company's
shareholders have approved the Plan in accordance with the provisions of Section
1.04 of the Plan, the Participant shall be eligible to exercise the ISO Option
pursuant to the vesting schedule set forth on the Cover Page (the "Vesting
Schedule"). If the Participant's employment with the Company (or with any
Subsidiary) remains full-time and continuous at all times prior to any of the
exercise dates specified on the Cover Page (the "Exercise Dates"), then the
Participant shall be entitled, subject to the applicable provisions of the Plan
and this Option Agreement having been satisfied, to exercise on or after the
applicable Exercise Date, on a cumulative basis, the number of ISO Options
determined by multiplying the aggregate number of shares of Stock subject to the
ISO Option set forth on the Cover Page by the designated percentage set forth on
the Cover Page.
Section 3. Term of ISO Option. Subject to earlier termination as hereafter
provided, the ISO Option shall expire at the close of business on the expiration
date set forth on the Cover Page and may not be exercised after such expiration
date; provided, however, in no event shall the term of the ISO Option be longer
than ten years from the Date of Grant. At all times during the period commencing
with the date the ISO Option is granted to the Participant and ending on the
earlier of the expiration of the ISO Option or the date which is three months
prior to the date the ISO Option is exercised by the Participant, the
Participant must be an employee of either (i) the Company, (ii) a Subsidiary of
the Company, or (iii) a corporation or a parent or a Subsidiary of such
corporation issuing or assuming an ISO Option in a transaction to which Section
424(a) of the Code applies.
Section 4. Nontransferability of ISO Option. Except as otherwise herein
provided, the ISO Option shall not be transferable otherwise than by will or the
laws of descent and distribution, and the ISO Option may be exercised, during
the lifetime of the Participant, only by the Participant. More particularly (but
without limiting the generality of the foregoing), the ISO Option may not be
assigned, transferred (except as provided above), pledged or hypothecated in any
way, shall not be assignable by operation of law and shall not be subject to
execution, attachment, or similar process. Any attempted assignment, transfer,
pledge, hypothecation or other disposition of the ISO Option contrary to the
provisions hereof shall be null and void and without effect.
Section 5. Employment. So long as the Participant shall continue to be a
full-time and continuous employee of the Company or a Subsidiary of the Company,
the ISO Option shall not be affected by any change of duties or position.
Nothing in the Plan or in this Option Agreement shall confer upon the
Participant any right to continue in the employ of the Company or a Subsidiary
of the Company, or interfere in any way with the right of the Company or a
Subsidiary of the Company to terminate the Participant's employment at any time.
Section 6. Special Rules With Respect to ISO Options. With respect to
the ISO Option granted hereunder, the following special rules shall apply:
(a) Annual Limitation on Exercise of ISO Options. Except as provided
in Section 8 herein, in no event during any calendar year will the
aggregate Fair Market Value, determined as of the time the ISO Option is
granted, of the Stock for which the Participant may first have the right to
exercise under the ISO Option and any other "incentive stock options"
granted under all plans qualified under Section 422 of the Code which are
sponsored by the Company or a Subsidiary of the Company exceed $100,000.
(b) Acceleration of Otherwise Unexercisable ISO Options on Death,
Disability or Other Special Circumstances. The Committee, in its sole
discretion, may permit (i) a Participant who terminates employment due to a
Disability, (ii) the personal representative of a deceased Participant, or
(iii) any other Participant who terminates employment upon the occurrence
of special circumstances (as determined by the Committee) to purchase all
or any all or any part of the shares subject to the ISO Option for which
the applicable Exercise Date(s) has not yet occurred on the date of the
Participant's death, termination of his employment due to a Disability, or
as the Committee otherwise so determines. With respect to shares subject to
the ISO Option for which the applicable Exercise Dates have occurred or for
which the Committee has permitted purchase in accordance with the foregoing
provision, the Participant, or the representative of a deceased
Participant, shall automatically have the right to purchase such shares
within three months of such date of termination of employment, one year in
the case of a Participant suffering a Disability or three years in the case
of a deceased Participant.
Section 7. Method of Exercising ISO Option.
(a) Procedures for Exercise. The manner of exercising the ISO Option
herein granted shall be by written notice to the Secretary of the Company
at the time the ISO Option, or part thereof, is to be exercised, and in any
event prior to the expiration of the ISO Option. Such notice shall state
the election to exercise the ISO Option, the number of shares of Stock to
be purchased upon exercise, the form of payment to be used, and shall be
signed by the person so exercising the ISO Option.
(b) Form of Payment. Payment in full for shares of Stock purchased
under this Option Agreement shall accompany the Participant's notice of
exercise, together with payment for any applicable withholding taxes.
Payment shall be made (i) in cash or by check, draft or money order payable
to the order of the Company; (ii) by delivering Stock or other equity
securities of the Company having a Fair Market Value on the date of payment
equal to the amount of the Option Price, but only to the extent such
exercise of an ISO Option would not result in an accounting charge with
respect to the shares used to pay the exercise price unless otherwise
determined by the Committee; or (iii) a combination thereof. In addition to
the foregoing procedure which may be available for the exercise of the ISO
Option, after the date on which the Company's stock is listed on a national
securities exchange or the NASDAQ/National Market System or quoted on the
over-the-counter market by the National Association of Securities Dealers,
the Participant may deliver to the Company a notice of exercise which
includes an irrevocable instruction to the Company to deliver the stock
certificate representing the shares of Stock being purchased, issued in the
name of the Participant, to a broker approved by the Company and authorized
to trade in the common stock of the Company. Upon receipt of such notice,
the Company shall acknowledge receipt of the executed notice of exercise
and forward this notice to the broker. Upon receipt of the copy of the
notice which has been acknowledged by the Company, and without waiting for
issuance of the actual stock certificate with respect to the exercise of
the ISO Option, the broker may sell the Stock or any portion thereof. The
broker shall deliver directly to the Company that portion of the sales
proceeds sufficient to cover the ISO Price and withholding taxes, if any.
For all purposes of effecting the exercise of the ISO Option, the date on
which the Participant gives the notice of exercise to the Company, together
with payment for the shares of Stock being purchased and any applicable
withholding taxes, shall be the "date of exercise." If a notice of exercise
and payment are delivered at different times, the date of exercise shall be
the date the Company first has in its possession both the notice and full
payment as provided herein.
(c) Further Information. In the event the ISO Option is exercised,
pursuant to the foregoing provisions of this Section 7, by any person other
than the Participant due to the death of the Participant, such notice shall
also be accompanied by appropriate proof of the right of such person to
exercise the ISO Option. The notice so required shall be given by personal
delivery to the Secretary of the Company or by registered or certified
mail, addressed to the Company at 302 North Independence, 3rd Floor, Post
Office Box 1032, Enid, Oklahoma 73702, and it shall be deemed to have been
given when it is so personally delivered or when it is deposited in the
United States mail in an envelope addressed to the Company, as aforesaid,
properly stamped for delivery as a registered or certified letter.
Section 8. Acceleration of ISO Option Upon Corporate Event. If the Company
shall, pursuant to action by its Board, at any time propose to dissolve or
liquidate or merge into, consolidate with, or sell or otherwise transfer all or
substantially all of its assets to another corporation and provision is not made
pursuant to the terms of such transaction for the assumption by the surviving,
resulting or acquiring corporation of outstanding ISO Options under this Option
Agreement, or for the substitution of new options therefor, the Committee shall
cause written notice of the proposed transaction to be given to the Participant
not less than forty days prior to the anticipated effective date of the proposed
transaction, and the ISO Option shall become 100% vested and, prior to a date
specified in such notice, which shall be not more than ten days prior to the
anticipated effective date of the proposed transaction, the Participant shall
have the right to exercise the ISO Option to purchase any or all of the Stock
then subject to the ISO Option. The Participant, by so notifying the Company in
writing, may, in exercising the ISO Option, condition such exercise upon, and
provide that such exercise shall become effective at the time of, but
immediately prior to, the consummation of the transaction, in which event the
Participant need not make payment for the Stock to be purchased upon exercise of
the ISO Option until five days after written notice by the Company to the
Participant that the transaction has been consummated. If the transaction is
consummated, the ISO Option, to the extent not previously exercised prior to the
date specified in the foregoing notice, shall terminate on the effective date of
such consummation. If the transaction is abandoned, (i) any Stock not purchased
upon exercise of the ISO Option shall continue to be available for purchase in
accordance with the other provisions of the Plan and this Option Agreement and
(ii) to the extent that any portion of the ISO Option not exercised prior to
such abandonment shall have vested solely by operation of this Section 8, such
vesting shall be deemed annulled, and the Vesting Schedule set forth on the
Cover Page shall be reinstituted, as of the date of such abandonment.
Section 9. Change of Control; Death of Harold Hamm. Promptly following the
first to occur of (a) a Change of Control of the Company, or (b) the death of
Harold Hamm if, immediately prior to the time of his death, the Controlling
Stockholders were the "beneficial owners," as defined in Rule 3d-3 under the
Exchange Act, of more than 35% of the total voting power of the Voting Stock of
the Company, on a fully diluted basis, the Committee shall cause written notice
of such event to be given to each Participant and his or her outstanding Options
shall become 100% vested and thereafter each Participant shall have the right to
exercise all or any of his or her Options to purchase Capital Stock then subject
to his or her Options.
Section 10. Securities Law Restrictions. The ISO Option shall be exercised
and Stock issued only upon compliance with the Securities Act of 1933, as
amended (the "Act"), and any other applicable securities law, or pursuant to an
exemption therefrom. If deemed necessary by the Company to comply with the Act
or any applicable laws or regulations relating to the sale of securities, the
Participant, at the time of exercise and as a condition imposed by the Company,
shall represent, warrant and agree that the shares of Stock subject to the ISO
Option are being purchased for investment and not with any present intention to
resell the same and without a view to distribution, and the Participant shall,
upon the request of the Company, execute and deliver to the Company an agreement
to such effect. The Participant acknowledges that any stock certificate
representing Stock purchased under such circumstances will be issued with a
restricted securities legend.
Section 11. Disqualifying Disposition of Stock. If the Participant shall
make a disposition (within the meaning of Section 424(c) of the Code and the
rules and regulations thereunder) of any shares of Stock covered by the ISO
Option within one year after the date of exercise of the ISO Option or within
two years after the Date of Grant of the ISO Option, then in either such event
the Participant shall promptly notify the Company, by delivery of written notice
to the Secretary of the Company, of (i) the date of such disposition, (ii) the
number of shares of Stock covered by the ISO Option which were disposed of and
(iii) the price at which such shares of Stock were disposed of or the amount of
any other consideration received on such disposition. The Company may make such
provision as it may deem appropriate for the withholding of any required
federal, state or local taxes that it determines it may be obligated to withhold
or pay in connection with the exercise of the ISO Option or the disposition of
shares of Stock acquired upon exercise of the ISO Option.
Section 12. Right of Company to Repurchase Stock.
(a) Right to Repurchase. In the event that the Participant exercises
the ISO Option, any shares of Stock which are issued to the Participant
will be subject to the right of the Company to repurchase (the "Repurchase
Right") the Stock at its Fair Market Value as determined by the Company in
accordance with the terms of this Option Agreement upon such Participant's
termination of employment (whether voluntary or involuntary), and such
right, unless sooner terminated as provided in Subsection (c) below, to
repurchase shall continue for a period of two years following such
termination of employment and upon such terms and conditions as the Company
deems appropriate or will be subject to a Stock Purchase Agreement in the
form which is applicable to the other shareholders of the Company.
(b) Right to Pledge or Transfer Stock. After the exercise of the ISO
Option, the Participant shall not be permitted to (i) pledge all or any
portion of the Stock as security for any debt or obligation of the
Participant or (ii) transfer any Stock without the prior written consent of
the Company (collectively the "Pledge/Transfer Restriction").
Section 13. Obligation of Company to Repurchase Stock.
(a) Obligation to Repurchase. In the event that the Participant
exercises the ISO Option, and if ""the Company is not a "reporting company"
under Section 12 of the Exchange Act, the Participant may elect to require
the Company to purchase from the Participant any and all shares of Stock
which are or have been issued to the Participant upon the exercise of
Options pursuant to this Option Agreement and which are beneficially owned
by the Participant as of the date of such election (the "Election Date"),
upon the following terms:
(i) The purchase price to be paid by the Company for the Stock to
be repurchased pursuant to this Section 13 (the "Affected Stock")
shall be the greater of (A) the Fair Market Value of the Affected
Stock as of the Election Date, and (B) the "Estimated Value of the
Affected Stock" as of the Election Date. As used herein, the term
"Estimated Value of the Affected Stock" shall be determined with
reference to the consolidated balance sheet of the Company as of the
last day of the calendar quarter next preceding the Election Date (the
"Balance Sheet"). The total assets reflected on the Balance Sheet
shall be adjusted to include the present value (discounted at an
annual rate of 10%) of the Company's oil and gas reserves as of the
date of the Balance Sheet, determined in accordance with Section 4-10
of Regulation S-X promulgated by the Securities and Exchange
Commission and Statement of Financial Accounting Standard No. 69
entitled "Disclosures About Oil and Gas Producing Activities"
promulgated by the Financial Accounting Standards Board. The book
value net worth of the Company as of the Balance Sheet date, adjusted
as provided above, shall be divided by the total number of shares of
Stock outstanding as of the Balance Sheet date. The resulting per
share value of the Common Stock shall be multiplied by 66 2/3% and the
resulting sum shall then be multiplied by the number of shares of
Affected Stock and the resulting sum shall be the Estimated Value of
the Affected Stock.
(ii) The purchase price shall be determined by the Company within
forty-five (45) days next following the Election Date. Within five (5)
calendar days next following the determination of the purchase price,
the Company shall provide to the Participant a written report
reflecting the Company's calculation of the purchase price in
reasonable detail. The Participant shall have five (5) calendar days
in which to deliver to the Company its objection to the Company's
determination of the purchase price. Any such objection shall be in
writing and shall state the basis for such objection. If no such
objection is timely made, the Company's determination of the purchase
price shall be final.
In the event of a timely objection, and within ten (10) days
following delivery of such objection to the Company, the determination
of the purchase price shall be submitted to a panel consisting of
three persons, one appointed by the Company, one appointed by the
Participant, and the third selected by the other two. The Company and
the Participant shall provide written notice to each other of the name
of the person appointed to the panel. If either the Company or the
Participant fail to timely appoint its member of the panel, the other
party may do so. The determination of the purchase price by a majority
of the members of the panel shall be final and binding on the parties.
(iii) The closing of the Company's purchase of the Affected Stock
shall occur at the offices of the Company on a business day which is
not more than seven (7) calendar days following the final
determination of the purchase price. At the closing, the Participant
shall deliver the Affected Stock by appropriate assignment against
payment of the purchase price.
Section 14. Restrictive Legend. Each certificate representing the Stock
shall contain on its face, in addition to any other legend, the following legend
in order to give notice of this restriction to any purchaser or transferee of
Stock:
"THE SHARES OF COMMON STOCK OF CONTINENTAL RESOURCES, INC. ("COMPANY")
REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON TRANSFER
AND THE RIGHT OF THE COMPANY TO REPURCHASE THE STOCK IN ACCORDANCE WITH
THE TERMS OF THAT CERTAIN INCENTIVE STOCK OPTION AGREEMENT
("AGREEMENT") DATED ________________, 2___ WHICH RELATES TO THE
CONTINENTAL RESOURCES, INC. 2000 STOCK OPTION PLAN. CERTAIN TRANSFERS
OF THE COMPANY STOCK MAY BE INVALIDATED IF SUCH TRANSFERS ARE NOT MADE
IN ACCORDANCE WITH THE TERMS OF THE AGREEMENT. ANY PURCHASER OR
TRANSFEREE OF THE SHARES OF COMPANY COMMON STOCK REPRESENTED BY THIS
CERTIFICATE SHOULD OBTAIN A COPY OF THE AGREEMENT AND INSURE THAT THE
PROPOSED PURCHASE OR TRANSFER DOES NOT VIOLATE THE AGREEMENT."
Section 15. Notices. All notices or other communications relating to the
Plan and this Option Agreement as it relates to the Participant shall be in
writing and shall be delivered personally or mailed (U.S. Mail) by the Company
to the Participant at the then current address as maintained by the Company or
such other address as the Participant may advise the Company in writing.
IN WITNESS WHEREOF, the parties have executed this Incentive Stock Option
Agreement as of the day and year first above written.
CONTINENTAL RESOURCES, INC., an Oklahoma
corporation
By
"COMPANY"
"PARTICIPANT"