Exhibit 10.7
QUEST RESOURCE CORPORATION
2005 OMNIBUS STOCK AWARD PLAN
FORM OF NONQUALIFIED STOCK OPTION AGREEMENT
To:                                          (“you” or the “Grantee”)
NOTICE OF GRANT:
          Quest Resource Corporation (the “Company”), hereby grants you an
option (the “Option”) to purchase common shares, $0.01 par value per share, of
Quest Resource Corporation (“Shares”), subject to the terms and conditions of
the Quest Resource Corporation 2005 Omnibus Stock Award Plan, as amended and
restated (the “Plan”), and the Option Award Agreement between you and the
Company, attached as Exhibit A, as follows:

         
 
       
Grant Date:
       
 
       
 
       
Total Number of Shares Subject to Option
       
 
       
 
       
Option Price per Share ($):
  $                        
 
       
Expiration Date:
       
 
       

          In order to fully understand your rights under the Plan (a copy of
which is attached) and the Option Award Agreement, attached as Exhibit A, you
are encouraged to read the Plan and this document carefully. By accepting this
Option, you are also agreeing to be bound by Exhibit A. Please refer to the Plan
document for the definition of capitalized terms used in this Agreement.

                  QUEST RESOURCE CORPORATION    
 
           
 
  By:        
 
         
 
           
 
           
 
           
 
           

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EXHIBIT A
AGREEMENT:
     In consideration of the mutual promises and covenants contained herein and
other good and valuable consideration paid by the Grantee to the Company, the
Grantee and the Company agree as follows:
     Section 1. Incorporation of Plan
     All provisions of this Award Agreement and the rights of the Grantee
hereunder are subject in all respects to the provisions of the Plan and the
powers of the Board therein provided. Capitalized terms used in this Award
Agreement but not defined shall have the meaning set forth in the Plan.
     Section 2. Grant of Nonqualified Stock Option
     As of the Grant Date identified above, the Company grants to the Grantee,
subject to the terms and conditions set forth herein and in the Plan, the right,
privilege, and option (the “Option”) to purchase that number of Shares
identified above opposite the heading “Total Number of Shares Subject to
Option,” at the per Share price specified above opposite the heading “Option
Price per Share.”
     Section 3. Exercisability of Option

  (a)   Except to the extent the Option is permitted to be transferred to a
person set forth in Section 8(b) of this Award Agreement, during the Grantee’s
lifetime, this Option may be exercised only by the Grantee. As of the dates
specified below, this Option, except as specifically provided elsewhere under
the terms of the Plan or this Award Agreement, shall become exercisable with
respect to that number of shares under the column stated “Number of Shares
Subject to Option Exercisable,” provided that the Grantee is an employee, and at
all times since the Grant Date has been an employee, of the Company on the
specified date:

                              Date                Number of Shares Subject to
Option Exercisable

      [Insert Applicable Vesting Schedule]

  (b)   In addition to the vesting conditions set forth above in Section (a),
the Option shall become fully exercisable upon the Grantee’s death or Disability
while the Grantee is serving as a employee of the Company; provided, however, if
the Grantee dies or becomes Disabled following the Grantee’s Termination of
Affiliation, the exercisability of the Option shall not accelerate due to such
death or Disability and shall be exercisable only to the extent it was
exercisable on the date of the Grantee’s Termination of Affiliation.

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     Section 4. Method of Exercise
     Provided this Option has not expired, been terminated or cancelled in
accordance with the terms of the Plan, that number of shares subject to the
Option which are exercisable in accordance with Section 3 above may be
exercised, in whole or in part and from time to time, by delivery to the Company
or its designee a written notice to the Company or its designee which shall:

  (a)   set forth the number of Shares with respect to which the Option is to be
exercised (such number must be in a minimum amount of 50 Shares);     (b)   if
the person exercising this Option is not the Grantee, be accompanied by
satisfactory evidence of such person’s right to exercise this Option; and    
(c)   be accompanied by payment in full of the Option Price in the form of cash,
personal or certified bank check or electronic wire transfer payable to the
order of the Company or any other means allowable under the Plan which the
Company in its sole discretion determines will provide legal consideration for
the Shares.

     Section 5. Expiration of Option
     Unless terminated earlier in accordance with the terms of this Award
Agreement or the Plan, the Option granted herein shall expire at 5:00 P.M., U.S.
Central Time, on the tenth (10th) Anniversary of the Grant Date (the “Expiration
Date”). In the event the Expiration Date is a Saturday, Sunday or any other day
which is a holiday of the United States Federal Government (a “Non-Business
Day”), then the Option granted herein shall expire, unless earlier terminated in
a accordance with the terms of this Award Agreement or the Plan, at 5:00 P.M.,
U.S. Central Time, on the first day that is not a Non-Business Day (a “Business
Day”) following such Expiration Date.
     Section 6. Effect of Termination of Affiliation
     If the Grantee has a Termination of Affiliation for any reason, including
termination by the Company with or without Cause, voluntary resignation, death,
or Disability, the effect of such Termination of Affiliation on all or any
portion of this Option is as provided below.

  (a)   If the Grantee has a Termination of Affiliation within the Option Term
due to the Grantee’s ceasing to be employed by the Company, the Option, to the
extent exercisable, may be exercised by the Grantee at any time prior to 5:00
P.M., U.S. Central Time, on the ninetieth (90th) calendar day following the
Grantee’s Termination of Affiliation (but in no event later than the Expiration
Date). In the event that such ninetieth (90th) day shall not be a Business Day,
then the Option shall expire at 5:00 P.M., U.S. Central Time, on the first (1st)
Business Day immediately following such ninetieth (90th) day. In any such case,
the Option may be exercised only as to the Shares as to which the Option had
become exercisable on or before the date of the Termination of Affiliation.    
(b)   If the Grantee dies or becomes Disabled within the Option Term (A) while
he or she is an employee of the Company, or (B) within the ninety-day period
referred to in

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      clause (a) above, the Option may be exercised by the Grantee or the
Grantee’s Beneficiaries entitled to do so at any time prior to 5:00 P.M., U.S.
Central Time, on the 365th calendar day following the date of the Grantee’s
death or Disability (but in no event later than the Expiration Date). In the
event that the 365th day is not a Business Day, then the Option shall expire at
5:00 P.M., U.S. Central Time, on the first (1st) Business Day immediately
following such 365th day.

     Section 7. Investment Intent
     The Grantee agrees that the Shares acquired on exercise of this Option
shall be acquired for his/her own account for investment only and not with a
view to, or for resale in connection with, any distribution or public offering
thereof within the meaning of the Securities Act of 1933 (the “1933 Act”) or
other applicable securities laws. If the Board so determines, any share
certificates issued upon exercise of this Option shall bear a legend to the
effect that the Shares have been so acquired. The Company may, but in no event
shall be required to, bear any expenses of complying with the 1933 Act, other
applicable securities laws or the rules and regulations of any national
securities exchange or other regulatory authority in connection with the
registration, qualification, or transfer, as the case may be, of this Option or
any Shares acquired upon the exercise thereof. The foregoing restrictions on the
transfer of the Shares shall be inoperative if (a) the Company previously shall
have been furnished with an opinion of counsel, satisfactory to it, to the
effect that such transfer will not involve any violation of the 1933 Act and
other applicable securities laws or (b) the Shares shall have been duly
registered in compliance with the 1933 Act and other applicable state or federal
securities laws. If this Option, or the Shares subject to this Option, are so
registered under the 1933 Act, the Grantee agrees that he will not make a public
offering of the said Shares except on a national securities exchange on which
the common shares of the Company are then listed.
     Section 8. Nontransferability of Option

  (a)   Except as provided above in Section 6(b) (in the event of the Grantee’s
death) or below in Section 8(b), or as otherwise may be provided in the Plan, no
portion of the Option granted hereunder may be sold, transferred, pledged,
assigned, or otherwise alienated or hypothecated, other than by will, by the
laws of descent and distribution. All rights with respect to the Option granted
to the Grantee shall be available during his or her lifetime only to the
Grantee.     (b)   Pursuant to conditions and procedures established by the
Board from time to time, the Board may permit the Option to be transferred to,
exercised by and paid to (a) the Grantee’s child, stepchild, grandchild, parent,
stepparent, grandparent, spouse, former spouse, sibling, niece, nephew,
mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or
sister-in-law (including adoptive relationships), (b) any person sharing the
Grantee’s household (other than a tenant or employee), (c) a trust in which
persons described in (a) or (b) have more than 50% of the beneficial interest,
(d) a foundation in which persons described in (a) or (b) or the Grantee owns
more than 50% of the voting interests; provided such transfer is not for value.
Any permitted transfer shall be subject to the condition that the Board receive
evidence satisfactory to it that the transfer is being made for estate and/or
tax planning purposes on a gratuitous or donative basis and without
consideration (other than nominal consideration).

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     Section 9. Status of the Grantee
     The Grantee shall not be deemed a shareholder of the Company with respect
to any of the Shares subject to this Option, except to the extent that such
Shares shall have been purchased and issued to him or her. The Company shall not
be required to issue or transfer any certificates for Shares purchased upon
exercise of this Option until all applicable requirements of law have been
complied with and such Shares shall have been duly listed on any securities
exchange on which the Shares may then be listed.
     Section 10. No Effect on Capital Structure
     This Option shall not affect the right of the Company to reclassify,
recapitalize or otherwise change its capital or debt structure or to merge,
consolidate, convey any or all of its assets, dissolve, liquidate, windup, or
otherwise reorganize.
     Section 11. Adjustments
     In the event of any change in the number of outstanding Shares effected
without receipt of consideration therefor by the Company, by reason of a merger,
reorganization, consolidation, recapitalization, separation, liquidation, stock
dividend, stock split, share combination or other change in the corporate
structure of the Company affecting the Shares, the aggregate number and class of
Shares subject to this Option and the exercise price of this Option shall
automatically adjust to accurately and equitably reflect the effect thereon of
such change; provided, however, that any fractional share resulting from such
adjustment shall be eliminated. In the event of a dispute concerning such
adjustment, the decision of the Board shall be conclusive.
     Section 12. Amendments
     This Award Agreement may be amended only by a writing executed by the
Company and the Grantee which specifically states that it is amending this Award
Agreement; provided that this Award Agreement is subject to the power of the
Board to amend the Plan as provided therein. Except as otherwise provided in the
Plan, no such amendment shall materially adversely affect the Grantee’s rights
under this Award Agreement without the Grantee’s consent.
     Section 13. Board Authority
     Any questions concerning the interpretation of this Award Agreement, any
adjustments required to be made under Sections 11 or 12 of this Award Agreement,
and any controversy which arises under this Award Agreement shall be settled by
the Board in its sole discretion.
     Section 14. Withholding Taxes
     The Grantee agrees to make appropriate arrangements with the Company for
satisfaction of any applicable Federal, state or local income tax or payroll tax
withholding amounts required by law to be withheld, including the payment to the
Company at the time of exercise of an Option of all

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such taxes and requirements. The Company is not required to issue shares upon
the exercise of this Option unless the Grantee first pays in cash or by share
withholding to the Company such amount, if any, of tax withholding. The Company
may, in its discretion, elect to withhold shares otherwise eligible to be
delivered to the Grantee having a value equal to the minimum amount required to
be withheld to cover such applicable tax withholding liability.
     Section 15. Nonqualified Stock Option
     This Option is not intended to qualify as an “incentive stock option”
within the meaning of Section 422 of the Code, and shall not be so construed.
     Section 16. Notice
     Whenever any notice is required or permitted hereunder, such notice must be
given in writing by (a) personal delivery, or (b) expedited, recognized delivery
service with proof of delivery, or (c) United States Mail, postage prepaid,
certified mail, return receipt requested. Any notice required or permitted to be
delivered hereunder shall be deemed to be delivered on the date which it was
personally delivered, received by the intended addressee, or, whether actually
received or not, on the third business day after it is deposited in the United
States mail, certified or registered, postage prepaid, addressed to the person
who is to receive it at the address which such person has theretofore specified
by written notice delivered in accordance herewith. The Company or the Grantee
may change, at any time and from time to time, by written notice to the other,
the address specified for receiving notices. Until changed in accordance
herewith, the Company’s address for receiving notices shall be Quest Resource
Corporation, Attention: Chief Financial Officer, 9520 North May Avenue, Oklahoma
City, Oklahoma 93120. Unless changed, the Grantee’s address for receiving
notices shall be the last known address of the Grantee on the Company’s records.
It shall be the Grantee’s sole responsibility to notify the Company as to any
change in his or her address. Such notification shall be made in accordance with
this Section 16.
     Section 17. Binding Effect
     This Award Agreement shall bind, and, except as specifically provided
herein, shall inure to the benefit of the respective heirs, legal
representatives, successors and assigns of the parties hereto.
     Section 18. Governing Law
     This Award Agreement and the rights of all persons claiming hereunder shall
be construed and determined in accordance with the laws of the State of Oklahoma
without giving effect to the principles of the Conflict of Laws to the contrary.
     IN WITNESS WHEREOF, the Company has caused this Agreement to be executed
and the Participant has hereunto set his or her hand effective the day and year
first above written.
QUEST RESOURCE CORPORATION

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  By:        
 
           
 
  Title:        
 
           
 
           
 
  GRANTEE    
 
                     

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