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GULFPORT ENERGY CORPORATION
 
2005 STOCK INCENTIVE PLAN
 
STOCK OPTION AGREEMENT
 

This Stock Option Agreement (the “Agreement”) is made and entered into as of the
date of grant set forth below (the “Date of Grant”) by and between Gulfport
Energy Corporation, a Delaware corporation (the “Company”), and the participant
named below (the “Participant”). Capitalized terms not defined herein shall have
the meaning ascribed to them in the Company’s 2005 Stock Incentive Plan (the
“Plan”).
 

 
Participant:
 
__________________________________
 
   
Social Security Number:
 
__________________________________
 
   
Address:
 
__________________________________
 
     
__________________________________
 
   
Total Option Shares:
 
__________________________________
 
   
Exercise Price Per Share:
 
__________________________________
 
   
Date of Grant:
 
__________________________________
 
   
Expiration Date:
 
__________________________________
 
   
Type of Stock Option:
 
o Incentive Stock Option
 
     
o Nonqualified Stock Option
 
 

1.    Grant of Option. The Company hereby grants to Participant an option (this
“Option”) to purchase the total number of shares of Common Stock of the Company
set forth above as Total Option Shares (the “Shares”) at the Exercise Price Per
Share set forth above (the “Exercise Price”), subject to all of the terms and
conditions of this Agreement and the Plan. If designated as an Incentive Stock
Option above, the Option is intended to qualify as an “incentive stock option”
(an “ISO”) within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended (the “Code”), although the Company makes no representation or
guarantee that such Option will qualify as an ISO.
 
2.    Exercise Period; Vesting. Unless expired as provided in Section 3 of this
Agreement, this Option may be exercised from time to time after the Date of
Grant set forth above (the “Date of Grant”) to the extent the Option has vested
in accordance with the vesting schedule set forth below. The Shares issued upon
exercise of the Option will be subject to the restrictions on transfer set forth
in Sections 8 and 9 below. Provided Participant continues to provide Continuous
Service to the Company or any Affiliate, the Option will become vested and
exercisable with respect to Twenty Percent (20%) of the Shares on the first
anniversary of the Date of Grant set forth above and thereafter at the end of
each full succeeding year from the Date of Grant the Option will become vested
and exercisable as to an additional Twenty Percent (20%) of the Shares until the
Option is vested and exercisable with respect to one hundred percent (100%) of
the Shares. A vested Option may not be exercised for less than a full share
unless the currently exercisable portion of such Option is less than a whole
share.
 

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3.    Expiration. The Option shall expire on the Expiration Date set forth above
or earlier as provided in Section 4 below or, if applicable, pursuant to Section
10 of the Plan.
 
4.    Termination of Continuous Service.
 
4.1.    Termination for Any Reason Except Death or Disability. Unless otherwise
provided in an employment agreement the terms of which have been approved by the
Administrator, if Participant’s Continuous Service is terminated for any reason
(including Cause), except death or Disability, the Option, to the extent (and
only to the extent) that it would have been exercisable by Participant on the
date of termination, may be exercised by Participant no later than three (3)
months after the date of termination, but in any event no later than the
Expiration Date. Outstanding Options that are not exercisable at the time
Participant’s Continuous Service terminates for any reason (including upon the
Optionholder’s death or Disability) shall be forfeited and expire at the close
of business on the date of such termination.
 
4.2.    Termination Because of Death or Disability. If Participant’s Continuous
Service is terminated because of death or Disability of Participant (or
Participant dies within three (3) months of the date of termination when such
termination is for any reason other than Participant’s Disability or for Cause),
the Option, to the extent that is exercisable by Participant on the date of
termination, may be exercised by Participant (or Participant’s legal
representative) no later than twelve (12) months after the date of termination,
but in any event no later than the Expiration Date. If permitted by this
Agreement, any exercise beyond (a) three (3) months after the date of
termination when the termination is for any reason other than the Participant’s
death or Disability or (b) twelve (12) months after the date of termination when
the termination is for Participant’s Disability is deemed to be a Nonqualified
Stock Option (an “NQSO”) and not an ISO.
 
4.3.    No Obligation to Employ. Nothing in the Plan or this Agreement shall
confer on Participant any right to continue in the employ of, or other
relationship with, the Company or any Affiliate, or limit in any way the right
of the Company or any Affiliate to terminate Participant’s employment or other
relationship at any time, with or without Cause.
 
5.    Manner of Exercise.
 
5.1.    Stock Option Exercise Agreement. To exercise this Option, Participant
(or in the case of exercise after Participant’s death or incapacity,
Participant’s executor, administrator, heir or legatee, as the case may be) must
deliver to the Company an executed stock option exercise agreement in the form
attached hereto as Exhibit A, or in such other form as may be approved by the
Administrator from time to time (the “Exercise Agreement”), which shall set
forth, inter alia, (a) Participant’s election to exercise the Option, (b) the
number of Shares being purchased, (c) any restrictions imposed on the Shares and
(d) any representations warranties and agreements regarding Participant’s
investment intent and access to information as may be required by the Company to
comply with applicable securities laws. If someone other than Participant
exercises the Option, then such person must submit documentation reasonably
acceptable to the Company verifying that such person has the legal right to
exercise the Option.
 

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5.2.    Limitations on Exercise. The Option may not be exercised unless such
exercise is in compliance with all applicable federal and state securities laws,
as they are in effect on the date of exercise. The Option may not be exercised
for fewer than one (1) Share unless it is exercised as to all Shares as to which
the Option is then exercisable.
 
5.3.    Payment. The entire Exercise Price of this Option to purchase shares of
Common Stock issued under the Plan shall be payable in full by cash or check for
an amount equal to the aggregate exercise price for the number of shares being
purchased. Alternatively, in the sole discretion of the Plan Administrator and
upon such terms as the Plan Administrator shall approve, the Exercise Price may
be paid by:
 
(a)    paying all or a portion of the aggregate exercise price for the number of
shares of Common Stock being purchased by delivery to the Company of other
shares of Common Stock, duly endorsed for transfer to the Company, with a Fair
Market Value on the date of delivery equal to the exercise price (or portion
thereof) due for the number of shares being acquired, or by means of attestation
whereby the Participant identifies for delivery specific shares of Common Stock
where such shares have a Fair Market Value on the date of attestation equal to
the exercise price (or portion thereof) and receives a number of shares of
Common Stock equal to the difference between the number of shares thereby
purchased and the number of identified attestation shares of Common Stock
(collectively a “Stock For Stock Exercise”); provided, however, that the shares
of Common Stock used in such Stock for Stock Exercise (i) have either (1) been
held for more than six (6) months (or such longer or shorter period of time
required to avoid a charge to earnings for financial accounting purposes) and
have been paid for within the meaning of SEC Rule 144 (and, if such shares were
purchased from the Company by use of a promissory note, such note has been fully
paid with respect to such shares); or (2) were obtained by Participant in the
open public market; and (ii) are clear of all liens, claims, encumbrances or
security interests.
 
(b)    during any period for which the Common Stock is publicly traded (i.e.,
the Stock is listed on any established stock exchange or a national market
system, including without limitation the Nasdaq National Market, or if the Stock
is quoted on the Nasdaq System (but not on the Nasdaq National Market) or any
similar system whereby the stock is regularly quoted by a recognized securities
dealer but closing sale prices are not reported), (i) a copy of instructions to
a broker-dealer that is a member of the National Association of Securities
Dealers (an “NASD Dealer”) directing such broker to sell the shares of Stock for
which this option is exercised, and to remit to the Company the aggregate
Exercise Price of such option or (ii) through a “margin” commitment from
Participant and an NASD Dealer whereby Participant irrevocably elects to
exercise the Option and to pledge the Shares so purchased to the NASD Dealer in
a margin account as security for a loan from NASD Dealer in the amount of the
total Exercise Price, and whereby the NASD Dealer irrevocably commits upon
receipt of such Shares to forward the total Exercise Price directly to the
Company (collectively referred to as a “Cashless Exercise”); provided, however,
a Cashless Exercise by a Director or executive officer that involves or may
involve a direct or indirect extension of credit or arrangement of an extension
of credit by the Company, a Parent or Subsidiary in violation of Section 402(a)
of the Sarbanes-Oxley Act (codified as Section 13(k) of the Securities Exchange
Act of 1934, 15 U.S.C. § 78m(k)) shall be prohibited;
 

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(c)    by cancellation of indebtedness of the Company to the Participant;
 
(d)    by waiver of compensation due or accrued to Participant for services
rendered;
 
(e)    by any other form of legal consideration that may be acceptable to the
Administrator, including without limitation with a full-recourse promissory
note. However, if there is a stated par value of the shares and applicable law
requires, the par value of the shares, if newly issued, shall be paid in cash or
cash equivalents. The shares shall be pledged as security for payment of the
principal amount of the promissory note and interest thereon. The interest rate
payable under the terms of the promissory note shall not be less than the
minimum rate (if any) required to avoid the imputation of additional interest
under the Code. Subject to the foregoing, the Administrator (in its sole
discretion) shall specify the term, interest rate, amortization requirements (if
any) and other provisions of such note. Unless the Administrator determines
otherwise, shares of Common Stock having a Fair Market Value at least equal to
the principal amount of the loan shall be pledged by the holder to the Company
as security for payment of the unpaid balance of the loan and such pledge shall
be evidenced by a pledge agreement, the terms of which shall be determined by
the Administrator, in its discretion; provided, however, that each loan shall
comply with all applicable laws, regulations and rules of the Board of Governors
of the Federal Reserve System and any other governmental agency having
jurisdiction. Exercise with a promissory note or other transaction by a Director
or executive officer that involves or may involve a direct or indirect extension
of credit or arrangement of an extension of credit by the Company, or an
Affiliate in violation of section 402(a) of the Sarbanes-Oxley Act (codified as
Section 13(k) of the Securities Exchange Act of 1934, 15 U.S.C. § 78m(k)) shall
be prohibited; or
 
(f)    by any combination of the foregoing.
 
5.4.    Tax Withholding. Prior to the issuance of the Shares upon exercise of
the Option, Participant must pay or provide for any applicable federal, state
and local withholding obligations of the Company. If the Administrator permits,
Participant may provide for payment of withholding taxes upon exercise of the
Option by requesting that the Company retain Shares with a Fair Market Value
that does not exceed the minimum statutory amount of taxes required to be
withheld. In such case, the Company shall issue the net number of Shares to the
Participant by deducting the Shares retained from the Shares issuable upon
exercise.
 
5.5.    Issuance of Shares. Provided that the Exercise Agreement and payment are
in form and substance satisfactory to counsel for the Company, the Company shall
issue the Shares registered in the name of Participant, Participant’s authorized
assignee, or Participant’s legal representative, and shall deliver certificates
representing the Shares with the appropriate legends affixed thereto.
 

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6.    Notice of Disqualifying Disposition of ISO Shares. If the Option is an
ISO, and if Participant sells or otherwise disposes of any of the Shares
acquired pursuant to the ISO on or before the later of (a) the date two (2)
years after the Date of Grant, and (b) the date one (1) year after transfer of
such Shares to Participant upon exercise of the Option, Participant shall
immediately notify the Company in writing of such disposition. Participant
agrees that Participant will satisfy any obligation in the event any such
disposition causes Participant to be subject to income tax withholding by the
Company on the compensation income recognized by Participant from the early
disposition by payment in cash or out of the current wages or other compensation
payable to Participant.
 
7.    Compliance with Laws and Regulations. The exercise of the Option and the
issuance and transfer of Shares shall be subject to compliance by the Company
and Participant with all applicable requirements of federal and state securities
laws and with all applicable requirements of any stock exchange on which the
Company’s Common Stock may be listed at the time of such issuance or transfer.
Participant understands that the Company is under no obligation to register or
qualify the Shares with the SEC, any state securities commission or any stock
exchange to effect such compliance.
 
8.    Nontransferability of Option. If the Option is an ISO, the Option may not
be transferred in any manner other than by will or by the laws of descent and
distribution and may be exercised during the lifetime of Participant only by
Participant or in the event of Participant’s incapacity, by Participant’s legal
representative. The terms of the Option shall be binding upon the executors,
administrators, successors and assigns of Participant. If the Option is not an
ISO, upon written approval by the Administrator, it may be transferred by gift
or domestic relations order to a member of the Participant’s immediate family
(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, any person sharing the Participant’s household (other than a
tenant or employee), a trust in which these persons have more than 50% of the
beneficial interest, a foundation in which these persons (or the Participant)
control the management of assets, and any other entity in which these persons
(or the Participant) own more than 50% of the voting interests.
 
9.    Privileges of Stock Ownership. Participant shall not have any of the
rights of a Stockholder with respect to any Shares until the Shares are issued
to Participant.
 
10.    Obligation To Sell. Notwithstanding anything herein to the contrary, if
at any time following Optionee’s acquisition of shares of Stock hereunder,
stockholders of the Company owning 51% or more of the shares of the Company (on
a fully diluted basis) (the “Control Sellers”) enter into an agreement
(including any agreement in principal) to transfer all of their shares to any
person or group of persons who are not affiliated with the Control Sellers, such
Control Sellers may require each stockholder who is not a Control Seller (a
“Non-Control Seller”) to sell all of their shares to such person or group of
persons at a price and on terms and conditions the same as those on which such
Control Sellers have agreed to sell their shares, other than terms and
conditions relating to the performance or non-performance of services. For the
purposes of the preceding sentence, an affiliate of a Control Seller is a person
who controls, which is controlled by, or which is under common control with, the
Control Seller.
 

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11.    Stockholders’ Agreement. As a condition to the issuance of Stock pursuant
to the exercise of the Stock Option Agreement, the Administrator, in its sole
and absolute discretion may require the Participant to execute and become a
party to any agreement by and among the Company and any the stockholders of the
Company, which exists on or after the Award (the “Stockholders’ Agreement”)
during any period during which the Common Stock is not publicly traded. If the
Participant becomes a party to a Stockholders’ Agreement, in addition to the
terms of the Plan and this Stock Option Agreement, the terms and conditions of
Stockholders’ Agreement shall govern Participant’s rights in and to the Stock;
and if there is any conflict between the provisions of the Stockholders’
Agreement and the Plan or any conflict between the provisions of the
Stockholders’ Agreement, the Stock Option Agreement or the Stock Option Exercise
Agreement, the provisions of the Stockholders’ Agreement shall be controlling.
 
12.    Restrictions On Transfer.
 
12.1.    Securities Law Restrictions. Regardless of whether the offering and
sale of shares of Stock under the Plan have been registered under the Securities
Act or have been registered or qualified under the securities laws of any state,
the Company at its discretion may impose restrictions upon the sale, pledge or
other transfer of such shares of Stock (including the placement of appropriate
legends on stock certificates or the imposition of stop-transfer instructions)
if, in the judgment of the Company, such restrictions are necessary or desirable
in order to achieve compliance with the Securities Act, the securities laws of
any state or any other law.
 
12.2.    Market Stand-Off. If an underwritten public offering by the Company of
its equity securities pursuant to an effective registration statement filed
under the Securities Act, including the Company’s initial public offering, the
Optionee shall not sell, make any short sale of, loan, hypothecate, pledge,
grant any option for the repurchase of, transfer the economic consequences of
ownership or otherwise dispose or transfer for value or otherwise agree to
engage in any of the foregoing transactions with respect to any Stock without
the prior written consent of the Company or its underwriters, for such period of
time from and after the effective date of such registration statement as may be
requested by the Company or such underwriters (the “Market Stand-Off”). In order
to enforce the Market Stand-Off, the Company may impose stop-transfer
instructions with respect to the shares of Stock acquired under this Agreement
until the end of the applicable stand-off period If there is any change in the
number of outstanding shares of Stock by reason of a stock split, reverse stock
split, stock dividend, recapitalization, combination, reclassification,
dissolution or liquidation of the Company, any corporate separation or division
(including, but not limited to, a split-up, a split-off or a spin-off), a merger
or consolidation; a reverse merger or similar transaction, then any new,
substituted or additional securities which are by reason of such transaction
distributed with respect to any shares of Stock subject to the Market Stand-Off,
or into which such shares of Stock thereby become convertible, shall immediately
be subject to the Market Stand-Off.
 
12.3.    Transfer of Stock Acquired Under Plan. Notwithstanding anything to the
contrary herein, if the Shares acquired upon exercise of this Option are not
readily tradable on an established securities market, Participant may not
transfer Shares acquired under this Plan within six months after the purchase of
such Shares (the “Six Months Holding Period”), other than, if permitted by the
Administrator in its discretion: (a) to satisfy minimum tax withholding
requirements, or (b) to a Permitted Transferee.
 

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12.4.    Investment Intent at Grant. If the grant of this option under the Plan
is not registered under federal or state securities laws, but an exemption is
available which requires an investment representation or other representation,
the Optionee shall represent and agree, at the time of grant of this option,
that the security being acquired upon the grant of this option is being acquired
for investment, and not with a view to the sale or distribution thereof, and
shall make such other representations as are deemed necessary or appropriate by
the Company and its counsel.
 
12.5.    Investment Intent at Exercise. If the sale of shares of Stock under the
Plan is not registered under federal or state securities laws, but an exemption
is available which requires an investment representation or other
representation, the Optionee shall represent and agree at the time of exercise
that the shares of Stock being acquired upon exercise of this option are being
acquired for investment, and not with a view to the sale or distribution
thereof, and shall make such other representations as are deemed necessary or
appropriate by the Company and its counsel.
 
12.6.    Legends. All certificates evidencing shares of Stock purchased under
this Agreement in an unregistered transaction shall bear the following legend
(and such other restrictive legends as are required or deemed advisable under
the provisions of any applicable law):
 
“THE SHARES OF COMMON STOCK EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO AND
TRANSFERABLE ONLY IN ACCORDANCE WITH THAT CERTAIN GULFPORT ENERGY CORPORATION
2005 STOCK INCENTIVE PLAN, THE OPTION AGREEMENT, THE EXERCISE AGREEMENT [AND THE
STOCKHOLDERS’ AGREEMENT] PURSUANT TO WHICH THE SHARES EVIDENCED BY THIS
CERTIFICATE WERE ISSUED, COPIES OF WHICH ARE ON FILE AT THE PRINCIPAL OFFICE OF
THE COMPANY. NO TRANSFER OR PLEDGE OF THE SHARES EVIDENCED HEREBY MAY BE MADE
EXCEPT IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF SAID PLAN AND OPTION
AGREEMENT AND THE TERMS OF THE EXERCISE AGREEMENT [AND STOCKHOLDERS’ AGREEMENT
(INCLUDING THE COMPANY’S RIGHT OF REPURCHASE AND RIGHT OF FIRST REFUSAL
CONTAINED THEREIN)].”
 
12.7.    Removal of Legends. If, in the opinion of the Company and its counsel,
any legend placed on a stock certificate representing shares of Stock sold under
this Agreement no longer is required, the holder of such certificate shall be
entitled to exchange such certificate for a certificate representing the same
number of shares of Stock but without such legend.
 
12.8.    Administration. Any determination by the Company and its counsel in
connection with any of the matters set forth in this Section 12 shall be
conclusive and binding on the Optionee and all other persons.
 

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13.    General.
 
13.1.    Interpretation. Any dispute regarding the interpretation of this
Agreement shall be submitted by Participant or the Company to the Administrator
for review. The resolution of such a dispute by the Administrator shall be final
and binding on the Company and Participant.
 
13.2.    Entire Agreement. The Plan is incorporated herein by reference. This
Agreement and the Plan constitute the entire agreement of the parties and
supercede all prior undertakings and agreements with respect to the subject
matter hereof. If any inconsistency should exit between the nondiscretionary
terms and conditions of this Agreement and the Plan, the Plan shall govern and
control.
 
13.3.    Notices. Any notice required to be given or delivered to the Company
under the terms of this Agreement shall be in writing and addressed to the
Corporate Secretary of the Company at its principal corporate offices. Any
notice required to be given or delivered to Participant shall be in writing and
addressed to Participant at the address indicated above or to such other address
as such party may designate in writing from time to time to the Company. All
notices shall be deemed to have been given or delivered upon: (a) personal
delivery; (b) five (5) days after deposit in the United States mail by certified
or registered mail (return receipt requested); (c) two (2) business day after
deposit with any return receipt express courier (prepaid); or (d) one (1)
business day after transmission by facsimile.
 
13.4.    Successors and Assigns. The Company may assign any of its rights under
this Agreement. This Agreement shall be binding upon and inure to the benefit of
the successors and assigns of the Company. Subject to the restrictions on
transfer set forth herein, this Agreement shall be binding upon Participant and
Participant’s heirs, executors, administrators, legal representatives,
successors and assigns.
 
13.5.    Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware without giving effect to its
conflict of law principles. If any provision of this Agreement is determined by
a court of law to be illegal or unenforceable, then such provision will be
enforced to the maximum extent possible and the other provisions will remain
fully effective and enforceable.
 
14.    Acceptance. Participant hereby acknowledges receipt of a copy of the Plan
and this Agreement. Participant has read and understands the terms and
provisions thereof, and accepts the Option subject to all the terms and
conditions of the Plan and this Agreement. Participant acknowledges that there
may be adverse tax consequences upon exercise of the Option or disposition of
the Shares and that Participant should consult a tax advisor prior to such
exercise or disposition.
 
15.    Section 409A Limitation. In the event the Administrator determines at any
time that this Option has been granted with an exercise price less than Fair
Market Value of the Common Stock subject to the Option on the date the Option is
granted (regardless of whether or not such exercise price is intentionally or
unintentionally priced at less than Fair Market Value, or is materially modified
at a time when the Fair Market Value exceeds the exercise price), or is
otherwise determined to constitute “nonqualified deferred compensation” within
the meaning of Section 409A of the Code, notwithstanding any provision of the
Plan or this Option Agreement to the contrary, the Option shall satisfy the
additional conditions applicable to nonqualified deferred compensation under
Section 409A of the Code, in accordance with Section 7 of the Plan. The
specified exercise date and term shall be the default date and term specified in
Section 7 of the Plan. Notwithstanding the foregoing, the Company shall have no
liability to any Participant or any other person if an Option designated as an
Incentive Stock Option fails to qualify as such at any time or if an Option is
determined to constitute “nonqualified deferred compensation” within the meaning
of Section 409A of the Code and the terms of such Option do not satisfy the
additional conditions applicable to nonqualified deferred compensation under
Section 409A of the Code and Section 7 of the Plan.
 

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[SIGNATURE PAGE FOLLOWS]
 

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IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its
duly authorized representative and Participant has executed this Agreement,
effective as of the Date of Grant.
 
 

        GULFPORT ENERGY CORPORATION  
   
   
  By:   /s/ __________________________________________   Name:
_______________________________________  
Title: ________________________________________

 

        PARTICIPANT  
   
   
  By:   /s/  __________________________________________    (Signature)   Printed
Name: __________________________________

 

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EXHIBIT A
 
FORM OF STOCK OPTION EXERCISE AGREEMENT
 
 

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