Form of Amendment to Stock Option Award Agreement
Exhibit 99.(d)(1)(B)
Form of
Amendment to Stock Option Award Agreement
Amendment to Stock Option Award Agreement
This Amendment to Stock Option Award Agreement (this “Amendment”) is entered into
effective as
of
, 2007 (the “Effective Date”), by and between Concho Resources Inc., a Delaware
corporation (the “Company”), and (“Employee”).
WITNESSETH:
WHEREAS, the Company (as successor to Concho Equity Holdings Corp.) has previously
granted to
Employee an option (the “Option”) effective as of _________, 200___
pursuant to a Stock Option Award
Agreement and Summary of Stock Option Grant (collectively, as amended, the “Stock Option
Agreement”) covering, as of the Effective Date, _________shares (after taking into
account certain
adjustments previously made to the Option) of the common stock of the Company, par value $.001
per
share (“Common Stock”), at a purchase price per share of $___(after
taking into account certain
adjustments previously made to the Option);
WHEREAS, as of the Effective Date, the Option is subject to the terms and conditions set forth
in the Stock Option Agreement and the Concho Resources Inc. 2006 Stock Incentive Plan (the “Plan”)
(which is an amendment and restatement of the Concho Equity Holdings Corp. 2004 Stock Option Plan
pursuant to which the Option was originally granted); and
WHEREAS, the Company and Employee are concerned that the Option could be subject to the
provisions of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), because
the original exercise price per share under the Option as of the date of grant of the Option was
less than the fair market value of a share on such date; and
WHEREAS, the Company and Employee wish to amend the Stock Option Agreement pursuant to the
transition relief made available under Section 3.02 of IRS Notice 2006-79 (as modified by IRS
Notice 2007-86) so that the Option will not be subject to the provisions of Section 409A of the
Code;
NOW, THEREFORE, in consideration of the foregoing and the mutual promises contained herein,
the parties, intending to be legally bound hereby, agree as follows, effective as of the Effective
Date:
1. Notwithstanding any provision in the Stock Option Agreement or the Plan to the contrary,
the Stock Option Agreement is hereby amended as follows:
(a) The Option shall be exercisable in accordance with the procedures set forth in the Stock
Option Agreement only upon the occurrence of an “Exercise Date” and only during the period
beginning on such Exercise Date and ending on the “Expiration Date” relating to such Exercise Date.
The potential Exercise Dates and related Expiration Dates are described in paragraph 1(b) below.
For purposes of this Amendment, (i) the term “Cause” shall have the meaning assigned to such term
in the Stock Option Agreement, (ii) the term “Change of Control” shall mean the occurrence of a
change in control event (as defined in Treasury regulation section 1.409A-3(i)(5)) with respect to
the Company, (iii) the term “Disabled” shall mean the Employee is unable to engage in any
substantial gainful activity by reason of any medically determinable physical or mental impairment
that can be expected to result in death or can be expected to last for a continuous period of not
less than 12 months, (iv) the term “Separation from Service” shall mean Employee’s separation of
service with the Company within the meaning of Section 409A(a)(2)(A)(i) of the Code and applicable
administrative guidance issued thereunder, and (v) the term “Specified Employee” has the meaning
assigned to such term in Section 409A of the Code as determined by the Company in accordance with
any of the methods permitted under the regulations issued under Section 409A of the Code.
(b) Subject to the provisions of paragraph 1(c) below, the Exercise Dates and related
Expiration Dates are as follows:
| (i) | If Employee incurs a Separation from Service by reason of Employee’s death, then the date of Employee’s death shall constitute an Exercise Date and the related Expiration Date shall be the |
| last day of the taxable year of Employee in which such Exercise Date occurs or, if later, the 15th day of the third calendar month following such Exercise Date; |
| (ii) | If Employee becomes Disabled prior to incurring a Separation from Service, then the date Employee becomes Disabled (as determined by the Social Security Administration) shall constitute an Exercise Date and the related Expiration Date shall be the last day of the taxable year of Employee in which such Exercise Date occurs or, if later, the 15th day of the third calendar month following such Exercise Date; | ||
| (iii) | The occurrence of a Change of Control shall constitute an Exercise Date and the related Expiration Date shall be the last day of the taxable year of Employee in which such Exercise Date occurs or, if later, the 15th day of the third calendar month following such Exercise Date (provided, however, that the Company may, in its sole discretion, specify an earlier Expiration Date (but in no event earlier than the date upon which the Change of Control occurs) upon written notice to Employee); | ||
| (iv) | If Employee incurs a Separation from Service for any reason other than Cause, death or becoming Disabled, and if the Employee is not a Specified Employee as of the date of such Separation from Service, then (x) the Exercise Date shall be the date of such Separation from Service and (y) the related Expiration Date shall be the earlier of (A) the date that is three months after such Exercise Date or (B) the later of (1) the last day of the taxable year of Employee in which such Exercise Date occurs or (2) the 15th day of the third calendar month following such Exercise Date; | ||
| (v) | If Employee incurs a Separation from Service for any reason other than Cause, death or becoming Disabled, and if the Employee is a Specified Employee as of the date of such Separation from Service, then (x) the Exercise Date shall be the earlier of the date of Employee’s death or the date that is six months after such Separation from Service and (y) the related Expiration Date shall be the earlier of (A) the date that is three months after such Exercise Date or (B) the later of (1) the last day of the taxable year of Employee in which such Exercise Date occurs or (2) the 15th day of the third calendar month following such Exercise Date; and | ||
| (vi) | Each of January 1, 2008, January 1, 2009, January 1, 2010, and January 1, 2011 shall constitute an Exercise Date with respect to a portion of the Option covering 25% of the shares of Common Stock subject to the Option as of the Effective Date, and the Expiration Date relating to each such Exercise Date shall be the last day of the taxable year of Employee in which such Exercise Date occurs. | ||
| (c) | Notwithstanding the provisions of paragraph 1(b) above: | ||
| (i) | If an Exercise Date occurs under clauses (i) through (v) of paragraph 1(b) above, then no subsequent Exercise Date may occur under any of such clauses or under clause (vi) of paragraph 1(b) above: | ||
| (ii) | If an Exercise Date occurs under clause (vi) of paragraph 1(b) above with respect to a percentage of the shares of Common Stock subject to the Option, then no subsequent Exercise Date may occur under any of clauses (i) through (vi) of paragraph 1(b) above with respect to such shares; | ||
| (iii) | If a Change of Control occurs after the occurrence of an Exercise Date pursuant to clauses (i), (ii), (iv), (v) or (vi) of paragraph 1(b) above and prior to the related Expiration Date, then the Company may, in its sole discretion, specify an earlier Expiration Date upon written notice to Employee; | ||
| (iv) | If Employee does not exercise the Option (or, in the case of clause (vi) of paragraph 1(b) above, the specified portion of the Option) on or before the applicable Expiration Date, then the Option (or, in the case of clause (vi) of paragraph 1(b) above, the specified portion of the Option) will terminate and no longer be exercisable immediately following such Expiration Date; | ||
| (v) | In no event shall the Option be exercisable after the expiration of the original term of the Option or from and after the date Employee incurs a Separation from Service on account of the Company’s termination of Employee’s employment for Cause; and |
| (vi) | If an Exercise Date would occur prior to January 1, 2008 pursuant to clauses (i) through (v) of paragraph 1(b) above, then such Exercise Date shall be deemed to have occurred on January 1, 2008. |
2. As additional consideration for the amendment to the Stock Option Agreement described in
paragraph 1 above, the Company shall make a cash payment to Employee (or to Employee’s estate in
the event of the death of Employee) on January 2, 2008, in the amount of $0.50 for each share of
Common Stock subject to the Option as of the Effective Date (the “Cash Payment”). The Cash Payment
shall be reduced by all applicable withholding taxes, which shall mean all taxes required by any
governmental entity to be withheld by the Company.
3. (a) Employee represents and warrants to the Company that: (i) this Amendment and the terms
of this Amendment have been freely made and without duress after having consulted with
professionals of Employee’s choice; (ii) as of the Effective Date, Employee is the lawful owner of,
and has good title to, the Option; (iii) the Option is free and clear of all liens, encumbrances,
and adverse claims; (iv) Employee has not heretofore assigned, transferred, sold, delivered,
mortgaged, pledged, granted options or rights to purchase, or encumbered the Option; (v) Employee
has the right, power, and authority to enter into this Amendment; and (vi) this Amendment has been
duly executed by, and constitutes a legal, valid, binding and enforceable obligation of, Employee.
(b) Employee acknowledges and agrees that Employee is not relying upon any written or oral
statement or representation of the Company, its affiliates, or any of their respective officers,
directors, shareholders, agents, attorneys, or successors, or any failure of such individual or
entity to disclose information, or any written or oral statements or representations or failure to
disclose information by any representative or agent of such individual or entity. Employee
acknowledges and agrees that in deciding to enter into this Amendment, Employee is relying on his
or her own judgment and the judgment of the professionals of Employee’s choice with whom Employee
has consulted.
4. As amended hereby, the Stock Option Agreement is specifically ratified and reaffirmed.
IN WITNESS WHEREOF, the Company has caused this Amendment to be duly executed by an officer
thereunto duly authorized, and Employee has executed this Amendment, as of the _________day of
___, 2007, effective as of the Effective Date.
| CONCHO RESOURCES INC. |
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| By: | ||||
| Name: | ||||
| Title: | ||||
| EMPLOYEE |
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