DI INDUSTRIES, INC.
NON-QUALIFIED STOCK OPTION AGREEMENT
THIS NON-QUALIFIED STOCK OPINION AGREEMENT (this "Agreement") made as of
September 3, 1996, by and between DI INDUSTRIES, INC., a corporation organized
under the laws of the State of Texas (the "Corporation"), and Xxxxxx X. XxXxxxx,
an individual (the "Optionee");
WITNESSETH:
WHEREAS, as an inducement to Optionee to enter into a contract of
employment with the Corporation under the terms of an Employment Agreement dated
of even date herewith by and between the Optionee and the Corporation (the
"Employment Agreement") and to further provide the Optionee with additional
incentive to further the business of the Corporation, the Corporation has agreed
to grant the Optionee options to purchase shares of common stock, $0.10 par
value ("Common Stock"), of the Corporation; and
WHEREAS, by granting the Optionee options to purchase shares of Common
Stock pursuant to the terms of this Agreement, the Corporation intends to carry
out the purposes set forth in the 1996 Employee Stock Option Plan of the
Corporation (the "Plan") adopted by the Board of Directors of the Corporation
(the "Board of Directors") effective July 29, 1996 and the shareholders of the
Corporation effective as of August 27, 1996; and
WHEREAS, the Corporation and the Optionee desire to set forth the terms and
conditions of such options to purchase Common Stock;
NOW, THEREFORE, in consideration of the mutual promises contained herein,
and other good and valuable consideration, the receipt, adequacy and sufficiency
of which are hereby acknowledged, the parties hereto do hereby agree as follows:
1. GRANT OF OPTION. Subject to the terms and conditions hereinafter set
forth, the Corporation hereby grants to the Optionee an option (the "Option") to
purchase all or any part of an aggregate number of 100,000 shares of Common
Stock (such shares, as increased or decreased in accordance with Section 9
hereof, being referred to hereinafter as the "Option Shares") at an exercise
price of $1.125 per share (hereinafter the "Exercise Price").
2. EXERCISE PERIOD. The Option shall be exercisable by Optionee as to
twenty percent (20%) of the Option Shares on December 31, 1996, as to an
additional twenty percent (20%) of the Option Shares one (1) year after the date
of this Agreement, as to an additional twenty percent (20%) of the Option Shares
two (2) years after the date of this Agreement, as to an additional twenty
percent (20%) of the Option Shares three (3) years after the date of this
Agreement, until the fourth anniversary of the date of this Agreement, after
which time the Option shall be exercisable in full. The Option shall expire and
terminate as to any Option Shares not purchased by the Optionee on or before
the tenth anniversary of the date of this Agreement (the "Expiration Date"),
subject to earlier termination as set forth herein.
3. METHOD OF EXERCISING THE OPTION. The Option shall be exercised by the
Optionee delivering to the Corporation (i) written notice from the Optionee
stating that the Optionee is exercising the Option and specifying the number of
Option Shares that the Optionee is entitled to purchase (the "Notice"), which
shall be in form and content identical to ANNEX I hereto and (ii) the aggregate
Exercise Price (the "Payment") for the number of Option Shares that the Optionee
is entitled to purchase, which Exercise Price must be in the form of (a) cash or
a cashier's or certified check payable to the order of the Corporation, or (b)
the tender to the Corporation of such number of shares of Common Stock owned by
the Optionee having an aggregate fair market value as of the date of exercise
that is not greater than the total Exercise Price for the shares of Common Stock
with respect to which the Option is being exercised and by paying the remaining
amount of the Exercise Price.
4. TRANSFERABILITY OF OPTION. The Option shall not be transferable or
assignable, in whole or in part, and except as otherwise provided in Section 11
of this Agreement, the Option shall be exercisable (i) only by the Optionee
during his lifetime, or (ii) in the event of his death, by his heirs,
representatives, distributees, or legatees in accordance with his will or the
laws of descent and distribution (but only to the extent that the Option would
be exercisable by the Optionee under Section 2).
5. PAYMENT OF TAXES UPON EXERCISE. The Optionee understands and
acknowledges that under currently applicable law, the Optionee may be required
to include in the Optionee's taxable income, at the time of exercise of the
Option, the amount by which the value of the Option Shares purchased (the
"Exercise Shares") exceeds the Exercise Price paid. The Optionee hereby
authorizes the Corporation to withhold Exercise Shares of a value equivalent to
the amount of tax required to be withheld by the Corporation out of any taxable
income derived by the Optionee upon exercise of the Option; provided however,
that the Optionee may, in the alternative, in order to satisfy such withholding
requirement, deliver to the Corporation cash or other shares of Common Stock
owned by the Optionee.
6. INVESTMENT REPRESENTATION. The Optionee represents that the Option
Shares available for purchase by the Optionee under this Agreement will be
acquired only for investment and not with a view toward resale or distribution.
7. SECURITIES LAW REQUIREMENTS; LEGENDS. The Optionee agrees and
understands that the Option Shares may be restricted securities as defined in
Rule 144 promulgated under the Securities Act of 1933, as amended (the
"Securities Act"), and may not be sold, assigned or transferred, unless the
sale, assignment or transfer of such shares is registered under the Securities
Act and applicable blue sky laws, as now in effect or hereafter amended, or
there is furnished an opinion of counsel in form and substance satisfactory to
the Corporation from counsel acceptable to the Corporation that such
registrations are not required. The Optionee further understands and agrees
that, unless issued pursuant to an effective registration statement under the
Securities Act, the following legend shall be set forth on each certificate
representing Option Shares:
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"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 OR UNDER THE BLUE SKY LAWS OF ANY STATE, AND MAY
NOT BE SOLD, ASSIGNED OR TRANSFERRED EXCEPT UPON SUCH REGISTRATION OR UPON
RECEIPT BY THE CORPORATION OF AN OPINION OF COUNSEL FOR THE CORPORATION
THAT SUCH REGISTRATION IS NOT REQUIRED FOR SUCH SALE, ASSIGNMENT OR
TRANSFER."
In addition, the following legend shall be placed on each certificate
representing Option Shares:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE GOVERNED BY THE TERMS OF
THE 1996 EMPLOYEE STOCK OPTION PLAN OF THE CORPORATION, DATED JULY 29,
1996, WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THE CORPORATION AND A
COPY OF WHICH WILL BE PROVIDED FOR INSPECTION UPON WRITTEN REQUEST."
8. NO RIGHTS AS SHAREHOLDER. The Optionee shall not have any rights as a
shareholder with respect to any of the Option Shares until the date of issuance
by the Corporation to the Optionee of a stock certificate representing such
Option Shares. Except as otherwise provided in Section 9 hereof, the Optionee
shall not be entitled to any dividends, cash or otherwise, or any adjustment of
the Option Shares for such dividends, if the record date therefor is prior to
the date of issuance of such stock certificate. Upon valid exercise of the
Option by the Optionee, the Corporation agrees to cause a valid stock
certificate for the number of Option Shares then purchased to be issued and
delivered to the Optionee within seven (7) business days thereafter.
9. CORPORATE PROCEEDINGS OF THE CORPORATION.
(a) The existence of the Option shall not affect in any way the right
or power of the Corporation or its officers, directors and shareholders, as
the case may be, to (i) make or authorize any adjustments,
recapitalizations, reorganizations or other changes in the capital
structure or business of the Corporation, (ii) participate in any merger or
consolidation of the Corporation, (iii) issue any Common Stock, bonds,
debentures, preferred or prior preference stock or any other securities
affecting the Common Stock or the rights of holders thereof, (iv) dissolve
or liquidate the Corporation, (v) sell or transfer all or any part of the
assets or business of the Corporation, or (vi) perform any other corporate
act or proceedings, whether of a similar character or otherwise.
(b) If the Corporation merges into or with or consolidates with (such
events collectively referred herein as a "Merger") any corporation or
corporations and is not the surviving corporation, then the surviving
corporation may assume the Option or substitute a new option of the
surviving corporation for the Option; provided, however, that the excess of
the aggregate fair market value of the securities subject to the Option
immediately after such assumption, or the new option immediately after such
substitution, over the aggregate
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Exercise Price of such shares must be, based upon a good faith
determination by the Board of Directors of the Corporation, not less than
the excess of the aggregate fair market value of the Common Stock subject
to the Option immediately before such substitution or assumption over the
aggregate Exercise Price of such Common Stock.
(c) In the event that the surviving corporation does not utilize the
provisions of (b) above, or in the event of a dissolution or liquidation of
the Corporation, the Corporation shall cause written notice of such Merger
or dissolution or liquidation (and the material terms and conditions
thereof) to be delivered to the Optionee at least ten (10) days prior to
the proposed effective date (the "Effective Date") of such event. The
Optionee shall be entitled to exercise the Option until the Effective Date,
or until the Expiration Date if earlier. To the extent that the Merger or
liquidation is consummated after the Effective Date, the Option shall
terminate and the Corporation shall have no further obligations of any type
hereunder. The provisions of this paragraph shall not apply to any merger
or reorganization, the principal purpose of which is to change the
jurisdiction of the domicile of the Corporation.
(d) If, while the Option is outstanding, the Corporation shall effect
a subdivision or consolidation of the shares of Common Stock or other
capital readjustment, the payment of a common stock dividend, or other
increase or reduction of the number of shares of Common Stock outstanding,
without receiving compensation therefor in money, services or property,
then (i) in the event of an increase in the number of shares of Common
Stock outstanding, the number of Option Shares shall be proportionately
increased, and the per share Exercise Price shall be proportionately
reduced, and (ii) in the event of a reduction in the number of shares of
Common Stock outstanding, the number of Option Shares shall be
proportionately reduced, and the per share Exercise Price shall be
proportionately increased. No fractional share of Common Stock shall be
issued upon any such exercise and the Exercise Price shall be appropriately
reduced on account of any fractional share not issued.
(e) The issuance by the Corporation of shares of stock of any class of
securities convertible into shares of stock of any class, including Common
Stock, for cash, property, labor or services rendered, either upon direct
sale or upon the exercise of rights, options, or warrants to subscribe
therefor, or upon conversion of shares or obligations of the Corporation
convertible into such shares or other securities, shall not affect, and no
adjustment by reason thereof shall be made with respect to, the number of
Option Shares or the Exercise Price.
10. REGISTRATION RIGHTS. The Optionee shall have no registration rights
with respect to the Option Shares.
11. TERMINATION.
(a) Except as otherwise provided in this Section 11, if the Optionee
for any reason whatsoever, other than death or permanent and total
disability, as defined in (b) below, ceases to be employed by the
Corporation, or a parent or subsidiary corporation of the Corporation, and
prior to such cessation, the Optionee was employed at all times from the
date of the granting of the Option until the date of such cessation, the
Option must be exercised by the
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Optionee (to the extent that the Optionee is entitled to do so at the date
of cessation) within three (3) months following the date of cessation of
employment, subject to the Expiration Date; provided, however, that if the
Optionee is terminated for cause (as defined in the Employment Agreement),
the Option will immediately terminate. Notwithstanding the foregoing, the
Corporation may, in its sole discretion, extend for a reasonable period the
time in which the Optionee may exercise the Option after the date of
cessation of employment, subject to the Expiration Date.
(b) If the Optionee becomes permanently and totally disabled, as
hereinafter defined, while employed by the Corporation or a parent or
subsidiary corporation of the Corporation, and prior to such disability the
Optionee was employed at all times from the date of the granting of the
Option until the date of disability, the Option must be exercised by the
Optionee (to the extent that the Optionee is entitled to do so at the date
of disability) at any time within one (1) year after the date of disability
or the Expiration Date, whichever is earlier.
"Permanently and totally disabled" means being unable to engage in any
substantial gainful activity by reason of any medically determinable
physical or mental impairment which can be expected to result in death or
which has lasted or can be expected to last for a continuous period of not
less than twelve (12) months. In the absence of any specific requirements
for this determination, the decision of the Corporation, as aided by any
physicians designated by the Corporation shall be conclusive and the
Corporation shall send written notice to the Optionee of the determination
that the Optionee has become permanently and totally disabled.
(c) In the event that the Optionee dies while employed by the
Corporation or a parent or subsidiary corporation of the Corporation, and
prior to death the Optionee was employed at all times from the date of the
granting of the Option until the date of death, the Option must be
exercised (to the extent that the Optionee is entitled to do so at the date
of death) by a legatee or legatees of the Optionee under the Optionee's
will, or by the Optionee's personal representatives or distributes, at any
time within one (1) year after the date of death or the Expiration Date,
whichever is earlier, and if not so exercised, the Option shall thereupon
terminate.
Nothing in (a), (b) or (c) shall extend the time for exercising the
Option granted pursuant to this Agreement beyond the Expiration Date.
12. DISPOSITION OF STOCK AFTER EXERCISE OF OPTION. Notwithstanding any
other provision of this Agreement to the contrary, in consideration of the
granting of the Option, the Optionee agrees not to dispose of any Option Shares
without the prior approval of the Corporation unless such shares have been
registered under the Securities Act.
13. NOTICES. All notices, demands, requests and other communications
required or permitted hereunder shall be in writing and shall be deemed to be
delivered when actually received through U.S. Express Mail or any private
express service (as evidenced by a written receipt), or, if
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earlier, and regardless of whether actually received (except where receipt is
specified in this Agreement), four (4) days following deposit in a regularly
maintained receptacle for the United States mail, registered or certified,
return receipt requested, postage fully prepaid, addressed to the addressee at
its address set forth below or at such other address as such party may have
specified theretofore by notice delivered in accordance with this Section:
If to the Corporation: DI Industries, Inc.
000 Xxxxx Xxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attn: President
If to Optionee: Xxxxxx X. XxXxxxx
0000 Xxxxx Xxxxx Xxxxx
Xxxxx Xxxx, Xxxxx 00000
14. TRANSFERABILITY; BINDING EFFECT. The Option shall be transferable only
as set forth in Section 4. Subject to the foregoing, all covenants, terms,
agreements and conditions of this Agreement shall be binding upon, inure to the
benefit of, and be enforceable by, the Corporation and the Optionee and their
respective successors and assigns.
15. ENTIRE AGREEMENT. This Agreement embodies the entire agreement and
understanding between the Corporation and the Optionee relating to the subject
matter hereof.
16. GOVERNING LAW. This Agreement shall be governed by the laws of the
State of Texas.
17. CAPTIONS. The section and paragraph headings in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
18. COUNTERPARTS. This Agreement may be executed in multiple original
counterparts, each of which shall be deemed an original, but all of which
together shall constitute but one and the same instrument.
IN WITNESS WHEREOF, this Agreement has been executed and delivered as of
the date first written above.
CORPORATION:
DI INDUSTRIES, INC.
By: /s/ X. X. XXXXXXXX
Name: X. X. XXXXXXXX
Title: PRESIDENT AND CEO
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OPTIONEE: /s/ XXXXXX X. XXXXXXX
Xxxxxx X. XxXxxxx
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ACKNOWLEDGEMENT OF SPOUSE TO
TERMS OF NON-QUALIFIED STOCK OPTION AGREEMENT
I, XXXXX XXXXXXX, am the spouse of Xxxxxx X. XxXxxxx ("Optionee"), and I am
fully aware of, understand, and fully consent and agree to the provisions of the
Non-Qualified Stock Option Agreement, dated September 3, 1996 executed by
Optionee and DI Industries, Inc. (the "Corporation"). I understand the binding
effect of this Agreement and its binding effect upon any interest community or
otherwise, I may now or hereafter own, and I agree that the termination for any
reason of my marital relationship with Optionee shall not have the effect of
removing any stock of the Corporation otherwise subject to the terms of this
Agreement from the coverage hereof.
Signed this 3rd day of September, 1996.
/s/ XXXXX XXXXXXX
Spouse of Xxxxxx X. XxXxxxx.
ANNEX I
DI INDUSTRIES, INC.
EXERCISE NOTICE
_________________, ________
DI Industries,Inc.
000 Xxxxx Xxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Gentlemen:
I hereby acknowledge that I am acquiring ___________ shares ("Shares") of
common stock, $0.10 par value, of DI Industries, Inc. ("Corporation") pursuant
to that certain Non-Qualified Stock Option Agreement dated September , 1996 (the
"Agreement").
I understand that the Shares have not been registered under the Securities
Act of 1933 (the "Act") on the grounds that the transfer to me is exempt from
registration pursuant to Section 4(2) of the Act.
By executing this letter, I represent that I am acquiring the Shares for
investment for my own account and not as a nominee or agent or with a view to,
or for resale in connection with, any distribution of such Shares within the
meaning of the Act. I further represent that I do not have any contract,
undertaking, agreement, or arrangement with any person to sell, transfer or
grant participations in any of the Shares to any third persons.
I understand that, unless the Shares are then registered under the Act, I
may only dispose of the Shares with the prior written consent of the
Corporation.
I also understand that, unless the Shares are issued pursuant to an
effective registration statement under the Act, a legend substantially in the
form set below shall be placed on each certificate representing the Shares and
on any substitutes thereof.
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 OR UNDER THE BLUE SKY LAWS OF ANY STATE, AND MAY
NOT BE SOLD, ASSIGNED OR TRANSFERRED EXCEPT UPON SUCH REGISTRATION OR UPON
RECEIPT BY THE CORPORATION OF AN OPINION OF COUNSEL FOR THE CORPORATION
THAT SUCH REGISTRATION IS NOT REQUIRED FOR SUCH SALE, ASSIGNMENT OR
TRANSFER."
I also understand that the Corporation may issue stop transfer instructions
to the Corporation's transfer agent, if any, with respect to the Shares or, if
the Corporation transfers its own securities, it may make a notation in the
appropriate records that the Shares cannot be transferred without an opinion of
counsel in the form required by this paragraph.
I also understand that a legend as set forth below will be placed on each
certificate representing the Shares or any substitutes thereof.
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE GOVERNED BY THE TERMS OF
THE 1996 EMPLOYEE STOCK OPTION PLAN OF THE CORPORATION, DATED JULY 29,
1996, WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THE CORPORATION AND A
COPY OF WHICH WILL BE PROVIDED FOR INSPECTION UPON WRITTEN REQUEST."
I understand that I may be required to include in my taxable income the
amount by which the value of the Shares exceeds the exercise price paid and I
hereby authorizes the Corporation to withhold Shares of a value equivalent to
the amount of tax required to be withheld by the Corporation out of any taxable
income derived by me; provided, however, that I may, in the alternative, in
order to satisfy such withholding requirement, deliver to the Corporation cash
or other shares of the Corporation's common stock owned by me.
I understand the nature of the Shares and the financial risks thereof. I do
not desire any further information or data concerning the Corporation.
Very truly yours,
Xxxxxx X. XxXxxxx
Date: ____________________
