EXHIBIT 10.2
DI INDUSTRIES, INC.
NON-QUALIFIED STOCK OPTION AGREEMENT
THIS NON-QUALIFIED STOCK OPTION 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.
XXXXXXXX, an individual (the "Optionee");
W I T N E S S E T H:
WHEREAS, as an inducement to Optionee's agreement to enter into a contract
of employment with the Corporation and to 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 under the terms of an Employment
Agreement dated as of even date herewith (the "Employment Agreement"); 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 two million (2,000,000)
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 $[the lesser of $1.50 or market at effective date of grant]
per share (hereinafter the "Exercise Price").
2. EXERCISE PERIOD. Subject to Sections 8(c) and 9, 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.
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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 in cash. If Optionee has transferred all or a
portion of the Options to the Partnership as contemplated by Section 4 below,
the Partnership shall be treated as the Optionee for purposes of the option
exercise provisions of this Section 3. For purposes of this Agreement, the fair
market value of a share of common stock on any particular date shall be the last
sales price of the Common Stock on that date as reported on a national
securities exchange or on the NASDAQ National Market System or, if last sale
reporting quotation is not available for the common stock, the average of the
bid and ask prices for the common stock at the end of the trading day, as
reported by NASDAQ or in the National Quotation Bureau, Inc.'s "Pink Sheets" or,
if such quotations are not available, such fair market value will be determined
by the mutual agreement of the Corporation and the holder of the Options,
without regard to any restriction other than a restriction that, by its terms,
will never lapse.
4. TRANSFERABILITY OF OPTION. Except as set forth below in this Section,
the Option shall not be transferable or assignable, in whole or in part, and
except as otherwise provided in this Section 4 or Section 9 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). The Corporation and Optionee acknowledge that Optionee plans
to transfer or assign some or all of the Options to a limited partnership owned
by members of the Optionee's immediate family (the "Partnership") promptly after
the date of this Agreement. Optionee agrees to ensure that no person obtains any
beneficial interest in the Partnership who is not a member of his immediate
family. The Corporation and the Optionee agree that the Optionee shall have the
right, upon written request to the Corporation, to designate a priority vesting
schedule as between the Options retained by Optionee and those Options
transferred to the Partnership. By way of illustration only, the Optionee may
determine that those Options retained by him shall vest first and those
transferred to the Partnership shall begin vesting only after the Options
retained by the Optionee have completely vested.
5. PAYMENT OF TAXES UPON EXERCISE. The Optionee understands and
acknowledges that under currently applicable law, at least as relates to the
options other than those options sold to the Partnership, 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 (to the extent that
the Corporation determines in good faith that such withholding is
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required under applicable law) out of any taxable income to be realized 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. SECURITIES LAW REQUIREMENTS; REGISTRATION The Corporation shall use all
reasonable efforts to ensure that the Options meet the requirements of Rule
16b-3, promulgated under Section 16 of the Securities Exchange Act of 1934, as
amended. The Corporation , at the Corporation's expense, register with the
Securities and Exchange Commission and under applicable blue sky laws, and list
with the American Stock Exchange or such other exchange on which Corporation
shares are listed from time to time, the Option Shares, as such Option Shares
may be modified by Section 8 hereof, which will be delivered to Optionee (and
Optionee's transferees) upon the exercise of the Options. The Corporation shall
use all reasonable efforts to cause a registration statement covering such
registration and the listing application covering such listing on to be ordered
effective or approved on or before December 31, 1996. It is the intent of the
parties to this Agreement that Optionee (and Optionee's transferees) may sell
the shares of common stock of the Corporation immediately after the exercise of
the Options.
7. NO RIGHTS AS SHAREHOLDER. The Optionee (and Optionee's transferees)
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 (and
Optionee's transferees) of a stock certificate representing such Option Shares.
Except as otherwise provided in Section 8 hereof, the Optionee (and Optionee's
transferees) 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 (and Optionee's transferees), 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 (and Optionee's
transferees) as soon as practicable thereafter and in any event no later than
five (5) business days after receipt of the applicable Notice and Payment from
the Optionee (and/or Optionee's transferees).
8. 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
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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
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 a description of the material
terms and conditions thereof to be delivered to the Optionee (and
Optionee's transferees) at least thirty (30) days prior to the proposed
effective date (the "Effective Date") of such event. The Optionee (and
Optionee's transferees) shall be entitled to exercise the Option (as to
all Option Shares, whether or not the Option is not then otherwise
exercisable under Section 2) until the earlier of the Effective Date or
the Expiration Date. Notwithstanding the foregoing, in the event that
Optionee (and/or Optionee's transferees) is precluded from immediately
selling the Option Shares received upon the exercise of the Options by
applicable state or federal securities laws, the Corporation agrees to
loan to Optionee (and/or Optionee's transferees, if applicable) amounts
necessary to fund the Payments to the Corporation pursuant to Section 3
hereof upon the exercise of the Options. The loans contemplated by this
Section shall bear interest (at the average borrowing rate charged from
time to time on the Company's indebtedness to its principal lender or
lenders), shall be secured by the Option Shares issued upon the exercise
of the applicable Options and shall be repayable promptly after the lapse
of the securities laws restrictions which precluded the sale of the Option
Shares by Optionee (and Optionee's transferees, if applicable) immediately
after exercise of the Options. To the extent that the Merger, dissolution
or liquidation is consummated after the Expiration 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.
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(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.
9. TERMINATION.Except as otherwise provided in this Section 9, if the
Optionee for any reason whatsoever 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 Optionee (to the extent that the Optionee is entitled to do so at the date
of cessation) within four years following the date of cessation of employment,
subject to the Expiration Date. Notwithstanding the foregoing:
(a) If the Optionee is terminated for cause (as defined in the
Employment Agreement), the Option will terminate as to all of the
unexercised Option Shares on the thirtieth day following such termination,
during which thirty days the Optionee may exercise the option as to the
Option Shares exercisable on or prior to the date of such termination for
cause.
(b) If the Optionee is terminated without cause (as defined in the
Employment Agreement), including a constructive termination without cause
(as described in Section 4.6 of the Employment Agreement), the Optionee
may exercise the Option as to all of the Option Shares (whether previously
vested or not); provided that any such exercise shall occur on or before
four years after the termination of Optionee's employment.
(c) If the Optionee becomes physically or mentally 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 two years year after the date of
disability or the Expiration Date, whichever is earlier.
" Physically or mentally disabled" shall have the meaning provided
in Section 4.5 of the Employment Agreement.
(d) 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 two (2) years after the date of
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death or the Expiration Date, whichever is earlier, and if not so
exercised, the Option shall thereupon terminate.
Nothing in (a), (b), (c) or (d) shall extend the time for exercising
the Option granted pursuant to this Agreement beyond the Expiration Date.
10. 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 disposition is
permissible under applicable state and federal securities laws.
11. 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 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. Xxxxxxxx
0000 Xxxxxx Xxxxx
Xxxxx Xxxx, Xxxxx 00000
12. 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.
13. ENTIRE AGREEMENT. This Agreement embodies the entire agreement and
understanding between the Corporation and the Optionee relating to the subject
matter hereof.
14. GOVERNING LAW. This Agreement shall be governed by the laws of the
State of Texas.
15. 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.
16. 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.
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IN WITNESS WHEREOF, this Agreement has been executed and delivered as of
the date first written above.
CORPORATION:
DI INDUSTRIES, INC.
By: /s/ XXXX XXXX
Name: Xxxx Xxxx
Title: Chairman of the Board
OPTIONEE:
/s/ XXXXXX X. XXXXXXXX
Xxxxxx X. Xxxxxxxx
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ACKNOWLEDGMENT OF SPOUSE TO
TERMS OF NON-QUALIFIED STOCK OPTION AGREEMENT
I, Xxxxx X. Xxxxxxxx, am the spouse of Xxxxxx X. Xxxxxxxx ("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 day of September 3, 1996.
/s/ XXXXX X. XXXXXXXX
Xxxxx X. Xxxxxxxx
Spouse of Xxxxxx X. Xxxxxxxx
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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 agree that the shares purchased will only be transferable in compliance
with applicable securities laws.
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,
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(Signature)
--------------------------------
(Name)
Date:___________________________
