EXHIBIT 10.1
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of September 3, 1996, between DI
INDUSTRIES, INC., a Texas corporation (the "Company"), and XXXXXX X. XXXXXXXX
(the "Executive").
The Company desires to employ the Executive and the Executive
desires to accept employment with the Company, on the terms and conditions of
this Agreement.
Accordingly, the parties agree as follows:
1. EMPLOYMENT, DUTIES AND ACCEPTANCE.
1.1 EMPLOYMENT BY THE COMPANY; DUTIES. The Company hereby
agrees to employ the Executive for a term commencing on September 3, 1996, and
expiring at the end of the day on September 2, 1999 (such date, or later date to
which this Agreement is extended in accordance with the terms hereof, the
"Termination Date"), unless earlier terminated as provided in Article 4 or
unless extended as provided herein (the "Term"). The Term shall automatically be
extended on the Termination Date and each anniversary thereof for successive
one-year periods unless either party notifies the other on or before the date 90
days prior to the Termination Date that he or it desires to terminate the
Agreement. During the Term, the Executive shall initially serve in the capacity
of President and Chief Executive Officer of the Company and shall also serve in
those offices and directorships of subsidiary corporations or entities of the
Company to which he may from time to time be appointed or elected. During the
Term, the Executive shall devote all reasonable efforts and all of his business
time and services to the Company, subject to the direction of the Board. The
Executive shall not engage in any other business activities except for passive
investments in corporations or partnerships not engaged in the oil or gas
drilling or well servicing business. The Company acknowledges that the Executive
has farming and ranching interests, holds working and royalty interests, owns an
interest in a family corporation which may engage in oil and gas servicing
business and may own working, carried or royalty interests in oil and gas xxxxx,
none of which are or will be in competition with Company Business (as
hereinafter defined); provided, however, that the Executive (or his family
partnership or corporation) may own royalties with respect to mineral interests
owned by them prior to becoming part of Company Business.
1.2 ACCEPTANCE OF EMPLOYMENT BY THE EXECUTIVE. The Executive
hereby accepts such employment and shall render the services and perform the
duties described above.
2. COMPENSATION AND OTHER BENEFITS.
2.1 ANNUAL SALARY. The Company shall pay to the Executive an
annual salary at a rate of not less than two hundred seventy-five thousand
dollars ($275,000) per year (the "Annual Salary"), subject to increase at the
sole discretion of the Board of Directors of the Company (the "Board"). The
Annual Salary shall be payable in accordance with the payroll policies of the
Company as from time to time in effect, but in no event less frequently than
once
each month, less such deductions as shall be required to be withheld by
applicable law and regulations.
2.2 BONUSES. The Executive shall receive an incentive bonus,
if earned, with respect to the fiscal years ending during the term hereof (the
"Incentive Bonus"), provided that an Incentive Bonus, payable in respect of a
fiscal year, shall not exceed one-half of the Annual Salary for such fiscal
year. The amount of the Incentive Bonus for the fiscal year ending December 31,
1996, shall be determined by the Board, in its sole discretion. The criteria for
determining the amount of the Incentive Bonus for each fiscal year thereafter
shall be set forth in a formalized plan which is prepared by the Board and
approved by the Compensation Committee of the Board and the Executive in advance
of such fiscal year included within the Term of this Agreement (including any
extension thereof). The Board shall use reasonable guidelines for establishing
such criteria, based upon the performance of the Executive, as measured by the
extent to which the Company achieves its business plan and with due regard to
eliminating any positive or negative effect on performance attributable solely
to drilling market conditions. The approval of the Executive to his bonus plan
shall not be unreasonably withheld or delayed.
2.3 GRANT OF OPTION. The Company agrees to grant the
Executive, in part pursuant to the terms of its existing stock option plan or to
newly adopted or amended stock option plans, options to acquire two million
(2,000,000) shares of the Company's common stock, at an exercise price equal to
the lesser of $1.50 per share and the fair market value of such stock on the
date of grant. The Company agrees to use all reasonable efforts, consistent with
the foregoing, to ensure that that portion of such stock options designated by
the Executive to the Company on the date hereof meets all requirements for
treatment as Incentive Stock Options under the Internal Revenue Code of 1986, as
amended, and that such stock option plan meets the requirements of Rule 16b-3,
promulgated under Section 16 of the Securities Exchange Act of 1934, as amended.
If, to qualify for ISO treatment, the exercise price of the ISOs is greater than
would otherwise be provided for in this Section 2.3, the exercise price of the
options not eligible for ISO treatment ("NSOs") will be reduced so that the
aggregate exercise price of all such ISOs and NSOs shall equal $3,000,000 (i.e.
$1.50 times 2,000,000). Contemporaneously with the execution of this Agreement,
the Company and the Executive shall enter into an NSO agreement for the benefit
of the Executive in the form attached hereto as Exhibit A. The NSOs may be
transferred by the Executive to a trust or partnership, the beneficiaries or
partners of which shall be and remain members of the Executive's immediate
family and lineal descendants. Any transferee of the NSOs shall be subject to
the terms of the NSOs, and no transfer of NSOs by such trust or partnership
shall be permitted without the consent of the Company; provided, however, that
such transfer limitations shall not apply to any stock issued upon the exercise
of any of the NSOs. The Company and the Executive acknowledge that the Executive
plans to transfer or assign all or substantially all of the NSOs to such a
family-owned limited partnership promptly after the date of grant. The stock
options shall vest in five equal increments over a four-year period commencing
on the date of grant, and shall expire ten years after the date of grant. One
fifth of the ISOs and one fifth of the NSOs shall vest on December 31, 1996, and
on the first, second, third and fourth anniversary of the date of grant. The
Company hereby agrees to use all reasonable efforts, at its expense, to register
with the Securities and Exchange Commission and under applicable state blue sky
laws, and to list with the American Stock Exchange or such other exchange on
which the Company shares are listed from time to time, the
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shares of Company common stock which will be delivered to the Executive and the
Executive's permitted assigns upon the exercise of the options granted to the
Executive pursuant to this Section 2.3, but only to the extent that such
registration can be accomplished on Form S-8 or Form S-3 (or similar or
successor forms). The Company agrees to use all reasonable efforts to file the
registration statement covering such registration and the listing application
covering such listing on or before December 31, 1996. The Executive shall be
consulted with regard to options granted to other senior executives of the
Company.
2.4 VACATION POLICY. The Executive shall be entitled to a paid
vacation of four weeks during each year of the Term.
2.5 PARTICIPATION IN EMPLOYEE BENEFIT PLANS. The Company
agrees to permit the Executive during the Term, if and to the extent eligible,
to participate in any group life, hospitalization or disability insurance plan,
health program, pension plan, similar benefit plan or other so-called "fringe
benefits" of the Company (collectively, "Benefits") which may be available to
other senior executives of the Company on terms no less favorable to the
Executive than the terms offered to such other executives. The Company agrees to
use its best efforts to obtain immediate coverage for the Executive upon the
commencement of the Term under its existing or newly adopted medical expense and
hospitalization plan for employees without premium surcharge and without
exclusions for disclosed preexisting conditions. The Executive shall cooperate
with the Company in applying for such coverage, including submitting to a
physical exam and providing all relevant health and personal data.
2.6 GENERAL BUSINESS EXPENSES. The Company shall pay or
reimburse the Executive for all expenses reasonably and necessarily incurred by
the Executive during the Term in the performance of the Executive's services
under this Agreement. Such payment shall be made upon presentation of such
documentation as the Company customarily requires of its senior executive
employees prior to making such payments or reimbursements. The Company shall
reimburse the Executive for 70% of his reasonable legal expenses incurred in
connection with the negotiation and preparation of this Agreement.
2.7 COMPANY CAR, CELLULAR TELEPHONE. The Company shall provide
an automobile, of the Executive's choice, to be used by the Executive during the
Term hereof or until his employment hereunder is terminated. The purchase price
of the automobile shall not exceed $45,000 unless increased by the Board. If
requested by the Executive, the Company will replace the automobile with a new
automobile no less frequently than every three years during the Term hereof. The
Company shall, at its expense, pay any and all expenses associated with the
operation of such company car, including but not limited to, collision and
liability insurance, maintenance and repair costs, replacement parts, tires,
fuel and oil. The Executive may use the automobile for personal purposes and, to
the extent of the value of such personal usage, the value thereof shall be
deemed to be additional compensation.
The Company shall also furnish the Executive with a cellular
telephone of his choice and the Company shall pay all charges in connection with
the use thereof, other than charges for calls not related to Executive's duties
hereunder.
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3. NON-COMPETITION.
3.1 COVENANTS AGAINST COMPETITION. The Executive acknowledges
that (i) the Company is currently engaged in the business of owning, managing
and operating onshore drilling and workover rigs for its own account or for
others which are contracted or hired for the purpose of drilling and/or workover
of oil or natural gas xxxxx and from time to time acquiring working or carried
interests in oil and gas xxxxx in connection with, or incident to, such drilling
or workover activities (the "Company Business"); (ii) his work for the Company
will give him access to trade secrets of and confidential information concerning
the Company; and (iii) the agreements and covenants contained in this Agreement
are essential to protect the business and goodwill of the Company. Accordingly,
the Executive covenants and agrees as follows:
3.1.1 NON-COMPETE. The Executive shall not during the
Restricted Period (as defined below) in the United States or any other place
where the Company and its affiliates conduct operations related to the Company
Business, directly or indirectly (except in the Executive's capacity as an
officer of the Company), (i) engage or participate in the Company Business; (ii)
enter the employ of, or render any other services to, any person engaged in the
Company Business except as permitted hereunder; or (iii) become interested in
any such person in any capacity, including, without limitation, as an
individual, partner, shareholder, lender, officer, director, principal, agent or
trustee except as permitted hereunder; PROVIDED, HOWEVER, that the Executive may
own, directly or indirectly, solely as an investment, securities of any person
traded on any national securities exchange or listed on the National Association
of Securities Dealers Automated Quotation System if the Executive is not a
controlling person of, or a member of a group which controls, such person and
the Executive does not, directly or indirectly, own 1% or more of any class of
equity securities, or securities convertible into or exercisable or exchangeable
for 1% or more of any class of equity securities, of such person. The Executive
shall not during the Restricted Period acquire any interest in any oil or gas
xxxxx that the Company is drilling or intends to drill. As used herein, the
"Restricted Period" shall mean a period commencing on the date hereof and
terminating upon the first to occur of (a) the date on which the Company
terminates or is deemed to terminate the Executive's employment without Cause,
(b) the date the Executive terminates or is deemed to terminate his employment
pursuant to Section 4.6 hereof or (c) the date of termination of this Agreement;
PROVIDED, HOWEVER, that if the Company shall have terminated the Executive's
employment for Cause and such Cause in fact exists or if the Executive shall
have terminated his employment with the Company in breach of the terms of this
Agreement, the Restricted Period shall end twelve months following the
termination of the Executive's employment hereunder.
3.1.2 CONFIDENTIAL INFORMATION; PERSONAL RELATIONSHIPS. The
Executive acknowledges that the Company has a legitimate and continuing
proprietary interest in the protection of its confidential information and that
it has invested substantial sums and will continue to invest substantial sums to
develop, maintain and protect confidential information. The Executive agrees
that, during and after the Restricted Period, the Executive shall keep secret
and retain in strictest confidence, and shall not use for the benefit of himself
or others all confidential matters directly relating to the Company Business
including, without limitation, financial information, trade secrets, customer
lists, details of client or consultant contracts, pricing policies, operational
methods, marketing plans or strategies, product development techniques or plans,
business acquisition plans, new personnel acquisition plans, technical
processes, designs and
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design projects, inventions and research projects of the Company, its
affiliates, or any other entity which may hereafter become an affiliate thereof,
learned by the Executive heretofore or hereafter unless otherwise in the public
domain other than as a result of disclosure by the Executive or unless
independently obtained from third parties not under disclosure restrictions in
favor of the Company.
3.1.3 PROPERTY OF THE COMPANY. All memoranda, notes, lists,
records, engineering drawings, technical specifications and related documents
and other documents or papers (and all copies thereof) relating to the Company,
including such items stored in computer memories, microfiche or by any other
means, made or compiled by or on behalf of the Executive after the date hereof,
or made available to the Executive after the date hereof relating to the
Company, its affiliates or any entity which may hereafter become an affiliate
thereof, shall be the property of the Company, and shall be delivered to the
Company promptly upon the termination of the Executive's employment with the
Company or at any other time upon request; PROVIDED, HOWEVER, that Executive's
address books, diaries, chronological correspondence files and rolodex files
shall be deemed to be property of the Executive.
3.1.4 ORIGINAL MATERIAL. The Executive agrees that any
inventions, discoveries, improvements, ideas, concepts or original works of
authorship relating directly to the Company Business, including without
limitation computer systems, programs and manufacturing techniques, whether or
not protectable by patent or copyright, that have been originated, developed or
reduced to practice by the Executive alone or jointly with others during the
Executive's employment with the Company shall be the property of and belong
exclusively to the Company. The Executive shall promptly and fully disclose to
the Company the origination or development by the Executive of any such material
and shall provide the Company with any information that it may reasonably
request about such material.
3.1.5 EMPLOYEES OF THE COMPANY AND ITS AFFILIATES. During the
Restricted Period, the Executive shall not, directly or indirectly, hire or
solicit, or cause others to hire or solicit, for employment by any person other
than the Company or any affiliate or successor thereof, any employee of the
Company and its affiliates or successors or encourage any such employee to leave
his employment.
3.1.6 CUSTOMERS OF THE COMPANY. During the Restricted Period,
the Executive shall not, except by reason of and in his capacity as an officer
of the Company, directly or indirectly, request or advise a customer of the
Company or its subsidiaries to curtail or cancel such customer's business
relationship with the Company.
3.2 RIGHTS AND REMEDIES UPON BREACH. If the Executive
breaches, or threatens to commit a breach of, any of the provisions contained in
Section 3.1 of this Agreement (the "Restrictive Covenants"), the Company shall
have the following rights and remedies, each of which rights and remedies shall
be independent of the others and severally enforceable, and each of which is in
addition to, and not in lieu of, any other rights and remedies available to the
Company under law or in equity:
3.2.1 SPECIFIC PERFORMANCE. The right and remedy to have the
Restrictive Covenants specifically enforced by any court of competent
jurisdiction, it being agreed
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that any breach or threatened breach of the Restrictive Covenants would cause
irreparable injury to the Company and that money damages would not provide an
adequate remedy to the Company.
3.2.2 ACCOUNTING. The right and remedy to require the
Executive to account for and pay over to the Company all compensation, profits,
monies, accruals, increments or other benefits derived or received by the
Executive as the result of any action constituting a breach of the Restrictive
Covenants.
3.3 SEVERABILITY OF COVENANTS. The Executive acknowledges and
agrees that the Restrictive Covenants are reasonable and valid in duration and
geographical scope and in all other respects. If any court determines that any
of the Restrictive Covenants, or any part thereof, is invalid or unenforceable,
the remainder of the Restrictive Covenants shall not thereby be affected and
shall be given full effect without regard to the invalid portions.
3.4 BLUE-PENCILLING. If any court determines that any of the
Restrictive Covenants, or any part thereof, is unenforceable because of the
duration or geographical scope of such provision, such court shall have the
power to reduce the duration or scope of such provision, as the case may be,
and, in its reduced form, such provision shall then be enforceable.
3.5 ENFORCEABILITY IN JURISDICTIONS. The Company and the
Executive intend to and hereby confer jurisdiction to enforce the Restrictive
Covenants upon the courts of any jurisdiction within the geographical scope of
such Restrictive Covenants. If the courts of any one or more of such
jurisdictions hold the Restrictive Covenants unenforceable by reason of the
breadth of such scope or otherwise, it is the intention of the Company that such
determination not bar or in any way affect the right of the Company to the
relief provided above in the courts of any other jurisdiction within the
geographical scope of such Restrictive Covenants, as to breaches of such
Restrictive Covenants in such other respective jurisdictions, such Restrictive
Covenants as they relate to each jurisdiction being, for this purpose, severable
into diverse and independent covenants.
4. TERMINATION.
4.1 TERMINATION UPON DEATH. If the Executive dies during the
Term, this Employment Agreement shall terminate, provided, however, that in any
such event, the Company shall pay to the Executive, or to his estate, any
portion of the Annual Salary that shall have been earned by the Executive prior
to the termination but not yet paid, any Benefits that have vested in the
Executive at the time of such termination as a result of his participation in
any of the Company's benefit plans shall be paid to the Executive, or to his
estate or designated beneficiary, in accordance with the provisions of such
plan; and the Company shall reimburse the Executive, or his estate, for any
expenses with respect to which the Executive is entitled to reimbursement
pursuant to Section 2.6 of this Agreement, and the Executive's right to
indemnification, payment or reimbursement pursuant to Section 6 of this
Agreement shall not be affected by such termination and shall continue in full
force and effect, both with respect to proceedings that are threatened, pending
or completed at the date of such termination and with respect to proceedings
that are threatened, pending or completed after that date.
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4.2 TERMINATION WITH CAUSE. The Company has the right, at any
time during the Term, subject to all of the provisions hereof, exercisable by
serving notice, effective on or after the date of service of such notice as
specified therein, to terminate the Executive's employment under this Agreement
and discharge the Executive with Cause. If such right is exercised, the
Company's obligation to the Executive shall be limited solely to the payment of
unpaid Annual Salary accrued, together with unpaid Incentive Bonus, if any, and
Benefits vested up to the effective date specified in the Company's notice of
termination. As used in this Agreement, the term "Cause" shall mean and include
(i) chronic alcoholism or controlled substance abuse as determined by a doctor
mutually acceptable to the Company and the Executive, (ii) an act of proven
fraud or dishonesty on the part of the Executive with respect to the Company or
its subsidiaries; (iii) knowing and material failure by the Executive to comply
with material applicable laws and regulations relating to the business of the
Company or its subsidiaries; (iv) the Executive's material and continuing
failure to perform (as opposed to unsatisfactory performance) his duties
hereunder or a material breach by the Executive of this Agreement except, in
each case, where such failure or breach is caused by the illness or other
similar incapacity or disability of the Executive; or (v) conviction of a
misdemeanor involving moral turpitude or a felony. Prior to the effectiveness of
termination for Cause under subclause (i), (ii), (iii) or (iv) above, the
Executive shall be given 30 days' prior notice from the Board specifically
identifying the reasons which are alleged to constitute cause for any
termination hereunder and an opportunity to be heard by the Board in the event
Executive disputes such allegations.
4.3 TERMINATION WITHOUT CAUSE. The Company has the right, at
any time during the Term, subject to all of the provisions hereof, exercisable
by serving notice, effective on or after the date of service of such notice as
specified therein, to terminate the Executive's employment under this Agreement
and discharge the Executive without Cause. If the Executive is terminated during
the Term without Cause (including any termination which is deemed to be a
constructive termination without Cause under Section 4.6 hereof), the Company's
obligation to the Executive shall be limited solely to the payment, at the times
and upon the terms provided for herein, of the greater of (i) the Executive's
Annual Salary and Incentive Bonus for the number of full months remaining in the
Term of this Agreement (assuming no automatic extension of the Term) had the
Executive not been so terminated and (ii) the Executive's Annual Salary for a
period of 36 months, in each case based on the Annual Salary of the Executive in
effect on the date of termination (or, if the Company has reduced the
Executive's Annual Salary in breach of this Agreement, the Executive's Annual
Salary before such reduction) and, in the case of clause (i), the average
Incentive Bonus received by the Executive for the immediately preceding two
fiscal years, together with all unpaid Incentive Bonus and Benefits awarded or
accrued up to the date of termination. If the Executive is terminated after he
has received one Incentive Bonus but before he has received two, the Incentive
Bonus in clause (i) shall be based on the amount of that one Incentive Bonus; if
he has not yet received an Incentive Bonus, it shall be based on the maximum
Incentive Bonus (i.e., one half of the Annual Salary). In the event of a
termination by the Company without Cause within 180 days after a Change of
Control (as hereinafter defined), including a constructive termination without
Cause pursuant to Section 4.6, the amounts due to the Executive pursuant to this
Section 4.3 shall be due and payable in one lump-sum payment within 60 days
after such termination. In all other cases, any amounts due to the Executive
pursuant to this Section 4.3 shall be due and payable as and when they would
have become due and payable absent such termination.
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4.4 TERMINATION BY THE EXECUTIVE. Any termination of this
Agreement by the Executive during the Term, except such termination as is deemed
to be a constructive termination without Cause by the Company under Section 4.6
of this Agreement, shall be deemed to be a breach of the terms of this Agreement
for the purposes of Section 3.1.1 hereof and shall entitle the Company to
discontinue payment of all Annual Salary, Incentive Bonuses and Benefits
accruing from and after the date of such termination.
4.5 TERMINATION UPON DISABILITY. If during the Term the
Executive becomes physically or mentally disabled, whether totally or partially,
as evidenced by the written statement of a competent physician licensed to
practice medicine in the United States who is mutually acceptable to the Company
and the Executive or his closest relative if he is not then able to make such a
choice, so that the Executive is unable substantially to perform his services
hereunder for (i) a period of four consecutive months, or (ii) for shorter
periods aggregating six months during any twelve-month period, the Company may
at any time after the last day of the four consecutive months of disability or
the day on which the shorter periods of disability equal an aggregate of six
months, by written notice to the Executive, terminate the Executive's employment
hereunder and discontinue payments of the Annual Salary, Incentive Bonuses and
Benefits accruing from and after the date of such termination. The Executive
shall be entitled to the full compensation payable to him hereunder for periods
of disability shorter than the periods specified in clauses (i) and (ii) of the
previous sentence.
4.6 CONSTRUCTIVE TERMINATION WITHOUT CAUSE. Notwithstanding
any other provision of this Agreement, the Executive's employment under this
Agreement may be terminated during the Term by the Executive, which shall be
deemed to be constructive termination by the Company without Cause, if one of
the following events shall occur without the consent of the Executive: (i) a
failure to elect or reelect or to appoint or reappoint the Executive to the
office of Chief Executive Officer of the Company or other material change by the
Company of the Executive's functions, duties or responsibilities which change
would reduce the ranking or level, dignity, responsibility, importance or scope
of the Executive's position with the Company from the position and attributes
thereof described in Section 1 above; (ii) the assignment or reassignment by the
Company of the Executive to a location outside an area of metropolitan Houston,
Texas, designated on the map attached as Exhibit B to this Agreement; (iii) the
liquidation, dissolution, consolidation or merger of the Company, or transfer of
all or substantially all of its assets, other than a transaction in which a
successor corporation with a net worth at least equal to that of the Company
assumes this Agreement and all obligations and undertakings of the Company
hereunder; (iv) a reduction in the Executive's fixed salary or change by the
Company without the consent of the Executive in the method of determining
Executive's annual bonus that results in a reduction of such annual bonus,
calculated on the assumption that any objectives for full payment are attained
but not exceeded; (v) a Change of Control as hereinafter defined; (vi) the
failure of the Company to continue to provide the Executive with office space,
related facilities and secretarial assistance that are commensurate with the
Executive's responsibilities to and position with the Company; (vii) the
notification by the Company of the Company's intention not to observe or perform
one or more of the obligations of the Company under this Agreement; (viii) the
failure by the Company to indemnify, pay or reimburse the Executive at the time
and under the circumstances required by Section 6 of this Agreement; (ix) the
occurrence of any other material breach of this Agreement by the Company or any
of its subsidiaries; or (x) the delivery of notice by the Company in
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accordance with Section 1.1 hereof that it desires to terminate the Agreement,
but only if such notice is given before the Term has been automatically extended
three times . Any such termination shall be made by written notice to each
member of the Board, specifying the event relied upon for such termination and
given within 60 days after such event. Any constructive termination shall be
effective 60 days after the date each member of the Board has been given such
written notice setting forth the grounds for such termination with specificity;
PROVIDED, HOWEVER, that Executive shall not be entitled to terminate this
Agreement in respect of any of the grounds set forth above if within 60 days
after such notice the action constituting such ground for termination is no
longer continuing. A constructive termination by the Company without Cause shall
terminate the Restrictive Period hereunder.
4.7 For the purposes hereof, a "Change of Control of the
Company" shall be deemed to have occurred if after the effective date (i) any
"person" (as such term is used in Sections 13(d) and 14(d) of the Act) is or
becomes the "beneficial owner" (as defined in Rule 13d-3 under the Securities
Exchange Act of 1934 (the "Act")), directly or indirectly, of securities of the
Company representing 50% or more of the combined voting power of the Company's
then outstanding securities without the prior approval of at least a majority of
the members of the Board in office immediately prior to such person attaining
such percentage interest; (ii) there occurs a proxy contest or a consent
solicitation, or the Company is a party to a merger, consolidation, sale of
assets, plan of liquidation or other reorganization not approved by at least a
majority of the members of the Board in office, as a consequence of which
members of the Board in office immediately prior to such transaction or event
constitute less than a majority of the Board thereafter; or (iii) during any
period of two consecutive years, other than as a result of an event described in
clause (ii) of this Section 4.7, individuals who at the beginning of such period
constituted the Board (including for this purpose any new director whose
election or nomination for election by the Company's stockholders was approved
by a vote of at least a majority of the directors then still in office who were
directors at the beginning of such period) cease for any reason to constitute at
least a majority of the Board.
5. INSURANCE. The Company may, from time to time, apply for and take
out, in its own name and at its own expense, naming itself or one or more of its
affiliates as the designated beneficiary (which it may change from time to
time), policies for life, health, accident, disability or other insurance upon
the Executive in any amount or amounts that it may deem necessary or appropriate
to protect its interest. The Executive agrees to aid the Company in procuring
such insurance by submitting to medical examinations and by filling out,
executing and delivering such applications and other instruments in writing as
may reasonably be required by an insurance company or companies to which any
application or applications for insurance may be made by or for the Company.
6. INDEMNIFICATION.
6.1 The Company shall, to the extent not prohibited by law,
indemnify the Executive if he is made, or threatened to be made, a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, including an action by or in the
right of the Company to procure a judgment in its favor (hereinafter a
"Proceeding"), by reason of the fact that the Executive is or was a director or
officer of the Company, or is or was serving in any capacity at the request of
the Company for
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any other corporation, partnership, joint venture, trust, employee benefit plan
or other enterprise, against judgments, fines, penalties, excise taxes, amounts
paid in settlement and costs, charges and expenses (including attorneys' fees
and disbursements) paid or incurred in connection with any such Proceeding.
6.2 The Company shall, from time to time, reimburse or advance
to the Executive the funds necessary for payment of expenses, including
attorneys' fees and disbursements, incurred in connection with any Proceeding in
advance of the final disposition of such Proceeding; PROVIDED, HOWEVER, that, if
required by the Texas Business Corporation Act, such expenses incurred by or on
behalf of the Executive may be paid in advance of the final disposition of a
Proceeding only upon receipt by the Company of an undertaking, by or on behalf
of the Executive, to repay any such amount so advanced if it shall ultimately be
determined by final judicial decision from which there is no further right of
appeal that the Executive is not entitled to be indemnified for such expenses.
6.3 The right to indemnification and reimbursement or
advancement of expenses provided by, or granted pursuant to, this Article 6
shall not be deemed exclusive of any other rights which the Executive may now or
hereafter have under any law, by-law, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his official capacity
and as to action in another capacity while holding such office.
6.4 The right to indemnification and reimbursement or
advancement of expenses provided by, or granted pursuant to, this Article 6
shall continue as to the Executive after he has ceased to be a director or
officer and shall inure to the benefit of the heirs, executors and
administrators of the Executive.
6.5 The Company shall purchase and maintain director and
officer liability insurance on such terms and providing such coverage as the
Board determines is appropriate, and the Executive shall be covered by such
insurance on the same basis as the other directors and executive officers of the
Company.
6.6 The right to indemnification and reimbursement or
advancement of expenses provided by, or granted pursuant to, this Article 6
shall be enforceable by the Executive in any court of competent jurisdiction.
The burden of proving that such indemnification or reimbursement or advancement
of expenses is not appropriate shall be on the Company. Neither the failure of
the Company (including its board of directors, independent legal counsel, or its
stockholders) to have made a determination prior to the commencement of such
action that such indemnification or reimbursement or advancement of expenses is
proper in the circumstances nor an actual determination by the Company
(including its board of directors, independent legal counsel, or its
stockholders) that the Executive is not entitled to such indemnification or
reimbursement or advancement of expenses shall constitute a defense to the
action or create a presumption that the Executive is not so entitled. The
Executive shall also be indemnified for any expenses incurred in connection with
successfully establishing his right to such indemnification or reimbursement or
advancement of expenses, in whole or in part, in any such proceeding.
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6.7 If the Executive serves (1) another corporation of which a
majority of the shares entitled to vote in the election of its directors is held
by the Company, or (2) any employee benefit plan of the Company or any
corporation referred to in clause (1), in any capacity, then he shall be deemed
to be doing so at the request of the Company.
6.8 The right to indemnification or reimbursement or
advancement of expenses shall be interpreted on the basis of the applicable law
in effect at the time of the occurrence of the event or events giving rise to
the applicable Proceeding.
7. OTHER PROVISIONS.
7.1 CERTAIN DEFINITIONS. As used in this Agreement, the
following terms have the following meanings unless the context otherwise
requires:
(i) "affiliate" with respect to the Company means any
other person controlled by or under common control with the Company
but shall not include any stockholder or director of the Company, as
such.
(ii) "person" means any individual, corporation,
partnership, firm, joint Company, association, joint-stock company,
trust, unincorporated organization, governmental or regulatory body
or other entity.
(iii) "subsidiary" means any corporation 50% or more of
the voting securities of which are owned directly or indirectly by
the Company.
7.2 NOTICES. Any notice or other communication required or
permitted hereunder shall be in writing and shall be delivered personally,
telegraphed, telexed, sent by facsimile transmission or sent by certified,
registered or express mail, postage prepaid. Any such notice shall be deemed
given when so delivered personally, telegraphed, telexed or sent by facsimile
transmission or, if mailed, on the date of actual receipt thereof, as follows:
(i) if to the Company, to:
DI Industries, Inc.
000 Xxxxx Xxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attention:
with a copy to:
Xxxxxx & Xxxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
(ii) if to the Executive, to:
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Xxxxxx X. Xxxxxxxx
0000 Xxxxxx Xxxxx
Xxxxxxxxx, Xxxxx 00000
Any party may change its address for notice hereunder by notice to the other
party hereto.
7.3 ENTIRE AGREEMENT. This Agreement contains the entire
agreement between the parties with respect to the subject matter hereof and
supersedes all prior agreements, written or oral, with respect thereto.
7.4 WAIVERS AND AMENDMENTS. This Agreement may be amended,
superseded, canceled, renewed or extended, and the terms and conditions hereof
may be waived, only by a written instrument signed by the parties or, in the
case of a waiver, by the party waiving compliance. No delay on the part of any
party in exercising any right, power or privilege hereunder shall operate as a
waiver thereof. Nor shall any waiver on the part of any party of any such right,
power or privilege hereunder, nor any single or partial exercise of any right,
power or privilege hereunder, preclude any other or further exercise thereof or
the exercise of any other right, power or privilege hereunder.
7.5 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas (without giving
effect to the choice of law provisions thereof) where the employment of the
Executive shall be deemed, in part, to be performed and enforcement of this
Agreement or any action taken or held with respect to this Agreement shall be
taken in the courts of appropriate jurisdiction in Houston, Texas.
7.6 ASSIGNMENT. This Agreement, and any rights and obligations
hereunder, may not be assigned by the Executive and may be assigned by the
Company (subject to Section 4.6 (iii) hereof) only to a successor by merger or
purchasers of substantially all of the assets of the Company.
7.7 COUNTERPARTS. This Agreement may be executed in separate
counterparts, each of which when so executed and delivered shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
7.8 HEADINGS. The headings in this Agreement are for reference
purposes only and shall not in any way affect the meaning or interpretation of
this Agreement.
7.9 NO PRESUMPTION AGAINST INTEREST. This Agreement has been
negotiated. drafted, edited and reviewed by the respective parties, and
therefore, no provision arising directly or indirectly herefrom shall be
construed against any party as being drafted by said party.
7.10 VALIDITY CONTEST. The Company shall promptly pay any and
all legal fees and expenses incurred by the Executive from time to time as a
direct result of the Company's contesting the due execution, authorization,
validity or enforceability of this Agreement.
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7.11 BINDING AGREEMENT. This Agreement shall inure to the
benefit of and be binding upon the Company and its respective successors and
assigns and the Executive and his legal representatives.
7.12 RELOCATION OF OFFICE. The Board shall, after consulting
with the Executive, select the location and office space for the Company's
corporate offices in the Houston, Texas, area in the area designated on the map
attached as Exhibit B to this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first above written.
DI INDUSTRIES, INC.
By /s/ XXXX XXXX
Name: Xxxx Xxxx
Title:
EXECUTIVE
/s/ XXXXXX X. XXXXXXXX
Xxxxxx X. Xxxxxxxx
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