INCENTIVE STOCK OPTION AGREEMENT
Exhibit
10.4
THIS
INCENTIVE STOCK OPTION AGREEMENT
(the
“Agreement”) is made as of the XX
day of <DATE>, XXXX,
between
STANDARD
DRILLING, INC.,
a
Delaware corporation (the “Company”), and <NAME>(“Executive”).
To
carry
out the purposes of the STANDARD
DRILLING, INC. 2006 STOCK INCENTIVE PLAN
(the
“Plan”), by affording Executive the opportunity to purchase shares of the common
stock of the Company, par value $0.001 per share (“Stock”), and in consideration
of the mutual agreements and other matters set forth herein and in the Plan,
the
Company and Executive hereby agree as follows:
1.
Grant
of Option.
The
Company hereby irrevocably grants to Executive the right and option (“Option”)
to purchase all or any part of an aggregate of <NUMBER>
shares of
Stock on the terms and conditions set forth herein and in the Plan, which Plan
is incorporated herein by reference as a part of this Agreement. In the event
of
any conflict between the terms of this Agreement and the Plan, the Plan shall
control. Capitalized terms used but not defined in this Agreement shall have
the
meaning attributed to such terms under the Plan, unless the context requires
otherwise. This Option is intended to constitute an incentive stock option,
within the meaning of section 422(b) of the Code, to the maximum extent
permitted under the Code. Executive acknowledges that only a portion of this
Option may qualify as such an incentive stock option due to the limitation
set
forth in section 422(d) of the Code.
2.
Purchase
Price.
The
purchase price of Stock purchased pursuant to the exercise of this Option shall
be <PRICE>
per
share, which has been determined to be not less than the Fair Market Value
of
the Stock at the date of grant of this Option. For all purposes of this
Agreement, Fair Market Value of Stock shall be determined in accordance with
the
provisions of the Plan.
3.
Exercise
of Option.
Subject
to the earlier expiration of this Option as herein provided, this Option may
be
exercised, by written notice to the Company at its principal executive office
addressed to the attention of its Corporate Secretary (or such other officer
or
Executive of the Company as the Company may designate from time to time), at
any
time and from time to time after the date of grant hereof, but, except as
otherwise provided below, this Option shall not be exercisable for more than
a
percentage of the aggregate number of shares offered by this Option determined
by the number of full years from the date of grant hereof to the date of such
exercise, in accordance with the following schedule:
|
Number
of Full Years
|
Percentage
of Shares
That
May Be Purchased
|
|
Less
than
|
1 year |
0%
|
|
|
1
year
|
25%
|
|
|
2
years
|
50%
|
|
|
3
years
|
75%
|
|
|
4
years or more
|
100%
|
Notwithstanding
the exercise schedule above or any provision in the Plan to the contrary, if
Executive is employed by the Company immediately prior to the consummation
of
any Corporate Change (as defined below), this Option shall be exercisable for
the entire number of shares set forth in Paragraph 1 hereof upon the
consummation of such Corporate Change. For purposes of the preceding sentence,
the term “Corporate Change” shall have the same meaning as is assigned to such
term in the Plan; provided, however, that the term “Corporate Change” shall not
include any reorganization, merger, consolidation, or similar transaction or
series of transactions pursuant to which the record holders of the outstanding
shares of the Company’s stock immediately prior to such transaction or series of
transactions continue to hold immediately following such transaction or series
of transactions 50% or more of the outstanding voting securities (based upon
voting power) of (a) any entity which owns (directly or indirectly) the stock
of
the Company, (b) any entity with which the Company has merged, or (c) any entity
that owns an entity with which the Company has merged. In addition, in no event
shall a recapitalization of the Company, a reclassification of the Company’s
capital stock, or other change in the Company’s capital structure (a
“recapitalization”), or an underwritten initial public offering of stock made by
the Company pursuant to an effective registration statement filed under the
Securities Act of 1933, as amended (the “Securities Act”), constitute a
Corporate Change, and the exercise of this Option shall not be accelerated
upon
the occurrence of any such recapitalization or initial public offering.
This
Option may be exercised only while Executive remains an Executive of the Company
and will terminate and cease to be exercisable upon Executive’s termination of
employment with the Company, except that:
(a)If
Executive’s employment with the Company terminates by reason of disability
(within the meaning of section 22(e)(3) of the Code), this Option may be
exercised by Executive (or Executive’s estate or the person who acquires this
Option by will or the laws of descent and distribution or otherwise by reason
of
the death of Executive) at any time during the period of one year following
such
termination, but only as to the number of shares Executive was entitled to
purchase hereunder as of the date Executive’s employment so
terminates.
(b)If
Executive dies while in the employ of the Company, Executive’s estate, or the
person who acquires this Option by will or the laws of descent and distribution
or otherwise by reason of the death of Executive, may exercise this Option
at
any time during the period of one year following the date of Executive’s death,
but only as to the number of shares Executive was entitled to purchase hereunder
as of the date of Executive’s death.
-2-
(c)If
Executive’s employment with the Company terminates for any reason other than as
described in (a) or (b) above, unless such employment is terminated for cause,
this Option may be exercised by Executive at any time during the period of
three
months following such termination, or by Executive’s estate (or the person who
acquires this Option by will or the laws of descent and distribution or
otherwise by reason of the death of Executive) during a period of one year
following Executive’s death if Executive dies during such three month period,
but in each case only as to the number of shares Executive was entitled to
purchase hereunder as of the date Executive’s employment so terminates. As used
in this paragraph, the term “cause” shall mean Executive (i) has been convicted
of a misdemeanor involving moral turpitude or of a felony, (ii) has engaged
in
gross negligence or willful misconduct in the performance of the duties of
Executive’s employment, or (iii) has materially breached any material provision
of any written agreement between Executive and the Company or any of its
Affiliates.
This
Option shall not be exercisable in any event after the expiration of 10 years
from the date of grant hereof.
Except
as
provided in Paragraph 4, the purchase price of shares as to which this Option
is
exercised shall be paid in full at the time of exercise (a) in cash (including
check, bank draft or money order payable to the order of the Company), (b)
by
delivering or constructively tendering to the Company shares of Stock having
a
Fair Market Value equal to the purchase price (provided such shares used for
this purpose must have been held by Executive for such minimum period of time
as
may be established from time to time by the Committee), (c) if the Stock is
readily tradable on a national securities market, through a “cashless exercise”
in accordance with a Company established policy or program for the same, or
(d)
any combination of the foregoing. No fraction of a share of Stock shall be
issued by the Company upon exercise of an Option or accepted by the Company
in
payment of the exercise price thereof; rather, Executive shall provide a cash
payment for such amount as is necessary to effect the issuance and acceptance
of
only whole shares of Stock. Unless and until a certificate or certificates
representing such shares shall have been issued by the Company to Executive,
Executive (or the person permitted to exercise this Option in the event of
Executive’s death) shall not be or have any of the rights or privileges of a
shareholder of the Company with respect to shares acquirable upon an exercise
of
this Option.
4.
Stock
Appreciation Right.
Upon an
exercise of this Option, Executive (or the person exercising this Option in
the
event of Executive’s death) may request the Company to compute an amount (the
“Appreciation Amount”) equal to the excess of the aggregate Fair Market Value of
any number of the shares of Stock with respect to which this Option is exercised
over the aggregate purchase price of such number of shares. Moreover, Executive
(or such person) may elect (subject to the consent or disapproval of the
Committee of any election to receive cash) to have the Company distribute to
Executive (or such person), in lieu of Executive’s purchasing such number of
shares, an amount of cash and/or a whole number of shares of Stock (in any
combination thereof as Executive or such person may elect) in Fair Market Value
equal to the Appreciation Amount. Notwithstanding anything to the contrary
herein, if Executive is then an officer, director or affiliate of the Company
who is subject to section 16 of the Securities Exchange Act of 1934, as amended
(the “Securities Exchange Act”), this Option may not be exercised prior to the
expiration of six months from the date of grant hereof (except in the event
of
the death or disability of Executive prior to the expiration of such six month
period); thereafter, any exercise of this Option or election pursuant to this
Paragraph 4 wherein Executive would receive any portion of the Appreciation
Amount in cash (other than cash in lieu of a fractional share) may be made
only
during a period beginning on the third business day and ending on the twelfth
business day following the date of release by the Company for publication of
quarterly and annual summary statements of sales and earnings. Should Executive
elect pursuant to this Paragraph 4 to receive the Appreciation Amount solely
in
shares of Stock, the number of shares of Stock distributable to Executive shall
be the highest whole number of shares whose value does not exceed the
Appreciation Amount, and any fractional share shall be paid in
cash.
-3-
5.
Withholding
of Tax.
To the
extent that the exercise of this Option or the disposition of shares of Stock
acquired by exercise of this Option results in compensation income or wages
to
Executive for federal, state or local tax purposes, Executive shall deliver
to
the Company at the time of such exercise or disposition such amount of money
as
the Company may require to meet its minimum obligation under applicable tax
laws
or regulations. Executive may elect with respect to this Option to surrender
or
authorize the Company to withhold shares of Stock (valued at their Fair Market
Value on the date of surrender or withholding of such shares) to satisfy any
tax
required to be withheld upon exercise of this Option. An election pursuant
to
the preceding sentence shall be referred to herein as a “Stock Withholding
Election.” All Stock Withholding Elections shall be made by written notice to
the Company’s Corporate Secretary (or such other officer or Executive of the
Company as the Company may designate from time to time). If Executive is not
a
Section 16 Person (as hereinafter defined), Executive may revoke such election
by delivering to the Company’s Corporate Secretary (or such other designated
officer or Executive) written notice of such revocation prior to the date such
election is implemented through actual surrender or withholding of shares of
Stock (the “Withholding Date”). If Executive is a Section 16 Person, the Stock
Withholding Election must:
(a)
be
irrevocable and made six months prior to the Withholding Date; or
(b)
(i)
be
approved by the Committee either before or after such election is made, (ii)
be
made, and the Withholding Date occur, during a period beginning on the third
business day following the date of release by the Company for publication of
quarterly and annual summary statements of sales and earnings and ending on
the
twelfth business day following such date, and (iii) be made more than six months
after the date of the grant of this Option to Executive; or
(c)
be
made in
connection with (i) a delivery to the Company of shares of Stock owned by
Executive prior to the exercise of this Option to satisfy the portion of the
tax
required to be withheld with respect to those shares of Stock received by
Executive upon exercise of this Option for which payment of the purchase price
was made to the Company in shares of Stock owned by Executive prior to the
exercise of this Option pursuant to Paragraph 3 hereof and (ii) the exercise
of
this Option more than six months after the date of grant hereof.
If
Executive fails to pay the required amount to the Company or fails to make
a
Stock Withholding Election, the Company is authorized to withhold from any
cash
remuneration (or, if Executive is not a Section 16 Person, Stock remuneration,
including withholding any shares of Stock distributable to Executive upon
exercise of this Option) then or thereafter payable to Executive any tax
required to be withheld by reason of the exercise of this Option or the
disposition of shares of Stock acquired by exercise of this Option. For purposes
of this Agreement, the term “Section 16 Person” means an officer, director or
affiliate of the Company or a former officer, director or affiliate of the
Company who is subject to Section 16 of the Securities Exchange
Act.
-4-
6.
Certain
Restrictions.
Shares
of Stock purchased pursuant to the exercise of this Option shall be subject
to
the following restrictions (until such time as such restrictions terminate
as
provided below):
(a)
such
shares of Stock may not be sold,
assigned, pledged, exchanged, hypothecated or otherwise transferred, encumbered
or disposed of by Executive;
and
(b)
if
Executive’s employment with the Company is terminated for “cause,” as defined in
Paragraph 3(c) hereof, the Company (or any subsidiary of the Company designated
by it) shall have the option for 60 days after such termination of employment
to
purchase for cash all or any part of such shares of Stock at the purchase price
paid therefor upon exercise of this Option.
The
restrictions imposed on such shares of Stock under this Paragraph shall
terminate on the earliest to occur of the following:
(a)
the
90th
day after the date on which shares of Stock are first listed or admitted to
unlisted trading privileges on a national stock exchange or on the National
Market System of NASDAQ or have sales or bid and offer quotations reported
in
the automated quotation system operated by the National Association of
Securities Dealers, Inc.;
(b)
the
10th
anniversary of the date of grant of this Option;
(c)
as
to any
shares of Stock for which the Company’s (or a subsidiary’s) 60 day option to
purchase upon termination of Executive’s employment with the Company shall have
become exercisable but shall have expired without having been exercised, on
the
first business day of the calendar month next following the expiration of such
60 day option period;
(d)
the
first
business day of the calendar month next following the termination of Executive’s
employment with the Company because of Executive’s death, normal or early
retirement in accordance with his employer’s established employment policies or
practices, or disability (within the meaning of section 22(e)(3) of the Code);
or
(e)
the
date
of the termination of this Option due to an adjustment being made to this Option
pursuant to Paragraph IX of the Plan.
7.
Lock-up
Provision.
Executive hereby agrees that in the event of any underwritten public offering
of
stock, including an initial public offering of stock, made by the Company
pursuant to an effective registration statement filed under the Securities
Act,
Executive shall not offer, sell, contract to sell, pledge, hypothecate, grant
any option to purchase or make any short sale of, or otherwise dispose of any
shares of stock of the Company or any rights to acquire stock of the Company
for
such period of time from and after the effective date of such registration
statement as may be established by the underwriter for such public offering;
provided,
however,
that
such period of time shall not exceed 180 days from the effective date of the
registration statement to be filed in connection with such public offering.
The
foregoing limitation shall not apply to shares registered in the public offering
under the Securities Act. Executive shall be subject to this Paragraph provided
and only if the officers and directors of the Company are also subject to
similar arrangements.
-5-
8.
Status
of Stock.
Executive understands that at the time of the execution of this Agreement the
shares of Stock to be issued upon exercise of this Option have not been
registered under the Securities Act, or any state securities law, and that
the
Company does not currently intend to effect any such registration. Until the
shares of Stock acquirable upon the exercise of the Option have been registered
for issuance under the Securities Act, the Company will not issue such shares
unless the holder of the Option provides the Company with a written opinion
of
legal counsel, who shall be satisfactory to the Company, addressed to the
Company and satisfactory in form and substance to the Company’s counsel, to the
effect that the proposed issuance of such shares to such Option holder may
be
made without registration under the Securities Act. In the event exemption
from
registration under the Securities Act is available upon an exercise of this
Option, Executive (or the person permitted to exercise this Option in the event
of Executive’s death or incapacity), if requested by the Company to do so, will
execute and deliver to the Company in writing an agreement containing such
provisions as the Company may require to assure compliance with applicable
securities laws.
Executive
agrees that the shares of Stock which Executive may acquire by exercising this
Option shall be acquired for investment without a view to distribution, within
the meaning of the Securities Act, and shall not be sold, transferred, assigned,
pledged or hypothecated in the absence of an effective registration statement
for the shares under the Securities Act and applicable state securities laws
or
an applicable exemption from the registration requirements of the Securities
Act
and any applicable state securities laws. Executive also agrees that the shares
of Stock which Executive may acquire by exercising this Option will not be
sold
or otherwise disposed of in any manner which would constitute a violation of
any
applicable federal or state securities laws.
In
addition, Executive agrees that (i) the certificates representing the shares
of
Stock purchased under this Option may bear such legend or legends as the
Committee deems appropriate in order to assure compliance with Xxxxxxxxx 0,
Xxxxxxxxx 7, and applicable securities laws, (ii) the Company may refuse to
register the transfer of the shares of Stock purchased under this Option on
the
stock transfer records of the Company if such proposed transfer would in the
opinion of counsel satisfactory to the Company constitute a violation of
Xxxxxxxxx 0, Xxxxxxxxx 7, or any applicable securities law, and (iii) the
Company may give related instructions to its transfer agent, if any, to stop
registration of the transfer of the shares of Stock purchased under this
Option.
9.
Employment
Relationship.
For
purposes of this Agreement, Executive shall be considered to be in the
employment of the Company as long as Executive remains an Executive of either
the Company, an Affiliate, or a corporation or a parent or subsidiary of such
corporation assuming or substituting a new option for this Option. Without
limiting the scope of the preceding sentence, it is expressly provided that
Executive shall be considered to have terminated employment with the Company
at
the time of the termination of the “Affiliate” status under the Plan of the
entity or other organization that employs Executive. Any question as to whether
and when there has been a termination of such employment, and the cause of
such
termination, shall be determined by the Committee and its determination shall
be
final.
-6-
10.
Binding
Effect.
This
Agreement shall be binding upon and inure to the benefit of any successors
to
the Company and all persons lawfully claiming under Executive.
11.
Entire
Agreement.
This
Agreement constitutes the entire agreement of the parties with regard to the
subject matter hereof, and contains all the covenants, promises,
representations, warranties and agreements between the parties with respect
to
the Option granted hereby. Without limiting the scope of the preceding sentence,
all prior understandings and agreements, if any, among the parties hereto
relating to the subject matter hereof are hereby null and void and of no further
force and effect. Any modification of this Agreement shall be effective only
if
it is in writing and signed by both Executive and an authorized officer of
the
Company.
12.
Governing
Law. This
Agreement shall be governed by, and construed in accordance with, the laws
of
the State of Delaware, without regard to conflicts of laws principles
thereof.
13.
Jurisdiction.Each
of
the Company and Executive hereby irrevocably (i) submits and consents to the
personal jurisdiction of the state and federal courts sitting in Xxxxxx County,
Texas with respect to any suit, action, or proceeding arising out of or based
upon this Agreement or the transactions contemplated hereby and (ii) waives
the
right to contend in any such action that venue is improperly laid in any such
court or that it is an improper or inconvenient forum or lacks personal
jurisdiction. If Executive now or hereafter resides outside the State of Texas,
Executive hereby irrevocably appoints the General Counsel of the Company as
Executive’s authorized agent upon whom process may be served at such General
Counsel’s Company office for notices under this Agreement in any suit, action,
or proceeding arising out of or based upon this Agreement or the transactions
contemplated hereby that may be instituted in any state or federal court in
the
State of Texas by the Company, and Executive hereby agrees to so act. Executive
agrees to take any and all action, including the filing of any and all documents
and instruments, that may be necessary to continue such appointment in full
force and effect as aforesaid. Service of process upon the authorized agent
of
Executive and written notice of such service to Executive shall be deemed,
in
every respect, effective service of process as to Executive for purposes of
any
such suit, action, or proceeding instituted in any state or federal court in
the
State of Texas.
-7-
IN
WITNESS WHEREOF,
the
Company has caused this Agreement to be duly executed by its officer thereunto
duly authorized, and Executive has executed this Agreement, all as of the day
and year first above written.
|
STANDARD
DRILLING, INC.
|
||
|
By:
|
||
|
Xxxxxxx
X. Xxxxxxxxx, Xx., CEO
|
||
| (DIRECTOR / EXECUTIVE) | ||
|
Print
Name
|
