EXHIBIT 10.17
EXECUTIVE NONSTATORY STOCK OPTION AGREEMENT
AGREEMENT made as of 11th day of February 2002, between OIL STATES
INTERNATIONAL, INC., a Delaware corporation (the "Company"), and ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇ ("Executive").
To carry out the purposes of the 2001 EQUITY PARTICIPATION PLAN OF OIL
STATES INTERNATIONAL, INC. (the "Plan"), by affording Executive the opportunity
to purchase shares of the common stock of the Company, par value $.01 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
100,000 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 in the Plan, unless
the context requires otherwise. This Option shall not be treated as an incentive
stock option, within the meaning of section 422(b) of the Internal Revenue Code
of 1986, as amended (the "Code").
2. PURCHASE PRICE. The purchase price of Stock purchased pursuant to the
exercise of this Option shall be $8.00 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. FORFEITURE OF OPTIONS.
(a) All or a portion of this Option shall be subject to forfeiture,
effective as of January 31, 2003, based on the Company's Overall Score Ranking
as of January 31, 2003, in accordance with the following schedule:
PERCENTAGE OF SHARES AS TO WHICH
SCORE RANKING OPTION IS FORFEITED
------------- -------------------
Highest 0%
Second Highest 33%
Third Highest 67%
Lowest 100%
Notwithstanding the forfeiture schedule provided above, if a Change of Control
of the Company occurs prior to January 31, 2003, this paragraph shall be of no
force or effect and the forfeiture restriction described in this paragraph shall
lapse as of the effective date of such Change of Control and the Option shall
vest as provided in Section 4 hereof.
(b) The Company's Overall Score Ranking shall be based on a composite
ranking of the Company against its Peer Group as of January 31, 2003, which
ranking shall be determined by applying the following four metrics, in
accordance with the rules described in paragraph (e) below, to each of the
Company and the members of the Peer Group:
i. Number of equity analysts that actively cover the company ("Metric
1");
ii. Average Daily Trading Volume of such company as a percentage of the
company's Stock Float ("Metric 2");
iii. The increase, on a percentage basis, of the Average Daily Stock Price
of the company for the period November 1, 2001 through January 31,
2002 as compared to the Average Daily Stock Price of such company for
the period November 1, 2002 through January 31, 2003 ("Metric 3"); and
iv. The actual EBITDA trading multiple ("Metric 4").
(c) For purposes of the Overall Score Ranking, for each metric described in
paragraph (b) above, each company being evaluated with respect to such metric
will receive a number of points that shall depend upon its relative place with
respect to its score for such metric as among the Company and the members of the
Peer Group as follows:
INDIVIDUAL METRIC SCORE
-------------------------------------------------------
Highest Second Highest Third Highest Lowest
Points Awarded 4 3 2 1
In the event of a tied individual metric score, for purposes of computing
the Overall Score Ranking, each tied company will be awarded the greatest number
of points possible for the ranking level for such individual metric. To
determine a company's Overall Score Ranking, the points earned by such company
with respect to the individual metrics described in this paragraph shall be
totaled and the result shall equal such company's Overall Score Ranking. The
maximum number of points a company may achieve as its Overall Score Ranking
shall be 16 and the minimum number of points a company may achieve as its
Overall Score Ranking shall be four.
(d) As used in this Section 3, the following capitalized terms shall have
the respective meanings set forth in this paragraph:
i. "Average Daily Stock Price" shall mean, with respect to a company and
a time period at issue, the sum of the closing daily stock price for
such company on each of the days during such period at issue, as
reported by Yahoo, divided by the number of trading days in such
period and as adjusted for stock splits.
2
ii. "Average Daily Trading Volume" shall mean, with respect to a company
and a time period at issue, the sum of the daily trading volumes of
such company on each of the days during such period, as reported by
Yahoo, divided by the number of trading days included in such
period, and as adjusted for stock splits.
iii. "EBITDA" shall mean, with respect to a company, such company's
earnings before interest, taxes, depreciation, and amortization,
with no adjustments made for unusual charges or credits during the
period for which EBITDA is being determined.
iv. reported during the period.
v. "Enterprise Value" shall mean, with respect to a company, the sum of
such company's Equity Value and Net Debt.
vi. "Equity Value" shall mean, with respect to a company, the product of
such company's Average Daily Stock Price for the period January 1,
2003 through January 31, 2003 and such company's number of fully
diluted shares outstanding as of December 31, 2002, as reported by
such company.
vii. "Net Debt" shall mean, with respect to a company, the sum of such
company's interest bearing debt, minority interest, and preferred
stock, less cash and cash equivalents, all as reported on such
company's publicly reported financial statements as of December 31,
2002.
viii. "Overall Score Ranking" shall mean, with respect to a company, the
sum of the points earned by such company on all four of the
individual metrics described above, determined pursuant to this
Section 3.
ix. "Peer Group" shall mean Hydril Co. (trading symbol HYDL), Superior
Energy Services, Inc. (trading symbol SPN), and W-H Energy Services,
Inc. (trading symbol WHES).
x. "Stock Float" shall mean, with respect to a company, the number of
fully diluted shares outstanding as of January 31, 2003 minus the
number of shares controlled by such company's insiders. For purposes
of this calculation, shares will be considered controlled by a
company's insiders if they are owned directly or beneficially by any
member of such company's management or its board of directors. Such
shares will be calculated based on the disclosures in such company's
2002 Proxy Statement, adjusted for stock splits and ownership
changes reported by such company in the SEC Form 13G filings made
after the filing of such Proxy Statement but prior to January 31,
2003.
(e) The following rules shall apply with respect to the determination of
the individual metrics described in paragraph (b) above:
i. Metric 1: A company's score on Metric 1 shall equal the number of
equity analysts that submitted earnings estimates to FirstCall as of
January 31, 2003
3
and that have published research reports on such company since
August 30, 2002. If an equity analyst is possibly in a "▇▇▇▇ period"
(a period during which the analyst is not publishing estimates and
research reports due to an impending or potential transaction being
handled by the brokerage firm affiliated with such analyst) with
respect to a company on which it has reported within the preceding
12 months, then, for purposes of this Agreement, such analyst will
be deemed to have submitted an earnings estimate or published a
research report during the requisite time frame under this metric,
unless such assumption is inappropriate under the circumstances, as
determined in the Committee's sole discretion.
xi. Metric 2: A company's score on Metric 2 shall be equal to 100%
multiplied by the quotient obtained by dividing the Average Daily
Trading Volume during the period November 1, 2002 through January
31, 2003 by the total Stock Float of such company as of January 31,
2002.
xii. Metric 3: A company's score on Metric 3 shall be equal to 100%
multiplied by (A) minus (B) where (A) equals the quotient obtained
by dividing the Average Daily Stock Price for such company during
the period November 1 2002 through January 31, 2003 by the Average
Daily Stock Price for such company during the period November 1,
2001 through January 31, 2002, and (B) equals the number one.
xiii. Metric 4: A company's score on Metric 4 shall be equal to such
company's Enterprise Value divided by the company's EBITDA, as
publicly reported by the company for the 12 month period ending
December 31, 2002.
An example of the calculation of each of the above-described metrics for each of
the Company and the members of the Peer Group, using data available as of March
14, 2002, is attached to this Agreement as Exhibit A.
(f) The Committee shall determine the Company's Overall Score Ranking
relative to the members of the Peer Group as soon as practicable after January
31, 2003, taking into account the availability of the information required for
purposes of making such determination.
4. EXERCISE OF OPTION. Subject to the earlier expiration of this Option
as provided in this section and forfeiture as provided in Section 3 hereof, this
Option may be exercised, by written notice to the Company at its principal
executive office addressed to the attention of its Corporate Secretary at any
time and from time to time after the date of grant hereof, but, except as
otherwise provided below, this Option shall only be exercisable for a percentage
of the number of shares as to which this Option was not forfeited pursuant to
Section 3 (the "Retained Shares") 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:
4
PERCENTAGE OF SHARES
NUMBER OF FULL YEARS THAT MAY BE PURCHASED
-------------------- ---------------------
Less than 1 year 0%
1 year 25%
2 years 50%
3 years 75%
4 years or more 100%
However, if a Change of Control of the Company occurs prior to January 31, 2003,
this Option shall become 100% exercisable for the full number of shares set
forth in Section 1 as of the effective date of such Change of Control. Except to
the extent otherwise set forth in the Executive Agreement between the Company
and Executive (the "Executive Agreement"), if applicable, the terms of which are
incorporated herein by reference, this Option will terminate and cease to be
exercisable upon Executive's termination of employment with the Company, except
that:
(1) 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 in full, but only as to the Retained Shares, by
Executive at any time during the period of one year 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 one year period following
Executive's death if Executive dies during the one year period following
such termination; provided, however, that if such termination occurs prior
to January 31, 2003, this Option may be exercised pursuant to this
paragraph for the number of shares set forth in Section 1.
(2) If Executive's employment with the Company terminates by reason
of retirement, this Option may be exercised in full, but only as to the
Retained Shares, by Executive at any time during the period of one year
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 one year period
following Executive's death if Executive dies during the one year period
following such termination; provided, however, that if Executive's
retirement occurs prior to January 31, 2003, then the Committee shall
determine, in its sole discretion, the number of shares that shall be
deemed to constitute the "Retained Shares" for purposes of this provision
based upon the methodology described in Section 3 and taking into account
the amount of time between the effective date of this Agreement and the
date of Executive's retirement. As used in this paragraph, "retirement"
shall mean the termination of Executive's employment with the Company for
reasons other than cause (as defined in (4) below) on or after attainment
of age 65, or, with the express written consent of the Committee, on or
after the age of 55.
(3) 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
5
or otherwise by reason of the death of Executive, may exercise this Option
in full, but only as to the Retained Shares, at any time during the period
of one year following the date of Executive's death; provided, however,
that if Executive's death occurs prior to January 31, 2003, the number of
shares for which this Option may be exercised pursuant to this paragraph
is the number of shares set forth in Section 1.
(4) If Executive's employment with the Company terminates for any
reason other than as described in (1), (2) or (3) 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 that percentage of the Retained Shares that Executive
was entitled to purchase hereunder as of the date Executive's employment
so terminates; provided, however, that if such termination occurs prior to
January 31, 2003, then the Committee shall determine, in its sole
discretion, the number of shares that shall be deemed to constitute the
"Retained Shares" for purposes of this paragraph based upon the
methodology described in Section 3 and taking into account the amount of
time between the effective date of this Agreement and the date of such
termination. For purposes of this Agreement, "Cause" shall have the
meaning attributed to such term in the Executive Agreement, regardless of
whether such agreement shall have expired or otherwise been terminated in
accordance with its terms.
This Option shall not be exercisable in any event after the expiration of ten
years from the date of grant hereof. 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 constructively tendering to the Company shares of Stock having
a fair market value equal to the purchase price and which shares, if acquired
pursuant to a Company granted option, have been held by Executive for more than
six months, (c) if the Stock is readily tradeable on a national securities
market, through a "cashless-broker" 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.
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 to Executive for federal or state income tax purposes,
Executive shall deliver to the Company at the time of such exercise or
disposition such amount of money or, with the consent of the Committee, shares
of Stock as the Company may require to meet its minimum withholding obligations
under applicable tax laws or regulations, provided that if, when the Option is
6
exercised, Executive is subject to Section 16(b) of the Securities Exchange Act
of 1934, as amended, by reason of being a current or former officer or director
of the Company or an Affiliate, Executive may direct the Company to withhold a
number of Option shares for the exercise sufficient to satisfy such minimum tax
withholding requirements. No exercise of this Option shall be effective until
Executive (or the person entitled to exercise the option, as applicable) has
made arrangements approved by the Company to satisfy all applicable minimum tax
withholding requirements of the Company
6. STATUS OF STOCK. The Company intends to register for issuance under
the Securities Act of 1933, as amended (the "Act"), the shares of Stock
acquirable upon exercise of this Option, and to keep such registration effective
throughout the period this Option is exercisable. In the absence of such
effective registration or an available exemption from registration under the
Act, issuance of shares of Stock acquirable upon exercise of this Option will be
delayed until registration of such shares is effective or an exemption from
registration under the Act is available. The Company intends to use its
reasonable best efforts to ensure that no such delay will occur. In the event
exemption from registration under the 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 will not be sold or otherwise disposed of in any manner
which would constitute a violation of any applicable securities laws, whether
federal or state. Executive also agrees (i) that 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 applicable
securities laws, and (ii) that 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 any applicable securities
laws and (iii) that 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.
7. EMPLOYMENT RELATIONSHIP. Executive shall be considered to be in the
employment of the Company as long as Executive remains an Employee, Director or
consultant of the Company or any of its Affiliates. 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.
8. 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.
9. GOVERNING LAW. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of
Texas, without regard to conflicts of
law principles thereof.
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.
OIL STATES INTERNATIONAL, INC.
BY: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------------
NAME: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
TITLE: President and Chief Executive
Officer
8
