DI INDUSTRIES, INC.
NON-QUALIFIED STOCK OPTION AGREEMENT
THIS NON-QUALIFIED STOCK OPTION AGREEMENT (this "Agreement") made as of
October 1, 1996, by and between DI INDUSTRIES, INC., a corporation organized
under the laws of the State of Texas (the "Corporation"), and XXXXXX X.
XXXXXX, an individual (the "Optionee").
WITNESSETH:
WHEREAS, as an inducement to Optionee to enter into a contract of
employment with the Corporation under the terms of an Employment Agreement dated
of even date herewith by and between the Optionee and the Corporation (the
"Employment Agreement") and to further provide the Optionee with additional
incentive to further the business of the Corporation, the Corporation has agreed
to grant the Optionee options to purchase shares of common stock, $0.10 par
value ("Common Stock"), of the Corporation; and
WHEREAS, by granting the Optionee options to purchase shares of Common
Stock pursuant to the terms of this Agreement, the Corporation intends to carry
out the purposes set forth in the 1996 Employee Stock Option Plan of the
Corporation (the "Plan") adopted by the Board of Directors of the Corporation
(the "Board of Directors") effective July 29, 1996 and the shareholders of the
Corporation effective as of August 27, 1996; and
WHEREAS, the Corporation and the Optionee desire to set forth the terms and
conditions of such options to purchase Common Stock;
NOW, THEREFORE, in consideration of the mutual promises contained herein,
and other good and valuable consideration, the receipt, adequacy and sufficiency
of which are hereby acknowledged, the parties hereto do hereby agree as follows:
1. GRANT OF OPTIONS. Subject to the terms and conditions hereinafter set
forth, the Corporation hereby grants to the Optionee an option (the "Option")
to purchase all or part of an aggregate number of 100,000 shares of Common Stock
(such shares, as increased or decreased in accordance with Section 9 hereof,
being referred to hereinafter as the "Option Shares") at an exercise price of
$1.50 per share (hereinafter the "Exercise Price").
2. EXERCISE PERIOD. The Option shall be exercisable by Optionee as to
twenty percent (20%) of the Option Shares on December 31, 1996, as to an
additional twenty percent (20%) of the Option Shares one (1) year after the date
of this Agreement, as to an additional twenty percent (20%) of the Option Shares
two (2) years after the date of this Agreement, as to an additional twenty
percent (20%) of the Option Shares three (3) years after the date of this
Agreement, until the fourth anniversary of the date of this Agreement, after
which time the Option shall be exercisable in full. The Option shall expire and
terminate as to any Option Shares not purchased by the Optionee on or before the
tenth anniversary of the date of this Agreement (the "Expiration Date"),
subject to earlier termination as set forth herein.
3. METHOD OF EXERCISING THE OPTION. The Option shall be exercised by the
Optionee delivering to the Corporation (i) written notice from the Optionee
stating that the Optionee is exercising the Option and specifying the number of
Option Shares that the Optionee is entitled to purchase (the "Notice"), which
shall be in form and content identical to ANNEX I hereto and (ii) the aggregate
Exercise Price (the "Payment") for the number of Option Shares that the
Optionee is entitled to purchase, which Exercise Price must be in the form of
(a) cash or a cashier's or certified check payable to the order of the
Corporation, or (b) the tender to the Corporation of such number of shares of
Common Stock owned by the Optionee having an aggregate fair market value as of
the date of exercise that is not greater than the total Exercise Price for the
shares of Common Stock with respect to which the Option is being exercised and
by paying the remaining amount of the Exercise Price.
4. TRANSFERABILITY OF OPTION. The Option shall not be transferable or
assignable, in whole or in part, and except as otherwise provided in Section 11
of this Agreement, the Option shall be exercisable (i) only by the Optionee
during his lifetime, or (ii) in the event of his death, by his heirs,
representatives, distributees, or legatees in accordance with his will or the
laws of descent and distribution (but only to the extent that the Option would
be exercisable by the Optionee under Section 2).
5. PAYMENT OF TAXES UPON EXERCISE. The Optionee understands and
acknowledges that under currently applicable law, the Optionee may be required
to include in the Optionee's taxable income, at the time of exercise of the
Option, the amount by which the value of the Option Shares purchased (the
"Exercise Shares") exceeds the Exercise Price paid. The Optionee hereby
authorizes the Corporation to withhold Exercise Shares of a value equivalent to
the amount of tax required to be withheld by the Corporation out of any taxable
income derived by the Optionee upon exercise of the Option; provided, however,
that the Optionee may, in the alternative, in order to satisfy such withholding
requirement, deliver to the Corporation cash or other shares of Common Stock
owned by the Optionee.
6. INVESTMENT REPRESENTATION. The Optionee represents that the Option
Shares available for purchase by the Optionee under this Agreement will be
acquired only for investment and not with a view toward resale or distribution.
7. SECURITIES LAW REQUIREMENTS; LEGENDS. The Optionee agrees and
understands that the Option Shares may be restricted securities as defined in
Rule 144 promulgated under the Securities Act of 1933, as amended (the
"Securities Act"), and may not be sold, assigned or transferred, unless the
sale, assignment or transfer of such shares is registered under the Securities
Act and applicable blue sky laws, as now in effect or hereafter amended, or
there is furnished an opinion of counsel in form and substance satisfactory to
the Corporation from counsel acceptable to the Corporation that such
registrations are not required. The Optionee further understands and agrees
that, unless issued pursuant to an effective registration statement under the
Securities Act, the following legend shall be set forth on each certificate
representing Option Shares:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 OR UNDER THE BLUE SKY LAWS OF ANY
STATE, AND MAY NOT BE SOLD, ASSIGNED OR TRANSFERRED EXCEPT UPON SUCH
REGISTRATION OR UPON RECEIPT BY THE CORPORATION OF AN OPINION OF
COUNSEL FOR THE CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED FOR
SUCH SALE, ASSIGNMENT OR TRANSFER."
In addition, the following legend shall be placed on each certificate
representing Option Shares:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE GOVERNED BY THE TERMS
OF THE 1996 EMPLOYEE STOCK OPTION PLAN OF THE CORPORATION, DATED JULY
29, 1996, WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THE CORPORATION
AND A COPY OF WHICH WILL BE PROVIDED FOR INSPECTION UPON WRITTEN
REQUEST."
8. NO RIGHTS AS SHAREHOLDER. The Optionee shall not have any
rights as a shareholder with respect to any of the Option Shares until
the date of issuance by the Corporation to the Optionee of a stock
certificate representing such Option Shares. Except as otherwise
provided in Section 9 hereof, the Optionee shall not be entitled to
any dividends, cash or otherwise, or any adjustment of the Option
Shares for such dividends, if the record date therefor is prior to the
date of issuance of such stock certificate. Upon valid exercise of the
Option by the Optionee, the Corporation agrees to cause a valid stock
certificate for the number of Option Shares then purchased to be
issued and delivered to the Optionee within seven (7) business days
thereafter.
9. CORPORATE PROCEEDINGS OF THE CORPORATION.
(a) The existence of the Option shall not affect in any way
the right or power of the Corporation or its officers, directors
and shareholders, as the case may be, to (i) make or authorize any
adjustments, recapitalizations, reorganizations or other changes in
the capital structure or business of the Corporation, (ii)
participate in any merger or consolidation of the Corporation,
(iii) issue any Common Stock, bonds, debentures, preferred or prior
preference stock or any other securities affecting the Common Stock
or the rights of holders thereof, (iv) dissolve or liquidate the
Corporation, (v) sell or transfer all or any part of the assets or
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business of the Corporation, or (vi) perform any other corporate
act or proceedings, whether of a similar character or otherwise.
(b) If the Corporation merges into or with or consolidates
with (such events collectively referred herein as a "Merger") any
corporation or corporations and is not the surviving corporation,
then the surviving corporation may assume the Option or substitute
a new option of the surviving corporation for the Option; provided,
however, that the excess of the aggregate fair market value of the
securities subject to the Option immediately after such assumption,
or the new option immediately after such substitution, over the
aggregate Exercise Price of such shares must be, based upon a good
faith determination by the Board of Directors of the Corporation,
not less than the excess of the aggregate fair market value of the
Common Stock subject to the Option immediately before such
substitution or assumption over the aggregate Exercise Price of
such Common Stock.
(c) In the event that the surviving corporation does not
utilize the provisions of (b) above, or in the event of a
dissolution or liquidation of the Corporation, the Corporation
shall cause written notice of such Merger or dissolution or
liquidation (and the material terms and conditions thereof) to be
delivered to the Optionee at least ten (10) days prior to the
proposed effective date (the "Effective Date") of such event. The
Optionee shall be entitled to exercise the Option until the
Effective Date, or until the Expiration Date if earlier. To the
extent that the Merger or liquidation is consummated after the
Effective Date, the Option shall terminate and the Corporation
shall have no further obligations of any type hereunder. The
provisions of this paragraph shall not apply to any merger or
reorganization, the principal purpose of which is to change the
jurisdiction of the domicile of the Corporation.
(d) If, while the Option is outstanding, the Corporation
shall effect a subdivision or consolidation of the shares of Common
Stock or other capital readjustment, the payment of a common stock
dividend, or other increase or reduction of the number of shares of
Common Stock outstanding, without receiving compensation therefor
in money, services or property, then (i) in the event of an
increase in the number of shares of Common Stock outstanding, the
number of Option Shares shall be proportionately increased, and the
per share Exercise Price shall be proportionately reduced, and (ii)
in the event of a reduction in the number of shares of Common Stock
outstanding, the number of Option Shares shall be proportionately
reduced, and the per share Exercise Price shall be proportionately
increased. No fractional share of Common Stock shall be issued upon
any such exercise and the Exercise Price shall be appropriately
reduced on account of any fractional share not issued.
(e) The issuance by the Corporation of shares of stock of any
class of securities convertible into shares of stock of any class,
including Common Stock, for cash, property, labor or services
rendered, either upon direct sale or upon the exercise of rights,
options, or warrants to subscribe therefor, or upon conversion of
shares or obligations of the Corporation convertible into such
shares or other securities, shall not affect, and no adjustment by
reason thereof shall be made with respect to, the number of Option
Shares or the Exercise Price.
10. REGISTRATION RIGHTS. The Optionee shall have no registration
rights with respect to the Option Shares.
11. TERMINATION.
(a) Except as otherwise provided in this Section 11, if the
Optionee for any reason whatsoever, other than death or permanent
and total disability, as defined in (b) below, ceases to be
employed by the Corporation, or a parent or subsidiary corporation
of the Corporation, and prior to such cessation, the Optionee was
employed at all times from the date of the granting of the Option
until the date of such cessation, the Option must be exercised by
the Optionee (to the extent that the Optionee is entitled to do so
at the date of cessation) within three (3) months following the
date of cessation of employment, subject to
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the Expiration Date; provided, however, that if the Optionee is
terminated for cause (as defined in the Employment Agreement), the
Option will immediately terminate. Notwithstanding the foregoing,
the Corporation may, in its sole discretion, extend for a
reasonable period the time in which the Optionee may exercise the
Option after the date of cessation of employment, subject to the
Expiration Date.
(b) If the Optionee becomes permanently and totally disabled,
as hereinafter defined, while employed by the Corporation or a
parent or subsidiary corporation of the Corporation, and prior to
such disability the Optionee was employed at all times from the
date of the granting of the Option until the date of disability,
the Option must be exercised by the Optionee (to the extent that
the Optionee is entitled to do so at the date of disability) at any
time within one (1) year after the date of disability or the
Expiration Date, whichever is earlier.
"Permanently and totally disabled" means being unable to
engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment which can be
expected to result in death or which has lasted or can be expected
to last for a continuous period of not less than twelve (12)
months. In the absence of any specific requirements for this
determination, the the decision of the Corporation, as aided by any
physicians designated by the Corporation shall be conclusive and
the Corporation shall send written notice to the Optionee of the
determination that the Optionee has become permanently and totally
disabled.
(c) In the event that the Optionee dies while employed by the
Corporation or a parent or subsidiary corporation of the
Corporation, and prior to death the Optionee was employed at all
times from the date of the granting of the Option until the date of
death, the Option must be exercised (to the extent that the
Optionee is entitled to do so at the date of death) by a legatee or
legatees of the Optionee under the Optionee's will, or by the
Optionee's personal representative or distributes, at any time
within one (1) year after the date of death or the Expiration Date,
whichever is earlier, and if not so exercised, the Option shall
thereupon terminate.
Nothing in (a), (b) or (c) shall extend the time for
exercising the Option granted pursuant to this Agreement beyond the
Expiration Date.
12. DISPOSITION OF STOCK AFTER EXERCISE OF OPTION.
Notwithstanding any other provision of this Agreement to the contrary,
in consideration of the granting of the Option, the Optionee agrees
not to dispose of any Option Shares without the prior approval of the
Corporation unless such shares have been registered under the
Securities Act.
12. 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: Xxxxxxx X. Xxxxxx
00000 Xxxxxxxx Xxxxxx
Xxxxxxx, Xxxxx 00000
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14. TRANSFERABILITY; BINDING EFFECT. The Option shall be transferable only
as set forth in Section 4. Subject to the foregoing, all covenants, terms,
agreements and conditions of this Agreement shall be binding upon, inure to the
benefit of, and be enforceable by, the Corporation and the Optionee and their
respective successors and assigns.
15. ENTIRE AGREEMENT. This agreement embodies the entire agreement and
understanding between the Corporation and the Optionee relating to the subject
matter hereof.
16. GOVERNING LAW. This Agreement shall be governed by the laws of the
State of Texas.
17. CAPTIONS. The section and paragraph headings in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
19. COUNTERPARTS. This Agreement may be executed in multiple original
counterparts, each of which shall be deemed an original, but all of which
together shall constitute but one and the same instrument.
IN WITNESS WHEREOF, this Agreement has been executed and delivered as of
the date first written above.
CORPORATION:
DI INDUSTRIES, INC.
By: X. X. XXXXXXXX
Name: X. X. Xxxxxxxx
Title: President and CEO
OPTIONEE:
XXXXXXX X. XXXXXX
Xxxxxxx X. Xxxxxx
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ACKNOWLEDGEMENT OF SPOUSE TO
TERMS OF NON-QUALIFIED STOCK OPTION AGREEMENT
I, Xxxxx Xxxxxx, am the spouse of Xxxxxxx X. Xxxxxx ("Optionee"), and I
am fully aware of, understand, and fully consent and agree to the provisions of
the Non-Qualified Stock Option Agreement, dated October 1, 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 10-30, 1996.
XXXXX XXXXXX
Xxxxx Xxxxxx,
Spouse of Xxxxxxx X. Xxxxxx
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