Allis-Chalmers Energy Inc. EMPLOYEE INCENTIVE STOCK OPTION AGREEMENT Pursuant to the terms of the Allis-Chalmers Energy Inc. 2006 Incentive Plan
EXHIBIT 10.4
▇▇▇▇▇-▇▇▇▇▇▇▇▇ Energy Inc.
EMPLOYEE INCENTIVE STOCK OPTION AGREEMENT
Pursuant to the terms of the ▇▇▇▇▇-▇▇▇▇▇▇▇▇ Energy Inc. 2006 Incentive Plan
Pursuant to the terms of the ▇▇▇▇▇-▇▇▇▇▇▇▇▇ Energy Inc. 2006 Incentive Plan
1. Grant of Incentive Stock Option. ▇▇▇▇▇-▇▇▇▇▇▇▇▇ Energy Inc., a Delaware corporation
(“Company”), hereby grants to (“Optionee”) the right, privilege and option
as herein set forth (the “Incentive Stock Option”) to purchase up to shares (the
“Shares”) of common stock, $0.01 par value per share, of the Company (“Common Stock”), subject to
and in accordance with the terms and conditions of this document. This Employee Incentive Stock
Option Agreement (the “Agreement”) is dated as of . The Shares, when issued to
Optionee upon exercise of the Incentive Stock Option, shall be fully paid and nonassessable and the
Optionee (or the person permitted to exercise the Incentive Stock Option in the event of Optionee’s
death) shall be and have all the rights and privileges of a stockholder of record of the Company
with respect to the Shares acquired upon exercise of the Incentive Stock Option, effective upon
such exercise. The Incentive Stock Option is granted pursuant to and to implement in part the
▇▇▇▇▇-▇▇▇▇▇▇▇▇ Energy Inc. 2006 Incentive Plan (as amended and in effect from time to time, the
“Plan”) and is subject to the provisions of the Plan, which is hereby incorporated herein and is
made a part hereof, as well as the provisions of this Agreement. By execution of this Agreement,
Optionee agrees to be bound by all of the terms, provisions, conditions and limitations of the Plan
as implemented by the Incentive Stock Option and this Agreement, together with all rules and
determinations from time to time issued by the Committee pursuant to the Plan. All capitalized
terms have the meanings set forth in the Plan unless otherwise specifically provided. All
references to specified paragraphs pertain to paragraphs of this Incentive Stock Option unless
otherwise provided. The Incentive Stock Option is intended to qualify as an “incentive stock
option” within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the
“Code”).
2. Option Terms. Subject to earlier termination as provided herein, the Incentive Stock
Option shall expire on the 10th anniversary of the date of grant of Incentive
Stock Option, which anniversary shall be . The period during which the Incentive Stock
Option is in effect is referred to as the “Option Period”.
3. Option Exercise Price. The exercise price (the “Exercise Price”) of the Shares subject to
the Incentive Stock Option shall be $ per Share which has been determined to be no less
than the Fair Market Value Per Share of the Common Stock on the date of grant of the Incentive
Stock Option or if the Optionee, at the date if grant, owned more than ten percent (10%) of the
total combined voting power of the Company’s voting securities, the Exercise Price has been
determined to be no less than one hundred ten percent (110%) of the Fair Market Value Per Share of
the Common Stock on that date of grant of the Incentive Stock Option.
4. Vesting. Subject to the provisions of this Agreement including, without limitation, the
following provisions of this Paragraph 4, the total number of Shares subject to this Incentive
Stock Option shall vest and be exercisable only in accordance with the following schedule:
[schedule to be specified]
The vested Shares that may be acquired under the Incentive Stock Option may be purchased, in whole
or in part, at any time after they become vested during the Option Period. In addition, upon the
occurrence of a Change in Control, to the extent provided in with Paragraph 8 below, the Incentive
Stock Option shall become immediately vested and fully exercisable.
5. Method of Exercise. To exercise the Incentive Stock Option, Optionee shall deliver notice
to the Company at its principal executive office, directed to the Plan Administrator, such exercise
to be effective at the time of receipt of such notice at the Company’s principal executive office
during normal business hours, stating the number of Shares with respect to which the Incentive
Stock Option is being exercised together with payment for such Shares plus any required withholding
taxes, unless other arrangements for withholding tax liability have been made with the Committee.
The exercise notice shall be delivered in person, by certified or regular mail, or by such other
method (including electronic transmission) as determined from time to time by the Committee or the
Plan Administrator. Any exercise of the Incentive Stock Option must be for a minimum of one
hundred (100) Shares or, if less, for all remaining Shares subject to the Incentive Stock Option.
6. Payment of Exercise Price and Required Withholding. In order to exercise the Incentive
Stock Option, the Optionee or other person or persons entitled to exercise such Incentive Stock
Option shall deliver to Company payment in full for (i) the Shares being purchased and (ii) unless
other arrangements have been made with the Committee, any required withholding taxes.
The payment of the Exercise Price for the Incentive Stock Option shall either be:
(i) in cash, or by check payable and acceptable to the Company;
(ii) with the consent of the Committee, by tendering to Company Shares of Common Stock
owned by the person exercising the Incentive Stock Option for more than six (6) months
having an aggregate Fair Market Value as of the date of exercise that is not greater than
the full exercise price for the Shares with respect to which the Incentive Stock Option is
being exercised and by paying any remaining amount of the Exercise Price (and any required
withholding taxes) as provided in (i) above; or
(iii) with the consent of the Committee and compliance with such instructions as the
Committee may specify, by delivering to the Company and to a broker a properly executed
exercise notice and irrevocable instructions to such broker to deliver to the Company cash
or a check payable and acceptable to the Company to pay the exercise price and any
applicable withholding taxes.
Upon receipt of the cash or check from the broker, the Company will deliver to the
broker the Shares for which the Incentive Stock Option is exercised. In the event that the
person elects to make payment as allowed under clause (ii) of the immediately preceding
sentence, the Committee may, upon confirming that the Optionee owns the number of additional
Shares being tendered, authorize the issuance of a new certificate for the number of Shares
being acquired pursuant to the exercise of the Incentive Stock Option less that number of
Shares being tendered upon the exercise and return to the person (or not require surrender
of) the certificate for the Shares being tendered upon the exercise. The date of sale of the
Shares by the broker pursuant to a cashless exercise under (iii) above shall be the date of exercise of the Incentive Stock Option. If the Committee so
requires, such person or persons shall also deliver a written representation that all Shares
being purchased are being acquired for investment and not with a view to, or for resale in
connection with, any distribution of such Shares.
7. Termination of Employment. Termination of Employment (defined below), Retirement (defined
below), death or Disability (defined below) of Optionee, shall affect Optionee’s rights under the
Incentive Stock Option as follows:
Page 2
(a) Termination of Employment. If Employment (defined below) of Optionee is terminated
for any reason whatsoever other than death, Disability or Retirement, subject to the
provisions of this Section 7, any nonvested portion of the Incentive Stock Option
outstanding at the time of such termination and all rights thereunder shall wholly and
completely terminate and no further vesting shall occur, and Optionee shall be entitled to
exercise his or her rights with respect to the portion of the Incentive Stock Option vested
as of the date of termination for a period that shall end on the earlier of (i) the
expiration date set forth in the Incentive Stock Option with respect to the vested portion
of the Incentive Stock Option or (ii) the date that occurs three (3) months after such
termination date. For all purposes of this Agreement, “employment” means any period in
which a Participant is an Employee of the Company or an Affiliate.
(b) Retirement. Upon the Retirement (defined below) of Optionee:
(i) any nonvested portion of the Incentive Stock Option shall immediately
terminate and no further vesting shall occur; and
(ii) any vested portion of the Incentive Stock Option shall expire on the
earlier of (A) the expiration of the Option Period; or (B) the expiration of three
(3) months after the date of Retirement.
For all purposes of this Agreement, “retirement” means termination of Employment of an
Employee under such circumstances as shall constitute retirement, as determined by the
Committee.
(c) Disability or Death. Upon termination of Employment as a result of Disability or
death of Optionee or if Optionee retires and dies during the period described in Section
7(b)(ii) above (hereinafter the “Applicable Retirement Period”), or if the Optionee’s
Employment was terminated as a result of Disability and the Optionee dies during the period
that expires on the earlier of the expiration of the Option Period or the first anniversary
of the Optionee’s termination of Employment due to Disability (hereinafter the “Applicable
Disability Period”),
(i) any nonvested portion of the Incentive Stock Option that has not already
terminated shall immediately terminate and no further vesting shall occur; and
(ii) any vested portion of the Incentive Stock Option shall expire upon the
earlier of (A) the expiration of the Option Period or (B) the later of (1) the first
anniversary of such termination of Employment as a result of Disability or death, or
(2) the first anniversary of Optionee’s death during the Applicable Retirement
Period or the Applicable Disability Period.
For all purposes of this Agreement, “disability” means the Participant (i) is 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 can be expected to last for
a continuous period of not less than twelve (12) months, or (ii) is, by reason of any
medically determinable physical or mental impairment which can be expected to result in
death or can be expected to last for a continuous period of not less than twelve (12)
months, receiving income replacement benefits for a period of not less than three (3) months
under an accident and health plan maintained by the Company or an Affiliate.
Page 3
(d) Notwithstanding any other provision of the Incentive Stock Option, the Committee,
in its discretion, may provide for the continuation of the Incentive Stock Option for such
period and upon such terms and conditions as are determined by the Committee in the event
that the Optionee ceases to be an Employee.
8. Change in Control.
(a) Change in Control. In the event of a Change in Control described in clauses (a),
(b) or (c) of the definition of Change in Control under Section 2 of the Plan, if the
Company does not survive as an independent corporation (excluding as a subsidiary) and if
any surviving or successor corporation and its affiliates refuse to assume or continue the
Incentive Stock Option, then, effective immediately prior to such Change in Control, the
Incentive Stock Option shall be immediately vested and exercisable in full for its then
remaining term.
(b) Right of Cash-Out. If approved by the Board prior to or within thirty (30) days
after such time as a Change in Control shall be deemed to have occurred, the Board shall
have the right for a forty-five (45) day period immediately following the date that the
Change in Control is deemed to have occurred to require Optionee to transfer and deliver to
Company the Incentive Stock Option in exchange for an amount equal to the “cash value”
(defined below) of the Incentive Stock Option. Such right shall be exercised by written
notice to Optionee. The cash value of the Incentive Stock Option shall equal the excess of
the “market value” (defined below) per Share over the Exercise Price, if any, multiplied by
the number of Shares subject to the Incentive Stock Option. For purposes of the preceding
sentence, “market value” per Share shall mean the higher of (i) the average of the Fair
Market Value per Share of Common Stock on each of the five (5) trading days immediately
following the date a Change in Control is deemed to have occurred or (ii) the highest price,
if any, offered in connection with the Change in Control. The amount payable to Optionee by
Company pursuant to this Paragraph 8(b) shall be in cash or by certified check and shall be
reduced by any taxes required to be withheld.
9. Reorganization of Company and Subsidiaries. The existence of the Incentive Stock Option
shall not affect in any way the right or power of Company or its stockholders to make or authorize
any or all adjustments, recapitalizations, reorganizations or other changes in the Company’s
capital structure or its business, or any merger or consolidation of Company or any issue of bonds,
debentures, preferred or prior preference stock ahead of or affecting the Shares or the rights
thereof, or the dissolution or liquidation of Company, or any sale or transfer of all or any part
of its assets or business, or any other corporate act or proceeding, whether of a similar character
or otherwise.
10. Adjustment of Shares. In the event of stock dividends, spin-offs of assets or other
extraordinary dividends, stock splits, combinations of shares, recapitalizations, mergers,
consolidations, reorganizations, liquidations, issuances of rights or warrants and similar
transactions or events involving Company, the Committee shall, in such manner as it may deem
equitable, make adjustments to the terms and provisions of this Incentive Stock Option.
11. No Rights in Shares. Optionee shall have no rights as a stockholder in respect of Shares
until such Optionee becomes the holder of record of such Shares.
12. Certain Restrictions. The certificate issued for the Shares subject to the restrictions
described in this Paragraph 12 may, in the Committee’s discretion, be issued with an appropriate
legend describing such restrictions, and the Committee may establish an escrow or
Page 4
other custodial arrangement for holding of the certificate by a person (other than Optionee)
selected by the Committee.
By exercising the Incentive Stock Option, Optionee agrees that if at the time of such exercise
the sale of Shares issued hereunder is not covered by an effective registration statement filed
under the Securities Act of 1933 (“Act”), Optionee will acquire the Shares for Optionee’s own
account and without a view to resale or distribution in violation of the Act or any other
securities law, and upon any such acquisition Optionee will enter into such written
representations, warranties and agreements as Company may reasonably request in order to comply
with the Act or any other securities law or with this Agreement. Optionee agrees that Company shall
not be obligated to take any affirmative action in order to cause the issuance or transfer of
Shares hereunder to comply with any law, rule or regulation that applies to the Shares subject to
the Incentive Stock Option.
13. Shares Reserved. Company shall at all times during the Option Period reserve and keep
available such number of Shares as will be sufficient to satisfy the requirements of this Incentive
Stock Option.
14. Nontransferability of Option. The Incentive Stock Option evidenced by this Agreement is
not transferable other than by will, and the laws of descent and distribution. The Incentive Stock
Option will be exercisable during Optionee’s lifetime only by Optionee or by Optionee’s guardian or
legal representative. No right or benefit hereunder shall in any manner be liable for or subject to
any debts, contracts, liabilities, or torts of Optionee.
15. Amendment and Termination. The Incentive Stock Option may not be terminated by the Board
or the Committee at any time without the written consent of Optionee. This Agreement may be
amended in writing by the Company and Optionee, provided the Company may amend this Agreement
unilaterally (i) if the amendment does not adversely affect the Optionee’s rights hereunder in any
material respect, (ii) if the Company determines that an amendment is necessary to comply with Rule
16b-3 under the Exchange Act or other applicable law, or (iii) if the Company determines that an
amendment is necessary to meet the requirements of the Code or to prevent adverse tax consequences
to the Optionee.
16. No Guarantee of Employment. The Incentive Stock Option shall not confer upon Optionee any
right with respect to continuance of employment or other service with the Company or any Affiliate,
nor shall it interfere in any way with any right Company or any Affiliate would otherwise have to
terminate such Optionee’s employment or other service at any time.
17. Notice of Disqualifying Disposition. If the Optionee sells or otherwise disposes of any
of the Shares acquired pursuant to the exercise of the Incentive Stock Option on or before the
later of (i) the date that is two (2) years after the date of grant of the Incentive Stock Option,
and (ii) the date that is one (1) year after the transfer of the Shares to the Optionee upon
exercise of the Incentive Stock Option, the Optionee shall make the information regarding such
disposition available to the Company upon the Company’s request.
18. Withholding of Taxes. Any issuance of Common Stock pursuant to the exercise of the
Incentive Stock Option shall not be made until appropriate arrangements satisfactory to the Company
have been made for the payment of any tax amounts (federal, state, local or other) that may be
required to be withheld or paid by the Company with respect thereto at the minimum statutory rate.
Company shall have the right to take such action as may be necessary or appropriate to satisfy any
such tax withholding obligations.
Page 5
19. No Guarantee of Tax Consequences. Neither Company nor any Affiliate nor the Board or
Committee makes any commitment or guarantee that any federal or state tax treatment will apply or
be available to any person eligible for the benefits under the Incentive Stock Option.
20. Consent to Electronic Delivery; Electronic Signature. In lieu of receiving documents in
paper format, Optionee agrees, to the fullest extent permitted by law, to accept electronic
delivery of any documents that the Company may be required to deliver
(including, but not limited to, prospectuses, prospectus supplements, grant or award notifications and
agreements, account statements, annual and quarterly reports, and all other forms of
communications) in connection with this and any other award made or offered by the Company.
Electronic delivery may be via a Company electronic mail system or by reference to a location on a
Company intranet to which Optionee has access. Optionee hereby consents to any and all procedures
the Company has established or may establish for an electronic signature system for delivery and
acceptance of any such documents that the Company may be required to deliver, and agrees that his
or her electronic signature is the same as, and shall have the same force and effect as, his or her
manual signature.
21. Severability. In the event that any provision of the Incentive Stock Option shall be held
illegal, invalid, or unenforceable for any reason, such provision shall be fully severable, but
shall not affect the remaining provisions of the Incentive Stock Option, and the Incentive Stock
Option shall be construed and enforced as if the illegal, invalid, or unenforceable provision had
never been included herein.
22. Governing Law. The Incentive Stock Option and this Agreement shall be construed in
accordance with the laws of the State of Delaware to the extent federal law does not supersede and
preempt Delaware law.
| COMPANY: | ||||
| ▇▇▇▇▇-▇▇▇▇▇▇▇▇ Energy Inc. | ||||
| By: | ||||
| Printed Name: | ||||
| Title: | ||||
| OPTIONEE: | ||||
| By: | ||||
| (Signature) | ||||
Page 6