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Exhibit 10.4
2004 INCENTIVE PLAN
OF
DRIL-QUIP, INC.
STANDARD
NON-QUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT ("Agreement") is made as of the
day of
, 20 (the "Grant Date"), by and
between Dril-Quip, Inc., a Delaware corporation (the "Company"),
and
(the "Grantee").
The Company has adopted the 2004 Incentive Plan of Dril-Quip,
Inc. (the "Plan") for the benefit of eligible employees of the
Company and its Subsidiaries. Capitalized terms used and not
otherwise defined herein shall have the meaning ascribed thereto in
the Plan.
Pursuant to the Plan, the Committee, which has generally been
assigned responsibility for administering the Plan, has determined
that it would be in the interest of the Company and its
stockholders to grant the options provided herein in order to
encourage the Grantee to remain in the employ of the Company or its
Subsidiaries, to encourage the sense of proprietorship of the
Grantee in the Company and to stimulate the active interest of the
Grantee in the development and financial success of the
Company.
The Company and the Grantee therefore agree as follows:
1. Grant of Option . Subject to the terms and conditions
herein, the Company grants to the Grantee during the period
commencing on
, 20 and expiring at 5 p.m.
Houston, Texas time ("Close of Business") on
, 20 (the "Option Term"), subject
to earlier termination pursuant to paragraph 6 below, an
option to purchase from the Company, at the price of $
per share (the "Option Price"),
shares (the "Option Shares") of Company Common Stock ("Common
Stock"); provided that the price at which any share of Common Stock
may be purchased on the exercise of any Option will not be less
than the Fair Market Value of a share of the Common Stock on the
date of grant of that Option. The Grantee agrees that the Option
Price complies with the provisions of the Grantee’s written
employment agreement with the Company dated
. The Option Price and Option Shares are subject to adjustment
pursuant to paragraph 9 below. This option is a "Nonqualified
Stock Option" and is hereinafter referred to as the "Option."
2. Conditions of Exercise . The Option is exercisable
only in accordance with the conditions stated in this
paragraph.
(a) Except as otherwise provided in this paragraph 2, this
Option shall become exercisable in four installments, with
one-fourth of the Option Shares becoming exercisable on
, 20 and an additional one-fourth
becoming exercisable on
of each of 20 , 20
and 20
; provided , however
, that subject to paragraph 2(c), the right to purchase Option
Shares is cumulative, so that the Grantee may purchase after any
such anniversary and during the remainder of the Option Term those
quantities of Option Shares which the Grantee was entitled to
purchase but did not purchase during any preceding
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period or periods. Notwithstanding the foregoing,
subject to the provisions of any applicable written employment
agreement between the Grantee and the Company or any Subsidiary, no
additional Option Shares shall become available for purchase if the
Grantee has not remained in continuous Employment through the
applicable date. "Employment" for purposes of this Agreement means
employment with the Company or any of its Subsidiaries.
(b) Notwithstanding the limitations set forth in paragraph 2(a),
the Option shall become fully exercisable, provided that the
Grantee has been in continuous Employment since the commencement of
the Option Term, upon the occurrence of a Change of Control.
For the purposes of this Agreement, "Change of Control" shall
mean a change in control of the Company after the commencement of
the Option Term, which shall be deemed to have occurred in any one
of the following circumstances occurring after such date:
(i) there shall have occurred an event required to be reported
with respect to the Company in response to Item 6(e) of
Schedule 14A of Regulation 14A (or in response to any
similar item or any similar schedule or form) promulgated under the
Exchange Act, whether or not the Company is then subject to such
reporting requirement; (ii) any "person" (as such term is used
in Sections 13(d) and 14(d) of the Exchange Act) other than
the Stockholder Group shall have become the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Corporation representing 30% or
more of the combined voting power of the Corporation’s then
outstanding voting securities; (iii) the Company is a party to
a merger, consolidation, sale of assets or other reorganization, or
a proxy contest, as a consequence of which members of the Board of
Directors in office immediately prior to such transaction or event
constitute less than a majority of the Board of Directors
thereafter; or (iv) during any period of two consecutive
years, individuals who at the beginning of such period constituted
the Board of Directors (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
two-thirds 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 of Directors. For the purposes of
this Agreement, "Stockholder Group" shall mean, to the extent such
group is deemed to be a "person" under Section 13(d) of the
Exchange Act, collectively, but not individually, J. Mike Walker,
Larry E. Reimert, Reimert Family Partners, Ltd., Gary D. Smith and
Four Smith’s Company, Ltd.
(c) To the extent the Option becomes exercisable, such Option
may be exercised only in whole or in increments of one-fourth,
one-half or three-quarters of the total number of Option Shares (at
any time or from time to time, except as otherwise provided herein)
until expiration of the Option Term or earlier termination
thereof.
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3. Manner of Exercise . The Option shall
be considered exercised (as to the number of Option Shares
specified in the notice referred to in subparagraph (a) below)
on the latest of (i) the date of exercise designated in the
written notice referred to in subparagraph (a) below,
(ii) if the date so designated is not a business day, the
first business day following such date or (iii) the earliest
business day by which the Company has received all of the
following:
(a) Written notice, in the form attached hereto as Exhibit A,
designating, among other things, the date of exercise and the
number of Option Shares to be purchased;
(b) If the Option is to be exercised, payment of the Option
Price for each Option Share to be purchased in cash, Common Stock
or in such other form (or combination of forms) of payment
contemplated by paragraph 10 of the Plan as the Committee may
permit; provided , however , that any shares of
Common Stock delivered in payment of the Option Price that are or
were the subject of an Employee Award must be shares that the
Grantee has owned for a period of at least six months prior to the
date of exercise; and
(c) Any other documentation that the Committee may reasonably
require.
4. Mandatory Withholding for Taxes . The Grantee
acknowledges and agrees that no certificates representing shares of
Common Stock purchased hereunder shall be delivered to or in
respect of the Grantee unless the amount of all federal, state and
other governmental withholding tax requirements imposed upon the
Company with respect to the issuance of such shares of Common Stock
has been remitted to the Company or unless provisions to pay such
withholding requirements have been made to the satisfaction of the
Committee pursuant to paragraph 11 of the Plan. The Committee
may make such provisions as it may deem appropriate for the
withholding of any taxes which it determines is required in
connection with this Option. The Grantee may pay all or any portion
of the taxes required to be withheld by the Company or paid by the
Grantee in connection with the exercise of all or any portion of
this Option by delivering cash, or, with the Committee’s
approval, by electing to have the Company withhold shares of Common
Stock, or by delivering previously owned shares of Common Stock,
having a Fair Market Value determined in accordance with
paragraph 11 of the Plan, equal to the amount required to be
withheld or paid.
5. Delivery by the Company . As soon as practicable after
receipt of all items referred to in paragraph 3, and subject
to the withholding referred to in paragraph 4, the Company
shall deliver to the Grantee certificates issued in the
Grantee’s name for the number of Option Shares purchased by
exercise of the Option. If delivery is by mail, delivery of shares
of Common Stock shall be deemed effected for all purposes when a
stock transfer agent of the Company shall have deposited the
certificates in the United States mail, addressed to the
Grantee.
6. Termination of Option : The Option hereby granted
shall terminate and be of no force and effect with respect to any
shares of Common Stock not previously purchased by the Grantee upon
the first to occur of:
(a) the expiration of the Option Term; or
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(b) with respect to
(i) the portion of the Option exercisable upon termination, the
expiration of (A) 90 days following the Grantee’s
termination of Employment for reasons other than death or
Disability (as defined below), or (B) one year following the
Grantee’s termination of Employment by reason of death or
Disability; and
(ii) the portion of the Option not exercisable upon termination,
the date of the Grantee’s termination of Employment.
"Disability" for purposes of the Agreement means illne
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