Exhibit 10.3

 

LONE STAR TECHNOLOGIES, INC.
FORM OF EMPLOYEE OPTION AGREEMENT

 

WITH ONE-YEAR VESTING

 

 

 

NON-QUALIFIED STOCK OPTION
GRANTED PURSUANT TO THE
2004 LONG-TERM INCENTIVE PLAN

 

OPTION granted [              ], 20[    ] (the “Date of Grant”) by Lone Star
Technologies, Inc. (“LST”) to [                  ] (“Optionee”) pursuant to
LST’s 2004 Long-Term Incentive Plan (the “Plan”).

 

1.                                       Option Grant.  LST hereby grants to the
Optionee the option (“Option”) to purchase a total of [            ] shares of
Common Stock, $1.00 par value, of LST (“Common Stock”) at the exercise price per
share of $[        ], upon the terms and conditions hereinafter stated. This
Option shall not be treated as an “incentive stock option” within the meaning of
section 422 of the Internal Revenue Code of 1986, as amended.

 

2.                                       Portions of Option Exercisable.  Except
as specifically provided herein, the Option will become exercisable as to the
total number of shares covered by the Option on the first anniversary of the
Date of Grant, subject to the Optionee’s remaining in the continuous employment
of LST or one of its subsidiaries (“employment”) through such anniversary date.
The Option will expire upon the termination of the Optionee’s employment if and
to the extent the Option has not then become exercisable.

 

3.                                       Acceleration of Vesting. The Option
will become fully exercisable if, before the first anniversary of the Date of
Grant, (a) the Optionee’s employment terminates by reason of the Optionee’s
death, retirement after age 65 or retirement with the consent of LST (subject,
in the case of retirement, to such other conditions as LST may impose), or (b)
there is a Change in Control (within the meaning of Section 9(d) of the Plan)
and, within two years after the Change in Control, the Optionee’s employment
terminates by reason of his removal without Cause (within the meaning of Section
5(e)(ii) of the Plan) or is terminated by the Optionee as a result of a
reduction of his compensation or any material change in location, authority,
duties or other working conditions of his employment.

 

4.                                       Periods in which Option Exercisable. If
and to the extent the Option becomes exercisable, it may be exercised in whole
or in part until (a) the third anniversary of the termination of the Optionee’s
employment in the case of a termination described in Section 3, whether or not
such termination occurred before the first anniversary of the Date of Grant, (b)
the first anniversary of the Optionee’s death if the Optionee dies after the
termination of his employment, but only to the extent the Option was otherwise
exercisable at the time of his death (provided that nothing in this Section 4(b)
shall shorten any longer period to which the Optionee is entitled under Section
4(a)), (c) the date of the termination of the Optionee’s employment for Cause
(as defined in the Plan), and (d) the date 90 days after the date of the
termination of the Optionee’s employment for any reason other than those
described in (a)-(c) above.

 

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5.                                       Expiration of Option. The Option will
expire if and to the extent it is not (or does not become) exercisable upon the
termination of the Optionee’s employment or is not exercised within the
applicable period following the Optionee’s death or termination of employment
during which it remains exercisable (or, in the case of a termination for Cause,
to the extent it is not exercised before such termination of employment).
Notwithstanding anything to the contrary herein, the Option will not be
exercisable after the fifth anniversary of the Date of Grant and, to the extent
not previously exercised, will expire on such date.

 

6.                                       Exercise. The Option, to the extent
exercisable, may be exercised in whole or in part by delivering to the Secretary
of LST (a) a written notice specifying the number of shares to be purchased and
(b) payment in full of the exercise price per share multiplied by the number of
shares with respect to which the Option is being exercised, together with the
amount (if any) deemed necessary by LST to enable it to satisfy any income tax
withholding obligations attributable to the exercise (unless other arrangements
acceptable to LST are made for the satisfaction of such withholding
obligations). The exercise price shall be payable in one or more of the
following forms: (i) cash, (ii) shares of Common Stock having a fair market
value on the date of exercise at least equal to the exercise price, (iii) while
the Common Stock is publicly traded, through a cashless exercise procedure
permitted by LST in accordance with Regulation T of the Federal Reserve Board
and other applicable law, or (iv) by any other means as LST may permit.

 

7.                                       Transferability. Except for inter vivos
transfers to “family members” as may be permitted by the Human Resources
Committee pursuant to Section 5(f) of the Plan, the Option is not assignable or
transferable other than to a beneficiary designated to receive the Option upon
the Optionee’s death in a manner acceptable to the LST or by will or the laws of
descent and distribution, and the Option shall be exercisable during the
lifetime of the Optionee only by the Optionee (or, in the event of the
Optionee’s incapacity, the Optionee’s legal representative or guardian). Any
attempt by the Optionee or any other person claiming against, through or under
the Optionee to cause the Option or any part of it to be transferred or assigned
in any manner and for any purpose (other than as expressly permitted by this
instrument or the Plan) will be null and void and without effect upon LST, the
Optionee and any other person.

 

8.                                       Rights of Optionee. Nothing herein
contained shall confer on the Optionee any right with respect to the
continuation of employment or interfere with the right of LST or any subsidiary
of LST to terminate such employment or, except as to shares actually issued,
confer any rights as a shareholder upon the holder hereof.

 

9.                                       Provisions of the Plan Control. This
Option is subject to all the terms, conditions and provisions of the Plan, a
copy which has been furnished or made available to the Optionee, and to such
rules, regulations and interpretations as may be established or made by the
Human Resources Committee acting within the scope of its authority and
responsibility under the Plan. The applicable provisions of the Plan shall
govern in any situation where this instrument is silent or where the applicable
provisions of this instrument are contrary to or not reconcilable with such Plan
provisions.

 

10.                                 Miscellaneous. LST may affix to certificates
representing shares issued pursuant to this instrument any legend that LST
determines to be necessary or advisable to reflect any

 

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restrictions to which the shares may be subject, whether by agreement or
otherwise. LST may advise the transfer agent to place a stop order against any
legended shares. LST shall have the right to offset against its obligation to
issue and  deliver shares under this instrument any outstanding amounts owed by
the Optionee to LST at the time those shares would otherwise be issued and
delivered. This Option shall be governed by and construed in accordance with the
laws of the State of Delaware, without regard to its principles of conflict of
laws. The terms of this Option may not be amended, except as provided in the
Plan or by a written instrument executed by LST and the Optionee.

 

 

 

LONE STAR TECHNOLOGIES, INC.

 

 

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

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