Exhibit 10.1
NON-QUALIFIED STOCK OPTION AGREEMENT
GREY WOLF, INC. 2003 INCENTIVE PLAN
(effective as of March 26, 2003)
     THIS NON-QUALIFIED STOCK OPTION AGREEMENT (this “Agreement”) made as of
_______________, 200_______________, by and between GREY WOLF, INC., a
corporation organized under the laws of the State of Texas (the “Company”), and
Thomas P. Richards, an individual (the “Grantee”);
WITNESSETH:
     WHEREAS, the Company desires to provide an incentive to the Grantee to
further the business of the Company and the Company has agreed to grant the
Grantee options to purchase shares of common stock, $0.10 par value (“Common
Stock”), of the Company; and
     WHEREAS, by granting the Grantee options to purchase shares of Common Stock
pursuant to the terms of this Agreement, the Company intends to carry out the
purposes set forth in the Grey Wolf, Inc. 2003 Incentive Plan (effective as of
March 26, 2003) (the “Plan”) adopted by the Board of Directors of the Company
(the “Board of Directors”) effective March 26, 2003 and approved by the
shareholders of the Company on May 13, 2003; and
     WHEREAS, the Company and the Grantee 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 Option. Subject to the terms and conditions hereinafter set forth,
the Company hereby grants to the Grantee a non-qualified option (the “Option”)
to purchase all or any part of an aggregate number of _______________ shares of
Common Stock (such shares, as increased or decreased in accordance with
Section 10 hereof, being referred to hereinafter as the “Option Shares”) at an
exercise price of $ __________ per share (hereinafter the “Exercise Price”).
2. Subject to Plan. The Option and its exercise are subject to the terms and
conditions of the Plan, and the terms of the Plan shall control to the extent
not otherwise inconsistent with the provisions of this Agreement. The
capitalized terms used herein that are defined in the Plan shall have the same
meanings assigned to them in the Plan. The Option is subject to any rules
promulgated pursuant to the Plan by the Board or the Committee and communicated
to the Grantee in writing.
3. Exercise Period. The Option shall be exercisable by Grantee as to
thirty-three and one-third percent (33-1/3%) of the Option Shares one (1) year
after the date of this Agreement, as to an additional thirty-three and one-third
percent (33-1/3%) of the Option Shares two (2) years after the date of this
Agreement until the third anniversary of the date of this Agreement,

 

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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 Grantee on or
before the tenth anniversary of the date of this Agreement (the “Expiration
Date”), subject to earlier termination as set forth herein or pursuant to the
terms of the Plan. Notwithstanding any other provision of this Agreement to the
contrary, the Option shall be immediately exercisable by Grantee as to one
hundred percent (100%) of the Option Shares as may be applicable pursuant to
Sections 5.5 and 5.7 of the Plan and Section 12 below.
4. Method of Exercising the Option. The Option shall be exercised by the Grantee
by delivering to the Company written notice from the Grantee as of a date set by
the Company which is in advance of the proposed exercise date. The notice from
the Grantee shall state that the Grantee is exercising the Option and shall
specify the number of Option Shares that the Grantee desires and is entitled to
purchase. Such notice shall be in a form and content as determined by the
Committee and shall be accompanied by full payment for the Option Shares to be
exercised. The Option may only be exercised with respect to full shares, and no
fractional shares shall be issued.
     The Option Price upon exercise of the Option Shares shall be payable to the
Company in full either: (i) in cash or its equivalent, or (ii) subject to prior
approval by the Committee in its discretion, by tendering previously acquired
Shares having an aggregate Fair Market Value at the time of exercise equal to
the total Option Price (provided that the Shares which are tendered must have
been held by the Grantee for at least six (6) months prior to their tender to
satisfy the Option Price), or (iii) subject to prior approval by the Committee
in its discretion, by withholding Shares which otherwise would be acquired on
exercise having an aggregate Fair Market Value at the time of exercise equal to
the total Option Price, or (iv) subject to prior approval by the Committee in
its discretion, by a combination of (i), (ii), and (iii) above. Any payment in
Shares shall be effected by the surrender of such Shares to the Company in good
form for transfer and shall be valued at their Fair Market Value on the date
when the Stock Option is exercised. Unless otherwise permitted by the Committee
in its discretion, the Grantee shall not surrender, or attest to the ownership
of, Shares in payment of the Option Price if such action would cause the Company
to recognize compensation expense (or additional compensation expense) with
respect to the Stock Option for financial reporting purposes.
     The Committee, in its discretion, also may allow the Option Price to be
paid with such other consideration as shall constitute lawful consideration for
the issuance of Shares (including, without limitation, effecting a “cashless
exercise” with a broker of the Option), subject to applicable securities law
restrictions and tax withholdings, or by any other means which the Committee
determines to be consistent with the Plan’s purpose and applicable law. A
“cashless exercise” of an Option is a procedure by which a broker provides the
funds to the Grantee to effect an Option exercise, to the extent consented to by
the Committee in its discretion. At the direction of the Grantee, the broker
will either (i) sell all of the Shares received when the Option is exercised and
pay the Grantee the proceeds of the sale (minus the Option Price, withholding
taxes and any fees due to the broker) or (ii) sell enough of the Shares received
upon exercise of the Option to cover the Option Price, withholding taxes and any
fees due the broker and deliver to the Grantee (either directly or through the
Company) a stock certificate for the remaining Shares. Dispositions to a broker
effecting a cashless exercise are not exempt under Section 16 of the Exchange
Act.

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     The Committee, in its discretion, may also allow an Option to be exercised
by a broker-dealer acting on behalf of the Grantee if (i) the broker-dealer has
received from the Grantee a duly endorsed Incentive Agreement evidencing such
Option and instructions signed by the Grantee requesting the Company to deliver
the Shares of Common Stock subject to such Option to the broker-dealer on behalf
of the Grantee and specifying the account into which such Shares should be
deposited, (ii) adequate provision has been made with respect to the payment of
any withholding taxes due upon such exercise, and (iii) the broker-dealer and
the Grantee have otherwise complied with Section 220.3(e)(4) of Regulation T, 12
CFR Part 220 (or its successor).
     As soon as practicable after receipt of a written notification of exercise
and full payment, the Company shall deliver, or cause to be delivered, to or on
behalf of the Grantee, in the name of the Grantee or other appropriate
recipient, Share certificates for the number of Shares purchased under the Stock
Option. Such delivery shall be effected for all purposes when the Company or a
stock transfer agent of the Company shall have deposited such certificates in
the United States mail, addressed to Grantee or other appropriate recipient.
     Subject to Section 6.2 of the Plan, during the lifetime of a Grantee, each
Option granted to him shall be exercisable only by the Grantee (or his legal
guardian in the event of his Disability) or by a broker-dealer acting on his
behalf pursuant to a cashless exercise under the foregoing provisions of this
Section.
     Any certificate issued to evidence Shares issued upon the exercise of this
Incentive Award may bear such legends and statements as the Committee shall deem
advisable to assure compliance with federal and state laws and regulations,
including but not limited to, blue sky and securities laws, the requirements of
the stock exchange or market upon which such shares are then listed and/or
traded and any other restrictions on these Shares.
     The Grantee or other person exercising the Option Shares under this
Incentive Award may be required by the Committee to give a written
representation that the Incentive Award and the Shares subject to the Incentive
Award will be acquired for investment and not with a view to public
distribution; provided, however, that the Committee, in its sole discretion, may
release any person receiving an Incentive Award from any such representations
either prior to or subsequent to the exercise of this Incentive Award.
5. Transferability of Option. The Option shall not be transferable or
assignable, in whole or in part, and except as otherwise provided in Section 12
of this Agreement and Section 5.2 of the Plan or by will or the laws of descent
or distribution. The Option shall be exercisable (i) only by the Grantee 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
Grantee under this Agreement).
6. Payment of Taxes Upon Exercise. The Grantee understands and acknowledges that
under currently applicable law, the Grantee maybe required to include in the
Grantee’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 Grantee

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hereby authorizes the Company to withhold Exercise Shares of a value equivalent
to (but not to exceed) the amount of tax required to be withheld by the Company
out of any taxable income derived by the Grantee upon exercise of the Option
pursuant to Section 6.3 of the Plan; provided, however, that the Grantee may, in
the alternative, in order to satisfy such withholding requirement, deliver to
the Company cash or other shares of Common Stock owned by the Grantee.
7. Investment Representation. The Grantee represents that the Option Shares
available for purchase by the Grantee under this Agreement will be acquired only
for investment and not with a view toward resale or distribution.
8. Securities Law, Other Applicable Laws and Company Policies; Legends. The
Grantee 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 state securities laws, as now in effect or
hereafter amended, or there is furnished an opinion of counsel in form and
substance satisfactory to the Company from counsel acceptable to the Company
that such registrations are not required. Grantee agrees and understands that
transactions under the Plan and this Agreement are intended to and shall comply
with all applicable laws including, but not limited to, the requirements of
Rule 16b-3 under the Securities Exchange Act and Securities Regulation BTR.
Grantee also agrees and understands that transactions under the Plan and this
Agreement are intended to and shall comply with the Company’s insider trading
policies as revised from time to time or such other of the Company’s policies
related to trading in the Company’s stock including, but not limited to,
policies relating to black-out periods. The Grantee further understands and
agrees that, unless issued pursuant to an effective registration statement under
the Securities Act, the following legend shall beset 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 SECURITIES LAWS OF ANY STATE, AND MAY NOT BE
SOLD OR TRANSFERRED EXCEPT UPON SUCH REGISTRATION OR UPON RECEIPT BY THE
CORPORATION OF AN OPINION OF COUNSEL FOR THE CORPORATION, IN FORM AND SUBSTANCE
SATISFACTORY TO THE CORPORATION, THAT SUCH REGISTRATION IS NOT REQUIRED FOR SUCH
SALE 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
GREY WOLF, INC. 2003 INCENTIVE PLAN (EFFECTIVE MARCH 26, 2003), WHICH IS ON FILE
AT THE PRINCIPAL OFFICE OF THE CORPORATION AND A COPY OF WHICH WILL BE PROVIDED
FOR INSPECTION UPON WRITTEN REQUEST.”

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9. No Rights as Shareholder. The Grantee shall not have any rights as a
shareholder with respect to any of the Option Shares until the date of issuance
by the Company to the Grantee of a stock certificate representing such Option
Shares. Except as otherwise provided in Section 5.5 of the Plan, the Grantee
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 Grantee, the Company agrees to cause a valid stock certificate for
the number of Option Shares then purchased to be issued and delivered to the
Grantee within seven (7) business days thereafter.
10. Corporate Proceedings of the Company. The terms respecting corporate
proceedings of the Company shall be governed by such terms as provided in
Section 5.5 of the Plan.
11. Registration Rights. The Grantee shall have no registration rights with
respect to the Option Shares.
12. Termination of Employment. Except as otherwise provided in this Section 12,
if the Grantee for any reason whatsoever ceases to be employed by the Company,
or a parent or subsidiary corporation of the Company or successor thereto, and
prior to such cessation, the Grantee was employed by the Company, or a parent or
subsidiary of the Company or a successor thereto at all times from the date of
the granting of the Option until the date of such cessation, the Option shall be
exercisable by the Grantee (whether previously exercisable or not, i.e., whether
vested or unvested) at any time on or before the Expiration Date.
Notwithstanding the foregoing:
     a. If the Grantee is terminated for Cause (as defined below), the Option
will terminate as to all of the unexercised Option Shares on the thirtieth day
following such termination, during which thirty (30) days the Grantee may
exercise the Option as to the Option Shares exercisable on or prior to the date
of such termination for Cause; provided, however, no unvested Option shall vest
during such thirty (30) day period; and
     b. If the Grantee’s employment is terminated as a result of a voluntary
resignation (which is neither a termination without cause nor a constructive
termination without cause as described in the Grantee’s employment agreement
with the Company) the Grantee may exercise the Option as to all of the Option
Shares as provided above in this Section 12; provided that no unvested Option
shall vest as a result of such voluntary resignation or thereafter.

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For purposes of this Agreement, the term “Cause” shall mean and include
(i) chronic alcoholism or controlled substance abuse as determined by a doctor
mutually acceptable to the Company and the Grantee, (ii) an act of proven fraud
or dishonesty on the part of the Grantee with respect to the Company or its
subsidiaries; (iii) knowing and material failure by the Grantee to comply with
material applicable laws and regulations relating to the business of the Company
or its subsidiaries; (iv) the Grantee’ s material and continuing failure to
perform (as opposed to unsatisfactory performance) his duties to the Company
except, in each case, where such failure is caused by the illness or other
similar incapacity or disability of the Grantee; or (v) conviction of a crime
involving moral turpitude or a felony. Prior to the effectiveness of termination
for Cause under subclause (i), (ii), (iii) or (iv) above, the Grantee shall be
given thirty (30) days prior notice from the Board specifically identifying the
reasons which are alleged to constitute Cause hereunder and an opportunity to be
heard by the Board in the event Grantee disputes such allegations.
Nothing in (a) or (b) shall extend the time for exercising the Option granted
pursuant to this Agreement beyond the Expiration Date.
13. Retirement. Upon the Retirement of the Grantee:
     a. any non-vested portion of any outstanding Option or other Option shall
immediately terminate and no further vesting shall occur, unless upon the
Retirement of Grantee, Grantee enters into a noncompetition agreement with the
Company agreeing not to compete against the Company, its Affiliates or
Subsidiaries in a form as determined by the Committee in its sole discretion
(the “Noncompetition Agreement”). Upon the execution of the Noncompetition
Agreement, the Grantee shall continue to vest in the Option pursuant to the
schedule in Section 3, as long as Grantee abides by the Noncompetition Agreement
and does not violate its terms as determined by the Committee in its sole
discretion. If the Committee determines that Grantee has violated the
Noncompetition Agreement, any unvested Options on the date of such violation
shall be forfeited; and
     b. any Option vested on the date of such Retirement and any Option that is
vested after the date of Retirement in accordance with Section 13.a shall expire
on the Expiration Date set forth in this Agreement.
14. 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 Grantee agrees not to dispose of any Option Shares without the
prior approval of the Company unless such shares have been registered under the
Securities Act.
15. 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 frilly
prepaid,

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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 Company:   GREY WOLF, Inc.
 
      10370 Richmond Ave., Suite 600
 
      Houston, Texas 77042
 
      Attn: Chief Financial Officer
 
       
 
  If to Grantee:   Thomas P. Richards
 
      1318 Forest Brook
 
      Sugar Land, Texas 77479

16. Transferability: Binding Effect. The Option shall be transferable only as
set forth in Section 5 of this Agreement and Section 5.2 of the Plan. 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
Company and the Grantee and their respective successors and assigns.
17. Entire Agreement. This Agreement together with the Plan supersede any and
all other prior understandings and agreements, either oral or in writing,
between the parties with respect to the subject matter hereof and constitute the
sole and only agreements between the parties with respect to the said subject
matter. All prior negotiations and agreements between the parties with respect
to this Incentive Award are merged into this Agreement. Each party to this
Agreement acknowledges that no representations, inducements, promises, or
agreements, orally or otherwise, have been made by any party or by anyone acting
on behalf of any party, which are not embodied in this Agreement or the Plan and
that any agreement, statement or promise that is not contained in this Agreement
or the Plan shall not be valid or binding or of any force or effect.
18. Governing Law. This Agreement shall be governed by the laws of the State of
Texas.
19. 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.
20. 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.
21. Modification. No change or modification of this Agreement shall be valid or
binding upon the parties unless the change or modification is in writing and
signed by the parties. Notwithstanding the preceding sentence, the Company may
amend the Plan or revoke this Option to the extent permitted by the Plan.
22. Community Property. Each spouse individually is bound by, and such spouse’s
interest, if any, in any Optioned Shares is subject to, the terms of this
Agreement. Nothing in this Agreement shall create a community property interest
where none otherwise exists.

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23. No Right to Continue Service or Employment. Nothing herein shall be
construed to confer upon the Grantee the right to continue in the employ or to
provide services to the Company or any Company affiliate or Subsidiary, whether
as an employee or as a consultant or as an Outside Director, or interfere with
or restrict in any way the right of the Company or any Company affiliate or
Subsidiary to discharge the Grantee as an employee, consultant or Outside
Director at any time.
24. Grantee’s Acknowledgments. The Grantee acknowledges receipt of a copy of the
Plan, which is annexed hereto, and represents that he or she is familiar with
the terms and provisions thereof, and hereby accepts this Option subject to all
the terms and provisions thereof. The Grantee hereby agrees to accept as
binding, conclusive, and final all decisions or interpretations of the Committee
or the Board, as appropriate, upon any questions arising under the Plan or this
Agreement.
     IN WITNESS WHEREOF, this Agreement has been executed and delivered as of
the date first written above.

              COMPANY:     GREY WOLF, INC.
 
       
 
  By:    
 
            Name: David W. Wehlmann     Title: Executive Vice President & CFO
 
            GRANTEE:
 
                  Thomas P. Richards

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ACKNOWLEDGMENT OF SPOUSE TO
TERMS OF NON-QUALIFIED STOCK OPTION AGREEMENT
     I, Anita Richards, am the spouse of Thomas P. Richards (“Grantee”), and I
am fully aware of, understand, and fully consent and agree to the provisions of
the Non-Qualified Stock Option Agreement, dated
                                         (the “Agreement”), executed by Grantee
and GREY WOLF, INC. (the “Company”). I understand the binding effect of this
Agreement and its binding effect upon any interest, community or otherwise, I
may now or hereafter own with respect to any option or stock of the Company
which is the subject of the Agreement, and I agree that the termination for any
reason of my marital relationship with Grantee shall not have the effect of
removing any such option or stock of the Company from the coverage of the
Agreement.
     Signed this ___day of                                         , 200___.

     
 
   
 
  Anita Richards
Spouse of Thomas P. Richards