Exhibit 10.9

 

EMPLOYMENT AGREEMENT

 

This EMPLOYMENT AGREEMENT (the “Agreement”), entered into on August 1, 2003 and
made effective as of June 1, 2003 (the “Effective Date”) by and among ProDril
Acquisition Company, Inc. to be renamed ProDril Services Incorporated
(collectively referred to as “PSI”) or (the “Company”) and Thomas E. Hardisty
(“Executive”);

 

W I T N E S S E T H:

 

WHEREAS, the Company desires to retain the services of the Executive, and the
Executive is willing to provide such services to the Company, all upon the terms
and conditions set forth herein;

 

NOW THEREFORE, in consideration of the premises, the terms and provisions set
forth herein, the mutual benefits to be gained by the performance thereof and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:

 

SECTION  1.          EMPLOYMENT.  THE COMPANY HEREBY EMPLOYS THE EXECUTIVE, AND
THE EXECUTIVE HEREBY ACCEPTS SUCH EMPLOYMENT, ALL UPON THE TERMS AND CONDITIONS
SET FORTH HEREIN.

 

SECTION  2.          TERM.  UNLESS SOONER TERMINATED PURSUANT TO SECTION 5 OF
THIS AGREEMENT, THE EXECUTIVE SHALL BE EMPLOYED FOR A TERM COMMENCING ON THE
EFFECTIVE DATE AND ENDING ON THE THIRD ANNIVERSARY OF THE EFFECTIVE DATE (THE
“TERM”); PROVIDED, HOWEVER, THAT THE TERM SHALL AUTOMATICALLY BE EXTENDED ON A
DAILY BASIS FOR AN ADDITIONAL DAY SUCH THAT, AT ALL TIMES, THE REMAINING TERM
SHALL BE THREE YEARS.  NOTWITHSTANDING ANY OTHER PROVISION OF THIS AGREEMENT TO
THE CONTRARY, THIS AGREEMENT MAY BE TERMINATED BY COMPANY UPON WRITTEN NOTICE,
IN WHICH CASE THE AGREEMENT WILL TERMINATE UPON THE EXPIRATION OF THE THREE-YEAR
TERM.

 

SECTION  3.          DUTIES AND RESPONSIBILITIES.

 

A.            CAPACITY.  THE EXECUTIVE SHALL SERVE IN THE CAPACITY OF SENIOR
VICE PRESIDENT OF CORPORATE DEVELOPMENT OF PSI, AND IN SUCH OTHER OR ADDITIONAL
CAPACITY OR CAPACITIES FOR THE COMPANY OR AN AFFILIATE OF PSI AS THE BOARD OF
DIRECTORS OF PSI (THE “BOARD”) MAY DIRECT FROM TIME TO TIME.  DURING THE TERM OF
THIS AGREEMENT, AS SENIOR VICE PRESIDENT, EXECUTIVE AGREES TO PERFORM SUCH
DUTIES AS ARE NORMALLY INCIDENT TO THAT POSITION AND SHALL PERFORM SUCH OTHER
DUTIES AND RESPONSIBILITIES AS MAY BE PRESCRIBED FROM TIME TO TIME BY THE BOARD
OF DIRECTORS OF THE COMPANY.

 

B.            FULL-TIME DUTIES.  THE EXECUTIVE SHALL DEVOTE HIS FULL BUSINESS
TIME, ATTENTION AND ENERGIES TO THE BUSINESS OF THE COMPANY AND SHALL NOT BE
ENGAGED IN ANY OTHER BUSINESS ACTIVITY, WHETHER OR NOT PURSUED FOR GAIN, PROFIT
OR OTHER PECUNIARY ADVANTAGE, WHICH WOULD IMPAIR HIS ABILITY TO FULFILL HIS
DUTIES TO THE COMPANY UNDER THIS AGREEMENT, WITHOUT THE PRIOR WRITTEN CONSENT OF
THE BOARD.  NOTHING CONTAINED IN THIS SECTION 3(B) SHALL PREVENT THE EXECUTIVE
FROM PASSIVELY INVESTING HIS ASSETS IN SUCH A FORM OR MANNER AS WILL NOT
CONFLICT WITH THE TERMS OF THIS AGREEMENT AND WILL NOT REQUIRE SERVICES ON THE
PART OF THE EXECUTIVE IN THE OPERATION OF THE BUSINESS OF THE COMPANIES OR OTHER
ENTERPRISES IN WHICH SUCH INVESTMENTS ARE MADE.

 

C.            STANDARD OF PERFORMANCE.  THE EXECUTIVE WILL PERFORM HIS DUTIES
UNDER THIS AGREEMENT WITH FIDELITY AND LOYALTY, TO THE BEST OF HIS ABILITY,
EXPERIENCE AND TALENT AND IN A MANNER CONSISTENT WITH HIS FIDUCIARY
RESPONSIBILITIES.

 

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SECTION  4.          COMPENSATION.

 

A. BASE SALARY.  THE COMPANY SHALL PAY THE EXECUTIVE A SALARY (THE “BASE
SALARY”) OF U.S. $150,000 PER ANNUM.  THE BASE SALARY SHALL BE PAYABLE IN
ACCORDANCE WITH THE GENERAL PAYROLL PRACTICES OF THE COMPANY IN EFFECT FROM TIME
TO TIME.  THE COMPANY SHALL REVIEW THE BASE SALARY THEN BEING PAID TO THE
EXECUTIVE AT SUCH TIMES AS THE COMPANY REGULARLY REVIEWS THE COMPENSATION PAID
TO EMPLOYEES.  UPON COMPLETION OF SUCH REVIEW, THE COMPANY IN ITS SOLE
DISCRETION MAY INCREASE OR MAINTAIN THE EXECUTIVE’S THEN CURRENT BASE SALARY,
AND ANY INCREASED SALARY SHALL BE THE “BASE SALARY” FOR ALL PURPOSES UNDER THIS
AGREEMENT.  NOTWITHSTANDING THE ABOVE, THE BASE SALARY SHALL BE INCREASED TO
$300,000 UPON THE THIRD ANNIVERSARY DATE FROM THE EFFECTIVE DATE OF THIS
AGREEMENT.  THE COMPANY MAY DECREASE THE EXECUTIVE’S THEN CURRENT BASE SALARY
AFTER THE THIRD ANNIVERSARY DATE ONLY WITH THE PRIOR WRITTEN CONSENT OF THE
EXECUTIVE.

 

B. Stock Options.  The Company shall grant the Executive 250,000 options to
purchase the Company’s stock at $2 per share.  Such options shall vest ratably
over a three year period and become exercisable on the third anniversary of the
Effective date and such vested options shall survive Executives termination
date.

 

C. BONUS.  THE EXECUTIVE SHALL BE ELIGIBLE, IN THE SOLE DISCRETION OF THE BOARD,
TO BE CONSIDERED FOR A BONUS FOLLOWING EACH FISCAL YEAR ENDING DURING THE TERM
BASED UPON THE EXECUTIVE’S PERFORMANCE AND THE OPERATING RESULTS OF THE COMPANY
AND THEIR AFFILIATES DURING SUCH YEAR IN RELATION TO PERFORMANCE TARGETS
ESTABLISHED BY THE BOARD. DETERMINATION OF THE BONUS AMOUNT SHALL TAKE INTO
ACCOUNT SUCH UNUSUAL OR NONRECURRING ITEMS AS THE CHIEF EXECUTIVE OFFICER OF PSI
AND/OR THE BOARD DEEM APPROPRIATE.

 

D. BENEFITS.  IF AND TO THE EXTENT THAT THE COMPANY MAINTAINS EMPLOYEE BENEFIT
PLANS (INCLUDING, BUT NOT LIMITED TO, PENSION, PROFIT SHARING, DISABILITY,
ACCIDENT, MEDICAL, LIFE INSURANCE AND HOSPITALIZATION PLANS), THE EXECUTIVE
SHALL BE ENTITLED TO PARTICIPATE THEREIN IN ACCORDANCE WITH THE TERMS OF SUCH
PLANS AND THE COMPANY’S REGULAR PRACTICES WITH RESPECT TO ITS EMPLOYEES.  IN
ADDITION, THE COMPANY PROMISES TO PROVIDE REASONABLE HEALTH AND DENTAL INSURANCE
FOR THE EXECUTIVE AND HIS FAMILY, INCLUDING $500,000 IN LIFE INSURANCE.  THE
EXECUTIVE SHALL BE ENTITLED TO REIMBURSEMENT FROM THE COMPANY FOR REASONABLE
OUT-OF-POCKET EXPENSES INCURRED BY HIM IN THE COURSE OF THE PERFORMANCE OF HIS
DUTIES, HEREUNDER, INCLUDING ALL REASONABLE COMMUTING AND COMMUNICATION COSTS,
UPON THE SUBMISSION OF APPROPRIATE DOCUMENTATION.

 

E. VACATION. THE EXECUTIVE SHALL BE ENTITLED TO FOUR WEEKS OF PAID VACATION PER
CALENDAR YEAR, WHICH, IF NOT TAKEN, MAY BE CARRIED FORWARD TO ANY SUBSEQUENT
YEAR, EXCEPT IN ACCORDANCE WITH COMPANY POLICY APPLICABLE TO THE COMPANY’S
EMPLOYEES GENERALLY.  THE EXECUTIVE SHALL ALSO BE ENTITLED TO SUCH HOLIDAYS AND,
SUBJECT TO THE PROVISIONS OF SECTION 5, OTHER PAID OR UNPAID LEAVES OF ABSENCE
AS ARE CONSISTENT WITH THE COMPANY’S NORMAL POLICIES.

 

SECTION  5.          TERMINATION OF EMPLOYMENT.

 

Notwithstanding the provisions of Section 2, the Executive’s employment
hereunder shall terminate under any of the following conditions:

 

A.            DEATH.  THE EXECUTIVE’S EMPLOYMENT UNDER THIS AGREEMENT SHALL
TERMINATE AUTOMATICALLY UPON HIS DEATH.

 

B.            DISABILITY.  THE EXECUTIVE’S EMPLOYMENT UNDER THIS AGREEMENT SHALL
TERMINATE AUTOMATICALLY UPON HIS DISABILITY.  FOR PURPOSES OF THIS AGREEMENT,
“DISABILITY” MEANS PERMANENT AND

 

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TOTAL DISABILITY (WITHIN THE MEANING OF SECTION 22(E) (3) OF THE INTERNAL
REVENUE CODE OF 1986, AS AMENDED, OR ANY SUCCESSOR PROVISION) WHICH HAS EXISTED
FOR AT LEAST 180 CONSECUTIVE DAYS.

 

C.            TERMINATION BY THE COMPANY WITHOUT CAUSE.  THE COMPANY MAY
TERMINATE THE EXECUTIVE’S EMPLOYMENT HEREUNDER WITHOUT “CAUSE” (AS HEREINAFTER
DEFINED) ON THREE MONTHS WRITTEN NOTICE BY THE COMPANY.

 

D.            TERMINATION BY THE COMPANY FOR CAUSE.  THE EXECUTIVE’S EMPLOYMENT
HEREUNDER MAY BE TERMINATED FOR CAUSE UPON WRITTEN NOTICE BY THE COMPANY.  FOR
PURPOSES OF THIS AGREEMENT, “CAUSE” SHALL MEAN (I) THE WILLFUL AND CONTINUED
FAILURE BY THE EXECUTIVE TO SUBSTANTIALLY PERFORM HIS OBLIGATIONS UNDER THIS
AGREEMENT (OTHER THAN SUCH FAILURE RESULTING FROM HIS DISABILITY) AFTER A DEMAND
FOR SUBSTANTIAL PERFORMANCE HAS BEEN DELIVERED TO HIM BY THE BOARD WHICH
SPECIFICALLY IDENTIFIES THE MANNER IN WHICH THE BOARD BELIEVES THE EXECUTIVE HAS
NOT SUBSTANTIALLY PERFORMED SUCH PROVISIONS AND THE EXECUTIVE HAS FAILED TO
REMEDY THE SITUATION THREE MONTHS AFTER SUCH DEMAND; (II) THE EXECUTIVE’S
WILLFULLY ENGAGING IN CONDUCT MATERIALLY AND DEMONSTRABLY INJURIOUS TO THE
PROPERTY OR BUSINESS OF THE COMPANY, INCLUDING WITHOUT LIMITATION, FRAUD,
MISAPPROPRIATION OF FUNDS OR OTHER PROPERTY OF THE COMPANY, OTHER WILLFUL
MISCONDUCT, GROSS NEGLIGENCE OR CONVICTION OF A FELONY OR ANY CRIME OF MORAL
TURPITUDE; OR (III) THE EXECUTIVE’S MATERIAL BREACH OF THIS AGREEMENT WHICH
BREACH HAS NOT BEEN REMEDIED BY THE EXECUTIVE WITHIN THREE MONTHS AFTER THE
RECEIPT BY THE EXECUTIVE OF WRITTEN NOTICE FROM THE COMPANY THAT THE EXECUTIVE
IS IN MATERIAL BREACH OF THIS AGREEMENT, SPECIFYING THE PARTICULARS OF SUCH
BREACH.

 

For purposes of this Agreement, no act, or failure to act, on the part of the
Executive shall be deemed “willful” or engaged in “willfully” if it was due
primarily to an error in judgment or negligence, but shall be deemed “willful”
or engaged in “willfully” only if done, or omitted to be done, by the Executive
not in good faith and without reasonable belief that his action or omission was
in the best interest of the Company.  Notwithstanding the foregoing, the
Executive shall not be deemed to have been terminated as a result of “Cause”
hereunder unless and until there shall have been delivered to the Executive a
copy of a resolution duly adopted by the affirmative vote of not less than
three-quarters of the Board then in office at a meeting of the Board called and
held for such purpose (after reasonable notice to the Executive and an
opportunity for the Executive, together with his counsel, to be heard before the
Board), finding that, in the good faith opinion of the Board, the Executive has
committed an act set forth above in this Section 5(D) and specifying the
particulars thereof in detail.  Nothing herein shall limit the right of the
Executive or his legal representative to contest the validity or propriety of
any such determination.

 

E.             TERMINATION BY THE EXECUTIVE FOR GOOD REASON.  THE EXECUTIVE MAY
TERMINATE HIS EMPLOYMENT HEREUNDER FOR “GOOD REASON.”  FOR PURPOSES OF THIS
AGREEMENT, “GOOD REASON” FOR TERMINATION SHALL MEAN ANY OF THE FOLLOWING (WHICH
OCCUR WITHOUT THE EXECUTIVE’S PRIOR WRITTEN CONSENT):

 

(1)           A DECREASE IN THE EXECUTIVE’S BASE SALARY NOT IN ACCORDANCE WITH
SECTION 4 (A) ABOVE;

 

(2)           A MATERIALLY ADVERSE DIMINUTION OF THE OVERALL LEVEL OF
RESPONSIBILITIES OF THE EXECUTIVE;

 

(3)           A MATERIAL BREACH BY THE COMPANY OF ANY TERM OR PROVISION OF THIS
AGREEMENT;

 

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(4)           AFTER A CHANGE OF CONTROL (AS DEFINED IN SECTION 7(B)) AND DURING
THE EFFECTIVE PERIOD (AS DEFINED IN SECTION 7(C)), (A) THE FAILURE OF THE
COMPANY TO CONTINUE IN EFFECT ANY BENEFIT OR COMPENSATION PLAN (INCLUDING, BUT
NOT LIMITED TO, ANY BONUS, INCENTIVE, RETIREMENT, SUPPLEMENTAL EXECUTIVE
RETIREMENT, SAVINGS, PROFIT SHARING, PENSION, PERFORMANCE, STOCK OPTION, STOCK
PURCHASE, DEFERRED COMPENSATION, LIFE INSURANCE, MEDICAL, DENTAL, HEALTH,
HOSPITAL, ACCIDENT OR DISABILITY PLANS) IN WHICH THE EXECUTIVE IS PARTICIPATING
AT THE TIME OF SUCH CHANGE OF CONTROL (OR PLANS PROVIDING TO THE EXECUTIVE, IN
THE AGGREGATE, SUBSTANTIALLY SIMILAR BENEFITS AS THE BENEFITS ENJOYED BY THE
EXECUTIVE UNDER THE BENEFIT AND COMPENSATION PLANS IN WHICH THE EXECUTIVE IS
PARTICIPATING AT THE TIME OF SUCH CHANGE OF CONTROL), OR (B) THE TAKING OF ANY
ACTION BY THE COMPANY THAT WOULD ADVERSELY AFFECT THE EXECUTIVE’S PARTICIPATION
IN OR MATERIALLY REDUCE THE EXECUTIVE’S BENEFITS UNDER ANY OF SUCH PLANS OR
DEPRIVE THE EXECUTIVE OF ANY MATERIAL FRINGE BENEFIT ENJOYED BY THE EXECUTIVE AT
THE TIME OF SUCH CHANGE IN CONTROL;

 

(5)           ANY PERSONAL REASON THAT THE COMPENSATION COMMITTEE OF THE BOARD
IN ITS DISCRETION DETERMINES SHALL CONSTITUTE GOOD REASON.

 

HOWEVER, THAT NO EVENT OR CONDITION DESCRIBED IN CLAUSES (1) – (4) OF THIS
SECTION 5(E) SHALL CONSTITUTE GOOD REASON UNLESS (A) THE EXECUTIVE GIVES THE
COMPANY WRITTEN NOTICE OF HIS OBJECTION TO SUCH EVENT OR CONDITION WITHIN 90
DAYS AFTER THE EXECUTIVE LEARNS OF SUCH EVENT, (B) SUCH EVENT OR CONDITION IS
NOT CORRECTED BY THE COMPANY WITHIN 10 DAYS OF ITS RECEIPT OF SUCH NOTICE AND
(C) THE EXECUTIVE VOLUNTARILY RESIGNS HIS EMPLOYMENT WITH THE COMPANY AND ITS 
AFFILIATES NOT MORE THAN 60 DAYS FOLLOWING THE EXPIRATION OF THE 10-DAY PERIOD
DESCRIBED IN THE FOREGOING CLAUSE (B).

 

F.             VOLUNTARY TERMINATION BY THE EXECUTIVE.  THE EXECUTIVE MAY
TERMINATE HIS EMPLOYMENT HEREUNDER AT ANY TIME FOR REASON OTHER THAN GOOD REASON
ON 30 DAYS WRITTEN NOTICE TO THE COMPANY.

 

SECTION  6.          PAYMENTS UPON TERMINATION.

 

A.            UPON TERMINATION OF THE EXECUTIVE’S EMPLOYMENT HEREUNDER, THE
COMPANY SHALL BE OBLIGATED TO PAY AND THE EXECUTIVE SHALL BE ENTITLED TO
RECEIVE, ON THE PAY DATE FOR THE PAY PERIOD IN WHICH THE TERMINATION OCCURS, ALL
ACCRUED AND UNPAID BASE SALARY TO THE DATE OF TERMINATION.  IN ADDITION, THE
EXECUTIVE SHALL BE ENTITLED TO ANY BENEFITS TO WHICH HE IS ENTITLED UNDER THE
TERMS OF ANY APPLICABLE EMPLOYEE BENEFIT PLAN OR PROGRAM OR APPLICABLE LAW.

 

B.            EXCEPT AS PROVIDED IN SECTION 7(A), UPON TERMINATION OF THE
EXECUTIVE’S EMPLOYMENT BY THE COMPANY WITHOUT CAUSE OR BY THE EXECUTIVE DUE TO
GOOD REASON, IN ADDITION TO THE AMOUNT SET FORTH IN SECTION 6(A), THE COMPANY
SHALL BE OBLIGATED TO PAY, AND THE EXECUTIVE SHALL BE ENTITLED TO RECEIVE, (I)
BASE SALARY FOR A PERIOD OF THREE YEARS AND (II) CONTINUED MEDICAL AND DENTAL
BENEFITS FOR A PERIOD OF THREE YEARS AT NO COST TO THE EXECUTIVE.  THE COMPANY
MAY CEASE ALL PAYMENTS OF BASE SALARY AND BONUS UNDER THIS SECTION 6(B) IN THE
EVENT OF A WILLFUL BREACH BY THE EXECUTIVE OF THE PROVISIONS OF SECTIONS 8, 9 OR
10 OF THIS AGREEMENT OR ANY INADVERTENT BREACH THAT CONTINUES AFTER NOTICE GIVEN
TO THE EXECUTIVE BY THE COMPANY.  AS A CONDITION PRECEDENT TO THE RECEIPT OF ANY
OF THE SEVERANCE BENEFITS HEREUNDER THE EXECUTIVE HEREBY AGREES TO EXECUTE A
RELEASE OF CLAIMS AGAINST THE COMPANY AND ITS AFFILIATES IN FORM AND SUBSTANCE
REASONABLY SATISFACTORY TO THE COMPANY.

 

C.            IN THE EVENT EXECUTIVE ELECTS TO TERMINATE EMPLOYMENT AS SET FORTH
IN SECTION 5(F) THEN IN SUCH EVENT ANY OPTIONS NOT VESTED AS SET FORTH IN
SECTION 3(B) SHALL TERMINATE.

 

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D.            UPON ANY TERMINATION OR EXPIRATION OF THE EXECUTIVE’S EMPLOYMENT
HEREUNDER PURSUANT TO SECTION 5, THE EXECUTIVE SHALL HAVE NO FURTHER LIABILITY
OR OBLIGATION UNDER OR IN CONNECTION WITH THIS AGREEMENT; PROVIDED, HOWEVER,
THAT THE EXECUTIVE SHALL CONTINUE TO BE SUBJECT TO THE PROVISIONS OF SECTIONS 8,
9, 10, 11 AND 12 HEREOF (IT BEING UNDERSTOOD AND AGREED THAT SUCH PROVISIONS
SHALL SURVIVE ANY TERMINATION OR EXPIRATION OF THE EXECUTIVE’S EMPLOYMENT
HEREUNDER FOR ANY REASON).  UPON ANY VOLUNTARY TERMINATION BY THE EXECUTIVE
(OTHER THAN A RESIGNATION BY THE EXECUTIVE FOR GOOD REASON), OR EXPIRATION OF
EXECUTIVE’S EMPLOYMENT AGREEMENT, THE COMPANY SHALL HAVE NO FURTHER LIABILITY
UNDER OR IN CONNECTION WITH THIS AGREEMENT, EXCEPT TO PAY THE PORTION OF THE
EXECUTIVE’S BASE SALARY EARNED OR ACCRUED AT THE DATE OF TERMINATION.

 

SECTION  7.          CHANGE OF CONTROL.

 

A.            IN THE EVENT THAT, DURING THE EFFECTIVE PERIOD (AS HEREINAFTER
DEFINED), THE EXECUTIVE’S EMPLOYMENT IS TERMINATED BY THE COMPANY WITHOUT CAUSE
OR BY THE EXECUTIVE FOR GOOD REASON, IN LIEU OF THE AMOUNT SET FORTH IN SECTION
6(B), THE EXECUTIVE SHALL IMMEDIATELY BECOME ENTITLED TO THE FOLLOWING BENEFITS:

 

(1)           THE OUTSTANDING OPTIONS TO ACQUIRE SHARES OF THE COMPANY HELD BY
THE EXECUTIVE UNDER ANY SHARE OPTION PLAN AND GRANTED ON OR PRIOR TO THE CHANGE
OF CONTROL SHALL BECOME IMMEDIATELY FULLY EXERCISABLE AND SHALL REMAIN
EXERCISABLE FOR THREE YEARS AFTER TERMINATION OF EMPLOYMENT OR, IF LESS, THEIR
REMAINING TERM;

 

(2)           A LUMP–PAYMENT EQUAL TO THREE TIMES: (A) THE EXECUTIVE’S THEN
CURRENT BASE SALARY OR (B) $360,000, WHICHEVER IS GREATER;

 

(3)           A LUMP–SUM PAYMENT EQUAL TO THREE TIMES THE HIGHEST ANNUAL BONUS
ALLOWED UNDER THE EXECUTIVE BONUS PLAN FOR THE EXECUTIVE DURING THE THREE-YEAR
PERIOD PRECEDING THE DATE OF THE CHANGE OF CONTROL; AND

 

(4)           CONTINUED MEDICAL AND DENTAL COVERAGE FOR THREE YEARS FROM THE
TERMINATION DATE AT NO COST TO THE EXECUTIVE.

 

B.            FOR PURPOSES OF THIS AGREEMENT, A “CHANGE OF CONTROL” SHALL BE
DEEMED TO HAVE TAKEN PLACE UPON THE EARLIEST OCCURRENCE OF ANY OF THE FOLLOWING:
(I) A TENDER OFFER IS MADE AND CONSUMMATED FOR THE BENEFICIAL OWNERSHIP OF 25%
OR MORE OF THE OUTSTANDING VOTING SECURITIES OF PSI; (II) PSI IS MERGED OR
CONSOLIDATED WITH ANOTHER CORPORATION, AND AS A RESULT OF SUCH MERGER OR
CONSOLIDATION, LESS THAN 75% OF THE OUTSTANDING VOTING SECURITIES OF THE
SURVIVING OR RESULTING CORPORATION ARE BENEFICIALLY OWNED IN THE AGGREGATE BY
THE PERSONS OR ENTITIES WHO WERE SHAREHOLDERS OF PSI IMMEDIATELY PRIOR TO SUCH
MERGER OR CONSOLIDATION; (III) PSI SELLS ALL OR SUBSTANTIALLY ALL OF ITS ASSETS
TO ANOTHER ENTITY OR PERSON THAT IS NOT A WHOLLY OWNED SUBSIDIARY; (IV) DURING
ANY 15-MONTH PERIOD, INDIVIDUALS WHO AT THE BEGINNING OF SUCH PERIOD CONSTITUTED
THE BOARD (INCLUDING FOR THIS PURPOSE ANY NEW MEMBER WHOSE ELECTION OR
NOMINATION FOR ELECTION BY THE SHAREHOLDERS OF PSI WAS APPROVED BY A VOTE OF AT
LEAST 2/3 OF THE MEMBERS THEN STILL IN OFFICE AND WHO WERE MEMBERS AT THE
BEGINNING OF SUCH PERIOD) CEASE FOR ANY REASON TO CONSTITUTE AT LEAST A MAJORITY
OF THE BOARD; (V) THE COMPENSATION COMMITTEE OF THE BOARD DETERMINES, IN ITS
SOLE DISCRETION, THAT A CHANGE OF CONTROL HAS OCCURRED FOR PURPOSES OF THIS
AGREEMENT; (VI) THE COMPANY SELLS ALL OR SUBSTANTIALLY ALL OF ITS ASSETS TO
ANOTHER ENTITY OR PERSON THAT IS NOT A SUBSIDIARY OR AFFILIATE OF THE COMPANY OR
(VII) 80% OR MORE OF THE OUTSTANDING VOTING SECURITIES OF THE COMPANY ARE
ACQUIRED BY ANY PERSON OR ENTITY OTHER THAN PSI, ITS SUBSIDIARIES OR AFFILIATES.

 

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C.            FOR PURPOSES OF THIS AGREEMENT, “EFFECTIVE PERIOD” SHALL MEAN THE
PERIOD BEGINNING ON THE DATE OF A CHANGE OF CONTROL AND ENDING ON THE EARLIER OF
THE THIRD ANNIVERSARY OF THE CHANGE OF CONTROL OR THE EXPIRATION OF THE TERM.

 

D.            TO THE EXTENT THAT THE ACCELERATION OF VESTING OR ANY PAYMENT,
DISTRIBUTION OR ISSUANCE MADE TO THE EXECUTIVE IN THE EVENT OF A CHANGE OF
CONTROL IS SUBJECT TO FEDERAL INCOME, EXCISE OR OTHER TAX AT A RATE ABOVE THE
RATE ORDINARILY APPLICABLE TO COMPENSATION PAID IN THE ORDINARY COURSE OF
BUSINESS (COLLECTIVELY, A “PARACHUTE TAX”), WHETHER AS A RESULT OF THE
PROVISIONS OF SECTION 280G AND 4999 OF THE INTERNAL REVENUE CODE OF 1986, AS
AMENDED, OR ANY SIMILAR OR ANALOGOUS PROVISIONS OF ANY STATUTE ADOPTED
SUBSEQUENT TO THE DATE HEREOF, OR OTHERWISE, THEN THE COMPANY SHALL PAY TO THE
EXECUTIVE AN ADDITIONAL SUM (THE “ADDITIONAL AMOUNT”) SUCH THAT THE NET AMOUNT
RECEIVED BY THE EXECUTIVE, AFTER PAYING ANY APPLICABLE PARACHUTE TAX AND ANY
FEDERAL OR STATE INCOME TAX ON SUCH ADDITIONAL AMOUNT, SHALL BE EQUAL TO THE
AMOUNT THAT THE EXECUTIVE WOULD HAVE RECEIVED IF SUCH PARACHUTE TAX WERE NOT
APPLICABLE.

 

SECTION  8.          CONFIDENTIAL INFORMATION AND INVENTIONS.

 

A.            NONDISCLOSURE.  THE EXECUTIVE HEREBY ACKNOWLEDGES THAT THE
EXECUTIVE HAS KNOWLEDGE OF CERTAIN CONFIDENTIAL AND PROPRIETARY INFORMATION
RELATING TO COMPANY, PSI OR THEIR AFFILIATES AND THAT IT WILL BE NECESSARY, IN
CONNECTION WITH THE PERFORMANCE OF SERVICES HEREUNDER, TO PROVIDE OR MAKE
AVAILABLE TO THE EXECUTIVE CERTAIN CONFIDENTIAL AND PROPRIETARY INFORMATION,
INCLUDING, BUT NOT LIMITED TO, BUSINESS AND FINANCIAL INFORMATION, TECHNOLOGICAL
INFORMATION, STRATEGIES, THE STATUS AND CONTENT OF CONTRACTS WITH SUPPLIERS OR
CLIENTS, CUSTOMER LISTS AND FINANCIAL INFORMATION ON CUSTOMERS, INTELLECTUAL
PROPERTY, TRADE SECRETS AND OTHER INFORMATION RELATING TO THE BUSINESSES,
PRODUCTS, TECHNOLOGY, SERVICES, CUSTOMERS, METHODS OR TACTICS OF THE COMPANY,
PSI OR ITS AFFILIATES (ANY SUCH CONFIDENTIAL OR PROPRIETARY INFORMATION BEING
HEREINAFTER REFERRED TO AS “CONFIDENTIAL INFORMATION”).  THE EXECUTIVE FURTHER
ACKNOWLEDGES THAT THE CONFIDENTIAL INFORMATION CONSTITUTES VALUABLE TRADE
SECRETS OF COMPANY, PSI AND ITS AFFILIATES AND AGREES THAT ANY SUCH CONFIDENTIAL
INFORMATION SHALL REMAIN THE PROPERTY OF THE COMPANY, PSI AND THEIR AFFILIATES
AT ALL TIMES DURING THE TERM OF THIS AGREEMENT AND FOLLOWING THE EXPIRATION OR
TERMINATION HEREOF.  THE EXECUTIVE SHALL NOT PUBLISH, DISSEMINATE, DISTRIBUTE,
DISCLOSE, SELL, ASSIGN, TRANSFER, COPY, REMOVE FROM THE PREMISES OF THE COMPANY,
PSI OR THEIR AFFILIATES, COMMERCIALLY EXPLOIT, MAKE AVAILABLE TO OTHERS, OR
OTHERWISE MAKE USE OF ANY CONFIDENTIAL INFORMATION TO OR FOR THE USE OR BENEFIT
OF THE EXECUTIVE OR ANY OTHER PERSON, FIRM, CORPORATION OR ENTITY, EXCEPT AS
SPECIFICALLY AND PREVIOUSLY AUTHORIZED IN WRITING BY THE BOARD OR AS REQUIRED
FOR THE DUE AND PROPER PERFORMANCE OF HIS DUTIES AND OBLIGATIONS UNDER THIS
AGREEMENT.  IN ADDITION, THE EXECUTIVE SHALL EMPLOY ALL NECESSARY SAFEGUARDS AND
PRECAUTIONS IN ORDER TO ENSURE THAT UNAUTHORIZED ACCESS TO THE CONFIDENTIAL
INFORMATION IS NOT AFFORDED TO ANY PERSON, FIRM, CORPORATION OR ENTITY.  UPON
ANY EXPIRATION OR TERMINATION OF THIS AGREEMENT, OR IF THE BOARD OR THE COMPANY
SO REQUESTS AT ANY TIME, THE EXECUTIVE SHALL PROMPTLY RETURN TO THE COMPANY, PSI
AND THEIR AFFILIATES ALL CONFIDENTIAL INFORMATION IN THE EXECUTIVE’S POSSESSION,
WHETHER IN WRITING, ON COMPUTER DISKS OR OTHER MEDIA, WITHOUT RETAINING ANY
COPIES, EXTRACTS OR OTHER REPRODUCTIONS THEREOF.  NOTWITHSTANDING THE FOREGOING,
NOTHING CONTAINED IN THIS SECTION 8(A) SHALL PREVENT THE PUBLISHING,
DISSEMINATION, DISTRIBUTION, DISCLOSURE, SALE, ASSIGNMENT, TRANSFER, COPYING,
REMOVAL, COMMERCIAL EXPLOITATION OR OTHER USE BY THE EXECUTIVE OF ANY
INFORMATION THAT (I) IS GENERALLY AVAILABLE TO THE PUBLIC (OTHER THAN THROUGH A
BREACH OF AN OBLIGATION OF CONFIDENTIALITY, OR (II) IS LAWFULLY OBTAINED BY THE
EXECUTIVE WITHOUT OBLIGATION OF CONFIDENTIALITY FROM A SOURCE OTHER THAN THE
COMPANY, PSI OR ITS AFFILIATES, DIRECTORS, OFFICERS, EMPLOYEES, AGENTS OR OTHER
REPRESENTATIVES (PROVIDED, HOWEVER, THAT SUCH SOURCE IS NOT BOUND BY A
CONFIDENTIALITY AGREEMENT WITH THE COMPANY, PSI OR ANY OF ITS AFFILIATES AND IS
NOT OTHERWISE UNDER AN OBLIGATION OF SECRECY OR CONFIDENTIALITY TO EITHER OF
THEM).

 

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B.            REQUESTS FOR DISCLOSURE.  IT SHALL NOT BE A BREACH OF THE
OBLIGATIONS OF SECTION 8(A) IF EXECUTIVE DISCLOSES CONFIDENTIAL INFORMATION AS
REQUIRED BY JUDICIAL OR ADMINISTRATIVE PROCESS OR, IN THE WRITTEN OPINION OF
EXECUTIVE’S COUNSEL, BY THE REQUIREMENTS OF APPLICABLE LAW, BUT ONLY UPON
SATISFACTION OF THE FOLLOWING CONDITIONS:  (I) THE EXECUTIVE GIVES PROMPT
WRITTEN NOTICE TO THE CHAIRMAN OF THE BOARD OF THE EXISTENCE OF, AND THE
CIRCUMSTANCES ATTENDANT TO, SUCH REQUEST, SUFFICIENT TO PERMIT THE COMPANY, PSI
OR AN AFFILIATE TO CONTEST OR SEEK TO RESTRICT THE REQUIRED DISCLOSURE (II) THE
EXECUTIVE CONSULTS WITH THE CHAIRMAN OF THE BOARD AS TO THE ADVISABILITY OF
TAKING LEGALLY AVAILABLE STEPS TO RESIST OR NARROW ANY SUCH REQUEST OR OTHERWISE
TO ELIMINATE THE NEED FOR SUCH DISCLOSURE, (III) IF DISCLOSURE IS REQUIRED, THE
EXECUTIVE COOPERATES WITH THE CHAIRMAN OF THE BOARD IN OBTAINING A PROTECTIVE
ORDER OR OTHER RELIABLE ASSURANCE IN FORM AND SUBSTANCE SATISFACTORY TO THE
CHAIRMAN OF THE BOARD THAT CONFIDENTIAL TREATMENT WILL BE ACCORDED TO SUCH
PORTION OF THE CONFIDENTIAL INFORMATION AS IS REQUIRED TO BE DISCLOSED, AND (IV)
THAT EXECUTIVE DISCLOSED ONLY SUCH CONFIDENTIAL INFORMATION AS IS LEGALLY
REQUIRED (OR, WHERE APPLICABLE, ONLY SUCH INFORMATION AS THE WRITTEN OPINION OF
EXECUTIVE’S COUNSEL DEEMS REQUIRED).

 

C.            CONFIDENTIAL INFORMATION OF OTHERS.  THE EXECUTIVE SHALL NOT
DISCLOSE TO THE COMPANY, PSI OR THEIR AFFILIATES, OR INDUCE THEM TO USE, THE
PROPRIETARY INFORMATION, TRADE SECRETS, OR CONFIDENTIAL INFORMATION OF OTHERS.

 

D.            DISCLOSURE.  UPON EACH OCCURRENCE OF CONCEPTION, CREATION, AND/OR
REDUCTION TO PRACTICE, THE EXECUTIVE WILL PROMPTLY PROVIDE A WRITTEN DESCRIPTION
OF EACH INVENTION (AS HEREINAFTER DEFINED) TO THE BOARD OR ITS DESIGNEE.

 

E.             ASSIGNMENT AND OWNERSHIP OF RIGHTS.  THE EXECUTIVE AGREES THAT
ALL INVENTIONS SHALL AND, TO THE EXTENT NECESSARY, SHALL BECOME AND REMAIN THE
PROPERTY OF PSI OR THE COMPANY, AND THEIR SUCCESSORS AND ASSIGNS, UNLESS
EXPRESSLY RELEASED BY PSI AND THE COMPANY IN WRITING.  THE EXECUTIVE ASSIGNS,
AND TO THE EXTENT SUCH ASSIGNMENT IS NOT EFFECTIVE, THE EXECUTIVE AGREES TO
ASSIGN ALL SUCH INVENTIONS TO PSI OR THE COMPANY.  THE EXECUTIVE AGREES THAT ALL
COPYRIGHTABLE WORKS CREATED FOR PSI OR THE COMPANY DURING THE EXECUTIVE’S
EMPLOYMENT ARE OWNED BY PSI OR THE COMPANY AND, IF NECESSARY OR APPROPRIATE, ARE
WORKS MADE FOR HIRE.

 

F.             OBTAINING PATENTS.  PSI OR THE COMPANY SHALL HAVE SOLE DISCRETION
TO DECIDE WHETHER TO OBTAIN ANY PATENT OR OTHER PROTECTION ON ANY INVENTION.  IF
PSI OR THE COMPANY SEEKS ANY SUCH PROTECTION, THE EXECUTIVE SHALL HAVE NO
OBLIGATION TO PAY ANY EXPENSES OF THE FILING OR MAINTENANCE OF ANY SUCH PATENT
OR OTHER PROTECTION.

 

G.            INVENTIONS.  “INVENTIONS” MEANS (I) ANY INVENTION, DEVELOPMENT,
IMPROVEMENT, OR COPYRIGHTABLE WORK, (II) CREATED, CONCEIVED, OR REDUCED TO
PRACTICE BY THE EXECUTIVE INDIVIDUALLY OR JOINTLY WITH OTHERS WHILE THE
EXECUTIVE IS EMPLOYED BY THE COMPANY, PSI OR THEIR AFFILIATES OR WITHIN A
SIX-MONTH PERIOD FOLLOWING TERMINATION OF THE EXECUTIVE’S EMPLOYMENT, (III)
WHETHER PATENTABLE OR NOT, (IV) WHETHER OR NOT CONCEIVED OR REDUCED TO PRACTICE
DURING REGULAR WORKING HOURS, (V) THAT RELATES TO ANY METHODS, APPARATUS,
PRODUCTS, OR COMPONENTS THEREOF WHICH, BEFORE TERMINATION OF THE EXECUTIVE’S
EMPLOYMENT, ARE MANUFACTURED, SOLD, LEASED, OR USED BY THE COMPANY, PSI OR THEIR
AFFILIATES OR WHICH ARE UNDER DEVELOPMENT BY, OR WHICH OTHERWISE PERTAIN TO THE
BUSINESS OF, THE COMPANY, PSI OR THEIR AFFILIATES.  HOWEVER, “INVENTIONS” SHALL
NOT INCLUDE ANY INVENTIONS, DEVELOPMENTS, IMPROVEMENTS, OR COPYRIGHTABLE WORK
(I) FOR WHICH NO EQUIPMENT, SUPPLIES, FACILITY, OR TRADE SECRET INFORMATION OF
THE COMPANY, PSI OR THEIR AFFILIATES WERE USED, (II) WHICH THE EXECUTIVE
DEVELOPED ENTIRELY ON THE EXECUTIVE’S OWN TIME (III) WHICH DOES NOT RELATE
DIRECTLY TO THE BUSINESS OF THE COMPANY, PSI OR THEIR AFFILIATES OR TO THEIR
ACTUAL OR DEMONSTRABLY ANTICIPATED RESEARCH OR DEVELOPMENT, OR (IV) WHICH DOES
NOT RESULT FROM ANY WORK PERFORMED BY THE EXECUTIVE FOR THE COMPANY, PSI OR
THEIR AFFILIATES.  THE EXECUTIVE REPRESENTS THAT HE HAS PROVIDED PSI, ON OR
PRIOR TO THE DATE HEREOF, A COMPLETE WRITTEN DESCRIPTION OF ALL UNPATENTED

 

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INVENTIONS AND IMPROVEMENTS IN WHICH THE EXECUTIVE HAS ANY RIGHTS THAT ARE NOT
INCLUDED IN THE TERM “INVENTIONS”, IN A FORM ACKNOWLEDGED IN WRITING BY THE
CHIEF EXECUTIVE OFFICER OF PSI.

 

SECTION  9.          COVENANT NOT TO COMPETE.

 

A.            NONCOMPETITION.  THE EXECUTIVE HEREBY AGREES THAT DURING THE
“NONCOMPETITION PERIOD” (AS HEREINAFTER DEFINED), HE WILL NOT, EXCEPT AS
OTHERWISE PERMITTED UNDER THIS AGREEMENT, DIRECTLY OR INDIRECTLY (WHETHER AS AN
EMPLOYEE, CONSULTANT, SHAREHOLDER OR DIRECTOR, OR WHETHER ACTING ALONE OR
THROUGH ANY OF HIS AFFILIATES, AS A MEMBER OF A PARTNERSHIP OR A JOINT VENTURE
OR AN INVESTOR IN, OR A HOLDER OF SECURITIES OF, ANY CORPORATION OR OTHER
ENTITY, OR OTHERWISE), ENGAGE IN ANY BUSINESS CONDUCTED BY THE COMPANY, PSI OR
ITS AFFILIATES IN THE AREA OF PARTICLE IMPACT DRILLING (THE “NONCOMPETITION
AREA”).  NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS SECTION 9, THE
EXECUTIVE MAY PASSIVELY INVEST HIS ASSETS IN SUCH A FORM OR MANNER AS WILL NOT
CONFLICT WITH THE TERMS OF THIS AGREEMENT AND WILL NOT REQUIRE SERVICES ON THE
PART OF THE EXECUTIVE IN THE OPERATION OF THE BUSINESS OF THE COMPANIES OR OTHER
ENTERPRISES IN WHICH SUCH INVESTMENTS ARE MADE.  THE EXECUTIVE ACKNOWLEDGES THAT
(I) THE PROVISIONS SET FORTH IN THIS SECTION 9 ARE FOR THE BENEFIT OF THE
COMPANY, PSI AND ITS AFFILIATES, (II) HIS AGREEMENT TO SUCH PROVISIONS IS AN
EXPRESS CONDITION TO HIS EMPLOYMENT BY THE COMPANY AND (III) SUCH PROVISIONS ARE
REASONABLY NECESSARY TO PROTECT THE GOODWILL AND OTHER BUSINESS INTERESTS OF THE
COMPANY, PSI AND ITS AFFILIATES.  THE “NONCOMPETITION PERIOD” SHALL BE THE
PERIOD COMMENCING ON THE EFFECTIVE DATE AND ENDING ON THE SECOND ANNIVERSARY OF
THE DATE OF TERMINATION OF THE EXECUTIVE’S EMPLOYMENT.

 

B.            REFORMATION OF SCOPE.  IF ANY OF THE PROVISIONS OF THIS SECTION 9
IS FOUND TO BE UNREASONABLY BROAD, OPPRESSIVE OR UNENFORCEABLE IN AN ACTION,
SUIT OR PROCEEDING BEFORE ANY FEDERAL OR STATE COURT, SUCH COURT (I) SHALL
NARROW THE NONCOMPETITION PERIOD OR THE NONCOMPETITION AREA OR SHALL OTHERWISE
ENDEAVOR TO REFORM THE SCOPE OF SUCH AGREEMENTS IN ORDER TO ENSURE THAT THE
APPLICATION THEREOF IS NOT UNREASONABLY BROAD, OPPRESSIVE OR UNENFORCEABLE AND
(II) TO THE FULLEST EXTENT PERMITTED BY LAW, SHALL ENFORCE SUCH AGREEMENTS AS SO
REFORMED.

 

SECTION  10.        NONSOLICITATION.  THE EXECUTIVE SHALL NOT, DIRECTLY OR
INDIRECTLY, DURING THE NONCOMPETITION PERIOD, (A) TAKE ANY ACTION TO SOLICIT OR
DIVERT ANY BUSINESS (OR POTENTIAL BUSINESS) OR CUSTOMERS (OR POTENTIAL
CUSTOMERS) AWAY FROM THE COMPANY, PSI OR ITS AFFILIATES, (B) INDUCE CUSTOMERS,
POTENTIAL CUSTOMERS, SUPPLIERS, AGENTS OR OTHER PERSONS UNDER CONTRACT OR
OTHERWISE ASSOCIATED OR DOING BUSINESS WITH THE COMPANY, PSI OR ITS AFFILIATES
TO TERMINATE, REDUCE OR ALTER ANY SUCH ASSOCIATION OR BUSINESS WITH OR FROM THE
COMPANY, PSI OR ITS AFFILIATES AND/OR (C) INDUCE ANY PERSON IN THE EMPLOYMENT OF
THE COMPANY, PSI OR ITS AFFILIATES OR ANY CONSULTANT TO THE COMPANY, PSI OR ITS
AFFILIATES TO (I) TERMINATE SUCH EMPLOYMENT OR CONSULTING ARRANGEMENT, (II)
ACCEPT EMPLOYMENT, OR ENTER INTO ANY CONSULTING ARRANGEMENT, WITH ANYONE OTHER
THAN THE COMPANY, PSI OR ITS AFFILIATES (EXCEPT TO THE EXTENT THE CONSULTANT
MAKES ITS SERVICES AVAILABLE TO THIRD PARTIES ON A REGULAR BASIS) AND/OR (III)
INTERFERE WITH THE CUSTOMERS, SUPPLIERS OR CLIENTS OF THE COMPANY, PSI OR ITS
AFFILIATES IN ANY MANNER OR THE BUSINESS OF THE COMPANY, PSI OR ITS AFFILIATES
IN ANY MANNER.  FOR PURPOSES OF THIS SECTION 10, A “POTENTIAL CUSTOMER” SHALL
MEAN A PERSON OR ENTITY THAT THE COMPANY, PSI OR ITS AFFILIATES, AS OF THE DATE
THE EXECUTIVE’S EMPLOYMENT TERMINATES, IS SOLICITING OR IS CONSIDERING
SOLICITING (OR HAS TARGETED FOR SOLICITATION).

 

SECTION  11.        REMEDIES.  THE EXECUTIVE HEREBY AGREES THAT A VIOLATION OF
THE PROVISIONS OF SECTION 8, 9 OR 10 HEREOF MAY CAUSE IRREPARABLE INJURY TO THE
COMPANY, PSI AND ITS AFFILIATES FOR WHICH THEY WOULD HAVE NO ADEQUATE REMEDY AT
LAW.  ACCORDINGLY, IN THE EVENT OF ANY SUCH VIOLATION, THE COMPANY, PSI AND/OR
ITS AFFILIATES SHALL BE ENTITLED TO PRELIMINARY AND OTHER INJUNCTIVE RELIEF. 
ANY SUCH INJUNCTIVE RELIEF SHALL BE IN ADDITION TO ANY OTHER REMEDIES TO WHICH
THE COMPANY, PSI AND/OR ITS AFFILIATES MAY BE ENTITLED AT LAW OR IN EQUITY OR
OTHERWISE.

 

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SECTION  12.        ARBITRATION.  ANY DISPUTE OR CONTROVERSY ARISING UNDER OR IN
CONNECTION WITH THIS AGREEMENT (OTHER THAN ANY DISPUTE OR CONTROVERSY ARISING
FROM A VIOLATION OR ALLEGED VIOLATION BY THE EXECUTIVE OF THE PROVISIONS OF
SECTION 8, 9 OR 10 HEREOF) SHALL BE SETTLED EXCLUSIVELY BY FINAL AND BINDING
ARBITRATION IN HOUSTON, TEXAS, IN ACCORDANCE WITH THE RULES FOR THE RESOLUTION
OF EMPLOYMENT DISPUTES OF THE AMERICAN ARBITRATION ASSOCIATION (“AAA”).  THE
ARBITRATOR SHALL BE SELECTED BY MUTUAL AGREEMENT OF THE PARTIES, IF POSSIBLE. 
IF THE PARTIES FAIL TO REACH AGREEMENT UPON APPOINTMENT OF AN ARBITRATOR WITHIN
30 DAYS FOLLOWING RECEIPT BY ONE PARTY OF THE OTHER PARTY’S NOTICE OF DESIRE TO
ARBITRATE, THE ARBITRATOR SHALL BE SELECTED FROM A PANEL OR PANELS OF PERSONS
SUBMITTED BY THE AAA.  THE SELECTION PROCESS SHALL BE THAT WHICH IS SET FORTH IN
THE AAA RULES FOR THE RESOLUTION OF EMPLOYMENT DISPUTES THEN PREVAILING, EXCEPT
THAT, IF THE PARTIES FAIL TO SELECT AN ARBITRATOR FROM ONE OR MORE PANELS, AAA
SHALL NOT HAVE THE POWER TO MAKE AN APPOINTMENT BUT SHALL CONTINUE TO SUBMIT
ADDITIONAL PANELS UNTIL AN ARBITRATOR HAS BEEN SELECTED.  THIS AGREEMENT TO
ARBITRATE SHALL NOT PRECLUDE THE PARTIES FROM ENGAGING IN VOLUNTARY, NONBINDING
SETTLEMENT EFFORTS, INCLUDING, BUT NOT LIMITED TO, MEDIATION.  IN THE EVENT THE
ARBITRATION IS DECIDED IN WHOLE OR IN PART IN FAVOR OF THE EXECUTIVE, THE
COMPANY WILL REIMBURSE THE EXECUTIVE FOR HIS REASONABLE COSTS AND EXPENSES OF
THE ARBITRATION (INCLUDING REASONABLE ATTORNEYS’ FEES).

 

SECTION  13.        NOTICES.  ALL NOTICES AND OTHER COMMUNICATIONS HEREUNDER
SHALL BE IN WRITING AND SHALL BE GIVEN (AND SHALL BE DEEMED TO HAVE BEEN DULY
GIVEN UPON RECEIPT) BY DELIVERY IN PERSON, BY REGISTERED OR CERTIFIED MAIL
(RETURN RECEIPT REQUESTED AND WITH POSTAGE PREPAID THEREON) OR BY FACSIMILE
TRANSMISSION TO THE RESPECTIVE PARTIES AT THE FOLLOWING ADDRESSES (OR AT SUCH
OTHER ADDRESS AS EITHER PARTY SHALL HAVE PREVIOUSLY FURNISHED TO THE OTHER IN
ACCORDANCE WITH THE TERMS OF THIS SECTION 13):

 

If to the Company:

 

ProDril Acquisition Company Inc.

808 Travis Street, Suite 850

Houston, Texas 77002

Attn:   Prentis B. Tomlinson, Jr.

 

if to the Executive:

 

Thomas E. Hardisty.

5707 Bermuda Dunes

Houston, TX 77069

 

SECTION  14.        NO MITIGATION.  IN THE EVENT OF ANY TERMINATION OF
EMPLOYMENT BY THE COMPANY WITHOUT CAUSE, BY THE EXECUTIVE FOR GOOD REASON, THE
EXECUTIVE SHALL BE UNDER NO OBLIGATION TO SEEK OTHER EMPLOYMENT, OR OTHERWISE
ENGAGE IN MITIGATING ACTIVITY, FOLLOWING THE DATE OF TERMINATION, AND THERE
SHALL BE NO OFFSET AGAINST AMOUNTS DUE THE EXECUTIVE UNDER THIS AGREEMENT ON
ACCOUNT OF ANY REMUNERATION ATTRIBUTABLE TO ANY SUBSEQUENT EMPLOYMENT THAT HE
MAY OBTAIN.

 

SECTION  15.        INDEMNIFICATION.  PSI AND THE COMPANY AGREE THAT, IN THE
EVENT THE EXECUTIVE’S EMPLOYMENT IS TERMINATED DURING THE TERM BY THE COMPANY
WITHOUT CAUSE OR BY THE EXECUTIVE FOR GOOD REASON, THE COMPANY SHALL CONTINUE TO
INDEMNIFY THE EXECUTIVE FOLLOWING TERMINATION TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW CONSISTENT WITH THE CERTIFICATE OF INCORPORATION AND BY-LAWS AND
THE COMPANY IN EFFECT AS OF THE DATE OF TERMINATION WITH RESPECT TO EXECUTIVES
SOLE, JOINT OR CONCURRENT NEGLIGENCE AND ANY ACTS OR OMISSIONS HE MAY HAVE
COMMITTED DURING THE PERIOD DURING WHICH HE WAS AN OFFICER, DIRECTOR AND/OR
EMPLOYEE OF THE COMPANY OR ANY OF THEIR AFFILIATES FOR WHICH HE SERVED AS AN
OFFICER, DIRECTOR OR EMPLOYEE AT THE REQUEST OF  THE COMPANY.

 

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SECTION  16.        AMENDMENT; WAIVER.  THE TERMS AND PROVISIONS OF THIS
AGREEMENT MAY BE MODIFIED OR AMENDED ONLY BY A WRITTEN INSTRUMENT EXECUTED BY
EACH OF THE PARTIES HERETO, AND COMPLIANCE WITH THE TERMS AND PROVISIONS HEREOF
MAY BE WAIVED ONLY BY A WRITTEN INSTRUMENT EXECUTED BY EACH PARTY ENTITLED TO
THE BENEFITS THEREOF.  NO FAILURE OR DELAY ON THE PART OF ANY PARTY IN
EXERCISING ANY RIGHT, POWER OR PRIVILEGE GRANTED HEREUNDER SHALL CONSTITUTE A
WAIVER THEREOF, NOR SHALL ANY SINGLE OR PARTIAL EXERCISE OF ANY SUCH RIGHT,
POWER OR PRIVILEGE PRECLUDE ANY OTHER OR FURTHER EXERCISE THEREOF OR THE
EXERCISE OF ANY OTHER RIGHT, POWER OR PRIVILEGE GRANTED HEREUNDER.

 

SECTION  17.        ENTIRE AGREEMENT.  THIS AGREEMENT CONSTITUTES THE ENTIRE
AGREEMENT BETWEEN THE PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF AND
SUPERSEDES ALL PRIOR WRITTEN OR ORAL AGREEMENTS OR UNDERSTANDINGS BETWEEN THE
EXECUTIVE AND THE COMPANY OR ITS AFFILIATES RELATING THERETO, INCLUDING, WITHOUT
LIMITATION.

 

SECTION  18.        SEVERABILITY.  IN THE EVENT THAT ANY TERM OR PROVISION OF
THIS AGREEMENT IS FOUND TO BE INVALID, ILLEGAL OR UNENFORCEABLE, THE VALIDITY,
LEGALITY AND ENFORCEABILITY OF THE REMAINING TERMS AND PROVISIONS HEREOF SHALL
NOT BE IN ANY WAY AFFECTED OR IMPAIRED THEREBY, AND THIS AGREEMENT SHALL BE
CONSTRUED AS IF SUCH INVALID, ILLEGAL OR UNENFORCEABLE PROVISION HAD NEVER BEEN
CONTAINED THEREIN.

 

SECTION  19.        BINDING EFFECT; ASSIGNMENT.  THIS AGREEMENT SHALL BE BINDING
UPON AND INURE TO THE BENEFIT OF THE PARTIES AND THEIR RESPECTIVE SUCCESSORS AND
ASSIGNS (IT BEING UNDERSTOOD AND AGREED THAT, EXCEPT AS EXPRESSLY PROVIDED
HEREIN, NOTHING CONTAINED IN THIS AGREEMENT IS INTENDED TO CONFER UPON ANY OTHER
PERSON OR ENTITY ANY RIGHTS, BENEFITS OR REMEDIES OF ANY KIND OR CHARACTER
WHATSOEVER).  THE EXECUTIVE MAY NOT ASSIGN THIS AGREEMENT WITHOUT THE PRIOR
WRITTEN CONSENT OF THE COMPANY.  EXCEPT AS OTHERWISE PROVIDED IN THIS AGREEMENT,
THE COMPANY MAY ASSIGN THIS AGREEMENT TO ANY OF THEIR AFFILIATES OR TO ANY
SUCCESSOR (WHETHER BY OPERATION OF LAW OR OTHERWISE) TO ALL OR SUBSTANTIALLY ALL
OF THEIR BUSINESS AND ASSETS WITHOUT THE CONSENT OF THE EXECUTIVE, AND ANY
TRANSFER OF EMPLOYMENT FROM THE COMPANY TO SUCH AFFILIATE OR SUCCESSOR SHALL BE
DEEMED TO CONSTITUTE AN ASSIGNMENT AND NOT A TERMINATION OF EMPLOYMENT
HEREUNDER.  IN THE EVENT OF AN ASSIGNMENT OF THIS AGREEMENT BY THE COMPANY, ALL
REFERENCES HEREIN TO PSI OR THE COMPANY SHALL BE DEEMED TO BE REFERENCES TO THE
ASSIGNEE.  SIMILARLY, IN THE EVENT PSI IS NO LONGER AN AFFILIATE OF THE COMPANY
(OR ANY ASSIGNEE), ALL REFERENCES TO PSI SHALL BE DEEMED TO BE REFERENCES TO THE
COMPANY (OR THE ASSIGNEE).

 

SECTION  20.        WITHHOLDING OF TAXES.  THE EXECUTIVE AGREES THAT THE COMPANY
SHALL DEDUCT, OR SHALL CAUSE TO BE DEDUCTED, FROM THE AMOUNT OF ANY BENEFITS TO
BE PAID HEREUNDER ANY TAXES REQUIRED TO BE WITHHELD BY THE FEDERAL OR ANY STATE
OR LOCAL GOVERNMENT.

 

SECTION  21.        GOVERNING LAW.  THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS (EXCEPT THAT NO
EFFECT SHALL BE GIVEN TO ANY CONFLICTS OF LAW PRINCIPLES THEREOF THAT WOULD
REQUIRE THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION).

 

SECTION  22.        HEADINGS.  THE HEADINGS OF THE SECTIONS CONTAINED IN THIS
AGREEMENT ARE FOR CONVENIENCE ONLY AND SHALL NOT BE DEEMED TO CONTROL OR AFFECT
THE MEANING OR CONSTRUCTION OF ANY PROVISION OF THIS AGREEMENT.

 

SECTION  23.        COUNTERPARTS.  THIS AGREEMENT MAY BE EXECUTED IN ONE OR MORE
COUNTERPARTS, EACH OF WHICH SHALL BE DEEMED AN ORIGINAL, BUT ALL OF WHICH
TOGETHER SHALL CONSTITUTE ONE AND THE SAME INSTRUMENT.

 

SECTION  24.        SUBSIDIARIES AND AFFILIATES.  AS USED HEREIN, THE TERM
“SUBSIDIARY” SHALL MEAN ANY CORPORATION OR OTHER BUSINESS ENTITY CONTROLLED BY
THE CORPORATION IN QUESTION, AND THE TERM

 

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“AFFILIATE” SHALL MEAN AND INCLUDE ANY CORPORATION OR OTHER BUSINESS ENTITY
CONTROLLING, CONTROLLED BY OR UNDER COMMON CONTROL WITH THE CORPORATION IN
QUESTION.  THE TERMS “CONTROLLED,” “CONTROLLING,” “CONTROLLED BY” AND “UNDER
COMMON CONTROL WITH,” AS USED WITH RESPECT TO ANY PERSON, MEANS THE POSSESSION,
DIRECTLY OR INDIRECTLY, OF THE POWER TO DIRECT OR CAUSE THE DIRECTION OF THE
MANAGEMENT AND POLICIES OF SUCH PERSON, WHETHER THROUGH THE OWNERSHIP OF VOTING
SECURITIES OR BY CONTRACT OR OTHERWISE.

 

IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date
first above written.

 

 

ProDril Acquisition Company, Inc.

 

 

 

 

 

By:

/s/ Prentis B. Tomlinson, Jr.

 

 

Prentis B. Tomlinson, Jr.

 

Chairman and CEO

 

 

 

 

 

Thomas E. Hardisty

 

 

 

 

 

/s/ Thomas E. Hardisty

 

 

Executive

 

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AMENDMENT TO EMPLOYMENT AGREEMENT

 

WHEREAS, Particle Drilling Inc, formerly ProDril Acquisition Company, Inc.
(“Company”) entered into that certain Employment Agreement dated August 1, 2003,
but made effective June 1, 2003 (the “Agreement”) with Thomas E. Hardisty
(“Executive”); and

 

WHEREAS, it is the desire of Company and Executive to amend and correct the
Agreement with respect to certain terms and provisions;

 

NOW, THEREFORE, in consideration of the premises, Company and Executive hereby
agree as follows:

 

1.                                       Executive hereby waives any right to
receive that portion of Executive’s beginning Base Salary as set forth in
Section 4.A of the Agreement equal to the difference between Base Salary of
$150,000.00 and $108,000.00 and it is understood and agreed that Executive has
not and shall not begin to accrue $150,000 in Base Salary until after such time
Executive’s Base Salary is restored in full.  After the date of this Amendment,
at such time the Company successfully obtains additional financing in an amount
not less than $1,500,000.00, then Executive’s annual Base Salary shall be
increased to $150,000.00 as originally contemplated in the Agreement.

 

2.                                       As a co-founder of Company, Executive
shall receive in kind distribution of 865,000 shares of common stock in the
Company from ProDril Partners, LLC.  ProDril Partners, LLC shall execute this
Amendment to more fully effectuate the distribution of these shares to
Executive.

 

3.                                       Section 4.B. of the Agreement shall be
deleted in its entirety and the following provision shall be substituted
therefor:  The Company shall grant the following stock options to Executive a.)
Non-statutory (fully vested as of this date) Stock Options to purchase 300,000
shares of the Company’s common stock at $0.12 per share; and b.) Statutory
Incentive Stock Options to purchase another 300,000 shares of the Company’s
common stock at $0.12 per share vesting over a four (4) year period and in
accordance with the Incentive Stock Plan as approved by the Company’s Board of
Directors.

 

4.                                       Neither the proposed merger between
Company and Particle Drilling Technologies, Inc. (the “PDI/PDT Merger”), nor the
proposed merger between the surviving company resulting from the PDI/PDT Merger
and the public company that has yet to be identified and as being coordinated by
Cagen McAfee Capital Partners shall be considered a “Change of Control” for
purposes of Section 7 of the Agreement.  This provision shall

 

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not constitute a waiver of the provisions of Section 7 of the Agreement with
respect to any other transaction or event.

 

The terms, provisions and conditions of the Agreement are hereby modified and
amended to the extent necessary to conform with the terms and provisions of this
Amendment; and all other terms, provisions and conditions of the Agreement are
hereby ratified and confirmed and Company and Executive hereby recognize the
Agreement is a valid and subsisting Agreement as hereby amended.

 

Agreed to and accepted this 8th day of April 2004, by:

 

 

“Company”

 

 

 

Particle Drilling Inc

 

 

 

 

 

/s/ Prentis B. Tomlinson, Jr.

 

 

Prentis B. Tomlinson, Jr.

 

President and CEO

 

 

 

 

 

/s/ J. Christopher Boswell

 

 

J. Christopher Boswell

 

Senior Vice President and CFO

 

 

 

 

 

“Executive”

 

 

 

 

 

/s/ Thomas E. Hardisty

 

 

Thomas E. Hardisty

 

Senior Vice President

 

Particle Drilling, Inc

 

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