Exhibit 10.1


RESTRICTED
STOCK AGREEMENT


THIS RESTRICTED STOCK AGREEMENT
(this “Agreement”) is made as of the 7th day of August, 2007, between PARTICLE DRILLING TECHNOLOGIES, INC., a Nevada corporation
(the “Company”), and JIM B. TERRY (“Employee”).


1.             Award.  Pursuant to the PARTICLE
DRILLING TECHNOLOGIES, INC. 2005 STOCK INCENTIVE PLAN, as amended
(the “Plan”), as of the date of this Agreement, 329,250 shares (the “Restricted
Shares”) of the Company’s common stock shall be issued as hereinafter provided
in Employee’s name subject to certain restrictions thereon.  The Restricted Shares shall be issued upon
acceptance hereof by Employee and upon satisfaction of the conditions of this
Agreement.  Employee acknowledges receipt
of a copy of the Plan, and agrees that this award of Restricted Shares shall be
subject to all of the terms and provisions of the Plan, including future
amendments thereto, if any, pursuant to the terms thereof.  In the event of any conflict between the
terms of this Agreement and the Plan, the Plan shall control.  Capitalized terms used but not defined in
this Agreement shall have the meaning attributed to such terms under the Plan,
unless the context requires otherwise.


2.             Restricted Shares.  Employee hereby accepts the Restricted Shares
when issued and agrees with respect thereto as follows:


(a)           Forfeiture Restrictions.  The Restricted Shares may not be sold,
assigned, pledged, exchanged, hypothecated or otherwise transferred, encumbered
or disposed of to the extent then subject to the Forfeiture Restrictions (as
hereinafter defined), and in the event of termination of Employee’s employment
with the Company, except as otherwise provided in Section 2(b) hereof, Employee
shall, for no consideration, forfeit to the Company all Restricted Shares to
the extent then subject to the Forfeiture Restrictions.  The prohibition against transfer and the
obligation to forfeit and surrender Restricted Shares to the Company upon
termination of employment are herein referred to as the “Forfeiture Restrictions.”  The Forfeiture Restrictions shall be binding
upon and enforceable against any transferee of Restricted Shares.


(b)           Lapse of Forfeiture
Restrictions.


The Forfeiture Restrictions shall lapse as to 129,250
of the Restricted Shares upon achievement of the following performance target,
provided that Employee has been continuously employed by the Company from the
date of this Agreement through the date of such lapse:



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The date the Company
files its first quarterly or annual report with the U.S. Securities and
Exchange Commission in which the Company reports Adjusted EBITDA for a fiscal
quarter that is greater than $0.  For
this purpose, “Adjusted EBITDA” for a particular fiscal quarter shall be
calculated as the Company’s net income (or net loss), increased by the reported
amount of (i) interest expense net of interest income, (ii) income tax expense,
(iii) depreciation expense, (iv) amortization expense and (v) non-cash,
stock-based compensation expense, with each such item to be determined in
accordance with generally accepted accounting principles.


The Forfeiture Restrictions shall lapse as to 200,000
of the Restricted Shares upon achievement of the following performance target,
provided that Employee has been continuously employed by the Company from the date
of this Agreement through the date of such lapse:


The date the Company
consummates a strategic transaction with a third party that the Committee, in
its sole discretion, determines satisfies the following criteria:


(i) the transaction is
supported by the holders of a majority of the Company’s securities entitled to
vote in the election of directors generally if the approval of such
stockholders is required by applicable law (including the rules and regulations
of any exchange or other self regulatory organization applicable to the
Company);


(ii) the transaction is
approved by a majority of the members of the Board;


(iii) the transaction
does not expose the Company to a significant risk of litigation due to either
the type of transaction or the method of consummating the transaction;


(iv) the transaction
creates additional liquidity for the Company;


(v) the transaction
results in a relationship with a third party that provides strategic
advantages; and


(vi) the transaction
creates significant additional value for the Company’s stockholders.


Notwithstanding the foregoing, the Forfeiture
Restrictions shall lapse as to all of the Restricted Shares then subject to the
Forfeiture Restrictions (i) in accordance with the provisions of that certain
Employment Agreement between Employee and the Company effective as of January
23, 2006, as the same may be amended from time to time, or (ii) on the date
Employee’s employment with the Company is terminated by reason of death or
disability (within the meaning of section 22(e)(3) of the Code).


(c)           Certificates.  A certificate evidencing the Restricted
Shares shall be issued by the Company in Employee’s name, pursuant to which
Employee shall have all 



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of the rights of a stockholder of the Company with
respect to the Restricted Shares, including, without limitation, voting rights
and the right to receive dividends (provided, however, that dividends paid in
shares of the Company’s stock shall be subject to the Forfeiture Restrictions
and further provided that dividends that are paid other than in shares of the
Company’s stock shall be paid no later than the end of the calendar year in
which the dividend for such class of stock is paid to stockholders of such
class or, if later, the 15th day of the third month following the date the
dividend is paid to stockholders of such class of stock). Employee may not
sell, transfer, pledge, exchange, hypothecate or otherwise dispose of the stock
until the Forfeiture Restrictions have expired and a breach of the terms of
this Agreement shall cause a forfeiture of the Restricted Shares. The
certificate shall be delivered upon issuance to the Secretary of the Company or
to such other depository as may be designated by the Committee as a depository
for safekeeping until the forfeiture of such Restricted Shares occurs or the
Forfeiture Restrictions lapse pursuant to the terms of the Plan and this award.
Employee agrees to deliver to the Company a stock power, endorsed in blank,
relating to the Restricted Shares. Upon the lapse of the Forfeiture Restrictions
without forfeiture, the Company shall cause a new certificate or certificates
to be issued without legend (except for any legend required pursuant to
applicable securities laws or any other agreement to which Employee is a party)
in the name of Employee in exchange for the certificate evidencing the
Restricted Shares.  However, the Company,
in its sole discretion, may elect to deliver the certificate either in
certificate form or electronically to a brokerage account established for
Employee’s benefit at a brokerage/financial institution selected by the
Company.  Employee agrees to complete and
sign any documents and take additional action that the Company may request to
enable it to deliver the shares on Employee’s behalf.


(d)           Corporate Acts.  The existence of the Restricted Shares shall
not affect in any way the right or power of the Board or the stockholders of
the Company to make or authorize any adjustment, recapitalization,
reorganization or other change in the Company’s capital structure or its
business, any merger or consolidation of the Company, any issue of debt or
equity securities, the dissolution or liquidation of the Company or any sale,
lease, exchange or other disposition of all or any part of its assets or
business or any other corporate act or proceeding. The prohibitions of Section
2(a) hereof shall not apply to the transfer of Restricted Shares pursuant to a
plan of reorganization of the Company, but the stock, securities or other
property received in exchange therefor shall also become subject to the
Forfeiture Restrictions and provisions governing the lapsing of such Forfeiture
Restrictions applicable to the original Restricted Shares for all purposes of
this Agreement and the certificates representing such stock, securities or other
property shall be legended to show such restrictions.


3.             Withholding
of Tax/Tax Election.
To the extent that the receipt of the Restricted Shares or the lapse of any
Forfeiture Restrictions results in compensation income or wages to Employee for
federal, state or local tax purposes, Employee shall deliver to the Company at
the time of such receipt or lapse such amount of money as the Company may
require to meet its minimum obligation under applicable tax laws or regulations
or make such other arrangements to satisfy such withholding obligation as the
Company or the Committee may approve.  In
addition, the Company may withhold unrestricted shares of stock of the Company
(valued at their fair market value on the date of withholding of such shares)
otherwise to be issued upon the lapse of the Forfeiture Restrictions to satisfy
its withholding obligations.  If Employee
makes the election 



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authorized by
section 83(b) of the Code in connection with the award of the Restricted
Shares, Employee shall submit to the Company a copy of the statement filed by
Employee to make such election.


4.             Status of
Stock.  Employee agrees that the Restricted Shares
issued under this Agreement will not be sold or otherwise disposed of in any
manner which would constitute a violation of any applicable securities laws,
whether federal or state. Employee also agrees that (a) the certificates
representing the Restricted Shares may bear such legend or legends as the
Committee deems appropriate in order to reflect the Forfeiture Restrictions and
to assure compliance with applicable securities laws, (b) the Company may
refuse to register the transfer of the Restricted Shares on the stock transfer
records of the Company if such proposed transfer would constitute a violation
of the Forfeiture Restrictions or, in the opinion of counsel satisfactory to
the Company, of any applicable securities law, and (c) the Company may give
related instructions to its transfer agent, if any, to stop registration of the
transfer of the Restricted Shares.


5.             Employment Relationship. 
For purposes of this Agreement, Employee shall be considered to be in
the employment of the Company as long as Employee remains an employee of either
the Company, an Affiliate, or any successor corporation.  Without
limiting the scope of the preceding sentence, it is expressly provided that
Employee shall be considered to have terminated employment with the Company at
the time of the termination of the “Affiliate” status under the Plan of the
entity or other organization that employs Employee.  Any question as to whether and when
there has been a termination of such employment, and the cause of such
termination, shall be determined by the Committee and its determination shall
be final.


6.             Notices.
Any notices or other communications provided for in this Agreement shall be
sufficient if in writing.  In the case of
Employee, such notices or communications shall be effectively delivered if hand
delivered to Employee at his principal place of employment or if sent by
registered or certified mail to Employee at the last address Employee has filed
with the Company. In the case of the Company, such notices or communications
shall be effectively delivered if sent by registered or certified mail to the
Company at its principal executive offices.


7.             Entire
Agreement; Amendment. This Agreement replaces and merges all
previous agreements and discussions relating to the same or similar subject
matters between Employee and the Company and constitutes the entire agreement
between Employee and the Company with respect to the subject matter of this
Agreement.  Without limiting the scope of
the preceding sentence, all prior understandings and agreements, if any, among
the parties hereto relating to the subject matter hereof are hereby null and
void and of no further force and effect. 
Any modification of this Agreement shall be effective only if it is in
writing and signed by both Employee and an authorized officer of the Company.


8.               Binding
Effect. This Agreement shall be binding upon and inure to the benefit
of any successors to the Company and all persons lawfully claiming under
Employee.


9.               Governing
Law. This Agreement shall be
governed by, and construed in accordance with, the laws of the State of Nevada,
without regard to conflicts of laws principles thereof.



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10.             Jurisdiction.         Each
of the Company and Employee hereby irrevocably (i) submits and consents to the
personal jurisdiction of the state and federal courts sitting in Harris County,
Texas with respect to any suit, action, or proceeding arising out of or based
upon this Agreement or the transactions contemplated hereby and (ii) waives the
right to contend in any such action that venue is improperly laid in any such
court or that it is an improper or inconvenient forum or lacks personal jurisdiction.  If Employee now or hereafter resides outside
the State of Texas, Employee hereby irrevocably appoints the General Counsel of
the Company as Employee’s authorized agent upon whom process may be served at
such General Counsel’s Company office for notices under this Agreement in any
suit, action, or proceeding arising out of or based upon this Agreement or the
transactions contemplated hereby that may be instituted in any state or federal
court in the State of Texas by the Company, and Employee hereby agrees to so
act.  Employee agrees to take any and all
action, including the filing of any and all documents and instruments, that may
be necessary to continue such appointment in full force and effect as
aforesaid.  Service of process upon the
authorized agent of Employee and written notice of such service to Employee
shall be deemed, in every respect, effective service of process as to Employee
for purposes of any such suit, action, or proceeding instituted in any state or
federal court in the State of Texas.


IN
WITNESS WHEREOF, the Company has caused this Agreement to be
duly executed by its officer thereunto duly authorized, and Employee has
executed this Agreement, all effective as of the day and year first above
written.


	
  

  	
   

  	
  PARTICLE DRILLING TECHNOLOGIES, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Ken R. LeSuer

  
	
   

  	
   

  	
  Name:

  	
  Ken R. LeSuer

  
	
   

  	
   

  	
  Position: Chairman of the Board

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  EMPLOYEE

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/ Jim B. Terry

  
	
   

  	
   

  	
  Jim B. Terry

  	
   

  	
   

  
							



 



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