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.


 





















 


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


 





















 


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;


 





















 


(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.


 





















 


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.


 





















 


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).


 





















 


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


 





















 


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.


 





















 


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.


 





















 


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


 





















 


“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

  



 





















 


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


 





















 


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