Document:

exv4w2

 

EXHIBIT 4.2

NON-QUALIFIED STOCK OPTION AGREEMENT

GREY WOLF, INC. 2003 INCENTIVE PLAN

(effective as of March 26, 2003)

     THIS NON-QUALIFIED STOCK OPTION AGREEMENT (this “Agreement”) made as of
March 25, 2004, by and between GREY WOLF, INC., a corporation organized under
the laws of the State of Texas (the “Company”), and «FirstName» «LastName», an
individual (the “Grantee”);

WITNESSETH:

     WHEREAS, the Company desires to provide an incentive to the Grantee to
further the business of the Company and the Company has agreed to grant the
Grantee options to purchase shares of common stock, $0.10 par value (“Common
Stock”), of the Company; and

     WHEREAS, by granting the Grantee options to purchase shares of Common
Stock pursuant to the terms of this Agreement, the Company intends to carry out
the purposes set forth in the Grey Wolf, Inc. 2003 Incentive Plan (effective as
of March 26, 2003) (the “Plan”) adopted by the Board of Directors of the
Company (the “Board of Directors”) effective March 26, 2003 and approved by the
shareholders of the Company on May 13, 2003; and

     WHEREAS, the Company and the Grantee desire to set forth the terms and
conditions of such options to purchase Common Stock;

     NOW, THEREFORE, in consideration of the mutual promises contained herein,
and other good and valuable consideration, the receipt, adequacy and
sufficiency of which are hereby acknowledged, the parties hereto do hereby
agree as follows:

     1. Grant of Option. Subject to the terms and conditions hereinafter set
forth, the Company hereby grants to the Grantee a non-qualified option (the
“Option”) to purchase all or any part of an aggregate number of «Shares» shares
of Common Stock (such shares, as increased or decreased in accordance with
Section 10 hereof, being referred to hereinafter as the “Option Shares”) at an
exercise price of $3.91 per share (hereinafter the “Exercise Price”).

     2. Subject to Plan. The Option and its exercise are subject to the terms
and conditions of the Plan, and the terms of the Plan shall control to the
extent not otherwise inconsistent with the provisions of this Agreement. The
capitalized terms used herein that are defined in the Plan shall have the same
meanings assigned to them in the Plan. The Option is subject to any rules
promulgated pursuant to the Plan by the Board or the Committee and communicated
to the Grantee in writing.

     3. Exercise Period. The Option shall be exercisable by Grantee as to
twenty (20%) of the Option Shares one (1) year after the date of this
Agreement, as to an additional twenty percent (20%) of the Option Shares two
(2) years after the date of this Agreement, as to an additional twenty percent
(20%) of the Option Shares three (3) years after the date of this Agreement, as
to an additional twenty percent (20%) of the Option Shares four (4) years after
the date of this Agreement, until the fifth anniversary of the date of this
Agreement, after which time the Option shall be exercisable in full. The

 

 

Option shall expire and terminate as to any Option Shares not purchased by
the Grantee on or before the tenth anniversary of the date of this Agreement
(the “Expiration Date”), subject to earlier termination as set forth herein or
pursuant to the terms of the Plan. Notwithstanding any other provision of this
Agreement to the contrary, the Option shall be immediately exercisable by
Grantee as to one hundred percent (100%) of the Option Shares as may be
applicable pursuant to Sections 5.5 and 5.7 of the Plan and Section 12 below.

     4. Method of Exercising the Option. The Option shall be exercised by the
Grantee by delivering to the Company written notice from the Grantee as of a
date set by the Company which is in advance of the proposed exercise date. The
notice from the Grantee shall state that the Grantee is exercising the Option
and shall specify the number of Option Shares that the Grantee desires and is
entitled to purchase. Such notice shall be in a form and content as determined
by the Committee and shall be accompanied by full payment for the Option Shares
to be exercised. The Option may only be exercised with respect to full shares,
and no fractional shares shall be issued.

     The Option Price upon exercise of the Option Shares shall be payable to
the Company in full either: (i) in cash or its equivalent, or (ii) subject to
prior approval by the Committee in its discretion, by tendering previously
acquired Shares having an aggregate Fair Market Value at the time of exercise
equal to the total Option Price (provided that the Shares which are tendered
must have been held by the Grantee for at least six (6) months prior to their
tender to satisfy the Option Price), or (iii) subject to prior approval by the
Committee in its discretion, by withholding Shares which otherwise would be
acquired on exercise having an aggregate Fair Market Value at the time of
exercise equal to the total Option Price, or (iv) subject to prior approval by
the Committee in its discretion, by a combination of (i), (ii), and (iii)
above. Any payment in Shares shall be effected by the surrender of such Shares
to the Company in good form for transfer and shall be valued at their Fair
Market Value on the date when the Stock Option is exercised. Unless otherwise
permitted by the Committee in its discretion, the Grantee shall not surrender,
or attest to the ownership of, Shares in payment of the Option Price if such
action would cause the Company to recognize compensation expense (or additional
compensation expense) with respect to the Stock Option for financial reporting
purposes.

     The Committee, in its discretion, also may allow the Option Price to be
paid with such other consideration as shall constitute lawful consideration for
the issuance of Shares (including, without limitation, effecting a “cashless
exercise” with a broker of the Option), subject to applicable securities law
restrictions and tax withholdings, or by any other means which the Committee
determines to be consistent with the Plan’s purpose and applicable law. A
“cashless exercise” of an Option is a procedure by which a broker provides the
funds to the Grantee to effect an Option exercise, to the extent consented to
by the Committee in its discretion. At the direction of the Grantee, the
broker will either (i) sell all of the Shares received when the Option is
exercised and pay the Grantee the proceeds of the sale (minus the Option Price,
withholding taxes and any fees due to the broker) or (ii) sell enough of the
Shares received upon exercise of the Option to cover the Option Price,
withholding taxes and any fees due the broker and deliver to the Grantee
(either directly or through the Company) a stock certificate for the remaining
Shares. Dispositions to a broker effecting a cashless exercise are not exempt
under Section 16 of the Exchange Act.

     The Committee, in its discretion, may also allow an Option to be exercised
by a broker-dealer acting on behalf of the Grantee if (i) the broker-dealer has
received from the Grantee a duly endorsed Incentive Agreement evidencing such
Option and instructions signed by the Grantee requesting the

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Company to deliver the Shares of Common Stock subject to such Option to the
broker-dealer on behalf of the Grantee and specifying the account into which
such Shares should be deposited, (ii) adequate provision has been made with
respect to the payment of any withholding taxes due upon such exercise, and
(iii) the broker-dealer and the Grantee have otherwise complied with Section
220.3(e)(4) of Regulation T, 12 CFR Part 220 (or its successor).

     As soon as practicable after receipt of a written notification of exercise
and full payment, the Company shall deliver, or cause to be delivered, to or on
behalf of the Grantee, in the name of the Grantee or other appropriate
recipient, Share certificates for the number of Shares purchased under the
Stock Option. Such delivery shall be effected for all purposes when the
Company or a stock transfer agent of the Company shall have deposited such
certificates in the United States mail, addressed to Grantee or other
appropriate recipient.

     Subject to Section 6.2 of the Plan, during the lifetime of a Grantee, each
Option granted to him shall be exercisable only by the Grantee (or his legal
guardian in the event of his Disability) or by a broker-dealer acting on his
behalf pursuant to a cashless exercise under the foregoing provisions of this
Section.

     Any certificate issued to evidence Shares issued upon the exercise of this
Incentive Award may bear such legends and statements as the Committee shall
deem advisable to assure compliance with federal and state laws and
regulations, including but not limited to, blue sky and securities laws, the
requirements of the stock exchange or market upon which such shares are then
listed and/or traded and any other restrictions on these Shares.

     The Grantee or other person exercising the Option Shares under this
Incentive Award may be required by the Committee to give a written
representation that the Incentive Award and the Shares subject to the Incentive
Award will be acquired for investment and not with a view to public
distribution; provided, however, that the Committee, in its sole discretion,
may release any person receiving an Incentive Award from any such
representations either prior to or subsequent to the exercise of this Incentive
Award.

     5. Transferability of Option. The Option shall not be transferable or
assignable, in whole or in part, and except as otherwise provided in Section 12
of this Agreement and Section 5.2 of the Plan or by will or the laws of
descent or distribution. The Option shall be exercisable (i) only by the
Grantee during his lifetime, or (ii) in the event of his death, by his heirs,
representatives, distributees, or legatees in accordance with his will or the
laws of descent and distribution (but only to the extent that the Option would
be exercisable by the Grantee under this Agreement).

     6. Payment of Taxes Upon Exercise. The Grantee understands and
acknowledges that under currently applicable law, the Grantee maybe required to
include in the Grantee’s taxable income, at the time of exercise of the Option,
the amount by which the value of the Option Shares purchased (the “Exercise
Shares”) exceeds the Exercise Price paid. The Grantee hereby authorizes the
Company to withhold Exercise Shares of a value equivalent to (but not to
exceed) the amount of tax required to be withheld by the Company out of any
taxable income derived by the Grantee upon exercise of the Option pursuant to
Section 6.3 of the Plan; provided, however, that the Grantee may, in the
alternative, in order to satisfy such withholding requirement, deliver to the
Company cash or other shares of Common Stock owned by the Grantee.

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     7. Investment Representation. The Grantee represents that the Option
Shares available for purchase by the Grantee under this Agreement will be
acquired only for investment and not with a view toward resale or distribution.

     8. Securities Law, Other Applicable Laws and Company Policies; Legends.
The Grantee agrees and understands that the Option Shares may be restricted
securities as defined in Rule 144 promulgated under the Securities Act of 1933,
as amended (the “Securities Act”), and may not be sold, assigned or
transferred, unless the sale, assignment or transfer of such shares is
registered under the Securities Act and applicable state securities laws, as
now in effect or hereafter amended, or there is furnished an opinion of counsel
in form and substance satisfactory to the Company from counsel acceptable to
the Company that such registrations are not required. Grantee agrees and
understands that transactions under the Plan and this Agreement are intended to
and shall comply with all applicable laws including, but not limited to, the
requirements of Rule 16b-3 under the Securities Exchange Act and Securities
Regulation BTR. Grantee also agrees and understands that transactions under
the Plan and this Agreement are intended to and shall comply with the Company’s
insider trading policies as revised from time to time or such other of the
Company’s policies related to trading in the Company’s stock including, but not
limited to, policies relating to black-out periods. The Grantee further
understands and agrees that, unless issued pursuant to an effective
registration statement under the Securities Act, the following legend shall
beset forth on each certificate representing Option Shares:

“THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 OR UNDER THE SECURITIES LAWS OF ANY
STATE, AND MAY NOT BE SOLD OR TRANSFERRED EXCEPT UPON SUCH
REGISTRATION OR UPON RECEIPT BY THE CORPORATION OF AN OPINION OF
COUNSEL FOR THE CORPORATION, IN FORM AND SUBSTANCE SATISFACTORY TO
THE CORPORATION, THAT SUCH REGISTRATION IS NOT REQUIRED FOR SUCH
SALE OR TRANSFER.”

     In addition, the following legend shall be placed on each certificate
representing Option Shares;

“THE SHARES REPRESENTED BY THIS CERTIFICATE ARE GOVERNED BY THE
TERMS OF THE GREY WOLF, INC. 2003 INCENTIVE PLAN (EFFECTIVE MARCH
26, 2003), WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THE
CORPORATION AND A COPY OF WHICH WILL BE PROVIDED FOR INSPECTION UPON
WRITTEN REQUEST.”

     9. No Rights as Shareholder. The Grantee shall not have any rights as a
shareholder with respect to any of the Option Shares until the date of issuance
by the Company to the Grantee of a stock certificate representing such Option
Shares. Except as otherwise provided in Section 5.5 of the Plan, the Grantee
shall not be entitled to any dividends, cash or otherwise, or any adjustment of
the Option Shares for such dividends, if the record date therefor is prior to
the date of issuance of such stock certificate. Upon valid exercise of the
Option by the Grantee, the Company agrees to cause a valid stock certificate
for the number of Option Shares then purchased to be issued and delivered to
the Grantee within seven (7) business days thereafter.

     10. Corporate Proceedings of the Company. The terms respecting corporate
proceedings of the Company shall be governed by such terms as provided in
Section 5.5 of the Plan.

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     11. Registration Rights. The Grantee shall have no registration rights
with respect to the Option Shares.

     12. Termination of Employment, Death, Disability and Retirement.

     a. Termination of Employment. If the Grantee’s Employment is
terminated for any reason other than due to his death, Disability,
Retirement or for Cause, any non-vested portion of the Option at the time
of such termination shall automatically expire and terminate and no
further vesting shall occur after the termination date. If the Grantee
ceases to be employed by the Company, or a parent or subsidiary of the
Company, and prior to such cessation the Grantee was so employed at all
times from the date of this grant in this Agreement until the date of the
cessation of Employment, then the Grantee shall be entitled to exercise
his rights only with respect to the portion of the Option that was vested
as of the termination date for a period that shall end on the earlier of
(i) the Expiration Date set forth in this Agreement with respect to the
vested portion of such Option or (ii) the date that occurs ninety (90)
calendar days after his termination date. Notwithstanding anything herein
to the contrary, the Grantee may exercise the Option as to all of the
Shares subject to the Option (to the extent the Grantee is entitled to do
so with respect to the portion of the Option that is vested at the date
Grantee ceases employment with the Company or a parent or subsidiary
corporation of the Company) on or before three years after the date
Grantee ceases employment with the Company or a parent or subsidiary
corporation of the Company if Grantee’s employment with the Company or a
parent or subsidiary corporation of the Company is terminated at any time
other than within one (1) year after that date a Change of Control of the
Company shall be deemed to have occurred for any reason other than (i)
voluntary resignation or retirement, (ii) death or Disability, or (iii)
Cause. A Grantee’s Employment shall not be deemed to have been terminated
if a Grantee who is an Employee becomes a Consultant or Outside Director
immediately upon his termination of employment with the Company, or if a
Grantee’s status otherwise changes between or among Employee, Consultant
or Outside Director without a gap in service for the Company in any such
capacity. All determinations regarding whether and when there has been a
termination of Employment shall be made by the Committee. Notwithstanding
the foregoing, the Committee may, in its sole discretion, extend for a
reasonable period the time in which a Grantee may exercise the Option
after termination of employment, not to extend beyond the Expiration Date.

     b. Termination of Employment for Cause. In the event of the
termination of a Grantee’s Employment for Cause, all vested and non-vested
Options under this Agreement shall immediately expire, and shall not be
exercisable to any extent, as of 12:01 a.m. (CST) on the date of such
termination of Employment.

     When used in connection with the termination of a Grantee’s
Employment, Cause shall mean and includes (i) chronic alcoholism or
controlled substance abuse as determined by a doctor chosen by the
Committee and the Grantee; (ii) an act of proven fraud or dishonesty on
the part of the Grantee with respect to the Company or its subsidiaries;
(iii) knowing and material failure by the Grantee to comply with material
applicable laws and regulations relating to the business of the Company or
its subsidiaries; (iv) the Grantee’s material and continuing failure to
perform (as opposed to unsatisfactory performance) his duties to the
Company except, in each case, where such failure is caused by the illness
or other similar incapacity or disability of the Grantee; or (v)
conviction of a crime involving moral turpitude or a felony.

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     c. Retirement. Upon the Retirement of the Grantee:

     (i) any non-vested portion of any outstanding Option or other
Option shall immediately terminate and no further vesting shall
occur; and

     (ii) any vested Option shall expire on the earlier of (A) the
Expiration Date set forth in this Agreement; or (B) the expiration
of (1) one year after the date of Retirement.

     d. Disability. Upon termination of Employment as a result of the
Grantee’s Disability:

     (i) any nonvested portion of any outstanding Option shall
immediately terminate upon termination of Employment and no further
vesting shall occur; and

     (ii) if the Grantee becomes Disabled while employed by the
Company or a parent or subsidiary corporation of the Company, and
prior to such Disability the Grantee was employed at all times from
the date of the granting of the Option until the date of Disability,
the Option must be exercised by the Grantee (to the extent that the
Grantee is entitled to do so at the date of Disability with respect
to the vested portion of the Option) at any time or before: (i) the
Expiration Date, if the Company determines that the Grantee is
Disabled within one (1) year after a date of Change of Control of
the Company shall be deemed to have occurred; or (ii) three years
after the Company determines the Grantee is Disabled, if such
determination occurs at any time other than within one (1) year
after the date of a Change of Control of the Company shall be deemed
to have occurred, and if not so exercised, the Option shall
thereupon terminate.

     e. Death. Upon termination of Employment as a result of death of the
Grantee:

     (i) any nonvested portion of any outstanding Option shall
immediately terminate upon termination of Employment and no further
vesting shall occur; and

     (ii) if the Grantee dies while employed by the Company or a
parent or subsidiary entity of the Company, and prior to death the
Grantee was employed at all times from the date of the granting of
the Option until the date of death, the Option must be exercised (to
the extent that the Grantee is entitled to do so at the date of
death with respect to the vested portion of the Option) by a legatee
or legatees of the Grantee under the Grantee’s will, or by the
Grantee’s personal representatives or distributes, at any time on or
before: (i) the Expiration Date, if Grantee dies within one (1) year
after the date a Change of Control of the Company shall be deemed to
have occurred; or (ii) three years after the Grantee dies, if the
Grantee dies at any time other than within one (1) year after the
date a Change of Control of the Company shall be deemed to have
occurred and if not so exercised, the Option shall thereupon
terminate.

     f. Change of Control. The Grantee may exercise this Option as to all
of the Shares subject to this Option (whether previously exercisable or
not, i.e., whether vested or unvested) on or before the expiration of the
Expiration Date if (i) a Change of Control of the Company shall be deemed
to have occurred and (ii) within one (1) year after the date a Change of
Control of the

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Company shall be deemed to have occurred, Grantee’s employment with
the Company or a parent or subsidiary corporation of the Company is
terminated for any reason other than voluntary resignation, retirement,
death, Disability or Cause,

     A “Change in Control” of the Company shall be deemed to occur if:

     (i) any “person” (as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934 (the “Act”)) is or
becomes the “beneficial owner” (as defined in Rule 13d-3 under the
Act), directly or indirectly, of securities of the Company
representing 35% or more of the combined voting power of the
Company’s then outstanding securities;

     (ii) there occurs a proxy contest or a consent solicitation, or
the Company is a party to a merger, consolidation, sale of assets,
plan of liquidation or other reorganization as a consequence of
which members of the Board of Directors in office immediately prior
to such transaction or event constitute less than a majority of the
Board of Directors thereafter;

     (iii) during any period of two consecutive years, other than as
a result of an event described in clause (b) of this paragraph,
individuals who at the beginning of such period constituted the
Board of Directors (including for this purpose any new director
whose election or nomination for election by the Company’s
stockholders was approved by a vote of at least a majority of the
directors then still in office who were directors at the beginning
of such period) cease for any reason to constitute at least a
majority of the Board of Directors; or

     (iv) Any other event that a majority of the Board of Directors,
in its sole discretion, shall determine constitutes a Change in
Control hereunder.

     13. Disposition of Stock After Exercise of Option. Notwithstanding any
other provision of this Agreement to the contrary, in consideration of the
granting of the Option, the Grantee agrees not to dispose of any Option Shares
without the prior approval of the Company unless such shares have been
registered under the Securities Act.

     14. Notices. All notices, demands, requests and other communications
required or permitted hereunder shall be in writing and shall be deemed to be
delivered when actually received through U.S. Express Mail or any private
express service (as evidenced by a written receipt), or, if earlier, and
regardless of whether actually received (except where receipt is specified in
this Agreement), four (4) days following deposit in a regularly maintained
receptacle for the United States mail, registered or certified, return receipt
requested, postage frilly prepaid, addressed to the addressee at its address
set forth below or at such other address as such party may have specified
theretofore by notice delivered in accordance with this Section:

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	 	If to the Company:
	 	GREY WOLF, INC.

10370 Richmond Ave., Suite 600

Houston, Texas 77042

Attn: Chief Financial Officer
	 
	 	 	 	 
	

	 	If to Grantee:
	 	«FirstName» «LastName»

«Address»

«City», «State» «Zip»

     15. Transferability: Binding Effect. The Option shall be transferable only
as set forth in Section 5 of this Agreement and Section 5.2 of the Plan.
Subject to the foregoing, all covenants, terms, agreements and conditions of
this Agreement shall be binding upon, inure to the benefit of, and be
enforceable by, the Company and the Grantee and their respective successors and
assigns.

     16. Entire Agreement. This Agreement together with the Plan supersede any
and all other prior understandings and agreements, either oral or in writing,
between the parties with respect to the subject matter hereof and constitute
the sole and only agreements between the parties with respect to the said
subject matter. All prior negotiations and agreements between the parties with
respect to this Incentive Award are merged into this Agreement. Each party to
this Agreement acknowledges that no representations, inducements, promises, or
agreements, orally or otherwise, have been made by any party or by anyone
acting on behalf of any party, which are not embodied in this Agreement or the
Plan and that any agreement, statement or promise that is not contained in this
Agreement or the Plan shall not be valid or binding or of any force or effect.

     17. Governing Law. This Agreement shall be governed by the laws of the
State of Texas.

     18. Captions. The section and paragraph headings in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.

     19. Counterparts. This Agreement may be executed in multiple original
counterparts, each of which shall be deemed an original, but all of which
together shall constitute but one and the same instrument.

     20. Modification. No change or modification of this Agreement shall be
valid or binding upon the parties unless the change or modification is in
writing and signed by the parties. Notwithstanding the preceding sentence, the
Company may amend the Plan or revoke this Option to the extent permitted by
the Plan.

     21. Community Property. Each spouse individually is bound by, and such
spouse’s interest, if any, in any Optioned Shares is subject to, the terms of
this Agreement. Nothing in this Agreement shall create a community property
interest where none otherwise exists.

     22. No Right to Continue Service or Employment. Nothing herein shall be
construed to confer upon the Grantee the right to continue in the employ or to
provide services to the Company or any Company affiliate or Subsidiary, whether
as an employee or as a consultant or as an Outside Director, or interfere with
or restrict in any way the right of the Company or any Company affiliate or
Subsidiary to discharge the Grantee as an employee, consultant or Outside
Director at any time.

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     23. Grantee’s Acknowledgments. The Grantee acknowledges receipt of a copy
of the Plan, which is annexed hereto, and represents that he or she is familiar
with the terms and provisions thereof, and hereby accepts this Option subject
to all the terms and provisions thereof. The Grantee hereby agrees to accept as
binding, conclusive, and final all decisions or interpretations of the
Committee or the Board, as appropriate, upon any questions arising under the
Plan or this Agreement.

     IN WITNESS WHEREOF, this Agreement has been executed and delivered as of
the date first written above.

	 	 	 	 	 
	 	 	COMPANY:
	 
	 	 	 	 
	 	 	GREY WOLF, INC.
	 
	 	 	 	 
	

	 	By:	 	 
	

	 	 	 	

	

	 	Name:
	 	David W. Wehlmann
	

	 	Title:
	 	Executive Vice President and CFO
	

	 	Date:
	 	March 25, 2004
	 
	 	 	 	 
	 	 	GRANTEE:
	 
	 	 	 	 
	 	 	

	

	 	Name:
	 	«FirstName» «LastName»
	

	 	Date:
	 	March 25, 2004

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ACKNOWLEDGMENT OF SPOUSE TO

TERMS OF NON-QUALIFIED STOCK OPTION AGREEMENT

     I, «Spouse», am the spouse of «FirstName» «LastName» (“Grantee”), and I am
fully aware of, understand, and fully consent and agree to the provisions of
the Non-Qualified Stock Option Agreement, dated March 25, 2004 (the
“Agreement”), executed by Grantee and GREY WOLF, INC. (the “Company”). I
understand the binding effect of this Agreement and its binding effect upon any
interest, community or otherwise, I may now or hereafter own with respect to
any option or stock of the Company which is the subject of the Agreement, and I
agree that the termination for any reason of my marital relationship with
Grantee shall not have the effect of removing any such option or stock of the
Company from the coverage of the Agreement.

     Signed this day of March 25, 2004.

	 	 	 
	

	 	

	 

	 	«Spouse»
	

	 	Spouse of «FirstName» «LastName»

10exv4w3

 

EXHIBIT 4.3

NON-QUALIFIED STOCK OPTION AGREEMENT

NON-EMPLOYEE DIRECTOR

GREY WOLF, INC. 2003 INCENTIVE PLAN

(effective as of March 26, 2003)

     THIS NON-QUALIFIED STOCK OPTION AGREEMENT (this “Agreement”) made as of
March 25, 2004, by and between GREY WOLF, INC., a corporation organized under
the laws of the State of Texas (the “Company”), and «FirstName» «LastName», an
individual (the “Grantee”);

WITNESSETH:

     WHEREAS, the Company desires to provide an incentive to the Grantee to
further the business of the Company and the Company has agreed to grant the
Grantee options to purchase shares of common stock, $0.10 par value (“Common
Stock”), of the Company; and

     WHEREAS, by granting the Grantee options to purchase shares of Common
Stock pursuant to the terms of this Agreement, the Company intends to carry out
the purposes set forth in the Grey Wolf, Inc. 2003 Incentive Plan (effective as
of March 26, 2003) (the “Plan”) adopted by the Board of Directors of the
Company (the “Board of Directors”) effective March 26, 2003 and approved by the
shareholders of the Company on May 13, 2003; and

     WHEREAS, the Company and the Grantee desire to set forth the terms and
conditions of such options to purchase Common Stock;

     NOW, THEREFORE, in consideration of the mutual promises contained herein,
and other good and valuable consideration, the receipt, adequacy and
sufficiency of which are hereby acknowledged, the parties hereto do hereby
agree as follows:

1. Grant of Option. Subject to the terms and conditions hereinafter set forth,
the Company hereby grants to the Grantee a non-qualified option (the “Option”)
to purchase all or any part of an aggregate number of 50,000 shares of Common
Stock (such shares, as increased or decreased in accordance with Section 10
hereof, being referred to hereinafter as the “Option Shares”) at an exercise
price of $3.91 per share (hereinafter the “Exercise Price”).

2. Subject to Plan. The Option and its exercise are subject to the terms and
conditions of the Plan, and the terms of the Plan shall control to the extent
not otherwise inconsistent with the provisions of this Agreement. The
capitalized terms used herein that are defined in the Plan shall have the same
meanings assigned to them in the Plan. The Option is subject to any rules
promulgated pursuant to the Plan by the Board or the Committee and communicated
to the Grantee in writing.

3. Exercise Period. The Option shall be exercisable by Grantee as to
thirty-three percent (33%) of the Option Shares one (1) year after the date of
this Agreement, as to an additional thirty-three percent (33%) of the Option
Shares two (2) years after the date of this Agreement, as to an additional
thirty-four percent (34%) of the Option Shares three (3) years after the date
of this Agreement. The Option shall expire and terminate as to any Option
Shares not purchased by

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the Grantee on or before the tenth anniversary of the date of this Agreement
(the “Expiration Date”), subject to earlier termination as set forth herein or
pursuant to the terms of the Plan. Notwithstanding any other provision of this
Agreement to the contrary, the Option shall be immediately exercisable by
Grantee as to one hundred percent (100%) of the Option Shares as may be
applicable pursuant to Sections 5.5 and 5.7 of the Plan and Section 12 below.

4. Method of Exercising the Option. The Option shall be exercised by the
Grantee by delivering to the Company written notice from the Grantee as of a
date set by the Company which is in advance of the proposed exercise date. The
notice from the Grantee shall state that the Grantee is exercising the Option
and shall specify the number of Option Shares that the Grantee desires and is
entitled to purchase. Such notice shall be in a form and content as determined
by the Committee and shall be accompanied by full payment for the Option Shares
to be exercised. The Option may only be exercised with respect to full shares,
and no fractional shares shall be issued.

     The Option Price upon exercise of the Option Shares shall be payable to
the Company in full either: (i) in cash or its equivalent, or (ii) subject to
prior approval by the Committee in its discretion, by tendering previously
acquired Shares having an aggregate Fair Market Value at the time of exercise
equal to the total Option Price (provided that the Shares which are tendered
must have been held by the Grantee for at least six (6) months prior to their
tender to satisfy the Option Price), or (iii) subject to prior approval by the
Committee in its discretion, by withholding Shares which otherwise would be
acquired on exercise having an aggregate Fair Market Value at the time of
exercise equal to the total Option Price, or (iv) subject to prior approval by
the Committee in its discretion, by a combination of (i), (ii), and (iii)
above. Any payment in Shares shall be effected by the surrender of such Shares
to the Company in good form for transfer and shall be valued at their Fair
Market Value on the date when the Stock Option is exercised. Unless otherwise
permitted by the Committee in its discretion, the Grantee shall not surrender,
or attest to the ownership of, Shares in payment of the Option Price if such
action would cause the Company to recognize compensation expense (or additional
compensation expense) with respect to the Stock Option for financial reporting
purposes.

     The Committee, in its discretion, also may allow the Option Price to be
paid with such other consideration as shall constitute lawful consideration for
the issuance of Shares (including, without limitation, effecting a “cashless
exercise” with a broker of the Option), subject to applicable securities law
restrictions and tax withholdings, or by any other means which the Committee
determines to be consistent with the Plan’s purpose and applicable law. A
“cashless exercise” of an Option is a procedure by which a broker provides the
funds to the Grantee to effect an Option exercise, to the extent consented to
by the Committee in its discretion. At the direction of the Grantee, the
broker will either (i) sell all of the Shares received when the Option is
exercised and pay the Grantee the proceeds of the sale (minus the Option Price,
withholding taxes and any fees due to the broker) or (ii) sell enough of the
Shares received upon exercise of the Option to cover the Option Price,
withholding taxes and any fees due the broker and deliver to the Grantee
(either directly or through the Company) a stock certificate for the remaining
Shares. Dispositions to a broker effecting a cashless exercise are not exempt
under Section 16 of the Exchange Act.

     The Committee, in its discretion, may also allow an Option to be exercised
by a broker-dealer acting on behalf of the Grantee if (i) the broker-dealer has
received from the Grantee a duly endorsed Incentive Agreement evidencing such
Option and instructions signed by the Grantee requesting the Company to deliver
the Shares of Common Stock subject to such

-2-

 

Option to the broker-dealer on behalf of the Grantee and specifying the account
into which such Shares should be deposited, (ii) adequate provision has been
made with respect to the payment of any withholding taxes due upon such
exercise, and (iii) the broker-dealer and the Grantee have otherwise complied
with Section 220.3(e)(4) of Regulation T, 12 CFR Part 220 (or its successor).

     As soon as practicable after receipt of a written notification of exercise
and full payment, the Company shall deliver, or cause to be delivered, to or on
behalf of the Grantee, in the name of the Grantee or other appropriate
recipient, Share certificates for the number of Shares purchased under the
Stock Option. Such delivery shall be effected for all purposes when the
Company or a stock transfer agent of the Company shall have deposited such
certificates in the United States mail, addressed to Grantee or other
appropriate recipient.

     Subject to Section 6.2 of the Plan, during the lifetime of a Grantee, each
Option granted to him shall be exercisable only by the Grantee (or his legal
guardian in the event of his Disability) or by a broker-dealer acting on his
behalf pursuant to a cashless exercise under the foregoing provisions of this
Section.

     Any certificate issued to evidence Shares issued upon the exercise of this
Incentive Award may bear such legends and statements as the Committee shall
deem advisable to assure compliance with federal and state laws and
regulations, including but not limited to, blue sky and securities laws, the
requirements of the stock exchange or market upon which such shares are then
listed and/or traded and any other restrictions on these Shares.

     The Grantee or other person exercising the Option Shares under this
Incentive Award may be required by the Committee to give a written
representation that the Incentive Award and the Shares subject to the Incentive
Award will be acquired for investment and not with a view to public
distribution; provided, however, that the Committee, in its sole discretion,
may release any person receiving an Incentive Award from any such
representations either prior to or subsequent to the exercise of this Incentive
Award.

5. Transferability of Option. The Option shall not be transferable or
assignable, in whole or in part, and except as otherwise provided in Section 12
of this Agreement and Section 5.2 of the Plan or by will or the laws of
descent or distribution. The Option shall be exercisable (i) only by the
Grantee during his lifetime, or (ii) in the event of his death, by his heirs,
representatives, distributees, or legatees in accordance with his will or the
laws of descent and distribution (but only to the extent that the Option would
be exercisable by the Grantee under this Agreement).

6. Payment of Taxes Upon Exercise. The Grantee understands and acknowledges
that under currently applicable law, the Grantee maybe required to include in
the Grantee’s taxable income, at the time of exercise of the Option, the amount
by which the value of the Option Shares purchased (the “Exercise Shares”)
exceeds the Exercise Price paid. The Grantee hereby authorizes the Company to
withhold Exercise Shares of a value equivalent to (but not to exceed) the
amount of tax required to be withheld by the Company out of any taxable income
derived by the Grantee upon exercise of the Option pursuant to Section 6.3 of
the Plan; provided, however, that the Grantee may, in the alternative, in order
to satisfy such withholding requirement, deliver to the Company cash or other
shares of Common Stock owned by the Grantee.

-3-

 

7. Investment Representation. The Grantee represents that the Option Shares
available for purchase by the Grantee under this Agreement will be acquired
only for investment and not with a view toward resale or distribution.

8. Securities Law, Other Applicable Laws and Company Policies; Legends. The
Grantee agrees and understands that the Option Shares may be restricted
securities as defined in Rule 144 promulgated under the Securities Act of 1933,
as amended (the “Securities Act”), and may not be sold, assigned or
transferred, unless the sale, assignment or transfer of such shares is
registered under the Securities Act and applicable state securities laws, as
now in effect or hereafter amended, or there is furnished an opinion of counsel
in form and substance satisfactory to the Company from counsel acceptable to
the Company that such registrations are not required. Grantee agrees and
understands that transactions under the Plan and this Agreement are intended to
and shall comply with all applicable laws including, but not limited to, the
requirements of Rule 16b-3 under the Securities Exchange Act and Securities
Regulation BTR. Grantee also agrees and understands that transactions under
the Plan and this Agreement are intended to and shall comply with the Company’s
insider trading policies as revised from time to time or such other of the
Company’s policies related to trading in the Company’s stock including, but not
limited to, policies relating to black-out periods. The Grantee further
understands and agrees that, unless issued pursuant to an effective
registration statement under the Securities Act, the following legend shall
beset forth on each certificate representing Option Shares:

“THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR UNDER THE
SECURITIES LAWS OF ANY STATE, AND MAY NOT BE SOLD OR TRANSFERRED
EXCEPT UPON SUCH REGISTRATION OR UPON RECEIPT BY THE CORPORATION
OF AN OPINION OF COUNSEL FOR THE CORPORATION, IN FORM AND
SUBSTANCE SATISFACTORY TO THE CORPORATION, THAT SUCH REGISTRATION
IS NOT REQUIRED FOR SUCH SALE OR TRANSFER.”

     In addition, the following legend shall be placed on each certificate
representing Option Shares;

“THE SHARES REPRESENTED BY THIS CERTIFICATE ARE GOVERNED BY THE
TERMS OF THE GREY WOLF, INC. 2003 INCENTIVE PLAN (EFFECTIVE MARCH
26, 2003), WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THE
CORPORATION AND A COPY OF WHICH WILL BE PROVIDED FOR INSPECTION
UPON WRITTEN REQUEST.”

9. No Rights as Shareholder. The Grantee shall not have any rights as a
shareholder with respect to any of the Option Shares until the date of issuance
by the Company to the Grantee of a stock certificate representing such Option
Shares. Except as otherwise provided in Section 5.5 of the Plan, the Grantee
shall not be entitled to any dividends, cash or otherwise, or any adjustment of
the Option Shares for such dividends, if the record date therefor is prior to
the date of issuance of such stock certificate. Upon valid exercise of the
Option by the Grantee, the Company agrees to cause a valid stock certificate
for the number of Option Shares then purchased to be issued and delivered to
the Grantee within seven (7) business days thereafter.

-4-

 

10. Corporate Proceedings of the Company. The terms respecting corporate
proceedings of the Company shall be governed by such terms as provided in
Section 5.5 of the Plan.

11. Registration Rights. The Grantee shall have no registration rights with
respect to the Option Shares.

12. Termination. Except as otherwise provided in this Section 12, if the
Grantee for any reason whatsoever ceases to serve as a director of the Company,
or a parent or subsidiary corporation of the Company or successor thereto and
prior to such cessation, the Grantee served as a director of the Company, or a
parent or subsidiary of the Company or a successor thereto at all times from
the date of the granting of the Option until the date of such cessation, the
Option shall be exercisable by the Grantee (whether previously exercisable or
not, i.e., whether vested or unvested) at any time on or before the Expiration
Date. Notwithstanding the foregoing:

     a. If the Grantee’s service as a director is terminated for Cause
(as defined below), the Option will terminate as to all of the
unexercised Option Shares on the thirtieth day following such
termination, during which thirty (30) days the Grantee may exercise the
Option as to the Option Shares exercisable on or prior to the date of
such termination for Cause; provided, however, no unvested Option shall
vest during such thirty (30) day period; and

     b. If the Grantee’s service as a director is terminated as a result
of a voluntary resignation, failure to stand for reelection or failure to
be reelected by a vote of the shareholders of the Company, the Grantee
may exercise the Option as to all of the Option Shares as provided above
in this Section 12; provided that no unvested Option shall vest as a
result of any of the foregoing events or thereafter.

     c. Notwithstanding the provisions of Section 12(b) above, the
Grantee may exercise the Option as to all of the Option Shares (whether
previously exercisable or not) on or before the Expiration Date if (i) a
Change of Control of the Corporation shall be deemed to have occurred and
(ii) within two (2) years after the date a Change of Control of the
Corporation shall be deemed to have occurred, Optionee’s service as a
director of the Corporation is terminated for any reason other than
Cause.

For purposes of this Agreement, the term “Cause” shall mean and include
(i) chronic alcoholism or controlled substance abuse as determined by a
doctor mutually acceptable to the Company and the Grantee, (ii) an act of
proven fraud or dishonesty on the part of the Grantee with respect to the
Company or its subsidiaries; (iii) knowing and material failure by the
Grantee to comply with material applicable laws and regulations relating
to the business of the Company or its subsidiaries; (iv) the Grantee’ s
material and continuing failure to perform (as opposed to unsatisfactory
performance) his duties to the Company except, in each case, where such
failure is caused by the illness or other similar incapacity or
disability of the Grantee; or (v) conviction of a crime involving moral
turpitude or a felony. Prior to the effectiveness of termination for
Cause under subclause (1), (ii), (iii) or (iv) above, the Grantee shall
be given thirty (30) days prior notice from the Board specifically
identifying the reasons which are alleged to constitute Cause hereunder
and an opportunity to be heard by the Board in the event Grantee disputes
such allegations.

-5-

 

Nothing in this Section 12 shall extend the time for exercising the
Option granted pursuant to this Agreement beyond the Expiration Date.

13. Disposition of Stock After Exercise of Option. Notwithstanding any other
provision of this Agreement to the contrary, in consideration of the granting
of the Option, the Grantee agrees not to dispose of any Option Shares without
the prior approval of the Company unless such shares have been registered under
the Securities Act.

14. Notices. All notices, demands, requests and other communications required
or permitted hereunder shall be in writing and shall be deemed to be delivered
when actually received through U.S. Express Mail or any private express service
(as evidenced by a written receipt), or, if earlier, and regardless of whether
actually received (except where receipt is specified in this Agreement), four
(4) days following deposit in a regularly maintained receptacle for the United
States mail, registered or certified, return receipt requested, postage frilly
prepaid, addressed to the addressee at its address set forth below or at such
other address as such party may have specified theretofore by notice delivered
in accordance with this Section:

	 	 	 	 	 
	

	 	If to the Company:
	 	GREY WOLF, Inc.

10370 Richmond Ave., Suite 600

Houston, Texas 77042

Attn: Chief Financial Officer
	 
	 	 	 	 
	

	 	If to Grantee:
	 	«FirstName» «LastName»

«Address»

«City», «State» «Zip»

15. Transferability: Binding Effect. The Option shall be transferable only as
set forth in Section 5 of this Agreement and Section 5.2 of the Plan. Subject
to the foregoing, all covenants, terms, agreements and conditions of this
Agreement shall be binding upon, inure to the benefit of, and be enforceable
by, the Company and the Grantee and their respective successors and assigns.

16. Entire Agreement. This Agreement together with the Plan supersede any and
all other prior understandings and agreements, either oral or in writing,
between the parties with respect to the subject matter hereof and constitute
the sole and only agreements between the parties with respect to the said
subject matter. All prior negotiations and agreements between the parties with
respect to this Incentive Award are merged into this Agreement. Each party to
this Agreement acknowledges that no representations, inducements, promises, or
agreements, orally or otherwise, have been made by any party or by anyone
acting on behalf of any party, which are not embodied in this Agreement or the
Plan and that any agreement, statement or promise that is not contained in this
Agreement or the Plan shall not be valid or binding or of any force or effect.

17. Governing Law. This Agreement shall be governed by the laws of the State of
Texas.

18. Captions. The section and paragraph headings in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.

-6-

 

19. Counterparts. This Agreement may be executed in multiple original
counterparts, each of which shall be deemed an original, but all of which
together shall constitute but one and. the same instrument.

20. Modification. No change or modification of this Agreement shall be valid or
binding upon the parties unless the change or modification is in writing and
signed by the parties. Notwithstanding the preceding sentence, the Company may
amend the Plan or revoke this Option to the extent permitted by the Plan.

21. Community Property. Each spouse individually is bound by, and such spouse’s
interest, if any, in any Optioned Shares is subject to, the terms of this
Agreement. Nothing in this Agreement shall create a community property interest
where none otherwise exists.

22. No Right to Continue Service. Nothing herein shall be construed to confer
upon the Grantee the right to continue as a director or to provide services to
the Company or any Company affiliate or Subsidiary, whether as a consultant or
as a director, or interfere with or restrict in any way the right of the
Company or any Company affiliate or Subsidiary to discharge the Grantee as a
consultant or director at any time.

23. Grantee’s Acknowledgments. The Grantee acknowledges receipt of a copy of
the Plan, which is annexed hereto, and represents that he or she is familiar
with the terms and provisions thereof, and hereby accepts this Option subject
to all the terms and provisions thereof. The Grantee hereby agrees to accept as
binding, conclusive, and final all decisions or interpretations of the
Committee or the Board, as appropriate, upon any questions arising under the
Plan or this Agreement.

     IN WITNESS WHEREOF, this Agreement has been executed and delivered as of
the date first written above.

	 	 	 	 	 
	 	 	COMPANY:
	 
	 	 	 	 
	 	 	GREY WOLF, INC.
	 
	 	 	 	 
	

	 	By:	 	 
	

	 	 	 	

	

	 	Name:
	 	David W. Wehlmann
	

	 	Title:
	 	Executive Vice President & CFO
	

	 	Date:
	 	March 25, 2004
	 
	 	 	 	 
	 	 	GRANTEE:
	 
	 	 	 	 
	 	 	

	

	 	Name:
	 	«FirstName» «LastName»
	

	 	Date:
	 	March 25, 2004

-7-

 

ACKNOWLEDGMENT OF SPOUSE TO

TERMS OF NON-QUALIFIED STOCK OPTION AGREEMENT

     I, «Spouse», am the spouse of «FirstName» «LastName» (“Grantee”), and I am
fully aware of, understand, and fully consent and agree to the provisions of
the Non-Qualified Stock Option Agreement, dated March 25, 2004 (the
“Agreement”), executed by Grantee and GREY WOLF, INC. (the “Company”). I
understand the binding effect of this Agreement and its binding effect upon any
interest, community or otherwise, I may now or hereafter own with respect to
any option or stock of the Company which is the subject of the Agreement, and I
agree that the termination for any reason of my marital relationship with
Grantee shall not have the effect of removing any such option or stock of the
Company from the coverage of the Agreement.

     Signed this day of March 25, 2004.

	 	 	 
	 

	 	

	

	 	«Spouse»,
	

	 	Spouse of «FirstName» «LastName»

-8-

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