W-H ENERGY SERVICES, INC.
1997 STOCK OPTION PLAN
AS RESTATED EFFECTIVE AS OF
The purpose of the W-H ENERGY SERVICES, INC. STOCK OPTION PLAN (the "Plan")
is to provide a means whereby certain employees of W-H ENERGY SERVICES, INC., a
Texas corporation (the "Company"), and its Affiliates may develop a sense of
proprietorship and personal involvement in the development and financial success
of the Company, and to encourage them to remain with and devote their best
efforts to the business of the Company, thereby advancing the interests of the
Company and its shareholders.
The following definitions shall be applicable throughout the Plan unless
specifically modified by any paragraph:
(a) "Affiliate" means any corporation, partnership, limited liability
company or partnership, association, trust or other organization which, directly
or indirectly, controls, is controlled by, or is under common control with, the
Company. For purposes of the preceding sentence, "control" (including, with
correlative meanings, the terms "controlled by" and "under common control
with"), as used with respect to any entity or organization, shall mean the
possession, directly or indirectly, of the power (i) to vote more than 50% of
the securities having ordinary voting power for the election of directors of the
controlled entity or organization, or (ii) to direct or cause the direction of
the management and policies of the controlled entity or organization, whether
through the ownership of voting securities or by contract or otherwise.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as amended. Reference
in the Plan to any section of the Code shall be deemed to include any amendments
or successor provisions to such section and any regulations under such section.
(d) "Committee" means a committee of the Board that is selected by the
Board as provided in Paragraph IV(a).
(e) "Common Stock" means the common stock, par value $.0001 per share, of
the Company, or any security into which such common stock may be changed by
reason of any transaction or event of the type described in Paragraph VIII.
(f) "Company" means W-H Energy Services, Inc., a Texas corporation.
(g) "Corporate Change" shall have the meaning assigned to such term in
Paragraph VIII(c) of the Plan.
(h) "Director" means an individual who is a member of the Board.
(i) An "employee" means any person (including a Director) in an employment
relationship with the Company or any Affiliate.
(j) "Fair Market Value" means, as of any specified date, the mean of the
high and low sales prices of the Common Stock (i) reported by the National
Market System of NASDAQ on that date or (ii) if the Common Stock is listed on a
national stock exchange, reported on the stock exchange composite tape on that
date (or such other reporting service approved by the Committee); or, in either
case, if no prices are reported on that date, on the last preceding date on
which such prices of the Common Stock are so reported. If the Common
Stock is traded over the counter at the time a determination of its fair market
value is required to be made hereunder, its fair market value shall be deemed to
be equal to the average between the reported high and low or closing bid and
asked prices of Common Stock on the most recent date on which Common Stock was
publicly traded. In the event Common Stock is not publicly traded at the time a
determination of its value is required to be made hereunder, the determination
of its fair market value shall be made by the Committee in such manner as it
(k) "1934 Act" means the Securities Exchange Act of 1934, as amended.
(l) "Option" means an award granted under Paragraph VII of the Plan.
(m) "Option Agreement" means a written agreement between the Company and a
Participant with respect to an Option.
(n) "Participant" means an employee, officer or Director of the Company or
an Affiliate thereof who has been granted an Option.
(o) "Plan" means the W-H Energy Services, Inc. 1997 Stock Option Plan, as
amended from time to time.
(p) "Rule 16b-3" means SEC Rule 16b-3 promulgated under the 1934 Act, as
such may be amended from time to time, and any successor rule, regulation or
statute fulfilling the same or a similar function.
(q) "Stock Appreciation Right" shall have the meaning assigned to such term
in Paragraph VII(d) of the Plan.
III. EFFECTIVE DATE AND DURATION OF THE PLAN
The Plan became effective upon August 11, 1997. No further Options may be
granted under the Plan after August 11, 2007. This restatement of the Plan is
effective as of the date of its approval by the shareholders of the Company. In
the event that the Company's shareholders do not approve this restatement, then
the Plan shall continue in effect as it currently exists. The Plan shall remain
in effect until all Options granted under the Plan have been satisfied or
(a) Composition of Committee. The Plan shall be administered by a
committee of, and appointed by, the Board that shall be comprised solely of two
or more outside Directors (within the meaning of the term "outside directors" as
used in section 162(m) of the Code and applicable interpretive authority
thereunder and within the meaning of the term "Non-Employee Director" as defined
in Rule 16b-3).
(b) Powers. Subject to the express provisions of the Plan, the Committee
shall have authority, in its discretion, to determine which employees shall
receive an Option, the time or times when such Option shall be granted, and the
number of shares to be subject to each Option. In making such determinations,
the Committee shall take into account the nature of the services rendered by the
respective employees, their present and potential contribution to the Company's
success and such other factors as the Committee in its discretion shall deem
(c) Additional Powers. The Committee shall have such additional powers as
are delegated to it by the other provisions of the Plan. Subject to the express
provisions of the Plan, this shall include the power to construe the Plan and
the respective Option Agreements executed hereunder, to prescribe rules and
regulations relating to the Plan, and to determine the terms, restrictions and
provisions of each Option Agreement and to make all other determinations
necessary or advisable for administering the Plan. The Committee may correct any
defect or supply any omission or reconcile any inconsistency in the Plan or in
any Option Agreement in the manner and to the extent it shall deem expedient to
carry it into effect. The determinations of the Committee on the matters
referred to in this Paragraph IV shall be conclusive.
V. SHARES SUBJECT TO THE PLAN; OPTION LIMITS;
GRANT OF OPTIONS
(a) Shares Subject to the Plan and Option Limits. Subject to adjustment in
the same manner as provided in Paragraph VIII with respect to shares of Common
Stock subject to Options then outstanding, the aggregate number of shares of
Common Stock that may be issued under the Plan shall not exceed 4,900,000 shares
(inclusive of any shares previously issued under the Plan). Shares shall be
deemed to have been issued under the Plan only (i) to the extent actually issued
and delivered pursuant to an Option or (ii) to the extent an Option is settled
in cash. To the extent that an Option lapses or the rights of its holder
terminate, any shares of Common Stock subject to such Option shall again be
available for the grant of an Option under the Plan. Notwithstanding any
provision in the Plan to the contrary, the maximum number of shares of Common
Stock that may be subject to Options granted to any one individual during the
term of the Plan may not exceed 500,000 shares of Common Stock (as adjusted from
time to time in accordance with the provisions of the Plan). The limitation set
forth in the preceding sentence shall be applied in a manner that will permit
compensation generated under the Plan to constitute "performance-based"
compensation for purposes of section 162(m) of the Code, including, without
limitation, counting against such maximum number of shares, to the extent
required under section 162(m) of the Code and applicable interpretive authority
thereunder, any shares subject to Options that are canceled or repriced.
(b) Grant of Options. The Committee may from time to time grant Options to
one or more persons determined by it to be eligible for participation in the
Plan in accordance with the terms of the Plan.
(c) Stock Offered. Subject to the limitations set forth in Paragraph V(a),
the stock to be offered pursuant to the grant of an Option may be authorized but
unissued Common Stock or Common Stock previously issued and outstanding and
reacquired by the Company. Any of such shares which remain unissued and which
are not subject to outstanding Options at the termination of the Plan shall
cease to be subject to the Plan but, until termination of the Plan, the Company
shall at all times make available a sufficient number of shares to meet the
requirements of the Plan.
Options may be granted only to persons who, at the time of grant, are key
employees, officers or Directors of the Company or an Affiliate thereof. An
Option may be granted on more than one occasion to the same person, and, subject
to the limitations set forth in the Plan.
VII. OPTION TERMS
(a) Nature of Option. Options granted under the Plan will be stock options
that do not constitute incentive stock options within the meaning of section
422(b) of the Code.
(b) Option Period. The term of each Option shall be as specified by the
Committee at the date of grant.
(c) Limitations on Exercise of Option. An Option shall be exercisable in
whole or in such installments and at such times as determined by the Committee.
(d) Option Agreement. Each Option shall be evidenced by an Option
Agreement in such form and containing such provisions not inconsistent with the
provisions of the Plan as the Committee from time to time shall approve. Each
Option Agreement shall specify the effect of termination of employment on the
exercisability of the Option. An Option Agreement may provide for the payment of
the option price, in whole or in part, by the delivery of a number of shares of
Common Stock (plus cash if necessary) having a Fair Market Value equal to such
option price. Further, an Option Agreement may provide for the surrender of the
right to purchase shares under the Option in return for a payment in cash or
shares of Common Stock or a combination of cash and shares of Common Stock equal
in value to the excess of the Fair Market Value of the shares with respect to
which the right to purchase is surrendered over the option price therefor
("Stock Appreciation Rights"), on such terms and conditions as the Committee in
its sole discretion may prescribe.
The terms and conditions of the respective Option Agreements need not be
identical. Subject to the consent of the Participant, the Committee may, in its
sole discretion, amend an outstanding Option Agreement from time to time in any
manner that is not inconsistent with the provisions of the Plan (including,
without limitation, an amendment that accelerates the time at which the Option,
or a portion thereof, may be exercisable).
(e) Option Price and Payment. The price at which a share of Common Stock
may be purchased upon exercise of an Option shall not be less than the Fair
Market Value of a share of Common Stock on the date such Option is granted. The
Option or portion thereof may be exercised by delivery of an irrevocable notice
of exercise to the Company, as specified by the Committee. The purchase price of
the Option or portion thereof shall be paid in full in the manner prescribed by
(f) Restrictions on Repricing of Options. Except as provided in Paragraph
VIII, the Committee may not, without approval of the shareholders of the
Company, amend any outstanding Option Agreement to lower the option price (or
cancel and replace any outstanding Option Agreement with Option Agreements
having a lower option price).
(g) Stockholder Rights and Privileges. The Participant shall be entitled
to all the privileges and rights of a shareholder only with respect to such
shares of Common Stock as have been purchased under the Option and for which
certificates of stock have been registered in the Participant's name.
(h) Options and Rights in Substitution for Options Granted by Other
Employers. Options and Stock Appreciation Rights may be granted under the Plan
from time to time in substitution for options held by individuals providing
services to corporations or other entities who become employees as a result of a
merger or consolidation or other business transaction with the Company or any
VIII. RECAPITALIZATION OR REORGANIZATION
(a) No Effect on Right or Power. The existence of the Plan and the Options
granted hereunder shall not affect in any way the right or power of the Board or
the shareholders of the Company to make or authorize any adjustment,
recapitalization, reorganization or other change in the Company's or any
Affiliate's capital structure or its business, any merger or consolidation of
the Company or any Affiliate, any issue of debt or equity securities ahead of or
affecting Common Stock or the rights thereof, the dissolution or liquidation of
the Company or any Affiliate or any sale, lease, exchange or other disposition
of all or any part of its assets or business or any other corporate act or
(b) Subdivision or Consolidation of Shares; Stock Dividends. The shares
with respect to which Options may be granted are shares of Common Stock as
presently constituted, but if, and whenever, prior to the expiration of an
Option theretofore granted, the Company shall effect a subdivision or
consolidation of shares of Common Stock or the payment of a stock dividend on
Common Stock without receipt of consideration by the Company, the number of
shares of Common Stock with respect to which such Option may thereafter be
exercised (i) in the event of an increase in the number of outstanding shares
shall be proportionately increased, and the purchase price per share shall be
proportionately reduced, and (ii) in the event of a reduction in the number of
outstanding shares shall be proportionately reduced, and the purchase price per
share shall be proportionately increased. Any fractional share resulting from
such adjustment shall be rounded up to the next whole share.
(c) Recapitalizations and Corporate Changes. If the Company recapitalizes,
reclassifies its capital stock, or otherwise changes its capital structure (a
"recapitalization"), the number and class of shares of Common Stock covered by
an Option theretofore granted shall be adjusted so that such Option shall
thereafter cover the number and class of shares of stock and securities to which
the Participant would have been entitled pursuant to the terms of the
recapitalization if, immediately prior to the recapitalization, the Participant
had been the holder of record of the number of shares of Common Stock then
covered by such Option. If (i) the Company shall not be the surviving entity in
any merger or consolidation (or survives only as a subsidiary of an entity),
(ii) the Company sells, leases or exchanges or agrees to sell, lease or exchange
all or substantially all of its assets to any other person or entity, (iii) the
Company is to be dissolved and liquidated, (iv) any person or entity, including
a "group" as contemplated by Section 13(d)(3) of the 1934 Act, acquires
or gains ownership or control (including, without limitation, power to vote) of
more than 50% of the outstanding shares of the Company's voting stock (based
upon voting power), or (v) as a result of or in connection with a contested
election of Directors, the persons who were Directors of the Company before such
election shall cease to constitute a majority of the Board (each such event is
referred to herein as a "Corporate Change"), no later than (x) 10 days after the
approval by the stockholders of the Company of such merger, consolidation,
reorganization, sale, lease or exchange of assets or dissolution or such
election of Directors or (y) 30 days after a Corporate Change of the type
described in clause (iv), the Committee, acting in its sole discretion without
the consent or approval of any Participant, shall act to effect one or more of
the following alternatives, which alternatives may vary among individual
Participants and which may vary among Options held by any individual
Participant: (1) accelerate the time at which Options then outstanding may be
exercised so that such Options may be exercised in full for a limited period of
time on or before a specified date (before or after such Corporate Change) fixed
by the Committee, after which specified date all unexercised Options and all
rights of Participants thereunder shall terminate, (2) require the mandatory
surrender to the Company by selected Participants of some or all of the
outstanding Options held by such Participants (irrespective of whether such
Options are then exercisable under the provisions of the Plan) as of a date,
before or after such Corporate Change, specified by the Committee, in which
event the Committee shall thereupon cancel such Options and cause the Company to
pay to each Participant an amount of cash per share equal to the excess, if any,
of the amount calculated in Subparagraph (d) below (the "Change of Control
Value") of the shares subject to such Option over the exercise price(s) under
such Options for such shares, or (3) make such adjustments to Options then
outstanding as the Committee deems appropriate to reflect such Corporate Change
(provided, however, that the Committee may determine in its sole discretion that
no adjustment is necessary to Options then outstanding), including, without
limitation, adjusting an Option to provide that the number and class of shares
of Common Stock covered by such Option shall be adjusted so that such Option
shall thereafter cover securities of the surviving or acquiring corporation or
other property (including, without limitation, cash) as determined by the
Committee in its sole discretion.
(d) Change of Control Value. For the purposes of clause (2) in
Subparagraph (c) above, the "Change of Control Value" shall equal the amount
determined in clause (i), (ii) or (iii), whichever is applicable, as follows:
(i) the per share price offered to shareholders of the Company in any such
merger, consolidation, sale of assets or dissolution transaction, (ii) the price
per share offered to shareholders of the Company in any tender offer or exchange
offer whereby a Corporate Change takes place, or (iii) if such Corporate Change
occurs other than pursuant to a tender or exchange offer, the fair market value
per share of the shares into which such Options being surrendered are
exercisable, as determined by the Committee as of the date determined by the
Committee to be the date of cancellation and surrender of such Options. In the
event that the consideration offered to shareholders of the Company in any
transaction described in this Subparagraph (d) or Subparagraph (c) above
consists of anything other than cash, the Committee shall determine the fair
cash equivalent of the portion of the consideration offered which is other than
(e) Other Changes in the Common Stock. In the event of changes in the
outstanding Common Stock by reason of recapitalizations, reorganizations,
mergers, consolidations, combinations, split-ups, split-offs, spin-offs,
exchanges or other relevant changes in capitalization or distributions to the
holders of Common Stock occurring after the date of the grant of any Option and
not otherwise provided for by this Paragraph VIII, such Option and the related
Option Agreement shall be subject to adjustment by the Committee at its
discretion as to the number and price of shares of Common Stock or other
consideration subject to such Option. In the event of any such change in the
outstanding Common Stock or distribution to the holders of Common Stock, or upon
the occurrence of any other event described in this Paragraph VIII, the
aggregate number of shares available under the Plan and the maximum number of
shares that may be subject to Options granted to any one individual shall be
appropriately adjusted to the extent, if any, determined by the Committee, whose
determination shall be conclusive.
(f) Stockholder Action. Any adjustment provided for in the above
Subparagraphs shall be subject to any required shareholder action.
(g) No Adjustments unless Otherwise Provided. Except as hereinbefore
expressly provided, the issuance by the Company of shares of stock of any class
or securities convertible into shares of stock of any
class, for cash, property, labor or services, upon direct sale, upon the
exercise of rights or warrants to subscribe therefor, or upon conversion of
shares or obligations of the Company convertible into such shares or other
securities, and in any case whether or not for fair value, shall not affect, and
no adjustment by reason thereof shall be made with respect to, the number of
shares of Common Stock subject to Options theretofore granted or the purchase
price per share.
IX. AMENDMENT AND TERMINATION OF THE PLAN
The Board in its discretion may terminate the Plan at any time with respect
to any shares of Common Stock for which Options have not theretofore been
granted. The Board shall have the right to alter or amend the Plan or any part
thereof from time to time; provided that no change in the Plan may be made that
would impair the rights of a Participant with respect to an Option theretofore
granted without the consent of the Participant, and provided, further, that the
Board may not, without approval of the stockholders of the Company, (a) amend
the Plan to increase the maximum aggregate number of shares that may be issued
under the Plan or change the class of individuals eligible to receive Options
under the Plan, (b) amend or delete Paragraph VII(f)., (c) expand the type of
awards available under the Plan, (d) expand the term of the Plan or (e) change
the method under the Plan for determining the price at which a share of Common
Stock may be purchased upon exercise of an Option.
(a) No Right To An Option. Neither the adoption of the Plan nor any action
of the Board or of the Committee shall be deemed to give an employee any right
to be granted an Option or any other rights hereunder except as may be evidenced
by an Option Agreement duly executed on behalf of the Company, and then only to
the extent and on the terms and conditions expressly set forth therein. The Plan
shall be unfunded. The Company shall not be required to establish any special or
separate fund or to make any other segregation of funds or assets to assure the
performance of its obligations under any Option Agreement.
(b) No Employment/Membership Rights Conferred. Nothing contained in the
Plan shall (i) confer upon any employee any right with respect to continuation
of employment or of a consulting or advisory relationship with the Company or
any Affiliate or (ii) interfere in any way with the right of the Company or any
Affiliate to terminate his or her employment or consulting or advisory
relationship at any time. Nothing contained in the Plan shall confer upon any
Director any right with respect to continuation of membership on the Board.
(c) Other Laws; Withholding. The Company shall not be obligated to issue
any Common Stock pursuant to any Option granted under the Plan at any time when
the shares covered by such Option have not been registered under the Securities
Act of 1933, as amended, and such other state and federal laws, rules and
regulations as the Company or the Committee deems applicable and, in the opinion
of legal counsel for the Company, there is no exemption from the registration
requirements of such laws, rules and regulations available for the issuance and
sale of such shares. No fractional shares of Common Stock shall be delivered,
nor shall any cash in lieu of fractional shares be paid. The Company shall have
the right to deduct in connection with all Options any taxes required by law to
be withheld and to require any payments required to enable it to satisfy its
(d) No Restriction on Corporate Action. Nothing contained in the Plan
shall be construed to prevent the Company or any Affiliate from taking any
action which is deemed by the Company or such Affiliate to be appropriate or in
its best interest, whether or not such action would have an adverse effect on
the Plan or any Option. No Participant, beneficiary or other person shall have
any claim against the Company or any Affiliate as a result of any such action.
(e) Restrictions on Transfer. An Option shall not be transferable
otherwise than (i) by will or the laws of descent and distribution, (ii)
pursuant to a qualified domestic relations order as defined by the Code or Title
I of the Employee Retirement Income Security Act of 1974, as amended, or the
rules thereunder, or (iii) with the consent of the Committee.
(f) Governing Law. The Plan shall be governed by, and construed in
accordance with, the laws of the State of Texas without regard to conflicts of
law principles thereof.