2001 Stock Option And Restricted Stock Plan

GRANT PRIDECO, INC.
2001 STOCK OPTION AND
RESTRICTED STOCK PLAN


GRANT PRIDECO, INC.
2001 STOCK OPTION AND
RESTRICTED STOCK PLAN


TABLE OF CONTENTS


Section
------- ARTICLE I - PLAN
Purpose............................................................1.1
Effective Date of Plan.............................................1.2


ARTICLE II - DEFINITIONS
Affiliate..........................................................2.1
Agreement..........................................................2.2
Award..............................................................2.3
Board of Directors.................................................2.4
Code...............................................................2.5
Committee..........................................................2.6
Company............................................................2.7
Disability.........................................................2.8
Employee...........................................................2.9
Exchange Act......................................................2.10
Fair Market Value.................................................2.11
Holder............................................................2.12
Mature Shares.....................................................2.13
Non-Employee Director.............................................2.14
Option............................................................2.15
Plan..............................................................2.16
Restricted Period.................................................2.17
Restricted Stock..................................................2.18
Restricted Stock Award............................................2.19
Retained Distributions............................................2.20
Stock.............................................................2.21


ARTICLE III - ELIGIBILITY


ARTICLE IV - STOCK SUBJECT TO THE PLAN


ARTICLE V - GENERAL PROVISIONS RELATING TO ALL OPTIONS
Authority to Grant Options ........................................5.1
Non-Transferability................................................5.2
Changes in the Company's Capital Structure.........................5.3
No Rights As a Stockholder.........................................5.4
Tax Withholding....................................................5.5


ARTICLE VI - VARIABLE PROVISIONS RELATING TO SPECIFIC OPTIONS
Option Price.......................................................6.1
Duration of Options................................................6.2
Amount Exercisable.................................................6.3


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Exercise of Options................................................6.4
Exercise Following Termination of Employment or Affiliation
Relationship.....................................................6.5
Substitution Options...............................................6.6


ARTICLE VII - GENERAL PROVISIONS RELATING TO ALL RESTRICTED STOCK AWARDS
Authority to Grant Awards..........................................7.1
Transferability and Rights with Respect to Restricted Stock........7.2
Withholding Tax....................................................7.3
Changes in Company's Capital Structure.............................7.4


ARTICLE VIII - VARIABLE PROVISIONS RELATING TO SPECIFIC RESTRICTED STOCK
AWARDS
Vesting of Restricted Stock........................................8.1
Consequence of Vesting.............................................8.2


ARTICLE IX - REQUIREMENTS OF LAW


ARTICLE X - ADMINISTRATION


ARTICLE XI - AMENDMENT OR TERMINATION OF PLAN


ARTICLE XII - MISCELLANEOUS
No Establishment of a Trust Fund..................................12.1
No Employment or Affiliation......................................12.2
Written Agreement.................................................12.3
Indemnification of the Committee and the Board of Directors.......12.4
Gender............................................................12.5
Headings..........................................................12.6
Other Compensation Plans..........................................12.7
Other Awards......................................................12.8
Section 83(b) Elections...........................................12.9
Governing Law....................................................12.10


ARTICLE I


PLAN


I.1 PURPOSE. The Plan is maintained for certain non-employee directors and employees (including directors employed by the Company or its Affiliates) of the Company and its Affiliates and is intended to advance the best interests of the Company, its Affiliates, and its stockholders by providing those persons who have substantial responsibility for the management and growth of the Company and its Affiliates with additional incentives and an opportunity to obtain or increase their proprietary interest in the Company, thereby encouraging them to continue in the employ of the Company or any of its Affiliates.


I.2 EFFECTIVE DATE OF PLAN. The Plan is effective October 18, 2001. No Award shall be granted pursuant to the Plan after October 18, 2011. Any Award granted shall be subject to approval and listing of the Plan and underlying shares by the New York Stock Exchange, or other exchange upon which the shares of common stock of the Company may be listed.


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ARTICLE II


DEFINITIONS


The words and phrases defined in this Article shall have the meaning set out in these definitions throughout the Plan, unless the context in which any such word or phrase appears reasonably requires a broader, narrower, or different meaning.


II.1 "AFFILIATE" means any parent corporation and any subsidiary corporation. The term "parent corporation" means any corporation (other than the Company) in an unbroken chain of corporations ending with the Company if, at the time of the action or transaction, each of the corporations other than the Company owns stock possessing 50 percent or more of the total combined voting power of all classes of stock in one of the other corporations in the chain. The term "subsidiary corporation" means any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company if, at the time of the action or transaction, each of the corporations other than the last corporation in the unbroken chain owns stock possessing 50 percent or more of the total combined voting power of all classes of stock in one of the other corporations in the chain.


II.2 "AGREEMENT" means a written agreement setting forth the terms of an Award.


II.3 "AWARD" means an Option or a Restricted Stock Award granted under the Plan.


II.4 "BOARD OF DIRECTORS" means the board of directors of the Company.


II.5 "CODE" means the Internal Revenue Code of 1986, as amended.


II.6 "COMMITTEE" means the Compensation Committee of the Board of Directors or other committee designated by the Board of Directors to administer the Plan.


II.7 "COMPANY" means Grant Prideco, Inc.


II.8 "DISABILITY" means a mental or physical disability which, in the opinion of a physician selected by the Committee, shall prevent the Holder (a) who is an Employee, from earning a reasonable livelihood with the Company or any Affiliate or (b) who is a Non-Employee Director, from adequately performing his services as a director of the Company and which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months and which: (x) was not contracted, suffered or incurred while the Holder was engaged in, or did not result from having engaged in, a felonious criminal enterprise; (y) did not result from alcoholism or addiction to narcotics; and (z) did not result from an injury incurred while a member of the Armed Forces of the United States for which the Holder receives a military pension.


II.9 "EMPLOYEE" means a person employed by the Company or any Affiliate as a common law employee, or as a consultant on a full-time or regular basis as determined by the Committee.


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II.10 "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.


II.11 "FAIR MARKET VALUE" of the Stock as of any date means (a) the closing sales price of the Stock on that date on the principal securities exchange on which the Stock is listed; or (b) if the Stock is not listed on a securities exchange, the average of the high and low bid quotations for the Stock on that date as reported by the National Association of Securities Dealers Automated Quotation National Market System; or (c) if neither of the foregoing is applicable, an amount determined by the Committee in its sole discretion.


II.12 "HOLDER" means a person who has been granted an Award or any person who is entitled to receive Stock under an Award.


II.13 "MATURE SHARES" means shares of Stock that the Holder has held for at least six months.


II.14 "NON-EMPLOYEE DIRECTOR" means a member of the Board of Directors who, while a director, is not an Employee.


II.15 "OPTION" means the right to purchase Stock at a price to be specified and upon terms to be designated by the Committee pursuant to the Plan. All Options granted pursuant to the Plan shall be "nonqualified stock options" that are not intended to meet the requirements of section 422 of the Code or any successor provision.


II.16 "PLAN" means the Grant Prideco, Inc. 2001 Stock Option and Restricted Stock Plan, as set out in this document and as it may be amended from time to time.


II.17 "RESTRICTED PERIOD" means the period designated by the Committee during which Restricted Stock may not be sold, assigned, transferred, pledged, or otherwise encumbered.


II.18 "RESTRICTED STOCK" means those shares of Stock issued pursuant to a Restricted Stock Award which are subject to the restrictions, terms, and conditions set forth in the related Agreement.


II.19 "RESTRICTED STOCK AWARD" means an award of Restricted Stock pursuant to Section 7.1.


II.20 "RETAINED DISTRIBUTIONS" means any securities or other property (other than regular cash dividends) distributed by the Company in respect of Restricted Stock during any Restricted Period.


II.21 "STOCK" means the common stock of the Company, $.01 par value (or such other par value as may be designated by act of the Company's stockholders) or, in the event that the outstanding shares of common stock are later changed into or exchanged for a different class of stock or securities of the Company or another corporation, that other stock or security.


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ARTICLE III


ELIGIBILITY


The individuals who shall be eligible to receive Awards shall be (1) those Non-Employee Directors as the Board of Directors shall determine from time to time and (2) those Employees as the Committee shall determine from time to time, including without limitation all employees located in the United States who are "exempt" employees. The Board of Directors may designate one or more individuals who shall not be eligible to receive any Awards under the Plan. Notwithstanding the foregoing, at least a majority of the shares of Stock underlying Awards granted during any three-year period between the effective date of the Plan and October 18, 2011 must be awarded to Employees who are not (x) officers of the Company or (y) members of the Board of Directors.


ARTICLE IV


STOCK SUBJECT TO THE PLAN


The total amount of the Stock with respect to which Awards may be granted shall not exceed in the aggregate 5,000,000 shares. The class and aggregate number of shares which may be subject to the Options granted under the Plan shall be subject to adjustment under Section 5.3. The class and aggregate number of shares which may be subject to the Restricted Stock Awards granted under the Plan shall also be subject to adjustment under Section 7.4. Shares may be treasury shares or authorized but unissued shares. If any Award under the Plan shall expire or terminate for any reason without having been exercised in full, or if any Award shall be forfeited, the shares subject to the unexercised or forfeited portion of such Award shall again be available for the purposes of the Plan.


ARTICLE V


GENERAL PROVISIONS RELATING TO ALL OPTIONS


V.1 AUTHORITY TO GRANT OPTIONS. The Board of Directors may grant to those Non-Employee Directors, as it shall from time to time determine, Options under the terms and conditions of the Plan. The Committee may grant to those Employees, as it shall from time to time determine, Options under the terms and conditions of the Plan. Subject only to any applicable limitations set out in the Plan, the number of shares of Stock to be covered by any Option to be granted to a Non-Employee Director or Employee shall be as determined by the Board of Directors or the Committee, respectively.


V.2 NON-TRANSFERABILITY. Options shall not be transferable by the Holder otherwise than by will or under the laws of descent and distribution or pursuant to a domestic relations order, and shall be exercisable, during the Holder's lifetime, only by the Holder.


V.3 CHANGES IN THE COMPANY'S CAPITAL STRUCTURE. The existence of outstanding Options shall not affect in any way the right or power of the Company or its stockholders to make or authorize any or all adjustments, recapitalizations, reorganizations or other changes in the Company's capital structure or its business, or any merger or consolidation of the Company, or any issue of bonds, debentures, preferred or prior preference stock ahead of or affecting the Stock or the rights thereof, or the dissolution or liquidation of the Company, or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding, whether of a similar character or otherwise.


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If the Company shall effect a subdivision or consolidation of shares or other capital adjustment of, or the payment of a dividend in capital stock or other equity securities of the Company on its Stock, or other increase or reduction of the number of shares of the Stock without receiving consideration therefor in money, services, or property, or the reclassification of its Stock, in whole or in part, into other equity securities of the Company, then (a) the number, class and per share price of shares of Stock subject to outstanding Options hereunder shall be appropriately adjusted (or in the case of the issuance of other equity securities as a dividend on, or in a reclassification of, the Stock, the Options shall extend to such other securities) in such a manner as to entitle a Holder to receive, upon exercise of an Option, for the same aggregate cash consideration, the same total number and class or classes of shares (or in the case of a dividend of, or reclassification into, other equity securities, such other securities) he would have held after such adjustment if he had exercised his Option in full immediately prior to the event requiring the adjustment, or, if applicable, the record date for determining stockholders to be affected by such adjustment; and (b) the number and class of shares then reserved for issuance under the Plan (or in the case of a dividend of, or reclassification into, other equity securities, such other securities) shall be adjusted by substituting for the total number and class of shares of stock then received, the number and class or classes of shares of stock (or in the case of a dividend of, or reclassification into, other equity securities, such other securities) that would have been received by the owner of an equal number of outstanding shares of Stock as a result of the event requiring the adjustment. Comparable rights shall accrue to each Holder in the event of successive subdivisions, consolidations, capital adjustments, dividends or reclassifications of the character described above.


If the Company shall distribute to all holders of its shares of Stock (including any such distribution made to non-dissenting stockholders in connection with a consolidation or merger in which the Company is the surviving corporation and in which holders of shares of Stock continue to hold shares of Stock after such merger or consolidation) evidences of indebtedness or cash or other assets (other than cash dividends payable out of consolidated retained earnings not in excess of, in any one year period, the greater of (a) an amount per share of Stock equal to $.01 per share of Stock (as the same may be adjusted from time to time by the Board of Directors to reflect the effect of changes in capitalization) and (b) two times the aggregate amount of dividends per share paid during the preceding calendar year and dividends or distributions payable in shares of Stock or other equity securities of the Company described in the immediately preceding paragraph, but including stock or other securities of any corporation or other entity owned by the Company, then in each case the Option price shall be adjusted by reducing the Option price in effect immediately prior to the record date for the determination of stockholders entitled to receive such distribution by the fair market value, as determined in good faith by the Board of Directors (whose determination shall be described in a statement filed in the Company's corporate records and be available for inspection by any holder of an Option) of the portion of the evidence of indebtedness or cash or other assets so to be distributed applicable to one share of Stock; provided that in no event shall the Option price be less than the par value of a share of Stock. In the event such adjustment would result in the Option price being less than the par value of a share of Stock but for the foregoing proviso, the terms of the Option shall be appropriately adjusted so as to maintain the economic value of the Option, including through an adjustment to the number of shares of Stock subject to the Option and through a provision allowing the holder of the Option to receive the evidence of indebtedness or cash or other assets so to be distributed applicable to one share of Stock for each share of Stock that may be purchased on the exercise of the Option. Such adjustment shall be made whenever any such


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If the Company shall make a ten ...