Exhibit 10.3

 

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[Date]

TO:

FROM:

 

RE: Cash-Settled Performance Unit Grant

Atwood Oceanics, Inc. (the “Company”) hereby grants to you, effective as of
                     (the “Date of Grant”),                  cash-settled
performance units (each a “Performance Unit”) (the “Target Amount”) under the
Atwood Oceanics, Inc. 2013 Long-Term Incentive Plan (the “Plan”), subject to the
Terms and Conditions of Cash-Settled Performance Unit Grant, attached hereto as
Appendix A (the “Terms and Conditions”). The Performance Units represent the
opportunity to receive the cash value of a number of shares of Common Stock
based on the “Payout Percentage” as defined in the Terms and Conditions. The
number of Performance Units that become “Earned Performance Units”, as defined
in the Terms and Conditions, will be between 0% and 200% of the Target Amount.
The number of Performance Units is subject to adjustment as provided in
Section 11 of the Plan.

Except as otherwise provided in Sections 3 or 4 of the Terms and Conditions, the
Performance Units shall vest on the “Determination Date”, as defined in the
Terms and Conditions; provided you remain continuously employed by the Company,
its subsidiary or an affiliate throughout the three-year period following the
Date of Grant.

The grant of Performance Units is governed by the terms and conditions of the
Plan, any rules and regulations adopted by the Compensation and Human Resources
Committee of the Board of Directors of the Company, and the Terms and Conditions
which form a part of this award letter to you (the “Notice”). The Prospectus
related to this offering can be referenced on myAtwood under Controlled
Documents on the Human Resources site.

Sincerely,

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Appendix A

ATWOOD OCEANICS, INC.

2013 LONG-TERM INCENTIVE PLAN

TERMS AND CONDITIONS OF

CASH-SETTLED PERFORMANCE UNIT GRANT

The cash-settled performance units (the “Performance Units”) granted to you on
the “Date of Grant” set forth in the award letter to you (the “Award Letter”) by
Atwood Oceanics, Inc. (the “Company”) are subject to the 2013 Long-Term
Incentive Plan (the “Plan”), these Terms and Conditions, including Exhibit A
hereto, and any rules and regulations adopted by the Committee. Terms used
herein and not otherwise defined shall have the meaning set forth in the Plan
and the Award Letter.

1. Determination of Earned Performance Units. The exact number of Performance
Units that shall actually be earned by and paid to you shall be based upon the
achievement by the Company of the performance standards as set forth in Exhibit
A hereto over the three-year period beginning on                      and ending
on                      (the “Total Performance Period”). The determination by
the Committee with respect to the achievement of such performance standards
shall be made as soon as administratively practicable following the Total
Performance Period after all necessary Company and peer information is
available. The specific date on which such determination is formally made and
approved by the Committee is referred to as the “Determination Date”. After the
Determination Date, the Company shall notify you of the number of Performance
Units, if any, that have become “Earned Performance Units” in accordance with
Exhibit A with respect to which you will receive a cash payment in satisfaction
of the award, subject to withholding as described in Section 11 below. The Fair
Market Value of the Earned Performance Units shall be determined as of the date
that stock-settled performance units granted to you with the same Date of Grant
as this award are settled in shares of Common Stock and shall be paid to you on
March 15 following the expiration of the Total Performance Period (the
“Settlement Date”).

The performance standards and the number of Performance Units which may be
earned are based on your Target Amount specified in the Award Letter and the
Company’s Total Shareholder Return compared against the Peer Group. The
methodology for calculating the number of Earned Performance Units and the
payments due with respect to the Earned Performance Units, including the
definitions used therefor, is set forth in Exhibit A hereto.

2. Vesting/Forfeiture. Except as otherwise provided in Sections 3 or 4 below,
the Performance Units shall vest on the Determination Date, provided you are
continuously employed by the Company Group throughout the Total Performance
Period. If your employment with the Company, its subsidiary or an affiliate
(collectively, the “Company Group”) terminates for any reason other than by
reason of your death or your inability to continue to actively work due to
Disability, the Performance Units shall be automatically forfeited on the date
of your termination of employment. Furthermore, the Performance Units are
subject to forfeiture, in whole or in part, if the Committee or its designee
determines, in its sole discretion, that you have taken any unlawful action
detrimental to the Company or have violated Company policy; any such
determination for an employee other than the Chief Executive Offer shall be
based on the recommendation of the Chief Executive Officer.

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3. Death or Disability. If during the Total Performance Period your employment
with the Company Group is terminated by reason of your death or you become
Disabled, the Performance Units shall automatically become fully vested and the
number of Earned Performance Units shall equal your Target Amount. The Fair
Market Value as of the date of your death or Disability, as applicable, of the
Earned Performance Units shall be paid to you or your legal beneficiary, as
applicable, thirty (30) days after your death or the date of your Disability, as
applicable. For purposes of this award of Performance Units, you are considered
to be “Disabled” or have a “Disability” on the date that you become eligible for
long-term disability benefits pursuant to the Company’s long-term disability
plan.

4. Change of Control. Notwithstanding the provisions of Sections 2 or 3 of these
Terms and Conditions, in the event of a Change of Control during the Total
Performance Period and prior to your termination of employment with the Company
Group, the Performance Units shall automatically vest and the Committee shall
determine in its sole discretion and based on such factors or methodology as the
Committee deems appropriate the number of Performance Units that become Earned
Performance Units provided however that the number of Earned Performance Units
shall be no less than your Target Amount. The Fair Market Value as of the date
immediately preceding the date of the Change of Control of the Earned
Performance Units shall be paid to you thirty (30) days after the effective date
of the Change of Control.

5. Dividend Equivalents. Upon the date of the cash payment in settlement of
Earned Performance Units, you shall also be entitled to receive a lump sum cash
payment equal to the Dividend Equivalent Amount. For purposes of this award of
Performance Units, “Dividend Equivalent Amount” means the sum of all cash
dividends, if any, declared on Earned Performance Units where the record date is
after the Date of Grant, but prior to the date such Earned Performance Units are
settled in cash. Any Earned Performance Units shall be subject to adjustment
under Section 11 of the Plan with respect to dividends or other distributions
that are paid in shares of Common Stock.

6. Transferability. You may not sell, transfer, pledge, exchange, hypothecate,
or otherwise dispose of the Performance Units.

7. No Right to Continued Employment. The award of Performance Units shall not
create any right to remain in the employ of the Company Group. The Company Group
retains the right to terminate your employment at will, for due cause or
otherwise. Your employment, as it relates to the Total Performance Period, shall
be deemed to continue during any leave of absence that has been authorized by
the Company Group.

8. Other Plans. Nothing herein contained shall affect your right to participate
in and receive benefits under and in accordance with the then current provisions
of any pension, insurance, profit sharing or other plan or program of the
Company Group.

9. Rights as Shareholder. You shall not be entitled to any of the rights or
privileges of a shareholder of the Company, including the right to vote with
respect to your Performance Units.

10. Plan Governs. The Performance Units and the Notice are subject to all of the
terms and conditions of the Plan, except that no amendment to the Plan shall
adversely affect your rights under the Notice. All the terms and conditions of
the Plan, as may be amended from time to time, and any rules, guidelines and
procedures which may from time to time be established pursuant to the Plan are
hereby incorporated into the Notice. In the event of a discrepancy between the
Notice and the Plan, the Plan shall govern.

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11. Withholding. Upon the payment of your Earned Performance Units, the Company
Group shall withhold from the payment that otherwise would have been made to
you, an amount necessary to satisfy the applicable federal, state and local tax
withholding obligation with respect to your Earned Performance Units.

12. Code Section 409A; No Guarantee of Tax Consequences. The award of
Performance Units is intended to be (i) exempt from Section 409A of the Code
(“Section 409A”), including, but not limited to, by reason of compliance with
the short-term deferral exemption as specified in Treas. Reg. § 1.409A-1(b)(4);
or (ii) in compliance with Section 409A, and the provisions of the Notice shall
be administered, interpreted and construed accordingly. Notwithstanding the
foregoing provisions of the Notice, if you are a “specified employee” as such
term is defined in Section 409A, any amounts that would otherwise be payable
hereunder as nonqualified deferred compensation within the meaning of
Section 409A on account of separation from service (other than by reason of
death) to you shall not be payable before the earlier of (i) the date that is 6
months after the date of your separation from service, (ii) the date of your
death, or (iii) the date that otherwise complies with the requirements of
Section 409A. In addition, notwithstanding the provisions of Section 4 of these
Terms and Conditions, in the event of a Change of Control that does not meet the
requirements of Treas. Reg. §1.409A-3(i)(5), any amounts that would otherwise be
payable hereunder as nonqualified deferred compensation within the meaning of
Section 409A shall be fully vested at a number of Earned Performance Units equal
to your Target Amount but shall be settled on the earlier of (i) the Settlement
Date, (ii) the date determined in accordance with the provisions of Section 3 of
these Terms and Conditions, and (iii) the date of any subsequent event that
would constitute a “change of control” that meets the requirements of Treas.
Reg. §1.409A-3(i)(5). To the extent required to comply with Section 409A, you
shall be considered to have terminated employment with the Company when you
incur a “separation from service” with the Company within the meaning of
Section 409A(a)(2)(A)(i) of the Code, and you shall not be considered to be
“Disabled” or to have a “Disability” unless the circumstances of the Disability
meet the requirements of Treas. Reg. §1.409A-3(i)(4). In order for the payment
of the Earned Performance Units to be deductible under Section 162(m) of the
Code, the Settlement Date of Earned Performance Units may be delayed in
accordance with the requirements of Treas. Reg. §1.409A-2(b)(7). The Company
makes no commitment or guarantee to you that any federal or state tax treatment
shall apply or be available to any person eligible for benefits under the
Notice.

13. Governing Law. The Plan and the Notice shall be governed by, and construed
in accordance with, the laws of the State of Texas, without regard to conflicts
of laws. The courts in Harris County, Texas shall be the exclusive venue for any
dispute regarding the Plan or the Notice.

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Exhibit A

Methodology for Calculating Earned Performance Units

A. Definitions. For purposes of determining the number of Earned Performance
Units, the following definitions shall apply:

 

  (1) Annual Ending Share Price means, for each fiscal year in the Total
Performance Period, the average closing price of shares over 30 trading days
comprised of: 15 trading days prior to the Annual Performance End Date, the
Annual Performance End Date, and the 14 trading days after the Annual
Performance End Date.

 

  (2) Annual Performance Beginning Date means each of                  ,
                 and                  , as applicable.

 

  (3) Annual Performance End Date means each of                  ,
                 and                  , as applicable.

 

  (4) Annual Starting Share Price means, for each fiscal year in the Total
Performance Period, the average closing price of the shares over 30 trading days
comprised of: 15 trading days prior to Annual Performance Beginning Date, Annual
Performance Beginning Date, and the 14 trading days after Annual Performance
Beginning Date.

 

  (5) Ending Share Price means the average closing price of shares over 90
trading days comprised of: 45 trading days prior to the Performance End Date,
the Performance End Date, and the 44 trading days after the Performance End
Date.

 

  (6) Peer Group means Seadrill Ltd., Transocean Ltd., Ensco plc, Noble
Corporation, Diamond Offshore Drilling, Inc. and Rowan Companies plc to the
extent such entities or their successors are in existence and publicly traded as
of the Performance End Date.

 

  (7) Performance End Date means                 .

 

  (8) Starting Share Price means the average closing price of the shares over 90
trading days comprised of: 45 trading days prior to                  ,
                , and the 44 trading days after                 .

 

  (9) Total Performance Period means the period beginning on                 
and ending                 .

 

  (10)

Total Shareholder Return means common stock price growth for each entity over
the Total Performance Period or a fiscal year within the Total Performance
Period, as applicable, as measured by dividing the sum of the cumulative amount
of dividends for the Total Performance Period or a fiscal year within the Total
Performance Period, as applicable, assuming dividend reinvestment, and the
difference between the entity’s Ending Share Price or Annual Ending Share

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  Price, as applicable, and the Starting Share Price or Annual Starting Share
Price, as applicable; by the entity’s Starting Share Price or Annual Starting
Share Price, as applicable.

In the event that any of the calendar dates specified in the definitions above
are not trading days, then such date shall refer to the next trading day.

B. Methodology. For purposes of determining the number of Earned Performance
Units, for the Total Performance Period and for each fiscal year within the
Total Performance Period, the Committee shall:

 

  (1) calculate the Total Shareholder Return for the Company and each company in
the Peer Group;

 

  (2) rank the Company and each member of the Peer Group based on Total
Shareholder Return with the company having the highest Total Shareholder Return
ranking in the first position and the company with the lowest Total Shareholder
Return ranking in the seventh position.

 

  (3) determine the number of Earned Performance Units based on the Seven
Company Payout Schedule below:

 

Seven Company Payout Schedule

Atwood Ranking

  

Payout Percentage

1

   200%

2

   150%

3

   100%

4

   75%

5

   50%

6

   0%

7

   0%

 

  (4) for purposes of determining the Earned Performance Units for each fiscal
year within the Total Performance Period, multiply the Payout Percentage by
16 2/3% of your Target Amount and for purposes of determining the Earned
Performance Units for the Total Performance Period, multiply the Payout
Percentage by 50% of your Target Amount.

If any calculation with respect to the Earned Performance Units would result in
a fractional share, the number of Earned Performance Units shall be rounded down
to the nearest whole share.

Because this award of Performance Units is settled in cash, the total Earned
Performance Units payable as of the Settlement Date shall not exceed the cash
limit applicable to Performance Awards pursuant to the Plan (as in effect on the
Date of Grant). Subject to Section 12, in the event that the amount payable on
the Settlement Date is limited by the foregoing sentence, such excess amount,
without interest, shall be payable on the first day of the next taxable year in
which the deduction would be permitted under Section 162(m) of the Code and any
such amount shall be applied toward and result in an appropriate reduction of
other cash awards payable in that year that are subject to a
shareholder-approved limit under Section 162(m) of

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the Code. Any such payment amounts delayed pursuant to this paragraph shall be
and remain fully vested and payable notwithstanding your termination of service
for any reason after the Determination Date.

C. Peer Group Changes.

(a) If, as a result of merger, acquisition or a similar corporate transaction, a
member of the Peer Group ceases to be publicly traded (an “Affected Peer
Company”)

(i) prior to July 1,              , the Affected Peer Company shall not be
included in the Seven Company Payout Schedule and the following alternative
schedules shall be used in its place:

 

Six Company Payout Schedule

Atwood Ranking

  

Payout Percentage

1

   200%

2

   150%

3

   100%

4

   75%

5

   50%

6

   0%

 

Five Company Payout Schedule

Atwood Ranking

  

Payout Percentage

1

   200%

2

   150%

3

   100%

4

   50%

5

   0%

 

Four Company Payout Schedule

Atwood Ranking

  

Payout Percentage

1

   200%

2

   100%

3

   100%

4

   0%

(ii) on or subsequent to July 1,              , the Affected Peer Company shall
remain in the Peer Group and its Ending Share Price shall be determined by
assuming that its performance for the remainder of the Total Performance Period
was equivalent to the arithmetic average (up or down) of the remaining members
of the Peer Group over the remainder of the Total Performance Period.

(b) If a member of the Peer Group declares bankruptcy, it shall be deemed to
remain in the Peer Group until the Performance End Date and shall occupy the
lowest ranking in the Payout Schedule.