Exhibit 10.3 — Form of Employee Performance Bonus Award Letter
«FirstLast»
Dear «First»,
I am pleased to advise you that you are eligible to participate in the TODCO
Performance Bonus Plan. Your bonus opportunity is «Bonus»% of Base Pay earned
for the year 2006. The award will be paid during the first quarter of 2007.
Your bonus opportunity is comprised of the following elements:
___%      EBITDA — based on TODCO EBITDA (Earnings Before Interest, Taxes,
Depreciation and Amortization).
___%      Direct Operating Expense — based on direct operating expense for your
rig or area of responsibility.
___%       Downtime results — based on the Downtime results of your rig or area
of responsibility compared to a target set by the Corporate Office.
___%       Safety Performance — based on the safety performance of your rig or
area of responsibility using TRIR as the standard of measurement.
___%      Reactivation Performance – based on reactivation cost vs. AFE for your
rig or group of rigs related to your area of responsibility.
___%      Individual Goals – Based on your completion of specific personal goals
set by you and your supervisor at the beginning of the year.
The Performance Bonus Award criteria are further described in Attachment A.
Your award is subject to the provisions of the TODCO 2005 Long Term Incentive
Plan, a copy of which is attached. Unless the Executive Compensation Committee
of the Board of Directors in its sole judgment decides otherwise, you must
remain an employee during the performance period and be an employee at the time
of payout to be eligible for an award.
Sincerely,
Jan Rask
CEO & President
Attachments

 

--------------------------------------------------------------------------------

 

Attachment A
SUMMARY OF THE 2006 PERFORMANCE BONUS
The Performance Bonus Plan Criteria include two or more of the following
criteria:

•   Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA)

•   Direct Operating Expense.

•   Downtime results

•   Reactivation results

•   Safety Performance

•   Individual Goals

The weighting of the criteria varies according to job responsibilities and is
specified in your award letter.
1. TODCO EBITDA
THE EBITDA criteria is a measure of actual EBITDA for 2006 vs. budget. The
possible payout ranges from zero to 200% of your target on a sliding scale. The
following table illustrates possible payouts.

          EBITDA   Payout
$[redacted]
  [redacted]%
$[redacted]
  [redacted]%
$[redacted]
  [redacted]%

2. DIRECT OPERATING EXPENSE
THE Direct Operating Expense criteria is a measure of actual Direct Operating
Expense for 2006 vs. budget. The possible payout ranges from zero to 200% of
your target on a sliding scale. The following table illustrates possible
payouts.

          Direct Operating Expense   Payout
<=[redacted]% of Budget
  [redacted]%
[redacted]% of Budget
  [redacted]%
>=[redacted]% of Budget
  [redacted]%

3. DOWNTIME
THE Downtime criteria is a measure of actual Downtime results of your rig or
area of responsibility compared to a target set by the Corporate Office.
Downtime will be defined as what is recorded under Code 8 of the IADC code
excluding any planned or budgeted service time, i.e. shipyard, UWILD or major
overhauls. The possible payout ranges from zero to 200% of your target on a
sliding scale. The following table illustrates possible payouts.

          Downtime   Payout
<=[redacted]%
  [redacted]%
[redacted]%
  [redacted]%
>=[redacted]%
  [redacted]%

 

--------------------------------------------------------------------------------

 

4. SAFETY PERFORMANCE
THE Safety criteria is a measure of actual safety performance of your rig or
area of responsibility compared to a target set by the Corporate Office using
TRIR as the measure. The possible payout ranges from zero to 200% of your target
on a sliding scale. The following table illustrates possible payouts.

      TRIR   Payout
<[redacted]%
  [redacted]%
[redacted]%
  [redacted]%
>[redacted]%
  [redacted]%

5. REACTIVATION PERFORMANCE
THE Safety criteria is a measure of actual reactivation cost of a rig in your
area of responsibility compared the original approved AFE. The possible payout
ranges from zero to 200% of your target on a sliding scale. The following table
illustrates possible payouts.

      TRIR   Payout
<[redacted]%
  [redacted]%
[redacted]%
  [redacted]%
>[redacted]%
  [redacted]%

6. INDIVIDUAL GOALS
This criteria is based on your successful accomplishment of the goals set by you
and your supervisor at the beginning of the year. Maximum payout is 100% for
full completion. The payout will be reduced on a prorated basis for partial
completion.
 
*   IN THE EVENT OF NEGATIVE EBITDA THERE WILL BE NO BONUS PAYOUTS FOR ANY PLAN
PARTICIPANTS. ALL BONUS PAYOUTS MAY BE REDUCED OR INCREASED BY THE EXECUTIVE
COMPENSATION COMMITTEE IN RELATION TO ACTUAL SAFETY PERFORMANCE OF THE COMPANY
DURING 2006.