Exhibit 10.3
(TRICO LOGO) [h56302h5630200.gif]
TRICO INCENTIVE BONUS PLAN
2008
     This Trico Marine Services, Inc. Annual Incentive Plan (the “Plan”) is
adopted by Trico Marine Services, Inc., a Delaware corporation (the “Company”).
The terms of the Plan have been approved by the Company’s Board of Directors and
are as follows:
I.    Purpose
     The Plan is designed to increase shareholder value through effective use of
performance-based bonus awards. The Plan is intended to advance the best
interests of the Company and its subsidiaries by providing key employees with
additional incentives through the grant of cash awards based on the performance
of the Company and the individual employee, thereby increasing the personal
stake of such employees in the continued success and growth of the Company and
encouraging them to remain in the employ of the Company.
II.    Term
     The effective date of this Plan is January 1, 2006. The Plan will remain in
effect for successive fiscal years beginning on January 1, 2006 (each, a “Plan
Year”).
III.    Eligibility
     The participants in this Plan shall be those employees of the Company who
have been selected by the CEO, and are approved by the Compensation Committee of
the Company’s Board of Directors (the “Compensation Committee”). Notwithstanding
the foregoing, eligible employees must have been full-time employees with the
Company or any of its subsidiaries for at least three months of the Plan Year
and remain employed on a full-time basis through the bonus payment date for such
Plan Year. Directors who are not employees of the Company shall not be eligible
to participate in the Plan.
IV.    Change in Eligibility Status
     In making decisions regarding employees’ participation in the Plan, the CEO
may consider any factors that he or she may consider relevant. The following
guidelines are provided as general information regarding employee status changes
upon the occurrence of the events described below, provided that recommendation
to include an employee in the Plan originates from the CEO:

  (a)   New hire, Transfer, Promotion. A newly hired, transferred or promoted
employee selected and approved as a Participant in the Plan after March 1 of the
Plan Year may participate in the Plan on a pro rata basis as of the date the
Participant was approved into the Plan. A newly hired, transferred or promoted
employee selected and approved as a Participant in the Plan prior to March 1 of
the Plan Year may participate based on a full Plan Year.

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  (b)   Demotion. An Incentive Award will generally not be made to an employee
who has been demoted during the Plan Year because of performance.     (c)  
Termination. An Incentive Award will generally not be made to any Participant
whose services are terminated prior to the payment of the Incentive Award for
reasons of misconduct, failure to perform or other cause.     (d)   Resignation.
An Incentive Award will generally not be made to any Participant who resigns for
any reason, including retirement, before the Incentive Award is made. However,
if the Participant has voluntarily terminated his or her employment with the
Company’s consent, the Participant may be considered for a pro rata Incentive
Award, provided the Participant otherwise qualifies for the Incentive Award.    
(e)   Death and Disability. A Participant whose status as an active employee is
changed prior to the payment of the Incentive Award for any reason other than
the reasons cited above may be considered for a pro rata Incentive Award,
provided the Participant otherwise qualifies for the Incentive Award. In the
event that an Incentive Award is made on behalf of an employee who has
terminated employment by reason of death, any such payments or other amounts due
will generally be paid to the Participant’s estate.

     The above guidelines are subject to the terms of any applicable severance
or similar agreements. Nothing in the Plan shall confer any right to any
employee to continue in the employ of the Company.
V.    Performance-Based Bonus Awards
     Subject to the following provisions, the CEO will determine, and recommend
for approval by the Compensation Committee, a Performance-Based Bonus Award (the
“Award”) for selected employees. Each grant of an Award shall specify the amount
and nature of the Award to be received by the employee subject to satisfaction
of specified “Incentive Opportunities” within a specified “Performance Period.”
(a)    Performance Period. The Performance Period with respect to each Award
shall be the period of time within which the Incentive Opportunities relating to
the Award are to be achieved. Unless otherwise specified, the Performance Period
shall be the then-current Plan Year relating to the granting of the Award.
(b)    Incentive Opportunities. The CEO will determine, and recommend for
approval by the Compensation Committee, Incentive Opportunities for each
Participant. The Incentive Opportunities will be defined as Incentive
Opportunity Zones that represent a range of threshold, target and maximum
performance outcomes for which incremental increases in performance will result
in incremental increases in the Award. Each Incentive Opportunity Zone will
include threshold, target and maximum incentive opportunities. The Participant’s
target incentive opportunity will be based on the Participant’s role and
responsibilities, and will be expressed as a percentage of the Participant’s
base salary. The Participant’s threshold and maximum incentive opportunities
will be expressed as a Payout Multiple of the target incentive opportunity and
will also be based on the Participant’s role and responsibilities. The tables
set forth on Exhibit A outline the target Payout Multiples for certain
Participant categories.
The target incentive opportunity as a multiple of base salary, and the resulting
threshold and maximum opportunities will be determined and approved in writing
and kept on file for each Participant.
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(c)    Performance Goals. Each Participant shall have specific performance goals
(the “Performance Goals”) determined for his or her position for the Plan Year.
These Performance Goals will be based on certain financial and non-financial
performance measures that support the approved business plan of the Company, and
should identify how the Participant will support the achievement of such goals.
     Two performance categories will generally be used for each Participant:

  1.   Corporate Performance — There will be one or more performance measures
with equal or different weights that may be used within this category, including
without limitation any one or more of the performance criteria described below:

  •   Safety     •   Corporate EBITDA versus Plan;

      EBITDA is defined as :         Charter Hire Revenue + Other Vessel Income
— Direct Vessel Operating Expenses — Classification Costs — General and
Administrative Costs

  •   Return on Capital versus Plan         Return on Capital is defined as:

     Net Income + Tax Adjusted Net Interest Expense
 
(Annual Average)Short term debt + Long term debt + Equity + Minority Interest —
Unrestricted Cash and Cash Equivalents
The Performance Goals for these financial measures will generally be based on
the Company’s financial plan for the relevant Plan Year as approved by the Board
of Directors.

  2.   Individual Performance — The Individual Performance Goals will generally
be based on those established using the Company’s annual performance appraisal
system.

The target mix and weighting of the Performance Goals for each Participant will
vary depending on the Participant’s role and responsibilities, as set forth on
Exhibit B.
For the financial performance measures, threshold, target and maximum
Performance Goals will be established and aligned within the Participant’s
applicable Incentive Opportunity Zone as defined above. Straight line
interpolation shall be used to determine the actual performance of each
financial measure. The threshold, target and maximum Performance Goals for these
financial measures, based on the Company’s plan for 2008 are set forth on
Exhibit C.
The threshold, target and maximum individual Performance Goals will be based on
how well the Participant met the goals established using the Company’s annual
performance management system. The Individual Performance Goals will be aligned
within the Participant’s applicable Incentive Opportunity Zone. While the
interpretation of how well the Individual Performance Goals are met will be more
subjective than for financial measures, the following descriptions will be used
to interpret individual performance:

  1.   Exceeds Expectations — Defined as performance that consistently exceeds
established expectations regarding the Participant’s key individual goals.

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      Performance at this level creates new standards of performance. Individual
awards near or at the maximum will be achieved if the participant has exhibited
“Exceeds Expectations” performance.     2.   Meets Expectations - Defined as
performance that consistently meets and often exceeds established expectations
regarding the Participant’s key individual goals. Individual award at target
will be achieved if the Participant has exhibited “Meets Expectations”
performance.     3.   Meets Most Expectations - Defined as performance that
often meets established expectations regarding the Participant’s key individual
goals, but also requires some development. Individual award near or at the
minimum will be achieved if the Participant has exhibited “Meets Most
Expectations” performance.     4.   Does Not Meet Expectations - Defined as
performance that does not consistently meet established expectations regarding
the Participant’s key individual goals and requires significant development.
Individual award at this level will result in no individual annual incentive
payment for the Participant.

(d)    Minimum Performance Requirements. There are two minimum performance
requirements in order to receive an Award in accordance with the Plan:

  1.   The Minimum Financial Performance Target level set forth on Exhibit C
must be achieved for Participants to be eligible for the Award.     2.  
Individual Performance at “Meets Most Expectations” or better.

(e) Distributions. To the extent it has been earned, an Award shall be
distributed in cash, and shall be paid in lump sum to the employee following
approval by the Board of Directors of the Company’s Plan Year financial
statements. The payment of such Award shall not be assigned, transferred,
mortgaged or otherwise disposed of prior to actual receipt, and any such attempt
shall be null and void.
VI.    Administration of the Plan
     This Plan shall be administered by the Compensation Committee with
oversight by the Board of Directors. The Compensation Committee shall have the
authority to interpret the provisions of this Plan and make final decisions with
respect to the entitlement of any employee to an Award. The Committee shall also
have the authority to review and approve any proposed amendments to the Plan
throughout the Plan Year. The Committee retains the right to discontinue or
amend this Plan at any time. The Committee may use discretion to adjust the
Award levels to account for events that impact the ability to meet the Incentive
Opportunities described in Section V. The CEO will be responsible for the
interpretation and the day-to-day management of the Plan. The CEO shall also
make recommendations to the Committee for review and approval.
     Nothing in this Plan is to be considered a guarantee of an Award. Any
decisions by the Compensation Committee, on behalf of the Board of Directors,
are final and binding on all parties.
VII.    Exemption from Liability; Indemnification
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     The members of the Compensation Committee and the persons acting on behalf
of the Compensation Committee shall be free from liability for their acts,
omissions, and conduct in the administration of the Plan, except for those acts,
omissions and conduct resulting from willful misconduct or lack of good faith.
     The Company shall indemnify each member of the Compensation Committee, the
persons acting on behalf of the Compensation Committee and any other employee,
officer or director of the Company against any claims, loss, damage, expense and
liability, by insurance or otherwise, reasonably incurred by the individual in
connection with any action or failure to act by reason of performance of an
authorized duty or responsibility for or on behalf of the Company pursuant to
the Plan unless the same is judicially determined to be the result of the
individual’s gross negligence or willful misconduct. The foregoing right shall
be in addition to any other rights to which such person may be entitled to as a
matter of law.
VIII.    Additional Provisions
(a)    Amendments. The Board of Directors may, in its sole discretion,
discontinue the Plan at any time, or amend it from time to time. The
Compensation Committee shall have the authority to amend any grant to include
any provision which, at the time of such amendment, is authorized under the
terms of the Plan; however, after the end of any plan year, no award that has
been earned and not paid may be revoked.
(b)    No Guaranty of Employment. The grant of an Award under the Plan shall not
constitute an assurance of continued employment during the Performance Period.
(c)    Withholding. Payments under the Plan shall be net of an amount sufficient
to satisfy any federal, state or local withholding tax liability.
(d)    Governing Law. This Plan shall be governed and construed under the laws
of the State of Texas.
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(713) 780-0062

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Exhibit A
Target Payout Multiples
     The following tables set forth the target Payout Multiples for certain
Participant categories (where “X” equals the target incentive opportunity as a
percentage of base salary):

•   Chief Executive Officer — responsible for overall financial performance of
the Company:

          Threshold Multiple of Target   Target   Maximum Multiple of Target  
.50X   1.00X   2.00X

•   Named Executive Officers— includes executives with direct profit and loss or
overall financial responsibilities for the Company at the corporate level:

          Threshold Multiple of Target   Target   Maximum Multiple of Target  
0.25X   .50X   1.00X

•   Senior Management — includes employees senior level management
responsibilities. responsibilities:

          Threshold Multiple of Target   Target   Maximum Multiple of Target  
0.15X   .30X   .60X

•   Level 1 Key Employees — includes employees with management responsibilities
and indirect profit and loss responsibilities:

          Threshold Multiple of Target   Target   Maximum Multiple of Target  
0.10X   .20X   .40X

•   Level 2 Key Employees — includes employees with indirect profit and loss
responsibilities:

          Threshold Multiple of Target   Target   Maximum Multiple of Target  
0.05X   .10X   .20X

3200 Southwest Freeway, Suite 2950 • Houston, Texas 77057 • (713) 780-9926 • Fax
(713) 780-0062

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Exhibit B
Target Mix and Weighting of Performance Goals
Target mix and weighting of the Performance Goals for certain Plan Participants:

                                              Performance Goals Weighting      
      Corporate   Return on                     EBITDA   Capital vs.        
Position   Safety   Vs. Plan   Plan   Individual   Total  
President & CEO
    20 %     35 %     25 %     20 %     100 %
Named Executive Officers
    20 %     35 %     25 %     20 %     100 %
Senior Management
    20 %     35 %     25 %     20 %     100 %
Designated Level 1 Employees
    20 %     35 %     25 %     20 %     100 %
Designated Level 2 Employees
    20 %     35 %     25 %     20 %     100 %

3200 Southwest Freeway, Suite 2950 • Houston, Texas 77057 • (713) 780-9926 • Fax
(713) 780-0062

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Exhibit C
Target Performance Goals
     The following are threshold, target and maximum Performance Goals for
financial measures to be utilized in connection with the Plan:

                          Performance Goals         Threshold   Target (Budget)
  Maximum Performance Measure   Rate   Rate   Rate  
Safety
  — ESQS (1)            
•
  Environment   Increase in number of incidents from 2007 by 20%   Same number
of incidents as in 2007   Reduction by 20% of incidents from 2007
•
  Safety (TRIR)   10% increase from
Target TRIR   Target TRIR   10% reduction from
Target TRIR
•
  Safety
(Operations)   Increase in number of incidents from 2007 by 20%   Same number of
incidents as in 2007   Reduction by 20% of incidents from 2007
•
  Quality   N/A   No major
non-conformities   N/A
•
  Security   N/A   No recordable
security incidents   N/A

 

    (1) Safety bonus would be forfeited in the event of a vessel related
accidental death.

                                                      Threshold   Target
(Budget)   Maximum Performance Measure   $ (millions)   % of Target   $
(millions)   % of Target   $ (millions)   % of Target  
Corporate EBITDA
    68.4       75 %     91.2       100 %     114.0       125 %

                                                      Threshold   Target
(Budget)   Maximum Performance Measure   %   % of Target   %   % of Target   %  
% of Target  
Return on Capital
    4.9       75 %     6.6       100 %     8.2       125 %

     Pursuant to Section V(d) of the Plan, the Minimum Financial Performance
Target level for Participants to be eligible for Annual Incentives is at least
75% of budgeted Corporate EBITDA.
3200 Southwest Freeway, Suite 2950 • Houston, Texas 77057 • (713) 780-9926 • Fax
(713) 780-0062

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