Exhibit 10.20

 

PROVISIONS OF THE TIDEWATER INC.

EXECUTIVE OFFICER ANNUAL INCENTIVE PLAN

 

I. PLAN OBJECTIVE

 

The primary objective of the Tidewater Inc. Executive Officer Annual Incentive
Plan (Executive Incentive Plan) is to reward Tidewater’s Executive Officers for
their assistance in helping the Company achieve its financial and operating
goals for the fiscal year.

 

The Executive Incentive Plan links a significant element of variable annual
compensation to the accomplishment of these goals.

 

The Compensation Committee of the Board of Directors established this Plan to
maximize Tidewater’s deduction under Section 162 of the Internal Revenue Code,
provided that such actions are consistent with its philosophy and in the best
interest of Tidewater and its shareholders. Notwithstanding the provisions of
Section 162 (m) of the Internal Revenue Code, the Committee may award
compensation that is not fully tax deductible if the Company determines that
such award is consistent with its philosophy and in the best interest of
Tidewater and its shareholders.

 

II. ADMINISTRATION

 

The Plan shall be administered by the Compensation Committee of the Board of
Directors of the Company; provided that all of the members of the Compensation
Committee qualify as outside directors under Section 162(m) of the Internal
Revenue Code. If all of the members do not so qualify, the Plan shall be
administered by the Special Subcommittee of the Compensation Committee, all of
the members of which qualify as outside directors under Section 162(m). The term
“Committee” shall be used herein to refer to the committee that is currently
authorized to administer the Plan.

 

III. BASIC PLAN CONCEPT

 

The Plan concept for fiscal 2005 focuses primarily on Tidewater’s overall
performance and is comprised of three specific criteria: (1) adjusted net
income, (2) return of total capital, and (3) safety. These criteria are the
bases upon which a monetary pool is established for the participants if certain
financial and operating goals are accomplished.

 

IV. ELIGIBILITY CRITERIA

 

Eligibility for participation in the Executive Incentive Plan is limited to
those executive officers who have a potential to earn compensation in excess of
$1,000,000. The specific positions eligible to participate in the Plan will be
reviewed and determined annually by the Compensation Committee of the Board of
Directors, but for fiscal 2005, Tidewater’s Chief Executive Officer (CEO) is the
sole eligible participant.

 

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V. AWARD OPPORTUNITIES

 

Prior to June 30 of each fiscal year, Tidewater will specify target incentive
awards for each eligible position. These target awards will determine the
threshold and maximum incentive award amounts. These amounts are determined from
each eligible participant’s base salary multiplied by the target percent
associated with the participant’s position within the Company. For fiscal year
2005, the Company has established that the CEO’s target award will be the
equivalent of 120% of base salary, and the maximum award will be equivalent to
227% of base salary. The threshold and maximum awards are intended to recognize
the risk/reward component of the Company’s overall compensation program. The
annual award to the participant under this Plan will not exceed $2 million.

 

VI. PERFORMANCE MEASURES AND STANDARDS

 

The performance goals under which a bonus may be paid shall be any or a
combination of the following: earnings per share, return on assets, an economic
value added measure, shareholder return, earnings, stock price, return on
equity, return on total capital, safety performance, reduction of expenses or
increase in cash flow of the Company, a division of the Company or a subsidiary.
For any performance period, such performance goals may be measured on an
absolute basis or relative to a group of peer companies selected by the
Compensation Committee, relative to internal goals or relative to levels
attained in prior years.

 

Prior to the beginning of each fiscal year, specific corporate and divisional
measures and standards will be set. In addition, the appropriate weighing of
each measure will also be established.

 

Before any individual incentive amount can be awarded, Tidewater must first
achieve minimum (threshold) performance in at least one of the three Company
performance measures.

 

The performance measures for fiscal 2005 are as follows:

 

(1) Adjusted Net Income (ANI) versus Budget – Under this test, net income as
compared with budgeted net income, adjusted as specified below, is used. This
test compares actual results against budgeted results for the year. Under this
performance measurement, the Company’s ANI must be at least 50% of the budgeted
net income, for a minimum (threshold) award to be paid. For fiscal year 2005,
the target incentive award will be paid if the Company’s adjusted net income
reaches at least 95% of budget. Prorating will be permitted. (Exhibit 2
illustrates this test). This measurement carries a weight of 65% of the
participant’s total award.

 

To encourage good management/business decisions, certain adjustments to net
income will be made in determining if the net income test has been met.
Accordingly, the following items reported in the Company’s consolidated
statement of earnings will be added to or subtracted from net income as reported
in order to determine net income for purposes of the Plan:

 

  1) Cumulative affect of accounting changes.

 

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  2) Extraordinary items, as that term is defined in Accounting Principles Board
Opinion #30.

 

  3) Discontinued operations; and

 

  4) Unusual or infrequently occurring items (less the amount of related income
taxes), as that term is used in Accounting Principles Board Opinion #30.

 

Note: For purposes of calculating achievement of this performance measure,
budgeted net income shall be divided by the average number of common shares
outstanding for the year as contemplated by the budget. Likewise, the amount of
adjusted net income shall be divided by the average number of common shares
outstanding during the year. When calculating these earnings per share
calculations, common stock equivalent shall not be considered in determining the
average number of common shares outstanding.

 

(2) Return of Total Capital (ROTC) – Under this performance measurement, the
Company must attain at least a 40th percentile where compared to the Peer Group
(See Exhibit 1) on ROTC. ROTC is defined as:

 

Earnings Before Interest Expense, Taxes,

Depreciation and Amortization (EBITDA)

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Average Shareholders Equity + Average Long-Term Debt

(including current maturities of Long-Term Debt)

 

This measurement carries a weight of 20% of the participant’s total award.

 

Note: Average shareholders equity and average long-term debt shall be
determining by summing the respective totals as of the end of each interim
quarterly reporting period during the fiscal year and shown on the Company’s
consolidated balance sheet and dividing such sums by the number of interim
reporting periods.

 

The standard for the ROTC performance measure will be established by considering
Tidewater’s performance against the Peer Group of companies (See Exhibit 1).
When determining peer group performance ranking, pro-rating is not permitted
below the 40th percentile. For fiscal year 2005, the target incentive award will
be paid if the Company’s ROTC performance reaches the 60th percentile versus the
Peer Group.

 

(3) Safety Performance – This measurement is determined by achievement of the
Company’s overall established safety performance goals for the fiscal year (See
Exhibit 2). Under this performance measure, payout is directly correlated with
the maximum allowable LTA’s for the current fiscal year. For fiscal year 2005,
it has been determined that there will be no payout if 25 or more LTA’s occur
during the fiscal year. Five (5) or less LTA’s for fiscal year 2005 will yield a
150% award, which is the maximum payout allowed under this measurement. For this
measurement, non-job related deaths will not count as an LTA. The safety
performance measurement carries a weight of 15% of the individual’s total award.

 

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VII. AWARD CALCULATIONS

 

The actual amount of the incentive award depends upon the attainment of Company
performance in each of the three criteria. Each measurement operates
independently of the other in determining the award due for the fiscal year.
Thus, the Company could achieve above threshold on one performance measure and
below threshold on another performance measure and still have funds available in
the pool. Exhibit 2 illustrates the threshold and maximum payouts for each
component of the Plan. The Compensation Committee has discretion to decrease but
not increase the amount of the bonus paid to a participant from the amount that
would be payable under the pre-established formula for the applicable fiscal
year.

 

VIII. AWARD PAYMENTS

 

Awards will be paid in cash.

 

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Exhibit 1

 

TIDEWATER INC.

 

Peer Group List

For Return on Total Capital Performance Objective

Fiscal Year 2005

 

The following list of companies represents the Industry Peer Group for the
fiscal year.

 

COMPANY NAME

 

BJ Services

Baker Hughes

Cal Dive International

Cooper Cameron

Diamond Offshore Drilling Inc.

ENSCO International

Global Industries Ltd.

GlobalSantaFe Corporation

Gulfmark Offshore Inc.

Haliburton Company

Helmerich & Payne

Input/Output Inc.

Nabors Industries

Noble Corporation

Parker Drilling

Rowan Companies

Schlumberger Ltd.

Seacor Smit Inc.

Smith International Inc.

TETRA Technologies

Tidewater Inc.

Transocean Sedco Forex

Trico Marine Services Inc.

Weatherford International

 

The above Peer Group list will be updated at the beginning of each fiscal year.
The effect of mergers and acquisitions within the peer group for purposes of
excluding any given company in the year will also be considered.

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Exhibit 2

 

TIDEWATER INC.

EXECUTIVE 2005 ANNUAL INCENTIVE POOL AWARDS MATRIX

 

Adjusted Net Income

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        ROTC Portion of Pool

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        Safety Performance

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  % Improvement in
Adj. Net Income
Income Over Budget

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Funding Pool

From Adjusted

Net Income

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        Tidewater ROTC
Relative to Peer
Companies

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  Incentive Funding
Pool From ROTC
Objective

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        LTAs

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  Incentive Funding
Pool From LTA
Objective

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  150%   769,860   210 %       90th %tile   169,200   150 %       5   126,900  
150 % 145%   733,200   200 %       87   163,560   145 %       6   122,670   145
% 140%   696,540   190 %       84   157,920   140 %       7   118,440   140 %
135%   659,880   180 %       81   152,280   135 %       8   114,210   135 % 130%
  623,220   170 %       78   146,640   130 %       9   109,980   130 % 125%  
586,560   160 %       75   141,000   125 %       10   105,750   125 % 120%  
549,900   150 %       72   135,360   120 %       11   101,520   120 % 115%  
513,240   140 %       69   129,720   115 %       12   97,290   115 % 110%  
476,580   130 %       66   124,080   110 %       13   93,060   110 % 105%  
439,920   120 %       63   118,440   105 %       14   88,830   105 % 100%  
403,260   110 %   +   60th%tile   112,800   100 %   +   15   84,600   100 %
  95%   366,600   100 %       58   107,160   95 %       16   76,140   90 %   90%
  339,105   93 %       56   101,520   90 %       17   67,680   80 %   85%  
311,610   85 %       54   95,880   85 %       18   59,220   70 %   80%   284,115
  78 %       52   90,240   80 %       19   50,760   60 %   75%   256,620   70 %
      50   84,600   75 %       20   42,300   50 %   70%   229,125   63 %      
48   78,960   70 %       21   33,840   40 %   65%   201,630   55 %       46  
73,320   65 %       22   25,380   30 %   60%   174,135   48 %       44   67,680
  60 %       23   16,920   20 %   55%   146,640   40 %       42   62,040   55 %
      24   8,460   10 %   50%   119,145   33 %       40th%tile   56,400   50 %  
    25 or more   0   0 % <50%   0   0 %       <40th%tile   0   0 %              
        Weight 65%                 Weight 20%                 Weight 15%