Exhibit 10.1

DIAMOND OFFSHORE DRILLING, INC.

2020 KEY EMPLOYEE INCENTIVE PLAN

1.    Purpose. The purpose of this Diamond Offshore Drilling, Inc. 2020 Key
Employee Incentive Plan (this “Plan”), is to promote the interests of Diamond
Offshore Drilling, Inc., a Delaware corporation, or any successor corporation
(the “Company”) by providing incentives to key management personnel of the
Company to make extraordinary efforts to execute the strategic objectives of the
Company in a manner most beneficial to the Company and its stakeholders.

2.    Effective Date of this Plan. This Plan is effective as of April 21, 2020
(the “Effective Date”) and was amended and restated, effective as of June 23,
2020.

3.    Definitions. For the purposes of this Plan:

(a)    “Ad Hoc Group” has the meaning set forth in the Verified Statement
Pursuant to Bankruptcy Rule 2019 dated May 22, 2020 [Docket No. 191] filed in
the Chapter 11 Cases.

(b)    “Award Letter” means, the award letter delivered to a Participant
granting a Participant the opportunity to earn a KEIP Payment.

(c)    “Board” means the Board of Directors of the Company.

(d)    “Catch-Up Payment” shall have the meaning set forth in Appendix A.

(e)    “Cause” shall mean have the meaning set forth in the employment or
engagement agreement between a Participant and the Company or any of its
subsidiaries or affiliates, if such an agreement exists and contains a
definition of “Cause” or term of similar import; otherwise Cause shall mean
(i) conviction of the Participant for committing a felony under Federal law or
the law of the state in which such action occurred, (ii) dishonesty in the
course of fulfilling a Participant’s employment, engagement or directorial
duties, (iii) willful and deliberate failure on the part of a Participant to
perform the Participant’s employment, engagement or directorial duties in any
material respect or (iv) such other events as shall be determined in good faith
by the Board. The Board shall, unless otherwise provided in an Award Letter or
employment or engagement agreement with the Participant, have the sole
discretion to determine whether Cause exists, and its determination shall be
final.

(f)    “Chapter 11 Cases” refers to In re Diamond Offshore Drilling, Inc., et.
al., Case No. 20-32307 (DRJ) (Bankr. S.D. Tex. 2020).

(g)    “Code” means the Internal Revenue Code of 1986, as amended and the
regulations thereunder, as they may from time to time be in effect (and any
applicable Internal Revenue Service guidance thereunder).

(h)    “Committee” means the Compensation Committee of the Board, or any other
committee authorized by the Board to administer this Plan. If no committee is
duly authorized by the Board to administer this Plan, the term “Committee” shall
be deemed to refer to the Board for all purposes of this Plan.

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(i)    “Company Group” means the Company and its direct and indirect
majority-owned subsidiaries.

(j)    “Disability” shall have the meaning set forth in the employment or
engagement agreement between a Participant and any member of the Company Group,
if such an agreement exists and contains a definition of Disability or term of
similar import; otherwise “Disability” means the inability of a Participant to
engage in any substantial gainful substantial gainful activity by reason of any
medically determinable physical or mental impairment that can be expected to
result in death or can be expected to last for a continuous period of not less
than twelve months, as provided in Section 409A(a)(2)(C) of the Code, including
Prop. Treas. Reg. § 1.409A-3(g)(4). A Participant will be deemed disabled if
such Participant is determined to be totally disabled by the Social Security
Administration. Moreover, a Participant will be deemed disabled if such
Participant is determined to be disabled in accordance with a disability
insurance program of the Company, provided that the definition of disability
applied under such disability insurance program complies with the requirements
of the Code, including Prop. Treas. Reg. § 1.409A-3(g)(4).

(k)    “Emergence Date” means the effective date of the Company’s and its debtor
subsidiaries emergence from Chapter 11 bankruptcy proceedings.

(l)    “Emergence Payment” shall have the meaning set forth in Section 5(b)(i).

(m)    “Fiscal Quarter” means each of the four three-month periods that make up
the Performance Period, specifically, April 1, 2020 through June 30, 2020,
July 1, 2020 through September 30, 2020, October 1, 2020 through December 31,
2020 and January 1, 2021 through March 31, 2021.

(n)    “Good Reason” shall have the meaning set forth in the employment or
engagement agreement between a Participant and any member of the Company Group;
if no such agreement containing a definition of “Good Reason” is then in effect,
the “Good Reason” shall mean, without the Participant’s consent: (i) a material
reduction in the Participant’s annual base salary, other than an across the
board reduction to base salary for all senior executives of the Company of no
more than ten percent (10%); (ii) a material diminution in the Participant’s
title; or (iii) the relocation of the Participant’s principal place of
employment to a location that increases the Participant’s one-way commute by
more than 25 miles in excess of his or her then-current commuting distance (it
being understood that temporary relocations on account of disaster or other
disruption shall not constitute Good Reason). Notwithstanding the above, the
events described in clauses (i), (ii) and (iii) above shall not constitute Good
Reason unless the Participant notifies the Company in writing within ten
(10) days of the event giving rise to Good Reason and the Company has failed to
cure the circumstances giving rise to Good Reason within thirty (30) days
following such notice by the Participant (the “Cure Period”). If the Company
fails to so cure prior to the expiration of the Cure Period, then the
Participant may tender his or her resignation for Good Reason, such resignation
to be effective no later than fifteen (15) days following the end of the Cure
Period; it being understood that if the Participant fails to resign within such
fifteen (15) day period, his or her right to terminate his or her employment for
Good Reason shall be deemed to be waived.

 

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(o)    “KEIP Payment” means each of the payments described in Section 5 of this
Plan, including any Quarterly Payment, Catch-Up Payment and any adjustment
thereto payable hereunder.

(p)    “KEIP Payment Pool” means the aggregate amount of all KEIP Payments
available to all Participants under this Plan.

(q)    “Participant” shall have the meaning as set forth in Section 4 of this
Plan.

(r)    “Performance Goals” means the goals for the Performance Metrics as
established by the Committee for each Fiscal Quarter and set forth in in
Appendix A or otherwise communicated to each Participant. For purposes of the
Catch-Up Payments described in Appendix A, “Performance Goals” will consist of:
(i) cumulative Threshold Performance Goals, (ii) cumulative Target Performance
Goals and (iii) cumulative Stretch Performance Goals ((i) through (iii),
collectively, the “Cumulative Performance Goals”).

(s)    “Performance Metrics” means the specific performance metrics used in
determining Performance Goals or Cumulative Performance Goals. Performance
Metrics may include, without limitation, one or more of the following:
(i) adjusted earnings before interest, tax, depreciation and amortization,
(ii) revenue, (iii) cost savings and other transformation goals, (iv) free cash
metrics, (v) productivity goals, (vi) safety metrics, and, in each case, may be
based on the Company as a whole or any individual business or division (or group
of businesses or divisions) thereof and may be calculated based on applicable
accounting principles or such other methodology as determined appropriate by the
Committee. Where applicable, the performance metrics may be expressed in terms
of attaining a specified level of the particular metric or the attainment of a
percentage increase or decrease in the particular metric, and may be applied to
one or more of the Company, a subsidiary or affiliate, or a division or
strategic business unit of the Corporation, or may be applied to the performance
of the Company relative to a market index, a group of other companies or a
combination thereof, all as determined by the Committee.

(t)    “Performance Period” means the period commencing on April 1, 2020 and
ending on March 31, 2021.

(u)    “Stretch” means the Performance Goal established for maximum performance
as established by the Committee for any Fiscal Quarter and set forth in Appendix
A or otherwise communicated to each Participant.

(v)    “Target” means the Performance Goal established for target performance as
established by the Committee for any Fiscal Quarter and set forth in Appendix A
or otherwise communicated to each Participant.

(w)    “Target Date” means the date that is the later of (i) four (4) months
from the date on which the Company and its debtor subsidiaries receive a binding
restructuring term sheet from the Ad Hoc Group that is reasonably acceptable to
the boards of directors, or managers, as applicable, of each of the Company and
its debtor subsidiaries and (ii) November 30, 2020.

 

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(x)    “Threshold means the Performance Goal established for threshold
performance as established by the Committee for any Fiscal Quarter and set forth
in Appendix A or otherwise communicated to each Participant.

4.    Eligible Participants. Each employee of the Company Group selected by the
Committee to participate in the Plan that receives an Award Letter shall be a
“Participant” under this Plan and eligible to receive KEIP Payments in the
amounts as set forth in his or her Award Letter based on the methodology set
forth in Appendix A.

5.    Terms of Participation. Unless otherwise determined by the Committee:

(a)    KEIP Payment Opportunity. Each Participant shall be eligible to receive a
KEIP Payment with an aggregate target bonus opportunity for all four Fiscal
Quarters equal to the amount specified in the Participant’s Award Letter (the
Participant’s “Target KEIP Payment”) with 25% of the Target KEIP Payment being
allocated to be earned each Fiscal Quarter. The amount of the KEIP Payment shall
be determined based upon achievement of the applicable Performance Goals for
each Fiscal Quarter (subject to the Catch-Up provision described in Appendix A).
Notwithstanding the foregoing, the Committee may provide that an employee who
commences employment with the Company Group, or is promoted or transferred
within the Company Group, shall be eligible to receive a prorated KEIP Payment
based on the date such person first becomes eligible to participate in the Plan.

(b)    KEIP Payments.

(i)    Subject to the provisions of this Plan (including Sections 5(b)(ii) and
6(a) and Appendix A) and any Award Letter, each Participant shall be eligible to
receive a pro-rata portion of such Participant’s KEIP Payment for each of the
four Fiscal Quarters, based upon the extent to which the Performance Goals have
been achieved for such Fiscal Quarter (the “Quarterly Payment” for such Fiscal
Quarter). Promptly after the end of each Fiscal Quarter and as soon as quarterly
financials are available, the Committee shall certify the degree to which the
applicable Performance Goals have been achieved and the amount of the Quarterly
Payment payable to each Participant hereunder. Eighty percent (80%) of any
Quarterly Payment and any Catch-Up Payment required to be made under the Plan
shall be paid in cash by the applicable member of the Company Group as soon as
practicable in the calendar month following the end of the applicable Fiscal
Quarter and in any event not later than 60 days after the end of the applicable
Fiscal Quarter. Subject to the terms of Section 5(b)(ii), up to twenty percent
(20%) of any Quarterly Payment and any Catch-Up Payment required to be made
under the Plan shall be subject to the satisfaction of the emergence performance
condition (each, a “Emergence Payment”) and paid, if at all, in accordance with
Section 5(b)(ii). No Quarterly Payment shall be payable unless the Threshold
level of performance of the applicable Performance Goals has been achieved for
such Fiscal Quarter.

(ii)    Emergence Payments, if any, shall be paid in cash by the applicable
member of the Company Group on, but in no event later than 60 days following,
the Emergence Date. The portion of the Emergence Payments that will be payable
to a Participant will be determined as follows:

(A)    If the Emergence Date is on or before the Target Date, then one hundred
percent (100%) of the Emergence Payments will become payable to the Participant.

 

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(B)    If the Emergence Date is after the Target Date, but on or before the date
that is one (1) month following the Target Date, then seventy percent (70%) of
the Emergence Payments will become payable to the Participant and the remaining
thirty percent (30%) of the Emergence Payments will be forfeited without
payment.

(C)    If the Emergence Date is after the date that is one (1) month following
the Target Date, but on or before the date that is two (2) months following the
Target Date, then fifty-five percent (55%) of the Emergence Payments will become
payable to the Participant and the remaining forty-five (45%) of the Emergence
Payments will be forfeited without payment.

(D)    If the Emergence Date is after the date that is two (2) months following
the Target Date, but on or before the date that is three (3) months following
the Target Date, then forty percent (40%) of the Emergence Payments will become
payable to the Participant and the remaining sixty (60%) of the Emergence
Payments will be forfeited without payment.

(E)    If the Emergence Date is after the date that is three (3) months
following the Target Date, but on or before the date that is four (4) months
following the Target Date, then twenty-five percent (25%) of the Emergence
Payments will become payable to the Participant and the remaining seventy-five
(75%) of the Emergence Payments will be forfeited without payment.

(F)    If the Emergence Date is after the date that is four (4) months following
the Target Date, but on or before the date that is five (5) months following the
Target Date, then ten percent (10%) of the Emergence Payments will become
payable to the Participant and the remaining ninety (90%) of the Emergence
Payments will be forfeited without payment.

(G)    If the Emergence Date is after the date that is five (5) months following
the Target Date, then one hundred percent (100%) of the Emergence Payments will
be forfeited without payment.

(iii)    Except as otherwise provided herein, in order to earn a Quarterly
Payment, Catch-Up Payment or Emergence Payment, a Participant must remain
actively employed by the Company Group (and not have been provided or received
any notice of termination of employment with the Company Group) through the date
on which such Quarterly Payment, Catch-Up Payment or Emergence Payment is paid.
For the avoidance of doubt, except as set forth in Sections 6(a) and 6(b), a
Participant whose employment with the Company Group terminates for any reason
(including the Participant’s resignation) before the payment date shall forfeit
the right to the Quarterly Payment, Catch-Up Payment or Emergence Payment
payable on such date.

 

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(iv)    If the Emergence Date occurs before the end of the Performance Period,
then, notwithstanding anything to the contrary herein, the Committee shall
measure both quarterly and cumulative performance as of the Emergence Date and
shall compare actual performance against the quarterly and cumulative
Performance Goals for the relevant Fiscal Quarter in which the Emergence Date
occurs. Each Participant shall receive an amount equal to a pro-rated portion of
the Quarterly Payment and a Catch-Up Payment, if applicable, he or she would
have been entitled to receive if the Plan had continued through the end of such
Fiscal Quarter based on actual performance, as described in the preceding
sentence, multiplied by (ii) a fraction, (A) the numerator of which is equal to
the number of calendar days that have elapsed during the applicable Fiscal
Quarter prior to the Emergence Date, and (B) the denominator of which is equal
to the total number of calendar days in the applicable Fiscal Quarter during
which the Emergence Date occurs. Eighty percent (80%) of the amount calculated
in accordance with the preceding sentence shall be payable as soon as
practicable and in any event not later than 60 days after the Emergence Date,
subject to a Participant’s continued employment through both the Emergence Date
and the date of payment and the remaining twenty percent (20%) of the amount
calculated in accordance with the preceding sentence will be deemed Emergence
Payments and shall be payable, if at all, in accordance with Section 5(b)(ii) of
the Plan. The Committee may, in its discretion, determine whether to continue or
replace the Plan following the Emergence Date.

6.    Termination of Employment; Forfeitures.

(a)    Termination Without Cause; Resignation for Good Reason; Death,
Disability. Notwithstanding anything herein to the contrary, upon a
Participant’s involuntary termination by the Company Group without Cause,
voluntary resignation for Good Reason, if applicable, or due to the
Participant’s death or Disability, such Participant shall receive an amount
equal to (i) the next Quarterly Payment and a Catch-Up Payment, if applicable,
he or she would have been entitled to receive if he or she had continued to be
employed with the Company Group through the next applicable payment date,
determined based on actual level of performance achievement for such Fiscal
Quarter multiplied by (ii) a fraction, (A) the numerator of which is equal to
the number of calendar days that have elapsed during the applicable Fiscal
Quarter prior to the date of termination of employment, and (B) the denominator
of which is equal to the total number of calendar days in the applicable Fiscal
Quarter during which the Participant’s employment terminates. Eighty percent
(80%) of the amount calculated in accordance with the preceding sentence shall
be payable at the same time that such Quarterly Payment and Catch-Up Payment, if
applicable, are paid to other Participants and the remaining twenty percent
(20%) of the amount calculated in accordance with the preceding sentence will be
deemed Emergence Payments and shall be payable, if at all, at the same time that
such Emergence Payments are paid to other Participants in accordance with
Section 5(b)(ii) of the Plan as if the Participant had remained employed through
the payment date.

(b)    Termination for Cause; Voluntary Resignation without Good Reason;
Forfeiture. Upon a Participant’s voluntary resignation other than for Good
Reason or termination by the Company Group for Cause, such Participant will
forfeit eligibility to receive any future KEIP Payments. Notwithstanding the
preceding sentence, upon a Participant’s voluntary resignation other than for
Good Reason, any Emergence Payments relating to previously completed Fiscal
Quarters shall remain outstanding and shall be payable, if at all, at the same
time that such

 

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Emergence Payments are paid to other Participants in accordance with
Section 5(b)(ii) of the Plan as if the Participant had remained employed through
the Emergence Date and the payment date.

(c)    Reallocation. In the event that a Participant is not entitled for any
reason to receive any KEIP Payments for which he or she is eligible (including
due to a forfeiture under Section 6(b)), the forfeited KEIP Payment(s) that
would have been received by such Participant shall be redistributed to the KEIP
Payment Pool and may be allocated to new Participants, as determined in the
reasonable discretion of the Committee, or if the Committee delegates its
authority to the Company’s Chief Executive Officer, as determined in the
reasonable direction of the Company’s Chief Executive Officer. For the avoidance
of doubt any forfeited KEIP Payments may not be reallocated to existing
Participants in the Plan.

7.    Plan Administration. This Plan shall be administered by the Committee. The
Committee is given full authority and discretion within the limits of this Plan
to establish such administrative measures as may be necessary to administer and
attain the objectives of this Plan and may delegate the authority to administer
this Plan to an officer of the Company. The Committee (or its delegate) shall
have full power and authority to construe and interpret this Plan and any
interpretation by the Committee (or its delegate) shall be binding on all
Participants and shall be accorded the maximum deference permitted by law. Such
designations, determinations, interpretations and decisions by the Committee
need not be the same with respect to each Participant (whether such Participants
are similarly situated or not).

(a)    General. All rights and interests of Participants under this Plan shall
be non-assignable and nontransferable, and otherwise not subject to pledge or
encumbrance, whether voluntary or involuntary, other than by will or by the laws
of descent and distribution. In connection with any sale, transfer or other
disposition of all or substantially all the Company’s assets or business,
whether by merger, stock sale, consolidation or otherwise, the Company may
assign this Plan’s sponsorship, in whole or in part.

(b)    Adjustments. The Committee may, in its discretion, adjust any Performance
Metrics on a pro forma basis or otherwise to take into account (i) any
acquisitions or dispositions consummated during any Fiscal Quarter or the
Performance Period or otherwise affecting the Performance Goals or Cumulative
Performance Goals, (ii) any material change in the Company’s business plan or
(iii) any other event or circumstance as determined appropriate. The
determination of the Performance Metrics (and calculations thereof) and any
adjustments thereto by the Committee shall be final, conclusive and binding on
all Participants and other persons.

(c)    Release. Any payment to a Participant in accordance with the provisions
of this Plan shall, to the extent thereof, be in full satisfaction of all claims
against the Company, and the Company may require such Participant, as a
condition precedent to such payment, to execute a release to such effect.

(d)    Form of Payment; Withholding. Payment of amounts due under this Plan
shall be provided to a Participant in the same manner as such Participant
receives his or her regular paycheck or by mail at the last known address of
Participant in the possession of the Company. The Company will withhold all
applicable taxes and any other required withholdings to be withheld with respect
to the payment of any award pursuant to this Plan.

 

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(e)    Unfunded Arrangement; Exclusion of Compensation. The Company shall not be
required to establish any special or separate fund or to make any other
segregation of assets to ensure the payment of any award provided for hereunder.
KEIP Payments shall not be considered as extraordinary, special incentive
compensation, and will not be included as “earnings,” “wages,” “salary,” or
“compensation” in any pension, welfare, life insurance, or other employee
benefit Plan or arrangement of the Company Group, except as otherwise provided
in any such other benefit plan.

(f)    Amendment and Termination. The Company, in its sole discretion, shall
have the right to modify, supplement, suspend or terminate this Plan at any
time; provided that in no event shall any amendment or termination adversely
affect the rights of any existing Participant regarding any KEIP Payment without
the prior written consent of the affected Participant. Subject to the foregoing,
this Plan shall terminate upon the satisfaction of all obligations of the
Company or its successor entities hereunder.

(g)    No Right to Continued Employment. Nothing contained in this Plan shall in
any way affect the right and power of the Company to discharge any Participant
or otherwise terminate his or her employment at any time or for any reason or to
change the terms of his or her employment in any manner.

(h)    Expenses of Plan. Except as otherwise provided under this Plan, any
expense incurred in administering this Plan shall be borne by the Company.

(i)    Captions. Captions preceding the sections hereof are inserted solely as a
matter of convenience and in no way define or limit the scope or intent of any
provision hereof.

(j)    Governing Law. The administration of this Plan shall be governed by the
substantive laws of the State of Delaware, without regard to principles of
conflicts of laws. Any persons or corporations who now are or shall subsequently
become parties to this Plan shall be deemed to consent to this provision.

(k)    Jurisdiction. The Participants agree that any suit, action or proceeding
seeking to enforce any provision of, or based on any matter arising out of or in
connection with this Plan, whether in contract, tort or otherwise, shall be
brought in the federal or state courts in Texas, so long as one of such courts
shall have subject-matter jurisdiction over such suit, action or proceeding, and
that any cause of action arising out of this Plan shall be deemed to have arisen
from a transaction of business in the State of Texas. Each of the parties hereby
irrevocably consents to the jurisdiction of such courts (and of the appropriate
appellate courts therefrom) in any such suit, action or proceeding and
irrevocably waives, to the fullest extent permitted by law, any objection that
it may now or hereafter have to the laying of the venue of any such suit, action
or proceeding in any such court or that any such suit, action or proceeding
which is brought in any such court has been brought in an inconvenient forum.

 

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(l)    Notices. All notices and other communications under this Plan shall be in
writing and shall be given by hand delivery to the other party or confirmed fax
or overnight courier, or by postage paid first class mail, addressed as follows:

If to the Participant:

The address of his principal residence as it appears in the Company’s records,
with a copy to him at his office in Houston, Texas.

If to the Company:

Diamond Offshore Drilling, Inc.

15415 Katy Freeway, Suite 100

Houston, Texas 77094-1800

Attention: Corporate Secretary

Facsimile: (281) 647-2223

or to such other address as any party shall have furnished to the other in
writing in accordance with this Section 7(l). Notice and communications shall be
effective when actually received by the addressee if given by hand delivery or
confirmed fax, when deposited with a courier service if given by overnight
courier, or two (2) business days following mailing if delivered by first class
mail.

(m)    Section 409A.

(i)    The Plan is intended to either comply with, or be exempt from, the
requirements of Section 409A of the Code (“Section 409A”). To the extent that
the Plan is not exempt from the requirements of Section 409A, the Plan is
intended to comply with the requirements of Section 409A and shall be limited,
construed and interpreted in accordance with such intent. Each Participant’s
right to receive any installment payments under the Plan shall be treated as a
right to receive a series of separate payments and, accordingly, each such
installment payment shall at all times be considered a separate and distinct
payment as permitted under Section 409A. Notwithstanding the foregoing, in no
event whatsoever shall the Company Group be liable for any additional tax,
interest, income inclusion or other penalty that may be imposed on a Participant
by Section 409A or for damages for failing to comply with Section 409A.

(ii)    Notwithstanding anything in this Plan to the contrary, any compensation
or benefits payable under this Plan that is considered nonqualified deferred
compensation under Section 409A and is designated under this Plan as payable
upon the Participant’s termination of employment shall be payable only upon the
Participant’s “separation from service” with the Company within the meaning of
Section 409A (a “Separation from Service”).

(iii)    Notwithstanding anything in this Plan to the contrary, if the
Participant is deemed by the Company at the time of the Participant’s Separation
from Service to be a “specified employee” for purposes of Section 409A, to the
extent delayed commencement of any portion of the benefits to which the
Participant is entitled under this Plan is required in order to avoid a
prohibited distribution under Section 409A, such portion of the Participant’s
benefits shall not be provided to the Participant prior to the earlier of
(A) the expiration of the six (6)-month period measured from the date of the
Participant’s Separation from Service with the

 

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Company or (B) the date of the Participant’s death. Upon the first business day
following the expiration of the applicable Section 409A period, all payments
deferred pursuant to the preceding sentence shall be paid in a lump sum to the
Participant (or the Participant’s estate or beneficiaries), and any remaining
payments due to Participant under this Plan shall be paid as otherwise provided
herein.

 

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Appendix A

Determination of Payments

The Plan establishes a “Target KEIP Payment” for each Participant, representing
the designated payout of the KEIP award if the Company’s actual performance
against each of the Performance Goals is at the Target level. The actual payout
of each KEIP award can be in a range from 50% (Threshold) to 150% (Stretch) of
the Target KEIP Payment amount specified in the Participant’s Award Letter,
depending upon performance against the Performance Goals, with no payment made
for any portion of the KEIP award allocated to a Performance Goal for which
performance is below Threshold.

The Target KEIP Payment is divided into four equal amounts (each, a “Target
Quarterly KEIP Payment”), eligible to be paid on a quarterly basis, based upon
achievement of quarterly Performance Goals for each Fiscal Quarter, subject to
the Catch-Up provision set forth below.

The amount of the payment will depend upon the achievement of the following
three Performance Metrics: (i) Rig Efficiency (as defined below), which is
weighted 40%; (ii) the number of Lost Time Incidents (as defined below), which
is weighted 20% and (iii) Reduction in Overhead Expenses (as described below),
weighted at 40%.

Performance Goal #1

Target Rig Efficiency for each Fiscal Quarter in the Performance Period shall
equal 93%, on average (the “First Goal Target”). Payout of the KEIP Payment,
which is allocated to the First Goal Target shall be determined based on
performance against the First Goal Target, in accordance with the table below.
Linear interpolation shall be applied to determine Payout Percentage in the
event of performance falling between the levels stated in the table. For the
avoidance of doubt, no credit shall be provided if actual performance is below
Threshold.

For purposes of this Appendix A, “Rig Efficiency” means the average contracted
rig efficiency (expressed as a percentage), determined in a manner consistent
with the Company’s control systems and historical past practice with respect to
the methodology utilized.

 

Performance Level

 

Actual Performance

 

Payout Percentage

Below Threshold   Less than 91%   0% Threshold   91%   50% Target   94%   100%
Stretch   97% or greater   150%

Performance Goal #2

The Company shall experience only one Lost Time Incident for each Fiscal Quarter
included in the Performance Period (the “Second Goal Target”). For the avoidance
of doubt, LTI shall not take into account any COVID-19 related illness, injury,
treatment or precaution in respect of the foregoing if it is determined
necessary or advisable by the Company. Payout of the KEIP

 

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Payment, which is allocated to the Second Goal Target shall be determined based
on performance against the Second Goal Target, in accordance with the table
below. For the avoidance of doubt, no credit shall be provided if actual
performance is below Threshold.

For purposes of this Appendix A, “Lost Time Incident” or “LTI” shall have the
meaning set forth in industry-recognized HSE metrics used by the International
Association of Drilling Contractors.

 

Performance Level

 

Actual Performance

 

Payout Percentage

Below Threshold   3 LTIs or above   0% Threshold   2 LTIs   50% Target   1 LTI  
100% Stretch   No LTIs   150%

Performance Goal #3

Achieve the Reduction in Overhead Expenses indicated in the table below for each
Fiscal Quarter included in the Performance Period (the “Third Goal Target”). The
percentage of achievement against the Third Goal Target shall be determined in
accordance with the schedule in the table below, based upon a target of 100%
achievement of the Third Goal Target. Linear interpolation shall be applied to
determine Percentage Credit Towards Performance Goal in the event of performance
falling between the levels stated in the table. For the avoidance of doubt, no
credit shall be provided if actual performance is below Threshold.

For purposes of this Appendix A, “Reduction in Overhead Expenses” means
reduction in total consolidated office overhead expense (i.e., general and
administrative expenses (G&A), shorebase expenses and indirect costs, excluding
fees, costs and expenses of third party advisors and consultants and other costs
related to the Company’s restructuring activities and also excluding fees, costs
and expenses incurred in connection with (a) changes in applicable laws or
regulations, (b) events or conditions determined to be extraordinary or unusual
in nature or infrequent in occurrence, (c) the disposal or addition of a
business segment or material asset, (d) a change in accounting principles,
(e) any transaction or capital expenditure entered into by the Company or any of
its subsidiaries that has the effect of increasing fees, costs or expenses
during the Performance Period in exchange for a commensurate material benefit to
be received in the future by the Company or any of its subsidiaries and (f) the
Company’s employee incentive programs) indicated in the table below for each
quarter included in the Performance Period as compared to the Company’s
quarterly average total consolidated office overhead expense for the fourth
quarter of 2019 and the first quarter of 2020.

 

Performance

Level

   Actual Performance     Payout Percentage      Q2
    2020         Q3
    2020         Q4
    2020         Q1
    2021      

Below Threshold

     <8 %      <14 %      <18 %      <21 %      0 % 

Threshold

     8 %      14 %      18 %      21 %      50 % 

Target

     18 %      25 %      29 %      31 %      100 % 

Stretch

     29 %      36 %      39 %      40 %      150 % 

 

A-2

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Payment for Weighted Average Performance

The level of overall achievement against all three Performance Goals shall
determine the percentage of the KEIP Payment that is paid each Fiscal Quarter in
accordance with the schedule in the table below:

 

Average

Performance Level

 

Average Percentage

Credit Towards

Performance Goals

 

Percent of Target Amount

of Performance

Award to be Paid

Below Threshold   Less than 50%   0% Threshold   50%   50% Target   100%   100%
Stretch   150% or greater   150%

For purposes of the table above, the Payout Percentage shall equal the sum of
the following:

(Payout Percentage for the First Goal Target x 0.4) + (Payout Percentage for the
Second Goal Target x 0.2) + (Payout Percentage for the Third Goal Target x 0.4).

Catch-Up

In addition to performance being measured for each Fiscal Quarter, Performance
Goals will be measured cumulatively at the end of the Fiscal Quarters ending
September 30, 2020, December 31, 2020 and March 31, 2021 (each, a “Catch-Up
Measurement Date”), taking into account each such Fiscal Quarter and all
preceding Fiscal Quarters. To the extent that performance was not achieved at
the Stretch level of performance with respect to each of the Performance Goals
for the Fiscal Quarters ending June 30, 2020, September 30, 2020, December 31,
2020, and March 31, 2021, a Participant will be eligible to earn an additional
amount for each such Fiscal Quarter (a “Catch-Up Payment”). A Catch-Up Payment
will be made at the conclusion of each Fiscal Quarter’s Catch-Up Measurement
Date based on the extent to which the Company meets or exceeds the Cumulative
Performance Goals, as specified below, as of such Catch-Up Measurement Date.

Calculation to Determine Catch-Up Payment as of any Catch-Up Measurement Date:

Step 1: Calculate the performance for the recently completed Fiscal Quarter.

Step 2: Calculate the cumulative performance for the period commencing as of
April 1, 2020 through the relevant Catch-Up Measurement Date (the “Relevant
Period”), less any Quarterly Payments and Catch-Up Payments previously paid or
Quarterly Payment payable to the Participant based on Relevant Period; provided,
that in no event shall such Catch-Up Payment be greater than the cumulative
quarterly KEIP Payments assuming Stretch level of performance for the Relevant
Period.

 

A-3

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Cumulative Performance Goals:

1.    Cumulative Performance Goals:

 

     Cumulative Performance Goals
First Cumulative Period
4/1 through 9/30/2020     Cumulative Performance Goals
Second Cumulative Period
4/1 through 12/31/2020     Cumulative Performance Goals
Third Cumulative Period
4/1/2020 through 3/31/2021  

Performance Level (Payout Percentage)

   Threshold
(50%)     Target
(100%)     Stretch
(150%)     Threshold
(50%)     Target
(100%)     Stretch
(150%)     Threshold
(50%)     Target
(100%)     Stretch
(150%)  

Cumulative Rig Efficiency
(40% Weighting)

     91 %      94 %      97 %      91 %      94 %      97 %      91 %      94 % 
    97 % 

Cumulative LTIs
(20% Weighting)

     4       2       0       6       3       0       8       4       0  

Cumulative Reduction in Overhead Expenses
(40% Weighting)

     11 %      22 %      32 %      14 %      24 %      34 %      16 %      26 % 
    36 % 

2.    For purposes of this Catch-Up provision:

(a)    “Cumulative Rig Efficiency” means the average Rig Efficiency based on
actual performance achieved for the Fiscal Quarter ending on the relevant
Cumulative Measurement Date and the preceding Fiscal Quarters.

(b)    “Cumulative LTIs” means the aggregate LTIs based on actual performance
achieved for the Fiscal Quarter ending on the relevant Cumulative Measurement
Date and the preceding Fiscal Quarters.

(c)    “Cumulative Reduction in Overhead Expenses” means the percentage of the
average Reduction in Overhead Expenses based on actual performance achieved for
the Fiscal Quarter ending on the relevant Cumulative Measurement Date and the
preceding Fiscal Quarters.

Linear interpolation shall be applied to determine Payout Percentage in the
event of performance falling between the levels stated in the table.

 

A-4