Document:

exv10w2

 

Exhibit 10.2 — Form of Employee Deferred Performance Unit Award Letter

«FirstLast»

(address)

Dear «Fname»:

TODCO (the “Company”) hereby awards to you effective as of                     , 200___(the “Award
Date”)                    Deferred Performance Units in accordance with the TODCO 2005 Long Term Incentive
Plan (the “Plan”). Each Deferred Performance Unit represents the opportunity for you to receive
one share of TODCO Class A common stock (“Common Stock”). Your award of Deferred Performance Units
is more fully described in Appendix A, Terms and Conditions of Employee Deferred Performance Unit
Award. This letter and the attached Appendix A shall be referred to and defined herein as the
“Award Letter.”

The exact amount of the shares of Common Stock you may earn will be determined based upon the
Company’s achievement of a performance standard during the Performance Cycle as described in
Appendix A. Your Deferred Performance Unit Award will become Earned Shares on the Determination
Date and will be issued in Common Stock thereafter in accordance with Appendix A.

Your Deferred Performance Units are subject to the terms and conditions set forth in the enclosed
Plan, the Prospectus for the Plan, this Award Letter and any rules and regulations adopted by the
Executive Compensation Committee of the Company’s Board of Directors in accordance with the terms
of the Plan.

This Award Letter, the Plan, and any other attachments should be retained in your files for future
reference.

Congratulations on your award.

Very truly yours,

Jan Rask

Enclosures

 

 

Appendix A

Terms and Conditions of

Employee Deferred Performance Unit Award

[Date]

The Deferred Performance Unit Award by TODCO (the “Company”) to you effective as of the Award Date
provides for the opportunity for you to receive, if certain conditions are met, shares of TODCO
Class A common stock (“Common Stock”) subject to the terms and conditions set forth in the TODCO
2005 Long Term Incentive Plan (the “Plan”), the enclosed Prospectus for the Plan, any rules and
regulations adopted by the Executive Compensation Committee of the Company’s Board of Directors
(the “Committee”), and this Award Letter. Any terms used and not defined in the Award Letter shall
have the meanings set forth in the Plan. In the event there is an inconsistency between the terms
of the Plan and the Award Letter, the terms of the Plan will prevail.

1. Determination of Earned Shares

Earned Shares. The exact number of shares of Common Stock that will actually be earned by and
awarded to you (the “Earned Shares”) out of the total maximum number of the Deferred Performance
Units awarded to you in this Award Letter will be based upon the level of achievement by the
Company of the performance standard described below over the three-year period commencing January
1, 200___(the “Performance Cycle”). The determination by the Committee with respect to the
achievement of such performance standards will be made in the first quarter of 200___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 will notify you of the number of Earned Shares, if any, to be
actually awarded to you. The delivery of the Earned Shares will be made no later than 2 1/2 months
after the Determination Date.

The calculation of Earned Shares shall be based on the Company’s Total Shareholder Return
ranking compared to a defined peer group at the end of the Performance Cycle as determined
by the Committee in its sole discretion. “Total Shareholder Return” is defined for a given
company as the change in share price plus cumulative dividends paid, assuming dividend
reinvestment during the Performance Cycle, over share price at the beginning of the
Performance Cycle of the applicable company. Earned Shares will be calculated by
multiplying the maximum number of Deferred Performance Units granted by the following
percentages for the percentile rank achieved. For Total Shareholder Return performance
between the percentile ranks noted below, linear interpolation will be used to calculate
the exact number of Earned Shares:

	 	 	 	 	 
	Percentile Rank	 	Percentage	 
	100th
	 	 	100	%
	92
	 	 	91.67	 
	84
	 	 	83.33	 
	75
	 	 	75.00	 
	68
	 	 	66.67	 
	62
	 	 	58.33	 
	56
	 	 	50.00	 
	50
	 	 	40.00	 
	44
	 	 	30.00	 
	38
	 	 	20.00	 
	32
	 	 	10.00	 
	25th or lower
	 	ZERO

 

 

The Company’s defined “Peer Group” shall consist of TODCO and the following companies:
Atwood Oceanics Inc., Cal Dive International, Ensco International, Global Industries, Grant
Prideco, Grey Wolf, Helmerich & Payne, Maverick Tube, Newpark Resources, Parker Drilling,
Patterson – UTI Energy, Pride International, Rowan Companies Inc. and Tidewater Inc.

Committee Determinations. In accordance with the provisions of the Plan, the Committee shall have
the exclusive authority to make all determinations hereunder, including but not limited to the
ranking of TODCO and its Peer Group. Without limiting the foregoing, the Committee shall have
absolute discretion to determine the number of Earned Shares to which you are entitled, if any,
including without limitation such adjustments as may be necessary in the opinion of the Committee
to account for changes since the date of the Award Letter. Notwithstanding the foregoing, the
Committee shall be precluded from increasing the amount that would otherwise be obtainable upon the
achievement of the performance goals described in Section 1(a) above to the extent prescribed by
Section 162(m) of the Internal revenue Code of 1986 as amended (the “Code”) and the applicable
regulations rulings and notices thereunder. The Committee’s determination shall be final,
conclusive and binding upon you. You will not have any right or claim with respect to any shares
other than Earned Shares to which you become entitled in accordance herewith.

You will not be required to pay any purchase price for the Earned Shares; however tax withholding
is required pursuant to Section 8.

2. Vesting

Unless vested on an earlier date as provided in this Appendix A, the Earned Shares will vest on the
Determination Date. The Deferred Performance Units will only become Earned Shares, if at all, on
the Determination Date.

As described in Section 7 below, in the event of a Change in Control, a portion of your Deferred
Performance Units may become Earned Shares.

3. Restrictions

Until and unless Earned Shares become vested, you do not own any of the Common Stock potentially
subject to the Deferred Performance Units awarded to you in this Award Letter and you may not
attempt to sell, transfer, assign or pledge the Deferred Performance Units or the Common Stock that
may be awarded hereunder. Your Earned Shares, if any, will be registered in your name as of the
Determination Date. The Deferred Performance Units awarded hereunder shall be accounted for by the
Company on your behalf on a ledger. Promptly after the Determination Date (but no later than 2 1/2
months after the Determination Date), the net shares (total vested Earned Shares minus any Earned
Shares retained to satisfy the tax withholding obligation of the Company, as described in Section 8
if applicable), will be delivered in street name to your brokerage account (or, in the event of
your death, to a brokerage account in the name of your beneficiary in accordance with the Plan) or,
at the Company’s option, a certificate for such shares will be delivered to you.

4. Dividends and Voting

The Deferred Performance Units granted herein do not give you any rights as a stockholder of the
Company including, but not limited to, voting and dividend rights.

5. Termination of Employment

If your employment is terminated prior to the Determination Date due to death, “Disability” (as
defined below), “Retirement” (as defined below) or at the convenience of the Company (as determined
by the Committee), you will be entitled to receive Earned Shares representing a “Pro Rata Share” of
your Deferred Performance Units, if any become payable, on the Determination Date. The calculation
of your Pro- Rata Share is determined by multiplying the number of Earned Shares calculated as of
the Determination Date

 

 

which would have otherwise been earned had your employment not been terminated, by a fraction, the
numerator of which is the number of calendar days you were employed during the Performance Cycle
after the Award Date and the denominator of which is the total number of calendar days in the
Performance Cycle after the Award Date. Retirement is defined for the purpose of this section of
Appendix A as meeting the “Rule of 70”, which requires a minimum age of 55, combined with years of
service to total 70 or more. If you retire after the age of 55, yet your age and years of service
do not lead to a combined 70, you will not be entitled to any Earned Shares. Retirement also means
your retirement at the convenience of the Company as determined by the Committee. Disability shall
mean you are unable to engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment that can be expected to result in death, or last a
continuous period of not less than twelve months or by reason of either of the foregoing you are
receiving income replacement benefits for a period of not less than three months under an accident
and health plan covering employees of the Company. Except as provided under Section 7, “Change in
Control”,” if your employment is terminated for any reason other than death, Disability,
Retirement, or termination for the convenience of the Company, you will not be entitled to any
Earned Shares. The Committee shall have absolute discretion to determine the date and circumstances
of termination of your employment, including without limitation whether as a result of death,
Disability, Retirement, or termination for the convenience of the Company, or any other reason, and
its determination shall be final, conclusive and binding upon you.

6. Beneficiary

You may designate a beneficiary to receive any Earned Shares that become due to you after your
death, and may change your beneficiary from time to time. Beneficiary designations should be filed
with the Committee of the Plan. If you fail to designate a beneficiary, Earned Shares due to you
under the Plan will be issued to the executor or administrator of your estate in the event of your
death.

7. Change in Control

Acceleration of Vesting. If you are employed by the Company on the date of a Change in
Control of the Company and the Determination Date has not occurred, you will be entitled to
receive Earned Shares representing 50% of your Deferred Performance Units. to be paid no
later than 2 1/2 months after a Change in Control. A Change in Control of the Company shall
be deemed to have occurred as of the first day any one or more of the following conditions
shall have been satisfied:

	 	(a)	 	The acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act (a “Person”)
of beneficial ownership (within the meaning of Rule 13d-3 promulgated under
the Exchange Act) of shares representing 20% or more of the combined voting
power of the then outstanding voting securities of the Company entitled to
vote generally in the election of directors (the “Outstanding Company Voting
Securities”); provided, however, that for purposes of this subsection (a), the
following acquisitions shall not constitute a Change in Control: (i) any
acquisition directly from the Company, (ii) any acquisition by the Company,
(iii) any acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any corporation or other entity
controlled by the Company, or (iv) any acquisition by any corporation or other
entity pursuant to a transaction which complies with clauses (i), (ii) and
(iii) of Section 7(c); or
	 
	 	(b)	 	Individuals who, as of the effective date of the Plan (as
defined in the Plan), are members of the Board of Directors of the Company
(the “Incumbent Board”) cease for any reason to constitute at least a majority
of the Board of Directors of the Company; provided, however, that for purposes
of this Section 7(b), any individual becoming a director subsequent to
the date hereof whose election, or nomination for election by the Company’s
shareholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board, shall be considered as though such
individual were a member of the Incumbent

 

 

Board, but excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of an actual or threatened
election contest with respect to the election or removal of directors or
other actual or threatened solicitation of proxies or consents by or on
behalf of a Person other than the Board of Directors of the Company; or

	 	(c)	 	Consummation of a reorganization, merger, conversion or
consolidation or sale or other disposition of all or substantially all of the
assets of the Company (a “Business Combination”), in each case, unless,
following such Business Combination, (i) all or substantially all of the
individuals and entities who were the beneficial owners, respectively, of the
Outstanding Company Voting Securities immediately prior to such Business
Combination beneficially own, directly or indirectly, more than 50% of the
then outstanding combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors of the
corporation or other entity resulting from such Business Combination
(including, without limitation, a corporation or other entity which as a
result of such transaction owns the Company or all or substantially all of the
Company’s assets either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership, immediately prior to
such Business Combination of the Outstanding Company Voting Securities, (ii)
no Person (excluding any corporation or other entity resulting from such
Business Combination or any employee benefit plan (or related trust) of the
Company or such corporation or other entity resulting from such Business
Combination) beneficially owns, directly or indirectly, 20% or more of the
combined voting power of the then outstanding voting securities of the
corporation or other entity resulting from such Business Combination except to
the extent that such ownership existed prior to the Business Combination and
(iii) at least a majority of the members of the board of directors of the
corporation or other entity resulting from such Business Combination were
members of the Incumbent Board at the time of the execution of the initial
agreement, or of the action of the Board of Directors of the Company,
providing for such Business Combination; or
	 
	 	(d)	 	Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company other than in connection with the
transfer of all or substantially all of the assets of the Company to an
affiliate or a Subsidiary of the Company.

8. Tax Consequences and Income Tax Withholding

You should review the Plan Prospectus for a general summary of the U.S. federal income tax
consequences to you from this award of Deferred Performance Units and any Earned Shares based on
currently applicable provisions of the Code and related regulations. The summary does not discuss
state and local tax laws or the laws of any other jurisdiction, which may differ from U.S. federal
tax law. Neither the Company nor the Committee guarantees the tax consequences of your award
herein. You are advised to consult your own tax advisor regarding the application of the tax laws
to your particular situation.

The award under the Award Letter is subject to your making of arrangements satisfactory to the
Company to satisfy any applicable U.S. federal, state or local withholding tax liability arising
from the vesting of the Earned Shares. You can either make a cash payment to the Company of the
required amount or at the discretion of the Committee you can elect to satisfy your withholding
obligation by having the Company retain Common Stock having a value approximately equal to the
amount of your withholding obligation from the Earned Shares otherwise deliverable to you upon the
vesting of such shares. You may not elect for such withholding to be greater than the minimum
statutory withholding tax liability arising from the vesting of the Earned Shares. If you fail to
satisfy your withholding obligation in a time and manner satisfactory to the Company, no shares
will be issued to you or the Company at its discretion shall have the right to

 

 

withhold the required amount from your salary or other amounts payable to you prior to the delivery
of the Common Stock to you.

In addition, you must make arrangements satisfactory to the Company to satisfy any applicable
withholding tax liability imposed under the laws of any other jurisdiction arising from the award
hereunder. You may not elect to have the Company withhold Earned Shares having a value in excess of
the minimum statutory withholding tax liability. If you fail to satisfy such withholding obligation
in a time and manner satisfactory to the Company, no shares will be issued to you or the Company
shall have the right to withhold the required amount from your salary or other amounts payable to
you prior to the delivery of the Common Stock to you.

9. Restrictions on Resale

Other than the restrictions referenced in paragraph 3, there are no restrictions imposed by the
Plan on the resale of Earned Shares acquired under the Plan. However, under the provisions of the
Securities Act of 1933 (the “Securities Act”) and the rules and regulations of the Securities and
Exchange Commission (the “SEC”), resales of shares acquired under the Plan by certain officers and
directors of the Company who may be deemed to be “affiliates” of the Company must be made pursuant
to an appropriate effective registration statement filed with the SEC, pursuant to the provisions
of Rule 144 issued under the Securities Act, or pursuant to another exemption from registration
provided in the Securities Act. At the present time, the Company does not have a currently
effective registration statement pursuant to which such resales may be made by affiliates. These
restrictions do not apply to persons who are not affiliates of the Company; provided, however, that
all employees and the award made hereby are subject to the Company’s policies against insider
trading (including black-out periods during which no sales are permitted) and to other restrictions
on resale that may be imposed by the Company from time- to- time if it determines such restrictions
are necessary or advisable to comply with applicable law.

10. Effect on Other Benefits

Income recognized by you as a result of this award of the Deferred Performance Units, vesting , or
payment of Earned Shares or dividends on your Earned Shares will not be included in the formula for
calculating benefits under any of the Company’s retirement and disability plans or any other
benefit plans.

11. Compliance With Laws

This Award Letter, the Deferred Performance Units and any Earned Shares issued hereunder shall be
subject to all applicable federal and state laws and the rules of the exchange on which shares of
the Company’s Common Stock are traded.

12. Miscellaneous

Not an Agreement for Continued Employment or Services. This Award Letter will not, and no
provision of this Award Letter will be construed or interpreted to, create any right to be employed
by or to provide services to or continue your employment with or provide services to the Company,
the Company’s affiliates, parent, subsidiary or their affiliates.

Community Property. Each spouse individually is bound by, and such spouse’s interest, if any, in
this award of Deferred Performance Units or in any shares of Common Stock that may be awarded
hereunder is subject to the terms of this Award Letter. Nothing in this Award Letter shall create
a community property interest where none otherwise exists.

Amendment for Code Section 409A. This award of Deferred Performance Units is intended to be exempt
from Code Section 409A. If the Committee determines that this award of Deferred Performance Units
is subject to Code Section 409A, the Committee may, in its sole discretion, amend the terms and
conditions of this Award Letter to the extent necessary to comply with Code Section 409A.

 

 

If you have any questions regarding your award of Deferred Performance Units or would like to
obtain additional information about the Plan or the Committee, please contact the Company’s General
Counsel. Your Award Letter, the Plan and all attachments should be retained in your files for
future reference.exv10w3

 

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.

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