Document:

a1042019roicawardform

                                                                                                   INDEPENDENCE CONTRACT DRILLING, INC.                     PERFORMANCE UNIT AWARD AGREEMENT                               Return on Invested Capital                                  Grantee:   _________         1.    Grant of Performance Unit Award.                 (a)   As of _______________ (the “ Effective Date ”), the date of this agreement  (this  “ Agreement ”),  Independence  Contract  Drilling,  Inc.,  a  Delaware  corporation  (the “Company ”), hereby grants to the Grantee (identified above) _______ restricted stock units   (the “ RSUs ”) pursuant to the Amended and Restated Independence Contract Drilling, Inc. 2019  Omnibus Incentive Plan, as may be amended from time to time (the “ Plan ”).  The number of RSUs  hereunder  that  are  considered  target  RSUs  shall  be ______  (the  “ Target  RSUs ”).   The  RSUs  represent the opportunity to receive a number of shares of Common Stock of the Company based  upon satisfaction of certain ROIC targets and the “Payout Multiplier ” as defined in Exhibit A,  subject to Exhibit C. The actual number of shares of Common Stock that may be issued pursuant  to the terms of this Agreement will be between 0% and 200% of the number of Target RSUs (as  determined in Exhibit A).                    (b)   To  determine  the  number,  if  any,  of  RSUs  that  shall  be  deemed  earned  (“ Earned RSUs ”), the methodology on Exhibit A shall be followed, subject to Exhibit C.          It  is  understood  that  Earned  RSU’s  are  also  subject  to  a  three-year  time-based  vesting  requirement that begins on the Effective Date, as described in paragraph 3 below.         2.    Definitions.   Exhibits  A,  B  and  C  are  incorporated  into  this  Agreement  by  reference.  Unless otherwise provided, all capitalized terms used herein shall have the meanings  set forth in the Plan, or as set forth in Exhibits A, B and C.  In the event of a conflict between the  terms of the Plan and terms of this Agreement, the terms of the Plan shall control.           3.    Vesting  and  Forfeiture.  Subject  to  Grantee’s  continued  employment  with  the  Company or its affiliates (the “ Company Group ”), and subject further to Exhibits A, B and C,  and  any  change  of  control  or  employment  agreement  between  Grantee  and  a  member  of  the  Company Group, only RSUs that become Earned RSUs shall have the opportunity to vest, and  Earned RSUs shall vest, if at all, on the third anniversary of the Effective Date (the  “ Vesting  Date ”).    Additionally, except to the extent a change of control or employment agreement between  Grantee and a member of the Company Group provides otherwise, a failure of Grantee to continue  his  or  her  employment  through  the  Vesting  Date  shall  result  in  an  immediate  and  automatic  forfeiture of outstanding RSUs and Earned RSUs under this Agreement.              4.    Purchase Price.  No consideration shall be payable by the Grantee to the Company  for the RSUs.                                         1    HOU:3760738.2  

 

                                                                                       5.    Restrictions on RSUs and Settlement of Vested RSUs.                 (a)   No Dividend Equivalents are granted with respect to any RSUs.               (b)   The Company shall settle vested Earned RSUs within 30 days of the date  such Earned RSUs become vested in accordance with Section 3, above.  Each vested Earned RSU  shall entitle the Grantee to receive one share of Common Stock.                 (c)   Nothing in this Agreement or the Plan shall be construed to:                     (i)   give the Grantee any right to be awarded any further RSUs or any        other  Award  in  the  future,  even  if  RSUs  or  other  Awards  are  granted  on  a  regular  or        repeated basis, as grants of RSUs and other Awards are completely voluntary and made        solely in the discretion of the Committee;                     (ii)  give the Grantee or any other person any interest in any fund or in        any specified asset or assets of the Company or any Affiliate; or                     (iii)  confer upon the Grantee the right to continue in the employment or        service of the Company or any Affiliate, or affect the right of the Company or any Affiliate        to terminate the employment or service of the Grantee at any time or for any reason.                (d)   The Grantee shall not have any voting rights with respect to the RSUs.          6.    Independent Legal and Tax Advice.  Grantee acknowledges that the Company  has  advised  Grantee  to  obtain  independent  legal  and  tax  advice  regarding  the  grant,  holding,  vesting and settlement of the RSUs in accordance with this Agreement and any disposition of any  such Awards or the shares of Common Stock issued with respect thereto.         7.    Reorganization of Company.  The existence of this Agreement shall not affect in  any way the right or power of the Company or its stockholders to make or authorize any or all  adjustments, recapitalizations, reorganizations or other changes in the Company’s capital structure  or its business, or any merger or consolidation of the Company, or any issue or bonds, debentures,  preferred stock or the rights thereof, or the dissolution or liquidation of the Company, or any sale  or transfer of all or any part of its assets or business, or any other corporate act or proceeding,  whether of a similar character or otherwise.  Except as otherwise provided herein, in the event of  a Corporate Change as defined in the Plan, Section 4.5 of the Plan shall be applicable.         8.    Investment Representation.  Grantee will enter into such written representations,  warranties and agreements as the Company may reasonably request in order to comply with any  federal or state securities law.  Moreover, any stock certificate for any shares of stock issued to  Grantee  hereunder  may  contain  a  legend  restricting their  transferability  as  determined  by  the  Company in its discretion.  Grantee agrees that the Company shall not be obligated to take any  affirmative action in order to cause the issuance or transfer of shares of Stock hereunder to comply  with any law, rule or regulation that applies to the shares subject to this Agreement.         9.    No Guarantee of Employment.  This Agreement shall not confer upon Grantee  any right to continued employment with the Company or any Affiliate thereof.                                         2    HOU:3760738.2  

 

                                                                                       10.   Withholding of Taxes.  The Company or an Affiliate shall be entitled to satisfy,  pursuant to Section 16.3 of the Plan, any and all tax withholding requirements with respect to  RSUs.         11.   General.               (a)   Notices.  All notices under this Agreement shall be mailed or delivered by  hand to the parties at their respective addresses set forth beneath their signatures below or at such  other address as may be designated in writing by either of the parties to one another, or to their  permitted transferees if applicable.  Notices shall be effective upon receipt.               (b)   Transferability  of  Award.   The  rights  of  the  Grantee  pursuant  to  this  Agreement are not transferable by Grantee.  No right or benefit hereunder shall in any manner be  liable  for  or  subject  to  any  debts,  contracts,  liabilities,  obligations  or  torts  of  Grantee  or  any  permitted  transferee  thereof.  Any  purported  assignment,  alienation,  pledge,  attachment,  sale,  transfer or other encumbrance of the RSUs, prior to the lapse of restrictions, that does not satisfy  the requirements hereunder shall be void and unenforceable against the Company.               (c)   Amendment and Termination.  No amendment, modification or termination  of  this  Agreement  shall  be  made  at  any  time  without  the  written  consent  of  Grantee  and  the  Company.               (d)   No  Guarantee  of  Tax  Consequences.   The  Company  and the  Committee  make no commitment or guarantee that any federal, state, local or other tax treatment will (or will  not)  apply  or  be  available  to  any  person  eligible  for  compensation  or  benefits  under  this  Agreement.   The  Grantee  has  been  advised  and  been  provided  the  opportunity  to  obtain  independent legal and tax advice regarding the granting, vesting and settlement of RSUs pursuant  to the Plan and this Agreement and the disposition of any Common Stock acquired thereby.                (e)   Section 409A.  The award of RSUs hereunder is intended to either comply  with or be exempt from Section 409A, and the provisions of this Agreement shall be administered,  interpreted and construed accordingly. If the award of RSUs is not exempt from Section 409A and  the Grantee is a “specified employee” within the meaning of Section 409A(a)(2)(B)(i) of the Code  on the date on which the Grantee has a “separation from service” (other than due to death) within  the  meaning  of  Section  1.409A-1(h)  of  the  Treasury Regulations,  then  notwithstanding  the  provisions of this Agreement, any transfer of shares or other compensation payable on account of  Grantee’s separation from service that constitute deferred compensation under Section 409A shall  take place on the earlier of (i) the first business day following the expiration of six months from  the Grantee’s separation from service, or (ii) such earlier date as complies with the requirements  of Section 409A. To the extent required under Section 409A, the Grantee shall be considered to  have terminated employment with the Company or its affiliates (the “Company Group”) when the  Grantee incurs a “separation from service” with respect to the Company Group within the meaning  of Section 409A(a)(2)(A)(i) of the Code.               (f)   Severability.  In the event that any provision of this Agreement shall be held  illegal, invalid or unenforceable for any reason, such provision shall be fully severable, but shall                                          3    HOU:3760738.2  

 

                                                                                 not affect the remaining provisions of the Agreement, and the Agreement shall be construed and  enforced as if the illegal, invalid or unenforceable provision had not been included therein.               (g)   Supersedes Prior Agreements.  This Agreement shall supersede and replace  all prior agreements and understandings, oral or written, between the Company and the Grantee  regarding the grant of the RSUs covered hereby.               (h)   Governing Law.  This Agreement shall be construed in accordance with the  laws of the State of Delaware without regard to its conflict of law provisions, to the extent federal  law does not supersede and preempt Delaware law.               (i)   No Trust or Fund Created.  This Agreement shall not create or be construed  to create a trust or separate fund of any kind or a fiduciary relationship between the Company or  any Affiliate and a Grantee or any other Person.  To the extent that any Person acquires a right to  receive payments from the Company or any Affiliates pursuant to this Agreement, such right shall  be no greater than the right of any general unsecured creditor of the Company or any Affiliate.               (j)   Clawback  Provisions.   Notwithstanding  any  other  provisions  in  this  Agreement  or  the  Change  of  Control  Agreement  to  the  contrary,  any  incentive-based  compensation,  or  any  other  compensation,  payable  pursuant  to  this  Agreement  or  any  other  agreement or arrangement with the Company or an affiliate which is subject to recovery under any  law,  government  regulation  or  stock  exchange  listing  requirement,  will  be  subject  to  such  deductions  and  clawback  as  may  be  required  to  be  made  pursuant  to  such  law,  government  regulation or stock exchange listing requirement (or any policy adopted by the Company or an  affiliate pursuant to such law, government regulation or stock exchange listing requirement).                 (k)   Restrictive  Covenants.   Grantee  agrees  to  the  restrictive  covenants  contained in Exhibit D to this Agreement.               (l)   Other Laws.  The Company retains the right to refuse to issue or transfer  any Stock if it determines that the issuance or transfer of such shares might violate any applicable  law or regulation or entitle the Company to recover under Section 16(b) of the Securities Exchange  Act of 1934.               (m)   Binding Effect.  This Agreement shall be binding upon and inure to the  benefit of any successors to the Company and all persons lawfully claiming under the Grantee.                            [SIGNATURES ON NEXT PAGE]                                               4    HOU:3760738.2  

 

                                                                                       IN WITNESS WHEREOF, the Company has caused this Agreement to be executed on its  behalf by its duly authorized officer and Grantee has hereunto executed this Agreement as of the  date set forth above.                                    INDEPENDENCE CONTRACT DRILLING, INC.                                    By:                                                                              Name:                                    Title:                                     Address for Notices:                                                                      Independence Contract Drilling, Inc.                                   20475 Hwy 249, Suite 300                                   Houston, Texas 77070                                   Attn:  Chief Executive Officer                                    GRANTEE                                                                                                                                                                                                                                                                   Address for Notices:                                                                      Executive’s then current address shown in the                                   Company’s records.                                           5    HOU:3760738.2  

 

                                                                                                                    Exhibit A                                                                   RETURN ON INVESTED CAPITAL  1.  Performance Targets                                                ROIC                                 Entry                           OA                                               Target                            (Multiplier = .01%             (Multiplier = 200%                                             (Multiplier =                                Target)                        Target)                                             100% Target )             Performance                                 __%            __%             __%           Period One:  Fiscal                            (80% of Target)                (120% of Target)            Year Ended ____             Performance                                ___%                            __%           Period Two:  Fiscal                  ___%                            (80% of Target)                (120% of Target)            Year Ended ____             Performance             Period Three:      ___%                           ___%                                                __%            Fiscal Year Ended (80% of Target)              (120% of Target)                 ___             Performance                                ___%                           ___%           Period Four:  Three                  ___%                            (80% of Target)                (120% of Target)            Years Ended____  2.  Definitions               a.  Average Invested Capital  means the sum of Invested Capital at the beginning of the         measurement period and Invested Capital at the end of the applicable measurement         period divided by two.                  b.  Invested Capital means Stockholders Equity plus short and long-term debt less cash               c.  Non-Operating Expenses  means without duplication during any Performance Period,         interest expense, gain or loss on dispositions of assets, non-cash asset impairments,         merger or acquisition expenses (so long as such impairment does not relate to an asset         acquired during the applicable Performance Period) or other non-routine charges         incurred during the applicable Performance Period as the Committee may determine is         appropriate to include as Non-Operating Expenses during the applicable Performance         Period.               d.  ROIC  means the ratio calculated by dividing NOPAT during the applicable         measurement period by Average Invested Capital.                                                   1    HOU:3760738.2  

 

                                                                                     e.  NOPAT means pretax net income during the applicable measurement period plus Non-        Operating Expenses during the applicable measurement period minus cash taxes paid         during the applicable measurement period           3.  Committee Methodology .            a.  The RSUs vested and earned shall be divided into four performance periods.               b.  For purposes of determining the Company’s ROIC during any particular performance         period, the Committee shall calculate ROIC each calendar quarter (each a measurement         period) within such Performance Period, with ROIC for the applicable Performance         Period equaling the average ROIC for each of the quarterly measurement periods during         the Performance Period.                c.  For the applicable Performance Period, calculate the number of Earned RSUs for such         Performance Period as follows (for the avoidance of doubt, Earned RSUs are not vested         and will not become vested RSU’s until the vesting restrictions set forth in the         Performance Unit Agreement are met):                  i.  Performance Period One :  Calculate ROIC for Performance Period One.  Multiply 1/3            of the Target RSUs by the Multiplier, with such answer being the Earned RSUs for            Performance Period One.                     i.  Performance Period Two :  Calculate ROIC for Performance Period Two.  Multiply            the 1/3 of the Target RSUs by the Multiplier, with such answer being the Earned RSUs            for  Performance Period Two.                     ii.  Performance Period Three :  Calculate ROIC for Performance Period Three.  Multiply            1/3 of the Target RSUs by the Multiplier, with such answer being the Earned RSUs            for the Performance Period Three.                     iii.  Performance Period Four :  Calculate ROIC for Performance Period Four.  Multiply            the Target RSUs by the Multiplier, with such answer, reduced by the amount of Earned            RSU’s  attributable  to  the  other  Performance  Periods  (but  not  reduced  below  zero)            being the Earned RSUs for Performance Period Four.              d.  Determine the number of Vested RSUs, which shall equal the sum of the Earned RSUs         for Performance Periods One, Two, Three and Four calculated pursuant to paragraph c         above.               e.  If any calculation with respect to the number of RSUs that are earned, and thus the number         of shares of Common Stock to be issued hereunder would result in a fractional share, the                                         2    HOU:3760738.2  

 

                                                                                        number of shares of Common Stock to be issued shall be rounded down to the nearest         whole share.              f.  All calculations shall be based upon the consolidated financial statements of the Company,         prepared  in  accordance  with  generally  accepted  accounting  principles  applied  on  a         consistent basis.              g.  For actual results achieved between Entry, Target and OA thresholds, the Multiplier for         purposes of determining number of awards earned during the applicable period shall be         calculated through interpolation.                                                   3    HOU:3760738.2  

 

                                                                                                                    Exhibit B                                  Certain Definitions .                      1.    Change of Control shall mean                A.    The acquisition by any individual, entity or group (within the meaning of         Section  13(d)(3)  or  14(d)(2)  of  the  Securities  Exchange  Act  of  1934,  as  amended  (the         “Exchange Act ”)) (a “ Person ”) of beneficial ownership (within the meaning of Rule 13d-        3  promulgated  under  the  Exchange  Act)  of  50  percent  or  more  of  either  (A)  the  then         outstanding  shares  of  common  stock  or  membership  interests  of  the  Company  (the         “Outstanding Company Common Stock ”) or (B) the combined voting power of the then         outstanding voting securities of the Company entitled to vote generally in the election of         directors  or  managers  (the  “ Outstanding  Company  Voting  Securities ”);  provided,         however,  that  for  purposes  of  this  subsection  A,  the  following  acquisitions  shall  not         constitute a Change of Control:  (1) any acquisition directly from the Company or any         acquisition by the Company; or (2) any acquisition by any employee benefit plan (or related         trust)  sponsored  or  maintained  by  the  Company  or  any  corporation  controlled  by  the         Company; or (3) any acquisition by any corporation pursuant to a transaction that complies         with clauses (1), (2) and (3) of subsection C of this definition; or                B.     Individuals,  who,  as  of  the  date  hereof  constitute  the  Board  (the         "Incumbent Board ") cease for any reason to constitute at least a majority of the Board;         provided, however, that any individual becoming a director subsequent to the date hereof         whose election, or nomination for election by the Company's stockholders or members,         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  was  a  member  of  the  Incumbent         Board, but excluding, for purpose of this subsection B, 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; or                C.    Consummation of a reorganization, merger or consolidation or sale or other         disposition  of  all  or  substantially  all  of  the  assets  of  the  Company  (a  " Corporate         Transaction ")  in  each  case,  unless,  following  such  Corporate  Transaction,  (1)  all  or         substantially  all  of  the  individuals  and  entities  who  were  the  beneficial  owners,         respectively,  of  the  Outstanding  Company  Common  Stock  and  Outstanding  Company         Voting  Securities  immediately  prior  to  such  Corporate  Transaction  beneficially  own,         directly or indirectly, more than 60 percent of, respectively, the then outstanding shares of         common stock and the combined voting power of the then outstanding voting securities         entitled to vote generally in the election of directors, as the case may be, of the corporation         resulting from such Corporate Transaction (including, without limitation, a corporation that         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 Corporate Transaction, of         the  Outstanding  Company  Common  Stock  and  the  Outstanding  Company  Voting         Securities, as the case may be, (2) no Person (excluding any corporation resulting from                                         1    HOU:3760738.2  

 

                                                                                       such Corporate Transaction or any employee benefit plan (or related trust) of the Company        or such corporation resulting from such Corporate Transaction) beneficially owns, directly        or indirectly, 20 percent or more of, respectively, the then outstanding shares of common        stock of the corporation resulting from such Corporate Transaction or the combined voting        power of the then outstanding voting securities of such corporation except to the extent that        such ownership existed prior to the Corporate Transaction and (3) at least a majority of the        members  of  the  board  of  directors  of  the  corporation  resulting  from  such  Corporate        Transaction were members of the  Incumbent Board at the time of the  execution of the        initial agreement, or of the action of the Board, providing for such Corporate Transaction;        or               D.    Approval by the stockholders of the Company of a complete liquidation or         dissolution of the Company.          Notwithstanding  the  foregoing,  however,  in  any  circumstance  or  transaction  in  which         compensation would be subject to the income tax under Section 409A if the foregoing         definition of “Change of Control” were to apply, but would not be so subject if the term         “Change of Control” were defined herein to mean a “change in control event” within the         meaning of Treasury Regulation Section 1.409A-3(i)(5), then “Change of Control” means,         but only to the extent necessary to prevent such compensation from becoming subject to         the  income  tax  under   Section  409A,  a  transaction  or  circumstance  that  satisfies  the         requirements of both (1) a Change of Control under the applicable clauses (A) through (D)         above, as applicable, and (2) a “change in control event” within the meaning of Treasury         Regulation Section 1.409A-3(i)(5).                                   *     *     *     *     *                                           2    HOU:3760738.2  

 

                                                                                                                       Exhibit C                                                     Change of Control.           1.  RSUs Becoming Earned RSUs.  If prior to the expiration of any applicable Performance           Period,  a  Change  of  Control  occurs,  and  the  Grantee  has  remained  continuously           employed by the Company Group from the Effective Date to the date of such Change           of Control, then, notwithstanding any other provision of this Agreement to the contrary,           a portion of the outstanding Target RSUs that have not previously converted to Earned           RSUs shall automatically and immediately become Earned RSUs on the date of such           Change of Control determined by the following:                 a.  If the Change of Control occurs prior to the expiration of Performance Period                 II, all Target RSUs (to the extent not previously forfeited) shall be included in                 the below fraction to determine what portion of the RSUs are Earned RSUs.               b.  If the Change of Control occurs prior to the expiration of Performance Period                 II, 75% of Target RSUs (to the extent not previously forfeited) shall be included                 in the below fraction to determine what portion of the RSUs are Earned RSUs.               c.  If the Change of Control occurs prior to the expiration of Performance Period                 III and IV, 50% of the Target RSUs (to the extent not previously forfeited) shall                 be included in the below fraction to determine what portion of the RSUs are                 Earned RSUs.            The  fraction  (not  greater  than  1)  to  be  utilized  in  the  above  calculations  shall  be           determined as follows:  the numerator being the number of months (not including any           partial months) that have elapsed since the Effective Date to the date of the Change of           Control, and the denominator being the total number of months in the period beginning           on the Effective Date and ending on the third anniversary of the Effective Date..         2.  Earned RSUs Becoming Vested.  If a Change of Control occurs and the Grantee has           remained continuously employed by the Company Group from the Effective Date to           the date of such Change of Control, then, notwithstanding any other provision of this           Agreement to the contrary, all Earned RSU’s (determined after calculating 1, above)           shall vest on the date of such Change of Control.            It  is  understood  that  to  the  extent  a  Change  of  Control  occurs  after  an  applicable           Performance  Period,  any  Earned  RSUs  relating  to  such  previously  occurring           Performance Period (as determined by the Committee pursuant to Exhibit A) shall be           considered, in addition to the Earned RSUs calculated pursuant to paragraph 1 above,           Earned RSUs for purposes of this paragraph 2.                *     *     *     *     *                                          1    HOU:3760738.2  

 

                                                                                                                       Exhibit D                                   Restrictive Covenants                                                      In consideration for the grant of RSU’s hereunder, which are expected to vest during   Grantee’s employment with the Company Group over the vesting period, as well as the   protection of the Company Group’s goodwill and Confidential Information, Grantee agrees to   the following:                  (a)   Certain Definitions. For purposes of this Exhibit D, the following terms shall have  the following meanings:               (i)   Cause ” shall mean Grantee’s:                           A.    willful and continued failure to comply with the reasonable               written  directives  of  the  Company  for  a  period  of  thirty  (30)  days  after  written               notice from the Company;                             B.    willful  and  persistent  inattention  to  duties  for  a period  of              thirty (30) days after written notice from the Company, or the commission of acts              within employment with the Company Group amounting to gross negligence or              willful misconduct;                           C.    misappropriation  of  funds  or  property  of  the  Company              Group or committing any fraud against the Company Group or against any other              person or entity in the course of employment with the Company Group;                           D.    misappropriation of any corporate opportunity, or otherwise              obtaining personal profit from any transaction which is adverse to the interests of              the Company Group or to the benefits of which the Company Group is entitled;                            E.    conviction of a felony involving moral turpitude;                           F.    willful  failure  to  comply  in  any  material  respect  with  the               terms of this Agreement and such non-compliance continues uncured after thirty               (30) days after written notice from the Company;                            G.    chronic substance abuse, including abuse of alcohol, drugs              or other substances or use of illegal narcotics or substances, for which Grantee fails              to undertake treatment immediately after requested by the Company or to complete              such treatment and which abuse continues or resumes after such treatment period,              or  possession  of  illegal  narcotics  or  substances  on  Company  premises  or  while              performing Grantee’s duties and responsibilities.                                         1    HOU:3760738.2  

 

                                                                                       For purposes of this definition, no act, or failure to act, by  Grantee  will be considered        “willful” if done, or omitted to be done, by Grantee in good faith and in the reasonable        belief  that  the  act  or  omission  was  in  the  best  interest  of  the  Company  or  required  by        applicable law.         Any  termination  during  the  Employment  Term  by  the  Company  for  Cause  shall  be        communicated by Notice of Termination to the Grantee.  For purposes of this Agreement,        a “Notice of Termination ” means a written notice which sets forth in reasonable detail the        facts  and  circumstances  claimed  to  provide  a  basis for  termination  of  the  Grantee’s        employment  for  “Cause”    The  failure  by  the  Company  to  set  forth  in  the  Notice  of        Termination any fact or circumstance which contributes to a showing of Cause shall not        waive any right of the Company from asserting such fact or circumstance in enforcing the        Company’s rights hereunder.                 (ii)  “Confidential Information ” means any information, knowledge or data of        any  nature  and  in  any  form  (including  information  that  is  electronically  transmitted  or        stored on any form of magnetic or electronic storage media) relating to the past, current or        prospective business or operations of the Company Group, that is not generally known to        persons engaged in a business similar to that conducted by the Company Group, whether        produced  by  the  Company  Group  or  any  of  its  consultants,  agents  or  independent        contractors  or  by  Grantee,  and  whether  or  not  marked  confidential.    Confidential        information does not include information that (1) at the time of disclosure is, or thereafter        becomes, generally available to the public, (2) prior to or at the time of disclosure was        already in the possession of Grantee, (3) is obtained by Grantee from a third party not in        violation  of  any  contractual,  legal  or  fiduciary  obligation  to  the  Company  Group  with        respect to that information or (3) is independently developed by Grantee, but not including        the confidential information provided by the Company Group.               (iii)  “Restricted  Business ”  means  any  the  oil  and  natural  gas  land  contract        drilling business conducted in the United States of America.           (b)   Nondisclosure  of  Confidential  Information.   Grantee  shall  hold  in  a  fiduciary  capacity for the benefit of the Company Group all Confidential Information which shall have been  obtained by Grantee during Grantee’s employment and shall not use such Confidential Information  other than within the scope of Grantee’s employment with and for the exclusive benefit of the  Company Group.  Following any termination of employment with the Company Group, Grantee  agrees (i) not to communicate, divulge or make available to any person or entity (other than the  Company  Group)  any  such  Confidential  Information,  except  (A)  upon  the  prior  written  authorization  of  the  Company  Group,  (B)  as  may  be  required  by  law  or  legal  process,  (C)  as  reasonably necessary in connection with the enforcement of any right or remedy related to this  Agreement, or (D) unless no longer Confidential Information, and (ii) to deliver promptly to the                                          2    HOU:3760738.2  

 

                                                                                 Company Group any Confidential Information in Grantee’s possession, including any duplicates  thereof and any notes or other records Grantee has prepared with respect thereto. In the event that  the provisions of any applicable law or the order of any court would require Grantee to disclose or  otherwise  make  available  any  Confidential  Information  then  Grantee  shall,  to  the  extent  practicable, give the Company prior written notice of such required disclosure and an opportunity  to contest the requirement of such disclosure or apply for a protective order with respect to such  Confidential Information by appropriate proceedings.            (c)   Limited  Covenant  Not  to  Compete.   In  the  event  Grantee’s  employment  is  terminated by Grantee for any reason or by the Company Group for Cause, Grantee agrees that  during the period beginning on the date of such termination and ending on the twelve (12) month  anniversary of the date of such termination:                 (i)   Grantee shall not, directly or indirectly, for himself or others, own, manage,        operate, control or participate in the ownership, management, operation or control of any        business,  whether  in  corporate,  proprietorship  or  partnership  form  or  otherwise,  that  is        engaged, directly or indirectly, in the United States in the Restricted Business; provided,        however ,  that  the  restrictions  contained  herein  shall  not restrict  (A)  the  acquisition  by        Grantee of less than 2% of the outstanding capital stock of any publicly traded company        engaged in a Restricted Business or (B) Grantee from being employed by an entity in which        the majority of such entity’s revenues on a consolidated basis determined in accordance        with generally accepted accounting principles are from activities and businesses that do        not constitute a Restricted Business and provided that Grantee is only employed by and        engaged  with  divisions  and  units  of  such  entity  that  are  not  engaged  in  the  Restricted        Business; and               (ii)  Grantee shall not, directly or indirectly (A) solicit any individual, who, at         the time of time of such solicitation is an employee of the Company Group, to leave such         employment  or  hire,  employ  or  otherwise  engage  any such  individual  (other  than         employees of the Company Group who respond to general advertisements for employment         in  newspapers  or  other  periodicals  of  general  circulation  (including  trade  journals)),  or         (B) cause,  induce  or  encourage  any  material  actual or  prospective  client,  customer,         supplier, landlord, lessor or licensor of the Company Group to terminate or modify any         such actual or prospective contractual relationship that exists on the date of termination of         employment.      For purposes of clarity, it is understood that the provisions of this paragraph D are not applicable   if Grantee’s employment with the Company Group is terminated by the Company Group without   Cause.                                           3    HOU:3760738.2  

 

                                                                                 In addition, it is understood that the provisions of this paragraph C shall terminate in all  respects on the fourth anniversary of the date of the Agreement to which this Exhibit D is a  part.         (d)   Injunctive  Relief;  Remedies.   The  covenants  and  undertakings  contained  in  this  Exhibit  D  relate  to  matters  which  are  of  a  special,  unique  and  extraordinary  character  and  a  violation of any of the terms of this Exhibit D will cause irreparable injury to the Company Group,  the amount of which will be impossible to estimate or determine and which cannot be adequately  compensated.  Accordingly, the remedy at law for any breach of this Exhibit D may be inadequate.   Therefore, notwithstanding anything to the contrary, the Company will be entitled to an injunction,  restraining order or other equitable relief from any court of competent jurisdiction in the event of  any breach of any provision of this Exhibit C without the necessity of proving actual damages or  posting any bond whatsoever.  The rights and remedies provided by this Exhibit C are cumulative  and in addition to any other rights and remedies which the Company Group may have hereunder  or at law or in equity.  The parties hereto further agree that, if any court of competent jurisdiction  in a final nonappealable judgment determines that a time period, a specified business limitation or  any other relevant feature of this Exhibit D is unreasonable, arbitrary or against public policy, then  a  lesser  time  period,  geographical  area,  business  limitation  or  other  relevant  feature  which  is  determined by such court to be reasonable, not arbitrary and not against public policy may be  enforced against the applicable party.           (e)   Governing Law of this Exhibit D; Consent to Jurisdiction. Any dispute regarding  the reasonableness of the covenants and agreements set forth in this Exhibit C, or the territorial  scope or duration thereof, or the remedies available to the Company upon any breach of such  covenants and agreements, shall be governed by and interpreted in accordance with the laws of the  state of Texas, without regard to conflict of law provisions thereof, and, with respect to each such  dispute, the Company and Grantee each hereby irrevocably consent to the exclusive jurisdiction  of the State of Texas for resolution of such dispute, and further agree that service of process may  be made upon Grantee in any legal proceeding relating to this Exhibit D by any means allowed  under the laws of such state.          (f)   Grantee’s  Understanding  of  this  Section.   Grantee  hereby  represents  to  the  Company that Grantee has read and understands, and agrees to be bound by, the terms of this  Exhibit  D.  Grantee  acknowledges  that  the  geographic  scope  and  duration  of  the  covenants  contained in Exhibit C are the result of arm’s-length bargaining and are fair and reasonable in light  of (i) the importance of the functions performed by Grantee and the length of time it would take  the Company Group to find and train a suitable replacement, (ii) the nature and wide geographic  scope of the operations of the Company Group, (iii) Grantee’s level of control over and contact  with the Company Group’s business and operations in all jurisdictions where they are located, and  (iv) the fact that the Restricted Business is potentially conducted throughout the geographic area  where competition is restricted by this Agreement. It is the desire and intent of the parties that the                                         4    HOU:3760738.2  

 

                                                                                 provisions of this Agreement be enforced to the fullest extent permitted under applicable law,  whether now or hereafter in effect and therefore, to the extent permitted by applicable law, the  parties hereto waive any provision of applicable law that would render any provision of this Exhibit  D invalid or unenforceable.                                           5    HOU:3760738.2a1052019tsrawardform

                                                                                                   INDEPENDENCE CONTRACT DRILLING, INC.                     PERFORMANCE UNIT AWARD AGREEMENT                          TOTAL SHAREHOLDER RETURN                                  Grantee:   _________          1.    Grant of Performance Unit Award.                 (a)   As of _______________ (the “ Effective Date ”), the date of this agreement  (this  “ Agreement ”),  Independence  Contract  Drilling,  Inc.,  a  Delaware  corporation  (the “Company ”), hereby grants to the Grantee (identified above) _______ restricted stock units   (the “ RSUs ”) pursuant to the Amended and Restated Independence Contract Drilling, Inc. 2019  Omnibus Incentive Plan, as may be amended from time to time (the “ Plan ”).  The number of RSUs  hereunder  that  are  considered  target  RSUs  shall  be ______  (the  “ Target  RSUs ”).   The  RSUs  represent the opportunity to receive a number of shares of Common Stock of the Company based  upon satisfaction of certain TSR targets and the “ Payout Multiplier ” as defined in Exhibit A,  subject to Exhibit C. The actual number of shares of Common Stock that may be issued pursuant  to the terms of this Agreement will be between 0% and 200% of the number of Target RSUs (as  defined in Exhibit A).                    (b)   To  determine  the  number,  if  any,  of  RSUs  that  shall  be  deemed  earned  (“ Earned RSUs ”), the methodology on Exhibit A shall be followed, subject to Exhibit C.  For  purposes of this Agreement, there shall be three performance periods:  (a) “ Performance Period  I” shall be deemed to begin on the Effective Date and end on ___________ (the “Performance  Period 1 Determination Date ”); (b) “ Performance Period II ” shall be deemed to begin on the  Effective Date and end on _____________ (the “ Performance Period II Determination Date ”,  and (c) “ Performance Period III ” shall be deemed to begin on the Effective Date and end on  _____________ (the “ Performance  Period III Determination Date ”).                        For purposes of this Agreement, each of Performance Period I, Performance  Period II and Performance Period III shall be considered a “ Performance Period ”, and each of  Performance  Period  I  Determination  Date,  Performance  Period  II  Determination  Date  and  Performance Period III Determination Date shall be considered a “ Determination Date ”.                     It is understood that Earned RSU’s are also subject to a three-year time- based vesting requirement that begins on the Effective Date, as described in paragraph 3 below.         2.    Definitions.   Exhibits  A,  B  and  C  are  incorporated  into  this  Agreement  by  reference.  Unless otherwise provided, all capitalized terms used herein shall have the meanings  set forth in the Plan, or as set forth in Exhibits A, B and C.  In the event of a conflict between the  terms of the Plan and terms of this Agreement, the terms of the Plan shall control.                                            1    HOU:3760738.2  

 

                                                                                       3.    Vesting  and  Forfeiture.  Subject  to  Grantee’s  continued  employment  with  the  Company or its affiliates (the “ Company Group ”), and subject further to Exhibits A, B and C,  and  any  change  of  control  or  employment  agreement  between  Grantee  and  a  member  of  the  Company Group, only RSUs that become Earned RSUs shall have the opportunity to vest, and  Earned RSUs shall vest, if at all, on the third anniversary of the Effective Date (the  “ Vesting  Date ”).  RSUs with respect to a Performance Period that fail to become Earned RSUs as of the   respective  Determination  Date  (as  determined  by  the  Committee)  shall  immediately  and   automatically be forfeited for no consideration.  Additionally, except to the extent a change of   control or employment agreement between Grantee and a member of the Company Group provides   otherwise, a failure of Grantee to continue his or her employment through the Vesting Date shall   result in an immediate and automatic forfeiture of outstanding RSUs and Earned RSUs under this   Agreement.               4.    Purchase Price.  No consideration shall be payable by the Grantee to the Company  for the RSUs.         5.    Restrictions on RSUs and Settlement of Vested RSUs.                 (a)   No Dividend Equivalents are granted with respect to any RSUs.               (b)   The Company shall settle vested Earned RSUs within 30 days of the date  such Earned RSUs become vested in accordance with Section 3, above.  Each vested Earned RSU  shall entitle the Grantee to receive one share of Common Stock.                 (c)   Nothing in this Agreement or the Plan shall be construed to:                     (i)   give the Grantee any right to be awarded any further RSUs or any        other  Award  in  the  future,  even  if  RSUs  or  other  Awards  are  granted  on  a  regular  or        repeated basis, as grants of RSUs and other Awards are completely voluntary and made        solely in the discretion of the Committee;                     (ii)  give the Grantee or any other person any interest in any fund or in        any specified asset or assets of the Company or any Affiliate; or                     (iii)  confer upon the Grantee the right to continue in the employment or        service of the Company or any Affiliate, or affect the right of the Company or any Affiliate        to terminate the employment or service of the Grantee at any time or for any reason.                (d)   The Grantee shall not have any voting rights with respect to the RSUs.          6.    Independent Legal and Tax Advice.  Grantee acknowledges that the Company  has  advised  Grantee  to  obtain  independent  legal  and  tax  advice  regarding  the  grant,  holding,  vesting and settlement of the RSUs in accordance with this Agreement and any disposition of any  such Awards or the shares of Common Stock issued with respect thereto.         7.    Reorganization of Company.  The existence of this Agreement shall not affect in  any way the right or power of the Company or its stockholders to make or authorize any or all  adjustments, recapitalizations, reorganizations or other changes in the Company’s capital structure                                         2    HOU:3760738.2  

 

                                                                                 or its business, or any merger or consolidation of the Company, or any issue or bonds, debentures,  preferred stock or the rights thereof, or the dissolution or liquidation of the Company, or any sale  or transfer of all or any part of its assets or business, or any other corporate act or proceeding,  whether of a similar character or otherwise.  Except as otherwise provided herein, in the event of  a Corporate Change as defined in the Plan, Section 4.5 of the Plan shall be applicable.         8.    Investment Representation.  Grantee will enter into such written representations,  warranties and agreements as the Company may reasonably request in order to comply with any  federal or state securities law.  Moreover, any stock certificate for any shares of stock issued to  Grantee  hereunder  may  contain  a  legend  restricting their  transferability  as  determined  by  the  Company in its discretion.  Grantee agrees that the Company shall not be obligated to take any  affirmative action in order to cause the issuance or transfer of shares of Stock hereunder to comply  with any law, rule or regulation that applies to the shares subject to this Agreement.         9.    No Guarantee of Employment.  This Agreement shall not confer upon Grantee  any right to continued employment with the Company or any Affiliate thereof.         10.   Withholding of Taxes.  The Company or an Affiliate shall be entitled to satisfy,  pursuant to Section 16.3 of the Plan, any and all tax withholding requirements with respect to  RSUs.         11.   General.               (a)   Notices.  All notices under this Agreement shall be mailed or delivered by  hand to the parties at their respective addresses set forth beneath their signatures below or at such  other address as may be designated in writing by either of the parties to one another, or to their  permitted transferees if applicable.  Notices shall be effective upon receipt.               (b)   Transferability  of  Award.   The  rights  of  the  Grantee  pursuant  to  this  Agreement are not transferable by Grantee.  No right or benefit hereunder shall in any manner be  liable  for  or  subject  to  any  debts,  contracts,  liabilities,  obligations  or  torts  of  Grantee  or  any  permitted  transferee  thereof.  Any  purported  assignment,  alienation,  pledge,  attachment,  sale,  transfer or other encumbrance of the RSUs, prior to the lapse of restrictions, that does not satisfy  the requirements hereunder shall be void and unenforceable against the Company.               (c)   Amendment and Termination.  No amendment, modification or termination  of  this  Agreement  shall  be  made  at  any  time  without  the  written  consent  of  Grantee  and  the  Company.               (d)   No  Guarantee  of  Tax  Consequences.   The  Company  and the  Committee  make no commitment or guarantee that any federal, state, local or other tax treatment will (or will  not)  apply  or  be  available  to  any  person  eligible  for  compensation  or  benefits  under  this  Agreement.   The  Grantee  has  been  advised  and  been  provided  the  opportunity  to  obtain  independent legal and tax advice regarding the granting, vesting and settlement of RSUs pursuant  to the Plan and this Agreement and the disposition of any Common Stock acquired thereby.                (e)   Section 409A.  The award of RSUs hereunder is intended to either comply  with or be exempt from Section 409A, and the provisions of this Agreement shall be administered,                                         3    HOU:3760738.2  

 

                                                                                 interpreted and construed accordingly. If the award of RSUs is not exempt from Section 409A and  the Grantee is a “specified employee” within the meaning of Section 409A(a)(2)(B)(i) of the Code  on the date on which the Grantee has a “separation from service” (other than due to death) within  the  meaning  of  Section  1.409A-1(h)  of  the  Treasury Regulations,  then  notwithstanding  the  provisions of this Agreement, any transfer of shares or other compensation payable on account of  Grantee’s separation from service that constitute deferred compensation under Section 409A shall  take place on the earlier of (i) the first business day following the expiration of six months from  the Grantee’s separation from service, or (ii) such earlier date as complies with the requirements  of Section 409A. To the extent required under Section 409A, the Grantee shall be considered to  have terminated employment with the Company or its affiliates (the “Company Group”) when the  Grantee incurs a “separation from service” with respect to the Company Group within the meaning  of Section 409A(a)(2)(A)(i) of the Code.               (f)   Severability.  In the event that any provision of this Agreement shall be held  illegal, invalid or unenforceable for any reason, such provision shall be fully severable, but shall  not affect the remaining provisions of the Agreement, and the Agreement shall be construed and  enforced as if the illegal, invalid or unenforceable provision had not been included therein.               (g)   Supersedes Prior Agreements.  This Agreement shall supersede and replace  all prior agreements and understandings, oral or written, between the Company and the Grantee  regarding the grant of the RSUs covered hereby.               (h)   Governing Law.  This Agreement shall be construed in accordance with the  laws of the State of Delaware without regard to its conflict of law provisions, to the extent federal  law does not supersede and preempt Delaware law.               (i)   No Trust or Fund Created.  This Agreement shall not create or be construed  to create a trust or separate fund of any kind or a fiduciary relationship between the Company or  any Affiliate and a Grantee or any other Person.  To the extent that any Person acquires a right to  receive payments from the Company or any Affiliates pursuant to this Agreement, such right shall  be no greater than the right of any general unsecured creditor of the Company or any Affiliate.               (j)   Clawback  Provisions.   Notwithstanding  any  other  provisions  in  this  Agreement  or  the  Change  of  Control  Agreement  to  the  contrary,  any  incentive-based  compensation,  or  any  other  compensation,  payable  pursuant  to  this  Agreement  or  any  other  agreement or arrangement with the Company or an affiliate which is subject to recovery under any  law,  government  regulation  or  stock  exchange  listing  requirement,  will  be  subject  to  such  deductions  and  clawback  as  may  be  required  to  be  made  pursuant  to  such  law,  government  regulation or stock exchange listing requirement (or any policy adopted by the Company or an  affiliate pursuant to such law, government regulation or stock exchange listing requirement).                 (k)   Restrictive  Covenants.   Grantee  agrees  to  the  restrictive  covenants  contained in Exhibit D to this Agreement.               (l)   Other Laws.  The Company retains the right to refuse to issue or transfer  any Stock if it determines that the issuance or transfer of such shares might violate any applicable                                          4    HOU:3760738.2  

 

                                                                                 law or regulation or entitle the Company to recover under Section 16(b) of the Securities Exchange  Act of 1934.               (m)   Binding Effect.  This Agreement shall be binding upon and inure to the  benefit of any successors to the Company and all persons lawfully claiming under the Grantee.                            [SIGNATURES ON NEXT PAGE]                                               5    HOU:3760738.2  

 

                                                                                       IN WITNESS WHEREOF, the Company has caused this Agreement to be executed on its  behalf by its duly authorized officer and Grantee has hereunto executed this Agreement as of the  date set forth above.                                    INDEPENDENCE CONTRACT DRILLING, INC.                                    By:                                                                              Name:                                    Title:  Officer                                    Address for Notices:                                                                      Independence Contract Drilling, Inc.                                   20475 Hwy 249, Suite 300                                   Houston, Texas 77070                                   Attn:  Chief Executive Officer                                    GRANTEE                                                                                                                                                                                                                                                                   Address for Notices:                                                                      Executive’s then current address shown in the                                   Company’s records.                                           6    HOU:3760738.2  

 

                                                                                                                    Exhibit A                                                                 Methodology for Calculating Earned RSUs                                                  1.    Definitions . For purposes of determining the number of RSUs that are deemed to  be Earned RSUs, the following definitions shall apply:                (a)   Peer Group means the following eight companies to the extent such entities  or their successors are in existence and publicly traded as of the Performance End Date:  [List Peer  Group]                             (b)   Total Shareholder Return or TSR means shall be defined and calculated as  follows, where “ Beginning Price ” is (1) with respect to the Company or with respect to members  of the Peer Group, the average closing price on the New York Stock Exchange (“ NYSE ”) for the  last 20 NYSE trading days prior to and including the Effective Date, and “ Ending Price ” is the  average  closing  price  on  the  NYSE  for  the  last  20  NYSE  trading  prior  to  and  including  the  applicable Determination Date, in each case as applied to the applicable equity security:                  TSR = (Ending Price – Beginning Price + cash dividends (if any) per share paid*)                                   Beginning Price            * Stock dividends paid in securities rather than cash in which there is a distribution of less          than 25 percent of the outstanding shares (as calculated prior to the distribution) shall be          treated as cash for purposes of this calculation.                  To the extent a security of the Company or any member of the Peer Group is not listed or   traded on the NYSE, “ NYSE ” as used above shall mean the principal national securities exchange  or quotation service on which the security is listed or quoted.  TSR of the Company or of any  member of the Peer Group shall be equitably adjusted, as determined by the Committee, to reflect  any spin-off, stock split, reverse stock split, stock dividend, recapitalization, reclassification or  other similar change in the number of outstanding shares of common stock.            2.  Committee Methodology .  The RSUs and Target RSUs shall be trifurcated into  three  equal  parts,  with  one-third  being  allocated  to  each  Performance  Period  (to  avoid  partial  shares, the portion of RSUs and Target RSUs allocated to a specific Performance Period shall be  reduced to the nearest whole number, with the excess rolling forward into the next sequentially  ordered  Performance  Period).   The  Committee  shall  calculate  the  number  of  Earned  RSU’s  applicable to each Performance Period as soon as reasonable practicable following expiration of  the applicable Performance Period, and in all events as soon as practicable in order to determine  the number of Earned RSU’s existing on the Vesting Date.    Subject to Exhibit C, for purposes of  determining the number of Earned RSUs for a particular Performance Period, the Committee shall:                      (a)   Calculate the Total Shareholder Return for the Company and each member  of the Peer Group for the Performance Period.                                          1    HOU:3760738.2  

 

                                                                                             (b)   Rank the Company  and  each member of the Peer Group based on Total  Shareholder Return with the entity having the highest Total Shareholder Return ranking in the first  position and the entity with the lowest Total Shareholder Return ranking in the ninth position.                            (c)   Determine the Payout Multiplier to be utilized in determining the number   of RSUs that vest, and thus the number of shares of Common Stock to be issued to the Grantee   based on the Payout Schedule below:                                    Eight Company Payout Schedule                        Company Ranking     Payout Multiplier                               1                  2.00                               2                  2.00                               3                  1.67                               4                  1.33                               5                  1.00                               6                  0.67                               7                  0.33                               8                  0.00                               9                  0.00                 (d)   For  the  applicable  Performance  Period,  calculate  the  number  of  Earned  RSUs for such Performance Period as follows:                   i.  .                (e)   If any calculation with respect to the number of RSUs that are earned, and  thus the number of shares of Common Stock to be issued hereunder would result in a fractional  share, the number of shares of Common Stock to be issued shall be rounded down to the nearest  whole share.                 3.   Peer Group Changes .                 If a member of the Peer Group declares bankruptcy, or ceases to be publicly traded as a  result of bankruptcy, it shall be deemed to remain in the Peer Group until the expiration of the  Performance Period and shall occupy the lowest ranking in the Payout Schedule. If, as a result of  a merger, acquisition or a similar corporate transaction, in which any member of the Peer Group  ceases to be publicly traded, the Committee may in its sole discretion, revise the makeup of the  Peer Group and calculate the resulting Total Shareholder Return for such affected member of the  Peer Group, adjusting accordingly, the associated Payout Multipliers in a manner consistent with  the methodologies contained herein.                                              2    HOU:3760738.2  

 

                                                                                                                    Exhibit B                                  Certain Definitions .                      1.    Change of Control shall mean                A.    The acquisition by any individual, entity or group (within the meaning of         Section  13(d)(3)  or  14(d)(2)  of  the  Securities  Exchange  Act  of  1934,  as  amended  (the         “Exchange Act ”)) (a “ Person ”) of beneficial ownership (within the meaning of Rule 13d-        3  promulgated  under  the  Exchange  Act)  of  50  percent  or  more  of  either  (A)  the  then         outstanding  shares  of  common  stock  or  membership  interests  of  the  Company  (the         “Outstanding Company Common Stock ”) or (B) the combined voting power of the then         outstanding voting securities of the Company entitled to vote generally in the election of         directors  or  managers  (the  “ Outstanding  Company  Voting  Securities ”);  provided,         however,  that  for  purposes  of  this  subsection  A,  the  following  acquisitions  shall  not         constitute a Change of Control:  (1) any acquisition directly from the Company or any         acquisition by the Company; or (2) any acquisition by any employee benefit plan (or related         trust)  sponsored  or  maintained  by  the  Company  or  any  corporation  controlled  by  the         Company; or (3) any acquisition by any corporation pursuant to a transaction that complies         with clauses (1), (2) and (3) of subsection C of this definition; or                B.     Individuals,  who,  as  of  the  date  hereof  constitute  the  Board  (the         "Incumbent Board ") cease for any reason to constitute at least a majority of the Board;         provided, however, that any individual becoming a director subsequent to the date hereof         whose election, or nomination for election by the Company's stockholders or members,         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  was  a  member  of  the  Incumbent         Board, but excluding, for purpose of this subsection B, 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; or                C.    Consummation of a reorganization, merger or consolidation or sale or other         disposition  of  all  or  substantially  all  of  the  assets  of  the  Company  (a  " Corporate         Transaction ")  in  each  case,  unless,  following  such  Corporate  Transaction,  (1)  all  or         substantially  all  of  the  individuals  and  entities  who  were  the  beneficial  owners,         respectively,  of  the  Outstanding  Company  Common  Stock  and  Outstanding  Company         Voting  Securities  immediately  prior  to  such  Corporate  Transaction  beneficially  own,         directly or indirectly, more than 60 percent of, respectively, the then outstanding shares of         common stock and the combined voting power of the then outstanding voting securities         entitled to vote generally in the election of directors, as the case may be, of the corporation         resulting from such Corporate Transaction (including, without limitation, a corporation that         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 Corporate Transaction, of         the  Outstanding  Company  Common  Stock  and  the  Outstanding  Company  Voting         Securities, as the case may be, (2) no Person (excluding any corporation resulting from                                         1    HOU:3760738.2  

 

                                                                                       such Corporate Transaction or any employee benefit plan (or related trust) of the Company        or such corporation resulting from such Corporate Transaction) beneficially owns, directly        or indirectly, 20 percent or more of, respectively, the then outstanding shares of common        stock of the corporation resulting from such Corporate Transaction or the combined voting        power of the then outstanding voting securities of such corporation except to the extent that        such ownership existed prior to the Corporate Transaction and (3) at least a majority of the        members  of  the  board  of  directors  of  the  corporation  resulting  from  such  Corporate        Transaction were members of the  Incumbent Board at the time of the  execution of the        initial agreement, or of the action of the Board, providing for such Corporate Transaction;        or               D.    Approval by the stockholders of the Company of a complete liquidation or         dissolution of the Company.          Notwithstanding  the  foregoing,  however,  in  any  circumstance  or  transaction  in  which         compensation would be subject to the income tax under Section 409A if the foregoing         definition of “Change of Control” were to apply, but would not be so subject if the term         “Change of Control” were defined herein to mean a “change in control event” within the         meaning of Treasury Regulation Section 1.409A-3(i)(5), then “Change of Control” means,         but only to the extent necessary to prevent such compensation from becoming subject to         the  income  tax  under   Section  409A,  a  transaction  or  circumstance  that  satisfies  the         requirements of both (1) a Change of Control under the applicable clauses (A) through (D)         above, as applicable, and (2) a “change in control event” within the meaning of Treasury         Regulation Section 1.409A-3(i)(5).                                           2    HOU:3760738.2  

 

                                                                                                                       Exhibit C                                                     Change of Control.           1.  RSUs  Becoming  Earned  RSUs.   If  prior  to  any  Determination  Date,  a  Change  of           Control occurs, and the Grantee has remained continuously employed by the Company           Group  from  the  Effective  Date  to  the  date  of  such  Change  of  Control,  then,           notwithstanding any other provision of this Agreement to the contrary, a portion of the           outstanding Target RSUs that have not previously forfeited or previously converted to           Earned RSUs shall automatically and immediately become Earned RSUs on the date           of such Change of Control in accordance with the following fraction (not greater than           1.0): the numerator being the number of months (not including any partial months) that           have elapsed since the Effective Date to the date of the Change of Control, and the           denominator being the total number of months in the period beginning on the Effective           Date and ending on the third anniversary of the Effective Date.  For example:                a.  If the Change of Control occurs prior to the Performance Period I Determination                 Date, all Target RSUs (to the extent not previously forfeited) in all Performance                 Periods shall be included in the above fraction to determine what portion of the                 RSUs are Earned RSUs.               b.  If  the  Change  of  Control  occurs  prior  to  the  Performance  Period  II                 Determination Date, all Target RSUs subject to Performance Period II (to the                 extent not previously forfeited) and all Target RSUs subject to Performance                 Period III (to the extent not previously forfeited) shall be included in the above                 fraction to determine what portion of RSUs are Earned RSUs.               c.  If the Change of Control occurs after the Performance Period II Determination                 Date  but  prior  to  the  Performance  Period  III  Determination  Date,  all  Target                 RSUs subject to Performance Period III (to the extent not previously forfeited)                 shall be included in the above fraction to determine what portion of RSUs are                 Earned RSUs.          2.  Earned RSUs Becoming Vested.  If a Change of Control occurs and the Grantee has           remained continuously employed by the Company Group from the Effective Date to           the date of such Change of Control, then, notwithstanding any other provision of this           Agreement to the contrary, all Earned RSU’s (determined after calculating 1, above)           shall vest on the date of such Change of Control.            It  is  understood  that  to  the  extent  a  Change  of  Control  occurs  after  an  applicable           Determination  Date  or  Performance  Period,  any  Earned  RSUs  relating  to  such           previously occurring Determination Date and Performance Period (as determined by           the Committee pursuant to Exhibit A) shall be considered, in addition to the Earned           RSUs  calculated  pursuant  to  paragraph  1  above,  Earned  RSUs  for  purposes  of  this           paragraph 2.                                                     1    HOU:3760738.2  

 

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                                                                                                                       Exhibit D                                   Restrictive Covenants                                                      In consideration for the grant of RSU’s hereunder, which are expected to vest during   Grantee’s employment with the Company Group over the vesting period, as well as the   protection of the Company Group’s goodwill and Confidential Information, Grantee agrees to   the following:                  (a)   Certain Definitions. For purposes of this Exhibit D, the following terms shall have  the following meanings:               (i)   Cause ” shall mean Grantee’s:                           A.    willful and continued failure to comply with the reasonable               written  directives  of  the  Company  for  a  period  of  thirty  (30)  days  after  written               notice from the Company;                             B.    willful  and  persistent  inattention  to  duties  for  a period  of              thirty (30) days after written notice from the Company, or the commission of acts              within employment with the Company Group amounting to gross negligence or              willful misconduct;                           C.    misappropriation  of  funds  or  property  of  the  Company              Group or committing any fraud against the Company Group or against any other              person or entity in the course of employment with the Company Group;                           D.    misappropriation of any corporate opportunity, or otherwise              obtaining personal profit from any transaction which is adverse to the interests of              the Company Group or to the benefits of which the Company Group is entitled;                            E.    conviction of a felony involving moral turpitude;                           F.    willful  failure  to  comply  in  any  material  respect  with  the               terms of this Agreement and such non-compliance continues uncured after thirty               (30) days after written notice from the Company;                            G.    chronic substance abuse, including abuse of alcohol, drugs              or other substances or use of illegal narcotics or substances, for which Grantee fails              to undertake treatment immediately after requested by the Company or to complete              such treatment and which abuse continues or resumes after such treatment period,              or  possession  of  illegal  narcotics  or  substances  on  Company  premises  or  while              performing Grantee’s duties and responsibilities.                                         3    HOU:3760738.2  

 

                                                                                       For purposes of this definition, no act, or failure to act, by  Grantee  will be considered        “willful” if done, or omitted to be done, by Grantee in good faith and in the reasonable        belief  that  the  act  or  omission  was  in  the  best  interest  of  the  Company  or  required  by        applicable law.         Any  termination  during  the  Employment  Term  by  the  Company  for  Cause  shall  be        communicated by Notice of Termination to the Grantee.  For purposes of this Agreement,        a “Notice of Termination ” means a written notice which sets forth in reasonable detail the        facts  and  circumstances  claimed  to  provide  a  basis for  termination  of  the  Grantee’s        employment  for  “Cause”    The  failure  by  the  Company  to  set  forth  in  the  Notice  of        Termination any fact or circumstance which contributes to a showing of Cause shall not        waive any right of the Company from asserting such fact or circumstance in enforcing the        Company’s rights hereunder.                 (ii)  “Confidential Information ” means any information, knowledge or data of        any  nature  and  in  any  form  (including  information  that  is  electronically  transmitted  or        stored on any form of magnetic or electronic storage media) relating to the past, current or        prospective business or operations of the Company Group, that is not generally known to        persons engaged in a business similar to that conducted by the Company Group, whether        produced  by  the  Company  Group  or  any  of  its  consultants,  agents  or  independent        contractors  or  by  Grantee,  and  whether  or  not  marked  confidential.    Confidential        information does not include information that (1) at the time of disclosure is, or thereafter        becomes, generally available to the public, (2) prior to or at the time of disclosure was        already in the possession of Grantee, (3) is obtained by Grantee from a third party not in        violation  of  any  contractual,  legal  or  fiduciary  obligation  to  the  Company  Group  with        respect to that information or (3) is independently developed by Grantee, but not including        the confidential information provided by the Company Group.               (iii)  “Restricted  Business ”  means  any  the  oil  and  natural  gas  land  contract        drilling business conducted in the United States of America.           (b)   Nondisclosure  of  Confidential  Information.   Grantee  shall  hold  in  a  fiduciary  capacity for the benefit of the Company Group all Confidential Information which shall have been  obtained by Grantee during Grantee’s employment and shall not use such Confidential Information  other than within the scope of Grantee’s employment with and for the exclusive benefit of the  Company Group.  Following any termination of employment with the Company Group, Grantee  agrees (i) not to communicate, divulge or make available to any person or entity (other than the  Company  Group)  any  such  Confidential  Information,  except  (A)  upon  the  prior  written  authorization  of  the  Company  Group,  (B)  as  may  be  required  by  law  or  legal  process,  (C)  as  reasonably necessary in connection with the enforcement of any right or remedy related to this  Agreement, or (D) unless no longer Confidential Information, and (ii) to deliver promptly to the                                          4    HOU:3760738.2  

 

                                                                                 Company Group any Confidential Information in Grantee’s possession, including any duplicates  thereof and any notes or other records Grantee has prepared with respect thereto. In the event that  the provisions of any applicable law or the order of any court would require Grantee to disclose or  otherwise  make  available  any  Confidential  Information  then  Grantee  shall,  to  the  extent  practicable, give the Company prior written notice of such required disclosure and an opportunity  to contest the requirement of such disclosure or apply for a protective order with respect to such  Confidential Information by appropriate proceedings.            (c)   Limited  Covenant  Not  to  Compete.   In  the  event  Grantee’s  employment  is  terminated by Grantee for any reason or by the Company Group for Cause, Grantee agrees that  during the period beginning on the date of such termination and ending on the twelve (12) month  anniversary of the date of such termination:                 (i)   Grantee shall not, directly or indirectly, for himself or others, own, manage,        operate, control or participate in the ownership, management, operation or control of any        business,  whether  in  corporate,  proprietorship  or  partnership  form  or  otherwise,  that  is        engaged, directly or indirectly, in the United States in the Restricted Business; provided,        however ,  that  the  restrictions  contained  herein  shall  not restrict  (A)  the  acquisition  by        Grantee of less than 2% of the outstanding capital stock of any publicly traded company        engaged in a Restricted Business or (B) Grantee from being employed by an entity in which        the majority of such entity’s revenues on a consolidated basis determined in accordance        with generally accepted accounting principles are from activities and businesses that do        not constitute a Restricted Business and provided that Grantee is only employed by and        engaged  with  divisions  and  units  of  such  entity  that  are  not  engaged  in  the  Restricted        Business; and               (ii)  Grantee shall not, directly or indirectly (A) solicit any individual, who, at         the time of time of such solicitation is an employee of the Company Group, to leave such         employment  or  hire,  employ  or  otherwise  engage  any such  individual  (other  than         employees of the Company Group who respond to general advertisements for employment         in  newspapers  or  other  periodicals  of  general  circulation  (including  trade  journals)),  or         (B) cause,  induce  or  encourage  any  material  actual or  prospective  client,  customer,         supplier, landlord, lessor or licensor of the Company Group to terminate or modify any         such actual or prospective contractual relationship that exists on the date of termination of         employment.      For purposes of clarity, it is understood that the provisions of this paragraph D are not applicable   if Grantee’s employment with the Company Group is terminated by the Company Group without   Cause.                                           5    HOU:3760738.2  

 

                                                                                 In addition, it is understood that the provisions of this paragraph C shall terminate in all  respects on the fourth anniversary of the date of the Agreement to which this Exhibit D is a  part.         (d)   Injunctive  Relief;  Remedies.   The  covenants  and  undertakings  contained  in  this  Exhibit  D  relate  to  matters  which  are  of  a  special,  unique  and  extraordinary  character  and  a  violation of any of the terms of this Exhibit D will cause irreparable injury to the Company Group,  the amount of which will be impossible to estimate or determine and which cannot be adequately  compensated.  Accordingly, the remedy at law for any breach of this Exhibit D may be inadequate.   Therefore, notwithstanding anything to the contrary, the Company will be entitled to an injunction,  restraining order or other equitable relief from any court of competent jurisdiction in the event of  any breach of any provision of this Exhibit C without the necessity of proving actual damages or  posting any bond whatsoever.  The rights and remedies provided by this Exhibit C are cumulative  and in addition to any other rights and remedies which the Company Group may have hereunder  or at law or in equity.  The parties hereto further agree that, if any court of competent jurisdiction  in a final nonappealable judgment determines that a time period, a specified business limitation or  any other relevant feature of this Exhibit D is unreasonable, arbitrary or against public policy, then  a  lesser  time  period,  geographical  area,  business  limitation  or  other  relevant  feature  which  is  determined by such court to be reasonable, not arbitrary and not against public policy may be  enforced against the applicable party.           (e)   Governing Law of this Exhibit D; Consent to Jurisdiction. Any dispute regarding  the reasonableness of the covenants and agreements set forth in this Exhibit C, or the territorial  scope or duration thereof, or the remedies available to the Company upon any breach of such  covenants and agreements, shall be governed by and interpreted in accordance with the laws of the  state of Texas, without regard to conflict of law provisions thereof, and, with respect to each such  dispute, the Company and Grantee each hereby irrevocably consent to the exclusive jurisdiction  of the State of Texas for resolution of such dispute, and further agree that service of process may  be made upon Grantee in any legal proceeding relating to this Exhibit D by any means allowed  under the laws of such state.          (f)   Grantee’s  Understanding  of  this  Section.   Grantee  hereby  represents  to  the  Company that Grantee has read and understands, and agrees to be bound by, the terms of this  Exhibit  D.  Grantee  acknowledges  that  the  geographic  scope  and  duration  of  the  covenants  contained in Exhibit C are the result of arm’s-length bargaining and are fair and reasonable in light  of (i) the importance of the functions performed by Grantee and the length of time it would take  the Company Group to find and train a suitable replacement, (ii) the nature and wide geographic  scope of the operations of the Company Group, (iii) Grantee’s level of control over and contact  with the Company Group’s business and operations in all jurisdictions where they are located, and  (iv) the fact that the Restricted Business is potentially conducted throughout the geographic area  where competition is restricted by this Agreement. It is the desire and intent of the parties that the                                         6    HOU:3760738.2  

 

                                                                                 provisions of this Agreement be enforced to the fullest extent permitted under applicable law,  whether now or hereafter in effect and therefore, to the extent permitted by applicable law, the  parties hereto waive any provision of applicable law that would render any provision of this Exhibit  D invalid or unenforceable.                                                                            *     *     *     *     *                                           7    HOU:3760738.2  

 

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