Document:

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                                                                     EXHIBIT 4.3

                               INPUT/OUTPUT, INC.

                         2003 EMPLOYEE STOCK OPTION PLAN

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                               INPUT/OUTPUT, INC.
                         2003 EMPLOYEE STOCK OPTION PLAN

                                TABLE OF CONTENTS

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                                                                                              Section
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<S>                                                                                           <C>
ARTICLE I - PLAN

         Purpose.............................................................................    1.1
         Effective Date of Plan..............................................................    1.2

ARTICLE II - DEFINITIONS

         Affiliate...........................................................................    2.1
         Board of Directors..................................................................    2.2
         Change of Control...................................................................    2.3
         Code................................................................................    2.4
         Committee...........................................................................    2.5
         Company.............................................................................    2.6
         Disability..........................................................................    2.7
         Effective Date......................................................................    2.8
         Employee............................................................................    2.9
         Exchange Act........................................................................   2.10
         Fair Market Value...................................................................   2.11
         Mature Shares.......................................................................   2.12
         Non-Employee Director...............................................................   2.13
         Option..............................................................................   2.14
         Option Agreement....................................................................   2.15
         Optionee............................................................................   2.16
         Outside Director....................................................................   2.17
         Plan................................................................................   2.18
         Retire or Retirement................................................................   2.19
         Stock...............................................................................   2.20

ARTICLE III - ELIGIBILITY

ARTICLE IV - GENERAL PROVISIONS RELATING TO OPTIONS

         Authority to Grant Options .........................................................    4.1
         Dedicated Shares....................................................................    4.2
         Non-Transferability.................................................................    4.3
         Requirements of Law.................................................................    4.4
         Changes in the Company's Capital Structure..........................................    4.5
         Acceleration........................................................................    4.6
         Election Under Section 83(b) of the Code............................................    4.7
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<TABLE>
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ARTICLE V - OPTIONS

         Type of Option......................................................................    5.1
         Option Price........................................................................    5.2
         Duration of Options.................................................................    5.3
         Amount Exercisable..................................................................    5.4
         Exercise of Options.................................................................    5.5
         Exercise on Termination of Employment...............................................    5.6
         Substitution Options................................................................    5.7
         No Rights as Stockholder............................................................    5.8

ARTICLE VI - ADMINISTRATION

         Committee...........................................................................    6.1
         Amendment and Repricing of Options..................................................    6.2

ARTICLE VII - AMENDMENT OR TERMINATION OF PLAN

ARTICLE VIII - MISCELLANEOUS

         No Establishment of a Trust Fund....................................................    8.1
         No Employment Obligation............................................................    8.2
         Forfeiture .........................................................................    8.3
         Tax Withholding.....................................................................    8.4
         Written Agreement...................................................................    8.5
         Indemnification of the Committee and the Board of Directors.........................    8.6
         Gender..............................................................................    8.7
         Headings............................................................................    8.8
         Other Compensation Plans............................................................    8.9
         Other Options or Awards.............................................................   8.10
         Governing Law.......................................................................   8.11
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                                   ARTICLE 1

                                      PLAN

         1.1      PURPOSE. This Plan is a plan for key Employees (including
officers and Employee directors) of the Company and its Affiliates and is
intended to advance the best interests of the Company, its Affiliates, and its
stockholders by providing those persons who have substantial responsibility for
the management and growth of the Company and its Affiliates with additional
incentives and an opportunity to obtain or increase their proprietary interest
in the Company, thereby encouraging them to continue in the employ of the
Company or any of its Affiliates.

         1.2      EFFECTIVE DATE OF PLAN. This Plan is effective March 27, 2003,
so long as within one year of that date it shall have been approved by at least
a majority vote of stockholders casting a vote in person or by proxy at a duly
held stockholders' meeting, or if the provisions of the corporate charter,
by-laws or applicable state law prescribes a greater degree of stockholder
approval for this action, the approval by the holders of that percentage, at a
duly held meeting of stockholders. No Option shall be granted pursuant to this
Plan after March 27, 2013.

                                   ARTICLE 2

                                   DEFINITIONS

         Except as defined elsewhere herein, the words and phrases defined in
this Article shall have the meaning set out in these definitions throughout this
Plan, unless the context in which any such word or phrase appears reasonably
requires a broader, narrower, or different meaning.

         2.1      "AFFILIATE" means any parent corporation and any subsidiary
corporation. The term "parent corporation" means any corporation (other than the
Company) in an unbroken chain of corporations ending with the Company if, at the
time of the action or transaction, each of the corporations other than the
Company owns stock possessing 50 percent (50%) or more of the total combined
voting power of all classes of stock in one of the other corporations in the
chain. The term "subsidiary corporation" means any corporation (other than the
Company) in an unbroken chain of corporations beginning with the Company if, at
the time of the action or transaction, each of the corporations other than the
last corporation in the unbroken chain owns stock possessing 50 percent (50%) or
more of the total combined voting power of all classes of stock in one of the
other corporations in the chain.

         2.2      "BOARD OF DIRECTORS" means the board of directors of the
Company.

         2.3      "CHANGE IN CONTROL OF THE COMPANY" shall mean the occurrence
of any of the following, after the Effective Date:

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                  (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, or any
successor statute) (a "Covered Person") of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of 51 percent (51%) or
more of either (i) the then outstanding shares of Common Stock (the "Outstanding
Company Common Stock"), or (ii) 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 Section 2.3, 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 entity controlled by the Company, or (iv) any acquisition by any
corporation pursuant to a transaction which complies with Section 2.3(c)(i),
(ii) or (iii); or

                  (b)      individuals who, as of the Effective Date, 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 Effective Date whose election, or nomination for
election by the Company's stockholders, was approved by a vote of at least
two-thirds 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 Covered Person other
than the Board; or

                  (c)      consummation of (xx) a reorganization, merger,
amalgamation, consolidation, sale or other form of business combination of the
Company or any subsidiary of the Company, or (yy) a sale, lease, exchange,
disposition or other transfer 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 Common Stock and Outstanding Company Voting Securities immediately prior
to such Business Combination beneficially own, directly or indirectly, more than
60 percent (60%) 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 or entity resulting from such Business Combination (including,
without limitation, a corporation or 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 Common Stock and Outstanding Company Voting Securities,
as the case may be, (ii) no Covered Person (excluding any employee benefit plan
(or related trust) of the Company or such corporation resulting from such
Business Combination) beneficially owns, directly or indirectly, 51 percent
(51%) or more of, respectively, the then outstanding shares of common stock of
the corporation resulting

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         from such Business Combination 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 Business Combination, and
         (iii) at least a majority of the members of the board of directors of
         the corporation 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, providing for
         such Business Combination; or

                           (d)      approval by the stockholders of the Company
         of a complete liquidation or dissolution of the Company.

         2.4      "CODE" means the Internal Revenue Code of 1986, as amended.

         2.5      "COMMITTEE" means the Compensation Committee of the Board of
Directors or such other committee designated by the Board of Directors. The
Committee shall be comprised solely of members who are both Non-Employee
Directors and Outside Directors.

         2.6      "COMPANY" means Input/Output, Inc.

         2.7      "DISABILITY" means a mental or physical disability as
determined under the then-established policies of the Company.

         2.8      "EFFECTIVE DATE" means March 27, 2003.

         2.9      "EXCHANGE ACT" means the Securities and Exchange Act of 1934,
as amended from time to time.

         2.10     "EMPLOYEE" means a person employed by the Company or any
Affiliate to whom an Option is granted. For purposes of the foregoing sentence,
"Employees" shall include consultants. "Employees" shall also include
prospective consultants and Employees to whom Options are granted in connection
with written offers of service and employment; provided however, that no such
Options may become vested or exercisable until the person commences service or
employment.

         2.11     "FAIR MARKET VALUE" of the Stock as of any date means (a) the
average of the high and low sale prices of the Stock on that date on the New
York Stock Exchange; or (b) if the Stock is not listed on the New York Stock
Exchange, the average of the high and low sale prices of the Stock on that date
as reported on the principal securities exchange on which the Stock is listed;
or (c) if the Stock is not listed on a securities exchange, the average of the
high and low sale prices of the Stock on that date as reported on the NASDAQ
National Market System; or (d) if the Stock is not listed on the NASDAQ National
Market System, the average of the high and low bid quotations for the Stock on
that date as reported by the National Quotation Bureau Incorporated; or (e) if
none of the foregoing is applicable, an amount at the election of the Committee
equal to the (x) the average between the closing bid and ask prices per Share of
Stock on the last preceding date on which those prices were reported or (y) that
amount as determined by the Committee in its sole discretion.

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         2.12     "MATURE SHARES" means shares of Stock that the Employee has
held for at least six months.

         2.13     "NON-EMPLOYEE DIRECTOR" means a `non-employee director" as
that term is defined in Rule 16b-3 under the Exchange Act.

         2.14     "OPTION" means both an Option granted under this Plan to
purchase shares of Stock.

         2.15     "OPTION AGREEMENT" means the written agreement which sets out
the terms of an Option.

         2.16     "OPTIONEE" means a person who is granted an Option under the
Plan.

         2.17     "OUTSIDE DIRECTOR" means a member of the Board of Directors
serving on the Committee who satisfies the criteria of section 162(m) of the
Code.

         2.18     "PLAN" means the Input/Output, Inc. 2003 Employee Stock Option
Plan, as set out in this document and as it may be amended from time to time.

         2.19     "RETIRE" or "RETIREMENT" means retirement in good standing
from the employ of the Company and all Affiliates for reason of age under
then-established policies of the Company and the Affiliates.

         2.20     "STOCK" means the common stock of the Company, $0.01 par value
or, in the event that the outstanding shares of common stock are later changed
into or exchanged for a different class of stock or securities of the Company or
another corporation, that other stock or security.

                                   ARTICLE 3

                                   ELIGIBILITY

         The individuals who shall be eligible to receive Options shall be those
key Employees of the Company or any of its Affiliates as the Committee shall
determine from time to time. However, no member of the Committee shall be
eligible to receive any Option or to receive stock, stock options, or stock
appreciation rights under any other plan of the Company or any of its
Affiliates, if to do so would cause the individual not to be a Non-Employee
Director or Outside Director. The Board of Directors may designate one or more
individuals who shall not be eligible to receive any Option under this Plan or
under other similar plans of the Company.

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                                   ARTICLE 4

                     GENERAL PROVISIONS RELATING TO OPTIONS

         4.1      AUTHORITY TO GRANT OPTIONS. The Committee may grant to those
key Employees of the Company or any of its Affiliates, as it shall from time to
time determine, Options under the terms and conditions of this Plan. Subject
only to any applicable limitations set out in this Plan, the number of shares of
Stock to be covered by any Option to be granted to an Employee of the Company or
any of its Affiliates shall be as determined by the Committee.

         4.2      DEDICATED SHARES. The total number of shares of Stock with
respect to which Options may be granted under the Plan shall be 1,500,000
shares. The maximum number of shares subject to Options which may be issued to
any Employee under the Plan during each Plan Year is 1,350,000 shares. The
shares may be treasury shares or authorized but unissued shares. The number of
shares stated in this Section 4.2 shall be subject to adjustment in accordance
with the provisions of Section 4.5.

         In the event that any outstanding Option shall expire or terminate for
any reason or any Option is surrendered, the shares of Stock allocable to the
unexercised portion of that Option may again be subject to an Option under the
Plan.

         4.3      NON-TRANSFERABILITY. Options shall not be transferable by the
Optionee otherwise than by will or under the laws of descent and distribution,
and shall be exercisable, during the Optionee's lifetime, only by him.

         4.4      REQUIREMENTS OF LAW. The Company shall not be required to sell
or issue any Stock under any Option if issuing that Stock would constitute or
result in a violation by the Optionee or the Company of any provision of any
law, statute, or regulation of any governmental authority. Specifically, in
connection with any applicable statute or regulation relating to the
registration of securities, upon exercise of any Option, the Company shall not
be required to issue any Stock unless the Committee has received evidence
satisfactory to it to the effect that the holder of that Option will not
transfer the Stock except in accordance with applicable law, including receipt
of an opinion of counsel satisfactory to the Company to the effect that any
proposed transfer complies with applicable law. The determination by the
Committee on this matter shall be final, binding and conclusive. The Company
may, but shall in no event be obligated to, register any Stock covered by this
Plan pursuant to applicable securities laws of any country or any political
subdivision. In the event the Stock issuable on exercise of an Option is not
registered, the Company may imprint on the certificate evidencing the Stock the
following legend or any other legend that counsel for the Company considers
necessary or advisable to comply with applicable law:

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                  THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT
         BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR UNDER THE
         SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR TRANSFERRED EXCEPT
         UPON SUCH REGISTRATION OR UPON RECEIPT BY THE CORPORATION OF AN OPINION
         OF COUNSEL SATISFACTORY TO THE CORPORATION, IN FORM AND SUBSTANCE
         SATISFACTORY TO THE CORPORATION, THAT REGISTRATION IS NOT REQUIRED FOR
         SUCH SALE OR TRANSFER.

         The Company may, but shall in no event be obligated to, register any
securities covered hereby pursuant to the Securities Act of 1933 (as now in
effect or as hereafter amended), and in the event any shares are so registered,
the Company may remove any legend on certificates representing such shares. The
Company shall not be obligated to take any other affirmative action in order to
cause the exercise of an Option and the issuance of shares thereunder, to comply
with any law or regulation of any governmental authority.

         4.5      CHANGES IN THE COMPANY'S CAPITAL STRUCTURE.

         The existence of outstanding Options shall not affect in any way the
right or power of the Company or its stockholders to make or authorize any and
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 of bonds, debentures, preferred or prior preference
stock ahead of or affecting the Stock or its rights, 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.

         If the Company shall effect a subdivision or consolidation of shares or
other capital readjustment, the payment of a stock dividend, or other increase
or reduction of the number of shares of the Stock outstanding, without receiving
compensation for it in money, services or property, then (i) the number, class,
and per share price of shares of Stock subject to outstanding Options under the
Plan shall be appropriately adjusted in such a manner so as to entitle an
Optionee to receive upon exercise of an Option, for the same aggregate cash
consideration, the equivalent total number and class of shares such Optionee
would have received had such Optionee exercised his or her Option in full
immediately prior to the event requiring the adjustment, and (ii) the number and
class of shares of Stock then reserved to be issued under the Plan shall be
adjusted by substituting for the total number and class of shares of Stock then
reserved, that number and class of shares of Stock that would have been received
by the owner of an equal number of outstanding shares of each class of Stock as
the result of the event requiring the adjustment.

         If while unexercised Options remain outstanding under the Plan (i) the
Company shall not be the surviving entity in any merger, consolidation or other
reorganization (or survives only as a subsidiary of an entity other than an
entity that was wholly-owned by the Company immediately prior to such merger,
consolidation or other reorganization), (ii) the Company sells, leases or
exchanges or agrees to sell, lease or exchange all or substantially all of its
assets to any other person or entity (other than an entity that is wholly-owned
by the Company), (iii) the

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Company is to be dissolved, or (iv) the Company is a party to any other
corporate transaction (as defined under section 424(a) of the Code and
applicable Treasury Regulations) that is not described in clauses (i), (ii) or
(iii) of this sentence (each such event is referred to herein as a "Corporate
Change"), then (x) except as otherwise provided in an Option Agreement or as a
result of the effectuation of one or more of the alternatives described below,
there shall be no acceleration of the time at which any Option then outstanding
may be exercised, and (y) no later than ten days after the approval by the
stockholders of the Company of such Corporate Change, the Board of Directors or
the Committee, acting in their sole and absolute discretion without the consent
or approval of any Optionee, shall act to effect one or more of the following
alternatives, which may vary among individual Optionees and which may vary among
Options held by any individual Optionee:

                           (1)      accelerate the time at which some or all of
         the Options then outstanding may be exercised so that such Options may
         be exercised in full for a limited period of time on or before a
         specified date (before or after such Corporate Change) fixed by the
         Committee or the Board of Directors, after which specified date all
         such Options that remain unexercised and all rights of Optionees
         thereunder shall terminate;

                           (2)      require the mandatory surrender to the
         Company by all or selected Optionees of some or all of the
         then-outstanding Options held by such Optionees (regardless of whether
         such Options are then exercisable under the provisions of the Plan or
         the Option Agreements evidencing such Options) as of a date, before or
         after such Corporate Change, specified by the Committee or the Board of
         Directors, in which event the Committee or the Board of Directors shall
         thereupon cancel such Options and the Company shall pay to each such
         Optionee an amount of cash per share equal to the excess, if any, of
         the per share price offered to stockholders of the Company in
         connection with such Corporate Change over the exercise price(s) under
         such Options for such shares;

                           (3)      with respect to all or selected Optionees,
         have some or all of their then-outstanding Options (whether vested or
         unvested) assumed or have a new Option substituted for some or all of
         their then-outstanding Options (whether vested or unvested) by an
         entity that is a party to the transaction resulting in such Corporate
         Change and that is then employing him, or a parent or subsidiary of
         such entity, provided that (A) such assumption or substitution is on a
         basis in which the excess of the aggregate fair market value of the
         shares subject to the Option immediately after the assumption or
         substitution over the aggregate exercise price of such shares is equal
         to the excess of the aggregate fair market value of all shares subject
         to the Option immediately before such assumption or substitution over
         the aggregate exercise price of such shares, and (B) the assumed rights
         under such existing Option or the substituted rights under such new
         Option, as the case may be, will have the same terms and conditions as
         the rights under the existing Option assumed or substituted for, as the
         case may be;

                           (4)      provide that the number and class of shares
         of Stock covered by an Option (whether vested or unvested) theretofore
         granted shall be adjusted so that such

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         Option when exercised shall thereafter cover the number and class of
         shares of stock or other securities or property (including, without
         limitation, cash) to which the Optionee would have been entitled
         pursuant to the terms of the agreement or plan (or both) relating to
         such Corporate Change if, immediately prior to such Corporate Change,
         the Optionee had been the holder of record of the number of shares of
         Stock then covered by such Option; or

                           (5)      make such adjustments to Options then
         outstanding as the Committee or the Board of Directors deems
         appropriate to reflect such Corporate Change (provided, however, that
         the Committee or the Board of Directors may determine in their sole and
         absolute discretion that no such adjustment is necessary).

         In effecting one or more of alternatives (3), (4) or (5) above, and
except as otherwise may be provided in an Option Agreement, the Committee or the
Board of Directors, in their sole and absolute discretion and without the
consent or approval of any Optionee, may accelerate the time at which some or
all Options then outstanding may be exercised.

         If changes occur in the outstanding Stock by reason of
recapitalizations, reorganizations, mergers, consolidations, combinations,
exchanges or other relevant changes in capitalization occurring after the date
of the grant of any Option and not otherwise provided for by this Section 4.5,
then any outstanding Options and any agreements evidencing such Options shall be
subject to adjustment by the Committee or the Board of Directors in their sole
and absolute discretion as to the number and price of shares of stock or other
consideration subject to such Options. If any such change occurs in the
outstanding Stock, then the aggregate number of shares available under the Plan
may be appropriately adjusted by the Committee or the Board of Directors, whose
determination shall be conclusive.

         The issue by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, for cash or property, or for
labor or services either upon direct sale or upon the exercise of rights or
warrants to subscribe for them, or upon conversion of shares or obligations of
the Company convertible into shares or other securities, shall not affect, and
no adjustment by reason of such issuance shall be made with respect to, the
number, class, or price of shares of Stock then subject to outstanding Options.

         4.6      ACCELERATION. The Committee may, in its discretion, provide
for the automatic acceleration upon a Change of Control of the Company, of the
time at which any Option will become exercisable and/or vested, by including a
provision to such effect in an Optionee's Option Agreement. The Committee may
also accelerate exercisability and/or vesting at such other times as it may
determine in its sole discretion.

         4.7      ELECTION UNDER SECTION 83(b) OF THE CODE. No Optionee shall
exercise the election permitted under section 83(b) of the Code without written
approval of the Committee. Any Optionee doing so shall forfeit all Options
issued to him under this Plan.

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                                   ARTICLE 5

                                     OPTIONS

         5.1      TYPE OF OPTION. Options granted under the Plan are not
intended to be governed by section 422 of the Code.

         5.2      OPTION PRICE. The price at which Stock may be purchased under
an Option shall not be less than the greater of: (a) 100 percent (100%) of the
Fair Market Value of the shares of Stock on the date the Option is granted or
(b) the aggregate par value of the shares of Stock on the date the Option is
granted. The Committee in its discretion may provide that the price at which
shares of Stock may be purchased under an Option shall be more than 100 percent
(100%) of Fair Market Value.

         5.3      DURATION OF OPTIONS. No Option shall be exercisable after the
expiration of ten (10) years from the date the Option is granted.

         5.4      AMOUNT EXERCISABLE. Each Option may be exercised from time to
time, in whole or in part, in the manner and subject to the conditions the
Committee, in its sole discretion, may provide in the Option Agreement, as long
as the Option is valid and outstanding.

         5.5      EXERCISE OF OPTIONS.

                  (a)      Forms of Consideration Authorized. The exercise of an
         Option shall be made only by a written notice delivered in person, by
         telecopy or by mail to the Secretary of the Company at the Company's
         principal executive office, specifying the number of shares of Stock to
         be purchased and accompanied by payment therefor and otherwise in
         accordance with the Agreement pursuant to which the Option was granted.
         The purchase price for any shares of Stock purchased pursuant to the
         exercise of an Option shall be paid in full upon such exercise by any
         one or a combination of the following: (i) by payment in cash,
         certified check, bank draft or postal or express money order payable to
         the order of the Company for an amount equal to the exercise price
         under the Option, (ii) by tender to the Company of Mature Shares with a
         Fair Market Value on the date of exercise equal to the exercise price
         under the Option, (iii) by delivery of a properly executed notice of
         exercise together with irrevocable instructions to a broker or dealer
         providing for the assignment to the Company of the proceeds of a sale
         or loan with respect to some or all of the shares being acquired upon
         the exercise of the Option (a "Cashless Exercise"), or (iv) by such
         other terms and conditions as may be approved by the Committee to the
         extent permitted by applicable law.

                  (b)      Limitations on Forms of Consideration.

                           (i)      General Restrictions. The Committee shall
         not permit an Optionee to pay his exercise price upon the exercise of
         an Option by having the Company reduce the number of shares of Stock
         that will be delivered to the Optionee pursuant to the exercise of the
         Option. In addition, the Committee shall not permit an Optionee to

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         pay his exercise price upon the exercise of an Option by using shares
         of Stock other than Mature Shares.

                           No fractional shares of Stock (or cash in lieu
         thereof) shall be issued upon exercise of an Option and the number of
         shares that may be purchased upon exercise shall be rounded to the
         nearest number of whole shares.

                           (ii)     Mature Shares. If Mature Shares are used for
         payment by the Optionee, the aggregate Fair Market Value of the Mature
         Shares tendered must be equal to or less than the aggregate exercise
         price of the shares being purchased upon exercise of the Option, and
         any difference must be paid by cash, certified check, bank draft or
         postal or express money order payable to the order of the Company.
         Delivery of the shares shall be deemed effected for all purposes when a
         stock transfer agent of the Company shall have deposited the
         certificates in the United States mail, addressed to the Optionee or to
         the Optionee's designated broker or dealer, at the address specified by
         the Optionee.

                           Whenever an Option is exercised by exchanging Mature
         Shares owned by the Optionee, the Optionee shall deliver to the Company
         certificates registered in the name of the Optionee representing a
         number of shares of Stock legally and beneficially owned by the
         Optionee, free of all liens, claims and encumbrances of every kind,
         accompanied by stock powers duly endorsed in blank by the record holder
         of the shares represented by the certificates (with signature
         guaranteed by a commercial bank or trust company or by a brokerage firm
         having a membership on a registered national stock exchange). The
         delivery of certificates upon the exercise of Options is subject to the
         condition that the person exercising the Option provide the Company
         with the information the Company might reasonably request pertaining to
         exercise, sale or other disposition. If requested by the Secretary of
         the Company, the Optionee shall deliver the Agreement evidencing the
         Option to the Secretary of the Company who shall endorse thereon a
         notation of such exercise and return such Agreement to the Optionee.

                           (iii)    Cashless Exercise. The Company reserves, at
         any and all times, the right, in the Company's sole and absolute
         discretion, to establish, decline to approve or terminate any program
         or procedures for the exercise of Options by means of a Cashless
         Exercise.

         5.6      EXERCISE ON TERMINATION OF EMPLOYMENT. Unless it is expressly
provided otherwise in the Option Agreement, Options shall (a) terminate one day
less than three months after severance of employment of the Employee from the
Company and all Affiliates for any reason, with or without cause, other than
death, Retirement under the then established rules of the Company, or severance
for Disability, and (b) be exercisable only to the extent such Options are
exercisable at the time of the Employee's severance of employment. Whether
authorized leave of absence or absence on military or government service shall
constitute severance of the employment of the Employee shall be determined by
the Committee at that time.

                                       10
<PAGE>

         In determining the employment relationship between the Company and the
Employee, employment by any Affiliate shall be considered employment by the
Company, as shall employment by a corporation issuing or assuming a stock option
in a transaction to which section 424(a) of the Code applies, or by a parent
corporation or subsidiary corporation of the corporation issuing or assuming a
stock option (and for this purpose, the phrase "corporation issuing or assuming
a stock option" shall be substituted for the word "Company" in the definitions
of parent corporation and subsidiary corporation in Section 2.1, and the
parent-subsidiary relationship shall be determined at the time of the corporate
action described in section 424(a) of the Code).

         5.7      DEATH. If, before the expiration of an Option, the Employee,
whether in the employ of the Company or after he has Retired or was severed for
Disability, dies, the Option shall continue until the earlier of the Option's
expiration date or one year following the date of his death, unless it is
expressly provided otherwise in the Option Agreement. After the death of the
Employee, his executors, administrators or any persons to whom his Option may be
transferred by will or by the laws of descent and distribution shall have the
right, at any time prior to the Option's expiration or termination, whichever is
earlier, to exercise it, to the extent to which he was entitled to exercise it
immediately prior to his death, unless it is expressly provided otherwise in the
Option Agreement.

         5.8      RETIREMENT. Unless it is expressly provided otherwise in the
Option Agreement, if before the expiration of an Option, the Employee shall be
Retired in good standing from the employ of the Company under the then
established rules of the Company, the Option shall terminate on the earlier of
the Option's expiration date or one day less than one year after his Retirement.
In the event of Retirement, the Employee shall have the right prior to the
termination of the Option to exercise the Option, to the extent to which he was
entitled to exercise it immediately prior to his Retirement, unless it is
expressly provided otherwise in the Option Agreement.

         5.9      DISABILITY. If, before the expiration of an Option, the
Employee shall be severed from the employ of the Company for Disability, the
Option shall terminate on the earlier of the Option's expiration date or one day
less than one year after the date he was severed because of Disability, unless
it is expressly provided otherwise in the Option Agreement. In the event that
the Employee shall be severed from the employ of the Company for Disability, the
Employee shall have the right prior to the termination of the Option to exercise
the Option, to the extent to which he was entitled to exercise it immediately
prior to his Retirement or severance of employment for Disability, unless it is
expressly provided otherwise in the Option Agreement.

         5.10     SUBSTITUTION OPTIONS. Options may be granted under this Plan
from time to time in substitution for stock options held by employees of other
corporations who are about to become Employees of or affiliated with the Company
or any Affiliate as the result of a merger or consolidation of the employing
corporation with the Company or any Affiliate, or the acquisition by the Company
or any Affiliate of the assets of the employing corporation, or the acquisition
by the Company or any Affiliate of stock of the employing corporation as the
result of which it becomes an Affiliate of the Company. The terms and conditions
of the substitute Options

                                       11
<PAGE>

granted may vary from the terms and conditions set out in this Plan to the
extent the Committee, at the time of grant, may deem appropriate to conform, in
whole or in part, to the provisions of the stock options in substitution for
which they are granted.

         5.11     NO RIGHTS AS STOCKHOLDER. No Employee shall have any rights as
a stockholder with respect to Stock covered by his Option until the date a stock
certificate is issued for the Stock.

                                   ARTICLE 6

                                 ADMINISTRATION

         6.1      COMMITTEE. This Plan shall be administered by the Committee.
All questions of interpretation and application of this Plan and Options shall
be subject to the determination of the Committee. A majority of the members of
the Committee shall constitute a quorum. All determinations of the Committee
shall be made by a majority of its members. Any decision or determination
reduced to writing and signed by a majority of the members shall be as effective
as if it had been made by a majority vote at a meeting properly called and held.
In carrying out its authority under this Plan, the Committee shall have full and
final authority and discretion, including but not limited to the following
rights, powers and authorities, to:

                  (a)      determine the Employees to whom and the time or times
         at which Options will be made,

                  (b)      determine the number of shares and the exercise price
         of Stock covered in each Option, subject to the terms of the Plan,

                  (c)      determine the terms, provisions and conditions of
         each Option, which need not be identical,

                  (d)      accelerate the time at which any outstanding Option
         may be exercise,

                  (e)      define the effect, if any, on an Option of the death,
         Disability, Retirement, or termination of employment of the Employee,

                  (f)      prescribe, amend and rescind rules and regulations
         relating to administration of this Plan, and

                  (g)      make all other determinations and take all other
         actions deemed necessary, appropriate, or advisable for the proper
         administration of this Plan.

         The actions of the Committee in exercising all of the rights, powers,
and authorities set out in this Article and all other Articles of this Plan,
when performed in good faith and in its sole judgment, shall be final,
conclusive and binding on all parties.

                                       12
<PAGE>

                                   ARTICLE 7

                        AMENDMENT OR TERMINATION OF PLAN

         7.1      AMENDMENT OR TERMINATION OF THE PLAN. The Board of Directors
of the Company may amend, terminate or suspend this Plan at any time, in its
sole and absolute discretion; provided, however, that (a) no plan or program
providing for either (a) the amendment of outstanding Options to reduce the
exercise price thereof or (b) the cancellation of outstanding Options and the
grant in substitution therefore of new Options having an exercise price that is
less than the original exercise price (as adjusted pursuant to Section 4.5)
shall be approved or adopted without the approval of the Company's stockholders,
and (b) no amendment to this Plan will have the effect of adversely modifying
the terms of any outstanding Option without the written consent of the
particular affected Optionee.

         7.2      AMENDMENT OF OPTIONS. The Committee may at any time or times
amend any outstanding Option or Options for the purpose of satisfying the
requirements of changes in applicable laws or regulations or the rules of any
national securities exchange or interdealer quotation service on which the Stock
is then listed or approved for quotation. Further, the Committee may, with the
consent of the holder of an Option, make such modifications or amendments to
such Option as it shall deem advisable. Notwithstanding the foregoing, except
for adjustments pursuant to Section 4.5, the Committee may not modify or amend
outstanding Options to reduce the exercise price thereof, or cancel outstanding
Options and grant substitute Options having an exercise price that is less than
the original exercise price (as it may be adjusted pursuant to Section 4.5)
therefor for the purpose of repricing, replacing or regranting such Options
without the the approval of the Company's stockholders.

                                   ARTICLE 8

                                  MISCELLANEOUS

         8.1      NO ESTABLISHMENT OF A TRUST FUND. No property shall be set
aside nor shall a trust fund of any kind be established to secure the rights of
any Employee under this Plan.

         8.2      NO EMPLOYMENT OBLIGATION. The granting of any Option shall not
constitute an employment contract, express or implied, nor impose upon the
Company or any Affiliate any obligation to employ or continue to employ any
Employee. The right of the Company or any Affiliate to terminate the employment
of any person shall not be diminished or affected by reason of the fact that an
Option has been granted to him.

         8.3      FORFEITURE. Notwithstanding any other provisions of this Plan,
if the Committee finds by a majority vote after full consideration of the facts
that the Employee, before or after termination of his employment with the
Company or an Affiliate for any reason committed or engaged in fraud,
embezzlement, theft, commission of a felony, or proven dishonesty in the course
of his employment by the Company or an Affiliate, which conduct has demonstrably
damaged the Company or Affiliate, the Employee shall forfeit all outstanding
Options, including all exercised Options pursuant to which the Company has not
yet delivered a stock certificate.

                                       13
<PAGE>

         The decision of the Committee as to the cause of the Employee's
discharge, and the damage done to the Company or an Affiliate, shall be final.
No decision of the Committee, however, shall affect the finality of the
discharge of the Employee by the Company or an Affiliate in any manner.

         8.4      TAX WITHHOLDING.

                  (a)      The Company or any Affiliate shall be entitled to
         deduct from other compensation payable to each Employee any sums
         required by federal, state, or local tax law to be withheld with
         respect to the grant or exercise of an Option. In the alternative, the
         Company may require the Employee (or other person exercising the
         Option) to pay the sum directly to the employer corporation. If the
         Employee (or other person exercising the Option) is required to pay the
         sum directly, payment in cash or by check of such sums for taxes shall
         be delivered within ten days after the date of exercise. In
         satisfaction of the payment of such sum to the Company or any
         Affiliate, the Employee may make a written election, which may be
         accepted or rejected in the discretion of the Chief Financial Officer
         of the Company, to have withheld a portion of the shares of Stock
         issuable to him or her upon exercise of the Option having an aggregate
         Fair Market Value, on the date of exercise, equal to or less than the
         amount required to be withheld, provided that the Fair Market Value of
         the shares held back shall not exceed the Company's or Affiliate's
         minimum statutory withholding tax obligations.

                  (b)      The Company and its Affiliates shall have no
         obligation upon exercise of any Option to issue any shares of Stock
         until the Company has received payment sufficient to cover all sums due
         with respect to that exercise. The Company and its Affiliates shall not
         be obligated to advise an Employee of the existence of the tax or the
         amount which the employer corporation will be required to withhold.

         8.5      WRITTEN AGREEMENT. Each Option shall be embodied in a written
Option Agreement which shall be subject to the terms and conditions of this Plan
and shall be signed by the Employee and by a member of the Committee on behalf
of the Committee and an executive officer of the Company other than the
Employee, on behalf of the Company. The Option Agreement may contain any other
provisions that the Committee in its discretion shall deem advisable which are
not inconsistent with the terms of this Plan.

         8.6      INDEMNIFICATION OF THE COMMITTEE AND THE BOARD OF DIRECTORS.
With respect to administration of this Plan, the Company shall indemnify each
present and future member of the Committee and the Board of Directors against,
and each member of the Committee and the Board of Directors shall be entitled
without further act on his part to indemnity from the Company for, all expenses
(including attorney's fees, the amount of judgments and the amount of approved
settlements made with a view to the curtailment of costs of litigation, other
than amounts paid to the Company itself) reasonably incurred by him in
connection with or arising out of any action, suit, or proceeding in which he
may be involved by reason of his being or having been a member of the Committee
and/or the Board of Directors, whether or not he continues to be a member of the
Committee and/or the Board of Directors at the time of

                                       14
<PAGE>

incurring the expenses. However, this indemnity shall not include any expenses
incurred by any member of the Committee and/or the Board of Directors in respect
of matters as to which he shall be finally adjudged in any action, suit or
proceeding to have been guilty of gross negligence or willful misconduct in the
performance of his duty as a member of the Committee or the Board of Directors.
In addition, no right of indemnification under this Plan shall be available to
or enforceable by any member of the Committee and the Board of Directors unless,
within 60 days after institution of any action, suit or proceeding, he shall
have offered the Company, in writing, the opportunity to handle and defend same
at its own expense. This right of indemnification shall inure to the benefit of
the heirs, executors or administrators of each member of the Committee and the
Board of Directors and shall be in addition to all other rights to which a
member of the Committee and/or the Board of Directors may be entitled as a
matter of law, contract, or otherwise.

         8.7      GENDER. If the context requires, words of one gender when used
in this Plan shall include the others and words used in the singular or plural
shall include the other.

         8.8      HEADINGS. Headings of Articles and Sections are included for
convenience of reference only and do not constitute part of this Plan and shall
not be used in construing the terms of this Plan.

         8.9      OTHER COMPENSATION PLANS. The adoption of this Plan shall not
affect any other stock option, incentive or other compensation or benefit plans
in effect for the Company or any Affiliate, nor shall this Plan preclude the
Company from establishing any other forms of incentive or other compensation for
Employees of the Company or any Affiliate.

         8.10     OTHER OPTIONS. The grant of an Option shall not confer upon
the Employee the right to receive any future or other Options under this Plan,
whether or not Options may be granted to similarly situated Employees, or the
right to receive future Options upon the same terms or conditions as previously
granted.

         8.11     GOVERNING LAW. The provisions of this Plan shall be construed,
administered, and governed under the laws of the State of Texas.

                                       15<PAGE>

                                                                     EXHIBIT 4.7

                               [TODCO LETTERHEAD]

_____________, 2004

[INSERT NAME]
[INSERT ADDRESS]

Dear ____________:

Effective as of ___________ (the "Award Date"), TODCO (the "Company") hereby
grants to you a nonqualified option ("Option") to purchase __________ shares of
Class A Common Stock of the Company ("Common Stock") in accordance with the
TODCO Long-Term Incentive Plan (the "Plan"). Your award is more fully described
in the attached Appendix A, Terms and Conditions of Nonqualified Stock Option
Award.

The price at which you may purchase the shares of Common Stock covered by the
Option is _______ per share ("Exercise Price"). Unless otherwise provided in the
attached Appendix A, your Option will expire on ________________ ("Expiration
Date"), and will become exercisable in installments as follows (the "Schedule"):

<TABLE>
<CAPTION>
PERIOD BEGINNING                       NUMBER OF SHARES PURCHASABLE
-------------------------------------------------------------------
<S>                                    <C>
______________, 2004
______________, 2005
______________, 2006
</TABLE>

You must be in continuous employment with the Company or its Subsidiary (as
defined in the Plan) from the Award Date through each date on which your Option
becomes exercisable in order for your Option to become exercisable on such date.

Your award is subject to the terms and conditions set forth in the enclosed
Plan, any additional terms and conditions set forth in the attached Appendix A
and the Prospectus for the Plan, and any rules and regulations adopted by the
Executive Compensation Committee of the Company's Board of Directors.

This award letter and the attachments contain the formal terms and conditions of
your award and accordingly should be retained in your files for future
reference.

Very truly yours,

Jan Rask
President and Chief Executive Officer

<PAGE>

Enclosures

<PAGE>

                                   APPENDIX A
                                 TO AWARD LETTER
                                      DATED
                               [_________________]

                             TERMS AND CONDITIONS OF
                    EMPLOYEE NONQUALIFIED STOCK OPTION AWARD

The nonqualified stock option (the "Option") granted to you by TODCO (the
"Company") to purchase Class A Common Stock of the Company ("Common Stock") is
subject to the terms and conditions set forth in the TODCO Long-Term Incentive
Plan (the "Plan"), any rules and regulations adopted by the Executive
Compensation Committee of the Company's Board of Directors (the "Committee"),
any additional terms and conditions set forth in this Appendix A which forms a
part of the attached award letter to you (the "Award Letter") and the enclosed
Prospectus for the Plan. Any terms used in this Appendix A and not defined in
the Award Letter or this Appendix A have the meanings set forth in the Plan. In
the event there is an inconsistency between the terms of the Plan and this
Appendix A, the terms of the Plan will control.

1.       EXERCISE PRICE

         You may purchase the Shares of Common Stock covered by the Option for
the Exercise Price stated in your Award Letter.

2.       TERM OF OPTION

         Your Option expires on the Expiration Date stated in your Award Letter.
         However, your Option will terminate prior to the Expiration Date as
         provided in paragraph 6 of this Appendix A upon the occurrence of one
         of the events described in that paragraph. Regardless of the provisions
         of paragraph 6, in no event can your Option be exercised after the
         Expiration Date, except that an Option which is outstanding on the date
         of your death shall remain outstanding and exercisable until the later
         of (i) one year after your death, or (ii) the Expiration Date.

3.       EARN-OUT OF OPTION

         (a)      Unless it becomes exercisable on an earlier date as provided
                  in paragraphs 6 and 7 below, your Option will become
                  exercisable in installments as set forth in the Schedule in
                  your Award Letter.

         (b)      The number of shares covered by each installment will be in
                  addition to the number of shares which previously became
                  exercisable.

<PAGE>

         (c)      To the extent your Option has become exercisable, you may
                  exercise the Option as to all or any part of the shares
                  covered by the Option, at any time on or before the date the
                  Option expires or terminates.

4.       EXERCISE OF OPTION

         Subject to the limitations set forth in this Appendix A and in the
         Plan, your Option may be exercised by written notice provided to the
         Company as set forth below. Such written notice shall (a) state the
         number of shares of Common Stock with respect to which your Option is
         being exercised and (b) be accompanied by a wire transfer, cashier's
         check, cash or money order payable to TODCO in the full amount of the
         Exercise Price for any shares of Common Stock being acquired and any
         appropriate withholding taxes (as provided in paragraph 8 of this
         Appendix), or by other consideration in the form and manner approved by
         the Committee pursuant to paragraphs 5 and 8 of this Appendix. If any
         law or regulation requires the Company to take any action with respect
         to the shares specified in such notice, the time for delivery thereof,
         which would otherwise be as promptly as possible, shall be postponed
         for the period of time necessary to take such action. You shall have no
         rights of a shareholder with respect to shares of Common Stock subject
         to your Option unless and until such time as your Option has been
         exercised and ownership of such shares of Common Stock has been
         transferred to you.

5.       SATISFACTION OF EXERCISE PRICE

         (a)      PAYMENT OF CASH OR COMMON STOCK. Your Option may be exercised
                  by payment in cash (including check, bank draft, money order
                  or wire transfer payable to the Company), in Common Stock, in
                  a combination of cash and Common Stock or in such other manner
                  as the Committee in its discretion may provide.

         (b)      PAYMENT OF COMMON STOCK. The fair market value of any shares
                  of Common Stock tendered as all or part of the Exercise Price
                  shall be the average of the high and low prices of the Common
                  Stock as reported on the New York Stock Exchange Composite
                  Tape for the date of exercise. The certificates evidencing
                  shares of Common Stock tendered must be duly endorsed or
                  accompanied by appropriate stock powers. Only stock
                  certificates issued solely in your name may be tendered in
                  exercise of your Option. Fractional shares may not be tendered
                  in satisfaction of the Exercise Price; any portion of the
                  Exercise Price which is in excess of the aggregate fair market
                  value of the number of whole shares tendered must be paid in
                  cash. If a certificate tendered in exercise of the Option
                  evidences more shares than are required pursuant to the
                  immediately preceding sentence for satisfaction of the portion
                  of the Exercise Price being paid in Common Stock, an
                  appropriate replacement certificate will be issued to you for
                  the number of excess shares.

<PAGE>

6.       TERMINATION OF EMPLOYMENT

         (a)      GENERAL. The following rules apply to your Option in the event
                  of your death, disability, retirement, or other termination of
                  employment.

                  (i)      TERMINATION OF EMPLOYMENT. If your employment
                           terminates for any reason other than death,
                           disability, retirement, or for the convenience of the
                           Company (as those terms are used below), your Option
                           will terminate 60 days after termination of your
                           employment. Following the termination of your
                           employment, no additional portions of your Option
                           will become exercisable, and your Option will be
                           limited to the number of shares of Common Stock which
                           you were entitled to purchase under the Option on the
                           date of the termination of your employment.

                  (ii)     RETIREMENT. If your employment terminates by reason
                           of retirement (under a retirement program of the
                           Company or one of its subsidiaries or otherwise as
                           determined by the Committee), your Option will
                           terminate three years after the date of your
                           retirement. Following your retirement, no additional
                           portions of your Option will become exercisable, and
                           your Option will be limited to the number of shares
                           of Common Stock which you were entitled to purchase
                           under the Option on the date of your retirement.

                  (iii)    DEATH OR DISABILITY. If your employment terminates by
                           reason of death or disability (as determined by the
                           Committee), your Option will become fully
                           exercisable, and will remain exercisable until the
                           Expiration Date.

                  (iv)     CONVENIENCE OF THE COMPANY. If your employment is
                           terminated for the convenience of the Company (as
                           determined by the Committee) or if you retire for the
                           convenience of the Company (as determined by the
                           Committee), your Option will become fully exercisable
                           and will remain exercisable until the Expiration
                           Date.

                  (v)      ADJUSTMENTS BY THE COMMITTEE. The Committee may, in
                           its sole discretion, exercised before or after your
                           termination of employment, declare all or any portion
                           of your Option immediately exercisable and/or permit
                           all or any part of your Option to remain exercisable
                           for such period designated by it after the time when
                           the Option would have otherwise terminated as
                           provided in the applicable portion of this paragraph
                           6(a), but not beyond the Expiration Date of your
                           Option.

         (b)      COMMITTEE DETERMINATIONS. The Committee shall have absolute
                  discretion to determine the date and circumstances of
                  termination of your employment, and its determination shall be
                  final, conclusive and binding upon you.

<PAGE>

7.       CHANGE IN CONTROL

         Notwithstanding the provisions of paragraphs 3 and 6, upon the
         occurrence of a Change in Control (as defined in the Plan), your Option
         will immediately become fully exercisable and will remain exercisable
         until the Expiration Date.

8.       TAX CONSEQUENCES AND WITHHOLDING

         (a)      You should consult the TODCO Long-Term Incentive Plan
                  Prospectus for a general summary of the federal income tax
                  consequences of your Option based on currently applicable
                  provisions of the Internal Revenue Code (the "Code") and
                  related regulations. The summary does not discuss state and
                  local tax laws, which may differ from the federal tax law. For
                  these reasons, you are urged to consult your own tax advisor
                  regarding the application of the tax laws to your particular
                  situation.

         (b)      The Option is not intended to be an "incentive stock option,"
                  as defined in Section 422 of the Code.

         (c)      You must make arrangements satisfactory to the Company to
                  satisfy any applicable federal, state or local withholding tax
                  liability arising from the grant or exercise of your Option.
                  You can either make a cash payment to the Company of the
                  required amount or you can elect to satisfy your withholding
                  obligation by having the Company retain shares of Common Stock
                  having a value equal to the amount of your withholding
                  obligation from the shares otherwise deliverable to you upon
                  the exercise of your Option. You may not elect to have the
                  Company withhold shares of Common Stock having a value in
                  excess of the minimum statutory withholding tax liability. If
                  you fail to satisfy your withholding obligation in a time and
                  manner satisfactory to the Company, the Company shall have the
                  right to withhold the required amount from your salary or
                  other amounts payable to you.

9.       RESTRICTIONS ON RESALE

         There are no restrictions imposed by the Plan on the resale of shares
         of Common Stock 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. There are no
         restrictions imposed by the SEC on the resale of shares acquired under
         the Plan by persons who are not affiliates of the Company.

<PAGE>

10.      EFFECT ON OTHER BENEFITS

         Income recognized by you as a result of exercise of the Option 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.

If you have any questions regarding your Option or would like to obtain
additional information about the Plan or the Committee, please contact the
Company's General Counsel, TODCO, 2000 W. Sam Houston Parkway South, Suite 800,
Houston, Texas 77042 (telephone (713) 278-6000). Your Award Letter and this
Appendix A contain the formal terms and conditions of your award and accordingly
should be retained in your files for future reference.

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