Exhibit 10.3 — Form
of Employee Deferred Performance Unit Award Letter
«FirstLast»
(address)
Dear
«Fname»:
TODCO (the “Company”)
hereby grants to you effective as of February 7, 2005 (the
“Grant Date”) Deferred Performance Units representing
the opportunity to receive up to a maximum of ___ shares of TODCO
Common Stock (“Common Stock”) in accordance with the
TODCO Long-Term Incentive Plan (the “Plan”). The exact
amount of your award will be determined as of December 31,
2007. Please refer to the attached Appendix A, Terms and
Conditions of Employee Deferred Performance Unit Award, for further
details.
Shares of Common Stock earned (if
any) will vest on the Determination Date.
Your Deferred Performance Units
are subject to the terms and conditions set forth in the enclosed
Plan, the Prospectus for the Plan, any additional terms and
conditions set forth in the attached Appendix A and any rules
and regulations adopted by the Executive Compensation Committee of
the Board of Directors in accordance with the terms of the
plan.
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.
Congratulations on your
award.
Very truly yours,
Jan Rask
Enclosures
8
Appendix A
To Award Letter
Terms and Conditions of
Employee Deferred Performance Unit Award
February 7, 2005
The Deferred Performance Unit
award by TODCO (the “Company”) to you effective as of
the Grant Date provides for the opportunity for you to receive, if
certain conditions are met, shares of TODCO Common Stock
(“Common Stock”) subject to the terms and conditions
set forth in the TODCO Long-Term Incentive Plan (the
“Plan”), the enclosed Prospectus for the Plan, any
rules and regulations adopted by the Executive Compensation
Committee of the Board of Directors (the “Committee”),
and any additional terms and conditions set forth in this
Appendix A all of which forms a part of the attached award
letter to you (“Award Letter”). Any terms used and not
defined in the Award Letter have the meanings set forth in the
Plan. In the event there is an inconsistency between the terms of
the Plan and the Award Letter, the terms of the Plan will
prevail.
1. Determination of Earned
Shares
(a)
Earned Shares
The
exact number of shares of Common Stock that will actually be earned
by and granted to you (the “Earned Shares”) out of the
total maximum number of Deferred Performance Units awarded to you
in the Award Letter will be based upon the level of achievement by
the Company of the performance standard described below over the
three-year period commencing January 1, 2005 (the
“Performance Cycle”). The determination by the
Committee with respect to the achievement of such performance
standards will be made in the first quarter of 2008 after all
necessary Company and peer information is available. The specific
date on which such determination is formally made and approved by
the Committee is referred to as the “Determination
Date”. After the Determination Date, the Company will notify
you of the number of Earned Shares, if any, to be actually granted
to you. All payments shall be made no later than February 28,
2008.
The
calculation of Earned Shares shall be based on the Company’s
Total Shareholder Return ranking compared to a defined peer group
at the end of the Performance Cycle as determined by the Committee
in its sole discretion. Total Shareholder Return is defined for a
given company as the change in share price plus cumulative
dividends paid, assuming dividend reinvestment during the
Performance Cycle, over share price at the beginning of the
Performance Cycle of the applicable Company. Earned Shares will be
calculated by multiplying the maximum number of deferred
performance units granted by the following percentages for the
percentile rank achieved. For Total Shareholder Return performance
between the percentile ranks noted below, linear interpolation will
be used to calculate the exact number of Earned Shares:
9
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Percentile
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Rank
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Percentage
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100
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%
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91.67
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83.33
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75.00
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66.67
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58.33
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50.00
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40.00
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30.00
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20.00
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10.00
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ZERO
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The
Company’s defined “Peer Group” shall consist of
TODCO and the following companies: Cal Dive International, Ensco
International, Global Industries, Grant Prideco, Grey Wolf,
Helmerich & Payne, Key Energy Services, Maverick Tube, Newpark
Resources, Parker Drilling, Patterson — UTI Energy, Pride
International, Rowan Companies Inc., Tidewater Inc., Varco
International Inc.
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(b)
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Committee
Determinations
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In
accordance with the provisions of the Plan, the Committee shall
have the exclusive authority to make all determinations hereunder,
including but not limited to the ranking of TODCO and its Peer
Group. Without limiting the foregoing, the Committee shall have
absolute discretion to determine the number of Earned Shares to
which you are entitled, if any, including without limitation such
adjustments as may be necessary in the opinion of the Committee to
account for changes since the date of the Award Letter.
Notwithstanding the foregoing, the Committee shall be precluded
from increasing the amount that would otherwise be obtainable upon
the achievement of the performance goals described in Section 1(a)
above to the extent prescribed by Section 162(m) of the Internal
revenue Code of 1986 as amended (the “Code”) and the
applicable regulations rulings and notices thereunder. The
Committee’s determination shall be final, conclusive and
binding upon you. You shall not have any right or claim with
respect to any shares other than Earned Shares to which you become
entitled in accordance herewith.
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(c)
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You
will not be required to pay any purchase price for the Earned
Shares; however tax withholding is required pursuant to
Section 8.
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(a)
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Unless vested on an earlier date as
provided in this Appendix A, the Earned Shares will vest on
the Determination Date.
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(b)
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As
described in Section 7 below, in the event of a Change of
Control a portion of your Deferred Performance Units may become
Earned Shares and vest prior to the Determination Date.
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3.
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Restrictions
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Until and unless Earned Shares
become vested, you do not own any of the Common Stock potentially
subject to this Deferred Performance Unit award and may not attempt
to sell, transfer, assign or pledge any such Common Stock. Your
Earned Shares, if any, will be registered in your name as of the
Determination Date. The Deferred Performance Unit grant shall be
accounted for by the Company on your behalf on a ledger pursuant to
Section 3.2(c) of the Plan until the number of Earned Shares
is determined and may not be transferred, sold, assigned or pledged
in any manner prior to vesting.
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