This Agreement
(“ Agreement ”), dated August 20, 2008, is
entered into between Pioneer Drilling Company (the “
Company ”) and Joyce M. Schuldt (“
Schuldt ,” and together with the Company, the “
Parties ”), and shall be effective as of the Effective
Date (as defined herein).
WHEREAS, Schuldt
has been designated as a Level II participant in the Amended and
Restated Pioneer Drilling Services, Ltd. Key Executive Severance
Plan (the “ Plan ”), pursuant to which she is
entitled to certain severance benefits upon her separation from the
Company as further described herein;
WHEREAS, this
Agreement is entered into by and between the Company and Schuldt
for the purpose of concluding their employment
relationship;
NOW, THEREFORE, in
consideration of the mutual covenants and agreements contained in
this Agreement, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the
Parties agree as follows:
1.
Definitions . As used in this Agreement, the following terms
shall have the meaning indicated:
(a)
“ Affiliates ” means when used with respect to a
specified Person, any other Person directly or indirectly
controlling or controlled by or under direct or indirect common
control with the specified Person. For purposes of this definition
“ control ”, when used with respect to any
specified Person, means the power to direct the management and
policies of the Person, directly or indirectly, whether through the
ownership of voting securities, by contract, by family relationship
or otherwise; and the terms “ controlling ” and
“ controlled ” have the meanings correlative to
the foregoing.
(b)
“ Person ” refers to and includes any
individual, corporation (including any non-profit corporation),
general or limited partnership, limited liability company, joint
venture, estate, trust, organization, or other entity.
(c)
“ Pioneer Releasees ” refers to the Company and
its Affiliates and each of their respective past or present
officers, directors, partners, stockholders, agents, employees,
attorneys, trustees, successors and assigns and/or any or all of
them.
(d)
“ Schuldt Releasees ” refers to Schuldt, her
heirs, assigns, executors, and personal representatives and/or any
or all of them.
2.
Resignations . As of the Effective Date, Schuldt hereby
resigns from her positions as a director, officer and employee of
the Company and its Affiliates, each as the case may be (the
“ Resignations ”) and the Company hereby accepts
Schuldt’s Resignations. The Parties agree that, for purposes
of the Plan, Schuldt’s termination shall be deemed to be an
“Involuntary Termination” as such term is defined under
the Plan. A
3.
Severance Benefits . In consideration for this Agreement,
and the covenants and agreements contained herein, including, but
not limited to, the waiver and release in Section 4 hereof,
Schuldt shall be entitled to the following severance
benefits:
(a) A
lump-sum cash payment of $900,000, as provided in
Section 4.1(a) of the Plan, to be paid to Schuldt on the
Effective Date. On the Effective Date, the Company shall deposit
such $900,000 into a trust to provide for the payment described in
the preceding sentence. Such trust shall be established by the
Company on the Effective Date in accordance with the terms of the
Trust Agreement attached hereto as Appendix A .
In addition to the foregoing, Schuldt may receive an additional
payment in respect of the earnings on the amount contributed to the
trust established under the terms of the Trust
Agreement.
(b) Acceleration
of the vesting of an aggregate of 41,666 shares of Common Stock
subject to those outstanding stock option awards granted to Schuldt
on July 18, 2007 (collectively, the “ July 2007
Option Award” ), as provided in Section 4.2(a) of
the Plan. The July 2007 Option Award was for an aggregate of
125,000 shares of Common Stock, of which 41,666 shares vested on
July 18, 2008, 41,666 shares are vesting pursuant to the terms of
this Agreement, and 41,666 shares terminate as of the Effective
Date. Following the Effective Date, the shares of Common Stock
subject to the July 2007 Option Award, to the extent not
terminated hereby, will remain subject to all other terms and
conditions of that Incentive Stock Option Agreement and
Non-Qualified Stock Option Agreement, as the case may be, both
dated July 18, 2007, by and between Schuldt and the Company,
and the terms and conditions of the Pioneer Drilling Company 2003
Stock Plan. Schuldt acknowledges and agrees that any portion of the
July 2007 Option Award that remains unexercised following the
three (3) month anniversary of the Effective Date will
terminate.
(c) Continuation
of life insurance coverage and coverage under the Company’s
medical benefits plan for twelve (12) months following the
Effective Date (the “ Coverage Expiration Date
”), as provided in, and to the extent of, Section 4.3(a)
of the Plan.
(d) For
eighteen (18) months following the Coverage Expiration Date,
Schuldt is eligible to commence continued medical coverage in
accordance with Consolidated Omnibus Budget Reconciliation Act of
1985, as amended, as provided in, and to the extent of,
Section 4.3(a) of the Plan.
(e) A
stock option award (“ Option Award ”) of 20,881
shares of the Company’s Common Stock with an exercise price
equal to the closing sale price of the Common Stock on
August 18, 2008 (the “ Grant Date ”) as
reported by the American Stock Exchange. The Option Award will be
granted pursuant to the terms and conditions of the Pioneer
Drilling Company 2007 Stock Plan and that form of Stock Option
Agreement attached as Appendix B of this
Agreement. The Option Award is fully vested upon the Effective Date
(but shall be forfeited if the Effective Date does not occur) and,
once vested, will remain exercisable through the three
(3) month anniversary of the Effective Date. Following the
three (3) month anniversary of the Effective Date, the Option
Award will terminate to the extent unexercised.
(f) A
stock award (“ Stock Award ”) of 3,645 shares of
Common Stock. The Stock Award will be granted pursuant to the terms
and conditions of the Pioneer Drilling Company 2007 Stock Plan and
that form of Restricted Stock Agreement attached as
Appendix C of this Agreement. The Stock Award
will be fully vested upon the Effective Date (but shall be
forfeited if the Effective Date does not occur).
The
number of shares subject to the awards in (e) and
(f) above have been calculated based on 2.1 times
Schuldt’s base salary with the allocation between option
awards and restricted stock awards being 70% and 30%, respectively,
of the dollar amount of such awards. The Compensation Committee of
the Company will be using the same 70% option award/30% restricted
stock award methodology for the other named executive officers of
the Company for equity awards being made for the 2008 incentive
plan year.
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(g) A
cash incentive award for the period ended March 31, 2008 in
the amount of $113,817. This cash incentive award was calculated
using the target as the measurement level for Schuldt’s
personal objectives. The Compensation Committee will not be using a
higher measurement level with respect to personal objectives for
determing the cash incentive award for this period for any of the
other named executive officers in the Company’s proxy
statement dated April 14, 2008.
(h) A
lump-sum cash payment of $16,948.92, which is equal to existing
unpaid relocation expenses incurred by Schuldt in connection with
her relocation from St. Louis, Missouri, to San Antonio, Texas, in
July 2007, grossed-up to pay taxes in connection therewith as,
and to the extent, provided in the Company’s Relocation
Plan.
(i) A
lump-sum cash payment of $25,457.62, for certain unpaid consulting
fees owed to Schuldt for the period prior to her employment with
the Company.
(j) A
lump-sum cash payment of $730.25, for certain unpaid employee
expenses.
(k) Reimbursement
of Schuldt’s legal fees and expenses incurred in connection
with the internal investigation by the special committee of the
Company’s Board of Directors and this Agreement.
(l) Payment
of Schuldt’s accrued but unpaid base salary through the
Effective Date.
(m) Payment
for Schuldt’s vacation days accrued as of the Effective Date
but untaken, if any, to the extent and in the manner provided by
Company policy for its employees generally.
Schuldt
acknowledges and agrees (i) that all payments and benefits
provided in this Section 3 will be made net of any applicable
withholding requirements of federal, state or local law, and
(ii) that other than as provided in this Section 3,
Schuldt is not due, and no other compensation or benefits shall be
paid to, Schuldt. It is acknowledged and agreed by Schuldt that
Section 3 sets forth all of the compensation and benefits to
which she is entitled under the Plan or otherwise.
(a) In
consideration for entering into this Agreement, and the acts,
payments, covenants and agreements of the Parties described and
contained herein, receipt and sufficiency of which is hereby
acknowledged and confessed, Schuldt does hereby fully, finally and
forever release, acquit, and discharge, and by these presents does
for herself, her heirs, executors, administrators, successors and
assigns, release, acquit, and forever discharge, the Pioneer
Releasees from any and all claims, liabilities, demands, debts,
accounts, obligations, actions and causes of action, of whatsoever
nature, known or unknown, at law or in equity, vested or
contingent, whether sounding in contract, statute, tort, fraud,
misrepresentation or other theory of liability, which Schuldt, in
whatever capacity including as an employee or stockholder of the
Company or any of its Affiliates, had, has or may have against
Pioneer Releasees arising at any time in the unlimited past to and
including the date of this Agreement, including, but without
limiting the generality of the foregoing, any and all matters
arising out of or in any manner whatsoever connected with
Schuldt’s employment with the Company, the ending of that
employment, the resignation of Schuldt from any and all employee,
officer and/or director positions in accordance with the terms
hereof, or any causes of action Schuldt had, have or may have as a
result of her ownership of stock in the Company (including
stockholder derivative claims). Without limiting the generality of
the foregoing, the Parties acknowledge and agree that among those
claims released are those arising under Title VII of the Civil
Rights Act of 1964, as amended (“Title VII”); the Age
Discrimination in Employment Act of 1967, as amended, including the
Older Workers Benefit Protection Act of 1990
3
(“ADEA”); the Civil Rights Act of
1866, as amended; the Civil Rights Act of 1991; the Americans with
Disabilities Act of 1990 (“ADA”); the Energy
Reorganization Act, as amended, 42 U.S.C. § 5851; the Workers
Adjustment and Retraining Notification Act of 1988; the Pregnancy
Discrimination Act of 1978; the Employee Retirement Income Security
Act of 1974, as amended; the Family and Medical Leave Act of 1993;
the Fair Labor Standards Act; the Occupational Safety and Health
Act; the Texas Labor Code § 21.001 et seq.; the Texas Labor
Code; claims in connection with workers’ compensation or
“whistle blower” statutes. Schuldt acknowledges that
payment of amounts to Schuldt by the Company pursuant to this
Agreement is not an admission by the Pioneer Releasees that they
engaged in any wrongful or unlawful act or that the Pioneer
Releasees violated any federal or state law or
regulation.
(b) In
consideration for entering into this Agreement, and the acts,
payments, covenants and agreements of the Parties described and
contained herein, receipt and sufficiency of which are hereby
acknowledged and confessed, the Company, on behalf of itself and
its Affiliates, does hereby fully, finally and forever release,
acquit, and discharge, and by these presents does for the Company
and its Affiliates, and the successors and assigns of the Company
and its Affiliates, release, acquit, and forever discharge the
Schuldt Releasees from any and all claims, liabilities, demands,
debts, accounts, obligations, actions and causes of action, of
whatsoever nature, known or unknown, at law or in equity, vested or
contingent, whether sounding in contract, statute, tort, fraud,
misrepresentati
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