PARKER DRILLING COMPANY
PHANTOM STOCK UNIT AWARD INCENTIVE AGREEMENT
THIS PHANTOM STOCK UNIT AWARD INCENTIVE AGREEMENT (this “Agreement”) is made and entered into by and between Parker Drilling Company, a Delaware corporation (the “Company”), and [NAME], an individual and employee of the Company (“Grantee”), as of the [DATE] day of [MONTH], 2015 (the “Grant Date”), subject to the terms and conditions of the Parker Drilling Company 2010 Long-Term Incentive Plan, as Amended and Restated, as it may be further amended from time to time thereafter (the “Plan”). The Plan is hereby incorporated herein in its entirety by this reference. Capitalized terms not otherwise defined in this Agreement shall have the meaning given to such terms in the Plan.
WHEREAS, Grantee is [TITLE] of the Company, and in connection therewith, the Company desires to grant a Performance-Based Stock-Based Award to Grantee, subject to the terms and conditions of this Agreement and the Plan, with a view to increasing Grantee’s interest in the Company’s success and growth; and
WHEREAS, Grantee desires to be the holder of a Performance-Based Stock-Based Award subject to the terms and conditions of this Agreement and the Plan;
NOW, THEREFORE, in consideration of the premises, mutual covenants and agreements contained herein, and such other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:
1.Grant of Phantom Stock Units. Subject to the terms and conditions of this Agreement and the Plan, the Company hereby grants to Grantee [NUMBER] Phantom Stock Units as described herein (the “Phantom Stock Units”), which constitutes a Performance-Based Stock based Award under the Plan. Each Phantom Stock Unit shall initially represent the equivalent of one Share as of the Grant Date, with the actual payout value to be determined under the terms and conditions of this Agreement. With respect to the Phantom Stock Units granted under this Agreement, the Committee reserves the right and authority, as exercised in its discretion, to decrease the size of the Incentive Award by a percentage not to exceed twenty percent (20%) at any time before or after the Incentive Award becomes fully vested but prior to actual payment, but subject to Section 6 for Detrimental Conduct. As a holder of Phantom Stock Units, the Grantee has the rights of a general unsecured creditor of the Company unless and until the Phantom Stock Units are vested and paid out to Grantee, as set forth herein.
2. Transfer Restrictions. Grantee shall not sell, assign, transfer, exchange, pledge, encumber, gift, devise, hypothecate or otherwise dispose of (collectively, “Transfer”) any Phantom Stock Units granted hereunder. Any purported Transfer of Phantom Stock Units in breach of this Agreement shall be void and ineffective, and shall not operate to Transfer any interest or title to the purported transferee.
3. Vesting of Phantom Stock Units.
(a) Performance Period. For purposes of this Agreement, the performance period is the three-year period that begins on January 1, 2015 and ends on December 31, 2017 (the “Performance Period”). Subject to the terms and conditions of this Agreement, the Phantom Stock Units shall vest and become payable to Grantee at the end of the Performance Period, provided that (i) Grantee was an Employee continuously throughout the Performance Period (the “Service Requirement”) and (ii) the Committee has certified in writing that the performance criterion established for the Performance Period as described below (the “Performance Criterion”) has been achieved. All Phantom Stock Units that do not become vested during or at the end of the Performance Period shall be forfeited.
(b) Performance Criteria. There is one Performance Criterion that has been established for the Phantom Stock Units awarded under this Agreement, as described in subsection (c) below. When determining performance, the Committee, in its discretion, may take into account special or non-recurring situations or circumstances with respect to the Company or any other company in the Peer Group for any year during the Performance Period arising from the acquisition or disposition of assets, costs associated with exit or disposal activities or material impairments.
(c) RTSR. The Performance Criterion is the Company’s Relative Total Shareholder Return (“RTSR”) as defined in Exhibit A to this Agreement (the “RTSR Criterion”). The Company’s RTSR is compared to the RTSR of each Peer Group company, as listed on Exhibit A to this Agreement (each a “Peer Company” and as a group, the “Peer Group”), as of the end of each calendar year within the Performance Period to determine where the Company ranks when compared to the Peer Group. The RTSR Criterion is one-hundred percent (100%) of the total weighting for each Phantom Stock Unit.
(d) Changes in Peer Group. When calculating RTSR for the Performance Period for the Company and the Peer Group, (i) the performance of a company in the Peer Group will not be used in calculating the RTSR of that member of the Peer Group if the company is not publicly traded (i.e., has no ticker symbol) at the end of the Performance Period; (ii) the performance of any company in the Peer Group that becomes bankrupt during the Performance Period will be included in the calculation of Peer Group performance even if it has no ticker symbol at the end of the measurement period; (iii) the performance of the surviving entities will be used in the event there is a combination of any of the Peer Group companies during the measurement period; and (iv) no new companies will be added to the Peer Group during the Performance Period (including a company that is not a Peer Group member which acquires a member of the Peer Group). Notwithstanding the foregoing provisions of this subsection (d), the Committee may disregard any of these guidelines when evaluating changes in the membership of the Peer Group during the Performance Period in any particular situation, as it deems reasonable in the exercise of its discretion.
(e) Ranking of Company as Compared to the Peer Group. The Committee will rank the Company’s performance within the Peer Group as of December 31st of each calendar
year within the Performance Period and apply the appropriate weighting and award multiplier from the following table:
Single Year RTSR (2015)
Cumulative RTSR (2015-2016)
Cumulative RTSR (2015-2017)
4. Termination of Employment. If Grantee’s Employment is voluntarily or involuntarily terminated during the Performance Period, then Grantee shall immediately forfeit the outstanding Phantom Stock Units, except as provided below in this Section 4. Upon the forfeiture of any Phantom Stock Units hereunder, the Grantee shall cease to have any rights in connection with such Phantom Stock Units as of the date of forfeiture.
(a) Termination of Employment. Except as provided in Section 4(c), if the Grantee’s Employment is terminated for any reason, including Retirement, other than due to death or Disability during the Performance Period, any non-vested Phantom Stock Units at the time of such termination shall automatically expire and terminate and no further vesting shall occur after the termination of Employment date. In such event, the Grantee will receive no payment for unvested Phantom Stock Units.
(b) Disability or Death. Upon termination of Grantee’s Employment as the result of Grantee’s Disability (as defined below) or death during the Performance Period, then all of the outstanding Phantom Stock Units shall become 100% vested on such date at the 1.0 multiplier award level. For purposes of this Agreement, “Disability” means (i) a disability that entitles the Grantee to benefits under the Company’s long-term disability plan, as may be in effect from time to time, as determined by the plan administrator of the long-term disability plan or (ii) a disability whereby the Grantee is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months.
(c) Change in Control. If there is a Change in Control of the Company (as defined in the Plan) during the Performance Period, then in the event of the Grantee’s Involuntary Termination Without Cause (as defined below) within two (2) years following the effective date of the Change in Control and during the same Performance Period, all the outstanding
Phantom Stock Units shall automatically become 100% vested on the Grantee’s termination of Employment date at the 1.0 multiplier award level.
(d) For purposes of this Agreement, “Involuntary Termination Without Cause” means the Employment of Grantee is involuntarily terminated by the Company (or by any successor to the Company) for any reason, including, without limitation, as the result of a Change in Control, except due to death, Disability, Retirement or Cause; provided, that in the event of a dispute regarding whether Employment was terminated voluntarily or involuntarily, or with or without Cause, such dispute will be resolved by the Committee, in good faith, in the exercise of its discretion.
5. Payment for Phantom Stock Units. Payment for the vested Phantom Stock Units subject to this Agreement shall be made to the Grantee as soon as practicable following the time such Phantom Stock Units become vested in accordance with Section 3 or Section 4 prior to their expiration, but not later than seventy-five (75) days following the date of such vesting event. The number of Phantom Stock Units that vest and are payable hereunder shall be determined by the Committee, in its discretion, in accordance with the Payout Schedule in Section 3.
Any amount paid in respect of the vested Phantom Stock Units shall be payable in U.S. dollars in cash or other form of immediately-available funds. The amount payable to the Grantee pursuant to this Agreement shall be an amount equal to (a) the number of vested Phantom Stock Units, multiplied by (b) the award multiplier for the level of achievement of the Performance Criterion determined in Section 3(d), multiplied by (c) the average closing price per Share for the twenty trading days immediately preceding the vesting date.
Prior to any payments under this Agreement, the Committee shall certify in writing, by resolution or otherwise, the amount to be paid in respect of the Phantom Stock Units as a result of the achievement of the Performance Criterion.
6. Detrimental Conduct. In the event that the Committee should determine, in its sole and absolute discretion, that, during Employment or within two (2) years following Employment termination for any reason, the Grantee engaged in Detrimental Conduct (as defined below), the Committee may, in its sole and absolute discretion, if payment previously has been made to the Grantee pursuant to Section 5 upon vesting of his Phantom Stock Units, direct the Company to send a notice of recapture (a “Recapture Notice”) to such Grantee. Within ten (10) days after receiving a Recapture Notice from the Company, the Grantee will deliver to the Company a cash payment in an amount equal to the payment to the Grantee at the time when paid to the Grantee, unless the Recapture Notice demands repayment of a lesser sum. All repayments hereunder shall be net of the taxes that were withheld by the Company when the payment was originally made to Grantee following vesting of the Phantom Stock Units pursuant to Section 5. For purposes of this Agreement, a Grantee has committed “Detrimental Conduct” if the Grantee (a) violated a confidentiality, non-solicitation, non-competition or similar restrictive covenant between the Company or one of its Affiliates and such Grantee, including violation of a Company policy relating to such matters, or (b) engaged in willful fraud that causes harm to the Company or one of its Affiliates or that is intended to manipulate the performance results of any Incentive Award, including, without
limitation, any material breach of fiduciary duty, embezzlement or similar conduct that results in a restatement of the Company’s financial statements.
7. Grantee’s Representations. Notwithstanding any provision hereof to the contrary, the Grantee hereby agrees and represents that neither Grantee nor the Company shall be obligated hereunder to the extent such obligation constitutes a violation by the Grantee or the Company of any law or regulation of any governmental authority. Any determination in this regard that is made by the Committee, in good faith, shall be final and binding. The rights and obligations of the Company and the Grantee are subject to all applicable laws and regulations.
8. Tax Withholding. To the extent that the receipt of the payment hereunder results in compensation income to Grantee for federal, state or local income tax purposes, Grantee shall deliver to Company at such time the sum that the Company requires to meet its tax withholding obligations under applicable law or regulation, and, if Grantee fails to do so, Company is authorized to withhold from any cash or other remuneration (including any Shares), then or thereafter payable to Grantee, any tax required to be withheld to satisfy such tax withholding requirements before transferring the resulting net funds to Grantee in satisfaction of its obligations under this Agreement.
9. Independent Legal and Tax Advice. The Grantee acknowledges that (a) the Company is not providing any legal or tax advice to Grantee and (b) the Company has advised the Grantee to obtain independent legal and tax advice regarding this Agreement and any payment hereunder.
10. No Rights in Shares. The Grantee shall have no rights as a stockholder in respect of any Shares, unless and until the Grantee becomes the record holder of such Shares on the Company’s records.
11. Conflicts with Plan, Correction of Errors, and Grantee’s Consent. In the event that any provision of this Agreement conflicts in any way with a provision of the Plan, such provisions shall be reconciled, or such discrepancy shall be resolved, by the Committee in the exercise of its discretion. In the event that, due to administrative error, this Agreement does not accurately reflect the Phantom Stock Units properly granted to the Grantee, the Committee reserves the right to cancel any erroneous document and, if appropriate, to replace the canceled document with a corrected document. All determinations and computations under this Agreement shall be made by the Committee (or its authorized delegate) in its discretion as exercised in good faith.
This Agreement and any award of Phantom Stock Units or payment hereunder are intended to comply with or be exempt from Section 409A of the Internal Revenue Code and shall be interpreted accordingly. Accordingly, Grantee consents to such amendment of this Agreement as the Committee may reasonably make in furtherance of such intention, and the Company shall promptly provide, or make available, to Grantee a copy of any such amendment.
(a) Transferability of Phantom Stock Units. The Phantom Stock Units are transferable only to the extent permitted under the Plan at the time of transfer (i) by will or by the laws of descent and distribution, or (ii) by a domestic relations order in such form as is acceptable
to the Company. No right or benefit hereunder shall in any manner be liable for or subject to any debts, contracts, liabilities, obligations or torts of the Grantee or any permitted transferee thereof.
(b) Not an Employment Agreement. This Agreement is not an employment agreement, and no provision of this Agreement shall be construed or interpreted to create any Employment relationship between Grantee and the Company for any time period. The Employment of Grantee with the Company shall be subject to termination to the same extent as if this Agreement did not exist.
(c) Notices. Any notice, instruction, authorization, request or demand required hereunder shall be in writing, and shall be delivered either by personal in-hand delivery, by telecopy or similar facsimile means, by certified or registered mail, return receipt requested, or by courier or delivery service, addressed to the Company at its then current main corporate address, and to Grantee at the address indicated on the Company’s records, or at such other address and number as a party has last previously designated by written notice given to the other party in the manner hereinabove set forth. Notices shall be deemed given when received, if sent by facsimile means (confirmation of such receipt by confirmed facsimile transmission being deemed receipt of communications sent by facsimile means); and when delivered and receipted for (or upon the date of attempted delivery where delivery is refused), if hand-delivered, sent by courier or delivery service, or sent by certified or registered mail, return receipt requested.
(d) Amendment, Termination and Waiver. This Agreement may be amended, modified, terminated or superseded only by written instrument executed by or on behalf of the Grantee and the Company (by action of the Committee or its delegate). Any waiver of the terms or conditions hereof shall be made only by a written instrument executed and delivered by the party waiving compliance. Any waiver granted by the Company shall be effective only if executed and delivered by a duly authorized executive officer of the Company other than Grantee. The failure of any party at any time or times to require performance of any provisions hereof shall in no manner affect the right to enforce the same. No waiver by any party of any term or condition herein, or the breach thereof, in one or more instances shall be deemed to be, or construed as, a further or continuing waiver of any such condition or breach or a waiver of any other condition or the breach of any other term or condition.
(e) No Guarantee of Tax or Other Consequences. The Company makes no commitment or guarantee that any tax treatment will apply or be available to the Grantee or any other person. The Grantee has been advised, and provided with ample opportunity, to obtain independent legal and tax advice regarding this Agreement.
(f) Governing Law and Severability. This Agreement shall be governed by the laws of the State of Texas without regard to its conflicts of law provisions, except as preempted by controlling federal law. The invalidity of any provision of this Agreement shall not affect any other provision hereof or of the Plan, which shall remain in full force and effect.
(g) Successors and Assigns. This Agreement shall bind, be enforceable by, and inure to the benefit of, the Company and Grantee and any permitted successors and assigns under the Plan.
[Signature page follows.]
IN WITNESS WHEREOF, this Agreement is hereby approved and executed as of the date first written above.
Parker Drilling Company
Grantee’s Address for Notices:
1. RTSR. RTSR is the Performance Criterion applicable to the Phantom Stock Units and is determined by dividing (1) the sum of (a) the cumulative amount of the dividends of the Company or the Peer Company, as applicable, for the applicable period assuming same-day reinvestment into the corporation’s common stock on the ex-dividend date and (b) the share price of such corporation at the end of the applicable period minus the share price at the beginning of the applicable period, by (2) the share price at the beginning of the applicable period. The RTSR for each Peer Company in the Peer Group will be calculated over the applicable period, annualized, and then compared with the identical calculation for the Company. The Company’s RTSR is a Performance Criterion that is compared to each Peer Company’s RTSR for the applicable period.
2. Peer Companies and Peer Group. Subject to Section 3(d), the following Peer Companies comprise the Peer Group to which the Company’s RTSR performance will be compared for the Performance Period:
1. BAS Basic Energy Services, Inc.
2. HP Helmerich & Payne, Inc.
3. HERO.O Hercules Offshore, Inc.
4. KEG Key Energy Services, Inc.
5. NBR Nabors Industries Ltd.
6. PES Pioneer Energy Services Corp.
7. PDS Precision Drilling Corporation
8. SPN Superior Energy Services Inc.
9. PTEN.O Patterson
10. WFT Weatherford
3. Alternate Payout Scales. Should the number of Peer Companies decrease during the Performance Period as described in Section 3(d) of the Agreement, then the Company’s performance within the Peer Group may be measured according to one of the following alternate tables, subject to the Committee’s discretion:
Company + 9 Peers
Company + 8 Peers
If the Peer Group size changes during the Performance Period all determinations that have already occurred for single year or cumulative period(s) will not be recalculated. However, all determinations after the change in Peer Group size will consider the updated Peer Group for measurement periods not yet completed. By way of example, if the Peer group size is 10 in the first year, 9 in the second year, and 8 in the third year, the calculation would be as follows:
Single Year RTSR (2015) compared to 10 peers
Cumulative RTSR (2015-2016) compared to 9 peers for the entire cumulative period
Cumulative RTSR (2015-2017) compared to 8 peers for the entire cumulative period