SECURITIES AND EXCHANGE COMMISSION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
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| o | Soliciting Material Pursuant to §240.14a-12 | | |
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NOTICE OF THE ANNUAL MEETING OF OUR STOCKHOLDERS
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| | Meeting Date | | Wednesday, May 2, 2012 | | |
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| Meeting Date: | | Wednesday, May 1, 2013 |
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| | Meeting TimeTime: | | 11:00 a.m., Central Time |
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| | Meeting PlacePlace: | | Tulsa Room - Ninth Floor |
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| | | | Bank of Oklahoma Tower |
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| | | | One Williams Center |
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| | | | Tulsa, Oklahoma | | |
On behalf of the board of directors and management, it is my pleasure to invite you to our Annual Meeting of Stockholders to be held on Wednesday, May 2, 20121, 2013 at 11:00 a.m., Central Time. The meeting will be held in the Tulsa Room on the ninth floor of the Bank of Oklahoma Tower, One Williams Center, Tulsa, Oklahoma. By attending the meeting you will have an opportunity to hear a report on our operations and to meet our directors and officers. There will also be time for questions.
Information about the meeting, including the various matters on which you will act, may be found in the attached Notice of Annual Meeting of Stockholders and Proxy Statement.
We hope that you will be able to attend the annual meeting. However, whether or not you plan to attend the meeting in person, it is important that your shares be represented. Please vote your shares using one of the methods available to you.
If you have any questions concerning the annual meeting or any of the proposals, please contact our investor relations department at (918) 493-7700. If you are a registered stockholder and have questions regarding your stock ownership, you may contact our transfer agent, American Stock Transfer & Trust Company (AST) at:
Toll Free Number: (800) 710-0929
Foreign Stockholders: (718) 921-8283
Web Site Address:
www.amstock.comAST Customer Service Representatives are also available through
AST’sAST's “Live Help” Internet service weekdays from 9:00 a.m.
-to 5:00 p.m., Eastern Time.
I look forward to your participation and thank you for your continued support.
Dated this 16th15th day of March 2012.2013. | | | | |
| | | | Sincerely, |
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| Sincerely, | |
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| | | | John G. Nikkel |
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| | Chairman of the Board | |
7130 S. Lewis Ave., Suite 1000, Tulsa, OK 74136 —= PO Box 702500, Tulsa, OK 74170-2500
Phone: (918) 493-7700 —= Fax: (918) 493-7711
7130 South Lewis Avenue, Suite 1000
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
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| Time and Date | | 11:00 a.m., Central Time, on Wednesday, May 2, 20121, 2013 |
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| Place | | Tulsa Room on the ninth floor of the Bank of Oklahoma Tower, One Williams Center, Tulsa, Oklahoma |
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| Items of Business | | • elect William B. Morgan, John G. Nikkel, Robert J. Sullivan Jr.,H. Williams, and Gary R. ChristopherLarry D. Pinkston to our board of directors for a three-year term expiring in 20152016 (Item No. 1 on the proxy card); |
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| | • cast a non-binding advisory vote on executive compensation (“say-on-pay vote”)(Item No. 2 onthe proxy card); |
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| | • re-approve the material terms of the performance goals for qualified performance-based compensation under the Unit Corporation Stock and Incentive Compensation Plan(Item No. 3on the proxy card);
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| | • approve the Amended and Restated Unit Corporation Stock and Incentive Compensation Plan(Item No. 4 on the proxy card); |
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| | • ratify the selection of PricewaterhouseCoopers LLP, Tulsa, Oklahoma, as our independent registered public accounting firm for our fiscal year 20122013 (Item No. 53 on the proxy card); and
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| | • transact any other business that properly comes before the meeting or any adjournment(s) of the meeting. |
| Record Date | March 4, 2013 |
Record Date | | March 5, 2012 |
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| Voting Options | | Most stockholders have four options for submitting their vote: |
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| | • via the Internet (please see your proxy card for instructions), |
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| | • by phone (please see your proxy card for instructions), |
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| | • by mail, using the paper proxy card, and |
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| | • in person at the meeting. |
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| Date of this Notice | | March 16, 201215, 2013 |
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| | By Order of the Board of Directors, |
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| | Mark E. Schell | |
| Senior Vice President, | |
| Secretary and General Counsel | |
Whether or not you plan to attend the meeting, we urge you to vote.
ANNUAL MEETING OF STOCKHOLDERS
This proxy statement and the accompanying proxy card are being mailed to our stockholders in connection with the solicitation of proxies by the board of directors for the 20122013 Annual Meeting of Stockholders. Mailing of this proxy statement will commence on or about March 16, 2012.15, 2013.
QUESTIONS AND ANSWERS
Addendum:
A – Copy of the Amended and Restated Unit Corporation Stock and Incentive Compensation Plan
(ii)
QUESTIONS AND ANSWERS
Q: | Why am I receiving these materials? |
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| A: | The board of directors of Unit Corporation, a Delaware corporation, is providing these proxy materials to you in connection with our annual meeting of stockholders. The meeting will take place on May 2, 2012.1, 2013. As a stockholder, you are invited to attend the meeting and are entitled to and requested to vote on the items of business described in this proxy statement. |
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| Q: | What is included in these materials? |
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| A: | These materials include: |
this Notice of the Annual Meeting of our Stockholders and Proxy Statement (the “proxy(“proxy statement”); and
our Annual Report for the year ended December 31, 2011 (the “annual2012 (“annual report”).
If you requested printed versions of these materials by mail, they also include the proxy card or vote instruction form for the annual meeting.
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| A: | You can vote if you were a stockholder at the close of business on the record date, March 5, 2012.4, 2013. On that date, there were 48,614,97649,142,890 shares outstanding and entitled to vote at the meeting. |
Q: | |
| Q: | What information is contained in this proxy statement? |
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| A: | The information included relates to the various proposals to be voted on at the meeting, the voting process, the compensation of our directors and certain executive officers, and certain other required information. |
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| A: | An NEO is one of the “named executive officers” for whom we provide compensation information in this proxy statement. For purposes of this proxy statement, our NEOs are: |
Larry D. Pinkston, our CEO and President;
Mark E. Schell, our Senior Vice President, General Counsel, and Secretary;
David T. Merrill, our Senior Vice President, Chief Financial Officer, and Treasurer;
John Cromling, the Executive Vice President of Unit Drilling Company; and
Bradford J. Guidry, the Executive Vice President of Unit Petroleum Company.
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| Q: | Can I access the proxy materialmaterials on the Internet? |
A: | |
| A: | Yes. We place the proxy materialmaterials on our web site atwww.unitcorp.com. www.unitcorp.com. |
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| Q: | How may I obtain the company’scompany's latest 10-K? |
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| A: | You may go to our website,www.unitcorp.com,, and download and print a copy of our Form 10-K or you can have one mailed to you at no charge by submitting a request to: |
7130 South Lewis Avenue, Suite 1000
We will also furnish any exhibit to the Form 10-K if you ask for it.
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| Q: | Who can attend the meeting? |
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| A: | All stockholders can attend. |
the election of William B. Morgan, John G. Nikkel, Robert J. Sullivan Jr.,H. Williams, and Gary R. ChristopherLarry D. Pinkston to the board of directors for terms that expireexpiring in 2015;
2016;a non-binding advisory resolution to approve executive compensation as disclosed in this proxy statement;
andthe re-approval, for purposes of continuing to elect to deduct compensation under Section 162(m) of the Internal Revenue Code, as amended, and regulations under it (the “Code”), the performance goals applicable to awards intended to constitute qualified performance-based compensation under the existing Unit Corporation Stock and Incentive Compensation Plan;
the approval of the Amended and Restated Unit Corporation Stock and Incentive Compensation Plan to, among other things, increase the number of shares of stock authorized for issuance from 2,500,000 to 3,300,000, to permit grants of awards to non-employee directors, to approve for purposes of Section 162(m) of the Code performance goals for performance-based compensation, and to increase the maximum annual award limits applicable to awards under that plan; and
the ratification of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2012.
2013.Q: | |
| Q: | How do I cast my vote? |
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| A: | If you hold your shares as a stockholder of record, you can vote in person at the meeting or you can vote by mail, telephone, or the Internet. If you are a street-name stockholder, you will receive instructions from your bank, broker, or other nominee describing how to vote your shares. |
The enclosed proxy card contains instructions for voting by mail, by telephone, or over the Internet. The proxies identified on the proxy card will vote the shares of which you are the stockholder of record in accordance with your instructions. If you submit a proxy card without giving specific voting instructions, the proxies will vote those shares as recommended by the board.
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| Q: | How does the board recommend I vote on the proposals? |
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| A: | The board recommends you vote“FOR”each of Items No. 1, 2, 3, 4, and 5.3. |
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| Q: | Can I revoke my proxy? |
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| A: | Yes. You can revoke your proxy by: |
giving written notice before the meeting to our corporate secretary stating that you are revoking your proxy; or
attending the meeting and voting your shares in person.
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| Q: | Who will count the vote? |
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| A: | American Stock Transfer & Trust Company, our transfer agent, will count the vote. A representative of American Stock Transfer & Trust Company will also act as the inspector of election. |
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| Q: | How many votes must be present to hold the annual meeting? |
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| A: | In order to conduct business and have a valid vote at the meeting a quorum must be present in person or represented by proxies. A quorum is defined as at least a majority of the shares outstanding on the record date and entitled to vote. In accordance with our amended and restated bylaws (“bylaws”) and Delaware law, broker “non-votes” and proxies reflecting abstentions will be considered present and entitled to vote for purposes of determining whether a quorum is present. |
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| Q: | What are broker “non-votes?” |
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| A: | Broker “non-votes” occur when a broker is not permitted to vote shares it holds for a beneficial owner and the beneficial owner does not provide voting instructions. Shares held in a broker’sbroker's name may be voted by the broker, but only in accordance with the rules of various national and regional securities exchanges. Under those rules, the broker must follow the instructions of the beneficial owner. If instructions are not provided, the broker may generally vote on routine matters but cannot vote on non-routine matters. This means that if you do not provide voting instructions to your broker for the non-routine items on our agenda, your broker will inform the inspector of elections that it does not have the authority to vote your shares with respect to those matters. This is referred to as a “broker non-vote.” |
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| Q: | Which ballot measures are considered “routine” or “non-routine?” |
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| A: | The ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 20122013 (Item No. 5)3) is a matter considered routine under applicable rules. A broker or other nominee may generally vote on routine matters, and therefore no broker non-votes are expected to exist in connection with Item No. 5.3. |
The election of directors (Item No. 1), and the advisory vote on executive compensation (Item No. 2), the approval of performance metrics included in the Unit Corporation Stock and Incentive Compensation Plan for purposes of Section 162(m) of the tax code (Item No. 3), and the approval of the Amended and Restated Unit Corporation Stock and Incentive Compensation Plan (Item No. 4) are
matters considered non-routine under applicable rules. A broker or other nominee cannot vote without instructions on non-routine matters, and therefore there may be broker non-votes on Item Nos. 1
2, 3, and
4.2.Q: | |
| Q: | How many votes are required to approve the proposals? |
A: | |
| A: | Directors will be elected by a plurality of the votes cast. This means that the three nominees with the greatest number of“FOR” votes will be elected as directors. Votes withheld will have no effect on the election of directors. Broker “non-votes” will be treated as though they are not entitled to vote and will not affect the outcome of the director elections. |
Approval of Items No. 2
through Item No. 5 requireand 3 requires the affirmative vote of a majority of the shares represented in person or by proxy at the meeting and entitled to vote on the proposal. Abstentions on these matters will be treated as votes against the
proposal.proposals. Broker “non-votes” will be treated as though they are not entitled to vote and will not affect the outcome of
thethese proposals.
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| Q: | What is the difference between holding shares as a stockholder of record and as a beneficial owner? |
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| A: | Most of our stockholders hold their shares through a broker or other nominee rather than directly in their own name. As summarized below, there are some distinctions between shares held of record and those owned beneficially. |
Stockholder of Record.Record. If your shares are registered directly in your name with the transfer agent, you are considered, with respect to those shares, thestockholder of record, and these proxy materials are being sent directly to you. As thestockholder ofrecord, you have the right to grant your voting proxy directly to the company or to vote in person at the meeting. We have enclosed or sent a proxy card for you to use.
Beneficial Owner. If your shares are held in a brokerage account or by another nominee, you are considered thebeneficial ownerof shares heldin street name, and these proxy materials are being forwarded to you together with a voting instruction card. As the beneficial owner, you have the right to direct your broker, trustee or nominee how to vote and are also invited to attend the meeting.
Since a beneficial owner is not thestockholder of record, you may not vote these shares in person at the meeting unless you obtain a “legal proxy” from the broker, trustee or nominee that holds your shares, giving you the right to vote the shares at the meeting. Your broker, trustee or nominee has enclosed or provided voting instructions for you to use in directing the broker, trustee or nominee how to vote your shares.
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| Q: | What shares are included on my proxy card? |
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| A: | Your proxy card represents all shares registered to your account in the same social security number and address. However, the proxy card does not include shares held for participants in our 401(k) plan. Instead, those participants will receive from the plan trustee separate voting instruction cards covering these shares. If voting instructions are not received from participants in the plan, the plan trustee will vote the shares in the same proportion as the votes that were cast by participants. |
Instead, those participants will receive from the plan trustee separate voting instruction cards covering these shares. If voting instructions are not received from participants in the plan, the plan trustee will vote the shares in the same proportion as the votes that were cast by participants.
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| Q: | What does it mean if I get more than one proxy card? |
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| A: | Your shares are probably registered in more than one account. You should vote each proxy card you receive according to the instructions on that specific card. We encourage you to consolidate all your accounts by registering them in the same name, social security number, and address. |
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| Q: | How many votes can I cast? |
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| A: | On each matter, including each director position, you are entitled to one vote per share. |
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| Q: | What happens if additional matters are presented at the meeting? |
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| A: | Other than the fivethree items of business described in this proxy statement, we are not aware of any other business to be acted on at the meeting. If you grant a proxy, the persons named as proxyholders, Larry D. Pinkston and Mark E. Schell, will have the discretion to vote your shares on any additional matters properly presented for a vote at the meeting. If, for any unforeseen reason, one or more of the board’sboard's nominees are not available as a candidate for director, the persons named as proxy holders will vote your proxy for that candidate or candidates as may be nominated by the board on the recommendation of the nominating and governance committee. |
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| Q: | Where can I find the voting results of the annual meeting? |
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| A: | The preliminary voting results will be announced at the annual meeting. The final voting results will be tallied by the inspector of election and published in a current report on Form 8-K, which we are required to file with the SEC within four business days following the annual meeting. |
Q: | |
| Q: | What is the deadline to propose actions for consideration at next year’syear's annual meeting of stockholders or to nominate individuals to serve as directors? |
A: | |
| A: | Stockholder proposals. For a stockholder proposal to be considered for inclusion in our proxy statement for next year’syear's annual meeting, the written proposal must be received by our corporate secretary at our principal executive offices no later than November 16, 2012. If the date of next year’s annual meeting is moved more than 30 days before or after the anniversary date of this year’s meeting, the deadline for inclusion of proposals in our proxy statement is instead a reasonable time before we begin to print and mail our proxy materials. Proposals will also need to comply with SEC regulations under Rule 14a-8 regarding the inclusion of stockholder proposals in company-sponsored proxy materials. Proposals should be addressed to: |
executive offices no later than November 15, 2013. If the date of next year's annual meeting is moved more than 30 days before or after the anniversary date of this year's meeting, the deadline for inclusion of proposals in our proxy statement is instead a reasonable time before we begin to print and mail our proxy materials. Proposals will also need to comply with SEC regulations under Rule 14a-8 regarding the inclusion of stockholder proposals in company-sponsored proxy materials. Proposals should be addressed to:
7130 South Lewis Avenue, Suite 1000
For a stockholder proposal that is not intended to be included in our proxy statement under Rule 14a-8, the stockholder must deliver a proxy statement and form of proxy to holders of a sufficient number of shares of our common stock to approve that proposal, provide the information required by our bylaws, and give timely notice to our corporate secretary in accordance with our bylaws, which, in general, require that the notice be received by the corporate secretary:
not earlier than the close of business on January 2, 2013;1, 2014; and
not later than the close of business on February 1, 2013.
January 31, 2014.If the date of the stockholder meeting is moved more than 30 days before or 70 days after the anniversary of our annual meeting for the previous year, then notice of a stockholder proposal that is not intended to be included in our proxy statement under Rule 14a-8 must be received no earlier than the close of business 120 days before the meeting and no later than the close of business on the later of the following two dates:
90 days before the meeting; and
10 days after public announcement of the meeting date.
Nomination of director candidates. You may propose director candidates for consideration by the board’sboard's nominating and governance committee. Any recommendations should include the nominee’snominee's name and qualifications for board membership and should be directed to our corporate secretary at the address of our principal executive offices set forth above. In addition, our bylaws permit a stockholder to nominate directors for election at an annual stockholder meeting. To nominate a director, a stockholder must deliver a proxy statement and form of proxy to holders of a sufficient number of shares of our common stock to elect the nominee and provide the information required by our bylaws, including a statement by the stockholder identifying (i) the name and address of the
stockholder, as they appear on the company’scompany's books, and of the beneficial owner, if any, on behalf of who the nomination or proposal is made, (ii) the class and number of shares of our capital stock which are owned beneficially and of record by the stockholder (and such beneficial owner, if any), (iii) whether and the extent to which any hedging or other transaction or series of transactions has been entered into by or on behalf of, or any other agreement, arrangement or understanding (including any short positions or any borrowing or lending of shares of stock) has been made, the effect or intent of which is to mitigate loss or manage risk of a stock price change for or to increase the voting power of such stockholder or beneficial owner with respect to any shares of stock of the corporation, (iv) a representation that the stockholder is a holder of record of our stock entitled to vote at the meeting and intends to appear in person or by proxy at the meeting to propose the nomination, and (v) a representation whether the stockholder or the beneficial owner, if any, intends or is part of a group which intends (A) to deliver a proxy statement and/or form of proxy to holders of at least the percentage of our outstanding capital stock required to elect the nominee and/or (B) otherwise to solicit proxies from stockholders in support of the nomination. In addition, the stockholder must give timely notice to our corporate secretary in accordance with our bylaws, which, in general, require that the notice be received by the corporate secretary within the January 2, 20131, 2014 through February 1, 2013January 31, 2014 time period described above.
Copy of bylaw provisions. You may contact our corporate secretary at our principal executive offices for a copy of the relevant bylaw provisions regarding the requirements for making stockholder proposals and nominating director candidates. Our bylaws are also available on our website athttp://www.unitcorp.com.www.unitcorp.com.
Q: | |
| Q: | How is this proxy solicitation being conducted? |
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| A: | We have hired Alliance Advisors, LLC, Bloomfield, New Jersey, as proxy solicitor to assist in the distribution of proxy materials and solicitation of votes. We will pay Alliance Advisors a fee of $6,500, plus reasonable out-of-pocket expenses incurred in connection with their proxy solicitation activities on our behalf. We will reimburse brokerage houses and other custodians, nominees and fiduciaries for their reasonable out-of-pocket expenses for forwarding proxy and solicitation materials to stockholders. Some of our employees may also solicit proxies. Alliance Advisors or our employees may solicit proxies in person, by telephone and by mail. None of our employees will receive special compensation for these services, which the employees will perform as part of their regular duties. |
distribution of proxy materials and solicitation of votes. We will pay Alliance Advisors a fee of $6,500, plus reasonable out-of-pocket expenses incurred in connection with their proxy solicitation activities on our behalf. We will reimburse brokerage houses and other custodians, nominees and fiduciaries for their reasonable out-of-pocket expenses for forwarding proxy and solicitation materials to stockholders. Some of our employees may also solicit proxies. Alliance Advisors or our employees may solicit proxies in person, by telephone and by mail. None of our employees will receive special compensation for these services, which the employees will perform as part of their regular duties.
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| Q: | What is the company’s fiscal year? |
A: | |
| A: | The company’s fiscal year is the calendar year period that ends on the 31st of December. Unless otherwise stated, all information presented in this proxy statement is based on the company’s fiscal year. |
Q: | |
| Q: | How can I obtain the company’scompany's corporate governance information? |
A: | |
A: | Our Internet website is located atwww.unitcorp.com. www.unitcorp.com. You may also enterwww.unitcorp.com/corpgov.htmlinvestor/governance.html for a direct link to the following information: |
Compensation Committee Charter;
Nominating and Governance Committee Charter;
Corporate Governance Guidelines;
Code of Business Conduct and Ethics;
Accounting and Auditing Complaint Procedures;
Policy and Procedures with respect to Related Person Transactions; and
Director Independence guidelines.
Our corporate governance webpage also has a link for reporting on any accounting, internal controls, or auditing matters that pertain to us.
CORPORATE GOVERNANCE AND BOARD MATTERS
GENERALGENERAL GOVERNANCE
INFORMATION We are committed to having sound corporate governance principles. Our Corporate Governance Guidelines and Code of Business Conduct and Ethics are available on our website athttp://www.unitcorp.com/corpgov.htmlinvestor/governance.html and copies of these documents may also be obtained from our corporate secretary. These provisions apply to our directors, employees, and officers, including our principal executive officer, principal financial officer, and principal accounting officer. We will post any amendments or waivers to our Code of Business Conduct and Ethics that
are required to be disclosed by the rules of either the SEC or the NYSE on our website.
Each year, our directors and executive officers are asked to complete a director and officer questionnaire which requires disclosure of any transactions with us in which the director or executive officer, or any member of his or her immediate family, have a direct or indirect material interest. Our CEO and general counsel are charged with resolving any conflict of interests not otherwise resolved under one of our other policies.
DIRECTOR
DIRECTOR INDEPENDENCE
CRITERIA Our board has defined an independent director as a director who the board has determined has no material relationship with the company, either directly, or as a partner, stockholder, or executive officer of an organization that has a relationship with the company. A relationship is “material” if, in the judgment of the board, the relationship would interfere with the
director’sdirector's independent judgment. Based on the materiality guidelines adopted by the board, a director is not independent if:
the director, or the director’sdirector's immediate family member received as direct compensation any payment from the company in excess of $120,000 during any twelve-month period within the last three years, other than compensation for board service and pension or other forms of deferred compensation for prior service with the company, except that compensation received by an immediate family member for service as an employee of the company (other than as an executive officer) need not be considered in determining independence;
the director is an executive officer or employee of, or his or her immediate family member, is an executive officer of, a company, or other for profit entity, to which the company made, or from which the company received for property or services (other than those arising solely from investments in the company’scompany's securities), payments in excess of the greater of $1 million or
| | 2% of that company’s consolidated gross revenues in any of the last three fiscal years; or
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the director serves as an executive officer of any tax exempt organization which received contributions from the company in any of the preceding three fiscal years in an aggregate amount that exceeded the greater of $1 million or 2% of that tax exempt organization’sorganization's consolidated gross revenues.
Any person who, or whose immediate family member(s), has within the last three years had any of the following relationships with the company does not qualify as an independent director.
| • | | Former employees. No director will be independent if he or she is currently, or was at any time within the last three years, an employee of the company.
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| • | | Interlocking directorships. No director, and no immediate family member of a director, may currently be, or have been within the last three years, employed as an executive officer of another company where any of our present executive officers at the same time serves or served on that company’s compensation committee.
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| • | | Former executive officers of company. No director will be independent if he or she has any immediate family member that is currently, or was at any time within the last three years, an executive officer of the company.
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| • | | Former auditor. No director will be independent if (i) he or she or an immediate family member is a current partner of a firm that is the company’s internal or external auditor; (ii) the director is a current employee of such a firm; (iii) the director has an immediate family member who is a current employee of such a firm; and who participates in the firm’s audit, assurance or tax compliance (but not tax planning) practice; or (iv) the director or an immediate family member was at any time within the last three years but is no longer a partner or employee of such a firm and personally worked on the company’s audit within that time.
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Former employees. No director will be independent if he or she is currently, or was at any time within the last three years, an employee of the company.
Interlocking directorships. No director, and no immediate family member of a director, may currently be, or have been within the last three years, employed as an executive officer of another company where any of our present executive officers at the same time serves or served on that company's compensation committee.
Former executive officers of company. No director will be independent if he or she has any immediate family member that is currently, or was at any time within the last three years, an executive officer of the company.
Former auditor. No director will be independent if (i) he or she or an immediate family member is a current partner of a firm that is the company's internal or external auditor; (ii) the director is a current employee of such a firm; (iii) the director has an immediate family member who is a current employee of such a firm; and who participates in the firm's audit, assurance or tax compliance (but not tax planning) practice; or (iv) the director or an immediate family member was at any time within the last three years but is no longer a partner or employee of such a firm and personally worked on the company's audit within that time.
Additional requirements for audit committee members.A director is not considered independent for purposes of serving on the audit committee, and may not serve on the audit committee, if the director:
receives directly or indirectly any consulting, advisory, or compensatory fee from the company, other than fees for service as a director or fixed amounts of compensation under a retirement plan (including deferred compensation) for prior service with the company (provided that such
compensation is not contingent in any way on continued service); or
is an affiliated person of the company or its subsidiaries, as determined in accordance with SEC regulations. In this regard, audit committee members are prohibited from owning or controlling more than 10% of any class of the company’scompany's voting securities or such lower amount as may be established by the SEC.
Additional requirements for compensation committee members. A director is not considered independent for purposes of serving on the compensation committee, and may not serve on the compensation committee, if the director: receives directly or indirectly any remuneration as specified for purposes of Section 162(m) of the Internal Revenue Code;
has ever been an officer of the company; or
has a direct or indirect material interest in any transaction, arrangement or relationship or any series of similar transactions, arrangements or relationships required to be disclosed under SEC Regulation S-K Item 404(a) and involving, generally, amounts in excess of $120,000.
DIRECTOR
DIRECTOR INDEPENDENCE
DETERMINATIONS The board has determined that at the present time William B. Morgan, John H. Williams, J. Michael Adcock, Gary R. Christopher, Robert J. Sullivan Jr., Steven B. Hildebrand,
and Larry C. Payne
and G. Bailey Peyton IV have no material relationship with the company (either directly or as a partner, stockholder, or officer of an organization that has a relationship with the company) and is independent within the meaning of both our director independence standards and those of the NYSE, as currently in effect. The board has also determined that each of the current members of its three standing committees has no material relationship with the company (either directly or as a partner, stockholder or officer of an organization that has a relationship with the company) and is “independent” within the meaning of our director independence standards.
For transactions considered in making the director independence determinations, please see “Related Person Transactions” section beginning on page 45.
ROLEROLE OF
THEBOARDINOURRISKMANAGEMENTPROCESS Oversight of risk management committee.Our board’s oversight of our risk management activities is delegated to our audit committee. The audit committee manages this responsibility by maintaining regular contact with our vice president of corporate planning, who oversees our risk management committee. The risk management committee was established in April of 2009, and is staffed by employees of our executive and operations management. The objective of this committee is to identify and analyze factors that might pose a significant risk to our company as a whole. In the fall of 2009, the committee began the
process of conducting in-depth risk analyses of the most significant potential risks initially identified. As necessary and feasible, remediation plans have been developed for the highest-priority risks. In April 2010, the committee completed its first full report and presented its findings to the audit committee. The committee has continued its annual risk analysis since that time. The vice president of corporate planning provides periodic progress reports directly to the audit committee, which provides input and direction that is communicated back to the risk management committee. The audit committee keeps the full board updated on the ongoing risk management activities of the company and reports any significant findings to the board. In addition, management discusses its highest priority risks and remediation plans with the full board.
Oversight of hedging activities.We hedge some of our oil, natural gas, and natural gas liquids production. The objective of our hedging program is to manage, to a degree, our exposure to changes in commodity prices. Any risk to our company from our hedging activities is overseen by our board. The board defines the scope of our permissible hedging or derivatives activities. The audit
committee (and, ultimately, the board) monitors our hedging activities on an ongoing basis.
BOARDBOARD STRUCTUREANDCOMMITTEES Our board is currently structured so that the principal executive officer (our CEO) and board chair positions are separate. Our Corporate Governance Guidelines provide that the board has no policy with respect to separation of these positions. Our board believes that the decision to combine or separate those positions should be an ad hoc decision based on the qualities of the individuals being considered to fill them at a given point in time. Our
board’sboard's oversight of risk management has had no effect on our leadership structure.
The current structure is a result of specific facts and circumstances and not a specific governance policy. When Mr. Nikkel chose to step down as CEO and retain only his Chairman position in 2005, both he and Mr. Pinkston had many years of leadership experience with the company, along with the valuable insightsknowledge that such experience provides. Separating the Chairman and CEO positions at that time was part of the succession plan for Mr. Nikkel, and the board felt that his ongoing service as Chairman would be a continuing benefit to the company. Accordingly, the board chose to have Mr. Nikkel continue in his role as Chairman, and elected Mr. Pinkston to succeed him as CEO. Our board still believes that the combined experience and knowledge of Messrs. Pinkston and Nikkel, strengthened further by several years of successful leadership and collaboration under the current structure, continues to benefit the company. At this time and in view of the individuals involved, maintaining the separation of the CEO and Chairman positions is the most appropriate leadership structure.
Our board does not have a “lead independent director.” However, Mr. Michael Adcock, an independent directors,director, presides over the executive sessions of the board.
As of the date of this proxy statement, our board has ten directors and the following three standing committees:
compensation; and
nominating and governance.
The board is divided into three classes. Classes I and II each consist of three directors and Class III consists of four directors. Directors serve for a three year term.
Each of the
board’sboard's three standing committees operates under a written charter adopted by the committee. Each
committee’scommittee's charter is available at our website at
http://www.unitcorp.com/corpgov.html.investor/governance.html. In addition, copies of these charters may also be obtained from our corporate secretary.
During
2011,2012, the board and its committees held a total of
2526 meetings. Our board met eight times
- seven of those meetings were regularly scheduled and one was a special telephone meeting. The committees met in the aggregate
1718 times. All directors attended 100% of the board
and committee meetings
held during their period of service during 2012, except
one directortwo directors missed
the special telephonic meetingboth a board and a committee meeting; however, both of those directors attended more than 75% of the
board. Eachboard and committee
member attended 100%meetings held during their respective periods of
his respective committee meetings.service during 2012. Directors are encouraged to attend our annual meeting of stockholders. All directors attended our last annual meeting of stockholders. In addition to meetings, the board and the various committees may act, from time to time, by unanimous consent.
The following table identifies the current membership of each of the three standing committees, and the number of meetings each committee held during
2011.2012. A summary of each
committee’scommittee's responsibilities follows the table.
| | | | | | |
| DIRECTOR | | COMMITTEE MEMBERSHIP |
| | | Audit | | Compensation | | Nominating and Governance |
J. Michael Adcock | | x | | x* | | x |
Gary R. Christopher | | x | | | | |
Steven B. Hildebrand | | x* | | x | | |
William B. Morgan | | x | | x | | x* |
Larry C. Payne | | x | | | | x |
G. Bailey Peyton IV | | | | x | | |
John H. Williams | | | | x | | x |
Number of meetings | | 10 | | 4 | | 3 |
| | | | | | DIRECTOR | COMMITTEE MEMBERSHIP | | Audit | Compensation | Nominating and Governance | | J. Michael Adcock | x | x* | x | | Gary R. Christopher | x | | | | Steven B. Hildebrand | x* | x | | | William B. Morgan | x | x | x* | | Larry C. Payne | x | | x | | Robert Sullivan, Jr. | | | x | | John H. Williams | | x | x | | Number of meetings | 10 | 5 | 3 |
*Designates the chairman of the committee. *
| Designates the chairman of the committee. |
Audit Committee.The responsibilities of our audit committee include:
selecting our independent registered public accounting firm;
approving all audit engagement fees and terms;
to pre-approvepre-approving all audit and non-audit services to be rendered by our independent registered public accounting firm;
reviewing and approving our annual and quarterly financial statements;
to consultconsulting with our employees and our independent registered public accounting firm to determine the adequacy of our internal accounting controls over financial reporting;
overseeing our relationship with our independent registered public accounting firm;
overseeing our internal audit functions;
reviewing with our independent registered public accounting firm and our internal audit department and management any significant matters regarding internal controls over financial reporting that may come to their attention during the conduct of their audit;
recommending to our board whether the financial statements should be included in our annual report on Form 10-K;
reviewing our earnings press releases, as well as our policies with respect to the publication of our earnings and other financial information; and
monitoring our ongoing risk assessment and management activities.
The committee has the authority to form and delegate authority to subcommittees and to delegate authority to one or more of its members.
The committee has the authority to obtain advice and assistance and receive appropriate funding from the company for outside legal, accounting, or other advisors, as the committee deems necessary or appropriate to carry out its duties.
The committee has established procedures for the receipt, retention, and treatment (on a confidential basis) of complaints received by the company, the board, or the audit committee, regarding accounting, internal accounting controls or auditing matters, and the confidential, anonymous submissions by employees of concerns regarding questionable accounting or auditing matters. These procedures are described in the Accounting and Auditing Complaint Procedures posted on our website.
The report of the audit committee is included at page
39.46.
Compensation Committee.Our compensation committee has overall responsibility for approving and evaluating director and executive officer compensation plans, policies, and programs. In carrying out these responsibilities the committee: annually reviews and approves any corporate goals and objectives relevant to our CEO’sCEO's compensation, and makes recommendations to the board as to our CEO’sCEO's compensation;
recommends to our board the compensation of our other executive officers and certain key employees;
reviews the severance arrangements, change-in-control agreements, and any special or
supplemental benefits or plans (if any) applicable to our NEOs;
administers any director and employee compensation plans, policies and programs, and discharges its duties under those plans;
recommends director compensation;
reviews and approves the “compensation discussion and analysis” for inclusion in our proxy statement; and
has the authority to retain and compensate compensation consultants or other advisors tothat assist the committee in its evaluation of director, CEO, or executive officer compensation.
compensation, and assess the independence of any such advisors.
The committee has the authority to form and delegate authority to subcommittees and to delegate authority to one or more of its members. For additional information on the operations of the committee, see “Compensation Discussion and Analysis – Administration of our executive compensation program – overview of the process.”
The compensation committee report is included at page
16.18.
Nominating and Governance Committee.The responsibilities of this committee include: advising the board as a whole on corporate governance matters;
advising the board on the size and composition of the board;
recommending a slate of nominees for election to the board;
identifying those individuals qualified to become board members, consistent with any criteria approved by the board;
recommending a slate of nominees for election to the board;
recommending membership to each board committee;
reviewing the continuing qualification of our directors to serve on the board and its committees;
reviewing any candidates recommended by our stockholders;
leading the board and its committees in an annual self-assessment;
considering and resolving questions of possible conflicts of interest or board members or the company's senior executives; and
identifying best practices and recommending corporate governance principles, including giving proper attention and making effective responses to stockholder concerns regarding corporate governance;governance.
recommending membership to each board committee; and
CONSIDERATION OF NOMINEES FOR DIRECTOR
defining specific criteria for director independence.
CONSIDERATIONOFNOMINEESFORDIRECTOR
Stockholder nominees.The nominating and governance committee is charged with evaluating any properly submitted stockholder nominations for candidates for membership on our board as more fully described below under “Identifying and evaluating nominees for directors; diversity policy.” In evaluating nominations, the committee seeks (but is not obligated) to achieve a balance of diversity, age, knowledge, skills, experience, and expertise on the board. Any stockholder nominations submitted for consideration by the committee should include the nominee’snominee's name and qualifications for board membership and should be addressed to:
7130 South Lewis Avenue, Suite 1000
Our bylaws
also permit stockholders to nominate directors for consideration at an annual stockholders meeting. For a description of the process for nominating directors under our bylaws, see “QUESTIONS AND ANSWERS - What is the deadline to propose actions for consideration at next
year’syear's annual meeting of stockholders or to nominate individuals to serve as directors?”
DIRECTORGeneral director qualifications.Our Corporate Governance Guidelines contain certainthe criteria that our nominating and governance committee uses in evaluating nominees that it may recommend for a position on our board. Under these criteria, nominees should meet the board’sboard's qualifications as independent (as applicable) and should have sufficient time to carry out their duties as well as being able to provide services beneficial to the company’scompany's success. Their service on other boards of public companies should be limited to a number that permits them, given their individual circumstances, to perform responsibly all director duties. Each director must represent the interests of the company and its stockholders. Current director specific qualifications.Each of our current directors possesses a combination of attributes that qualifies him for service on our board. These attributes can include (but are not limited) to: business experience (in general or specific to our industry), knowledge based on specialized education (such as technical industry training, or legal, or accounting), and leadership abilities (civic, work-related, or both). We believe the qualifications of our directors, individually and collectively, have made our board an effective and productive one. At its February 2013 meeting, our nominating and governance committee reviewed the individual qualifications of each of our board members and determined that all directors continue to be well qualified both for board service as well as service on the various committees of the board on which they now serve. The following is a non-exhaustive description of the attributes of each of the three nominees standing for election or re-election at the
20122013 Annual Meeting of Stockholders, followed by that of the other members of the board:
Nominees:
Nominees:Larry D. Pinkston | • | | John G. Nikkel – Mr. Nikkel is a geologist and mathematician with over 54 years of experience in the energy industry, 45 years of which were spent in management positions. Mr. Nikkel retired from the company in 2005, after a 21-year tenure as its president and chief operating officer and then CEO. He has served the company as a director for 28 years, serving as the board’s chairman for the last seven years. His years of insight into the operations of the company and the industry, along with his years of successful leadership of the company, make him an invaluable member of the board, and more than
|
– Mr. Pinkston has served the company since 1981, and his three decades of experience with the company have provided him a unique knowledge and expertise that is both industry- and company-specific, and is of great value to the board. Additionally, Mr. Pinkston is an accounting and finance professional, and in the early years of his employment with the company served in various accounting and finance positions, including 17 years as the company’s Treasurer and 14 years as a Vice President and Chief Financial Officer (overlapping service in
those capacities). All told, Mr. Pinkston has served the company in a variety of management positions for more than a quarter of a century, and he is currently President (since 2003), Director and COO (since 2004), and CEO (since 2005). The nominating and governance committee continues to believe that Mr. Pinkston possesses strong leadership skills and operational expertise, which, along with his accounting and finance expertise, serve as continuing qualifications for service as a board member.
William B. Morgan – Mr. Morgan is a licensed attorney with over 36 years of experience, both as an attorney in private practice and as vice president and general counsel of a large healthcare organization. He has also served as President of that healthcare organization's principal for-profit subsidiary, which employed 1,500 persons. Over the course of his career, Mr. Morgan has advised clients with respect to a broad range of matters, including domestic and foreign loan syndications, project financing, leveraged sale and leasebacks, receivable and depreciation monetization, private and public placement of debt and equity securities, and entity formation. He also served as an adjunct professor of law for over 15 years, teaching securities law and appellate advocacy. Mr. Morgan has served on our board since 1988. The nominating and governance committee continues to believe that Mr. Morgan’s experience inside and outside of the energy industry, along with his leadership and analytical skills, working knowledge of securities and compliance laws, financial and business expertise, and his extensive history with our company all qualify him for service on our board as well as the three committees on which he serves.
John H. Williams – Mr. Williams is a degreed engineer by training, with over six decades of experience in the energy industry, almost thirty of which was as the President and CEO of The Williams Companies, Inc., a multi-billion dollar public energy company. During the course of his long business career, Mr. Williams has gained industry, financial, corporate governance, operating, and international business experience, all of which are of value to our board. Additionally, Mr. Williams has long been an active civic leader in his community, serving as a trustee of the Tulsa Performing Arts Center Trust since 1977, as well as serving as a director for the Philbrook Museum of Art and the Gilcrease Museum, both in Tulsa, Oklahoma, for a combined total of 12 years. Like Mr. Morgan, Mr. Williams has served the company as a director since 1988. The nominating and governance committee continues to believe that Mr. Williams'
qualify
lifetime knowledge of the energy industry, along with his many years as a corporate and civic leader along with his lengthy history with and knowledge of our company make him a valuable and contributing member of our board.
Continuing directors:
John G. Nikkel – Mr. Nikkel is a geologist and mathematician who has been active in the energy industry since 1958, serving in various management positions since 1976. Mr. Nikkel retired from the company in 2005, after a 21-year tenure as its president and chief operating officer and after nearly four years as CEO. He has served the company as a director since 1983, and has effectively led the company as its chairman of the board since 2003. The nominating and governance committee believes that Mr. Nikkel’s decades of experience in the energy industry as well as his historical familiarity with the day-in and day-out operations of the company serve to provide him with the knowledge and expertise necessary to serve as a member of the board, and his lengthy track record as a leader of the company demonstrates his ongoing qualification to serve as its chairman.
Gary R. Christopher – Mr. Christopher has a petroleum engineering degree, and nearly four decades of experience in the energy industry. Mr. Christopher's industry experience has been diverse: he has experience as a drilling engineer, production engineer, reservoir engineer, an acquisitions advisor, and an energy lending professional. Mr. Christopher has also served as President and CEO of a publicly traded oil and natural gas company. He currently consults on financial and engineering matters in the oil and natural gas business. Accordingly, Mr. Christopher has operations expertise, financial expertise, and leadership expertise, all of which have enabled him to serve as a productive board member, including in his role as an SEC audit committee financial expert. Additionally, Mr. Christopher's knowledge of lending practices and his ability to identify and analyze potential business acquisitions for the company are of significant value to the board.
Robert J. Sullivan Jr. – Mr. Sullivan has both undergraduate and master's degrees in business administration, and he has over four decades of experience in the energy business. Mr. Sullivan founded and operated both a 3D seismic company and a midstream natural gas transportation company, and he has been involved in a family-owned independent oil and natural gas company since 1975. He has also served the State of Oklahoma as its Energy Secretary under former Governor Frank Keating's administration.
Mr. Sullivan's energy industry background serves as a complement to the backgrounds of the other industry-side directors.
J. Michael Adcock – Mr. Adcock is a licensed attorney with over 27 years of experience in tax, banking and SEC/regulatory compliance law, working both as in-house counsel and in private practice. He has served as CEO of two different companies, one a community bank and one a publicly-traded international energy company with exploration and production, pipeline, trading and co-generation subsidiaries. In his capacity as CEO he was responsible for all operations, financial statements, and SEC and other regulatory-agency reporting. He currently serves as Co-Trustee of a private business trust responsible for investments in real estate, oil and gas, and other equity investments. In addition, Mr. Adcock serves as chairman of the board of a privately held bank, where he is a member of the loan committee, responsible for reviewing and approving business loans. He is also a current position as chairman. | • | | Gary R. Christopher – Mr. Christopher has a petroleum engineering degree, and over 38 years of experience in the energy industry. Mr. Christopher’s industry experience has been diverse: he has experience as a drilling engineer, production engineer, reservoir engineer, an acquisitions advisor, and an energy lending professional. Mr. Christopher has also served as President and CEO of a publicly traded oil and natural gas company. He currently consults on financial and engineering matters in the oil and natural gas business. Accordingly, Mr. Christopher has operations expertise, financial expertise, and leadership expertise, all of which have enabled him to serve as a productive board member, including in his role as an SEC audit committee financial expert. Mr. Christopher’s knowledge of lending practices and his ability to identify and analyze potential business acquisitions for the company are of significant value to the board.
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| • | | Robert J. Sullivan Jr. – Mr. Sullivan has both undergraduate and master’s degrees in business administration, and he has over 41 years of experience in the energy business. Mr. Sullivan founded and operated both a 3D seismic company and a mid-stream natural gas transportation company, and he has been involved in a family-owned independent oil and natural gas company since 1975. He has also served the State of Oklahoma as its Energy Secretary under former Governor Frank Keating’s administration. Mr. Sullivan’s unique energy industry background serves as a complement to the backgrounds of the other industry-side directors.
|
Continuing directors:
| • | | J. Michael Adcock – Mr. Adcock is a licensed attorney with over 26 years of experience in tax, banking and SEC/regulatory compliance law, working both as in-house counsel and in private practice. He has served as CEO of two different companies, one a community bank and one a publicly-traded international energy company with exploration and production, pipeline, trading and co-generation subsidiaries. In his capacity as CEO he was responsible for all operations, financial statements, and SEC and other regulatory-agency reporting. He currently serves as Co-Trustee of a private business trust responsible for investments in real estate, oil and gas, and other equity investments. In addition, Mr. Adcock serves as chairman of the board of a privately held bank, where he is a member of the loan committee, responsible for reviewing and approving business loans. He is also a current
|
director of a non-profit community health organization, where he serves on the compensation committee and as its finance chairman. He has 14 years of experience asbeen a director for the company.company since 1997. Mr. Adcock’sAdcock's legal background, his executive experience in energy operations and lending, and his familiarity with the company’scompany's business practices and history all serve to qualify him for service on our board as well as the three committees on which he serves.
| • | | Steven B. Hildebrand – Mr. Hildebrand brings to the board 32 years of experience in the accounting and finance field, more than 10 years of which was as the chief financial officer for a public company. While serving as a public company executive, Mr. Hildebrand was involved in an initial public stock offering, strategic planning, SEC reporting, Sarbanes-Oxley compliance, investor relations, enterprise risk management, executive compensation, establishing and monitoring corporate compliance programs, internal audit, bank facilities, private placement debt transactions and working with ratings agencies. All of these areas of expertise are valuable to his service on the board and its audit and compensation committees. A CPA with both public and private experience, he is qualified for board service as well as serving as the chairman and SEC audit committee financial expert for our audit committee.
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| • | | Larry C. Payne – Mr. Payne brings to the board over 36 years of experience in the energy industry, six years of which was in the capacity of president and COO of a midstream energy company engaged in natural gas liquids supply and marketing. He has an extensive background in commodity risk management, serving for six years as vice president of commodity management for another midstream energy operation. Mr. Payne is familiar with requirements for marketing various oil and natural gas components. In addition to executive and strategic experience in the industry, Mr. Payne also has extensive operational experience that includes management of assets such as product terminals, pipelines, fractionators, storage facilities, and transportation equipment. Mr. Payne’s expertise in the energy industry based on his many years of executive and operational experience is of significant value to our company, and qualifies him to serve as a board member as well as on the audit committee and the nominating and governance committee.
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| • | | G. Bailey Peyton IV – Mr. Peyton has 23 years of energy industry operations experience. He founded an oil and natural gas exploration company in 1984 and operated it as its president until he sold the company in 2007. At the time of
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Steven B. Hildebrand – Mr. Hildebrand brings to the board more than 30 years of experience in the accounting and finance field, more than 10 years of which was as the chief financial officer for a public company. While serving as a public company executive, Mr. Hildebrand was involved in an initial public stock offering, strategic planning, SEC reporting, Sarbanes-Oxley compliance, investor relations, enterprise risk management, executive compensation, establishing and monitoring corporate compliance programs, internal audit, bank facilities, private placement debt transactions and working with ratings agencies. All of these areas of expertise are valuable to his service on the board and its audit and compensation committees. A CPA with both public and private experience, he is qualified for board service as well as serving as the chairman and SEC audit committee financial expert for our audit committee.
Larry C. Payne – Mr. Payne brings to the board over 37 years of experience in the energy industry, six years of which was in the capacity of president and COO of a midstream energy company engaged in natural gas liquids supply and
marketing. He has an extensive background in commodity risk management, serving for six years as vice president of commodity management for another midstream energy operation. Mr. Payne is familiar with requirements for marketing various oil and natural gas components. In addition to executive and strategic experience in the industry, Mr. Payne also has extensive operational experience that includes management of assets such as product terminals, pipelines, fractionators, storage facilities, and transportation equipment. Mr. Payne’s expertise in the energy industry based on his many years of executive and operational experience is of significant value to our company, and qualifies him to serve as a board member as well as on the audit committee and the nominating and governance committee.
G. Bailey Peyton IV – Mr. Peyton has 24 years of energy industry operations experience. He founded an oil and natural gas exploration company in 1984 and operated it as its president until he sold the company in 2007. At the time of sale, the company operated over 120 wells with a daily production of 12,000 MCF of natural gas and 200 bbls of oil per day. Mr. Peyton currently operates a company he founded in 1985 to purchase land, minerals, and royalty interests. His company currently owns over 50,000 acres, with holdings in Texas, Oklahoma, and Nebraska. The board feels that Mr. Peyton’s longtime familiarity and hands-on experience with the operations side of our exploration and production business brings experience and practical guidance to the company that qualifies him to serve as a board member as well as on the compensation committee. | • | | Larry D. Pinkston – Mr. Pinkston is an accounting professional who has served the company for 30 years, 26 of which have been in the following leadership positions (some of these positions he has held concurrently):
|
Treasurer – 17 years
member. Vice President – 14 years
Chief Financial Officer – 14 years
Chief Operating Officer – 7 years
Mr. Pinkston’s extensive knowledge of the company (both as a whole as well as that of each of its three business segments), along with his accounting and finance expertise and his many years of experience provides significant and continuing value to our board.
| • | | William B. Morgan – Mr. Morgan is a licensed attorney with over 35 years of experience, both as an attorney in private practice and as vice president and general counsel of a large healthcare organization. He has also served as President of that healthcare organization’s principal for-profit subsidiary, which employed 1,500 persons. Over the course of his career, Mr. Morgan has advised clients with respect to a broad range of matters, including domestic and foreign loan syndications, project financing, leveraged sale and leasebacks, receivable and depreciation monetization, private and public placement of debt and equity securities, and entity formation. He also served as an adjunct professor of law for over 15 years, teaching securities law and appellate advocacy. Mr. Morgan has served on our board for 23 years. His experience inside and outside of the energy industry, along with his leadership and analytical skills, working knowledge of securities and compliance laws, financial and business expertise, and his extensive history with our company all qualify him for service on our board as well as the three committees on which he serves.
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| • | | John H. Williams – Mr. Williams is a degreed engineer by training, with over 61 years of experience in the energy industry, almost thirty of which was as the President and CEO of The Williams Companies, Inc., a multi-billion dollar public energy company. During the course of his long business career, Mr. Williams has gained industry, financial, corporate governance, operating, and international business experience, all of which are of value to our board. Additionally, Mr. Williams has long been an active civic leader in his community, serving as a trustee of the Tulsa Performing Arts Center Trust since 1977, as well as serving as a director for the Philbrook Museum of Art and the Gilcrease Museum, both in Tulsa, Oklahoma, for a combined total of 12 years. Like Mr. Morgan, Mr. Williams has served the company as a director for 23 years. Mr. Williams’ lifetime knowledge of the energy industry, along with his many years as a corporate and civic leader along with his lengthy history with and knowledge of our company make him a valuable and contributing member of our board.
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Our board is a mix of personalities, backgrounds, and experiences that continually provesexperiences. We believe this mix gives proof to the adage that the sum is greater than the individual parts. The current directors have a proven track record of working well together to ably guide the company.
For additional information on the background and experience of each of our directors, including their other board memberships, please refer to individual director biographical summaries starting on page
4248 of this proxy statement.
Identifying and evaluating nominees for directors; diversity policy.The nominating and governance committee uses a variety of means to identify and evaluate individuals being considered for a position on our board. The committee assesses the appropriate size of the board (within the size limits contained in our corporate charter), and whether any vacancies on the board are expected due to retirement or otherwise. In the event that vacancies are anticipated (or otherwise arise), the committee undertakes to identify those potential candidates that it believes will make good decisions and be able to contribute to the
company in a meaningful way. Candidates may come to the attention of the committee through current board members, professional search firms, stockholders, or other persons. Candidates are evaluated at regular or special meetings of the committee and may be considered at any point during the year. As described above, it is the committee’scommittee's responsibility to consider any properly-submitted stockholder nominations for candidates for the board, verify the stockholder status of persons proposing candidates, and then submit its recommendations to the full board.
Our Corporate Governance Guidelines set forth our position with respect to diversity. Our board is committed to inclusiveness in selecting candidates for board membership. Within the context of our fiduciary duties, applicable law and regulations, and the membership of the board at the applicable time, our nominating and governance committee will take reasonable steps to include women, minority candidates, and candidates from non-traditional environments (such as government, academia, and non-profit organizations) in the pool from which board nominees are chosen. Although there is no specific implementation plan, achievement of our diversity goals is evaluated annually as part of our board self-evaluations.
EXECUTIVEExecutive sessions of non-management directors are held from time to time following regularly-scheduled board meetings. The sessions are scheduled and presided over by Mr. J. Michael Adcock, who was elected by the board to chair its executive sessions. Any non-management director can request that an executive session be scheduled.
Any interested party may communicate directly with the presiding director by writing to the following:
7130 South Lewis Avenue, Suite 1000
CONTACTINGIndividuals may communicate with our board by submitting an e-mail to the board in care of the company’s
company's corporate secretary atmark.schell@unitcorp.com or sending a letter to: Board of Directors, c/o Corporate Secretary, Unit Corporation, 7130 South Lewis Avenue, Suite 1000, Tulsa, Oklahoma 74136.
The chair of the nominating and governance committee has been designated as the person to receive communications directed to non-management directors. Our stockholders may write to the chairman of this or any other board committee or to the outside directors as a group c/o Mark E. Schell, Senior Vice President and General Counsel, Unit Corporation, 7130 South Lewis Avenue, Suite 1000, Tulsa, Oklahoma 74136.
Stockholder communications are distributed to the board, or to the appropriate individual director or directors, depending on the facts and circumstances of the communication. However, at the request of the board, certain items that are not related to the duty and responsibilities of the board are excluded, such as advertisements, junk mail, mass mailings, spam, and surveys.
BOARDBOARD AND
COMMITTEEEVALUATIONS Each year the board evaluates its performance and effectiveness. Each director completes a board evaluation form to solicit feedback on specific aspects of the
board’sboard's role, organization, and meetings. The collective ratings and comments are compiled by or for the chairman of the nominating and governance committee, and presented by him to the full board. Additionally, each of the three
standing board committees conducts an annual self-evaluationself evaluation of its performance through a committee evaluation form.
DIRECTORS’
DIRECTORS' COMPENSATION AND BENEFITS
CASHOnly non-employee directors receive compensation for serving as a director. The various components of the
20112012 cash compensation paid to our non-employee directors are as follows:
| | |
| |
Annual retainer (payable quarterly) | | | | $60,000 |
Annual retainer for each committee a board member serves on (payable
(payable quarterly) | | | | $3,500 |
Each board meeting attended* | | | attended | $1,500 |
Each committee meeting attended* | | | attended | $1,5001,500* |
Additional compensation for service as chairman of the board | $25,000 |
Additional compensation for service as chairman of the audit committee** | | | committee | $7,50015,000 |
Additional compensation for service as chairman for each of the
compensation committee and nominating and governance committee** | | | committee | $3,5006,000 |
Reimbursement for expenses incurred attending stockholder, board and
committee meetings | | | | Yes |
Range of total cash compensation (excluding expense reimbursement and retirement/consulting fees)reimbursement) earned by directors for the year 2011 2012 | | | | $52,500 – $104,000 |
* No fees were paid for the special telephonic meeting of the board held April 5, 2011. Additionally, the audit committee conducts quarterly telephone meetings expressly for purposes of finalizing its review$72,875 and approval of financial reports and earnings press releases. No meeting fees are paid for these quarterly telephone meetings.
$109,000 |
| | | | |
** Effective January 1, 2012, the audit committee chairman will receive $15,000 annually, payable quarterly, for serving in that capacity, and both the compensation committee chairman and the nominating and governance committee chairman will receive $6,000 annually, payable quarterly, for their services as committee chairs. Additionally, the chairman of the board will be paid a retainer of $25,000 per year, payable quarterly, for services in that capacity during 2012.
|
*Fees are sometimes waived for telephonic meetings of the board or a committee.
EQUITY AWARDSAt the 2012 annual meeting, our stockholders approveapproved the Amended and Restated Unit Corporation Stock and Incentive Compensation Plan Amended and Restated May 2, 2012 (the “amended stock plan”), voting Item No. 4 in this proxy statement,and under that plan we willare permitted to make annual equity awards to our non-employee directors. Under the plan, the maximum number of shares that may be granted to any one participant in any one fiscal year is 125,000 shares. On May 7, 2012, after reviewing data on peer company director stock awards, the compensation committee agreed to grant our non-employee directors underrestricted stock in that number of shares valued at $110,000 based on the closing price of our stock on the NYSE on May 14, 2012. Based on that closing price, each non-employee director received 2,734 shares of restricted stock as the equity component of their 2012 director compensation. The 2012 awards vest in three equal annual installments on May 14th in each of 2013, 2014, and 2015. If a director's service terminates before all shares have vested, the unvested shares will be forfeited unless the termination of service is due to death, disability, a change of control (see "Change-in-Control Arrangements, Unit Corporation Stock and Incentive Compensation Plan," on page 40 for definition), or, unless the committee specifically determines to accelerate vesting on a director's retirement, in which case all unvested shares will accelerate and vest 100% as of the date of death, disability, change of control, or at the time the compensation committee determines in the case of retirement. Also on May 7, 2012, our compensation committee determined that, unless and until changed by further action of that
committee, for annual equity awards in 2013 and subsequent years, non-employee directors will receive an annual equity award equal to that number of shares of restricted common stock valued at $110,000, based on the closing price of our stock on the NYSE on the first business day after each year’s respective annual meeting.
Before stockholders approved the amended stock plan
andlast year, we
will no longer grant new awardsmade annual equity grants to our non-employee directors under the Unit Corporation 2000 Non-Employee Directors’ Stock Option Plan (the “option plan”).
The option plan is the planSeveral directors have unexercised options issued and outstanding under
which we have in years past granted annual stock option awards to our non-employee directors.If our stockholders do not approve the amended stock plan, we will continue to make grants to our non-employee directors underthat plan. Under the option plan. Under that plan, each non-employee director automatically receivesreceived an option to purchase 3,500 shares of our common stock on the first business day following each annual meeting of our
stockholders. The option exercise price iswas the NYSE closing price of our common stock on that date. Payment of the exercise price cancould be made in cash or in shares of common stock that havehad been held by the director for at least one year. No stock option cancould be exercised during the first six months of its term except in the case of death. Each option hashad a ten-year term. Since the amended stock plan was approved, we no longer issue awards under the option plan.
Shares that are issued under either the
amended stock plan or the
directors’ option plan can be clawed back in the event of certain specified instances of director misconduct.
As of March
5, 2012, 175,0004, 2013, 168,000 shares
wereare subject to outstanding options held by current non-employee
directors and there were 230,000 shares remaining for use in connection with anydirectors. No future
awards.awards will be made under the option plan.
The following table shows the outstanding options held by our non-employee directors as of March 5, 2012:4, 2013:
| | | | | | |
Director | | Date of Option | | Shares Subject to Option(#) | | Exercise Price($) |
| | | 05/05/05 | | 3,500 | | 39.50 |
| | | 05/04/06 | | 3,500 | | 62.40 |
| | | 05/03/07 | | 3,500 | | 57.63 |
| | | 05/08/08 | | 3,500 | | 73.26 |
J. Michael Adcock | | 05/07/09 | | 437 | | 31.30 |
| | | 05/29/09 | | 3,063 | | 33.51 |
| | | 05/06/10 | | 3,500 | | 41.21 |
| | | 05/05/11 | | 3,500 | | 53.81 |
| | | 05/04/06 | | 3,500 | | 62.40 |
| | | 05/03/07 | | 3,500 | | 57.63 |
| | | 05/08/08 | | 3,500 | | 73.26 |
Gary R. Christopher | | 05/07/09 | | 437 | | 31.30 |
| | | 05/29/09 | | 3,063 | | 33.51 |
| | | 05/06/10 | | 3,500 | | 41.21 |
| | | 05/05/11 | | 3,500 | | 53.81 |
| | | 05/07/09 | | 437 | | 31.30 |
Steven B. Hildebrand | | 05/29/09 | | 3,063 | | 33.51 |
| | | 05/06/10 | | 3,500 | | 41.21 |
| | | 05/05/11 | | 3,500 | | 53.81 |
| | | 05/08/03 | | 3,500 | | 20.46 |
| | | 05/06/04 | | 3,500 | | 28.23 |
| | | 05/05/05 | | 3,500 | | 39.50 |
| | | 05/04/06 | | 3,500 | | 62.40 |
William B. Morgan | | 05/03/07 | | 3,500 | | 57.63 |
| | | 05/08/08 | | 3,500 | | 73.26 |
| | | 05/07/09 | | 437 | | 31.30 |
| | | 05/29/09 | | 3,063 | | 33.51 |
| | | 05/06/10 | | 3,500 | | 41.21 |
| | | 05/05/11 | | 3,500 | | 53.81 |
| | | 05/05/05 | | 3,500 | | 39.50 |
| | | 05/04/06 | | 3,500 | | 62.40 |
| | | 05/03/07 | | 3,500 | | 57.63 |
John G. Nikkel | | 05/08/08 | | 3,500 | | 73.26 |
| | | 05/07/09 | | 437 | | 31.30 |
| | | 05/29/09 | | 3,063 | | 33.51 |
| | | 05/06/10 | | 3,500 | | 41.21 |
| | | 05/05/11 | | 3,500 | | 53.81 |
Larry C. Payne | | 05/05/11 | | 3,500 | | 53.81 |
| | | | | | | | | | |
| Director | | Date of Option | | Shares Subject to Option(#) | | | Exercise Price($) | |
G. Bailey Peyton IV | | 05/05/11 | | | 3,500 | | | | 53.81 | |
| | | 05/04/06 | | | 3,500 | | | | 62.40 | |
| | | 05/03/07 | | | 3,500 | | | | 57.63 | |
| | | 05/08/08 | | | 3,500 | | | | 73.26 | |
Robert J. Sullivan Jr. | | 05/07/09 | | | 437 | | | | 31.30 | |
| | | 05/29/09 | | | 3,063 | | | | 33.51 | |
| | | 05/06/10 | | | 3,500 | | | | 41.21 | |
| | | 05/05/11 | | | 3,500 | | | | 53.81 | |
| | | 05/02/02 | | | 3,500 | | | | 20.10 | |
| | | 05/08/03 | | | 3,500 | | | | 20.46 | |
| | | 05/06/04 | | | 3,500 | | | | 28.23 | |
| | | 05/05/05 | | | 3,500 | | | | 39.50 | |
| | | 05/04/06 | | | 3,500 | | | | 62.40 | |
John H. Williams | | 05/03/07 | | | 3,500 | | | | 57.63 | |
| | | 05/08/08 | | | 3,500 | | | | 73.26 | |
| | | 05/07/09 | | | 437 | | | | 31.30 | |
| | | 05/29/09 | | | 3,063 | | | | 33.51 | |
| | | 05/06/10 | | | 3,500 | | | | 41.21 | |
| | | 05/05/11 | | | 3,500 | | | | 53.81 | |
|
| | | | | |
| Director | Date of Option | | Shares Subject to Option(#) | | Exercise Price($) |
| J. Michael Adcock | 05/05/05 | | 3,500 | | 39.50 |
| 05/04/06 | | 3,500 | | 62.40 |
| 05/03/07 | | 3,500 | | 57.63 |
| 05/08/08 | | 3,500 | | 73.26 |
| 05/07/09 | | 437 | | 31.30 |
| 05/29/09 | | 3,063 | | 33.51 |
| 05/06/10 | | 3,500 | | 41.21 |
| 05/05/11 | | 3,500 | | 53.81 |
| Gary R. Christopher | 05/04/06 | | 3,500 | | 62.40 |
| 05/03/07 | | 3,500 | | 57.63 |
| 05/08/08 | | 3,500 | | 73.26 |
| 05/07/09 | | 437 | | 31.30 |
| 05/29/09 | | 3,063 | | 33.51 |
| 05/06/10 | | 3,500 | | 41.21 |
| 05/05/11 | | 3,500 | | 53.81 |
| Steven B. Hildebrand | 05/07/09 | | 437 | | 31.30 |
| 05/29/09 | | 3,063 | | 33.51 |
| 05/06/10 | | 3,500 | | 41.21 |
| 05/05/11 | | 3,500 | | 53.81 |
| William B. Morgan | 05/08/03 | | 3,500 | | 20.46 |
| 05/06/04 | | 3,500 | | 28.23 |
| 05/05/05 | | 3,500 | | 39.50 |
| 05/04/06 | | 3,500 | | 62.40 |
| 05/03/07 | | 3,500 | | 57.63 |
| 05/08/08 | | 3,500 | | 73.26 |
| 05/07/09 | | 437 | | 31.30 |
| 05/29/09 | | 3,063 | | 33.51 |
| 05/06/10 | | 3,500 | | 41.21 |
| 05/05/11 | | 3,500 | | 53.81 |
| John G. Nikkel | 05/05/05 | | 3,500 | | 39.50 |
| 05/04/06 | | 3,500 | | 62.40 |
| 05/03/07 | | 3,500 | | 57.63 |
| 05/08/08 | | 3,500 | | 73.26 |
| 05/07/09 | | 437 | | 31.30 |
| 05/29/09 | | 3,063 | | 33.51 |
| 05/06/10 | | 3,500 | | 41.21 |
| 05/05/11 | | 3,500 | | 53.81 |
| Larry C. Payne | 05/05/11 | | 3,500 | | 53.81 |
| G. Bailey Peyton IV | 05/05/11 | | 3,500 | | 53.81 |
| Robert J. Sullivan Jr. | 05/04/06 | | 3,500 | | 62.40 |
| 05/03/07 | | 3,500 | | 57.63 |
| 05/08/08 | | 3,500 | | 73.26 |
| 05/07/09 | | 437 | | 31.30 |
| 05/29/09 | | 3,063 | | 33.51 |
| 05/06/10 | | 3,500 | | 41.21 |
| 05/05/11 | | 3,500 | | 53.81 |
| John H. Williams | 05/06/04 | | 3,500 | | 28.23 |
| 05/05/05 | | 3,500 | | 39.50 |
| 05/04/06 | | 3,500 | | 62.40 |
| 05/03/07 | | 3,500 | | 57.63 |
| 05/08/08 | | 3,500 | | 73.26 |
| 05/07/09 | | 437 | | 31.30 |
| 05/29/09 | | 3,063 | | 33.51 |
| 05/06/10 | | 3,500 | | 41.21 |
| 05/05/11 | | 3,500 | | 53.81 |
DIRECTOR
DIRECTOR COMPENSATION
TABLE The following table shows the total compensation received in
20112012 by each of our non-employee directors:
| | | | | | | | | | | | | | |
| DIRECTOR COMPENSATION FOR 2011 |
| Name | | Fees Earned
or Paid in Cash ($)(1) | | Stock Awards ($) | | Option
Awards ($)(2) | | Non-Equity
Incentive Plan
Compensation
($) | | Change in
Pension Value and
Nonqualified
Deferred
Compensation
Earnings ($) | | All Other
Compensation
($) | | Total ($) |
| (a) | | (b) | | (c) | | (d) | | (e) | | (f) | | (g) | | (h) |
J. Michael Adcock | | 104,000 | | n/a | | 82,460 | | n/a | | n/a | | - | | 186,460 |
Gary R. Christopher | | 83,000 | | n/a | | 82,460 | | n/a | | n/a | | - | | 165,460 |
Steven B. Hildebrand | | 100,000 | | n/a | | 82,460 | | n/a | | n/a | | - | | 182,460 |
King P. Kirchner* | | 70,500 | | n/a | | n/a | | n/a | | n/a | | - | | 70,500 |
William B. Morgan | | 104,000 | | n/a | | 82,460 | | n/a | | n/a | | - | | 186,460 |
John G. Nikkel | | 70,500 | | n/a | | 82,460 | | n/a | | n/a | | 35,004(3) | | 187,964 |
Larry C. Payne | | 52,500 | | n/a | | 82,460 | | n/a | | n/a | | - | | 134,960 |
G. Bailey Peyton IV** | | 52,500 | | n/a | | 82,460 | | n/a | | n/a | | - | | 134,960 |
Robert J. Sullivan Jr.** | | 78,500 | | n/a | | 82,460 | | n/a | | n/a | | - | | 160,960 |
John H. Williams | | 88,000 | | n/a | | 82,460 | | n/a | | n/a | | - | | 170,460 |
* | Mr. Kirchner served as a director from January 1, 2011 until May 2011 when he retired to the position of a director emeritus. The amount shown as Mr. Kirchner’s Total compensation reflects all fees paid for service from January 1, 2011, through December 31, 2011. |
** | Messrs. Payne and Peyton were elected to the board on May 4, 2011. The amounts shown for each of them as Total Compensation reflects all fees paid for services from May 4, 2011, through December 31, 2011. |
|
| | | | | | | |
| DIRECTOR COMPENSATION FOR 2012 |
| Name | Fees Earned or Paid in Cash ($)(1) | Stock Awards(2) ($) | Option Awards(3) ($) | Non-Equity Incentive Plan Compensation ($) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) | All Other Compensation ($) | Total ($) |
| (a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) |
| J. Michael Adcock | 108,000 | 110,000 | n/a | n/a | n/a | - | 218,000 |
| Gary R. Christopher | 86,000 | 110,000 | n/a | n/a | n/a | - | 196,000 |
| Steven B. Hildebrand | 109,000 | 110,000 | n/a | n/a | n/a | - | 219,000 |
| William B. Morgan | 105,000 | 110,000 | n/a | n/a | n/a | - | 215,000 |
| John G. Nikkel | 95,500 | 110,000 | n/a | n/a | n/a | - | 205,500 |
| Larry C. Payne | 91,625 | 110,000 | n/a | n/a | n/a | - | 201,625 |
| G. Bailey Peyton IV | 78,500 | 110,000 | n/a | n/a | n/a | - | 188,500 |
| Robert J. Sullivan Jr. | 72,875 | 110,000 | n/a | n/a | n/a | - | 182,875 |
| John H. Williams | 78,750 | 110,000 | n/a | n/a | n/a | - | 188,750 |
(1) | |
| (1) | Represents cash compensation for board and committee meeting attendance, retainers, and service as a board or committee chairman. |
(2) | |
| (2) | The amounts included for each director in the “Option“Stock Awards” column are calculated underaggregate grant date fair value computed in accordance with FASB ASC Topic 718 using an exercisebased on a stock price of $53.81$40.23, reflecting the fair market value on the date of grant. For a discussionThe non-employee directors had the following aggregate number of stock awards outstanding at the valuation assumptions used in calculating these values, see Notes 2 and 12 to our 2011 Consolidated Financial Statements included in our annual report on Form 10-K for the year ended December 31, 2011. Our currentend of 2012: |
|
| | | | |
| Name | Number of Stock Awards Outstanding as of December 31, 2012* | Vesting Schedule |
| 5/14/13 | 5/14/14 | 5/14/15 |
| J. Michael Adcock | 2,734 | 912 | 911 | 911 |
| Gary R. Christopher | 2,734 | 912 | 911 | 911 |
| Steven B. Hildebrand | 2,734 | 912 | 911 | 911 |
| William B. Morgan | 2,734 | 912 | 911 | 911 |
| John G. Nikkel | 2,734 | 912 | 911 | 911 |
| Larry C. Payne | 2,734 | 912 | 911 | 911 |
| G. Bailey Peyton IV | 2,734 | 912 | 911 | 911 |
| Robert J. Sullivan Jr. | 2,734 | 912 | 911 | 911 |
| John H. Williams | 2,734 | 912 | 911 | 911 |
*Each director listed above has one outstanding stock award, granted May 14, 2012, with a grant date fair value of $110,000.
| |
| (3) | The non-employee directors had the following aggregate number of stock options outstanding at the end of 2011:2012: |
| | |
| |
| Name | | Name | | Number of Options
as of December 31, 2011 31,2012 |
| J. Michael Adcock | | 24,500 |
| Gary R. Christopher | | 21,000 |
| Steven B. Hildebrand | | 10,500 |
| William B. Morgan | | 31,500 |
| John G. Nikkel | | 24,500 |
| Larry C. Payne | | 3,500 |
| G. Bailey Peyton IV | | 3,500 |
| Robert J. Sullivan Jr. | | 21,000 |
| John H. Williams | | 35,000 28,000 |
(3) | Represents amounts paid under certain of our plans or retirement or consulting agreements as more fully discussed under, “Potential payments on termination or change in control - Retirement or consulting agreements.” |
OWNERSHIP OF OUR COMMON STOCK BY BENEFICIAL OWNERS AND MANAGEMENT
DIRECTORSDIRECTORS AND
EXECUTIVEOFFICERS The following table shows the number of shares of our common stock beneficially owned by each of our current directors, each NEO, and by all current directors and executive officers as a group as of March
5, 2012.4, 2013. Except as otherwise noted, all shares are directly owned.
| | | | | | | | | | | | |
| STOCK OWNED BY OUR DIRECTORS, NOMINEES AND EXECUTIVE OFFICERS AS OF MARCH 5, 2012 | |
Name of Beneficial Owner | | Common
Stock(1) | | | | Stock Appreciation Rights
and Options Exercisable within 60 days(3) (b) | | Unvested
Common
Stock(4) | | Total | |
| | | (a) | | | | | (c) | | | |
J. Michael Adcock | | 17,891(2) | | | | 24,500 | | - | | | 42,391 | |
Gary R. Christopher | | 12,000 | | | | 21,000 | | - | | | 33,000 | |
Steven B. Hildebrand | | 3,000(2) | | | | 10,500 | | - | | | 13,500 | |
William B. Morgan | | 7,500 | | | | 31,500 | | - | | | 39,000 | |
John G. Nikkel | | 122,989(2) | | | | 24,500 | | - | | | 147,489 | |
Larry C. Payne | | 0 | | | | 3,500 | | - | | | 3,500 | |
G. Bailey Peyton IV | | 3,550 | | | | 3,500 | | - | | | 7,050 | |
Robert J. Sullivan Jr. | | 0 | | | | 21,000 | | - | | | 21,000 | |
John H. Williams | | 1,000 | | | | 35,000 | | - | | | 36,000 | |
Larry D. Pinkston | | 55,491 | | | | 98,745 | | 90,504 | | | 244,740 | |
Mark E. Schell | | 63,100 | | | | 47,449 | | 37,284 | | | 147,833 | |
David T. Merrill | | 13,794 | | | | 34,772 | | 35,772 | | | 84,338 | |
John Cromling | | 16,888 | | | | 26,504 | | 35,772 | | | 79,164 | |
Bradford J. Guidry | | 6,274 | | | | 28,631 | | 38,931 | | | 73,836 | |
All directors and executive officers as a group* | | 323,477 | | | | 411,101 | | 238,263 | | | 972,841 | |
| * | Each named director and officer individually owns less than one percent of our outstanding shares of common stock and collectively the directors and officers own 1.9% . For purposes of calculating this percentage ownership, the total number of shares outstanding includes the shares previously issued and outstanding (which includes all of the “Unvested” restricted stock identified in column (c)) plus the number of shares that any named owner has the right to acquire within 60 days. |
|
| | | | |
| STOCK OWNED BY OUR DIRECTORS, NOMINEES AND EXECUTIVE OFFICERS AS OF MARCH 4, 2013 |
Name of Beneficial
Owner | Common
Stock(1)
(a) | Stock Appreciation Rights and Options Exercisable
within 60 days(3) (b) | Unvested
Common
Stock(4)
(c) | Total |
| J. Michael Adcock | 17,891(2) | 24,500 | 2,734 | 45,125 |
| Gary R. Christopher | 12,000 | 21,000 | 2,734 | 35,734 |
| Steven B. Hildebrand | 3,000(2) | 10,500 | 2,734 | 16,234 |
| William B. Morgan | 7,500 | 31,500 | 2,734 | 41,734 |
| John G. Nikkel | 87,115(2) | 24,500 | 2,734 | 114,349 |
| Larry C. Payne | - | 3,500 | 2,734 | 6,234 |
| G. Bailey Peyton IV | 6,550 | 3,500 | 2,734 | 12,784 |
| Robert J. Sullivan Jr. | - | 21,000 | 2,734 | 23,734 |
| John H. Williams | 1,000 | 28,000 | 2,734 | 31,734 |
| Larry D. Pinkston | 83,391 | 91,245 | 138,319 | 312,955 |
| Mark E. Schell | 74,084 | 39,949 | 59,909 | 173,942 |
| David T. Merrill | 24,399 | 34,772 | 58,551 | 117,722 |
| John Cromling | 27,022 | 26,504 | 58,551 | 112,077 |
| Bradford J. Guidry | 17,771 | 28,631 | 61,710 | 108,112 |
| All directors and executive officers as a group* (15 people) | 366,717 | 389,101 | 443,160 | 1,198,978 |
* Each named director and officer individually owns less than one percent of our outstanding shares of common stock and collectively the directors and officers own 2.4%. For purposes of calculating this percentage ownership, the total number of shares outstanding includes the shares previously issued and outstanding (which includes all of the “Unvested” restricted stock identified in column (c)) plus the number of shares that any named owner has the right to acquire within 60 days.
Notes to table:
| |
| (1) | Includes the following shares of common stock held under our 401(k) thrift plan as of March 5, 2012:4, 2013: Mr. Pinkston, 6,8767,241 shares; Mr. Schell 36,51837,360 shares; Mr. Merrill, 5,0005,883 shares; Mr. Cromling, 2,6453,057 shares; Mr. Guidry, 8221,649 shares; and directors and executive officers as a group, 51,86157,849 shares. Entry for Mr. Pinkston also includes 300 shares owned by his minor child. Excludes unvested common stock, which is set forth separately in column (c), and explained at footnote (4) below.. |
| |
| (2) | Of the shares listed as being beneficially owned, the following individuals disclaim any beneficial interest in shares held by spouses, trusts or for the benefit of family members: Mr. Adcock, 17,891 shares; Mr. Nikkel, 35,000 shares; and Mr. Hildebrand, 3,000 shares. |
| |
| (3) | The stock appreciation rights (all settled in stock) and options have all vested, but have not been exercised. |
| |
| (4) | These unvested shares of restricted stock over which the named executive officer or director has voting power but not investment power were awarded as follows: |
| (a) | On March 9, 2010, the following restricted stock awards were granted. The total amount of the awards and the vesting schedule is shown below. The unvested part of these awards is subject to the recipient’s continued employment with the company on the vesting date: |
| | | | | | | | | | |
Name
(a) | On May 14, 2012, each director received a restricted stock award of 2,734 shares of stock, vesting in three equal annual installments on each of May 14, 2013, 2014, and 2015. Absent a decision by the compensation committee to treat them otherwise, these awards, all unvested, will vest only if the director is still serving as a director on the dates of vesting. |
(b) On March 9, 2010, the following restricted stock awards were granted to our named executive officers. The total amount of the awards and the vesting schedule is shown below. The unvested part of these awards is subject to the recipient’s continued employment with the company on the vesting date:
|
| | | | | |
| Name | Shares
subject to award | Vesting schedule (#) |
| 4/1/10 | 4/1/11 | 4/1/12 | 4/1/13 |
| Larry D. Pinkston | 37,018 | (9,255) | (9,255) | (9,254) | 9,254 |
| Mark E. Schell | 10,334 | (2,584) | (2,584) | (2,583) | 2,583 |
| David T. Merrill | 9,985 | (2,497) | (2,496) | (2,496) | 2,496 |
| John Cromling | 9,985 | (2,497) | (2,496) | (2,496) | 2,496 |
| Bradford J. Guidry | 9,985 | (2,497) | (2,496) | (2,496) | 2,496 |
| Shares
subject to award
| | Vesting schedule (#) |
| (c) | | 4/1/10 | | 4/1/11 | | 4/1/12 | | 4/1/13 |
Larry D. Pinkston
| | 37,018 | | (9,255) | | (9,255) | | 9,254 | | 9,254 |
Mark E. Schell
| | 10,334 | | (2,584) | | (2,584) | | 2,583 | | 2,583 |
David T. Merrill
| | 9,985 | | (2,497) | | (2,496) | | 2,496 | | 2,496 |
John Cromling
| | 9,985 | | (2,497) | | (2,496) | | 2,496 | | 2,496 |
Bradford J. Guidry
| | 9,985 | | (2,497) | | (2,496) | | 2,496 | | 2,496 |
| (b) | On February 15, 2011, the following restricted stock awards were granted.granted to our named executive officers. Seventy percent of the total amount of the awards is time vested and will vest as shown in the first three columns of the vesting schedule below. The remaining thirty percent, shown in the fourth column of the vesting schedule shown below, is performance-based and will vest, subject to adjustment based on achievement of certain performance criteria, on March 9, 2014. The unvested part of these awards is subject to the recipient’s continued employment with the company on the vesting date: |
|
| | | | | |
| Name | Shares
subject to award | Vesting schedule (#) |
| 70% | 30% |
| 3/9/12 | 3/9/13 | 3/9/14 | 3/9/14 |
| Larry D. Pinkston | 25,661 | (5,988) | 5,988 | 5,987 | 7,698 |
| Mark E. Schell | 8,950 | (2,089) | 2,088 | 2,088 | 2,685 |
| David T. Merrill | 8,665 | (2,022) | 2,022 | 2,021 | 2,600 |
| John Cromling | 8,665 | (2,022) | 2,022 | 2,021 | 2,600 |
| Bradford J. Guidry | 8,665 | (2,022) | 2,022 | 2,021 | 2,600 |
| | | | | | | | | | |
Name
(d) | | Shares
subject to award
| | Vesting schedule (#) |
| | 70% | | 30% |
| | 3/9/12 | | 3/9/13 | | 3/9/14 | | 3/9/14 |
Larry D. Pinkston
| | 25,661 | | 5,988 | | 5,988 | | 5,987 | | 7,698 |
Mark E. Schell
| | 8,950 | | 2,089 | | 2,088 | | 2,088 | | 2,685 |
David T. Merrill
| | 8,665 | | 2,022 | | 2,022 | | 2,021 | | 2,600 |
John Cromling
| | 8,665 | | 2,022 | | 2,022 | | 2,021 | | 2,600 |
Bradford J. Guidry
| | 8,665 | | 2,022 | | 2,022 | | 2,021 | | 2,600 |
| (c) | On February 14, 2012, the following restricted stock awards were granted.granted to our named executive officers. Seventy percent of the total amount of the awards is time vested and will vest as shown in the first three columns of the vesting schedule below. The remaining thirty percent, shown in the fourth column of the vesting schedule shown below, is performance-based and will vest, subject to adjustment based on achievement of certain performance criteria, on March 9, 2015. The unvested part of these awards is subject to the recipient’s continued employment with the company on the vesting date: |
|
| | | | | |
| Name | Shares
subject to award | Vesting schedule (#) |
| 70% | 30% |
| 3/9/13 | 3/9/14 | 3/9/15 | 3/9/15 |
| Larry D. Pinkston | 46,335 | 10,812 | 10,812 | 10,811 | 13,900 |
| Mark E. Schell | 23,168 | 5,406 | 5,406 | 5,406 | 6,950 |
| David T. Merrill | 22,115 | 5,160 | 5,160 | 5,160 | 6,635 |
| John Cromling | 22,115 | 5,160 | 5,160 | 5,160 | 6,635 |
| Bradford J. Guidry | 25,274 | 5,897 | 5,897 | 5,897 | 7,583 |
| | | | | | | | | | |
Name
(e) | | Shares
On February 12, 2013, the following restricted stock awards were granted to our named executive officers. Seventy percent of the total amount of the awards is time vested and will vest as shown in the first three columns of the vesting schedule below. The remaining thirty percent, shown in the fourth column of the vesting schedule shown below, is performance-based and will vest, subject to award | | Vesting schedule (#) |
| | 70% | | 30% |
| | 3/9/13 | | 3/9/14 | | 3/9/15 | | 3/9/15 |
Larry D. Pinkston
| | 46,335 | | 10,812 | | 10,812 | | 10,811 | | 13,900 |
Mark E. Schell
| | 23,168 | | 5,406 | | 5,406 | | 5,406 | | 6,950 |
David T. Merrill
| | 22,115 | | 5,160 | | 5,160 | | 5,160 | | 6,635 |
John Cromling
| | 22,115 | | 5,160 | | 5,160 | | 5,160 | | 6,635 |
Bradford J. Guidry
| | 25,274 | | 5,897 | | 5,897 | | 5,897 | | 7,583adjustment based on achievement of certain performance criteria, on March 9, 2016. The unvested part of these awards is subject to the recipient’s continued employment with the company on the vesting date: |
|
| | | | | |
| Name | Shares
subject to award | Vesting schedule (#) |
| 70% | 30% |
| 3/9/14 | 3/9/15 | 3/9/16 | 3/9/16 |
| Larry D. Pinkston | 63,057 | 14,714 | 14,713 | 14,713 | 18,917 |
| Mark E. Schell | 27,297 | 6,370 | 6,369 | 6,369 | 8,189 |
| David T. Merrill | 27,297 | 6,370 | 6,369 | 6,369 | 8,189 |
| John Cromling | 27,297 | 6,370 | 6,369 | 6,369 | 8,189 |
| Bradford J. Guidry | 27,297 | 6,370 | 6,369 | 6,369 | 8,189 |
STOCKHOLDERS
STOCKHOLDERS OWNING
MORETHAN 5%
OFOURCOMMONSTOCK The following table sets forth information concerning the beneficial ownership of our common stock by stockholders who own more than five percent of our common stock.
| | | | |
| STOCKHOLDERS WHO OWN MORE THAN 5% OF OUR COMMON STOCK |
| Name and Address | | Amount and Nature of
Beneficial Ownership(1) | | Percent of Class(2) |
George Kaiser Family Foundation | | | | |
7030 S Yale, Suite 600 | | 4,770,271 | | 9.81% |
Tulsa, Oklahoma 74136 | | | | |
Royce & Associates, LLC | | | | |
1414 Avenue of the Americas | | 7,222,650 | | 14.86% |
New York, New York 10019 | | | | |
FMR LLC | | | | |
82 Devonshire Street | | 6,285,446 | | 12.92% |
Boston, MA 02109 | | | | |
Black Rock, Inc. | | 2,468,680 | | |
40 East 52ndStreet | | | 5.07% |
New York, NY 10022 | | | | |
|
| | |
| STOCKHOLDERS WHO OWN MORE THAN 5% OF OUR COMMON STOCK |
| Name and Address | Amount and Nature of
Beneficial Ownership(1) | Percent of Class(2) |
George Kaiser Family Foundation
7030 S Yale, Suite 600
Tulsa, Oklahoma 74136 | 4,471,560 | 9.09% |
Royce & Associates, LLC
1414 Avenue of the Americas
New York, New York 10019 | 7,197,194 | 14.64% |
FMR LLC
82 Devonshire Street
Boston, MA 02109 | 6,217,038 | 12.65% |
Black Rock, Inc.
40 East 52nd Street
New York, NY 10022 | 2,463,656 | 5.01% |
Heartland Advisors, Inc. 789 N. Water St. Milwaukee, WI 53202 | 2,511,504 | 5.11% |
| |
| (1) | Beneficial ownership is based on the Schedule 13G or 13G/A most recently filed by the stockholder or other information provided to us. Beneficial ownership may under certain circumstances include both voting power and investment power. Information is provided for reporting purposes only and should not be construed as an admission of actual beneficial ownership. |
| |
| (2) | Based on the issued and outstanding shares of our common stock as of March 5, 2012.4, 2013. |
OVERVIEWOVERVIEW OF
NEOS’ 2011 NEOS’ 2012 COMPENSATIONLarry D. Pinkston – $684,000$760,000
Mark E. Schell – $342,600
$400,000David T. Merrill – $331,000
$400,000John Cromling – $331,000
$400,000Bradford J. Guidry – $331,000
$400,000Cash bonuses (50% performance-based, 50% discretionary) awarded in 2012early 2013 as annual or short-term incentive compensation for 2011:
2012:performance-based component
Larry D. Pinkston – $540,702$328,514
Mark E. Schell – $175,000
$115,268David T. Merrill – $170,000
$115,268John Cromling – $170,000
$104,839Bradford J. Guidry – $180,000
$140,439Larry D. Pinkston – $334,806
Mark E. Schell – $150,000
David T. Merrill – $150,000
John Cromling – $150,000
Bradford J. Guidry – $150,000
Number of shares of restricted common stock (30% performance-based, 70% time vested) subject to awards made in 2011:under 2012 awards:
Larry D. Pinkston – 25,661
Mark E. Schell – 8,950
23,168David T. Merrill – 8,66522,115
John Cromling – 8,665
22,115Bradford J. Guidry – 8,665
25,274
HIGHLIGHTSHIGHLIGHTS OF
2011 FINANCIAL PERFORMANCEexceeded originally budgeted cash flow per share by 18%;
2012 PERFORMANCEexceeded originally budgeted net income by 16%;
commodity hedging program provided $4 million of cash flow;
successfully completed our first public debt offering of $250 million of Senior Subordinated Notes;
net income increased 34% over 2010;
net income per diluted share increased 32% over 2010; and
invested over $832 million in capital expenditures and maintained a conservative debt to capitalization ratio of 13%.
Unit Corporation
Financial Performance Markers
Fiscal Years 2010 and 2011
($ in millions)
* Represents net cash provided by operating activities.
As the chart shows, our 2011 annual revenues, net income, and cash flow were all up compared to 2010.
The compensation committee considered various aspects of our 20112012 performance in connection with making its compensation decisions. Highlights of 2012 performance include:
Drilling Segment:
Sold a 600 hp mechanical rig during 2012 that had very limited market capabilities for us;
Added two new drilling rigs into service;
Increased cash flow per rig per day from $8,496 in 2011 to $9,578 in 2012;
Significantly improved safety performance; and
Refurbished, upgraded, or returned to service 15 existing drilling rigs.
Exploration and Production Segment:
Replaced 337% of 2012 annual production with new reserves (including reserves from the Noble Energy property acquisition);
Finished the year with proved reserves of 150 million barrels of oil equivalents (MMBoe), a 29% increase over 2011;
Annual oil and gas production was 14.2 MMBoe, an increase of 18% over 2011;
Finalized a significant acquisition of properties from Noble Energy;
Divested Bakken and East Texas properties (outside our core areas of operations);
Established a significant Mississippian position and drilled its first Mississippian horizontal well;
Attained significant drilling efficiencies in the Granite Wash and Marmaton plays of Oklahoma;
Made a significant new discovery in the Wilcox formation; and
Successfully continued its liquids focus strategy.
Midstream Segment:
Expanded its Hemphill, Oklahoma processing facility capacity by 45MMcf per day;
Completed first phase of Pittsburgh Mills, Pennsylvania gathering system, and started construction of the second phase;
Completed construction of Bellman processing system and started an expansion project in Oklahoma;
Expanded Cashion, Oklahoma processing facility capacity by 25MMcf per day; and
Negotiated new NGLs contract to receive Belview pricing for significant portion of Conway NGLs.
Corporate:
Attained tax savings through Internal Revenue Code Section 1031 like-kind exchange treatment of exploration and production acquisitions/divestitures;
Enhanced the flexibility of the commodity hedging program through prospective adoption of mark-to-market accounting for hedging transactions;
Completed a $400 million add-on to its existing senior subordinated notes offering; and
Amended the bank credit facility and expanded the syndication with the addition of two new banks.
We believe thosethe compensation committee's decisions with respect to our NEOs' 2012 compensation resulted in a well-balanced compensation package that metmeets our continuing goals of competitively compensating our executives for performance while at the same time managing the
resources of the company, all of which serve to build stockholder value.
PROTECTINGPROTECTING THE
INTEGRITYOFOURCOMPENSATIONPRACTICES Compensation practices supporting our efforts to make sound executive compensation decisions and deliver stockholder value include:
Clawback rights– We have the right to “claw“claw- back” our long-term incentive compensation paid to any executive who commits specific acts of fraud or dishonesty;
Performance metrics– Since 2011, we have awarded a portion of our short- and long-term incentive awards subject to certain performance metrics.metrics;
Ongoing compensation risk assessment– As described in “Our compensation policies and program as they relate to risk management” on page 18,21, our compensation committee continually evaluates the risk associated with the compensation decisions it makes, and our risk management plan has identified compensation risk as one of the risks to be analyzed; and
Trend toward longer-term and at-risk compensation for executives – Our practices with respect to the mix between long-term and short-term compensation, and between time-vested and performance-vested (“at risk”) compensation have shifted over the last several years. As recently as 2006, 82% of our executives’ compensation was in salary and short-term incentives, and only 18%
was awarded as long-term incentives and none of it was subject to performance conditions. In 2011,2012, the ratio was 49%38% salary and short-term incentives and 51%62% long-term (equity) incentives and performance-based (at risk) short-term cash incentives.
COMPENSATIONCOMPENSATION COMMITTEE
REPORT The compensation committee has reviewed and discussed with our management the following compensation discussion and analysis. Based on that review and discussion, the compensation committee recommended to the board that the compensation discussion and analysis be included in this proxy statement and incorporated into our annual report on Form 10-K for fiscal year
20112012 by reference to this proxy statement.
The members of the Compensation Committee are:
J. Michael Adcock
-– Chairman
Steven B. Hildebrand
G. Bailey Peyton IV
COMPENSATION
COMPENSATION DISCUSSION
ANDANALYSIS To assist you in reviewing our compensation discussion and analysis, we have broken our discussion into the following sections, each of which may have its own subsections:
Our general compensation objectives
Elements of our compensation program
Our compensation policies and program as they relate to risk management
Effect of stockholder say-on-pay vote on compensation decisions
Administration of our executive compensation program – overview of the process
Role of compensation consultant
2012 long-term incentive awards
20112012 annual cash bonus awards paid in 2012
201320122013 compensation decisions
Executive stock ownership policy
Policy on hedging and pledging our securities
No backdating, springloadingspring-loading, or repricing of options
Non-employee director compensation
Accounting and tax considerations
Our general compensation objectives.Our primary goal,goals, both for executives and non-executives, isare to attract, motivate, reward, and retain competent employees. We try to set our goals in a way that joins our employees’employees' interests with our business and financial objectives, as well as the interests of our stockholders. To do that we:
offer a competitive compensation mix consisting of reasonable salaries, short-term and long-term incentives, as well as certain additional benefits;
reward performance that achieves our business objectives and enhances the performance of our common stock; and
link executive compensation to our stockholders’stockholders' interests by usingboth generally through the use of equity awards based on the valueas components of executive and non-executive compensation, and more specifically by tying a portion of both long- and short-term incentive compensation to various performance goals and metrics for our common stock.executives.
Elements of our compensation program.As a general rule, our executive compensation program consists of salary, annual cash bonus (also referred to as “short-term incentive awards”), and certain forms of equity awards (also referred to as “long-term incentive awards”). We also make available health, disability and life insurance, certain indemnification protection, 401(k) retirement i.e., 401(k),benefits, separation benefits, and certain limited perquisites. We use each of these elements because we believe they provide the mix required to attract and retain talented executives, reward them for quality performance, and
motivate them to focus on both the short-term and long-term performance of the company. Specifically, we believe a competitive salary is required to attract and retain qualified executives. When authorized, annual cash bonuses provide executives with potential earnings based on annual financial and operating results and reward them for short-term successes. Long-term incentive awards are used to motivate both long-term and short-term results and aid in the retention of our executives. Compensating our executives for company performance in both the short term and the long term serves our goal of aligning our executives’ compensation with the interests of our stockholders. Indemnification protections, retirement and separation benefits, and general perquisites are commonly included in executive compensation packages offered by our competitors, and we believe that providing them helps achieve our compensation goals.
The following chart provides further details about what we pay (or offer) our executives and why we do so:
| | | | |
| | | |
Form of compensation
or benefit
| Description | Description | | | | Purpose and
what it rewards
| | Interaction with other elements of
compensation or benefits |
| Base Salary | | Regular cash income, paid semi-monthly. | | | | Provides competitive and predictable regular compensation and rewards core competence and experience. | | Is a fundamental or foundation component of our overall competitive pay mix; serves as a short-term feature to balance long-term incentives. |
Cash Bonus
(or
“short-term incentive
compensation”)
| | Discretionary cash awards. | | | | Provides annual incentive in the form of cash compensation and rewards short-term corporate and individual performance. | | Serves as a short-term incentive to balance long-term incentives; rewards short-term performance, aligning executives’executives' interests with those of the stockholders in the short term. |
| Performance-based cash awards that may be made under the Unit Corporation Annual Performance Bonus Plan. | | | | Provides an annual incentive award based on the attainment of previously designated performance measures. | | Serves as a short-term incentive to balance long-term incentives; rewards short-term performance, aligning executive interests with those of the stockholders in the short term. |
| Long-term Incentives | | Before 2005, we used stock options as our long-term equity incentive. Starting in 2005, we awarded shares of restricted stock and in 2006 and 2007 we awarded a combination of shares of restricted stock and stock appreciation rights. Since 2009, we have awarded restricted common stock exclusively as long-term incentive compensation. Pay-out is generally staggered over a vesting period, although we have also awarded retention shares structured to have a one-time “cliff” vesting feature. Since 2011, we have also tied a part of this award to attainment of certain performance criteria. | | | | Provides long-term incentive to contribute to company performance and rewards corporate performance as well as continued service with company. | | Balances the short-term features of our mix and motivates our executives to enhance corporate performance, further aligning executive interest with stockholder interests. |
| Indemnification | | We indemnify our officers and directors to the fullest extent permitted by law. This is required by our charter, bylaws, and certain contracts. | | | | We include this as a compensation element because it is commonly provided by peer organizations and is valued by our executives. We believe it allows our executives to be free from undue concern about personal liability in connection with their service to the company and it rewards willingness to serve in positions that carry exposure to liability. | | Represents a significant component of a competitive executive compensation package. |
| | | | | | |
Form of compensation
or benefit
| | Description | | Purpose and
what it rewards
| | Interaction with other elements of
compensation or benefits |
Medical, Dental, Life and Disability | | Available to full-time company employees through our benefit plans. The value of these is not included in the Summary Compensation Table, since they are available on a company-wide basis. | | We include this as a compensation element as it is commonly provided by our competitors and it encourages the health of our employees, and adds to employee productivity and loyalty. | | Represents a significant component of a competitive executive compensation package. |
| Other Paid Time-off Benefits | | We provide vacation and other paid holidays to full-time employees, including the NEOs. | | Rewards continuity of service and is a standard benefit comparable to the vacation benefits provided by competitors. | | Works together with other elements to create a competitive compensation package. |
Unit Corporation Employees’ Employees' Thrift Plan [401(k) plan] | | Tax-qualified retirement savings plan under which participating employees can contribute up to 99% of their pre-tax compensation, a portion of which the company can match. Our match for 20112012 was 117% of the first 6% of the participant’sparticipant's salary. The company match is paid in shares of the company's common stock. | | A 401(k) plan is a standard corporate benefit and our match to the participants is a competitive feature of our plan. This type of benefit rewards continuity of service. | | Works in combination with our other executive pay components to create a competitive overall executive compensation package. |
Unit Corporation Salary Deferral Plan
[Non-qualified plan]
| | Our non-qualified plan allows designated participants to defer salary and cash bonus for tax purposes until actual distribution at termination, death, in service, or under defined hardship. We do not make a matching contribution to this plan. | | This element of compensation is a standard benefit at executive levels, and is a component of our program that contributes to our competitiveness. This rewards continuity of service. | | Works in combination with our other executive pay components to create a competitive overall executive compensation package. |
| Separation Benefits | | We provide payments to salaried full-time employees in cases of involuntary termination, change-in-control, or on retirement after 20 years of service with the company. For specifics, see the narrative discussion at “Potential payments on termination or change in control.” | | This element of compensation is a standard benefit at executive levels. It is a component of our program that contributes to our competitiveness, and helps retain our employees. This benefit rewards length and continuity of service. | | Works in combination with our other executive pay components to create a competitive overall executive compensation package. |
| Perquisites | | We provide a car allowance to our NEOs and pay for certain club memberships. | | We believe that compensating with certain perquisites adds to the general attractiveness and competitiveness of our compensation mix, and helps attract and retain the executive talent we value. | | Works in combination with our other executive pay components to create a competitive executive compensation program. |
Our compensation policies and program as they relate to risk management.We have reviewed our compensation policies and program for both executives and non-executives as they relate to risk and determined that at the present time they are not reasonably likely to have a material adverse effect on the company. Historically, we have not had any measurable risk exposure linked to our compensation program because our compensation decisions were made on a discretionary basis. Salaries and bonuses were not based on formulas with unknown variables that could result in future valuations or results that were unrestricted in either amount or scope. Starting in 2011 we have added performance metrics to a portion of our NEOs’executive officers' incentive compensation thus reducing to a degree the discretionary aspect of our compensation program. We have analyzed those performance metrics and their potential impact in the context of our overall general compensation practices and determined that they are not reasonably likely to have a material adverse effect on the company for the following reasons:
the performance metrics component of our annual cash awards is limited to determining 50% of that award. The committee retains the discretion with rightregard to awarding none, part, or all of the other 50%. This discretionary 50%component gives the committee the ability to adjust for any unanticipated results that could arise with regard to the 50% that is performance based;
performance-based;the metrics we use were carefully evaluated, and are believed to be appropriate for our particular business model; the metrics are diversified, with performance goals focused on varying measures of growth, performance, and cost control acrossfor each of the different business segments of our company;
our equity awards generally have either long-range performance conditions attached to them or vest equally over several periods of time, so that they do not encourage short-term business decisions and instead encourage consistency and long-term performance; and
since 2006, we have added clawback provisions in our long-term equity awards that allow us to
| | reclaim any of that compensation paid or payable to our key employees and executives in the event of certain wrongful activity.
|
Our compensation committee addresses compensation risk each time it makes a decision about executive compensation or issuances under our compensation plans.
Effect of stockholder say-on-pay vote on compensation decisions.In accordance with the vote of our stockholders at our 2011 annual meeting, we provide our stockholders an annual say-on-pay vote, and we will continue to do so until the stockholders next vote on the frequency of the say-on-pay vote. The committee reviewed the voting results from the say-on-pay vote
conducted at our
20112012 annual meeting of stockholders. Approximately
95%96.5% of the shares voting on that item approved our
20102011 executive compensation as set forth in our
20112012 proxy statement. The remaining
5%3.5% voting “no” were believed to be held by stockholders holding their shares through a brokerage account and not subject to identification and engagement. It was the committee’s assessment that it should continue to make its executive compensation decisions as it had in years past, attempting to gauge competitive practices and authorizing compensation that is within the range of what is deemed to be competitive and appropriate in our industry.
Administration of our executive compensation program – overview of the process.Our executive compensation program is administered by our compensation committee. Additional details about that committee are located in the corporate governance provisions of this proxy statement, under “Compensation Committee.” Each year the chairman of the compensation committee, our CEO,
the directorour vice president of human resources, and any compensation consultant the committee may have retained, meet during the fourth quarter of the year to analyze the current compensation package of our executive and non-executive employees. (See “Role of CEO,” and “Role of compensation consultant,” for greater detail on this process.) Our CEO ultimately makes recommendations
with regard to salaries, any annual bonus awards, and any long-term incentive compensation awards for our non-executive employees and for all executives besides himself. None of our NEOs has a role in recommending their own compensation.
The CEO’s salaryIn December of each year, the committee considers the CEO's recommendations for the othernon-CEO NEOs, arealong with any peer and market information presented to the committee, and it makes a decision as to the appropriate salary for the CEO and the other NEOS. The committee then presents its salary determination to the board, at the December committee and board meetings.full board. Salaries, as may be adjusted over the year then ending, are effective starting January 1st of the new year.No action is taken regarding annual bonus awards until sometime after the firststart of the new year.year following the year to which the bonuses relate. This allows time for the complete financial and operating performance results for the prior year to become known and then taken into account when determining those awards. Once that information is available the annual bonus awardawards for the prior year will beare determined. Long-term awards are considered to be made prospectively, and are usually made in the first quarter of the year to which they relate. Consequently, salary determinations for 20112012 were made
in December 20102011, effective January 1, 2011,2012; annual bonus incentive awards based on 20112012 results were made in February 2013; and 2012 and 2011 long-term incentive awards were granted in the first quarter of 2011.
February 2012. Equity awards, if any, are effective as of the date of the committee’s approval of the award.
Generally, once the committee has approved the NEOs’ compensation, the only adjustments that might be made before the committee’s next annual review would be those deemed necessary or useful due to a change in circumstances (e.g., in the event of a promotion or material increase in responsibility, or in the event of a severe downturn in our industry).
Under thoseNo such adjustments were made in any of the years reflected in this proxy statement. It is possible, however, that the committee may make adjustments in the future based on changed circumstances,
the decision to make any adjustmentsand those changes if made would be
made on an ad hoc basis and
could affect any or all elements of compensation
could be adjusted based on the actual circumstances involved.
In selecting the overall compensation package for our NEOs, the committee considers the financial and operating results of the company generally taking into account:
the growth in each segment of the company;
net income, cash flow, and asset base growth;
any acquisitions made during the year;
the attainment of any designated business objectives; and
our compensation practices compared to those of other companies.
In addition, the
The committee may also take into account any significant changes in or to the industry in which we operate,
andas well as general economic conditions.
Other than its view of future industry and economic conditions, the
committee’scommittee's compensation decisions generally entail a retrospective review of past performance or results. However, beginning in 2011, the committee adopted certain future performance metrics for our NEOs.
In addition to any performance metrics, individual performance is taken into account in making executive compensation decisions for the NEOs (other than our CEO) but only in the context of assessing corporate or segment performance, with any individual contributions noted in the context of the
committee’scommittee's evaluation of the overall operational and financial results of the company. For the CEO, performance is measured by the overall operational and financial results of the company.
Decisions not tied to performance-based incentive awards are made at the committee’s discretion. In those cases there is no weighting of assessed factors, no formulaic modeling of how to tie company or individual achievement to awards, no fixed position on whether prior compensation should be considered in making compensation decisions, or whether or how to incorporate any other criteria-based measures into the compensation-setting process.
Role of compensation consultant.
The committee used the services of Villareal and Associates (“Villareal”), a Tulsa, Oklahoma-based compensation consultant, to assist it in determining the types and amounts of the compensation
paid to our executives for
2011.2012. The committee has used the services of Villareal as its independent compensation consultant since 2009. Villareal provided peer and survey information used in determining all components of our NEOs’ reported compensation. Villareal also worked with our management and
the head of our human resources
directordepartment to create the metrics used in our performance-based incentive awards.
Villareal’s 2010 consulting fees were $64,060,
In 2012, we paid Villareal a total of $96,115, of which
$37,040$33,810 was for executive compensation services and
$27,020$62,305 was for other services
(mainly employee recruiting services). In 2011, we paidconsisting mainly of executive and professional search services. The committee's selection of Villareal
a total of $72,781, of which $47,870 was foras its executive compensation
services and $24,911 was for other services. For the services Villareal performed for the committee, it was the committee’s decision to engage those services. Villareal’s engagement by the committeeadvisor was not based on
anya recommendation by our
management.management, but was based on the committee's preferences. The decision to use Villareal for other services was made by management and was not required to be approved by the committee. But in any event, during its February 2013 evaluation of the compensation consultant independence questionnaire completed by Villareal, the committee reviewed all of the fees paid to Villareal in 2012. Based on Villareal's answers to the questionnaire, the committee determined that at this time there is no conflict of interest created by Villareal's work for either the committee or the company.
Role of CEO.Before those meetings at which it makes decisions concerning our NEOs’NEOs' compensation, committee members receive and review the recommendations (and any information on which they are based) made by our CEO regarding the salary and incentive-based compensation for the other NEOs. The CEO does not evaluate or make a recommendation regarding his salary or incentive compensation. Additionally, our CEO meets with the committee and discusses his recommendations. The executives who are subject to the CEO’s
CEO's recommendations are not present at the time of these deliberations. The compensation committee has the authority to accept, reject, or adjust the CEO’s recommendations or those made by any other person. After the committee has reached its decisions regarding the NEOs’NEOs' compensation, its determinations are then submitted to the full board. The full board then ratifies (and approves, if required) the committee’scommittee's determinations. The full board does have the authority to make any changes it feels are appropriate to the recommendations of the committee.
2011 Salaries.Peer group. Historically, and for purposes of setting the NEOs' 2012 salaries and long-term incentive compensation levels, the company's peer group consisted of:
Cabot Oil & Gas Corporation
Cimarex Energy Company
Continental Resources, Inc.
Denbury Resources, Inc.
Forest Oil Corporation
Helmerich & Payne, Inc.
Newfield Exploration Company
Parker Drilling Company
Patterson – UTI Energy, Inc.
Pioneer Drilling Company
SandRidge Energy, Inc.*
SM Energy Company
Whiting Petroleum
*("SandRidge"), no longer a peer company,
effective February 2013.
This group of companies was chosen as the peer group because they are energy companies deemed to be comparable in revenue size, and to be competing for the same executive (and non-executive) talent as the company. At the compensation committee's February 2013 meeting, when 2012 cash bonus award decisions were made, it was determined that, prospectively, SandRidge Energy, Inc. ("SandRidge") would no longer be included in the peer group for purposes of determining NEO compensation. SandRidge was removed from the peer group because it was the consensus of the committee that its executive compensation practices were not providing a meaningful comparison for the company, and that the peer group without SandRidge would be a more appropriate peer group. The committee decided not to designate a replacement for SandRidge, so the peer group will consist of 12 companies.
2012 salaries.Salaries for 20112012 were recommended by the committee and approved by the boardset in early December 2010,2011, and were effective January 1, 2011. Due to practices in the industry and ongoing competitive pressures being exerted on many of our employees, the committee felt it was important to continue its historic practice of setting salary increases before but effective as of the first day of the new fiscal year.2012. Mr. Pinkston had recommended raises for the company’s non-NEO employees that would place the majority of them on average at the median of the market (and at approximately 90% of the 7550th percentile of the market). His recommendation was based on his review of comparable jobs in the industrymarket targets as reflected primarily in the Mercer 20102011 US MTCS Compensation Survey for the Energy Sector. He also recommended that a subgroup of non-executive employees identified as top performers be compensated, on average, at approximately the committee provide63rd percentile of their market targets. For the non-CEO NEOs, his recommendation was that they receive raises comparable increases to those of the other NEOs as well.high performing non-executive
employees, or at approximately the 63rd percentile of their respective market targets. Mr. Pinkston made no recommendation as to his 20112012 salary. The
In making its 2012 salary determination, the committee considered peer company salary information provided to it by Villareal. That information was based on proxy information from the 13-company peer group that, at that time, included SandRidge.
Villareal also provided salary information based on the following surveys:
Economic Research Institute’s “Salary Assessor” for energy companies of comparable revenue size;
Towers Watson Data Services’ “ECS Industry Report on Top Management Compensation,” for energy companies of comparable revenue size;
2011 Mercer Survey of companies with revenues in the $1.0 to $3.0 billion range; and
2011 ECI Survey of energy companies of $750 million to $1.5 billion in revenues.
Villareal “aged” the survey information provideddata, adjusting upward by 4.1% on an annual basis, in order to bring the April 2011 data current with projected executive salaries at December 2011. Villareal pertaining to medianchose the 4.1% multiplier based on the 2011/2012 World at Work Salary Budget Survey on salary increases projected for executives for 2012. Villareal also adjusted the survey figures used for Mr. Schell, the company’s Senior Vice President, General Counsel, and 75th percentile salary levelsSecretary. The survey figures for the NEOs, whichgeneral counsel position were adjusted upward by 15% to better reflect the additional responsibility of Mr. Schell’s position compared to those of other general counsels; Mr. Schell is not only general counsel, but also oversees the company’s Human Resources, Risk Management, and Training departments, as well as its Workers’ Compensation programs. As adjusted, the Villareal materials reflected the following:
| | | | | | | | | | |
| SURVEY DATA - NEOS |
| | | | | Mercer(1) | | ERI(2)/Towers Watson(3) |
Executive
Officer | | 2010
Salary
($) | | Average/
Median
Peer
Salary | | 75th
Percentile
Peer Salary | | Average/
Median
Peer
Salary | | 75th
Percentile
Peer Salary |
Larry Pinkston | | 637,000 | | 654,359 | | 845,424 | | 665,010 | | 892,812 |
Mark E. Schell | | 318,600 | | 326,304 | | 389,649 | | 318,296 | | 388,368 |
David T. Merrill | | 308,000 | | 339,900 | | 427,450 | | 356,181 | | 466,121 |
Bradford Guidry | | 308,000 | | 301,275 | | 376,774 | | 339,635 | | 456,445 |
John Cromling | | 308,000 | | 283,250 | | 334,544 | | 325,369 | | 437,314 |
Notes to table:
| (1) | 2010 Mercer Total Compensation Study for the Energy Sector, aged 4% to bring April 2010 figures current to December 2010 levels. |
| (2) | Salary Assessor – Economic Research Institute – Survey data covering 2,000 industries, 300 cities and over 6,200 position titles, including 500 top management/executive positions. |
| (3) | ECS Industry Report on Top Management Compensation, Towers Watson Data Services - 2010/2011. |
|
| | | | | |
Position |
Current Salary ($000’s) | Survey Group 50th Percentile Salary ($000’s) | Survey Group 75th Percentile Salary ($000’s) | Peer Group 50th Percentile Salary ($000’s) | Peer Group 75th Percentile Salary ($000’s) |
| CEO L. Pinkston | 684.0 | 701.6 | 862.9 | 652.7 | 810.8 |
| Senior Vice President, Secretary and General Counsel M. Schell | 342.6 | 371.8 | 418.6 | 309.5 | 394.5 |
Senior Vice President, CFO and Treasurer D. Merrill | 331.0 | 387.5 | 450.0 | 333.1 | 428.7 |
Executive Vice President, Drilling J. Cromling | 331.0 | 348.6 | 445.9 | N.A. | N.A. |
| Executive Vice President, E&P B. Guidry | 331.0 | 350.7 | 420.9 | N.A. | N.A.
|
The committee determined that
athe non-CEO NEOs should be paid salaries on par with those of the company’s highest-performing non-executive employees. The committee's approved salary
increase of 7.5% (on average) would placeincreases placed the
non-CEO NEOs
(includingat the
CEO) between the median and the 75th62.5 percentile of the market asrates reflected in the surveys.Villareal materials. The Villareal materials indicated that compensating Mr. Pinkston at the same 62.5 percentile of the market would result in a salary ranging from $731,750 (based on the peer group data) to $780,250 (based on the published survey data). The committee approved salary increasesnoted that the raises for all the non-CEO NEOs atranged between 17% and 21%, and agreed that level.$760,000, an 11% raise, would be appropriate for the CEO’s 2012 salary. Accordingly, the salaries for our NEOs for 20112012 were:
Mr. Schell – $342,600
$400,000Mr. Merrill – $331,000
$400,000Mr. Cromling – $331,000
$400,000Mr. Guidry – $331,000
$400,00020112012 long-term incentive awards.The committee addressed 2011 2012 long-term incentive awards during February of 2011. The committee reviewed the total
compensation paid to our NEOs as compared to similarly-situated executives at peer companies, along with the information prepared by Villareal comparing the NEOs’ long- and short-term incentives to those paid to similar executiveswere addressed at the peer companies for the three previously completed fiscal years.committee's February 14, 2012 meeting. The following energy companies made up the “peer group” as that term is used in this proxy statement:
Cabot Oil & Gas Corporation
Continental Resources, Inc.
Newfield Exploration Company
Patterson – UTI Energy, Inc.
Petrohawk Energy Corporation*
| * | Petrohawk was acquired and was not used for 2010, only for prior years. |
The Villareal materials showed that the dollar value of our incentives program was low relative to the peer group based on an analysis of comparative cash flows.
The committee also reviewed the followingcompany’s 2011 financial and operational results, in the form available at that time, were provided to the committee by the company for 2010:
Corporatechairman. Among the highlights of those results were the following:
total annual revenues reached $881.8 million, up from $709.9 million in 2009;
Exceeded budgeted cash flow by 18%;
Exceeded budgeted net income by 16%;
Received $4 million of $146.5 million, compared to 2009 net loss of $55.5 million;
cash flow from hedging program provided $53during 2011;
Completed $250 million of cash;Senior Subordinated Notes debt offering;
ended year with only $163 million of long-termIncreased net income by 34%;
Increased net income per diluted share by 32%; and
Maintained a debt (debt to capitalcapitalization ratio of 9%);13%.
EPS was $3.09 per share compared to ($1.18) per share for 2009; and
on December 31, 2010, the price of the company’s common stock closed at $46.48 per share, up $4.00 from the same date in 2009.
Drilling segment
sold 11 650-1000 hp mechanical rigs that had limited current market ability in order to refurbish other rigs;
increased operating rigs for horizontal drilling from 38 on January 1, 2010 to 72 on December 31, 2010;
Segment | |
| • | | built a new 1500 hp rig that beganIncreased operating rigs from 70 in 1st quarter 2010;2011 to 82 in the 4th quarter;
|
acquired one 1200Added seven new 1500 hp electric rig;
added 23 top drives to the fleet enhancing marketability of the fleet;
increasedIncreased cash flow margin per rig per day from $4,200/dayday;
Increased number of drilling rigs operating in January to $7,400/day in December;the Bakken shale of North Dakota; and
daily revenue increased from $657,000/day in January to $1,221,000/day in December.
Exceeded budgeted cash flow by 23%.Exploration and Production Segment
Replaced 202% of annual production,
segmentreplaced 176%141% of its 2010which was through drilling activities;
Finished the year with reserves of 116.0 million barrels of oil equivalents;
Increased annual oil and gas production by 23%;
Increased oil and gas reserves by 12%;
Increased oil and natural gas production;liquids production by 55%;
finished the year with 622 BCFEIncreased present value of oil and natural gas reserves;
annual production was 59 BCFE;
completed 167 gross wells with a 90% success rate; and
oil and natural gas reserves grew 8% during 2010, with a 50% increase in oil reservesby 23%; and a
Exceeded budgeted cash flow by 10% increase in NGL reserves..
Mid-stream segment
Completed construction of a 16-mile,16 mile 16-inch pipelinegathering system in Preston County, West Virginia;
increasedBegan construction of a gathering system in Allegheny and Butler counties in Pennsylvania;
Increased processing volumes per day and liquids sold volume per day by 8%41% and 11%52%, respectively;
completedIncreased natural gas volumes gathered by 17%;
Completed construction of a gathering systems and processing plant in HemphillGrant County, TexasOklahoma;
Signed processing contract with capacity to process 50 MMCF/day;a potential major producer in the Mississippi play; and
obtained contract to enable ourBegan construction of a gathering system and processing plantsplant in Texas Panhandle to be operating at 70–80%Noble and Kay counties of capacity by mid-year 2011.
Oklahoma.In addition to
considering the above financial and operational results, the committee reviewed the CEO Assessment Survey for
20102011 performance completed by the non-CEO directors. That survey indicated that on the whole the directors felt that the CEO was performing at a skilled or highly-skilled level.
Our CEO
The committee reviewed materials prepared by Villareal summarizing the total compensation paid to our NEOs as compared to similarly-situated executives in the peer group (both with and without SandRidge, as explained further below), along with information comparing our NEOs’ long- and short-term incentives to similar executives at the peer companies for the three previously-completed fiscal years. Peer group proxy information set forth in Villareal's materials indicated that for 2007 - 2010 the average long-term incentive awards paid to the highest-paid executive at the peer companies (excluding Sandridge's CEO) were paid at 419.4% of salary, compared to Mr. Pinkston's long-term incentives, which amounted to 177% of salary for that same time period. The Villareal materials reflected that long-term incentives for the 2nd-5th highest paid executives in the peer group (including Sandridge) for 2007 - 2010 were paid at 286.4% of salary, compared to our non-CEO NEOs' long-term incentives over the same
period, which came to an average of 115.4% of salaries for that period. Villareal's materials also showed that for 2010, which was the most recent year for which complete proxy information was available, the average long-term incentive compensation paid to the highest paid executive in the peer group (excluding Sandridge's CEO) was 495.5% of salary, compared to the 266.6% of salary paid to Mr. Pinkston as 2010 long-term incentive compensation. Similarly, proxy data for 2010 for the 2nd-5th highest paid executives at the peer group (including Sandridge) reflected long-term incentives paid at 338.5% of salary, compared to the 148.7% of salary paid as 2010 long-term incentives to our non-CEO NEOs. The Villareal materials showed that, for all five NEOs as a group, 2010 long-term incentives in the peer group (excluding data for Sandridge's CEO) were paid at 386.2% of salary, compared to 2010 long-term incentives for our NEO group, which was paid at an average of 188.7% of salary.
Mr. Pinkston recommended that 2012 long-term incentives for the non-CEO NEOs should be calculated using 329% of salary as the market-based target. He recommended that the actual long-term incentive award for the non-CEO NEOs be at 99.3% of that 329%-of-salary target, or an actual award of 326.86% of salary for that group (including Mr. Bob Parks, President of our midstream segment, and the four non-CEO NEOs) as a whole. More specifically, Mr. Pinkston recommended that Mr. Guidry receive an award that placed him at 362.54% of salary, and that the other non-CEO NEOs receive awards placing them between 317.22% and 321.07% of salary, reflecting the allocation of a greater percentage of the available awards to Mr. Guidry due to his segment’s outstanding performance in 2011. The committee grantagreed with Mr. Pinkston’s recommendations for the non-CEO NEOs.
The committee determined that applying the 326.86% of salary multiplier used for the non-CEO NEOs as a group would be appropriate for our CEO as well. Accordingly, the committee authorized the following long-term incentive restricted stock awards to the other NEOs at 100% of the market-based target. That target was based on a percentage-of-salary multiplier that is deemed to be representative of market pay practices as reflected in the data presented by Villareal and reviewed by our CEO and our director of human resources. For non-CEO NEO’s, that data reflected that market pay practices are to grant long-term incentive compensation at 158% of salary. The committee agreed with the CEO’s recommendations, and granted awards at 100% of target. The data reflected that for the CEO, the target for long-term incentives was 283% of salary. The committee determined that the CEO’s long-term incentive award should be at 80% of that 283%-of-salary target. Accordingly, the long-term incentives, granted in shares of restricted common stock of the company, were as follows:NEOs:
Mr. Pinkston – 25,66146,335 shares
Mr. Schell – 8,95023,168 shares
Mr. Merrill – 8,66522,115 shares
Mr. Cromling – 8,66522,115 shares
Mr. Guidry – 8,66525,274 shares
The committee further determined that 30% of the long-term incentives set forth above should vest subject to performance conditions, and that 70% should be time vested. The committee determined that the 30%:70% allocation reflectscontinues to reflect a reasonable allocation of at-risk compensation to time-based compensation. For the 70% that was to vest over time, the committee determined that it wouldshould vest in three equal annual installments commencingstarting March 9, 2012.2013. The performance-based shares will vest in an amount that will be determined based on application of
the following formula, which measures total stockholder return as compared to
our peer companies:
Total Stockholder Return (“TSR”) =
Ending stock price – Beginning stock price + Dividends
beginning
For purposes of the formula, the ending and beginning common stock price used will be calculated using the average of the closing price of our common stock on the NYSE for the
fifteen day15-day period ending on the start and end of the designated performance period
(the cliff vesting date for this part of the award)(February 14, 2012 – February 14, 2015) and the peer company stock prices will be determined in the same manner.
The number of performance-based shares that ultimately vest for the NEOs will be determined by the TSR of the company relative to the TSR of the peer companies at the end of the performance period, as follows: | | |
Company’s Performance Percentile Rank (Unit TSR vs. peer TSR) | | Vesting (% that will vest) |
90 | | 150% |
75 | | 125% |
60 | | 100% |
50 | | 75% |
40 | | 50% |
follows
|
| |
Company’s Performance
Percentile Rank
(Unit TSR vs. Peer TSR) | Vesting
(% that will vest) |
| 90 | 150% |
| 75 | 125% |
| 60 | 100% |
| 50 | 75% |
| 40 | 50% |
If the company’sour TSR is less than the 40th percentile of peer TSR levels at the end of the performance period, none of the performance-based shares will not vest and will be void.vest. 20112012 annual cash bonus awards paid in 2012.2013.The committee made its 20112012 short-term incentive cash bonus award determination in February of 2012. Fifty percent2013. The award was structured so that 50% of thatthe target bonus was performance-based, and 50% was discretionary. The committee continues to believe that the 50:50 allocation reflects the committee’s recognition of the valueis an appropriate mix of formula-based objective performance measures to be used in making bonus decisions, balanced by its desire to retain aand committee discretion. The discretionary component in order to provideallows the committee with the ability necessary to respond toadjust for any unforeseen circumstances that might arise both favorable(such as unusual commodities prices) or not, such as in the latter case unintended consequences arising from the application of the performance metrics.
Performance-based Component of Short-term
Incentive Cash Bonus Awards.
The
Performance-basedperformance-based short-term incentives comprised two separate awards, a “financial performance award,” and a “scorecard award.” The financial performance award was computed in the same manner for all segments of the company, but weighted more heavily for
Messrs. Pinkston, Schell, and Merrill, the corporate NEOs (60% of the total performance-based bonus amount), and less heavily for
theMessrs. Guidry and Cromling, NEOs who head
our business operating segments (20% of total performance-based bonus amount).
The total performance-based incentives available to the NEOs for
20112012 were multipliers of their salaries that were based on the level of performance achieved, as follows:
| | | | | | |
Incentive range for performance-based total of short-term incentives (Financial Performance Award + Scorecard Award) (% of salary) |
| Name | | Threshold | | Target | | Outstanding |
Mr. Pinkston | | 18.75% | | 37.5% | | 75.0% |
Mr. Schell | | 12.5% | | 25.0% | | 50.0% |
Mr. Merrill | | 12.5% | | 25.0% | | 50.0% |
Mr. Cromling | | 12.5% | | 25.0% | | 50.0% |
Mr. Guidry | | 12.5% | | 25.0% | | 50.0% |
The percentage of salary
|
| | | |
Incentive range for performance-based total of
short-term incentives
(Financial Performance Award + Scorecard Award) (% of salary) |
| Name | Threshold | Target | Outstanding |
| Mr. Pinkston | 18.75% | 37.5% | 75.0% |
| Mr. Schell | 12.5% | 25.0% | 50.0% |
| Mr. Merrill | 12.5% | 25.0% | 50.0% |
| Mr. Cromling | 12.5% | 25.0% | 50.0% |
| Mr. Guidry | 12.5% | 25.0% | 50.0% |
Because the short-term incentive target awards were designed to be 50% performance-based and 50% discretionary, the percentage-of-salary multipliers
chosen forset forth in the
CEO and other NEOsabove table reflect 50% of the standard
multipliers believed by the committee to represent the multiplier
rangeof salary that was the then-current market target for short-term incentives for executives in similar positions
as reflected inbased on the market-based survey data.
Financial performance award. For purposes of the 20112012 financial performance award, NEO performance was measured in terms of the ratio of the company’sour consolidated annual cash flow to itsour average total annual assets, as compared to the same ratio for our peer group. Peer group performance was determined based on analyst’sanalyst's published projected financial performance levels for the performance year (i.e., 2011)2012). Performance on this ratio at the 25th percentile of the peer group constituted “threshold” performance, at 50th percentile performance constituted “target” performance, and at 75th percentile performance constituted “outstanding” performance. Depending on the performance level achieved, the incentive opportunity ranges for the NEOs were as follows for the financial performance award: | | | | | | |
| Name | | Threshold | | Target | | Outstanding |
Mr. Pinkston | | 11.25% | | 22.5% | | 45.0% |
Mr. Schell | | 7.5% | | 15.0% | | 30.0% |
Mr. Merrill | | 7.5% | | 15.0% | | 30.0% |
Mr. Cromling | | 2.5% | | 5.0% | | 10.0% |
Mr. Guidry | | 2.5% | | 5.0% | | 10.0% |
|
| | | |
| Name | Threshold | Target | Outstanding |
| Mr. Pinkston | 11.25% | 22.5% | 45.0% |
| Mr. Schell | 7.5% | 15.0% | 30.0% |
| Mr. Merrill | 7.5% | 15.0% | 30.0% |
| Mr. Cromling | 2.5% | 5.0% | 10.0% |
| Mr. Guidry | 2.5% | 5.0% | 10.0% |
The incentive ranges reflected for Messrs. Pinkston, Schell, and Merrill for 20112012 were 60% of the total ranges available for the performance-based total short-term incentive, reflecting the 60% weighting of this financial performance factor for the corporate NEOs. For Messrs. Cromling and Guidry, it was 20% of the total available incentive, reflecting the established weighting for the business segments. If the threshold level of performance had not been achieved,
there would have been no payout on the financial performance award.
Performance at the 25th percentile of the peer group constituted “threshold” performance; 50th percentile performance constituted “target” performance, and 75th percentile performance constituted “outstanding” performance. The amount payable for performance falling
between two performance levels is determined by interpolation.
Scorecard Award. The scorecard component of the 20112012 short-term incentive award was based on the performance of the individual business units,our three primary operating segments, and the performance metrics differed for each segment. The scorecard award for Messrs. Pinkston, Schell, and Merrill, our corporate-level NEOs, is referred to as the “corporate scorecard award.” Our other two NEOs, Messrs. Guidry and Cromling, are heads of two of our operating segments, and their scorecards are based on operating metrics relevant to their segments. Mr. Cromling’s scorecard award is referred to as the “drilling segment scorecard award,” and Mr. Guidry’s scorecard award is referred to as the “exploration and production segment scorecard award.” We have a third main operating subsidiary, Superior Pipeline Company, LLC (“Superior”). While Superior’s President is not an NEO and his compensation is not covered in this proxy statement, his segment’s scorecard, the “midstream segment scorecard” factors into the Corporate scorecard.scorecard award and is detailed below.
2012 corporate scorecard award.The scorecard for Messrs. Pinkston, Schell, and Merrill was a composite of the scorecards of the three business segments. For 2011, theThe segments were weighted 60%55% for the petroleum segment, 30%25% for the drilling segment, and 10%20% for the mid-streammidstream segment. Depending on the performance level achieved, the incentive opportunity for the corporate NEOs
based on the corporate scorecard, was as follows
expressed(expressed as a percentage of their annual
salaries: | | | | | | |
| Name | | Threshold | | Target | | Outstanding |
Mr. Pinkston | | 7.5% | | 15.0% | | 30.0% |
Mr. Schell | | 5.0% | | 10.0% | | 20.0% |
Mr. Merrill | | 5.0% | | 10.0% | | 20.0% |
salaries):
|
| | | |
| Name | Threshold | Target | Outstanding |
| Mr. Pinkston | 7.5% | 15.0% | 30.0% |
| Mr. Schell | 5.0% | 10.0% | 20.0% |
| Mr. Merrill | 5.0% | 10.0% | 20.0% |
The incentive range for these awards is 40%of the performance based incentive opportunity range for the corporate NEOs, reflecting the weighting of the corporate scorecard award relative to the financial performance award for those NEOs. Drilling2012 drilling segment scorecard.For 2011, thescorecard award. The drilling segment’ssegment's scorecard award was determined based on the segment’s performance on four factors:totalcash flow per drilling rig costs;
per day;average number of drilling rigs operating; and
For the head of our drilling segment, the incentive range for the scorecard award as a whole was 80% of the total
incentive opportunity range for this performance-based incentive award.
Exploration and production segment scorecard.For 2011, this segment’s scorecard performance was determined based on the segment’s performance on the following four factors:
The incentive range for the scorecard award as a whole was 80%of the total incentive opportunity range for this performance-based incentive award.
Mid-stream2012 exploration and production segment scorecard.For 2011,scorecard award. This segment’s scorecard performance was
determined based on the segment's performance on the following four factors:
net reserve increase;
capital cost control;
production growth; and
operating costs.
The incentive range for the scorecard award as a whole was 80%of the total incentive opportunity range for this segment’sperformance-based incentive award.
2012 midstream segment scorecard award. This segment's scorecard performance was determined based on the segment’ssegment's performance on these three factors: growth in invested capital;
volumes gathered;return on invested capital; and
operating cost.
growth in segment cash flow.The incentive range for the scorecard award as a whole was 80% of the incentive opportunity range for this performance-based incentive award for the segment head.
Based on the
combined financial performance award and the relevant scorecard
performanceaward results, set forth
in greater detail below, the following amounts were paid to the NEOs for the performance-based component of the bonus:
Mr. Pinkston – $395,262
$328,514Mr. Schell – $131,985
$115,268Mr. Merrill – $127,516
$115,268Mr. Cromling – $63,684
$104,839Mr. Guidry – $115,816
$140,439The individual scorecards on which these amounts are based are set forth below.as follows:
Business Segment NEOs. The performance-based cash bonus awards for NEOs.
Mr. Guidry (head– Executive Vice President of our exploration and production segment), and Mr. Cromling (headUnit Petroleum Company: |
| | | | | | |
| A. Exploration and Production Segment Scorecard Award |
Performance Measure | Threshold
(pays 10% of salary/2.5% per factor) | Target
(pays 20% of salary/5% per factor) | Outstanding
(pays 40% of salary/10% per factor) | Actual | % Salary
Payable | Bonus
Payable |
Reserves
Replacement(1) | 120.00% | 150.00% | 180.0% | 197.59% | 10% | $40,000 |
Capital Cost
Control(2) | $2.81 | $2.58 | $2.40 | $2.81 | 2.5% | $10,000 |
Production
Growth(3) | 8.00% | 10.00% | 15.00% | 17.60% | 10% | $40,000 |
Operating Costs(4) | $1.60 | $1.50 | $1.30 | $1.44 | 6.5% | $26,000 |
| Scorecard Total | 29.00% | $116,000 |
| |
| B. Financial Performance Award |
| Threshold (2.5% of Salary)(6) | Target (5% of Salary)(7) | Outstanding (10% of Salary)(8) | Actual | % Salary Payable | Bonus
Payable |
Cash Flow-to-Assets Ratio(5) | 16.38% | 18.01% | 22.38% | 18.98% | 6.11%* | $24,439 |
| | | | | | | |
| Total Performance-based Bonus Award (A + B) for Mr. Guidry | 35.11%* | $140,439 |
*Decimals truncated for purposes of
our drilling segment), were weighted at 80% for their respective operating segment scorecard award, and 20% for the corporate-level financial performance award.Mr. Guidry’s scorecard is as follows:
| | | | | | | | | | | | |
| A. Unit Petroleum Company Scorecard Award |
| | | Threshold (pays 10% of
salary/2.5% per
factor) | | Target (pays 20% of
salary/5% per
factor) | | Outstanding
(pays 40% of
salary/10% per
factor) | | Actual | | % Salary
Payable | | Bonus Payable |
ReservesReplacement(1) | | 120.00% | | 150.00% | | 180.00% | | 201.97% | | 10.00% | | $33,100 |
Capital CostControl(2) | | $294,231,688 | | $267,505,353 | | $243,453,610 | | $368,003,616 | | 0.0% | | |
ProductionGrowth(3) | | 8.00% | | 10.00% | | 15.00% | | 22.69% | | 10.00% | | $33,100 |
Operating Costs(4) | | $1.60 | | $1.50 | | $1.10 | | $1.44 | | 5.75% | | $19,033 |
| | | | | | | | | | | 25.75% | | $85,233 |
| | | | | | | | | | |
| B. Financial Performance Award |
Threshold (2.5% of salary)(5) | | Target (5% of salary)(6) | | Outstanding
(10% of salary)(7) | | Actual | | % Salary
Payable | | Bonus Payable |
12.18% | | 15.88% | | 21.80% | | 20.90% | | 9.24%* | | $30,583 |
Total Payable for A. Scorecard Award + B. Financial Performance Award | | 34.99% | | $115,816 |
| * | Decimals truncated for purposes of table. Calculations based in truncated values in table will be slightly off due to rounding. |
table. Calculations based on truncated values will be slightly off due to rounding.
Notes to table:
| |
| (1) | Defined as percentage of 20102011 reserves replaced through 20112012 drilling activity. |
| |
| (2) | Defined as total costs incurred per MCF equivalent on new wells completed during 2011.2012. |
| |
| (3) | Defined as percentage by which 20112012 production increased over 20102011 production. |
| |
| (4) | Defined as total operating costs divided by total production in terms of MCF-equivalent amounts. |
| |
| (5) | Defined as the cash flow of the company for fiscal 2012 divided by the average assets of the company for for fiscal year 2012. |
| |
| (6) | Represents cashflow-to-assetscash flow-to-assets ratio at 25th percentile of peer companies. |
| (6) |
| (7) | Represents cashflow-to-assetscash flow-to-assets ratio at 50th percentile of peer companies. |
| (7) |
| (8) | Represents cashflow-to-assetscash flow-to-assets ratio at 75th percentile of peer companies. |
Mr.
Cromling’s scorecard is as follows: | | | | | | | | | | | | |
| A. Unit Drilling Company Scorecard Award |
| | | Threshold (pays 10% of
salary/2.5% per
factor) | | Target (pays 20% of
salary/5% per factor) | | Outstanding
(pays 40% of salary/10% per
factor) | | Actual | | % Salary
Payable | | Bonus Payable |
Accidents(1) | | 3.5 | | 3.0 | | 2.5 | | 3.93 | | 0.0% | | |
Total Daily Rig Cost(2) | | $9,000 | | $8,750 | | $8,500 | | $9,683 | | 0.0% | | |
No. of Rigs Operating(3) | | 70 | | 73 | | 76 | | 76.10 | | 10.0% | | $33,100 |
Rig Downtime(4) | | 1.00% | | 0.80% | | 0.70% | | 1.22% | | 0.0% | | |
| | | 10.0% | | $33,100 |
| | | | | | | | | | |
| B. Financial Performance Award |
Threshold (2.5% of salary)(5) | | Target (5% of salary)(6) | | Outstanding (10% of salary)(7) | | Actual | | % Salary
Payable | | Bonus Payable |
12.18% | | 15.88% | | 21.80% | | 20.90% | | 9.24%* | | $30,584 |
Total Payable for A. Scorecard Award + B. Financial Performance Award | | 19.24% | | $63,684 |
| * | Decimals truncated for purposes of table. Calculations based in truncated issues in table will be slightly off due to rounding. |
Cromling – Executive Vice President of Unit Drilling Company:
|
| | | | | | |
| A. Drilling Segment Scorecard Award |
Performance Measure | Threshold
(pays 10% of salary/2.5% per factor) | Target
(pays 20% of salary/5% per factor) | Outstanding
(pays 40% of salary/10% per factor) | Actual | % Salary
Payable | Bonus
Payable |
Accidents(1) | 3.5 | 3.0 | 2.5 | 2.87 | 6.3% | $25,200 |
Cash Flow per Rig per Day(2) | $8,500 | $9,000 | $9,500 | $9,456.66 | 9.55% | $38,200 |
No. of Rigs Operating(3) | 75 | 80 | 85 | 73.90 | 0 | $0 |
Rig Downtime(4) | 1.00% | 0.80% | 0.70% | 0.86% | 4.25% | $17,000 |
| |
| Scorecard Total | 20.10% | $80,400 |
| B. Financial Performance Award |
| Threshold (2.5% of Salary)(6) | Target (5% of Salary)(7) | Outstanding (10% of Salary)(8) | Actual | % Salary
Payable | Bonus
Payable |
Cash Flow-to-Assets Ratio(5) | 16.38% | 18.01% | 22.38% | 18.98% | 6.11%* | $24,439 |
| | | | | | | |
| Total Performance-based Bonus Award (A + B) for Mr. Cromling | 26.21%* | $104,839 |
*Decimals truncated for purposes of table. Calculations based on truncated values will be slightly off due to rounding.
Notes to table:
| |
| (1) | Defined as number of recordable accidents per 200,000 man-hours worked. |
| |
| (2) | Defined as average total rig costs incurreddaily cash flow generated per rig per day in 2011.2012. |
| |
| (3) | Defined as average number of rigs operating per day in 2011.2012. |
| |
| (4) | Defined as total rig hours available but not billed as a ratio of total rig hours available. |
| |
| (5) | Defined as the cash flow of the company for fiscal year 2012 divided by the average assets of the company for fiscal year 2012. |
| |
| (6) | Represents cashflow-to-assetscash flow-to-assets ratio at 25th percentile of peer companies. |
| (6) |
| (7) | Represents cashflow-to-assetscash flow-to-assets ratio at 50th percentile of peer companies. |
| (7) |
| (8) | Represents cashflow-to-assetscash flow-to-assets ratio at 75th percentile of peer companies. |
Corporate NEOs. TheNEOs. Forty percent of the performance-based cash bonus awards for the three corporate NEOs, Messrs. Pinkston, Schell, and Merrill, were weightedthe three NEOs at 40%the corporate level, were based on thea composite score onof the three operating segment scorecards, and at 60% of their awards was based on corporate financial performance. Mr. Pinkston’s scorecard is as follows:
| | | | | | | | | | | | |
| A. Corporate Scorecard Award |
(a) Segment | | (b) Scorecard(1) | | (c) 75% of Col. (b) | | (d) Segment Weight | | (e)
Col. (c) x Col. (d) | | % Salary
Payable(2) | | Bonus Payable |
UPC(3) | | 25.75% | | 19.31% | | 60.00% | | 11.59% | | | | |
UDC(4) | | 10.00% | | 7.5% | | 30.00% | | 2.25% | | | | |
SPC(5) | | 31.60% | | 23.7% | | 10.00% | | 2.37% | | | | |
| | | 16.21%* | | $110,859 |
| | | | | | | | | | | | |
| B. Financial Performance Award |
| | | Threshold (25th %tile of Peers) | | Target (50th%tile of Peers) | | Outstanding (75th %tile of Peers) | | Actual | | % Salary
Payable | | Bonus Payable |
| | | 12.18% | | 15.88% | | 21.80% | | 20.90% | | 41.58%* | | $284,403 |
Total Payable for A. Scorecard Award + B. Financial Performance Award | | 57.79% | | $395,262 |
| * | Decimals truncated for purposes of table. Calculations based on truncated values in table will be slightly off due to rounding. |
|
| | | | | | | | | |
| A. Corporate Scorecard Award |
(a) Segment | (b) Scorecard(1) | (c) 75% of Col. (b)(2) | (d) Segment Weight | (e)
Col. (c) x Col. (d) | % Salary
Payable | Bonus
Payable |
E & P(3) | 29.00% | 21.75% | 55.00% | 11.96% | 11.96% | $90,915 |
Drilling(4) | 20.10% | 15.075% | 25.00% | 3.77% | 3.77% | $28,642 |
Midstream(5) | — | — | 20.00% | — | — | — |
| Scorecard Total | 15.73%* | $119,557 |
| |
| B. Financial Performance Award |
| | Threshold
(25th %tile of Peers) | Target
(50th %tile of Peers) | Outstanding
(75th %tile of Peers) | Actual | % Salary
Payable | Bonus
Payable |
Cash Flow-to-Assets Ratio(6) | 16.38% | 18.01% | 22.38% | 18.98% | 27.49%* | $208,957 |
| Total Financial Performance Award | 27.49%* | $208,957 |
| |
| Total Performance-based Bonus Award (A + B) for Mr. Pinkston | 43.22%* | $328,514 |
*Decimals truncated for purposes of table. Calculations based on truncated values will be slightly off due to rounding
Notes to table:
| |
| (1) | Expressed as a percentage of salary payable to each division head for the Scorecard Award.Award for his respective business segment. |
| |
| (2) | Calculated by totaling all entries in column (e)75% chosen because maximum payout for segment scorecards for Mr. Pinkston is 30% and maximum scorecard performance for each segment is 40% (30%/40%=75%). |
| |
| (3) | UPC = Unit Petroleum Company;Scores in this row are based on the Exploration and Production Segment Scorecard; see “Scorecard Total” for UPC Scorecard, see Part A. of table for Mr. Guidry, above. |
| |
| (4) | UDC = UnitScores in this row are based on the Drilling Company;Segment Scorecard; see “Scorecard Total” for UDC Scorecard, see Part A. of table for Mr. Cromling, above. |
| |
| (5) | SPC = Superior Pipeline Company;Scores in this row are based on the Midstream Segment Scorecard; see SPC Scorecard, as follows:“Scorecard Total” in the table below: |
| | | | |
| | | | | |
Superior Pipeline CompanyMidstream Segment Scorecard |
| | Threshold | Threshold Target | Outstanding | Target Actual | | Outstanding | | Actual | | % Salary Payable |
Growth in Invested CapitalVolumes Gathered(a) | | 15.00%
45.00% (3% of salary)
| | 20.00%
55.00% (6% of salary)
| | 25.00%
65.00% (12% of salary)
| 34.19% | 36.48% | | 12.00%—% |
Return on Invested Capital(b) | | (3.5% of salary)
| | (7% of salary)
| | (14% of salary)
| 8.9% | 13.87% | | 5.6% —% |
Operating Costs and G&A/Gathered MMBTUGrowth in Segment Cash Flow(c)
| | $0.38
30.00% (3.5% of salary)
| | $0.35
40.00% (7% of salary)
| | $0.32
50.00% (14% of salary)
| (8.32)% | $0.27 | | 14.0% —% |
Superior Pipeline Company Scorecard Award
Total | | 31.6%
—% |
Notes to table:
| |
| (a) | Defined as the percentage increase in the total capital invested by this business unit in 2011 asvolumes gathered for 2012 compared to 2010.2011. |
| |
| (b) | Defined as business unit EBITDA divided by the average invested capital for 2011.2012. |
| |
| (c) | Defined as total operating costs and general and administrative expensethe percentage increase in 2011segment cash flow for 2012 compared to 2011. |
| |
| (6) | Defined as cash flow of the company for fiscal year 2012 divided by total gas gathered, as expressed in MMBTU, during this same period.the average assets of the company for fiscal year 2012. |
Mr. Schell’s scorecard is as follows:
| | | | | | | | | | | | |
| A. Corporate Scorecard Award |
(a) Segment | | (b) Scorecard(1) | | (c) 50% of Col. (b) | | (d) Segment Weight | | (e) Col. (c) x Col. (d) | | % Salary
Payable(2) | | Bonus Payable |
UPC(3) | | 25.75% | | 12.88% | | 60.00% | | 7.73% | | | | |
UDC(4) | | 10.00% | | 5.00% | | 30.00% | | 1.5% | | | | |
SPC(5) | | 31.60% | | 15.80% | | 10.00% | | 1.58% | | | | |
| | | 10.81%* | | $37,018 |
| | | | | | | | | | | | |
| B. Financial Performance Award(6) |
| | | Threshold (25th%tile of Peers) | | Target (50th%tile of Peers) | | Outstanding (75th%tile of Peers) | | Actual | | % Salary
Payable | | Bonus Payable |
| | | 12.18% | | 15.88% | | 21.80% | | 20.90% | | 27.72%* | | $94,967 |
Total Payable for A. Scorecard Award + B. Financial Performance Award | | 38.52% | | $131,985 |
| * | Decimals truncated for purposes of table. Calculations based on truncated values in table will be slightly off due to rounding. |
|
| | | | | | | | | |
| A. Corporate Scorecard Award |
(a) Segment | (b) Scorecard(1) | (c) 50% of Col. (b)(2) | (d) Segment Weight | (e) Col. (c) x Col. (d) | % Salary
Payable | Bonus
Payable |
E & P(3) | 29.00% | 14.50% | 55.00% | 7.98% | 7.98% | $31,900 |
Drilling(4) | 20.10% | 10.05% | 25.00% | 2.51% | 2.51% | $10,050 |
Midstream(5) | —% | | 20.00% | — | — | — |
| Scorecard Total | 10.49%* | $41,950 |
| |
| B. Financial Performance Award |
| | Threshold
(25th %tile of Peers) | Target
(50th %tile of Peers) | Outstanding
(75th %tile of Peers) | Actual | % Salary
Payable | Bonus
Payable |
Cash Flow-to-Assets Ratio(6) | 16.38% | 18.01% | 22.38% | 18.98% | 18.33%* | $73,318 |
| Total Financial Performance Award | 18.33%* | $73,318 |
| |
| Total Performance-based Bonus Award (A + B) for Mr. Schell | 28.82%* | $115,268 |
*Decimals truncated for purposes of table. Calculations based on truncated values will be slightly off due to rounding.
Notes to table:
| |
| (1) | Expressed as a percentage of salary payable to each division head for the Scorecard Award.Award for his respective business segment. |
| |
| (2) | Calculated by totaling all entries in column (e)50% chosen because maximum payout for segment scorecards for Mr. Schell is 20% and maximum scorecard performance for each segment is 40% (20%/40% = 50%). |
| |
| (3) | UPC = Unit Petroleum Company; for UPC Scorecard,Scores in this row are based on the Exploration and Production Segment Scorecard; see Part A. of table for Mr. Guidry, above. |
| |
| (4) | UDC = UnitScores in this row are based on the Drilling Company; for UDC Scorecard,Segment Scorecard; see Part A. of table for Mr. Cromling, above. |
| |
| (5) | SPC = Superior Pipeline Company; for SPC Scorecard,Scores in this row are based on the Midstream Segment Scorecard; see footnote 36 to Scorecard for Mr. Pinkston, above. |
| |
| (6) | Based on company’sDefined as the relative cashflow-to-assets ratio compared to its peers.cash flow of the company for fiscal year 2012 divided by the average assets of the company for fiscal year 2012. |
Mr. Merrill’s scorecard is as follows:
| | | | | | | | | | | | |
| A. Corporate Scorecard Award(6) |
(a) Segment | | (b) Scorecard(1) | | (c) 50% of Col. (b) | | (d) Segment Weight | | (e)
Col. (c) x Col. (d) | | % Salary
Payable(2) | | Bonus Payable |
UPC(3) | | 25.75% | | 12.88% | | 60.00% | | 7.73% | | | | |
UDC(4) | | 10.00% | | 5.00% | | 30.00% | | 1.5% | | | | |
SPC(5) | | 31.60% | | 15.80% | | 10.00% | | 1.58% | | | | |
| | | 10.81%* | | $35,765 |
| | | | | | | | | | | | |
| B. Financial Performance Award(6) |
| | | Threshold (25th %tile of Peers) | | Target
(50th %tile of Peers) | | Outstanding
(75th %tile of Peers) | | Actual | | % Salary
Payable | | Bonus Payable |
| | | 12.18% | | 15.88% | | 21.80% | | 20.90% | | 27.72%* | | $91,751 |
Total Payable for A. Scorecard Award + B. Financial Performance Award | | 38.52% | | $127,516 |
| * | Decimals truncated for purposes of table. Calculations based on truncated values in table will be slightly off due to rounding. |
|
| | | | | | | | | |
| A. Corporate Scorecard Award |
(a) Segment | (b) Scorecard(1) | (c) 50% of Col. (b)(2) | (d) Segment Weight | (e) Col. (c) x Col. (d) | % Salary
Payable | Bonus
Payable |
E & P(3) | 29.00% | 14.50% | 55.00% | 7.98% | 7.98% | $31,900 |
Drilling(4) | 20.10% | 10.05% | 25.00% | 2.51% | 2.51% | $10,050 |
Midstream(5) | —% | | 20.00% | — | — | — |
| Scorecard Total | 10.49%* | $41,950 |
| |
| B. Financial Performance Award |
| | Threshold
(25th %tile of Peers) | Target
(50th %tile of Peers) | Outstanding
(75th %tile of Peers) | Actual | % Salary
Payable | Bonus
Payable |
Cash Flow-to-Assets Ratio(6) | 16.38% | 18.01% | 22.38% | 18.98% | 18.33%* | $73,318 |
| Total Financial Performance Award | 18.33%* | $73,318 |
| |
| Total Performance-based Bonus Award (A + B) for Mr. Merrill | 28.82%* | $115,268 |
*Decimals truncated for purposes of table. Calculations based on truncated values will be slightly off due to rounding.
Notes to table:
| |
| (1) | Expressed as a percentage of salary payable to each division head for the Scorecard Award.Award for his respective business segment. |
| |
| (2) | Calculated by totaling all entries in column (e)50% chosen because maximum payout for segment scorecards for Mr. Merrill is 20% and maximum scorecard performance for each segment is 40% (20%/40% = 50%). |
| |
| (3) | UPC = Unit Petroleum Company; for UPC Scorecard,Scores in this row are based on the Exploration and Production Segment Scorecard; see Part A. of table for Mr. Guidry, above. |
| |
| (4) | UDC = UnitScores in this row are based on the Drilling Company; for UDC Scorecard,Segment Scorecard; see Part A. of table for Mr. Cromling, above. |
| |
| (5) | SPC = Superior Pipeline Company; for SPC Scorecard,Scores in this row are based on the Midstream Segment Scorecard; see footnote 36 to Scorecard for Mr. Pinkston, above. |
| |
| (6) | Based on company’sDefined as the relative cashflow-to-assets ratio compared to its peers.cash flow of the company for fiscal year 2012 divided by the average assets of the company for fiscal year 2012. |
Discretionary Component of Short-term Incentive
Cash Bonus Awards.
In deciding the discretionary component
The previously-established target for total non-CEO NEO short-term incentive compensation was 50% of salary, with half of the bonus award (up to 25% of salary) to be discretionary and the other half (again, of up to 25% of salary) to be non-discretionary and performance-based. Based on our non-CEO NEOs' 2012 salaries, a total (discretionary and non-discretionary) short-term incentive award of $200,000 would represent 100% of the total target for each of the non-CEO NEOs, and, accordingly, $100,000 per component would reflect payment at target for the individual discretionary and non-discretionary components of the award. At its February 2013 meeting, the committee reviewed competitive market data. Dataconsidered materials from Villareal showing that for the Mercer US MTCS Compensation Surveyperiod from 2008 - 2011, peer group (without SandRidge) proxy information reflected payment of short-term incentives at 142.1% of salary for
peer company non-CEO NEOs, and at 164.3% of salary for peer company CEOs, in contrast to the Energy Sector for 2008 through 2011 reflected that50%- and 75%-of-salary multipliers the marketcompany had been and was still using to set the respective targets for total short-term incentives relevant tofor our non-CEO NEOs expressed as a percentage of salary, were as follows:
and our CEO. | | |
Mercer Survey Data – Percentage of Salary Market Targets for
Total Short-term Incentives 2008-2011
|
Position | | % of salary paid
as cash bonus |
CEO – Non-Chairman
| | 95.0% |
Top Legal Executive - Corporate
| | 57.5% |
Chief Financial Officer - Corporate
| | 62.5% |
Top Drilling Operations Executive
| | 48.3% |
Top Exploration & Production Executive
| | 57.6% |
The percentage-of-salary incentive award levels used as targets by the committee in calculating the NEOs’ bonuses in recent years are as follows:
| | |
Current Targets for NEOs’
Total Short-term Incentives
|
Position
| | % of salary
target
|
CEO (Mr. Pinkston)
| | 75.0% |
Sr. VP, General Counsel (Mr. Schell)
| | 50.0% |
CFO/Treasurer (Mr. Merrill)
| | 50.0% |
Executive VP, Drilling (Mr. Cromling)
| | 50.0% |
Executive VP, E&P (Mr. Guidry)
| | 50.0% |
Although the percentage-of-salary award levels the committee used for the total annual targets for the NEOs were lower than the percentage-of-salary levels used to calculate total cash bonuses for similarly-situated executives in the survey reports, Mr. Pinkston recommended that the combined performance-based and discretionary component of the bonuses not be paid at higher percentages of salary than previously used. He did however recommend that they be paid at a higher percentage of target than paid in years past. His recommendation, with respect to the Non-CEO NEOs, was that the discretionary component of the cash bonus2012 short-term incentive awards for the non-CEO NEOs be paid at 150% of the target, due to both the company's positive performance in 2012, and because the company had lagged the peer companies with respect to the percentage of salary being used for calculating short-term incentive targets for NEOs. The net effect of paying the non-CEO NEOs at 150% of target instead of target was that the non-discretionary component of the awards increased by $50,000, from $100,000 to $150,000.
The committee considered Mr. Pinkston's recommendation for payment of the discretionary cash bonus amounts at 150% of the 25%-of-salary target, and noted that, when combined with the scorecard-derived non-discretionary amounts, the proposed total short-term incentive award (discretionary and non-discretionary) would place Messrs. Schell and Merrill at 132.6% of the combined 50%-of-salary target for total short-term incentive bonus compensation. For the segment heads, the total payout recommended would place Mr. Guidry at 145.2% of the 50%-of-salary target and Mr. Cromling at 127.4% of target. The range of percentage-of-target payouts recommended for the non-CEO NEOs was deemed consistent with the performance of the operating segments on the goals selected for the non-discretionary component of the award, and, at the corporate level, whichreflected the primary weighting of Unit Petroleum Company, the highest-achieving operating segment. The committee approved Mr.
Pinkston's recommended discretionary awards for the non-CEO NEOs.
The committee then discussed the appropriate discretionary component for the CEO's 2012 short-term incentive award. The committee determined that paying Mr. Pinkston at 100% of target, plus an additional $50,000 (keeping the dollar amount of the over-target payout the same for himself and the non-CEO NEOs) would be appropriate. Accordingly, the committee determined that Mr. Pinkston would receive approximately $334,806 for the discretionary component of the short-term incentive award. That proposed discretionary award would, when combined with the non-discretionary performance-based component of the cash bonushis award, payplace him at 104.1%116.4% of thehis 75%-of-salary target for the Non-CEO NEOs as a group. Within that group, he recommended that Mr. Guidry receive a bonus at 108.8% of the target, and the remaining NEOs receive bonuses at 102.2% to 102.7% of their targets. The higher percentage of target recommended for Mr. Guidry was in recognition of the 2011 performance of the company’s exploration and production segment. The recommendation that the total cash bonus award for the non CEO-NEOs as a group be paid at 104.1% of the target was deemed to be in parity with Mr. Pinkston’s recommendation for the non-NEO employees, whose short-term awards equaled 104% of their target award levels. The committee agreed with Mr. Pinkston’s recommendations and approved discretionary cash bonus amounts that, when combined with the performance-based components of the awards, resulted in a total cash bonus payout for the Non-CEO NEOs (as a group) at 104.1% of their respective target award levels. The committee determined that Mr. Pinkston’s bonus should be paid at 105.4% of his target award level, which is the average percentage of all the bonuses for the NEOs and the President of Superior Pipeline. incentives.
Accordingly, the following amounts were approved as the discretionary cash bonus amounts for the NEO’s:
Mr. Pinkston – $145,440
$334,806Mr. Schell – $43,015
$150,000Mr. Merrill – $42,484
$150,000Mr. Cromling – $106,316
$150,000Mr. Guidry – $64,184
$150,00020122013 compensation decisions.The following is provided as supplemental information beneficial to our stockholders. It provides additional context to our fiscal year 20112012 compensation decisions. This information will be analyzed in detail in the proxy statement for our 20132014 annual meeting because the decisions detailed in this section involve compensation decisions for 20122013 and are not considered to have been earned in 2011.2012. These amounts do not appear in the summary compensation or other tables set forth in this proxy statement.In December
20112012 the compensation committee approved the following
20122013 salaries for our NEOs:
Mr. Pinkston – $760,000
$800,000Mr. Schell – $400,000
$420,000Mr. Merrill – $400,000
$420,000Mr. Cromling – $400,000
$420,00Mr. Guidry – $400,000
$420,000These salaries were effective January 1,
2012.2013.
In February
20122013 the compensation committee approved the following restricted stock awards for our NEOs for
20122013 long-term incentive awards:
Mr. Pinkston – 46,33563,057 shares
Mr. Schell – 23,16827,297 shares
Mr. Merrill – 22,11527,297 shares
Mr. Cromling – 22,11527,297 shares
Mr. Guidry – 25,27427,297 shares
Seventy percent of the shares awarded will vest in equal one-third annual increments beginning March 9,
2013.2014. The remaining 30% will cliff vest on March 9,
20152016 assuming, in addition to the
other possible requirements,retention requirement, that the applicable targeted performance is met. If performance is above or below target, the number of shares vesting will also be higher or lower than the 30% of the total shares set forth above.
Executive stock ownership policy. Although we encourage our NEOs to own company stock, we do not require them to do so. During the course of their employment, all NEOs have received compensation in the form of stock or other equity interests, and all executive officers currently own company stock.
Policy on hedging and pledging our securities. We have a policy of prohibitingstrongly discouraging our executive officers (and directors)and directors from engaging in short-term or speculative transactions in our securities, including hedging activities.activities; no hedging activities may be engaged in unless pre-approved by our General Counsel, and he has never approved any such transactions. At the current time, no directors or executive officers have hedged or pledged any of our securities. No backdating, springloading,spring-loading, or repricing of options. We do not backdate options, grant options retroactively, or reprice existing options. In addition, we do not coordinate grants of options so that they are made before announcement of favorable information, or after
announcement of unfavorable information. Option and stock awards are granted at fair market value on the date the award is approved. Our general practice is to grant awards only on an annual grant basis, although there are occasions when grants have been made on other dates, such as in connection with a newly-hired employee or special employee retention restricted stock awards that are granted from time to time.
Non-employee director compensation.The compensation committee recommends the form and amount of compensation for our non-employee directors to the board and the board makes the final determination. In making its decisions, the compensation committee considers such factors as it deems appropriate, including historical compensation information, level of compensation necessary to attract and retain non-employee directors meeting our desired qualifications and market data.data from published surveys and from peer company proxy statements. Accounting and tax considerations.Before 2006, the primary form of equity compensation that we awarded to
our NEOs consisted of stock options. We selected this form of award because of the then favorable accounting and tax treatment and the expectation of employees in our industry. However, beginning in 2006, the accounting treatment of stock options changed as a result of Statement of Financial Accounting Standards No. 123(R) (now replaced by FASB Accounting Standards Codification Topic 718), making the accounting treatment of stock options less attractive as a form of employee compensation. As a result, since 2006 we have used stock appreciation rights, restricted stock or a mix of the two for our NEOs.
Section 162(m). The committee considers the potential effects of Section 162(m) of the Code on the compensation paid to our NEOs (excluding our Chief Financial Officer).
Section 162(m) disallows a tax deduction for any publicly held corporation for individual compensation exceeding $1.0 million in any taxable year for our named executive officersNEOs (excluding our Chief Financial Officer), unless the compensation is performance-based.
The committee has examined our current executive compensation program and understands that occasionally some of the compensation paid to our NEOs (excluding our Chief Financial Officer) may not bebe deductible under Section 162(m) of the Code. However, the committee does not believe that the loss of any deductions will be likely to have a material negative financial impact on the company. The net impact on the company for 2011 was approximately $309,417 – the amount of the taxes on compensation that was not deductible under Section 162(m) of theInternal Revenue Code. The committee also believes that it is important to retain the flexibility to motivate performance through awards or programs that do not meet all of the rigid requirements of Section 162(m). However, the committee does not believe that the loss of any deductions will be likely to have a material negative financial impact on the company. The net impact on us for 2012 was approximately $360,942 – the amount of the taxes on compensation that was not deductible under Section 162(m) of the Code. The committee will continue to monitor the issue of deductibility, and make adjustments to our executive compensation programs as it feels appropriate and warranted. Non-qualified deferred compensation. On October 22, 2004, the American Jobs Creation Act of 2004 was signed into law changing the tax rules applicable to non-qualified deferred compensation arrangements. A more detailed discussion of our non-qualified deferred compensation program is provided on page 31below under the heading “Non-qualified deferred compensation for 2011.2012.” No employment agreements.We currently do not have employment contractsagreements with our NEOs. But we have entered into key employee contracts with three of our NEOs. Additional information regarding those agreementscontracts is contained in the discussion under “Potential payments on termination or change in control” below.
SUMMARY COMPENSATION TABLE
SUMMARYCOMPENSATIONTABLE
The following table sets forth information regarding the compensation paid, distributed, or earned by or for our NEOs for fiscal years 20092010 through 2011.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| SUMMARY COMPENSATION TABLE | |
Name and Principal Position | | Year | | Salary
($)(1) | | | Bonus
($)(1)(2) | | | Stock
Awards
($)(3) | | | Option
Awards
($) | | Non- Equity
Incentive Plan
Compensation
($)(4) | | Change in
Pension Value and Nonqualified Deferred
Compensation
Earnings ($)(5) | | All Other
Compensation
($)(6) | | | Total ($) | |
| (a) | | (b) | | (c) | | | (d) | | | (e) | | | (f) | | (g) | | (h) | | (i) | | | (j) | |
Larry D. Pinkston, | | 2011 | | | 684,000 | | | | 145,440 | (7) | | | 1,442,148 | | | - | | 395,262 | | - | | | 24,699 | | | | 2,691,549 | |
President and CEO | | 2010 | | | 637,000 | | | | 425,000 | | | | 1,698,016 | | | - | | - | | - | | | 24,699 | | | | 2,784,715 | |
| | | 2009 | | | 600,000 | | | | 450,000 | | | | - | | | - | | - | | - | | | 24,699 | | | | 1,074,699 | |
Mark E. Schell, Sr. V.P., Secretary and General Counsel | | 2011 | | | 342,600 | | | | 43,015 | (7) | | | 502,990 | | | - | | 131,985 | | - | | | 25,545 | | | | 1,046,135 | |
| | 2010 | | | 318,600 | | | | 143,000 | | | | 474,021 | | | - | | - | | - | | | 25,545 | | | | 961,166 | |
| | 2009 | | | 300,000 | | | | 150,000 | | | | - | | | - | | - | | - | | | 25,545 | | | | 475,545 | |
David T. Merrill, CFO | | 2011 | | | 331,000 | | | | 42,484 | (7) | | | 486,973 | | | - | | 127,516 | | - | | | 31,289 | | | | 1,019,262 | |
and Treasurer | | 2010 | | | 308,000 | | | | 138,000 | | | | 458,012 | | | - | | - | | - | | | 31,302 | | | | 935,314 | |
| | | 2009 | | | 290,000 | | | | 145,000 | | | | - | | | - | | - | | - | | | 30,593 | | | | 465,593 | |
John Cromling, Executive | | 2011 | | | 331,000 | | | | 106,316 | (7) | | | 486,973 | | | - | | 63,684 | | - | | | 27,163 | | | | 1,015,136 | |
V.P. - Drilling | | 2010 | | | 308,000 | | | | 138,000 | | | | 458,012 | | | - | | - | | - | | | 29,744 | | | | 933,756 | |
| | | 2009 | | | 290,000 | | | | 145,000 | | | | - | | | - | | - | | - | | | 27,499 | | | | 462,499 | |
Bradford J. Guidry, Executive V.P. - Exploration | | 2011 | | | 331,000 | | | | 64,184 | (7) | | | 486,973 | | | - | | 115,816 | | - | | | 23,199 | | | | 1,021,172 | |
| | 2010 | | | 308,000 | | | | 138,000 | | | | 458,012 | | | - | | - | | - | | | 23,199 | | | | 927,211 | |
| | 2009 | | | 290,000 | | | | 145,000 | | | | - | | | - | | - | | - | | | 23,502 | | | | 458,502 | |
2012.
|
| | | | | | | | | |
| SUMMARY COMPENSATION TABLE |
| Name and Principal Position | Year
| Salary
($)(1) | Bonus
($)(1)(2) | Stock Awards
($)(3) | Option
Awards
($) | Non-
Equity
Incentive
Plan
Compensation
($)(4) | Change in Pension
Value and
Nonqualified
Deferred
Compensation
Earnings
($)(5) | All Other
Compensation
($)(6) | Total
($) |
| (a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | (j) |
| Larry D. Pinkston, President and CEO | 2012 | 760,000 | 334,806 | 1,970,646 | - | 328,514 | - | 25,050 | 3,419,016 |
| 2011 | 684,000 | 145,440 | 1,442,148 | - | 395,262 | - | 24,699 | 2,691,549 |
| 2010 | 637,000 | 425,000 | 1,698,016 | - | - | - | 24,699 | 2,784,715 |
Mark E. Schell, Sr. V.P., Secretary and General Counsel | 2012 | 400,000 | 150,000 | 985,347 | - | 115,268 | - | 25,962 | 1,676,577 |
| 2011 | 342,600 | 43,015 | 502,990 | - | 131,985 | - | 25,545 | 1,046,135 |
| 2010 | 318,600 | 143,000 | 474,021 | - | - | - | 25,545 | 961,166 |
David T. Merrill, Sr. V.P., CFO and Treasurer | 2012 | 400,000 | 150,000 | 940,547 | - | 115,268 | - | 32,121 | 1,637,936 |
| 2011 | 331,000 | 42,484 | 486,973 | - | 127,516 | - | 31,289 | 1,019,262 |
| 2010 | 308,000 | 138,000 | 458,012 | - | - | - | 31,302 | 935,314 |
| John Cromling, Executive V.P. - Drilling | 2012 | 400,000 | 150,000 | 940,547 | - | 104,839 | - | 28,884 | 1,624,270 |
| 2011 | 331,000 | 106,316 | 486,973 | - | 63,684 | - | 27,163 | 1,015,136 |
| 2010 | 308,000 | 138,000 | 458,012 | - | - | - | 29,744 | 933,756 |
| Bradford J. Guidry, Executive V.P. - Exploration | 2012 | 400,000 | 150,000 | 1,074,895 | - | 140,439 | - | 23,550 | 1,788,884 |
| 2011 | 331,000 | 64,184 | 486,973 | - | 115,816 | - | 23,199 | 1,021,172 |
| 2010 | 308,000 | 138,000 | 458,012 | - | - | - | 23,199 | 927,211 |
Notes to table:
(1) | |
| (1) | Compensation deferred at the election of an executive is included in the year earned. During 2009, 2010, 2011, and 2011,2012, the NEOs deferred, on a discretionary basis, the following amounts of salary or bonus into our compensation deferral plans: |
|
| | | |
| Name | Amounts Deferred |
| Year | Salary($) | Bonus($) |
| Larry D. Pinkston | 2012 | 3,800 | 18,700 |
| 2011 | 5,000 | 17,000 |
| 2010 | 4,247 | 17,753 |
| Mark E. Schell | 2012 | 24,500 | 14,000 |
| 2011 | 10,560 | 11,440 |
| 2010 | 10,715 | 20,280 |
| David T. Merrill | 2012 | 22,500 | 0 |
| 2011 | 12,340 | 9,660 |
| 2010 | 4,980 | 11,600 |
| John Cromling | 2012 | 9,500 | 13,000 |
| 2011 | 10,960 | 11,040 |
| 2010 | 10,400 | 11,600 |
| Bradford J. Guidry | 2012 | 127,000 | 15,500 |
| 2011 | 8,275 | 13,725 |
| 2010 | 10,267 | 11,733 |
| | | | | | | | | | | | |
| (2) | | | | Amounts Deferred | |
| Name | | Year | | Salary($) | | | Bonus($) | |
| | | 2011 | | | 5,000 | | | | 17,000 | |
| Larry D. Pinkston
| | 2010 | | | 4,247 | | | | 17,753 | |
| | | 2009 | | | 22,000 | | | | - | |
| | | 2011 | | | 10,560 | | | | 11,440 | |
| Mark E. Schell
| | 2010 | | | 10,715 | | | | 20,280 | |
| | | 2009 | | | 22,000 | | | | - | |
| | | 2011 | | | 12,340 | | | | 9,660 | |
| David T. Merrill
| | 2010 | | | 4,980 | | | | 11,600 | |
| | | 2009 | | | 68,700 | | | | - | |
| | | 2011 | | | 10,960 | | | | 11,040 | |
| John Cromling
| | 2010 | | | 10,400 | | | | 11,600 | |
| | | 2009 | | | 22,000 | | | | - | |
| | | 2011 | | | 8,275 | | | | 13,725 | |
| Bradford J. Guidry
| | 2010 | | | 10,267 | | | | 11,733 | |
| | | 2009 | | | 22,000 | | | | - | |
(2) | The amounts in column (d) reflect the bonus amount earned in the year without regard to the year(s) those amounts were actually paid, and do not include amounts, if any, earned in prior years but paid in the stated year. The amount for 2011 was bothAll amounts listed were awarded and paid in 2012,during the subsequent fiscal year, but is included as 2011 income because it was deemed to be earned in 2011.are compensation for the year listed, and were paid at the discretion of the compensation committee. |
(3) | The |
| (3) | For 2012, the amounts included in the “Stock Awards” column are the aggregate grant date fair value of these awards based on 65.25% payout for performance at the 46.1 percentile of the peer group, as computed in accordance with FASB ASC Topic 718 “Stock Compensation,” which excludes the effect of estimated forfeitures. For a discussion of the valuation assumptions used in calculating these values for year 2011,2012, see Notes 2 and 1213 to our 2011 Consolidated Financial Statements included in our annual report on Form 10-K for the year ended December 31, 2011. The amount shown does not represent amounts paid to the NEOs.2012 |
Consolidated Financial Statements included in our annual report on Form 10-K for the year ended December 31, 2012. The amount shown does not represent amounts paid to the NEOs. If performance had been at its highest level, the award payout would be at 150% and would be as follows:
|
| | |
| | 2012 | 2011 |
| Larry D. Pinkston | $989,958 | $648,941 |
| Mark E. Schell | $494,979 | $276,346 |
| David T. Merrill | $472,545 | $219,180 |
| John Cromling | $472,545 | $219,180 |
| Bradford J. Guidry | $540,061 | $219,180 |
(4) | |
| (4) | Reflects performance-based component of 2011 cash bonusbonuses paid under the Annual Performance Bonus Plan.for 2012 and 2011. |
(5) | |
| (5) | We do not provide for preferential or above-market earnings on deferred compensation. |
(6) | |
| (6) | The table below shows the components of this column: |
|
| | | | | |
| Name | Year | 401(k) Match
for stated
Plan year
($)* | Personal Car
Allowance
($) | Club
Membership
($) | Total “All
Other
Compensation”
($) |
| Larry D. Pinkston | 2012 | 17,550 | 7,500 | - | 25,050 |
| 2011 | 17,199 | 7,500 | - | 24,699 |
| 2010 | 17,199 | 7,500 | - | 24,699 |
| Mark E. Schell | 2012 | 17,550 | 7,500 | 912 | 25,962 |
| 2011 | 17,199 | 7,500 | 846 | 25,545 |
| 2010 | 17,199 | 7,500 | 846 | 25,545 |
| David T. Merrill | 2012 | 17,550 | 6,000 | 8,571 | 32,121 |
| 2011 | 17,199 | 6,000 | 8,090 | 31,289 |
| 2010 | 17,199 | 6,000 | 8,103 | 31,302 |
| John Cromling | 2012 | 17,550 | 3,893** | 7,441 | 28,884 |
| 2011 | 17,199 | 2,788** | 7,176 | 27,163 |
| 2010 | 17,199 | 5,498** | 7,047 | 29,744 |
| Bradford J. Guidry | 2012 | 17,550 | 6,000 | - | 23,550 |
| 2011 | 17,199 | 6,000 | - | 23,199 |
| 2010 | 17,199 | 6,000 | - | 23,199 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| * | Our matching contribution is made in shares of our common stock. |
| Name | | Year | | 401(k) Match
for stated
Plan year
($)* | | Personal Car
Allowance
($) | | Club
Membership
($) | | Total “All
Other
Compensation”
($) |
| ** | | | | | 2011 | | | | | 17,199 | | | | | 7,500 | | | | | - | | | | | 24,699 | |
| Larry D. Pinkston
| | | | 2010 | | | | | 17,199 | | | | | 7,500 | | | | | - | | | | | 24,699 | |
| | | | | 2009 | | | | | 17,199 | | | | | 7,500 | | | | | - | | | | | 24,699 | |
| | | | | 2011 | | | | | 17,199 | | | | | 7,500 | | | | | 846 | | | | | 25,545 | |
| Mark E. Schell
| | | | 2010 | | | | | 17,199 | | | | | 7,500 | | | | | 846 | | | | | 25,545 | |
| | | | | 2009 | | | | | 17,199 | | | | | 7,500 | | | | | 846 | | | | | 25,545 | |
| | | | | 2011 | | | | | 17,199 | | | | | 6,000 | | | | | 8,090 | | | | | 31,289 | |
| David T. Merrill
| | | | 2010 | | | | | 17,199 | | | | | 6,000 | | | | | 8,103 | | | | | 31,302 | |
| | | | | 2009 | | | | | 16,694 | | | | | 6,000 | | | | | 7,899 | | | | | 30,593 | |
| | | | | 2011 | | | | | 17,199 | | | | | 2,788 | | | | | 7,176 | | | | | 27,163 | |
| John Cromling
| | | | 2010 | | | | | 17,199 | | | | | 5,498** | | | | | 7,047 | | | | | 29,744 | |
| | | | | 2009 | | | | | 17,199 | | | | | 4,184** | | | | | 6,116 | | | | | 27,499 | |
| | | | | 2011 | | | | | 17,199 | | | | | 6,000 | | | | | - | | | | | 23,199 | |
| Bradford J. Guidry
| | | | 2010 | | | | | 17,199 | | | | | 6,000 | | | | | - | | | | | 23,199 | |
| | | | | 2009 | | | | | 17,199 | | | | | 6,000 | | | | | 303 | | | | | 23,502 | Represents the imputed income attributable to Mr. Cromling's use of a company vehicle. |
* Our matching contribution is made in shares of our common stock.
** This amount represents the imputed income attributable to Mr. Cromling’s use of a company vehicle.
(7) | Reflects discretionary portion of 2011 cash bonus, paid under the Annual Performance Bonus Plan. |
GRANT
GRANT OF
PLAN-BASED PLAN-BASED AWARDSFOR 2011 2012
In
2011,2012, the NEOs received the following plan-based awards:
| | | | | | | | | | | | | | | | | | | | | | |
| GRANTS OF PLAN-BASED AWARDS FOR 2011 |
Name | | Grant
Date | | Estimated Possible Payouts Under Non-Equity Incentive Plan Awards(1) | | Estimated Future Payouts Under Equity Incentive Plan Awards(2) | | All Other
Stock
Awards:
Number of
Shares of
Stock or
Units
(#)(3) | | All Other
Option
Awards:
Number of
Securities
Underlying
Options
(#) | | Exercise or
Base Price
of Option
Awards ($/sh) | | Grant Date
Fair Value
of Stock and
Option
Awards ($)(4) |
| | | | | Thresh- old ($) | | Target ($) | | Maxi- mum ($) | | Thresh- old (# shares) | | Target (# shares) | | Maxi- mum (# shares) | | | | |
| (a) | | (b) | | (c) | | (d) | | (e) | | (f) | | (g) | | (h) | | (i) | | (j) | | (k) | | (l) |
Larry D. Pinkston | | 2/15/11 | | | | | | | | 3,849 | | 7,698 | | 11,547 | | | | | | | | 432,628(4) |
| | 2/15/11 | | | | | | | | | | | | | | 17,963 | | | | | | 1,009,520 |
| | | | 128,250 | | 256,500 | | 513,000 | | | | | | | | | | | | | | |
Mark E. Schell | | 2/15/11 | | | | | | | | 1,343 | | 2,685 | | 4,028 | | | | | | | | 150,897(4) |
| | 2/15/11 | | | | | | | | | | | | | | 6,265 | | | | | | 352,093 |
| | | | 42,825 | | 85,650 | | 171,300 | | | | | | | | | | | | | | |
David T. Merrill | | 2/15/11 | | | | | | | | 1,300 | | 2,600 | | 3,900 | | | | | | | | 146,120(4) |
| | 2/15/11 | | | | | | | | | | | | | | 6,065 | | | | | | 340,853 |
| | | | 41,375 | | 82,750 | | 165,500 | | | | | | | | | | | | | | |
John Cromling | | 2/15/11 | | | | | | | | 1,300 | | 2,600 | | 3,900 | | | | | | | | 146,120(4) |
| | 2/15/11 | | | | | | | | | | | | | | 6,065 | | | | | | 340,853 |
| | | | 41,375 | | 82,750 | | 165,500 | | | | | | | | | | | | | | |
Bradford J. Guidry | | 2/15/11 | | | | | | | | 1,300 | | 2,600 | | 3,900 | | | | | | | | 146,120(4) |
| | 2/15/11 | | | | | | | | | | | | | | 6,065 | | | | | | 340,853 |
| | | | 41,375 | | 82,750 | | 165,500 | | | | | | | | | | | | | | |
|
| | | | | | | | | | | |
GRANTS OF PLAN-BASED AWARDS FOR 2012
|
| Name | Grant
Date | Estimated Possible Payouts Under Non-Equity Incentive Plan Awards(1) | Estimated Future Payouts Under Equity Incentive Plan Awards(2) | All Other
Stock
Awards:
Number of
Shares of
Stock or
Units
(#)(3) | All Other
Option
Awards:
Number of
Securities
Underlying
Options
(#) | Exercise or
Base Price
of Option
Awards
($/sh) | Grant Date
Fair Value
of Stock and
Option
Awards
($)(4) |
Thresh-old
($) | Target
($) | Maxi-mum
($) | Thresh-
old
(#
shares) | Target
(#
shares) | Maxi-
mum
(# shares) |
| (a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | (j) | (k) | (l) |
| Larry D. Pinkston | 2/14/12 | | | | 6,950 | 13,900 | 20,850 | | | | 430,632 |
| 2/14/12 | | | | | | | 32,435 | | | 1,540,014 |
| | 142,500 | 285,000 | 570,000 | | | | | | | |
| Mark E. Schell | 2/14/12 | | | | 3,475 | 6,950 | 10,425 | | | | 215,316 |
| 2/14/12 | | | | | | | 16,218 | | | 770,031 |
| | 50,000 | 100,000 | 200,000 | | | | | | | |
| David T. Merrill | 2/14/12 | | | | 3,318 | 6,635 | 9,953 | | | | 205,557 |
| 2/14/12 | | | | | | | 15,480 | | | 734,990 |
| | 50,000 | 100,000 | 200,000 | | | | | | | |
| John Cromling | 2/14/12 | | | | 3,318 | 6,635 | 9,953 | | | | 205,557 |
| 2/14/12 | | | | | | | 15,480 | | | 734,990 |
| | 50,000 | 100,000 | 200,000 | | | | | | | |
| Bradford J. Guidry | 2/14/12 | | | | 3,792 | 7,583 | 11,375 | | | | 234,926 |
| 2/14/12 | | | | | | | 17,691 | | | 839,969 |
| | 50,000 | 100,000 | 200,000 | | | | | | | |
Notes to table:
(1) | |
| (1) | These columns show the threshold, target, and maximum potential value of the payment for each NEO under our Annual Performance Bonus Plan if certain performance objectives were achieved between January 1, 20112012 and December 31, 2011.2012. Actual payouts were made in February 20122013 according to the performance levels reflected in the scorecards starting on page 2327 of this proxy.proxy statement. Based on scorecard performance, actual payouts were as follows: Mr. Pinkston, $395,267;$328,514; Mr. Schell, $131,985;$115,268; Mr. Merrill, $127,516;$115,268; Mr. Cromling, $63,684;$104,839; and Mr. Guidry, $115,816.$140,439. |
(2) | |
| (2) | Reflects threshold, target and maximum vesting levels for performance-based restricted stock granted under the Unit Corporation Stock and Incentive Compensation Plan. Actual vesting amounts will be determined based on performance outcomes during the three-year performance period that ends February 15, 2014.March 9, 2015. Threshold payout requires the company’sour 3-year TSR to be at the 40th percentile of the three-year TSR performance levels of itsour peer group. Target payout requires TSR performance at the 60th percentile of the peer group, and Maximum payout requires TSR performance at the 90th percentile of the peer group. For details on how TSR is calculated for these purposes, see “2011“2012 long-term incentive awards,” page 20.24. |
(3) | |
| (3) | Represents time-vested shares of restricted stock granted under the Unit Corporation Stock and Incentive Compensation Plan. Shares are time-vested and will vest in three equal annual installments on March 9th of each of the years 20122013 through 2014.2015. |
(4) | |
| (4) | Grant date fair value of performance-based restricted stock if vesting occurs at Target level.65.25% of target level, based on probable outcome of conditions on date of grant. |
For 2012, 38% of our NEOs' total compensation consisted of salaries and annual bonuses and 62% consisted of restricted stock awards. For 2011, 49% of our
NEO’sNEOs' total compensation consisted of salaries and annual bonuses, and 51% consisted of restricted stock awards. For 2010, 45.8% of our
NEOs’NEOs' total compensation consisted of salaries and annual bonuses, and 54.2% consisted of restricted stock awards.
No plan-based grants were made to the NEOs during 2009, so for 2009 100% of our NEOs’ total compensation consisted of salaries and annual bonuses. Of the restricted stock granted to our NEOs in 2011,2012, there are performance-based conditions that affect the vesting of 18,18341,703 shares (calculated assuming that vesting occurs at the Target level). For the remaining 42,423 97,304 shares of restricted stock granted to our NEOs in 2011,2012, the only condition to vesting is that the recipient must be in the employ of the companyemployed with us on the vesting date in order to receive the stock. In
the event of a change-in-control, of the company, any unvested shares immediately vest in the recipient. The recipient of each restricted stock award has
all of the rights of a holder of shares of the company’sour common stock, including the right to vote those shares and to receive any cash dividends paid on them. The compensation committee may however determine that cash dividends be automatically reinvested in additional shares which become shares of restricted stock and are subject to the same restrictions and other terms of the award. To date, the company haswe have not issued dividends with respect to its common stock.
Amounts realizable from prior compensation did not affect the awards set forth above. There was no repricing involved with respect to any outstanding equity-based award or option.
OUTSTANDING
OUTSTANDING EQUITY
AWARDSATENDOF 2011 2012
The following table shows outstanding equity awards at December 31, 20112012 for each of the NEOs: |
| | | | | | | | | |
| OUTSTANDING EQUITY AWARDS AT END OF 2012 |
| | Option Awards | Stock Awards |
| Name | Number
of
Securities
Underlying
Unexercised
Options
Exercisable
(#)(1) | Number of
Securities
Underlying
Unexercised
Options
Unexercisable
(#) | Equity
Incentive Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
(#) | Option
Exercise
Price
($) | Option
Expiration
Date | Number of
Shares or
Units of
Stock That
Have Not
Vested
(#)(2) | Market
Value of
Shares or
Units of
Stock That
Have Not
Vested
($)(3) | Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares, Units
or Other
Rights That
Have Not
Vested
(#)(2) | Equity
Incentive
Plan Awards:
Market or
Payout Value
of Unearned
Shares, Units
or Other
Rights That
Have Not
Vested
($)(3) |
| (a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | (j) |
| Larry D. Pinkston | | | | | | | | | |
| 10,000 | | | 22.95 | 12/17/13 | | | | |
| 10,000 | | | 37.83 | 12/14/14 | | | | |
| 23,716 | | | 51.76 | 12/12/16 | | | | |
| 47,529 | | | 44.31 | 12/19/17 | | | | |
| | | | | | 53,664 | 2,417,563 | 30,473 | 1,372,809 |
| Mark E. Schell | | | | | | | | | |
| 7,500 | | | 22.95 | 12/17/13 | | | | |
| 8,500 | | | 37.83 | 12/14/14 | | | | |
| 6,522 | | | 51.76 | 12/12/16 | | | | |
| 17,427 | | | 44.31 | 12/19/17 | | | | |
| | | | | | 22,977 | 1,035,114 | 13,781 | 620,834 |
| David T. Merrill | 5,000 | | | 21.50 | 08/25/13 | | | | |
| 3,000 | | | 22.95 | 12/17/13 | | | | |
| 5,000 | | | 37.83 | 12/14/14 | | | | |
| 5,929 | | | 51.76 | 12/12/16 | | | | |
| 15,843 | | | 44.31 | 12/19/17 | | | | |
| | | | | | 22,019 | 991,956 | 13,203 | 594,795 |
| John Cromling | 700 | | | 22.95 | 12/17/13 | | | | |
| 3,500 | | | 37.83 | 12/14/14 | | | | |
| 7,500 | | | 37.69 | 05/25/15 | | | | |
| 4,348 | | | 51.76 | 12/12/16 | | | | |
| 10,456 | | | 44.31 | 12/19/17 | | | | |
| | | | | | 22,019 | 991,956 | 13,203 | 594,795 |
Bradford J. Guidry | 3,500 | | | 22.95 | 12/17/13 | | | | |
| 3,500 | | | 37.83 | 12/14/14 | | | | |
| 7,500 | | | 37.69 | 05/25/15 | | | | |
| 4,150 | | | 51.76 | 12/12/16 | | | | |
| 9,981 | | | 44.31 | 12/19/17 | | | | |
| | | | | | 24,230 | 1,091,562 | 14,625 | 658,856 |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | OUTSTANDING EQUITY AWARDS AT END OF 2011 | | | | | | |
| | | | | | Option Awards | | | | | | | | Stock Awards | | |
| Name | | Number of
Securities
Underlying
Unexercised
Options
Exercisable
(#)(1) | | | Number of
Securities
Underlying
Unexercised
Options
Unexercisable
(#) | | Equity
Incentive Plan
Awards:
Number of
Securities Underlying
Unexercised
Unearned
Options (#) | | Option Exercise
Price
($) | | Option
Expiration
Date | | Number of
Shares or
Units of
Stock That
Have Not
Vested
(#)(2) | | Market
Value of
Shares or
Units of
Stock That
Have Not
Vested
($)(3) | | Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares, Units
or Other
Rights That
Have Not
Vested (#)(2) | | Equity
Incentive
Plan Awards:
Market or
Payout Value
of Unearned Shares, Units
or Other
Rights That
Have Not
Vested ($)(3) |
| (a) | | (b) | | | (c) | | (d) | | (e) | | (f) | | (g) | | (h) | | (i) | | (j) |
Larry D. Pinkston | | | 7,500 | | | | | | | 19.04 | | 12/17/12 | | | | | | | | |
| | | 10,000 | | | | | | | 22.95 | | 12/17/13 | | | | | | | | |
| | | 10,000 | | | | | | | 37.83 | | 12/14/14 | | | | | | | | |
| | | 23,716 | | | | | | | 51.76 | | 12/12/16 | | | | | | | | |
| | | 47,529 | | | | | | | 44.31 | | 12/19/17 | | | | | | | | |
| | | | | | | | | | | | | | 36,471 | | 1,692,254 | | 5,774 | | 267,914 |
Mark E. Schell | | | 7,500 | | | | | | | 19.04 | | 12/17/12 | | | | | | | | |
| | | 7,500 | | | | | | | 22.95 | | 12/17/13 | | | | | | | | |
| | | 8,500 | | | | | | | 37.83 | | 12/14/14 | | | | | | | | |
| | | 6,522 | | | | | | | 51.76 | | 12/12/16 | | | | | | | | |
| | | 17,427 | | | | | | | 44.31 | | 12/19/17 | | | | | | | | |
| | | | | | | | | | | | | | 11,431 | | 530,398 | | 2,014 | | 93,450 |
David T. Merrill | | | 5,000 | | | | | | | 21.50 | | 08/25/13 | | | | | | | | |
| | | 3,000 | | | | | | | 22.95 | | 12/17/13 | | | | | | | | |
| | | 5,000 | | | | | | | 37.83 | | 12/14/14 | | | | | | | | |
| | | 5,929 | | | | | | | 51.76 | | 12/12/16 | | | | | | | | |
| | | 15,843 | | | | | | | 44.31 | | 12/19/17 | | | | | | | | |
| | | | | | | | | | | | | | 11,057 | | 513,045 | | 1,950 | | 90,480 |
John Cromling | | | 700 | | | | | | | 22.95 | | 12/17/13 | | | | | | | | |
| | | 3,500 | | | | | | | 37.83 | | 12/14/14 | | | | | | | | |
| | | 7,500 | | | | | | | 37.69 | | 05/25/15 | | | | | | | | |
| | | 4,348 | | | | | | | 51.76 | | 12/12/16 | | | | | | | | |
| | | 10,456 | | | | | | | 44.31 | | 12/19/17 | | | | | | | | |
| | | | | | | | | | | | | | 11,057 | | 513,045 | | 1,950 | | 90,480 |
Bradford J. Guidry | | | 3,500 | | | | | | | 22.95 | | 12/17/13 | | | | | | | | |
| | | 3,500 | | | | | | | 37.83 | | 12/14/14 | | | | | | | | |
| | | 7,500 | | | | | | | 37.69 | | 05/25/15 | | | | | | | | |
| | | 4,150 | | | | | | | 51.76 | | 12/12/16 | | | | | | | | |
| | | 9,981 | | | | | | | 44.31 | | 12/19/17 | | | | | | | | |
| | | | | | | | | | | | | | 11,057 | | 513,045 | | 1,950 | | 90,480 |
Notes to table:
(1) | |
| (1) | Each option grant has a ten-year term. Exercise prices are determined using the closing market price of our common stock on the date of grant. |
(2) | |
| (2) | Vesting dates for unvested time-vesting restricted stock and unvested and unearned performance-based restricted stock are shown in the table below. TheBased on our performance as of December 31, 2012, the last trading day of the year, the number of shares of performance-based restricted stock shown to vest on March 9, 2014 reflects a projected payout for performance at the 5075th percentile of the peer group, basedand the number of shares of performance-based restricted stock shown to vest on ourMarch 9, 2015 reflects a projected payout for performance as of December 30, 2011,at the last trading day90th percentile of the year.peer group. |
| | 000,000,000,000 | | 000,000,000,000 | | 000,000,000,000 | | 000,000,000,000 |
| | | Unvested Restricted Stock | | Unvested and Unearned
Performance-based
Restricted Stock |
| Name | | # Shares | | Vesting Date | | # Shares | | Vesting Date |
| | | 5,988 | | 3/9/12 | | 5,774 | | 3/9/14 |
| | | 9,254 | | 4/1/12 | | | | |
Larry Pinkston | | 5,988 | | 3/9/13 | | | | |
| | | 9,254 | | 4/1/13 | | | | |
| | | 5,987 | | 3/9/14 | | | | |
| | | 2,089 | | 3/9/12 | | 2,014 | | 3/9/14 |
| | | 2,583 | | 4/1/12 | | | | |
Mark Schell | | 2,088 | | 3/9/13 | | | | |
| | | 2,583 | | 4/1/13 | | | | |
| | | 2,088 | | 3/9/14 | | | | |
| | | 2,022 | | 3/9/12 | | 1,950 | | 3/9/14 |
| | | 2,496 | | 4/1/12 | | | | |
David Merrill | | 2,022 | | 3/9/13 | | | | |
| | | 2,496 | | 4/1/13 | | | | |
| | | 2,021 | | 3/9/14 | | | | |
| | | 2,022 | | 3/9/12 | | 1,950 | | 3/9/14 |
| | | 2,496 | | 4/1/12 | | | | |
John Cromling | | 2,022 | | 3/9/13 | | | | |
| | | 2,496 | | 4/1/13 | | | | |
| | | 2,021 | | 3/9/14 | | | | |
| | | 2,022 | | 3/9/12 | | 1,950 | | 3/9/14 |
| | | 2,496 | | 4/1/12 | | | | |
Brad Guidry | | 2,022 | | 3/9/13 | | | | |
| | | 2,496 | | 4/1/13 | | | | |
| | | 2,021 | | 3/9/14 | | | | |
|
| | | | |
| | Unvested Restricted Stock | Unvested and Unearned
Performance-based
Restricted Stock |
| Name | # Shares | Vesting Date | # Shares | Vesting Date |
| Larry D. Pinkston | 16,800 | 3/9/13 | 9,623 | 3/9/14 |
| 9,254 | 4/1/13 | 20,850 | 3/9/15 |
| 16,799 | 3/9/14 | | |
| 10,811 | 3/9/15 | | |
| Mark E. Schell | 7,494 | 3/9/13 | 3,356 | 3/9/14 |
| 2,583 | 4/1/13 | 10,425 | 3/9/15 |
| 7,494 | 3/9/14 | | |
| 5,406 | 3/9/15 | | |
| David T. Merrill | 7,182 | 3/9/13 | 3,250 | 3/9/14 |
| 2,496 | 4/1/13 | 9,953 | 3/9/15 |
| 7,181 | 3/9/14 | | |
| 5,160 | 3/9/15 | | |
| John Cromling | 7,182 | 3/9/13 | 3,250 | 3/9/14 |
| 2,496 | 4/1/13 | 9,953 | 3/9/15 |
| 7,181 | 3/9/14 | | |
| 5,160 | 3/9/15 | | |
| Bradford J. Guidry | 7,919 | 3/9/13 | 3,250 | 3/9/14 |
| 2,496 | 4/1/13 | 11,375 | 3/9/15 |
| 7,918 | 3/9/14 | | |
| 5,897 | 3/9/15 | | |
(3) | |
| (3) | Market value is determined based on a market value of our common stock of $46.40, $45.05, the closing price of our common stock on the NYSE on December 30, 2011,31, 2012, the last trading day of the year. |
OPTIONOPTION EXERCISES
ANDSTOCKVESTEDTABLEFOR 2011 2012
The table below shows information regarding options and stock awards exercised and vested, respectively, for the NEOs in
2011. | | 000,000,000,000 | | 000,000,000,000 | | 000,000,000,000 | | 000,000,000,000 |
| OPTION EXERCISES AND STOCK VESTED FOR 2011 |
| | | Option Awards | | Stock Awards |
Name (a) | | Number of
Shares
Acquired
on Exercise (#) (b) | | Value
Realized
on Exercise
($)(1) (c) | | Number of
Shares
Acquired
on Vesting
(#) (d) | | Value
Realized
on Vesting
($)(2) (e) |
Larry D. Pinkston | | - | | - | | 12,375 | | 732,780 |
Mark E. Schell | | - | | - | | 3,728 | | 217,339 |
David T. Merrill | | - | | - | | 3,536 | | 206,900 |
John Cromling | | - | | - | | 3,182 | | 190,364 |
Bradford J. Guidry | | 5,000 | | 202,400 | | 3,151 | | 188,916 |
2012.
|
| | | | |
| OPTION EXERCISES AND STOCK VESTED FOR 2012 |
| Name | Option Awards | Stock Awards |
Number of
Shares
Acquired
on Exercise
(#) | Value
Realized
on Exercise
($)(1) | Number of
Shares
Acquired
on Vesting
(#) | Value
Realized
on Vesting
($)(2) |
| (a) | (b) | (c) | (d) | (e) |
| Larry D. Pinkston | 7,500 | 196,200 | 15,242 | 679,592 |
| Mark E. Schell | 7,500 | 174,225 | 4,672 | 209,489 |
| David T. Merrill | - | - | 4,518 | 202,592 |
| John Cromling | - | - | 4,518 | 202,592 |
| Bradford J. Guidry | - | - | 4,518 | 202,592 |
Notes to table:
| |
| (1) | Value realized equals fair market value of the stock on date of exercise minus the option price times the number of shares exercised. |
| |
| (2) | Value realized equals fair market value of the stock on date of vesting times the number of shares acquired. |
NON-QUALIFIED
NON-QUALIFIED DEFERRED
COMPENSATIONFOR 2011 2012
We permit the NEOs and certain other employees to elect to receive a portion of their compensation on a deferred basis under our salary deferral plan (an unsecured, non-qualified, deferred compensation plan). We do not provide any matching contributions to this plan. Certain material terms of that plan are discussed below.
Under the plan, each participant may elect to defer up to 100% of his salary and any cash bonuses he or she may have earned.
A participant’sparticipant's deferrals under the plan (including earnings) are credited with investment gains and losses until the amounts are paid out. Account balances are deemed invested in phantom investments selected by the
executive from an array of investment options that are similar to the funds in our 401(k) plan (excluding the company’stour common stock fund), subject to restrictions established by the plan administrator.
The following table presents the investment gain or loss (expressed as a percentage of rate of return) for each of the investment options under the plan for 2011.
2012.
| | |
| |
| FUND | | FUND | | PERCENTAGE RETURN |
| Columbia Dividend Opportunity Z Fund | | 7.00% 13.34% |
| Oppenheimer International Growth Y Fund | Neuberger Berman Partners Tr Fund
| | -11.46% 22.10% |
| LargeCap S&P 500 Index Inst. Fund | | 2.00% 15.73% |
| LargeCap Growth I R5 Fund | | -0.58% 16.23% |
| MidCap Value I R5R3 Fund | | -4.17% 17.19% |
| MidCap S&P 400 Index Inst. Fund | | -1.95% 17.65% |
| Janus Enterprise S Fund | | -2.11% 17.33% |
| Neuberger Berman Genesis Tr Fund | | 4.60% 9.82% |
| Perkins Small Cap Value T Fund | | -3.43% 8.99% |
| SmallCap S&P 600 Index Inst Fund | | 0.72% 16.10% |
| Prudential Jennison Small Company A Fund | | -1.97% 13.20% |
| Dodge & Cox International Stock Fund | | -15.97% 21.03% |
| American Funds New Perspective R3 Fund | 20.40% |
| Janus Overseas T Fund | 12.42% |
| American Funds EuroPacific Growth R3 Fund | | -13.85% 18.89% |
| Goldman Sachs Small Cap Value Inst Fund | Janus Overseas T Fund
| | -32.78% 16.54% |
| American Funds New Perspective R3 Fund
| | -7.93% |
| Vanguard Target Retirement Income Inv Fund | | 5.25% 8.23% |
| Vanguard Target Retirement 2005 Inv Fund
| | 5.14% |
| Vanguard Target Retirement 2010 Inv Fund | | 3.37% 10.12% |
| Vanguard Target Retirement 2015 Inv Fund | | 1.71% 11.37% |
| Vanguard Target Retirement 2020 Inv Fund | | 0.60% 12.35% |
| Vanguard Target Retirement 2025 Inv Fund | | -0.37% 13.29% |
| Vanguard Target Retirement 2030 Inv Fund | | -1.27% 14.24% |
| Vanguard Target Retirement 2035 Inv Fund | | -2.24% 15.16% |
| Vanguard Target Retirement 2040 Inv Fund | | -2.55% 15.56% |
| Vanguard Target Retirement 2045 Inv Fund | | -2.51% 15.58% |
| Vanguard Target Retirement 2050 Inv Fund | | -2.54% 15.58% |
| Vanguard Target Retirement 2055 Inv Fund | | -2.27% 15.58% |
| PIMCO Total Return Admin Fund | | 3.91% 10.08% |
| Dreyfus Bond Market Index Inv Fund | 3.69% |
| Principal Global Investors Money Market Inst. Fund | 7.42% 0.00% |
At the participant’sparticipant's election, the plan balance may be paid as a lump sum, or in monthly or annual installments over a period of no longer than five years. If a participant elects payment over a period of years, the participant may elect that all remaining payments to his or her beneficiary be made in a lump sum on the participant’sparticipant's death.
Despite the
foregoing, a participant may elect to receive a lump sum distribution from the plan in the event of certain severe financial hardships. The amount of any hardship distribution may not exceed the amount necessary to satisfy the hardship.
The following table shows the
NEOs’NEOs' contributions, earnings and account balances in our non-qualified plan as of December 31,
2011. | | | | | | | | | | |
| NON-QUALIFIED DEFERRED COMPENSATION FOR 2011 |
| Name | | Executive
Contributions in
2011 ($)(1) | | Registrant
Contributions in
2011 ($)(2) | | Aggregate Earnings in 2011 ($) | | Aggregate
Withdrawals/
Distributions ($) | | Aggregate Balance
at End of 2011 ($)(3) |
| (a) | | (b) | | (c) | | (d) | | (e) | | (f) |
Larry D. Pinkston | | - | | - | | 14,428 | | - | | 988,001 |
Mark E. Schell | | - | | - | | -2,654 | | - | | 354,954 |
David T. Merrill | | - | | - | | -15,820 | | - | | 170,926 |
John Cromling | | - | | - | | - | | - | | - |
Bradford J. Guidry | | - | | - | | -27 | | - | | 21,318 |
2012.
|
| | | | | |
| NON-QUALIFIED DEFERRED COMPENSATION FOR 2012 |
| Name | Executive
Contributions in
2012
($)(1) | Registrant
Contributions in
2012
($)(2) | Aggregate
Earnings in
2012
($) | Aggregate
Withdrawals/
Distributions
($) | Aggregate
Balance
at End of
2012
($)(1)(3) |
| (a) | (b) | (c) | (d) | (e) | (f) |
| Larry D. Pinkston | - | - | 61,995 | - | 1,049,996 |
| Mark E. Schell | 16,000 | - | 47,758 | - | 418,045 |
| David T. Merrill | - | - | 28,191 | - | 199,117 |
| John Cromling | - | - | - | - | - |
| Bradford J. Guidry | 120,000 | - | 6,333 | - | 142,652 |
Notes to table:
(1) | All |
| (1) | Only Messrs. Schell and Guidry contributed to the non-qualified deferred compensation plan in 2012. For Messrs. Pinkston, Merrill and Cromling, the amounts shown as deferred in 20112012 under footnote (1) to the Summary Compensation Table on page 28 were33 reflect their contributions to their 401(k) accounts only; for Messrs. Schell and Guidry, the NEOs’amounts shown in that footnote reflect both their 401(k) accounts; no NEOs contributedcontributions and their contributions to thetheir non-qualified deferred compensation plan in 2011.accounts. The table below quantifies the amounts in the “Aggregate Balance” column (column (f) above)) that represent salary or bonus reported in the Summary Compensation Tables for proxy statements in prior years. The table also quantifies the annual rate of return earned by the NEOs during 2011.2012. |
|
| | | |
| Name | Amount included in both
Non-qualified Deferred
Compensation Table and
2012 Summary
Compensation Table
($) | Amount included in
Non-qualified Deferred
Compensation Table
previously reported in
prior years' Summary
Compensation Tables
($) | Annual Rate of Return
for 2012 (%) |
| Larry D. Pinkston | - | 988,001 | 6.27 |
| Mark E. Schell | 15,333 | 354,954 | 13.18 |
| David T. Merrill | - | 170,726 | 16.49 |
| John Cromling | - | - | - |
| Bradford J. Guidry | 115,001 | 21,318 | 8.32 |
| | | | | | | | | | |
Name (2) | | Amount included in both
Non-qualified Deferred
Compensation Table and
2011 Summary
Compensation Table
($)
| | Amount included in
Non-qualified Deferred
Compensation Table
previously reported in
prior years’ Summary
Compensation Tables
($)
| | | Annual Rate of Return
for 2011 | |
Larry D. Pinkston
| | - | | | 706,831 | | | | 1.48% | |
Mark E. Schell
| | - | | | 192,078 | | | | - .74% | |
David T. Merrill
| | - | | | 153,467 | | | | - 8.47% | |
John Cromling
| | - | | | - | | | | - | |
Bradford J. Guidry
| | - | | | 17,400 | | | | -.12% | |
(2) | We do not make contributions to our non-qualified deferral plan. |
(3) | |
| (3) | The aggregate balances represent 20112012 executive contributions and associated earnings, as well as amounts that the NEOs earned but elected to defer, plus earnings or losses from prior years’years' participation in this plan. |
POTENTIAL PAYMENTS ON TERMINATION OR CHANGE IN CONTROL
The discussion below provides a summary of the various plans and contracts under which each of the NEOs would be entitled to certain compensation in the event of termination of that
executive’sexecutive's employment.
We have single-trigger provisions in the plans that apply to all salaried full-time employees, including all of our NEOs (see Separation Benefit Plan, Unit Corporation Amended and Restated Stock Option Plan, Unit Corporation Stock and Incentive Compensation Plan, and Unit Corporation Annual Performance Bonus Plan, as described below). The key employee contracts that currently apply to three of our NEOs contain double-trigger provisions. It is our
belief that any plan that we maintain that contains change-in-control provisions benefits the company by enhancing the quality and stability of our workforce, since those benefits serve as incentives to our employees to remain with the company. The single-trigger provision in the broader-based plans are intended to avoid the potential ambiguity or confusion that might result on the part of the participants in those plans should a change in control occur. Given the involvement and position of the three individuals under the key employee contracts, it is believed that they are in a better position to monitor and evaluate the implementation of the second trigger mechanism during the period after a change-in-control.
The amounts that would actually be paid out can only be determined at the time of the executive’sexecutive's separation from service, and may well be different than the figures set forth below. The company hasWe have determined (and, where necessary, taken any action required to carry out that determination) that, as long as the George Kaiser Family Foundation (“GKFF”) does not exceed ownership of more than 25% of the total number of the company’sour issued and outstanding shares of common stock, and otherwise complies with the terms and conditions of the Standstill Agreement and the Fourth Amendment to Rights Agreement entered into on March 24, 2009, GKFF’s ownership of more than 15% of our issued and outstanding shares will not constitute a change-in-control or trigger the change in control provisions of any company plan or the
key employee contracts. The Standstill Agreement and the Fourth Amendment to Rights Agreement were attached as exhibits to our Current Report on Form 8-K filed March 25, 2009.
SEPARATIONOn December 20, 1996, effective as of January 1, 1997, our board adopted the Separation Benefit Plan of Unit Corporation and Participating Subsidiaries. This plan is generally applicable to all of our full-time salaried employees and to the salaried employees of our subsidiaries, who have been with their employer for at least one year. Subject to the terms of the plan, any eligible employee whose employment is terminated is entitled to receive a separation benefit in an amount calculated by dividing the eligible employee’semployee's average annual base salary in effect immediately before the employee’semployee's separation by 52 to determine a weekly separation benefit amount. The number of weekly separation benefit payments then payable to an eligible employee is calculated based on the employee’semployee's years of service in accordance with a schedule set forth in the plan. Employees who voluntarily leave their employment are not entitled to receive a separation benefit unless they have completed at least 20 years of service. Any eligible employee who has completed 20 years of service or more is vested in his or her separation benefit, subject to fulfilling the other requirements of the plan. Separation benefit payments are limited to a maximum of 104 weekly payments. The plan also provides that, unless otherwise provided by our board before a change in control of the company, as defined in the plan, all eligible employees shall be vested in their separation benefit as of the date of the change in control based on their years of service. As a condition to receiving the separation benefits, employees must sign a separation agreement waiving certain claims the employee may have against the company or its subsidiaries.
This table identifies the amounts that would be due to each of our NEOs assuming that these amounts were determined as of December 31, 2011.
2012. | | |
| |
ESTIMATED BENEFIT AMOUNTS AS OF DECEMBEREstimated Benefit Amounts as of December 31, 2011 | 2012 |
| Name | | Amount Due Under Plan($)* | |
Larry D. Pinkston | | | 1,368,000 | 1,520,000 |
Mark E. Schell | | | 632,492 | 769,231 |
David T. Merrill | | | 203,692 | 276,923 |
John Cromling | | | 356,462 | 461,539 |
Bradford J. Guidry | | | 585,615 | 738,462 |
* | |
| * | Assumes for purposes of this disclosure only that the amount shown has either vested under the terms of the plan or that a change-in-control of the company (as defined in the plan) has occurred. |
CHANGE-IN-CONTROLCHANGE-IN-CONTROL ARRANGEMENTS
Unit Corporation Amended and Restated Stock Option Plan.As provided for in option agreements entered into under the terms of the Unit Corporation Amended and Restated Stock Option Plan, all stock options vest immediately in the event of a change in control of the company. A change in control is deemed to have occurred at the time any person or group, other than the company or an “Exempt Person,” is or becomes the beneficial owner, directly or indirectly, of our securities representing 50% or more of the combined voting power of our then outstanding securities. An Exempt Person is generally defined to be any person (or estate or trust of such person) who, on the date of the plan, owned securities representing more than 20% of the combined voting power of our then outstanding securities, and any spouse, parent or issue of such person. Although awards are no longer being granted under this plan, there do remain several awards still remain outstanding under the plan. Unit Corporation Stock and Incentive Compensation Plan.The restricted shares of stock and the stock appreciation rights awards granted under the Unit Corporation Stock and Incentive Compensation Plan vest immediately in the event of a change in control of the company. Under that plan as currently in effect, a change in control is generally defined as: | |
| (1) | Any individual, entity or group acquiring beneficial ownership of 15%20% or more of either the outstanding shares of the company’scompany's common stock or the combined voting power of the outstanding voting securities of the company entitled to vote generally for the election of directors; |
| |
| (2) | Individuals who constitute the board on the date thereof ceasing to constitute a majority of the board (provided that an individual whose election or nomination as a director is approved by a vote of at least a majority of the directors as of the date thereof will be deemed a member of the incumbent board); |
| |
| (3) | Approval by our stockholdersConsummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the company or the acquisition of assets of another |
| entity, unless following the business combinations: |
all or substantially all of the beneficial owners of the company’scompany's then outstanding common stock prior to the business combination own more than 70% of the outstanding common stock of the company resulting from the business combination;
no person, entity or group owns 25% or more of the outstanding voting securities of the company resulting from the business combination; and
at least a majority of the board of the company resulting from the business combination were members of the company’scompany's board prior to the business combination; or
| |
| (4) | Approval by our stockholders of a complete liquidation or dissolution of the company. |
Unit Corporation Annual Performance Bonus Plan.Under this plan as currently in effect, a change in control occurs when a natural or corporate person acquires 15%20% or more of either (i) the then outstanding shares of common stock of the company, or (ii) the combined voting power of the then outstanding voting securities of the company. The following circumstances are not considered a change in control for purposes of this plan:
any acquisition directly from the company;
any acquisition by the company;
any acquisition by any employee benefit plan or related trust sponsored/maintained by the company or an affiliate of the company; or
any acquisition related to a statutory reorganization, merger, share exchange or sale of all or substantially all of the company’scompany's assets where:
all of the beneficial owners of the company’scompany's stock just prior to and just after the transaction continue to own more than 60% of the stock and voting power in substantially the same proportion to their pre-transaction interests; and
no person beneficially owns 15%20% or more of the stock result or voting power of the combined organization except to the extent they did so before the transaction; and
at least a majority of the board of the new entity were members of the board of the previous entity.
Any participants in the performance bonus plan at the time of a change in control will receive a minimum award that is the greatest of:
the amount of the performance bonus award received by the participant for the performance period ending before the calendar year of the change in control; or
the amount that would be payable to the participant assuming the company achieved the target level of
the performance objectives for the performance period; or
the award amount that would be payable to the participant based on the company’scompany's actual performance and achievement of applicable performance objectives for the performance period through the date of the change in control.
If, between the date of payment of an award under the performance bonus plan and the date of a change in control, an employee is terminated without cause by the employer or by good reason at the
employee’semployee's election, the participant is entitled to receive their scheduled performance bonus award, except that if such employee is also a party to a key employee change-in-control contract, then that
employee’semployee's award will be the greater or the amount they would receive under the terms of the performance bonus plan or the amount they would receive under the change-in-control contract. Cause is defined as willful and continued failure to perform substantially the
employee’semployee's duties (except for illness) after written demand for performance identifying nature of defective performance or willfully engaging in illegal or gross misconduct that materially and demonstrably injures the company.
As of December 31, 2011, no awards had vested under this plan, however a portion of the 2011 bonus payable in 2012 were calculated under metrics adopted under this plan in February 2011 and those paid out in February 2012. Additionally, metrics for a similar award for the 2012 bonus payable in 2013 were used under this plan.
Key Employee Contracts.We have entered into key employee change-in-control contracts with Messrs. Pinkston, Schell, and Merrill. These contracts have an initial three-year term that is automatically extended for one year on each anniversary, unless a notice not to extend is given by us. If a change in control of the company (as defined below) occurs during the term of the contract, then the contract becomes operative for a fixed three-year period. The contracts generally provide that the executive’sexecutive's terms and conditions of employment (including position, work location, compensation and benefits) will not be adversely changed during the three-year period after a change in control. If the executive’sexecutive's employment is terminated by the company (other than for cause, death or disability), the executive terminates for good reason during the three-year period, or the executive terminates employment for any reason during the 30-day period following the first anniversary of the change in control, and on certain terminations before a change in control or in connection with or in anticipation of a change in control, the executive is generally entitled to receive from the company in a lump sum the following payment and benefits: earned but unpaid compensation;
up to 3 times the executive’sexecutive's base salary plus annual bonus (based on historic annual bonus); and
the company matching contributions that would have been made had the executive continued to participate in the company’scompany's 401(k) plan for up to an additional three years.
In addition, the contract provides for a continuation of various medical, dental, disability and life insurance plans for a period of up to three years, outplacement services and the payment of all legal fees and expenses incurred by the executive in enforcing any right or benefit provided by the contract. The contract provides that the executive is entitled to receive a payment in an amount sufficient to make the executive whole for any excise tax on excess parachute payments imposed under Section 4999 of the Code.
As a condition to receipt of these severance benefits, the executive must remain in the employ of the company and render services commensurate with his position. The executive must also agree to retain in confidence any and all confidential information known to him concerning the company and its business so long as the information is not otherwise publicly disclosed. As of the date of this proxy statement, no amounts have been paid under these contracts.
For purposes of these contracts, a change in control is generally defined as:
| |
| (1) | Any individual, entity or group acquiring beneficial ownership of 15% or more of either the outstanding shares of the company’scompany's common stock or the combined voting power of the outstanding voting securities of the company entitled to vote generally for the election of directors.directors; |
| |
| (2) | Individuals who constitute the board on the date thereof cease to constitute a majority of the board, provided that an individual whose election or nomination as a director is approved by a vote of at least a majority of the directors as of the date thereof will be deemed a member of the incumbent board.board; |
| |
| (3) | Approval by our stockholders of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the company or the acquisition of assets of another entity, unless following the business combination: |
of all or substantially all of the assets of the company or the acquisition of assets of another entity, unless following the business combination:
all or substantially all of the beneficial owners of our outstanding common stock before the business combination own more than 60% of the outstanding common stock of the corporation resulting from the business combination;
no person, entity or group owns 15% or more of the outstanding voting securities of the corporation resulting from the business combination; and,
at least a majority of the board of the company resulting from the business combination were members of the company’scompany's board prior to the business combination; or
| |
| (4) | Approval by our stockholders of a complete liquidation or dissolution of the company. |
PAYMENTSPAYMENTS ON
TERMINATIONORCHANGE-IN-CONTROL CHANGE-IN-CONTROL TABLE The following table sets forth quantitative information with respect to potential payments to be made to each of
the NEOs or their beneficiaries on termination under various circumstances, assuming termination on December 31, 2011.2012. The potential payments are based on the various plans maintained by us as well as the negotiated contractual terms of certain agreements we have made with some of the NEOs. For a more detailed description of each of these plans and agreements, see the discussion of each plan and agreement above. These disclosed amounts are estimates only and do not necessarily reflect the actual amounts that would be paid to the executive. Actual amounts would only be known at the time they would become due under the plan(s) or agreement.
The amounts presented in the table below are in addition to each of the
NEO’sNEO's deferred compensation noted in the “Non-qualified deferred compensation for
2011”2012” table on page
32. | | | | | | | | | | | | | | | | | | | | | | | | | | |
| TYPE OF TRIGGERING EVENT | |
Named Executive Officer | | Death or
Disability | | | Voluntary
Termination
or
Retirement | | | Change in
Control
without
Termination | | | Termination
by Company
for Cause | | Termination
by Company
without Cause
unrelated to
Change in
Control | | | Termination
by Company
or by
Executive
for Good
Reason after
Change in
Control | | | Termination
by Executive
without Good
Reason after
Change in
Control | |
Larry D. Pinkston | | | | | | | | | | | | | | | | | | | | | | | | | | |
Key Employee | | | | | | | | | | | | | | | | | | | | | | | | | | |
Contract Payments: | | | | | | | | | | | | | | | | | | | | | | | | | | |
Salary under contract formula(1) | | | - | | | | - | | | | - | | | - | | | - | | | $ | 2,052,000 | | | | - | |
Bonus under contract formula(1) | | | - | | | | - | | | | - | | | - | | | - | | | $ | 1,350,000 | | | | - | |
Previously-earned but unpaid bonus amounts | | | - | | | | - | | | | - | | | - | | | - | | | | - | | | | - | |
Tax Gross-up(2) | | | - | | | | - | | | | - | | | - | | | - | | | | - | | | | - | |
36 months 401(k) company match | | | - | | | | - | | | | - | | | - | | | - | | | $ | 51,597 | | | | - | |
Health Insurance(3) | | | - | | | | - | | | | - | | | - | | | - | | | $ | 26,796 | | | | - | |
Disability Insurance(3) | | | - | | | | - | | | | - | | | - | | | - | | | $ | 5,542 | | | | - | |
Outplacement Services | | | - | | | | - | | | | - | | | - | | | - | | | $ | 30,000 | | | | - | |
Stock Awards(4) | | $ | 2,049,442 | | | | - | | | | $2,049,442 | | | - | | | - | | | $ | 2,049,442 | | | $ | 2,049,442 | |
Option and SARs Awards | | | - | | | | - | | | | - | | | - | | | - | | | | - | | | | - | |
Separation Benefit Plan Payment | | $ | 1,368,000 | | | $ | 1,368,000 | | | | - | | | - | | | $ 1,368,000 | | | $ | 1,368,000 | | | $ | 1,368,000 | |
| | | $ | 3,417,442 | | | $ | 1,368,000 | | | | $2,049,442 | | | - | | | $ 1,368,000 | | | $ | 6,933,377 | | | $ | 3,417,442 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| TYPE OF TRIGGERING EVENT | |
Named Executive Officer | | Death or
Disability | | | Voluntary
Termination
or
Retirement | | | Change in
Control
without
Termination | | | Termination
by Company
for Cause | | Termination
by Company
without Cause
unrelated to
Change in
Control | | | Termination
by Company
or by
Executive
for Good
Reason after
Change in
Control | | | Termination
by Executive
without Good
Reason after
Change in
Control | |
Mark E. Schell | | | | | | | | | | | | | | | | | | | | | | | | | | |
Key Employee | | | | | | | | | | | | | | | | | | | | | | | | | | |
Contract Payments: | | | | | | | | | | | | | | | | | | | | | | | | | | |
Salary under contract formula(1) | | | - | | | | - | | | | - | | | - | | | - | | | $ | 1,027,800 | | | | - | |
Bonus under contract formula(1) | | | - | | | | - | | | | - | | | - | | | - | | | $ | 450,000 | | | | - | |
Previously-earned but unpaid bonus amounts | | | - | | | | - | | | | - | | | - | | | - | | | | - | | | | - | |
Tax Gross-up(2) | | | - | | | | - | | | | - | | | - | | | - | | | | - | | | | - | |
36 months 401(k) company match | | | - | | | | - | | | | - | | | - | | | - | | | $ | 51,597 | | | | - | |
Health Insurance(3) | | | - | | | | - | | | | - | | | - | | | - | | | $ | 43,343 | | | | - | |
Disability Insurance(3) | | | - | | | | - | | | | - | | | - | | | - | | | $ | 2,951 | | | | - | |
Outplacement Services | | | - | | | | - | | | | - | | | - | | | - | | | $ | 30,000 | | | | - | |
Stock Awards(4) | | $ | 654,982 | | | | - | | | $ | 654,982 | | | - | | | - | | | $ | 654,982 | | | $ | 654,982 | |
Option and SARs Awards | | | - | | | | - | | | | - | | | - | | | - | | | | - | | | | - | |
Separation Benefit Plan Payment | | $ | 632,492 | | | $ | 632,492 | | | | - | | | - | | $ | 632,492 | | | $ | 632,492 | | | $ | 632,492 | |
| | | $ | 1,287,474 | | | $ | 632,492 | | | $ | 654,982 | | | - | | $ | 632,492 | | | $ | 2,893,165 | | | $ | 1,287,474 | |
David T. Merrill | | | | | | | | | | | | | | | | | | | | | | | | | | |
Key Employee | | | | | | | | | | | | | | | | | | | | | | | | | | |
Contract Payments: | | | | | | | | | | | | | | | | | | | | | | | | | | |
Salary under contract formula(1) | | | - | | | | - | | | | - | | | - | | | - | | | $ | 993,000 | | | | - | |
Bonus under contract formula(1) | | | - | | | | - | | | | - | | | - | | | - | | | $ | 435,000 | | | | - | |
Previously-earned but unpaid bonus amounts | | | - | | | | - | | | | - | | | - | | | - | | | | - | | | | - | |
Tax Gross-up(2) | | | - | | | | - | | | | - | | | - | | | - | | | | - | | | | - | |
36 months 401(k) company match | | | - | | | | - | | | | - | | | - | | | - | | | $ | 51,597 | | | | - | |
Health Insurance(3) | | | - | | | | - | | | | - | | | - | | | - | | | $ | 29,459 | | | | - | |
Disability Insurance(3) | | | - | | | | - | | | | - | | | - | | | - | | | $ | 2,951 | | | | - | |
Outplacement Services | | | - | | | | - | | | | - | | | - | | | - | | | $
| 30,000
|
| | | - | |
Stock Awards(4) | | $ | 633,684 | | | | - | | | $ | 633,684 | | | - | | | - | | | $ | 633,684 | | | $ | 633,684 | |
Option and SARs Awards | | | - | | | | - | | | | - | | | - | | | - | | | | - | | | | - | |
Separation Benefit Plan Payment | | $ | 203,692 | | | $ | 203,692 | | | | - | | | - | | $ | 203,692 | | | $ | 203,692 | | | $ | 203,692 | |
| | | $ | 837,376 | | | $ | 203,692 | | | $ | 633,684 | | | - | | $ | 203,692 | | | $ | 2,379,383 | | | $ | 837,376 | |
39.
|
| | | | | | | |
| TYPE OF TRIGGERING EVENT |
Named Executive
Officer | Death or
Disability | Voluntary
Termination
or
Retirement | Change in
Control
Without
Termination | Termination
by Company
for Cause | Termination
by Company
Without Cause
Unrelated to
Change in
Control | Termination
by Company
or by
Executive
for Good
Reason After
Change in
Control | Termination
by Executive
Without Good
Reason After
Change in
Control |
| Larry D. Pinkston | | | | | | | |
| Key Employee Contract Payments: | | | | | | | |
Salary under contract formula(1) | - | - | - | - | - | 2,280,000 | - |
Bonus under contract formula(1) | - | - | - | - | - | 1,622,106 | - |
| Previously-earned but unpaid bonus amounts | - | - | - | - | - | - | - |
Tax Gross-up(2) | - | - | - | - | - | - | - |
| 36 months 401(k) company match | - | - | - | - | - | 52,650 | - |
Health Insurance(3) | - | - | - | - | - | 26,938 | - |
Disability Insurance(3) | - | - | - | - | - | 5,542 | - |
| Outplacement Services | - | - | - | - | - | 30,000 | - |
Stock Awards(4) | 3,390,554 | - | 3,390,554 | - | - | 3,390,554 | 3,390,554 |
| Option and SARs Awards | - | - | - | - | - | - | - |
| Separation Benefit Plan Payment | 1,520,000 | 1,520,000 | - | - | 1,520,000 | 1,520,000 | 1,520,000 |
| | 4,910,554 | 1,520,000 | 3,390,554 | - | 1,520,000 | 8,927,790 | 4,910,554 |
| Mark E. Schell | | | | | | | |
| Key Employee Contract Payments: | | | | | | | |
Salary under contract formula(1) | - | - | - | - | - | 1,200,000 | - |
Bonus under contract formula(1) | - | - | - | - | - | 525,000 | - |
| Previously-earned but unpaid bonus amounts | - | - | - | - | - | - | - |
Tax Gross-up(2) | - | - | - | - | - | - | - |
| 36 months 401(k) company match | - | - | - | - | - | 52,650 | - |
Health Insurance(3) | - | - | - | - | - | 44,204 | - |
Disability Insurance(3) | - | - | - | - | - | 2,951 | - |
| Outplacement Services | - | - | - | - | - | 30,000 | - |
Stock Awards(4) | 1,469,169 | | 1,469,169 | | | 1,469,169 | 1,469,169 |
| Option and SARs Awards | - | - | - | - | - | - | - |
| Separation Benefit Plan Payment | 769,231 | 769,231 | - | - | 769,231 | 769,231 | 769,231 |
| | 2,238,400 | 769,231 | 1,469,169 | - | 769,231 | 4,093,205 | 2,238,400 |
|
| | | | | | | |
| TYPE OF TRIGGERING EVENT |
Named Executive
Officer | Death or
Disability | Voluntary
Termination
or
Retirement | Change in
Control
Without
Termination | Termination
by Company
for Cause | Termination
by Company
Without Cause
Unrelated to
Change in
Control | Termination
by Company
or by
Executive
for Good
Reason After
Change in
Control | Termination
by Executive
Without Good
Reason After
Change in
Control |
| David T. Merrill | | | | | | | |
| Key Employee Contract Payments: | | | | | | | |
Salary under contract formula(1) | - | - | - | - | - | 1,200,000 | - |
Bonus under contract formula(1) | - | - | - | - | - | 510,000 | - |
| Previously-earned but unpaid bonus amounts | - | - | - | - | - | - | - |
Tax Gross-up(2) | - | - | - | - | - | 801,130 | - |
| 36 months 401(k) company match | - | - | - | - | - | 52,650 | - |
Health Insurance(3) | - | - | - | - | - | 30,140 | - |
Disability Insurance(3) | - | - | - | - | - | 2,951 | - |
| Outplacement Services | - | - | - | - | - | 30,000 | - |
Stock Awards(4) | 1,407,993 | | 1,407,993 | | | 1,407,993 | 1,407,993 |
| Option and SARs Awards | - | - | - | - | - | - | - |
| Separation Benefit Plan Payment | 276,923 | 276,923 | - | - | 276,923 | 276,923 | 276,923 |
| | 1,684,916 | 276,923 | 1,407,993 | - | 276,923 | 4,311,787 | 1,684,916 |
| John Cromling | | | | | | | |
Stock Awards(4) | 1,407,993 | - | 1,407,993 | - | - | 1,407,993 | 1,407,993 |
| Option and SARs Awards | - | - | - | - | - | - | - |
| Separation Benefit Plan Payment | 461,539 | 461,539 | - | - | 461,539 | 461,539 | 461,539 |
| | 1,869,532 | 461,539 | 1,407,993 | - | 461,539 | 1,869,532 | 1,869,532 |
| Bradford J. Guidry | | | | | | | |
Stock Awards(4) | 1,550,306 | - | 1,550,306 | - | - | 1,550,306 | 1,550,306 |
| Option and SARs Awards | - | - | - | - | - | - | - |
| Separation Benefit Plan Payment | 738,462 | 738,462 | - | - | 738,462 | 738,462 | 738,462 |
| | 2,288,768 | 738,462 | 1,550,306 | - | 738,462 | 2,288,768 | 2,288,768 |
Notes to Table:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Named Executive Officer | | Death or
Disability | | Voluntary Termination or Retirement | | Change in
Control
without
Termination | | Termination by Company for Cause | | Termination
by Company without Cause unrelated to
Change in Control | | Termination
by Company or by Executive for Good Reason after
Change in
Control | | Termination
by Executive
without Good
Reason after
Change in
Control |
John Cromling | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Stock Awards(4) | | | $ | 633,684 | | | | | - | | | | $ | 633,684 | | | - | | | | - | | | | $ | 633,684 | | | | $ | 633,684 | |
Option and SARs Awards | | | | - | | | | | - | | | | | - | | | - | | | | - | | | | | - | | | | | - | |
Separation Benefit Plan Payment | | | $ | 356,462 | | | | $ | 356,462 | | | | | - | | | - | | | $ | 356,462 | | | | $ | 356,462 | | | | $ | 356,462 | |
| | | | $ | 990,146 | | | | $ | 356,462 | | | | $ | 633,684 | | | - | | | $ | 356,462 | | | | $ | 990,146 | | | | $ | 990,146 | |
Bradford J. Guidry | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Stock Awards(4) | | | $ | 633,684 | | | | | - | | | | $ | 633,684 | | | - | | | | - | | | | $ | 633,684 | | | | $ | 633,684 | |
Option and SARs Awards(5) | | | | - | | | | | - | | | | | - | | | - | | | | - | | | | | - | | | | | - | |
Separation Benefit Plan Payment | | | $ | 585,615 | | | | $ | 585,615 | | | | | - | | | - | | | $ | 585,615 | | | | $ | 585,615 | | | | $ | 585,615 | |
| | | | $ | 1,219,299 | | | | $ | 585,615 | | | | $ | 633,684 | | | - | | | $ | 585,615 | | | | $ | 1,219,299 | | | | $ | 1,219,299 | |
Notes to Table:
| (1) | (1) | It is assumed for purposes of these calculations that all year-to-date accrued salary, bonus and vacation pay is current as of December 31, 2011.2012. This amount is based on the 20112012 salary and excludes the bonus awarded in February 20122013 but deemed earned in 2011,2012, since that bonus amount would not be a factor in calculating these amounts under the terms of the governing agreements. If that bonus had been included in these calculations, there would be no changes to the figures set forth above. This calculation represents the product of 3 and the sum of: |
| |
| (i) | the executive officer’sofficer's annual base salary, as defined, and |
| |
| (ii) | the highest annual bonus (as determined under the agreement). |
| |
| (2) | The estimated tax gross up is based on the 20% excise tax, grossed up for taxes, on the amount of severance and other benefits above each individual’sindividual's average five-year W-2 earnings times 3. This estimate is made as of December 31, 2011.2012. For each of Messrs. Pinkston Schell, and Merrill,Schell, payment due under change-in-control provisions did not exceed histheir respective base amountamounts times 3. |
| |
| (3) | The amount for health and disability coverage was determined by assuming that the rate of cost increases for coverage equals the discount rate applicable to reduce the amount to present value as of December 31, 2011.2012. |
| |
| (4) | The value of restricted stock assumes a fair market value for our common stock of $46.40,$45.05, the closing price of our common stock on the NYSE on December 30, 2011.31, 2012. All performance-based restricted stock has been assumed to vest at target. Target means performance at the 60th percentile of the peer group, which pays at 100% of the face value of the performance-based component of the award. |
RETIREMENTORCONSULTINGAGREEMENTS
After our chairman John G. Nikkel retired as CEO in April of 2005, he served as a consultant to the company under a consulting agreement that terminated on May 31, 2011. Under that agreement Mr. Nikkel received, on an annual basis, $70,000 per year. From January through May of
2011, we paid Mr. Nikkel $5,834.00 per month for consulting services. In addition, we provided him with office space and secretarial services for the time he served as a consultant.
RELATED PERSON TRANSACTIONS
OUROUR RELATED
PERSONTRANSACTIONPOLICY Our board has adopted a policy and procedures for the review, approval or ratification of related person transactions (as defined below) which is set forth in our Policy and Procedures with Respect to Related Person Transactions (the “Policy”).
For purposes of the Policy, a “related person transaction” is a transaction, arrangement or relationship (or any series of similar transactions, arrangements or relationships) in which the company (including any of its subsidiaries) was, is or will be a participant and in which any Related Person (as defined below) had, has or will have a direct or indirect material interest, other than (1) transactions in which the amount involved does not exceed $100,000,
$120,000, (2) transactions available to employees generally, or (3) transactions involving compensation approved by the company’scompany's compensation committee.
For purposes of the Policy, a “related person” means (1) any person who is, or at any time since the beginning of the company’scompany's last fiscal year was, a director or executive officer of the company or a nominee to become a director of the company, (2) any person who is known to be the beneficial owner of more than 5% of our voting securities, (3) any immediate family member of any of the above persons, which means any child, stepchild, parent, stepparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law of the director, executive officer, nominee or more
than 5% beneficial owner, and any person (other than a tenant or employee) sharing the household of such director, executive officer, nominee or more than 5% beneficial owner, and (4) any firm, corporation or other entity in which any of the foregoing persons is employed or is a general partner or principal or in a similar position or in which such person has a 5% or greater ownership or economic interest.
Our audit committee is responsible for reviewing and approving (or prohibiting) any transaction that is determined by our general counsel to constitute a related person transaction. The audit committee will consider all of the relevant facts and circumstances available to it, including (if applicable) but not limited to (1) the benefits to the company, (2) the impact on a director’sdirector's independence in the event the related person is a director, an immediate family member of a director or an entity in which a director is a partner, stockholder or executive officer, (3) the availability of other sources for comparable products or services, (4) the terms of the transaction, and (5) the terms available to unrelated third parties or to employees generally. No member of the audit committee will
participate in any review, consideration or approval of any related person transaction with respect to which such member or any of his or her immediate family members is the related person. The audit committee will approve only those related person transactions that are in, or are not inconsistent with, the best interests of the company and its stockholders, as the audit committee determines in good faith.
CERTAINCERTAIN TRANSACTIONS
BETWEENTHECOMPANYANDITSOFFICERS,,DIRECTORS,,NOMINEESFORDIRECTORANDTHEIRASSOCIATESSince 1984, one of our subsidiaries, or its predecessor, has formed employee-limited partnerships for investment by our employees and directors. The limited partnerships participate with Unit Petroleum Company, a subsidiary of
ours, in its exploration and production operations.
Investment in these programs is offered, where allowed under applicable law, to all of our full time salaried employees who satisfy certain financial and other qualification requirements.
Over the years, certain of our NEOs and directors have invested in these employee programs. The following table shows their investments in the 2011 employee program.
J. Michael Adcock – $104,000
Gary R. Christopher – $50,000
King P. Kirchner – $40,000
Larry D. Pinkston – $12,000
Additionally, onOn November 21, 2011, Superior Pipeline Company, L.L.C. (“Superior”), a wholly-owned subsidiary of the company, entered into a Gas Purchase Agreement with Sullivan and Company, L.L.C. (“Sullivan”), an Oklahoma limited liability company, for which Robert Sullivan Jr., one of our directors, is a manager and a fractional co-owner. Under the terms of the agreement, Sullivan is selling natural gas to Superior, which will gather, process and sell purchased volumes. The term of the agreement is for a five-year period beginning September 1, 2011, after which it will be on a year-to-year basis until terminated by either party on sixty days written notice. The agreement is believed to be the result of an arm’s length transaction reflecting market rate terms and conditions and comparable to those in similar agreements negotiated by Superior with similarly situated sellers of natural gas in the same market during the same general time frame. Our Audit Committee, in accordance with the Policy, and the board have determined that this agreement is in the best interest of the company and that the resulting relationship is not one that at the current time constitutes a material relationship between Mr. Sullivan and the company. In 2011,2012, Sullivan and Company received a total of $77, 835$158,644 under the terms of the agreement. So faragreement, which is less than 2% of the consolidated gross revenues for Sullivan and Company for each of 2012, 2011, and 2010.
Additionally, G. Bailey Peyton IV, one of our directors, serves as President and co-owner of Upland Resources, LLC, a small independent oil and natural gas exploration company that, in the ordinary course of business during 2012, $24,859 has beenunder standard day-rate contracts available generally to all similarly-situated customers at that time and in that region and with appropriate audit committee and board pre-approval, was a participant in wells for which the company's drilling segment performed contract drilling services. We received approximately $1.6 million for those services in 2012. Additionally, through our exploration and productions segment, we paid under that agreement.or distributed royalties in
2012 (primarily as a successor-in-interest to prior transactions and as operator of the wells involved, and in some instances as lessee) to Mr. Peyton, members of Mr. Peyton's family, and Peyton Royalties, LP (a subsidiary of
Peyton Holdings Corporation, owned by Mr. Peyton). Those royalty payments amounted to approximately $1.2 million during 2012.
REPORT OF THE AUDIT COMMITTEE
The SEC rules require that we include in our proxy statement a report from the
board’sboard's audit committee. The following report concerns that
committee’scommittee's activities regarding oversight of our financial reporting and auditing process.
The audit committee assists the board in fulfilling its responsibility for oversight of the quality and integrity of our accounting, auditing and financial reporting practices. Our management has the primary responsibility for the financial statements and the reporting process including the systems of internal controls.
In fulfilling its oversight responsibilities, the committee reviewed the audited financial statements in our annual report on Form 10-K for 20112012 with our management
including a discussion of the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments, and the clarity of disclosures in the financial statements.
The committee reviewed with our independent registered public accounting firm, who is responsible for expressing an opinion on the conformity of those audited financial statements with generally accepted accounting principles, its judgments as to the quality, not just the acceptability, of the company’scompany's accounting principles and such other matters as are required to be discussed with the committee under generally-accepted auditing standards, including Statement on Auditing Standards No. 61 (Communication with Audit Committees), as amended and as adopted by the Public Company Accounting Oversight Board
(PCAOB) in Rule 3200T. The committee has discussed with the independent registered public accounting firm the auditors’auditors' independence from management, including the implications of the SEC regulations regarding the provisions of non-audit services by the independent registered public accounting firm and determined that the provisions of the non-audit services were not inconsistent with the independent registered public accounting firm’sfirm's status as an independent registered public accounting firm. In addition, the committee received the written disclosures and letter from the independent registered public accounting firm required by PCAOB Rule 3526.
The committee also reviewed the report of management contained in our annual report on Form 10-K for the year
20112012 filed with the SEC, as well as PricewaterhouseCoopers
LLP’sLLP's Report of Independent Registered Public Accounting Firm (included in our annual report on Form 10-K). This report related to its audit of (i) the consolidated financial statements, and (ii) the effectiveness of internal control over financial reporting.
Based on review and discussions with management and the independent registered public accounting firm, the committee recommended to the board that the company’scompany's audited financial statements be included in its annual report on Form 10-K for the year ended December 31,
2011, 2012, for filing with the SEC. The committee also discussed the interim financial information contained in each quarterly earnings announcement and Form 10-Q with our chief financial officer and independent registered public accounting firm before public release.
The board and the audit committee believe that the audit
committee’scommittee's current member composition satisfies the rule of the NYSE that governs audit committee composition, including the requirement that audit committee members all be “independent directors” as that term is defined by applicable NYSE rule. Each member of the committee is financially literate, knowledgeable and qualified to review financial statements. The board has determined that Steven B. Hildebrand, Gary R. Christopher and Larry C. Payne qualify as “audit committee financial experts” under the rules of the SEC. During the year
2011,2012, the committee met ten times.
Members of the Audit Committee:
Steven B. Hildebrand – Chairman
Larry C. Payne
PRINCIPAL ACCOUNTANT FEES AND SERVICES
By April
17, 2012,16, 2013, the
audit committee expects to have appointed PricewaterhouseCoopers LLP as
the company’sour independent registered public accounting firm for the fiscal year ending December 31,
2012.FEES2013.
FEES INCURRED
FOR PRICEWATERHOUSECOOPERS PRICEWATERHOUSECOOPERS LLP
The following table shows the fees for professional audit services provided by PricewaterhouseCoopers LLP for the integrated audit of the
company’scompany's annual financial statements for the years ended December 31,
20112012 and
2010,2011, and fees billed for other services during those years.
| | | | | | | | |
| | | 2011 ($) | | | 2010 ($) | |
Audit Fees(1) | | | 711,300 | | | | 624,000 | |
Audit-Related Fees(2) | | | 105,000 | | | | 102,600 | |
Tax Fees(3) | | | 53,200 | | | | 21,442 | |
All Other Fees | | | - | | | | - | |
Total | | | 869,500 | | | | 748,042 | |
|
| | |
| | 2012 ($) | 2011 ($) |
Audit Fees(1) | 664,500 | 711,300 |
Audit-Related Fees(2) | 227,500 | 105,000 |
Tax Fees(3) | 10,700 | 53,200 |
| All Other Fees | - | - |
| Total | 902,700 | 869,500 |
Notes to table:
(1) | |
| (1) | Audit fees represent fees for professional services provided in connection with the integrated audit of our financial statements and review of our quarterly financial statements and audit services provided in connection with the issuance of consents and assistance with review of documents filed with the SEC. |
(2) | |
| (2) | Audit-related fees consisted primarily of services provided in connection with audits of an employee benefit plan, and oil and gas partnerships.partnerships, and for 2012, review of the Noble properties acquisition. |
(3) | |
| (3) | For fiscal 20112012 and 2010,2011, respectively, tax fees principally included tax compliance fees of $53,200$10,700 and $21,442.$53,200. No fees for tax advice were incurred in 20112012 or 2010.2011. |
POLICY ON AUDIT COMMITTEE PRE-APPROVAL OF AUDIT AND PERMISSIBLE NON-AUDIT SERVICES OF INDEPENDENT AUDITOR
POLICYONAUDITCOMMITTEEPRE-APPROVALOFAUDITANDPERMISSIBLENON-AUDITSERVICESOFINDEPENDENTAUDITOR
Consistent with SEC policies regarding auditor independence, the audit committee has responsibility for appointing, setting compensation and overseeing the work of the independent registered public accounting firm. In recognition of this responsibility, the audit committee has established a policy to pre-approve all audit and permissible non-audit services provided by the independent registered public accounting firm.
Before incurring the following, management will submit a list of services and related fees expected to be rendered during that year within each of the following four categories of services to the audit committee for approval:
| |
| (1) | Auditservices include audit work performed on the financial statements, internal control over financial reporting, as well as work that generally only the independent registered public accounting firm can reasonably be expected to provide, including comfort letters, statutory audits, and discussions surrounding the proper application of financial accounting and reporting standards. |
| |
| (2) | Audit-relatedservices are for assurance and related services that are traditionally performed by the independent registered public accounting firm, including due diligence related to mergers and |
| acquisitions, employee benefit plan audits, and special procedures required to meet certain regulatory requirements. |
| |
| (3) | Taxservices include all services, except those services specifically related to the audit of the financial statements performed by the independent registered public accounting firm’sfirm's tax personnel, including tax analysis; assisting with coordination of execution of tax related activities, primarily in the area of corporate development; supporting other tax related regulatory requirements; and tax compliance and reporting. |
| |
| (4) | Other Fees are those associated with services not captured in the other categories. The companyWe generally doesdo not request such services from the independent registered public accounting firm. |
The audit committee pre-approves the independent registered public accounting firm’sfirm's services within each
category. The fees are budgeted and the audit committee requires the independent registered public accounting firm and management to report actual fees versus the budget periodically throughout the year. During the year, circumstances may arise when it may become necessary to engage the independent registered public accounting firm for additional services not contemplated in the original pre-approval categories. In those instances (subject to certain de minimus exceptions), the audit committee requires specific pre-approval before engaging the independent registered public accounting firm.
The audit committee may (and has at various times in the past) delegate pre-approval authority to one or more of its members. The member to whom such authority is delegated must report, for informational purposes only, any pre-approval decisions to the audit committee at its next scheduled meeting.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The following directors (none of whom was or had been an officer or employee of the company or any of its subsidiaries) served on the compensation committee during the full course of fiscal year 2011:2012: J. Michael Adcock, William B. Morgan, John H. Williams, and Steven B. Hildebrand. Additionally,Hildebrand and G. Bailey Peyton IV was added to that committee in December 2012, and is included as a committee member for purposes of this provision. There are no committee interlocks with other
companies within the meaning of the SEC’s rules during 2011.
As more fully discussed in “Related Person Transactions – CertainPeyton. See “Certain transactions between the company and its officers, directors, nominees for director and their associates,” certain of these directors
above, for details on ordinary course transactions between G. Bailey Peyton or his affiliated companies and officers have, from time to time invested in limited partnerships that are formed and administered by oneour operating segments during 2012. G. Bailey Peyton does not currently serve on the compensation committee. There were no committee interlocks with other companies within the meaning of the company’s subsidiaries.SEC's rules during 2012.
ITEM ITEM 1:ELECTIONELECTION OFDIRECTORS Item 1 is the election of three directors to the board. Our Amended and Restated Certificate of Incorporation provides that the number of directors on our board may not be less than three nor more than ten. Our board currently is composed of ten members and is divided into three classes each serving for a three-year term. Classes I and II consist of three directors and Class III consists of four directors. At each annual meeting, the term of one class expires. The term of service for those named directors serving in Class III expires at this meeting. We know of no reason why any nominee may be unable to serve as a
director. If any nominee is unable to serve, your proxy
may vote for another nominee proposed by the board, or the board may reduce the number of directors to be elected.
If any director resigns, dies or is otherwise unable to serve out his or her term, or the board increases the number of directors, the board may fill the vacancy or elect the new director.
THEBOARDOFDIRECTORSUNANIMOUSLYRECOMMENDSTHATYOUVOTEFOREACHOFTHETHREENOMINEES.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR EACH OF:
William B. Morgan,
John H. Williams, and
Larry D. Pinkston.
| |
| | |
| Nominees For Director |
Terms expiring at 2012
annual
meeting
(Class I)
| | John G. Nikkel
Age 77
Director
since 1983
| | Mr. Nikkel joined the company as its President, Chief Operating Officer and a director in 1983. He was elected its CEO in July 2001 and Chairman of the Board in August 2003. Mr. Nikkel retired as an employee and as the CEO of the company on April 1, 2005. He currently holds the position of Chairman of the Board. From 1976 until January 1982 when he co-founded Nike Exploration Company, Mr. Nikkel was an officer and director of Cotton Petroleum Corporation, serving as the President of Cotton from 1979 until his departure. Before joining Cotton, Mr. Nikkel was employed by Amoco Production Company for 18 years, last serving as Division Geologist for Amoco’s Denver Division. Mr. Nikkel presently serves as President and a director of Nike Exploration Company, a family owned oil and natural gas investment company. Mr. Nikkel received a Bachelor of Science degree in Geology and Mathematics from Texas Christian University. |
| | Robert J. Sullivan Jr.
Age 66
Director
since 2005
| | Mr. Sullivan is a Principal with Sullivan and Company LLC, a family-owned independent oil and natural gas exploration and production company founded in 1958. He is also the Founder (1989) and served as Chairman and CEO of Lumen Energy Corporation prior to its sale in 2004. Mr. Sullivan was appointed to Oklahoma Governor Frank Keating’s Cabinet as Secretary of Energy in March 2002. He received a BBA from the University of Notre Dame, and a MBA from the University of Michigan. Mr. Sullivan is a Board Member of the Oklahoma Independent Petroleum Association, St. John Medical Center, St. Joseph Residence, and former Board Member of University of Notre Dame Alumni Association, Catholic Charities and Gatesway Foundation. He also is Trustee for the Monte Cassino Endowment Trust, a Member of the University of Notre Dame Irish Studies Advisory Council and Past Chairman of the following School Boards: Cascia Hall Preparatory School, Monte Cassino School and School of St. Mary. Mr. Sullivan has over 41 years of energy industry experience. |
| | Gary R. Christopher
Age 62
Director
since 2005
| | Mr. Christopher is engaged in personal investments and consulting. Between August 1999 and January 2004, he served as President and CEO of PetroCorp Incorporated (a public oil and natural gas exploration company), and from March 1996 to August 1999 he served as the Acquisition Coordinator of Kaiser-Francis Oil Company. His other past professional experience includes serving as Vice President of Acquisitions for Indian Wells Oil Company, Senior Vice President and Manager of the Energy Lending Division of First National Bank of Tulsa and from 1991 to 1996 Senior Vice President and Manager of Energy Lending for Bank of Oklahoma. Previous to that, Mr. Christopher worked for Amerada Hess Corporation as a Reservoir Engineer and for Texaco, Inc. as a Production Engineer. Mr. Christopher is a member of the Society of Petroleum Engineers and the Oklahoma Independent Petroleum Association. Mr. Christopher received a B.S. degree in Petroleum Engineering from the University of Missouri at Rolla. Mr. Christopher is a past Director of the Petroleum Club of Tulsa, Middle Bay Oil Company, Three Tech Energy, PetroCorp Incorporated and a present Director of the Summit Bank of Oklahoma. |
Continuing Directors |
Terms
expiring
at 2013 annual meeting (Class II) | | | | Mr. Morgan was elected a director of the company in 1988. Mr. Morgan is engaged in personal investments and volunteer activities and has been for more than five years. Mr. Morgan retired in June 2007 from his position as Executive Vice President and General Counsel of St. John Health System, Inc., Tulsa, Oklahoma, and President of its principal for-profit subsidiary Utica Services, Inc., which positions he had held since 1995. Prior to joining St. John, he was Partner in the law firm of Doerner, Saunders, Daniel & Anderson, Tulsa, Oklahoma, and served as Adjunct Professor of Law at the University of Tulsa College of Law, where he taught Securities Regulation. During 1968 and 1969, he served as a United States Army Officer in Vietnam and was awarded several medals including the Bronze Star. Mr. Morgan has an undergraduate degree from Muhlenberg College, Allentown, Pennsylvania, and a Juris Doctor from the University of Tulsa College of Law. Mr. Morgan is a member of numerous professional and Bar associations and various federal Bars including the United States Supreme Court. He has been listed inWho’s Who inAmerican Law, Who’sWho's Who in American Law, Who's Who in American EducationandThe Best Lawyers in America. Mr. Morgan is a Fellow of the American College of Healthcare Executives and a Dispute Resolution Arbitrator with the Financial Industry Regulatory Authority. |
| |
| | |
| | | | | Mr. Williams was elected a director of the company in December 1988. Mr. Williams is engaged in personal investments and has been for more than five years. He was Chairman of the Board and CEO of The Williams Companies, Inc. before retiring in 1978, and he continues to serve as an honorary director. Mr. Williams is, and for more than the last five years has been, a director, audit committee member, and member and chairman of the nominating and governance committee of Apco Oil & Gas International, Inc. (a Nasdaq registered company) as well as an honorary director of Willbros Group, Inc. He formerly served as a director of Petrolera Entre Lomas S.A. In addition, Mr. Williams is a member of the Tulsa Performing Arts Center Trust and is a finance committee member and has served in those capacities since 1977. Mr. Williams was a 1977 inductee into the Oklahoma Hall of Fame, and a 2006 inductee into the University of Tulsa, Collins College of Business Hall of Fame. |
| | | | | Mr. Pinkston joined the company in December 1981. He had served as Corporate Budget Director and Assistant Controller before being appointed Controller in February 1985. In December 1986, he was elected Treasurer and was elected to the position of Vice President and Chief Financial Officer in May 1989. In August 2003, he was elected to the position of President. He was elected a director by the board in January 2004. In February 2004, in addition to his position as President, he was elected to the office of Chief Operating Officer. Effective April 1, 2005, Mr. Pinkston was elected to the additional position of CEO. He holds a Bachelor of Science Degree in Accounting from East Central University of Oklahoma. |
Continuing Directors |
Terms Expiring at 2014 annual meeting (Class III)
| | | | Mr. Adcock was elected a director in December 1997. He is an attorney and is currently a Co-trustee of the Don Bodard Trust, which is a private business trust that deals in real estate, oil and natural gas properties and other equity investments. He is Chairman of the Board of Arvest Bank, Shawnee, and a director, finance chair, and compensation committee member of Community Health Partners, Inc. Mr. Adcock is also a co-owner of Central Disposal, LLC, a solid waste management company with operations in Central Oklahoma. Between 1997 and September 1998 he was the Chairman of the Board of Ameribank and President and CEO of American National Bank and Trust Company of Shawnee, Oklahoma, and Chairman of AmeriTrust Corporation, Tulsa, Oklahoma. Prior to holding these positions, he was engaged in the private practice of law and served as General Counsel for Ameribank Corporation. |
| | | | | Mr. Hildebrand was elected as a director in October 2008. Since March 2008, he has been engaged in personal investments. Mr. Hildebrand retired in 2008 from Dollar Thrifty Automotive Group, Inc. (NYSE: DTG), a car rental business, where he served as Executive Vice President and Chief Financial Officer since 1997. Prior to that, Mr. Hildebrand served as Executive Vice President and Chief Financial Officer of Thrifty Rent-A-Car System, Inc., a subsidiary of Dollar Thrifty. Mr. Hildebrand joined Thrifty Rent-A-Car System, Inc. in 1987 as Vice President and Treasurer and became Chief Financial Officer in 1989. Mr. Hildebrand was with Franklin Supply Company, an oilfield supply business, from 1980 to 1987 where he held several positions including Controller and Vice President of Finance. From 1976 to 1980, Mr. Hildebrand was with the accounting firm Coopers & Lybrand, most recently as Audit Supervisor. Mr. Hildebrand has been designated by the board of directors as an audit committee financial expert. Mr. Hildebrand has been a director of APMEX Precious Metals Management Services, Inc. since December 2011. Mr. Hildebrand has served on boards for several charitable organizations in the Tulsa community. |
| |
| | |
| | | | | Mr. Payne currently serves as President and Chief Executive Officer of LESA and Associates, LLC, a private investment and consulting firm he started in June of 2011. Additionally, since December 2012, Mr. Payne retired from the energy industryhas served as Interim President of Magnum NGLs, LLC, a private company engaged in natural gas liquids storage in Delta, Utah. From April 2010 to April 2011, after over 38 years of service. Prior to his retirement, Mr. Payne served as President and Chief Operating Officer of Lansing NGL Services Natural Gas Liquids Division, a division of Lansing Trade Group, LLC, a commodities trading company located in Overland Park, Kansas from April 2010 to April 2011. BetweenKansas. From August 2009 andto April 2010, Mr. Payne provided energy consulting services to private clients interested in the midstream energy business. From 2003 until August 2009 Mr. Payne served as President and Chief Operating Officer of SemStream, L.P., a midstream energy company engaged in natural gas liquids supply and marketing. Before joining SemStream, Mr. Payne served as Vice President of Commodity Management for Williams Midstream Marketing and Risk Management, LLC., and before that he served as Vice President of Natural Gas Liquids Supply, Trading and Risk managementManagement for Texaco NGL. During his earlier years of service, Mr. Payne held numerous other positions in the energy industry including executive positions with Enterprise Products, Aux Sable Liquid Products and Ferrellgas. Mr. Payne received a B.S. in Business Administration from Grambling State University, and an MBA from Texas Southern University with a concentration in Finance and Economics. Mr. Payne currently serves on the board of directors for the Tulsa Day Center for the Homeless,following non-profit organizations: the Wayman Tisdale Foundation, The Reserve at Forest Hills, and the Board of Trustees for the Metropolitan Baptist Church.Church, and Big Brothers Big Sisters of Oklahoma. |
| | | | | From 1985 to the current date, Mr. Peyton is currentlyhas been President of Peyton Holdings Corp.Corporation (formerly Peyton Oil and Gas), a businessCanadian, Texas company he foundedformed in 1985 for purposes of buying land, minerals, and royalties. From 2009 to date, Mr. Peyton ownshas owned and served as President and managing member of Perryton Feeders, LLC, a cattle feeding business in Perryton, Texas, which heTexas. Also from 2009 to date, Mr. Peyton has owned since 2009 and for which he servesserved as managing member. Mr. Peyton also is current ownerPresident of Cuatro Cattle Company, a cattle ranching operation in Canadian, Texas. From 2007 to date Mr. Peyton has served as President and co-owner of Upland Resources, LLC, a Canadian, Texas oil and gas exploration company that began actively drilling in the Texas Panhandle in 2012. From 1984 to 2007, Mr. Peyton served as President of Upland Resources, Inc., an oil and natural gas exploration company he founded by Mr. Peyton.and later sold. Mr. Peyton currently serves on the board of directors of Happy State Bank in Amarillo, Texas, and The Citadelle Art Foundation in Canadian, Texas. Mr. Peyton is a past President of the Panhandle Association of Landmen, Amarillo, Texas. |
Terms expiring at 2015 annual meeting (Class I) | John G. Nikkel Age 78 Director since 1983 | Mr. Nikkel joined the company as its President, Chief Operating Officer and a director in 1983. He was elected its CEO in July 2001 and Chairman of the Board in August 2003. Mr. Nikkel retired as an employee and as the CEO of the company on April 1, 2005. He currently holds the position of Chairman of the Board. From 1976 until January 1982 when he co-founded Nike Exploration Company, Mr. Nikkel was an officer and director of Cotton Petroleum Corporation, serving as the President of Cotton from 1979 until his departure. Before joining Cotton, Mr. Nikkel was employed by Amoco Production Company for 18 years, last serving as Division Geologist for Amoco's Denver Division. Mr. Nikkel presently serves as President and a director of Nike Exploration Company, a family-owned oil and natural gas investment company. Mr. Nikkel received a Bachelor of Science degree in Geology and Mathematics from Texas Christian University. |
| Robert J. Sullivan Jr. Age 67 Director since 2005 | Mr. Sullivan is, and since 1975 has been, a Principal with Sullivan and Company LLC, a family-owned independent oil and natural gas exploration and production company founded in 1958, and he has served as a manager of that company since approximately 1995. He is also the Founder (1989) of Lumen Energy Corporation, serving as its Chairman and CEO from inception to the time of its sale in 2004. Mr. Sullivan was appointed to Oklahoma Governor Frank Keating's Cabinet as Secretary of Energy in March 2002. He received a BBA from the University of Notre Dame, and a MBA from the University of Michigan. Mr. Sullivan is a Board Member of the Oklahoma Independent Petroleum Association, St. John Medical Center, St. Joseph Residence, and former Board Member of University of Notre Dame Alumni Association, Catholic Charities and Gatesway Foundation. He also is Trustee for the Monte Cassino Endowment Trust, a Member of the University of Notre Dame Irish Studies Advisory Council and Past Chairman of the following School Boards: Cascia Hall Preparatory School, Monte Cassino School and School of St. Mary. |
|
| | |
| Gary R. Christopher Age 63 Director since 2005
| Mr. Christopher is engaged in personal investments and consulting and has been for more than five years. From August 1999 to January 2004, he served as President and CEO of PetroCorp Incorporated (a public oil and natural gas exploration company), and from March 1996 to August 1999 he served as the Acquisition Coordinator of Kaiser-Francis Oil Company. His other past professional experience includes serving as Vice President of Acquisitions for Indian Wells Oil Company, Senior Vice President and Manager of the Energy Lending Division of First National Bank of Tulsa and from 1991 to 1996 Senior Vice President and Manager of Energy Lending for Bank of Oklahoma. Previous to that, Mr. Christopher worked for Amerada Hess Corporation as a Reservoir Engineer and for Texaco, Inc. as a Production Engineer. Mr. Christopher is a member of the Society of Petroleum Engineers and the Oklahoma Independent Petroleum Association. Mr. Christopher received a B.S. degree in Petroleum Engineering from the University of Missouri at Rolla. Mr. Christopher is a past Director of the Petroleum Club of Tulsa, Middle Bay Oil Company, Three Tech Energy, PetroCorp Incorporated and a present Director of the Summit Bank of Oklahoma. |
The following table identifies our executive officers who are not directors as well as certain executive officers of our subsidiaries.
| | | | |
| |
| | Name and Age as of the 2012
2013 Annual Meeting
| | Position, Principal Occupation, Business Experience and Directorships
| | |
| | Mark E. Schell - Age 55 | 56 | Senior Vice President, General Counsel and Secretary | | |
| | David T. Merrill - Age 5152 | | Senior Vice President, Treasurer and Chief Financial Officer and Treasurer | | |
| | John H. Cromling - Age 64 | 65 | Executive Vice President of Unit Drilling Company | | |
| | Bradford J. Guidry - Age 56 | 57 | Executive Vice President of Unit Petroleum Company | | |
| | Robert H. Parks Jr. - Age 5758 | | President and Manager of Superior Pipeline Company, L.L.C. | | |
| | Don Hayes - Age 52 | | Vice President, Controller | | |
| | David Dunham - Age 32 | | Vice President of Corporate Planning | | |
| | Richard E. Heck - Age 51 | | Vice President, Safety, Health and Environment | | |
ITEM ITEM 2: ADVISORYADVISORY VOTEONEXECUTIVECOMPENSATION (“SAYONPAY” PAY”) The Dodd-Frank Wall Street Reform and Consumer Protection Act, enacted in July 2010, requires that we provide our stockholders with the opportunity to vote to approve, on a non-binding, advisory basis, the compensation of our NEOs as disclosed in this proxy statement in accordance with the compensation disclosure rules of the SEC.
We have chosen to provide our stockholders the opportunity to vote on our executive compensation once a year, in accordance with the frequency vote of our stockholders.
As described in detail under the heading “Compensation Discussion and Analysis,” we seek to closely align the interests of our NEOs with the interests of our
stockholders. Our compensation programs are designed to reward our NEOs for the achievement of short-term and long-term strategic and operational goals and the achievement of increased total stockholder return, while at the same time avoiding the encouragement of unnecessary or excessive risk-taking. The choices we make with respect to our NEOs’ compensation seek to balance our goal of paying fair, reasonable, and competitive compensation with our goal of attracting and retaining talented and motivated professionals in our industry. We believe the compensation package we have described in this proxy statement achieves that balance.
The vote on this resolution is not intended to address any specific element of compensation; rather, the vote relates to
the compensation of our NEOs, as described in this proxy statement in accordance with the compensation disclosure rules of the SEC. The vote is advisory, which means that the vote is not binding on the company, our board, or the compensation committee of the board. To the extent there is any significant vote against our NEO compensation as disclosed in this proxy statement, the compensation committee will evaluate whether any actions are necessary to address the concerns of stockholders. The affirmative vote of a majority of the shares present or represented and entitled to vote either in person or by proxy is required to approve this proposal. Accordingly, we ask our stockholders to vote on the following resolution at the Annual Meeting: “RESOLVED, that the Company’s stockholders approve, on an advisory basis, the compensation of the NEOs, as disclosed in the Company’s Proxy Statement for the
20122013 Annual Meeting of Stockholders under the compensation disclosure rules of the SEC, including the Compensation Discussion and Analysis, the
20112012 Summary Compensation Table, and the other related tables and disclosure.”
THETHE BOARDOFDIRECTORSUNANIMOUSLYRECOMMENDSAVOTEFORTHEAPPROVALOFTHECOMPENSATIONOFOURNEOS,,ASDISCLOSEDINTHISPROXYSTATEMENT. STATEMENT.
ITEM
ITEM 3:RE-APPROVALRATIFICATION OFPERFORMANCEGOALSINCLUDEDINTHE UNIT CORPORATION STOCKAND INCENTIVE COMPENSATION PLAN,ASCURRENTLYINEFFECT,FORTHEPURPOSES APPOINTMENT OFSECTION 162(M)OFTHE CODE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMWhy the Company is Seeking Stockholder Approval
Section 162(m) of the Code limits the corporate tax deductibility of compensation paid to “covered employees” (within the meaning of Section 162(m) of the Code) in excess of $1 million unless the compensation, in relevant part, satisfies the “performance-based compensation” exception under Section 162(m) of the Code. Qualified performance-based compensation must be paid solely on account of the attainment of one or more pre-established, objective performance goals.
Section 162(m) of the Code requires stockholder approval of the material terms of the performance goals applicable to awards intended to qualify as performance-based compensation under the Unit Corporation Stock and Incentive Compensation Plan (the “SIP”), and it requires re-approval of those goals every five years if the committee retains discretion to use different goals under performance-based compensation awards. Our committee retains discretion to select from among different goals under the terms of the SIP. Accordingly, we are asking our stockholders to re-approve the materials terms of the
performance goals contained in the SIP, which are described below, for purposes of establishing stockholder re-approval under Section 162(m) of the Code.
Note that we are not seeking approval for the SIP generally, as it has previously been approved by stockholders, nor are we seeking in this Item 3 approval for the Amended and Restated SIP, which we are requesting by separate vote under Item 4 of this proxy statement. Rather, in this Item 3, we are asking our stockholders to re-approve the material terms of the performance goals contained in the SIP for purposes of maximizing tax deductions available to the company under Section 162(m) of the Code for any future performance-based compensation to be paid under the SIP. Future awards will be made under the SIP only if Item 4 is not approved by our stockholders.
What Happens if Stockholder Approval of this Item 3 is Not Received?
What happens if stockholder approval of this Item 3 is not received will differ depending on whether Item 4 is approved or not. If the Amended and Restated SIP proposed under Item 4 is approved, then failure of this Item 3 will have no consequences as we will cease making awards under the original SIP and no tax deductions for performance-based compensation will be lost. If Item 4 is not approved, we will continue to make awards under the original SIP, and to the extent those awards are performance-based, we will lose the ability to qualify for tax deductions for amounts in excess of $1 million. For this reason we encourage stockholders to vote yes on both of these Items, as a safeguard to ensure that the company has the maximum available tax deductions under either scenario.
Required disclosures for purposes of obtaining stockholder approval of performance goals for purposes of Section 162(m) of the Code
To establish appropriate stockholder approval of the material performance goals under the SIP, we provide the following details on employees eligible for performance-based awards, the material business criteria for the performance goals, and the individual maximum amounts permitted for various types of awards under the plan:
The SIP provides for awards to eligible individuals, including employees of the company or any of its affiliates. Non-employee directors are not eligible participants under the current SIP.
Awards may be granted upon approval of our compensation committee (the “committee”) or any other duly authorized committee of our board appointed by our board to administer the SIP. As a result, it is not possible to determine the number of individuals to whom awards will be made in the future under the SIP, nor is it possible to disclose the amounts of any future awards. However, as of March 5, 2012, approximately 520 employees of the company were eligible to participate in the SIP. The
current executive officers of the company named in the Summary Compensation Table in this proxy statement are among the individuals eligible to receive awards under the SIP.
The SIP provides that, in order to meet the performance-based compensation exception under Section 162(m) of the Code, performance goals may be established by the committee for any award other than awards of stock options and stock appreciation rights. Awards of stock options and stock appreciation rights granted under the SIP are granted with a per-share exercise price no less than the “fair market value” of a share of our common stock on the date of grant and are intended to separately meet the performance-based compensation exception under Section 162(m) of the Code based on the SIP’s terms and conditions and the operation of the SIP.
In the case of awards intended to qualify as performance-based compensation under the SIP based on one or more applicable performance goals, those performance goals must be based on the attainment of specified levels of one or more of the following measures:
| (a) | Net earnings or net income (before or after taxes); |
| (e) | Operating earnings per share; |
| (f) | Return measures (including, but not limited to, return on assets, capital, equity, or sales); |
| (g) | Cash flow (including, but not limited to, operating cash flow, free cash flow, and cash flow return on capital); |
| (h) | Earnings before or after taxes, interest, depreciation, and/or amortization and including/excluding capital gains and losses; |
| (i) | Gross or operating margins; |
| (j) | Share price (including, but not limited to, growth measures and total shareholder return); |
| (m) | Customer satisfaction; |
| (n) | Employee satisfaction; |
| (o) | Working capital targets; |
Any performance measure may be used to measure the performance of the company as a whole, a company division or a subsidiary, or any combination thereof, in each case as the committee may deem appropriate in its sole discretion, and any performance measure may be used to measure performance as compared to the performance of a group of comparable companies or published or special index that the committee, in its sole discretion, deems appropriate.
The committee may provide in any award agreement that the evaluation of the level of attainment of a particular performance goal may include or exclude any of the following events that occurs during the relevant performance period (in the case of awards to any Section 16 officers, any such inclusion or exclusion must meet the requirements of Section 162(m) of the Code for deductibility for federal income tax purposes): (a) asset write-downs; (b) litigation or claim judgments or settlements; (c) the effect of changes in tax laws, accounting principles, or other laws or provisions affecting reported results; (d) any reorganization and restructuring programs; (e) extraordinary nonrecurring items as described in Accounting Principles Board Opinion No. 30 and/or in management’s discussion and analysis of financial condition and results of operations appearing in the company’s annual report to shareholders for the applicable year; (f) acquisitions or divestitures; and (g) foreign exchange gains and losses.
If the applicable tax or securities laws change in such manner to give the committee discretion to alter the applicable performance goals without obtaining stockholder approval of such changes, the committee may in its sole discretion make such changes without obtaining stockholder approval. Additionally, the committee may, in its sole discretion, make appropriate adjustments in the terms of any awards under the SIP to reflect or in relation to changes or distributions and may modify any other terms of outstanding awards (including modifications of performance criteria and changes in the length of performance periods). If the committee determines it is advisable to grant awards to Section 16 officers that shall not qualify as awards that meet the performance-based compensation exception under Section 162(m) of the Code, the committee may make such grants without satisfying the requirements of Section 162(m) of the Code.
Subject to adjustment in certain cases as provided in the SIP (e.g., in connection with a recapitalization or stock split, as determined by the committee), the SIP provides that: (a) the maximum number of shares that may be awarded in the form of options or stock appreciation rights (“SARs”) to an employee in any fiscal year is 100,000; (b) the maximum number of shares that may be awarded in the form of restricted stock to an employee in any fiscal year is 50,000; (c) the maximum number of shares that may be awarded in the form of performance shares or performance units to an employee in any fiscal year is 50,000 or equal to the value of 50,000 shares; (d) the maximum number of shares that may be awarded in the form of stock-based awards to an employee in any fiscal year is 50,000; and (e) the maximum amount that may be awarded in the form of cash-based awards to an employee in any fiscal year is $1,000,000.
This proposal and the description of the SIP herein address only the material terms of the performance goals that apply to awards granted under the SIP intended to qualify as performance-based compensation for purposes of Section
162(m) of the Code. The description is qualified in its entirety by the full text of the SIP, filed as Appendix A to the company’s proxy statement filed March 29, 2006 for the company’s 2006 annual stockholders meeting, incorporated by reference herein.
Approval Standard Under Section 162(m) of the Code
Under Section 162(m) of the Code, the material terms of a performance goal are approved by stockholders if, in a separate vote, a majority of the votes cast (in person or by proxy) on the issue are cast in favor of approval.
Board Recommendation
The board of directors of the company believes that the approval of the material terms of the performance goals applicable to awards intended to qualify as performance-based compensation granted under the SIP, as described above for purposes of Section 162(m) of the Code, is in the best interests of the company and its stockholders and will permit the committee to continue to grant performance-based awards under the SIP that meet the requirements for tax deductibility under Section 162(m) of the Code.
THEBOARDOFDIRECTORSRECOMMENDSTHATYOUVOTEFORTHERE-APPROVALOFTHEPERFORMANCEGOALSAPPLICABLETOAWARDSINTENDEDTOQUALIFYASPERFORMANCE-BASEDCOMPENSATIONGRANTEDUNDERTHECURRENTVERSIONOFTHE SIPFORPURPOSESOFSECTION 162(M)OFTHE CODE.
ITEM 4:APPROVALOFTHE AMENDEDAND RESTATED UNIT CORPORATION STOCKAND INCENTIVE COMPENSATION PLANTOINCREASENUMBEROFSHARESSUBJECTTOTHEPLAN,PERMITGRANTSOFAWARDSTONON-EMPLOYEEDIRECTORS,APPROVESECTION 162(M)PERFORMANCEGOALS,ANDINCREASEANNUALMAXIMUMAWARDLIMITS
Why the Company is Seeking Stockholder Approval
The Unit Corporation Stock and Incentive Compensation Plan (the “SIP”) was adopted by our board and approved by our stockholders in 2006. We are asking our stockholders to approve the Amended and Restated Stock and Incentive Compensation Plan (the “Amended and Restated SIP”) to make, among others, the following changes:
1. To increase the number of shares available for issuance
As of February 29, 2012, there were 893,680 remaining shares of common stock reserved for future grants under the existing SIP. If the Amended and Restated SIP is approved by our stockholders, the total number of shares of common stock reserved for future issuance under the Amended and Restated Plan will be 1,923,680, reflecting an increase of 800,000 authorized shares, and the addition of 230,000 shares transferred from the Directors’ Option
Plan, under which no new awards would be issued if the Amended and Restated SIP is approved.
We are asking our shareholders to approve the increased number of shares of our common stock authorized for issuance under the Amended and Restated SIP to allow us to continue to grant awards to our employees and to begin granting awards to non-employee members of our board of directors, who currently are not eligible to receive awards under the SIP. Our workforce continues to expand and as we continue to incentivize selected employees with awards under the SIP, the number of shares available for future issuance continues to decrease. We have found that granting awards under the SIP has permitted us to attract and retain qualified employees and to align their interests with those of our stockholders, and we believe it is in the best interests of our stockholders to continue making such awards and to include non-employee directors in the participant group, such that an increase in authorized shares is reasonable and in the company’s best interests.
If the Amended and Restated SIP is approved by our stockholders under this Item 4, it will serve as the successor plan to both the SIP and the Non-employee Directors’ 2000 Stock Option Plan (the “Directors’ Option Plan”) and no further grants will be made under either of those plans after that approval.
2. To add non-employee directors’ as participants under Amended and Restated SIP
We are asking our stockholders to add our non-employee directors to the group of participants eligible for awards under the Amended and Restated SIP because at this time the only form of equity award that can be granted to non-employee directors are stock options. The board believes it would be better for the committee to have a broader range of choices when selecting equity compensation for non-employee directors. The Amended and Restated Plan will permit the committee to select from non-qualified stock options, performance shares, performance units, restricted stock, restricted stock units, stock appreciation rights, cash-based awards, and cash stock-based awards when making awards to our non-employee directors. Just as our ability to grant awards under the SIP has allowed us to attract and retain employees and align the interests of our employees with those of our stockholders, our board of directors believes that permitting us to grant different types of equity awards to our non-employee directors under the Amended and Restated SIP would similarly help us attract and retain qualified non-employee directors while helping to align their interests with those of our stockholders.
If the Amended and Restated SIP is approved, the 230,000 shares available at this time under the Directors’ Option Plan will be added to the shares available under the Amended and Restated SIP, and the Directors’ Option Plan will be “frozen” as to new awards and no new awards will be issued under it. Under the Directors’ Option Plan, each non-employee director automatically received an option to purchase 3,500 shares of our common stock on the first
business day following each annual meeting of our stockholders. The option exercise price was the NYSE closing price of our common stock on that date. Payment of the exercise price could be made in cash or in shares of common stock that had been held by the director for at least one year. No stock option could be exercised during the first six months of its term except in the case of death. Each option had a ten-year term.
If the Amended and Restated SIP is not approved by our stockholders under this Item 4, we will not be permitted to select from the types of awards available under the SIP (i.e., non-qualified stock options, performance shares, performance units, restricted stock awards, restricted stock unit awards, stock appreciation rights, cash-based awards, and cash stock-based awards) when determining the types of awards to be granted to our non-employee directors, the Directors’ Option Plan will continue in effect according to its terms, we will continue to make annual stock option awards to our non-employee directors under the Directors’ Option Plan, and the Directors’ Option Plan will retain the 230,000 shares currently available under it for future awards.
3. To establish approval of performance goals under Amended and Restated SIP for purposes of Section 162(m) of the Code
If the Amended and Restated SIP is approved by stockholders, it will allow for awards that qualify as tax-deductible performance-based compensation under Section 162(m) of the Code. As described in Item 3 of this proxy statement, Section 162(m) of the Code generally places a $1 million annual limit on a company’s tax deduction for compensation paid to certain senior executives, other than compensation that satisfies the applicable requirements for a performance-based compensation exception. To qualify as performance-based compensation under Section 162(m) of the Code, the compensation must (among other requirements) be subject to attainment of performance goals that have been disclosed to stockholders and approved by a majority stockholder vote. We are asking stockholders to approve the material terms of the performance goals under the Amended and Restated SIP so that we may grant awards under it that qualify as performance-based compensation under Section 162(m) of the Code, and thus, would be tax deductible.
By approving the Amended and Restated SIP, the stockholders will be approving, among other things, the eligibility requirements, performance goals and limits on various stock awards contained therein for purposes of Section 162(m) of the Code.
4. To increase the maximum award limits available for performance-based awards for purposes of receiving tax deductions under Section 162(m)of the Code
If the Amended and Restated SIP is approved, the maximum award limits for purposes of receiving tax
deductions for performance-based awards to employees under Section 162(m) of the Code will be as follows:
Maximum aggregate number of shares in the form of options or SARs under any award in any one fiscal year to any one participant: 250,000
Maximum aggregate grant of restricted stock/RSUs under any award in any one fiscal year to any one participant: 125,000
Maximum aggregate grant of performance shares or performance units under any award in any one fiscal year to any one participant: 125,000
Maximum cash-based awards to any one participant in any one fiscal year: $1,500,000
Maximum aggregate stock-based award to any one participant in any one fiscal year: 125,000.
In the recent years we have made more of our awards performance-based, and the maximum potential payout under those awards could, in the near future, exceed the maximum payouts permitted under the original SIP. If these maximums are not increased and awards in excess of those limits are granted, the amount in excess of the limit will not qualify for tax deductions under Section 162(m) of the Code. We believe that increasing the limits available for performance based awards in order to preserve greater tax deductibility under Section 162(m) of the Code is in the best interests of both the company and the stockholders.
What happens if stockholder approval of this Item 4 is not received?
If the Amended and Restated SIP is not approved by our stockholders under this Item 4, the committee will continue to make awards to our employees under the original SIP, and we will continue to make annual stock option awards to our directors under the Directors Option Plan. If Item 4 is not approved, the number of shares available for issuance to employees under the SIP would not increase from 2,500,000 to 3,300,000, and the number of shares available for stock option awards to our non-employee directors would remain at 230,000 shares as currently available under the Directors Option Plan. If this Item 4 is not approved, we will not qualify for tax deductions under Section 162(m) of the Code for performance-based awards in excess of maximum award limits under the original SIP, which could reasonably be expected to be exceeded in the future. If neither Item 3 nor Item 4 is approved, there would be no tax deductions available to us under Section 162(m) of the Code for any performance-based awards.
Summary of the terms and conditions of the amended
and restated SIP
The principal features of the Amended and Restated SIP are set forth below. We first describe the material differences between the Amended and Restated SIP and the SIP (and, where necessary to provide additional
context, we describe terms and conditions of the Amended and Restated SIP that are consistent with the SIP), and we then describe the remaining terms and conditions of the Amended and Restated SIP which are materially consistent with the terms and conditions of the SIP. This summary is qualified in its entirety, however, by reference to the Amended and Restated SIP, which, in a form marked to show changes, is attached as Addendum A to this proxy statement and incorporated by reference herein.
Material differences between the Amended and Restated SIP and the SIP:
Number of Shares Available for Issuance Increased.As discussed above in this Item 4, if the Amended and Restated SIP is approved by our stockholders, the total authorized shares permitted under the Amended and Restated SIP will be 3,300,000, an increase of 800,000 shares over the 2,500,000 authorized in the original SIP. Of the 3,300,000 shares authorized, and including the 230,000 shares that will come into the Amended and Restated Plan from the Directors’ Option Plan, 1,923,680 shares will be available for future awards under the Amended and Restated Plan. The closing sale price of a share of common stock, as quoted on the NYSE on March 5, 2012, was $47.02.
Non-Employee Directors Eligible to Participate.As discussed above in this Item 4, if the Amended and Restated SIP is approved by our stockholders, we will be able to grant awards to non-employee members of our board under the Amended and Restated SIP. Those directors currently are not eligible to receive awards under the SIP; the SIP currently provides for awards to eligible individuals, which includes only employees of the company or any of its affiliates and excludes non-employee members of our board of directors.
We are unable at this time to estimate the number of employees that would be eligible to participate in the Amended and Restated SIP, but there are currently approximately 220 employees who hold awards outstanding under the SIP, and there are nine non-employee directors and 520 employees who would be eligible to participate. Awards under the Amended and Restated SIP (which we refer to hereinafter as “Awards”) may be granted in any one or a combination of the following forms:
incentive stock options under Section 422 of the Code (non-employee directors would not be eligible to receive grants of incentive stock options);
non-qualified stock options;
stock appreciation rights;
other stock-based awards.
Change of Control Definition Amended.We have revised the definition of a “change of control” in the Amended and Restated SIP to provide that the acquisition of 20% (rather than 15%, as currently provided under the SIP) of the outstanding shares of our common stock (by vote or value) would generally trigger a change in control of us. Additionally, we have amended the change of control definition in the Amended and Restated SIP to provide that the consummation (rather than the approval by our stockholders) of a merger, reorganization, consolidation or sale or other disposition of all or substantially all of our assets generally constitutes a change in control of us. These changes are believed to meet the guidelines recommended by Institutional Shareholder Services, a proxy advisory company and we believe they align with the interests of our stockholders.
“Safety” added as a Performance Goal.In addition to the performance goals described under our discussion of performance goals being approved under Item 3 for the current version of the SIP, we have amended the SIP to include “safety” as a permitted performance goal. We believe that safety is a valuable performance goal in any business, and an appropriate performance goal that we should be able to compensate under the Amended and Restated SIP. Accordingly, under the Amended and Restated SIP, in order to meet the performance-based compensation exception under Section 162(m) of the Code, permissible performance goals must be based on the attainment of specified levels of one or more of the following measures:
| (a) | Net earnings or net income (before or after taxes); |
| (e) | Operating earnings per share; |
| (f) | Return measures (including, but not limited to, return on assets, capital, equity, or sales); |
| (g) | Cash flow (including, but not limited to, operating cash flow, free cash flow, and cash flow return on capital); |
| (h) | Earnings before or after taxes, interest, depreciation, and/or amortization and including/excluding capital gains and losses; |
| (i) | Gross or operating margins; |
| (j) | Share price (including, but not limited to, growth measures and total shareholder return); |
| (m) | Customer satisfaction; |
| (n) | Employee satisfaction; |
| (o) | Working capital targets; |
Maximum Limits applicable to Performance-based Compensation Increased. Under the SIP, awards allowed to qualify as performance-based compensation were subject to the following maximum annual limits:
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Maximum aggregate number of shares in the form of options or SARs under any award in any one fiscal year to any one participant: 100,000;
Maximum aggregate grant of restricted stock or restricted stock units under any award in any one fiscal year to any one participant: 50,000;
Maximum aggregate number of performance shares or performance units under any award in any one fiscal year to any one participant: 50,000;
Maximum aggregate stock-based award to any one participant in any one fiscal year: 50,000;
Maximum value of cash-based awards to any one participant in any one fiscal year: $1,000,000.
Under the Amended and Restated SIP, the annual maximums for performance-based compensation are as follows:
Maximum aggregate number of shares in the form of options or SARs under any award in any one fiscal year to any one participant: 250,000;
Maximum aggregate grant of restricted stock or restricted stock units under any award in any one fiscal year to any one participant: 125,000;
Maximum aggregate number of performance shares or performance units under any award in any one fiscal year to any one participant: 125,000;
Maximum aggregate stock-based award to any one participant in any one fiscal year: 125,000;
Maximum value of cash-based to any one participant in any one fiscal year: $1,500,000.
The increased annual maximums do not change the number of shares authorized for issuance under the Amended and Restated SIP, and they allow the company greater latitude in making awards that are performance based while still receiving maximum available tax deductions, which we believe to be in the best interests of the stockholders.
Terms of the Amended and Restated SIP that are consistent with the original SIP:
Administration of the plan.The committee (the “committee”) administers the Amended and Restated SIP and has authority to make Awards, to set the terms of the Awards, to interpret the Amended and Restated SIP, to establish any rules or regulations relating to the Amended and Restated SIP that it determines to be appropriate, and to make any other determination that it believes necessary or advisable for the proper administration of the Amended and Restated SIP. Subject to the limitations specified in the Amended and Restated SIP, the committee may delegate its authority to appropriate company personnel.
Limitations on incentive stock options and adjustments to shares issuable through the plan. The Amended and Restated Plan limits the maximum number of shares that can be issued as “incentive stock options” to 2,000,000 shares.
All Awards shall be subject to the minimum vesting periods, determined by the committee and included in the Award agreement.
For purposes of determining the maximum number of shares of common stock available for delivery under the Amended and Restated SIP, shares of common stock that are not delivered because the Award is forfeited, canceled or settled in cash will not be deemed to have been delivered under the Amended and Restated SIP. With respect to stock appreciation rights, the net number of shares of common stock delivered on exercise of the stock appreciation right will be counted against the Amended and Restated SIP plan limits.
Proportionate adjustments will be made to all of the share limitations provided in the Amended and Restated SIP, including shares subject to outstanding Awards, in the event of any recapitalization, stock dividend, stock split, combination of shares or other change in the shares of common stock, and the terms of any Award will be adjusted to the extent appropriate to provide participants with the same relative rights before and after the occurrence of any such event.
Amendments to the Amended and Restated SIP.The committee or board may, at any time and from time to time, alter, amend, modify, suspend, or terminate the Amended and Restated SIP in whole or in part; provided however, that:
without the prior approval of the company’s stockholders, options and stock appreciation rights issued under the Amended and Restated SIP will not be repriced, replaced, regranted through cancellation or by lowering the exercise price of a previously granted option, nor will they be cashed out; and
to the extent necessary under any applicable law, regulation or exchange requirement, no amendment shall be effective unless approved by the stockholders of the company in accordance with applicable law, regulation, or exchange requirement.
Types of Awards.Each type of Award that may be granted under the Amended and Restated SIP is described below:
Stock Options.For employees, the committee may grant non-qualified stock options or incentive stock options to purchase shares of common stock. For non-employee directors, the committee can grant non-qualified stock options, but cannot grant incentive stock options. The committee will determine the number and exercise price of the options, and the time
or times that the options become exercisable, provided that the option exercise price may not be less than the fair market value of a share of common stock on the date of grant, except for an option granted in substitution of an outstanding award in an acquisition transaction in accordance with Section 424(h) of the Code. The term of an option will also be determined by the committee, but may not exceed 10 years.
The option exercise price may be paid in cash; by check; in shares of common stock, subject to certain limitations; through a “cashless” exercise arrangement with a broker approved in advance by us; or in any other manner authorized by the committee. Incentive stock options will be subject to certain additional requirements necessary in order to qualify as incentive stock options under Section 422 of the Code.
Except for certain permitted adjustments, unless approved by our stockholders, (a) the exercise price for any outstanding option granted under the Amended and Restated SIP may not be decreased after the date of grant and (b) an outstanding option that has been granted under the Amended and Restated SIP may not, as of any date that such option has a per share exercise price that is greater than the then current fair market value of our common stock, be surrendered as consideration for the grant of a new option with a lower exercise price, shares of common stock, shares of restricted stock, restricted stock units, another “stock-based” award or a cash payment, nor may they be cashed out.
Restricted Stock.Shares of common stock may be granted by the committee to an eligible employee or non-employee director and made subject to restrictions on sale, pledge or other transfer for a certain period (the restricted period). All shares of restricted stock will be subject to such restrictions as the committee may provide in an Award agreement with the participant, including provisions obligating the participant to forfeit or resell the shares to us in the event of termination of employment or service or if specified performance goals or targets are not met. Participant’s rights with respect to such shares shall be subject to the restrictions provided in the Award agreement and the Amended and Restated SIP.
Restricted Stock Units.A restricted stock unit represents the right to receive from us, on the respective scheduled vesting or payment date for such restricted stock unit, one share of common stock. An Award of restricted stock units may be subject to the attainment of specified performance goals or targets, forfeitability provisions and such other terms and conditions as the committee may determine, subject to the provisions of the Amended and Restated SIP. To the extent an award of restricted stock units is intended to qualify as performance-based compensation under Section 162(m), it must be
granted subject to the attainment of performance goals and meet the additional requirements imposed by Section 162(m).
Stock Appreciation Rights.A stock appreciation right may be granted by the committee in its discretion. The committee may grant free standing stock appreciation rights, tandem stock appreciation rights or any combination of these forms of stock appreciation rights. The grant price for each stock appreciation right shall be determined by the committee and shall be specified in the Award agreement, but in no event shall the grant price be less than the fair market value of the shares of common stock of the company on the date the stock appreciation right is granted. The grant price of tandem stock appreciation rights shall be equal to the option price of the related option. The term of the stock appreciation right shall be determined by the committee and specified in the Award agreement, which relates to the stock appreciation right. No stock appreciation right will be exercised after the tenth anniversary from the date of its grant. However, for employees employed outside the United States and who are third-country nationals, the committee may grant stock appreciation rights with a term of more than 10 years. Outstanding stock appreciation rights may be exercised on whatever terms the condition the committee imposes. Tandem stock appreciation rights may be exercised for all or part of the shares subject to the related option on the surrender of the right to exercise equivalent portions of the related option. A tandem stock appreciation right may be exercised only with respect to the shares for which the related option is unexercisable. With respect to a tandem stock appreciation right granted in connection with an incentive stock option, (a) the tandem stock appreciation right will expire no later than the expiration of the underlying incentive stock option; (b) the value of the payout with respect to the tandem stock appreciation right will be for no more than 100% of the difference between the option price of the underlying incentive stock option and the fair market value of the shares subject to the underlying incentive stock option at the time the tandem stock appreciation right is exercised; and (c) the tandem stock appreciation right may be exercised only when the fair market value of the shares subject to the incentive stock option exceeds the option price of the incentive stock option.
On the exercise of a stock appreciation right, a participant will be entitled to receive payment in an amount determined by multiplying: (a) the difference between the fair market value of a share of common stock on the date of exercise and the grant price; by (b) the number of shares with respect to which the stock appreciation right is exercised. In the discretion of the committee, the payment of the stock
appreciation right exercised may be in cash, shares of equivalent value (based on the fair market value on the date of exercise of a stock appreciation right) in some combination thereof or in any other form approved by the committee.
Other Stock-Based Awards.The Amended and Restated SIP also authorizes the committee to grant participants awards of common stock and other awards that are denominated in, payable in, valued in whole or in part by reference to, or are otherwise based on the value of, or the appreciation in value of, shares of common stock (other stock-based awards). The committee has discretion to determine the participants to whom other stock-based awards are to be made, the times at which such awards are to be made, the size of such awards, the form of payment, and all other conditions of such awards, including any restrictions, deferral periods or performance requirements.
Performance-Based Compensation Under Section 162(m). Stock options and stock appreciation rights granted in accordance with the terms of the Amended and Restated SIP, the exercise of which is based on the attainment of performance goals, will qualify as performance-based compensation under Section 162(m). Grants of any restricted stock, restricted stock units or other stock-based awards that we intend to qualify as performance-based compensation under Section 162(m) must be made subject to the achievement of pre-established performance goals. Eligible participants are employees of the company or an affiliate as well as Non-employee Directors. Awards may be granted upon approval of our compensation committee ( the “committee”) or any other duly authorized committee of our board of directors appointed by our board to administer the Amended and Restated SIP. As a result, it is not possible to determine the number of individuals to whom awards will be made in the future under the Amended and Restated SIP, nor is it possible to disclose the amounts of any future awards. However, as of March 5, 2012, approximately 520 employees of the company were eligible to participate in the SIP, and nine Non-employee Directors were eligible. The current executive officers of the company named in the Summary Compensation Table in this proxy statement are among the individuals eligible to receive awards under the Amended and Restated SIP.
The Amended and Restated SIP provides that, in order to meet the performance-based compensation exception under Section 162(m) of the Code, performance goals may be established by the committee for any award other than awards of stock options and stock appreciation rights. (Awards of stock options and stock appreciation rights granted under the Amended and Restated SIP are granted with
a per-share exercise price no less than the “fair market value” of a share of our common stock on the date of grant and are intended to separately meet the performance-based compensation exception under Section 162(m) of the Code based on the Amended and Restated SIP’s terms and conditions and the operation of that plan.)
The pre-established performance goals will be based on any or a combination of the following business criteria applied to our company as a whole, a company division or a subsidiary or any combination thereof:
| (a) | Net earnings or net income (before or after taxes); |
| (e) | Operating earnings per share; |
| (f) | Return measures (including, but not limited to, return on assets, capital, equity, or sales); |
| (g) | Cash flow (including, but not limited to, operating cash flow, free cash flow, and cash flow return on capital); |
| (h) | Earnings before or after taxes, interest, depreciation, and/or amortization and including/excluding capital gains and losses; |
| (i) | Gross or operating margins; |
| (j) | Share price (including, but not limited to, growth measures and total stockholder return); |
| (m) | Customer satisfaction; |
| (n) | Employee satisfaction; |
| (o) | Working capital targets; |
Any performance goal may be used to measure the performance of the company as a whole, a company division or a subsidiary, or any combination thereof, as the committee may deem appropriate, or any of the above performance measures as compared to the performance of a group of comparative companies, or published or special index that the committee, in its sole discretion, deems appropriate.
Subject to adjustment in certain cases as provided in the Amended and Restated SIP (e.g., in connection with a recapitalization or stock split, as determined by the committee), the Amended and Restated SIP provides that: (a) the maximum number of shares that may be awarded in the form of options or stock appreciation rights to an employee in any fiscal year is 250,000; (b) the maximum number of shares that may be awarded in the form of restricted stock to an
employee in any fiscal year is 125,000; (c) the maximum number of shares that may be awarded in the form of performance shares or performance units to an employee in any fiscal year is 125,000 or equal to the value of 125,000 shares; (d) the maximum number of shares that may be awarded in the form of stock-based awards to an employee in any fiscal year is 125,000; and (e) the maximum amount that may be awarded in the form of cash-based awards to an employee in any fiscal year is $1,500,000.
The committee may provide in any award agreement that the evaluation of the level of attainment of a particular performance goal may include or exclude any of the following events that occurs during the relevant performance period (in the case of awards to any Section 16 officers, any such inclusion or exclusion must meet the requirements of Section 162(m) of the Code for deductibility for federal income tax purposes): (a) asset write-downs; (b) litigation or claim judgments or settlements; (c) the effect of changes in tax laws, accounting principles, or other laws or provisions affecting reported results; (d) any reorganization and restructuring programs; (e) extraordinary nonrecurring items as described in Accounting Principles Board Opinion No. 30 and/or in management’s discussion and analysis of financial condition and results of operations appearing in the company’s annual report to shareholders for the applicable year; (f) acquisitions or divestitures; and (g) foreign exchange gains and losses.
If the applicable tax or securities laws change in such manner to give the committee discretion to alter the applicable performance goals without obtaining stockholder approval of such changes, the committee may in its sole discretion make such changes without obtaining stockholder approval. Additionally, the committee may, in its sole discretion, make appropriate adjustments in the terms of any awards under the Amended and Restated SIP to reflect or in relation to changes or distributions and may modify any other terms of outstanding awards (including modifications of performance criteria and changes in the length of performance periods). If the committee determines it is advisable to grant awards to Section 16 officers that shall not qualify as awards that meet the performance-based compensation exception under Section 162(m) of the Code, the committee may make such grants without satisfying the requirements of Section 162(m) of the Code.
The committee has authority to use different targets from time to time under the performance goals provided in the Amended and Restated SIP. As a result, the regulations under Section 162(m) require that the material terms of the performance goals be re-approved by the stockholders every five years. Approval of the amended and restated Amended and Restated SIP will also constitute approval of the plan
by our stockholders for purposes of 162(m). To qualify as performance-based compensation, grants of restricted stock, restricted stock units and other stock-based awards will be required to satisfy the other applicable requirements of Section 162(m).
Termination of Employment.If a participant ceases to be employed by us or provide services to us for any reason, including death, or his outstanding Awards may be exercised or shall expire at such time or times as may be determined by the committee and described in the Award agreement.
Change of Control.In the event of a change of control of our company, as defined in the Amended and Restated SIP, unless otherwise provided in the Award agreement or the compensation committee determines that equivalent awards have been substituted for Awards outstanding immediately prior to the change of control (in which case Awards shall not vest or become exercisable upon such change of control), all Awards will become fully vested and exercisable, all restrictions or limitations on any Awards will generally lapse and, all performance criteria and other conditions relating to the payment of Awards will generally be deemed to be achieved or waived.
Transferability of Awards.The Awards awarded under the plan may not be transferred except
by the laws of descent and distribution; or
in the case of non-qualified stock options only, if permitted by the committee and if so provided in the Award agreement.
Payment of Withholding Taxes.We may withhold from any payments or stock issuances under the Amended and Restated SIP, or collect as a condition of payment, any taxes required by law to be withheld. Any participant may, but is not required to, satisfy his or her withholding tax obligation by electing to deliver currently owned shares of common stock or to have us withhold, from the shares the participant would otherwise receive, shares of common stock, in each case having a value equal to the minimum amount required to be withheld. This election must be made before the date on which the amount of tax to be withheld is determined and is subject to the committee’s right of disapproval.
Awards to be Granted
Grants of awards to selected employees and non-employee directors selected by the committee will be made in the future as necessary to attract and retain employees and non-employee directors. Accordingly, it is not possible to determine currently the benefits that will be received by such personnel.
Federal Income Tax Consequences of Stock Options
Under existing federal income tax provisions, a participant who is granted a stock option normally will not realize any
income, nor will we normally receive any deduction for federal income tax purposes, in the year the option is granted.
When a non-qualified stock option granted under the Amended and Restated SIP is exercised, the participant will realize ordinary income measured by the difference between the aggregate purchase price of the shares of common stock acquired and the aggregate fair market value of the shares of common stock acquired on the exercise date and, subject to the limitations of Section 162(m) of the Code, we will be entitled to a deduction in the year the option is exercised equal to the amount the participant is required to treat as ordinary income.
A participant generally will not recognize any income on the exercise of any incentive stock option, but the excess of the fair market value of the shares at the time of exercise over the option price will be an item of tax preference, which may, depending on particular factors relating to the employee, subject the participant to the alternative minimum tax imposed by Section 55 of the Code. The alternative minimum tax is imposed in addition to the federal individual income tax, and it is intended to ensure that individual taxpayers do not completely avoid federal income tax by using preference items. A participant will recognize capital gain or loss in the amount of the difference between the exercise price and the sale price on the sale or exchange of stock acquired pursuant to the exercise of an incentive stock option, provided the employee does not dispose of such stock within two years from the date of grant and one year from the date of exercise of the incentive stock option (the holding periods). A participant disposing of such shares before the expiration of the holding periods will recognize ordinary income generally equal to the difference between the option price and the lesser of the fair market value of the stock on the date of exercise or date of sale. The remaining gain, if any, will be short-term capital gain. We will not be entitled to a federal income tax deduction in connection with the exercise of an incentive stock option, except where the participant disposes of the shares of common stock received upon exercise before the expiration of the holding periods.
If the exercise price of a non-qualified option is paid by the surrender of previously owned shares, the basis and the holding period of the previously owned shares carry over to the same number of shares received in exchange for the previously owned shares. The compensation income recognized on exercise of these options is added to the
basis of the shares received. If the exercised option is an incentive stock option and the shares surrendered were acquired through the exercise of an incentive stock option and have not been held for the holding periods, the optionee will recognize income on such exchange, and the basis of the shares received will be equal to the fair market value of the shares surrendered. If the applicable holding period has been met on the date of exercise, there will be no income recognition and the basis and the holding period of the previously owned shares will carry over to the same number of shares received in exchange, and the remaining shares will begin a new holding period and have a zero basis.
If, on a change of control of our company, the exercisability or vesting of an Award is accelerated, any excess on the date of the change of control of the fair market value of the shares or cash issued under accelerated Awards over the purchase price of such shares, if any, may be characterized as “parachute payments” (within the meaning of Section 280G of the Code) if the sum of such amounts and any other such contingent payments received by the participant exceeds an amount equal to three times the “base amount” for such participant. The base amount generally is the average of the annual compensation of such employee for the five years preceding such change in ownership or control. An “excess parachute payment,” with respect to any participant, is the excess of the parachute payments to such person, in the aggregate, over and above such person’s base amount. If the amounts received by a participant upon a change of control are characterized as parachute payments, such employee will be subject to a 20% excise tax on the excess parachute payment and we will be denied any deduction with respect to such excess parachute payment.
Vote Required
Approval of the Amended and Restated SIP requires the affirmative vote of the holders of a majority of the votes cast on the Amended and Restated SIP, and the total votes cast on the proposal must represent more than 50% of our outstanding common stock as of the record date of the stockholders’ meeting. Under Section 162(m) of the Code, the material terms of a performance goal are approved by stockholders if, in a separate vote, a majority of the votes cast (in person or by proxy) on the issue are cast in favor of approval, and approval of this Item 4 is deemed to satisfy the requirements of Section 162(m) with respect to approval of performance goals.
The following table provides information for all equity compensation plans as of the fiscal year ended December 31, 2011, under which our equity securities were authorized for issuance:
| | | | | | |
| Plan Category | | Number of Securities to be Issued Upon Exercise of
Outstanding Options, Warrants and Rights (a) | | Weighted Average Exercise Price of
Outstanding Options, Warrants and Rights (b) | | Number of Securities
Remaining Available for Future Issuance Under
Equity Compensation Plans
(Excluding Securities Reflected in Column (a)) (c) |
| Equity compensation plans approved by security holders(1) | | 338,480(2) | | $41.40 | | 1,491,616(3) |
| Equity compensation plans not approved by security holders | | - | | - | | - |
Total | | 338,480 | | $41.40 | | 1,491,616 |
Notes to Table:
(1) | Shares awarded under these plans may be newly issued, from our treasury, or acquired in the open market. |
(2) | This number includes the following: |
| 138,980 stock options outstanding under the company’s Amended and Restated Stock Option Plan. |
| 199,500 stock options outstanding under the Non-Employee Directors’ Stock Option Plan. |
(3) | This number reflects 230,000 shares available for issuance under the Non-Employee Directors’ Stock Option Plan and 1,261,616 shares available for issuance under the Unit Corporation Stock and Incentive Compensation Plan. No more than 2,000,000 of the shares available under the Unit Corporation Stock and Incentive Compensation Plan may be issued as “incentive stock options” and all of the shares available under this plan may be issued as restricted stock. In addition, shares related to grants that are forfeited, terminated, cancelled, expire unexercised, or settled in such manner that all or some of the shares are not issued to a participant shall immediately become available for issuance. |
THEBOARDOFDIRECTORSUNANIMOUSLYRECOMMENDSTHATYOUVOTEFORTHEPROPOSALTOAPPROVETHE AMENDEDAND RESTATED SIP.
ITEM 5: RATIFICATIONOFAPPOINTMENTOFINDEPENDENTREGISTEREDPUBLICACCOUNTINGFIRM
At its meeting scheduled for April 20122013 our audit committee expects to appoint PricewaterhouseCoopers LLP as our independent registered public accounting firm for our 20122013 fiscal year. We are asking you to ratify and approve that action. A representative of PricewaterhouseCoopers LLP, will attend the annual meeting, will have the opportunity to make a statement if he or she desires to do so, and will be available to answer appropriate questions.
Although the law does not require this ratification, the audit committee believes that you should be given the opportunity to express your views on this matter.
However, even if you ratify the selection, the audit committee may still appoint a new independent registered public accounting firm at any time if it believes that change would be in the best interest of the company and its stockholders. Failure to ratify this selection is not binding on the audit committee. However, if our stockholders do not ratify this selection, the audit committee will reconsider the appointment.
THEBOARDOFDIRECTORSUNANIMOUSLYRECOMMENDSTHATYOUVOTEFORAPPROVAL,WHICHVOTEWILLACTTORATIFYTHESELECTIONOF PRICEWATERHOUSECOOPERSLLP.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR APPROVAL, WHICH VOTE WILL ACT TO RATIFY THE SELECTION OF PRICEWATERHOUSECOOPERS LLP.
SECTION 16(A)SECTION 16(A) BENEFICIAL
OWNERSHIPREPORTINGCOMPLIANCE Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our directors and officers and persons who own more than 10% of a registered class of our equity securities to file initial reports of ownership and reports of changes in ownership with the SEC. These persons are required by SEC regulation to furnish us with copies of all Section 16(a) forms they file.
Based solely on a review of the copies of the forms furnished to us, we believe that during 20112012 all Section 16(a) filing requirements applicable to our reporting
persons were complied with and all reports were timely filed.
MATTERSMATTERS WHICH
MAYCOMEBEFORETHEMEETING The board does not intend to bring any other matters before the meeting, nor do we know of any matters that other persons intend to bring before the meeting. However, should other matters not mentioned in this proxy statement properly come before the meeting, the persons named in the accompanying proxy card will vote on them in accordance with their best judgment.
20132014 STOCKHOLDER
PROPOSALSORNOMINATIONS Stockholder proposals.For a stockholder proposal to be considered for inclusion in our proxy statement for next year’syear's annual meeting, the written proposal must be received by our corporate secretary at our principal executive offices no later than November 16, 2012.15, 2013. If the date of next year’syear's annual meeting is moved more than 30 days before or after the anniversary date of this year’syear's annual meeting, the deadline for inclusion of proposals in
the
company’scompany's proxy statement is instead a reasonable time before the company begins to print and mail its proxy materials. These proposals also will need to comply with SEC regulations under Rule 14a-8 regarding the inclusion of stockholder proposals in company-sponsored proxy materials. Proposals should be addressed to:
7130 South Lewis Avenue, Suite 1000
For a stockholder proposal that is not intended to be included in the
company’scompany's proxy statement under Rule 14a-8, the stockholder must deliver a proxy statement and form of proxy to holders of a sufficient number of shares of our common stock to approve that proposal, provide the information required by our bylaws and give timely notice to our corporate secretary in accordance with the bylaws, which, in general, require that the notice be received by our corporate secretary:
not earlier than the close of business on January 2, 2013;1, 2014; and
not later than the close of business on February 1, 2013.
January 31, 2014.If the date of the stockholder meeting is moved more than 30 days before or 70 days after the anniversary date of our annual meeting for the prior year, then notice of a stockholder proposal that is not intended to be included in our proxy statement under Rule 14a-8 must be received no earlier than the close of business 120 days before the meeting and no later than the close of business on the later of the following two dates:
90 days before the meeting; and
10 days after public announcement of the meeting date.
Nomination of director candidates.You may propose director candidates for consideration by the board’sboard's nominating and governance committee. Any recommendation should include the nominee’snominee's name and qualifications for board membership and should be directed to our corporate secretary at the address of our principal executive offices set forth above. In addition, our bylaws permit a stockholder to nominate directors for election at an annual stockholder meeting. To nominate a director, a stockholder must deliver a proxy statement and
form of proxy to holders of a sufficient number of our shares of common stock to elect the nominee and provide the information required by our bylaws, including a statement by the stockholder identifying (i) the name and address of the stockholder, as they appear on the company’scompany's books, and of the beneficial owner, if any, on whose behalf the nomination or proposal is made, (ii) the class and number of shares of our common stock which are owned beneficially and of record by the stockholder (and such beneficial owner), (iii) whether and the extent to which any hedging or other transaction or series of transactions has been entered into by or on behalf of, or any other agreement, arrangement or understanding (including any short positions or any borrowing or lending of shares of stock) has been made, the effect or intent of which is to mitigate loss or manage risk of a stock price change for or to increase the voting power of such stockholder or beneficial owner with respect to any shares of stock of the corporation, (iv) a representation that the stockholder is a holder of record of shares of our common stock entitled to vote at the meeting and intends to appear in person or by proxy at the meeting to propose the nomination, and (v) a representation whether the stockholder or the beneficial owner, if any, intends or is part of a group which intends (A) to deliver a proxy statement and/or form a proxy to holders of at least the percentage of our common stock required to elect the nominee and/or (B) otherwise to solicit proxies from stockholders in support of the nomination. In addition, the stockholder must give timely notice to our corporate secretary in accordance with our bylaws, which, in general, require that the notice be received by the corporate secretary within the time period described above under “Stockholder Proposals.proposals.”
CONTACTINGThe following options are available if you would like to contact
us.us:if you would like to receive information about the company:
Our home page on the Internet, located at
http://www.unitcorp.com, gives you access to certain information regarding the company. This site contains our press releases, financial information and stock quotes, as well as our SEC filings. An online version of this proxy statement is also located on the site.
if you would like to contact us direct,directly, please call our Investor Relations Department at (918) 493-7700, or send your correspondence to the following address:
7130 South Lewis Avenue, Suite 1000
Tulsa, Oklahoma 74136
AVAILABILITYAVAILABILITY OF
OURFORM 10-K,
ANNUALREPORTANDPROXYSTATEMENT
Copies of our Form 10-K for the fiscal year ended December 31,
2011,2012, as filed with the SEC, may be obtained without charge by writing to: Mark E. Schell, Secretary, Unit Corporation, 7130 South Lewis Avenue, Suite 1000, Tulsa, Oklahoma 74136. You also may view a copy of the Form 10-K electronically by accessing our website at
www.unitcorp.com/corpgov.html.investor/filings.htm
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE STOCKHOLDER MEETING TO BE HELD ON MAY
2, 20121, 2013
You may access our 20112012 annual report and this proxy statement and our form of proxy for our May 2, 2012
1, 2013 annual meeting of stockholders at our website atwww.unitcorp.com/corpgov.html,, which does not have “cookies” that identify visitors to the site.
INCORPORATIONINCORPORATION BY
REFERENCE To the extent that this proxy statement is incorporated by reference into any other filing by us under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, the sections of this proxy statement entitled “Compensation Committee Report” and “Report of the Audit Committee” (to the extent permitted by the rules of the SEC), will not be deemed incorporated unless specifically provided otherwise in such filing. Information contained on or connected to our website is not incorporated by reference into this proxy statement and should not be considered part of this proxy statement or any other filing that we make with the SECSEC.
Addendum A
Unit Corporation
Stock and Incentive Compensation Plan
Effective as ofAmended and Restated May 3, 20062, 2012
Table of Contents
| | | | | | | | |
| | | | | | | Page | |
| |
Article 1. Establishment, Purpose, and Duration | | | 1 | |
| | 1.1 | | Establishment of this Plan. | | | 1 | |
| | 1.2 | | Purpose of this Plan. | | | 1 | |
| | 1.3 | | Duration of this Plan. | | | 1 | |
| | 1.4 | | Successor Plan. | | | 1 | |
| |
Article 2. Definitions | | | 1 | |
| |
Article 3. Administration | | | 5 | |
| | 3.1 | | General. | | | 5 | |
| | 3.2 | | Authority of the Committee. | | | 5 | |
| | 3.3 | | Delegation. | | | 5 | |
| |
Article 4. Shares Subject to this Plan and Maximum Awards | | | 6 | |
| | 4.1 | | Number of Shares Available for Awards. | | | 6 | |
| | 4.2 | | Adjustments in Authorized Shares. | | | 6 | |
| |
Article 5. Eligibility and Participation | | | 7 | |
| | 5.1 | | Eligibility. | | | 7 | |
| | 5.2 | | Actual Participation. | | | 7 | |
| |
Article 6. Stock Options | | | 7 | |
| | 6.1 | | Grant of Options. | | | 7 | |
| | 6.2 | | Award Agreement. | | | 7 | |
| | 6.3 | | Option Price. | | | 7 | |
| | 6.4 | | Duration of Options. | | | 7 | |
| | 6.5 | | Exercise of Options. | | | 7 | |
| | 6.6 | | Payment. | | | 8 | |
| | 6.7 | | Restrictions on Share Transferability. | | | 8 | |
| | 6.8 | | Termination of Employment. | | | 8 | |
| | 6.9 | | Nontransferability of Options. | | | 8 | |
| | 6.10 | | Notification of Disqualifying Disposition. | | | 8 | |
| |
Article 7. Stock Appreciation Rights | | | 8 | |
| | 7.1 | | Grant of SARs. | | | 8 | |
| | 7.2 | | SAR Agreement. | | | 9 | |
| | 7.3 | | Term of SAR. | | | 9 | |
| | 7.4 | | Exercise of Freestanding SARs. | | | 9 | |
| | 7.5 | | Exercise of Tandem SARs. | | | 9 | |
| | 7.6 | | Payment of SAR Amount. | | | 9 | |
| | 7.7 | | Termination of Employment. | | | 9 | |
| | 7.8 | | Nontransferability of SARs. | | | 9 | |
| | 7.9 | | Other Restrictions. | | | 9 | |
| |
Article 8. Restricted Stock and Restricted Stock Units | | | 9 | |
| | 8.1 | | Grant of Restricted Stock or Restricted Stock Units. | | | 9 | |
| | 8.2 | | Restricted Stock or Restricted Stock Unit Agreement. | | | 10 | |
| | 8.3 | | Nontransferability of Restricted Stock and Restricted Stock Units. | | | 10 | |
| | 8.4 | | Other Restrictions. | | | 10 | |
| | 8.5 | | Certificate Legend. | | | 10 | |
| | 8.6 | | Voting Rights. | | | 10 | |
| | 8.7 | | Dividends and Other Distributions. | | | 10 | |
| | 8.8 | | Termination of Employment. | | | 11 | |
| | | | | | | | |
| | 8.9 | | Payment In Consideration of Restricted Stock Units. | | | 11 | |
| |
Article 9. Performance Shares and Performance Units | | | 11 | |
| | 9.1 | | Grant of Performance Shares and Performance Units. | | | 11 | |
| | 9.2 | | Value of Performance Shares and Performance Units. | | | 11 | |
| | 9.3 | | Earning of Performance Shares and Performance Units. | | | 11 | |
| | 9.4 | | Form and Timing of Payment of Performance Shares and Performance Units. | | | 11 | |
| | 9.5 | | Termination of Employment. | | | 11 | |
| | 9.6 | | Nontransferability of Performance Shares and Performance Units. | | | 11 | |
| |
Article 10. Cash-Based Awards and Stock-Based Awards | | | 12 | |
| | 10.1 | | Grant of Cash-Based Awards. | | | 12 | |
| | 10.2 | | Value of Cash-Based Awards. | | | 12 | |
| | 10.3 | | Payment in Consideration of Cash-Based Awards. | | | 12 | |
| | 10.4 | | Form and Timing of Payment of Cash-Based Awards. | | | 12 | |
| | 10.5 | | Stock-Based Awards. | | | 12 | |
| | 10.6 | | Termination of Employment. | | | 12 | |
| | 10.7 | | Nontransferability of Cash-Based Awards and Stock-Based Awards. | | | 12 | |
| |
Article 11. Performance Measures | | | 12 | |
| |
Article 12. Beneficiary Designation | | | 14 | |
| |
Article 13. Rights ofEmployees Participants | | | 14 | |
| | 13.1 | | Employment. | | | 14 | |
| | 13.2 | | Participation. | | | 14 | |
| | 13.3 | | Rights as a Shareholder. | | | 14 | |
| |
Article 14. Change of Control | | | 14 | |
| | 14.1 | | Accelerated Vesting and Payment. | | | 14 | |
| | 14.2 | | Alternative Awards. | | | 15 | |
| |
Article 15. Amendment, Modification, Suspension, and Termination | | | 15 | |
| | 15.1 | | Amendment, Modification, Suspension, and Termination. | | | 15 | |
| | 15.2 | | Adjustment of Awards on the Occurrence of Certain Unusual or Nonrecurring Events. | | | 16 | |
| | 15.3 | | Awards Previously Granted. | | | 16 | |
| |
Article 16. Withholding | | | 16 | |
| |
Article 17. Successors | | | 16 | |
| |
Article 18. General Provisions | | | 16 | |
| | 18.1 | | Forfeiture Events. | | | 16 | |
| | 18.2 | | Legend. | | | 17 | |
| | 18.3 | | Delivery Of Title. | | | 17 | |
| | 18.4 | | Investment Representations. | | | 17 | |
| | 18.5 | | Employees Based Outside of The United States. | | | 17 | |
| | 18.6 | | Uncertificated Shares. | | | 17 | |
| | 18.7 | | Unfunded Plan. | | | 17 | |
| | 18.8 | | No Fractional Shares. | | | 17 | |
| | 18.9 | | Other Compensation and Benefit Plans. | | | 18 | |
| | 18.10 | | No Constraint on Corporate Action. | | | 18 | |
| |
Article 19. Legal Construction | | | 18 | |
| | 19.1 | | Gender And Number. | | | 18 | |
| | 19.2 | | Severability. | | | 18 | |
| | 19.3 | | Requirements of Law. | | | 18 | |
| | 19.4 | | Governing Law. | | | 18 | |
Unit Corporation
Stock and Incentive Compensation Plan
Effective: May 3, 20062, 2012
Article 1.
Establishment, Purpose, and Duration
1.1 Establishment of this Plan. Effective with shareholder approval received May 3, 2006, Unit Corporation, a Delaware corporation (hereinafter referred to as the “Company”),establishesestablished an incentive compensation plan to be known as the Stock and Incentive Compensation Plan (hereinafter referred to as the “Plan”), as set forth in this document.
ThisThe Plan permits the grant of Nonqualified Stock Options, Incentive Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Shares, Performance Units, Cash-Based Awards, and Stock-Based Awards.
Thisamended and restated version of the Plan shall become effective, if approved by theCompany’sBoard and shareholders, on May 3 20062, 2012 (the “Effective Date”) and shall remain in effect as provided in Section 1.3 of this document.
1.2 Purpose of this Plan. The purpose of this Plan is to promote the success and enhance the value of the Company and Affiliates by linking the personal interests of the Participants to those of the Company’s shareholders, and by providing Participants with an incentive for outstanding performance.
This Plan is further intended to provide flexibility to the Company in its ability to motivate, attract, and retain the services of Participants on whose judgment, interest, and special effort the successful conduct of its operation largely is dependent.
1.3 Duration of this Plan. This Plan shall commence as of the Effective Date and shall remain in effect, subject to the right of the Committee or the Board to amend or terminate this Plan at any time under Article 15, until all Shares subject to this Plan have been purchased or acquired according to this Plan’s provisions.
1.4Successor Plan. This Plan shall serve as the successor to the Unit Corporation Amended and Restated Stock Option Plan and,the Employee Bonus Plan, and the Non-employee Directors 2000 Stock Option Plan (the “Predecessor Plans”), and no further grants shall be made under the Predecessor Plans from and after the Effective Date of this Plan.
Article 2.
Definitions
Whenever used in this Plan, the following terms shall have the meaning set forth below, and when the meaning is intended, the initial letter of the word shall be capitalized.
“Affiliate” shall have the meaning given to that term in Rule 12b-2 of the General Rules and Regulations of the Exchange Act, with reference to the Company, and shall also include any corporation, partnership, joint venture, limited liability company, or other entity in which the Company owns, directly or indirectly, at least fifty percent (50%) of the total combined Voting Power of such corporation or of the capital interest or profits interest of such partnership or other entity.
“Award” means, individually or collectively, a grant under this Plan of NQSOs, ISOs, SARs, Restricted Stock, Restricted Stock Units, Performance Shares, Performance Units, Cash-Based Awards, or Stock-Based Awards, in each case subject to the terms of this Plan.
“Award Agreement” means either (i) a written agreement entered into by the Company or an Affiliate and a Participant setting forth the terms and provisions applicable to Awards granted under this Plan; or (ii) a written statement issued by the Company or an Affiliate to a Participant describing the terms and provisions of such Award.
“Beneficial Owner” or “Beneficial Ownership” shall have the meaning given to that term in rule 13d-3 of the General Rules and Regulations under the Exchange Act.
“Board” or “Board Of Directors” means the Board of Directors of the Company.
“Cash-Based Award” means an Award granted under Article 10, the value of which is denominated in cash as determined by the Committee and which is not any other form of Award described in this Plan.
“Cause” means (i) the willful failure by the Participant to perform substantially the Participant’s duties as an Employeeor Non-employee Director (other than due to physical or mental illness) after reasonable notice to the Participant of such failure, (ii) the Participant’s engaging in serious misconduct that is injurious to the Company or any Affiliate in any way, including, but not limited to, by way of damage to their respective reputations or standings in their respective industries, (iii) the Participant’s having been convicted of, or having entered a plea of nolo contendere to, a crime that constitutes a felony or (iv) the breach by the Participant of any written covenant or agreement with the Company or any Affiliate not to disclose or misuse any information pertaining to, or misuse any property of, the Company or any Affiliate or not to compete or interfere with the Company or any Affiliate.
“Change of Control” of the Company shall be deemed to have occurred as of the first day that any one or more of the following conditions shall have been satisfied:
(a)On the close of business on the tenth day following the time the Company learns of the acquisition byany individual, entity, or group (a “Person”), including any “person” within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act,ofbecomes the beneficialownershipowner(within the meaning of Rule 13d-3 promulgated under the Exchange Act,), of1520% or more of either (i) the then outstanding shares of common stock of the Company (the “Outstanding Company Common Stock”) or (ii) the combined voting power of the then outstanding securities of the Company entitled to vote generally in the election of Directors (the “Outstanding Company Voting Securities”); excluding, however, the following: (A) any acquisition directly from the Company (excluding any acquisition resulting from the exercise of an exercise, conversion or exchange privilege unless the security being so exercised, converted or exchanged was acquired directly from the Company); (B) any acquisition by the Company; (C) any acquisition by an employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company; (D) any acquisition by any corporation pursuant to a transaction with complies with clauses (i), (ii) and (iii) of subsection (iii) of this definition; and (E) if the Board of Directors of the Company determines in good faith that a Person became the beneficial owner of1520% or more of the Outstanding Company Common Stock inadvertently (including, without limitation, because (A) such Person was unaware that it beneficially owned a percentage of Outstanding Company Common Stock that would cause a Change of Control or (B) such Person was aware of the extent of its beneficial ownership of Outstanding Company Common Stock but had no actual knowledge of the consequences of such beneficial ownership under this Plan) and without any intention of changing or influencing control of the Company, then the beneficial ownership of Outstanding Company Common Stock by that Person shall not be deemed to be or to have become a Change of Control for any purposes of this Plan unless and until such Person shall have failed to divest itself, as soon as practicable (as determined, in good faith, by the Board of Directors of the Company), of beneficial ownership of a sufficient number of Outstanding Company Common Stock so that such Person’s beneficial ownership of Outstanding Company Common Stock would no longer otherwise qualify as a Change of Control.
(b) individuals who, as of the date hereof, constitute the Board of Directors (the “Incumbent Board”) cease for any reason to constitute at least a majority of such Board; provided that any individual who becomes a Director of the Company subsequent to the date hereof whose election, or nomination for election by the Company’s stockholders, was approved by the vote of at least a majority of the Directors then comprising the Incumbent Board shall be deemed a member of the Incumbent Board; and provided further, that any individual who was initially elected as a Director of the Company as a result of an actual or threatened election contest, as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange act, or any other actual or
threatened solicitation of proxies or consents by or on behalf of any Person other than the Board shall not be deemed a member of the Incumbent Board;
(c)approval by the stockholders of the companyconsummation of a reorganization, merger, statutory share exchange or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a “Corporate Transaction”); excluding, however, a Corporate Transaction Pursuant to which (i) all or substantially all of the individuals or entities who are the beneficial owners, respectively, of the Outstanding Company Common Stock and the Outstanding Company Voting Securities immediately prior to such Corporate Transaction will beneficially own, directly or indirectly, more than 70% of, respectively, the outstanding shares of common stock, and the combined voting power of the outstanding securities of such corporation entitled to vote generally in the election of Directors, as the case may be, of the corporation resulting from such Corporate Transaction (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company’s assets either directly or indirectly) in substantially the same proportions relative to each other as their ownership, immediately prior to such Corporate Transaction, of the Outstanding Company Common stock and the Outstanding Company Voting Securities, as the case may be, (ii) no Person (other than: the Company; the corporation resulting from such Corporate Transaction; and any Person which beneficially owned, immediately prior to such Corporate Transaction, directly or indirectly, 25% or more of the Outstanding Company Common Stock or the Outstanding Voting Securities, as the case may be) will beneficially own, directly or indirectly, 25% or more of, respectively, the outstanding shares of common stock of the corporation resulting from such Corporate Transaction or the combined voting power of the outstanding securities of such corporation entitled to vote generally in the election of Directors and (iii) individuals who were members of the Incumbent Board will constitute a majority of the members of the Board of Directors of the corporation resulting from such Corporate Transaction; or
(d) approval by the stockholders of the Company of a plan of complete liquidation or dissolution of the Company.
“Code” means the U.S. Internal Revenue Code of 1986, as amended from time to time, or any successor thereto.
“Committee” means the Compensation Committee of the Board of Directors, or any other duly authorized committee of the Board appointed by the Board to administer this Plan.
“Company” means Unit Corporation, a Delaware corporation, and any successor thereto as provided in Article 18.
“Constructively Terminated” means, unless otherwise specified by the Committee in the Award Agreement, a voluntary termination of employment by an Employee within ten (10) business days after any of the following actions by the Company, Affiliate, or person acting on behalf of either:
| (i) | Requiring the Employee to be based as his/her regular or customary place of employment or Agency at any office or location more than fifty (50) miles from the location at which the Employee performed his/her duties immediately before the Change of Control, or in a state other than the one in which the Employee performed his/her duties immediately before the Change of Control, in each case except for travel reasonably required in the performance of the individual’s responsibilities; |
| (ii) | In the case of an Employee, reducing the Employee’s base salary below the rate in effect at the time of a Change of Control; or |
| (iii) | In the case of an Employee, failing to pay the Employee’s base salary, other wages, or employment-related benefits as required by law. |
“Disability” means a termination of a Non-employee Director’s service as a member of the Board as a result of physical or mental impairment of sufficient severity such that, in the opinion of a physician selected by the Company, he or she is unable to continue to serve on the Board.
“Employee” means any employee of the Company or an Affiliate. Directors who are not otherwise employed by the Company or an Affiliate shall not be considered Employees under this Plan. For greater clarity, and without limiting the generality of the foregoing, individuals described in the first sentence of this definition who are foreign nationals or are employed outside of the United States, or both, are Employees and may be granted Awards on the terms and conditions
set forth in this Plan, or on such other terms and conditions as may, in the judgment of the Committee, be necessary or desirable to further the purposes of this Plan.
“Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time, or any successor act thereto.
“Fair Market Value” or “FMV” means a price that is based on the opening, closing, actual, high, low, or average selling prices of a Share on the New York Stock Exchange (“NYSE”) or other established stock exchange (or exchanges) on the applicable date, the preceding trading day, the next succeeding trading day, or an average of trading days, as determined by the Committee in its discretion. Such definition(s) of FMV shall be specified in each Award Agreement and may differ depending on whether FMV is in reference to the grant, exercise, vesting, settlement, or payout of an Award. If, however, the accounting standards used to account for equity awards granted to Participants are substantially modified subsequent to the Effective Date of this Plan, the Committee shall have the ability to determine an Award’s FMV based on the relevant facts and circumstances. If Shares are not traded on an established stock exchange, FMV shall be determined by the Committee based on objective criteria.
“Fiscal Year” means the year commencing on January 1 and ending December 31 or other time period as approved by the Board.
“Freestanding SAR” means an SAR that is not a Tandem SAR, as described in Article 7.
“Grant Price” means the price against which the amount payable is determined on exercise of an SAR.
“Incentive Stock Option” or “ISO” means an Option to purchase Shares granted under Article 6 and that is designated as an Incentive Stock Option and is intended to meet the requirements of Section 422 of the Code, or any successor provision.
“Insider” shall mean anindividualEmployee who is, on the relevant date, subject to the reporting requirements of Section 16 of the Exchange Act, as determined by the Board.
“Non-employee Director” means a director whose only relationship to the Company is based on his or her service on the Board, and who is not an Employee.
“Nonqualified Stock Option” or “NQSO” means an Option to purchase Shares, granted under Article 6, which is not intended to be an Incentive Stock Option or that otherwise does not meet such requirements.
“Option” means the conditional right to purchase Shares at a stated Option Price for a specified period of time in the form of an Incentive Stock Option or a Nonqualified Stock Option subject to the terms of this Plan.
“Option Price” means the price at which a Share may be purchased by a Participant under an Option, as determined by the Committee.
“Participant” means an Employee or Non-employee Director who has been selected to receive an Award, or who has an outstanding Award granted under this Plan.
“Performance-Based Compensation” means compensation under an Award that is granted in order to provide remuneration solely on account of the attainment of one or more Performance Goals under circumstances that satisfy the requirements of Section 162(m) of the Code.
“Performance Goal” means a performance criterion selected by the Committee for a given Award for purposes of Article 11 based on one or more of the Performance Measures.
“Performance Measures” means measures as described in Article 11, the attainment of one or more of which shall, as determined by the Committee, determine the vesting, payability, or value of an Award to an Insider that are designated to qualify as Performance-Based Compensation.
“Performance Period” means the period of time during which the assigned performance criteria must be met in order to determine the degree of payout and/or vesting with respect to an Award.
“Performance Share” means an Award granted under Article 9 and subject to the terms of this Plan, denominated in Shares, the value of which at the time it is payable is determined as a function of the extent to which corresponding performance criteria have been achieved.
“Performance Unit” means an Award granted under Article 9 and subject to the terms of this Plan, denominated in units, the value of which at the time it is payable is determined as a function of the extent to which corresponding performance criteria have been achieved.
“Period Of Restriction” means the period when an Award of Restricted Stock or Restricted Stock Unit is subject to forfeiture based on the passage of time, the achievement of performance criteria, and/or on the occurrence of other events as determined by the Committee, in its discretion.
“Person” shall have the meaning ascribed to such term in Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof, including a “group” as defined in Section 13(d) thereof; provided, however, that “Person” shall not include (i) the Company or any Affiliate or (ii) any employee benefit plan (including an employee stock ownership plan) sponsored by the Company or any Affiliate.
“Restricted Stock” means an Award of Shares subject to a Period of Restriction, granted under Article 8 and subject to the terms of this Plan.
“Restricted Stock Unit” means an Award denominated in units subject to a Period of Restriction, granted under Article 8 herein and subject to the terms of this Plan.
“Retirement” means the termination of a Non-employee Director’s service as a member of the Board at the end of any full term to which he or she was elected or appointed.
“Shares” means the shares of common stock of the Company, $0.20 par value per Share.
“Stock Appreciation Right” or “SAR” means the conditional right to receive the difference between the FMV of a Share on the date of exercise over the Grant Price, under the terms of Article 7 and subject to the terms of this Plan.
“Stock-Based Award” means an equity-based or equity-related Award granted under Article 10 and subject to the terms of this Plan, and not otherwise described by the terms of this Plan.
“Tandem SAR” means an SAR that the Committee specifies is granted in connection with a related Option under Article 7 and subject to the terms of this Plan, the exercise of which shall require forfeiture of the right to purchase a Share under the related Option (and when a Share is purchased under the Option, the Tandem SAR shall similarly be cancelled). Regardless of whether an Option is granted coincident with an SAR, an SAR is not a Tandem SAR unless so specified by the Committee at time of grant.
“Voting Power” shall mean that number of Voting Securities as shall enable the holders thereof to cast all the votes which could be cast in an annual election of directors of a company.
“Voting Securities” shall mean all securities entitling the holders thereof to vote in an annual election of directors of a company.
Article 3.
Administration
3.1 General. The Committee shall be responsible for administering this Plan. The Committee may employ attorneys, consultants, accountants, agents, and other individuals, any of whom may be an Employee, and the Committee, the Company, and its officers and Directors shall be entitled to rely on the advice, opinions, or valuations of any such persons. All actions taken and all interpretations and determinations made by the Committee shall be final, conclusive, and binding on the Participants, the Company, and all other interested parties.
3.2 Authority of the Committee. The Committee shall have full and exclusive discretionary power to interpret the terms and the intent of this Plan and any Award Agreement or other agreement ancillary to or in connection with this Plan, to determine eligibility for Awards, and to adopt such rules, regulations, and guidelines for administering this Plan as the Committee may deem necessary or proper. Such authority shall include, but not be limited to, selecting Award recipients, establishing all Award terms and conditions and, subject to Article 15, adopting modifications and amendments, or subplans to this Plan (as described in Section 18.5) or any Award Agreement, including, without limitation, any that are necessary or appropriate to comply with the laws or compensation practices of the countries and other jurisdictions in which the Company and Affiliates operate.
3.3 Delegation. The Committee may delegate to one or more of its members or to one or more officers of the Company or its Affiliates, any of its duties or powers as it may deem advisable; provided, however, that the Committee
may not delegate any of its non-administrative powers with respect to Awards intended to be Performance-Based Compensation; and provided further, that the member(s) or officer(s) shall report periodically to the Committee regarding the nature and scope of the Awards granted under the authority delegated under this Section 3.3. Subject to the terms of the previous sentence, the Committee may delegate to any individual(s) such administrative duties or powers as it may deem advisable
Article 4.
Shares Subject to this Plan and Maximum Awards
4.1 Number of Shares Available for Awards. Subject to adjustment as provided in Section 4.2, the number of Shares hereby reserved for issuance to Participants under this Plan shall beTwoThree MillionFiveThree Hundred Thousand (2,5003,300,000) (such total number of Shares, including such adjustment and remaining Shares, the “TotalShare Authorization”). The maximum aggregate number of Shares that may be granted in the form of Nonqualified Stock Options shall be equal to the Total Authorization. The maximum aggregate number of Shares that may be granted in the form of Incentive Stock Options shall be Two Million (2,000,000).
For greater clarity, any Awards that are not settled in Shares shall not reduce any of these reserves. Any Shares related to Awards which (i) terminate by expiration, forfeiture, cancellation, or otherwise without the issuance of such Shares, (ii) are settled in cash either in lieu of Shares or otherwise, or (iii) are exchanged with the Committee’s permission for Awards not involving Shares, shall be available again for grant under this Plan. Moreover, if the Option Price of any Option granted under this Plan or the tax withholding requirements with respect to any Award granted under this Plan are satisfied by tendering Shares to the Company (by either actual delivery or by attestation), or if an SAR is exercised, only the number of Shares issued, net of the Shares tendered, if any, will be deemed delivered for purposes of determining the maximum number of Shares available for issuance under this Plan. The maximum number of Shares available for issuance under this Plan shall not be reduced to reflect any dividends or dividend equivalents that are reinvested into additional Shares or credited as additional Restricted Stock, Restricted Stock Units, Performance Shares, or Stock-Based Awards. The Shares available for issuance under this Plan may be authorized and unissued Shares or treasury Shares.
Unless and until the Committee determines that an Award to an Insider shall not be designed to qualify as Performance-Based Compensation, the following limits (“Award Limits”) shall apply to grants of Awards to Insiders under this Plan:
(a)OPTIONS AND SARS: The maximum aggregate number of Shares that may be granted in the form of Options or Stock Appreciation Rights, under any Award granted in any one Fiscal Year to any one Participant, shall be250,000100,000.
(b)RESTRICTED STOCK/RESTRICTED STOCK UNITS: The maximum aggregate grant with respect to Awards of Restricted Stock/Restricted Stock Units granted in any one Fiscal Year to any one Participant shall be125,00050,000.
(c)PERFORMANCE SHARES/PERFORMANCE UNITS: The maximum aggregate Award of Performance Shares or Performance Units that a Participant may receive in any one Fiscal Year shall be125,00050,000 Shares, or equal to the value of125,00050,000 Shares determined as of the date of vesting or payout, as applicable.
(d)CASH-BASED AWARDS: The maximum aggregate amount awarded or credited with respect to Cash-Based Awards to any one Participant in any one Fiscal Year may not exceed$1,500,000$1,000,000 determined as of the date of vesting or payout, as applicable.
(e)STOCK AWARDS: The maximum aggregate grant with respect to Awards of Stock-Based Awards in any one Fiscal Year to any one Participant shall be125,00050,000.
4.2 Adjustments in Authorized Shares. In the event of any corporate event or transaction (including, but not limited to, a change in the Shares of the Company or the capitalization of the Company) such as a merger, consolidation, reorganization, recapitalization, separation, stock dividend, extraordinary dividend, stock split, reverse stock split, split up, spin-off, or other distribution of stock or property of the Company, combination of securities, exchange of securities, dividend in kind, or other like change in capital structure or distribution (other than normal cash dividends) to shareholders of the Company, or any similar corporate event or transaction, the Committee, in its sole discretion, in order to prevent dilution or enlargement of Participants’ rights under this Plan, may substitute or adjust, as
applicable, the number and kind of Shares that may be issued under this Plan, the number and kind of Shares subject to outstanding Awards, the Option Price or Grant Price applicable to outstanding Awards, the Award Limits, the limit on issuing Awards other than Options granted with an Option Price equal to at least the FMV of a Share on the date of grant or Stock Appreciation Rights with a Grant Price equal to at least the FMV of a Share on the date of grant, and any other value determinations applicable to outstanding Awards or to this Plan provided that any such substitution or adjustment is made in accordance with Section 424(h) of the Code.
The Committee, in its sole discretion, may also make appropriate adjustments in the terms of any Awards under this Plan to reflect, or related to, such changes or distributions and may modify any other terms of outstanding Awards, including modifications of performance criteria and changes in the length of Performance Periods. The determination of the Committee as to the foregoing adjustments, if any, shall be conclusive and binding on Participants under this Plan.
Subject to the provisions of Article 14 and any applicable law or regulatory requirement, without affecting the number of Shares reserved or available under this Plan, the Committee may authorize the issuance, assumption, substitution, or conversion of Awards under this Plan in connection with any such corporate event or transaction on such terms and conditions as it may deem appropriate. Additionally, the Committee may amend this Plan, or adopt supplements to this Plan, in such manner as it deems appropriate to provide for such issuance, assumption, substitution, or conversion as provided in the previous sentence.
Article 5.
Eligibility and Participation
5.1 Eligibility. Individuals eligible to participate in this Plan include all Employees. and Non-employee Directors.
5.2 Actual Participation. Subject to the provisions of this Plan, the Committee may from time to time, select from all eligible Employees and Non-employee Directors, those to whom Awards shall be granted and shall determine in its discretion, the nature, terms, and amount of each Award.
Article 6.
Stock Options
6.1 Grant of Options. Subject to the terms and provisions of this Plan, Options may be granted to Participants in such number, and on such terms, and at any time and from time to time as shall be determined by the Committee in its discretion. Despite the foregoing, no ISOs may be granted to any Non-employee Director and no ISO may be granted more than ten (10) years afterthe earlier of (a) adoption of this Plan by the Board, and (b) the Effective Date.
6.2 Award Agreement. Each Option grant shall be evidenced by an Award Agreement that shall specify the Option Price, the duration of the Option, the number of Shares to which the Option pertains, the conditions on which an Option shall become vested and exercisable, and any such other provisions as the Committee shall determine. The Award Agreement also shall specify whether the Option is intended to be an ISO or a NQSO.
6.3 Option Price. The Option Price for each grant of an Option under this Plan shall be determined by the Committee and shall be specified in the Award Agreement but in no event shall the Option Price be less than the FMV of the Shares on the date of grant.
6.4 Duration of Options. Each Option granted to a Participant shall expire at such time as the Committee shall determine at the time of grant; provided, however, no Option shall be exercisable later than the tenth (10th) anniversary date of its grant. Despite the forgoing, for Options granted to Participants employed outside the United States and who are third country nationals, the Committee has the authority to grant Options that have a term greater that ten (10) years.
6.5 Exercise of Options. Options granted under this Article 6 shall be exercisable at such times and on the occurrence of such events, and be subject to such restrictions and conditions, as the Committee shall in each instance approve, which need not be the same for each grant or for each Participant.
6.6 Payment. Options granted under this Article 6 shall be exercised by the delivery of a notice of exercise to the Company or an agent designated by the Company in a form specified or accepted by the Committee, or by complying with any alternative procedures which may be authorized by the Committee, setting forth the number of Shares with respect to which the Option is to be exercised, accompanied by full payment for the Shares.
The Option Price on exercise of any Option shall be payable to the Company in full either: (a) in cash or its equivalent; (b) by tendering (either by actual delivery or attestation) previously acquired Shares having an aggregate FMV at the time of exercise equal to the total Option Price; (c) by a combination of (a) and (b); or (d) any other method approved or accepted by the Committee in its sole discretion subject to such rules and regulations as the Committee may establish.
Subject to Section 6.7 and any governing rules or regulations, as soon as practicable after receipt of a notification of exercise and full payment, the Committee shall cause to be delivered to the Participant Share certificates or evidence of book entry Shares in an appropriate amount based on the number of Shares purchased under the Option(s). Unless otherwise determined or accepted by the Committee, all payments in cash shall be paid in United States dollars.
6.7 Restrictions on Share Transferability. The Committee may impose such restrictions on any Shares acquired under the exercise of an Option granted under this Plan as it may deem advisable, including, without limitation, requiring the Participant to hold the Shares acquired under exercise for a specified period of time, or restrictions under applicable laws or under the requirements of any stock exchange or market on which such Shares are listed and/or traded.
6.8 Termination of Employment or Board Service. Each Participant’s Award Agreement shall set forth the extent to which the Participant shall have the right to exercise the Option following termination of the Participant’s employmentor service as a Non-Employee Directorwith the Company oranAffiliates. Such provisions shall be determined in the sole discretion of the Committee, shall be included in the Award Agreement entered into with each Participant, need not be uniform among all Options issued under this Article 6, and may reflect distinctions based on the reasons for termination.
6.9 Nontransferability of Options.
(a)INCENTIVE STOCK OPTIONS. No ISO granted under this Plan may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. Further, all ISOs granted to a Participant under this Article 6 shall be exercisable during his or her lifetime only by such Participant.
(b)NONQUALIFIED STOCK OPTIONS. Except as otherwise provided in a Participant’s Award Agreement at the time of grant, or thereafter by the Committee, NQSO granted under this Article 6 may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. Further, except as otherwise provided in a Participant’s Award Agreement at the time of grant or thereafter by the Committee, all NQSOs granted to a Participant under this Article 6 shall be exercisable during the Participant’s lifetime only by such Participant.
6.10 Notification of Disqualifying Disposition. The Participant will notify the Company on the disposition of Shares issued under the exercise of an ISO. The Company will use such information to determine whether a disqualifying disposition as described in Section 421(b) of the Code has occurred.
Article 7.
Stock Appreciation Rights
7.1 Grant of SARs. Subject to the terms and conditions of this Plan, SARs may be granted to Participants at any time and from time to time and on such terms as shall be determined by the Committee in its discretion. The Committee may grant Freestanding SARs, Tandem SARs, or any combination of these forms of SARs.
The SAR Grant Price for each grant of a Freestanding SAR shall be determined by the Committee and shall be specified in the Award Agreement but in no event shall the Grant Price be less than FMV of the Shares on the date of grant The Grant Price of Tandem SARs shall be equal to the Option Price of the related Option.
7.2 SAR Agreement. Each SAR Award shall be evidenced by an Award Agreement that shall specify the Grant Price, the term of the SAR, and any such other provisions as the Committee shall determine.
7.3 Term of SAR. The term of an SAR granted under this Plan shall be determined by the Committee, in its sole discretion, and except as determined otherwise by the Committee and specified in the SAR Award Agreement, no SAR shall be exercisable later than the tenth (10th) anniversary date of its grant. Despite the forgoing, for SARs granted to Participants employed outside the United States and who are third country nationals, the Committee has the authority to grant Options that have a term greater that ten (10) years.
7.4 Exercise of Freestanding SARs. Freestanding SARs may be exercised on whatever terms and conditions the Committee, in its sole discretion, imposes.
7.5 Exercise of Tandem SARs. Tandem SARs may be exercised for all or part of the Shares subject to the related Option on the surrender of the right to exercise the equivalent portion of the related Option. A Tandem SAR may be exercised only with respect to the Shares for which its related Option is then exercisable.
Despite any other provision of this Plan to the contrary, with respect to a Tandem SAR granted in connection with an ISO: (a) the Tandem SAR will expire no later than the expiration of the underlying ISO; (b) the value of the payout with respect to the Tandem SAR may be for no more than one hundred percent (100%) of the difference between the Option Price of the underlying ISO and the FMV of the Shares subject to the underlying ISO at the time the Tandem SAR is exercised; and (c) the Tandem SAR may be exercised only when the FMV of the Shares subject to the ISO exceeds the Option Price of the ISO.
7.6 Payment of SAR Amount. On the exercise of an SAR, a Participant shall be entitled to receive payment from the Company in an amount determined by multiplying:
(a) The difference between the FMV of a Share on the date of exercise over the Grant Price; by
(b) The number of Shares with respect to which the SAR is exercised.
At the discretion of the Committee, the payment on SAR exercise may be in cash, Shares of equivalent value (based on the FMV on the date of exercise of the SAR, as defined in the Award Agreement or otherwise defined by the Committee thereafter), in some combination thereof, or in any other form approved by the Committee at its sole discretion. The Committee’s determination regarding the form of SAR payout shall be set forth or reserved for later determination in the Award Agreement pertaining to the grant of the SAR.
7.7 Termination of Employmentor Board Service. Each Award Agreement shall set forth the extent to which the Participant shall have the right to exercise the SAR following termination of the Participant’s employmentor service as a Non-employee Directorwith the Company oranAffiliates. Such provisions shall be determined in the sole discretion of the Committee, shall be included in the Award Agreement entered into with Participants, need not be uniform among all SARs issued under this Plan, and may reflect distinctions based on the reasons for termination.
7.8 Nontransferability of SARs. Except as otherwise provided in a Participant’s Award Agreement at the time of grant or thereafter by the Committee, an SAR granted under this Plan may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. Further, except as otherwise provided in a Participant’s Award Agreement at the time of grant or thereafter by the Committee, all SARs granted to a Participant under this Plan shall be exercisable during his or her lifetime only by such Participant.
7.9 Other Restrictions. Without limiting the generality of any other provision of this Plan, the Committee may impose such other conditions and/or restrictions on any Shares received on exercise of an SAR granted under this Plan as it may deem advisable. This includes, but is not limited to, requiring the Participant to hold the Shares received on exercise of an SAR for a specified period of time.
Article 8.
Restricted Stock and Restricted Stock Units
8.1 Grant of Restricted Stock or Restricted Stock Units.
Subject to the terms and provisions of this Plan, the Committee, at any time and from time to time, may grant Shares of Restricted Stock and/or Restricted Stock Units to Participants in such amounts and on such terms as the Committee shall determine.
8.2 Restricted Stock or Restricted Stock Unit Agreement. Each Restricted Stock and/or Restricted Stock Unit grant shall be evidenced by an Award Agreement that shall specify the Period(s) of Restriction, the number of Shares of Restricted Stock or the number of Restricted Stock Units granted, and any such other provisions as the Committee shall determine.
8.3 Nontransferability of Restricted Stock and Restricted Stock Units. Except as otherwise provided in this Plan or the Award Agreement, the Shares of Restricted Stock and/or Restricted Stock Units granted may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated until the end of the applicable Period of Restriction specified in the Award Agreement (and in the case of Restricted Stock Units until the date of delivery or other payment), or on earlier satisfaction of any other conditions, as specified by the Committee in its sole discretion and set forth in the Award Agreement at the time of grant or thereafter by the Committee. All rights with respect to the Restricted Stock and/or Restricted Stock Units granted to a Participant under this Plan shall be available during his or her lifetime only to such Participant, except as otherwise provided in the Award Agreement at the time of grant or thereafter by the Committee.
8.4 Other Restrictions. The Committee shall impose, in the Award Agreement at the time of grant or anytime thereafter, such other conditions and/or restrictions on any Shares of Restricted Stock or Restricted Stock Units granted under this Plan as it may deem advisable including, without limitation, a requirement that Participants pay a stipulated purchase price for each Share of Restricted Stock or each Restricted Stock Unit, restrictions based on the achievement of specific performance criteria, time-based restrictions on vesting following the attainment of the performance criteria, time-based restrictions, restrictions under applicable laws or under the requirements of any stock exchange or market on which such Shares are listed or traded, or holding requirements or sale restrictions placed on the Shares by the Company on vesting of such Restricted Stock or Restricted Stock Units.
To the extent deemed appropriate by the Committee and subject to Section 18.6, the Company may retain the certificates representing Shares of Restricted Stock, or Shares and delivered in consideration of Restricted Stock Units, in the Company’s possession until such time as all conditions and/or restrictions applicable to such Shares have been satisfied or lapse.
Except as otherwise provided in this Article 8, Shares of Restricted Stock covered by each Restricted Stock Award shall become freely transferable by the Participant after all conditions and restrictions applicable to such Shares have been satisfied or lapse, and Restricted Stock Units shall be paid in cash, Shares, or a combination of cash and Shares as the Committee, in its sole discretion shall determine.
8.5 Certificate Legend. In addition to any legends placed on certificates under Section 8.4, each certificate representing Shares of Restricted Stock granted under this Plan may bear a legend such as the following:
The sale or other transfer of the Shares of stock represented by this certificate, whether voluntary, involuntary, or by operation of law, is subject to certain restrictions on transfer as set forth in the Unit Corporation Stock and Incentive Compensation Plan, and in the associated Award Agreement. A copy of this Plan and such Award Agreement may be obtained from Unit Corporation.
8.6 Voting Rights. To the extent provided by the Committee in the Award Agreement, Participants holding Shares of Restricted Stock may be granted the right to exercise full voting rights with respect to those Shares during the Period of Restriction. A Participant shall have no voting rights with respect to any Restricted Stock Units granted hereunder.
8.7 Dividends and Other Distributions. During the Period of Restriction, Participants holding Shares of Restricted Stock or Restricted Stock Units may, if the Committee so determines and provides in the Participant’s Award Agreement, be credited with dividends paid with respect to the underlying Shares or dividend equivalents while they are so held in a manner determined by the Committee in its sole discretion. The Committee may apply any restrictions to
the dividends or dividend equivalents that the Committee deems appropriate. The Committee, in its sole discretion, may determine the form of payment of dividends or dividend equivalents, including cash, Shares, Restricted Stock, or Restricted Stock Units.
8.8 Termination of Employment. or Board Service.Each Award Agreement shall set forth the extent to which the Participant shall have the right to retain Restricted Stock and/or Restricted Stock Units following termination of the Participant’s employmentor service as a Non-employee Directorwith the Company oranAffiliates. These provisions shall be determined in the sole discretion of the Committee, shall be included in the Award Agreement entered into with each Participant, need not be uniform among all Shares of Restricted Stock or Restricted Stock Units issued under this Plan, and may reflect distinctions based on the reasons for termination.
8.9 Payment In Consideration of Restricted Stock Units. When and if Restricted Stock Units become payable, a Participant having received the grant of such units shall be entitled to receive payment from the Company in cash, Shares of equivalent value (based on the FMV, as defined in the Award Agreement at the time of grant or thereafter by the Committee), in some combination thereof, or in any other form determined by the Committee at its sole discretion. The Committee’s determination regarding the form of payout shall be set forth or reserved for later determination in the Award Agreement pertaining to the grant of the Restricted Stock Unit.
Article 9.
Performance Shares and Performance Units
9.1 Grant of Performance Shares and Performance Units. Subject to the terms and provisions of this Plan, the Committee, at any time and from time to time, may grant Performance Shares and/or Performance Units to Participants in such amounts and on such terms as the Committee shall determine.
9.2 Value of Performance Shares and Performance Units. Each Performance Share shall have an initial value equal to the FMV of a Share on the date of grant. Each Performance Unit shall have an initial value that is established by the Committee at the time of grant which shall in no event be less than the FMV of a Share. The Committee shall set performance criteria for a Performance Period in its discretion which, depending on the extent to which they are met, will determine, in the manner determined by the Committee and documented in the Award Agreement the value and/or number of each Performance Share or Performance Unit that will be paid to the Participant.
9.3 Earning of Performance Shares and Performance Units. Subject to the terms of this Plan, after the applicable Performance Period has ended, the holder of Performance Shares/Performance Units shall be entitled to receive payout on the value and number of Performance Shares/Performance Units determined as a function of the extent to which the corresponding performance criteria have been achieved. Despite the foregoing, the Company has the ability to require the Participant to hold the Shares received under such Award for a specified period of time.
9.4 Form and Timing of Payment of Performance Shares and Performance Units. Payment of earned Performance Shares/Performance Units shall be as determined by the Committee and as evidenced in the Award Agreement. Subject to the terms of this Plan, the Committee, in its sole discretion, may pay earned Performance Shares/Performance Units in the form of cash or in Shares (or in a combination thereof) equal to the value of the earned Performance Shares/Performance Units at the close of the applicable Performance Period. Any Shares may be granted subject to any restrictions deemed appropriate by the Committee. The determination of the Committee with respect to the form of payout of such Awards shall be set forth in the Award Agreement pertaining to the grant of the Award or reserved for later determination.
9.5 Termination of Employment or Board Service. Each Award Agreement shall set forth the extent to which the Participant shall have the right to retain Performance Shares/Performance Units following termination of the Participant’s employment orAgencyservice as a Non-employee Director with the Company or an Affiliate. Such provisions shall be determined in the sole discretion of the Committee, shall be included in the Award Agreement entered into with each Participant, need not be uniform among all Awards of Performance Shares/Performance Units issued under this Plan, and may reflect distinctions based on the reasons for termination.
9.6 Nontransferability of Performance Shares and Performance Units. Except as otherwise provided in a Participant’s Award Agreement at the time of grant or thereafter by the Committee, Performance Shares/Performance
Units may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution.
Article 10.
Cash-Based Awards and Stock-Based Awards
10.1 Grant of Cash-Based Awards. Subject to the terms and provisions of this Plan, the Committee, at any time and from time and time, may grant Cash-Based Awards to Participants in such amounts and on such terms as the Committee may determine.
10.2 Value of Cash-Based Awards. Each Cash-Based Award shall have a value as may be determined by the Committee. For each Cash-Based Award, the Committee may establish performance criteria in its discretion. If the Committee exercises its discretion to establish such performance criteria, the number and/or value of Cash-Based Awards that will be paid out to the Participant will be determined, in the manner determined by the Committee, the extent to which the performance criteria are met.
10.3 Payment in Consideration of Cash-Based Awards. Subject to the terms of this Plan, the holder of a Cash-Based Award shall be entitled to receive payout on the value of Cash-Based Award determined as a function of the extent to which the corresponding performance criteria, if any, have been achieved.
10.4 Form and Timing of Payment of Cash-Based Awards. Payment of earned Cash-Based Awards shall be as determined by the Committee and evidenced in the Award Agreement. Subject to the terms of this Plan, the Committee, in its sole discretion, may pay earned Cash-Based Awards in the form of cash or in Shares (or in a combination thereof) that have an aggregate FMV equal to the value of the earned Cash-Based Awards (the applicable date regarding which aggregate FMV shall be determined by the Committee). Such Shares may be granted subject to any restrictions deemed appropriate by the Committee. The determination of the Committee with respect to the form of payout of such Awards shall be set forth in the Award Agreement pertaining to the grant of the Award.
10.5 Stock-Based Awards. The Committee may grant other types of equity-based or equity-related Awards not otherwise described by the terms of this Plan (including the grant or offer for sale of unrestricted Shares) in such amounts and subject to such terms and conditions including, but not limited to being subject to performance criteria, or in satisfaction of such obligations, as the Committee shall determine. Such Awards may entail the transfer of actual Shares to Participants, or payment in cash or otherwise of amounts based on the value of Shares and may include, without limitation, Awards designed to comply with or take advantage of the applicable local laws of jurisdictions other than the United States.
10.6 Termination of Employment or Board Service. Each Award Agreement shall set forth the extent to which the Participant shall have the right to receive Cash-Based Awards and Stock-Based Awards following termination of the Participant’s employmentor service as a Non-employee Directorwith the Company orAffiliatesan Affiliate. Such provisions shall be determined in the sole discretion of the Committee, shall be included in the applicable Award Agreement, need not be uniform among all Awards of Cash-Based Awards and Stock-Based Awards issued under this Plan, and may reflect distinctions based on the reasons for termination.
10.7 Nontransferability of Cash-Based Awards and Stock-Based Awards. Except as otherwise provided in a Participant’s Award Agreement at the time of grant or thereafter by the Committee, Cash-Based Awards and Stock-Based Awards may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution.
Article 11.
Performance Measures
Despite any other terms of this Plan, the vesting, payment, or value (as determined by the Committee) of each Award other than an Option or SAR that, at the time of grant, the Committee intends to be Performance-Based Compensation to an Insider shall be determined by the attainment of one or more Performance Goals as determined by the Committee in conformity with Section 162(m) of the Code. The Committee shall specify in writing, by resolution or otherwise, the Participants eligible to receive such an Award (which may be expressed in terms of a class of individuals) and the
Performance Goal(s) applicable to such Awards within ninety (90) days after the commencement of the period to which the Performance Goal(s) relate(s) or such earlier time as required to comply with Section 162(m) of the Code. No such Award shall be payable unless the Committee certifies in writing, by resolution or otherwise, that the Performance Goal(s) applicable to the Award were satisfied. In no case may the Committee increase the value of an Award of Performance-Based Compensation above the maximum value determined under the performance formula by the attainment of the applicable Performance Goal(s), but the Committee may retain the discretion to reduce the value below such maximum.
Unless and until the Committee proposes for shareholder vote and the shareholders approve a change in the general Performance Measures set forth in this Article 11, the Performance Goal(s) on which the payment or vesting of an Award to an Insider that is intended to qualify as Performance-Based Compensation shall be limited to the following Performance Measures:
(a) Net earnings or net income (before or after taxes);
(b) Earnings per share;
(c) Net operating profit;
(d) Operating earnings;
(e) Operating earnings per share;
(f) Return measures (including, but not limited to, return on assets, capital, equity, or sales);
(g) Cash flow (including, but not limited to, operating cash flow, free cash flow, and cash flow return on capital);
(h) Earnings before or after taxes, interest, depreciation, and/or amortization and including/excluding capital gains and losses;
(i) Gross or operating margins;
(j) Share price (including, but not limited to, growth measures and total shareholder return);
(k) Margins;
(l) Operating efficiency;
(m) Customer satisfaction;
(n) Employee satisfaction;
(o) Working capital targets;
(p) Revenue growth; and
(q)Growth of Assets; and
(r) Safety.
Any Performance Measure (s) may be used to measure the performance of the Company as a whole or any business unit of the Company or any combination thereof, as the Committee may deem appropriate, or any of the above Performance Measures as compared to the performance of a group of comparator companies, or published or special index that the Committee, in its sole discretion, deems appropriate. In the Award Agreement, the Committee also has the authority to provide for accelerated vesting of any Award based on the achievement of Performance Goal(s).
The Committee may provide in any Award Agreement that any evaluation of attainment of a Performance Goal may include or exclude any of the following events that occurs during the relevant period: (a) asset write-downs; (b) litigation or claim judgments or settlements; (c) the effect of changes in tax laws, accounting principles, or other laws or provisions affecting reported results; (d) any reorganization and restructuring programs; (e) extraordinary nonrecurring items as described in Accounting Principles Board Opinion No. 30 and/or in management’s discussion and analysis of financial condition and results of operations appearing in the Company’s annual report to shareholders for the applicable year; (f) acquisitions or divestitures; and (g) foreign exchange gains and losses. To the extent such inclusions or exclusions affect Awards to Insiders, they shall be prescribed in a form that meets the requirements of Section 162(m) of the Code for deductibility for federal income tax purposes.
In the event that applicable tax and/or securities laws change to permit Committee discretion to alter the governing Performance Measures without obtaining shareholder approval of such changes, the Committee shall have sole discretion to make such changes without obtaining shareholder approval. In addition, in the event that the Committee determines that it is advisable to grant Awards to Insiders that shall not qualify as Performance-Based Compensation, the Committee may make such grants without satisfying the requirements of Code Section 162(m).
Article 12.
Beneficiary Designation
A Participant’s “beneficiary” is the person or persons entitled to receive payments or other benefits or exercise rights that are available under this Plan in the event of the Participant’s death. A Participant may designate a beneficiary or change a previous beneficiary designation at such times prescribed by the Committee by using forms and following procedures approved or accepted by the Committee for that purpose. If no beneficiary designated by the Participant is eligible to receive payments or other benefits or exercise rights that are available under this Plan at the Participant’s death the beneficiary shall be the Participant’s estate.
Despite the above, the Committee may in its discretion, after notifying the affected Participants, modify the foregoing requirements, institute additional requirements for beneficiary designations, or suspend the existing beneficiary designations of living Participants or the process of determining beneficiaries under this Article 12, or both, in favor of another method of determining beneficiaries.
Article 13.
Rights ofParticipantsEmployees
13.1 Employment. Nothing in this Plan or an Award Agreement shall interfere with or limit in any way the right of the Company or an Affiliate to terminate any Participant’s employment or other service relationship at any time, nor confer on any Participant any right to continue in the capacity in which he or she is employed or otherwise serves the Company or an Affiliate.
Neither an Award nor any benefits arising under this Plan shall constitute part of an employment contract with the Company or an Affiliate and, accordingly, subject to the terms of this Plan, this Plan may be terminated or modified at any time in the sole and exclusive discretion of the Committee without giving rise to liability on the part of the Company or an Affiliate for severance payments or otherwise except as provided in this Plan.
For purposes of this Plan, unless otherwise provided by the Committee, transfer of employment of a Participant between the Company and an Affiliate or among Affiliates, shall not be deemed a termination of employment. The Committee may stipulate in a Participant’s Award Agreement or otherwise the conditions under which a transfer of employment orAgencyservices to an entity that is spun-off from the Company or an Affiliate, if any, shall not be deemed a termination of employmentor servicesfor purposes of an Award.
13.2 Participation. No Employeeor Non-employee Directorshall have the right to be selected to receive an Award. No Employee or Non-employee Director, having been selected to receive an Award, shall have the right to be selected to receive a future Award or (if selected to receive such a future Award) the right to receive such a future Award on terms and conditions identical or in proportion in any way to any prior Award.
13.3 Rights as a Shareholder. Except to the extent otherwise provided in an Award Agreement, a Participant shall have none of the rights of a shareholder with respect to Shares covered by any Award until the Participant becomes the record holder of such Shares.
Article 14.
Change of Control
14.1 Accelerated Vesting and Payment. Subject to the provisions of Section 14.2 or as otherwise provided in the Award Agreement, in the event of a Change of Control, unless otherwise specifically prohibited under law or by the rules and regulations of a national security exchange:
(a) Any and all Options and SARs granted under this Plan shall become immediately exercisable; additionally, if a Participant’s employmentor service as a Non-employee Directoris involuntarily terminatedby the Companyfor any reason except Cause within twelve (12) monthsoffollowing such Changeinof Control, the Participant shall have until the earlier of (i) twelve (12) months following such termination date , or (ii) the term of the Option or SAR, to exercise such Options or SARs;
(b) Any Period of Restriction and other restrictions imposed on Restricted Stock or Restricted Stock Units shall lapse, and Restricted Stock Units shall be immediately payable;
(c) The target payout opportunities attainable under all outstanding Awards of performance-based Restricted Stock, performance-based Restricted Stock Units, Performance Units, and Performance Shares (including but not limited to Awards intended to be Performance-Based Compensation) shall be deemed to have been fully earned based on targeted performance being attained as of the effective date of the Change of Control: and performance-based Restricted Stock Units and Performance Units shall be immediately payable:
| (i) | The vesting of all Awards denominated in Shares shall be accelerated as of the effective date of the Change of Control, and shall be paid out to Participants within thirty (30) days following the effective date of the Change of Control; and |
| (ii) | Awards denominated in cash shall be paid to Participants in cash within thirty (30) days following the effective date of the Change of Control; and |
(d) On a Change of Control, unless otherwise specifically provided in a written agreement entered into between the Participant and the Company or an Affiliate, the Committee shall immediately vest and pay out all Cash-Based Awards and Other Stock-Based Awards as determined by the Committee.; and
(e) Notwithstanding anything in this Section 14.1 to the contrary, if any Award constitutes nonqualified deferred compensation within the meaning of Section 409A of the Code, such Award shall be immediately payable only if such Change of Control also constitutes a “change in control event” within the meaning of Section 409A of the Code, and shall otherwise be payable on the earliest possible date otherwise permissible under the terms of such Award.
14.2 Alternative Awards. Despite Section 14.1, no cancellation, acceleration of vesting, lapsing of restrictions, payment of Award, cash settlement or other payment shall occur with respect to any Award if the Committee reasonably determinesin good faith,before the occurrence of a Change of Control, in good faith and, to the extent applicable, in accordance qith Section 409A of the Code, that such Award shall be honored or assumed, or new rights substituted therefor (such honored, assumed or substituted Award hereinafter called an “Alternative Award”) by any successor as described in Article 17; provided that any such Alternative Award must:
(a) Be based on stock which is traded on an established U.S. securities market, or that the Committee reasonably believes will be so traded within sixty (60) days after the Change of Control;
(b) Provide such Participant with rights and entitlements substantially equivalent to or better than the rights, terms and conditions applicable under such Award, including, but not limited to, an identical or better exercise or vesting schedule and identical or better timing and methods of payment;
(c) Have substantially equivalent economic value to such Award (determined at the time of the Change of Control); and
(d) Have terms and conditions which provide that in the event that the Participant’s employmentor service as a Non-employee Directoris involuntarily terminated or Constructively Terminated, any conditions on a Participant’s rights under, or any restrictions on transfer or exercisability applicable to, each such Alternative Award shall be waived or shall lapse, as the case may be.
Article 15.
Amendment, Modification, Suspension, and Termination
15.1 Amendment, Modification, Suspension, and Termination. The Committee or Board may, at any time and from time to time, alter, amend, modify, suspend, or terminate this Plan in whole or in part; provided however, that:
(a)Without the prior approval of the Company’s shareholders, Options and SARs issued under this Plan will not be repriced, replaced, or regranted through cancellation or by lowering the exercise price of a previously granted Option. Except in connection with a corporate transaction involving the Company (including, without limitation, any stock dividend, stock split, extraordinary cash dividend, recapitalization, reorganization, merger, consolidation, split-up, spin-off, combination, or exchange of shares), the terms of outstanding Awards may not be amended to reduce the exercise price of outstanding Options or SARs or cancel outstanding Options or SARs in exchange for cash, other awards or Options or SARs without stockholder approval.
(b) To the extent necessary under any applicable law, regulation or exchange requirement, no amendment shall be effective unless approved by the shareholders of the Company in accordance with applicable law, regulation, or exchange requirement.
15.2 Adjustment of Awards on the Occurrence of Certain Unusual or Nonrecurring Events. The Committee may make adjustments in the terms and conditions of, and the criteria included in, Awards in recognition of unusual or nonrecurring events (including, without limitation, the events described in Section 4.2 hereof) affecting the Company or the financial statements of the Company or of changes in applicable laws, regulations, or accounting principles, whenever the Committee determines that such adjustments are appropriate in order to prevent unintended dilution or enlargement of the benefits or potential benefits intended to be made available under this Plan. The determination of the Committee as to the foregoing adjustments, if any, shall be conclusive and binding on Participants under this Plan. To the extent such adjustment affects Awards to Insiders intended to be Performance-Based Compensation, they shall be prescribed in a form that meets the requirements of Section 162(m) of the Code for deductibility for federal income tax purposes.
15.3 Awards Previously Granted. Despite any other provision of this Plan to the contrary, no termination, amendment, suspension, or modification of this Plan shall adversely affect in any material way any Award previously granted under this Plan, without the written consent of the Participant holding such Award.
Article 16.
Withholding
The Company or any Affiliate shall have the power and the right to deduct or withhold, or require a Participant to remit to the Company or any Affiliate, an amount sufficient to satisfy federal, state, and local taxes, domestic or foreign (including the Participant’s FICA obligation), required by law or regulation to be withheld with respect to any taxable event arising or as a result of this Plan. The Committee may provide for Participants to satisfy withholding requirements by having the Company withhold Shares or the Participant making such other arrangements, in either case on such conditions as the Committee specifies.
Article 17.
Successors
Any obligations of the Company or an Affiliate under this Plan with respect to Awards granted under this Plan, shall be binding on any successor to the Company or Affiliate, respectively, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Company or Affiliate, as applicable.
Article 18.
General Provisions
18.1 Forfeiture Events. Without limiting in any way the generality of the Committee’s power to specify any terms and conditions of an Award consistent with law, and for greater clarity, the Committee may specify in an Award Agreement that the Participant’s rights, payments, and benefits with respect to an Award shall be subject to reduction, cancellation, forfeiture, or recoupment on the occurrence of certain specified events, in addition to any otherwise applicable vesting or performance conditions of an Award. Such events shall include, but shall not be limited to, failure to accept the terms of the Award Agreement, termination of employment or board service under certain or all circumstances, violation of material Company and Affiliate policies, breach of noncompetition, confidentiality, nonsolicitation, noninterference, corporate property protection, or other agreement that may apply to the Participant, or other conduct by the Participant that is detrimental to the business or reputation of the Company and Affiliates.
18.2 Legend. The certificates for Shares may include any legend that the Committee deems appropriate to reflect any restrictions on transfer of such Shares.
18.3 Delivery Of Title. The Company shall have no obligation to issue or deliver evidence of title for Shares issued under this Plan before:
(a) Obtaining any approvals from governmental agencies that the Company determines are necessary or advisable; and
(b) Completion of any registration or other qualification of the Shares under any applicable national or foreign law or ruling of any governmental body that the Company determines to be necessary or advisable.
18.4 Investment Representations. The Committee may require each Participant receiving Shares under an Award under this Plan to represent and warrant in writing that the Participant is acquiring the Shares for investment and without any present intention to sell or distribute such Shares.
18.5 Employees or Non-employee Directors Based Outside of The United States. Without limiting in any way the generality of the Committee’s powers under this Plan, including but not limited to the power to specify any terms and conditions of an Award consistent with law, in order to comply with the laws in other countries in which the Company or an Affiliate operates or has Employees or Non-employee Directors, the Committee, in its sole discretion, shall have the power and authority, notwithstanding any provision of this Plan to the contrary, to:
(a) Determine which Affiliates shall be covered by this Plan;
(b) Determine which Employeesor Non-employee Directorsoutside the United States are eligible to participate in this Plan;
(c) Modify the terms and conditions of any Award granted to Employeesor Non-employee Directorsoutside the United States to comply with applicable foreign laws;
(d) Establish subplans and modify exercise procedures and other terms and procedures, to the extent such actions may be necessary or advisable. Any subplans and modifications to Plan terms and procedures established under this Section 18.5 by the Committee shall be attached to this Plan document as appendices; and
(e) Take any action, before or after an Award is made, that it deems advisable to obtain approval or comply with any necessary local government regulatory exemptions or approvals.
Despite the above, the Committee may not take any actions under this Plan and no Awards shall be granted that would violate the Exchange Act, the Code, any securities law, or governing statute or any other applicable law.
18.6 Uncertificated Shares. To the extent that this Plan provides for issuance of certificates to reflect the transfer of Shares, the transfer of such Shares may be effected on a noncertificated basis to the extent not prohibited by applicable law or the rules of any stock exchange.
18.7 Unfunded Plan. Participants shall have no right, title, or interest whatsoever in or to any investments that the Company or an Affiliate may make to aid it in meeting its obligations under this Plan. Nothing contained in this Plan, and no action taken under its provisions, shall create or be construed to create a trust of any kind, or a fiduciary relationship between the Company or an Affiliate and any Participant, beneficiary, legal representative, or any other person. Awards shall be general, unsecured obligations of the Company, except that if an Affiliate signs an Award Agreement instead of the Company the Award shall be a general, unsecured obligation of the Affiliate and not any obligation of the Company. To the extent that any individual acquires a right to receive payments from the Company or an Affiliate, such right shall be no greater than the right of an unsecured general creditor of the Company or Affiliate, as applicable. All payments to be made under this Plan shall be paid from the general funds of the Company or Affiliate, as applicable, and no special or separate fund shall be established and no segregation of assets shall be made to assure payment of such amounts except as expressly set forth in this Plan. This Plan is not intended to be subject to ERISA.
18.8 No Fractional Shares. No fractional Shares shall be issued or delivered under this Plan or any Award Agreement. In such an instance, unless the Committee determines otherwise, fractional Shares and any rights thereto shall be forfeited or otherwise eliminated.
18.9 Other Compensation and Benefit Plans. Nothing in this Plan shall be construed to limit the right of the Company or an Affiliate to establish other compensation or benefit plans, programs, policies, or arrangements. Except as may be otherwise specifically stated in any other benefit plan, policy, program, or arrangement, no Award shall be treated as compensation for purposes of calculating a Participant’s rights under any such other plan, policy, program, or arrangement.
18.10 No Constraint on Corporate Action. Nothing in this Plan shall be construed (i) to limit, impair or otherwise affect the Company’s or an Affiliate’s right or power to make adjustments, reclassifications, reorganizations or changes of its capital or business structure, or to merge or consolidate, or dissolve, liquidate, sell, or transfer all or any part of its business or assets, or (ii) to limit the right or power of the Company or an Affiliate to take any action which such entity deems to be necessary or appropriate.
Article 19.
Legal Construction
19.1 Gender And Number. Except where otherwise indicated by the context, any masculine term used herein also shall include the feminine, the plural shall include the singular, and the singular shall include the plural.
19.2 Severability. In the event any provision of this Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of this Plan, and this Plan shall be construed and enforced as if the illegal or invalid provision had not been included.
19.3 Requirements of Law. The granting of Awards and the issuance of Shares under this Plan shall be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required. The Company or an Affiliate shall receive the consideration required by law for the issuance of Awards under this Plan.
The inability of the Company or an Affiliate to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company’s or the Affiliate’s counsel to be necessary to the lawful issuance and sale of any Shares under this Plan, shall relieve the Company or Affiliate of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained.
19.4 Governing Law. This Plan and each Award Agreement shall be governed by the laws of the State of Oklahoma, excluding any conflicts or choice of law rule or principle that might otherwise refer construction or interpretation of this Plan to the substantive law of another jurisdiction.
ANNUAL MEETING OF STOCKHOLDERS OF
UNIT CORPORATION
May 2, 2012
NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIAL:
The Notice of Meeting, proxy statement, proxy card, and annual report
are available athttp://www.unitcorp.com/corpreports.html
Please sign, date and mail
your proxy card in the
envelope provided as soon
as possible.
ê Please detach along perforated line and mail in the envelope provided. ê
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| | ¢ 20333033000000000000 7 | | | | 050212
|
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” ALL OF THE LISTED NOMINEES FOR THE ELECTION OF DIRECTORS,
“FOR” PROPOSAL 2, “FOR” PROPOSAL 3, “FOR” PROPOSAL 4 AND “FOR” PROPOSAL 5.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE x
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | FOR
| | AGAINST
| | ABSTAIN
| | |
| | | | 1. Election of Directors:
| | | | 2.
| | Approve, on an advisory basis, our named executive officers’ compensation.
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| | | | ¨
¨
¨
| | FOR ALL NOMINEES
WITHHOLD AUTHORITY
FOR ALL NOMINEES
FOR ALL EXCEPT
(See instructions below)
| | NOMINEES:
John G. Nikkel
Robert J. Sullivan Jr.
Gary R. Christopher
| | | | | | 3.
| | Re-approve, for purposes of Section 162(m) of the Internal Revenue Code, the performance goals for performance-based compensation under the existing Unit Corporation Stock and Incentive Compensation Plan.
| | ¨ | | ¨ | | ¨ | | |
| | | | | | | | | | | 4.
| | Approve the Amended and Restated Unit Corporation Stock and Incentive Compensation Plan.
| | ¨
| | ¨
| | ¨
| | |
| | | | | | | | | | | 5.
| | Ratify the selection of PricewaterhouseCoopers LLP as the company’s independent public accounting firm for the year 2012.
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| | | | | | | | | | | THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED BY THE STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE RECOMMENDATION OF THE BOARD OF DIRECTORS.
| | |
| | | | INSTRUCTIONS: To withhold authority to vote for any individual nominee(s), mark“FOR ALL EXCEPT” and fill in the circle next to each nominee you wish to withhold, as shown here: l
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| | | | To change the address on your account, please check the box at right and indicate your new address in the address space above. Please note that changes to the registered name(s) on the account may not be submitted via this method.
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| | Signature of Stockholder
| | | | Date:
| | | | Signature of Stockholder
| | | | Date:
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| | ¢
| | Note:
| | Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder must sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person.
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ANNUAL MEETING OF STOCKHOLDERS OF
UNIT CORPORATION
May 2, 2012
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| | PROXY VOTING INSTRUCTIONS
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INTERNET - Access “www.voteproxy.com” and follow the on-screen instructions. Have your proxy card available when you access the web page.
TELEPHONE - Call toll-free1-800-PROXIES(1-800-776-9437) in the United States or1-718-921-8500from foreign countries from any touch-tone telephone and follow the instructions. Have your proxy card available when you call.
Vote online/phone until 11:59 PM EST the day before the meeting.
MAIL - Sign, date and mail your proxy card in the envelope provided as soon as possible.
IN PERSON - You may vote your shares in person by attending the Annual Meeting.
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COMPANY NUMBER
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ACCOUNT NUMBER
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NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIAL:
The Notice of Meeting, proxy statement, proxy card, and annual report
are available athttp://www.unitcorp.com/corpreports.html
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ê Please detach along perforated line and mail in the envelope providedIF you are not voting via telephone or the Internet. ê
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| | | | 20333033000000000000 7
| | 050212
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” ALL OF THE LISTED NOMINEES FOR THE ELECTION OF DIRECTORS,
“FOR” PROPOSAL 2, “FOR” PROPOSAL 3, “FOR” PROPOSAL 4 AND “FOR” PROPOSAL 5.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HEREx
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| | | | | | | | | | | | | | | | FOR
| | AGAINST
| | ABSTAIN
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| | 1. Election of Directors:
| | | | | | | | | | 2. Approve, on an advisory basis, our named executive officers’ compensation.
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| | FOR ALL NOMINEES
WITHHOLD AUTHORITYFOR ALL NOMINEES
FOR ALL EXCEPT
(See instructions below)
| | NOMINEES:
John G. Nikkel
Robert J. Sullivan Jr.
Gary R. Christopher
| | | | | | | | 3. Re-approve, for purposes of Section 162(m) of the Internal Revenue Code, the performance goals for performance-based compensation under the existing Unit Corporation Stock and Incentive Compensation Plan.
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| | | | | | | | | | 4. Approve the Amended and Restated Unit Corporation Stock and Incentive Compensation Plan.
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| | | | | | | | | | 5. Ratify the selection of PricewaterhouseCoopers LLP as the company’s independent public accounting firm for the year 2012.
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| | | | | | | | | | | | | | THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED BY THE STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE RECOMMENDATION OF THE BOARD OF DIRECTORS.
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| | INSTRUCTIONS: To withhold authority to vote for any individual nominee(s), mark “FOR ALL EXCEPT” and fill in the circle next to each nominee you wish to withhold, as shown here:l
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| | To change the address on your account, please check the box at right and indicate your new address in the address space above. Please note that changes to the registered name(s) on the account may not be submitted via this method.
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| | Signature of Stockholder
| | | | Date:
| | | | Signature of Stockholder
| | | | Date:
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| | | | Note:
| | Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder must sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person.
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