def14a
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by
the Registrant ý
Filed by a Party other than the Registrant o
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Preliminary Proxy Statement |
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
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Definitive Proxy Statement |
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Definitive Additional Materials |
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Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12 |
COMPLETE PRODUCTION SERVICES, INC.
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
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Fee paid previously with preliminary materials. |
o Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2)
and identify the filing for which the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or Schedule and the date of its filing.
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Form, Schedule or Registration Statement No.: |
April 4, 2008
Dear Stockholder:
You are invited to attend the annual meeting of stockholders of
Complete Production Services, Inc. to be held on May 22,
2008, at 9:00 a.m. local time, at The Lancaster Hotel, 701
Texas Avenue, Houston, Texas 77002.
At this year’s annual meeting you will be asked to:
(i) elect three directors to serve for a three-year term;
(ii) approve the Complete Production Services, Inc. 2008
Incentive Award Plan; (iii) ratify the selection of our
independent registered public accountants; and
(iv) transact such other business as may properly come
before the annual meeting. The accompanying Notice of Meeting
and Proxy Statement describe these matters. We urge you to read
this information carefully.
Your board of directors unanimously believes that election of
its nominees for directors, approval of the Complete Production
Services, Inc. 2008 Incentive Award Plan and ratification of the
Audit Committee’s selection of independent registered
public accountants are in the best interests of Complete
Production Services, Inc. and its stockholders, and,
accordingly, recommends a vote “FOR” election of each
of the three nominees for directors, “FOR” the
approval of the Complete Production Services, Inc. 2008
Incentive Award Plan and “FOR” the ratification of the
selection of Grant Thornton LLP as our independent registered
public accountants.
In addition to the business to be transacted as described above,
management will speak on our developments of the past year and
respond to comments and questions of general interest to
stockholders.
It is important that your shares be represented and voted
whether or not you plan to attend the annual meeting in person.
You may vote by completing and mailing the enclosed proxy card
or the voting instruction form provided by your broker or other
nominee. This will ensure your shares are represented at the
annual meeting. Your vote is important!
Sincerely,
James F. Maroney
Vice President, Secretary and General Counsel
COMPLETE PRODUCTION SERVICES,
INC.
11700 Old Katy Road, Suite 300
Houston, Texas 77079
NOTICE OF ANNUAL MEETING OF
STOCKHOLDERS
TO BE HELD ON MAY 22, 2008
To the stockholders of Complete Production Services, Inc.:
We will hold our annual meeting of stockholders at The Lancaster
Hotel, 701 Texas Avenue, Houston, Texas 77002, on May 22,
2008, at 9:00 A.M. local time, for the following purposes:
1. To elect Robert S. Boswell, Michael McShane and Marcus
A. Watts as directors with a three-year term expiring at the
2011 annual meeting of stockholders and until their successors
are duly elected and qualified or until their earlier
resignation or removal.
2. To approve the Complete Production Services, Inc. 2008
Incentive Award Plan.
3. To ratify the selection of Grant Thornton LLP as our
independent registered public accountants for the fiscal year
ending December 31, 2008.
4. To transact any other business as may properly come
before the annual meeting or any adjournments or postponements
of the annual meeting.
These items of business are described in the attached proxy
statement. Only our stockholders of record at the close of
business on March 25, 2008, the record date for the annual
meeting, are entitled to notice of and to vote at the annual
meeting and any adjournments or postponements of the annual
meeting.
A list of stockholders eligible to vote at our annual meeting
will be available for inspection at the annual meeting, and at
our executive offices during regular business hours for a period
of no less than ten days prior to the annual meeting.
Your vote is very important. It is important that your
shares be represented and voted whether or not you plan to
attend the annual meeting in person. You may vote by completing
and mailing the enclosed proxy card or voting instruction form.
If your shares are held in “street name,” which means
shares held of record by a broker, bank or other nominee, you
should check the voting instruction form used by that firm to
determine whether you will be able to submit your proxy by
telephone or over the Internet. Submitting a proxy over the
Internet, by telephone or by mailing the enclosed proxy card or
voting instruction card will ensure your shares are represented
at the annual meeting. Please review the instructions in this
proxy statement and the enclosed proxy card or the information
forwarded by your broker, bank or other nominee regarding your
voting rights.
By Order of the Board of Directors,
James F. Maroney
Vice President, Secretary and General Counsel
Complete Production Services, Inc.
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ii
PROXY
STATEMENT
INFORMATION
CONCERNING VOTING AND SOLICITATION
General
The enclosed proxy is solicited on behalf of the board of
directors of Complete Production Services, Inc., a Delaware
corporation (“Complete Production Services,”
“we,” “our” or “us”), for use at
the 2008 annual meeting of stockholders to be held on Thursday,
May 22, 2008, at 9:00 A.M. local time, or at any
continuation, postponement or adjournment thereof, for the
purposes discussed in this proxy statement and in the
accompanying notice of annual meeting and any business properly
brought before the annual meeting. Proxies are solicited to give
all stockholders of record an opportunity to vote on matters
properly presented at the annual meeting. We intend to mail this
proxy statement and accompanying proxy card on or about
April 9, 2008 to all stockholders entitled to vote at the
annual meeting. The annual meeting will be held at The Lancaster
Hotel, 701 Texas Avenue, Houston, Texas 77002. Directions to
attend the meeting can be found on our Internet website,
www.completeproduction.com.
Important Notice Regarding the Availability of Proxy
Materials for the 2008 Stockholder Meeting to Be Held on
May 22, 2008
This proxy statement and our 2007 annual report to
stockholders are available on our website address at
www.completeproduction.com/fin-reports. This website address
contains the following documents: the notice of the annual
meeting, this proxy statement and proxy card sample, and the
2007 annual report to stockholders. You are encouraged to access
and review all of the important information contained in the
proxy materials before voting.
Who Can
Vote
You are entitled to vote if you were a stockholder of record of
our common stock as of the close of business on March 25,
2008. You are entitled to one vote for each share of common
stock held on all matters to be voted upon at the annual
meeting. Your shares may be voted at the annual meeting only if
you are present in person or represented by a valid proxy.
Voting by
Proxy
The method of voting by proxy differs for shares held as a
record holder and shares held in “street name.” If you
hold your shares of common stock as a record holder, you may
vote by completing, dating and signing the enclosed proxy card
and promptly returning it in the enclosed, preaddressed, postage
paid envelope or otherwise mailing it to us. If you hold your
shares of common stock in “street name,” which means
your shares are held of record by a broker, bank or nominee, you
will receive instructions from your broker, bank or other
nominee that you must follow in order to vote your shares. A
large number of banks and brokerage firms are participating in
the Broadridge Investor Communication Solutions, Inc. (formerly
ADP Investor Communication Services) online program. This
program provides eligible stockholders the opportunity to vote
via the Internet or by telephone. If your bank or brokerage firm
is participating in Broadridge’s program, your voting form
will provide instructions. If your voting form does not
reference Internet or telephone information, please complete and
return the enclosed paper proxy in the self-addressed postage
paid envelope provided.
Your vote is very important. Accordingly, please complete, sign
and return the enclosed proxy card or voting instruction card
whether or not you plan to attend the annual meeting in person.
You should vote by submitting your proxy or voting instructions
even if you plan to attend the annual meeting.
All properly signed proxies that are received before the polls
are closed at the annual meeting and that are not revoked will
be voted at the annual meeting according to the instructions
indicated on the proxies or, if no direction is indicated, they
will be voted “FOR” the election of each of the
three nominees for director, “FOR” the approval
of the Complete Production Services, Inc. 2008 Incentive Award
Plan and “FOR” the ratification of the
selection of the independent auditors.
The enclosed proxy gives each of Joseph C. Winkler and James F.
Maroney discretionary authority to vote your shares in
accordance with his best judgment with respect to all additional
matters that might come before the annual meeting.
Voting in
Person
If you are a stockholder of record and plan to attend the annual
meeting and wish to vote in person, you will be given a ballot
at the annual meeting. Please note, however, that if your shares
are held in “street name,” which means your shares are
held of record by a broker, bank or other nominee, and you wish
to vote in person at the annual meeting, you must bring to the
annual meeting a legal proxy from the record holder of the
shares (your broker or other nominee) authorizing you to vote at
the annual meeting.
Revocation
of Proxy
If you are a stockholder of record, you may revoke your proxy at
any time before your proxy is voted at the annual meeting by
taking any of the following actions:
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delivering to our corporate secretary a signed written notice of
revocation, bearing a date later than the date of the proxy,
stating that the proxy is revoked;
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signing and delivering a new proxy, relating to the same shares
and bearing a later date than the original proxy; or
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attending the annual meeting and voting in person, although
attendance at the annual meeting will not, by itself, revoke a
proxy.
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Written notices of revocation and other communications with
respect to the revocation of proxies should be addressed to:
Complete Production Services, Inc.
11700 Old Katy Road, Suite 300
Houston, Texas 77079
Attn: Secretary
If your shares are held in “street name” by a broker
or other nominee, you may change your vote by submitting new
voting instructions to your broker, bank or other nominee. You
must contact your broker, bank or other nominee to find out how
to do so.
Broker
Non-votes
Brokers or other nominees who hold shares of common stock in
“street name” for a beneficial owner of those shares
typically have the authority to vote at their discretion on
“routine” proposals when they have not received
instructions from beneficial owners. However, brokers are not
allowed to exercise their voting discretion with respect to the
approval of matters which the New York Stock Exchange
(“NYSE”), determines to be “non-routine,”
without specific instructions from the beneficial owner. These
non-voted shares are referred to as “broker
non-votes.” If your broker holds your common stock in
“street name,” your broker will vote your shares on
“non-routine” proposals only if you provide
instructions on how to vote by filling out the voter instruction
form sent to you by your broker with this proxy statement. The
election of directors and ratification of accountants are
generally considered to be routine proposals, while approval of
the Complete Production Services Inc. 2008 Incentive Award Plan
is considered to be a non-routine proposal.
Quorum
and Votes Required
At the close of business on March 25, 2008,
73,488,736 shares of our common stock were outstanding and
entitled to vote. All votes will be tabulated by the inspector
of election appointed for the annual meeting, who will
separately tabulate affirmative and negative votes, abstentions
and broker non-votes.
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A majority of the outstanding shares of common stock present in
person or represented by proxy will constitute a quorum at the
annual meeting. Shares of common stock held by persons attending
the annual meeting but not voting, shares represented by proxies
that reflect abstentions as to a particular proposal and broker
non-votes will be counted as present for purposes of determining
a quorum.
For Proposal 1, directors will be elected by a plurality of
the votes cast. Thus the three nominees receiving the greatest
votes will be elected. As a result, abstentions will not be
counted in determining which nominees received the largest
number of votes cast. Brokers generally have discretionary
authority to vote on the election of directors and thus broker
non-votes are generally not expected to result from the vote on
election of directors. Any broker non-votes that may result will
not affect the outcome of the election.
For Proposal 2, approval of the Complete Production
Services, Inc. 2008 Incentive Award Plan, is governed by the
NYSE listing standards, which require that to be approved, the
plan must receive the affirmative vote of the holders of a
majority of the shares of common stock cast on such proposal, in
person or by proxy, provided that the votes cast on the proposal
represent over 50% of the total outstanding shares of common
stock entitled to vote on the proposal. Under this standard,
votes “For” and “Against” and abstentions
count as votes cast, while broker non-votes do not count as
votes cast. All outstanding shares on the record date, including
shares resulting in broker non-votes, count as shares entitled
to vote. Thus, the total sum of votes “For,” votes
“Against,” and abstentions, which sum is referred to
as the “NYSE Votes Cast,” must be greater than 50% of
the total outstanding shares of common stock. Once satisfied,
the number of votes “For” the proposal must be greater
than 50% of the NYSE Votes Cast. Abstentions will have the
effect of a vote against Proposal 2. The approval of an
equity plan is a matter on which brokers or other nominees are
not empowered to vote without direction from the beneficial
owner. Thus, broker non-votes can result from Proposal 2
and may make it difficult to satisfy the NYSE Votes Cast
requirement.
For Proposal 3, the affirmative vote of a majority of the
shares represented in person or by proxy at the annual meeting
and entitled to vote is required for the ratification of the
selection of Grant Thornton LLP as our independent auditors.
Abstentions will have the same effect as votes against this
proposal. Brokers generally have discretionary authority to vote
on the ratification of our independent auditors, thus broker
non-votes are generally not expected to result from the vote on
Proposal 3. Any broker non-votes that may result will not
affect the outcome of this proposal.
Solicitation
of Proxies
Our board of directors is soliciting proxies for the annual
meeting from our stockholders. We will bear the entire cost of
soliciting proxies from our stockholders. In addition to the
solicitation of proxies by mail, we will request that brokers,
banks and other nominees that hold shares of our common stock,
which are beneficially owned by our stockholders, send proxies
and proxy materials to those beneficial owners and secure those
beneficial owners’ voting instructions. We will reimburse
those record holders for their reasonable expenses. We have
engaged Morrow & Co., LLC, to assist in the
solicitation of proxies and to provide related advice and
informational support, for a service fee of approximately $5,500
(which includes an advance against expenses of $2,500) and the
reimbursement of additional customary expenses. We also may use
several of our regular employees, who will not be specially
compensated, to solicit proxies from our stockholders, either
personally or by telephone, Internet, telegram, facsimile or
special delivery letter.
Assistance
If you need assistance in completing your proxy card or have
questions regarding the annual meeting, please contact our
investor relations department at
(281) 372-2300
or investor.relations@completeproduction.com or write to:
Complete Production Services, Inc., 11700 Old Katy Road,
Suite 300, Houston, Texas 77079, Attn: Investor Relations.
Important
Information About Us
On September 12, 2005, Integrated Production Services, Inc.
(“IPS”), Complete Energy Services, Inc.
(“CES”) and I.E. Miller Services, Inc.
(“IEM”) were combined and became Complete Production
Services,
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Inc. in a transaction we refer to as the
“Combination.” IPS was the acquirer in the Combination
and was subsequently renamed Complete Production Services, Inc.
On April 20, 2006, we entered into an underwriting
agreement in connection with our initial public offering and
became subject to the reporting requirements of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”).
On April 21, 2006, our common stock began trading on the
NYSE under the symbol “CPX.”
ITEM 1:
ELECTION
OF DIRECTORS
Board
Structure
Our Amended and Restated Certificate of Incorporation provides
that the number of directors shall be set by our board of
directors. Our board of directors has set the current authorized
directors at nine members. The directors are divided into three
classes, with each class serving for a term of three years. At
each annual meeting, the term of one class expires. The class of
directors with a term expiring at this annual meeting,
Class III, consists of three directors: Robert S. Boswell;
Michael McShane; and Marcus A. Watts. Effective as of
March 20, 2007, David C. Baldwin, a Class III
director, resigned from our board of directors and Michael
McShane and Marcus A. Watts were each appointed as
Class III directors to our board of directors to serve
until the 2008 annual meeting of stockholders. Also on
March 20, 2007, Mr. Winkler was appointed our Chairman
of the Board and Mr. Waite was appointed our Presiding
Non-Employee Director.
Board
Nominees
Based upon the recommendation of our Nominating and Corporate
Governance Committee, our board of directors has nominated
Michael McShane and Marcus A. Watts for election, and Robert S.
Boswell for re-election, as directors to the board. All three
nominees currently serve on our board. Messrs. McShane and
Watts were each first recommended to the Nominating and
Corporate Governance Committee to become a member of our board
of directors by Joseph C. Winkler, our Chairman and Chief
Executive Officer. If elected, each director nominee would serve
a three-year term expiring at the close of our 2011 annual
meeting, or until their successors are duly elected.
Messrs. Boswell, McShane and Watts currently serve on our
board of directors. Biographical information on each of the
nominees is furnished below under “Director Biographical
Information.”
Set forth below is information regarding each nominee and each
person whose term of office as a director will continue after
the annual meeting as of the record date. There are no family
relationships amongst our directors.
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Director
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Age
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Expires
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Joseph C. Winkler
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Chairman and Chief Executive Officer
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2005
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2009
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Andrew L. Waite
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Presiding Non-Employee Director
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2005
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2009
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Robert S. Boswell
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Director
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2005
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2008
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Harold G. Hamm
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Director
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2005
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2010
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Michael McShane(1)(2)
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Director
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2007
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2008
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W. Matt Ralls(1)
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Director
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2005
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2010
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R. Graham Whaling(1)(2)
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Director
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2005
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2009
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Marcus A. Watts(3)
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Director
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2007
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2008
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James D. Woods(2)(3)
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Director
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2001
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2010
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Current member of the Audit Committee of the Board |
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Current member of the Compensation Committee of the Board |
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Current member of the Nominating and Corporate Governance
Committee of the Board |
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Director
Biographical Information
The following biographical information is furnished with regard
to our directors (including nominees) as of March 25, 2008.
Nominees
for Election at the Annual Meeting to Serve for a Three-Year
Term Expiring at the 2011 Annual Meeting of
Stockholders
Robert S. Boswell. Mr. Boswell has served
as our director since September 2005. From July 2004 until
September 2005, Mr. Boswell served as a director of CES,
one of our predecessors. He serves as Chairman and Chief
Executive Officer of Laramie Energy II, LLC, a Denver-based
privately held oil and gas exploration and production company he
founded in June 2007. Prior to the formation of Laramie II,
Mr. Boswell served as Chairman and Chief Executive Officer
of Laramie Energy, LLC, a privately held oil and gas exploration
company, whose assets were sold in May 2007. Prior to his time
at Laramie, Mr. Boswell served as Chairman of the board of
directors of Forest Oil Corporation, an independent exploration
and production company, from March 2000 until September 2003. He
served as Chief Executive Officer of Forest Oil Corporation from
December 1995 until September 2003. Mr. Boswell served as
Forest Oil Corporation’s President from November 1993 to
March 2000 and Chief Financial Officer from May 1991 until
December 1995, having served as a member of the board of
directors of Forest Oil Corporation from 1986 until September
2003. He has also served as a director of C.E. Franklin Ltd., a
provider of products and services to the oilfield industry,
specifically completion products.
Michael McShane. Mr. McShane has served
as our director since March 20, 2007. Since June 2002,
Mr. McShane has served as a director and President and
Chief Executive Officer of Grant Prideco, Inc., a public company
which manufactures and supplies oilfield drill pipe and other
drill stem products. Beginning in May 2003, he assumed the role
of Grant Prideco, Inc.’s Chairman of the Board. Prior to
joining that company, Mr. McShane was Senior Vice President
— Finance and Chief Financial Officer and director of
BJ Services Company from 1990 to June 2002 and Vice
President — Finance from 1987 to 1990 while BJ
Services Company was a division of Baker-Hughes.
Mr. McShane joined BJ Services Company in 1987 from Reed
Tool Company, where he was employed for seven years in various
financial management positions.
Marcus A. Watts. Mr. Watts has served as
our director since March 20, 2007. Mr. Watts is a
partner in the law firm of Locke Lord Bissell &
Liddell LLP where he has practiced corporate and securities law
since 1984 and is the Vice Chairman of the firm and managing
partner of its Houston office. From January 2001 to June 2005,
Mr. Watts served as a director of Cornell Companies, a
public company which is a provider of corrections, treatment and
educational services outsourced by federal, state and local
governmental agencies.
Board
Recommendation
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” EACH
OF THE THREE DIRECTOR NOMINEES.
Directors
Continuing in Office Until the 2009 Annual Meeting of
Stockholders
Andrew L. Waite. Mr. Waite has served as
our director since September 2005 and as our presiding
non-employee director since March 20, 2007. Mr. Waite
is a Managing Director of L.E. Simmons and Associates,
Incorporated, a private equity firm and has been an officer of
that company since October 1995. L.E. Simmons and Associates,
Incorporated is one of our largest stockholders. See
“Security Ownership of Directors and Executive Officers and
Certain Beneficial Owners”. He was previously Vice
President of Simmons & Company International, an
investment banking firm specializing in the energy industry
where he served from August 1993 to September 1995. From 1984 to
1991, Mr. Waite held a number of engineering and management
positions with the Royal Dutch/Shell Group, an integrated energy
company. From November 2003 to June 2005, he served as Chairman,
President and Chief Executive Officer of CES, one of our
predecessors. He served as Chairman of CES prior to September
2005 and currently serves as Chairman of Triton Group Holdings,
LLC, an international provider of subsea, remote, intervention
systems and services and Subsea Services International, Inc., a
provider of offshore pipeline field joint coatings and as a
director of
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Green Bancorp, Inc., a bank holding company; Reservoir Group
LLC, a global provider of coring services for oil and gas
companies; Clyde Pumps Holdings Ltd., a UK based designer and
manufacturer of pumps for the oil and gas power industries; and
as a member of the Board of Trustees of the Houston Museum of
Natural Science. He received an M.B.A. degree from the Harvard
University Graduate School of Business Administration and an
M.S. degree from the California Institute of Technology.
Joseph C. Winkler. Mr. Winkler has served
as our Chief Executive Officer since September 2005, as our
director since June 2005 and as our Chairman of the Board since
March 20, 2007. On June 20, 2005, Mr. Winkler
assumed his duties as President and Chief Executive Officer of
CES and as a director of CES, IEM and IPS. CES and IEM were
combined in September 2005 with IPS, which was renamed Complete
Production Services, Inc. Mr. Winkler served as the
Executive Vice President and Chief Operating Officer of National
Oilwell Varco, Inc., an oilfield capital equipment and services
company, from March 2005 until June 2005 and the company’s
predecessor, Varco International, Inc.’s President and
Chief Operating Officer from May 2003 until March 2005. From
April 1996 until May 2003, Mr. Winkler served in various
other capacities with Varco International, Inc. and its
predecessor including Executive Vice President and Chief
Financial Officer. From 1993 to April 1996, Mr. Winkler
served as the Chief Financial Officer of D.O.S., Ltd., a
privately held provider of solids control equipment and services
and coil tubing equipment to the oil and gas industry, which was
acquired by Varco in April 1996. Prior to joining D.O.S., Ltd.,
he was Chief Financial Officer of Baker Hughes INTEQ, and served
in a similar role for various companies owned by Baker Hughes
Incorporated including Eastman/Teleco and Milpark Drilling
Fluids. Mr. Winkler received a Bachelor of Science degree
from Louisiana State University. Mr. Winkler serves on the
board of directors of Petroleum Equipment Suppliers Association
(PESA), an oilfield service and supply industry trade
association and is a member of the board of directors of
Dresser-Rand Group, Inc.
R. Graham Whaling. Mr. Whaling has
served as our director since September 2005. Mr. Whaling is
the managing director of Parkman Whaling LLC, an energy
investing and banking advisory firm he founded in November 2007.
In addition, he has served as a director of Brigham Exploration
Company, an independent exploration and production company from
June 2001 to December 2007. From October 2001 through
February 28, 2007, Mr. Whaling served as Chairman and
Chief Executive Officer of Laredo Energy, LP, a privately owned
partnership engaged in the acquisition and development of
natural gas reserves in south Texas. Subsequent to Laredo
Energy III LP’s sale of its producing properties and
undeveloped acreage to El Paso Corporation in November
2006, Mr. Whaling retired from Laredo Energy LP effective
February 28, 2007. Immediately prior to joining Laredo
Energy, LP, Mr. Whaling was Chairman of Michael Petroleum
Corporation, an independent exploration and production company
that no longer exists. From May 1999 to May 2001,
Mr. Whaling was a Managing Director with Credit Suisse
First Boston’s Global Energy Partners, which specialized in
private equity investments in energy businesses world-wide.
Prior to joining Credit Suisse First Boston, Mr. Whaling
was Chairman and Chief Executive Officer of Monterey Resources
from its inception until it was acquired by Texaco in 1997.
Prior to joining Monterey Resources, Mr. Whaling was the
Chief Financial Officer for Santa Fe Energy, an independent
exploration and production company, where he managed the initial
public offering and the spin-off of Santa Fe’s western
division, Monterey Resources. Previously, Mr. Whaling spent
seven years as an investment banker focusing on the energy
industry with Lazard Freres & Co. and Credit Suisse
First Boston. Mr. Whaling worked as a petroleum engineer
for nine years in the beginning of his career primarily with
Ryder Scott Company, an oil and gas consulting firm.
Mr. Whaling has spent his entire career in the energy
industry, as a petroleum engineer, an energy investment banker,
a chief financial officer and a chief executive officer of
energy companies.
Directors
Continuing in Office Until the 2010 Annual Meeting of
Stockholders
Harold G. Hamm. Mr. Hamm has served as
our director since September 2005. From October 2004 until
September 2005, Mr. Hamm served as a director of CES, one
of our predecessors. Mr. Hamm was elected Chairman of the
board of directors of Hiland Partners’ general partner in
October 2004. Hiland Partners is a NASDAQ publicly traded
midstream master limited partnership. Mr. Hamm has served
as President and Chief Executive Officer and as a director of
Continental Gas, Inc., a midstream natural gas gathering company
since December 1994 and then served as Chief Executive Officer
and a director until 2004.
6
Since its inception in 1967, Mr. Hamm has served as
President and Chief Executive Officer and a director of
Continental Resources, Inc. and currently serves as Chairman of
its board of directors. Continental Resources, Inc. is an
independent exploration and production company. Mr. Hamm is
the immediate past chairman of the Oklahoma Independent
Petroleum Association. He is the founder and served as Chairman
of the board of directors of Save Domestic Oil, Inc.
Mr. Hamm is immediate past President of the National
Stripper Well Association, and currently serves on the executive
boards of the Oklahoma Independent Petroleum Association and the
Oklahoma Energy Explorers.
W. Matt Ralls. Mr. Ralls has served
as our director since December 2, 2005. Mr. Ralls
served as Executive Vice President and Chief Operating Officer
of GlobalSantaFe Corporation, an international contract drilling
company, from June 2005 until the completion of the merger of
GlobalSantaFe with Transocean, Inc. in November 2007.
Mr. Ralls also served as Senior Vice President and Chief
Financial Officer for GlobalSantaFe from November 2001 to June
2005. Previously, he was Global Marine Inc.’s Senior Vice
President, Chief Financial Officer and Treasurer from January
1999 to November 2001 when Global Marine merged to become
GlobalSantaFe. He also served as Global Marine’s Executive
Vice President, Chief Financial Officer and Treasurer from 1997
to January 1999. Mr. Ralls served as Vice President of
Capital Markets and Corporate Development for The Meridian
Resource Corporation, an independent exploration and production
company, before joining Global Marine. Prior to joining The
Meridian Resource Corporation, Mr. Ralls served as
Executive Vice President, Chief Financial Officer and a director
of Kelley Oil and Gas Corporation, an independent exploration
and production company, from 1990 until 1996. Mr. Ralls
spent the first 17 years of his career in commercial
banking, mostly at the senior loan management level, with three
large Texas banks, including NationsBank in San Antonio,
Texas.
James D. Woods. Mr. Woods has served as
our director since June 2001. From June 2001 until September
2005, Mr. Woods served as a director of IPS, which,
subsequent to the Combination in September 2005 with CES and
IEM, was renamed Complete Production Services, Inc.
Mr. Woods is the Chairman Emeritus and retired Chief
Executive Officer of Baker Hughes Incorporated. Mr. Woods
was Chief Executive Officer of Baker Hughes from April 1987, and
Chairman from January 1989, in each case until January 1997.
Mr. Woods is currently a director of ESCO Technologies, a
NYSE-listed supplier of engineered filtration products to the
process, healthcare and transportation market and Foster Wheeler
Ltd., an OTC-traded holding company of various subsidiaries
which provides a broad range of engineering, design,
construction and environmental services.
Executive
Officers
Set forth below is information regarding each of our executive
officers as of March 25, 2008:
|
|
|
|
|
|
|
Name
|
|
Age
|
|
Position
|
|
Joseph C. Winkler
|
|
|
56
|
|
|
Chairman and Chief Executive Officer
|
Brian K. Moore
|
|
|
51
|
|
|
President and Chief Operating Officer
|
J. Michael Mayer
|
|
|
51
|
|
|
Senior Vice President and Chief Financial Officer
|
James F. Maroney
|
|
|
57
|
|
|
Vice President, Secretary and General Counsel
|
Kenneth L. Nibling
|
|
|
57
|
|
|
Vice President — Human Resources and Administration
|
Robert L. Weisgarber
|
|
|
56
|
|
|
Vice President — Accounting and Controller
|
Jose Bayardo
|
|
|
36
|
|
|
Vice President — Corporate Development and Investor
Relations
|
Joseph C. Winkler. See above
“— Directors Continuing in Office Until the
2009 Annual Meeting of Stockholders.”
Brian K. Moore. Mr. Moore has served as
our President and Chief Operating Officer since March 20,
2007 and prior to that served as our President, IPS Operations
from September 2005 through March 20, 2007. From April 2004
through September 2005, Mr. Moore served as President and
Chief Executive Officer and a director of IPS, one of our
predecessor companies. From January 2001 through April 2004,
Mr. Moore served
7
as General Manager — Oilfield Services, U.S. Land
Central Region, at Schlumberger Ltd., an international oilfield
and information services company. Prior to serving as General
Manager — Oilfield Services, Mr. Moore served as
Pressure Pumping Manager for Schlumberger’s Eastern Region
from July 1999 to January 2001. Mr. Moore has over
27 years of oilfield service experience including
15 years with Camco International where he served in
various management and engineering positions including General
Manager — Coiled Tubing Operations.
J. Michael Mayer. Mr. Mayer has
served as our Senior Vice President and Chief Financial Officer
since September 2005. He joined CES, one of our predecessors, as
Vice President and Chief Financial Officer in May 2004. Prior to
joining CES, Mr. Mayer served as the Chief Financial
Officer of Tri-Point Energy Services, Inc., a Houston based
private company providing repair and refurbishment services to
the drilling industry, from March 2003 until May 2004. Before
joining Tri-Point, Mr. Mayer was the Chief Financial
Officer of NATCO Group Inc., a NYSE-listed provider of process
and production equipment to the oil and gas industry, from
September 1999 to March 2003. At NATCO, Mr. Mayer was
active in taking the company public in 2000 and completed a
number of acquisitions while in that role. He has served as
Chief Financial Officer in a number of private entities engaged
in various facets of the oilfield service industry, as well as
approximately 10 years in various financial management
positions at Baker Hughes Incorporated, an international
oilfield service company. Mr. Mayer received a Bachelor of
Business Administration degree from Texas A&M University
and is a certified public accountant.
James F. Maroney. Mr. Maroney has served
as our Vice President, Secretary and General Counsel since
October 2005. From August 2005 until October 2005,
Mr. Maroney surveyed various opportunities until accepting
employment with us. Mr. Maroney served as Of Counsel to
National Oilwell Varco, Inc. from March 2005 to August 2005. He
served as Vice President, Secretary and General Counsel of Varco
International, Inc. from May 2000 until March 2005. Prior to
that time, Mr. Maroney served as Vice President, Secretary
and General Counsel of Tuboscope, Inc., predecessor to Varco
International, Inc.
Kenneth L. Nibling. Mr. Nibling has
served as our Vice President — Human Resources and
Administration since October 2005. From August 2005 to October
2005, Mr. Nibling surveyed various opportunities until
accepting employment with us. He served as Vice President, Human
Resources of National Oilwell Varco, Inc. from March 2005
through July 2005. He served as Varco International, Inc.’s
Vice President — Human Resources and Administration
from May 2000 until March 2005. Prior to that time,
Mr. Nibling served as Vice President — Human
Resources and Administration of Tuboscope, Inc., predecessor to
Varco International, Inc.
Robert L. Weisgarber. Mr. Weisgarber has
served as our Vice President — Accounting and
Controller since September 2005. From April 2004 until September
2005, he served as the Vice President — Accounting of
CES, one of our predecessor companies. From October 2003 until
April 2004, Mr. Weisgarber served as CFO Partner for Tatum
Partners, an executive services and consulting firm.
Mr. Weisgarber served as Chief Financial Officer of DSI
Toys, Inc., a publicly owned manufacturer of toys that has since
liquidated pursuant to Chapter 7 of the Bankruptcy Code,
from March 1999 until its bankruptcy in October 2003.
Jose Bayardo. Mr. Bayardo has served as
our Vice President — Corporate Development and
Investor Relations since February 2007. From April 2006 to
January 2007 he served as Vice President of our IPS
Division’s Rocky Mountain and Mid Continent operations.
From April 2003 to April 2006 he served as the Vice President of
Corporate Development of IPS, our predecessor company. Prior to
joining us, Mr. Bayardo was an investment banker with
JPMorgan where he led the firm’s energy technology
investment banking efforts.
CORPORATE
GOVERNANCE
Composition
of the Board of Directors
Our board of directors has adopted corporate governance
guidelines to set forth its agreements concerning overall
governance practices. Our board has also adopted a Code of
Business Conduct and Ethics, which
8
contains general guidelines for conducting our business that
applies to all of our employees, including our principal
executive officer and our principal financial officer, our
principal accounting officer and our controller, and a Code of
Ethics for Non-Employee Directors that applies to all of our
non-employee directors. Our guidelines and codes of ethics can
be found in the corporate governance section of our website at
www.completeproduction.com. In addition, our guidelines
and codes of ethics are available in print to any stockholder
who requests a copy. Please direct all requests to our
Secretary, Complete Production Services, Inc., 11700 Old Katy
Road, Suite 300, Houston, Texas 77079.
Board
Independence
Our board of directors has determined that each of
Messrs. Boswell, McShane, Ralls, Watts, Whaling and Woods
is an independent member of the board under the listing
standards of the NYSE and has no material relationship with us
that would impair such director’s independence. Our board
has further determined that each of our standing committees is
comprised solely of such independent members of our board. In
making these determinations, our board considered all
relationships between us and the director and the
director’s family members, including:
|
|
|
|
•
|
Joseph C. Winkler, our chairman of the board, has served as our
Chief Executive Officer since September 2005. In addition, on
June 20, 2005, Mr. Winkler assumed his duties as
President and Chief Executive Officer of CES and as director of
CES, IEM and IPS. CES and IEM were combined with IPS in
September 2005, which was renamed Complete Production Services,
Inc. Mr. Winkler was thus determined to be not independent.
|
|
|
•
|
Andrew L. Waite, our presiding non-employee director, is also a
Managing Director and an officer of L.E. Simmons and Associates,
Incorporated, the ultimate general partner of
SCF-IV,
L.P., which together with related entities, holds approximately
27.6% of the outstanding shares of our common stock. In
addition, from November 2003 to November 2005, Mr. Waite
served as Chairman, President and Chief Executive Officer of
CES, which following the September 2005 Combination, became one
of our subsidiaries. Mr. Waite was thus determined to be
not independent.
|
|
|
•
|
For Messrs. Hamm and Watts, see the relationships discussed
under the “Certain Relationships and Related
Transactions.” As noted above, Mr. Watts was
determined to be independent. Based on the amount of business
done by us with Continental Resources, the board of directors
determined that Mr. Hamm was not independent.
|
|
|
•
|
For Messrs. Boswell and Ralls, immaterial (less than
$60,000) commercial relationships exist between us and the
companies that employed these directors. These directors were
determined to be independent.
|
Board
Meetings
Our board held five meetings during fiscal year 2007 and acted
by unanimous written consent two times. During fiscal year 2007,
all directors attended at least 75% of the combined total of
(i) all board meetings and (ii) all meetings of
committees of the board of which the director was a member. The
chairman of the board or his designee, taking into account
suggestions from other board members, establishes the agenda for
each board meeting and distributes it in advance to the each
member of the board. Each board member is free to suggest the
inclusion of items on the agenda. The board regularly meets in
executive session without management present. Mr. Waite has
been appointed our presiding non-employee director to preside at
such executive sessions. The board has a policy that all
directors attend the annual meeting of stockholders, absent
unusual circumstances. All of our directors attended last
year’s annual meeting of stockholders.
9
Board
Committees
Our board maintains a standing: (i) Audit Committee,
(ii) Nominating and Corporate Governance Committee and
(iii) Compensation Committee. To view the charter of each
of these committees please visit our website at
www.completeproduction.com. In addition, the charter for
each of our committees is available in print to any stockholder
who requests a copy. Please direct all requests to our
Secretary, Complete Production Services, Inc., 11700 Old Katy
Road, Suite 300, Houston, Texas 77079. The membership of
our standing committees as of the record date is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nominating and
|
|
|
|
|
Independent
|
|
|
|
|
Corporate
|
|
|
|
|
Under NYSE
|
|
|
Audit
|
|
Governance
|
|
Compensation
|
Director
|
|
Standards
|
|
|
Committee
|
|
Committee
|
|
Committee
|
|
Joseph C. Winkler
|
|
|
No
|
|
|
|
|
|
|
|
Andrew L. Waite
|
|
|
No
|
|
|
|
|
|
|
|
Robert S. Boswell
|
|
|
Yes
|
|
|
|
|
|
|
|
Harold G. Hamm
|
|
|
No
|
|
|
|
|
|
|
|
Michael McShane
|
|
|
Yes
|
|
|
**
|
|
|
|
**
|
W. Matt Ralls
|
|
|
Yes
|
|
|
“C”
|
|
|
|
|
R. Graham Whaling
|
|
|
Yes
|
|
|
**
|
|
|
|
“C”
|
Marcus A. Watts
|
|
|
Yes
|
|
|
|
|
“C”
|
|
|
James D. Woods
|
|
|
Yes
|
|
|
|
|
**
|
|
**
|
“C” Chair
Audit
Committee
The Audit Committee has sole authority for the appointment,
compensation and oversight of our independent registered public
accountants and our internal auditors, and responsibility for
reviewing and discussing with our management and our independent
registered public accountants (when appropriate), the audited
consolidated financial statements, prior to filing or issuance,
included in our Annual Report on
Form 10-K
and our unaudited condensed consolidated financial information
included in our earnings press releases. The Audit Committee
carries out its responsibilities in accordance with the terms of
its charter.
W. Matt Ralls (Chairman) and R. Graham Whaling were members
of the Audit Committee throughout fiscal year 2007. Robert S.
Boswell served on this committee until March 20, 2007, at
which point Michael McShane was appointed to the Audit
Committee. Currently our Audit Committee is composed of
Mr. Ralls (Chairman), Mr. McShane and
Mr. Whaling. Our board of directors has determined that all
current Audit Committee members are financially literate under
the current listing standards of the NYSE and that all current
Audit Committee members are independent under the requirements
of SEC
Rule 10A-3.
Our board has also determined that Mr. Ralls qualifies as
an “audit committee financial expert” as defined by
the Securities Exchange Commission, or SEC. During fiscal year
2007, the Audit Committee met eight times.
Nominating
and Corporate Governance Committee
James D. Woods was a member and Chairman of the Nominating and
Corporate Governance Committee (“Nominating
Committee”) throughout fiscal year 2007. Harold G. Hamm and
R. Graham Whaling served on the Nominating Committee through
March 20, 2007. On March 20, 2007, Marcus Watts was
appointed to the Nominating Committee and Mr. Hamm and
Mr. Whaling relinquished their seats on the Nominating
Committee. Mr. Watts was appointed as the Chairman of the
Nominating Committee in February 2008 in order to comply with
the Nominating Committee’s charter, which requires rotating
the position of Chairman. Previously, Mr. Woods served as
Chairman of the Nominating Committee. The Nominating Committee
met three times in fiscal year 2007. Currently our Nominating
Committee is composed of Mr. Watts (Chairman) and
Mr. Woods.
10
The purpose of the Nominating Committee is to make
recommendations concerning the size and composition of our board
and its committees, evaluate and recommend candidates for
election as directors, develop, implement and review our
corporate governance policies, and evaluate the effectiveness of
our board. The Nominating Committee works with the board as a
whole on an annual basis to determine the appropriate skills and
characteristics required of board members in the context of the
current
make-up of
the board and its committees.
Our entire board of directors is responsible for nominating
members for election to the board and for filling vacancies on
the board that may occur between annual meetings of the
stockholders. The Nominating Committee is responsible for
identifying, screening and recommending candidates to the entire
board for prospective board membership. In evaluating the
suitability of individuals, the Nominating Committee considers
many factors, including issues of experience, integrity,
qualifications (such as understanding of finance and marketing),
educational and professional background and willingness to
devote adequate time to board duties. When formulating its board
membership recommendations, the Nominating Committee also
considers any advice and recommendations offered by our Chief
Executive Officer. The Nominating Committee may also review the
composition and qualification of the board of directors of our
competitors or other companies and may seek input from industry
experts. In determining whether to recommend a director for
re-election, the Nominating Committee also considers the
board’s and each committee’s annual performance
self-evaluation as well as annual individual director
evaluations, which address the director’s past attendance
at meetings and participation in and contributions to the
activities of the board and the like. The Nominating Committee
evaluates each individual in the context of the board as a
whole, with the objective of recommending a group that can best
perpetuate the success of the business and represent stockholder
interests through the exercise of sound judgment.
The Nominating Committee will consider stockholder
recommendations of candidates on the same basis as it considers
all other candidates. Stockholder recommendations should be
submitted to us under the procedures discussed in “Other
Matters — Stockholder Proposals and Nominations,”
and should include the candidate’s name, age, business
address, residence address, principal occupation or employment,
the number of shares beneficially owned by the candidate and
information that would be required to solicit a proxy under
federal securities law. In addition, the notice must include the
recommending stockholder’s name, address, the number of
shares beneficially owned and the time period those shares have
been held.
Compensation
Committee
R. Graham Whaling (Chairman) and James D. Woods were the
members of the Compensation Committee during fiscal year 2007
and are currently members of the Compensation Committee.
Mr. Woods was the Chairman of the Compensation Committee
until February 2008 when Mr. Whaling was appointed
Chairman. Michael McShane was appointed to the Compensation
Committee in February 2008. Our board has determined that all
current Compensation Committee members qualify as
“non-employee directors” within the meaning of
Section 16 of the Exchange Act and as “outside
directors” within the meaning of Section 162(m) of the
Internal Revenue Code. The Compensation Committee met four times
and acted by unanimous written consent four times in fiscal year
2007.
The Compensation Committee reviews and establishes the
compensation of our executives officers, including our chief
executive officer, division presidents and all other members of
our senior management who earn greater than $200,000 in salary
on an annual basis, has direct access to third party
compensation consultants, and administers our stock incentive
plans, including the review and grant of stock options and
restricted stock to all eligible employees under our stock
incentive plans.
The Compensation Committee reviews annually in the first quarter
the base salaries for our executive officers and other members
of senior management who earn greater than $200,000 in salary.
The Compensation Committee also determines annually, generally
during the first quarter, the annual cash bonuses to be awarded
to our executive officers and certain members of senior
management based upon pre-established financial performance
criteria set under the Management Incentive Plan for the prior
fiscal year and our performance relative to such criteria. In
addition, under our equity grant policy, the Compensation
Committee makes grants of equity awards at least once annually
and the grant date for the annual grant has been established as
the last business day of January. Our chief executive officer
makes recommendations to the Compensation Committee regarding
our other executive officers’ compensation based on his
evaluation of the
11
performance of each other executive officer against objectives
established by our chief executive officer and the executive
officer at the beginning of each year, the officer’s scope
of the responsibilities, our financial performance, retention
considerations and general economic and competitive conditions.
The Compensation Committee has the sole authority to retain
consultants and advisors as it may deem appropriate in its
discretion, and the Compensation Committee has the sole
authority to approve related fees and other retention terms.
Since September 2006, the Compensation Committee has engaged
Pearl Meyer & Partners, independent compensation
consultants, to advise the Compensation Committee on an ongoing
basis. The consultant reports directly to the Compensation
Committee and works closely with our Vice President —
Human Resources and Administration, who is management’s
representative to the Compensation Committee. The consultant,
when invited, attends meetings of the Compensation Committee.
The Compensation Committee determines when to hire, terminate or
replace the consultant, and which projects are to be performed
by the consultant. During fiscal 2007 and early 2008, the
Compensation Committee directed the consultant to provide:
(i) a summary report on projected 2007 increases in base
salaries and total cash compensation for executives in the
energy and energy services sector; and (ii) a comprehensive
market analysis of our executives’ 2007 compensation forms
and levels, including an analysis of share allocation and usage
levels and an analysis of executive benefits and perquisites and
severance and change of control provisions.
Communication
with the Board
Interested persons, including our stockholders, may communicate
with our board of directors, including the non-management
directors, by sending a letter to our Secretary at our principal
executive offices at 11700 Old Katy Road, Suite 300,
Houston, Texas 77079. Our Secretary will submit all
correspondence to the presiding non-employee director and to any
specific director to whom the correspondence is directed.
Compensation
of Directors
Our executive officers do not receive additional compensation
for their service as directors. The table below summarizes the
compensation received by our non-employee directors for the year
ended December 31, 2007. Effective as of March 20,
2007, Messrs. McShane and Watts were appointed to our board
of directors and Mr. Baldwin retired from our board of
directors.
Director
Compensation Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fees Earned
|
|
|
|
|
|
|
|
|
|
|
|
|
or Paid
|
|
|
Stock
|
|
|
Option
|
|
|
|
|
Director
|
|
in Cash(1)
|
|
|
Awards(2)(3)(5)
|
|
|
Awards(2)(4)(5)
|
|
|
Total
|
|
|
David C. Baldwin(6)
|
|
$
|
9,125
|
|
|
$
|
16,672
|
|
|
$
|
86,651
|
|
|
$
|
112,448
|
|
Robert S. Boswell
|
|
$
|
42,125
|
|
|
$
|
49,499
|
|
|
$
|
26,152
|
|
|
$
|
117,776
|
|
Harold G. Hamm
|
|
$
|
40,625
|
|
|
$
|
49,499
|
|
|
$
|
26,152
|
|
|
$
|
116,276
|
|
Michael McShane(7)
|
|
$
|
36,000
|
|
|
$
|
70,329
|
|
|
$
|
16,634
|
|
|
$
|
122,963
|
|
W. Matt Ralls
|
|
$
|
63,875
|
|
|
$
|
66,171
|
|
|
$
|
37,867
|
|
|
$
|
167,913
|
|
Andrew L. Waite
|
|
$
|
39,875
|
|
|
$
|
49,499
|
|
|
$
|
26,152
|
|
|
$
|
115,526
|
|
Marcus A. Watts(7)
|
|
$
|
31,500
|
|
|
$
|
70,329
|
|
|
$
|
16,634
|
|
|
$
|
118,463
|
|
R. Graham Whaling
|
|
$
|
56,375
|
|
|
$
|
49,499
|
|
|
$
|
26,152
|
|
|
$
|
132,026
|
|
James D. Woods
|
|
$
|
67,625
|
|
|
$
|
49,499
|
|
|
$
|
26,152
|
|
|
$
|
143,276
|
|
|
|
(1) |
In February 2007, our board increased the annual retainer fee
for each non-employee director from $27,500 to $35,000 and the
annual fee for each director who serves as committee chairman
(other than the chairman of the Audit Committee) from $7,500 to
$10,000, with such changes to take effect pro-rata with the
quarterly retainer payment for the second quarter of 2007. The
chairman of the Audit Committee was entitled to receive an
annual retainer fee of $15,000. Each non-employee director was
also entitled to receive fees of $1,500 for attendance at each
meeting of our board of directors or $750 for each meeting of
our board of directors attended telephonically.
|
12
|
|
|
Members of our board also are entitled to reimbursement of their
expenses, in accordance with our policy, incurred in connection
with attendance at board and committee meetings and conferences
with our senior management. We do not offer our non-employee
directors any perquisites or other forms of compensation.
|
|
(2)
|
As of February 2007, non-employee directors received an
automatic grant, upon initial appointment and upon each annual
meeting of stockholders, of equity awards valued at $100,000 as
follows: options to purchase 5,000 shares of our common
stock, to be valued as of the date of grant based on the closing
price of our common stock multiplied by the number of options
multiplied by 33%, and the balance of the $100,000, in
restricted stock, to be valued based on the closing price of our
common stock on the date of grant. The 2007 annual awards were
granted on May 24, 2007. Directors must continue to hold
and may not transfer 65% of their restricted shares that have
vested until their directorship on our board is terminated.
Prior to February 2007, upon initial appointment, each
non-employee director was entitled to receive options to
purchase 5,000 shares of our common stock and restricted
stock valued at $50,000 and, on an annual basis thereafter,
options to purchase 5,000 shares of our common stock and
restricted stock valued at $50,000 based on the closing price of
our common stock on the date of grant.
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Effective as of our 2007 annual meeting, the options have a term
of ten years and vest in three equal installments, generally on
each of the first, second and third anniversaries of the grant
date, subject to continued service on the board of directors.
The restricted stock generally vests in full on the first
anniversary of the grant date.
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(3)
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The amounts shown are the compensation costs recognized by us in
fiscal year 2007 related to grants of restricted stock in fiscal
year 2007 and prior fiscal years, as described in Financial
Accounting Standards Board Statement of Financial Accounting
Standards No. 123 (revised 2004), Share Based
Payment, as amended (“FAS 123R”). For a
discussion of valuation assumptions, see Footnote 14,
“Stockholders’ Equity” to our 2007 consolidated
financial statements included in our Annual Report on
Form 10-K
for the year ended December 31, 2007; except that, for
purposes of the amounts shown, no forfeitures were assumed to
take place. The table below shows how much of the overall amount
of the compensation cost is attributable to each award. See also
footnote (6) regarding certain compensation cost recognized
in connection with the accelerated vesting of restricted stock
held by Mr. Baldwin in connection with his retirement from
our Board.
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Number of Shares in
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Fiscal Year 2007
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Director
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Grant Date
|
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Original Grant
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Compensation Cost
|
|
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David C. Baldwin
|
|
04/20/2006
|
|
|
2,084
|
|
|
$
|
16,672
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|
Robert S. Boswell
|
|
05/24/2007
|
|
|
2,143
|
|
|
$
|
32,827
|
|
|
|
04/20/2006
|
|
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2,084
|
|
|
$
|
16,672
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Harold G. Hamm
|
|
05/24/2007
|
|
|
2,143
|
|
|
$
|
32,827
|
|
|
|
04/20/2006
|
|
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2,084
|
|
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$
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16,672
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Michael McShane
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|
05/24/2007
|
|
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2,143
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$
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32,827
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|
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03/20/2007
|
|
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2,559
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$
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37,502
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W. Matt Ralls
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05/24/2007
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2,143
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$
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32,827
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|
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04/20/2006
|
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4,168
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$
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33,344
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Andrew L. Waite
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05/24/2007
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|
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2,143
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|
|
$
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32,827
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|
|
|
04/20/2006
|
|
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2,084
|
|
|
$
|
16,672
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Marcus A. Watts
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|
05/24/2007
|
|
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2,143
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|
|
$
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32,827
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|
|
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03/20/2007
|
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2,559
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$
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37,502
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R. Graham Whaling
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05/24/2007
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2,143
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$
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32,827
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04/20/2006
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2,084
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$
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16,672
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James D. Woods
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05/24/2007
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|
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2,143
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$
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32,827
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|
|
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04/20/2006
|
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2,084
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$
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16,672
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The grant date fair value of the 2,143 shares of restricted
stock granted on May 24, 2007 to the non-employee
directors, was $56,275, as computed in accordance with
FAS 123R, based on the closing price of our common stock of
$26.26 on the grant date. The restricted stock will vest in full
on May 22, 2008. The grant date fair value of the
2,559 shares of restricted stock granted on March 20,
2007 to Mr. McShane and Mr. Watts, was $50,003, as
computed in accordance with FAS 123R, based on the closing
price of our common stock of $19.54 on the grant date. These
shares of restricted stock will vest in full on March 20,
2008, the anniversary of the date of grant.
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13
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(4)
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The amounts shown are the amounts of compensation cost
recognized by us in fiscal year 2007 related to grants of stock
options in fiscal year 2007 and in prior fiscal years, as
described in FAS 123R. For a discussion of valuation
assumptions, see Footnote 14, “Stockholders’
Equity” to our 2007 consolidated financial statements
included in our Annual Report on
Form 10-K
for the year ended December 31, 2007; except that for
purposes of the amounts shown, no forfeitures were assumed to
take place. See also footnote (6) regarding certain
compensation cost recognized in connection with the accelerated
vesting of options held by Mr. Baldwin in connection with
his retirement from our Board.
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The grant date fair value of the options to purchase
5,000 shares of our common stock granted on May 24,
2007 under our 2001 Stock Incentive Plan was $41,990, based on
the Black-Scholes model of option valuation to determine grant
date fair value, as prescribed under FAS 123R. The
following assumptions were used in the Black-Scholes model:
market price of stock, $26.26; exercise price of option, $26.26;
expected stock volatility, 29.7%; risk-free interest rate, 4.79%
(based on the
10-year
treasury bond rate); expected life, 5.1 years; dividend
yield, 0%. The grant date fair value of the options to purchase
5,000 shares of our common stock granted on March 20,
2007 under our 2001 Stock Incentive Plan was $31,505, based on
the Black-Scholes model of option valuation to determine grant
date fair value, as prescribed under FAS 123R. The
following assumptions were used in the Black-Scholes model:
market price of stock, $19.54; exercise price of option, $19.54;
expected stock volatility, 31.0%; risk-free interest rate, 4.47%
(based on the
10-year
treasury bond rate); expected life, 5.1 years; dividend
yield, 0%.
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The table below shows how much of the overall amount of the
compensation cost is attributable to each award.
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Exercise
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Number of Shares in
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Fiscal Year 2007
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Director
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Grant Date
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Price
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Original Grant
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Compensation Cost
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David C. Baldwin
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04/20/2006
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$
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24.00
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5,000
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$
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34,061
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|
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10/01/2005
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$
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11.66
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5,000
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$
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52,590
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Robert S. Boswell
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05/24/2007
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$
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26.26
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|
|
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5,000
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|
|
$
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8,437
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|
|
|
04/20/2006
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|
$
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24.00
|
|
|
|
5,000
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|
|
$
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14,715
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|
|
|
10/01/2005
|
|
$
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11.66
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|
|
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5,000
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|
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$
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3,000
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Harold G. Hamm
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|
05/24/2007
|
|
$
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26.26
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|
|
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5,000
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|
|
$
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8,437
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|
04/20/2006
|
|
$
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24.00
|
|
|
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5,000
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$
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14,715
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10/01/2005
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$
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11.66
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5,000
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$
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3,000
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Michael McShane
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05/24/2007
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$
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26.26
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|
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5,000
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|
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$
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8,437
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|
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03/20/2007
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$
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19.54
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|
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5,000
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|
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$
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8,197
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W. Matt Ralls
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05/24/2007
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$
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26.26
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5,000
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$
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8,437
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04/20/2006
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$
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24.00
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10,000
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$
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29,430
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Andrew L. Waite
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05/24/2007
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|
$
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26.26
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5,000
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|
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$
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8,437
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|
|
|
04/20/2006
|
|
$
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24.00
|
|
|
|
5,000
|
|
|
$
|
14,715
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|
|
|
10/01/2005
|
|
$
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11.66
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|
|
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5,000
|
|
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$
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3,000
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Marcus A. Watts
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|
05/24/2007
|
|
$
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26.26
|
|
|
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5,000
|
|
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$
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8,437
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|
|
|
03/20/2007
|
|
$
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19.54
|
|
|
|
5,000
|
|
|
$
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8,197
|
|
R. Graham Whaling
|
|
05/24/2007
|
|
$
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26.26
|
|
|
|
5,000
|
|
|
$
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8,437
|
|
|
|
04/20/2006
|
|
$
|
24.00
|
|
|
|
5,000
|
|
|
$
|
14,715
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|
|
|
10/01/2005
|
|
$
|
11.66
|
|
|
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5,000
|
|
|
$
|
3,000
|
|
James D. Woods
|
|
05/24/2007
|
|
$
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26.26
|
|
|
|
5,000
|
|
|
$
|
8,437
|
|
|
|
04/20/2006
|
|
$
|
24.00
|
|
|
|
5,000
|
|
|
$
|
14,715
|
|
|
|
10/01/2005
|
|
$
|
11.66
|
|
|
|
5,000
|
|
|
$
|
3,000
|
|
|
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The “Number of Shares in Original Grant” shown above
represents shares outstanding after FIN 144 adjustment, as
applicable, for our stock dividend in September 2005 and our
stock split in December 2005.
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14
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(5) |
The table below shows the aggregate numbers of unvested stock
awards and option awards (exercisable and unexercisable) granted
in fiscal year 2007 and prior years, and reflects the amounts
outstanding for each director as of December 31, 2007.
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|
|
|
|
|
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|
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Options Outstanding at
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|
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Stock Awards Outstanding
|
|
Director
|
|
Fiscal Year End
|
|
|
at Fiscal Year End
|
|
|
Andrew L. Waite
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|
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15,000
|
|
|
|
2,143
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Joseph C. Winkler
|
|
|
772,037
|
|
|
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151,820
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David C. Baldwin
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|
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10,000
|
|
|
|
0
|
|
Robert S. Boswell
|
|
|
27,514
|
|
|
|
2,143
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|
Harold G. Hamm
|
|
|
15,000
|
|
|
|
2,143
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|
Michael McShane
|
|
|
10,000
|
|
|
|
4,702
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|
W. Matt Ralls
|
|
|
15,000
|
|
|
|
2,143
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Marcus A. Watts
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|
|
10,000
|
|
|
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4,702
|
|
R. Graham Whaling
|
|
|
22,397
|
|
|
|
2,143
|
|
James D. Woods
|
|
|
23,462
|
|
|
|
2,143
|
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(6)
|
Effective as of March 20, 2007, Mr. Baldwin resigned
from our board of directors. In connection with his resignation,
our board accelerated the vesting of his unvested stock options
(covering 10,000 shares of our common stock) and unvested
restricted stock (covering 2,084 shares) effective as of
March 20, 2007, resulting in a compensation cost recognized
by us in fiscal year 2007 of approximately $86,651 and $4,168,
respectively. This compensation cost is included in the charts
above. In addition, the exercise period for
Mr. Baldwin’s stock options was extended to
December 31, 2007.
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(7)
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Effective upon their initial appointment to our board on
March 20, 2007, Messrs. McShane and Watts received a
grant of 2,559 shares of restricted stock and an option to
purchase 5,000 shares of our common stock.
|
ITEM 2:
APPROVAL OF THE COMPLETE PRODUCTION SERVICES, INC.
2008 INCENTIVE AWARD PLAN
Our stockholders are being asked to approve the Complete
Production Services, Inc. 2008 Incentive Award Plan, or 2008
Plan, at the annual meeting. On February 21, 2008, based on
the recommendation of our Compensation Committee, our board
unanimously approved and adopted the 2008 Plan, subject to
approval by our stockholders.
The 2008 Plan is intended to succeed the Complete Production
Services, Inc. Amended and Restated 2001 Stock Incentive Plan,
as amended, which we refer to as the Prior Plan. Approval of the
2008 Plan by our stockholders will be considered approval of the
2008 Plan for purposes of Sections 162(m) and 422 of the
Internal Revenue Code of 1986, as amended, or the Code. If the
2008 Plan is not approved by our stockholders, the Prior Plan
will remain in full force and effect. As of March 25, 2008,
only 85,810 shares remain available for grant under the
Prior Plan. If the 2008 Plan is approved by our stockholders,
the Prior Plan will be terminated once the remaining
85,810 shares are granted in fiscal 2008.
The principal features of the 2008 Plan are summarized below,
but the summary is qualified in its entirety by reference to the
2008 Plan itself. The 2008 Plan is attached to this proxy
statement as Appendix A.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE
APPROVAL OF THE COMPLETE PRODUCTION SERVICES, INC. 2008
INCENTIVE AWARD PLAN.
15
Purpose
of the 2008 Plan
The purpose of the 2008 Plan is to promote our success and
enhance our value by linking the personal interests of the
members of our board, employees and consultants to those of our
stockholders and by providing such individuals with an incentive
for outstanding performance that generates superior returns to
our stockholders. The 2008 Plan is further intended to provide
flexibility in our ability to motivate, attract, and retain the
services of members of our board, employees and consultants upon
whose judgment, interest, and special effort, the successful
conduct of our operation is largely dependent.
The 2008 Plan also expands the type of equity awards that may be
granted. The 2008 Plan is also designed to permit us to make
cash- and equity-based awards intended to qualify as
“performance-based compensation” under
Section 162(m) of the Code. Our annual cash based
Management Incentive Plan currently does not meet the
performance-based criteria of Section 162(m) of the
Internal Revenue Code. If approved by our stockholders at this
annual meeting, it is the intention of the Compensation
Committee to operate the Management Incentive Plan under the
2008 Plan, thereby permitting future performance-based award
payments under the Management Incentive Plan to qualify as
performance-based compensation under Section 162(m).
The 2008 Plan will become effective immediately upon stockholder
approval at the annual meeting.
Securities
Subject to the 2008 Plan
The aggregate number of shares of our common stock that may be
issued or transferred pursuant to awards under the 2008 Plan is
2,500,000 shares plus any shares of our common stock that
as of the date of the annual meeting are subject to awards under
the Prior Plan, which following such date are forfeited,
cancelled, terminated or expire unexercised under the Prior
Plan. No more than 2,500,000 shares of common stock may be
issued upon the exercise of incentive stock options.
The shares of common stock covered by the 2008 Plan may be
treasury shares, authorized but unissued shares or shares
purchased in the open market. For purposes of the 2008 Plan, the
fair market value of a share of common stock as of any given
date will be the closing sales price for a share of our common
stock on the stock exchange or national market system on which
our common stock is listed on such date or, if no sales occurred
on the date in question, the closing sales price for a share of
our common stock on the last preceding date for which such
quotation exists, as reported in The Wall Street Journal.
The closing sales price for a share of common stock on the New
York Stock Exchange, or the NYSE, on March 25, 2008 was
$21.06.
The 2008 Plan counts shares on a “gross” basis and
does not allow the re-grant of shares withheld or surrendered in
payment of the exercise price or tax withholding obligations of
an award. In the event of any termination, expiration, lapse or
forfeiture of an award granted under the 2008 Plan or the Prior
Plan, any shares subject to the award at such time will again be
made available for future grants under the 2008 Plan. If any
shares of restricted stock are surrendered by a holder or
repurchased by us pursuant to the terms of the 2008 Plan or the
Prior Plan, such shares also will be available for future grants
under the 2008 Plan. To the extent permitted by applicable law
or any exchange rule, shares issued or issuable in connection
with any award issued in substitution for any outstanding award
of any entity acquired in any form of combination by us or our
subsidiaries will not be counted against the shares available
for issuance under the 2008 Plan.
Eligibility
Our and our subsidiaries’ employees, consultants and
non-employee directors are eligible to receive awards under the
2008 Plan. As of March 25, 2008, there were eight eligible
non-employee directors. As of December 31, 2007, we had
7,062 employees. However, historically, we have granted
equity awards to not more than 250 employees. No employee,
consultant or non-employee director is entitled to participate
in the 2008 Plan as a matter of right, nor does any such
participation constitute assurance of continued employment or
service. Only those employees, consultants and non-employee
directors who are selected to receive grants by the
administrator may participate in the 2008 Plan.
16
Awards
under the 2008 Plan
The 2008 Plan provides that the administrator may grant or issue
stock options, stock appreciation rights, restricted stock,
restricted stock units, deferred stock, dividend equivalents,
performance awards and stock payments, or any combination
thereof. Each award will be evidenced by a separate agreement or
other document which will indicate the type, terms and
conditions of the award.
Non-Qualified Stock Options. Non-qualified
stock options will provide for the right to purchase shares of
our common stock at a specified price that is not less than the
closing price of a share of our common stock on the date of
grant, and usually will become exercisable (as determined by the
administrator) in one or more installments after the grant date,
subject to the completion of the applicable vesting service
period or the satisfaction of pre-established performance goals.
Non-qualified stock options may be granted for any term
specified by the administrator, but the term may not exceed ten
years.
Incentive Stock Options. Incentive stock
options will be designed to comply with the applicable
provisions of Section 422 of the Code and will be subject
to certain restrictions contained in the Code. Among such
restrictions, incentive stock options must have an exercise
price that is not less than the closing price of a share of
common stock on the date of grant, may only be granted to our
and our subsidiaries’ employees and must not be exercisable
after a period of ten years measured from the date of grant.
However, if subsequently modified, incentive stock options may
cease to qualify for treatment as incentive stock options and be
treated as non-qualified stock options. The total fair market
value of shares (determined as of the respective date or dates
of grant) for which one or more options granted to any employee
(including all options granted under the 2008 Plan and all or
our and our subsidiaries’ other option plans) may for the
first time become exercisable as incentive stock options during
any one calendar year may not exceed the sum of $100,000. To the
extent this limit is exceeded, the options granted will be
non-qualified stock options. In the case of an incentive stock
option granted to an individual who owns (or is deemed to own)
more than 10% of the total combined voting power of all classes
of our stock or the stock of one of our parent or subsidiary
corporations, the exercise price of such incentive stock option
must be at least 110% of the fair market value of a share of
common stock on the date of grant and such incentive stock
option must not be exercisable after a period of five years
measured from the date of grant. Like non-qualified stock
options, incentive stock options usually will become exercisable
(as determined by the administrator) in one or more installments
after the grant date, subject to the completion of the
applicable vesting service period or the satisfaction of
pre-established performance goals.
Stock Appreciation Rights. Stock appreciation
rights provide for the payment of an amount to the holder based
upon the excess (if any) of the fair market value of a share of
our common stock on the date of exercise over the fair market
value of a share of our common stock on the date of grant. Stock
appreciation rights under the 2008 Plan will be settled in cash
or shares of common stock, or in a combination of both, at the
election of the administrator. Stock appreciation rights may be
granted in connection with stock options or other awards or
separately. Stock appreciation rights may be granted for any
term specified by the administrator, but the term may not exceed
ten years.
Restricted Stock. Restricted stock may be
issued at such price, if any, as may be determined by the
administrator and may be made subject to such restrictions
(including service vesting or vesting based on the satisfaction
of pre-established performance goals), as may be determined by
the administrator. Restricted stock typically may be repurchased
by us at the original purchase price, if any, or forfeited, if
the vesting conditions and other restrictions are not met. In
general, restricted stock may not be sold, or otherwise
hypothecated or transferred, until the vesting restrictions and
other restrictions applicable to such shares lapse. A holder of
restricted stock, unlike a holder of options or restricted stock
units, generally will have voting rights and may receive
dividends prior to the time when the restrictions lapse.
Deferred Stock Awards. Deferred stock awards
provide for the deferred issuance to the holder of the award of
shares of our common stock, subject to any conditions determined
by the administrator (including service vesting or vesting based
on the satisfaction of pre-established performance goals).
Deferred stock may not be sold or otherwise hypothecated or
transferred until shares of common stock have been issued under
the deferred stock award. Deferred stock will not be issued
until the deferred stock award has vested, and a holder
17
of deferred stock generally will have no voting or dividend
rights prior to the time when the vesting conditions are
satisfied and the shares are issued. Deferred stock awards
generally will be forfeited and the underlying shares of
deferred stock will not be issued, if the applicable vesting
conditions and other restrictions are not met.
Restricted Stock Units. Restricted stock units
provide for the issuance of shares of common stock, subject to
vesting conditions (including vesting based on continued service
or the satisfaction of pre-established performance goals). The
issuance of shares of our common stock pursuant to restricted
stock units may be delayed beyond the time at which the
restricted stock units vest. On the deferral or vesting date, as
applicable, we will transfer one unrestricted, fully
transferable share of our common stock for each vested
restricted stock unit not previously forfeited. Restricted stock
units may not be sold, or otherwise hypothecated or transferred,
and a holder of restricted stock units will not have voting
rights or dividend rights prior to the time when the vesting
conditions are satisfied and the shares of common stock are
issued. Restricted stock units generally will be forfeited and
the underlying shares of our common stock will not be issued, if
the applicable vesting conditions are not met.
Dividend Equivalents. Dividend equivalents
represent the right to receive the value of the dividends per
share paid by us, if any, calculated with reference to a
specified number of shares of our common stock. Dividend
equivalent rights may be granted in connection with full value
awards granted under the 2008 Plan, but may not be granted in
connection with options or stock appreciation rights. Dividend
equivalents may be paid in cash or shares of our common stock,
or in a combination of both, at the election of the
administrator. No dividend equivalents shall be payable with
respect to options or stock appreciation rights.
Stock Payments. Stock payments may be
authorized by the administrator in the form of our common stock
or an option or other right to purchase shares of our common
stock and may, without limitation, be issued as part of a
deferred compensation arrangement in lieu of all or any part of
earned bonuses or compensation — including, without
limitation, salary, bonuses, commissions and directors’
fees — that would otherwise be payable in cash to the
employee, consultant or non-employee director.
Performance Awards. Performance awards may be
granted by the administrator to our or our subsidiaries’
employees, consultants or non-employee directors based upon,
among other things, the contributions, responsibilities and
other compensation of the particular recipient. Generally, the
amount paid or distributed under performance awards will be
based on specific performance goals and may be paid in cash or
in shares of our common stock, or in a combination of both, at
the election of the administrator. Performance awards may
include “phantom” stock awards that provide for
payments based upon the value of our common stock. Performance
awards may also include bonuses granted by the administrator,
which may be payable in cash or in shares of our common stock,
or in a combination of both.
Section 162(m) “Performance-Based”
Awards. The administrator may grant performance
awards payable in cash or shares of our common stock or a
combination of the both under the 2008 Plan that are intended to
qualify as “performance-based compensation” under
Section 162(m) of the Code and that are paid, vest or
become exercisable upon the achievement of specified performance
goals during a specified performance period that are related to
one or more specified performance criteria, as applicable to us
or any division, business unit or individual. These performance
criteria include, but are not limited to, the following:
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net earnings (either before or after interest, taxes,
depreciation and amortization);
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gross or net sales or revenue;
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net income (either before or after taxes);
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operating earnings or profit;
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cash flow (including, but not limited to, operating cash flow
and free cash flow);
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return on assets;
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return on capital;
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18
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return on stockholders’ equity;
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return on sales;
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gross or net profit or operating margin;
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costs;
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funds from operations;
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expenses;
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working capital;
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earnings per share;
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price per share of our common stock;
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regulatory body approval for commercialization of a product;
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implementation or completion of critical projects;
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various statistics including total reportable incident rates
(TRIR), loss time incident rates (LTIR) or workers comp
experience modifier; and
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market share.
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Performance goals established by the administrator based on the
performance criteria for the performance period may be measured
either in absolute terms or as compared to any incremental
increase or decrease or as compared to the results of a peer
group. Except as provided by the administrator, the achievement
of each performance goal will be determined in accordance with
United States generally accepted accounting principles to the
extent applicable. At the time of grant, the administrator may
provide that objectively determinable adjustments will be made
for purposes of determining the achievement of one or more of
the performance goals established for an award. Any such
adjustments will be based on one or more of the following:
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items related to a change in accounting principle;
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items relating to financing activities;
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expenses for restructuring or productivity initiatives;
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other non-operating items;
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items related to acquisitions;
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items attributable to the business operations of any entity
acquired by us during the performance period;
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items related to the disposal of a business or segment of a
business;
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items related to discontinued operations that do not qualify as
a segment of a business under United States generally
accepted accounting principles;
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items attributable to any stock dividend, stock split,
combination or exchange of shares occurring during the
performance period;
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any other items of significant income or expense which are
determined to be appropriate adjustments;
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items relating to unusual or extraordinary corporate
transactions, events or developments;
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items related to amortization of acquired intangible assets;
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items that are outside the scope of our core, on-going business
activities; or
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items relating to any other unusual or nonrecurring events or
changes in applicable laws, accounting principles or business
conditions items related to a change in accounting principle.
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19
Award
Limits
The maximum number of shares which may be subject to awards
granted under the 2008 Plan to any individual during any
calendar year may not exceed 900,000 shares of our common
stock, subject to adjustment in the event of any
recapitalization, reclassification, stock split, reverse stock
split, reorganization, merger, consolidation,
split-up,
spin-off or other transaction that affects our common stock in a
manner that would require adjustment to such limit in order to
prevent the dilution or enlargement of the potential benefits
intended to be made available under the 2008 Plan. In addition,
the maximum aggregate cash amount that may become payable
pursuant to all performance-based awards that may be granted to
any individual during any calendar year shall be $4,000,000.
Vesting
and Exercise of Awards
The applicable award agreement governing an award will contain
the period during which the right to exercise the award in whole
or in part vests, including the events or conditions upon which
the vesting of an award may accelerate. Generally, our
employees’ option and restricted stock grants vest in equal
annual installments over a three-year period on each anniversary
of the grant date, subject to continued service with us.
Effective as of our 2007 annual meeting of stockholders, our
non-employee directors’ options also vest in equal annual
installments over a three-year period on each anniversary of the
grant date, while our non-employee directors’ restricted
stock grants vest in full on the anniversary of the date of
grant, in each case, subject to continued service with us. No
portion of an award which is not vested at the holder’s
termination of employment, consulting or directorship
relationship will subsequently become vested, except as may be
otherwise provided by the administrator either in the agreement
relating to the award or by action following the grant of the
award.
Generally, an option or stock appreciation right may only be
exercised while such person remains an employee, consultant or
non-employee director of us or for a specified period of time
(up to the remainder of the award term) following the
holder’s termination of employment or directorship, as
applicable. An award may be exercised for any vested portion of
the shares subject to such award until the award expires. Upon
the grant of an award or following the grant of an award, the
administrator may provide that the period during which the award
will vest or become exercisable will accelerate, in whole or in
part, upon the occurrence of one or more specified events,
including, a change in control or a holder’s termination of
employment or service by reason of the holder’s
resignation, discharge, retirement or death.
Only whole shares of common stock may be purchased or issued
pursuant to an award. Any required payment for the shares
subject to an award, including any required payment of
withholding taxes, will be paid in the form of cash or a check
payable to us in the amount of the aggregate purchase price, or
through a broker assisted cashless exercise procedure where the
holder of the award places a market sell order with a broker
with respect to the shares of common stock issuable upon
exercise or vesting of the award and the broker timely remits
such payment to us. However, the administrator may in its
discretion and subject to applicable laws allow payment through
one or more of the following:
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the delivery of shares of common stock owned by the holder;
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the surrender of shares of common stock which would otherwise be
issuable upon exercise or vesting of the award;
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the delivery of other lawful consideration of any kind; or
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any combination of the foregoing.
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Grants of
Awards to Non-Employee Directors
The 2008 Plan authorizes the grant of discretionary awards to
non-employee directors, the terms and conditions of which are to
be determined by the administrator. Historically, our
non-employee directors receive an automatic grant of certain
awards. As of February 2007, non-employee directors receive an
automatic grant, upon initial appointment and upon each annual
meeting of stockholders, of equity awards valued at $100,000
20
as follows: options to purchase 5,000 shares of our common
stock, to be valued as of the date of grant based on the closing
price of our common stock multiplied by the number of options
multiplied by 33%, and the balance of the $100,000, in
restricted stock, to be valued based on the closing price of our
common stock on the date of grant. Since as of the record date
there were only 85,810 shares of common stock available for
grant under the Prior Plan, if our stockholders do not approve
the 2008 Plan, then our non-employee directors will not receive
their annual award of options and restricted stock on the date
of the annual meeting.
New Plan
Benefits
Awards may be granted under the 2008 Plan prior to the time the
2008 Plan is approved by our stockholders; except that these
awards will not be exercisable and will not vest prior to the
time when the 2008 Plan is approved by our stockholders. The
Compensation Committee’s equity award policy provides that
the Compensation Committee will grant its annual equity awards
to be effective as of January 31 of each year. Because the Prior
Plan did not have sufficient shares to cover the amount of
annual equity awards determined appropriate by the Compensation
Committee to be awarded effective as of January 31, 2008,
the Compensation Committee has authorized the award of a total
of 282,900 shares of restricted stock to our senior
management team, as set forth in the following table, to be
effective as of the date of stockholder approval of the 2008
Plan. These shares of restricted stock will vest in equal
installments of
1/3rd
of the restricted shares granted on each of January 31,
2009, January 31, 2010 and January 31, 2011. The
shares available under the Prior Plan were sufficient to make
all intended awards to employees, other than members of senior
management on January 31, 2008 and to make the intended
stock option awards to the members of our senior management
team. The following table also includes the 5,000 stock options
to be granted to each non-employee director as of the annual
meeting date, plus the estimated number of shares of restricted
stock to be granted to our non-employee directors as of the
annual meeting date, based on the closing sale price of our
common stock on March 25, 2008. The total value to be
delivered to each of our non-employee directors on the date of
our annual meeting will be $100,000 in accordance with the
director compensation program. The actual number of shares of
restricted stock to be granted to our directors will be based on
the value of the 5,000 options granted, which will be subtracted
from the $100,000 resulting in the remaining value to be granted
in shares of restricted stock, based on the closing price of our
common stock on the date of the annual meeting. If our
stockholders do not approve the 2008 Plan, the following equity
awards will not be made effective. In addition if our
stockholders do not approve the 2008 Plan within twelve months
following approval of the 2008 Plan by our board, any other
awards granted under the 2008 Plan prior to receipt of
stockholder approval of the 2008 Plan will be cancelled. We have
not made any other awards under the 2008 Plan.
Equity to be Awarded on the Date of the Annual Meeting if the
2008 Plan is Approved by Our Stockholders:
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Number of
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Restricted
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Number of Stock
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Name
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Shares(1)
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Options
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Named Executive Officers
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Joseph C. Winkler
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91,100
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0
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Brian K. Moore
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38,400
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0
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J. Michael Mayer
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29,300
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0
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James F. Maroney
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21,000
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0
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Kenneth L. Nibling
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19,700
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0
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All Current Executive Officers as a Group
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217,900
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0
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All Current Non-Employee Directors as a Group
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(2
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40,000
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All Non-Executive Employees as a Group
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65,000
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0
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(1) |
The value of restricted stock granted to our employees and
non-employee directors will be based on the closing sales price
for a share of our common stock on the NYSE on the date of
grant, which will be the date of the annual meeting if the 2008
Plan is approved by our stockholders.
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(2) |
Our non-employee directors will each receive a grant of
restricted stock on the date of the annual meeting such that,
when combined with the option grant covering 5,000 shares
each, the total value of the options and restricted stock grant
will equal $100,000. See “Corporate Governance —
Compensation of Directors” for a more complete description
of the equity awards to be granted to our non-employee directors
on the date of this annual meeting.
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Transferability
of Awards
Awards generally may not be assigned, transferred, or otherwise
disposed in any manner other than by will or by the laws of
descent and distribution, pursuant to beneficiary designation
procedures approved from time to time by the administrator or,
subject to the consent of the administrator, pursuant to a
domestic relations order. Notwithstanding the foregoing, the
administrator may also permit a non-qualified stock option to be
transferred to certain family members, trusts or entities owned
by these family members and trusts. Under no circumstances may
awards be transferred for consideration. Awards may be
exercised, during the lifetime of the holder, only by the holder
or such permitted transferee, unless it has been disposed of
pursuant to a domestic relations order.
Adjustments
for Stock Splits, Recapitalizations, Mergers
In the event of any dividend, stock split, combination or
exchange of shares, merger, consolidation or other distribution
(other than normal cash dividends), or any other change
affecting the shares of our common stock or the share price of
our common stock, the administrator of the 2008 Plan will
equitably adjust any or all of the following in order to reflect
such change:
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the aggregate number and kind of shares of common stock (or
other securities or property) with respect to which awards may
be granted or awarded under the 2008 Plan;
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the aggregate number of shares that may be subject to awards
granted to any person in any calendar year, referred to as the
award limit;
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the number and kind of shares of common stock subject to
outstanding awards;
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the terms and conditions of any outstanding awards; and/or
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the grant or exercise price with respect to any outstanding
award under the 2008 Plan.
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The administrator has the authority to take certain
discretionary actions in these events including as accelerating
the awards and terminating the awards in exchange for cash.
Change in
Control
In the event of a Change in Control (as defined in the 2008
Plan), each outstanding award will be assumed or an equivalent
award will be substituted by the successor corporation. If the
successor corporation does not assume or substitute an award,
the administrator may cause such award to become fully
exercisable and cause all forfeiture restrictions applicable to
such award to lapse. In addition, the administrator will notify
the holder that the award is fully exercisable for 15 days
after the date of such notice and will terminate upon the
expiration of this 15 day period.
Administration
of the 2008 Plan
The board will administer the 2008 Plan with respect to awards
to non-employee directors, and the Compensation Committee of the
board (or another committee or subcommittee of the board) will
be the administrator of the 2008 Plan with respect to all other
awards. The Compensation Committee of the board, or another
committee or subcommittee of the board serving as administrator
of the plan is expected to consist solely of two or more
directors, each of whom is intended to qualify as a
“non-employee director” as defined in
Rule 16b-3
of the Securities Exchange Act of 1934, as amended, or the
Exchange Act, an “outside director” for purposes of
Section 162(m) of the Code, and an “independent
director” under the rules of the NYSE. The board or the
Compensation Committee may delegate authority to a subcommittee
comprised of one or more
22
directors or officers to grant, or amend awards to persons other
than those persons subject to Section 16 of the Exchange
Act or whose compensation in the year of grant is, or in a
future calendar year may be, subject to the limitation on
deductibility under Section 162(m) of the Code.
The administrator of the 2008 Plan (i.e., the board,
Compensation Committee or other committee of the board, or the
subcommittee to whom authority has been delegated, as
applicable) will have the power to:
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designate which eligible individuals are to receive awards and
the terms of such awards (including, but not limited to, the
exercise price, grant price, or purchase price, any schedule for
vesting, and any accelerations or waivers thereof);
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determine the type(s) of awards to be granted to each
participant;
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determine the number of awards to be granted and the number of
shares of common stock to which an award will relate;
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determine whether, to what extent, and pursuant to what
circumstances an award may be settled in, or the exercise price
of an award may be paid in, cash, common stock, other awards, or
other property, or an award may be canceled, forfeited, or
surrendered;
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prescribe the form of each award agreement;
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decide all other matters that must be determined in connection
with an award;
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establish, adopt, or revise any rules and regulations as it may
deem necessary or advisable to administer the 2008 Plan;
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interpret the terms of, and any matter arising pursuant to, the
2008 Plan or any award agreement; and
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make all other decisions that may be required pursuant to the
2008 Plan or as the administrator deems necessary or advisable
to administer the 2008 Plan.
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The 2008 Plan also authorizes the administrator to make such
modifications to the terms and conditions of awards, including
the adoption of one or more subplans, as may be deemed advisable
to ensure compliance with applicable foreign laws and listing
standards, provided any such action does not violate any other
applicable law or require stockholder approval.
Amendment
and Termination of the 2008 Plan
The administrator may terminate, amend or modify the 2008 Plan
at any time, subject to stockholder approval to the extent
required by applicable law or regulation or the listing
standards of the NYSE (or any other market or stock exchange on
which our common stock is at the time primarily traded).
Additionally, stockholder approval will be specifically required
to increase the maximum number of shares of common stock that
may be issued under the 2008 Plan (other than by reason of the
adjustments described under the title “Adjustments for
Stock Splits, Recapitalizations, and Mergers” above) or
decrease the exercise price of any option or stock appreciation
right granted under the 2008 Plan.
Except with respect to amendments that are intended to cause
awards to comply with or be exempt from Section 409A of the
Code, no amendment, modification or termination of the 2008 Plan
will adversely affect in any material way any award previously
granted pursuant to the 2008 Plan without the participant’s
consent. Additionally, in no event may an award be granted
pursuant to the 2008 Plan on or after the tenth anniversary of
the date of the annual meeting.
Federal
Income Tax Consequences Associated with the 2008 Plan
The following is a general summary under current law of the
material federal income tax consequences to an employee,
consultant or non-employee director granted an award under the
2008 Plan. This summary deals with the general federal income
tax principles that apply and is provided only for general
information. Some kinds of taxes, such as state, local and
foreign income taxes and federal employment taxes, are not
discussed. Tax laws are complex and subject to change and may
vary depending on individual circumstances and from
23
locality to locality. The summary does not discuss all
aspects of federal income taxation that may be relevant in light
of a holder’s personal circumstances. This summarized tax
information is not tax advice and a holder of an award should
rely on the advice of his or her legal and tax advisors.
Non-Qualified Stock Options. If an optionee is
granted a non-qualified stock option under the 2008 Plan, the
optionee should not have taxable income on the grant of the
option. Generally, the optionee should recognize ordinary income
at the time of exercise in an amount equal to the fair market
value of a share of our common stock at such time, less the
exercise price paid. The optionee’s basis in the common
stock for purposes of determining gain or loss on a subsequent
sale or disposition of such shares generally will be the fair
market value of our common stock on the date the optionee
exercises such option. Any subsequent gain or loss will be
taxable as a capital gain or loss.
Incentive Stock Options. No taxable income
should be recognized by the optionee at the time of the grant of
an incentive stock option, and no taxable income should be
recognized for regular federal income tax purposes at the time
the option is exercised; however, the excess of the fair market
value of our common stock received over the option price is an
“item of adjustment” for alternative minimum tax
purposes. The optionee will recognize taxable income in the year
in which the purchased shares are sold or otherwise made the
subject of a taxable disposition. For federal income tax
purposes, dispositions are divided into two categories:
qualifying and disqualifying. A qualifying disposition generally
occurs if the sale or other disposition is made more than two
years after the date the option for the shares involved in such
sale or disposition is granted and more than one year after the
date the shares are transferred upon exercise. If the sale or
disposition occurs before these two periods are satisfied, then
a disqualifying disposition generally will result.
Upon a qualifying disposition, the optionee should recognize
long-term capital gain in an amount equal to the excess of the
amount realized upon the sale or other disposition of the
purchased shares over the exercise price paid for the shares. If
there is a disqualifying disposition of the shares, then the
excess of the fair market value of those shares on the exercise
date (or, if less, the price at which the shares are sold) over
the exercise price paid for the shares should be taxable as
ordinary income to the optionee. Any additional gain or loss
recognized upon the disposition will be recognized as a capital
gain or loss by the optionee.
We will not be entitled to any federal income tax deduction if
the optionee makes a qualifying disposition of the shares. If
the optionee makes a disqualifying disposition of the purchased
shares, then generally we or our subsidiary should be entitled
to a federal income tax deduction, for the taxable year in which
such disposition occurs, equal to the ordinary income recognized
by the optionee.
Stock Appreciation Rights. No taxable income
generally should be recognized upon the grant of a stock
appreciation right, but, upon exercise of the stock appreciation
right, the cash or the fair market value of the shares received
should be taxable as ordinary income to the recipient in the
year of such exercise.
Restricted Stock. In general, a recipient of
restricted stock should not be taxed upon the grant or purchase
of restricted stock that is subject to a “substantial risk
of forfeiture” and non-transferable within the meaning of
Section 83 of the Code. However, at the time the restricted
stock is no longer subject to the substantial risk of forfeiture
(e.g., when the restrictions lapse on a vesting date) or
the shares become transferable, the recipient should recognize
ordinary income equal to the fair market value of the common
stock on the date the restrictions lapse or become transferable,
less the amount the participant paid, if any, for such
restricted stock. A recipient of restricted stock may, however,
make an election under Section 83(b) of the Code to be
taxed at the time of the grant or purchase on an amount equal to
the fair market value of the common stock on the date of
transfer, less the amount paid, if any, for such restricted
stock. If a timely Section 83(b) election is made, the
recipient should not recognize any additional income as and when
the restrictions applicable to the restricted stock lapses.
Restricted Stock Units and Deferred Stock. A
recipient of restricted stock units or a deferred stock award
generally should not have ordinary income upon grant of
restricted stock units or deferred stock. When the shares of
common stock are delivered under the terms of the award, the
recipient should recognize ordinary income equal to the fair
market value of the shares delivered, less any amount paid by
the participant for such shares.
24
Dividend Equivalent Awards and Performance
Awards. A recipient of a dividend equivalent
award or a performance award generally will not recognize
taxable income at the time of grant. However, at the time such
an award is paid, whether in cash or in shares of common stock,
the recipient will recognize ordinary income equal to the value
received.
Stock Payments. A recipient of a stock payment
generally will recognize taxable ordinary income in an amount
equal to the fair market value of the shares of common stock
received.
Tax Deductions and Section 162(m) of the
Code. Except as otherwise described above with
respect to incentive stock options, we or our subsidiaries
generally should be entitled to a federal income tax deduction
at the time and for the same amount as the recipient recognizes
ordinary income, subject to the limitations of
Section 162(m) of the Code with respect to compensation
paid to certain “covered employees.” Under
Section 162(m), income tax deductions of publicly-held
corporations may be limited to the extent total compensation
(including base salary, annual bonus, stock option exercises and
non-qualified benefits paid) for certain executive officers
exceeds $1,000,000 in any one year. The Section 162(m)
deduction limit, however, does not apply to certain
“performance-based compensation” as provided for by
the Code and established by an independent compensation
committee. In particular, stock options and stock appreciation
rights will satisfy the “performance-based
compensation” exception if the awards are made by a
qualifying compensation committee, the underlying plan sets the
maximum number of shares that can be granted to any person
within a specified period and the compensation is based solely
on an increase in the stock price after the grant date
(i.e., the exercise price or base price is not less than
the fair market value of the stock subject to the award on the
grant date). Other awards granted under the 2008 Plan may be
“qualified performance-based compensation” for
purposes of Section 162(m), if such awards are granted or
vest based upon the achievement of one or more pre-established
objective performance goals using one of the performance
criteria described above.
The 2008 Plan is structured in a manner that is intended to
provide the administrator with the ability to provide awards
that satisfy the requirements for “qualified
performance-based compensation” under Section 162(m)
of the Code. In the event the administrator determines that it
is in our best interests to make use of such awards, the
remuneration attributable to those awards should not be subject
to the $1,000,000 limitation. We have not, however, requested a
ruling from the Internal Revenue Service or an opinion of
counsel regarding this issue. This discussion will neither bind
the Internal Revenue Service nor preclude the Internal Revenue
Service from adopting a contrary position.
Section 409A of the Code. Certain awards
under the 2008 Plan may be considered “non-qualified
deferred compensation” for purposes of Section 409A of
the Code, which imposes additional requirements on the payment
of deferred compensation. Generally, if at any time during a
taxable year a non-qualified deferred compensation plan fails to
meet the requirements of Section 409A, or is not operated
in accordance with those requirements, all amounts deferred
under the non-qualified deferred compensation plan for the
taxable year and all preceding taxable years, by or for any
participant with respect to whom the failure relates, are
includible in the gross income of the participant for the
taxable year to the extent not subject to a substantial risk of
forfeiture and not previously included in gross income. If a
deferred amount is required to be included in income under
Section 409A, the amount also is subject to interest and an
additional income tax. The interest imposed is equal to the
interest at the underpayment rate plus one percentage point,
imposed on the underpayments that would have occurred had the
compensation been includible in income for the taxable year when
first deferred, or if later, when not subject to a substantial
risk of forfeiture. The additional income tax is equal to 20% of
the compensation required to be included in gross income.
Board
Recommendation
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE
APPROVAL OF THE COMPLETE PRODUCTION SERVICES, INC. 2008
INCENTIVE AWARD PLAN.
25
ITEM 3:
RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTANTS
The Audit Committee of our board of directors has selected Grant
Thornton LLP (“Grant Thornton”) as our independent
registered public accountants for the year ending
December 31, 2008, and has further directed that management
submit the selection of independent registered public
accountants for ratification by the stockholders at the annual
meeting. A representative of Grant Thornton is expected to be
present at the annual meeting and will have an opportunity to
make a statement if he or she so desires and will be available
to respond to appropriate questions.
Stockholder ratification of the selection of Grant Thornton as
our independent registered public accountants is not required by
our bylaws or otherwise. However, the board is submitting the
selection of Grant Thornton to the stockholders for ratification
as a matter of corporate practice. If the stockholders fail to
ratify the selection, the Audit Committee will reconsider
whether or not to retain that firm. Even if the selection is
ratified, the Audit Committee in its discretion may direct the
appointment of a different independent accounting firm at any
time during the year if the Audit Committee determines that such
a change would be in our best interests and in the best
interests of our stockholders.
Board
Recommendation
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE
RATIFICATION OF GRANT THORNTON LLP AS OUR INDEPENDENT REGISTERED
PUBLIC ACCOUNTANTS FOR FISCAL YEAR 2008.
26
SECURITY
OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
AND CERTAIN BENEFICIAL OWNERS
The following table shows ownership of our common stock on
March 25, 2008, based on 73,488,736 shares of common
stock outstanding on that date, by (i) each person known to
us to own beneficially more than five percent (5%) of our
capital stock; (ii) each director and nominee;
(iii) our Chief Executive Officer and Chief Financial
Officer, and each of our other three most highly compensated
executive officers for the year ended December 31, 2007
(collectively the “named executive officers”); and
(iv) all of our current directors and nominees, named
executive officers and executive officers as a group. Except to
the extent indicated in the footnotes to the following table,
the person or entity listed has sole voting and dispositive
power with respect to the shares that are deemed beneficially
owned by such person or entity, subject to community property
laws, where applicable:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rights to
|
|
|
|
|
|
|
|
|
|
Shares of
|
|
|
Acquire
|
|
|
|
|
|
Percentage of
|
|
|
|
Common
|
|
|
Common
|
|
|
Total Shares
|
|
|
Outstanding
|
|
Name
|
|
Stock(1)
|
|
|
Stock(2)
|
|
|
Beneficially Owned
|
|
|
Common Stock(3)
|
|
|
Directors and Nominees:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joseph C. Winkler
|
|
|
299,208
|
|
|
|
386,020
|
|
|
|
685,228
|
|
|
|
*
|
|
Robert S. Boswell
|
|
|
23,221
|
|
|
|
19,180
|
|
|
|
42,401
|
|
|
|
*
|
|
Harold G. Hamm(4)
|
|
|
4,068,976
|
|
|
|
6,667
|
|
|
|
4,075,653
|
|
|
|
5.55
|
%
|
Michael McShane
|
|
|
4,702
|
|
|
|
3,334
|
|
|
|
8,036
|
|
|
|
*
|
|
W. Matt Ralls
|
|
|
6,311
|
|
|
|
6,667
|
|
|
|
12,978
|
|
|
|
*
|
|
Andrew L. Waite(5)
|
|
|
783,866
|
|
|
|
6,667
|
|
|
|
790,533
|
|
|
|
*
|
|
Marcus A. Watts
|
|
|
6,702
|
|
|
|
3,334
|
|
|
|
10,036
|
|
|
|
*
|
|
R. Graham Whaling
|
|
|
44,527
|
|
|
|
14,064
|
|
|
|
58,591
|
|
|
|
*
|
|
James D. Woods
|
|
|
88,016
|
|
|
|
15,129
|
|
|
|
103,145
|
|
|
|
*
|
|
Other Named Executive Officers:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brian K. Moore
|
|
|
75,532
|
|
|
|
187,970
|
|
|
|
263,502
|
|
|
|
*
|
|
J. Michael Mayer
|
|
|
104,483
|
|
|
|
98,245
|
|
|
|
202,728
|
|
|
|
*
|
|
James F. Maroney
|
|
|
67,320
|
|
|
|
54,568
|
|
|
|
121,888
|
|
|
|
*
|
|
Kenneth L. Nibling
|
|
|
66,720
|
|
|
|
53,368
|
|
|
|
120,088
|
|
|
|
*
|
|
All current executive officers and directors (including
nominees) as a group (15 persons)
|
|
|
5,660,758
|
|
|
|
934,783
|
|
|
|
6,595,541
|
|
|
|
8.86
|
%
|
Stockholders Holding 5% or more:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SCF-IV, L.P.
and Related Entities(6)
600 Travis, Suite 6600,
Houston, Texas 77002
|
|
|
20,255,292
|
|
|
|
0
|
|
|
|
20,255,292
|
|
|
|
27.6
|
%
|
27
|
|
|
(1) |
|
Includes unvested restricted common stock as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested Restricted
|
|
|
|
Unvested Restricted
|
Directors and Nominees
|
|
Common Stock
|
|
Other Named Executive Officers
|
|
Common Stock
|
|
Mr. Winkler
|
|
|
144,986
|
|
|
Mr. Moore
|
|
|
8,866
|
|
Mr. Boswell
|
|
|
2,143
|
|
|
Mr. Mayer
|
|
|
18,652
|
|
Mr. Hamm
|
|
|
2,143
|
|
|
Mr. Maroney
|
|
|
13,776
|
|
Mr. McShane
|
|
|
2,143
|
|
|
Mr. Nibling
|
|
|
13,376
|
|
Mr. Ralls
|
|
|
2,143
|
|
|
All current executive
|
|
|
|
|
Mr. Waite
|
|
|
2,143
|
|
|
officers and directors
|
|
|
229,082
|
|
Mr. Watts
|
|
|
2,143
|
|
|
|
|
|
|
|
Mr. Whaling
|
|
|
2,143
|
|
|
|
|
|
|
|
Mr. Woods
|
|
|
2,143
|
|
|
|
|
|
|
|
|
|
|
(2) |
|
Represents shares which the person or group has a right to
acquire within sixty (60) days of March 25, 2008, upon
the exercise of options. |
|
(3) |
|
Shares of common stock subject to options which are currently
exercisable or which become exercisable within sixty
(60) days of March 25, 2008 are deemed to be
beneficially owned by the person holding such options for the
purposes of computing the percentage of ownership of such person
but are not treated as outstanding for the purposes of computing
the percentage of any other person. |
|
(4) |
|
Includes an aggregate of 4,047,843 shares owned by Harold
G. Hamm GRAT 4; Harold G. Hamm GRAT 6; and Harold G. Hamm GRAT 8
and 21,133 shares owned by the Revocable Inter Vivos Trust
of Harold G. Hamm, as amended and restated, dated as of
April 23, 1984, each of which is an estate planning trust.
Mr. Hamm is the grantor and serves as the trustee of each
of theses trusts. As such, Mr. Hamm may be deemed to have
voting and dispositive power over the shares beneficially owned
by these trusts. |
|
(5) |
|
Mr. Waite serves as Managing Director of L.E. Simmons and
Associates, Incorporated, the ultimate general partner of
SCF-IV, L.P.
As such, Mr. Waite may be deemed to have voting and
dispositive power over the shares beneficially owned by L.E.
Simmons and Associates. Mr. Waite disclaims beneficial
ownership of the shares owned by
SCF-IV, L.P.
See Footnote 6 below. |
|
(6) |
|
According to a Schedule 13G/A filed by L.E. Simmons on
February 12, 2008. Includes 16,946,231 shares owned
directly by
SCF-IV,
L.P., 1,390,530 shares owned directly by L.E. Simmons,
1,043,545 shares owned directly by LESFP, Ltd.,
681,432 shares owned directly by
SCF-VI,
L.P., and 72,900 shares owned directly by L.E.
Simmons & Associates, Incorporated. L.E. Simmons may
be deemed to beneficially own 20,255,292 of these shares based
on his sole power to vote and dispose of the shares held
directly by him and shared power to vote and dispose of
18,864,762 shares. L.E. Simmons is the President and sole
member of LESGP, LLC, which is the general partner of LESFP,
Ltd. and is thus deemed the beneficial owner of, based on its
power to direct the voting and disposition of, the shares held
by LESFP, Ltd. L.E. Simmons is the sole stockholder of L.E.
Simmons & Associates, Incorporated, which is the sole
member and general partner, respectively, of
SCF-IV,
G.P., LLC and
SCF-VI G.P.
Limited Partnership, and thus L.E. Simmons and L.E.
Simmons & Associates, Incorporated may be deemed to
beneficially own all of the securities beneficially owned by
these entities.
SCF-IV,
G.P., LLC is the sole member of
SCF-IV, L.P.
and is deemed the beneficial owner of, based on its power to
direct the voting and disposition of, the shares held by
SCF-IV, L.P.
SCF-VI,
G.P., Limited Partnership is the general partner of
SCF-VI, L.P.
and is deemed the beneficial owner of, based on its power to has
the power to direct the voting and disposition of, the shares
held by
SCF-VI, L.P. |
|
|
|
62,050 of the 72,900 shares owned directly by L.E.
Simmons & Associates, Incorporated, 890,105 of the
1,043,545 shares owned directly by LESFP, Ltd. and
1,190,813 of the 1,390,530 shares owned directly by L.E.
Simmons are subject to an understanding pursuant to which such
parities have agreed not dispose of such shares at a faster rate
than SCF-IV,
L.P. disposes of the shares owned directly by it. The parties to
the understanding described above disclaim that the
understanding constitutes the formation of a group. |
28
|
|
|
|
|
Excludes the following shares, a portion of which are subject to
an understanding (the “understanding”) pursuant to
which the owner has agreed not dispose of such shares at a
faster rate than
SCF-IV, L.P.
disposes of the shares owned directly by it: |
|
|
|
• 734,930 shares owned directly by David C.
Baldwin, of which 609,806 shares are subject to the
understanding; |
|
|
|
• 478,220 shares owned directly by Anthony F.
DeLuca, of which 406,540 shares are subject to the
understanding; |
|
|
|
• 783,866 shares owned directly by Andrew L.
Waite, of which 652,599 shares are subject the
understanding; |
|
|
|
• 348,555 shares owned directly by JWG
Management, Ltd., of which 299,555 shares are subject to
the understanding;
|
|
|
|
• 5,740 shares owned directly by John H.W.
Geddes, the president and sole stockholder of JWG Management,
Ltd.
|
|
|
|
The parties to the understanding described above disclaim that
the understanding constitutes the formation of a group. |
EXECUTIVE
COMPENSATION
Compensation
Discussion and Analysis
This Compensation Discussion and Analysis section discusses the
compensation programs and policies for our executive officers
and the Compensation Committee’s role in the design and
administration of these programs and policies and in making
specific compensation decisions for our executive officers,
including our “named executive officers” which consist
of Joseph C. Winkler, our Chairman of the Board and Chief
Executive Officer, Brian K. Moore, our President and Chief
Operating Officer, J. Michael Mayer, our Senior Vice President
and Chief Financial Officer, James F. Maroney, our Vice
President, Secretary and General Counsel, and Kenneth L.
Nibling, our Vice President — Human Resources and
Administration.
Executive
Summary
Fiscal 2007. The initial public offering of
our common stock occurred on April 21, 2006, and the
compensation decisions made during 2007 were in large part a
continuation of the programs established in connection with our
initial public offering and the market study performed in
anticipation of our public company status. At the time of our
initial public offering, in early 2006, the Compensation
Committee approved the following compensation strategy for our
senior management:
|
|
|
|
•
|
Align base salaries at the market median;
|
|
|
•
|
Align total direct compensation (base, annual performance-based
cash bonuses, and long-term equity awards) between the median
and 75th percentile when our performance under our annual
cash bonus plan is between “Expected Value” and
“Over Achievement,” as such terms are used in the
Management Incentive Plan discussed below;
|
|
|
•
|
Employ long-term equity incentive award target guidelines, based
on the fair value of the award on the date of grant, the
executive’s position and the executive’s
salary; and
|
|
|
•
|
Provide long-term incentive awards in a mix of 70% options,
based on the Black-Scholes model for valuations, and 30%
restricted shares, based on fair market value on grant, for
senior management, and provide all other employees with options
only.
|
This pay strategy results in a significant percentage of annual
compensation being delivered in the form of equity, rather than
cash, and is oriented to rewarding performance, long-term in the
form of equity awards and short-term in the form of performance
based annual cash awards. This strategy also places more
compensation at risk in the form of annual incentive
opportunities and equity awards for employees with higher levels
of responsibility.
29
Fiscal 2007 was marked by an increase in revenues, from
$1.21 billion in 2006 to $1.66 billion in 2007, and an
increase in earnings per diluted share from continuing
operations, from $2.02 in 2006 to $2.38 (before the goodwill
impairment charge of $0.18 per share) in 2007. In 2007, we
continued our investment in equipment and personnel and our
growth through acquisitions. During 2006 and 2007, we have
invested an aggregate of approximately $671 million in
equipment and other capital expenditures and approximately
$468 million in acquisitions. In March 2007, we promoted
Brian K. Moore, from President IPS Division, to President and
Chief Operating Officer, providing additional operations support
for our growing business needs. Despite our positive financial
performance and growth, our stock price has declined from $19.82
at January 1, 2007 to $17.97 at December 31, 2007.
Some of the highlights of 2007 executive compensation are as
follows:
|
|
|
|
•
|
At the commencement of 2007, since a comprehensive review of
base salaries at our peer group companies had been performed in
March 2006 in connection with our initial public offering, the
Compensation Committee requested its compensation consultant to
provide a summary report on their findings regarding the actual
and projected movement for base pay for executives in the energy
and energy services sector generally. The findings of the
consultant were that salary increases generally ranged from
6-11% in our industry. In light of these findings and the salary
increases that went into effect in April 2006, the Compensation
Committee determined to raise the salaries of the executive
officers for fiscal 2007 by approximately 6%. Base salary
increases for our non-management level employees typically
ranged from 4-7% for fiscal 2007 as determined in the discretion
of each division’s president, taking into account, among
other factors, competition, performance and retention.
|
|
|
•
|
Also at the commencement of 2007, the Compensation Committee
determined to change the financial performance measure under our
Management Incentive Plan from adjusted EBITDA, or earnings
before interest, taxes, depreciation and amortization, to
adjusted earnings per share, or adjusted EPS, in order to better
align the performance measure with the interests of our
stockholders, given the emphasis on earnings per share
information among public companies and its impact on stockholder
value. In addition, the Compensation Committee believed that a
performance measurement that considered other income statement
factors such as depreciation, taxes and interest could be a
better indicator of the financial performance of a public
company. Fiscal 2007 fully diluted EPS was $2.20, and adjusted
EPS under the 2007 Management Incentive Plan was $2.36, which
reflected an addition of $.18 for the impact of goodwill
impairment specifically related to Canada and a subtraction of
$.02 due to the estimated impact of unplanned acquisitions. Our
2007 adjusted EPS of $2.36 resulted in bonus awards for 2007 at
approximately 70% of each executive’s target bonus
opportunity. This percentage is based on the 10% payout for
exceeding the “Entry” level target, plus an additional
60% based on the extent to which our 2007 actual adjusted EPS
fell within the range between “Entry” level target and
“Expected Value” target for adjusted EPS.
|
|
|
•
|
In early 2007, the same equity grants levels, expressed in
number of shares, were awarded to the named executive officers
as were awarded in 2006, despite our lower stock price,
resulting in lower values delivered in the form of long term
equity incentives.
|
|
|
•
|
Based in part on the findings of our compensation consultant in
September 2006, and to provide more parity between the
compensation of our Chief Executive Officer and the other
executive officers and members of senior management, in early
2007, the Compensation Committee finalized change in control and
severance agreements for our executive officers and six other
members of the senior management team.
|
|
|
•
|
As a result of our stock price performance on December 31,
2007, 32% of our outstanding stock options and 12% of the stock
options held by our named executive officers, are underwater.
All option grants made in connection with and since becoming a
public company have an exercise price in excess of the market
price on December 31, 2007.
|
2008 Changes. Our 2007 revenues of
approximately $1.665 billion are more than twice our 2005
revenues of approximately $800 million, which revenues were
the basis for the last comprehensive market
30
study reviewed by the Compensation Committee in March 2006 just
prior to our initial public offering. In light of our growth
since the date of the last comprehensive market study, in
October 2007, the Compensation Committee commissioned its
consultant, Pearl Meyer & Partners
(“PM&P”), to perform an analysis of our
executives’ compensation forms and levels.
In January 2008, PM&P concluded that the named executive
officers’ 2007 base salaries and total direct compensation
levels were below the Compensation Committee’s stated pay
strategy of paying base salaries at the median of their
competitors and total direct compensation between the market
median and 75th percentile. PM&P noted a substantial
gap between the peer companies’ compensation practices and
the current compensation levels of the named executive officers.
Base salaries for each of the named executive officers were
below the 25th percentile and total direct compensation
levels were approximately 24% below the market median. Given the
current market environment and concerns about our stock price
performance, however, the Compensation Committee was concerned
about the timing and the size of the base salary adjustments
that would be needed to comply with their stated compensation
philosophy. The Compensation Committee determined to partially
address the gap through increased pay for performance
opportunities and thus approved certain limited adjustments for
2008 compensation, as follows:
|
|
|
|
•
|
The named executive officers would forego base salary increases
for 2008;
|
|
|
•
|
The 2008 bonus opportunities at the “Expected Value”
level of performance, expressed as a percentage of salary, would
be increased by 25 percentage points (i.e., the Chief
Executive Officer’s increase was from 100% of base salary
to 125% of base salary);
|
|
|
•
|
The targeted long-term incentive (LTI) multiples for the named
executive officers would be increased by one-third and the 2008
equity grants would be based upon the adjusted LTI multiple
(i.e., the Chief Executive Officer’s LTI multiple increased
from 3.0 x base salary to 4.0 x base salary); and
|
|
|
•
|
The 2008 equity grant values for the named executive officers
would be in the form of approximately 35% stock options and 65%
restricted shares (compared to 70% stock options and 30%
restricted stock in 2007 and 2006). The Compensation Committee
revised the mix of options to restricted stock to address a
number of factors, including, the retention disincentive created
by underwater options and the shortage in our share reserve
under our existing equity incentive plan.
|
In 2008, the Compensation Committee also approved a new
incentive award plan, subject to stockholder approval at this
2008 annual meeting of stockholders. The Compensation Committee
was not able to make all of its proposed equity awards in
accordance with its guidelines as the share reserve under our
existing plan was exhausted on January 31, 2008 in
connection with the equity grants to all employees. Accordingly,
the award of 282,900 shares of restricted stock to the
named executive officers and other members of the senior
management team that should have been granted on
January 31, 2008 in accordance with the Compensation
Committee’s guidelines will be made on the date of this
annual meeting if our stockholders approve the proposed new
incentive award plan. These stock awards will vest in one third
increments on January 31, 2009, 2010 and 2011, subject to
continued service with us. See Proposal 2 “Approval of
the Complete Production Services, Inc. 2008 Incentive Award
Plan.”
Objectives
and Elements of our Compensation Programs and
Policies
The Compensation Committee’s objective is to provide a
total compensation package that is balanced with the proper
incentives and is competitive with public companies within our
peer group, while aligning the interests of our executives with
our public stockholders. We believe a significant portion of
compensation should be tied to our measurable performance.
The objectives of our compensation programs and policies
are to:
|
|
|
|
•
|
attract and retain highly qualified and talented executive
officers and other key employees;
|
|
|
•
|
motivate our executive officers and other key employees by
aligning pay and performance and subjecting a significant
portion of our executive officer’s compensation to the
achievement of our short-
|
31
|
|
|
|
|
term financial performance goals and, for the other members of
our senior management, with the goals for their respective
divisions and units;
|
|
|
|
|
•
|
align the interests of our executive officers with those of our
stockholders through equity-based long-term incentive awards
that link executive compensation to stockholder return;
|
|
|
•
|
provide financial stability while recognizing individual
performance and achievements;
|
|
|
•
|
ensure that our executive officers are placed on a level playing
field with potential deal partners and serve the best interests
of our stockholders in the event of a proposed transaction
without concern over their personal financial security; and
|
|
|
•
|
honor the severance commitments made to our executives in
inducing them to join our team.
|
The major compensation elements for our named executive officers
are:
|
|
|
|
•
|
base salaries, which form stable parts of our named executive
officers’ compensation packages that reward individual
achievements and contributions;
|
|
|
•
|
annual cash bonuses that are based on our short-term financial
performance measured against specific pre-established goals;
|
|
|
•
|
long-term equity incentive compensation, in the form of stock
options that are tied to stock price appreciation, and the form
of restricted stock awards that enhance retention and a
long-term focus;
|
|
|
•
|
severance benefits, which were offered as part of the
executive’s hiring package in order to induce quality
executive talent to join us and which provide financial
stability for the executives; and
|
|
|
•
|
change of control benefits, which predominate in our industry
and facilitate the completion of transactions that are in the
best interests of our stockholders.
|
We use each element of compensation to satisfy one or more of
these compensation objectives and each element is an integral
part of and supports our overall compensation objectives. We
strive to offer our executive officers compensation and benefits
that are attractive and competitive in the marketplace for
talent.
Consistent with our performance-based philosophy, we reserve the
largest potential compensation awards for performance and
incentive-based programs. Our annual performance-based cash
bonus program rewards our short-term financial performance,
while our long-term equity awards reward our long-term stock
price performance and align the interests of our senior
management with our stockholders. The average mix of 2007
compensation paid to our named executive officers are reflected
below.
Average
NEO Compensation Mix
Determination
of Compensation
The Compensation Committee reviews and approves all compensation
decisions relating to our Chief Executive Officer and the other
named executive officers, all division presidents and all other
members of our senior management who earn greater than $200,000
in salary.
32
Pay
Strategy
In March 2006, the Compensation Committee retained Stone
Partners, an independent compensation consultant, to assist in
ensuring that our compensation programs provided proper rewards
and incentives given the combination of our predecessor
companies and the anticipated completion of the initial public
offering of our common stock. Specifically, the Compensation
Committee reviewed external market analysis prepared by the
consultant, the pay practices of our predecessor companies and
pay strategies for senior management going forward. The market
analysis performed by Stone Partners analyzed 14 peer group
companies in the oilfield products and services industry. The
data was regressed to reflect comparables for a company with
revenue of $800 million. Based on its review of the peer
company comparisons and market data, and the history of
compensation practices of our predecessor companies, and its
consideration of various recommendations of the consultant
regarding pay strategies, in early 2006 the Compensation
Committee approved the following compensation strategies:
|
|
|
|
•
|
Align base salaries at the market median;
|
|
|
•
|
Align total direct compensation (base, annual performance-based
cash bonuses, and long-term equity awards) between the median
and 75th percentile when our performance under our annual
cash bonus plan is between “Expected Value” and
“Over Achievement,” as such terms are used in the
Management Incentive Plan discussed below;
|
|
|
•
|
Employ long-term equity incentive award target guidelines, based
on the fair value of the award on the date of grant, the
executive’s position and the executive’s
salary; and
|
|
|
•
|
Provide long-term incentive awards in a mix of 70% options,
based on the Black-Scholes model for valuations, and 30%
restricted shares, based on fair market value on grant, for
senior management, and provide all other employees with options
only.
|
We believe in retaining the best talent among our senior
executive management team. While this structure was established
as a guideline, the Compensation Committee also considers the
performance of the executive officer over time, as well as our
financial performance and the performance of our stock price. To
retain and motivate these key individuals, the Compensation
Committee may determine that it is in our best interests to
provide total compensation packages with one or more members of
our senior executive management that may deviate from the
general principle of targeting compensation at the levels
discussed above.
The Compensation Committee did not perform any further
comprehensive market analysis in setting 2007 compensation and
generally continued the programs put in place in 2006 in
response to the above strategies.
Compensation
Consultant
The Compensation Committee has retained PM&P since
September 2006 as its compensation consultant to advise the
Compensation Committee on an as needed basis. PM&P reports
directly to the Compensation Committee and works closely with
our Vice President — Human Resources and
Administration, who is management’s representative to the
Compensation Committee. PM&P, when invited, attends
meetings of the Compensation Committee. The Compensation
Committee determines when to hire, terminate or replace the
consultant, and which projects are to be performed by the
consultant. PM&P has provided only services directed by the
Compensation Committee related to executive compensation,
services directed by the Nominating Committee related to
director compensation and provided management with a
non-executive compensation energy services study at a cost of
less than $2,000. PM&P has not provided any other services
directly to us.
During fiscal year 2006, PM&P provided at the request of
the Compensation Committee specific studies and recommendations
regarding change of control and severance benefit practices. Our
employment agreement with our Chief Executive Officer, which was
entered into when we hired him, included severance and change of
control benefits and the letter agreements with our executive
officers included certain severance benefits. The Compensation
Committee desired to (i) provide more internal pay equity
among the executive officers with regard to severance and change
of control benefits, (ii) ensure that our senior management
was not
33
disadvantaged in light of the prevalence of change of control
benefits in our industry and (iii) ensure compliance with
Section 409A of the Internal Revenue Code. In November
2006, the Compensation Committee approved certain of the
material terms of the severance and change of control benefits
and payments, and the agreements were finalized in March 2007.
In early 2007, PM&P also provided a summary report of
executive base salary increases in the energy and energy
services sector, and provided market data, consistent with the
strategies outlined above, regarding the compensation levels of
Chief Operating Officers at companies within the oilfield
services industry and assisted the Compensation Committee in
determining the compensation package of Brian Moore upon his
promotion to President and Chief Operating Officer in March 2007.
2008
Market Study
In October 2007, the Compensation Committee commissioned
PM&P to perform a comprehensive market analysis of our
executives’ compensation forms and levels. In its January
2008 analysis, PM&P compared our executives’
compensation forms and levels to peer company proxy data for the
following pay components: (i) base salary; (ii) target
annual cash incentives; (iii) total target cash
compensation (base salary plus target annual cash incentives);
(iv) long-term incentives (using grant date fair values)
and (v) total direct compensation (total target cash
compensation plus long-term incentives). In addition, the study
examined long-term incentive trends and reviewed peer company
share allocation and usage levels. The analysis also provided a
summary of executive benefits and perquisites and severance and
change of control provisions.
The Compensation Committee worked closely with management and
the consultant to define the peer group companies in the
oilfield products and services industry, determining to exclude
certain companies which were considered too large or not
comparable. The peer group reviewed for the early 2008
compensation determinations consisted of the following companies:
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TTM
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Market
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Company Name
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Revenue(1)
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Capitalization(2)
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($ millions)
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($ millions)
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Basic Energy Services, Inc.
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$
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849
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$
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898
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|
Helix Energy Solutions Group, Inc.
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$
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1,663
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|
$
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3,790
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|
Key Energy Services, Inc.
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|
$
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1,642
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|
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$
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1,909
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|
Newpark Resources, Inc.
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|
$
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620
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|
|
$
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491
|
|
Oil States International, Inc.
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|
$
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1,992
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|
$
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1,709
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|
RPC, Inc.
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|
$
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664
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|
|
$
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1,148
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|
Superior Energy Services, Inc.
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|
$
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1,478
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|
$
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2,771
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Superior Wells Services, Inc.
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|
$
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331
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|
$
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498
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TETRA Technologies, Inc.
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$
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942
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|
$
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1,157
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W-H Energy Services, Inc.
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$
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1,072
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$
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1,725
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|
75th Percentile
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|
$
|
1,601
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|
|
$
|
1,863
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|
Median
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$
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1,015
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|
|
$
|
1,433
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Average
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$
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1,127
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$
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1,610
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25th Percentile
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|
$
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710
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$
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960
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Complete Production Services, Inc.
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$
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1,594
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$
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1,312
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|
|
|
|
(1) |
|
TTM = Trailing Twelve Months. Revenue information is for the TTM
ending September 30, 2007. |
|
(2) |
|
Market capitalization information is as of December 31,
2007. |
The data was regressed to reflect comparables for a company with
a revenues size of $1.655 billion (our revenues) because
the median revenue of the peer group companies was meaningfully
below our revenues. The data was trended to January 1, 2008
using a 6.0% aging factor, which the consultant advised was
conservative. The Compensation Committee will continue to review
the composition of the peer group and will consider
34
modifications to the peer group in order to ensure that it
adequately represents our executive talent pool and is
appropriate from a market capitalization and revenue size
perspective.
Other than TETRA Technologies, Inc., Key Energy Services, Inc.,
Newpark Resources, Inc., W-H Energy Services, Inc., Superior
Energy Services, Inc. and Oil States International, Inc., our
peer group companies changed from the companies used in Stone
Partners’ March 2006 market study, primarily to reflect our
increased revenue size. In addition to these six continuing
companies, the market analysis performed by Stone Partners in
March 2006 included the following companies in the oilfield
products and services industry: Hydril Company, Grant Prideco,
Inc., Noble Corporation, GlobalSanteFe Corporation, Cameron
International Corporation (formerly Cooper Cameron Corp.),
Nabors Industries Ltd., Weatherford International Ltd., and BJ
Services Company.
Based on PM&P’s January 2008 market study and findings
that the named executive officers’ 2007 base salaries were
below the 25th percentile of the peer group companies and
total direct compensation levels were approximately 24% below
the median of the peer group companies, the Compensation
Committee determined in 2008 to increase pay for performance
opportunities and thus approved certain limited adjustments for
2008 compensation, as discussed above under “Executive
Summary — 2008 Changes” and throughout this
CD&A.
Components
of Compensation
Base
Salary
Base salaries provide our executive officers with a degree of
financial certainty and stability. In order to attract and
retain highly qualified executives, in 2006 the Compensation
Committee established a philosophy to provide base salaries
comparable to those being paid by our peer group companies,
targeting base salaries at the median market rates. The
Compensation Committee annually reviews and determines the base
salaries of our named executive officers. Salaries are also
reviewed in the case of executive promotions or other
significant changes in responsibilities. The Compensation
Committee typically takes into consideration the Chief Executive
Officer’s recommendations based on his evaluation of the
performance of each other named executive officer against
objectives established by the Chief Executive Officer and the
executive at the beginning of each year, the executive’s
scope of the responsibilities, our financial performance,
retention considerations and general economic and competitive
conditions.
Since a comprehensive review of base salaries at our peer group
companies had been performed in March 2006, the Compensation
Committee in March 2007 requested PM&P to provide a summary
report on their findings regarding the actual and projected
movement for base pay for executives in the energy and energy
services sector generally. The PM&P summary report found a
wage movement in the 6-11% range in these sectors, and
recommended an overall salary budget increase of 10%. Based in
part on this information and the fact that the named executive
officers received salary increases consistent with the strategy
of setting salaries at the median of the market in April 2006,
and the recommendations of management, the Compensation
Committee approved salary increases for fiscal 2007 for the
named executive officers, other than Mr. Moore, ranging
from 5.2% to 6.2%.
Mr. Moore’s salary was increased 55% from $200,000 to
$310,000 in connection with his promotion to President and Chief
Operation Officer on March 20, 2007. In approving
Mr. Moore’s base salary increase, the Compensation
Committee reviewed a summary report presented by PM&P
regarding base salaries of Chief Operating Officers, indicating
that salaries at the 25th percentile were approximately
$303,000, while salaries at the 50th percentile were
approximately $362,000. The Compensation Committee determined to
set Mr. Moore’s salary at below the market median, but
to provide a target bonus opportunity at 75% of his base salary,
which was greater than the target bonus opportunities of between
50% to 70% of base salaries provided by the market. This was
consistent with the Compensation Committee’s focus on
performance based compensation and appropriate given the
relatively large salary increase resulting from his promotion.
The Compensation Committee also reviewed
Messrs. Winkler’s and Mayer’s compensation
packages and determined that Mr. Moore’s compensation
package as Chief Operating Officer should fall between
Mr. Winkler’s and Mr. Mayer’s compensation
packages.
35
Even though PM&P’s January 2008 market analysis
indicated that the named executive officers’ 2007 base
salaries were below the 25th percentile and total direct
compensation levels were approximately 24% below the market
median, given the current market environment and concerns about
our stock price performance, the Compensation Committee did not
approve any base salary increases for 2008.
Annual
Performance-Based Cash Bonuses
We maintain an annual cash performance based bonus program
entitled the Management Incentive Plan (“MIP”), in
which approximately 223 employees participated for fiscal
2007, including our named executive officers and all members of
our senior management team. The MIP is designed to emphasize the
importance of our short-term financial performance objectives
and to reward members of our senior management for attaining and
exceeding these objectives.
The MIP permits the payment of yearly cash bonuses based upon
pre-established financial performance criteria for each plan
year and provides for four levels of targeted financial
performance: “Entry,” “Expected Value,”
“Over Achievement” and “Stretch,” with the
“Entry” level being the minimum level of performance
that will be rewarded, “Expected Value” being the 100%
target performance and the “Stretch” level being the
highest level of performance that will be rewarded. At the
beginning of each calendar year, the Compensation Committee
establishes in writing the financial performance criteria to be
used for that fiscal year and the “Entry,”
“Expected Value,” “Over Achievement” and
“Stretch” performance levels related to that
performance criteria and the potential bonus payouts for each
plan participant. For fiscal 2007, the Compensation Committee
set adjusted EPS as the performance criteria. In the preceding
two years, the Compensation Committee used adjusted EBITDA as
the performance criteria. The Compensation Committee changed the
performance criteria to adjusted EPS in order to better align
the executive’s incentives with stockholder results, given
the emphasis of earnings per share information among public
companies and its impact on stockholder value. The Compensation
Committee also believed that a performance measurement that
included such factors as depreciation, taxes and interest could
be a better indicator of the financial performance of a public
company. In maintaining this performance measure for the 2008
fiscal period, the Compensation Committee also considered the
consultant’s January 2008 market study which indicated that
40% of our peer group companies used EPS as a performance
measure in their annual incentive programs. In setting the
adjusted EPS targets for fiscal 2007, the Compensation Committee
considered our prior financial performance, budgeted performance
and anticipated developments.
As part of the MIP, individual target bonus opportunity is
payable at “Expected Value” performance and is
expressed as a percentage of each participant’s base
salary, which varies based on position. For members of our
senior management team, which includes our executive officers
and division presidents, “Entry Level” performance
level results in a payment equal to 10% of the target bonus
opportunity, “Over Achievement” performance results in
a payment equal to 150% of target bonus opportunity and
“Stretch” performance results in a payment equal to
200% of the target bonus opportunity. Bonus payouts are based on
the target level that was exceeded, plus an additional
percentage based on the extent to which actual performance fell
within the range between the target level that was exceeded and
the next higher target level. Based on market data reviewed by
the Compensation Committee in early 2006, this program
facilitated our objective of aligning total direct compensation
(base salaries, annual performance-based cash bonuses, and
long-term equity awards) between the median and
75th percentile when our performance under our annual cash
bonus plan is between the “Expected Value” and
“Over Achievement” levels. The following table
provides the potential bonus payouts for 2007, expressed as a
percentage of salary, to each of our named executive officers in
the case of “Entry,” “Expected Value,”
“Over Achievement” and “Stretch” performance.
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Expected
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Over
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Entry
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Value
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Achievement
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|
Stretch
|
|
|
Payout as % of
|
|
Payout as % of
|
|
Payout as % of
|
|
Payout as % of
|
Position
|
|
Base Salary
|
|
Base Salary
|
|
Base Salary
|
|
Base Salary
|
|
Chairman and Chief Executive Officer
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|
|
10
|
%
|
|
|
100
|
%
|
|
|
150
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%
|
|
|
200
|
%
|
President and Chief Operating Officer
|
|
|
7.5
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%
|
|
|
75
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%
|
|
|
112.5
|
%
|
|
|
150
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%
|
Senior Vice President and Chief Financial Officer
|
|
|
6
|
%
|
|
|
60
|
%
|
|
|
90
|
%
|
|
|
120
|
%
|
All Other Named Executive Officers
|
|
|
5
|
%
|
|
|
50
|
%
|
|
|
75
|
%
|
|
|
100
|
%
|
36
In 2007, the performance objectives for our named executive
officers were based completely on targeted adjusted EPS. The
performance objectives for division presidents were based 25% on
targeted adjusted EPS and 75% on the performance of individual
divisions against pre-established performance targets, such as
division EBITDA and division safety results. Following the
end of the year in which the performance objectives are to be
achieved, the Compensation Committee determines whether and to
what extent the specified performance objectives have been
achieved.
For fiscal year 2007, the Compensation Committee approved the
following performance target levels for adjusted EPS:
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|
|
|
|
|
|
|
|
|
|
Over
|
|
|
Actual
|
|
Entry
|
|
Expected Value
|
|
Achievement
|
|
Stretch
|
Performance
|
|
Performance
|
|
Performance
|
|
Performance
|
|
Performance
|
|
$2.36
|
|
$
|
2.04
|
|
|
$
|
2.52
|
|
|
$
|
2.72
|
|
|
$
|
2.90
|
|
The adjusted EPS targets include adjustments to give effect to
discontinued operations and acquisitions, as permitted under the
MIP. Fiscal 2007 fully diluted EPS was $2.20, and adjusted EPS
under the 2007 MIP was $2.36, which reflected an addition of
$.18 for the impact of goodwill impairment specifically related
to Canada and a subtraction of $.02 due to the estimated impact
of unplanned acquisitions. Our 2007 adjusted EPS of $2.36
resulted in bonus awards at approximately 70% of the
executive’s target bonus opportunity. This percentage
includes the percentage payable based on exceeding
“Entry” level performance plus an additional
percentage based on the extent to which actual performance fell
within the range between “Entry” level performance and
“Expected Value” performance. Our performance of $2.36
was $0.32 over our “Entry” level target, representing
67% of performance toward “Expected Value” target (67%
of the $0.48 difference between “Entry” target and
“Expected Value” target), and thus representing 67% of
the 90% difference between 100% “Expected Value”
payout and 10% “Entry” payout, or 60%, which is added
to the 10% payout for “Entry” level performance,
resulting in 70% payout of the executive’s bonus
opportunity at “Expected Value.” The actual amounts
awarded under the MIP to our named executive officers for fiscal
year 2006 are reflected in the Summary Compensation Table.
2008 Material Changes. In 2008, the
Compensation Committee reviewed data regarding the pay practices
of 10 peer group companies that illustrated that our named
executive officers’ base salaries were below the
25th percentile and their total direct compensation levels
were below the median of the peer group companies. In order to
address this disadvantage in the competitive marketplace for
high quality executive talent, and taking into consideration
employee morale and its previously established guidelines and
its philosophy to pay for performance, the Compensation
Committee increased the potential bonus payouts as a percentage
of each named executive officer’s base salary for the
fiscal 2008 MIP, by 25 percentage points, as follows:
|
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|
|
Position
|
|
2007 Bonus at Expected Value
|
|
2008 Bonus at Expected Value
|
|
Chairman and Chief Executive Officer
|
|
100% of base salary
|
|
125% of base salary
|
President and Chief Operating Officer
|
|
75% of base salary
|
|
100% of base salary
|
Chief Financial Officer
|
|
60% of base salary
|
|
85% of base salary
|
All Other Named Executive Officers
|
|
50% of base salary
|
|
75% of base salary
|
Long-term
Incentive Awards — Stock Options and Restricted
Stock
Stock options and shares of restricted stock provide an
incentive for our executives and other employees to focus their
efforts towards a strategy that will increase our market value,
as represented by our stock price. Capital accumulation from
vested and unvested equity in these programs serves as a method
for motivating and retaining our executives. Our employees,
including our named executive officers, are eligible to
participate in our annual grant of equity awards on the last
business day of January in accordance with our Equity Award
Policy. In addition, our employees are eligible to receive other
equity awards throughout the fiscal year in connection with
certain events, such as a new hire, retention of an employee,
promotion or the achievement of certain individual or
departmental performance objectives.
37
In connection with our initial public offering, the Compensation
Committee established equity grant guidelines. The guidelines
were based on input from the compensation consultant, and after
consideration of peer group and market data, current and
proposed total direct compensation, the rate of our share usage,
dilution of our common stock, and individual and corporate
performance achievements. The guidelines established for our
senior management, including our named executive officers, is to
provide equity awards based on the value of the award on the
date of grant as a multiple of the executive’s base salary,
as set forth below, subject to continued review by the
Compensation Committee of potential share dilution and overhang.
|
|
|
Position
|
|
Value as Multiple of Salary
|
|
Chief Executive Officer
|
|
3.00 times base salary
|
President and Chief Operating Officer*
|
|
2.00 times base salary*
|
Chief Financial Officer
|
|
1.75 times base salary
|
Other Executive Officers, Corporate Vice Presidents and
Division Presidents
|
|
1.50 times base salary
|
|
|
|
* |
|
Mr. Moore’s multiple was increased from 1.5 to 2.0 in
connection with his promotion to President and Chief Operating
Officer. |
These guidelines are consistent with our emphasis on long-term
compensation that closely ties our executives’ compensation
with the price of our common stock and satisfies our objective
to link executive compensation to stockholder return. Our named
executive officers and senior management are awarded options and
shares of restricted stock. Commencing in 2007, restricted stock
was also awarded to employees below the senior management level.
In 2006, based on the market study performed in March 2006, the
equity awards for named executive officers and senior management
were established based on 70% of the award value, using a
Black-Scholes model for calculations developed by the
Compensation Committee’s consultant, in the form of options
and 30% of the award value, based on the closing price of our
common stock on the grant date, in shares of restricted stock.
For 2007, the Compensation Committee granted the same number of
options and shares of restricted stock that were awarded to the
named executive officers in 2006. This, however, resulted in
lower valuations delivered in the form of equity incentive
awards from those established by the guidelines due to our lower
stock price.
The Compensation Committee annually reviews the rate of share
usage and dilution of our common stock resulting from the grant
of our equity awards. Our fiscal year 2007 rate of share usage
of 1.41% of the common shares outstanding was below the median
and below the average for the peer group companies, based on the
January 2008 market data. Our past practice has been to keep
dilution of our common stock by outstanding stock options and
shares of restricted stock to below 10%. Subsequent to our 2007
annual grants, dilution by outstanding equity awards was
approximately 7.18%, which is below the median and the average
for the peer group companies.
All stock options granted to our executive officers in 2007 were
made under our Amended and Restated 2001 Stock Incentive Plan,
or the 2001 Plan and have a term of 10 years, subject to
earlier termination in connection with termination of
employment. In addition to our annual grants in January 2007,
our Compensation Committee awarded Mr. Moore
5,200 shares of restricted stock and 26,200 options on
March 20, 2007 in connection with his promotion to
President and Chief Operating Officer in order to achieve his
targeted long term equity award target of 2.00 times salary. In
April 2006, the Compensation Committee adopted a policy of
vesting stock options and shares of restricted stock at a rate
of one-third per year generally on each anniversary of the grant
date over three years in order to provide an incentive for
continued employment. In August 2006, we updated our form of
equity award agreements and provided our executive officers with
an extended option exercise period of one year following
termination of employment in order to facilitate option
exercises post termination of employment when a participant is
no longer in possession of material non-public information
concerning us and to permit better personal financial planning.
For option grants following our initial public offering, the
exercise price of such grants is equal to the closing price of
our common stock on the NYSE on the grant date.
In January 2008, the Compensation Committee made awards of stock
options and shares of restricted stock covering approximately
675,000 shares under our 2001 Plan, depleting the share
reserve under the 2001
38
Plan. The Compensation Committee has approved our 2008 Incentive
Award Plan and authorized 2.5 million shares for issuance
under the 2008 Plan, subject to stockholder approval of the 2008
Incentive Award Plan at this 2008 annual meeting of
stockholders. The Compensation Committee has delayed the award
of 282,900 shares of restricted stock to the named
executive officers and other members of the senior management
team, that should have been granted on January 31, 2008 in
accordance with the Compensation Committee’s guidelines,
until the date of this annual meeting and conditioned upon our
stockholders approving the proposed 2008 Incentive Award Plan.
In order not to penalize our executives and members of our
senior management team, these restricted stock awards will vest
in one third increments on January 31, 2009, 2010 and 2011,
subject to continued service with us.
In March 2008, as part of the initial revisions to address the
deviation between total direct compensation paid by us and the
median of total direct compensation paid by our competitors, as
revealed by the 2008 market study performed by PM&P, the
Compensation Committee approved new multipliers to determine the
2008 equity awards to be granted to the named executive
officers, as described below.
|
|
|
|
|
Position
|
|
Prior Multiple
|
|
New Multiple
|
|
Chief Executive Officer
|
|
3.00 times base salary
|
|
4.00 times base salary
|
President and Chief Operating Officer
|
|
2.25 times base salary
|
|
3.00 times base salary
|
Chief Financial Officer
|
|
1.75 times base salary
|
|
2.33 times base salary
|
Vice President and General Counsel; Vice President, Human
Resources and Administration
|
|
1.50 times base salary
|
|
2.00 times base salary
|
The Compensation Committee also revised the mix of options to
restricted stock, from a value of 70% options/30% restricted
stock in 2007 to 35% options/65% restricted stock in 2008 in
order to address a number of factors, including the retention
disincentive created by underwater options, the potential that
in a slowly rising or down market the “cost” of the
options to the company may be more than the value delivered to
the recipient, the challenges in replenishing share reserves,
and to reduce the overall amount of equity awards being issued.
The Compensation Committee also considered our consultant’s
January 2008 findings that our peer group companies have
increased their use of full-value awards, including restricted
stock, in some cases, by partly or totally substituting
restricted stock for options.
Delegation of Authority to Grant Equity
Awards. In September 2006, our board of directors
established an Equity Award Sub-Committee of our board and our
Chief Executive Officer was appointed as the sole member of the
Equity Award Sub-Committee. The Compensation Committee and the
board delegated the making of grants of equity awards, to
employees who are not Section 16 officers and who are not
officers or senior managers or other key employees with a salary
in excess of $200,000 per year, to our Chief Executive Officer,
as the sole member of the Equity Award Sub-Committee. The
foregoing delegation was generally subject to the following
limitations and conditions:
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|
•
|
the aggregate number of awards that may be granted must be set
by the Compensation Committee each year;
|
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|
•
|
the options must have an exercise price equal to the closing
price of our common stock on the grant date and may have a term
not longer than ten years; and
|
|
|
•
|
the awards shall be exercisable in installments, with full
vesting to occur no sooner than the third anniversary after the
grant date and awards shall be made under and subject to the
terms set forth in our 2001 Plan.
|
In accordance with this delegation of authority, the Equity
Award Sub-Committee granted 584,000 options on January 31,
2007 and an aggregate of 36,700 additional stock options during
fiscal 2007.
Policies with Respect to Equity Compensation Awards
Determinations. Effective for 2007 and on a going
forward basis, our board of directors adopted a written policy
regarding granting of equity awards. Under our policy, we make
grants of equity awards at least once annually and the grant
date for the annual grant has been established as the last
business day of January. The date of approval for such grants
may
39
precede, or occur on, the last business day of January. All
options must be granted with an exercise price equal to the
closing price of our common stock on the date of grant. The
Compensation Committee, in approving the annual grants is
required to (i) specify the annual grants of equity awards
to be made to each executive officer, each division president
and each other employee whose base salary equals or exceeds
$200,000, and (ii) specify the total grants to be made to
the employees as a group comprising each of our business units
and/or
divisions, as applicable, which for 2007, was 634,000. The
Equity Award Sub-Committee, consisting of our Chief Executive
Officer, may then allocate the equity awards to the specific
employees within such business units
and/or
divisions and such allocation shall be complete and evidenced by
a unanimous written consent executed by the Equity Award
Sub-Committee on or before the last business day of January.
The Compensation Committee and the Equity Award Sub-Committee
may from time to time grant equity awards in addition to the
annual grant effective as of a specified future date or upon the
occurrence of a specified and objectively determinable future
event, such as an individual’s commencement of employment
or promotion, in which case such future date shall be the date
of grant of the equity award. In no event may the grant date of
an equity award be made effective as of a date earlier than the
approval date of the award and in no event may the exercise
price of an option grant be less than the closing price of our
common stock on the NYSE on the grant date.
Severance
and Change of Control Agreements
During the fourth quarter of 2006, the Compensation Committee
reviewed market data provided by PM&P relating to the
prevalence of change of control agreements in the energy
services and peripheral energy industry, and the standard terms
for such benefits. The market data was compiled from a
cross-section of 33 energy and energy service companies that
were selected on the basis that they directly or indirectly
compete with us for executive talent, they experience comparable
market cycles and they may be tracked similarly by market
analysts. The Compensation Committee also considered the
existing terms of the agreement with our Chief Executive Officer
providing certain severance and change of control benefits, and
the existing terms of the employment letters with our executive
officers providing certain severance benefits. The Compensation
Committee approved agreements for a total of nine members of
senior management, including our named executive officers, that
provide such employees with certain payments and other benefits
in the event of a change of control, in the event of a
qualifying termination of employment in connection with a change
of control and in the event of certain terminations of
employment not related to a change of control.
The benefits payable to the named executive officers in
connection with a change of control vary with position and range
from a multiple of three to two and a half times salary and
bonus, based on position, plus continuation of 401(k)
contribution and health and other benefits for a period of years
multiplied by the applicable multiple. These payments and
benefits are payable only upon a double trigger, wherein the
executive’s employment is terminated by us without cause or
by the executive for good reason within six months prior to or
two years following a change of control. The payments and
benefits also include full acceleration of all equity awards
upon a change of control (i.e. a single trigger).
Gross-up
payments to reimburse for excise taxes payable by the executive
are provided to the named executive officers. These provisions
were prevalent in our industry and ensured that the executive
officers would receive the full value of the expected payments.
These agreements are designed to retain our executive officers
and provide continuity of management in the event of an actual
or threatened change in control and to ensure that our executive
officers direct their energies to creating the best deal for our
stockholders without concern for their personal prospects.
The agreements also provide certain benefits and payments in the
event a named executive officer is terminated without cause. The
benefits payable to the named executive officers in connection
with this type of termination vary with position and range from
a multiple of two to one and two-third times salary and bonus,
based on position, plus acceleration of all equity awards, and
continuation of health and other benefits for a period of years
multiplied by the applicable multiple. These provisions were
consistent with the letter agreements of the executive officers
and certain of the terms of our Chief Executive Officer’s
agreement. These benefits were also prevalent in approximately
two-thirds of the companies reviewed. A more complete
40
description of the material terms of our severance and change of
control arrangements can be found under “Potential Payments
Upon Termination or Change of Control.”
Perquisites
and Other Benefits
The only perquisite that we provide to our named executive
officers that is not provided to our employees generally, is a
car allowance with an incremental cost of less than $10,000 per
year. The car allowance is intended to cover expenses related to
the lease, purchase, insurance and maintenance of a vehicle. It
is provided in recognition of the need to have executive
officers visit customers, business partners and other
stakeholders in order to fulfill their job responsibilities.
This travel causes wear and tear on personal vehicles and
increases fuel expenses. We believe that providing this benefit
is a relatively inexpensive way to enhance the competitiveness
of the executive’s compensation package. The
consultant’s January 2008 market analysis demonstrated that
a majority of our peer companies provided auto allowance for
their top executives.
We have no defined benefit or defined contribution retirement
plans other than the Complete Production Services Inc. 401(k)
Employee Savings Plan established under Section 401(k) of
the Internal Revenue Code. Contributions to the 401(k) plan are
voluntary and all employees who are at least 21 years of
age are eligible to participate. Approximately 49.9% of our
eligible employees participate in this plan. The 401(k) plan
permits us to match employee contributions, 100% of the
participant’s elective deferrals up to 4% of the total
compensation. The amount of employer matching contributions paid
to named executive officers are shown in the Summary
Compensation Table.
Policy
on Deductibility of Compensation
Section 162(m) of the Internal Revenue Code limits the tax
deductibility by a company of annual compensation in excess of
$1,000,000 paid to certain of our executive officers. However,
performance-based compensation that has been approved by
stockholders is excluded from the $1,000,000 limit if, among
other requirements, the compensation is payable only upon
attainment of pre-established, objective performance goals and
our board of directors’ committee that establishes such
goals consists only of “outside directors.” All
members of the Compensation Committee are intended to qualify as
“outside directors.” Additionally, stock options will
qualify for the performance-based exception where, among other
requirements, the exercise price of the option is not less than
the fair market value of the stock on the date of grant, and the
plan includes a per-executive limitation on the number of shares
for which options may be granted during a specified period. Our
stock option grants under our 2001 Plan are intended to meet the
criteria of performance-based compensation under
Section 162(m), while our restricted stock awards do not
qualify as performance-based compensation. The 2007 MIP has not
met the performance-based criteria of Section 162(m) of the
Internal Revenue Code. If approved by our stockholders at this
annual meeting, it is the intention of the Compensation
Committee to operate the MIP under the 2008 Plan, thereby
permitting future performance-based award payments under the MIP
to qualify as performance-based compensation under
Section 162(m).
The Compensation Committee considers the anticipated tax
treatment to us and our executive officers when reviewing
executive compensation and our compensation programs. While the
tax impact of any compensation arrangement is one factor to be
considered, such impact is evaluated in light of the
Compensation Committee’s overall compensation philosophy.
The Compensation Committee will consider ways to maximize the
deductibility of executive compensation, while retaining the
discretion it deems necessary to compensate officers in a manner
commensurate with performance and the competitive environment
for executive talent. From time to time, the Compensation
Committee may award compensation to our executive officers which
is not fully deductible if it determines that such award is
consistent with its philosophy and is in our and our
stockholders best interests, such as time vested grants of
restricted stock or retention bonuses, as part of their initial
employment offers.
Sections 280G and 4999 of the Internal Revenue Code impose
certain adverse tax consequences on compensation treated as
excess parachute payments. An executive is treated as having
received excess parachute payments for purposes of
Sections 280G and 4999 of the Internal Revenue Code if he
or she receives compensatory payments or benefits that are
contingent on a change in the ownership or control of a
41
corporation, and the aggregate amount of such contingent
compensatory payments and benefits equal or exceeds three times
the executive’s base amount. If this occurs, the portion of
the payments and benefits in excess of one times the base amount
is treated as an excess parachute payment subject to a 20%
excise tax under Section 4999 of the Internal Revenue Code,
in addition to any applicable federal income and employment
taxes. Also, the corporation’s compensation deduction in
respect of the executive’s excess parachute payment is
disallowed under Section 280G of the Internal Revenue Code.
If we were to be subject to a change of control, certain amounts
received by our executives (for example, amounts attributable to
the accelerated vesting of stock options and the payments and
benefits payable upon a qualifying termination following a
change of control) could be excess parachute payments under
Sections 280G and 4999 of the Internal Revenue Code. We
provide certain of our executive officers with tax
gross-up
payments in the event of a qualifying termination in connection
with a change of control.
Summary
Compensation Table
The following table sets forth summary information concerning
the compensation awarded, paid to, or earned by each of our
named executive officers for all services rendered in all
capacities to us for the years ended December 31, 2007 and
2006:
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Non-Equity
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Stock
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|
Option
|
|
Incentive Plan
|
|
All Other
|
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Name and Principal Position
|
|
Year
|
|
Salary(1)
|
|
Awards(2)
|
|
Awards(3)
|
|
Compensation(4)
|
|
Compensation(5)
|
|
Total
|
|
Joseph C. Winkler
|
|
|
2007
|
|
|
$
|
544,024
|
|
|
$
|
538,792
|
|
|
$
|
430,581
|
|
|
$
|
386,400
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|
|
$
|
18,600
|
|
|
$
|
1,918,397
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|
Chairman and Chief Executive Officer
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2006
|
|
|
$
|
482,404
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|
|
$
|
359,348
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|
|
$
|
380,256
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|
|
$
|
927,160
|
|
|
$
|
18,400
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|
|
$
|
2,167,568
|
|
Brian K. Moore
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|
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2007
|
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|
$
|
287,120
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|
|
$
|
82,102
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|
|
$
|
126,716
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|
|
$
|
162,750
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|
|
$
|
18,600
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|
|
$
|
677,288
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|
President and Chief Operating Officer
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
J. Michael Mayer
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|
|
2007
|
|
|
$
|
301,263
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|
|
$
|
172,869
|
|
|
$
|
138,753
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|
|
$
|
128,100
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|
|
$
|
18,600
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|
|
$
|
759,585
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|
Senior Vice President and Chief Financial Officer
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2006
|
|
|
$
|
284,105
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|
|
$
|
95,199
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|
|
$
|
72,519
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|
|
$
|
310,242
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|
|
$
|
18,400
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|
|
$
|
780,465
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|
James F. Maroney
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|
|
2007
|
|
|
$
|
250,810
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|
|
$
|
109,919
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|
|
$
|
129,464
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|
|
$
|
89,040
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|
|
$
|
18,600
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|
|
$
|
597,833
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Vice President, Secretary and General Counsel
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2006
|
|
|
$
|
235,305
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|
|
$
|
68,850
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|
|
$
|
78,048
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|
$
|
213,960
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|
|
$
|
17,050
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$
|
613,213
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Kenneth L. Nibling
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2007
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|
$
|
235,136
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|
$
|
105,697
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|
|
$
|
123,538
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|
|
$
|
83,475
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|
|
$
|
18,600
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|
|
$
|
566,446
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|
Vice President — Human Resources
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2006
|
|
|
$
|
218,739
|
|
|
$
|
67,250
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|
|
$
|
75,432
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|
|
$
|
200,588
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|
|
$
|
16,588
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|
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$
|
578,597
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and Administration
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|
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(1) |
|
Includes any amount of salary deferred under the Complete
Production Services, Inc. 401(k) Retirement and Savings Plan
(the “401(k) Plan”) otherwise payable in cash during
the year. |
|
(2) |
|
The amounts shown are the amounts of compensation cost
recognized by us in the year indicated related to the grants of
restricted stock, as prescribed under FAS 123R. For a
discussion of valuation assumptions, see Footnote 14,
“Stockholders’ Equity” to our 2007 consolidated
financial statements included in our Annual Report on
Form 10-K
for the year ended December 31, 2007; except that for
purposes of the amounts shown, no forfeitures were assumed to
take place. The table below shows how much of the overall amount
of the compensation cost recognized by us in fiscal year 2007 is
attributable to each award: |
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Number of Shares of
|
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Fiscal Year 2007
|
Named Executive Officer
|
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Grant Date
|
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Stock in Original Grant
|
|
Compensation Cost
|
|
Mr. Winkler
|
|
|
01/31/2007
|
|
|
|
20,500
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|
|
$
|
124,463
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|
|
|
|
04/20/2006
|
|
|
|
20,500
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|
|
$
|
164,000
|
|
|
|
|
06/20/2005
|
|
|
|
117,654
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|
|
$
|
250,329
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|
Mr. Moore
|
|
|
03/20/2007
|
|
|
|
5,200
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|
|
$
|
25,402
|
|
|
|
|
01/31/2007
|
|
|
|
4,200
|
|
|
$
|
25,500
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|
|
|
|
04/20/2006
|
|
|
|
3,900
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|
|
$
|
31,200
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Mr. Mayer
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01/31/2007
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|
|
6,600
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|
$
|
40,071
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|
|
|
|
04/20/2006
|
|
|
|
6,600
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|
|
$
|
52,800
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|
|
|
|
03/15/2005
|
|
|
|
39,408
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|
|
$
|
79,998
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|
Mr. Maroney
|
|
|
01/31/2007
|
|
|
|
4,700
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|
|
$
|
28,536
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|
|
|
|
04/20/2006
|
|
|
|
4,700
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|
|
$
|
37,600
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|
|
|
|
10/03/2005
|
|
|
|
15,020
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|
|
$
|
43,783
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|
Mr. Nibling
|
|
|
01/31/2007
|
|
|
|
4,400
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|
|
$
|
26,714
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|
|
|
|
04/20/2006
|
|
|
|
4,400
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|
|
$
|
35,200
|
|
|
|
|
10/03/2005
|
|
|
|
15,020
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|
|
$
|
43,783
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|
42
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|
The restricted shares of our common stock shown in the Summary
Compensation Table were issued under our 2001 Stock Incentive
Plan and vest in equal annual installments over a three-year
period, in the case of 2006 and 2007 awards, and over a
four-year period, in the case of 2005 awards, in each case, on
each anniversary of the date of issuance, subject to continued
service with us, except for Mr. Winkler’s
June 20, 2005 award, which vests in full on the fourth
anniversary of the date of issuance. The holders of our
restricted stock are entitled to vote and receive dividends, if
issued, on the shares of common stock covered by the restricted
stock grant. See “Compensation Discussion and
Analysis — Components of Compensation —
Long-term Incentive Awards — Stock Options and
Restricted Stock” for a more complete description of the
2001 Stock Incentive Plan. |
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Number of shares underlying original grants represents shares
outstanding after FIN 144 adjustment, as applicable, for
our stock dividend in September 2005 and our stock split in
December 2005. |
|
(3) |
|
The amounts shown are the amounts of compensation cost
recognized by us in the year indicated related to the grants of
stock options, as prescribed under FAS 123R. For a
discussion of valuation assumptions, see Footnote 14,
“Stockholders’ Equity” to our 2007 consolidated
financial statements included in our Annual Report on
Form 10-K
for the year ended December 31, 2007; except that for
purposes of the amounts shown, no forfeitures were assumed to
take place. The table below shows how much of the overall amount
of the compensation cost recognized by us in fiscal year 2007 is
attributable to each award: |
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Shares of
|
|
|
|
|
|
|
|
|
Stock Underlying
|
|
|
|
|
|
|
|
|
Options in Original
|
|
Fiscal Year 2007
|
Named Executive Officer
|
|
Grant Date
|
|
Exercise Price
|
|
Grant
|
|
Compensation Cost
|
|
Mr. Winkler
|
|
|
01/31/2007
|
|
|
$
|
19.87
|
|
|
|
87,200
|
|
|
$
|
173,951
|
|
|
|
|
04/20/2006
|
|
|
$
|
24.00
|
|
|
|
87,200
|
|
|
$
|
256,630
|
|
Mr. Moore
|
|
|
03/20/2007
|
|
|
$
|
19.54
|
|
|
|
26,200
|
|
|
$
|
42,952
|
|
|
|
|
01/31/2007
|
|
|
$
|
19.87
|
|
|
|
17,500
|
|
|
$
|
34,910
|
|
|
|
|
04/20/2006
|
|
|
$
|
24.00
|
|
|
|
16,600
|
|
|
$
|
48,854
|
|
Mr. Mayer
|
|
|
01/31/2007
|
|
|
$
|
19.87
|
|
|
|
28,100
|
|
|
$
|
56,055
|
|
|
|
|
04/20/2006
|
|
|
$
|
24.00
|
|
|
|
28,100
|
|
|
$
|
82,698
|
|
Mr. Maroney
|
|
|
01/31/2007
|
|
|
$
|
19.87
|
|
|
|
19,900
|
|
|
$
|
39,698
|
|
|
|
|
04/20/2006
|
|
|
$
|
24.00
|
|
|
|
19,900
|
|
|
$
|
58,566
|
|
|
|
|
10/03/2005
|
|
|
$
|
11.66
|
|
|
|
52,000
|
|
|
$
|
31,200
|
|
Mr. Nibling
|
|
|
01/31/2007
|
|
|
$
|
19.87
|
|
|
|
18,700
|
|
|
$
|
37,304
|
|
|
|
|
04/20/2006
|
|
|
$
|
24.00
|
|
|
|
18,700
|
|
|
$
|
55,034
|
|
|
|
|
10/03/2005
|
|
|
$
|
11.66
|
|
|
|
52,000
|
|
|
$
|
31,200
|
|
|
|
|
|
|
The options shown in the above table were issued under our 2001
Stock Incentive Plan and vest in equal annual installments over
a three-year period on each anniversary of the grant date,
subject to continued service with us, and have a term ranging
from five to ten years. |
|
|
|
Number of shares underlying original grants represents shares
outstanding after FIN 144 adjustment, as applicable, for
our stock dividend in September 2005 and our stock split in
December 2005. |
|
(4) |
|
The amounts shown represent the bonus performance awards earned
under the MIP for services rendered during fiscal year 2007. Our
2007 adjusted EPS of $2.36 resulted in bonus awards for 2007 at
approximately 70% of each executive’s target bonus
opportunity. Bonuses to our executive officers are based upon a
percentage of their base salary. See “Compensation
Discussion and Analysis — Components of
Compensation — Annual Performance-Based Cash
Bonuses” for a more complete description of the bonus plan. |
|
(5) |
|
The amounts shown include our incremental cost for the provision
to each of the named executive officers of a car allowance equal
to $9,600 for fiscal 2007, and matching contributions made under
our 401(k) Plan for fiscal 2007 for each of the named executive
officers equal to $9,000. |
43
Grants of
Plan-Based Awards
The following table sets forth summary information regarding all
grants of plan-based awards made to our named executive officers
for the year ended December 31, 2007:
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
|
|
|
All Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
|
Option
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
|
Awards:
|
|
|
Exercise or
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
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|
|
Number of
|
|
|
Base Price
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Possible Payouts Under
|
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Shares of
|
|
|
Securities
|
|
|
of Option
|
|
|
|
|
|
|
|
|
|
Approval
|
|
|
Grant
|
|
|
Non-Equity Incentive Plan Awards(1)
|
|
|
Stock or
|
|
|
Underlying
|
|
|
Awards
|
|
|
Grant Date Fair Value
|
|
Name
|
|
Date
|
|
|
Date
|
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
|
Units(2)
|
|
|
Awards(3)
|
|
|
($/Sh)
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
Joseph C. Winkler
|
|
|
01/26/2007
|
|
|
|
01/31/2007
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
20,500
|
|
|
|
87,200
|
|
|
$
|
19.87
|
|
|
$
|
632,549
|
(4)
|
|
$
|
407,335
|
(5)
|
|
|
|
04/16/2007
|
|
|
|
04/16/2007
|
|
|
$
|
55,200
|
|
|
$
|
552,000
|
|
|
$
|
1,104,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Brian K. Moore
|
|
|
01/26/2007
|
|
|
|
01/31/2007
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4,200
|
|
|
|
17,500
|
|
|
$
|
19.87
|
|
|
$
|
125,945
|
(4)
|
|
$
|
83,454
|
(5)
|
|
|
|
03/14/2007
|
|
|
|
03/20/2007
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5,200
|
|
|
|
26,200
|
|
|
$
|
19.54
|
|
|
$
|
183,426
|
(6)
|
|
$
|
101,608
|
(7)
|
|
|
|
04/16/2007
|
|
|
|
04/16/2007
|
|
|
$
|
23,250
|
|
|
$
|
232,500
|
|
|
$
|
465,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
J. Michael Mayer
|
|
|
01/26/2007
|
|
|
|
01/31/2007
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
6,600
|
|
|
|
28,100
|
|
|
$
|
19.87
|
|
|
$
|
203,426
|
(4)
|
|
$
|
131,142
|
(5)
|
|
|
|
04/16/2007
|
|
|
|
04/16/2007
|
|
|
$
|
18,300
|
|
|
$
|
183,000
|
|
|
$
|
366,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
James F. Maroney
|
|
|
01/26/2007
|
|
|
|
01/31/2007
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4,700
|
|
|
|
19,900
|
|
|
$
|
19.87
|
|
|
$
|
144,355
|
(4)
|
|
$
|
93,389
|
(5)
|
|
|
|
04/16/2007
|
|
|
|
04/16/2007
|
|
|
$
|
12,720
|
|
|
$
|
127,200
|
|
|
$
|
254,400
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Kenneth L. Nibling
|
|
|
01/26/2007
|
|
|
|
01/31/2007
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4,400
|
|
|
|
18,700
|
|
|
$
|
19.87
|
|
|
$
|
135,650
|
(4)
|
|
$
|
87,428
|
(5)
|
|
|
|
04/16/2007
|
|
|
|
04/16/2007
|
|
|
$
|
11,925
|
|
|
$
|
119,250
|
|
|
$
|
238,500
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
(1) |
|
The amounts shown represent potential value of performance bonus
awards under the MIP for fiscal year 2007 based on targeted
performance. The amounts shown under “Threshold”
correspond to “Entry” level performance (adjusted EPS
of $2.04), the amounts shown under “Target” correspond
to “Expected Value” level of performance (adjusted EPS
of $2.52) and the amounts shown under “Maximum”
correspond to “Stretch” level of performance (adjusted
EPS of $2.90). Potential bonus payouts are represented as a
percentage of each participant’s base salary. Actual
amounts awarded under the plan to our named executive officers
for fiscal year 2007 are reflected in the Summary Compensation
Table. Please also see “Compensation Discussion and
Analysis — Components of Compensation —
Annual Performance-Based Cash Bonuses” for a more complete
discussion regarding the MIP. |
(2) |
|
Amounts shown represent restricted shares of our common stock
issued under our 2001 Stock Incentive Plan that vest in three
equal annual installments over a three-year period on each
anniversary of the date of grant, subject to continued service
with us. |
(3) |
|
Amounts shown represent options issued under our 2001 Stock
Incentive Plan that vest in three equal annual installments over
a three-year period on each anniversary of the date of grant,
subject to continued service with us, and have a ten-year term. |
(4) |
|
The dollar value of the options shown represents the grant date
fair value based on the Black-Scholes model of option valuation
to determine grant date fair value, as prescribed under
FAS 123R. The actual value, if any, an executive may
realize will depend on the excess of the stock price over the
exercise price on the date the option is exercised. There is no
assurance that the value realized by an executive will be at or
near the value estimated by the Black-Scholes model. The
following assumptions were used in the Black-Scholes model:
market price of stock, $19.87; exercise price of option, $19.87;
expected stock volatility, 31.0%; risk-free interest rate, 4.82%
(based on the
10-year
treasury bond rate); expected life, 5.1 years; dividend
yield, 0%. |
(5) |
|
The dollar value of the stock shown represents the grant date
fair value as prescribed under FAS 123R, based on the
closing price of our common stock on the date of grant of $19.87. |
(6) |
|
The dollar value of the options shown represents the grant date
fair value based on the Black-Scholes model of option valuation
to determine grant date fair value, as prescribed under
FAS 123R. The actual value, if any, an executive may
realize will depend on the excess of the stock price over the
exercise price on the date the option is exercised. There is no
assurance that the value realized by an executive will be at or
near the value estimated by the Black-Scholes model. The
following assumptions were used in the Black-Scholes model:
market price of stock, $19.54; exercise price of option, $19.54;
expected stock volatility, 31.0%; risk-free interest rate, 4.47%
(based on the
10-year
treasury bond rate); expected life, 5.1 years; dividend
yield, 0%. |
44
|
|
|
(7) |
|
The dollar value of the stock shown represents the grant date
fair value as prescribed under FAS 123R, based on the
closing price of our common stock on the date of grant of $19.54. |
Outstanding
Equity Awards at Fiscal Year End
The following table sets forth summary information regarding the
outstanding equity awards held by our named executive officers
at December 31, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
|
Number of
|
|
|
Number of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities
|
|
|
Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underlying
|
|
|
Underlying
|
|
|
|
|
|
|
|
|
Number of Shares
|
|
|
Market Value of
|
|
|
|
Unexercised
|
|
|
Unexercised
|
|
|
Option
|
|
|
Option
|
|
|
or Units of Stock
|
|
|
Shares or Units of
|
|
|
|
Options
|
|
|
Options
|
|
|
Exercise
|
|
|
Expiration
|
|
|
That Have Not
|
|
|
Stock That Have
|
|
Name
|
|
Exercisable
|
|
|
Unexercisable(1)
|
|
|
Price
|
|
|
Date
|
|
|
Vested
|
|
|
Not Vested(2)
|
|
|
Joseph C. Winkler
|
|
|
0
|
|
|
|
87,200
|
|
|
$
|
19.87
|
|
|
|
01/31/2017
|
|
|
|
151,820
|
(3)
|
|
$
|
2,728,205
|
|
|
|
|
29,067
|
|
|
|
58,133
|
|
|
$
|
24.00
|
|
|
|
04/20/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
26,476
|
|
|
|
26,474
|
|
|
$
|
6.69
|
|
|
|
06/23/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
272,344
|
|
|
|
272,343
|
|
|
$
|
6.69
|
|
|
|
06/20/2015
|
|
|
|
|
|
|
|
|
|
Brian K. Moore
|
|
|
0
|
|
|
|
26,200
|
|
|
$
|
19.54
|
|
|
|
03/20/2017
|
|
|
|
12,000
|
(4)
|
|
$
|
215,640
|
|
|
|
|
0
|
|
|
|
17,500
|
|
|
$
|
19.87
|
|
|
|
01/31/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
5,534
|
|
|
|
11,066
|
|
|
$
|
24.00
|
|
|
|
04/20/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
33,874
|
|
|
|
16,936
|
|
|
$
|
5.00
|
|
|
|
01/01/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
25,094
|
|
|
|
8,364
|
|
|
$
|
4.48
|
|
|
|
04/30/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
58,551
|
|
|
|
19,516
|
|
|
$
|
4.48
|
|
|
|
03/26/2009
|
|
|
|
|
|
|
|
|
|
J. Michael Mayer
|
|
|
0
|
|
|
|
28,100
|
|
|
$
|
19.87
|
|
|
|
01/31/2017
|
|
|
|
30,704
|
(5)
|
|
$
|
551,751
|
|
|
|
|
9,367
|
|
|
|
18,733
|
|
|
$
|
24.00
|
|
|
|
04/20/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
70,144
|
|
|
|
0
|
|
|
$
|
2.00
|
|
|
|
05/28/2009
|
|
|
|
|
|
|
|
|
|
James F. Maroney
|
|
|
0
|
|
|
|
19,900
|
|
|
$
|
19.87
|
|
|
|
01/31/2017
|
|
|
|
15,343
|
(6)
|
|
$
|
275,714
|
|
|
|
|
6,634
|
|
|
|
13,266
|
|
|
$
|
24.00
|
|
|
|
04/20/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
34,667
|
|
|
|
17,333
|
|
|
$
|
11.66
|
|
|
|
10/03/2015
|
|
|
|
|
|
|
|
|
|
Kenneth L. Nibling
|
|
|
0
|
|
|
|
18,700
|
|
|
$
|
19.87
|
|
|
|
01/31/2017
|
|
|
|
14,843
|
(7)
|
|
$
|
266,729
|
|
|
|
|
6,234
|
|
|
|
12,466
|
|
|
$
|
24.00
|
|
|
|
04/20/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
34,667
|
|
|
|
17,333
|
|
|
$
|
11.66
|
|
|
|
10/03/2015
|
|
|
|
|
|
|
|
|
|
45
|
|
|
(1) |
|
The following table shows the vesting schedules relating to the
option awards which are represented in the above table by their
expiration dates and presumes continued service with us through
the vesting date: |
Option
Awards Vesting Schedule
|
|
|
|
|
Expiration Date
|
|
Grant Date
|
|
Vesting Schedule
|
|
03/20/2017
|
|
03/20/2007
|
|
Original grant vests in 3 equal installments on 3/20/2008,
3/20/2009 and 3/20/2010
|
01/31/2017
|
|
01/31/2007
|
|
Original grant vests in 3 equal installments on 1/31/2008,
1/31/2009 and 1/31/2010
|
04/20/2016
|
|
04/20/2006
|
|
Original grant vests in 3 equal installments on 4/20/2007,
4/20/2008 and 4/20/2009
|
06/23/2015
|
|
06/23/2005
|
|
Original grant vests in 4 equal installments on 6/23/2006,
6/23/2007, 6/23/2008 and 6/23/2009
|
06/20/2015
|
|
06/20/2005
|
|
Original grant vests in 4 equal installments on 6/20/2006,
6/20/2007, 6/20/2008 and 6/20/2009
|
10/03/2015
|
|
10/03/2005
|
|
Original grant vests in 3 equal installments on 10/03/2006,
10/03/2007 and 10/03/2008
|
01/01/2010
|
|
01/01/2005
|
|
Original grant vests in 3 equal installments on 01/01/2006,
01/01/2007 and 01/01/2008
|
04/30/2009
|
|
04/30/2004
|
|
Original grant vests in 4 equal installments on 04/30/2005,
04/30/2006, 04/30/2007 and 04/30/2008
|
03/26/2009
|
|
03/26/2004
|
|
Original grant vests in 4 equal installments on 03/26/2005,
03/26/2006, 03/26/2007 and 03/26/2008
|
|
|
|
(2) |
|
Represents the closing price of a share of our common stock on
December 31, 2007 ($17.97) multiplied by the number of
shares that have not vested. |
|
(3) |
|
Represents 20,500 shares of restricted stock that vest in
installments of 6,834, 6,833 and 6,833 shares on January 31
of 2008, 2009 and 2010, respectively, 13,666 shares of
restricted stock that vest in installments of 6,833 shares
on April 20 of 2008 and 2009 and 117,654 shares of
restricted stock that vest in full on June 20, 2009, in
each case subject to continued service with us. |
|
(4) |
|
Represents 5,200 shares of restricted stock that vest in
installments of 1,734, 1,733 and 1,733 shares on March 20
of 2008, 2009 and 2010, 4,200 shares of restricted stock
that vest in equal installments of 1,400 shares on January
31 of 2008, 2009 and 2010, and 2,600 shares of restricted
stock that vest in installments of 1,300 shares on April 20
of 2008 and 2009, in each case subject to continued service with
us. |
|
(5) |
|
Represents 6,600 shares of restricted stock that vest in
installments of 2,200 shares on January 31 of 2008, 2009
and 2010, 4,400 shares of restricted stock that vest in
installments of 2,200 shares on April 20 of 2008 and 2009,
and 19,704 shares of restricted stock that vest in equal
installments of 9,852 shares on March 15 of 2008 and 2009,
in each case subject to continued service with us. |
|
(6) |
|
Represents 4,700 shares of restricted stock that vest in
installments of 1,567, 1,567 and 1,566 shares on January 31
of 2008, 2009 and 2010, 3,133 shares of restricted stock
that vest in installments of 1,567 and 1,566 shares on
April 20 of 2008 and 2009 and 7,510 shares of restricted
stock that vest in installments of 3,755 shares on October
3 of 2008 and 2009, in each case subject to continued service
with us. |
|
(7) |
|
Represents 4,400 shares of restricted stock that vest in
installments of 1,467, 1,467, and 1,466 shares on January
31 of 2008, 2009 and 2010, 2,933 shares of restricted stock
that vest in installments of 1,467 and 1,466 shares on
April 20 2008 and 2009, and 7,510 shares of restricted
stock that vest in installments of 3,755 shares on October
3 of 2008 and 2009, in each case subject to continued service
with us. |
46
Option
Exercises and Stock Vested
The following table summarizes the vesting of stock awards for
each of our named executive officers for the year ended
December 31, 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
|
Number of
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities Acquired
|
|
|
Value Realized
|
|
|
Number of Shares
|
|
|
Value Realized
|
|
Name
|
|
on Exercise
|
|
|
on Exercise(1)
|
|
|
Acquired on Vesting
|
|
|
on Vesting(2)
|
|
|
Joseph C. Winkler
|
|
|
0
|
|
|
$
|
0
|
|
|
|
6,834
|
|
|
$
|
156,499
|
|
Brian K. Moore
|
|
|
0
|
|
|
$
|
0
|
|
|
|
1,300
|
|
|
$
|
29,770
|
|
J. Michael Mayer
|
|
|
55,000
|
|
|
$
|
1,240,634
|
|
|
|
12,052
|
|
|
$
|
241,016
|
|
James F. Maroney
|
|
|
0
|
|
|
$
|
0
|
|
|
|
5,322
|
|
|
$
|
114,063
|
|
Kenneth L. Nibling
|
|
|
0
|
|
|
$
|
0
|
|
|
|
5,222
|
|
|
$
|
111,773
|
|
|
|
|
(1) |
|
The value realized upon exercise of stock options reflects the
price at which shares acquired upon exercise of the stock
options were sold or valued for income tax purposes, net of the
exercise price for acquiring the shares. |
|
(2) |
|
Represents the closing price of a share of our common stock the
date of vesting multiplied by the number of shares that have
vested. |
Potential
Payments Upon Termination or Change of Control
We have entered into agreements with each of our named executive
officers and certain other members of our senior management that
provide certain severance payments and benefits (the severance
plan) and certain change of control payments and benefits (the
change of control plan).
Severance
Plan
Pursuant to the terms of the severance plan, if we terminate the
employee’s employment other than for “cause” (as
defined below), and for Mr. Winkler, the employee
voluntarily terminates his employment for “good
reason” (as defined below) prior to attainment of
age 63, the employee will be entitled to receive certain
compensation and benefits from us, including the following:
|
|
|
|
•
|
a bonus for the year during which the employee’s employment
is terminated, which shall not be less than the target bonus
amount for such year and shall be pro-rated for the days served;
|
|
|
•
|
a severance payment equal to two times (in the case of
Mr. Winkler) or 1.67 times (in the case of each of
Messrs. Moore, Mayer, Maroney and Nibling) the sum of the
employee’s annual base salary and bonus (the greater of the
target bonus amount or the highest annual bonus paid during the
prior three fiscal years);
|
|
|
•
|
for Messrs. Winkler, Moore, Mayer, Maroney and Nibling, all
unvested stock options and restricted stock will immediately
vest; and
|
|
|
•
|
additional benefits, such as health and disability coverage and
benefits and a lump sum payment in lieu of an automobile
allowance for up to 24 months (in the case of
Mr. Winkler) or 20 months (in the case of each
Messrs. Moore, Mayer, Maroney and Nibling) following the
date of termination and an extended exercise period for options
granted after the effective date of the agreements.
|
Change
of Control Plan
Pursuant to the change of control plan, upon a “change of
control” all unvested stock options and restricted stock
will immediately vest. In addition, if at any time during the
period that commences six months prior to and ends two years
following the effective date of a “change of control,”
the employee voluntarily terminates his employment for
“good reason” (as defined below) or we terminate the
employee’s employment
47
other than for “cause,” the employee will be entitled
to receive certain additional compensation and benefits from us,
including the following:
|
|
|
|
•
|
a bonus for the year during which the employee’s employment
is terminated, which shall not be less than the target bonus
amount for such year and shall be pro-rated for the days served;
|
|
|
•
|
a severance payment equal to three times (in the case if
Mr. Winkler) or 2.5 times (in the case of each of
Messrs. Moore, Mayer, Maroney and Nibling) of the sum of
the employee’s annual base salary and bonus (the greater of
the target bonus amount or the highest annual bonus paid during
the prior three fiscal years);
|
|
|
•
|
a payment equal to three times (in the case if Mr. Winkler)
or 2.5 times (in the case of each of Messrs. Moore, Mayer,
Maroney and Nibling) the amount we would be required to
contribute on the employee’s behalf under our pension,
401(k), deferred compensation and other retirement plans based
on the employee’s termination base salary;
|
|
|
•
|
the employee shall become fully vested in the employee’s
accrued benefits under all pension, 401(k), deferred
compensation or any other retirement plans maintained by us;
|
|
|
•
|
additional benefits, such as health and disability coverage and
benefits and a lump sum payment in lieu of a car allowance for
up to three years (in the case of Mr. Winkler) or
2.5 years (in the case of each Messrs. Moore, Mayer,
Maroney and Nibling) following the date of termination and an
extended exercise period for options granted after the effective
date of the agreements, and in the case of Mr. Winkler, a
lump sum payment in lieu of outplacement services equal to 15%
of his termination base salary; and
|
|
|
•
|
in the case of Messrs. Winkler, Moore, Mayer, Maroney and
Nibling, additional payments to compensate for excise taxes
imposed by Section 4999 of the Internal Revenue Code on the
compensation and benefits provided.
|
General
All payments under both the severance plan and the change of
control plan are designed to be paid in lump sum, which is
designed to avoid the taxation imposed by Section 409A of
the Internal Revenue Code. Throughout the severance payout
period (two years in the case of Mr. Winkler and
20 months in the case of Messrs. Moore, Mayer, Maroney
and Nibling) or the change of control payout period (three years
in the case of Mr. Winkler and 2.5 years in the case
of Messrs. Moore, Mayer, Maroney and Nibling) the executive
shall not induce any person in our employment to terminate such
employment or accept employment with anyone other than us or,
subject to certain limited exceptions, engage in any business or
activity or render any services or provide any advice to any
business or entity that directly or indirectly competes in any
material manner with us. The initial term of
Mr. Winkler’s agreement terminates on June 20,
2008, the third anniversary of the effective date of the
agreement, while the initial term of the other officers’
agreements terminates on March 21, 2009, the second
anniversary of the effective date of the agreements. Unless
either party gives notice of its intention not to renew, the
term will be automatically extended for successive one-year
periods.
“Cause” is generally defined as the executive’s:
(a) conviction of a felony; (b) commission of any act
of theft, fraud, embezzlement or misappropriation against us
that is materially injurious; (c) willful and continued
failure to devote substantially all of his business time to our
business affairs, which failure is not remedied within a
reasonable time after written demand is delivered;
(d) unauthorized disclosure of our confidential information
that is materially injurious to us; or (e) knowing or
willful material violation of federal or state securities laws.
A “change of control” is generally defined as one of
the following: (a) any person becomes the beneficial owner
of our securities representing 20% or more of our combined
voting power; (b) a change in the majority of the
membership of our board occurs without approval by two-thirds of
the directors who are continuing directors; (c) we are
merged, consolidated or combined with another corporation or
entity and our stockholders prior to such transaction own less
than 55% of the outstanding voting securities of the surviving
entity; (d) a tender offer or exchange offer is made and
consummated by a person or group of persons for the ownership of
48
20% or more of our voting securities; or (e) there is a
disposition, transfer, sale or exchange of all or substantially
all of our assets, or stockholder approval of a plan of our
liquidation or dissolution.
“Good reason” is generally defined as any of the
following which results in the terms of employee’s
employment having been detrimentally and materially affected:
(a) failure to re-elect or appoint the employee to any
corporate office or directorship he currently occupies or a
material reduction in his authority, duties or responsibilities
or if the executive is assigned duties or responsibilities
materially inconsistent from those immediately prior to such
assignment; (b) a material reduction in the employee’s
compensation, benefits and perquisites; (c) we fail to
obtain a written agreement satisfactory to the executive from
our successor or assigns to assume and perform his employment
agreement; or (d) we require the executive to be based at
any office located more than 50 miles from our current
offices.
In accordance with the requirements of the rules of the SEC, the
following table presents our reasonable estimate of the benefits
payable to the named executive officers under our employment
agreements: (1) assuming that a change of control and
qualifying termination of employment occurred on
December 31, 2007, the last business day of fiscal year
2007; (2) assuming that a change of control occurred on
December 31, 2007, the last business day of fiscal year
2007; and (3) assuming that a termination of employment
without cause (and not within the change of control protective
period), as described above, occurred on December 31, 2007,
the last business day of fiscal year 2007. Excluded are benefits
provided to all employees, such as accrued vacation, and
benefits provided by third parties under our life and other
insurance policies. Also excluded are pro-rated bonuses for
fiscal year 2007 as the trigger event occurs on the last day of
2007 and thus the payout would be the same as if the trigger
event had not occurred. The bonuses earned for fiscal year 2007
are provided in the Summary Compensation Table. While we have
made reasonable assumptions regarding the amounts payable, there
can be no assurance that in the event of a change of control,
the named executive officers will receive the amounts reflected
below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement
|
|
|
Value of
|
|
|
Restricted
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
Other
|
|
|
Health and
|
|
|
Plan
|
|
|
Option
|
|
|
Stock
|
|
|
280G Tax
|
|
|
Total
|
|
Name
|
|
Trigger
|
|
Severance(1)
|
|
|
Benefits(2)
|
|
|
Insurance(3)
|
|
|
Contributions(4)
|
|
|
Acceleration(5)
|
|
|
Acceleration(6)
|
|
|
Gross-up(7)
|
|
|
Value(8)
|
|
|
Joseph C. Winkler
|
|
Change of Control
Termination
|
|
$
|
4,437,480
|
|
|
$
|
111,600
|
|
|
$
|
30,496
|
|
|
$
|
27,600
|
|
|
$
|
3,370,667
|
|
|
$
|
2,728,217
|
|
|
$
|
2,118,279
|
|
|
$
|
12,824,339
|
|
|
|
Change of Control
No Termination
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
3,943,936
|
|
|
|
2,728,217
|
|
|
|
0
|
|
|
|
6,672,153
|
|
|
|
Termination without Cause(9)
|
|
|
2,958,320
|
|
|
|
102,000
|
|
|
|
20,331
|
|
|
|
0
|
|
|
|
3,370,667
|
|
|
|
2,728,217
|
|
|
|
0
|
|
|
|
9,179,535
|
|
|
|
Brian K. Moore
|
|
Change of Control
Termination
|
|
|
1,450,208
|
|
|
|
24,000
|
|
|
|
25,413
|
|
|
|
23,000
|
|
|
|
219,686
|
|
|
|
93,444
|
|
|
|
1,554,802
|
|
|
|
3,390,553
|
|
|
|
Change of Control
No Termination
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
430,238
|
|
|
|
93,444
|
|
|
|
0
|
|
|
|
532,682
|
|
|
|
Termination without Cause(9)
|
|
|
978,091
|
|
|
|
16,000
|
|
|
|
16,942
|
|
|
|
0
|
|
|
|
219,686
|
|
|
|
93,444
|
|
|
|
0
|
|
|
|
1,324,163
|
|
|
|
J. Michael Mayer
|
|
Change of Control
Termination
|
|
|
1,538,105
|
|
|
|
24,000
|
|
|
|
25,413
|
|
|
|
23,000
|
|
|
|
0
|
|
|
|
551,751
|
|
|
|
569,034
|
|
|
|
2,731,303
|
|
|
|
Change of Control
No Termination
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
152,957
|
|
|
|
551,751
|
|
|
|
0
|
|
|
|
704,708
|
|
|
|
Termination without Cause(9)
|
|
|
1,027,454
|
|
|
|
16,000
|
|
|
|
16,942
|
|
|
|
0
|
|
|
|
0
|
|
|
|
551,751
|
|
|
|
0
|
|
|
|
1,612,147
|
|
|
|
James F. Maroney
|
|
Change of Control
Termination
|
|
|
1,170,900
|
|
|
|
24,000
|
|
|
|
25,413
|
|
|
|
23,000
|
|
|
|
109,373
|
|
|
|
275,720
|
|
|
|
420,251
|
|
|
|
2,048,657
|
|
|
|
Change of Control
No Termination
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
235,029
|
|
|
|
275,720
|
|
|
|
0
|
|
|
|
510,749
|
|
|
|
Termination without Cause(9)
|
|
|
782,161
|
|
|
|
16,000
|
|
|
|
16,942
|
|
|
|
0
|
|
|
|
109,373
|
|
|
|
275,720
|
|
|
|
0
|
|
|
|
1,200,196
|
|
|
|
Kenneth L. Nibling
|
|
Change of Control
Termination
|
|
|
1,096,470
|
|
|
|
24,000
|
|
|
|
25,413
|
|
|
|
23,000
|
|
|
|
109,373
|
|
|
|
266,735
|
|
|
|
394,112
|
|
|
|
1,939,103
|
|
|
|
Change of Control
No Termination
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
228,497
|
|
|
|
266,735
|
|
|
|
0
|
|
|
|
495,232
|
|
|
|
Termination without Cause(9)
|
|
|
732,442
|
|
|
|
16,000
|
|
|
|
16,942
|
|
|
|
0
|
|
|
|
109,373
|
|
|
|
266,735
|
|
|
|
0
|
|
|
|
1,141,492
|
|
49
|
|
|
(1) |
|
Represents the dollar value of cash severance based upon the
appropriate multiple for the executive, multiplied by
(a) the sum of the executive’s annual base salary,
plus (b) the greater of the target bonus amount or the
highest annual bonus paid during the prior three fiscal years.
Amounts do not include a pro-rated bonus for fiscal year 2007 as
the trigger event occurs on the last day of 2007 and thus the
payout would be the same as if the trigger event had not
occurred. |
|
(2) |
|
Represents a lump sum payment in lieu of a car allowance for the
payout period following the date of termination, plus, in the
case of Mr. Winkler, a lump sum payment in lieu of
outplacement services equal to 15% of executive’s
termination base salary. The employment agreements also provide
incremental benefits received from fully vested accrued benefits
under all pension, 401(k), deferred compensation or any other
retirement plans, and if it cannot accelerate, the incremental
benefit received from the payment of unvested benefits made in
lump sum plus tax
gross-up. No
such benefits were accrued to any named executive officer as of
December 31, 2007. |
|
(3) |
|
Represents continued benefits, such as medical, dental,
disability and life insurance coverage and benefits for the
payout period, based on our current costs to provide such
coverage. |
|
(4) |
|
Represents the dollar value of the payment based on the maximum
amount we would be required to contribute on the
executive’s behalf under our 401(k) Plan based on the
appropriate multiple for the executive and the executive’s
termination base salary. We do not currently have any pension,
deferred compensation or other retirement plans. |
|
(5) |
|
Represents the aggregate value of the acceleration of vesting of
the executive’s unvested stock options, based on the spread
between the closing price of our common stock ($17.97) on the
NYSE on December 31, 2007 and the stock options’
exercise prices. In the event of a change of control only,
represents the aggregate value of the acceleration of vesting of
the executive’s unvested stock options using the
Black-Scholes model value based on the remaining expected life
of the stock options. |
|
(6) |
|
Represents the aggregate value of the acceleration of vesting of
the executive’s unvested restricted stock, based on the
closing price of our common stock ($17.97) on the NYSE on
December 31, 2007. |
|
(7) |
|
Represents an additional amount sufficient to offset the impact
of any “excess parachute payment” excise tax and
income tax payable by the executive pursuant to the provisions
of the Internal Revenue Code (assuming a Federal tax rate of
36.45%) or any comparable provision of state law (assuming no
state taxes). For ease of presentation, no value has at this
time been ascribed to the non-competition provisions. |
|
(8) |
|
Excludes the value to the executive of the continued right to
indemnification by us. Executives will be indemnified by us and
will receive continued coverage under our directors’ and
officers’ liability insurance (if applicable). |
|
(9) |
|
Termination without cause and not within six months prior to, or
24 months after, a change of control. |
Compensation
Committee Report
The Compensation Committee has reviewed and discussed the
Compensation Discussion and Analysis with management, and based
on the review and discussions, the Compensation Committee
recommended to the board of directors that the Compensation
Discussion and Analysis be included in our 2007 Annual Report on
Form 10-K
and in this proxy statement for the 2008 annual meeting of
stockholders.
Compensation Committee of the Board of Directors
James D. Woods
R. Graham Whaling
50
Equity
Compensation Plan Information
The following table provides information as of December 31,
2007, about compensation plans under which shares of our common
stock may be issued to employees, consultants or non-employee
directors of our board of directors upon exercise of options,
warrants or rights.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Securities
|
|
|
|
|
|
|
|
|
|
Remaining Available for
|
|
|
|
Number of Securities
|
|
|
|
|
|
Future Issuance Under
|
|
|
|
to be Issued Upon
|
|
|
Weighted-Average Exercise
|
|
|
Equity Compensation
|
|
|
|
Exercise of Outstanding
|
|
|
Price of Outstanding
|
|
|
Plans (Excluding
|
|
|
|
Options, Warrants and
|
|
|
Options, Warrants and
|
|
|
Securities Reflected in
|
|
Plan Category
|
|
Rights(a)
|
|
|
Rights(b)
|
|
|
Column (a))(c)
|
|
|
Plans approved by stockholders
|
|
|
2,586,191
|
|
|
$
|
17.06
|
|
|
|
675,369
|
|
Plans not approved by stockholders
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
2,586,191
|
|
|
$
|
17.06
|
|
|
|
675,369
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Represents the number of securities to be issued upon exercise
of outstanding options under our 2001 Stock Incentive Plan (and
its predecessor plan). |
|
|
|
We assumed the CES 2003 Stock Incentive Plan and the IEM 2004
Stock Incentive Plan in connection with our September 2005
Combination with CES and IEM. While the plans will continue to
govern the existing options granted thereunder, they were
terminated in connection with the Combination as to any future
awards. Similarly, we assumed the Pumpco Services, Inc. 2005
Stock Incentive Plan in connection with our acquisition of
Pumpco Services, Inc. in November 2006 and while the plan will
continue to govern the existing options granted thereunder, the
plan was terminated in connection with the acquisition as to any
future awards. As of December 31, 2007, (i) options
for 931,828 shares of our common stock were outstanding
under the CES 2003 Stock Incentive Plan with a weighted-average
exercise price of $4.85; (ii) options for
67,742 shares of our common stock were outstanding under
the IEM 2004 Stock Incentive Plan with a weighted-average
exercise price of $5.67; and (iii) options for
145,000 shares of our common stock were outstanding under
the Pumpco Services, Inc. 2005 Stock Incentive Plan with a
weighted-average exercise price of $5.00. |
|
(b) |
|
Represents the weighted-average exercise price of outstanding
options under our 2001 Stock Incentive Plan. |
|
(c) |
|
Represents the number of securities remaining available for
issuance under our 2001 Stock Incentive Plan, excluding
securities to be issued upon exercise of outstanding options
under the 2001 Stock Incentive Plan, the CES 2003 Stock
Incentive Plan, the IEM 2004 Stock Incentive Plan or the Pumpco
Services, Inc. 2005 Stock Incentive Plan. On January 31,
2008 the Company issued options and shares of restricted stock
covering 632,500 shares leaving only 85,810 shares
available for issuance as of March 25, 2008. The amount
shown does not include shares of our common stock available for
issuance under the Complete Production Services, Inc. 2008
Incentive Award Plan proposed for approval by our stockholders
at the annual meeting under Item No. 2 of this proxy
statement. If approved, the aggregate number of shares of our
common stock available for issuance under the Complete
Production Services, Inc. 2008 Incentive Award Plan will be
2,500,000. |
AUDIT
MATTERS
Audit
Committee Report
Following is the report of the Audit Committee with respect to
Complete Production Services’ audited financial statements
for the fiscal year ending December 31, 2007, and the
related consolidated statements of operations,
stockholders’ equity and cash flows for each of the three
years in the period ended December 31, 2007 and the notes
thereto.
The Audit Committee has reviewed and discussed our audited
financial statements (including the quality of Complete
Production Services, Inc.’s accounting principles) with
management. Our management is
51
responsible for the preparation, presentation and integrity of
our financial statements. Management is also responsible for
establishing and maintaining internal controls over financial
reporting (as defined in Exchange Act
Rule 13a-15(f))
and for evaluating the effectiveness of those internal controls
and for evaluating any changes in those controls that will, or
is reasonably likely to, affect internal controls over financial
reporting. Management is also responsible for establishing and
maintaining disclosure controls (as defined in Exchange Act
Rule 13a-15(e))
and for evaluating the effectiveness of disclosure controls and
procedures.
The Audit Committee has reviewed and discussed our audited
financial statements (including the quality of our accounting
principles) with Grant Thornton LLP. The Audit Committee has
discussed with Grant Thornton LLP the matters required to be
discussed by Statement on Auditing Standards No. 61, as
amended, “Communications with Audit Committees,” which
includes, among other items, matters related to the conduct of
the audit of our financial statements, and the matters required
to be discussed by Public Company Accounting Oversight Board
Auditing Standard No. 2, “An Audit of Internal Control
Over Financial Reporting Performed in Conjunction with an Audit
of Financial Statements.” Further, the Audit Committee
reviewed Grant Thornton LLP’s Report of Independent
Registered Public Accounting Firm included in our Annual Report
on
Form 10-K
related to its audit of the consolidated financial statements
and financial statement schedules.
The Audit Committee has also received written disclosures and
the letter from Grant Thornton LLP required by Public Company
Accounting Oversight Board’s Rule 3600T, which adopts
on an interim basis, Independence Standards Board Standard
No. 1, as amended “Independence Discussions with Audit
Committees,” and has discussed with Grant Thornton LLP its
independence from us.
Based on the review and discussions referred to above, the Audit
Committee recommended to the board of directors of Complete
Production Services, Inc. that its audited financial statements
be included in the its Annual Report on
Form 10-K
for the fiscal year ended December 31, 2007.
Audit Committee of the Board of Directors
Michael McShane
W. Matt Ralls
R. Graham Whaling
Independent
Registered Public Accountants
Grant Thornton LLP provided audit, audit-related and tax
services to us during the fiscal years ended December 31,
2007 and 2006 as follows:
|
|
|
|
|
|
|
|
|
Type of Fees
|
|
Fiscal 2007
|
|
|
Fiscal 2006
|
|
|
Audit Fees
|
|
$
|
2,437,255
|
|
|
$
|
1,401,550
|
|
Audit-Related Fees
|
|
|
26,000
|
|
|
|
0
|
|
Tax Fees
|
|
|
1,250
|
|
|
|
250,000
|
|
All Other Fees
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
2,464,505
|
|
|
$
|
1,651,550
|
|
|
|
|
|
|
|
|
|
|
Audit
Fees
The category includes fees associated with our annual audit, our
audit of internal controls over financial reporting and the
review of our quarterly reports on
Form 10-Q.
This category also includes advice on audit and accounting
matters that arose during, or as a result of, the audit or the
review of our interim financial statements and the assistance
with the review of our SEC registration statements and our debt
offering audit.
Audit-Related
Fees
This category includes fees associated with accounting
consultations and attestation services that are not required by
statute or regulation.
52
Tax
Fees
This category includes fees associated with tax return
preparation, tax planning for merger and acquisition activities
and tax consultations.
All
Other Fees
We did not engage Grant Thornton LLP to provide any other
services during the fiscal years ended December 31, 2007 or
2006.
Pre-Approval
Policies and Procedures
The Audit Committee has specifically approved all of the audit,
internal audit and non-audit services performed by Grant
Thornton LLP and has determined the rendering of such non-audit
services was compatible with maintaining Grant Thornton
LLP’s independence. The Audit Committee has delegated to
the Chairman of the Audit Committee the authority to pre-approve
audit-related and non-audit related services not prohibited by
law to be performed by our independent auditors and associated
fees, provided the Chairman shall report any decisions to
pre-approve such audit-related or non-audit services and fees to
the full Audit Committee at its next regular meeting. In fiscal
year 2007 and 2006 all audit fees, audit-related fees and tax
fees were approved by the Audit Committee directly.
From and after the effective date of the SEC rule requiring
Audit Committee pre-approval of all audit and permissible
non-audit services provided by independent registered public
accountants, the Audit Committee has approved all audit and
permissible non-audit services prior to such services being
provided by Grant Thornton LLP. The Audit Committee, or one or
more of its designated members that have been granted authority
by the Audit Committee, meets to approve each audit or non-audit
services prior to the engagement of Grant Thornton LLP for such
services. Each such service approved by one or more of the
authorized and designated members of the Audit Committee is
presented to the entire Audit Committee at its next meeting.
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
Related
Person Transactions Policy and Procedures
Effective as of February 2007, our board adopted written Related
Party Transactions Policy and Procedures. A related party
transaction (as defined below) may be consummated or may
continue only if the Nominating Committee of our board of
directors approves or ratifies the transaction in accordance
with the guidelines set forth in the policy. If advance
committee approval of a related party transaction requiring the
committee’s approval is not feasible, then the transaction
may be preliminarily entered into by management upon prior
approval of the transaction by the Chairman of the Nominating
Committee subject to ratification of the transaction by the
Nominating Committee at the committee’s next regularly
scheduled meeting; provided that if ratification is not
forthcoming, management shall make all reasonable efforts to
cancel or annul such transaction. Management shall present to
the Nominating Committee each proposed related party
transaction, including all relevant facts and circumstances
relating thereto and shall update the Nominating Committee as to
any material changes to any approved or ratified related party
transaction and shall provide a status report at least annually
at a regularly scheduled meeting of the Nominating Committee of
all then current related party transactions. In addition, under
our policy, any related party transactions which could
reasonably be expected to have a material impact on our
financial statements shall be brought to the attention of the
Audit Committee of our board of directors.
For the purposes of our policy, a “related party
transaction” is a transaction, arrangement or relationship
(or any series of similar transactions, arrangements or
relationships) in which Complete Production Services, Inc.
(including any of our subsidiaries) was, is or will be a
participant and the amount involved exceeds $100,000, and in
which any related party had, has or will have a direct or
indirect interest. A “related party” includes:
(i) any person who is, or at any time since the beginning
of our last fiscal year was, a member of our board, one of our
executive officers or a nominee to become a member of our board;
(ii) any person who
53
is known to be the beneficial owner of more than 5% of any class
of our voting securities; (iii) any immediate family
member, as defined in the policy, of, or sharing a household
with, any of the foregoing persons; and (iv) 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
greater-than-five-percent
beneficial ownership interest.
Prior to February 2007, the charter of the Audit Committee
required that it review with management and our independent
auditor any related party transactions brought to the Audit
Committee’s attention which could reasonably be expected to
have a material impact on our financial statements. In
connection with this requirement, each of the transactions or
relationships disclosed below were disclosed to and approved by
our Audit Committee and our board of directors. In addition,
transactions involving our directors were disclosed and reviewed
by our Nominating Committee in its assessment of our
directors’ independence requirements. To the extent such
transactions are ongoing business relationships, they will
continue only if ratified by our Nominating Committee in
accordance with the guidelines set forth in our recently adopted
related party transactions policy and procedures.
Related
Person Transactions
Harold G. Hamm, one of our directors, is a majority owner as
well as the Chairman and Chief Executive Officer of Continental
Resources, Inc., an independent exploration and production
company (“Continental Resources”). In connection with
CES’s acquisition of Hamm Co. in 2004, CES entered into a
Strategic Customer Relationship Agreement with Continental
Resources. By virtue of our Combination in September 2005 with
CES, we are now a party to such agreement. The agreement
provides Continental Resources the option to engage a limited
amount of our assets into a long-term contract at market rates.
We sell services and products to Continental Resources and its
subsidiaries. Revenues attributable to these sales totaled
approximately $51.3 million for the year ended
December 31, 2007. In addition, we lease offices and an
oilfield yard from Continental Management Co. and Mr. Hamm
for an aggregate of $13,396 per month. These leases expire
between 2009 and 2010. Mr. Hamm is the owner of Continental
Management Co.
Marcus A. Watts, one of our directors, is a partner in the law
firm of Locke Lord Bissell & Liddell LLP. In 2007, we
made payments of approximately $373,097 to Locke Lord
Bissell & Liddell LLP for legal services.
Robert S. Boswell, one of our directors, served as Chairman and
Chief Executive Officer of Laramie Energy, LLC, whose assets
were sold in May 2007. Prior to this sale in May 2007, Laramie
Energy paid us approximately $2.01 million for services
during fiscal 2007.
We believe that all of these related party transactions were
either on terms at least as favorable to us as could have been
obtained through arm’s-length negotiations with
unaffiliated third parties or were negotiated in connection with
acquisitions, the overall terms of which were as favorable to us
as could have been obtained through arm’s-length
negotiations with unaffiliated third parties.
OTHER
MATTERS
Section 16(a)
Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as
amended, or the “Exchange Act,” requires our directors
and executive officers, and persons who own more than 10% of a
registered class of our securities, to file with the SEC initial
reports of ownership and reports of changes in ownership of our
common stock and other equity securities. Based solely on a
review of copies of such forms received with respect to fiscal
year 2007 and the written representations received from certain
reporting persons that no other reports were required, we
believe that all directors, executive officers and persons who
own more that 10% of our Common Stock have complied with the
reporting requirements of Section 16(a), except that
(i) Jose Bayardo, our Vice President-Corporate Development
and Investor Relations, filed his Form 3 late, and
(ii) James Woods, our director, filed a late Form 4
regarding an option exercise.
54
Stockholder
Proposals and Nominations
Proposals Pursuant to
Rule 14a-8. Pursuant
to
Rule 14a-8
under the Exchange Act, stockholders may present proper
proposals for inclusion in our proxy statement and for
consideration at our next annual meeting of stockholders. To be
eligible for inclusion in our 2009 proxy statement, your
proposal must be received by us no later than December 10,
2008, and must otherwise comply with Rule
14a-8. While
our board will consider stockholder proposals, we reserve the
right to omit from our proxy statement stockholder proposals
that we are not required to include under the Exchange Act,
including
Rule 14a-8.
Proposals and Nominations Pursuant to our
Bylaws. Under our Amended and Restated Bylaws
(“bylaws”), in order to nominate a director or bring
any other business before the stockholders at the 2009 annual
meeting that will not be included in our proxy statement, you
must comply with these procedures as described below. In
addition, you must notify us in writing and such notice must be
delivered to our Secretary no earlier than January 22, 2009
and later than February 21, 2009.
Our bylaws provide that a stockholder’s nomination must
contain the following information about the nominee:
(i) all information relating to such person that is
required to be disclosed in solicitations of proxies for
election of directors in an election contest, or is otherwise
required, in each case pursuant to and in accordance with
Regulation 14A under the Exchange Act and
Rule 14a-11
thereunder, and (ii) such person’s written consent to
being named in the proxy statement as a nominee and to serving
as a director if elected. Any candidates recommended by
stockholders for nomination to the board will be evaluated in
the same manner that nominees suggested by board members,
management or other parties are evaluated.
Our bylaws provide that a stockholder’s notice of a
proposed business item must include: a brief description of the
business desired to be brought before the meeting, the text of
the proposal or business (including the text of any resolutions
proposed for consideration and in the event that such business
includes a proposal to amend the bylaws of the corporation, the
language of the proposed amendment), the reasons for conducting
such business at the meeting and any material interest in such
business of such stockholder and the beneficial owner, if any,
on whose behalf the proposal is made. In addition, the bylaws
provide that a stockholder proposing any nomination or other
business item must include, as to the stockholder giving the
notice and the beneficial owner, if any, on whose behalf the
nomination or proposal is made: (i) the name and address of
such stockholder, as they appear on our books, and of such
beneficial owner; (ii) the class and number of shares of
our capital stock which are owned beneficially and of record by
such stockholder and such beneficial owner; (iii) a
representation that the stockholder is a holder of record of our
stock entitled to vote at such meeting and intends to appear in
person or by proxy at the meeting to propose such business or
nomination; and (iv) 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 approve or adopt the
proposal or elect the nominee
and/or
(b) otherwise to solicit proxies from stockholders in
support of such proposal or nomination. We may require any
proposed nominee to furnish such other information as we may
reasonably require to determine the eligibility of such proposed
nominee to serve as our director.
You may write to our Secretary at our principal executive
office, 11700 Old Katy Road, Suite 300, Houston, Texas
77079 to deliver the notices discussed above and for a copy of
the relevant bylaw provisions regarding the requirements for
making stockholder proposals and nominating director candidates
pursuant to the bylaws.
Householding
of Proxy Materials
The SEC has adopted rules that permit companies and
intermediaries (such as banks and brokers) to satisfy the
delivery requirements for proxy statements and annual reports
with respect to two or more stockholders sharing the same
address by delivering a single proxy statement addressed to
those stockholders. This process, which is commonly referred to
as “householding,” potentially means extra convenience
for stockholders and cost savings for companies.
55
This year, a number of banks and brokers with account holders
who are our stockholders will be householding our proxy
materials. A single proxy statement will be delivered to
multiple stockholders sharing an address unless contrary
instructions have been received from the affected stockholders.
Once you have received notice from your bank or broker that it
will be householding communications to your address,
householding will continue until you are notified otherwise or
until you revoke your consent. If, at any time, you no longer
wish to participate in householding and would prefer to receive
a separate proxy statement and annual report, please notify your
bank or broker, direct your written request to Investor
Relations, Complete Production Services, Inc., 11700 Old Katy
Road, Suite 300, Houston, Texas 77079, or contact Investor
Relations by telephone at
(281) 372-2300.
Stockholders who currently receive multiple copies of the proxy
statement at their address and would like to request
householding of their communications should contact their bank
or broker.
Incorporation
by Reference
Notwithstanding anything to the contrary set forth in any of our
previous filings under the Securities Act of 1933, as amended,
or the Exchange Act which might incorporate future filings made
by us under those statutes, neither the preceding Compensation
Committee Report nor the Audit Committee Report will be
incorporated by reference into any of those prior filings, nor
will any such report be incorporated by reference into any
future filings made by us under those statutes, except to the
extent we specifically incorporate such reports by reference
therein. In addition, information on our website, other than our
proxy statement and form of proxy, is not part of the proxy
soliciting material and is not incorporated herein by reference.
COMPLETE PRODUCTION SERVICES, INC.
James F. Maroney
Vice President, Secretary and General Counsel
56
APPENDIX A
COMPLETE
PRODUCTION SERVICES, INC.
2008
INCENTIVE AWARD PLAN
Complete Production Services, Inc., a Delaware corporation (the
“Company”), by resolution of its Board of
Directors, hereby adopts the Complete Production Services, Inc.
2008 Incentive Award Plan, as the same may be amended or
restated from time to time (the “Plan”).
The purpose of the Plan is to promote the success and enhance
the value of the Company by linking the personal interests of
the members of the Board, Employees, and Consultants to those of
the Company’s stockholders and by providing such
individuals with an incentive for outstanding performance to
generate superior returns to the Company’s stockholders.
The Plan is further intended to provide flexibility to the
Company in its ability to motivate, attract, and retain the
services of members of the Board, Employees, and Consultants
upon whose judgment, interest, and special effort the successful
conduct of the Company’s operation is largely dependent.
The Plan succeeds the Complete Production Services, Inc. Amended
and Restated 2001 Stock Incentive Plan, as amended from time to
time.
ARTICLE I.
DEFINITIONS
Wherever the following terms are used in the Plan they shall
have the meanings specified below, unless the context clearly
indicates otherwise. The singular pronoun shall include the
plural where the context so indicates.
1.1. “Administrator” shall
mean the entity that conducts the general administration of the
Plan as provided in Article XI. With reference to the
duties of the Committee under the Plan which have been delegated
to one or more persons pursuant to Section 11.6, or as to
which the Board has assumed, the term “Administrator”
shall refer to such person(s) unless the Committee or the Board
has revoked such delegation or the Board has terminated the
assumption of such duties.
1.2. “Award” shall mean an
Option, a Restricted Stock award, a Restricted Stock Unit award,
a Performance Award, a Dividend Equivalents award, a Deferred
Stock award, a Stock Payment award or a Stock Appreciation
Right, which may be awarded or granted under the Plan
(collectively, “Awards”).
1.3. “Award Agreement” shall
mean any written notice, agreement, terms and conditions,
contract or other instrument or document evidencing an Award,
including through electronic medium, which shall contain such
terms and conditions with respect to an Award as the
Administrator shall determine consistent with the Plan.
1.4. “Award Limit” shall mean
900,000 shares of Common Stock, as adjusted pursuant to
Section 11.3; provided, however, that each
share of Common Stock subject to an Award shall be counted as
one share against the Award Limit. Solely with respect to
Performance Awards granted pursuant to Section 8.1(b) and
payable in cash, “Award Limit” shall mean $4,000,000.
1.5. “Board” shall mean the
Board of Directors of the Company.
1.6. “Change in Control”
shall mean the occurrence of any of the following events:
(a) a transaction or series of transactions whereby any
“person” or related “group” of
“persons” (as such terms are used in
Sections 13(d) and 14(d)(2) of the Exchange Act) directly
or indirectly acquires beneficial ownership (within the meaning
of
Rule 13d-3
under the Exchange Act) of securities of the Company possessing
more than 20% of the total combined voting power of the
Company’s securities outstanding immediately after such
acquisition, other than:
A-1
(i) an acquisition by an employee benefit plan or any
trustee holding securities under any employee benefit plan (or
related trust) sponsored or maintained by the Company or any
person controlled by the Company; or
(ii) an acquisition by the Company or any
Subsidiary; or
(iii) an acquisition pursuant to the offering of shares of
Common Stock by the Company to the general public through a
registration statement filed with the Securities and Exchange
Commission; or
(iv) an acquisition of voting securities pursuant to a
transaction described in clause (c) below that would not be
a Change in Control under clause (c).
(b) individuals who, as of the date hereof, constitute the
Board (the “Incumbent Board”) cease for any
reason to constitute at least a majority of the Board;
provided, however, that any individual becoming a
director subsequent to the date hereof whose election, or
nomination for election by the Company’s stockholders, was
approved by a vote of at least two thirds of the directors then
comprising the Incumbent Board shall be considered to be members
of the Incumbent Board, but excluding, for this purpose, any
such individual whose initial assumption of office was a result
of an actual or threatened election contest with respect to the
election or removal of directors; or
(c) the consummation by the Company (whether directly
involving the Company or indirectly involving the Company
through one or more intermediaries or subsidiaries) of
(x) a merger, consolidation, reorganization, or business
combination, including without limitation, a reverse or forward
triangular merger, or (y) the acquisition of assets or
stock of another entity, in each case, other than a
transaction, which results in the Company’s stockholders
prior to such transaction owning at least 55% of the outstanding
voting securities of the surviving or resulting corporation or
entity.
(d) a tender offer or exchange offer is made and
consummated by a person or group of persons other than the
Company for the ownership of 20% or more of the Company’s
voting securities; or
(e) a disposition, transfer, sale or exchange of all or
substantially all of the Company’s assets, or the
Company’s stockholders approve a plan of liquidation or
dissolution of the Company.
For purposes of subsection (a) above, the calculation of
voting power shall be made as if the date of the acquisition
were a record date for a vote of the Company’s
stockholders, and for purposes of subsection (c) above, the
calculation of voting power shall be made as if the date of the
consummation of the transaction or at the consummation of the
last of a series of related transactions were a record date for
a vote of the Company’s stockholders.
1.7. “Code” shall mean the
Internal Revenue Code of 1986, as amended from time to time.
1.8. “Committee” shall mean
the Compensation Committee of the Board, or another committee or
subcommittee comprised solely of independent members of the
Board, appointed as provided in Section 10.1.
1.9. “Common Stock” shall
mean the common stock of the Company, par value $0.01 per share.
1.10. “Company” shall mean
Complete Production Services, Inc., a Delaware
corporation.
1.11. “Consultant” shall mean
any consultant or adviser that qualifies as a consultant under
the applicable rules of the Securities and Exchange Commission
for registration of shares on a
Form S-8
Registration Statement.
1.12. “Deferred Stock” shall
mean a right to receive Common Stock awarded under
Section 8.5.
1.13. “Director” shall mean a
member of the Board as constituted from time to time.
1.14. “Dividend Equivalent”
shall mean a right to receive the equivalent value (in cash
or Common Stock) of dividends paid on Common Stock, awarded
under Section 8.3.
A-2
1.15. “DRO” shall mean a
domestic relations order as defined by the Code or Title I
of the Employee Retirement Income Security Act of 1974, as
amended from time to time, or the rules thereunder.
1.16. “Effective Date” shall
mean the date the Plan is approved by the Board, subject to
approval of the Plan by the Company’s stockholders.
1.17. “Eligible Individual”
means any person who is an Employee, Consultant or a
Non-Employee Director, as determined by the Administrator.
1.18. “Employee” shall mean
any officer or other employee (as determined in accordance with
Section 3401(c) of the Code and the Treasury Regulations
thereunder) of the Company or of any Subsidiary.
1.19. “Exchange Act” shall
mean the Securities Exchange Act of 1934, as amended from time
to time
1.20. “Fair Market Value”
means, as of any date, the value of a share of Common Stock
determined as follows:
(a) If the Common Stock is listed on any established stock
exchange (such as the New York Stock Exchange, the NASDAQ Global
Market and the NASDAQ Global Select Market) or national market
system, its Fair Market Value shall be the closing sales price
for a share of Common Stock as quoted on such exchange or system
for such date or, if there is no closing sales price for a share
of Common Stock on the date in question, the closing sales price
for a share of Common Stock on the last preceding date for which
such quotation exists, as reported in The Wall Street Journal
or such other source as the Administrator deems reliable;
(b) If the Common Stock is not listed on an established
stock exchange or national market system , but the Common Stock
is regularly quoted by a recognized securities dealer, its Fair
Market Value shall be the mean of the high bid and low asked
prices for such date or, if there are no high bid and low asked
prices for a share of Common Stock on such date, the high bid
and low asked prices for a share of Common Stock on the last
preceding date for which such information exists, as reported in
The Wall Street Journal or such other source as the
Administrator deems reliable; or
(c) If the Common Stock is neither listed on an established
stock exchange or a national market system nor regularly quoted
by a recognized securities dealer, its Fair Market Value shall
be established by the Administrator in good faith.
1.21. “Holder” shall mean a
person who has been granted an Award.
1.22. “Incentive Stock Option”
shall mean an option is intended to qualify as an incentive
stock option and conforms to the applicable provisions of
Section 422 of the Code.
1.23. “Non-Employee Director”
shall mean a member of the Board who is not an Employee.
1.24. “Non-Qualified Stock
Option” shall mean an Option that is not an
Incentive Stock Option.
1.25. “Option” shall mean a
right to purchase shares of Common Stock at a specified exercise
price, granted under Article V. An Option shall be either a
Non-Qualified Stock Option or an Incentive Stock Option;
provided, however, that Options granted to
Non-Employee Directors and Consultants shall be Non-Qualified
Stock Options.
1.26. “Performance Award”
shall mean a cash bonus award, stock bonus award,
performance award or incentive award that is paid in cash,
Common Stock or a combination of both, awarded under
Section 8.1.
1.27. “Performance-Based
Compensation” means any compensation that is
intended to qualify as “performance-based
compensation” as described in Section 162(m)(4)(C) of
the Code.
A-3
1.28. “Performance Criteria”
means the criteria (and adjustments) that the Committee
selects for an Award for purposes of establishing the
Performance Goal or Performance Goals for a Performance Period,
determined as following:
(a) The Performance Criteria that shall be used to
establish Performance Goals are limited to the following:
(i) net earnings (either before or after one or more of the
following: (A) interest, (B) taxes,
(C) depreciation and (D) amortization),
(ii) gross or net sales or revenue, (iii) net income
(either before or after taxes), (iv) operating earnings or
profit, (v) cash flow (including, but not limited to,
operating cash flow and free cash flow), (vi) return on
assets, (vii) return on capital, (viii) return on
stockholders’ equity, (ix) return on sales,
(x) gross or net profit or operating margin,
(xi) costs, (xii) funds from operations,
(xiii) expenses, (xiv) working capital,
(xv) earnings per share, (xvi) price per share of
Common Stock, (xvii) regulatory body approval for
commercialization of a product, (xviii) implementation or
completion of critical projects, (xix) various safety
statistics including any of (a) total reportable incident
rates (TRIR), (b) loss time incident rates
(LTIR) or (c) workers comp experience modifier and
(xx) market share, any of which may be measured either in
absolute terms or as compared to any incremental increase or
decrease or as compared to results of a peer group.
(b) The Administrator may, in its sole discretion, provide
that one or more objectively determinable adjustments shall be
made to one or more of the Performance Goals. Such adjustments
may include one or more of the following: (i) items related
to a change in accounting principle; (ii) items relating to
financing activities; (iii) expenses for restructuring or
productivity initiatives; (iv) other non-operating items;
(v) items related to acquisitions; (vi) items
attributable to the business operations of any entity acquired
by the Company during the Performance Period; (vii) items
related to the disposal of a business or segment of a business;
(viii) items related to discontinued operations that do not
qualify as a segment of a business under United States generally
accepted accounting principles (“GAAP”);
(ix) items attributable to any stock dividend, stock split,
combination or exchange of shares occurring during the
Performance Period; (x) any other items of significant
income or expense which are determined to be appropriate
adjustments; (xi) items relating to unusual or
extraordinary corporate transactions, events or developments,
(xii) items related to amortization of acquired intangible
assets; (xiii) items that are outside the scope of the
Company’s core, on-going business activities; or
(xiv) items relating to any other unusual or nonrecurring
events or changes in applicable laws, accounting principles or
business conditions. For all Awards intended to qualify as
Performance-Based Compensation, such determinations shall be
made within the time prescribed by, and otherwise in compliance
with, Section 162(m) of the Code.
1.29. “Performance Goals”
means, for a Performance Period, one or more goals
established in writing by the Administrator for the Performance
Period based upon one or more Performance Criteria. Depending on
the Performance Criteria used to establish such Performance
Goals, the Performance Goals may be expressed in terms of
overall Company performance or the performance of a division,
business unit, or an individual. The achievement of each
Performance Goal shall be determined in accordance with GAAP to
the extent applicable.
1.30. “Performance Period”
means one or more periods of time, which may be of varying
and overlapping durations, as the Administrator may select, over
which the attainment of one or more Performance Goals will be
measured for the purpose of determining a Holder’s right
to, and the payment of, a Performance Award.
1.31. “Plan” means this
Complete Production Services, Inc. 2008 Incentive Award Plan, as
amended or restated from time to time.
1.32. “Prior Award” means a
stock option or restricted stock award granted under the Prior
Plan.
1.33. “Prior Plan” shall mean
the Complete Production Services, Inc. Amended and Restated 2001
Stock Incentive Plan, as amended.
1.34. “Restricted Stock”
shall mean Common Stock awarded under Article VII that
is subject to certain restrictions and to risk of forfeiture or
repurchase.
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1.35. “Restricted Stock Units”
shall mean rights to receive Common Stock awarded under
Section 8.5.
1.36. “Rule 16b-3”
shall mean
Rule 16b-3
promulgated under the Exchange Act, as such Rule may be amended
from time to time.
1.37. “Securities Act” shall
mean the Securities Act of 1933, as amended from time to time.
1.38. “Stock Appreciation Right”
shall mean a stock appreciation right granted under
Article IX.
1.39. “Stock Payment” shall
mean: (a) a payment in the form of shares of Common Stock,
or (b) an option or other right to purchase shares of
Common Stock, as part of a bonus, deferred compensation or other
arrangement awarded under Section 8.3.
1.40. “Subsidiary” means any
entity (other than the Company), whether domestic or foreign, in
an unbroken chain of entities beginning with the Company if each
of the entities other than the last entity in the unbroken chain
beneficially owns, at the time of the determination, securities
or interests representing more than fifty percent (50%) of the
total combined voting power of all classes of securities or
interests in one of the other entities in such chain.
1.41. “Substitute Award”
shall mean an Option granted under this Plan upon the
assumption of, or in substitution for, outstanding equity awards
previously granted by a company or other entity in connection
with a corporate transaction, such as a merger, combination,
consolidation or acquisition of property or stock;
provided, however, that in no event shall the term
“Substitute Award” be construed to refer to an award
made in connection with the cancellation and repricing of an
Option.
1.42. “Greater Than 10%
Stockholder” shall mean an individual then owning
(within the meaning of Section 424(d) of the Code) more
than 10% of the total combined voting power of all classes of
stock of the Company or any subsidiary corporation (as defined
in Section 424(f) of the Code) or parent corporation
thereof (as defined in Section 424(e) of the Code).
1.43. “Termination of Service”
shall mean,
(a) As to a Consultant, the time when the engagement of a
Holder as a Consultant to the Company or a Subsidiary is
terminated for any reason, with or without cause, including,
without limitation, by resignation, discharge, death or
retirement, but excluding terminations where the Consultant
simultaneously commences or remains in employment or service
with the Company or any Subsidiary.
(b) As to a Non-Employee Director, the time when a Holder
who is a Non-Employee Director ceases to be a Director for any
reason, including, without limitation, a termination by
resignation, failure to be elected, death or retirement, but
excluding terminations where the Holder simultaneously commences
or remains in employment or service with the Company or any
Subsidiary.
(c) As to an Employee, the time when the employee-employer
relationship between a Holder and the Company or any Subsidiary
is terminated for any reason, including, without limitation, a
termination by resignation, discharge, death, disability or
retirement; but excluding terminations where the Holder
simultaneously commences or remains in employment or service
with the Company or any Subsidiary.
The Administrator, in its sole discretion, shall determine the
effect of all matters and questions relating to Terminations of
Service, including, without limitation, the question of whether
a Termination of Service resulted from a discharge for cause and
all questions of whether particular leaves of absence constitute
a Termination of Service; provided, however, that,
with respect to Incentive Stock Options, unless the
Administrator otherwise provides in the terms of the Award
Agreement or otherwise, a leave of absence, change in status
from an employee to an independent contractor or other change in
the employee-employer relationship shall constitute a
Termination of Service only if, and to the extent that, such
leave of absence, change in status or other change interrupts
employment for the purposes of Section 422(a)(2) of the
Code and the then applicable regulations and revenue rulings
under said Section. For purposes of the Plan, a Holder’s
employee-employer relationship or consultancy relations shall be
deemed to be terminated in the event that the Subsidiary
employing or contracting with such Holder ceases to remain a
Subsidiary following any merger, sale of stock or other
corporate transaction or event (including, without limitation, a
spin-off).
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ARTICLE II.
SHARES
SUBJECT TO PLAN
2.1. Shares Subject to Plan.
(a) Subject to Section 12.2(a) and
Section 2.1(b), the aggregate number of shares of Common
Stock that may be issued or transferred pursuant to Awards under
the Plan initially shall be equal to two million five hundred
thousand (2,500,000) (“Initial Authorized
Shares”). In addition, in the event of any
cancellation, termination, expiration or forfeiture of any Prior
Award during the term of the Plan (including any unvested shares
of Common Stock that are forfeited by the holder or repurchased
by the Company pursuant to the terms of the applicable award
agreement at a price not greater than the original purchase
price paid by the holder), the number of shares of Common Stock
that may be issued or transferred pursuant to Awards under the
Plan shall be automatically increased by one share for each
share subject to such Prior Award that is so cancelled,
terminated, expired, forfeited or repurchased (collectively, the
“Cancelled Prior Award Shares”). In no event,
however, shall the aggregate number of shares available for
issuance pursuant to Incentive Stock Options under the Plan
exceed 2,500,000.
(b) To the extent that an Award terminates, expires,
lapses, settles in cash, or is forfeited for any reason, any
shares of Common Stock then subject to such Award shall again be
available for the grant of an Award pursuant to the Plan. If any
shares of Restricted Stock are surrendered by the Holder or
repurchased by the Company pursuant to Section 7.4 hereof,
such shares may again be granted or awarded hereunder. To the
extent exercised, the full number of shares subject to an Option
or Stock Appreciation Right shall be counted for purposes of
calculating the aggregate number of shares of Common Stock
available for issuance under the Plan and for purposes of
calculating the share limitation set forth in Section 3.7,
regardless of the actual number of shares issued or transferred
upon any net exercise of an Option (in which Common Stock is
withheld to satisfy the exercise price or taxes) or upon
exercise of any Stock Appreciation Right for Common Stock or
cash. The payment of Dividend Equivalents in cash in conjunction
with any outstanding Awards shall not be counted against the
shares available for issuance under the Plan. To the extent
permitted by applicable law or any exchange rule, shares of
Common Stock issued in assumption of, or in substitution for,
any outstanding awards of any entity acquired in any form of
combination by the Company or any Subsidiary shall not be
counted against shares of Common Stock available for grant
pursuant to this Plan, but shall be available under the Plan by
virtue of the Company’s assumption of the plan or
arrangement of the acquired company or business. Notwithstanding
the provisions of this Section 2.1(b), no shares of Common
Stock may again be awarded if such action would cause an
Incentive Stock Option to fail to qualify as an incentive stock
option under Section 422 of the Code. Notwithstanding the
provisions of this Section 2.1(b), no shares shall become
available pursuant to this Section 2.1 to the extent that
such return of shares would constitute a “material
revision” of the Plan subject to stockholder approval under
then applicable rules of the New York Stock Exchange (or any
other applicable exchange or quotation system).
2.2. Stock Distributed. Any
Common Stock distributed pursuant to an Award shall consist, in
whole or in part, of authorized and unissued Common Stock,
shares of Common Stock held in treasury or shares of Common
Stock purchased on the open market.
ARTICLE III.
GRANTING OF
AWARDS
3.1. Participation. The
Administrator shall, from time to time, select from among all
Eligible Individuals, those to whom an Award shall be granted
and shall determine the nature and amount of each Award, which
shall not be inconsistent with the requirements of the Plan. No
Eligible Individual shall have any right to be granted an Award
pursuant to the Plan.
3.2. Award Agreement. Each
Award shall be evidenced by an Award Agreement. Award Agreements
evidencing Awards intended to qualify as Performance-Based
Compensation shall contain such terms and conditions as may be
necessary to meet the applicable provisions of
Section 162(m) of the Code. Award Agreements evidencing
Incentive Stock Options shall contain such terms and conditions
as may be necessary to meet the applicable provisions of
Section 422 of the Code.
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3.3. Limitations Applicable to
Section 16 Persons. Notwithstanding
any other provision of the Plan, the Plan, and any Award granted
or awarded to any individual who is then subject to
Section 16 of the Exchange Act, shall be subject to any
additional limitations set forth in any applicable exemptive
rule under Section 16 of the Exchange Act (including
Rule 16b-3
of the Exchange Act and any amendments thereto) that are
requirements for the application of such exemptive rule. To the
extent permitted by applicable law, the Plan and Awards granted
or awarded hereunder shall be deemed amended to the extent
necessary to conform to such applicable exemptive rule.
3.4. At-Will
Employment. Nothing in the Plan or in any
Award Agreement hereunder shall confer upon any Holder any right
to continue in the employ of, or as a Director or Consultant
for, the Company or any Subsidiary, or shall interfere with or
restrict in any way the rights of the Company and any
Subsidiary, which rights are hereby expressly reserved, to
discharge any Holder at any time for any reason whatsoever, with
or without cause, except to the extent expressly provided
otherwise in a written agreement between the Holder and the
Company or any Subsidiary.
3.5. Foreign
Holders. Notwithstanding any provision of the
Plan to the contrary, in order to comply with the laws in other
countries in which the Company and its Subsidiaries operate or
have Employees, Non-Employee Directors or Consultants, or in
order to comply with the requirements of any foreign stock
exchange, the Administrator, in its sole discretion, shall have
the power and authority to: (a) determine which
Subsidiaries shall be covered by the Plan; (b) determine
which Eligible Individuals outside the United States are
eligible to participate in the Plan; (c) modify the terms
and conditions of any Award granted to Eligible Individuals
outside the United States to comply with applicable foreign laws
or listing requirements of any such foreign stock exchange;
(d) establish subplans and modify exercise procedures and
other terms and procedures, to the extent such actions may be
necessary or advisable (any such subplans
and/or
modifications shall be attached to the Plan as appendices);
provided, however, that no such subplans
and/or
modifications shall increase the share limitations contained in
Sections 2.1 and 3.7; 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 governmental
regulatory exemptions or approvals or listing requirements of
any such foreign stock exchange. Notwithstanding the foregoing,
the Administrator may not take any actions hereunder, and no
Awards shall be granted, that would violate the Code, the
Exchange Act, the Securities Act or any other securities law or
governing statute or any other applicable law.
3.6. Stand-Alone and Tandem
Awards. Awards granted pursuant to the Plan
may, in the sole discretion of the Administrator, be granted
either alone, in addition to, or in tandem with, any other Award
granted pursuant to the Plan. Awards granted in addition to or
in tandem with other Awards may be granted either at the same
time as or at a different time from the grant of such other
Awards.
3.7. Award
Limits. Notwithstanding any provision in the
Plan to the contrary, and subject to Section 12.2(a), the
maximum number of shares of Common Stock with respect to one or
more Awards that may be granted to any Eligible Individual
during any calendar year shall not exceed the applicable Award
Limit. To the extent required by Section 162(m) of the
Code, shares subject to Awards which are canceled shall continue
to be counted against the Award Limit. In addition, the maximum
cash payment with respect to one or more Performance Awards
granted pursuant to Section 8.1(b) and payable in cash that
may be granted to any Eligible Individual during any calendar
year shall not exceed the Award Limit.
ARTICLE IV.
PROVISIONS
APPLICABLE TO AWARDS INTENDED TO QUALIFY AS
PERFORMANCE-BASED
COMPENSATION.
4.1. Purpose. The Committee,
in its sole discretion, may determine whether an Award is to
qualify as Performance-Based Compensation. If the Committee, in
its sole discretion, decides to grant such an Award to an
Eligible Individual that is intended to qualify as
Performance-Based Compensation, then the provisions of this
Article IV shall control over any contrary provision
contained in this Plan. The Administrator may in its sole
discretion grant Awards to Eligible Individuals that are based
on Performance Criteria or Performance Goals but that do not
satisfy the requirements of this Article IV and that are
not intended to qualify as Performance-Based Compensation.
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4.2. Applicability. The
grant of an Award to an Eligible Individual for a particular
Performance Period shall not require the grant of an Award to
such Individual in any subsequent Performance Period and the
grant of an Award to any one Eligible Individual shall not
require the grant of an Award to any other Eligible Individual
in such period or in any other period.
4.3. Types of
Awards. Notwithstanding anything in the Plan
to the contrary, the Committee may grant any type of Award to an
Eligible Individual intended to qualify as Performance-Based
Compensation, including, without limitation, Restricted Stock
the restrictions with respect to which lapse upon the attainment
of specified Performance Goals and any performance or incentive
Awards described in Article VIII that vest or become
exercisable or payable upon the attainment of one or more
specified Performance Goals.
4.4. Procedures with Respect to
Performance-Based Awards. To the extent
necessary to comply with the requirements of
Section 162(m)(4)(C) of the Code, with respect to any Award
granted under Articles VII or VIII to one or more Eligible
Individuals that is intended to qualify as Performance-Based
Compensation, no later than 90 days following the
commencement of any Performance Period or any designated fiscal
period or period of service (or such earlier time as may be
required under Section 162(m) of the Code), the Committee
shall, in writing, (a) designate one or more Eligible
Individuals, (b) select the Performance Criteria applicable
to the Performance Period, (c) establish the Performance
Goals, and amounts of such Awards, as applicable, which may be
earned for such Performance Period based on the Performance
Criteria, and (d) specify the relationship between
Performance Criteria and the Performance Goals and the amounts
of such Awards, as applicable, to be earned by each Holder for
such Performance Period. Following the completion of each
Performance Period, the Committee shall certify in writing
whether and the extent to which the applicable Performance Goals
have been achieved for such Performance Period. In determining
the amount earned under such Awards, the Committee shall have
the right to reduce or eliminate (but not to increase) the
amount payable at a given level of performance to take into
account additional factors that the Committee may deem relevant
to the assessment of individual or corporate performance for the
Performance Period.
4.5. Payment of Performance-Based
Awards. Unless otherwise provided in the
applicable Award Agreement, as to an Award that is intended to
qualify as Performance-Based Compensation, the Holder must be
employed by the Company or a Subsidiary throughout the
Performance Period. Furthermore, a Holder shall be eligible to
receive payment pursuant to such Awards for a Performance Period
only if and to the extent the Performance Goals for such period
are achieved.
4.6. Additional
Limitations. Notwithstanding any other
provision of the Plan, any Award which is granted to an Eligible
Individual and is intended to qualify as Performance-Based
Compensation shall be subject to any additional limitations set
forth in Section 162(m) of the Code or any regulations or
rulings issued thereunder that are requirements for
qualification as Performance-Based Compensation, and the Plan
and the Award Agreement shall be deemed amended to the extent
necessary to conform to such requirements.
ARTICLE V.
GRANTING OF OPTIONS
5.1. Granting of Options to Eligible
Individuals.
(a) The Administrator shall from time to time, in its sole
discretion, and, subject to applicable limitations of the Plan:
(i) Select from among the Eligible Individuals (including
Eligible Individuals who have previously received Awards under
the Plan) such of them as in its opinion should be granted
Options;
(ii) Subject to Section 3.7, determine the number of
shares to be subject to such Options granted to the selected
Eligible Individuals;
(iii) Subject to Section 5.2, determine whether such
Options are to be Incentive Stock Options or Non-Qualified Stock
Options; and
(iv) Determine the terms and conditions of such Options,
which shall not be inconsistent with the Plan.
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(b) Upon the selection of an Eligible Individual to be
granted an Option, the Administrator shall instruct the
Secretary of the Company to issue the Option and may impose such
conditions on the grant of the Option as it deems appropriate.
5.2. Qualification of Incentive Stock
Options. No Incentive Stock Option shall be
granted to any person who is not an Employee of the Company or
any subsidiary corporation of the Company (as defined in
Section 424(f) of the Code). Any Incentive Stock Option
granted under the Plan may be modified by the Administrator,
with the consent of the Holder, to disqualify such Option from
treatment as an “incentive stock option” under
Section 422 of the Code. To the extent that the aggregate
fair market value of stock with respect to which “incentive
stock options” (within the meaning of Section 422 of
the Code, but without regard to Section 422(d) of the Code)
are exercisable for the first time by a Holder during any
calendar year under the Plan, and all other plans of the Company
and any subsidiary corporation (as defined in
Section 424(f) of the Code) or parent corporation thereof
(as defined in Section 424(e) of the Code), exceeds
$100,000, the Options shall be treated as Non-Qualified Stock
Options to the extent required by Section 422 of the Code.
The rule set forth in the preceding sentence shall be applied by
taking Options and other “incentive stock options”
into account in the order in which they were granted and the
fair market value of stock shall be determined as of the time
the respective options were granted.
5.3. Option Exercise
Price. The exercise price per share of Common
Stock subject to each Option shall be set by the Administrator,
but shall not be less than 100% of the Fair Market Value of a
share of Common Stock on the date the Option is granted (or, as
to Incentive Stock Options, on the date the Option is modified,
extended or renewed for purposes of Section 424(h) of the
Code). In addition, in the case of Incentive Stock Options
granted to a Greater Than 10% Stockholder, such price shall not
be less than 110% of the Fair Market Value of a share of Common
Stock on the date the Option is granted (or the date the Option
is modified, extended or renewed for purposes of
Section 424(h) of the Code).
5.4. Option Term. The term
of each Option shall be set by the Administrator in its sole
discretion; provided, however, that the term shall
not be more than ten (10) years from the date the Option is
granted, or five (5) years from the date an Incentive Stock
Option is granted to a Greater Than 10% Stockholder. The
Administrator shall determine the time period, including the
time period following a Termination of Service, during which the
Holder has the right to exercise the vested Options, which time
period may not extend beyond the term of the Option term. Except
as limited by the requirements of Section 409A or
Section 422 of the Code and regulations and rulings
thereunder, the Administrator may extend the term of any
outstanding Option, and may extend the time period during which
vested Options may be exercised, in connection with any
Termination of Service of the Holder, and may amend any other
term or condition of such Option relating to such a Termination
of Service.
5.5. Option Vesting.
(a) The period during which the right to exercise, in whole
or in part, an Option vests in the Holder shall be set by the
Administrator and the Administrator may determine that an Option
may not be exercised in whole or in part for a specified period
after it is granted. Such vesting may be based on service with
the Company or any Subsidiary, any of the Performance Criteria,
or any other criteria selected by the Administrator. At any time
after grant of an Option, the Administrator may, in its sole
discretion and subject to whatever terms and conditions it
selects, accelerate the period during which an Option vests.
(b) No portion of an Option which is unexercisable at the
Holder’s Termination of Service shall thereafter become
exercisable, except as may be otherwise provided by the
Administrator either in the Award Agreement or by action of the
Administrator following the grant of the Option.
5.6. Substitute
Awards. Notwithstanding the foregoing
provisions of this Article V to the contrary, in the case
of an Option that is a Substitute Award, the price per share of
the shares subject to such Option may be less than the Fair
Market Value per share on the date of grant, provided,
that the excess of: (a) the aggregate Fair Market Value (as
of the date such Substitute Award is granted) of the shares
subject to the Substitute Award, over (b) the aggregate
exercise price thereof does not exceed the excess of:
(x) the aggregate fair market value (as of the time
immediately preceding the transaction giving rise to the
Substitute Award,
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such fair market value to be determined by the Administrator) of
the shares of the predecessor entity that were subject to the
grant assumed or substituted for by the Company, over
(y) the aggregate exercise price of such shares.
5.7. Substitution of Stock Appreciation
Rights. The Administrator may provide in the
Award Agreement evidencing the grant of an Option that the
Administrator, in its sole discretion, shall have the right to
substitute a Stock Appreciation Right for such Option at any
time prior to or upon exercise of such Option;
provided, that such Stock Appreciation Right shall
be exercisable with respect to the same number of shares of
Common Stock for which such substituted Option would have been
exercisable.
ARTICLE VI.
EXERCISE OF OPTIONS
6.1. Partial Exercise. An
exercisable Option may be exercised in whole or in part.
However, an Option shall not be exercisable with respect to
fractional shares and the Administrator may require that, by the
terms of the Option, a partial exercise must be with respect to
a minimum number of shares.
6.2. Manner of Exercise. All
or a portion of an exercisable Option shall be deemed exercised
upon delivery of all of the following to the Secretary of the
Company, or such other person or entity designated by the
Administrator, or his, her or its office, as applicable:
(a) A written notice complying with the applicable rules
established by the Administrator stating that the Option, or a
portion thereof, is exercised. The notice shall be signed by the
Holder or other person then entitled to exercise the Option or
such portion of the Option;
(b) Such representations and documents as the
Administrator, in its sole discretion, deems necessary or
advisable to effect compliance with all applicable provisions of
the Securities Act and any other federal, state or foreign
securities laws or regulations. The Administrator may, in its
sole discretion, also take whatever additional actions it deems
appropriate to effect such compliance including, without
limitation, placing legends on share certificates and issuing
stop-transfer notices to agents and registrars;
(c) In the event that the Option shall be exercised
pursuant to Section 10.3 by any person or persons other
than the Holder, appropriate proof of the right of such person
or persons to exercise the Option; and
(d) Full payment of the exercise price and applicable
withholding taxes to the Secretary of the Company for the shares
with respect to which the Option, or portion thereof, is
exercised, in a manner permitted by Section 10.1.
6.3. Notification Regarding
Disposition. The Holder shall give the
Company prompt notice of any disposition of shares of Common
Stock acquired by exercise of an Incentive Stock Option within
(a) two years from the date of granting (including the date
the Option is modified, extended or renewed for purposes of
Section 424(h) of the Code) such Option to such Holder, or
(b) one year after the transfer of such shares to such
Holder.
ARTICLE VII.
AWARD OF
RESTRICTED STOCK
7.1. Award of Restricted Stock.
(a) The Administrator shall determine the terms and
conditions, including the restrictions applicable to each award
of Restricted Stock, which terms and conditions shall not be
inconsistent with the Plan, and may impose such conditions on
the issuance of such Restricted Stock as it deems appropriate.
(b) The Administrator shall establish the purchase price,
if any, and form of payment for Restricted Stock;
provided, however, that such purchase price shall
be no less than the par value of the Common Stock to be
purchased, unless otherwise permitted by applicable state law.
In all cases, legal consideration shall be required for each
issuance of Restricted Stock.
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7.2. Rights as
Stockholders. Subject to Section 7.4,
upon issuance of Restricted Stock, the Holder shall have, unless
otherwise provided by the Administrator, all the rights of a
stockholder with respect to said shares, subject to the
restrictions in his or her Award Agreement, including the right
to receive all dividends and other distributions paid or made
with respect to the shares; provided, however,
that, in the sole discretion of the Administrator, any
extraordinary distributions with respect to the Common Stock
shall be subject to the restrictions set forth in
Section 7.3.
7.3. Restrictions. All
shares of Restricted Stock (including any shares received by
Holders thereof with respect to shares of Restricted Stock as a
result of stock dividends, stock splits or any other form of
recapitalization) shall, in the terms of each individual Award
Agreement, be subject to such restrictions and vesting
requirements as the Administrator shall provide. Such
restrictions may include, without limitation, restrictions
concerning voting rights and transferability and such
restrictions may lapse separately or in combination at such
times and pursuant to such circumstances or based on such
criteria as selected by the Administrator, including, without
limitation, criteria based on the Holder’s duration of
employment, directorship or consultancy with the Company, the
Performance Criteria, Company performance, individual
performance or other criteria selected by the Administrator. By
action taken after the Restricted Stock is issued, the
Administrator may, on such terms and conditions as it may
determine to be appropriate, accelerate the vesting of such
Restricted Stock by removing any or all of the restrictions
imposed by the terms of the Award Agreement, or continue to vest
such Restricted Stock in accordance with the terms of the Award
Agreement following a Termination of Service. Restricted Stock
may not be sold or encumbered until all restrictions are
terminated or expire.
7.4. Repurchase or Forfeiture of Restricted
Stock. If no price was paid by the Holder for
the Restricted Stock, upon a Termination of Service the
Holder’s rights in unvested Restricted Stock then subject
to restrictions shall lapse, and such Restricted Stock shall be
surrendered to the Company and cancelled without consideration.
If a price was paid by the Holder for the Restricted Stock, upon
a Termination of Service the Company shall have the right to
repurchase from the Holder the unvested Restricted Stock then
subject to restrictions at a cash price per share equal to the
price paid by the Holder for such Restricted Stock. The
Administrator in its sole discretion may provide, in the Award
Agreement or by action after the Restricted Stock is issued,
that in the event of certain events, including a Change in
Control, the Holder’s death, retirement or disability or
any other specified Termination of Service or any other event,
the Holder’s rights in unvested Restricted Stock shall not
lapse, such Restricted Stock shall either vest immediately upon
the occurrence of such specified event or continue to vest in
accordance with the terms of the Award Agreement and, if
applicable, the Company shall not have a right of repurchase.
7.5. Certificates for Restricted
Stock. Restricted Stock granted pursuant to
the Plan may be evidenced in such manner as the Administrator
shall determine. Certificates or book entries evidencing shares
of Restricted Stock must include an appropriate legend referring
to the terms, conditions, and restrictions applicable to such
Restricted Stock, and the Company may, in its sole discretion,
retain physical possession of any stock certificate until such
time as all applicable restrictions lapse.
7.6. Section 83(b)
Election. If a Holder makes an election under
Section 83(b) of the Code, or any successor section
thereto, to be taxed with respect to the Restricted Stock as of
the date of transfer of the Restricted Stock rather than as of
the date or dates upon which the Holder would otherwise be
taxable under Section 83(a) of the Code, the Holder shall
be required to deliver a copy of such election to the Company
promptly after filing such election with the Internal Revenue
Service.
ARTICLE VIII.
AWARD OF
PERFORMANCE AWARDS, DIVIDEND EQUIVALENTS, DEFERRED STOCK,
STOCK
PAYMENTS, RESTRICTED STOCK UNITS
8.1. Performance Awards.
(a) The value of Performance Awards may be linked to any
one or more of the Performance Criteria or other specific
criteria determined by the Administrator, in each case on a
specified date or dates or over any
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period or periods determined by the Administrator. In making
such determinations, the Administrator shall consider (among
such other factors as it deems relevant in light of the specific
type of Award) the contributions, responsibilities and other
compensation of the particular Eligible Individual. Performance
Awards may be paid in cash, shares of Common Stock, or both, as
determined by the Administrator.
(b) Without limiting Section 8.1(a), the Administrator
may grant to any Employee Performance Awards intended to qualify
as Performance Based Compensation, payable in cash based upon
the attainment of objective Performance Goals which are
established by the Administrator, in each case on a specified
date or dates or over any period or periods determined by the
Administrator, and which comply with Article IV.
8.2. Dividend Equivalents.
(a) Dividend Equivalents may be granted by the
Administrator based on dividends declared on the Common Stock,
to be credited as of dividend payment dates during the period
between the date an Award is granted to a Holder and the date
such Award vests, is exercised, is distributed or expires, as
determined by the Administrator. Such Dividend Equivalents shall
be converted to cash or additional shares of Common Stock by
such formula and at such time and subject to such limitations as
may be determined by the Administrator.
(b) Notwithstanding the foregoing, no Dividend Equivalents
shall be payable with respect to Options or Stock Appreciation
Rights.
8.3. Stock Payments. The
number or value of shares of any Stock Payment shall be
determined by the Administrator and may be based upon one or
more Performance Criteria or any other specific criteria,
including service to the Company or any Subsidiary, determined
by the Administrator. Stock Payments may, but are not required
to be made in lieu of base salary, bonus, fees or other cash
compensation otherwise payable to such Eligible Individual.
8.4. Deferred Stock. The
number of shares of Deferred Stock shall be determined by the
Administrator and may be based on one or more Performance
Criteria or other specific criteria, including service to the
Company or any Subsidiary, as the Administrator determines, in
each case on a specified date or dates or over any period or
periods determined by the Administrator. Common Stock underlying
a Deferred Stock award will not be issued until the Deferred
Stock award has vested, pursuant to a vesting schedule or other
conditions or criteria set by the Administrator. Unless
otherwise provided by the Administrator, a Holder of Deferred
Stock shall have no rights as a Company stockholder with respect
to such Deferred Stock until such time as the Award has vested
and the Common Stock underlying the Award has been issued to the
Holder.
8.5. Restricted Stock
Units. The number and terms and conditions of
Restricted Stock Units shall be determined by the Administrator.
The Administrator shall specify the date or dates on which the
Restricted Stock Units shall become fully vested and
nonforfeitable, and may specify such conditions to vesting as it
deems appropriate, including conditions based on one or more
Performance Criteria or other specific criteria, including
service to the Company or any Subsidiary, in each case on a
specified date or dates or over any period or periods, as the
Administrator determines,. The Administrator shall specify, or
permit the Holder to elect, the conditions and dates upon which
the shares of Common Stock underlying the Restricted Stock Units
which shall be issued, which dates shall not be earlier than the
date as of which the Restricted Stock Units vest and become
nonforfeitable and which conditions and dates shall be subject
to compliance with Section 409A of the Code. On the
distribution dates, the Company shall issue to the Holder one
unrestricted, fully transferable share of Common Stock for each
vested and nonforfeitable Restricted Stock Unit.
8.6. Term. The term of a
Performance Award, Dividend Equivalent award, Deferred Stock
award, Stock Payment award
and/or
Restricted Stock Unit award shall be set by the Administrator in
its sole discretion.
8.7. Exercise or Purchase
Price. The Administrator may establish the
exercise or purchase price of a Performance Award, shares of
Deferred Stock, shares distributed as a Stock Payment award or
shares distributed pursuant to a Restricted Stock Unit award;
provided, however, that value of the consideration
shall not be less than the par value of a share of Common Stock,
unless otherwise permitted by applicable state law.
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8.8. Exercise upon Termination of
Service. A Performance Award, Dividend
Equivalent award, Deferred Stock award, Stock Payment award
and/or
Restricted Stock Unit award is exercisable or distributable only
while the Holder is an Employee, Director or Consultant, as
applicable. The Administrator, however, in its sole discretion
may provide that the Performance Award, Dividend Equivalent
award, Deferred Stock award, Stock Payment award
and/or
Restricted Stock Unit award may be exercised or distributed
subsequent to a Termination of Service in certain events,
including a Change in Control, the Holder’s death,
retirement or disability or any other specified Termination of
Service.
ARTICLE IX.
AWARD OF
STOCK APPRECIATION RIGHTS
9.1. Grant of Stock Appreciation
Rights. A Stock Appreciation Right may be
granted: (a) in connection and simultaneously with the
grant of an Option, or (b) independent of an Option. A
Stock Appreciation Right shall be subject to such terms and
conditions not inconsistent with the Plan as the Administrator
shall impose.
9.2. Coupled Stock Appreciation Rights.
(a) A Coupled Stock Appreciation Right
(“CSAR”) shall be related to a particular
Option and shall be exercisable only when and to the extent the
related Option is exercisable.
(b) A CSAR may be granted to the Holder for no more than
the number of shares subject to the simultaneously granted
Option to which it is coupled.
(c) A CSAR shall entitle the Holder (or other person
entitled to exercise the Option pursuant to the Plan) to
surrender to the Company unexercised a portion of the Option to
which the CSAR relates (to the extent then exercisable pursuant
to its terms) and to receive from the Company in exchange
therefor an amount determined by multiplying (i) the
difference obtained by subtracting the exercise price per share
of the CSAR from (ii) the Fair Market Value of a share of
Common Stock on the date of exercise of the CSAR by the number
of shares of Common Stock with respect to which the CSAR shall
have been exercised, subject to any limitations the
Administrator may impose.
9.3. Independent Stock Appreciation
Rights.
(a) An Independent Stock Appreciation Right
(“ISAR”) shall be unrelated to any Option and
shall have a term set by the Administrator in its sole
discretion, which term shall not be more than ten years
following the date of grant of the ISAR. An ISAR shall be
exercisable in such installments as the Administrator may
determine. An ISAR shall cover such number of shares of Common
Stock as the Administrator may determine. The exercise price per
share of Common Stock subject to each ISAR shall be set by the
Administrator, but shall not be less than 100% of the Fair
Market Value of a share of Common Stock on the date the ISAR is
granted. An ISAR is exercisable only while the Holder is an
Employee, Non-Employee Director or Consultant; provided,
that the Administrator may determine that the ISAR may be
exercised subsequent to Termination of Service or following a
Change in Control, or because of the Holder’s retirement,
death or disability, or termination without cause, or otherwise
to the extent not inconsistent with the terms of any employment
agreement or other commitments made by the Company.
(b) An ISAR shall entitle the Holder (or other person
entitled to exercise the ISAR pursuant to the Plan) to exercise
all or a specified portion of the ISAR (to the extent then
exercisable pursuant to its terms) and to receive from the
Company an amount determined by multiplying (i) the
difference obtained by subtracting the exercise price per share
of the ISAR from the Fair Market Value of a share of Common
Stock on the date of exercise of the ISAR by (ii) the
number of shares of Common Stock with respect to which the ISAR
shall have been exercised, subject to any limitations the
Administrator may impose.
9.4. Payment. Payment of the
amounts determined under Section 9.2(c) and 9.3(b) above
shall be in cash, shares of Common Stock (based on its Fair
Market Value as of the date the Stock Appreciation Right is
exercised), or a combination of both, as determined by the
Administrator.
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ARTICLE X.
ADDITIONAL
TERMS OF AWARDS
10.1. Payment. The
Administrator shall determine the methods by which payments with
respect to any Awards granted under the Plan shall be made,
including, without limitation: (a) cash or check,
(b) shares of Common Stock (including, in the case of
payment of the exercise price of an Award, shares of Common
Stock issuable pursuant to the exercise of the Award) or shares
of Common Stock held for such period of time as may be required
by the Administrator in order to avoid adverse accounting
consequences, in each case, having a Fair Market Value on the
date of delivery equal to the aggregate payments required,
(c) delivery of a notice that the Holder has placed a
market sell order with a broker with respect to shares of Common
Stock then issuable upon exercise or vesting of an Award, and
that the broker has been directed to pay a sufficient portion of
the net proceeds of the sale to the Company in satisfaction of
the aggregate payments required, provided, that payment
of such proceeds is then made to the Company upon settlement of
such sale, or (d) any other form of legal consideration
acceptable to the Administrator. The Administrator shall also
determine the methods by which shares of Common Stock shall be
delivered or deemed to be delivered to Holders. Notwithstanding
any other provision of the Plan to the contrary, no Holder who
is a Director or an “executive officer” of the Company
within the meaning of Section 13(k) of the Exchange Act
shall be permitted to make payment with respect to any Awards
granted under the Plan, or continue any extension of credit with
respect to such payment with a loan from the Company or a loan
arranged by the Company in violation of Section 13(k) of
the Exchange Act.
10.2. Tax Withholding. The
Company or any Subsidiary shall have the authority and the right
to deduct or withhold, or require a Holder to remit to the
Company, an amount sufficient to satisfy federal, state, local
and foreign taxes (including the Holder’s FICA or
employment tax obligation) required by law to be withheld with
respect to any taxable event concerning a Holder arising as a
result of this Plan. The Administrator may in its sole
discretion and in satisfaction of the foregoing requirement
allow a Holder to elect to have the Company withhold shares of
Common Stock otherwise issuable under an Award (or allow the
surrender of shares of Common Stock). The number of shares of
Common Stock which may be so withheld or surrendered shall be
limited to the number of shares which have a Fair Market Value
on the date of withholding or repurchase equal to the aggregate
amount of such liabilities based on the minimum statutory
withholding rates for federal, state, local and foreign income
tax and payroll tax purposes that are applicable to such
supplemental taxable income. The Administrator shall determine
the fair market value of the Common Stock, consistent with
applicable provisions of the Code, for tax withholding
obligations due in connection with a broker-assisted cashless
option exercise involving the sale of shares to pay the option
exercise price or tax withholding obligation.
10.3. Transferability of Awards.
(a) Except as otherwise provided in Section 10.3(b):
(i) No Award under the Plan may be sold, pledged, assigned
or transferred in any manner other than by will or the laws of
descent and distribution or, subject to the consent of the
Administrator, pursuant to a DRO, unless and until such Award
has been exercised, or the shares underlying such Award have
been issued, and all restrictions applicable to such shares have
lapsed;
(ii) No Award or interest or right therein shall be liable
for the debts, contracts or engagements of the Holder or his
successors in interest or shall be subject to disposition by
transfer, alienation, anticipation, pledge, hypothecation,
encumbrance, assignment or any other means whether such
disposition be voluntary or involuntary or by operation of law
by judgment, levy, attachment, garnishment or any other legal or
equitable proceedings (including bankruptcy), and any attempted
disposition thereof shall be null and void and of no effect,
except to the extent that such disposition is permitted by the
preceding sentence; and
(iii) During the lifetime of the Holder, only the Holder
may exercise an Award (or any portion thereof) granted to him
under the Plan, unless it has been disposed of pursuant to a
DRO; after the death of the Holder, any exercisable portion of
an Award may, prior to the time when such portion becomes
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unexercisable under the Plan or the applicable Award Agreement,
be exercised by his personal representative or by any person
empowered to do so under the deceased Holder’s will or
under the then applicable laws of descent and distribution.
(b) Notwithstanding Section 10.3(a), the
Administrator, in its sole discretion, may determine to permit a
Holder to transfer a Non-Qualified Stock Option to any one or
more Permitted Transferees (as defined below), subject to the
following terms and conditions: (i) a Non-Qualified Stock
Option transferred to a Permitted Transferee shall not be
assignable or transferable by the Permitted Transferee other
than by will or the laws of descent and distribution;
(ii) any Non-Qualified Stock Option which is transferred to
a Permitted Transferee shall continue to be subject to all the
terms and conditions of the Non-Qualified Stock Option as
applicable to the original Holder (other than the ability to
further transfer the Non-Qualified Stock Option); and
(iii) the Holder and the Permitted Transferee shall execute
any and all documents requested by the Administrator, including,
without limitation documents to (A) confirm the status of
the transferee as a Permitted Transferee, (B) satisfy any
requirements for an exemption for the transfer under applicable
federal, state and foreign securities laws and (C) evidence
the transfer. For purposes of this Section 10.3(b),
“Permitted Transferee” shall mean, with respect
to a Holder, any “family member” of the Holder, as
defined under the instructions to use of the
Form S-8
Registration Statement under the Securities Act, or any other
transferee specifically approved by the Administrator after
taking into account any state, federal, local or foreign tax and
securities laws applicable to transferable Non-Qualified Stock
Options.
(c) Notwithstanding Section 10.3(a), a Holder may, in
the manner determined by the Administrator, designate a
beneficiary to exercise the rights of the Holder and to receive
any distribution with respect to any Award upon the
Holder’s death. A beneficiary, legal guardian, legal
representative, or other person claiming any rights pursuant to
the Plan is subject to all terms and conditions of the Plan and
any Award Agreement applicable to the Holder, except to the
extent the Plan and Award Agreement otherwise provide, and to
any additional restrictions deemed necessary or appropriate by
the Administrator. If the Holder is married and resides in a
community property state, a designation of a person other than
the Holder’s spouse as his or her beneficiary with respect
to more than 50% of the Holder’s interest in the Award
shall not be effective without the prior written consent of the
Holder’s spouse. If no beneficiary has been designated or
survives the Holder, payment shall be made to the person
entitled thereto pursuant to the Holder’s will or the laws
of descent and distribution. Subject to the foregoing, a
beneficiary designation may be changed or revoked by a Holder at
any time provided the change or revocation is filed with the
Administrator prior to the Holder’s death.
10.4. Conditions to Issuance of Shares.
(a) Notwithstanding anything herein to the contrary, the
Company shall not be required to issue or deliver any
certificates or make any book entries evidencing shares of
Common Stock pursuant to the exercise of any Award, unless and
until the Board has determined, with advice of counsel, that the
issuance of such shares is in compliance with all applicable
laws, regulations of governmental authorities and, if
applicable, the requirements of any exchange on which the shares
of Common Stock are listed or traded, and the shares of Common
Stock are covered by an effective registration statement or
applicable exemption from registration. In addition to the terms
and conditions provided herein, the Board may require that a
Holder make such reasonable covenants, agreements, and
representations as the Board, in its sole discretion, deems
advisable in order to comply with any such laws, regulations, or
requirements.
(b) All Common Stock certificates delivered pursuant to the
Plan and all shares issued pursuant to book entry procedures are
subject to any stop-transfer orders and other restrictions as
the Administrator deems necessary or advisable to comply with
federal, state, or foreign securities or other laws, rules and
regulations and the rules of any securities exchange or
automated quotation system on which the Common Stock is listed,
quoted, or traded. The Administrator may place legends on any
Common Stock certificate or book entry to reference restrictions
applicable to the Common Stock.
(c) The Administrator shall have the right to require any
Holder to comply with any timing or other restrictions with
respect to the settlement, distribution or exercise of any
Award, including a window-period limitation, as may be imposed
in the sole discretion of the Administrator.
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(d) No fractional shares of Common Stock shall be issued
and the Administrator shall determine, in its sole discretion,
whether cash shall be given in lieu of fractional shares or
whether such fractional shares shall be eliminated by rounding
down.
10.5. Forfeiture
Provisions. Pursuant to its general authority
to determine the terms and conditions applicable to Awards under
the Plan, the Administrator shall have the right to provide, in
the terms of Awards made under the Plan, or to require a Holder
to agree by separate written instrument, that: (a)(i) any
proceeds, gains or other economic benefit actually or
constructively received by the Holder upon any receipt or
exercise of the Award, or upon the receipt or resale of any
Common Stock underlying the Award, must be paid to the Company,
and (ii) the Award shall terminate and any unexercised
portion of the Award (whether or not vested) shall be forfeited,
if (b)(i) a Termination of Service occurs prior to a specified
date, or within a specified time period following receipt or
exercise of the Award, or (ii) the Holder at any time, or
during a specified time period, engages in any activity in
competition with the Company, or which is inimical, contrary or
harmful to the interests of the Company, as further defined by
the Administrator or (iii) the Holder incurs a Termination
of Service for “cause” (as such term is defined in the
sole discretion of the Administrator, or as set forth in a
written agreement relating to such Award between the Company and
the Holder).
10.6. Prohibition on
Repricing. Subject to Section 12.2, the
Administrator shall not, without the approval of the
stockholders of the Company, authorize the amendment of any
outstanding Award to reduce its price per share. Furthermore, no
Award shall be canceled and replaced with the grant of an Award
having a lesser price per share without the further approval of
stockholders of the Company. Subject to Section 12.2, the
Administrator shall have the authority, without the approval of
the stockholders of the Company, to amend any outstanding award
to increase the price per share or to cancel and replace an
Award with the grant of an Award having a price per share that
is greater than or equal to the price per share of the original
Award.
ARTICLE XI.
ADMINISTRATION
11.1. Administrator. The
Compensation Committee (or another committee or a subcommittee
of the Board assuming the functions of the Committee under the
Plan) shall administer the Plan (except as otherwise permitted
herein) and shall consist solely of two or more Non-Employee
Directors appointed by and holding office at the pleasure of the
Board, each of whom is intended to qualify as both a
“non-employee director” as defined by
Rule 16b-3
of the Exchange Act or any successor rule, an “outside
director” for purposes of Section 162(m) of the Code
and an “independent director” under the rules of the
New York Stock Exchange (or other principal securities market on
which shares of Common Stock are traded); provided, that
any action taken by the Committee shall be valid and effective,
whether or not members of the Committee at the time of such
action are later determined not to have satisfied the
requirements for membership set forth in this Section 11.l
or otherwise provided in any charter of the Committee. Except as
may otherwise be provided in any charter of the Committee,
appointment of Committee members shall be effective upon
acceptance of appointment. Committee members may resign at any
time by delivering written notice to the Board. Vacancies in the
Committee may only be filled by the Board. Notwithstanding the
foregoing, (a) the full Board, acting by a majority of its
members in office, shall conduct the general administration of
the Plan with respect to Awards granted to Non-Employee
Directors and (b) the Board or Committee may delegate its
authority hereunder to the extent permitted by Section 11.6.
11.2. Duties and Powers of
Committee. It shall be the duty of the
Committee to conduct the general administration of the Plan in
accordance with its provisions. The Committee shall have the
power to interpret the Plan and the Award Agreement, and to
adopt such rules for the administration, interpretation and
application of the Plan as are not inconsistent therewith, to
interpret, amend or revoke any such rules and to amend any Award
Agreement, provided that the rights or obligations of the holder
of the Award that is the subject of any such Award Agreement are
not affected adversely by such amendment, unless the consent of
the Holder is obtained or such amendment is otherwise permitted
under Section 12.10. Any such grant or award under the Plan
need not be the same with respect to each holder. Any such
interpretations and rules with respect to Incentive Stock
Options shall be consistent with the provisions of
Section 422 of the Code. In
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its sole discretion, the Board may at any time and from time to
time exercise any and all rights and duties of the Committee
under the Plan except with respect to matters which under
Rule 16b-3
under the Exchange Act or any successor rule, or
Section 162(m) of the Code, or any regulations or rules
issued thereunder, are required to be determined in the sole
discretion of the Committee.
11.3. Action by the
Committee. Unless otherwise established by
the Board or in any charter of the Committee, a majority of the
Committee shall constitute a quorum and the acts of a majority
of the members present at any meeting at which a quorum is
present, and acts approved in writing by all members of the
Committee in lieu of a meeting, shall be deemed the acts of the
Committee. Each member of the Committee is entitled to, in good
faith, rely or act upon any report or other information
furnished to that member by any officer or other employee of the
Company or any Subsidiary, the Company’s independent
certified public accountants, or any executive compensation
consultant or other professional retained by the Company to
assist in the administration of the Plan.
11.4. Authority of
Administrator. Subject to any specific
designation in the Plan, the Administrator has the exclusive
power, authority and sole discretion to:
(a) Designate Eligible Individuals to receive Awards;
(b) Determine the type or types of Awards to be granted to
each Holder;
(c) Determine the number of Awards to be granted and the
number of shares of Common Stock to which an Award will relate;
(d) Determine the terms and conditions of any Award granted
pursuant to the Plan, including, but not limited to, the
exercise price, grant price, or purchase price, any restrictions
or limitations on the Award, any schedule for vesting, lapse of
forfeiture restrictions or restrictions on the exercisability of
an Award, and accelerations or waivers thereof, any provisions
related to non-competition and recapture of gain on an Award,
based in each case on such considerations as the Administrator
in its sole discretion determines;
(e) Determine whether, to what extent, and pursuant to what
circumstances an Award may be settled in, or the exercise price
of an Award may be paid in cash, Common Stock, other Awards, or
other property, or an Award may be canceled, forfeited, or
surrendered;
(f) Prescribe the form of each Award Agreement, which need
not be identical for each Holder;
(g) Decide all other matters that must be determined in
connection with an Award;
(h) Establish, adopt, or revise any rules and regulations
as it may deem necessary or advisable to administer the Plan;
(i) Interpret the terms of, and any matter arising pursuant
to, the Plan or any Award Agreement; and
(j) Make all other decisions and determinations that may be
required pursuant to the Plan or as the Administrator deems
necessary or advisable to administer the Plan.
11.5. Decisions Binding. The
Administrator’s interpretation of the Plan, any Awards
granted pursuant to the Plan, any Award Agreement and all
decisions and determinations by the Administrator with respect
to the Plan are final, binding, and conclusive on all parties.
11.6. Delegation of
Authority. To the extent permitted by
applicable law, the Board or Committee may from time to time
delegate to a committee of one or more members of the Board or
one or more officers of the Company the authority to grant or
amend Awards; provided, however, that in no event shall
an officer be delegated the authority to grant awards to, or
amend awards held by, the following individuals:
(a) individuals who are subject to Section 16 of the
Exchange Act, (b) any Employee who is a “covered
employee” within the meaning of Section 162(m) of the
Code, or (c) officers of the Company (or Directors) to whom
authority to grant or amend Awards has been delegated hereunder.
Any delegation hereunder shall be subject to the restrictions
and limits that the Board or Committee specifies at the time of
such delegation, and the Board
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may at any time rescind the authority so delegated or appoint a
new delegatee. At all times, the delegatee appointed under this
Section 11.6 shall serve in such capacity at the pleasure
of the Board and the Committee.
ARTICLE XII.
MISCELLANEOUS
PROVISIONS
12.1. Amendment, Suspension or Termination of
the Plan. Except as otherwise provided in
this Section 12.1, the Plan may be wholly or partially
amended or otherwise modified, suspended or terminated at any
time or from time to time by the Administrator. However, without
approval of the Company’s stockholders given within twelve
(12) months before or after the action by the
Administrator, no action of the Administrator may, except as
provided in Section 12.2, (i) increase the limits
imposed in Section 2.1 on the maximum number of shares
which may be issued under the Plan, or (ii) decrease the
exercise price of any outstanding Option or Stock Appreciation
Right granted under the Plan. Except as provided in
Section 12.10, no amendment, suspension or termination of
the Plan shall, without the consent of the Holder, impair any
rights or obligations under any Award theretofore granted or
awarded, unless the Award itself otherwise expressly so
provides. No Awards may be granted or awarded during any period
of suspension or after termination of the Plan, and in no event
may any Award be granted under the Plan after February 21,
2018.
12.2. Changes in Common Stock or Assets of the
Company, Acquisition or Liquidation of the Company and Other
Corporate Events.
(a) In the event of any stock dividend, stock split,
combination or exchange of shares, merger, consolidation or
other distribution (other than normal cash dividends) of Company
assets to stockholders, or any other change affecting the shares
of Common Stock or the share price of the Common Stock, the
Administrator shall make equitable adjustments, if any, to
reflect such change with respect to (i) the aggregate
number and kind of shares that may be issued under the Plan
(including, but not limited to, adjustments of the limitations
in Section 2.1 on the maximum number and kind of shares
which may be issued under the Plan, and adjustments of the Award
Limit); (ii) the number and kind of shares of Common Stock
(or other securities or property) subject to outstanding Awards;
(iii) the terms and conditions of any outstanding Awards
(including, without limitation, any applicable performance
targets or criteria with respect thereto); and (iv) the
grant or exercise price per share for any outstanding Awards
under the Plan. Any adjustment affecting an Award intended as
Performance-Based Compensation shall be made consistent with the
requirements of Section 162(m) of the Code or any successor
provision.
(b) In the event of any transaction or event described in
Section 12.2(a) or any unusual or nonrecurring transactions
or events affecting the Company, any affiliate of the Company,
or the financial statements of the Company or any affiliate, or
of changes in applicable laws, regulations or accounting
principles, the Administrator, in its sole discretion, and on
such terms and conditions as it deems appropriate, either by the
terms of the Award or by action taken prior to the occurrence of
such transaction or event and either automatically or upon the
Holder’s request, is hereby authorized to take any one or
more of the following actions whenever the Administrator
determines that such action is appropriate in order to prevent
dilution or enlargement of the benefits or potential benefits
intended to be made available under the Plan or with respect to
any Award under the Plan, to facilitate such transactions or
events or to give effect to such changes in laws, regulations or
principles
(i) To provide for either (A) termination of any such
Award in exchange for an amount of cash, if any, equal to the
amount that would have been attained upon the exercise of such
Award or realization of the Holder’s rights (and, for the
avoidance of doubt, if as of the date of the occurrence of the
transaction or event described in this Section 12.2 the
Administrator determines in good faith that no amount would have
been attained upon the exercise of such Award or realization of
the Holder’s rights, then such Award may be terminated by
the Company without payment) or (B) the replacement of such
Award with other rights or property selected by the
Administrator in its sole discretion having an aggregate value
not exceeding the amount that could have been attained upon the
exercise of such Award or realization of the Holder’s
rights had such Award been currently exercisable or payable or
fully vested;
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(ii) To provide that such Award be assumed by the successor
or survivor corporation, or a parent or subsidiary thereof, or
shall be substituted for by similar options, rights or awards
covering the stock of the successor or survivor corporation, or
a parent or subsidiary thereof, with appropriate adjustments as
to the number and kind of shares and prices;
(iii) To make adjustments in the number and type of shares
of Common Stock (or other securities or property) subject to
outstanding Awards, and in the number and kind of outstanding
Restricted Stock or Deferred Stock
and/or in
the terms and conditions of (including the grant or exercise
price), and the criteria included in, outstanding options,
rights and awards and options, rights and awards which may be
granted in the future;
(iv) To provide that such Award shall be exercisable or
payable or fully vested with respect to all shares covered
thereby, notwithstanding anything to the contrary in the Plan or
the applicable Award Notice; and
(v) To provide that the Award cannot vest, be exercised or
become payable after such event.
(c) Notwithstanding any other provision of the Plan, in the
event of a Change in Control, each outstanding Award shall be
assumed or an equivalent Award substituted by the successor
corporation or a parent or subsidiary of the successor
corporation. In the event that the successor corporation refuses
to assume or substitute for the Award, the Administrator may
cause any or all of such Awards to become fully exercisable
immediately prior to the consummation of such transaction and
all forfeiture restrictions on any or all of such Awards to
lapse. If an Award is exercisable in lieu of assumption or
substitution in the event of a Change in Control, the
Administrator shall notify the Holder that the Award shall be
fully exercisable for a period of fifteen (15) days from
the date of such notice, and the Award shall terminate upon the
expiration of such period. For the purposes of this
Section 12.2(c), an Award shall be considered assumed if,
following the Change in Control, the Award confers the right to
purchase or receive, for each share of Common Stock subject to
the Award immediately prior to the Change in Control, the
consideration (whether stock, cash, or other securities or
property) received in the Change in Control by holders of Common
Stock for each share held on the effective date of the
transaction (and if holders were offered a choice of
consideration, the type of consideration chosen by the holders
of a majority of the outstanding shares); provided,
however, that if such consideration received in the
Change in Control was not solely common stock of the successor
corporation or its parent, the Administrator may, with the
consent of the successor corporation, provide for the
consideration to be received upon the exercise of the Award, for
each share of Common Stock subject to an Award, to be solely
common stock of the successor corporation or its parent equal in
fair market value to the per share consideration received by
holders of Common Stock in the Change in Control.
(d) The Administrator may, in its sole discretion, include
such further provisions and limitations in any Award, agreement
or certificate, as it may deem equitable and in the best
interests of the Company that are not inconsistent with the
provisions of this Plan.
(e) With respect to Awards which are intended to qualify as
Performance-Based Compensation, no adjustment or action
described in this Section 12.2 or in any other provision of
the Plan shall be authorized to the extent that such adjustment
or action would cause such Award to fail to so qualify as
Performance-Based Compensation, unless the Administrator
determines that the Award should not so qualify. No adjustment
or action described in this Section 12.2 or in any other
provision of the Plan shall be authorized to the extent that
such adjustment or action would cause the Plan to violate
Section 422(b)(1) of the Code. Furthermore, no such
adjustment or action shall be authorized to the extent such
adjustment or action would result in short-swing profits
liability under Section 16 or violate the exemptive
conditions of
Rule 16b-3
unless the Administrator determines that the Award is not to
comply with such exemptive conditions.
(f) The existence of the Plan, the Award Agreement and the
Awards granted hereunder shall not affect or restrict in any way
the right or power of the Company or the stockholders of the
Company to make or authorize any adjustment, recapitalization,
reorganization or other change in the Company’s capital
structure or its business, any merger or consolidation of the
Company, any issue of stock or of options, warrants or rights to
purchase stock or of bonds, debentures, preferred or prior
preference stocks whose rights are superior to or
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affect the Common Stock or the rights thereof or which are
convertible into or exchangeable for Common Stock, or the
dissolution or liquidation of the company, or any sale or
transfer of all or any part of its assets or business, or any
other corporate act or proceeding, whether of a similar
character or otherwise.
(g) No action shall be taken under this Section 12.2
which shall cause an Award to fail to comply with
Section 409A of the Code or the Treasury Regulations
thereunder, to the extent applicable to such Award.
12.3. Approval of Plan by
Stockholders. The Plan will be submitted for
the approval of the Company’s stockholders within twelve
(12) months after the date of the Board’s initial
adoption of the Plan. Awards may be granted or awarded prior to
such stockholder approval, provided that such Awards shall not
be exercisable, shall not vest and the restrictions thereon
shall not lapse and no shares of Common Stock shall be issued
pursuant thereto prior to the time when the Plan is approved by
the stockholders, and provided further that if such approval has
not been obtained at the end of said twelve (12) month
period, all Awards previously granted or awarded under the Plan
shall thereupon be canceled and become null and void.
12.4. No Stockholders
Rights. Except as otherwise provided herein,
a Holder shall have none of the rights of a stockholder with
respect to shares of Common Stock covered by any Award until the
Holder becomes the record owner of such shares of Common Stock.
12.5. Paperless
Administration. In the event that the Company
establishes, for itself or using the services of a third party,
an automated system for the documentation, granting or exercise
of Awards, such as a system using an internet website or
interactive voice response, then the paperless documentation,
granting or exercise of Awards by a Holder may be permitted
through the use of such an automated system.
12.6. Effect of Plan upon Other Compensation
Plans. The adoption of the Plan shall not
affect any other compensation or incentive plans in effect for
the Company or any Subsidiary. Nothing in the Plan shall be
construed to limit the right of the Company or any Subsidiary:
(a) to establish any other forms of incentives or
compensation for Employees, Directors or Consultants of the
Company or any Subsidiary, or (b) to grant or assume
options or other rights or awards otherwise than under the Plan
in connection with any proper corporate purpose including
without limitation, the grant or assumption of options in
connection with the acquisition by purchase, lease, merger,
consolidation or otherwise, of the business, stock or assets of
any corporation, partnership, limited liability company, firm or
association.
12.7. Compliance with
Laws. The Plan, the granting and vesting of
Awards under the Plan and the issuance and delivery of shares of
Common Stock and the payment of money under the Plan or under
Awards granted or awarded hereunder are subject to compliance
with all applicable federal, state, local and foreign laws,
rules and regulations (including but not limited to state,
federal and foreign securities law and margin requirements) and
to such approvals by any listing, regulatory or governmental
authority as may, in the opinion of counsel for the Company, be
necessary or advisable in connection therewith. Any securities
delivered under the Plan shall be subject to such restrictions,
and the person acquiring such securities shall, if requested by
the Company, provide such assurances and representations to the
Company as the Company may deem necessary or desirable to assure
compliance with all applicable legal requirements. To the extent
permitted by applicable law, the Plan and Awards granted or
awarded hereunder shall be deemed amended to the extent
necessary to conform to such laws, rules and regulations.
12.8. Titles and Headings, References to
Sections of the Code. The titles and headings
of the Sections in the Plan are for convenience of reference
only and, in the event of any conflict, the text of the Plan,
rather than such titles or headings, shall control. References
to sections of the Code shall include any amendment or successor
thereto.
12.9. Governing Law. The
Plan and any agreements hereunder shall be administered,
interpreted and enforced under the internal laws of the State of
Delaware without regard to conflicts of laws thereof.
12.10. Section 409A. To
the extent that the Administrator determines that any Award
granted under the Plan is subject to Section 409A of the
Code, the Award Agreement evidencing such Award shall
incorporate the terms and conditions required by
Section 409A of the Code. To the extent applicable, the
Plan and Award Agreements shall be interpreted in accordance
with Section 409A of the Code and Department of Treasury
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regulations and other interpretive guidance issued thereunder,
including without limitation any such regulations or other
guidance that may be issued after the Effective Date.
Notwithstanding any provision of the Plan to the contrary, in
the event that following the Effective Date the Administrator
determines that any Award may be subject to Section 409A of
the Code and related Department of Treasury guidance (including
such Department of Treasury guidance as may be issued after the
Effective Date), the Administrator may adopt such amendments to
the Plan and the applicable Award Agreement or adopt other
policies and procedures (including amendments, policies and
procedures with retroactive effect), or take any other actions,
that the Administrator determines are necessary or appropriate
to (a) exempt the Award from Section 409A of the Code
and/or
preserve the intended tax treatment of the benefits provided
with respect to the Award, or (b) comply with the
requirements of Section 409A of the Code and related
Department of Treasury guidance and thereby avoid the
application of any penalty taxes under such Section.
12.11. No Rights to
Awards. No Eligible Individual or other
person shall have any claim to be granted any Award pursuant to
the Plan, and neither the Company nor the Administrator is
obligated to treat Eligible Individuals, Holders or any other
persons uniformly.
12.12. Unfunded Status of
Awards. The Plan is intended to be an
“unfunded” plan for incentive compensation. With
respect to any payments not yet made to a Holder pursuant to an
Award, nothing contained in the Plan or any Award Agreement
shall give the Holder any rights that are greater than those of
a general creditor of the Company or any Subsidiary.
12.13. Indemnification. To
the extent allowable pursuant to applicable law, each member of
the Committee or of the Board shall be indemnified and held
harmless by the Company from any loss, cost, liability, or
expense that may be imposed upon or reasonably incurred by such
member in connection with or resulting from any claim, action,
suit, or proceeding to which he or she may be a party or in
which he or she may be involved by reason of any action or
failure to act pursuant to the Plan and against and from any and
all amounts paid by him or her in satisfaction of judgment in
such action, suit, or proceeding against him or her; provided
he or she gives the Company an opportunity, at its own
expense, to handle and defend the same before he or she
undertakes to handle and defend it on his or her own behalf. The
foregoing right of indemnification shall not be exclusive of any
other rights of indemnification to which such persons may be
entitled pursuant to the Company’s Certificate of
Incorporation or Bylaws, as a matter of law, or otherwise, or
any power that the Company may have to indemnify them or hold
them harmless.
12.14. Relationship to other
Benefits. No payment pursuant to the Plan
shall be taken into account in determining any benefits under
any pension, retirement, savings, profit sharing, group
insurance, welfare or other benefit plan of the Company or any
Subsidiary except to the extent otherwise expressly provided in
writing in such other plan or an agreement thereunder.
12.15. Expenses. The
expenses of administering the Plan shall be borne by the Company
and its Subsidiaries.
* * * * *
I hereby certify that the foregoing Complete Production
Services, Inc. 2008 Incentive Award Plan was duly adopted by the
Board of Directors of Complete Production Services, Inc. on
February 21, 2008.
* * * * *
I hereby certify that the foregoing Complete Production
Services, Inc. 2008 Incentive Award Plan was approved by the
stockholders of Complete Production Services, Inc. on
May 22, 2008
* * * * *
Executed on this day
of ,
2008.
James F. Maroney, III,
Corporate Secretary
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COMPLETE PRODUCTION SERVICES, INC.
ANNUAL MEETING OF STOCKHOLDERS
May 22, 2008
9:00 a.m.
The Lancaster Hotel
701 Texas Avenue
Houston, TX 77002
Complete Production Services, Inc.
11700 Old Katy Road, Suite 300
Houston, Texas, 77079
proxy
This proxy is solicited by the Board of Directors for use at the Annual Meeting on May 22, 2008.
The shares of stock you hold in your account or in a dividend reinvestment account will be voted as
you specify on the reverse side.
If no choice is specified, the proxy will be voted “FOR” Items 1, 2 and 3.
By signing the proxy, you revoke all prior proxies and appoint Joseph C. Winkler and James F.
Maroney, and each of them acting in the absence of the other, with full power of substitution, to
vote your shares on the matters shown on the reverse side and any other matters which may come
before the Annual Meeting and all adjournments.
See reverse for voting instructions.
Mark, sign and date your proxy card and return it in the postage-paid envelope we’ve provided or
return it to Complete Production Services, Inc., c/o Shareowner ServicesSM, P.O. Box
64873, St. Paul, MN 55164-9397.
ò Please detach here ò
The Board of Directors Recommends a Vote FOR Items 1, 2 and 3.
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1.
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To elect three
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01 Robert S. Boswell
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03 Marcus A. Watts
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Vote FOR
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Vote |
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Class III directors
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02 Michael McShane
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all nominees
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WITHHELD |
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to serve for three-
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(except as
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from all |
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year terms until the
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marked)
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nominees |
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annual meeting of |
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stockholders in |
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2011: |
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(Instructions: To withhold authority to vote for any indicated nominee,
write the number(s) of the nominee(s) in the box provided to the right.)
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2. |
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To approve the Complete
Production Services, Inc. 2008 Incentive Award Plan. |
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o For
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o Against
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o Abstain |
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To ratify the appointment of Grant Thornton LLP as our independent registered
public accountants for the year ending December 31, 2008. |
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o For
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o Against
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THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS GIVEN, WILL BE
VOTED FOR ITEMS 1, 2 AND 3.
Address Change? Mark Box o Indicate changes below:
Signature(s) in Box
Please sign exactly as your name(s) appears on
Proxy. If held in joint tenancy, all persons
should sign. Trustees, administrators, etc.,
should include title and authority.
Corporations should provide full name of
corporation and title of authorized officer
signing the Proxy.