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 (Amendment No. )
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Noble Energy, Inc.
(Name of Registrant as Specified In Its Charter)
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TABLE OF CONTENTS
100 Glenborough Drive
Suite 100
Houston, Texas
77067-3610
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held On April 26,
2011
To the Stockholders of
Noble Energy, Inc.:
The annual meeting of stockholders of NOBLE ENERGY, INC., a
Delaware corporation (Company), will be held on
Tuesday, April 26, 2011, at 9:30 a.m., Central Time,
at The Woodlands Waterway Marriott Hotel & Convention
Center, 1601 Lake Robbins Drive, The Woodlands, Texas 77380, for
the following purposes:
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1.
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To elect the nine nominees of the Board of Directors as members
of the Board of Directors of the Company to serve until the next
annual meeting of the Companys stockholders;
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2.
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To ratify the appointment of the independent auditor by the
Companys Audit Committee;
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To approve, in a nonbinding advisory vote, the compensation of
the Companys named executive officers;
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To determine, in a nonbinding advisory vote, whether a
stockholder vote to approve the compensation of the
Companys named executive officers should occur every one,
two or three years;
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5.
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To approve the amendment and restatement of the Companys
1992 Stock Option and Restricted Stock Plan to increase the
number of shares of common stock authorized for issuance under
the plan from 24,000,000 to 31,000,000 and modify certain plan
provisions; and
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6.
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To transact such other business as may properly come before the
meeting and any adjournment or postponement thereof.
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The Board of Directors has fixed the close of business on
March 8, 2011 as the record date for the determination of
stockholders entitled to notice of, and to vote at, the meeting
and any adjournment or postponement thereof. Only stockholders
of record at the close of business on the record date are
entitled to notice of, and to vote at, the meeting. A complete
list of the stockholders will be available for examination at
the offices of the Company in Houston, Texas during ordinary
business hours for a period of 10 days prior to the meeting.
A record of the Companys activities during 2010 and its
financial statements for the fiscal year ended December 31,
2010 are contained in the Companys 2010 Annual Report on
Form 10-K.
The Annual Report does not form any part of the material for
solicitation of proxies.
All stockholders are cordially invited to attend the meeting.
Stockholders are urged, whether or not they plan to attend
the meeting, to complete, date and sign the accompanying proxy
card and to return it promptly in the postage-paid return
envelope provided, or, alternatively, to vote their proxy by
telephone or the internet according to the instructions on the
proxy card. If a stockholder who has returned a proxy
attends the meeting in person, the stockholder may revoke the
proxy and vote in person on all matters submitted at the meeting.
By Order of the Board of Directors of
Noble Energy, Inc.
Arnold J. Johnson
Senior Vice President, General Counsel and Secretary
Houston, Texas
March 22, 2011
IMPORTANT
NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR
THE 2011 ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON APRIL 26,
2011.
The Companys Proxy Statement for the 2011 Annual Meeting
of Stockholders, Annual Report to Stockholders for the fiscal
year ended December 31, 2010 and Annual Report on
Form 10-K
for the fiscal year ended December 31, 2010 are available
at https://materials.proxyvote.com/655044.
100 Glenborough Drive
Suite 100
Houston, Texas
77067-3610
For Annual Meeting of Stockholders
To Be Held On April 26, 2011
The accompanying proxy, mailed together with this Proxy
Statement, is solicited by and on behalf of the Board of
Directors (Board of Directors or Board)
of Noble Energy, Inc., a Delaware corporation
(Company), for use at the annual meeting of
stockholders of the Company to be held at 9:30 a.m.,
Central Time, on Tuesday, April 26, 2011, at The Woodlands
Waterway Marriott Hotel & Convention Center, 1601 Lake
Robbins Drive, The Woodlands, Texas 77380, and at any
adjournment or postponement thereof. The approximate date on
which this Proxy Statement and the accompanying proxy will first
be mailed to our stockholders is March 24, 2011.
Shares represented by valid proxies will be voted at the meeting
in accordance with the directions given. If no directions are
given, the shares will be voted in accordance with the
recommendations of our Board unless otherwise indicated. Any
stockholder of the Company returning a proxy has the right to
revoke the proxy at any time before it is voted by communicating
the revocation in writing to Arnold J. Johnson, Secretary, Noble
Energy, Inc., 100 Glenborough Drive, Suite 100, Houston,
Texas
77067-3610,
or by executing and delivering a proxy bearing a later date. No
revocation by written notice or by delivery of another proxy
will be effective until the notice of revocation or other proxy,
as the case may be, has been received by the Company at, or
prior to, the meeting.
In order for an item of business proposed by a stockholder to be
considered properly brought before the annual meeting of
stockholders as an agenda item or to be eligible for inclusion
in our proxy statement, our By-laws require that the stockholder
give written notice to our Secretary. The notice must specify
certain information concerning the stockholder and the item of
business proposed to be brought before the meeting. The notice
must be received by our Secretary no later than 120 calendar
days before the anniversary of the previous years annual
meeting of stockholders; provided, however, that in the event
that (1) no annual meeting was held in the previous year or
(2) the date of the annual meeting has changed by more than
30 days from the date of the previous years meeting,
notice by the stockholder must be received no later than the
close of business on the tenth day following the earlier of the
day on which notice of the meeting date was mailed or public
disclosure of the meeting date was made for such notice to be
timely. Accordingly, proper notice of a stockholder proposal for
the 2012 annual meeting must be received by us no later than
December 28, 2011.
Voting
Procedures and Tabulation
Holders of record of our common stock may vote using one of the
following three methods:
By Mail: Stockholders of record may vote by
signing, dating and returning the proxy card in the accompanying
postage-paid envelope.
By Telephone: Stockholders of record may call
the toll-free number on the accompanying proxy card to vote by
telephone, in accordance with the instructions included on the
proxy card and through voice prompts received during the call.
By Internet: By accessing the voting website
listed on the proxy card, stockholders of record may vote
through the internet in accordance with the instructions
included on the proxy card and on the voting website.
Stockholders electing to vote through the internet may incur
telephone and internet access charges.
Proxies submitted by telephone or the internet are treated in
the same manner as if the stockholder had signed, dated and
returned the proxy card by mail. Therefore, stockholders of
record electing to vote by telephone or the internet should not
return their proxy cards by mail.
Stockholders whose shares of our common stock are held in the
name of a bank, broker or other holder of record (that is,
street name) will receive separate instructions from
such holder of record regarding the voting of proxies.
We will appoint one or more inspectors of election to act at the
meeting and to make a written report thereof. Prior to the
meeting, the inspectors will sign an oath to perform their
duties in an impartial manner and according to the best of their
ability. The inspectors will ascertain the number of shares
outstanding and the voting power of each, determine the shares
represented at the meeting and the validity of proxies and
ballots, count all votes and ballots, and perform certain other
duties as required by law.
The inspectors will tabulate the number of votes cast for, or
withheld from, each matter submitted at the meeting for a
stockholder vote. Votes that are withheld will be excluded
entirely from the vote and will have no effect. Under the rules
of the New York Stock Exchange (NYSE), brokers who
hold shares in street name have the discretionary authority to
vote on certain routine items when they have not
received instructions from beneficial owners. For purposes of
our 2011 annual meeting, brokers will be prohibited from
exercising discretionary authority with respect to all proposals
except the ratification of the appointment of our independent
auditor. In instances where brokers are prohibited from
exercising discretionary authority and no instructions are
received from beneficial owners with respect to such item
(so-called broker non-votes), the shares they hold
will have no effect on the vote.
CORPORATE
GOVERNANCE
We are committed to integrity, reliability and transparency in
our disclosures to the public. To this end, we adhere to
corporate governance practices designed to ensure that our
business is conducted in the best interest of our stockholders
and in compliance with our legal and regulatory obligations,
including the listing standards of the NYSE and the rules and
regulations of the Securities and Exchange Commission
(SEC). We monitor developments in the area of
corporate governance.
Recent
Corporate Governance Initiatives
On January 25, 2011, our Board adopted stock ownership
guidelines for our officers and non-employee directors. These
guidelines are discussed under Stock Ownership
Guidelines in our Compensation Discussion and Analysis in
this Proxy Statement and are set out in our Corporate Governance
Guidelines, which are available on our website,
www.nobleenergyinc.com.
Effective February 1, 2011, amendments were made to the
change of control arrangements for our named executive officers
and other officers and employees of the Company for the purpose
of eliminating tax
gross-up
payment obligations of the Company to those individuals. These
amendments are discussed under Change of Control
Arrangements in our Compensation Discussion and Analysis
in this Proxy Statement and described in
Form 8-K
filed with the SEC on February 4, 2011.
One of our objectives is to promote a culture of corporate
social responsibility that respects the rights and safety of
individuals, as well as the laws, environments and
sustainability of the communities in which we operate. In 2010
we adopted a Corporate Social Responsibility Policy, which is
available on our website, www.nobleenergyinc.com,
and continued to integrate a number of our ongoing initiatives
into a corporate social responsibility program. As an example of
one of those initiatives, we participated in the Carbon
Disclosure Project by which companies publicly disclose on a
voluntary basis certain information pertaining to greenhouse gas
emissions. We also expanded the role of our Environment, Health
and Safety Committee to include assisting our Board by serving
as a forum for the review of Company strategy and initiatives in
the area of corporate social responsibility. This expanded role
is reflected in the committees charter, which is available
on our website, www.nobleenergyinc.com.
2
Director
Independence
The standards applied by our Board in affirmatively determining
whether a director is independent in compliance with
the listing standards of the NYSE generally provide that a
director is not independent if:
1. the director is, or has been within the last three
years, an employee of the Company, or an immediate family member
(defined as including a persons spouse, parents, children,
siblings, mothers- and
fathers-in-law,
sons-and
daughters-in-law,
brothers- and
sisters-in-law,
and anyone, other than domestic employees, who shares such
persons home) is, or has been within the last three years,
an executive officer, of the Company;
2. the director has received, or has an immediate family
member who has received, during any twelve-month period within
the last three years, more than $120,000 per year in direct
compensation from us, other than director and committee fees and
pension or other forms of deferred compensation for prior
service (provided such compensation is not contingent in any way
on continued service);
3. (a) the director is a current partner or employee
of our internal or external auditor; (b) the director has
an immediate family member who is a current partner of that
firm; (c) the director has an immediate family member who
is a current employee of that firm and personally works on our
audit; or (d) the director or an immediate family member
was, within the last three years, a partner or employee of that
firm and personally worked on our audit during that time;
4. the director or an immediate family member is, or has
been within the last three years, employed as an executive
officer of another company where any of our present executive
officers at the same time serves or served on that
companys compensation committee; or
5. the director is a current employee, or an immediate
family member is a current executive officer, of a company that
has made payments to, or received payments from, us for property
or services in an amount which, in any of the last three fiscal
years, exceeds the greater of $1 million or 2% of such
other companys consolidated gross revenues.
In addition to these objective standards, our Board has adopted
a general standard, also in compliance with the NYSE listing
standards, to the effect that no director qualifies as
independent unless the Board affirmatively
determines that the director has no material relationship with
the Company that could interfere with the directors
ability to exercise independent judgment. Our Board exercises
appropriate discretion in identifying and evaluating the
materiality of any relationships directors may have with us or
with parties that conduct business with us.
On February 9, 2011, our Board reviewed our directors
relationships with the Company (and those of their immediate
family members), including information related to transactions,
relationships or arrangements between the Company and our
directors or parties related to our directors. The following is
a description of categories or types of transactions,
relationships and arrangements considered by our Board in
confirming its determination that these directors are
independent:
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Jeffrey L. Berenson is President and Chief Executive Officer of
Berenson & Company, as well as a director and chair of
the Compensation Committee of Epoch Holdings Corporation, a
holding company that provides investment management and advisory
services. Mr. Berenson is a former director of Patina
Oil & Gas Corporation (Patina), which we
acquired by merger in May 2005.
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Michael A. Cawley is President, Chief Executive Officer and
Trustee of The Samuel Roberts Noble Foundation, Inc., to which
we paid $17,500 in 2010 for the use of its aircraft.
Mr. Cawley received payments totaling approximately $25,775
in 2010 attributable to his interests in certain oil and gas
royalties that he purchased from the Company in the 1990s.
Mr. Cawley is also a director and member of the
Compensation Committee of Noble Corporation, a publicly-traded
drilling company with which the Company conducted business in
2010.
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Edward F. Cox received payments in 2010 totaling approximately
$298,222 attributable to his interests in certain oil and gas
royalties and interests in two general partnerships that hold
royalties and are managed by
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the Company. Mr. Cox purchased these interests from the
Company in the 1980s and 1990s. Mr. Cox also holds the
position of chair of The New York Republican State Committee.
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Thomas J. Edelman is a director of Berenson & Company,
as well as managing partner of White Deer Energy LP, an energy
private equity fund that owns oil service companies with which
the Company conducted business in 2010. Mr. Edelman is the
former Chairman and Chief Executive Officer of Patina, which we
acquired by merger in May 2005.
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Eric P. Grubman is Executive Vice President of the National
Football League, and assumed the role of the leagues Chief
Financial Officer in September 2010.
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Kirby L. Hedrick is a former Executive Vice President of
Phillips Petroleum Company.
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Scott D. Urban is a former Group Vice President, Upstream for
several profit centers at BP and is a partner in Edgewater
Energy LLC, an exploration and production consulting and private
investment firm. Mr. Urban is also a director and chair of
the Compensation Committee, and member of the Nominating and
Corporate Governance Committee, of Pioneer Drilling Company.
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William T. Van Kleef is a director and chair of the Audit
Committee of Oil States International, Inc., a publicly-traded
company that provides specialty products and services to oil and
gas drilling and production companies worldwide and with which
the Company conducted business in 2010.
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After reviewing these categories or types of transactions,
relationships and arrangements, and after applying the NYSE
independence standards described above, our Board affirmatively
determined that no material relationship existed that would
interfere with the ability of Messrs. Berenson, Cawley,
Cox, Edelman, Grubman, Hedrick, Urban or Van Kleef to exercise
independent judgment and that each is independent for Board
membership purposes. Our Board also determined that all members
of our Audit Committee, Corporate Governance and Nominating
Committee and Compensation, Benefits and Stock Option Committee
are independent under the NYSE independence standards and
applicable SEC rules.
Leadership
Structure
Chairman
and Chief Executive Officer
Our Board currently combines the role of chairman of the board
with the role of chief executive officer (CEO), and
maintains a separate empowered lead independent director
position to further strengthen our governance structure. Our
Board believes this provides an efficient and effective
leadership model for the Company. Combining the chairman and CEO
roles fosters clear accountability, effective decision-making
and alignment on corporate strategy.
Our Board believes that the Company is strengthened by the
chairmanship of Mr. Davidson, who provides strategic,
operational and technical expertise, vision and a proven ability
to lead the Company to the successes it has experienced. Under
Mr. Davidsons leadership, the Company has continued
to reflect solid growth. The Board believes that, under the
present circumstances, the interests of the Company and its
stockholders are best served by the leadership and direction of
Mr. Davidson as Chairman and CEO.
Our Board recognizes that no single leadership model is right
for all companies and at all times and that, depending on the
circumstances, other leadership models, such as a separate
independent chairman of the board, might be appropriate.
A key responsibility of our CEO and Board is ensuring that an
effective process is in place to provide continuity of Company
leadership over the long term. Each year, a full review of
senior leadership succession is conducted by our Board. During
this review, the CEO and the independent directors discuss
candidates for senior leadership positions, succession timing
for those positions and development plans for the
highest-potential candidates. This process ensures continuity of
leadership over the long term and forms the basis on which the
Company makes ongoing leadership assignments.
4
Lead
Independent Director and Executive Sessions
Our Lead Independent Director, currently Michael A. Cawley, is
elected annually by our Board. Our Lead Independent Director
serves as a key component of our governance structure, subject
to oversight by the independent members of our Board. We have
not experienced any problematic governance or management issues
resulting from our maintaining separate Chairman and CEO and
Lead Independent Director positions. The Lead Independent
Directors responsibilities and authority generally include:
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approving the scheduling of regular and, where feasible, special
meetings of the Board to ensure that there is sufficient time
for discussion of all agenda items;
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consulting with the Chairman to establish, and approving, the
agenda for each Board meeting;
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discussing with the Chairman and approving the scope of
materials to be delivered to the directors in advance of Board
meetings;
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presiding at all executive sessions of the independent or
non-management directors and all other Board meetings at which
the Chairman is not present;
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serving as a liaison between the Chairman and the independent or
non-management directors;
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coordinating the activities of such directors;
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coordinating the agenda for, and moderating, sessions of the
Boards independent directors and other non-management
directors;
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facilitating communications among the other members of the
Board; and
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consulting with the chairs of the Board committees and
soliciting their participation to avoid diluting their authority
or responsibilities.
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Our Lead Independent Directors responsibilities and
authority are more specifically described in our Corporate
Governance Guidelines.
Our non-management directors hold executive sessions without
management at regularly scheduled meetings of our Board and at
such other times as our Lead Independent Director shall
designate. These sessions take place outside the presence of our
CEO or any of our other employees. The Lead Independent Director
presides at these executive sessions, which allow our
non-management directors the opportunity to separately consider
management performance and broader matters of strategic
significance to us. During 2010, our non-management directors
met five times in executive sessions of the Board.
Audit
Committee
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All members of our Audit Committee have been determined to meet
the standards of independence required of audit committee
members by the NYSE and applicable SEC rules. See Director
Independence above.
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Our Board has determined that all members of our Audit Committee
are financially literate. Our Board has also determined that
William T. Van Kleef possesses accounting or related financial
management expertise within the meaning of the listing standards
of the NYSE and is an audit committee financial
expert within the meaning of applicable SEC rules.
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KPMG LLP, our independent auditor, reports directly to our Audit
Committee.
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Our Audit Committee, consistent with the Sarbanes-Oxley Act of
2002 and the rules adopted thereunder, meets with management and
our independent auditor to receive information concerning, among
other things, the integrity of our financial controls and
reporting.
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Our Audit Committee has adopted a Policy on Reporting Concerns
and Complaints Regarding Accounting, Internal Accounting
Controls and Auditing Matters to enable confidential and
anonymous reporting to the Audit Committee of concerns regarding
questionable accounting matters.
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Compensation,
Benefits and Stock Option Committee
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All members of our Compensation, Benefits and Stock Option
Committee (Compensation Committee) have been
determined to meet the NYSE standards for independence. See
Director Independence above. Further, each member of
our Compensation Committee is a Non-Employee
Director as defined in
Rule 16b-3
under the Securities Exchange Act of 1934, as amended
(Exchange Act), and an outside director
as defined for purposes of Section 162(m) of the Internal
Revenue Code of 1986, as amended (Internal Revenue
Code).
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Corporate
Governance and Nominating Committee
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All members of our Corporate Governance and Nominating Committee
(Governance Committee) have been determined to meet
the NYSE standards for independence. See Director
Independence above.
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Our Governance Committee considers candidates for Board
membership suggested by its members and other Board members, as
well as by our management and stockholders. A stockholder who
wishes to recommend a prospective nominee for the Board should
follow the procedures described in this Proxy Statement under
the caption Stockholder Nominees.
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Committee
Charters
Each of our Board committees operates under a charter adopted by
our Board that governs its duties and conduct. A copy of each
charter can be obtained free of charge from our website,
www.nobleenergyinc.com, or by written request to
us at the address appearing on the first page of this Proxy
Statement to the attention of our Secretary or by calling
(281) 872-3100.
Oversight
of Risk Management
Our risk management program is overseen by our Board and its
committees, with support from our management and external
consultants. Our Board and its committees interact in this
effort through discussions arising out of committee reports at
each regular Board meeting.
Enterprise risk management is a routinely scheduled agenda item
for regular Board meetings, with our Chairman consulting with
our Lead Independent Director to define the topic and scope of
each discussion. A number of other Board processes support our
risk management effort, such as those by which our Board reviews
and approves our capital budget and certain capital projects,
hedging policy, new country entry, significant acquisitions and
divestitures, equity and debt offerings and the delegation of
authority to our management.
Our Audit Committee plays an important role in risk management
by assisting our Board in fulfilling its responsibility to
oversee the integrity of our financial statements and our
compliance with legal and regulatory requirements. The committee
retains, and interacts directly with, our independent auditors
of financial statements and oil and gas reserves, and holds
periodic reviews with our management to address financial and
related disclosures, key legal and regulatory developments and
possible enhancements to our Code of Business Conduct and Ethics.
Our Governance Committees role in our risk management
program includes annually reviewing developments in the area of
corporate governance and our Corporate Governance Guidelines in
order to recommend appropriate actions to our Board. It also
reviews director independence, Board membership and committee
assignments and makes adjustments in order to ensure that we
have the appropriate director expertise to oversee the
Companys evolving business operations.
Our Environment, Health and Safety (EH&S)
Committee plays an important role in risk management by
assisting our Board in determining whether we have appropriate
policies and management systems in place with respect to
EH&S matters and monitoring and reviewing compliance with
applicable EH&S laws, rules and regulations. This includes
periodic reviews of EH&S performance, our annual EH&S
audit schedule, key EH&S legal and regulatory developments
and trends such as climate change, and Company initiatives in
the area of corporate social responsibility.
6
Our Compensation Committee reviews our proxy statement
Compensation Discussion and Analysis and discusses its
disclosures with our management. It evaluates our CEOs
performance, considering input from our other independent
directors on Company risk management efforts and other criteria.
The committee also reviews our compensation program, most
recently on October 25, 2010, in an effort to ensure that
it remains aligned with our compensation objectives and to
address any potential risks that are reasonably likely to have a
material adverse effect on the Company. There are several design
features of our short- and long-term incentive plans for all
employees that reduce the likelihood of excessive risk-taking:
the program design provides a balanced mix of cash and equity
and short- and long-term incentives; the maximum payout under
our short-term incentive plan is capped at 2.5 times the
aggregate target bonus pool for all employees; and all of our
regular U.S. employees participate in the same short-term
incentive plan. Our recent adoption of stock ownership
guidelines and elimination of tax
gross-up
payment obligations from our change of control arrangements also
support our risk management effort. See Recent Corporate
Governance Initiatives above.
Corporate
Governance Guidelines
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We have adopted a set of Corporate Governance Guidelines,
including standards for director qualification and director
responsibilities. The guidelines can be obtained free of charge
from our website, www.nobleenergyinc.com, or by
written request to us at the address appearing on the first page
of this Proxy Statement to the attention of our Secretary or by
calling
(281) 872-3100.
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Codes of
Business Conduct and Ethics
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We have adopted a Code of Business Conduct and Ethics that
applies to our directors, officers and employees and sets out
our policy regarding laws and business conduct, contains other
policies relevant to business conduct and sets out a process for
reporting violations thereof.
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We have also adopted a Code of Ethics for Chief Executive and
Senior Financial Officers, violations of which are to be
reported to our Audit Committee.
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A copy of these codes can be obtained free of charge from our
website, www.nobleenergyinc.com, or by written
request to us at the address appearing on the first page of this
Proxy Statement to the attention of our Secretary or by calling
(281) 872-3100.
Amendments to these codes will be promptly posted on our website.
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Personal
Loans to Executive Officers and Directors
We comply with, and operate in a manner consistent with,
applicable law prohibiting extensions of credit in the form of
personal loans to, or for the benefit of, our directors and
executive officers.
Directors
Attendance at Annual Meetings of Stockholders
All of our directors are expected to attend each annual meeting
of our stockholders. A director who is unable to attend the
annual meeting, which it is understood will occur on occasion,
is expected to notify the Chairman of the Board in advance of
such meeting. Attendance at our annual meeting will be
considered by our Governance Committee in assessing each
directors performance. Last year, all of our directors
attended our annual meeting of stockholders.
Communication
with the Board of Directors
Stockholders and other interested parties may contact any member
of our Board, any Board committee or any chair of any such
committee by mail, electronically or by calling our independent,
toll-free compliance line. To communicate by mail with our
Board, any individual director, or any group or committee of
directors, correspondence should be addressed to our Board or
any individual director or group or committee of directors by
either name or title. All correspondence should be sent to Noble
Energy, Inc., Attention: Secretary, at 100 Glenborough Drive,
Suite 100, Houston, Texas
77067-3610.
To communicate with any of our directors electronically,
7
stockholders should go to our website,
www.nobleenergyinc.com. Under the heading
Corporate Governance you will find a link
Contact the Board that may be used for writing an
electronic message to our Board, any individual director, or any
group or committee of directors. In addition, stockholders may
call our independent, toll-free compliance line listed on our
website under the same link.
All stockholder communications properly received will be
reviewed by the office of our General Counsel to determine
whether the contents represent a message to our directors. Any
contents that are not in the nature of advertising, promotions
of a product or service, or patently offensive material will be
forwarded promptly to the appropriate director or directors.
8
VOTING
SECURITIES
Only holders of record of our common stock, par value
$3.331/3
per share, at the close of business on March 8, 2011, the
record date for our annual meeting, are entitled to notice of,
and to vote at, the meeting. A majority of the shares of common
stock entitled to vote, present in person or represented by
proxy, is necessary to constitute a quorum. Abstentions and
broker non-votes on filed proxies and ballots are counted as
present for establishing a quorum. On the record date for our
annual meeting, there were issued and outstanding
176,276,634 shares of common stock. Each share of common
stock is entitled to one vote.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following tabulation sets forth, as of March 8, 2011,
information with respect to the only persons who were known to
us to be beneficial owners of more than five percent of the
outstanding shares of our common stock, based on statements
filed with the SEC pursuant to Section 13(g) or 13(d) of
the Exchange Act.
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Number of Shares
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of Common Stock
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Percent
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Name and Address of Beneficial Owner
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Beneficially Owned
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of Class
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FMR LLC
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16,651,086
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(1)
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9.5
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%
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82 Devonshire Street
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Boston, MA 02109
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Capital World Investors
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13,134,000
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(2)
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7.5
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%
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333 South Hope Street
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Los Angeles, CA 90071
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Blackrock, Inc.
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11,332,201
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(3)
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6.4
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%
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40 East 52nd Street
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New York, NY 10022
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(1) |
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Included in the shares of common stock that are beneficially
owned by FMR LLC are (a) 16,523,343 shares
beneficially owned by Fidelity Management & Research
Company, a wholly-owned subsidiary of FMR LLC and an investment
adviser registered under the Investment Advisers Act of 1940
(Investment Advisers Act) (which includes
13,283,436 shares held by Fidelity Contrafund, an
investment company), (b) 1,969 shares beneficially
owned by Strategic Advisors, Inc., a wholly-owned subsidiary of
FMR LLC and an investment adviser registered under the
Investment Advisers Act, and (c) 125,774 shares
beneficially owned by Pyramis Global Advisors
Trust Company, an indirect wholly-owned subsidiary of FMR
LLC and a bank as defined under Section 3(a)(6) of the
Exchange Act. |
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(2) |
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Capital World Investors is deemed to be the beneficial owner of
13,134,000 shares of common stock as a result of CRMC
acting as investment adviser to various investment companies
registered under the Investment Company Act of 1940. Capital
World Investors has sole voting power and dispositive power with
respect to 13,134,000 shares of common stock. |
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(3) |
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Blackrock, Inc. is deemed to be the beneficial owner of
11,332,201 shares of common stock and has sole voting and
dispositive power with respect to such shares. |
PROPOSAL I
ELECTION
OF DIRECTORS
As of the date of this Proxy Statement, our Board consists of
nine directors, eight of whom are independent. The business
experience of each nominee as well as the qualifications that
led our Board to select each nominee for election to the Board
is discussed below. All directors are elected annually to serve
until the next annual meeting and until their successors are
elected.
Directors in uncontested elections will be elected by majority
vote of the shares cast at the 2011 annual meeting. A majority
of the votes cast means that the number of votes cast
for a director nominee must exceed the number of
votes cast against that director nominee. In
contested elections (an election in which the number of
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nominees for director is greater than the number of directors to
be elected) the vote standard will be a plurality of votes cast.
In accordance with our Corporate Governance Guidelines, our
Board will nominate for election or re-election as a director
only candidates who agree to tender, promptly following the
annual meeting, irrevocable resignations that will be effective
upon (i) the failure to receive the required vote at the
next annual meeting and (ii) acceptance by the Board. In
addition, our Board will fill director vacancies and new
directorships only with candidates who agree to tender the same
form of resignation promptly following their appointment to the
Board.
If an incumbent director fails to receive the required vote for
re-election, then, within 90 days following certification
of the stockholder vote, our Governance Committee will act to
determine whether to accept the directors resignation and
will submit its recommendation for prompt consideration by our
Board, and the Board will act on the Committees
recommendation. Promptly thereafter, our Board will publicly
disclose its decision-making process and decision regarding
whether to accept the directors resignation (or the
reason(s) for rejecting the resignation, if applicable).
Any director who tenders a resignation pursuant to this
provision of our Corporate Governance Guidelines may not
participate in the Governance Committee recommendation or Board
action regarding whether to accept his or her resignation. If
each member of our Governance Committee fails to receive the
required vote in favor of his or her election in the same
election, then a majority of the directors who did receive the
required vote will appoint a committee of independent directors
to consider the resignations and recommend to the Board whether
to accept them. However, if three or fewer independent directors
receive the required vote for election, all directors may
participate in the action regarding whether to accept the
resignations.
Our Board expects that all of the nominees will be available to
serve as directors as indicated. In the event that any nominee
should become unavailable, however, the proxyholders will vote
for a nominee or nominees who would be designated by our Board
unless the Board chooses to reduce the number of directors
serving on our Board.
Company
Nominees for Director
Jeffrey L. Berenson Mr. Berenson,
age 60, is President and Chief Executive Officer of
Berenson & Company, a private investment banking firm
in New York City that he co-founded in 1990. From 1978 until
co-founding
Berenson & Company, he was with Merrill Lynchs
Mergers and Acquisitions department, becoming head of that
department in 1986 and then co-head of its Merchant Banking unit
in 1988. Mr. Berenson was appointed to the Board of
Directors of Patina Oil & Gas Corporation
(Patina) in December 2002 and joined our Board upon
completion of our merger with Patina on May 16, 2005. He is
also a member of the Board of Directors of Epoch Holdings
Corporation. Mr. Berenson brings a strong financial and
executive management background to our Board as well as
important historical perspective on the organization and assets
acquired in our Patina merger.
Michael A. Cawley Mr. Cawley,
age 63, has served as President and Chief Executive Officer
of The Samuel Roberts Noble Foundation, Inc.
(Foundation) since February 1, 1992, after
serving as Executive Vice President of the Foundation since
January 1, 1991. Prior to 1991, Mr. Cawley was the
President of Thompson, Cawley, Veazey & Burns, a
professional corporation, attorneys at law. Mr. Cawley has
served as a trustee of the Foundation since 1988 and is also a
director of Noble Corporation. He has served on our Board since
1995 and has been our Lead Independent Director since 2001.
Mr. Cawley brings a strong legal and executive management
background to our Board, complementary to his role as our Lead
Independent Director.
Edward F. Cox Mr. Cox, age 64, is
chair of The New York Republican State Committee
(NYRSC) and was previously for more than five years
a partner in the law firm of Patterson Belknap Webb &
Tyler LLP, New York, New York, serving as the chair of the
firms corporate department and as a member of its
management committee. For more than five years he has been chair
of the New York League of Conservation Voters Education Fund
and, for more than five years prior to his election as NYRSC
chair in 2009, was chair of the community college and charter
school committees of the Trustees of The State University of New
York and of the State University Construction Fund, and was a
member of New Yorks merit selection constitutional
Commission on Judicial Nomination. During the two years leading
up to his 2009 election as NYRSC chair, Mr. Cox served as
the New York State Chair of Senator John McCains
presidential campaign. He has served Presidents Nixon, Reagan
and
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H. W. Bush in the international arena, has been a
member of the Council on Foreign Relations since 1993 and serves
on the boards of the Foreign Policy Association, the Levin
Institute (State University of New York) and the American
Ditchley Foundation. He has served on our Board since 1984.
Mr. Cox brings a strong legal and foreign relations
background to our Board, with experience in corporate governance
matters.
Charles D. Davidson Mr. Davidson,
age 61, has served as our Chief Executive Officer since
October 2000 and has served as Chairman of our Board since April
2001. In addition, he served as our President from October 2000
through April 2009. Prior to October 2000, he served as
President and Chief Executive Officer of Vastar Resources, Inc.
(Vastar) from March 1997 to September 2000 (Chairman
from April 2000) and was a Vastar director from March 1994
to September 2000. From September 1993 to March 1997, he served
as a Senior Vice President of Vastar. From 1972 to October 1993,
he held various positions with ARCO. Mr. Davidson brings a
strong oil and gas operational and executive management
background to our Board, having industry experience in domestic
and international operations.
Thomas J. Edelman Mr. Edelman,
age 60, founded Patina Oil & Gas Corporation and
served as its Chairman and Chief Executive Officer from its
formation in 1996 through its merger with Noble Energy, Inc. in
2005. He co-founded Snyder Oil Corporation and was its President
from 1981 through 1997. He served as Chairman and Chief
Executive Officer and later as Chairman of Range Resources
Corporation from 1988 through 2003. From 1980 to 1981, he was
with The First Boston Corporation and, from 1975 through 1980
with Lehman Brothers Kuhn Loeb Incorporated. Mr. Edelman is
currently Managing Partner of White Deer Energy LP, an energy
private equity fund. He is also President of Lenox Hill
Neighborhood House, a Trustee and Chair of the Investment
Committee of The Hotchkiss School, a member of the Board of
Directors of Georgetown University and a director of
Berenson & Company. Mr. Edelman brings a strong
financial and executive management background to our Board as
well as important historical perspective on the organization and
assets acquired in our Patina merger.
Eric P. Grubman Mr. Grubman,
age 53, has served as Executive Vice President of the
National Football League since 2004. He was responsible for
Finance and Strategic Transactions from 2004 to 2006, has served
as the Leagues President of Business Ventures from 2006 to
present and assumed the role of Chief Financial Officer in
September 2010. Mr. Grubman was a private investor from
2001 to 2004, Co-President of Constellation Energy Group, Inc.
from 2000 to 2001 and Partner and Co-Head of the Energy Group at
Goldman Sachs from 1996 to 2000. He joined our Board on
January 27, 2009. Mr. Grubman brings a strong
financial and executive management background to our Board, and
familiarity with the energy sector through his prior investment
banking experience.
Kirby L. Hedrick Mr. Hedrick,
age 58, served as Executive Vice President over upstream
operations for Phillips Petroleum Company from 1997 until his
retirement in 2000. He joined our Board on August 1, 2002.
Mr. Hedrick brings a strong oil and gas operational and
executive management background to our Board, having industry
experience that includes major international project development.
Scott D. Urban Mr. Urban, age 57,
served in executive management positions at Amoco and its
successor, BP, from 1977 to 2005. At the time of his retirement
from BP in 2005, he was Group Vice President, Upstream for
several profit centers including North America Gas, Alaska,
Egypt and Middle East and, before that, Group Vice President,
Upstream North Sea. He held various positions at Amoco
including, at the time of its merger with BP, Group Vice
President, Worldwide Exploration. Mr. Urban is also a
partner in Edgewater Energy LLC, an exploration and production
consulting and private investment firm, and a member of the
Board of Directors of Pioneer Drilling. He joined our Board on
October 23, 2007. Mr. Urban brings a strong oil and
gas operational and executive management background to our
Board, having industry experience that includes major
international project development.
William T. Van Kleef Mr. Van Kleef,
age 59, served in executive management positions at Tesoro
Corporation (Tesoro) from 1993 to 2005, most
recently as Tesoros Executive Vice President and Chief
Operating Officer. During his tenure at Tesoro, Mr. Van
Kleef held various positions, including President, Tesoro
Refining and Marketing, and Executive Vice President and Chief
Financial Officer. Before joining Tesoro,
Mr. Van Kleef, a Certified Public Accountant, served
in various financial and accounting positions with Damson Oil
from 1982 to 1991, most recently as Senior Vice President and
Chief Financial Officer. He joined our Board on
November 11, 2005. Mr. Van Kleef is also a member of
the Board of Directors of Oil States International, Inc.
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Mr. Van Kleef brings a strong financial, accounting and
executive management background to our Board, as well as
experience in the downstream side of our business.
Generally, our By-laws provide that a stockholder must deliver
written notice to our Secretary no later than 120 calendar days
prior to our annual meeting naming the stockholders
nominee(s) for director and specifying certain information
concerning the stockholder and nominee(s) as described below
under the section Stockholder Nominees. Accordingly,
a stockholders nominee(s) for director to be presented at
our 2012 annual meeting of stockholders must be received by us
no later than December 28, 2011.
Our Board unanimously recommends that stockholders vote
FOR the election of each of its nine nominees.
INFORMATION
CONCERNING THE BOARD OF DIRECTORS
Our Board held nine meetings in 2010, consisting of five regular
meetings, its annual organizational meeting and three special
meetings.
Evaluation
of Director Nominees
Our Governance Committee believes that the minimum
qualifications for serving as a director of the Company are that
a nominee demonstrate, by significant accomplishment in his or
her field, an ability to make a meaningful contribution to our
Boards oversight of the business and affairs of the
Company and have an impeccable record and reputation for honest
and ethical conduct in both his or her professional and personal
activities. Nominees for director shall be those people who,
after taking into account their skills, expertise, integrity,
diversity, character, judgment, age, independence, corporate
experience, length of service, potential conflicts of interest
and commitments (including, among other things, service on the
boards or comparable governing bodies of other public companies,
private business companies, charities, civic bodies or similar
organizations) and other qualities, are believed to enhance our
Boards ability to manage and direct, in an effective
manner, the affairs and business of the Company, including, when
applicable, to enhance the ability of committees of our Board to
fulfill their duties and to satisfy any independence
requirements imposed by law, regulation or listing standards of
the NYSE.
In general, nominees for director should have an understanding
of the workings of large business organizations such as the
Company and senior level executive experience, as well as the
ability to make independent, analytical judgments, the ability
to be an effective communicator and the ability and willingness
to devote the time and effort to be an effective and
contributing member of our Board. In addition, our Governance
Committee will examine a candidates specific experiences
and skills, time availability in light of other commitments,
potential conflicts of interest and independence from management
and the Company. Our Governance Committee will also seek to have
our Board represent a diversity of backgrounds, experience,
gender and race.
Our Governance Committee will identify potential nominees by
asking current directors and executive officers to notify the
committee if they become aware of persons meeting the criteria
described above who have had a change in circumstances that
might make them available to serve on our Board for
example, retirement as a CEO or CFO of a public company or
exiting government or military service or business and civic
leaders in the communities in which our facilities are located.
Our Governance Committee also, from time to time, will engage
firms that specialize in identifying director candidates. Our
Governance Committee will also consider candidates recommended
by our stockholders.
Once a person has been identified by our Governance Committee as
a potential candidate, the committee may collect and review
available information regarding the person to assess whether the
person should be considered further. If our Governance Committee
determines that the person warrants further consideration, the
committee Chair or another member of our Governance Committee
will contact the individual. Generally, if the person expresses
a willingness to be considered and to serve on our Board, our
Governance Committee will request information, review the
persons accomplishments and qualifications, including in
light of any other candidates that the committee might be
considering, and conduct one or more interviews with the
candidate. In certain instances, Governance Committee members
may contact one or more references provided by the candidate or
may contact other members of the business community or other
persons that may have greater first-hand knowledge of the
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candidates accomplishments. Our Governance
Committees evaluation process will be the same whether or
not a candidate is recommended by a stockholder, although our
Board may take into consideration the number of shares held by
the recommending stockholder and the length of time that such
shares have been held.
Our Governance Committee annually reviews its long-term plan for
Board composition, giving consideration to the foregoing
factors. Based on this review in July 2010, the committee
concluded that the current Board size and composition continued
to be appropriate in light of the Companys focus and
operations.
Stockholder
Nominees
Our Governance Committee will consider director nominees of
stockholders, provided that such recommendations are made in
writing to the attention of our Secretary and generally received
not less than 120 days before the anniversary date of the
immediately previous years annual meeting of stockholders.
A stockholder must include the following information with each
recommendation for a director nominee:
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the name and address of the stockholder and evidence of the
stockholders ownership of our stock, including the number
of shares owned and the length of time of ownership, as well as
any other direct or indirect pecuniary or economic interest the
person may have in any of our stock;
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whether the stockholder intends to appear in person or by proxy
at our annual stockholders meeting to make the nomination;
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a description of all arrangements or understandings between the
stockholder and the nominee and any other person or persons
(naming such person or persons) pursuant to which the nomination
is made;
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the name, age and business and residence address of the
candidate, the candidates résumé or a listing of
his or her principal occupation or employment and qualifications
to be a member of our Board and the candidates consent to
be named as a director if selected by our Governance Committee
and nominated by our Board; and
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the class and number of shares of our stock that are
beneficially owned by the candidate and any other direct or
indirect pecuniary economic interest that the candidate may have
in any of our stock.
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Committees
of the Board of Directors
Our Board has four standing committees, whose names, current
members and purposes are as follows:
Audit Committee William T. Van Kleef, Chair;
Michael A. Cawley; Eric P. Grubman; and
Scott D. Urban. The primary purpose of our Audit
Committee is to: (1) assist our Board in fulfilling its
responsibility to oversee the integrity of our financial
statements, our compliance with legal and regulatory
requirements, the independent auditors qualifications and
independence, and the performance of our internal audit function
and independent auditor and (2) prepare a committee report
as required by the SEC to be included in our annual proxy
statement. Our Audit Committee held five meetings during 2010.
For more details, see information under the section Report
of the Audit Committee.
Compensation, Benefits and Stock Option
Committee Kirby L. Hedrick, Chair; Jeffrey L.
Berenson; Edward F. Cox; and Thomas J. Edelman. The purpose of
our Compensation Committee is to: (1) review and approve
our goals and objectives in the areas of: (a) salary and
bonus compensation, (b) benefits, and (c) equity-based
compensation, as they relate to our CEO, evaluating our
CEOs performance based on those goals and objectives and,
either as a committee or together with the other independent
directors (as directed by our Board), determine and approve our
CEOs compensation level based on that evaluation;
(2) make recommendations to our Board with respect to
non-CEO executive officer compensation, incentive-compensation
plans and equity-based plans that are subject to Board approval;
and (3) produce an annual report on executive compensation
as required by the SEC to be included, or incorporated by
reference, in our proxy statement or other applicable SEC
filings. Our Board has delegated authority to our Compensation
Committee to determine and approve our compensation philosophy;
the annual salary, bonus, equity-based compensation and other
benefits applicable to our executive officers; and equity-based
compensation applicable to non-
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executive-officer employees. Our Compensation Committee held
eight meetings during 2010. For more details, see information
under the section Compensation Discussion and
Analysis.
Corporate Governance and Nominating Committee
Michael A. Cawley, Chair; Jeffrey L. Berenson; Edward F. Cox;
Thomas J. Edelman; Eric P. Grubman; Kirby L. Hedrick; Scott D.
Urban; and William T. Van Kleef. The overall purpose
of our Governance Committee is to: (1) take a leadership
role in providing a focus on corporate governance to enable and
enhance our short- and long-term performance; (2) engage in
appropriate identification, selection, retention and development
of qualified directors consistent with criteria approved by our
Board; (3) develop, and recommend to our Board, a set of
corporate governance principles or guidelines applicable to us;
(4) advise our Board with respect to the Boards
composition, procedures and committees; and (5) oversee the
evaluation of our Board and management. Our Governance Committee
held five meetings during 2010.
Environment, Health and Safety Committee
Edward F. Cox, Chair; Charles D. Davidson; Thomas J. Edelman;
Kirby L. Hedrick; and Scott D. Urban. The overall purpose of our
Environment, Health and Safety Committee is to assist our Board
in determining whether we have appropriate policies and
management systems in place with respect to environment, health
and safety (EH&S) matters and to monitor and
review compliance with applicable EH&S laws, rules and
regulations. The committee is further assisting the Board by
serving as a forum for the review of Company strategy and
initiatives in the area of corporate social responsibility. Our
Environment, Health and Safety Committee held three meetings
during 2010.
Meeting
Attendance
All of our directors attended at least 75% of the meetings of
our Board and its committees of which such director was a member
during 2010.
Compensation
Committee Interlocks and Insider Participation
Kirby L. Hedrick, Jeffrey L. Berenson and Edward F. Cox served
on our Compensation Committee for all of 2010, with
Mr. Edelman who was appointed to the committee by our Board
on April 27, 2010. There were no Compensation Committee
interlocks nor insider (employee) participation during 2010.
PROPOSAL II
RATIFICATION
OF APPOINTMENT OF INDEPENDENT AUDITOR
The Audit Committee of our Board has appointed the firm of KPMG
LLP to serve as our independent auditor for the fiscal year
ending December 31, 2011. This firm has audited our
accounts since May 2002. Although action by our stockholders on
this matter is not required, our Audit Committee believes that
it is important to seek stockholder ratification of this
appointment in light of the critical role played by our
independent auditor in maintaining the integrity of our
financial controls and reporting.
One or more representatives of KPMG LLP are expected to be
present at our annual meeting, will be able to make a statement
if they so desire, and will be available to respond to
appropriate questions.
Our Board unanimously recommends that stockholders vote
FOR ratification of the appointment of KPMG LLP as
our independent auditor.
PROPOSAL III
ADVISORY VOTE ON EXECUTIVE COMPENSATION
The Dodd-Frank Wall Street Reform and Consumer Protection Act,
enacted in July 2010, requires that we provide our stockholders
with the opportunity to vote to approve, on a nonbinding
advisory basis, the compensation of our named executives
officers as disclosed in this Proxy Statement in accordance with
the SECs compensation disclosure rules.
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As described in our Compensation Discussion and Analysis in this
Proxy Statement, we seek to link compensation strongly to
performance through the use of financial incentives that are
tied to the Companys operational and financial
performance. Our compensation programs are designed to reward
our named executive officers for the achievement of short- and
long-term strategic and operational goals and the achievement of
increased total shareholder return, while at the same time
avoiding the encouragement of unnecessary or excessive
risk-taking.
We believe the Company had an excellent year in 2010. Production
was very close to target under our short-term incentive plan, as
adjusted for acquisitions and divestitures, discretionary cash
flow (a non-GAAP financial measure that is calculated by adding
back depreciation, depletion, amortization and various other
non-cash expense items to net income) was above target and
reserve additions were at a record high, as were exploration
resources added through discoveries. Highlighting our
exploration success was the announcement at the end of the year
of another major discovery offshore Israel at our Leviathan
prospect. We achieved favorable results in a number of financial
metrics compared to fiscal year 2009. Our 2010 safety
performance was among our best over the past ten years. Also in
2010, we maintained a competitive cost structure although unit
costs were not as low, relative to peers, as in previous years.
Major initiatives were achieved including the sanction of the
Tamar and Alen projects (Israel and Equatorial Guinea,
respectively), the closing of our Petro-Canada acquisition
(Rocky Mountains) and the sale of our non-core Mid-continent
assets. We believe that our organizations response to the
issues arising from the Deepwater Horizon incident was
outstanding.
The vote on this resolution is not intended to address any
specific element of compensation; rather, the vote relates to
the compensation of our named executive officers as disclosed in
this Proxy Statement in accordance with the SECs
compensation disclosure rules. The vote is advisory, which means
that it is not binding on the Company, our Board or the
Compensation Committee of our Board. To the extent there is any
significant vote against our named executive officer
compensation as disclosed in this Proxy Statement, our
Compensation Committee will evaluate whether any actions are
necessary to address the concerns of stockholders.
This proposal will be approved on an advisory basis if it
receives the affirmative vote of a majority of the shares
present or represented and entitled to vote either in person or
by proxy. As noted earlier in this Proxy Statement, broker
non-votes will not affect the outcome of this proposal, and
abstentions will be equivalent to a vote against this proposal.
If no voting specification is made on a properly returned or
voted proxy card, the proxies named on the proxy card will vote
FOR the proposal.
Accordingly, we ask our stockholders to vote on the following
resolution at our annual meeting:
RESOLVED, that the Companys stockholders approve, on
an advisory basis, the compensation of the named executive
officers, as disclosed in the Companys Proxy Statement for
the 2011 annual meeting of stockholders pursuant to the
compensation disclosure rules of the Securities and Exchange
Commission, including the Compensation Discussion and Analysis,
the 2010 Summary Compensation Table and the other related tables
and disclosure.
Our Board unanimously recommends that the stockholders vote
FOR the approval of the compensation of our named
executive officers, as disclosed in this Proxy Statement.
PROPOSAL IV
ADVISORY
VOTE ON FREQUENCY OF EXECUTIVE COMPENSATION VOTE
The Dodd-Frank Wall Street Reform and Consumer Protection Act
also provides that stockholders must be given the opportunity to
vote, on a nonbinding advisory basis, for their preference as to
how frequently we should seek future advisory votes on the
compensation of our named executive officers as disclosed in
accordance with the SECs compensation disclosure rules,
which we refer to as an advisory vote on executive compensation.
By voting on this proposal, stockholders may indicate whether
they would prefer that we conduct future advisory votes on
executive compensation once every one, two, or three years.
Stockholders also may, if they wish, abstain from casting a vote
on this proposal.
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Our Board has determined that an annual advisory vote on
executive compensation will allow our stockholders to provide
timely, direct input on the Companys executive
compensation philosophy, policies and practices as disclosed in
our proxy statement each year. The Board believes that an annual
vote is therefore consistent with the Companys efforts to
engage in an ongoing dialogue with our stockholders on executive
compensation and corporate governance matters.
The Company recognizes that the stockholders may have different
views as to the best approach for the Company, and therefore we
look forward to hearing from our stockholders as to their
preferences on the frequency of an advisory vote on executive
compensation.
This vote is advisory, which means that it is not binding on the
Company, our Board or the Compensation Committee of our Board.
Our Board and the Compensation Committee will take into account
the outcome of the vote, however, when considering the frequency
of future advisory votes on executive compensation. Our Board
may decide that it is in the best interests of our stockholders
and the Company to hold an advisory vote on executive
compensation on a different frequency than the frequency
receiving the most votes cast by our stockholders.
The proxy card provides stockholders with the opportunity to
choose among four options (holding the vote every one, two or
three years, or abstaining) and, therefore, stockholders will
not be voting to approve or disapprove the recommendation of our
Board.
The advisory vote regarding frequency of a stockholder advisory
vote on executive compensation will be determined by whichever
of the choices annually, every other year or every
three years receives the greatest number of votes
cast. Shares represented by proxies that are marked to indicate
abstentions from this proposal and broker non-votes with respect
to this proposal will not affect its outcome. If no voting
specification is made on a properly returned or voted proxy
card, the proxies named on the proxy card will vote
FOR a frequency of one year for future
advisory votes regarding executive compensation.
Our Board unanimously recommends that stockholders vote
FOR the option of once every year as the preferred
frequency for the advisory vote on executive compensation.
PROPOSAL V
APPROVAL
OF AMENDMENT AND RESTATEMENT OF
1992
STOCK OPTION AND RESTRICTED STOCK PLAN
The Noble Energy, Inc. 1992 Stock Option and Restricted Stock
Plan (1992 Plan) was adopted by our Board and
approved by our stockholders at the 1992 annual meeting of
stockholders, and was most recently amended in 2009. At the 2011
annual meeting, our stockholders are being asked to approve an
amendment and restatement of our 1992 Plan. The changes to the
1992 Plan include an increase in the number of shares of common
stock authorized for issuance under the 1992 Plan from
24,000,000 shares to 31,000,000 shares (an increase of
7,000,000 shares), the addition of Incentive Options and
Cash Awards to the types of awards that may be granted,
revisions to the share counting provisions, the addition of
performance-based compensation criteria, and updates of certain
other plan provisions. Our Board unanimously approved this
amendment and restatement on March 17, 2011, subject to
stockholder approval at our annual meeting. Capitalized terms
not otherwise defined in this proposal have the meanings
ascribed to them in the 1992 Plan.
Background
and Purpose
Our Board recommends approval of the amendment and restatement
of the 1992 Plan. The proposed increase in the number of shares
authorized for issuance under the 1992 Plan would enable the
continued use of the 1992 Plan for stock-based grants consistent
with the objectives of our compensation program in order to:
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promote the long-term success of the Company;
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continue to attract and retain high quality talent;
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motivate key employees by instilling a sense of business
ownership in the Company;
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provide incentive compensation opportunities that are
competitive with those of our compensation peer group; and
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further align the interests of our stockholders, executive
officers and employees.
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We believe that the success of our compensation program,
including the use of stock-based grants under our 1992 Plan, is
well-evidenced by the performance of our common stock over the
last several years, as we ranked first among our peer group in
total shareholder return for the five-year period 2006 through
2010 at 123%. Total shareholder return represents the change in
capital value of our common stock for the period indicated, plus
dividends, expressed as a percentage.
The use of stock-based grants under our 1992 Plan continues to
be an important part of our compensation program. Of the
24,000,000 shares currently authorized for issuance under
the 1992 Plan, 2,132,845 shares remain as of March 8,
2011 after February 1, 2011 grants totaling
1,323,985 shares. We do not believe that this leaves
sufficient shares available for more than one additional year of
grants under the 1992 Plan. By increasing the number of shares
authorized for issuance under the 1992 Plan by 7,000,000, a
total of 31,000,000 shares would be available. This
increase would give us the flexibility to continue to make
stock-based grants over the next four years in amounts
determined appropriate by our Compensation Committee.
In addition to the increase in the number of shares authorized
for issuance, the proposed amendment and restatement would
modify certain 1992 Plan provisions to:
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provide a fungible ratio to be applied to share
counting to determine the number of stock options versus shares
of restricted stock that may be subject to grant;
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provide for the grant of incentive stock options and cash awards;
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clarify that (i) shares tendered by a plan participant to
pay the exercise price of an award or to satisfy tax withholding
obligations are not available for future grant under the plan
and (ii) SARs that are stock-settled are counted against
the plan on a full share (rather than net share) basis;
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prohibit the Company from making a cash buyout of
underwater stock options without stockholder
approval;
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establish performance-based criteria that may be applied to
future awards of Restricted Stock or Cash Awards in order that
such awards would qualify for exemption from the deduction
limitations imposed by Section 162(m) of the Internal
Revenue Code; and
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change the methodology by which Fair Market Value is
determined with respect to the pricing of stock options to match
the methodology provided in the Noble Energy, Inc. 2005 Stock
Plan for Non-Employee Directors.
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The proposed amendment and restatement will not be implemented
unless approved by our stockholders. If the proposed amendment
and restatement is not approved by our stockholders, the 1992
Plan will remain in effect in its present form.
As of the record date of March 8, 2011, there were a total
of 176,276,634 shares of our common stock issued and
outstanding. In addition to the shares remaining available for
issuance under the 1992 Plan, there were 504,841 shares
available for grant under the 2005 Stock Plan for Non-Employee
Directors of Noble Energy, Inc. The Company had a total of
6,927,128 stock options outstanding with a weighted average
exercise price of $58.32 and a weighted average remaining term
of 6.81 years, and 1,023,455 shares of restricted
stock outstanding as of the record date.
The following is a summary of the principal features of our 1992
Plan as amended by the proposed plan restatement. The summary
does not purport to be a complete description of all provisions
of our 1992 Plan and is qualified in its entirety by the text of
the 1992 Plan, a copy of which (as amended to reflect the
proposed plan amendment and restatement) is attached to this
Proxy Statement as Appendix A.
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General
Under our 1992 Plan, shares of Common Stock may be subject to
grants of Nonqualified Options, Incentive Options, SARs, or
awards of Restricted Stock to officers and other employees of
the Company or one of its Affiliates. Nonqualified Options and
Incentive Options, and any SARs related thereto, may be granted,
and Restricted Stock may be awarded, until the shares of Common
Stock available under the 1992 Plan have been exhausted or the
1992 Plan has been terminated (or, if earlier, with respect to
Incentive Options until March 17, 2021, the 10th
anniversary of the date the amended and restated 1992 Plan was
approved by our Board). Cash Awards also may be granted under
the 1992 Plan to officers and other employees of the Company or
one of its Affiliates.
Shares Subject
to 1992 Plan
The total number of shares of Common Stock available for grants
or awards made under the 1992 Plan may not exceed a maximum of
31,000,000 shares in the aggregate. The total number of
shares of Common Stock that may be issued on or after
April 26, 2011 pursuant to Incentive Options shall not
exceed a maximum of 7,000,000 shares of Common Stock in the
aggregate. For the purpose of determining the number of shares
of Common Stock available for grants or awards made under the
1992 Plan prior to April 26, 2011, each share subject to a
Nonqualified Option (whether with or without a related SAR), and
each share awarded as Restricted Stock, shall count against the
plan share limit as one share, and with respect to grants or
awards made under the 1992 Plan on or after April 26, 2011,
each share subject to an Incentive Option or a Nonqualified
Option (whether with or without a related SAR) shall count
against the plan share limit as one share, and each share of
Common Stock awarded as Restricted Stock shall count against the
plan share limit as 2.39 shares. The total number of shares
of Common Stock for which Incentive Options and Nonqualified
Options and SARs may be granted, and which may be awarded as
Restricted Stock, to any one person during any calendar year
shall not exceed a maximum of 400,000 shares of Common
Stock in the aggregate.
Shares of Common Stock covered by a Nonqualified Option or an
Incentive Option that expires or terminates prior to exercise
and shares of Restricted Stock returned to the Company upon
forfeiture are again available for grant. Shares of Common Stock
tendered or withheld to satisfy an exercise price or tax
withholding obligation pertaining to an Incentive Option,
Nonqualified Option, SAR or Restricted Stock shall not be
available for grants or awards made under the 1992 Plan and
shall not be added to the number of shares of Common Stock
available for such grants or awards. Our 1992 Plan contains
anti-dilution provisions that apply in the event of an increase
or decrease in the number of outstanding shares of Common Stock,
effected without receipt of consideration therefor by the
Company, through a stock dividend or through a stock split,
combination or exchange of our shares that results from a
recapitalization, merger or other restructuring in which the
Company is the surviving company. In the event of such increase
or decrease, appropriate adjustments will be made in the maximum
number of shares subject to the 1992 Plan and the number of
shares and option prices under then outstanding Nonqualified
Options and Incentive Options.
Administration
Our 1992 Plan provides that it is to be administered by a
committee of our Board. The committee must consist of two or
more of our directors, all of whom must be (1) Non-Employee
Directors as defined in
Rule 16b-3
of the Exchange Act and (2) Outside Directors as defined in
Section 162(m) of the Internal Revenue Code, and the
regulations promulgated thereunder. Our Compensation Committee
meets these requirements and administers our 1992 Plan. In doing
so, our Compensation Committee determines the grants of
Nonqualified Options and Incentive Options, awards of Restricted
Stock, and Cash Awards, the terms and provisions of the
respective agreements covering the grants or awards and all
other decisions concerning the 1992 Plan. Our 1992 Plan provides
that the determination of the committee is binding with respect
to all questions of interpretation and application of the 1992
Plan and of Nonqualified Options and Incentive Options granted
and awards of Restricted Stock and Cash Awards made thereunder,
subject to the express provisions of the 1992 Plan and except as
set forth below under Stock Options and SARs and
Amendment and Duration of the 1992 Plan.
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Eligibility
All of our regular salaried executive officers and other
employees and those of our Affiliates are eligible to
participate in the 1992 Plan. As of March 8, 2011, all of
our executive officers and approximately 570 other current
employees participate in the 1992 Plan.
Market
Value
On March 8, 2011, the reported closing price per share of
our Common Stock on the NYSE was $91.03.
Stock
Options and SARs
Our 1992 Plan provides that, from time to time during the term
of the plan, the committee, in its sole discretion, may grant
Nonqualified Options and Incentive Options, or any combination
thereof to any employee eligible under the 1992 Plan. Each
person who accepts a Nonqualified Option or Incentive Option is
required to enter into an agreement with the Company.
The committee may, from time to time, grant SARs in conjunction
with all or any portion of a Nonqualified Option or Incentive
Option either at the time of the initial Nonqualified Option or
Incentive Option grant or, with respect to a Nonqualified
Option, at any time after the initial grant while the
Nonqualified Option is outstanding. SARs generally will be
subject to the same terms and conditions and exercisable to the
same extent as Nonqualified Options or Incentive Options, as
described above. SARs entitle an Optionee to receive without
payment to the Company (except for applicable withholding taxes)
the excess of the aggregate fair market value per share with
respect to which the SAR is then being exercised (determined as
of the date of the exercise) over the aggregate purchase price
of the shares as provided in the related Nonqualified Option or
Incentive Option. Payment may be made in shares of already owned
Common Stock or in cash, or a combination thereof, as determined
by the committee.
Option
Price
The option price for each Share covered by a Nonqualified Option
or an Incentive Option shall not be less than the greater of
(1) the par value of the Share or (2) 100% of the Fair
Market Value of the Share at the time the Nonqualified Option or
Incentive Option is granted. For grants made on or after
April 26, 2011, Fair Market Value will be the
closing sales price per share of Common Stock on the NYSE on the
date in question (or if there was no reported sale on the NYSE
on such date, then on the last preceding day on which any
reported sale occurred on the NYSE). Notwithstanding the
preceding sentence, if, in connection with certain corporate
transactions, the Company agrees to substitute a new option
under the 1992 Plan for an old option, or to assume an old
option, as provided for in the 1992 Plan, the option price of
the Shares covered by each new option or assumed option will be
determined by a formula that is designed to preserve the
underlying value of the option at the time of the transaction,
subject to limitations set forth in the 1992 Plan.
Restricted
Stock
Our 1992 Plan provides that Restricted Stock may be awarded by
the committee to the eligible recipients as it may determine
from time to time. Restricted Stock is Common Stock that may not
be sold, assigned, transferred, discounted, exchanged, pledged
or otherwise encumbered or disposed of until the terms and
conditions set by the committee, which terms and conditions may
include, among other things, the achievement of specific goals,
have been satisfied (Restricted Period). During the
Restricted Period, unless specifically provided otherwise in
accordance with the terms of the 1992 Plan, the recipient of
Restricted Stock would be the record owner of the shares and
have all the rights of a stockholder with respect to the shares,
including the right to vote and the right to receive dividends
or other distributions made or paid with respect to the shares.
Our 1992 Plan provides that the committee has the authority to
cancel all or any portion of any outstanding restrictions prior
to the end of the Restricted Period with respect to any and all
of the shares of Restricted Stock awarded to an individual on
the terms and conditions as the committee may deem appropriate.
If the terms and
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conditions for the removal of the restrictions on the Restricted
Stock that has been awarded to a recipient are not satisfied,
the Restricted Stock is forfeited by the recipient and returned
to the Company.
Cash
Awards
Our 1992 Plan provides that Cash Awards may be awarded by the
committee to the eligible recipients as it may determine from
time to time, although the provisions for such awards do not
replace, limit, modify or otherwise affect the Companys
ability to make payments or grants under its short-term
incentive plan or any other compensation arrangements. A Cash
Award provides for the payment of a cash bonus upon the
achievement of specified performance goals. The committee will
specify the terms, conditions, restrictions and limitations that
apply to a Cash Award. The maximum amount that may be paid under
all Cash Awards awarded to any one person under the 1992 plan
during any one calendar year may not exceed $4,000,000.
Performance
Awards
The Nonqualified Options and Incentive Options and SARs granted
pursuant to the 1992 Plan are granted under terms that are
designed to provide for the payment of qualified
performance-based compensation (within the meaning of Treasury
Regulation
section 1.162-27(e))
(the 162(m) Requirements) that is exempt from the
deduction limitations imposed on the Company under
Section 162(m) of the Internal Revenue Code. The Restricted
Stock and Cash Awards are not designed to be so exempt. However,
at the time of awarding any Restricted Stock award or Cash
Award, the committee may designate such an award to be a
Performance Award that is intended to satisfy the 162(m)
Requirements. In such case, the compensation payable under the
award will be provided or paid solely on account of the
attainment of one or more preestablished, objective performance
goals during a specified performance period that is not shorter
than one year, and will comply with the 162(m) Requirements.
Each agreement embodying a Performance Award will set forth
(i) the maximum amount that may be earned thereunder in the
form of cash or Shares, as applicable, (ii) the performance
goal or goals and level of achievement applicable to such
Performance Award, (iii) the performance period over which
performance is to be measured, and (iv) such other terms
and conditions as the committee may determine that are not
inconsistent with the 1992 Plan or the 162(m) Requirements.
The performance goal or goals for a Performance Award will be
established in writing by the committee based on one or more
performance goals listed below not later than 90 days after
commencement of the performance period with respect to such
award, provided that the outcome of the performance in respect
of the goal or goals remains substantially uncertain as of such
time. At the time of the award of a Performance Award, and to
the extent permitted under applicable tax rules, the committee
may provide for the manner in which the performance goals will
be measured in light of specified corporate transactions,
extraordinary events, accounting changes and other similar
occurrences.
The performance goal or goals to be used for the purposes of
Performance Awards may be described in terms of objectives that
are related to the particular eligible employee to whom the
award is being made, or objectives that are Company-wide or
related to a subsidiary, division, department, region, function
or business unit of the Company in which such person is employed
or with respect to which such person performs services, and may
consist of one or more or any combination of the following
criteria: (a) an amount or level of earnings or cash flow;
(b) earnings or cash flow per share (whether on a pre-tax,
after-tax, operational or other basis); (c) return on
equity or assets; (d) return on capital or invested capital
and other related financial measures; (e) cash flow or
EBITDA; (f) revenues; (g) income, net income or
operating income; (h) expenses or costs or expense levels
or cost levels (absolute or per unit); (i) proceeds of sale
or other disposition; (j) share price; (k) total
shareholder return; (l) operating profit; (m) profit
margin, (n) capital expenditures, (o) net borrowing,
debt leverage levels, credit quality or debt ratings;
(p) the accomplishment of mergers, acquisitions,
dispositions, or similar business transactions; (q) net
asset value per share; (r) economic value added;
(s) individual business objectives; (t) growth in
reserves or production; (u) finding and development costs
and/or
(v) safety results. The performance goals based on these
performance measures may be made relative to the performance of
peers or other business entities.
Prior to the payment of any compensation pursuant to a
Performance Award, the committee must certify in writing that
the applicable performance goal or goals and other material
terms of the award have been satisfied. The
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committee will have the authority to reduce, but not to
increase, the amount payable in cash and the number of Shares to
be issued, retained or vested pursuant to a Performance Award.
Amendment
and Duration of the 1992 Plan
The Board may at any time amend, suspend or terminate our 1992
Plan; provided, however, the Board may not, without the approval
of the stockholders of the Company, amend the 1992 Plan so as to
(1) increase the maximum number of shares subject thereto,
(2) reduce the option price per share covered by Options
granted under the 1992 Plan below the price specified in the
1992 Plan, or (3) permit the repricing of
Options and any SARs that relate to such new Options, or permit
the cancellation of underwater Options and any SARs
that relate to such Options in return for cash or other
consideration. Additionally, the Board may not, without the
consent of the holder thereof, amend or cancel any outstanding
award in a manner that adversely affects the holder thereof in a
material way.
United
States Federal Income Tax Consequences
The following summary is based upon an analysis of the Internal
Revenue Code, existing laws, judicial decisions, administrative
rulings, regulations and proposed regulations, all of which are
subject to change. Moreover, the following is only a summary of
United States federal income tax consequences and the
consequences may be either more or less favorable than those
described below depending on an employees particular
circumstances.
As required by United States Treasury Regulations, this
communication is not intended or written to be used, and cannot
be used, by any person for the purpose of avoiding penalties
that may be imposed under United States federal tax laws.
Nonqualified Options. No income will be
recognized by an Optionee for federal income tax purposes upon
the grant of a Nonqualified Option. Upon exercise of a
Nonqualified Option, the Optionee will recognize ordinary income
in an amount equal to the excess of the fair market value of the
shares on the date of exercise over the amount paid for such
shares and, subject to applicable deduction limitations, the
Company will be entitled to a deduction equal to the ordinary
income recognized by the Optionee.
The basis of shares transferred to an Optionee pursuant to the
exercise of a Nonqualified Option is the price paid for the
shares plus an amount equal to any income recognized by the
Optionee as a result of the exercise of the option. If an
Optionee thereafter sells shares acquired upon exercise of a
Nonqualified Option, any amount realized over the basis of the
shares will constitute capital gain to the Optionee for federal
income tax purposes.
If an Optionee uses already-owned shares of Common Stock to pay
the exercise price for shares under a Nonqualified Option, the
number of shares received pursuant to the Nonqualified Option
which is equal to the number of shares delivered in payment of
the exercise price will be considered received in a nontaxable
exchange, and the fair market value of the remaining shares
received by the Optionee upon the exercise will be taxable to
the Optionee as ordinary income. If the already-owned shares of
Common Stock are not statutory option stock (as
defined in Section 424(c)(3)(B) of the Internal Revenue
Code) or are statutory option stock with respect to which the
applicable holding period referred to in
Section 424(c)(3)(A) of the Internal Revenue Code has been
satisfied, the shares received pursuant to the exercise of the
Nonqualified Option will not be statutory option stock and the
Optionees basis in the number of shares received in
exchange for the stock delivered in payment of the exercise
price will be equal to the basis of the shares delivered in
payment. The basis of the remaining shares received upon the
exercise will be equal to the fair market value of the shares on
the date of exercise. However, if the already-owned shares of
Common Stock are statutory option stock with respect to which
the applicable holding period has not been satisfied, it is
likely, although not presently clear under applicable guidance,
that such exercise will be considered a disqualifying
disposition of the statutory option stock. Applicable guidance
is also not clear with regard to whether the shares received
upon the exercise will be statutory option stock, or how the
Optionees basis will be allocated among the shares
received.
The ordinary income recognized by an Optionee upon the exercise
of a Nonqualified Option is compensation subject to withholding
for federal income tax purposes, and the Company must make
arrangements with the Optionee to ensure that the amount of the
tax required to be withheld by the Company is paid to the
Internal Revenue
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Service for the benefit of the Optionee. This tax withholding
obligation may be satisfied by an Optionee at the time of the
exercise of a Nonqualified Option by paying cash to the Company
or by transferring already-owned shares of Common Stock to the
Company. If an Optionee transfers already-owned shares of Common
Stock to the Company in order to satisfy the Companys tax
withholding obligation, the transfer of such shares will be a
taxable event. If the already-owned shares of Common Stock are
not statutory option stock or are statutory option stock with
respect to which the applicable holding period has been
satisfied, the amount by which the consideration received by the
Optionee (i.e., the amount of the Optionees tax
withholding that is satisfied by the transfer, plus any cash
paid by the Company to the Optionee in lieu of a fractional
share) exceeds the Optionees basis in the transferred
stock will be a capital gain to the Optionee (or, if the
consideration received is less than the Optionees basis,
the difference will be a capital loss to the Optionee). If the
already-owned shares of Common Stock are statutory option stock
with respect to which the applicable holding period has not been
satisfied, the transfer of the shares will be a disqualifying
disposition of statutory option stock.
Incentive Options. No income will be
recognized by an Optionee for federal income tax purposes upon
the grant or the exercise of an Incentive Option; provided,
however, that to the extent that an Incentive Option is
exercised more than three months (twelve months in the event of
disability within the meaning of Section 22(e)(3) of the
Internal Revenue Code) from the date of termination of
employment for any reason other than death, such Incentive
Option will be taxed in the same manner described above for
Nonqualified Options (rather than in the manner described herein
for an Incentive Option). The basis of shares transferred to an
Optionee pursuant to the exercise of an Incentive Option is the
price paid for such shares. If the Optionee holds such shares
for at least one year after transfer of the shares to the
Optionee and two years after the grant of the option, the
Optionee will recognize long- or short-term capital gain or loss
(depending on the Optionees holding period with respect to
the shares) upon sale of the shares received upon such exercise
equal to the difference between the amount realized on such sale
and the basis of the shares. Generally, if the shares are not
held for that period (a disqualifying disposition)
the Optionee will recognize ordinary income upon disposition in
an amount equal to the excess of the fair market value of the
purchased shares on the date of exercise over the option price
of such shares, or if less (and if the disposition is a
transaction in which loss, if sustained, will be recognized),
the gain on disposition. Any additional gain realized by the
Optionee upon such disposition will be a capital gain. The
excess of the fair market value of shares received upon the
exercise of an Incentive Option over the option price for the
shares is an item of adjustment for the Optionee for purposes of
the alternative minimum tax. Therefore, although no income is
recognized upon exercise of an Incentive Option, an Optionee may
be subject to alternative minimum tax as a result of the
exercise. The Company is not entitled to a compensation
deduction with respect to an Incentive Option unless a
disqualifying disposition occurs.
If an Optionee uses already-owned shares of Common Stock to pay
the exercise price for shares under an Incentive Option, the
resulting tax consequences will depend upon whether the
already-owned shares of common stock are statutory option
stock, and, if so, whether the statutory option stock has
been held by the Optionee for the applicable holding period
referred to in Section 424(c)(3)(A) of the Internal Revenue
Code. In general, statutory option stock (as defined
in Section 424(c)(3)(B) of the Internal Revenue Code) is
any stock acquired through the exercise of an incentive stock
option or an option granted pursuant to an employee stock
purchase plan, but not stock acquired through the exercise of a
nonqualified stock option. If the stock is statutory option
stock with respect to which the applicable holding period has
been satisfied, or if the stock is not statutory option stock,
no income will be recognized by the Optionee upon the transfer
of the stock in payment of the exercise price of an Incentive
Option. If the stock used to pay the exercise price of an
Incentive Option is statutory option stock with respect to which
the applicable holding period has not been satisfied, the
transfer of the stock will be a disqualifying disposition
described in Section 421(b) of the Internal Revenue Code
which will result in the recognition of ordinary income by the
Optionee in an amount equal to the excess of the fair market
value of the statutory option stock at the time the Incentive
Option covering the stock was exercised over the amount paid for
the stock.
SARs. There will be no federal income tax
consequences to either the recipient or the Company upon the
grant of SARs. Generally, the recipient will recognize ordinary
income subject to withholding upon the exercise of SARs in an
amount equal to the amount of cash received and the fair market
value of any shares acquired pursuant to the exercise. Subject
to applicable deduction limitations, the Company will be
entitled to a corresponding tax deduction equal to the amount
includable in the recipients income.
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Restricted Stock. If the restrictions on an
award of Restricted Stock are of a nature that the shares are
both subject to a substantial risk of forfeiture and are not
freely transferable within the meaning of Section 83 of the
Internal Revenue Code, the recipient will not recognize income
for federal income tax purposes at the time of the award unless
the recipient affirmatively elects to include the fair market
value of the shares of restricted stock on the date of the
award, less any amount paid therefor, in gross income for the
year of the award pursuant to Section 83(b) of the Internal
Revenue Code. In the absence of an election, the recipient will
be required to include in income for federal income tax purposes
in the year in which the shares either become freely
transferable or are no longer subject to a substantial risk of
forfeiture within the meaning of Section 83 of the Internal
Revenue Code, the fair market value of the shares of restricted
stock on that date, less any amount paid therefor. Subject to
applicable deduction limitations, the Company will be entitled
to a deduction at the time of income recognition to the
recipient in an amount equal to the amount the recipient is
required to include in income with respect to the shares,
subject to the deduction limitations described below. If a
Section 83(b) election is made within 30 days after
the date the Restricted Stock is received, the recipient will
recognize ordinary income at the time of receipt of the
Restricted Stock and the Company will be entitled to a
corresponding deduction equal to the fair market value
(determined without regard to applicable restrictions) of the
shares at the time less the amount paid, if any, by the
recipient for the Restricted Stock. If a Section 83(b)
election is made, no additional income will be recognized by the
recipient upon the lapse of restrictions on the Restricted
Stock, but, if the Restricted Stock is subsequently forfeited,
no deduction will be allowed to the recipient with respect to
the forfeiture. Dividends paid to a recipient holding Restricted
Stock before the expiration of the restriction period will be
additional compensation taxable as ordinary income to the
recipient, unless the recipient made an election under
Section 83(b) of the Internal Revenue Code. Subject to
applicable deduction limitations, the Company will be entitled
to a corresponding tax deduction equal to the dividends
includable in the recipients income as compensation. If
the recipient has made a Section 83(b) election, the
dividends will be dividend income rather than additional
compensation to the recipient.
If the restrictions on an award of Restricted Stock are not of a
nature that the shares are both subject to a substantial risk of
forfeiture and not freely transferable, within the meaning of
Section 83 of the Internal Revenue Code, the recipient will
recognize ordinary income for federal income tax purposes at the
time of the award in an amount equal to the fair market value of
the shares of Restricted Stock on the date of the award, less
any amount paid therefor. Subject to applicable deduction
limitations, the Company will be entitled to a deduction at that
time in an amount equal to the amount the recipient is required
to include in income with respect to the shares, subject to the
deduction limitations described below.
Cash Awards. An individual who receives a Cash
Award will recognize ordinary income subject to withholding for
federal income tax purposes at the time the cash is received
(or, if earlier, the date the cash is made available to the
individual). The Company will be entitled to a deduction for the
amount of the Cash Award at such time, subject to applicable
deduction limitations.
Limitations on the Companys Compensation
Deduction. Section 162(m) of the Internal
Revenue Code limits the deduction that the Company may take for
otherwise deductible compensation payable to certain officers of
the Company to the extent that compensation paid to any such
officer for the year exceeds $1,000,000, unless the compensation
is performance-based. Compensation attributable to a stock
option or stock appreciation right is deemed to satisfy the
requirements for performance-based compensation if: (1) the
grant or award is made by a compensation committee composed of
two or more outside directors; (2) the plan under which the
option or right is granted states the maximum number of shares
with respect to which options or rights may be granted during a
specified period to any employee; and (3) under the terms
of the option or right, the amount of compensation the employee
could receive is based solely on an increase in the value of the
stock after the date of the grant or award. The 1992 Plan has
been designed to enable awards of Nonqualified Options and
Incentive Options and SARs granted by the committee to qualify
as performance-based compensation for purposes of
Section 162(m) of the Internal Revenue Code. In addition,
awards of Restricted Stock and Cash Awards that are designated
as and designed to satisfy the requirements for Performance
Awards are intended to qualify as performance-based compensation
for purposes of Section 162(m) of the Internal Revenue Code.
Section 280G of the Internal Revenue Code limits the
deduction that the employer may take for otherwise deductible
compensation payable to certain individuals if the compensation
constitutes an excess parachute payment. Excess
parachute payments arise from payments made to disqualified
individuals that are in the nature of compensation
23
and are contingent on changes in ownership or control of the
employer or certain affiliates. Accelerated vesting or payment
of awards under the 1992 Plan upon a change in ownership of
control of the employer or its affiliates could result in excess
parachute payments. In addition to the deduction limitation
applicable, a disqualified individual receiving an excess
parachute payment is subject to a 20 percent excise tax on
the amount thereof.
Application of Section 409A of the Internal Revenue
Code. Section 409A of the Internal Revenue
Code imposes an additional 20% tax and interest on an individual
receiving nonqualified deferred compensation under a plan that
fails to satisfy certain requirements. For purposes of
Section 409A, nonqualified deferred
compensation includes equity-based incentive programs,
including some stock options and stock appreciation rights.
Section 409A of the Internal Revenue Code does not apply to
incentive stock options, or to nonqualified stock options or
stock appreciation rights granted with an option price that is
not less than fair market value if no deferral is provided
beyond exercise, or to restricted stock. The Incentive Options,
Nonqualified Options and SARs, and the Restricted Stock awarded
pursuant to the 1992 Plan are designed to be exempt from the
application of Section 409A of the Internal Revenue Code.
The Cash Awards will be designed to comply with the requirements
of Section 409A of the Internal Revenue Code to the extent
they are not exempt. However, if an award does not comply with
Section 409A of the Internal Revenue Code and is not
exempt, a participant may be subject to additional taxes.
Our Board unanimously recommends that stockholders vote
FOR the approval of the proposed amendment and
restatement of our 1992 Plan.
SECURITY
OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following tabulation sets forth, as of March 8, 2011,
the shares of common stock beneficially owned by each director,
each named executive officer listed in the Summary Compensation
Table included in this Proxy Statement, and all directors and
named executive officers as a group.
|
|
|
|
|
|
|
|
|
|
|
Common Stock Beneficially Owned(1)
|
|
|
Number of
|
|
Percent of
|
Name
|
|
Shares(2)(3)
|
|
Class
|
|
Director
|
|
|
|
|
|
|
|
|
Jeffrey L. Berenson
|
|
|
47,819
|
|
|
|
*
|
|
Michael A. Cawley
|
|
|
58,646
|
(4)
|
|
|
*
|
|
Edward F. Cox
|
|
|
40,495
|
(5)
|
|
|
*
|
|
Charles D. Davidson
|
|
|
1,227,688
|
(6)
|
|
|
*
|
|
Thomas J. Edelman
|
|
|
2,099,636
|
(7)
|
|
|
1.2
|
%
|
Eric P. Grubman
|
|
|
19,794
|
|
|
|
*
|
|
Kirby L. Hedrick
|
|
|
78,995
|
|
|
|
*
|
|
Scott D. Urban
|
|
|
30,753
|
|
|
|
*
|
|
William T. Van Kleef
|
|
|
82,995
|
|
|
|
*
|
|
Named Executive Officer (excluding any director named
above)
|
|
|
|
|
|
|
|
|
Rodney D. Cook
|
|
|
160,458
|
|
|
|
*
|
|
Susan M. Cunningham
|
|
|
334,574
|
|
|
|
*
|
|
Kenneth M. Fisher
|
|
|
75,098
|
|
|
|
*
|
|
David L. Stover
|
|
|
385,677
|
|
|
|
*
|
|
All directors and named executive officers as a group
(13 persons)
|
|
|
4,642,628
|
|
|
|
2.6
|
%
|
|
|
|
* |
|
Represents less than one percent of outstanding shares of common
stock. |
|
(1) |
|
Unless otherwise indicated, all shares are directly held with
sole voting and investment power. |
24
|
|
|
(2) |
|
Includes shares not outstanding but subject to options that are
currently exercisable (or that will become exercisable on or
before May 8, 2011), as follows:
Mr. Berenson 21,412 shares;
Mr. Cawley 48,422 shares;
Mr. Cox 18,212 shares;
Mr. Davidson 818,504 shares;
Mr. Edelman 29,412 shares;
Mr. Grubman 13,336 shares;
Mr. Hedrick 68,212 shares;
Mr. Urban 20,729 shares; Mr. Van
Kleef 29,412 shares; Mr. Cook
109,859 shares; Ms. Cunningham
280,136 shares; Mr. Fisher
19,949 shares; and Mr. Stover
278,528 shares. |
|
(3) |
|
Includes restricted stock awards not currently vested, as
follows: 1,200 shares held by each of
Messrs. Berenson, Cawley, Cox, Edelman, Grubman, Hedrick,
Urban, and Van Kleef; Mr. Cook
24,814 shares; Ms. Cunningham
32,701 shares; Mr. Davidson
97,694 shares; Mr. Fisher
48,328 shares; and Mr. Stover
56,489 shares. |
|
(4) |
|
Mr. Cawley is one of 12 trustees of The Samuel Roberts
Noble Foundation, Inc. The Foundation holds of record
1,047,166 shares of our common stock. As with other
corporate action, the voting of the shares held by the
Foundation requires a majority vote of its trustees at a meeting
at which a quorum of trustees is present. Where there are more
than three trustees of a company and a majority vote is required
for corporate action, no individual trustee is deemed to have
beneficial ownership of securities held by such company.
Accordingly, the 1,047,166 shares held of record by the
Foundation are not reflected in Mr. Cawleys
beneficial ownership of common stock. |
|
(5) |
|
Includes 12,000 shares held by spouse. |
|
(6) |
|
Includes shares indirectly held in a qualified 401(k) Plan, as
follows: Mr. Davidson 3,243 shares. |
|
(7) |
|
Includes 1,000,000 shares held under deferred compensation
plans. |
EXECUTIVE
COMPENSATION
COMPENSATION
DISCUSSION AND ANALYSIS
The first part of our Compensation Discussion and Analysis,
entitled Compensation Considerations in the Current Environment,
discusses how our executive compensation program operates in the
current business environment. The second part, entitled Overview
of Our Executive Compensation Program, discusses the elements
and provides an analysis of our executive compensation program.
The third part includes a presentation of executive compensation
in tabular form.
Compensation
Considerations in the Current Environment
Our goal continues to be to link compensation strongly to
performance through the use of financial incentives that are
tied to the Companys operational and financial
performance. 2010 was a challenging year in the energy industry
due to the continued recession and the April incident in which
the deepwater Gulf of Mexico drilling rig Deepwater Horizon,
engaged in drilling operations for another operator, sank after
a blow-out and fire. Even with these challenges, we believe the
Company had an excellent year. Production was very close to
target under our short-term incentive plan, as adjusted for
acquisitions and divestitures, discretionary cash flow was above
target and reserve additions were at a record high, as were
exploration resources added through discoveries. Highlighting
our exploration success was the announcement at the end of the
year of another major discovery offshore Israel at our Leviathan
prospect. Our 2010 safety performance was among our best over
the past ten years. Also in 2010, we maintained a competitive
cost structure although unit costs were not as low, relative to
peers, as in previous years. Major initiatives were achieved
including the sanction of the Tamar and Alen projects, the
closing of our Petro-Canada acquisition and the sale of our
non-core Mid-continent assets. While the Deepwater Horizon
incident was a setback for our Gulf of Mexico program, we
believe that our organizations response to the issues
arising from that incident was outstanding.
25
As described in Managements Discussion and
Analysis of Financial Conditions and Results of
Operations in our Annual Report on
Form 10-K,
our fiscal 2010 financial results were strong relative to our
fiscal 2009 results. The following table highlights the
year-over-year
comparison of some of our key financial metrics:
|
|
|
|
|
|
|
|
|
|
Fiscal Year 2010
|
|
|
Fiscal Year 2009
|
Net income (loss)
|
|
|
$725 million
|
|
|
$(131) million
|
|
|
|
|
|
|
|
Net gain on asset sales
|
|
|
$113 million
|
|
|
$22 million
|
|
|
|
|
|
|
|
Asset impairment charges
|
|
|
$144 million
|
|
|
$604 million
|
|
|
|
|
|
|
|
Diluted earnings (loss) per share
|
|
|
$4.10
|
|
|
$(0.75)
|
|
|
|
|
|
|
|
Cash flows provided by operating activities
|
|
|
$1.9 billion
|
|
|
$1.5 billion
|
|
|
|
|
|
|
|
Capital spending by operating activities
|
|
|
$2.3 billion(1)
|
|
|
$1.3 billion
|
|
|
|
|
|
|
|
Cash and cash equivalents balance at Dec. 31
|
|
|
$1.1 billion
|
|
|
$1.0 billion
|
|
|
|
|
|
|
|
Total liquidity
|
|
|
$2.8 billion
|
|
|
$2.7 billion
|
|
|
|
|
|
|
|
Debt-to-book
capital at Dec. 31
|
|
|
25%
|
|
|
25%
|
|
(1) Includes $458 million for the acquisition of
additional Central DJ Basin assets.
Our fiscal 2010 financial performance, including our performance
relative to our peers, along with the individual performance of
our executive officers, served as key factors in determining
compensation for 2010, including:
|
|
|
|
|
While executive officer salaries were unchanged in 2009 compared
to 2008, in 2010 our Compensation Committee decided to increase
the base salaries of our named executive officers by an average
of 5.4%, taking into account the results of data provided by our
compensation consultant and each executives scope of
responsibilities.
|
|
|
|
Production, controllable unit costs and discretionary cash flow
are the performance measures for the non-discretionary component
of our short-term incentive plan. These metrics provide for a
balanced approach to measuring annual Company performance. The
Companys performance with respect to each of these
metrics, along with other performance-based measures described
below, resulted in the payment of annual cash incentive awards
at above-target levels for our named executive officers.
|
|
|
|
Long-term incentive compensation continues to constitute a
substantial portion of the compensation for each of our named
executive officers, comprised of equity awards of stock options
and restricted stock.
|
Changes were made to our compensation program for 2010 to build
upon the Companys compensation governance framework,
including:
|
|
|
|
|
The Compensation Committees engagement of, and increased
presence at regular committee meetings by, an independent
compensation consultant that does not provide any services to
our management.
|
|
|
|
The appointment of Thomas J. Edelman, an additional independent
director with executive management and compensation experience,
to our Compensation Committee.
|
We recently changed our compensation program to further align
the interests of our named executive officers with our
stockholders interests, including:
|
|
|
|
|
On January 25, 2011, our Board adopted stock ownership
guidelines for our officers and non-employee directors.
|
|
|
|
Effective February 1, 2011, amendments were made to the
change of control arrangements for our named executive officers
and other officers and employees of the Company for the purpose
of eliminating tax
gross-up
payment obligations of the Company to those individuals.
|
26
We encourage you to read this Compensation Discussion and
Analysis for a detailed discussion and analysis of our executive
compensation program, including information about 2010
compensation of our named executive officers.
Overview
of Our Executive Compensation Program
Our executive compensation program is overseen by our
Compensation Committee, with input from our management and
outside compensation consultants.
Compensation
Program Oversight
Role
of Compensation Committee
The purpose of our Compensation Committee is set out in detail
in the committees charter but generally is to:
|
|
|
|
|
review and approve our goals and objectives relating to CEO
compensation, evaluating our CEOs performance based on
those goals and objectives and determining and approving our
CEOs compensation level based on that evaluation;
|
|
|
|
make recommendations to our Board with respect to non-CEO
executive officer compensation; and
|
|
|
|
produce an annual report on executive compensation as required
by the SEC to be included, or incorporated by reference, in our
proxy statement or other applicable SEC filings.
|
The committee also serves an important role in setting the
overall compensation philosophy, goals and objectives of the
Company.
Our Board has delegated authority to our Compensation Committee
to determine and approve (1) our compensation philosophy,
(2) the compensation of our non-CEO executive officers, and
(3) equity-based compensation applicable to
non-executive-officer employees.
Membership
Our Board appoints our Compensation Committee members and Chair,
and these appointees continue to be members until their
successors are elected and qualified or until their earlier
resignation or removal. Any member of our Compensation Committee
may be removed, with or without cause, by our Board. Our
Governance Committee, after consultation with our Lead
Independent Director, makes recommendations to our Board with
respect to the appointment of Board members to all of its
committees considering, in the case of our Compensation
Committee, criteria such as experience in compensation matters,
familiarity with our management and other key personnel,
understanding of public company compensation issues, time
availability necessary to fulfill committee responsibilities and
independence and other regulatory requirements. No member of our
Compensation Committee participates in any of our employee
compensation programs, and our Board has determined that none of
our Compensation Committee members has any material business
relationship with us.
Independence
We believe that these membership criteria are met by Kirby L.
Hedrick, Jeffrey L. Berenson, Edward F. Cox and Thomas J.
Edelman, who currently serve on our Compensation Committee and
did so throughout 2010 (with the exception of Mr. Edelman,
who was appointed to the committee on April 27, 2010). Each
has been determined by our Board to meet the NYSE standards for
independence, to be a Non-Employee Director as
defined in
Rule 16b-3
under the Exchange Act, and to be an outside
director as defined for purposes of Section 162(m) of
the Internal Revenue Code.
Meetings
Our Compensation Committees meeting schedule is determined
annually and meeting agendas are based on an annual calendar of
recurring agenda items approved by the committee. The meeting
agendas may include additional items as determined by the
committee in its discretion, and the committee may also hold
special
27
meetings. Committee meeting agendas are reviewed by our Lead
Independent Director and approved by the committee Chair. Our
Compensation Committee held eight meetings during 2010.
Delegation
of Authority
In an effort to minimize the need for special meetings of our
Compensation Committee to address routine compensation matters
involving non-executive-officer employees, the committee has
delegated limited authority to our CEO to (1) grant stock
options and restricted stock to new hires for employment
inducement purposes, (2) approve cash retention payments,
and (3) make adjustments related to change of control
severance plan participation resulting from organizational
changes affecting employees not participating in the Change of
Control Severance Plan for Executives. Actions taken by our CEO
under these delegations are required to be reported to our
Compensation Committee at its next regularly scheduled meeting
and the committee reviews the appropriateness of the delegation
on an annual basis.
Role
of Management
Our CEO and our Vice President Human Resources
generally attend Compensation Committee meetings and provide
input to the committee with respect to executive compensation,
key job responsibilities, performance objectives and
compensation trends. They also coordinate with our compensation
consultant to ensure that committee requests regarding executive
compensation matters are addressed. We believe that our CEO and
Vice President Human Resources are best qualified to
support the committee in these areas given their understanding
of our business and personnel, compensation program and
competitive environment. In this supporting role they may
provide information and recommendations relevant to establishing
performance measures, weightings, targets, and similar items
that affect compensation. Our CEO is closely involved in
assessing the performance of our executive officers and advising
our Compensation Committee in that regard, and may request that
our Compensation Committee schedule special meetings to address
executive compensation matters. Our CEO and Vice
President Human Resources may also communicate
directly with our compensation consultant in this supporting
role. Our Compensation Committee is not obligated to accept our
managements recommendations with respect to executive
compensation matters, and meets in executive session to discuss
such matters outside of the presence of our management. During
2010, the committee held four executive sessions.
Role
of Compensation Consultant
Our Compensation Committee may retain, at our expense,
independent compensation consultants it deems advisable to
assist it in executive compensation matters. The committee meets
with the compensation consultants, with and outside the presence
of our management, to review findings based on market research
regarding executive compensation and considers those findings in
determining and making adjustments to our executive compensation
program.
Following the merger of our prior compensation consultant,
Towers Perrin, with Watson Wyatt in late 2009, we reassessed our
compensation consultant needs and evaluated potential
candidates. Based on that evaluation, the committee retained
consultants from Hewitt Associates LLC (Hewitt) as
independent advisors on executive compensation. The
Committees engagement transitioned to Meridian
Compensation Partners, LLC (Meridian) in October
2010 upon Meridians separation from Hewitt. In making this
decision, the committee considered the consultants
experience, familiarity with our executive compensation program
and the compensation programs of our peer companies and sector,
range of compensation services, absence of any business or
personal relationship with any member of our Compensation
Committee and policies and procedures designed to avoid
potential conflicts of interest arising out of the provision of
services with respect to the Company. In 2010, the compensation
consultants were responsible for reviewing our executive
compensation program and providing comparative market data on
compensation practices and programs based on an analysis of our
peer companies and other factors. They also provided
compensation consulting services to our Governance Committee in
2010 in reviewing our non-employee directors fees and
equity compensation awards. A breakdown of fees paid to our
compensation consultants for fiscal year 2010 is set out below.
28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
%
|
Executive Compensation Fees(1)
|
|
|
$
|
125,270
|
|
|
|
|
86
|
|
Director Compensation Fees(2)
|
|
|
|
20,300
|
|
|
|
|
14
|
|
Total(3)
|
|
|
$
|
145,570
|
|
|
|
|
100.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Services rendered in 2010 include evaluating executive officer
total compensation, including base salary, short- and long-term
incentive compensation and post-employment compensation, and
addressing peer group comparisons and trends. |
|
(2) |
|
Services rendered in 2010 include evaluating non-employee
director total compensation, including annual retainer and
committee fees and equity grants of stock options and restricted
stock, and addressing peer group comparisons and trends. |
|
(3) |
|
Includes $78,158 paid to Hewitt and $67,412 paid to Meridian. |
Other
Compensation Considerations
Compensation
Peer Group
When making compensation decisions, we also look at the
compensation of our CEO and other executive officers relative to
that paid to similarly-situated executives at companies that we
consider to be our peers this is often referred to
as benchmarking. We consider benchmarking data in
determining executive officer base salary, our short-term
incentive plan target bonus percentage factors, equity grant
levels and the overall structure of our compensation program. We
believe, however, that a benchmark should be just
that a point of reference for
measurement but not the determinative factor for our
executives compensation. Because comparative compensation
information is just one of the several analytic tools that are
used in setting executive compensation, our Compensation
Committee has discretion in determining the nature and extent of
its use. Further, given the limitations associated with
comparative pay information for setting individual executive
compensation, the committee may decide to not use comparative
compensation information at all in the course of making
compensation decisions.
Our Compensation Committee maintains a compensation peer group
of companies, which consists of larger and smaller publicly
traded oil and gas exploration and production companies that
have similar operating and financial characteristics. With the
assistance of our CEO and our compensation consultant, as
appropriate, our Compensation Committee reviews the composition
of the peer group annually to ensure that companies remain
relevant for comparative purposes. After review in January 2010,
our Compensation Committee removed XTO Energy Inc. from that
list given its then-pending merger with ExxonMobil Corporation,
but added Talisman Energy Inc., a Canadian company with dual
listing on the NYSE and a balance of U.S. and international
projects similar in size and scope to our operations. After
review in January 2011, our Compensation Committee decided to
retain the same compensation peer group, which consists of the
following companies:
|
|
|
Anadarko Petroleum Corp.
|
|
Newfield Exploration Company
|
Apache Corp.
|
|
Noble Energy, Inc.
|
Cabot Oil & Gas Corporation
|
|
Pioneer Natural Resources Company
|
Chesapeake Energy Corp.
|
|
Plains Exploration and Production Company
|
Devon Energy Corp.
|
|
Range Resources Corporation
|
EOG Resources, Inc.
|
|
Southwestern Energy Company
|
Forest Oil Corp.
|
|
Talisman Energy Inc.
|
Murphy Oil Corp.
|
|
|
We believe that this group of companies continues to be
representative of the sector in which we operate, and includes
companies of similar market size and geographic scope of
operations, nature and relative complexity of business and roles
and responsibilities of executive officers.
29
Internal
Pay Equity
When making executive compensation decisions, our Compensation
Committee analyzes total compensation with a focus on base
salary, short-term incentive plan and long-term incentive plan
elements. To facilitate this analysis, our CEO and Vice
President Human Resources work with our compensation
consultant to provide the committee comparative compensation
information in these areas for each executive officer, along
with summary information on post-employment compensation trends,
benefits and other relevant factors. This information is
compiled in written report format and includes recent publicly
available information and other market data, as well as tally
sheets detailing the base salary, short-term incentive plan and
long-term incentive plan elements. We believe that this
information provides our Compensation Committee with a
sufficient basis to evaluate executive officer compensation by
presenting a comprehensive review of compensation data on each
executive officer and the opportunity for related discussion
with our compensation consultant.
While comparisons to compensation levels at companies in our
compensation peer group are helpful in assessing the overall
competitiveness of our executive compensation program, we
believe that our program must also be internally consistent and
equitable. In its review of total compensation, our Compensation
Committee considers the relationship between our CEOs
total compensation and that of our other executive officers. The
committee has not adopted a formal policy regarding internal pay
equity, but for 2010 concluded that CEO compensation was
equitable compared to that of our President and Chief Operating
Officer (COO) and other named executive officers in
recognition of the CEOs broad responsibility and
accountability for the Companys strategy and operations,
compliance and controls, investor relations and role as Chairman
of our Board. The 2010 total compensation of our COO was
likewise found to be equitable compared to that of the next
named executive officer in recognition of the COOs broad
responsibility for the Companys worldwide exploration and
production operations, our Compensation Committees views
on that position relative to the other named executive officer
positions and the fact that two of the other named executive
officers report directly to the COO. Internal pay equity was
also considered by our Compensation Committee with respect to
the Companys Chief Financial Officer (CFO).
The Compensation Committee likewise concluded that the 2010
compensation of our other named executive officers was equitable
in light of their respective roles, responsibilities and
reporting relationships.
Objectives
of Our Executive Compensation Program
Our executive compensation program is designed to incentivize
consistent, longer-term performance and achievement of strategic
objectives in a manner that will:
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compensate employees for the value of their contributions;
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provide total compensation that is flexible enough to respond to
changing market conditions and that also aligns compensation
levels with performance; and
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provide total compensation that will attract, motivate and
retain individuals of high quality and support a long-standing
internal culture of loyalty and dedication to our interests.
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We believe that linking executive compensation to Company
performance is in the best interest of our stockholders and, as
an individuals level of responsibility increases, a
greater portion of total compensation should be at risk and the
mix of total compensation should be weighted more heavily in
favor of incentive-based compensation including equity-linked
compensation. As performance goals are met or exceeded,
resulting in increased value to stockholders, our executive
officers should be rewarded commensurately. Our Compensation
Committee believes that our 2010 executive compensation program
achieved these objectives.
Elements
of Our Executive Compensation Program
Our executive compensation program consists of four principal
elements: base salary; a short-term incentive plan; a long-term
incentive plan; and post-employment compensation. The following
is a discussion of each of these elements and their respective
roles in our compensation program.
30
Base
Salary
Base salary provides a cash foundation for our total
compensation program that helps us attract and retain
individuals of high quality. Our Compensation Committee believes
that base salaries for executive officers should be competitive
with comparable positions in peer companies to allow us to
attract and retain such individuals. The policy of our
Compensation Committee generally is to establish base salary
levels that approximate the market median. Competitive
information is obtained through oil and gas industry
compensation surveys and other analyses conducted by our
compensation consultant. Our Compensation Committee analyzes
this information and makes appropriate annual adjustments.
Executive officer salaries were unchanged in 2009 compared to
2008. Taking into account the results of market data provided by
our compensation consultant and each executives scope of
responsibility, named executive officers base salaries
were increased by an average of 5.4% effective November 1,
2010.
Short-Term
Incentive Plan
Our short-term incentive plan (STIP) is a
performance-based annual incentive bonus plan that is payable in
cash and available to all of our full-time employees, including
executive officers. It provides a performance-based incentive
beyond base salary that is designed to motivate performance and
compensate employees for the value of their annual
contributions. In addition, given its annual nature and
discretionary component, the STIP has flexibility to respond to
changing market conditions.
The target STIP bonus for an employee is the employees
base salary at year-end multiplied by the percentage factor
assigned to the employees salary classification. Target
bonus percentage factors range from 6% to 100%, with factors of
100% for the CEO and from 75% to 90% for the other named
executive officers, with the differences primarily attributable
to each officers respective scope of responsibility within
the Company. Payout under the plan may range from 0 to 2.5 times
the aggregate target bonus pool for all employees.
In January of each year, our Compensation Committee approves
annual STIP performance-based measures, including their relative
weighting and specific targets, in addition to a discretionary
component to be determined by the committee. The measures,
weighting and targets are communicated to our executive officers
at that time. The 2010 measures approved by our Compensation
Committee on January 25, 2010 accounted for 36% of the STIP
formula and consisted of quantitative targets for production,
controllable unit costs and discretionary cash flow. For 2010,
the Compensation Committee decided to exclude reserve additions
from the STIP formula and instead consider them as part of the
discretionary STIP component in order to mitigate the risk of
widely variable reserve bookings that could occur as a result of
the Companys sanction of, or failure to sanction, major
projects in the deepwater Gulf of Mexico, Israel and West Africa.
Our Compensation Committee approves the target for each
performance measure after considering prior year financial and
operational results, the Board-approved budget, planned projects
and capital spending plans for the upcoming year. Our
Compensation Committee also considers that the achievement of
those targets can be significantly affected by availability of
labor and equipment, acquisitions and sales, weather, product
demand and pricing, competition and other industry conditions
that cannot be determined with certainty at the time the targets
are set. For example, the Deepwater Horizon incident led to a
drilling moratorium that stopped our deepwater drilling
operations in the Gulf of Mexico. We believe that our targets
are set aggressively in light of these variables and require
achievement of significant performance.
The targets for the annual STIP performance measures may include
certain adjustments that are not normally included in publicly
reported results. For instance, the production target is
significantly reduced from reported production by discounting
gas volumes sold at a lower price in Equatorial Guinea. In
addition, any significant acquisitions or divestitures are
excluded when considering performance against the production and
discretionary cash flow targets. Also, the discretionary cash
flow target excludes deferred taxes. Including these
adjustments, the targets for 2010 were 186.6 thousand barrels of
oil equivalent per day for production, the 50th percentile
relative to our compensation peer group for controllable unit
costs for the
12-month
period ending September 30, 2010 and $1.67 billion in
discretionary cash flow. The first two targets were weighted 14%
each and the discretionary cash flow target was weighted 8%. The
remaining 64% is the discretionary component determined by the
Compensation Committee.
31
Payout curves were approved for each measure at the time targets
were set, ranging from a factor of 0 to 2.5, with a 1.0 factor
at each target. The Companys 2010 performance exceeded the
targets for controllable unit costs and discretionary cash flow
but fell slightly short of the target for production (as
adjusted for acquisitions and divestitures). Our Compensation
Committee reviewed information provided by management on actual
performance for each measure as applied to the measures
payout curve to determine the bonus factor for that measure.
Each bonus factor was then multiplied by the weighting for its
respective measure, with the sum of the three bonus factors, as
adjusted for weighting, yielding the performance-based STIP
component.
The discretionary component, which accounted for the remaining
64% of the 2010 STIP formula, was determined by our Compensation
Committee based on the committees review of overall
Company performance. While a specific target for reserves was
not included in the formula portion of the STIP this year,
reserve additions were at a record high and strongly considered
in determining the discretionary part of the plan. We also
considered other performance-based measures such as: exploration
success, with record-high exploration resources added through
discoveries; exceptional safety performance; and total
shareholder return, which was 22% in fiscal 2010, compared to
the returns of our peer compensation group. The Committee also
took into account the Companys financial controls,
regulatory compliance, and the achievement of major initiatives,
including the sanction of the Tamar and Alen projects, the
organizations response to the issues arising from the
Deepwater Horizon incident, the closing of our PetroCanada
acquisition and the sale of our non-core Mid-continent assets.
The sum of the performance-based and discretionary components
was applied to the Companys aggregate target bonus pool to
determine our total bonus amount to be paid. This amount was
then allocated between executive officers and other employees.
In the case of executive officers, the committee considered the
performance of the CEO as measured against operational and
financial goals submitted by the CEO earlier in the year, as
well as the CEOs assessment of the performance of the
other executive officers as measured against goals each
submitted earlier in the year for his or her business unit or
organization, and allocated the pool based on that assessment of
individual performance and each executive officers
respective target bonus percentage factor. A cash payout under
the plan based on the Companys 2010 performance occurred
in February 2011.
The 2011 performance-based measures and specific targets were
approved by our Compensation Committee on January 25, 2011
and communicated to our executive officers. Our Compensation
Committee elected to retain the three performance-based measures
used in 2010, each with the same weighting as 2010 but with
different targets. These include production, controllable unit
costs and discretionary cash flow. The performance measure for
proved reserve additions was discontinued, but will be
considered by the committee in determining the discretionary
component which, for 2011, will remain at 64% of the STIP
formula. We believe that the approved targets for 2011 will be
appropriately difficult to achieve since they will be affected
by many of the same challenges and uncertainties as described
above. While those targets are disclosed above in the context of
historical 2010 performance, we believe that the disclosure of
2011 targets would result in competitive harm to us and are
therefore omitted since (1) we are engaged in a highly
competitive business, (2) we may pursue opportunities in
areas without first publicly disclosing our intention to do so
and (3) disclosure of these targets might enable our
competitors to determine our strategic areas of interest and
priorities throughout the year. We also do not believe that the
disclosure of 2011 targets is material to an understanding of
our 2010 executive compensation program as covered by this Proxy
Statement.
Long-Term
Incentive Plan
Our long-term incentive plan (LTIP) was approved by
our Compensation Committee and adopted by our Board on
January 27, 2004 and is primarily an equity-linked plan
that is available to our executive officers and certain other
key employees determined on an annual basis. It is designed to
attract, motivate and retain individuals of high quality by:
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providing competitive long-term incentive compensation
opportunities;
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rewarding outstanding achievement by those who can most directly
affect our performance and instill a sense of business
ownership; and
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32
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aligning the interests of our employees with those of our
stockholders so as to maximize long-term stockholder value
creation.
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Our Compensation Committee may make grants or awards of stock
options, restricted stock and performance units under our LTIP.
Stock options and restricted stock are granted under our 1992
Plan, which was originally approved by our stockholders in 1992
and most recently amended in 2009. The following description of
the 1992 Plan is subject to any changes that may result from
stockholder approval of the plan amendment and restatement
described in Proposal V of this Proxy Statement. The 1992
Plan permits the use of nonqualified stock options, with or
without stock appreciation rights, and restricted stock.
Pursuant to the 1992 Plan, stock options may be granted for a
period of up to ten years at fair market value, as defined in
the 1992 Plan, on the date of grant and upon such terms and
conditions, consistent with the provisions of the plan, as are
specified by our Compensation Committee at the time of grant.
Restricted stock may be granted by our Compensation Committee
subject to such terms and conditions as may be set by the
committee.
In 2007 and 2008 our Compensation Committee made grants of stock
options that vested ratably over a three-year period and
restricted stock that vested at the end of the third year. In
2009, 2010 and 2011 our Compensation Committee made grants of
stock options on the same terms but, in order to facilitate
grant administration while encouraging retention consistent with
our compensation program objectives, began making 1992 Plan
grants of restricted stock that time-vest 20% on the first
anniversary of the grant date, an additional 30% on the second
anniversary of the grant date and the remaining 50% on the third
anniversary of the grant date.
Approval
of Grants
Stock options and shares of restricted stock are granted to our
executive officers under our 1992 Plan. Our Compensation
Committee approves all such grants, which are determined based
on input from the CEO and market data provided by our
compensation consultant. Grants for the CEO and other executive
officers are approved by our Compensation Committee and
discussed with our Board, outside the presence of the CEO and
the other executive officers. In approving such grants, our
Compensation Committee also assesses the reasonableness of grant
levels considering the Companys relative performance
versus our compensation peer group over the past three years on
measures such as total shareholder return, debt-adjusted per
share production growth and reserve replacement, as well as
executive officer total compensation and internal pay equity.
The regular Board and Compensation Committee meeting schedule
for the upcoming year is set in April of the prior year, with
regular Board meetings held in January, April, July, October and
December. Our Compensation Committee meetings are usually held
the day before each Board meeting. The timing of these meetings
is not determined by executive officers and is usually in
advance of the announcement of earnings. We do not time the
release of material non-public information for the purpose of
affecting the values of executive compensation. Our Compensation
Committee may be aware of approximate earnings results at the
time of making equity grant decisions, but it does not adjust
the size or timing of grants to reflect possible market reaction.
Generally, annual stock option and restricted stock grants are
approved at a January meeting of our Compensation Committee.
Stock options and restricted stock are granted annually on
February 1 (or the preceding business day if February 1 falls on
a Saturday, Sunday or holiday). It is our policy to make grants
to executive officers and other employees at the same time.
However, specific grants of stock options or restricted stock
may be approved at other regular or special meetings to
recognize the completion of a significant transaction, a change
in an employees responsibility or a specific achievement,
or as an inducement to, or for the retention of, employment. No
special grants were made to executive officers in 2010. We
communicate grants to executive officers and other employees
shortly after the date of approval, in accordance with our
customary human resource practices.
Terms of
Grants
Stock option grants represent the right to purchase shares of
our common stock over a period of up to ten years at fair market
value, as defined in the 1992 Plan, on the date of grant and
upon such terms and conditions, consistent with the provisions
of the plan, as are specified by our Compensation Committee at
the time of grant. The 1992 Plan currently defines fair
market value for grant purposes as the average of the
reported high and low trading price of our common stock on the
NYSE on the date of grant (or if there was no reported sale on
such date, on the last
33
preceding date on which any reported sale occurred). We believe
that this method of determining fair market value is neutral to
the use of the closing price of our common stock and provides a
valid representation of fair market value. Therefore, consistent
with the terms of our 1992 Plan, we continued to grant stock
options on this basis in 2010.
Stock
Ownership Guidelines
We historically encouraged, but did not require, stock ownership
by our executive officers and directors. We likewise did not
require our executive officers and directors to hold a
substantial portion of their equity awards until they retire
from service. The rationale was that our executive officers have
received periodic grants of shares of restricted stock and stock
options under our 1992 Plan, consistent with the objectives of
our executive compensation program, providing them with
meaningful equity ownership in the Company and allowing them to
demonstrate their commitment as stockholders in the Company. Our
compensation and governance committees reevaluated this approach
and, after discussion with our Board on January 25, 2011,
our Board adopted stock ownership guidelines for our officers
and non-employee directors. These guidelines are set out in our
Corporate Governance Guidelines.
We believe that our stock ownership guidelines reinforce the
alignment of the long-term interests of our executive officers,
non-employee directors and stockholders. We also believe that
they help discourage the taking of excessive business risks.
Each officer is expected to own a number of our shares with a
value that is a multiple of the officers current base
salary and each non-employee director is expected to own a
number of shares with a value that is a multiple of the
directors annual cash retainer, as follows:
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Position
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Multiple
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Chief Executive Officer
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6X base salary
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President
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3X base salary
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Chief Financial Officer
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3X base salary
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Other Senior Vice President
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2.5X base salary
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Vice President
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2X base salary
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Non-Employee Director
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5X annual cash retainer
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These stock ownership guidelines also impose certain retention
requirements on any officer or director who fails to maintain
the prescribed level. All of our executive officers and outside
directors are in compliance with the guidelines as of the date
of this Proxy Statement.
2010
Compensation of CEO
Our Compensation Committee, with input from our other
independent directors, evaluates Mr. Davidsons
performance, with that evaluation supporting the determination
of Mr. Davidsons compensation level. In addition to
the financial results discussed above, other key 2010 results
under Mr. Davidsons leadership include:
Onshore United States
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a Central DJ Basin asset acquisition which enhanced our largest
onshore US property in Wattenberg;
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an increase in our Central DJ Basin position to over
830,000 net acres;
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the drilling and completion of 21 horizontal wells in the
Central DJ Basin Niobrara formation;
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an increase in Wattenberg production volumes to a record 54.2
thousand barrels of oil equivalent per day; and
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the sale of certain Mid-continent and Illinois Basin assets for
$552 million.
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Deepwater Gulf of Mexico
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the successful adjustment of our Gulf of Mexico business plan in
response to the Deepwater Horizon incident;
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the well completion work at Isabela and Santa Cruz at the
Galapagos project in the deepwater Gulf of Mexico; and
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an award of 11 deepwater lease blocks from the Central Gulf of
Mexico lease sale 213.
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International
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the sanction of the development plan for the Tamar project,
offshore Israel;
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the sanction of the development plan for the Alen project,
offshore Equatorial Guinea;
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a major exploration discovery at Leviathan, offshore Israel;
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the completion of two new Mari-B wells, offshore Israel,
maintaining field deliverability of 600 million cubic feet
per day, gross; and
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the conclusion of field drilling and initiation of completions
at Aseng, offshore Equatorial Guinea.
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Mr. Davidsons base salary as of January 1, 2010
was $1,025,000. Based on the results of our compensation
consultants review of 2010 executive compensation, our
Compensation Committee adjusted Mr. Davidsons salary
based on the market median for his position relative to our
compensation peer group giving consideration to the scope of his
responsibilities. Mr. Davidson received a 3.4% base salary
increase to $1,060,000, effective November 1, 2010.
Mr. Davidson received a total STIP payment of $1,855,000 in
February 2011, based on our Compensation Committees review
of overall performance of the Company for 2010, as well as
Mr. Davidsons performance as measured against
operational and financial goals for 2010 that he submitted
earlier in the year. Mr. Davidsons STIP payment for
2010 performance increased by 29.3% compared to 2009.
Mr. Davidson was granted awards under our 1992 Plan of
105,760 stock options and 43,281 shares of restricted stock
on February 1, 2010, based in part on market data from our
compensation consultant and considering our performance against
our compensation peer group and Mr. Davidsons
leadership performance.
We believe that Mr. Davidsons compensation level is
consistent with the objectives of our compensation program,
provides an appropriate mix of salary and incentive
compensation, rewards leadership performance by
Mr. Davidson that has produced some key results by the
Company in 2010 and provides motivation for the future
achievement of short- and long-term goals necessary to
stockholder value creation. We also believe that it is
internally consistent and equitable compared to our other
executive officers in recognition of Mr. Davidsons
broad responsibility and accountability for the Companys
strategy and operations, compliance and controls, investor
relations and role as Chairman of our Board.
2010
Compensation of Other Named Executive Officers
In determining the compensation of Messrs. Fisher, Stover
and Cook and Ms. Cunningham for 2010, our Compensation
Committee considered their respective roles, responsibilities
and reporting within the Company; their respective contributions
to the overall performance of the Company; the performance of
their respective business units or organizations; comparisons to
our compensation peer group; and internal pay equity.
Based on the results of our compensation consultants
review of 2010 executive compensation, each of our other named
executive officers received an increase in base salary as our
Compensation Committee determined that an increase was
appropriate based on the median for their respective positions
relative to our compensation peer group giving consideration to
the scope of their respective responsibilities. Effective
November 1, 2010, Mr. Fishers base salary was
increased to $525,000, Mr. Stovers base salary was
increased to $625,000, Ms. Cunninghams base salary
was increased to $475,000, and Mr. Cooks base salary
was increased to $425,000.
After reviewing the overall performance of the Company for 2010
and the contributions to that performance of each non-CEO named
executive officer and his or her respective business unit or
organization, our Compensation Committee approved the following
STIP payments: Mr. Fisher $790,000;
Mr. Stover $1,200,000;
Ms. Cunningham $675,000; and
Mr. Cook $700,000. The STIP payments for 2010
performance for Mr. Fisher, Mr. Stover,
Ms. Cunningham, and Mr. Cook increased approximately
39%, 59%, 38%, and 63%, respectively,
35
compared to 2009. We believe that these STIP payments are
appropriate in light of the Companys performance in 2010
and reflect the relative contributions of these executive
officers, including Mr. Fishers leadership within the
Companys financial organization; Mr. Stovers
role in the growth of our domestic and international businesses
and the Companys exceptional safety performance;
Ms. Cunninghams role in our exploration success with
another major discovery offshore Israel at our Leviathan
prospect; and Mr. Cooks role in the progress made in
our international development projects, including the
sanctioning of the Tamar and Alen projects.
On January 29, 2010, our Compensation Committee approved
the following stock option grants and restricted stock awards
under our 1992 Plan for our other named executive officers:
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Shares of
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Named Executive Officer
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Stock Options
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Restricted Stock
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Kenneth M. Fisher
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26,896
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11,007
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David L. Stover
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55,841
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22,853
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Susan M. Cunningham
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26,847
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10,987
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Rodney D. Cook
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20,797
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8,511
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In determining the level of these grants, our Compensation
Committee considered market data provided by our compensation
consultant regarding our compensation program and appropriate
long-term incentive grant levels in light of compensation peer
group practices.
Post-Employment
Compensation
Our post-employment compensation is provided under qualified and
nonqualified defined benefit plans, qualified and nonqualified
defined contribution plans, and either individual change of
control agreements or, alternatively, a change of control plan.
Through its various components, our post-employment compensation
facilitates our efforts to retain individuals of high quality
and support a long-standing internal culture of loyalty and
dedication to our interests.
Qualified
Defined Benefit Plan
Our qualified defined benefit plan (Retirement Plan)
provides employees originally hired before May 1, 2006,
which includes all of our named executive officers except
Mr. Fisher, with retirement income benefits commencing upon
retirement after attaining the normal retirement age of 65 or
upon early or deferred vested retirement after attaining
age 55 and completing 5 years of vesting service.
Early retirement reductions apply if retirement benefits are
commenced prior to age 65. The amount of an employees
monthly Retirement Plan benefit will depend upon the
employees final average monthly compensation, age and the
number of his or her years of credited service (which is limited
to a maximum of 30 years). Monthly Retirement Plan benefits
commencing upon retirement after attaining the normal retirement
age of 65 are calculated using the greater of the following two
formulas:
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Formula 1
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Formula 2
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1.25% × final average monthly
compensation × years of credited service (up to 30) + 0.50%
× final average monthly compensation that exceeds Social
Security covered compensation × years of credited service
(up to 30)
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2% × final average monthly compensation × years of
credited service (up to 20)
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Final average monthly compensation generally means the
employees average monthly compensation from the Company
for the 60 consecutive months prior to retirement that results
in the highest average monthly compensation for the employee.
The compensation taken into account for Retirement Plan purposes
includes the employees salary and STIP payment. The annual
amount of compensation that can be taken into account for
Retirement Plan purposes is limited by the Internal Revenue
Code. This annual compensation limit is $245,000 for
36
2010 and 2011. The maximum annual benefit that may be paid to an
employee under our Retirement Plan is also limited by the
Internal Revenue Code. This maximum annual benefit is $195,000
for 2010 and 2011.
Our Compensation Committee reviewed our Retirement Plan in 2006
and concluded that an enhanced defined contribution plan would
be better aligned with our compensation program objectives
because it would offer employees more investment choices, be
portable and be more cost-effective to the Company. Accordingly,
beginning on May 1, 2006, our Retirement Plan was closed to
new participants and new employees became eligible to instead
receive an enhanced Company contribution in the qualified
defined contribution plan described below. Employees originally
hired before May 1, 2006, which include all of our named
executive officers except Mr. Fisher, continue to accrue
benefits under the Retirement Plan.
We amended our Retirement Plan effective January 1, 2008 to
allow existing plan participants to elect to receive a lump sum
distribution upon separation from service. Lump sums are
calculated using Internal Revenue Service mandated rates.
Nonqualified
Defined Benefit Plan
Our nonqualified defined benefit plan (Restoration
Plan) is an unfunded plan that provides the benefits under
the Retirement Plans benefit formula that cannot be
provided by the Retirement Plan because of the annual
compensation and annual benefit limitations applicable to the
Retirement Plan under the Internal Revenue Code. The amount of
an employees monthly Restoration Plan benefit will depend
upon the employees final average monthly compensation, age
and the number of his or her years of credited service (which is
limited to a maximum of 30 years). Existing plan
participants were allowed to make a one-time election prior to
January 1, 2008 to receive plan benefits in a lump sum
payment upon separation from service, as permitted by the
transition relief provisions of Internal Revenue Code
Section 409A. Restoration Plan benefits are calculated
using the same methodology utilized for our Retirement Plan.
Employees originally hired before May 1, 2006, which
include all of our named executive officers except
Mr. Fisher, continue to accrue benefits under the
Restoration Plan.
Qualified
Defined Contribution Plan
Our qualified defined contribution plan (Thrift
Plan) allows employees to make pre-tax contributions to
the plan out of their basic compensation. For the purposes of
the Thrift Plan, basic compensation generally means cash
compensation, including overtime but excluding incentive
payments, bonuses, allowances and other extraordinary
remuneration. The amount of an employees basic
compensation taken into account under the Thrift Plan cannot
exceed the Internal Revenue Code limit, which is $245,000 for
2010 and 2011. The annual contribution made by an employee to
the Thrift Plan cannot exceed 50% of his or her basic
compensation and is limited to a maximum contribution amount
specified under the Internal Revenue Code (which is $16,500 for
2010 and 2011, plus a
catch-up
contribution in each of those years of $5,500 for employees who
are at least 50 years of age). An employees pre-tax
contributions (other than
catch-up
contributions) made to the Thrift Plan are matched by the
Company on a
dollar-for-dollar
basis up to 6% of the employees basic compensation. In
addition, beginning in 2006, the Company makes the following
age-weighted contribution to the Thrift Plan for each
participant whose initial employment date with the Company is on
or after May 1, 2006 (which does not include any of our
named executive officers except Mr. Fisher) and who is
employed by or on authorized leave of absence from the Company
on the last day of the calendar year (or whose retirement,
permanent disability or death occurred during such year while
employed by or on authorized leave of absence from the Company):
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Contribution Percentage
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Contribution Percentage
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for Portion of Basic
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for Portion of Basic
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Compensation Below
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Compensation Above
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Age of Participant
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the FICA Taxable Wage Base
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the FICA Taxable Wage Base
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Under 35
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4
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%
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8
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%
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At least 35 but under 48
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7
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%
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10
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%
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At least 48
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9
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%
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12
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%
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The contributions made to our Thrift Plan by or for a
participant are credited to accounts maintained for such
participant under the plan. The amounts credited to a
participants accounts are invested at the direction of the
participant in various investment fund options available under
the Thrift Plan, including investment in shares of our
37
common stock. The amounts credited to a participants
accounts that are attributable to his or her pre-tax
contributions are immediately 100% vested. Amounts attributable
to the Companys matching contributions become 34% vested
upon the completion of one year of service, 67% vested upon the
completion of two years of service, and 100% vested upon the
completion of three years of service. The amounts attributable
to the Companys age-weighted contributions become vested
after three years of service. The amounts credited to a
participants accounts become distributable upon the
participants termination of employment with the Company,
and certain amounts are available for loans, hardship
distributions and in-service withdrawals.
Nonqualified
Deferred Compensation Plan
Our nonqualified deferred compensation plan (Deferred
Compensation Plan) allows executive officers, and certain
other employees, to save for retirement in a tax-effective way
at minimal cost to us. Under the Deferred Compensation Plan,
participants are allowed to defer portions of their salary and
bonus and to receive certain matching and age-weighted
contributions that would have been made to our Thrift Plan if
the Thrift Plan had not been subject to Internal Revenue Code
compensation and contribution limitations. Under this unfunded
program, amounts deferred by the participant are credited
annually with interest at a rate equal to the greater of 125% of
the
120-month
rolling average of
10-year
U.S. Treasury Notes or the
120-month
rolling average of the prime rate as published in The Wall
Street Journal.
Change of
Control Arrangements
We have adopted change of control arrangements for our executive
officers and certain other employees. These arrangements are
intended to preserve morale and productivity and encourage
retention in the face of the disruptive impact of an actual or
rumored change of control of the Company. Based on information
provided by our compensation consultant, we believe that these
arrangements are common practice and align our executive officer
interests with those of our stockholders by enabling our
executive officers to consider corporate transactions that are
in the best interest of stockholders without undue concern over
whether the transactions may jeopardize their continued
employment.
A change of control will be deemed to have occurred under our
change of control arrangements if any of the following events
occurs:
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individuals who constituted our Board on January 1, 2008
(or such other date as may be specified in individual change of
control agreements) (Incumbent Board) cease to
constitute at least 51% of the Board, provided that any
individual whose election was approved by a vote of at least a
majority of the directors of the Incumbent Board will be
considered a member of the Incumbent Board;
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our stockholders approve a reorganization, merger or
consolidation whereby the persons who were stockholders
immediately prior to the reorganization, merger or consolidation
do not immediately thereafter own at least 51% of the voting
shares of the new entity;
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our stockholders approve a liquidation or dissolution of the
Company or a sale of all or substantially all of our assets to a
non-related party; or
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a new person or entity becomes the owner of at least 25% of our
outstanding common stock or voting power in the Company.
|
We believe that these changes of control events are an accurate
depiction of circumstances that could reasonably be expected to
result in a material change in the leadership and direction of
the Company, creating uncertainties among employees and
executive officers in such areas as the continuity of
management, continued employment opportunities, and our ability
to execute existing programs.
All of our change of control arrangements include provisions
regarding severance benefits that our executive officers and
certain other employees may be entitled to receive if they are
terminated within two years following a change of control of the
Company. Under these arrangements, if a named executive officer
is terminated for any reason (other than for cause, disability
or death) within two years after a change of control, we will
then pay or provide the following to that named executive
officer:
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all unpaid salary and expenses;
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38
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a lump sum equal to a multiple of his or her annual cash
compensation (made up of annual salary and bonus) ranging from
2.5 times to 2.99 times;
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an amount equal to his or her pro-rata target bonus for the
then-current year;
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life, disability, medical and dental insurance benefits, upon
his or her written request, ranging among named executive
officers from 30 to 36 months or such shorter period until
the executive obtains substantially equivalent coverage from a
subsequent employer;
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the vesting of his or her stock options and restricted
stock; and
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reimbursement for reasonable fees up to $15,000 for
out-placement employment services.
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If we terminate the named executive officer for cause, no
benefit is payable to, or with respect to, that named executive
officer under our change of control arrangements. A termination
for cause may only be made by the affirmative vote of a majority
of the members of our Board.
Our change of control arrangements include a plan or, in the
alternative, individual change of control agreements.
Specifically, on October 24, 2006, our Board approved a
Change of Control Severance Plan for Executives (Executive
Change of Control Plan), which became effective on that
date. The plan covers our executive officers and certain key
employees, provided that they are not already party to
pre-existing change of control agreements with us. All of our
named executive officers, except Messrs. Fisher and Cook,
are parties to pre-existing change of control agreements and
therefore may not participate in the plan at this time.
Messrs. Fisher and Cook currently participate in our
Executive Change of Control Plan.
Our change of control arrangements previously provided for a tax
gross-up
payment to the named executive officer that would fully offset
the effect of (1) any excise tax imposed by
Section 4999 of the Internal Revenue Code upon the benefits
payable under such arrangements (or under any other Company
plan, arrangement or agreement), and (2) any federal, state
or local income tax or additional Section 4999 excise tax
that is attributable to the tax
gross-up
payment. Effective February 1, 2011, the tax
gross-up
provision was eliminated from all of our individual change of
control agreements and our Executive Change of Control Plan
(although the effectiveness of such elimination under the
Executive Change of Control Plan is subject to a pre-existing
delay provision contained in the plan if a change of control
occurs before January 26, 2012).
Severance
Benefit Plan
Our Severance Benefit Plan (Severance Benefit Plan)
is an unfunded plan that provides for severance benefits to
eligible employees, including our executive officers, in certain
instances based upon years of completed service. The severance
benefits are comprised of:
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a cash payment of two weeks of base salary pay for every year of
completed service, with a minimum of 12 weeks of pay and a
maximum of 52 weeks of pay;
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a pro-rated STIP payment based on the number of months of
employment during the calendar year of termination;
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six months of reduced-rate contributions under our medical and
dental plans; and
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twelve weeks of coverage under our employee assistance plan.
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Perquisites: We do not consider perquisites to
be a principal element of executive compensation. In 2010,
certain of our executive officers received non-material personal
benefits, such as club membership dues reimbursement and
comprehensive physical examinations.
Other
Compensation Matters
Health
and Welfare Programs
We offer a number of other benefits to our executive officers
pursuant to benefit programs that provide for broad-based
employee participation. These benefit programs include medical,
dental and vision insurance, long-
39
term disability (LTD) and short-term disability
insurance, life and accidental death and dismemberment
(AD&D) insurance, health and dependent care
flexible spending accounts, relocation/expatriate programs and
services, educational assistance, employee assistance and
certain other benefits.
Indemnification
Agreements
We have entered into an indemnification agreement with each of
our non-employee directors and our executive officers. These
agreements provide for us to indemnify such persons against
certain liabilities that may arise by reason of their status or
service as directors or executive officers and to advance their
expenses incurred as a result of a proceeding as to which they
may be indemnified. We also cover such persons under a
directors and officers liability insurance policy
that we choose, in our discretion, to maintain. These
indemnification agreements are intended to provide
indemnification rights to the fullest extent permitted under
applicable law and are in addition to any other rights the
individual may have under our Certificate of Incorporation,
By-laws and applicable law. We believe these indemnification
agreements enhance our ability to attract and retain
knowledgeable and experienced executive officers and
non-employee directors.
Tax
and Accounting Considerations
Under Section 409A of the Internal Revenue Code, amounts
deferred for an executive officer under a nonqualified deferred
compensation plan may be included in gross income when vested
and subject to a 20% or more additional federal tax, unless the
plan complies with certain requirements related to the timing of
deferral election and distribution decisions.
Section 162(m) of the Internal Revenue Code may limit our
ability to deduct annual compensation in excess of $1,000,000
that is paid to our CEO and other named executive officers,
unless that compensation is performance-based
compensation within the meaning of Section 162(m) and
the regulations promulgated thereunder. We believe that all of
the stock options granted under the 1992 Plan qualify as
performance-based compensation and therefore are not subject to
the deduction limitation of Section 162(m). However, the
salary and STIP payouts paid to our executive officers, the
time-vested restricted stock awards, and certain payments
provided for under our change of control arrangements with the
named executive officers are not exempt from this deduction
limit.
Section 280G of the Internal Revenue Code limits our
ability to deduct amounts paid to certain disqualified
individuals, including our executive officers, that are treated
as excess parachute payments. Excess parachute payments are also
subject to an excise tax payable by the recipient of such
payment. Parachute payments are payments that are contingent on
a change in the ownership or effective control of the Company or
in the ownership of a substantial portion of our assets, and
they become excess parachute payments with respect to a
disqualified individual to the extent that the total amount of
the parachute payments made to such individual exceeds a certain
threshold amount. Examples of the types of payments that could
give rise to parachute payments are the accelerated vesting of
stock options and restricted stock upon a change of control and
severance payments made upon a termination of employment in
connection with a change of control.
Although we consider tax deductibility in the design and
administration of our executive compensation plans and program,
we believe that there are circumstances where our interests are
best served by maintaining flexibility in the way compensation
is provided, even if it results in the non-deductibility of
certain compensation under the Internal Revenue Code.
Rules under generally accepted accounting principles determine
the manner in which we account in our financial statements for
grants of equity-based compensation to our employees. Our
accounting policies for equity-based compensation are further
discussed in Notes 2 and 13 to our consolidated financial
statements, included in our 2010 Annual Report on
Form 10-K.
40
REPORT OF
THE COMPENSATION, BENEFITS
AND STOCK OPTION COMMITTEE
ON EXECUTIVE COMPENSATION
The following report of the Compensation, Benefits and Stock
Option Committee of the Board of Directors shall not be deemed
to be soliciting material or to be filed
with the SEC or subject to the SECs proxy rules, except
for the required disclosure in this Proxy Statement, or subject
to the liabilities of Section 18 of the Securities Exchange
Act of 1934 (Exchange Act), and the information
shall not be deemed to be incorporated by reference into any
filing made by the Company under the Securities Act of 1933 or
the Exchange Act.
The Compensation, Benefits and Stock Option Committee has
reviewed the Compensation Discussion and Analysis contained in
this Proxy Statement and discussed this disclosure with
management. Based on this review and discussions with
management, the Compensation, Benefits and Stock Option
Committee recommended to the Board of Directors that the
Compensation Discussion and Analysis be included in this Proxy
Statement and incorporated by reference in the Companys
Annual Report on
Form 10-K
for the fiscal year ended December 31, 2010 for filing with
the SEC.
March 22, 2011
Compensation, Benefits and
Stock Option Committee
Kirby L. Hedrick, Chair
Jeffrey L. Berenson
Edward F. Cox
Thomas J. Edelman
41
Summary
Compensation Table
The following table sets forth certain summary information
concerning the compensation earned by our CEO and CFO and each
of our three most-highly compensated executive officers other
than the CEO and CFO (collectively, the named executive
officers) during 2008, 2009 and 2010.
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Change in
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Pension Value
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and Non-
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Non-Equity
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Qualified
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Stock
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Option
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Incentive Plan
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Deferred
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All Other
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Name and
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Salary
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Awards
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Awards
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Compensation
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Compensation
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Compensation
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Total
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Principal Position
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Year
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($)(1)
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Bonus($)
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($)(2)
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($)(3)
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($)(4)
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Earnings($)(5)
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($)(6)
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($)
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Charles D. Davidson
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2010
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$
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1,012,644
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$
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3,249,970
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$
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2,650,346
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$
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1,855,000
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$
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1,494,043
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$
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70,539
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$
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10,332,542
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Chairman and Chief
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2009
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1,025,000
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2,445,629
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|
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2,445,383
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1,435,000
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1,934,613
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74,386
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9,360,011
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Executive Officer
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2008
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1,025,000
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3,534,599
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2,545,316
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4,354,359
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889,986
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70,908
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12,420,168
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Kenneth M. Fisher(7)
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2010
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495,192
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$
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500,000
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826,516
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674,014
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790,000
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83,771
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3,369,493
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Senior Vice President and Chief Financial Officer
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2009
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62,500
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500,000
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|
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2,399,957
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899,508
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70,000
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505,970
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3,937,935
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David L. Stover
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2010
|
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593,461
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1,716,032
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1,399,375
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1,200,000
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527,382
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24,023
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|
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5,460,274
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President and Chief
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2009
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600,000
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1,662,774
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1,668,488
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756,000
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456,033
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26,199
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5,169,494
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Operating Officer
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2008
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556,250
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1,686,810
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1,214,697
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1,362,707
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199,415
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22,687
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5,042,566
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Susan M. Cunningham
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2010
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437,769
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825,014
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672,786
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675,000
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386,614
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16,847
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3,014,030
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Senior Vice President
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2009
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440,000
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1,138,344
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1,148,115
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489,720
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402,430
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22,644
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3,641,253
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Exploration
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2008
|
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428,333
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836,257
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|
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602,215
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1,092,242
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|
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|
156,030
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|
|
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|
16,106
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|
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|
3,131,183
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|
|
|
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Rodney D. Cook
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2010
|
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384,490
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|
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|
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|
639,091
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|
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|
|
521,173
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|
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700,000
|
|
|
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|
747,129
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|
|
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|
23,670
|
|
|
|
|
3,015,553
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|
Senior Vice President
|
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2009
|
|
|
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|
385,000
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|
|
|
|
|
|
|
|
|
763,339
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|
|
|
|
765,728
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|
|
|
|
428,505
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|
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|
708,675
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|
|
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|
34,282
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|
|
|
|
3,085,529
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|
International
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|
2008
|
|
|
|
|
350,000
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|
|
|
|
|
|
|
|
|
749,021
|
|
|
|
|
381,797
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|
|
|
|
697,510
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|
|
|
|
243,559
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|
|
|
|
29,105
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|
|
|
|
2,450,992
|
|
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|
(1) |
|
Certain of our named executive officers deferred a portion of
their base salaries under our Deferred Compensation Plan: |
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Percentage of
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Amount
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Name
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Year
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Salary Deferred
|
|
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Deferred
|
Charles D. Davidson
|
|
|
|
2010
|
|
|
|
|
45
|
%
|
|
|
$
|
455,690
|
|
|
|
|
|
2009
|
|
|
|
|
45
|
%
|
|
|
|
461,250
|
|
|
|
|
|
2008
|
|
|
|
|
45
|
%
|
|
|
|
461,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rodney D. Cook
|
|
|
|
2010
|
|
|
|
|
0
|
%
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
|
|
10
|
%
|
|
|
|
38,500
|
|
|
|
|
|
2008
|
|
|
|
|
10
|
%
|
|
|
|
35,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2) |
|
Reflects the aggregate grant date fair value of restricted stock
granted under our 1992 Plan, which was computed in accordance
with FASB ASC Topic 718. Shares granted in 2009 and 2010 will
vest according to the following schedule: 20% on the first
anniversary of the grant date; an additional 30% on the second
anniversary of the grant date; and the remaining 50% on the
third anniversary of the grant date. Shares granted in 2008 will
vest 100% on the third anniversary of the grant date. The
vesting of these shares is not contingent upon the satisfaction
of any performance goals. See the Grants of Plan-Based Awards
table for information on restricted stock granted in 2010. |
|
(3) |
|
Reflects the aggregate grant date fair value of nonqualified
stock options granted under our 1992 Plan. Options represent the
right to purchase shares of common stock at a price per share
equal to fair market value on the date of grant. Options will
vest ratably over three years in equal installments on the
first, second and third anniversaries of the date of grant.
Vesting of these options is not contingent upon the satisfaction
of any performance goals, although none of the options may be
exercised before the first anniversary (absent a change of
control of the Company) or after the tenth anniversary of the
date of grant. See the Grants of Plan-Based Awards table for
information on stock options granted in 2010. |
42
|
|
|
(4) |
|
Reflects payments under our STIP based on the achievement of
certain performance goals during the year indicated and payout
of performance units previously awarded under our LTIP. STIP
awards earned during the year indicated were paid or deferred in
February of the following year, and performance unit awards
under the LTIP cover the three-year performance period ending on
December 31st of the year indicated, as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance
|
Name
|
|
|
Year
|
|
|
STIP Payout
|
|
|
Units Payout(a)
|
Charles D. Davidson
|
|
|
|
2010
|
|
|
|
$
|
1,855,000
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
|
|
1,435,000
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
|
|
1,435,000
|
|
|
|
$
|
2,919,359
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kenneth M. Fisher
|
|
|
|
2010
|
|
|
|
|
790,000
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
|
|
70,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David L. Stover
|
|
|
|
2010
|
|
|
|
|
1,200,000
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
|
|
756,000
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
|
|
764,296
|
|
|
|
|
598,411
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Susan M. Cunningham
|
|
|
|
2010
|
|
|
|
|
675,000
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
|
|
489,720
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
|
|
493,831
|
|
|
|
|
598,411
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rodney D. Cook
|
|
|
|
2010
|
|
|
|
|
700,000
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
|
|
428,505
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
|
|
432,437
|
|
|
|
|
265,073
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Performance units were not awarded after 2006; therefore, the
final payment of performance units was made in May 2009 for the
three-year period ended on December 31, 2008.
|
|
|
|
(5) |
|
Reflects during the year indicated: (a) the aggregate
increase in actuarial present value of the named executive
officers benefits under our Retirement Plan and our
Restoration Plan; and (b) the above-market Deferred
Compensation Plan earnings, as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
|
|
|
|
|
|
|
|
|
Increase in
|
|
|
|
Compensation
|
|
|
|
|
|
|
|
|
Retirement and
|
|
|
|
Above-Market
|
|
Name
|
|
|
Year
|
|
|
|
Restoration Plans(a)
|
|
|
|
Earnings(b)
|
|
Charles D. Davidson
|
|
|
|
2010
|
|
|
|
$
|
1,324,713
|
|
|
|
$
|
169,330
|
|
|
|
|
|
2009
|
|
|
|
|
1,757,599
|
|
|
|
|
177,014
|
|
|
|
|
|
2008
|
|
|
|
|
795,515
|
|
|
|
|
94,471
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David L. Stover
|
|
|
|
2010
|
|
|
|
|
513,313
|
|
|
|
|
14,069
|
|
|
|
|
|
2009
|
|
|
|
|
441,239
|
|
|
|
|
14,794
|
|
|
|
|
|
2008
|
|
|
|
|
191,411
|
|
|
|
|
8,004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Susan M. Cunningham
|
|
|
|
2010
|
|
|
|
|
386,614
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
|
|
402,430
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
|
|
156,030
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rodney D. Cook
|
|
|
|
2010
|
|
|
|
|
743,818
|
|
|
|
|
3,311
|
|
|
|
|
|
2009
|
|
|
|
|
705,759
|
|
|
|
|
2,916
|
|
|
|
|
|
2008
|
|
|
|
|
242,326
|
|
|
|
|
1,233
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Beginning of year values for calculating the aggregate increase
in actuarial present value reflect a 6.00% discount rate; end of
year values reflect a 5.50% discount rate for the Retirement
Plan and a 5.25% discount rate for the Restoration Plan. Present
values are based on the same actuarial assumptions and
measurement dates disclosed in Note 14 to our financial
statements in the
Form 10-K
for the year ended December 31, 2010, except that for
purposes of the present value calculations participants are
assumed to work until age 65 and commence their benefits at
that time.
|
|
|
|
|
(b)
|
Above-market earnings in 2010 are based on the difference
between the plan crediting rate of 6.11% and 120% of the annual
long-term Applicable Federal Rate as of September 2009 (5.27%);
earnings in 2009 are based on the difference between the plan
crediting rate of 6.55% and 120% of the annual long-term
Applicable Federal Rate as of September 2008 (5.51%); earnings
in 2008 are based on the
|
43
|
|
|
|
|
difference between the plan crediting rate of 6.81% and 120% of
the annual long-term Applicable Federal Rate as of September
2007 (6.13%).
|
|
|
|
(6) |
|
All other compensation includes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thrift Plan
|
|
|
Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit Sharing
|
|
|
|
|
|
|
Matching
|
|
|
Matching
|
|
|
Club
|
|
|
Insurance
|
|
|
Holiday
|
|
|
Physical
|
|
|
Plan
|
Name
|
|
|
Year
|
|
|
Contributions
|
|
|
Contributions
|
|
|
Memberships
|
|
|
Premiums
|
|
|
Bonus
|
|
|
Examinations
|
|
|
Contributions(a)
|
Charles D. Davidson
|
|
|
|
2010
|
|
|
|
$
|
14,700
|
|
|
|
$
|
46,059
|
|
|
|
$
|
7,391
|
|
|
|
$
|
2,232
|
|
|
|
$
|
157
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
|
|
14,700
|
|
|
|
|
46,800
|
|
|
|
|
7,391
|
|
|
|
|
2,508
|
|
|
|
|
157
|
|
|
|
|
2,580
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
|
|
13,800
|
|
|
|
|
47,700
|
|
|
|
|
6,743
|
|
|
|
|
2,508
|
|
|
|
|
157
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kenneth M. Fisher
|
|
|
|
2010
|
|
|
|
|
14,700
|
|
|
|
|
|
|
|
|
|
10,463
|
|
|
|
|
2,232
|
|
|
|
|
157
|
|
|
|
|
|
|
|
|
$
|
56,219
|
|
|
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
209
|
|
|
|
|
136
|
|
|
|
|
|
|
|
|
|
5,625
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David L. Stover
|
|
|
|
2010
|
|
|
|
|
14,700
|
|
|
|
|
|
|
|
|
|
6,934
|
|
|
|
|
2,232
|
|
|
|
|
157
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
|
|
14,700
|
|
|
|
|
|
|
|
|
|
6,934
|
|
|
|
|
2,508
|
|
|
|
|
157
|
|
|
|
|
1,900
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
|
|
13,800
|
|
|
|
|
|
|
|
|
|
6,222
|
|
|
|
|
2,508
|
|
|
|
|
157
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Susan M. Cunningham
|
|
|
|
2010
|
|
|
|
|
14,700
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,990
|
|
|
|
|
157
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
|
|
14,700
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,207
|
|
|
|
|
157
|
|
|
|
|
5,580
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
|
|
13,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,149
|
|
|
|
|
157
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rodney D. Cook
|
|
|
|
2010
|
|
|
|
|
14,700
|
|
|
|
|
|
|
|
|
|
7,065
|
|
|
|
|
1,748
|
|
|
|
|
157
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
|
|
14,700
|
|
|
|
|
8,400
|
|
|
|
|
7,065
|
|
|
|
|
1,931
|
|
|
|
|
136
|
|
|
|
|
2,050
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
|
|
13,800
|
|
|
|
|
7,200
|
|
|
|
|
6,192
|
|
|
|
|
1,756
|
|
|
|
|
157
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Mr. Fisher received Profit Sharing Plan contributions for
2010 and 2009 as of the last day of each calendar year. A
portion of Mr. Fishers 2010 Profit Sharing
contribution ($17,800) was deposited into Mr. Fishers
Profit Sharing Plan contribution account in our Thrift Plan. The
remaining portion of Mr. Fishers 2010 Profit Sharing
Plan contribution ($38,419) was credited to
Mr. Fishers account in our nonqualified Deferred
Compensation Plan. Mr. Fishers 2009 Profit Sharing
Plan contribution ($5,625) was deposited into
Mr. Fishers Profit Sharing Plan account in our Thrift
Plan.
|
As reflected in the table above, the salary received by each of
our named executive officers as a percentage of their respective
total compensation during the year indicated was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage
|
|
|
|
|
|
|
of Total
|
Name
|
|
|
Year
|
|
|
Compensation
|
Charles D. Davidson
|
|
|
|
2010
|
|
|
|
|
9.8
|
%
|
|
|
|
|
2009
|
|
|
|
|
11.0
|
%
|
|
|
|
|
2008
|
|
|
|
|
9.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Kenneth M. Fisher
|
|
|
|
2010
|
|
|
|
|
14.7
|
%
|
|
|
|
|
2009
|
|
|
|
|
1.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
David L. Stover
|
|
|
|
2010
|
|
|
|
|
10.9
|
%
|
|
|
|
|
2009
|
|
|
|
|
11.6
|
%
|
|
|
|
|
2008
|
|
|
|
|
14.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Susan M. Cunningham
|
|
|
|
2010
|
|
|
|
|
14.5
|
%
|
|
|
|
|
2009
|
|
|
|
|
12.1
|
%
|
|
|
|
|
2008
|
|
|
|
|
15.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Rodney D. Cook
|
|
|
|
2010
|
|
|
|
|
12.8
|
%
|
|
|
|
|
2009
|
|
|
|
|
12.5
|
%
|
|
|
|
|
2008
|
|
|
|
|
16.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7) |
|
Mr. Fisher was appointed Senior Vice President and CFO of
the Company effective November 16, 2009 and received two
cash payments in the amount of $500,000 each pursuant to the
terms of his compensation arrangement with the Company. The
first payment was made on December 16, 2009 and the second
payment was made on May 21, 2010. |
44
Grants of
Plan-Based Awards
The table below sets forth information regarding grants of
plan-based awards made to our named executive officers during
2010.
|
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|
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|
|
|
|
|
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|
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|
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|
|
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|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
All Other
|
|
|
All Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
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|
|
|
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|
|
|
|
|
|
Stock
|
|
|
Option
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Future Payouts
|
|
|
Estimated Future Payouts
|
|
|
Awards:
|
|
|
Awards:
|
|
|
Exercise
|
|
|
|
|
|
|
|
|
|
|
|
|
Under Non-Equity Incentive
|
|
|
Under Equity Incentive
|
|
|
Number of
|
|
|
Number of
|
|
|
or Base
|
|
|
Grant Date
|
|
|
|
|
|
|
|
|
|
Plan Awards
|
|
|
Plan Awards
|
|
|
Shares of
|
|
|
Securities
|
|
|
Price of
|
|
|
Fair Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock or
|
|
|
Underlying
|
|
|
Option
|
|
|
of Stock and
|
|
|
|
Approval
|
|
|
Grant
|
|
|
Units
|
|
|
Threshold
|
|
|
Target
|
|
|
Max
|
|
|
Threshold
|
|
|
Target
|
|
|
Max
|
|
|
Units (#)
|
|
|
Options (#)
|
|
|
Awards
|
|
|
Option
|
Name
|
|
|
Date(1)
|
|
|
Date(1)
|
|
|
Granted
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
(#)
|
|
|
(#)
|
|
|
(#)
|
|
|
(2)
|
|
|
(3)
|
|
|
($/Sh)(4)
|
|
|
Awards(5)
|
Charles D. Davidson
|
|
|
|
01/29/10
|
|
|
|
|
02/01/10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
43,281
|
|
|
|
|
105,760
|
|
|
|
$
|
75.09
|
|
|
|
$
|
5,900,316
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kenneth M. Fisher
|
|
|
|
01/29/10
|
|
|
|
|
02/01/10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,007
|
|
|
|
|
26,896
|
|
|
|
|
75.09
|
|
|
|
|
1,500,529
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David L. Stover
|
|
|
|
01/29/10
|
|
|
|
|
02/01/10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,853
|
|
|
|
|
55,841
|
|
|
|
|
75.09
|
|
|
|
|
3,115,407
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Susan M. Cunningham
|
|
|
|
01/29/10
|
|
|
|
|
02/01/10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,987
|
|
|
|
|
26,847
|
|
|
|
|
75.09
|
|
|
|
|
1,497,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rodney D. Cook
|
|
|
|
01/29/10
|
|
|
|
|
02/01/10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,511
|
|
|
|
|
20,797
|
|
|
|
|
75.09
|
|
|
|
|
1,160,264
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
All grants were approved by our Compensation Committee, and were
effective and priced on the date of grant. |
|
(2) |
|
Represents the shares of restricted stock granted under our 1992
Plan in 2010. The shares will vest according to the following
schedule: 20% of the award will vest on the first anniversary of
the grant date; an additional 30% of the award will vest on the
second anniversary of the grant date; and the remaining 50% of
the award will vest on the third anniversary of the grant date. |
|
|
|
Dividends declared on shares of restricted stock are accrued
during the three-year restricted period. Accrued dividends will
be paid upon vesting of restricted shares. Dividends accrued
during 2010 as follows: Mr. Davidson $31,162;
Mr. Fisher $7,925; Mr. Stover
$16,454; Ms. Cunningham $7,911; and
Mr. Cook $6,128. |
|
(3) |
|
Represents grants of nonqualified stock options under our 1992
Plan. Options represent the right to purchase shares of common
stock at the price per share (equal to fair market value on the
date of grant) indicated in the table. Options will vest ratably
over three years in equal installments on the first, second and
third anniversaries of the date of grant. |
|
(4) |
|
Exercise price at fair market value is defined in
our 1992 Plan as the average of the reported high and low
trading price of our common stock on the NYSE on the date of
grant. The closing price of our common stock on February 1,
2010 was $75.82. |
|
(5) |
|
Reflects aggregate grant date fair value of restricted stock and
nonqualified stock options granted to our named executive
officers on February 1, 2010 computed in accordance with
FASB ASC Topic 718. Grant date fair value of stock options
reported above is as follows: Mr. Davidson
$2,650,346; Mr. Fisher $674,013;
Mr. Stover $1,399,375;
Ms. Cunningham $672,786; and
Mr. Cook $521,173. Grant date fair value of
restricted stock reported above is as follows:
Mr. Davidson $3,249,970;
Mr. Fisher $826,516;
Mr. Stover $1,716,032;
Ms. Cunningham $825,014; and
Mr. Cook $639,091. |
45
Outstanding
Equity Awards at Fiscal Year-End
The following table sets forth certain information with respect
to restricted stock and stock options held by our named
executive officers as of December 31, 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan Awards:
|
|
|
|
|
|
|
|
|
|
|
|
Market
|
|
|
Plan
|
|
|
Equity Incentive
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Value
|
|
|
Awards:
|
|
|
Plan Awards:
|
|
|
|
Number of
|
|
|
Number of
|
|
|
Securities
|
|
|
|
|
|
|
|
|
Shares or
|
|
|
of Shares
|
|
|
Number of
|
|
|
Market or Payout
|
|
|
|
Securities
|
|
|
Securities
|
|
|
Underlying
|
|
|
|
|
|
|
|
|
Units of
|
|
|
or Units of
|
|
|
Unearned
|
|
|
Value of Unearned
|
|
|
|
Underlying
|
|
|
Underlying
|
|
|
Unexercised
|
|
|
|
|
|
|
|
|
Stock
|
|
|
Stock
|
|
|
Shares, Units or
|
|
|
Shares, Units or
|
|
|
|
Unexercised
|
|
|
Unexercised
|
|
|
Unearned
|
|
|
Option
|
|
|
Option
|
|
|
Held That
|
|
|
Held That
|
|
|
Other Rights
|
|
|
Other Rights That
|
|
|
|
Options (#
|
|
|
Options (#
|
|
|
Options
|
|
|
Exercise
|
|
|
Expiration
|
|
|
Have Not
|
|
|
Have Not
|
|
|
That Have Not
|
|
|
Have Not Vested
|
Name
|
|
|
Exercisable)
|
|
|
Unexercisable)
|
|
|
(#)
|
|
|
Price ($)
|
|
|
Date
|
|
|
Vested (#)
|
|
|
Vested ($)(7)
|
|
|
Vested (#)
|
|
|
($)
|
Charles D. Davidson
|
|
|
|
150,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17.6825
|
|
|
|
|
2/1/2013
|
|
|
|
|
48,459
|
(6)
|
|
|
|
4,171,351
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
86,580
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22.2325
|
|
|
|
|
2/1/2014
|
|
|
|
|
38,967
|
(8)
|
|
|
|
3,354,279
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
58,852
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29.8700
|
|
|
|
|
2/1/2015
|
|
|
|
|
43,281
|
(9)
|
|
|
|
3,725,628
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21,550
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32.7925
|
|
|
|
|
5/16/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
41.4650
|
|
|
|
|
8/1/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
77,957
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45.9400
|
|
|
|
|
2/1/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
164,118
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
53.4150
|
|
|
|
|
2/1/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
83,467
|
|
|
|
|
41,733
|
(1)
|
|
|
|
|
|
|
|
|
72.9400
|
|
|
|
|
2/1/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
43,497
|
|
|
|
|
86,993
|
(2)
|
|
|
|
|
|
|
|
|
50.2050
|
|
|
|
|
1/30/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
105,760
|
(3)
|
|
|
|
|
|
|
|
|
75.0900
|
|
|
|
|
2/01/2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kenneth M. Fisher
|
|
|
|
10,983
|
|
|
|
|
21,966
|
(4)
|
|
|
|
|
|
|
|
|
67.4600
|
|
|
|
|
11/16/2019
|
|
|
|
|
28,461
|
(10)
|
|
|
|
2,449,923
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26,896
|
(3)
|
|
|
|
|
|
|
|
|
75.0900
|
|
|
|
|
2/01/2020
|
|
|
|
|
11,007
|
(9)
|
|
|
|
947,483
|
|
|
|
|
|
|
|
|
|
|
|
|
David L. Stover
|
|
|
|
5,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20.0350
|
|
|
|
|
12/16/2012
|
|
|
|
|
23,126
|
(6)
|
|
|
|
1,990,686
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17.6825
|
|
|
|
|
2/1/2013
|
|
|
|
|
21,713
|
(8)
|
|
|
|
1,869,055
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,872
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22.2325
|
|
|
|
|
2/1/2014
|
|
|
|
|
4,725
|
(11)
|
|
|
|
406,728
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,580
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29.8700
|
|
|
|
|
2/1/2015
|
|
|
|
|
22,853
|
(9)
|
|
|
|
1,967,186
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
41.4650
|
|
|
|
|
8/1/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,980
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45.9400
|
|
|
|
|
2/1/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
48,610
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
53.4150
|
|
|
|
|
2/1/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
39,833
|
|
|
|
|
19,916
|
(1)
|
|
|
|
|
|
|
|
|
72.9400
|
|
|
|
|
2/1/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24,237
|
|
|
|
|
48,473
|
(2)
|
|
|
|
|
|
|
|
|
50.2050
|
|
|
|
|
1/30/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,325
|
|
|
|
|
10,649
|
(5)
|
|
|
|
|
|
|
|
|
50.8000
|
|
|
|
|
3/18/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
55,841
|
(3)
|
|
|
|
|
|
|
|
|
75.0900
|
|
|
|
|
2/01/2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Susan M. Cunningham
|
|
|
|
13,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20.9250
|
|
|
|
|
4/23/2011
|
|
|
|
|
11,465
|
(6)
|
|
|
|
986,907
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
54,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16.2700
|
|
|
|
|
2/1/2012
|
|
|
|
|
10,171
|
(8)
|
|
|
|
875,520
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17.6825
|
|
|
|
|
2/1/2013
|
|
|
|
|
7,875
|
(11)
|
|
|
|
677,880
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,094
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22.2325
|
|
|
|
|
2/1/2014
|
|
|
|
|
10,987
|
(9)
|
|
|
|
945,761
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,580
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29.8700
|
|
|
|
|
2/1/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
41.4650
|
|
|
|
|
8/1/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,980
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45.9400
|
|
|
|
|
2/1/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
34,455
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
53.4150
|
|
|
|
|
2/1/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,748
|
|
|
|
|
9,874
|
(1)
|
|
|
|
|
|
|
|
|
72.9400
|
|
|
|
|
2/1/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,353
|
|
|
|
|
22,706
|
(2)
|
|
|
|
|
|
|
|
|
50.2050
|
|
|
|
|
1/30/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,875
|
|
|
|
|
17,749
|
(5)
|
|
|
|
|
|
|
|
|
50.8000
|
|
|
|
|
3/18/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26,847
|
(3)
|
|
|
|
|
|
|
|
|
75.0900
|
|
|
|
|
2/01/2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rodney D. Cook
|
|
|
|
432
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22.2325
|
|
|
|
|
2/1/2014
|
|
|
|
|
10,269
|
(6)
|
|
|
|
883,956
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,224
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29.8700
|
|
|
|
|
2/1/2015
|
|
|
|
|
10,171
|
(8)
|
|
|
|
875,520
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,078
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45.9400
|
|
|
|
|
2/1/2016
|
|
|
|
|
1,969
|
(11)
|
|
|
|
169,492
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
38.3400
|
|
|
|
|
6/16/2016
|
|
|
|
|
8,511
|
(9)
|
|
|
|
732,627
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,268
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
53.4150
|
|
|
|
|
2/1/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,520
|
|
|
|
|
6,260
|
(1)
|
|
|
|
|
|
|
|
|
72.9400
|
|
|
|
|
2/1/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,353
|
|
|
|
|
22,706
|
(2)
|
|
|
|
|
|
|
|
|
50.2050
|
|
|
|
|
1/30/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,219
|
|
|
|
|
4,437
|
(5)
|
|
|
|
|
|
|
|
|
50.8000
|
|
|
|
|
3/18/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,797
|
(3)
|
|
|
|
|
|
|
|
|
75.0900
|
|
|
|
|
2/01/2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Stock options vested February 1, 2011. |
|
(2) |
|
50% of stock options vested January 30, 2011; and 50% of
stock options vest January 30, 2012. |
|
(3) |
|
331/3%
of stock options vested February 1, 2011;
331/3%
of stock options vest February 1, 2012; and
331/3%
of stock options vest February 1, 2013. |
|
(4) |
|
50% of stock options vest November 16, 2011; and 50% of
stock options vest November 16, 2012. |
|
(5) |
|
50% of stock options vested March 18, 2011; and 50% of
stock options vest March 18, 2012. |
46
|
|
|
(6) |
|
Restricted stock vested February 1, 2011. |
|
(7) |
|
Market value based on December 31, 2010 closing price of
$86.08. |
|
(8) |
|
37.5% of restricted stock vested January 30, 2011; and
62.5% of restricted stock vests January 30, 2012. |
|
(9) |
|
20% of restricted stock vested February 1, 2011; 30% of
restricted stock vests February 1, 2012; and 50% of
restricted stock vests February 1, 2013. |
|
(10) |
|
37.5% of restricted stock vests November 16, 2011; and
62.5% of restricted stock vests November 16, 2012. |
|
(11) |
|
37.5% of restricted stock vested March 18, 2011; and 62.5%
of restricted stock vests March 18, 2012. |
Stock
Option Exercises and Stock Vesting
The following table sets forth certain information with respect
to vesting of restricted stock and the exercise of stock options
held by our named executive officers during fiscal year 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
|
|
|
|
|
|
|
Number of Shares
|
|
|
|
|
|
|
|
|
Stock Awards
|
|
|
|
Acquired on
|
|
|
Value Realized on
|
|
|
Number of Shares
|
|
|
Value Realized on
|
Name
|
|
|
Exercise (#)
|
|
|
Exercise ($)
|
|
|
Acquired on Vesting (#)
|
|
|
Vesting ($)(1)
|
Charles D. Davidson
|
|
|
|
434,000
|
|
|
|
$
|
25,394,705
|
|
|
|
|
68,003
|
|
|
|
$
|
5,105,225
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kenneth M. Fisher
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,115
|
|
|
|
|
575,034
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David L. Stover
|
|
|
|
10,000
|
|
|
|
|
624,650
|
|
|
|
|
23,866
|
|
|
|
|
1,791,745
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Susan M. Cunningham
|
|
|
|
7,000
|
|
|
|
|
449,995
|
|
|
|
|
16,741
|
|
|
|
|
1,257,242
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rodney D. Cook
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,229
|
|
|
|
|
993,186
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Shares of restricted stock granted to our named executive
officers on February 1, 2007, January 30, 2009,
March 18, 2009 and November 16, 2009 vested on
February 1, 2010, January 30, 2010, March 18,
2010 and November 16, 2010, respectively. Income was
recognized on vesting based on the average of the high and low
trading price of our common stock on those dates ($75.09 on
February 1, 2010, $74.975 January 30, 2010,
$75.32 on March 18, 2010 and $80.82 on November 16,
2010). Dividends that accrued on the shares of restricted stock
that vested on those dates during the restricted period were
paid in 2010 as follows: Mr. Davidson $112,759;
Mr. Fisher $5,123; Mr. Stover
$36,080; Ms. Cunningham $25,446; and
Mr. Cook $20,688. |
Pension
Benefits
The amounts reported in the table below reflect the present
value of accumulated benefits as of December 31, 2010 for
the named executive officers under our Retirement Plan and
Restoration Plan. The estimates assume that benefits are
received in the form of a ten-year certain and life annuity.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
|
|
|
|
|
|
Years of
|
|
|
Present Value of
|
|
|
Payments During
|
|
|
|
|
|
|
Credited
|
|
|
Accumulated
|
|
|
Last Fiscal Year
|
Name
|
|
|
Plan Name
|
|
|
Service(1)
|
|
|
Benefit ($)(2)
|
|
|
($)
|
Charles D. Davidson
|
|
|
Retirement Plan
|
|
|
|
10
|
|
|
|
$
|
481,271
|
|
|
|
|
|
|
|
|
|
Restoration Plan
|
|
|
|
10
|
|
|
|
|
5,515,226
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David L. Stover
|
|
|
Retirement Plan
|
|
|
|
8
|
|
|
|
|
251,309
|
|
|
|
|
|
|
|
|
|
Restoration Plan
|
|
|
|
8
|
|
|
|
|
1,211,060
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Susan M. Cunningham
|
|
|
Retirement Plan
|
|
|
|
10
|
|
|
|
|
338,849
|
|
|
|
|
|
|
|
|
|
Restoration Plan
|
|
|
|
10
|
|
|
|
|
1,060,971
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rodney D. Cook
|
|
|
Retirement Plan
|
|
|
|
30
|
|
|
|
|
751,092
|
|
|
|
|
|
|
|
|
|
Restoration Plan
|
|
|
|
30
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1,707,189
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47
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(1) |
|
The above named executive officers are fully vested in their
retirement benefits. Each is eligible for immediate commencement
and can elect an unlimited lump sum option for his or her
Retirement Plan benefit. For the Restoration Plan benefit,
participants previously elected to receive their benefit as
either an annuity or lump sum, and specified the timing for
receipt of benefits. Each of the above named executive officers
elected to receive a lump sum from the Restoration Plan.
Mr. Davidson and Ms. Cunningham elected to receive
their Restoration Plan benefits upon separation of service and
Messrs. Stover and Cook elected to receive their
Restoration Plan benefits at the later of age 55 or
separation of service. The following amounts would be payable to
our named executive officers from our Retirement Plan and
Restoration Plan effective January 1, 2011: |
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Retirement
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Retirement
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Restoration
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Age at
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Plan Monthly
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Plan
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Plan
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Name
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12/31/2010
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Annuity
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Lump Sum
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Lump Sum
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Charles D. Davidson
|
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60.83
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|
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$
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3,725
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$
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611,825
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$
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6,948,038
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David L. Stover
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53.17
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960
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226,771
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1,133,395(a)
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Susan M. Cunningham
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55.00
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2,520
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449,330
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1,421,245
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Rodney D. Cook
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53.58
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6,826
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1,278,632
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1,875,880(a)
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(a) |
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Not payable until the later of separation of service or
attainment of age 55. An actuarially equivalent amount will
be payable at that time. |
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(2) |
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Represents the actuarial present value of the accumulated
pension benefits as of December 31, 2010 under our
Retirement Plan and Restoration Plan. Present values are based
on the same actuarial assumptions and measurement dates
described in Note 14 to our consolidated financial
statements, included in our 2010 Annual Report on
Form 10-K. |
Nonqualified
Deferred Compensation Table
The following table sets forth certain information with respect
to contributions made to our Deferred Compensation Plan by our
named executive officers during fiscal year 2010.
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Aggregate
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Executive
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Registrant
|
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Aggregate
|
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Withdrawals/
|
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Contributions in
|
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|
Contributions in
|
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Earnings
|
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Distributions in
|
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Aggregate Balance at
|
Name
|
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Last FY ($)(1)
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Last FY ($)(2)
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in Last FY ($)(4)
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Last FY
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Last FYE ($)(5)
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Charles D. Davidson
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$
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1,890,690
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$
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46,059 (2
|
)
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$
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1,204,934
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$
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$
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20,814,193
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Kenneth M. Fisher
|
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38,419
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(3)
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38,419
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David L. Stover
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|
151,200
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|
|
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100,100
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1,708,343
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Susan M. Cunningham
|
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Rodney D. Cook
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64,276
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23,589
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405,483
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(1) |
|
Mr. Davidson deferred 100% ($1,435,000) of the STIP payment
he earned in 2009 (otherwise paid in 2010) and 45%
($455,690) of base salary in 2010. Mr. Stover deferred 20%
($151,200) of the STIP payment he earned in 2009 (otherwise paid
in 2010). Mr. Cook deferred 15% ($64,276) of the STIP
payment he earned in 2009 (otherwise paid in 2010). |
|
(2) |
|
Represents matching contributions of 100% of the first 6% of
base salary deferred, to the extent not matched in our Thrift
Plan. |
|
(3) |
|
Represents the portion of Mr. Fishers 2010 Profit
Sharing Plan contribution that could not be made into our Thrift
Plan as a result of Internal Revenue Code limitations. |
|
(4) |
|
Interest is paid at the greater of 125% of the
120-month
rolling average of the
10-year
Treasury Note, or the
120-month
rolling average of the Prime Rate. Interest paid in 2010 is
based on Prime Rate average of 6.11%, compounded monthly. |
48
|
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|
(5) |
|
All named executive officers, except Mr. Fisher, are 100%
vested in these balances. Mr. Fisher will vest in his
account on the third anniversary of his hire date
(November 16, 2012). |
The matching contributions and a portion of the interest
earnings credited to the Deferred Compensation Plan accounts of
our named executive officers are reflected in the All
Other Compensation and the Change in Pension
Value columns of the Summary Compensation Table above,
respectively.
Potential
Payments and Benefits Upon Termination of Employment
The tables below estimate the amount of compensation payable to
each of our named executive officers upon voluntary and
involuntary termination of employment, termination following a
change of control and in the event of disability or death, in
each case effective as of December 31, 2010. The actual
amount of compensation payable to each of our named executive
officers can only be determined at the time of his or her
separation from the Company. For purposes of this discussion
with respect to the payment of compensation that is deferred
compensation subject to Section 409A of the Internal Revenue
Code, an individuals termination of employment should be
interpreted to mean the date as of which the individual has a
separation from service for the purposes of
Section 409A.
Payments
Made Upon Termination
Upon termination of employment for reasons other than
disability, death or in connection with a change of control,
each named executive officer is entitled to receive amounts
earned during his or her term of employment. Such amounts
include:
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|
amounts credited under our Deferred Compensation Plan;
|
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|
unused vacation pay; and
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|
amounts accrued and vested under our Retirement Plan and
Restoration Plan.
|
Payments
Made Upon Retirement
In the event of the retirement of a named executive officer, in
addition to the items identified above, the named executive
officer:
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|
|
will have until the earlier of (1) the fifth anniversary of
his or her retirement date or (2) the expiration of the
remainder of the outstanding ten-year option term, to exercise
all stock options that are vested as of his or her retirement
date;
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|
may elect to continue to participate in our medical and dental
plans at subsidized retiree rates until he or she reaches
age 65 (continued coverage for medical and dental benefits
for the named executive officers dependents may also be
elected at subsidized retiree rates); and
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|
may continue to receive life insurance coverage until the
attainment of age 65 at subsidized premium rates.
|
Payments
Made Upon Death or Disability
In the event of the death or disability of a named executive
officer, in addition to the benefits listed under the headings
Payments Made Upon Termination and Payments
Made Upon Retirement above, the named executive officer or
his or her named beneficiary will receive benefits under our
disability plan or payments under our life insurance plan, as
appropriate.
Payments
Made Upon a Change of Control
We have entered into change of control arrangements with each of
our named executive officers. If a named executive
officers employment is terminated within two years after a
change of control of the Company, he or she may be entitled to
receive certain severance benefits pursuant to the terms of his
or her change of control arrangement. These benefits are
described above more fully in this Proxy Statement under the
heading Change of Control Arrangements.
49
Charles
D. Davidson
The following table shows the potential payments to
Mr. Davidson, Chairman and CEO, in the event of his
termination of employment as of December 31, 2010.
|
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|
Involuntary Termination or
|
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|
|
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Termination Without Cause
|
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Voluntary
|
|
|
Involuntary
|
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|
in Connection With a
|
|
|
|
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|
|
Executive Benefits and
|
|
|
Termination on
|
|
|
Termination on
|
|
|
Change of Control on
|
|
|
Disability on
|
|
|
|
Payments Upon Separation
|
|
|
12/31/2010(1)
|
|
|
12/31/2010(1)
|
|
|
12/31/2010
|
|
|
12/31/2010(1)
|
|
|
Death on 12/31/2010
|
Compensation:
|
|
|
|
|
|
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|
|
|
|
|
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|
|
|
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|
|
Severance
|
|
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|
|
(8)
|
|
|
$
|
7,878,650
|
(9)
|
|
|
|
|
|
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|
|
|
|
STIP Payments
|
|
|
|
|
(2)
|
|
|
|
|
(2)
|
|
|
|
1,060,000
|
(9)
|
|
|
|
|
(2)
|
|
|
|
|
(2)
|
Stock Options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,831,564
|
(10)
|
|
|
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|
|
Restricted Stock
|
|
|
|
|
(3)
|
|
|
|
|
(3)
|
|
|
|
11,251,259
|
(11)
|
|
|
$
|
11,251,259
|
(3)
|
|
|
$
|
11,251,259
|
(3)
|
|
|
|
|
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|
|
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|
|
|
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|
|
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|
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|
|
|
Benefits and Perquisites:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement Plans
|
|
|
$
|
7,559,863
|
(4)
|
|
|
$
|
7,559,863
|
(4)
|
|
|
|
7,559,863
|
(4)
|
|
|
|
6,333,685
|
(15)
|
|
|
|
3,910,331
|
(17)
|
Deferred Compensation Plan
|
|
|
|
|
(5)
|
|
|
|
|
(5)
|
|
|
|
|
(5)
|
|
|
|
|
(5)
|
|
|
|
|
(5)
|
Health & Welfare Benefits
|
|
|
|
20,252
|
(6)
|
|
|
|
20,252
|
(6)
|
|
|
|
32,778
|
(12)
|
|
|
|
20,252
|
(6)
|
|
|
|
|
|
Disability Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(16)
|
|
|
|
|
|
Life Insurance Benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,000,000
|
(18)
|
Excise Tax &
Gross-Up
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,700,000
|
(13)
|
|
|
|
|
|
|
|
|
|
|
Accrued Vacation Pay
|
|
|
|
|
(7)
|
|
|
|
|
(7)
|
|
|
|
|
(7)
|
|
|
|
|
(7)
|
|
|
|
|
(7)
|
Employment Services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,000
|
(14)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
|
$
|
7,580,115
|
|
|