ttidef14a-20100322.htm
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A INFORMATION
Proxy
Statement Pursuant to Section 14(a) of the
Securities
Exchange Act of 1934 (Amendment No.
)
Filed by the
registrant [ X ].
Filed by a party
other than the registrant [ __ ].
Check the
appropriate box:
[
__ ] Preliminary proxy statement.
[
__ ] Confidential, for use of the Commission only (as permitted by Rule
14a-6(e)(2)).
[
X ] Definitive proxy statement.
[
__ ] Definitive additional materials.
[
__ ] Soliciting material under Rule 14a-12.
TETRA
TECHNOLOGIES, INC.
(Name of Registrant
as Specified in its Charter)
(Name of Person(s)
Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing
Fee (check the appropriate box):
[
X ] No Fee required.
[
__ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which
transaction applies:
(2) Aggregate number of securities to which
transaction applies:
|
(3) Per unit
price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was
determined):
|
(4) Proposed maximum aggregate value of the
transaction:
(5) Total Fee paid:
[
__ ] Fee paid previously with preliminary materials.
[
__ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement
No.:
(3) Filing party:
(4) Date filed:
TETRA
Technologies, Inc.
24955
Interstate 45 North
The
Woodlands, Texas 77380
NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS
To
Be Held May 5, 2010
To our
stockholders:
Where
and When. We will hold our 2010 Annual Meeting of Stockholders at our
corporate headquarters, 24955 Interstate 45 North, The Woodlands, Texas on
Wednesday, May 5, 2010, at 11:00 a.m. local time.
Record
Date. Only stockholders of record at the close of business on March 8,
2010 will be entitled to notice of and to vote at the Annual
Meeting.
Purpose
of the Meeting. We have called the Annual Meeting for the following
purposes:
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1.
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To elect nine
directors to serve one-year terms ending at the 2011 Annual Meeting of
Stockholders, or until their successors have been duly elected or
appointed;
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2.
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To ratify and
approve the appointment of Ernst & Young LLP as our independent
registered public accounting firm for the fiscal year ending December 31,
2010;
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3.
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To consider
and vote upon a proposal to amend and restate the Amended and Restated
2007 Equity Incentive Compensation Plan;
and
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4.
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To transact
such other business as may properly come before the Annual Meeting or any
adjournments.
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You will find more information on
our nominees for directors and the other purposes listed above in the attached
proxy statement. You will find more instructions on how to vote starting on page
2 of the proxy statement.
Your vote is important! Please
promptly vote your shares by telephone, the internet, or, if the proxy statement
was mailed to you, by marking, signing, dating, and returning the enclosed proxy
card as soon as possible, regardless of whether you plan to attend the Annual
Meeting. You may revoke your proxy at any time before it is
voted.
I hope you will be able to attend
the Annual Meeting.
Bass C. Wallace,
Jr.
Corporate
Secretary
March 22,
2010
The Woodlands,
Texas
TETRA
Technologies, Inc.
24955
Interstate 45 North
The
Woodlands, Texas 77380
TABLE
OF CONTENTS
General
Information
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Internet and
Electronic Availability of Proxy Materials
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1
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General
Voting Instructions
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2
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Voting
Rules
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3
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Proposals
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Proposal No.
1: Election of Directors
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5
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Proposal No.
2: Appointment of Independent Registered Public Accounting
Firm
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9
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Proposal No.
3: Amendment and Restatement of our Amended and
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Restated
2007 Equity Incentive Compensation Plan
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10
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Information
About Us
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Corporate
Governance
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23
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Director
Independence
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23
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Board
Leadership, Structure and Risk Oversight
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24
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Board
Meetings and Committees
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24
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Certain
Transactions
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29
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Stockholder
Litigation
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29
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Equity
Compensation Plan Information
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30
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Insider Stock
Sales and Stock Ownership Guidelines
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31
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Audit
Committee Report
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32
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Fees Paid to
Principal Accounting Firm
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33
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Audit
Committee Preapproval Policies and Procedures
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33
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Executive
Officers
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34
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Compensation
Discussion and Analysis
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37
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Management
and Compensation Committee Report
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51
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Compensation
of Executive Officers
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52
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Grants of
Plan Based Awards
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53
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Outstanding
Equity Awards at Fiscal Year End
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54
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Option
Exercises and Stock Vested
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55
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Nonqualified
Deferred Compensation
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55
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Potential
Payments upon Termination or Change in Control
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56
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Compensation
Risk
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58
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Director
Compensation
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59
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Beneficial
Stock Ownership of Certain Stockholders and Management
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62
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Section 16(a)
Beneficial Ownership Reporting Compliance
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63
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Proposals of
Stockholders
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63
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Householding
of Annual Meeting Materials
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64
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Additional
Financial Information
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64
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Other
Matters
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64
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2007 Long
Term Incentive Compensation Plan
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Appendix
A
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This
proxy statement, and the accompanying Notice of the 2010 Annual Meeting of
Stockholders and proxy card are first being made available to our stockholders
on or about March 22, 2010.
This proxy statement is furnished in
connection with the solicitation of proxies on behalf of the Board of Directors
of TETRA Technologies, Inc., to be voted at our Annual Meeting of Stockholders
to be held on Wednesday, May 5, 2010 at 11:00 a.m. local time, and at any
adjournment(s) thereof. The purposes of the Annual Meeting are set forth in this
proxy statement and in the accompanying Notice of Annual Meeting of
Stockholders.
The complete mailing address of our
principal executive offices is 24955 Interstate 45 North, The Woodlands, Texas
77380, and our telephone number is (281) 367-1983.
Attendance at the Annual Meeting is
limited to stockholders as of the record date (or their authorized
representatives) with evidence of their share ownership and our
guests.
Internet
and Electronic Availability of Proxy Materials
As permitted by the rules adopted by
the Securities and Exchange Commission (“SEC”), we are making this proxy
statement and related proxy materials available on the internet under the
“notice and access” delivery model. The “notice and access” model removes the
requirement for public companies to automatically send stockholders a printed
set of proxy materials and allows companies instead to deliver to their
stockholders a “Notice of Internet Availability of Proxy Materials” and to
provide access to the documents over the internet. Our Notice of Internet
Availability of Proxy Materials (“Notice”) was first mailed to stockholders of
record and beneficial owners on or about March 22, 2010. The Notice is not a
form for voting, and presents only an overview of the more complex proxy
materials. Stockholders are encouraged to access and review the proxy materials
before voting.
This proxy statement, the form of
proxy, and voting instructions are being made available to stockholders on or
about March 22, 2010, at www.proxyvote.com. You may also request a printed copy
of this proxy statement and the form of proxy by any of the following
methods:
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by telephone
at 1-800-579-1639;
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·
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via the
internet at www.proxyvote.com; or
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·
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by email at
sendmaterial@proxyvote.com.
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Our Annual Report
to Stockholders, including financial statements, for the fiscal year ended
December 31, 2009 is being made available at the same time and by the same
methods. The Annual Report to Stockholders is not to be considered as a part of
the proxy solicitation material or as having been incorporated by
reference.
In
addition, any stockholder may request to receive proxy materials in printed form
by mail or electronically by email on an ongoing basis. Receiving future proxy
materials by email will save the cost of printing and mailing documents to
stockholders and will reduce the impact of annual meetings on the environment. A
stockholder’s election to receive proxy materials by email will remain in effect
unless the stockholder terminates it.
General
Voting Instructions
Below are instructions on how to
vote as well as information on your rights as a stockholder as they relate to
voting. Some of the instructions will differ depending on how your stock is
held. It is important to follow the instructions that apply to your
situation.
Stockholder
of Record. If your shares are registered directly in your name with our
transfer agent, Computershare Investor Services, you are considered a
stockholder of record and the Notice was sent directly to you by
us.
If you are a stockholder of record,
you may vote in person at the Annual Meeting. Your Notice will be your evidence
of ownership and serve as your authorization to vote in person; we will provide
a ballot for you when you arrive at the meeting. If you requested printed copies
of the proxy materials, check the appropriate box on the proxy card and bring
evidence of your share ownership to the meeting. The proxy card and the evidence
of your ownership will serve as your authorization to vote in
person.
If you do not wish to vote in person
or if you will not be attending the Annual Meeting, you may vote by proxy. You
may vote by internet or telephone by following the instructions in the Notice
or, if you requested printed copies of the proxy materials, you can also vote by
delivering your proxy through the mail.
Beneficial
Owners. If your shares are held in an account at a brokerage firm, bank,
broker-dealer, or other similar organization, then you are the beneficial owner
of shares held in “street name,” and the Notice was forwarded to you by that
organization. The organization holding your account is considered the
stockholder of record for purposes of voting at the Annual Meeting. As a
beneficial owner, you have the right to direct that organization on how to vote
the shares held in your account.
If
you are a beneficial owner, in order to vote in person at the Annual Meeting,
you must obtain a valid proxy from the organization that holds your shares and
bring evidence of your stock ownership from the organization with you to the
meeting.
If
you do not wish to vote in person or if you will not be attending the Annual
Meeting, you may direct the vote of your shares by the internet or telephone
following the instructions on the Notice delivered to you by the organization
holding your account. Many brokerage firms, banks, broker-dealers, or other
similar organizations participate in the Broadridge Financial Solutions, Inc.,
Online and Telephone Program. This program provides eligible stockholders the
opportunity to vote via the internet or by telephone. Voting forms will provide
instructions for beneficial owners if the organization holding their account
participates in the program or other similar programs.
401(k)
Plan Participants. If you participate in our 401(k) Retirement Plan (the
“401(k) Plan”) and have contributions allocated to the TETRA stock fund, you are
entitled to direct the 401(k) Plan trustee to vote the shares of our common
stock credited to your account as of the close of business on the record date.
You may deliver your voting instructions to the 401(k) Plan trustee by internet
or telephone by following the instructions on your proxy card, or by indicating
your voting instructions on your proxy card and returning it by mail. All
proxy cards that are properly completed, signed, and returned by mail or
submitted via the internet or by telephone prior to April 30, 2010 will be
voted. If you return your proxy card with no voting instructions marked, or if
you do not return a proxy card or submit voting instructions via the internet or
by telephone, your shares will be voted by the trustee as directed by our 401(k)
Plan administrator.
How
to Revoke Your Proxy. All valid proxies received prior to the Annual
Meeting will be voted in accordance with the instructions so indicated. You may
revoke your proxy and change your
vote at any time
before the final vote at the Annual Meeting. A proxy may be revoked by a
stockholder of record at any time before it is exercised by submitting a written
revocation or a later-dated proxy to our Corporate Secretary at the mailing
address provided above, by voting again via the internet or telephone, or by
attending the Annual Meeting in person and so notifying the Inspector of
Elections. If you are a beneficial owner and wish to change your vote, you must
contact the organization that holds your shares prior to the Annual Meeting to
assist you with this process. If you are a 401(k) Plan participant, you may
revoke your voting instructions by submitting a new proxy containing your voting
instructions via the internet, by telephone or by delivering a later dated proxy
card by mail prior to April 30, 2010.
VOTING
RULES
Stockholders
Entitled to Vote – the Record Date. We fixed the close of business on
March 8, 2010 as the record date for the determination of stockholders entitled
to vote at the Annual Meeting and any adjournment(s) thereof. As of the record
date, we had issued and outstanding 75,594,057 shares of common stock and no
shares of preferred stock.
Quorum
Required. A quorum must be present at the Annual Meeting for us to
conduct business at the Annual Meeting. To establish a quorum, we need the
presence, either in person or by proxy, of holders of a majority of the shares
of our common stock issued, outstanding and entitled to vote. We will count
abstentions and broker nonvotes to determine whether a quorum is present. Broker
nonvotes occur when a nominee holding shares for a beneficial owner does not
vote on a particular proposal because the nominee does not have discretionary
voting power and the nominee has not received voting instructions from the
beneficial owner.
Number
of Votes. You are entitled to one vote per share of our common stock that
you own as of the record date on each matter that is called to vote at the
Annual Meeting.
Voting
to Elect Directors. When voting to elect directors, you have three
options:
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vote for all
of the nominees;
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vote for one
or more of the nominees, but not all;
or
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withhold
authority to vote for all of the
nominees.
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If
a quorum is present at the Annual Meeting, the nine persons receiving the
greatest number of votes will be elected to serve as directors. Therefore, any
shares that are not voted and votes that are withheld will not influence the
outcome of the election of directors. Brokers who have not received voting
instructions from the beneficial owner do not have the discretionary authority
to vote on the election of directors. Therefore, broker nonvotes will not be
considered in the vote totals and will have no effect on the vote. You may not
cumulate your votes for any one of the nominees.
Voting
on Other Matters. When voting on all other matters, you have three
options:
·
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vote FOR a
given proposal;
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vote AGAINST
a given proposal; or
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ABSTAIN from
voting on a given proposal.
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Each matter other than the election
of directors requires the affirmative vote of a majority of the shares having
voting power on such matter present or represented at the Annual Meeting. For
the purpose of determining whether a proposal other than the election of
directors has received a majority vote, abstentions will be included in the vote
totals with the result that an abstention will have the same effect as a vote
against the proposal. With respect to the approval of auditors, brokers who have
not received voting instructions from the beneficial owner have the
discretionary
authority to vote
on this matter. Therefore, broker nonvotes will be included in the vote totals
and have the same effect as a vote against this proposal. Brokers do not have
discretionary authority to vote on the proposal to amend and restate the Amended
and Restated 2007 Equity Incentive Compensation Plan. Consequently, broker
nonvotes will not be considered in the vote totals for this proposal and will
have no effect on the vote.
In
addition to the vote required by our bylaws described above, under New York
Stock Exchange (“NYSE”) rules, approval of the amendment and restatement of the
Amended and Restated 2007 Equity Incentive Compensation Plan requires approval
by a majority of votes cast on the proposal, provided that the total votes cast
on the proposal represent over 50% in interest of all securities entitled to
vote on the proposal. The NYSE takes the position that a broker nonvote is not a
“vote cast.” Accordingly, broker nonvotes have to be subtracted when determining
whether the 50% in interest test has been met.
The proxy confers
discretionary authority to the persons named in the proxy authorizing those
persons to vote, in their discretion, on any other matters properly presented at
the Annual Meeting. Our Board of Directors is not currently aware of any such
other matters.
Voting
of Proxies with Unmarked Votes. All proxies that are properly completed,
signed, and returned or submitted via the internet or by telephone prior to the
Annual Meeting will be voted. If you return or submit your proxy with no votes
marked, your shares will be voted as follows:
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FOR the
election of each of the nominees for
director;
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·
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FOR the
appointment of Ernst & Young LLP as our independent registered public
accounting firm; and
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·
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FOR the
approval of the amendment and restatement of the Amended and Restated 2007
Equity Incentive Compensation Plan.
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It is possible for
a proxy to indicate that some of the shares represented are not being voted as
to certain proposals. This occurs, for example, when a broker is not permitted
to vote on a proposal without instructions from the beneficial owner of the
stock. In such a case, the nonvoted shares will be considered in the manner
described above.
Who
Counts the Votes. Votes will be counted by Broadridge Financial
Solutions, Inc.
Information
About the Solicitation of Proxies. Our Board of Directors is soliciting
the proxy accompanying this statement in connection with the Annual Meeting. In
addition to the solicitation of proxies by use of this proxy statement, our
directors, officers and employees may solicit the return of proxies by mail,
personal interview, telephone, or email. Our officers and employees will not
receive additional compensation for their solicitation efforts, but they will be
reimbursed for any out-of-pocket expenses incurred. Brokerage houses and other
custodians, nominees, and fiduciaries will be requested, in connection with the
stock registered in their names, to forward solicitation materials to the
beneficial owners of such stock.
We
will pay all costs of preparing, printing, assembling, and delivering the Notice
of the Annual Meeting, the Notice, this proxy statement, the enclosed form of
proxy card and any additional materials, as well as the cost of forwarding
solicitation materials to the beneficial owners of stock and all other costs of
solicitation.
PROPOSAL
NO. 1: Election of Directors
In accordance with our Amended and
Restated Bylaws, our Board of Directors has set the size of our Board of
Directors at nine members. The Nominating and Corporate Governance Committee of
the Board of Directors has recommended, and the Board of Directors has nominated
and urges you to vote “FOR” the election of the nine persons listed below who
have been nominated to serve one-year terms as directors. Each proxy solicited
hereby will be so voted unless you specify otherwise in the proxy. A plurality
vote is required for the election of directors in Proposal 1. Accordingly, if a
quorum is present at the Annual Meeting, the nine nominees receiving the
greatest numbers of votes will be elected to serve as directors. Proxies cannot
be voted for more than nine nominees for election to the Board of
Directors.
The terms of office of each of the
nine current directors will expire at the time of the Annual Meeting. Each of
the nine nominees listed below has been recommended by the Nominating and
Corporate Governance Committee and nominated by the Board of Directors to serve
a one-year term as a director. Pursuant to the terms of our Transition Agreement
with Mr. Hertel, if he is recommended by the Nominating and Corporate Governance
Committee, we are required to nominate him for election as a director during the
term of his employment under the Transition Agreement. Each of the nominees has
consented to be named in this proxy statement and to serve as a director, if
elected.
It is intended that the proxies
solicited hereby will be voted “FOR” the election of such nominees, unless the
authority to do so has been withheld. If, at the time of the Annual Meeting, any
of the nominees should be unable or decline to serve, the discretionary
authority provided in the proxy will enable the proxy holder to vote for a
substitute nominee of the Board of Directors. The Board of Directors has no
reason to believe that any substitute nominee will be
required.
Nominees
for Director
The nominees for election as
directors are as follows:
Name
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Age
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Position
with us
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Director
Since
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Stuart M.
Brightman
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53
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Director,
President and Chief Executive Officer
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2009
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Paul D.
Coombs
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54
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Director
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1994
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Ralph S.
Cunningham
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69
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Director
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1999
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Tom H.
Delimitros
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69
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Director
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1994
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Geoffrey M.
Hertel
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65
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Director
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1984
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Allen T.
McInnes
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72
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Director
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1993
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Kenneth P.
Mitchell
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70
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Director
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1997
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William D.
Sullivan
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53
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Director
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2007
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Kenneth E.
White, Jr.
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63
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Director
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2002
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Biographical summaries of the nominees for
director, including the experiences, qualifications, attributes and skills of
each director that have been considered by the Nominating and Corporate
Governance Committee and the Board of Directors in determining that these
nominees should serve as directors, are set forth below. See “Beneficial Stock
Ownership of
Certain
Stockholders and Management” below for information regarding the number of
shares of our common stock owned by each nominee.
Stuart
M. Brightman has served as our President and Chief Executive Officer
since May 2009, at which time Mr. Brightman was also elected as a director. He
served as Executive Vice President and Chief Operating Officer from April 2005
through May 2009. Mr. Brightman also serves as a director of Compressco Partners
GP Inc., one of our subsidiaries. From April 2004 to April 2005, Mr. Brightman
was self-employed. Mr. Brightman served as president of the Dresser Flow Control
division of Dresser, Inc. from April 2002 until April 2004. Dresser Flow
Control, which manufactures and sells valves, actuators, and other equipment and
provides related technology and services for the oil and gas industry, had
revenues in excess of $400 million in 2004. From November 1998 to April 2002,
Mr. Brightman was president of the Americas Operation of the Dresser Valve
Division of Dresser, Inc. He served in other capacities during the earlier
portion of his career with Dresser, from 1993 to 1998. From 1982 to 1993, Mr.
Brightman served in several financial and operational positions with Cameron
Iron Works and its successor, Cooper Oil Tools. Mr. Brightman received his B.S.
degree from the University of Pennsylvania and his Master of Business
Administration degree from the Wharton School of Business.
Mr. Brightman has almost thirty
years of experience in a manufacturing business related to the oil and gas
industry. He has experience in corporate finance and in the management of
capital intensive operations. Mr. Brightman’s prior service as our Chief
Operating Officer and his current position with us as President and Chief
Executive Officer also provides our Board of Directors with an in-depth source
of knowledge regarding our operations, our executive management team and the
effectiveness of our compensation programs.
Paul
D. Coombs has served as a member of our Board of Directors since June
1994. Mr. Coombs currently serves on our Reserves Committee. From April 2005
until his retirement in June 2007, Mr. Coombs served as our Executive Vice
President of Strategic Initiatives, and from May 2001 to April 2005, as our
Executive Vice President and Chief Operating Officer. From January 1994 to May
2001, Mr. Coombs served as our Executive Vice President – Oil & Gas, from
1987 to 1994 he served as Senior Vice President – Oil & Gas, and from 1985
to 1987, as General Manager – Oil & Gas. Mr. Coombs has served in numerous
other positions with us since 1982.
Mr. Coombs has almost thirty years
of experience with us, which, together with his entrepreneurial approach to
management, provides the Board of Directors with insight into our capabilities
and personnel. Mr. Coombs has substantial experience with the oil and gas
services we provide and with oil and gas exploration and production operations
in general.
Ralph
S. Cunningham, Ph.D., has served as a member of our Board of Directors
since 1999, and as Chairman of our Board of Directors since December 2006. Dr.
Cunningham currently serves on our Audit Committee and our Nominating and
Corporate Governance Committee. Dr. Cunningham is presently a director and
president and chief executive officer of EPE Holdings, LLC, the general partner
of Enterprise GP Holdings L.P., a publicly traded partnership subject to the
reporting requirements of the Securities Exchange Act of 1934 (the “Exchange
Act”). He also serves as a director of Enterprise Products GP, LLC, a director
of LE GP, LLC, the general partner of Energy Transfer Equity, L.P., and as a
director of DEP Holdings, LLC. Dr. Cunningham is a director of Agrium,
Incorporated, a Canadian publicly traded company involved in the agricultural
chemicals business, and a director of Cenovus Energy Inc., a Canadian publicly
traded independent integrated oil company that was formerly named EnCana
Corporation. Dr. Cunningham served as a director of Enterprise Products GP from
1998 until March 2005 and served as chairman and a director of TEPPCO GP from
March 2005 until November 2005. He retired in 1997 from CITGO Petroleum
Corporation, where he had served
as president and
chief executive officer since 1995. Dr. Cunningham served as vice chairman of
Huntsman Corporation from April 1994 to April 1995; and from August 1990 to
April 1994, he served as president of Texaco Chemical Company. Prior to joining
Texaco Chemical Company, Dr. Cunningham held various executive positions with
Clark Oil & Refining and Tenneco Inc. He began his career in Exxon’s
refinery operations. Dr. Cunningham received his B.S. degree in Chemical
Engineering from Auburn University and his M.S. and Ph.D. degrees in Chemical
Engineering from Ohio State University.
Dr. Cunningham has
extensive experience in both the international oil and gas and chemicals
industries, both as a director and in management positions with various
operational responsibilities. He has significant board experience, having served
as a director of public companies for approximately sixteen years.
Tom
H. Delimitros has served as a member of our Board of Directors since
1994. Mr. Delimitros is Chairman of our Audit Committee and also serves on our
Management and Compensation Committee and our Reserves Committee. He is a
founding general partner of AMT Venture Funds, a private limited partnership
formed in 1991 that provides equity and debt capital to emerging growth
companies involved in advanced material technologies and the energy sector. Mr.
Delimitros is also a director and is chairman of the audit committee of the
board of directors of Plains Exploration & Production Company, a publicly
held energy company that is subject to the reporting requirements of the
Exchange Act. Mr. Delimitros received his B.S. and M.S. degrees in Materials
Science and Engineering from the University of Washington in Seattle, where he
currently serves as a University of Washington Foundation Board member, and he
received his Master of Business Administration degree from Harvard
University.
As
a venture capitalist, Mr. Delimitros has worked with numerous smaller companies
in the energy and chemicals industries and he brings a valuable entrepreneurial
approach to management and compensation issues. Mr. Delimitros has extensive
experience in corporate finance and accounting, as well as with the operation of
chemicals businesses, including chemicals utilized in the oil and gas services
industry.
Geoffrey
M. Hertel has served as a member of our Board of Directors since 1984 and
is a member of our Reserves Committee. Mr. Hertel previously served as our
President from May 2000 through May 2009, and as our Chief Executive
Officer from May 2001 through May 2009. Mr. Hertel remains employed by us,
assisting in strategic planning. From January 2000 to May 2001 he also served as
our Chief Operating Officer. From January 1994 to 2000, Mr. Hertel served as our
Executive Vice President – Finance and Administration. He joined us in March
1993 as Senior Vice President – Finance and Administration. From 1981 to 1984
Mr. Hertel was associated with us as a nonvoting director and a special
consultant to the board. Mr. Hertel has served as chairman of the board of
directors of Compressco Partners GP Inc., one of our subsidiaries, since October
2008. He has served as president and a director of Fairway Petroleum, Inc., a
private oil and gas company, since 1980, and as a director of Life-Tech, Inc., a
private manufacturer of medical devices, since 1991. From 1972 to 1984, Mr.
Hertel held various positions with Rotan Mosle, Inc., an investment banking
firm, including senior vice president – corporate finance. Mr. Hertel received
his B.A. degree in Finance and his Master of Business Administration degree from
Michigan State University.
Mr. Hertel’s
long-term involvement with us as a director, chief financial officer and chief
executive officer contributes an in-depth knowledge of our operations and a
sense of strategic continuity to our Board of Directors. Mr. Hertel has
considerable experience in corporate finance, strategic planning, and with the
oil and gas services industry and the exploration and production of oil and
gas.
Allen
T. McInnes, Ph.D., has served as a member of our Board of Directors since
1993. He served as our President and Chief Executive Officer from April 1996 to
January 2000. He has served as dean of the business school of Texas Tech
University since September 2001. He has served as chairman of the board of TGC
Industries, a publicly traded company that is subject to the reporting
requirements of the Exchange Act and is involved in the geophysical business,
since July 1993, and as a director of Chase Packaging Corporation, which is a
shell company as defined in Rule 12b-2 of the Exchange Act, and a public company
that is subject to the reporting requirements of the Exchange Act, since 1993.
Dr. McInnes was a director of Alamosa Holdings, Inc., from February 2003 until
December 2007. Dr. McInnes is a former executive vice president and director of
Tenneco Inc., where at various times he had overall corporate-level
responsibility for chemicals, minerals, packaging, international development,
and real estate operations. Dr. McInnes received his B.B.A. degree in Finance,
his Master of Business Administration degree, and his Ph.D. degree in Finance
from the University of Texas, and he completed the Advanced Management Program
at Harvard Business School in 1973.
Dr. McInnes has
substantial experience in the leadership of large organizations and in corporate
finance and accounting. In addition, Dr. McInnes’ current position as Dean of
the business school of Texas Tech University provides the board with an
important link to recent developments in business management
practices.
Kenneth
P. Mitchell has served as a member of our Board of Directors since 1997.
Mr. Mitchell is Chairman of our Nominating and Corporate Governance Committee
and also serves on our Management and Compensation Committee. He is presently
lead director and chairman of the executive committee of Balchem Corporation, a
public company that is subject to the reporting requirements of the Exchange
Act, that manufactures microencapsulated products and is a specialty repackager
of industrial gases. Mr. Mitchell served as president and chief executive
officer of Oakite Products, Inc., a specialty chemicals company, from 1986 until
his retirement in 1993. From 1964 to 1986, he held a number of executive
positions with Diamond Shamrock Corporation, all of which were related to
various commodity and specialty chemicals businesses. Mr. Mitchell received his
B.S. degree in Marketing and Finance from Ohio State University, and he
completed the Senior Executive Program at M.I.T. in 1979.
Mr. Mitchell has
extensive experience in various management roles in the specialty chemicals
industry, including manufacturing, sales and marketing. In addition, Mr.
Mitchell has considerable experience in executive compensation
matters.
William
D. Sullivan has served as a member of our Board of Directors since August
2007. Mr. Sullivan currently serves on our Management and Compensation
Committee, our Nominating and Corporate Governance Committee, and our Reserves
Committee. Mr. Sullivan currently serves as a director of Compressco Partners GP
Inc., one of our subsidiaries. Mr. Sullivan is the non-executive chairman of the
board of directors and serves on the nominating and corporate governance and
compensation committees of St. Mary Land & Exploration Company, a publicly
traded exploration and production company. Mr. Sullivan is also a director,
serves on the audit and nominating and corporate governance committees, and is
chairman of the conflicts committee of Legacy Reserves GP, LLC, the general
partner of Legacy Reserves, LP, a publicly traded limited partnership holding
oil and gas producing assets, primarily in the Permian Basin. Mr. Sullivan is a
director and serves on the conflicts and audit committees of Targa Resources
Partners GP, LLC, the general partner of Targa Resources Partners LP, a publicly
traded limited partnership focused on mid-stream gas gathering, processing,
liquids fractionation, and transportation. From 1981 through August 2003, Mr.
Sullivan was employed in various capacities by Anadarko Petroleum Corporation,
most recently as executive vice president, exploration and production. From
August 2003 through June 2005, Mr. Sullivan was not in, and since August 2005
Mr. Sullivan has not entered into, an employment relationship with any employer.
From June 2005 through August 2005, Mr. Sullivan served as president and
chief executive
officer of Leor Energy LP. Mr. Sullivan received his B.S. degree in Mechanical
Engineering from Texas A&M University.
Mr. Sullivan has
significant management experience in mid-stream oil and gas operations and in
the exploration and production of oil and gas on an international level. Mr.
Sullivan also has substantial experience in executive compensation matters and
in serving on the boards of publicly held corporations and publicly traded
limited partnerships operating in the oil and gas industry.
Kenneth
E. White, Jr. has served as a member of our Board of Directors since
2002. Mr. White is Chairman of our Management and Compensation Committee,
Chairman of our Reserves Committee, and also serves on our Audit Committee. He
served as president and chief operating officer and a director of Torch Energy
Advisors, a private company that owns and operates oil and gas projects on
behalf of its investors, until his retirement in January 2001. Prior to his
initial employment with Torch in 1989, Mr. White served as executive vice
president and general manager of Gruy Engineering, a petroleum consulting firm
affiliated with Torch. From 1982 to 1989, Mr. White served in several positions
related to Gulf Coast reservoir management and engineering with Tenneco Oil. He
received his B.S. degree in Mechanical Engineering from Louisiana State
University.
Mr. White has
substantial experience in the oil and gas industry, including with regard to the
management, operation and analysis of oil and gas reserves. In addition, Mr.
White has significant experience in executive compensation matters.
The Board of Directors recommends
that you vote “FOR” the election of each of the above named
nominees.
PROPOSAL
NO. 2: Appointment of Independent Registered Public Accounting Firm
Proposal 2 requests stockholder
approval of the Board of Directors’ appointment of the firm of Ernst & Young
LLP as our independent registered public accounting firm for the year ending
December 31, 2010. Representatives of Ernst & Young LLP are expected to be
present at the Annual Meeting and will have an opportunity to make a statement
if they desire and to respond to appropriate questions from those attending that
meeting. Ernst & Young LLP have served as our independent auditors since
1981.
Our organizational documents do not
require our stockholders to ratify the appointment of Ernst & Young LLP as
our independent registered public accounting firm. We are doing so, as we have
done in prior years, because we believe it is a matter of good corporate
practice. If our stockholders do not ratify the appointment, the Audit Committee
may reconsider its selection of the firm as our independent registered public
accounting firm for the year ending December 31, 2010, but the Audit Committee
may also elect to retain the firm.
The Board of Directors recommends
that you vote “FOR” ratification and approval of the appointment of Ernst &
Young LLP as our independent registered public accounting firm for the 2010
fiscal year, and proxies returned will be so voted unless contrary instructions
are indicated thereon.
PROPOSAL
NO. 3: Approval of the Amendment and Restatement of our Amended and Restated
2007 Equity Incentive Compensation Plan
Our stockholders are being asked to
consider and vote on a proposal to approve the amendment and restatement of the
Amended and Restated 2007 Equity Incentive Compensation Plan, which is being
renamed the “2007 Long Term Incentive Compensation Plan” and is referred to in
this description as the 2007 LTIP. If the proposed amendment and restatement is
approved by our stockholders, the 2007 LTIP will provide us with more
flexibility in creating incentives for our employees, officers, directors and
consultants. Our Board of Directors has approved the amendment and restatement
of the Amended and Restated 2007 Equity Incentive Compensation Plan, subject to
the approval of our stockholders at the Annual Meeting. Our executive officers
and members of our Board of Directors will be eligible to receive awards under
the 2007 LTIP and therefore have an interest in this proposal. We also have
grants outstanding under the 1990 Stock Option Plan, as amended, the 1996 Stock
Option Plan for Nonexecutive Employees and Consultants, the 1998 Director Stock
Option Plan, as amended and restated, and the Amended and Restated 2006 Equity
Incentive Compensation Plan, and each of these plans remains in effect in
accordance with their terms, although no further options or awards may be
granted under such plans.
The 2007 LTIP was originally adopted
by our Board of Directors as the 2007 Equity Incentive Compensation Plan, and it
was approved by our stockholders on May 4, 2007. Subsequently, our Board of
Directors approved and adopted the Amended and Restated 2007 Equity Incentive
Compensation Plan, primarily to meet the requirements of, and to facilitate
compliance with, Section 409A of the Internal Revenue Code of 1986, as amended
(the “Code”). On May 9, 2008, our stockholders approved a further amendment to
the Amended and Restated 2007 Equity Incentive Compensation Plan to increase the
number of shares available under the plan from 90,000 to 4,590,000. Pursuant to
our bylaws, approval of the currently proposed amendments requires the
affirmative vote of a majority of the common shares represented in person or by
proxy and entitled to vote on the proposal at the annual meeting of
stockholders. In addition, under the rules of the NYSE, approval of the
amendments requires approval by a majority of votes cast on the proposal,
provided that the total votes cast on the proposal represents over 50% in
interest of all securities entitled to vote on the proposal. If the stockholders
approve the proposed amendments, the 2007 LTIP will be effective as of May 5,
2010. A copy of the 2007 LTIP, as amended and restated to reflect the proposed
amendments, is attached to this proxy statement as Appendix A, in which we have
shown the changes resulting from the proposed amendments, with deletions
indicated by strikeouts and additions indicated by underlining. The following
description of the proposed amendments to the Amended and Restated 2007 Equity
Incentive Compensation Plan and of the 2007 LTIP itself is not intended to be
complete and is qualified by reference to Appendix A, which contains the
complete, marked text of the 2007 LTIP, as amended and restated to reflect the
proposed amendments.
Summary
of Proposed Amendments to the Plan
The following is a
summary of the proposed amendments to the Amended and Restated 2007 Equity
Incentive Compensation Plan. The full text of the 2007 LTIP, as amended and
restated, is attached to this proxy statement as Appendix A for your
reference.
The proposed amendments to the
Amended and Restated 2007 Equity Incentive Compensation Plan
will:
·
|
clarify the
authority of the Management and Compensation Committee with respect to the
administration of the 2007 LTIP;
|
·
|
increase the
number of shares authorized for issuance under the 2007 LTIP by 1,000,000
shares from 4,590,000 shares (of which 926,826 shares remain available for
grant as of March 8, 2010) to 5,590,000
shares;
|
·
|
increase the
maximum number of shares that may be granted to a participant in any
calendar year from 100,000 to 400,000
shares;
|
·
|
increase the
maximum value of performance awards denominated or payable in dollars,
stock or other awards that any participant may receive in any calendar
year from $1,000,000 to $2,000,000;
|
·
|
amend
provisions concerning share usage while still expressly providing that the
number of shares available for grant will not be increased by actions such
as the tendering or withholding of shares in payment of a stock option
exercise, or the withholding of shares to satisfy tax withholding
obligations;
|
·
|
allow
performance awards to be settled in cash, shares of common stock, other
awards or property;
|
·
|
add certain
financial measures to the business criteria that may be used to establish
the performance goals applicable to performance
awards;
|
·
|
allow the
Management and Compensation Committee the discretionary authority to
accelerate the vesting period with respect to outstanding stock options,
stock appreciation rights and restricted stock upon the retirement, death,
or disability of a plan
participant;
|
·
|
amend
provisions relating to consultants to conform with the provisions
applicable to employees; and
|
·
|
extend the
termination date of the 2007 LTIP to February 27,
2017.
|
Equity
Philosophy
As described in more detail in the
Compensation Discussion and Analysis included in this proxy statement, our
equity compensation philosophy is to pay for performance through competitive
compensation programs that relate directly to our short and long-term goals, and
to reward executives, managers, and professionals who achieve these goals, while
at the same time, remaining sensitive to the potential impact on our other
stockholders. Stock-based awards linked to our short and long-term goals provide
a significant incentive to our employees for improved performance, and we
believe equity awards are critical to attracting and retaining employees who are
vital to our development and financial success, while also aligning the
employees’ interests with those of our stockholders.
In connection with our equity-based
compensation programs, we seek to balance our need to attract and retain
employees with efforts to closely monitor and reduce our “burn rate,” which is
the total number of equity awards granted in a given year divided by the number
of common shares outstanding at the end of such year. Our three-year average
burn rate for 2007 through 2009 is 1.99%, which is under the allowable threshold
recommended by RiskMetrics Group. The selection of employees and consultants who
may receive awards under the 2007 LTIP and the amount and timing of any such
awards will be determined by the Management and Compensation
Committee pursuant to our Procedures for Grants of Awards under the
TETRA Technologies, Inc. Equity Compensation Plans (the “Grant Procedures”) for
awards to be made under the plans. The Nominating and Corporate Governance
Committee will be responsible for making recommendations regarding any awards to
our non-employee directors, with such recommendations subject to final action of
the Management and Compensation Committee and, with regard to members of those
committees, the entire Board of Directors.
We strongly believe that our equity
compensation philosophy has been a key component of our past success and will be
equally important in the years ahead. Accordingly, approval of the proposed
amendment and restatement of the 2007 LTIP is critical to our ability to
attract, retain, and reward the caliber of employees necessary for continued
achievement of superior performance.
Summary
of Material Features of the Plan
The 2007 LTIP, as
amended, will continue to provide for the grant to eligible persons of stock
options, restricted stock, bonus stock, stock appreciation rights, and
performance awards (collectively, “Awards”).
The following are
key features of the 2007 LTIP, including the proposed amendments.
·
|
The 2007 LTIP
is administered by the Management and Compensation Committee which has
authority to (i) select the participants to whom awards may be granted,
(ii) determine the type, amount, terms, and conditions of awards, (iii)
modify or amend awards including the discretionary acceleration of vesting
or the extension of the post-termination exercise period in certain
circumstances, and (iv) interpret and determine any and all matters
relating to the administration of the 2007 LTIP and the award
grants.
|
·
|
If the
amendments are approved, the maximum number of shares of our common stock
authorized under the 2007 LTIP will be 5,590,000 shares, or approximately
7.4% of our currently outstanding
shares.
|
·
|
At the time
of grant, the exercise price of any option or stock appreciation right
cannot be less than the fair market value of our common stock as of the
date of grant.
|
·
|
The 2007 LTIP
does not allow liberal share counting. The 2007 LTIP provides that the
plan share limit will not be increased by shares delivered or withheld to
pay the exercise price of awards or to pay tax withholding obligations,
nor will it be increased in connection with the exercise of a stock
appreciation right, whether or not all of the shares of common stock
covered by the right are actually issued upon exercise of the stock
appreciation right.
|
·
|
Stock options
and stock appreciation rights cannot be repriced without the approval of
our stockholders. The 2007 LTIP requires stockholder approval for any
material plan amendments in accordance with NYSE
rules.
|
Available
Shares
If the amendments are approved, the
maximum number of shares of common stock that may be covered by Awards granted
under the 2007 LTIP shall be 5,590,000 shares, subject to adjustment in the
event of stock splits and certain other corporate events. For purposes of
implementing the limitation on the maximum number of shares of common stock that
may be covered by Awards granted under the 2007 LTIP, an Award of an option or a
stock appreciation right in respect of one share of common stock shall be deemed
to be an Award of one share of common stock on the date of grant. An Award of a
share of bonus stock or restricted stock shall be deemed to be an Award of 1.15
shares of common stock for every one share granted on the date of grant. With
respect to any performance award to be settled in shares of common stock, the
value of the maximum benefits that may be paid under a performance award shall
be divided by the fair market value per share of common stock as of the date of
grant of the performance award, and each share resulting from such computation
shall be deemed to be an Award of 1.15 shares of common stock on the date of
grant. If the number of shares issued in settlement of such performance award
exceeds the number determined to have been issued on the grant date, each
additional share issued shall be deemed to be an Award of 1.15 shares of common
stock. In addition, during any calendar year, the number of shares of common
stock reserved for issuance under the 2007 LTIP which are subject to Awards that
may be granted to any one participant shall
not exceed 400,000
shares, subject to adjustment in the event of stock splits and certain other
corporate events, and the maximum dollar amount of cash or fair market value of
common stock that any participant may receive under a performance award may not
exceed $2,000,000. To the extent shares cease to be issuable under an Award made
under the 2007 LTIP, they will be available under the 2007 LTIP for the grant of
additional Awards in the same amount as such shares were counted against the
limit on the date of grant unless such shares cease to be subject to an Award
because of the exercise of the Award or the vesting of a restricted stock award
or similar Award. If any performance award granted under the 2007 LTIP may only
be settled in cash, such award shall not be counted against the maximum number
of shares that may be covered by Awards under the 2007 LTIP. Shares tendered or
withheld in payment of the exercise price of a stock option do not increase the
number of shares available under the 2007 LTIP. Shares withheld to satisfy tax
withholding obligations on the exercise, vesting, or earning of an Award are not
added to the shares authorized under the 2007 LTIP. All shares subject to a
stock appreciation right, to the extent exercised, are considered issued,
regardless of the actual number of shares issued to the
participant.
Persons
Eligible to Participate
Except with respect to Awards of
incentive stock options, all employees, consultants, and non-employee directors
of us and our affiliates are eligible to participate in the 2007 LTIP. Incentive
stock options may be awarded only to employees. In selecting employees and
consultants to receive Awards, including the type and size of the Award, the
Management and Compensation Committee may consider any factors that it deems
relevant. In considering Awards for non-employee directors, the Management and
Compensation Committee shall consider the recommendations of the Nominating and
Corporate Governance Committee and such other factors as the Management and
Compensation Committee may consider relevant. As of March 8, 2010, there were
approximately 2,840 employees and seven non-employee directors eligible to
participate in the 2007 LTIP.
Administration
The 2007 LTIP will be administered
by the Management and Compensation Committee, which consists of three or more
directors appointed by the Board of Directors. The members of the Management and
Compensation Committee as of the date of this proxy statement are Messrs.
Delimitros, Mitchell, Sullivan and White (as Chairman). Our Board of Directors
has determined that each of these directors is an “independent” director as
defined under the rules of the NYSE. No person shall be eligible to serve on the
Management and Compensation Committee unless such person is a “non-employee
director” as defined in Rule 16b-3 promulgated under the Exchange Act, as then
in effect, and also an “outside director” within the meaning of Section 162(m)
of the Code and the rules and regulations thereunder. Subject to the provisions
of the 2007 LTIP, the Management and Compensation Committee will (i) select the
participants to whom awards may be granted, (ii) determine the type, amount,
terms and conditions of awards, (iii) modify or amend awards including the
discretionary acceleration of vesting or the extension of a post-termination
exercise period in certain circumstances, (iv) interpret the 2007 LTIP and all
Awards under the 2007 LTIP, (v) make rules as it deems necessary for the proper
administration of the 2007 LTIP, (vi) make all other determinations necessary or
advisable for the administration of the 2007 LTIP, and (vii) correct any defect
or supply any omission or reconcile any inconsistency in the 2007 LTIP or in any
Award under the 2007 LTIP in the manner and to the extent that it deems
desirable to effectuate the 2007 LTIP. Any action taken or determination made by
the Management and Compensation Committee pursuant to the 2007 LTIP will be
binding on all parties. No member of the Board of Directors or the Management
and Compensation Committee will be liable for any action or determination made
in good faith with respect to the 2007 LTIP or an Award granted
thereunder.
Types
of Awards
The 2007 LTIP provides for the grant
of any or all of the following types of Awards: (i) stock options, including
incentive stock options and nonqualified stock options; (ii) restricted stock;
(iii) bonus stock; (iv) stock appreciation rights; and (v) performance
awards. All Awards will be evidenced by a written agreement and the terms,
conditions, and/or restrictions contained in an Award may differ from the terms,
conditions, and/or restrictions contained in any other Award. Each type of Award
is discussed in more detail below.
Stock
Options. The Management and Compensation Committee has the authority to
grant options, in such form as the Management and Compensation Committee may
from time to time approve, subject to the terms of the 2007 LTIP. The Management
and Compensation Committee also has the authority to determine whether options
granted to employees will be incentive options or nonqualified
options.
To exercise an option granted under
the 2007 LTIP, the person entitled to exercise the option must deliver to us
payment in full of the exercise price for the shares being purchased, together
with any required withholding tax, unless other arrangements have been made with
the Management and Compensation Committee. The payment must be (i) in cash or
check, (ii) with the consent of the Management and Compensation Committee, in
shares of common stock already owned by the person for more than six months, or
(iii) with the consent of the Management and Compensation Committee and in
compliance with such instructions as the committee may specify, by sale through
a broker. The value (the “Fair Market Value”) of each share of common stock
delivered as payment of the exercise price on any given date will be deemed to
be equal to the closing price on the principal exchange or over-the-counter
market on which such shares are trading.
Except as described below, no option
may be exercised later than the date which is ten years after the date of grant.
The exercise price at which shares of common stock may be purchased upon the
exercise of an option shall not be less than the Fair Market Value on the date
of grant of the option. In the case of incentive stock options granted to
employees owning more than ten percent (10%) of the total combined voting power
of us and our affiliates, the exercise price at which shares of common stock may
be purchased upon the exercise of such incentive option shall be equal to one
hundred ten percent (110%) of the Fair Market Value per share of common stock at
the time of the grant, and such incentive option may not be exercised later than
five years after the date of grant. The aggregate fair market value (determined
as of the respective date or dates of grant) of shares of common stock for which
one or more options granted to any employee under the 2007 LTIP (or any other
option plan of ours or our affiliates) may for the first time become exercisable
as incentive stock options during any one calendar year cannot exceed
$100,000.
The exercise price for and the
number of shares of common stock subject to existing options shall be subject to
appropriate adjustments in the event that the outstanding shares of our common
stock are changed into or exchanged for a different number or kind of shares or
other securities by reason of merger, consolidation, recapitalization,
reclassification, stock split, stock dividend, combination of shares, or the
like. The 2007 LTIP does not permit the Management and Compensation Committee to
reprice options without stockholder approval. The 2007 LTIP does not provide the
Management and Compensation Committee with discretionary authority to accelerate
the vesting of Awards without stockholder approval except upon the retirement,
death, or permanent disability of a participant or upon the occurrence of a
change in control. The Management and Compensation Committee shall determine, at
the date of grant, the time or times at which the options will be
exercisable.
Restricted
Stock Awards. The 2007 LTIP authorizes the Management and Compensation
Committee to grant Awards in the form of restricted shares of common stock.
These Awards are
subject to such
restrictions as the Management and Compensation Committee may impose, including
forfeiture, transfer, and repurchase restrictions, and in no event will the term
of any such Award exceed ten years. We have the right to repurchase restricted
shares for the amount of cash paid for such shares, if any, if the participant
terminates employment with or services to us prior to the lapse of such
restrictions, or if the restricted stock is forfeited by the participant in
accordance with the Award thereof.
Bonus
Stock. The Management and Compensation Committee has the authority to
grant shares of our common stock as “bonus stock” to employees, consultants, and
non-employee directors of us or our affiliates for the performance of services
by such individuals without additional consideration, except as may be required
by the Management and Compensation Committee.
Stock
Appreciation Rights. The Management and Compensation Committee may grant
stock appreciation rights (rights to receive the excess of the Fair Market Value
of the common stock on the date of exercise over the Fair Market Value of the
common stock as of the date of grant), in shares of common stock. The Management
and Compensation Committee may provide that the excess may not exceed a
specified amount. The Management and Compensation Committee shall determine, at
the date of grant, the time or times at which and the circumstances under which
a stock appreciation right may be exercised. The term of such Award may not
exceed ten years.
Performance
Awards. The 2007 LTIP authorizes the Management and Compensation
Committee to grant performance awards that may be settled in shares of common
stock, cash, or other awards or property upon the attainment of certain
performance goals measured over a designated performance period. After the end
of each performance period, the Management and Compensation Committee will
determine the amount, if any, of performance awards payable to each participant
based upon the achievement of the performance goals. In the case of any
performance award granted under the 2007 LTIP to our Chief Executive Officer or
any of our four highest paid officers (other than the Chief Executive Officer),
the performance goals will be objective and meet the requirements of Section
162(m) of the Code, and regulations thereunder, including the requirement that
achievement of performance goals be substantially uncertain at the time of
grant.
The performance goals may differ
among Awards or participants; however, the Management and Compensation Committee
may not exercise discretion to increase any amount payable under a performance
award intended to comply with Section 162(m) of the Code. In establishing
performance goals, the Management and Compensation Committee may use one or more
of the following business criteria on a consolidated basis or for our specified
subsidiaries, divisions, or business or geographical units: (i) earnings per
share; (ii) increase in price per share; (iii) increase in revenues; (iv)
increase in cash flow; (v) return on assets; (vi) return on investments; (vii)
return on equity; (viii) return on net capital employed; (ix) economic value
added; (x) gross margin; (xi) net income; (xii) earnings before interest, taxes,
depreciation, depletion and amortization; (xiii) earnings before interest and
taxes; (xiv) profit before taxes; (xv) operating income; (xvi) total stockholder
return; (xvii) debt reduction; (xviii) health, safety and environmental
performance; and (xix) any of the above goals determined on an absolute or
relative basis or as compared to the performance of a published or special index
deemed applicable by the Management and Compensation Committee, including, but
not limited to, a market index or a group of comparable
companies.
The amount determined to be payable
under a performance award shall be paid in cash, other Awards or other property,
or in shares of common stock, subject to the availability of shares under the
2007 LTIP. If a performance award is payable in shares, the number of shares of
common stock to be paid shall be determined by dividing the amount of the
performance award earned by the Fair Market Value per share of common stock on
the determination date. A stock certificate evidencing the resulting shares of
common stock (to the nearest full share) shall be delivered to the participant
or his or her personal representative, and the value of any fractional
share will be paid
in cash. In the event there is not a sufficient number of shares available under
the 2007 LTIP at the time of payment of any performance award, the performance
award shall be paid first in shares to the extent available and the remainder
shall be paid in cash; provided, however, that the Management and Compensation
Committee may not increase the amount payable under any outstanding performance
award which is intended to comply with Section 162(m) of the Code.
Transferability
Except as otherwise provided in the
2007 LTIP, no Award and no right under the 2007 LTIP, other than bonus stock or
restricted stock as to which restrictions have lapsed, is (i) assignable,
saleable, or transferable by a participant, or (ii) subject to any encumbrance,
pledge, or charge of any nature. Any attempted transfer in violation of the 2007
LTIP will be void and ineffective for all purposes. The Management and
Compensation Committee may, however, establish rules and procedures to allow the
transfer of specific nonqualified stock options for estate planning purposes to
one or more immediate family members or related family trusts or partnerships,
or similar entities.
Change
in Control
Unless otherwise provided in an
Award, upon the occurrence of a change in control (defined generally as certain
reorganizations, mergers, consolidations, sales of all or substantially all of
our assets, or liquidations), the Management and Compensation Committee may, but
is not required to, (i) accelerate vesting and the time at which all options and
stock appreciation rights then outstanding may be exercised; (ii) waive all
restrictions and conditions of all restricted stock then outstanding; or (iii)
determine to amend performance awards or substitute new performance awards in
consideration of the cancellation of outstanding performance
awards.
If approved by our Board of
Directors prior to or within 30 days after a change in control, the Board of
Directors will have the right for the 45-day period following the change in
control to require all participants to transfer to us all Awards previously
granted to the participants in exchange for an amount equal to the cash value of
the Awards. The cash value of an Award will equal the sum of (i) the cash value
of all benefits to which the participant would be entitled upon settlement or
exercise of any Award which is not an option or restricted stock and (ii) in the
case of an option or restricted stock, the excess of the market value per share
over the option price, or the market value per share of restricted stock,
multiplied by the number of shares as to which such Award is
vested.
Termination,
Death, Disability and Retirement
Unless otherwise provided for in an
Award, if the employment of an employee or service of a non-employee director or
consultant is terminated for any reason other than death, disability, or
retirement, any nonvested Award outstanding at the time of such termination will
terminate, no further vesting will occur, and the participant will be entitled
to exercise his or her exercise rights with respect to any portion of the Award
which is vested until the earlier of (i) the expiration date set forth in the
Award, or (ii) three months after the termination date.
Unless otherwise provided for in an
Award, upon the retirement of a participant, any nonvested portion of an
outstanding Award will terminate and no further vesting will occur; provided,
however, that the Management and Compensation Committee, at its discretion, may
accelerate the vesting of the nonvested portion of an outstanding award. Any
exercise rights with respect to any vested Award will expire on the earlier of
(i) the expiration date set forth in the Award, or (ii) twelve months after the
date of retirement.
Unless otherwise provided for in an
Award, (i) upon the termination due to the disability of a participant, (ii)
upon the death of a participant, (iii) with respect to a participant who is
either a retired former employee, non-employee director or consultant who dies
during the period in which
he
or she can exercise any vested Award (the “applicable retirement period”), or
(iv) with respect to a disabled former employee, non-employee director or
consultant who dies during the period that expires on the earlier of the
expiration date set forth in any applicable outstanding Award or the first
anniversary of the person’s termination due to disability (the “applicable
disability period”), any nonvested portion of an outstanding Award that has not
already terminated will terminate and no further vesting will occur; provided,
however, that upon the termination of employment or service due to the death or
disability of a participant, the Management and Compensation Committee, at its
discretion, may accelerate the vesting of the nonvested portion of an
outstanding award. Any exercise rights with respect to any vested Award will
expire on the earlier of (i) the expiration date set forth in the Award, or (ii)
the later of (x) the first anniversary of such termination due to death or
disability, or (y) the first anniversary of such person’s death during the
applicable retirement period (except in the case of an incentive stock option),
or the applicable disability period.
The Management and
Compensation Committee, in its discretion and on an individual basis, may
provide that the vested portion of a stock option or stock appreciation right
may remain exercisable for such period and upon such terms and conditions as are
determined by the Management and Compensation Committee in the event that a
participant ceases to be an employee, consultant or non-employee director,
provided that such continuation may not exceed the expiration date set forth in
the Award.
Adjustments
Upon Changes in Capitalization or Reorganization
The type or number of shares
authorized under the 2007 LTIP or subject to an Award and/or the exercise or
purchase price applicable to an Award, subject to any required action by our
stockholders, will automatically be proportionately adjusted in the event of a
subdivision or consolidation of shares, payment of stock dividend, or any other
increase or decrease in the number of shares effected without receipt of
consideration by us, or in the event of a reorganization, merger, consolidation,
or recapitalization.
Amendment
or Termination of the Plan and Amendment of Awards
Except with respect to Awards then
outstanding, if not sooner terminated by the Board of Directors, the 2007 LTIP
will terminate on, and no further Awards shall be made after, February 27, 2017;
provided that the termination of the 2007 LTIP will not affect any Award then
outstanding, which shall continue to be governed by the terms of the 2007 LTIP.
The Board of Directors may amend, suspend, or terminate the 2007 LTIP; provided,
however, that no amendment, suspension, or termination of the 2007 LTIP may,
without the consent of the holder of an Award, terminate such Award or adversely
affect such person’s rights in any material respect. Moreover, no amendment to
the 2007 LTIP will be effective prior to its approval by our stockholders to the
extent that (i) it would provide or accelerate vesting other than in
connection with a change in control, or upon the retirement, death or disability
of a participant, or would change stockholder approval requirements relating to
option repricing, or (ii) such approval is required by applicable law, or
the requirements of any securities exchange on which our stock may be listed or
admitted for trading. The Board of Directors may, however, amend the 2007 LTIP
as necessary to permit Awards to meet the requirements of the Code or other
applicable laws, or to prevent adverse tax consequences to
participants.
Subject to the restrictions set
forth in the 2007 LTIP, the Management and Compensation Committee may amend any
outstanding Award and may waive or accelerate any requirement or condition of an
Award including the acceleration of vesting or waiver of restrictions; however,
the Management and Compensation Committee may not waive or accelerate any term
or condition of an Award (i) if it would cause adverse tax consequences under
Section 409A of the Code, or (ii) if the Award is intended to qualify as
performance-based compensation for purposes of Section 162(m) of the Code and
such action would cause the Award not to so qualify. The Management and
Compensation
Committee may not amend any outstanding Award in a manner that would adversely
affect, in any material respect, the rights of a 2007 LTIP participant without
such participant’s consent.
New
Plan Benefits
The 2007 LTIP is discretionary and
the benefits and amounts of any awards to be received by our executive officers
and other employees in the future are not determinable. Under the compensation
arrangements for our non-employee directors, each of our current non-employee
directors will receive a grant of restricted stock on May 20, 2010 in
conjunction with our annual broad based awards to employees, in accordance with
the procedures adopted by our Management and Compensation Committee. The number
of shares of restricted stock issuable to the non-employee directors will equal
$100,000 divided by the fair market value per share on the date of grant and is
therefore not determinable at this time. The number of shares reflected in the
table below is determined based on the average high and low stock prices for the
five trading days ending March 8, 2010.
|
|
|
|
|
Number
of Shares
|
|
Name
and Position
|
|
Dollar
Value ($)
|
|
|
of
Restricted Stock
|
|
Stuart M.
Brightman, Director, President and
|
|
|
|
|
|
|
Chief
Executive Officer
|
|
|
- |
|
|
|
- |
|
Joseph M.
Abell III, Senior Vice President and
|
|
|
|
|
|
|
|
|
Chief
Financial Officer
|
|
|
- |
|
|
|
- |
|
Edwin H.
Goldman, Senior Vice President
|
|
|
- |
|
|
|
- |
|
Philip N.
Longorio, Senior Vice President
|
|
|
- |
|
|
|
- |
|
Bass C.
Wallace, Jr., General Counsel
|
|
|
|
|
|
|
|
|
and
Secretary
|
|
|
- |
|
|
|
- |
|
Geoffrey M.
Hertel, former Chief Executive Officer
|
|
|
- |
|
|
|
- |
|
Executive
officers as a group
|
|
|
- |
|
|
|
- |
|
Non-executive
officer employees, as a group
|
|
|
- |
|
|
|
- |
|
Non-employee
directors, as a group
|
|
$ |
700,000 |
|
|
|
57,323 |
|
Federal
Income Tax Consequences of the Plan
In
General. The 2007 LTIP is not intended to be subject to any provision of
the Employee Retirement Income Security Act of 1974, as amended, and is not
qualified under Section 401(a) of the Code. The following summary is based on
the applicable provisions of the Code, as currently in effect, and the income
tax regulations and proposed income tax regulations issued
thereunder.
Status
of Options. Options granted under the 2007 LTIP may be either incentive
stock options or nonqualified stock options. Under certain circumstances, an
incentive stock option may be treated as a nonqualified stock option. The tax
consequences, both to the option holder and to us, differ depending on whether
an option is an incentive stock option or a nonqualified stock
option.
Nonqualified
Options. No federal income tax is imposed on the option holder upon the
grant of a nonqualified stock option. If the shares of common stock received by
an option holder upon the exercise of a nonqualified stock option are not
subject to certain restrictions in the hands of the option holder, then the
option holder will be treated as receiving compensation, taxable as ordinary
income and subject to employment taxes in the year of exercise. The amount
recognized as ordinary income and subject to employment taxes upon such an
exercise is the excess of the fair market value of the shares of common stock at
the time of exercise over the exercise price paid for
such common stock.
At the time common stock received upon exercise of a nonqualified stock option
is disposed of, any difference between the fair market value of the shares of
common stock at the time of exercise and the amount realized on the disposition
will be treated as a capital gain or loss. The gain, if any, realized upon such
a disposition will be treated as a long-term or short-term capital gain,
depending on the holding period of the shares of common stock. Any loss realized
upon such a disposition will be treated as a long-term or short-term capital
loss, depending on the holding period of the shares of common
stock.
If the shares of common stock
received by an option holder upon the exercise of a nonqualified stock option
are subject to certain restrictions in the hands of the option holder at the
time of receipt, then the income recognized for federal income tax purposes by
the option holder, unless the option holder elects otherwise, and our tax
deduction (assuming we satisfy the federal income tax reporting and other
deductibility requirements with respect to such compensation) should be deferred
and should be measured with reference to the fair market value of the shares at
the time the restrictions lapse. The restriction imposed on officers, directors,
and 10% stockholders by Section 16(b) of the Exchange Act is such a restriction
during the period prescribed thereby if other shares have been purchased by such
an individual within six (6) months of the exercise of a nonqualified stock
option.
Upon an option
holder’s exercise of a nonqualified stock option, in the case of shares that are
not subject to restrictions at the time of exercise, or upon the lapse of all
such restrictions in the case of shares subject to restrictions at the time of
exercise, and subject to the application of Section 162(m) of the Code as
discussed below, we may claim a deduction for the compensation paid at the same
time and in the same amount as compensation is treated as being received by the
option holder, assuming we satisfy the federal income tax reporting and other
deductibility requirements with respect to such compensation. We are not
entitled to any tax deduction in connection with a subsequent disposition by the
option holder of the shares of common stock.
Incentive
Stock Options. No federal income tax is imposed on the option holder upon
the grant of an incentive stock option. The option holder will recognize no
income for federal income tax purposes upon exercise of an incentive stock
option if the option holder (a) does not dispose of the shares of common stock
acquired pursuant to the exercise of an incentive stock option within two years
from the date the option was granted or within one year after the shares of
common stock were transferred to the option holder (the “Holding Period”), and
(b) is an employee of either (i) the company granting the option, (ii) the
parent company or a subsidiary of such corporation, or (iii) a corporation which
has assumed such option of another corporation as a result of a corporate
reorganization, merger, or similar transaction. Such employment must continue
for the entire time from the date the option was granted until three months
before the date of exercise, or twelve months before the date of exercise if
employment ceases due to permanent and total disability. If common stock
received upon exercise of an incentive stock option is disposed of after
completion of the Holding Period, any difference between the exercise price paid
for such common stock and the amount realized on the disposition will be treated
as a capital gain or loss. The gain, if any, realized upon such a disposition
will be treated as a long-term capital gain. Any loss realized upon such a
disposition will be treated as a long-term capital loss. We would not be
entitled to any deduction in connection with the grant or exercise of the option
or the disposition of the shares of common stock so
acquired.
If, however, an option holder
disposes of shares of common stock acquired pursuant to exercise of an incentive
stock option before the Holding Period has expired (a “Disqualifying
Disposition”), the option holder would be treated as having received, at the
time of disposition, compensation taxable as ordinary income. In such event,
subject to the application of Section 162(m) of the Code, as discussed below, we
may claim a deduction for compensation paid at the same time and in the same
amount as compensation is treated as being received by the option holder. The
amount treated as compensation is the lesser of (i) the excess of the fair
market value
of
the common stock at the time of exercise over the exercise price, or (ii) the
excess of the amount realized on disposition over the exercise price. The
balance of the gain, if any, realized upon such a disposition will be treated as
a long-term or short-term capital gain depending on the holding period. If the
amount realized at the time of the disposition is less than the exercise price,
the option holder will not be required to treat any amount as ordinary income,
provided that the disposition is of a type that would give rise to a
recognizable loss. In such event, the loss will be treated as a long-term or
short-term capital loss depending upon the holding period. A disposition
generally includes a sale, exchange, or gift, but does not include certain other
transfers, such as by reason of death or a pledge or exchange of shares
described in Section 424(c) of the Code.
Alternative
Minimum Tax. Although the exercise of an incentive stock option does not
result in current taxable income, there are implications with regard to the
Alternative Minimum Tax (“AMT”). The excess of the fair market value of shares
of common stock acquired upon exercise of an incentive stock option over the
exercise price paid for such shares of common stock is an adjustment to AMT
income for the option holder’s taxable year in which such exercise occurs
(unless the shares of common stock are disposed of in the same taxable year and
the amount realized is less than the fair market value of the shares on the date
of exercise, in which event the amount included in AMT income will not exceed
the amount realized on the disposition over the adjusted basis of the
shares).
Payment
of Option Price in Shares. In the case of a nonqualified option, if the
option price upon the exercise of a nonqualified option is paid by the delivery
of shares of common stock previously acquired by the option holder having a fair
market value equal to the option price (“Previously Acquired Shares”), no gain
or loss would be recognized on the exchange of the Previously Acquired Shares
for a like number of shares of common stock. The option holder’s basis and
holding period in the number of shares of common stock received from the
exercise (to the extent equal to the number of Previously Acquired Shares used)
would be the same as his or her basis and holding period in the Previously
Acquired Shares used. The option holder would treat the fair market value of the
number of shares of common stock received upon the exercise in excess of the
number of Previously Acquired Shares used as ordinary compensation income. The
option holder’s basis in such excess shares of common stock would be equal to
the shares’ fair market value at the time of exercise. The option holder’s
holding period in such excess shares of common stock begins on the date the
option holder acquires those shares of common stock from the exercise of the
nonqualified option.
In
the case of an incentive stock option, the federal income tax consequences to
the option holder of the payment of the option price with Previously Acquired
Shares depends on the nature of the Previously Acquired Shares. If the
Previously Acquired Shares were acquired through the exercise of a qualified
stock option, an incentive stock option, or an option granted under an employee
stock purchase plan (“Statutory Option”) and if such Previously Acquired Shares
are being transferred prior to expiration of the applicable Holding Period, the
transfer would be treated as a Disqualifying Disposition of the Previously
Acquired Shares. If the Previously Acquired Shares were acquired other than
pursuant to the exercise of a Statutory Option, or were acquired pursuant to the
exercise of a Statutory Option but have been held for the applicable Holding
Period, no gain or loss should be recognized on the exchange of the Previously
Acquired Shares. In either case, (i) the option holder’s basis and
holding period in the number of shares of common stock received (to the extent
equal to the number of Previously Acquired Shares used) would be the same as his
or her basis and holding period in the Previously Acquired Shares used,
increased by any income recognized to the option holder upon the Disqualifying
Disposition of the Previously Acquired Shares, (ii) the option holder’s basis in
the number of shares of common stock received in excess of the number of
Previously Acquired Shares used would be zero, (iii) the option holder’s holding
period in such excess shares of common stock begins on the date the option
holder acquires those shares of common stock, and (iv) the other incentive stock
option rules would apply. Upon a
subsequent
Disqualifying Disposition of the shares of common stock so received, the shares
with the lowest basis would be treated as disposed of first.
Restricted
Stock. A participant who has been granted an Award of restricted stock
will not recognize taxable income for federal income tax purposes at the time of
the Award, and we will not be entitled to a tax deduction at the time of the
Award, unless the participant makes an election to be taxed at the time of the
Award. When the restrictions lapse without an election by the participant to be
taxed at the time of the Award, the participant will recognize income for
federal income tax purposes in an amount equal to the excess of the market value
of the shares at such time over the amount, if any, paid for such shares.
Subject to the application of Section 162(m) of the Code, as discussed below, we
will be entitled to a deduction for the corresponding amount, assuming we
satisfy the federal income tax reporting and other deductibility requirements
with respect to such compensation.
Bonus
Stock. In general, a person will treat the fair market value of bonus
stock Awards on the date such amount is received as compensation, taxable as
ordinary income and subject to employment taxes. Subject to the application of
Section 162(m) of the Code, as discussed below, we will be entitled to a
deduction for the corresponding amount, assuming we satisfy the federal income
tax reporting and other deductibility requirements with respect to such
compensation.
Stock
Appreciation Rights. Upon receipt of shares of common stock pursuant to
the exercise of a stock appreciation right, the fair market value of the shares
received is recognized as income for federal income tax purposes at the time the
shares are received. Subject to Section 162(m) of the Code, described below, and
assuming we satisfy the federal income tax reporting and other deductibility
requirements with respect to such compensation, we will be entitled to a
deduction at the same time and in the same amount as the income recognized by
the 2007 LTIP participant.
Performance
Awards. In general, a participant who receives a performance award will
not be taxed on receipt of the Award; instead, the fair market value of the
shares of common stock and any cash received in settlement of the performance
award will be taxable as ordinary compensation income to the grantee of the
performance award on the date that the requirements of the Award are met and the
Award is timely settled in accordance with its terms. Subject to the application
of Section 162(m) of the Code, as discussed below, and assuming we satisfy the
federal income tax reporting and other deductibility requirements with respect
to such compensation, we will be entitled to a deduction for an amount
corresponding to the compensation income recognized by the grantee. If, upon a
taxable disposition of the shares of common stock received in settlement of a
performance award, the grantee receives proceeds of more or less than his or her
basis in the shares of common stock, any gain will be a long-term or short-term
capital gain, and any loss will be a long-term or short-term capital loss,
depending on the holding period of the shares of common stock, measured from the
date that the shares of common stock were received.
Withholding
for Taxes
No common stock shall be issued
under the 2007 LTIP until arrangements satisfactory to us have been made for the
payment of any tax amounts that may be required to be withheld or paid by us
with respect thereto at the minimum statutory rate. At the discretion of the
Committee, such arrangements may include allowing the participant to tender to
us shares of common stock already owned by the participant.
Additional
Tax Consequences
Section 162(m) of the Code places a
$1 million cap on the deduction of compensation paid to certain executives of
publicly traded corporations in a given year. Amounts that qualify as
“performance-based” compensation under Section 162(m)(4)(C) of the Code are
exempt from the cap and do not count toward the $1 million limit. Generally,
options granted with an exercise price at least equal to the fair market value
of the stock on the date of grant will qualify as performance-based
compensation. Other Awards may or may not so qualify, depending on their
terms.
In addition, some Awards may
constitute or result in the recognition of income that is subject to an
additional income tax imposed on the participant at the rate of twenty percent
(20%), plus interest and penalties, pursuant to Section 409A of the Code.
We expect to design and administer all Awards in a manner that ordinarily should
avoid adverse federal income tax consequences under Section 409A of the
Code to any affected participant.
Notwithstanding the foregoing, the
2007 LTIP expressly provides that there is no commitment or guarantee that any
federal, state, or local tax treatment will apply or be available to any person
who participates or is eligible to participate in the 2007
LTIP.
The Board of Directors recommends
that you vote “FOR” the approval of the amendment and restatement of the TETRA
Technologies, Inc. Amended and Restated 2007 Equity Incentive Compensation Plan,
and proxies returned will be so voted unless contrary instructions are indicated
thereon.
CORPORATE
GOVERNANCE
The Board of Directors has adopted
Corporate Governance Guidelines that give effect to the NYSE corporate
governance listing requirements and various other corporate governance matters.
The Board of Directors believes the Corporate Governance Guidelines assist in
ensuring that the Board of Directors is independent from management, that the
Board of Directors adequately performs its function as the overseer of
management, and that the interests of management and the Board of Directors
align with the interests of our stockholders.
The Corporate Governance Guidelines,
as well as the charters of the Audit Committee, Management and Compensation
Committee, Nominating and Corporate Governance Committee, and the Reserves
Committee are available in the Corporate Governance section of the Investor
Relations area of our website at www.tetratec.com. In addition, the Company has
adopted a Code of Business Conduct and Ethics for directors, officers and
employees and a Code of Ethics for Senior Financial Officers, copies of which
are also available in the Corporate Governance section of the Investor Relations
area of our website at www.tetratec.com. If any substantive amendments are made
to either code, the nature of such amendment will be disclosed on our website.
In addition, if a waiver from either code is granted to an executive officer,
director, or principal accounting officer, the nature of such waiver will be
disclosed on our website. We have also adopted stock ownership guidelines
designed to align the interests of our executive officers and directors with the
interests of our stockholders. Our stock ownership guidelines are also available
in the Corporate Governance section of the Investor Relations area of our
website at www.tetratec.com. We will provide to our stockholders, without
charge, printed copies of the foregoing materials upon written request. Requests
for copies should be addressed to Corporate Secretary, TETRA Technologies, Inc.,
24955 Interstate 45 North, The Woodlands, Texas 77380.
Director
Independence
The NYSE listing standards require
our Board of Directors to be comprised of at least a majority of independent
directors. Our Board of Directors will determine independence in accordance with
the listing requirements of the NYSE, taking into consideration such facts and
circumstances as the board considers relevant. In order to assist the Board of
Directors in making its determination of whether directors are independent, each
director has completed and delivered to us a questionnaire. The Board of
Directors, with the assistance of the Nominating and Corporate Governance
Committee, reviewed such questionnaires and such other information considered
relevant with respect to the existence of any relationships between a director
and us.
The Board of Directors has
affirmatively determined that the following directors are independent: Ralph S.
Cunningham, Tom H. Delimitros, Allen T. McInnes, Kenneth P. Mitchell, William D.
Sullivan, and Kenneth E. White, Jr. Mr. Cunningham is a director of Enterprise
Products GP, LLC, EPE Holdings, LLC and Cenovus Energy Inc. (formerly EnCana
Corporation), Mr. Delimitros is a director of Plains Exploration &
Production Company, and Mr. Sullivan is a director of St. Mary Land &
Exploration Company, Targa Resources GP, LLC and Legacy Reserves GP, LLC. Each
of these entities or their affiliates is a customer of ours, although the
revenues we receive from them are not considered to be material. These
transactions did not automatically disqualify Messrs. Cunningham, Delimitros,
and Sullivan from being considered independent under the rules of the NYSE. Our
Board of Directors has also determined that none of Messrs. Cunningham,
Delimitros, or
Sullivan has a material interest in these transactions, and that each of them is
independent.
In addition, based upon such
standards, the Board of Directors has determined that Messrs. Brightman, Hertel
and Coombs are not independent because of, in Messrs. Brightman’s and Hertel’s
cases, their ongoing employment with us, and in Mr. Coombs’ case, his recent
prior employment with us.
Board
Leadership, Structure and Risk Oversight
As set forth in our Corporate
Governance Guidelines, our Board of Directors is comprised of a majority of
directors who qualify as independent directors in accordance with the listing
standards of the NYSE. We have no formal policy regarding the separation of the
positions of Chairman of the Board and Chief Executive Officer. However, since
1992, we have bifurcated the positions of Chairman of the Board of Directors and
Chief Executive Officer. Our Board of Directors believes that the separation of
these positions strengthens the independence of our board and its ability to
carry out its roles and responsibilities on behalf of our stockholders. In
addition, as directors continue to have more oversight duties, we believe that
the separation of the offices allows us to have a Chairman of the Board focused
on the leadership of the board while allowing our Chief Executive Officer to
focus his time and energy on managing our operations.
The Board of
Directors’ responsibilities include, but are not limited to, appointing our
Chief Executive Officer, monitoring our performance relative to our goals,
strategy, and to the performance of our competitors, reviewing and approving our
annual budget, and reviewing and approving investments in and acquisitions and
dispositions of assets and businesses. It is our management’s responsibility to
manage risk and to bring to the Board of Directors’ attention any aspects of our
business or operations that may give rise to a material level of
risk.
Our Chief
Executive Officer brings members of management from various business or
administrative areas into meetings of the Board of Directors from time to time
to make presentations and to provide insight to the board, including insight
into areas of potential risk. Such risks include competition risks, industry
risks, economic risks, liquidity risks, risks posed by significant litigation
matters, risks from operations and risks related to acquisitions and
dispositions. The Board of Directors, either directly or through its committees,
reviews with our management policies, strategic initiatives and other actions
designed to mitigate various types of risk. Our Audit Committee periodically
reviews with our management and our independent auditors significant financial
risk exposures and the processes we have implemented to monitor, control and
report such exposures. Specific examples of risks overseen by our Audit
Committee include risks related to the preparation of our financial statements,
disclosure controls and procedures, internal controls and procedures required by
the Sarbanes-Oxley Act, accounting, financial and auditing risks, and matters
reported to the Audit Committee through our internal auditors and through
anonymous reporting procedures. Our Nominating and Corporate Governance
Committee periodically reviews our Code of Business Conduct and Ethics,
periodically reviews and administers our Policy and Procedures with respect to
Related Person Transactions, and reviews our compliance with applicable laws and
regulations related to corporate governance. Our Management and Compensation
Committee reviews and evaluates potential risks related to the design and
implementation of our compensation programs, and our Reserves Committee reviews
and evaluates risks related to the preparation and disclosure of information
with respect to our oil and gas reserves.
Board
Meetings and Committees
Meetings
and Attendance. During 2009, the Board of Directors held six meetings.
The standing committees of the Board of Directors currently consist of an Audit
Committee, a Management and Compensation Committee, a Nominating and Corporate
Governance Committee,
and a Reserves
Committee. During 2009, the Audit Committee held five meetings, the Management
and Compensation Committee held four meetings, the Nominating and Corporate
Governance Committee held four meetings, and the Reserves Committee held two
meetings.
During 2009, each member of the
Board of Directors attended 75% or more of the meetings of the Board of
Directors held while serving as a member of the board, and 75% or more of the
meetings of all committees of the Board of Directors of which he was a member
that were held during the time he was a member. Our Corporate Governance
Guidelines provide that our preference is to have our directors attend the
annual meeting of stockholders. All members of our Board of Directors who were
serving at the time of the annual meeting attended the Annual Meeting of
Stockholders in 2009.
Audit
Committee. The Board of Directors has an Audit Committee, which is
currently composed of Mr. Delimitros, as Chairman, and Messrs. Cunningham and
White. The Audit Committee’s primary purpose is to assist the Board of Directors
in its oversight of (i) the integrity of our financial statements, (ii) our
compliance with legal and regulatory requirements, (iii) the independent
auditor’s qualifications, and (iv) the performance of our internal audit
function and independent auditors. The Audit Committee has sole authority to
appoint and terminate our independent auditors. To promote the independence of
its audit, the Audit Committee consults separately and jointly with the
independent auditors, the internal auditors, and management. As required by the
NYSE and SEC rules regarding audit committees, the Board of Directors has
reviewed the qualifications of its Audit Committee and has determined that none
of the current members of the Audit Committee has a relationship with us that
might interfere with the exercise of his independence from us or our management,
as independence is defined in the listing standards of the NYSE. Accordingly,
our Board of Directors has determined that all current members of our Audit
Committee, as well as Mr. McInnes, who was a member during 2009, are independent
as defined in Section 10A of the Exchange Act and independent as defined in the
listing standards of the NYSE. Further, our board has determined that Mr.
Delimitros, the Chairman of our Audit Committee, is an audit committee financial
expert within the definition established by the SEC.
Management
and Compensation Committee. The Board of Directors has a Management and
Compensation Committee, which is currently composed of Mr. White, as Chairman,
and Messrs. Delimitros, Mitchell, and Sullivan. The functions performed by the
Management and Compensation Committee include reviewing and establishing overall
management compensation, administering our employee stock option plans, and
approving salary and bonus awards to our executive officers. Our Board of
Directors has determined that each member of the Management and Compensation
Committee is independent, as independence is defined in the listing standards of
the NYSE. The Management and Compensation Committee may designate a subcommittee
and delegate authority to such subcommittee as it deems
appropriate.
Compensation decisions for our Chief
Executive Officer are made by the Management and Compensation Committee. The
Management and Compensation Committee is also responsible for approving the
compensation for our other executive officers and in such process, it reviews
and gives significant consideration to the recommendations made by the Chief
Executive Officer with respect to the non-equity compensation for such other
executive officers. As part of its role in reviewing and approving management
compensation, the Management and Compensation Committee administers our employee
stock option plans and our cash incentive plan under which discretionary cash
incentives may be awarded to our executive officers and other key employees
based on performance, including the attainment of performance goals. Our Chief
Executive Officer, with input from senior management, recommends to the
Management and Compensation Committee base salaries, target bonus levels, actual
bonus payouts, and equity awards, as well as company, division, and individual
performance measures for our executive officers other than the Chief Executive
Officer. The Management and Compensation Committee considers, discusses, and
takes action on such proposals as it deems appropriate. The Nominating and
Corporate
Governance
Committee is responsible for reviewing and making compensation decisions with
respect to our non-employee directors.
The Management and Compensation
Committee has the authority to retain, approve fees and other terms for, and
terminate any compensation consultant, outside counsel, or other advisors to
assist the committee in the discharge of its duties. The Management and
Compensation Committee did not retain the services of a compensation consultant
during 2008 to provide services relating to our 2009 compensation. However, in
February 2009, the Management and Compensation Committee retained the services
of Longnecker & Associates, an executive compensation consulting firm, to
provide information and recommendations related to our then outstanding option
awards. Following its review of the Longnecker & Associates data and
recommendations, the Management and Compensation Committee determined that no
action should be taken with regard to such awards at that
time.
In November 2009, after interviewing
a number of consulting firms, our Management and Compensation Committee retained
the services of Stone Partners, Inc., an independent human resource consulting
firm, to provide an analysis of our executive compensation program, including
appropriate peer comparisons, evolving compensation trends and regulatory
initiatives, and the impact of the turmoil in the financial markets and world
economy on executive compensation plan design. Based on the findings reported in
the Stone Partners analysis, the Management and Compensation Committee further
engaged Stone Partners to provide specific recommendations related to modifying
the structures of our discretionary performance-based annual cash incentive
program and our long-term equity incentive program. The Management and
Compensation Committee’s consideration of these recommendations, and actions
taken by the committee to address the recommendations, are further discussed in
the Compensation Discussion and Analysis. Stone Partners acted as independent
advisor to the Management and Compensation Committee and does not provide any
other services to us or earn any compensation from us outside of the services
provided as an independent advisor to the Management and Compensation
Committee.
Management
and Compensation Committee Interlocks and Insider Participation. The
members of the Management and Compensation Committee during 2009 were Messrs.
Delimitros, Mitchell, Sullivan, and White, none of whom is or had previously
been an officer or employee of ours, and none of whom had any relationship
required to be disclosed under this section.
Nominating
and Corporate Governance Committee. The Board of Directors has a
Nominating and Corporate Governance Committee, which is currently composed of
Mr. Mitchell, as Chairman, and Messrs. Cunningham and Sullivan. The Nominating
and Corporate Governance Committee investigates and makes recommendations to the
Board of Directors with respect to qualified candidates to be nominated for
election to the board, and reviews and makes recommendations to the board with
regard to candidates for directors nominated by stockholders in accordance with
our bylaws. The Nominating and Corporate Governance Committee will consider
candidates for director who are properly nominated by stockholders. Any
stockholder wishing to propose a nominee should submit a recommendation in
writing to our Corporate Secretary, indicating the nominee’s qualifications and
other relevant biographical information, confirmation of the nominee’s consent
to serve as a director, and all other information required by our bylaws for the
nomination of director candidates. The Nominating and Corporate Governance
Committee is responsible for reviewing and making compensation decisions with
respect to non-employee directors provided that any recommendations relating to
equity compensation are subject to final action by the Management and
Compensation Committee. This committee also investigates and makes
recommendations to the Board of Directors with regard to all matters of
corporate governance, including the structure, operation, and evaluation of the
board and its committees. Our Board of Directors has determined that each
current member of the Nominating and Corporate Governance Committee, as well as
Mr. McInnes, who was a member during 2009, is independent, as independence is
defined in the listing standards of the NYSE.
Director
Tenure. The Board of Directors does not believe that non-management
directors who retire or change the primary employment position they held when
they became a member of the board should necessarily leave the board. However,
promptly following such event, the director must notify the Nominating and
Corporate Governance Committee, which will review the continued appropriateness
of the affected director remaining on the board under such circumstances. The
affected director is expected to resign if requested to by the Nominating and
Corporate Governance Committee following such review. In addition, in connection
with a director’s resignation or the recommendation of a new director nominee,
the Nominating and Corporate Governance Committee will consider the issue of
continuing director tenure, and take steps as may be appropriate to ensure that
the Board of Directors maintains its majority independence.
Reserves
Committee. The Board of Directors has a Reserves Committee, which is
currently composed of Mr. White, as Chairman, and Messrs. Coombs, Delimitros,
Hertel and Sullivan. The Reserves Committee is directly responsible for the
appointment, compensation, retention (or termination) and oversight of our
independent petroleum engineering consultants for the purpose of auditing our
oil and gas reserves. The Reserves Committee is charged with fostering open
communications among the committee, the independent petroleum engineering
consultants, and our management, including the resolution of disagreements
between management and the independent consultants. In addition, the Reserves
Committee provides assistance to the board in ensuring our compliance with
applicable regulatory and securities laws relating to the preparation and
disclosure of information with respect to oil and gas
reserves.
Executive
Sessions of the Board of Directors. As set forth in our Corporate
Governance Guidelines, our non-management directors meet in executive session at
least four times per year. In addition, our independent non-management directors
meet in executive session at least one time per year. These executive sessions
are presided over by Dr. Cunningham. The non-management directors presently
consist of all current directors except Messrs. Brightman and
Hertel.
Communications
with Directors. Our security holders and other interested parties may
communicate with one or more of our directors (including the non-management
directors as a group) by mail in care of our Corporate Secretary, TETRA
Technologies, Inc., 24955 Interstate 45 North, The Woodlands, Texas 77380, or by
email at corpsecretary@tetratec.com. Such communications should specify the
intended recipient or recipients. All such communications, other than commercial
solicitations or communications, will be forwarded to the appropriate director
or
directors.
Stockholder
Nominations. Our Corporate Governance Guidelines provide that the
Nominating and Corporate Governance Committee will consider proposals for
nominees for director from others. In order to nominate a director at the annual
meeting, our bylaws require that a stockholder follow the procedures set forth
in Article III, Section 3 of our bylaws. (This bylaw provision is available on
our website at www.tetratec.com.) In order to recommend a nominee for a director
position, a stockholder must be a stockholder of record at the time the
stockholder gives notice of the recommendation, and the stockholder must be
entitled to vote for the election of directors at the meeting at which such
nominee will be considered. Stockholder recommendations must be made pursuant to
written notice delivered to our Corporate Secretary at our principal executive
offices no later than 80 days prior to the date of the annual or special meeting
at which directors are to be elected; provided, that the date of the annual or
special meeting is not publicly announced more than 90 days prior to the annual
or special meeting, such notice by the stockholder will be considered timely if
delivered to the Corporate Secretary no later than the close of business on the
tenth day following the day on which such announcement of the date of the
meeting was communicated to the stockholders.
The stockholder
notice must set forth the following:
1.
|
name and
address of the stockholder who intends to make the nomination and of the
person or persons to be nominated;
|
2.
|
a
representation that the stockholder is a holder of record of common stock
entitled to vote at the meeting and intends to appear in person or by
proxy to nominate the person or persons
specified;
|
3.
|
a description
of all arrangements or understandings between the stockholder and each
nominee and any other person or persons under which the nomination(s) are
to made by the stockholder;
|
4.
|
for each
person the stockholder proposes to nominate for election as a director,
all information relating to such person that would be required to be
disclosed in solicitations of proxies for the election of such nominees as
directors pursuant to Schedule 14A promulgated under the Exchange Act;
and
|
5.
|
for each
person nominated, a written consent to serve as a director, if
elected.
|
In addition to
complying with the foregoing procedures, any stockholder nominating a director
must also comply with all applicable requirements of the Exchange Act and the
rules and regulations thereunder.
Nominating
and Corporate Governance Committee Nominations. The Nominating and
Corporate Governance Committee selects each nominee for recommendation to the
Board of Directors based on the nominee’s skills, achievements, and experience.
As set forth in our Corporate Governance Guidelines, the following will be
considered, among other things, in selecting candidates for the Board of
Directors: independence; knowledge, experience, and skill in areas critical to
understanding us and our business; personal characteristics, such as integrity
and judgment; diversity; and commitments to the boards of other
companies.
When seeking
candidates for director, the Nominating and Corporate Governance Committee may
solicit suggestions from incumbent directors, management, stockholders, or
others. While the committee has authority under its charter to retain a search
firm for this purpose, no such firm was utilized in 2009. After conducting an
initial evaluation of a potential candidate, the committee will interview that
candidate if it believes such candidate might be suitable to be a director. The
committee may also ask the candidate to meet with management. If the committee
believes a candidate would be a valuable addition to the Board of Directors, it
will recommend to the full Board of Directors that candidate’s
election.
Although we have
not adopted a formal policy with regard to the consideration of diversity when
evaluating candidates for election to the board, our Corporate Governance
Guidelines provide that when assessing candidates, we will consider diversity.
The Nominating and Corporate Governance Committee does believe that board
membership should reflect diversity in the broadest sense, and so when reviewing
candidates for nomination to the Board of Directors, the committee considers
each nominee’s skills, perspectives, experiences, personal characteristics and
diversity, taking into account our needs and the current composition of the
board. We strive to maintain a reasonable diversity of background and experience
among the members of the board, so that each member may contribute a unique
viewpoint to the board’s deliberations. The Board of Directors’ final selection
of qualified candidates is based on merit, giving consideration to the
candidate’s knowledge, experience, skills in areas deemed critical to
understanding our business, personal characteristics such as integrity and
judgment, and diversity, including gender, ethnicity and background, and the
candidates commitments to boards of other companies.
Certain
Transactions
The Board of Directors has
determined that there are no material transactions involving an executive
officer, director, or other related person which require
disclosure.
The Board of Directors, upon
recommendation of the Nominating and Corporate Governance Committee, has adopted
the TETRA Technologies, Inc. Policy and Procedures with respect to Related
Person Transactions (“Policy”), for the review and approval of related person
transactions. The Policy covers transactions in which (i) we, or any subsidiary
of ours, are a participant, (ii) the aggregate amount involved exceeds $100,000,
and (iii) any related party (generally, directors and executive officers, and
their immediate family members, and 5% stockholders) has a direct or indirect
interest. The Policy generally requires that such transactions be approved in
advance by the Nominating and Corporate Governance Committee. Under the Policy,
the Nominating and Corporate Governance Committee shall consider all relevant
facts and circumstances available to the committee and will approve such
transactions only if they are in, or are not inconsistent with, our best
interests and the best interests of our stockholders. In the event a transaction
is not identified as a related person transaction in advance, it will be
submitted to the Nominating and Corporate Governance Committee, which will
evaluate the transaction, including ratification or rescission of the
transaction, and possible disciplinary action.
Stockholder
Litigation
Between March 27,
2008 and April 30, 2008, two putative class action complaints were filed in the
United States District Court for the Southern District of Texas (Houston
Division) against us and certain of our officers by certain stockholders on
behalf of themselves and other stockholders who purchased our common stock
between January 3, 2007 and October 16, 2007. The complaints assert claims under
Sections 10(b) and 20(a) of the Exchange Act, and Rule 10b-5 promulgated
thereunder. The complaints allege that the defendants violated the federal
securities laws during the period by, among other things, disseminating false
and misleading statements and/or concealing material facts concerning our
current and prospective business and financial results. The complaints also
allege that, as a result of these actions, our stock price was artificially
inflated during the class period, which enabled our insiders to sell their
personally-held shares for a substantial gain. The complaints seek unspecified
compensatory damages, costs, and expenses. On May 8, 2008, the Court
consolidated these complaints as In
re TETRA Technologies, Inc. Securities Litigation, No. 4:08-cv-0965 (S.D.
Tex.). On August 27, 2008, Lead Plaintiff Fulton County Employees’ Retirement
System filed its Amended Consolidated Complaint. On October 28, 2008, we filed a
motion to dismiss the federal class action. On July 9, 2009, the Court issued an
opinion dismissing, without prejudice, most of the claims in this lawsuit but
permitting plaintiffs to proceed on their allegations regarding disclosures
pertaining to the collectability of certain insurance receivables.
Between May 28,
2008 and June 27, 2008, two petitions were filed by alleged stockholders in the
District Courts of Harris County, Texas, 133rd and
113th
Judicial Districts, purportedly on our behalf. The suits name our directors and
certain officers as defendants. The factual allegations in these lawsuits mirror
those in the class action lawsuit, and the claims are for breach of fiduciary
duty, unjust enrichment, abuse of control, gross mismanagement, and waste of
corporate assets. The petitions seek disgorgement, costs, expenses, and
unspecified equitable relief. On September 22, 2008, the 133rd
District Court consolidated these complaints as In
re TETRA Technologies, Inc. Derivative Litigation, Cause No. 2008-23432
(133rd
Dist. Ct., Harris County, Tex.), and appointed Thomas Prow and Mark Patricola as
Co-Lead Plaintiffs. This lawsuit was stayed by agreement of the parties pending
the Court’s ruling on our motion to dismiss the federal class action. On
September 8, 2009, the plaintiffs in this state court action filed a
consolidated petition which makes factual allegations similar to the surviving
allegations in the federal lawsuit.
Pursuant to our
charter documents and existing indemnification agreements, we have advanced to
the former and current officer and director defendants the fees and expenses
they have incurred to defend themselves, subject to repayment in the event of a
determination that they are not entitled to indemnification.
Equity
Compensation Plan Information
The following table provides
information as of December 31, 2009, regarding compensation plans (including
individual compensation arrangements) under which equity securities are
authorized for issuance.
|
|
|
|
|
|
Number
of Securities
|
|
|
|
Number
of Securities
|
|
|
|
Remaining
Available for Future
|
|
|
|
to
be Issued upon
|
|
Weighted
Average
|
|
Issuance
under Equity Comp.
|
|
|
|
Exercise
of
|
|
Exercise
Price of
|
|
Plans
(Excluding Securities
|
|
Plan
Category
|
|
Outstanding
Options
|
|
Outstanding
Options
|
|
Shown
in the First Column)
|
|
|
|
|
|
|
|
|
|
Equity
compensation plans
|
|
|
|
|
|
|
|
approved by
stockholders(1)
|
|
|
|
|
|
|
|
1990
Employee Incentive
|
|
|
1,289,507 |
|
$ |
7.4298 |
|
|
0 |
|
2006
Equity Incentive
|
|
|
464,149 |
|
$ |
27.3305 |
|
|
0 |
|
2007
Equity Incentive
|
|
|
3,192,066 |
|
$ |
10.8586 |
|
|
931,042 |
|
Total:
|
|
|
4,945,722 |
|
$ |
11.5105 |
|
|
931,042 |
|
|
|
|
|
|
|
|
|
|
|
|
Equity
compensation plans not
|
|
|
|
|
|
|
|
approved by
stockholders(2)
|
|
|
|
|
|
|
|
|
|
|
1996
Nonexecutive Plan
|
|
|
679,742 |
|
$ |
11.7247 |
|
|
0 |
|
1998
Director Plan
|
|
|
144,000 |
|
$ |
15.2600 |
|
|
0 |
|
Brightman
Plan
|
|
|
240,000 |
|
$ |
9.0767 |
|
|
0 |
|
Total:
|
|
|
1,063,742 |
|
$ |
11.6058 |
|
|
0 |
|
|
|
|
|
|
|
|
|
|
|
|
All
Plans(3)
|
|
|
|
|
|
|
|
|
|
|
Total:
|
|
|
6,009,464 |
|
$ |
11.5273 |
|
|
931,042 |
|
(1) |
Consists
of the 1990 Stock Option Plan, as amended, the Amended and Restated 2006
Equity Incentive Compensation Plan, and the Amended and Restated 2007
Equity Incentive Compensation Plan. |
(2) |
Consists of the 1996 Stock
Option Plan for Nonexecutive Employees and Consultants (the “1996
Nonexecutive Plan”), the 1998 Director Stock Option Plan, as amended and
restated (the “1998 Director Plan”), and the award granted to Mr.
Brightman in connection with his initial employment. A description of each
of these plans follows. |
(3) |
The table
above does not include information regarding the proposed amendment and
restatement of the Amended and Restated 2007 Equity Incentive Compensation
Plan to be considered at the annual meeting; 262,417 shares of restricted
stock subject to awards outstanding under the Amended and Restated 2006
and 2007 Equity Incentive Compensation Plans as of December 31, 2009; and
21,140 shares of restricted stock outstanding under the award granted to
Philip N. Longorio on February 22, 2008, as an inducement to his initial
employment. |
Non-Stockholder
Approved Plans
1996
Stock Option Plan for Nonexecutive Employees and Consultants
The TETRA Technologies, Inc. 1996
Stock Option Plan for Nonexecutive Employees and Consultants (the “1996
Nonexecutive Plan”) was adopted effective July 25, 1996. As of December 31,
2009, options covering 679,742 shares were outstanding under the 1996
Nonexecutive Plan, and options under the 1996 Nonexecutive Plan covering 7,953
shares were exercised during the year ended December 31, 2009. No grants of
awards were permitted to be made under the 1996 Nonexecutive Plan after May 2,
2006.
1998
Director Stock Option Plan
The TETRA Technologies, Inc. 1998
Director Stock Option Plan was adopted effective December 1998, was amended and
restated effective June 27, 2003, and was further amended in December 2005 (the
“1998 Director Plan”). As of December 31, 2009, options covering 144,000 shares
were outstanding under the 1998 Director Plan, and options under the 1998
Director Plan covering 106,000 shares were exercised during the year ended
December 31, 2009. No grants of awards were permitted to be made under the 1998
Director Plan after May 2, 2006.
Brightman
Plan
As an inducement to his employment,
Mr. Brightman was awarded, effective April 20, 2005, an option to purchase
80,000 shares at an exercise price of $27.23 per share (as adjusted to reflect
the effect of our 3-for-2 stock split effected on August 26, 2005, and our
2-for-1 stock split effected on May 22, 2006, this presently equates to 240,000
shares at an exercise price of $9.0767 per share), which grant is evidenced by a
Nonqualified Stock Option Agreement dated April 20, 2005. The option was 50%
vested on the date of grant, and additional 25% portions of the award vested on
the first and second anniversaries of the grant date. As of December 31, 2009,
options covering 240,000 shares were outstanding under the award. The maximum
term of the award is ten years.
Insider
Stock Sales and Stock Ownership Guidelines
We acknowledge that sales of common
stock by our executive officers will occur periodically. In particular, we
believe that our executive officers who have a significant portion of their net
worth in common stock may desire to diversify their investment portfolios over
time and may be required to sell common stock to finance stock option exercises
and to pay related taxes. We have established a policy for trading in common
stock. This policy is designed to help ensure compliance with federal securities
laws and allow the anticipated periodic sales to occur in an orderly fashion.
The trading policy also prohibits our directors, officers, and employees from
engaging in short sales of our common stock, and from buying or selling puts,
calls, or options involving common stock (other than employee stock
options).
Our Board of Directors has adopted
stock ownership guidelines for our directors and executive officers. The stock
ownership guidelines are intended to align the interests of our directors and
executive officers with the interests of our stockholders. The policy
establishes the following minimum ownership guidelines.
·
|
Our executive
officers must hold shares of our common stock equal to a multiple, based
upon position, of their base salary. The multiples are as follows: Chief
Executive Officer, three-times base salary; Chief Financial Officer and
Chief Operating Officer, two-times base salary; and, Senior Vice
Presidents and Vice Presidents, one-time base salary. Executive officers
as of February 21, 2008 have until February 21, 2013, to be in compliance
with the guidelines, and executive officers appointed after February 21,
2008 will have five years following attainment of executive officer status
to be in compliance.
|
·
|
Our
non-employee directors, other than the Chairman of the Board of Directors,
are required to hold shares of our common stock equal to five-times their
annual cash retainer. Our chairman is required to hold shares of our
common stock equal to one and one-half-times his annual cash retainer.
Non-employee directors as of February 21, 2008 have until February 21,
2012, to be in compliance with the guidelines, and non-employee directors
who are elected after February 21, 2008 will have four years from the date
of their election or appointment to be in
compliance.
|
The Audit Committee assists the
board in overseeing matters relating to our accounting and financial reporting
practices, the adequacy of our internal controls, and the quality and integrity
of our financial statements. The charter of the Audit Committee is available in
the Corporate Governance section of the Investor Relations area of our website
at www.tetratec.com.
Management is
responsible for the preparation, presentation and integrity of our financial
statements and for the appropriateness of our accounting and financial reporting
principles and policies. Management is also responsible for establishing and
maintaining our internal controls and procedures, establishing financial
reporting processes and controls, and evaluating the effectiveness of such
controls and procedures. Our independent registered public accounting firm,
Ernst & Young LLP, is responsible for performing an independent audit
of our financial statements in accordance with the standards of the Public
Company Accounting Oversight Board (United States) (the “PCAOB”) and issuing a
report thereon as well as expressing an opinion on the effectiveness of our
internal controls over financial reporting. The Audit Committee’s responsibility
is to monitor and oversee these processes.
The Audit Committee consists of
three directors who are independent, as independence is defined in the listing
standards for the NYSE and the rules of the SEC. The Audit Committee met five
times during the year ended December 31, 2009. The Audit Committee reviewed and
discussed with management our financial results prior to the release of
earnings. In addition, the Audit Committee reviewed and discussed with
management and Ernst & Young LLP the interim financial information included
in our quarterly reports on Form 10-Q for the fiscal quarters ended March 31,
2009, June 30, 2009, and September 30, 2009 prior to their being filed with the
SEC.
The Audit Committee has received
written disclosures and the letter from Ernst & Young LLP required by the
applicable requirements of the PCAOB regarding Ernst & Young LLP’s
communications with the Audit Committee concerning independence, and has
discussed with Ernst & Young LLP its independence.
The Audit Committee has also
discussed with Ernst & Young LLP the matters required to be discussed by the
Statement on Auditing Standards No. 61, as amended (AICPA, Professional
Standards, Vol. 1. AU section 380), as adopted by the PCAOB in Rule
3200T.
The Audit Committee reviewed our
audited financial statements as of and for the year ended December 31, 2009, and
discussed them with management and Ernst & Young LLP. Based on the review
and discussions described above, the Audit Committee recommended to the board
that our audited financial statements be included in our Annual Report on Form
10-K for the fiscal year ended December 31, 2009 for filing with the
SEC.
Submitted by the Audit Committee of
the Board of Directors,
Tom H. Delimitros,
Chairman
Ralph S.
Cunningham
Kenneth E. White,
Jr.
This report of the Audit Committee
shall not be deemed “soliciting material” or to be “filed” with the SEC or
subject to Regulation 14A or 14C or to the liabilities of Section 18 of the
Exchange Act, except to the extent that we specifically request that the
information be treated as soliciting material or specifically incorporate it by
reference into a document filed under the Securities Act of 1933 (the
“Securities Act”) or the Exchange Act. Further, this report will not be deemed
to be incorporated by reference into any filing under the Securities Act or the
Exchange Act, except to the extent that we specifically incorporate this
information by reference.
FEES
PAID TO PRINCIPAL ACCOUNTING FIRM
The following table sets forth the
aggregate fees billed to us by our principal accounting firm, Ernst & Young
LLP, for the fiscal years ended December 31, 2009, and 2008,
respectively:
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
Audit
fees
|
|
$ |
1,778,688 |
|
|
$ |
1,914,100 |
|
Audit of
Compressco subsidiary(1)
|
|
|
- |
|
|
|
1,068,500 |
|
Audit related
fees(2)
|
|
|
37,000 |
|
|
|
39,300 |
|
Tax fees(3)
|
|
|
64,989 |
|
|
|
154,336 |
|
All other
fees(4)
|
|
|
- |
|
|
|
13,400 |
|
Total
fees
|
|
$ |
1,880,677 |
|
|
$ |
3,189,636 |
|
(1) |
Consists
of fees related to the Compressco Partners, L.P. Registration Statement on
Form S-1, filed on November 10, 2008, as amended. |
(2) |
Consists
primarily of fees for an employee benefit plan audit. |
(3) |
Consists
primarily of fees related to the Compressco MLP tax structuring in 2008,
as well as fees for international tax compliance review in 2009 and
2008. |
(4) |
Consists
of fees for verification of financial information to regulatory agencies
in 2008. |
The Audit Committee
approved 100% of these fees. Before approving these fees, the Audit Committee
considered whether the provision of services by Ernst & Young LLP that are
not related to the audit of our financial statements was compatible with
maintaining the independence of Ernst & Young LLP, and the Audit Committee
concluded that it was.
AUDIT
COMMITTEE PREAPPROVAL POLICIES AND PROCEDURES
The Audit Committee’s policy
provides that our independent registered public accounting firm (the “Audit
Firm”) may provide only those services preapproved by the Audit Committee. The
Audit Committee annually reviews and preapproves the audit, review, attest, and
permitted non-audit services to be provided during the next audit cycle by the
Audit Firm. To the extent practical, at the same meeting, the Audit Committee
also reviews and approves a budget for each of such services. The term of any
such preapproval is for the period of the annual audit cycle, unless the Audit
Committee specifically provides for a different period.
Services proposed to be provided by
the Audit Firm that have not been preapproved during the annual review and the
fees for such proposed services must be preapproved by the Audit Committee.
Additionally, fees for previously approved services that are expected to exceed
the previously approved budget must be preapproved by the Audit Committee. The
Audit Committee has delegated the authority to grant specific preapprovals under
its policy with respect to these services and fees to its chairman, who reports
such preapproval to the full Audit Committee no later than its next scheduled
meeting. The Audit Committee may not delegate to management its responsibilities
to preapprove services performed by the Audit Firm.
All requests or applications for the
Audit Firm to provide services to us must be submitted to the Audit Committee or
its chairman by the Audit Firm and the Chief Financial Officer and must include
a joint statement as to whether, in their view, the request or application is
consistent with applicable laws, rules, and regulations relating to auditor
independence. It is our policy that if any of our employees or any
representative of the Audit Firm becomes aware that any services are being, or
have been, provided by the Audit Firm to us without the requisite preapproval,
such individual must immediately notify the Controller or the Chief Financial
Officer, who must promptly notify the Chairman of the Audit Committee and
appropriate members of senior management so that prompt action may be taken to
the extent deemed necessary or advisable.
EXECUTIVE
OFFICERS
Our current executive officers and
their ages and positions are as follows:
Name
|
|
Age
|
|
Position
|
Stuart M.
Brightman
|
|
53
|
|
President and
Chief Executive Officer
|
Joseph M.
Abell III
|
|
55
|
|
Senior Vice
President and Chief Financial Officer
|
Edwin H.
Goldman
|
|
61
|
|
Senior Vice
President
|
Philip N.
Longorio
|
|
56
|
|
Senior Vice
President
|
Dennis R.
Mathews
|
|
51
|
|
Senior Vice
President
|
Bass C.
Wallace, Jr.
|
|
51
|
|
General
Counsel and Corporate Secretary
|
Edgar A.
Anderson
|
|
52
|
|
President -
Maritech Resources, Inc.
|
Ronald J.
Foster
|
|
53
|
|
President -
Compressco, Inc.
|
Ben C.
Chambers
|
|
54
|
|
Vice
President - Accounting and Controller
|
Bruce A.
Cobb
|
|
60
|
|
Vice
President - Finance and Treasurer
|
Linden H.
Price
|
|
63
|
|
Vice
President - Administration
|
(Information regarding the business
experience of Mr. Brightman is set forth above under “Nominees for
Director.”)
Joseph
M. Abell III has served as our Senior Vice President and Chief Financial
Officer since May 2001. From January 1998 to May 2001, he served as vice
president of Sithe Energies, Inc. and then as senior vice president of one of
its parent companies, Marubeni Power International, Inc., where he was involved
in the acquisition, development, and financing of power generation projects in
Latin America. From December 1994 through December 1997, Mr. Abell was employed
as a project director by British Gas International, Inc. and prior to that time
he held various acquisition, strategic planning, and project development
positions in the power generation and gas pipeline businesses with American
National Power, Transco Energy Company, and Tenneco Inc. Mr. Abell received his
B.S. degree in Mechanical Engineering from Cornell University and his Master of
Business Administration degree from the University of
Chicago.
Edwin
H. Goldman has served as our Senior Vice President since August 2008.
From February 2002 through August 2008, he was employed in various executive
management positions with Kellogg Brown & Root Inc., ultimately serving as
vice president – upstream oil and gas facilities, by which he had direct
responsibility for the onshore and offshore production facilities and pipeline
business of the oil and gas market segment. From February 1999 through February
2002, Mr. Goldman was employed as manager of business strategy and development
and manager of business acquisition, Africa, Middle East and Asia by Heerema
Marine Contractors, a marine contracting company based in Leiden, Netherlands.
From January 1997 to February 1999, Mr. Goldman served as director and
commercial manager Asia-Pacific for Heerema Far East Pte. Ltd., in Singapore.
Mr. Goldman served as manager of business strategy and development with Heere
Mac Vof, based in Leiden, Netherlands, from 1990 through 1997. From 1980 through
1990, Mr. Goldman held various positions of international responsibility with
Heerema Offshore Construction Group, Heerema Engineering US, and Heerema
Engineering Service, and from 1977 through 1980, served as legal advisor with
Smit International Marine Services and Global Marine Drilling Inc. Mr. Goldman
received his Masters Degree at Law from Erasmus University in Rotterdam,
Netherlands.
Philip
N. Longorio has served as our Senior Vice President since February 2008.
Mr. Longorio is a thirty-year veteran of the oil and gas service industry, and
has held various executive management positions with both major and smaller oil
service companies. From July 2004 through May 2007, Mr. Longorio served as
president and chief executive officer of WellDynamics B.V., a joint venture
between Halliburton Energy Services and Shell Technology Ventures that provides
intelligent well technology. From December 1999 through February 2004, Mr.
Longorio served as vice president of Sperry-Sun Drilling Services, a subsidiary
of Halliburton Energy Services, and from 1988 through 1999, he served at
Halliburton in executive management roles leading the well testing, wireline
logging and perforating businesses. Mr. Longorio began his oilfield career in
1977 at Gearhart Industries. Mr. Longorio currently serves as non-executive
chairman of the board of directors for GEODynamics, Inc., a private company
involved in the manufacture and sale of shaped perforating charges for downhole
well applications, and for SensorTran, a private company that provides products
and services related to remote downhole well monitoring. Mr. Longorio is a
United States Air Force veteran, and an active member of the SPE and
SPWLA.
Dennis
R. Mathews has served as our Senior Vice President since January 2001. He
has served as Vice President of TETRA International since 1994, as General
Manager of our INTEQ/TETRA joint venture from 1991 to 1994, and in numerous
other positions with us since 1982. Mr. Mathews received his B.S. degree in
Business Management from Southwestern Oklahoma State
University.
Bass
C. Wallace, Jr. has served as our General Counsel since 1994 and as our
Corporate Secretary since 1996. From 1984 to 1994 he was engaged in the private
practice of law. Mr. Wallace received his B.A. degree in Economics from the
University of Virginia and his J.D. degree from the University of Texas School
of Law.
Edgar
A. Anderson has
served as President of our Maritech Resources, Inc. subsidiary since January
2008. From April 2000 to December 2007, Mr. Anderson served as Maritech’s Senior
Vice President – Engineering. Mr. Anderson served as vice president of Global
Industries, Ltd. and later as president of their subsidiary, Global Production
Services, LLC from 1998 to 2000. From 1996 to 1998 Mr. Anderson served as
exploitation engineering advisor with Kerr-McGee Oil and Gas, and from 1990 to
1996 as a senior staff engineer with Sonat Exploration Corporation, where he
received the chairman’s award for innovative completion ideas and production
improvement contributions. Mr. Anderson is an associate member of the Houston
Association of Professional Landmen and a Registered Professional Engineer in
the State of Texas. He received his B.S. degree in Petroleum Engineering from
Texas A&M University.
Ronald
J. Foster has
served as President of our Compressco, Inc. subsidiary since October 2008. From
August 2002 to September 2008 Mr. Foster served as Senior Vice President of
Sales and Marketing with Compressco. Prior to joining Compressco, Mr. Foster
served as vice president of North American operations with Wood Group ESP. He
has served as a director of Compressco Partners GP since October 2008. Mr.
Foster received his B.S. degree in Economics from Oklahoma State
University.
Ben
C. Chambers has served as our Vice President – Accounting and Controller
since May 2001. He served as Chief Accounting Officer from May 2000 to May 2001.
He was first employed by us in 1993, and served as Controller of our Oil &
Gas Services Division from January 1995 to May 2000. From 1979 to 1992, Mr.
Chambers held various management positions with Baker Hughes, Inc., ultimately
serving as controller for its Tubular Services Division. Mr. Chambers received
his B.S. degree in Accounting from the University of Oklahoma, and he is a
certified public accountant.
Bruce
A. Cobb has served as our Vice President – Finance and Treasurer since
May 2001. He served as our Controller and Treasurer from May 2000 to May 2001,
and as our Chief Accounting Officer from June 1999 to May 2000. Mr. Cobb served
as our Controller from 1991 to May 1999. From 1987 to 1991, he was the chief
financial officer of Speeflo Manufacturing Company. From 1979 to 1987, Mr. Cobb
served as division controller for Hughes Production Tools, a division of Hughes
Tool Company. From 1973 to 1979, he practiced accounting with Ernst & Young.
Mr. Cobb received his B.B.A. degree in Accounting from the University of Texas,
and he is a certified public accountant.
Linden
H. Price has served as our Vice President – Administration since May
2001. He has served as Director of our Human Resources department since
September 1993. From 1989 to 1993, Mr. Price was director of human resources for
TRW Environmental Services, a business unit of TRW Inc. From 1982 to 1989, he
was director of human resources and administration for Grant Norpac, a
geophysical services company. Mr. Price received his B.A. degree in Social
Sciences from the College of Santa Fe and his M.S. degree in Human Development
from the University of Maryland.
COMPENSATION
DISCUSSION AND ANALYSIS
Oversight
of Executive Compensation Program
The Management and
Compensation Committee of our Board of Directors is responsible for discharging
the responsibilities of our Board of Directors relating to the compensation of
our executive officers and advising our board on our compensation philosophy,
programs, and objectives. The Management and Compensation Committee oversees our
compensation programs, which include components that are designed specifically
for (i) our most senior executive officers, which includes our current Chief
Executive Officer, our former Chief Executive Officer, and the executive
officers named in the Summary Compensation Table (collectively, the “Named
Executive Officers” or “NEOs”); (ii) employees who are designated as our senior
officers (“Senior Officers”); and (iii) a broad-base of our employees.
Additionally, the Management and Compensation Committee is charged with the
review and approval of all annual compensation decisions relating to the CEO,
and with the review and oversight of annual compensation decisions relating to
other NEOs and Senior Officers (collectively, “Senior Management”).
Consistent with the listing
requirements of the NYSE, the Management and Compensation Committee is composed
entirely of independent, non-management members of our Board of Directors. With
the exception of awards received under our Amended and Restated 2007 Equity
Incentive Compensation Plan, no Management and Compensation Committee member
participates in any of the Company’s employee compensation programs. Each year,
we review any and all relationships that each director may have with us, and the
Board of Directors subsequently reviews our findings. The Board of Directors has
determined that none of the Management and Compensation Committee members have
any material business relationships with us.
The responsibilities of the
Management and Compensation Committee include the following:
·
|
establishing
a compensation philosophy designed to support our overall business
strategy and objectives, and establishing a compensation strategy designed
to attract and retain executive talent, motivate executive officers to
improve their performance and the financial performance of the company,
and otherwise implement the compensation
philosophy;
|
·
|
reviewing and
annually establishing annual and long-term performance goals and
objectives for our Senior Management intended to support our compensation
philosophy and the Management and Compensation Committee’s compensation
strategies;
|
·
|
evaluating
annually the performance of our CEO and other NEOs in light of approved
performance goals and objectives;
|
·
|
reviewing and
approving annually the compensation of the CEO and other NEOs based on
their performance evaluations, including annual salary, performance-based
bonus awards, bonus opportunities including long-term incentive
opportunities, and any other matter relating to the compensation of the
CEO and other NEOs which the Management and Compensation Committee
considers appropriate;
|
·
|
reviewing at
least annually all equity-based compensation plans and arrangements,
including the number of shares remaining available for issuance under
those plans, and making recommendations to our Board of Directors
regarding the need to amend existing plans or to adopt new plans for the
purposes of implementing the Management and Compensation Committee’s goals
regarding long-term and equity-based
compensation;
|
·
|
reviewing at
least annually all components of compensation paid to or available to the
CEO and other NEOs which may include salary, bonuses (both
performance-based and otherwise), long-term incentive compensation,
perquisites, and other personal benefits to determine the appropriateness
of each component in light of our compensation
philosophy;
|
·
|
reviewing and
approving all employment, severance, change of control or other
compensation agreements or arrangements to be entered into or otherwise
established with our CEO and other
NEOs;
|
·
|
producing an
annual Management and Compensation Committee report for inclusion in our
proxy statement or Annual Report on Form 10-K in accordance with the rules
and regulations of the SEC; and
|
·
|
reviewing
with the CEO matters relating to management succession, including
compensation related issues.
|
Overview
of Compensation Philosophy and Objectives
In order to recruit and retain
highly qualified and competent individuals as Senior Management, we strive to
maintain a compensation program that is competitive in the global labor market.
Our guiding philosophy is to maintain an executive compensation program that
will attract, retain, motivate and reward highly qualified and talented
individuals to enable us to perform better than our competitors. The following
are our key objectives in setting the compensation programs for our Senior
Management:
·
|
design
competitive total compensation programs to enhance our ability to attract
and retain knowledgeable and experienced Senior
Management;
|
·
|
motivate our
Senior Management to deliver outstanding financial performance and meet or
exceed general and specific business, operational, and individual
objectives;
|
·
|
set
compensation and incentive levels that reflect competitive market
practices in relevant markets and are generally within the median range
for the relevant peer group;
|
·
|
provide a
significant percentage of total compensation that is “at risk,” or
“variable,” based on predetermined performance measures and objectives;
and
|
·
|
ensure that a
significant portion of the total compensation package is determined by
increases in stockholder value, thus assuring an alignment of Senior
Management and stockholder
interests.
|
Implementation
and Management of Compensation Programs
Role
of Management and Compensation Committee. The Management and Compensation
Committee determines our overall compensation philosophy and sets the
compensation of our CEO and other members of Senior Management. In making
compensation decisions, the Management and Compensation Committee considers
compensation paid by companies in our peer group; compensation data from
available surveys of the oilfield services and the oil and gas industries for
executive officers with similar positions and with roles and responsibilities
similar to our Senior Management; market data, analysis and recommendations
provided by any compensation consultant engaged by the Management and
Compensation Committee; and recommendations from our CEO with respect to
specific compensation matters, including changes in compensation for our Senior
Management. The Management and Compensation Committee has the authority to
retain compensation consultants, outside counsel, or other advisors to assist
the committee in the discharge of its duties. In any given year, the Management
and Compensation Committee bases its decision on whether to retain a
compensation
consultant on factors including prevailing market conditions, changes in the
regulation of executive compensation, and the quality and applicability of any
other relevant data that may be available. If a compensation consultant is
engaged, the Chairman of the Management and Compensation Committee maintains a
direct line of communication with the consultant and arranges meetings with the
consultant that may include other members of the committee and/or the CEO.
Through this communication with the Chairman of the Management and Compensation
Committee, the consultant reports to, and acts at the discretion of, our
Management and Compensation Committee. Although our CEO may receive the
consultant’s report and data, the Management and Compensation Committee retains
and exercises control and authority over the compensation
consultant.
The Management and
Compensation Committee did not engage a compensation consultant to provide
services relating to our 2009 compensation decisions. The Management and
Compensation Committee considered the Oilfield Manufacturing and Services
Industry Survey (OFMS) report, along with other compensation data available at
www.salary.com in assessing market compensation data and evaluating our
compensation program for 2009, including the compensation of our Senior
Management. The OFMS report includes data on salaries, bonuses, and long-term
equity incentives that is obtained from participating companies. The following
companies, which we considered our peer group for the purpose of evaluating our
compensation programs during 2009, were respondents to the 2008
OFMS:
Allis-Chalmers
Energy Inc.
|
Atwood
Oceanics, Inc.
|
Basic Energy
Services
|
BJ Services
Company
|
Bolt
Technology Corp.
|
Bristow Group
Inc.
|
Bronco
Drilling Company Inc.
|
Cal Dive
International Inc.
|
Dawson
Geophysical Company
|
Diamond
Offshore Drilling Inc.
|
Dresser-Rand
Group Inc.
|
Dril-Quip
Inc.
|
ENGlobal
Corp.
|
ENSCO
International Inc.
|
Exterran
Holdings Inc.
|
FMC
Technologies
|
Gardner
Denver Inc.
|
Global
Industries Ltd.
|
Grey Wolf
Inc.
|
Gulf Island
Fabrication Inc.
|
Halliburton
Co.
|
Helix Energy
Solutions Group Inc.
|
Hercules
Offshore Inc.
|
Hornbeck
Offshore Services Inc.
|
Lufkin
Industries Inc.
|
McDermott
International Inc.
|
Mitcham
Industries Inc.
|
Nabors
Industries
|
Noble
Corp.
|
Oceaneering
International Inc.
|
Parker
Drilling
|
Particle
Drilling Technologies, Inc.
|
Patterson-UTI
Energy Inc.
|
Petroleum
Development Corp.
|
RPC
Inc.
|
Schlumberger
Limited
|
Seacor
Holdings, Inc.
|
Smith
International Inc.
|
Superior Well
Services Inc.
|
T-3 Energy
Services
|
Tidewater
Inc.
|
Transocean
Inc.
|
Union
Drilling, Inc.
|
Unit
Corporation
|
Weatherford
International Ltd.
|
W-H Energy
Services Inc.
|
|
|
Although the Management and
Compensation Committee did not utilize a compensation consultant relating to our
2009 compensation decisions, in February 2009, the Management and Compensation
Committee retained the services of Longnecker & Associates, an executive
compensation consulting firm, to provide information and recommendations related
to our then outstanding option awards. Following its review of the Longnecker
& Associates data and recommendations, the Management and Compensation
Committee determined that no action should be taken with regard to such awards
at that time.
Role
of CEO. Our CEO makes recommendations to the Management and Compensation
Committee with regard to salary adjustments and the annual and long-term
incentives available to our Senior Management, excluding himself. Based upon his
judgment and experience, taking into consideration available industry-based
compensation surveys and other data, including data provided by the Management
and Compensation Committee’s consultant, if one is retained for that year, our
CEO annually reviews with the Management and Compensation Committee specific
compensation recommendations for Senior Management. In preparation for these
evaluations, our CEO compiles a year-end compensation report that includes
industry-based compensation data,
data generated by
any compensation consultant engaged by the Management and Compensation
Committee, and our CEO’s personal evaluation of the performance of Senior
Management.
In
its review of our CEO’s compensation report and its consideration of whether
changes in compensation recommended therein for the 2009 fiscal year were in
line with our overall compensation philosophy, current competitive market
conditions, and current economic conditions, the Management and Compensation
Committee considered the CEO’s comments in addition to its own evaluations of
Senior Management. The Management and Compensation Committee reviewed our CEO’s
compensation report among themselves and with our CEO and approved prospective
changes in compensation for Senior Management other than our CEO. The Management
and Compensation Committee, in executive session, establishes the compensation
for our CEO. The Management and Compensation Committee generally gives our CEO
discretion as to when prospective changes in base salary for Senior Management
are made effective during the following year.
In
addition to the 2008 year-end recommendations made by the CEO with respect to
the compensation of our Senior Management for fiscal year 2009, in November
2009, the CEO recommended that the Management and Compensation Committee rescind
the wage and salary reductions that had been in effect since February 2009. The
wage and salary reductions are further discussed in “Salary”
below.
Timing
of Compensation Decisions. Our CEO typically distributes his year-end
compensation report and specific compensation recommendations to the Management
and Compensation Committee, as well as the entire Board of Directors, prior to
the December board and committee meetings. The Management and Compensation
Committee reviews the CEO’s compensation report, information and recommendations
provided by its compensation consultant, if any for that year, and such other
information it considers relevant, and typically approves prospective changes in
compensation for Senior Management that may be implemented in the following year
at the CEO’s discretion. Also at its December meeting, the Management and
Compensation Committee typically reviews a preliminary estimate of the aggregate
amount of the discretionary incentive compensation bonuses that may be awarded
based on current year performance. The actual amount of the discretionary
incentive compensation available for annual awards is finalized, individually
allocated, and approved by the Management and Compensation Committee at a
meeting early the following year prior to payment, based upon the determination
of our full year financial results. Finally, at its December meeting, the
Management and Compensation Committee reviews succession plans for our CEO and
other members of Senior Management, as well as total headcount and aggregate
compensation costs.
Compensation
Elements
We strongly believe that Senior
Management should be compensated with a total package that includes, at a
minimum, the following three elements: salary, performance-based cash
incentives, and equity incentives. A significant portion of the total
prospective compensation paid to each member of Senior Management should be tied
to measurable financial and operational objectives. These objectives, whether on
a divisional or company-wide basis, may include absolute performance and
performance relative to a peer group. During periods when performance meets or
exceeds established objectives, Senior Management should be paid at or above
targeted levels, respectively. When our performance does not meet key
objectives, incentive award payments, if any, should be less than such targeted
levels. The Management and Compensation Committee seeks to structure a balance
between achieving strong short-term annual results and ensuring long-term
viability and success. To reinforce the importance of balancing these
perspectives, we endeavor to provide each member of Senior Management with both
annual and long-term incentives. Currently, a majority of short-term incentives
are in the form of discretionary cash bonuses that are based on both objective
performance criteria and subjective criteria and all long-
term incentives are
in the form of equity awards. While the mix of salary, annual cash incentive
bonuses, and long-term incentives earned by Senior Management can vary from
year-to-year depending on individual performance and on our overall performance,
the Management and Compensation Committee believes that the potential future
value of long-term incentives, which is heavily contingent on our long-term
health and success, should constitute a significant portion of total
compensation in any one year.
Salary.
The Management and Compensation Committee reviews relevant survey data and
information and analysis provided by its consultant, if one is retained for that
year, to ensure that our salary program is competitive. We believe that a
competitive salary program is an important factor in our ability to attract and
retain Senior Management, and we generally target a median range for our base
salaries relative to the survey data. Benchmarking is also important, and we do
consider the compensation offered by our peer companies in establishing a target
level of base salary. The Management and Compensation Committee reviews the
salaries of all members of Senior Management at least annually. Salaries may be
adjusted for performance, which may include individual, business unit and/or
company-wide performance, expansion of duties and responsibilities, and changes
in market salary levels. In considering salary adjustments, the Management and
Compensation Committee will give weight to the foregoing factors with particular
emphasis on corporate performance goals, our CEO’s analysis of the individual’s
performance, and our CEO’s specific compensation recommendations. However, the
Management and Compensation Committee does not rely on formulas and considers
all factors when evaluating salary adjustments.
In December 2008, the Management and
Compensation Committee approved proposed salary increases for certain of our
Senior Management and NEOs, to be made effective during 2009 at the discretion
of our CEO. However, subsequent to the December 2008 review, in February 2009,
the Board of Directors, as part of our efforts to reduce costs and expenses,
approved wage and salary reductions of 5% to 20% of base annual compensation
rates. As part of this general wage and salary reduction, the Management and
Compensation Committee also approved salary reductions for our Senior
Management, including our then CEO, Mr. Hertel, and other NEOs. The salary
reductions were effective as of the pay period beginning on February 14,
2009.
Immediately following our annual
meeting of stockholders on May 5, 2009, Mr. Hertel resigned from, and
Mr. Brightman was appointed by the Board of Directors to, the positions of
President and Chief Executive Officer. On May 19, 2009, the Management and
Compensation Committee approved an increase, effective as of May 9, 2009, of Mr.
Brightman’s annual base salary from $410,000 to $500,000, subject to the 20%
salary reduction that had been in effect for Mr. Hertel, our prior
CEO.
In
November 2009, our CEO recommended that the Management and Compensation
Committee rescind the wage and salary reduction program that had been in effect
since February 2009. In its consideration of the CEO’s recommendation, the
Management and Compensation Committee evaluated a number of relevant factors,
including our forecasted 2009 year-end results and recommendations from a
compensation consultant engaged by the Management and Compensation Committee for
our 2010 compensation analysis. Following this review, the Management and
Compensation Committee approved the reinstatement of our Senior Managements’
pre-reduction salaries, and the reinstatement of salaries and wages for other
employees. The following table sets forth the annual base salaries that were
effective for our NEOs as of January 2, 2010:
Name
|
|
Base
Salary
|
|
Stuart M.
Brightman
|
|
$ |
500,000 |
|
Joseph M.
Abell III
|
|
$ |
285,000 |
|
Edwin H.
Goldman
|
|
$ |
325,000 |
|
Geoffrey M.
Hertel
|
|
$ |
400,000 |
|
Philip N.
Longorio
|
|
$ |
325,000 |
|
Bass C.
Wallace, Jr.
|
|
$ |
260,000 |
|
In
connection with the February 2009 salary reductions, we adopted a claw-back
program that was designed to give our employees as of December 31, 2009,
including Messrs. Brightman, Abell, Goldman, Longorio, and Wallace, but
excluding Mr. Hertel, an opportunity to be reimbursed 30% to 100% of the amount
by which their respective wages and salaries were reduced, depending on the
level of our long-term debt as of December 31, 2009 and, in certain
circumstances, the amount of our per share earnings in 2009. The interpretation
and implementation of the claw-back program was solely within the Board of
Directors’ discretion. On February 17, 2010, the Board of Directors approved a
50% reimbursement for all of our employees as of December 31, 2009 who had
participated in the wage and salary reduction program, including all of our NEOs
other than Mr. Hertel, pursuant to the terms of the claw-back program. We
have entered into a transition agreement with Mr. Hertel relating to his
continued employment by us, and under the terms of this agreement, Mr. Hertel’s
salary following the May 5, 2009 transition was not subject to the wage and
salary reduction, nor was he eligible for any reimbursement under the claw-back
program.
Discretionary
Performance-Based Cash Incentive (Bonus). We have maintained a
discretionary performance-based cash bonus program which provides each member of
Senior Management the opportunity to earn a cash bonus based upon levels of
performance versus objective performance criteria, including consolidated or
divisional pre-tax profits, other financial metrics and safety statistics, and
subjective individual criteria. In addition, the performance criteria applicable
to members of Senior Management with operational responsibilities may include
performance criteria for their respective divisions and/or units, financial
metrics applicable to certain capital projects or acquisitions, and safety
criteria. For 2009, the performance objectives for Messrs. Brightman, Abell,
Hertel and Wallace included the attainment of budgeted per-share earnings on a
consolidated basis and the achievement of personal performance goals. For
Messrs. Goldman and Longorio, performance objectives for 2009 included, for the
operations within their respective scopes of responsibility, attainment of
budgeted levels of pre-tax profitability and improved safety performance, and
the achievement of personal performance goals. The discretionary
performance-based cash bonus program has been used to provide incentive
compensation relating to short-term (annual) performance. Although we do
establish specific performance objectives, the amount of the cash incentive
bonus ultimately received by a member of our Senior Management is subject to the
discretion of the Management and Compensation Committee. If our performance
meets, but does not exceed, our targeted performance objectives and the
subjective criteria are satisfied, a discretionary cash incentive bonus may be
paid at the target level. If our performance significantly exceeds targeted
performance objectives, then the discretionary cash incentive bonus may exceed
the target level.
The target
percentages in the table below represent the 2009 annual cash incentive bonus
opportunities for our NEOs if the annual performance objectives and/or
subjective criteria are achieved. Although specific incentive bonus targets for
each member of Senior Management have generally been set at the beginning of the
year, the amount of bonus ultimately payable is discretionary and is heavily
influenced by the recommendations of our CEO and the evaluation of the
Management and Compensation Committee. For significant achievement, the specific
target award opportunity, including those set forth in the table below, may be
exceeded.
The following table
sets forth the target award opportunities established as a percentage of base
salary for the CEO and other NEOs for the 2009 discretionary performance-based
cash bonus program:
Target
Incentive Opportunities as a
|
|
Percentage
of Base Salary
|
|
Stuart M.
Brightman
|
|
|
50 |
% |
Joseph M.
Abell III
|
|
|
32 |
% |
Edwin H.
Goldman
|
|
|
32 |
% |
Geoffrey M.
Hertel
|
|
|
50 |
% |
Philip N.
Longorio
|
|
|
32 |
% |
Bass C.
Wallace, Jr.
|
|
|
32 |
% |
Although our 2009
performance was favorable compared to our budgeted expectations, the Management
and Compensation Committee acknowledged that part of our success was
attributable to the record performance of our Offshore Services segment, and the
collection of approximately $40.0 million in settlement of our insurance
litigation regarding costs associated with damages sustained during Hurricanes
Rita and Katrina. The Management and Compensation Committee recognized that our
successful efforts to reduce long-term debt and increase cash flow during 2009
were promulgated and led by our Senior Management as a group, and specifically
by Mr. Brightman. The Management and Compensation Committee noted that Mr.
Brightman’s leadership of the organization following his transition into the
President and CEO positions had been exemplary, particularly given the difficult
market conditions experienced during 2009. In addition, prior to our hiring of
Mr. Goldman in August 2008, Mr. Brightman was responsible for the day-to-day
operations of our Offshore Services segment and the Management and Compensation
Committee determined that Mr. Brightman’s prior management had laid the
groundwork for the Offshore Services segment’s record 2009 performance. The
Management and Compensation Committee also considered and discussed the
individual contributions of Messrs. Abell, Hertel and Wallace to our 2009
results, and made subjective assessments of each individual’s effectiveness in
advancing our long-term strategies. Based on these deliberations, the Management
and Compensation Committee approved a discretionary payment of 96% of Mr.
Brightman’s target award opportunity, and 75% of the target award opportunities
for Messrs. Abell, Hertel and Wallace.
In
its review of Mr. Goldman’s 2009 performance, the Management and Compensation
Committee considered the record profitability of our Offshore Services segment,
which is led by Mr. Goldman, and the improved safety statistics reported by a
majority of the business units within the Offshore Services segment. The
Management and Compensation Committee considered and discussed Mr. Goldman’s
individual contribution to these results, and made a subjective assessment of
his effectiveness in advancing our long-term strategies. Based on these
deliberations, the Management and Compensation Committee concluded that Mr.
Goldman’s leadership of the Offshore Services segment was a critical factor in
its success during 2009, and approved a discretionary payment of approximately
240% of Mr. Goldman’s target award opportunity.
In its review of Mr. Longorio’s 2009
performance, the Management and Compensation Committee considered the difficult
market environment for many of the businesses under his leadership.
Specifically, demand for the services and products provided by these businesses
was adversely affected by decreased levels of oil and gas drilling activity and
lower average commodity prices during much of 2009 compared to 2008. The
Management and Compensation Committee also noted that most of the businesses
within Mr. Longorio’s oversight reported improved safety statistics. The
Management and Compensation Committee considered and discussed Mr. Longorio’s
individual contribution to the improved safety results, and made a subjective
assessment of his effectiveness in advancing our long-term strategies. Based on
these deliberations, the
Management and
Compensation Committee concluded that Mr. Longorio’s contributions to improved
safety results during 2009 merited recognition, and approved a discretionary
payment of 30% of Mr. Longorio’s target award opportunity.
Equity
Incentive Awards. Historically, equity incentives, predominantly awards
of stock options and restricted stock, have comprised a significant portion of
our Senior Management’s total compensation package. In establishing equity
incentive opportunities for Senior Management, the Management and Compensation
Committee considers peer group compensation practices and past individual
performance. In general, equity incentives have been awarded on the same date to
each member of Senior Management. In an effort to formalize this
practice, the Management and Compensation Committee adopted Procedures for
Grants of Awards Under the TETRA Technologies, Inc. Equity Compensation Plans
(the “Grant Procedures”) for annual and other awards to be made under the plans.
With respect to annual awards to employees, under the Grant Procedures, the
Management and Compensation Committee determines the number of shares available
for awards after consultation with our CEO. Our CEO then makes a recommendation
to the Management and Compensation Committee as to the number and type of awards
for members of Senior Management. The Management and Compensation Committee
considers such recommendations and, after considering such other factors and
information as it deems appropriate, the committee makes any adjustments it
feels appropriate. The Grant Procedures generally provide that the annual equity
awards will be approved at a meeting of the Management and Compensation
Committee held in conjunction with our annual meeting of stockholders. To avoid
timing of equity-based awards ahead of the release of our quarterly earnings,
the annual awards to our Senior Management under the Grant Procedures generally
have a grant date of May 20th.
With respect to newly hired employees, the Grant Procedures provide that the
awards will be made on a monthly basis. The Grant Procedures provide that the
Management and Compensation Committee may refrain from or delay regularly
scheduled awards if it or Senior Management are aware of any material non-public
information.
With respect to our
equity incentives, the Management and Compensation Committee seeks to strike a
balance between achieving strong short-term annual results and ensuring strong
long-term success. The equity incentive portion of the compensation package
primarily addresses our longer-term success. Stock options and restricted stock
awards are the two forms of equity compensation which have historically been
utilized, although additional forms of equity compensation are authorized under
our equity plans. Both of these forms of equity incentives are geared toward
longer-term performance, as both generally, although not always, require a
period of vesting, and their values are materially affected by share price
appreciation. As our stockholder value increases, so too does the value of the
equity incentive compensation increase to our Senior Management. We believe that
tying a portion of our Senior Management’s compensation directly to our
stockholders’ returns is an important aspect of our total compensation
plan.
While our Grant
Procedures provide that annual equity awards are generally approved at a meeting
of our Management and Compensation Committee held in conjunction with our annual
meeting, the Grant Procedures may be amended or modified by the Management and
Compensation Committee. In February 2009, in order to address concerns related
to the retention of employees created by the decline in the market price of our
common stock, the Management and Compensation Committee elected to modify the
date of the 2009 annual equity award. At that time, more than 85% of the stock
options granted to our employees in prior years were significantly
out-of-the-money, leaving the holders of those options without any effective
long-term incentive. On February 11, 2009, the Management and Compensation
Committee approved the award of stock options to a broad-base of employees and
to certain members of Senior Management, to be effective as of February 12,
2009. Such awards, granted at 100% of the market price on the effective grant
date, vest over a period of three years following the grant date. Messrs.
Brightman, Abell, Goldman, Hertel, Longorio and Wallace each received an award
of stock options in conjunction with this initiative.
Tax
and Accounting Implications of Executive Compensation
Section 162(m) of the Internal
Revenue Code of 1986, as amended (the “Code”), places a limit of $1,000,000 on
the amount of compensation that may be deducted by the Company in a year with
respect to the CEO and other NEOs, unless the compensation is performance-based
compensation (as described in Section 162(m) and the restated regulations), as
well as pursuant to a plan approved by the our stockholders. We have qualified
certain equity compensation paid to Senior Management for deductibility under
Section 162(m). We may from time to time pay compensation to our Senior
Management that may not be deductible, including discretionary bonuses or other
types of compensation outside of our plans. Although the Management and
Compensation Committee has generally attempted to structure executive
compensation so as to preserve deductibility, it also believes that there are
circumstances where our interests are best served by maintaining flexibility in
the way compensation is provided, even if it might result in the
non-deductibility of certain compensation under the Code.
On January 1, 2006, we began
accounting for stock-based compensation in accordance with SFAS No. 123(R),
now codified as FASB Codification Topic 718.
Retirement,
Health, and Welfare Benefits
We offer a variety of health and
welfare benefits to all eligible employees. Members of Senior Management are
generally eligible for the same benefit programs on the same basis as the rest
of our broad-based employees. Our health and welfare programs are intended to
protect employees against catastrophic loss and to encourage a healthy
lifestyle. These health and welfare programs include medical, wellness,
pharmacy, dental, life insurance, and accidental death and
disability.
401(k)
Plan. We offer a 401(k) program that is intended to supplement a
participant’s personal savings and social security. Under our 401(k) Retirement
Plan (the “401(k) Plan”), eligible employees may contribute on a pretax basis up
to 70% of their compensation, subject to an annual maximum established under the
Code. Prior to February 14, 2009, we made a matching contribution under the
401(k) Plan equal to 50% of the first 6% of a participant’s annual compensation
that is contributed to the 401(k) Plan. On February 14, 2009, the matching
contribution was suspended in conjunction with wage and salary reductions
adopted on that date. Members of Senior Management participate in the 401(k)
Plan on the same basis as other employees, and our matching contributions to all
members of Senior Management were suspended on February 14, 2009. In November
2009, the Board of Directors approved our reinstatement of matching
contributions under the 401(k) Plan, effective as of December 26, 2009 for
non-exempt employees, and as of January 2, 2010 for exempt employees. As of
December 31, 2009, approximately 95% of all eligible employees were
participating in the 401(k) Plan. All employees (other than nonresident aliens)
who have reached the age of eighteen and have completed six months of service
with us are eligible to participate in the 401(k) Plan.
Nonqualified
Deferred Compensation Plan. We provide our Senior Management, directors,
and certain other key employees with the opportunity to participate in the
Executive Nonqualified Excess Plan, an unfunded, deferred compensation program.
There were thirty-one participants in the program at December 31, 2009. Under
the program, participants may defer a specified portion of their annual total
cash compensation, including salary and performance-based cash incentive,
subject to certain established minimums. The amounts deferred may increase or
decrease depending on the participant’s deemed investment elections from among
hypothetical investment election options. Deferral contributions and earnings
credited to such contributions are 100% vested and may be distributed in cash at
a time selected by the participant and irrevocably designated on the
participant’s deferral form. In-service distributions may not be withdrawn until
two years following the participant’s initial enrollment. Notwithstanding the
participant’s deferral election,
the participant
will receive distribution of his deferral account if the participant becomes
disabled or dies, or upon a change in control.
Perquisites
We have a general policy under which
we allow few perquisites (“perks”) and they are generally de minimis. Perks are
not a material component of compensation. On rare occasions, the Chief Executive
Officer allows exceptions to this rule for NEOs, excluding the CEO. Any
individual perks exceeding $2,500 for the CEO must be authorized by the
Management and Compensation Committee in advance. In general, NEOs do not
receive allowances for the private use of country clubs, automobile expenses,
airline and travel costs other than those costs allowed for all employees,
tickets to sporting events and entertainment events, hunting and fishing camp
costs, home security, and meals. During 2009, neither Mr. Hertel nor Mr.
Brightman during their respective terms as CEO received an allowance for any of
the above.
Severance
Plan and Termination Payments
We currently do not have a defined
severance plan for, or any agreement with, any NEO that would require us to make
any termination payments, with the sole exception of our transition agreement
with Mr. Hertel, which is further discussed in “Employment Agreements,”
below.
Employment
Agreements
We
have previously entered into employment agreements with each of the Named
Executive Officers that are substantially identical to the form of agreement
executed by all of our employees. Each agreement evidences the at-will nature of
employment and does not guarantee the term of employment, which is entirely at
the discretion of the Board of Directors, or otherwise set forth the salary and
other compensation of the NEOs, which is established in accordance with the
procedures described above. In connection with Mr. Hertel’s resignation
from his positions as President and Chief Executive Officer in 2009, we entered
into a Transition Agreement with Mr. Hertel setting forth the terms of his
continued employment with us. The Transition Agreement, which was effective as
of May 5, 2009, extends Mr. Hertel’s employment with us from May 5, 2009 through
January 5, 2012, subject to earlier termination in accordance with the terms of
the Transition Agreement.
Under the terms of
the Transition Agreement, Mr. Hertel is entitled to receive a monthly base
salary of $33,333, and he is eligible to participate in all incentive, stock
option, savings and retirement plans, practices, policies and programs generally
available to our executive officers. For each calendar year ending during the
employment period, Mr. Hertel will be eligible for an annual bonus on the same
basis as our executive officers under our then current discretionary
performance-based cash bonus program. Target payout of the annual bonus is
$200,000 for each of the 2009 and 2010 calendar years, and $83,200 for the 2011
calendar year. Payout of the annual bonus is subject to Mr. Hertel’s continued
employment during the period to which each bonus relates.
It is contemplated that Mr. Hertel’s
duties as an employee will include assisting with the completion of an initial
public offering by Compressco Partners, L.P. Under the Transition Agreement, Mr.
Hertel is eligible for an additional cash bonus of between $250,000 and $900,000
if the offering is closed on or before June 30, 2010, based on the market
capitalization of Compressco Partners after the closing of the offering. Mr.
Hertel is also eligible to receive bonuses based on the successful transitions
of Mr. Brightman to the positions of President and Chief Executive Officer and
Edwin H. Goldman to the position of Senior Vice President. Subject to the
complete discretion of the Board of Directors based on its subjective evaluation
of the success of the transition over two performance periods, Mr. Hertel may be
eligible to receive cash bonuses of
up to $200,000 in
the aggregate for the period from May 5, 2009 until May 4, 2010, and $200,000 in
the aggregate for the period from May 5, 2010 until May 4, 2011. Payout of the
transition bonuses is subject to the continued employment of Messrs. Brightman
and Goldman, respectively, during the period to which each bonus relates. In the
event a change in control occurs on or before May 4, 2010 and
Mr. Brightman and/or Mr. Goldman remain employed by us immediately
prior to the change of control, the payment of all or a portion of the initial
transition bonus will be accelerated and payable within seven days following the
change in control.
Mr. Hertel’s
employment will automatically terminate upon his death and may be terminated by
us in the event of his “disability” (as defined in the Transition Agreement)
during the Employment Period. In addition, Mr. Hertel may terminate his
employment with us for “Good Reason,” as specified in the Transition Agreement,
or for any other reason upon 30 days’ advance notice. The Transition Agreement
defines “Good Reason” as (i) any failure by us to comply with the
compensation provisions of the Transition Agreement other than an isolated,
insubstantial and inadvertent failure; (ii) our requiring Mr. Hertel
to be based at any office or location other than our headquarters in The
Woodlands, Texas; (iii) any purported termination by us of
Mr. Hertel’s employment other than as expressly permitted by the Transition
Agreement; or (iv) any failure on our part to require the Transition
Agreement to be assumed by any successor entity. The Transition Agreement also
provides that Mr. Hertel’s employment may be terminated by us for “Cause,”
as specified in the Transition Agreement. “Cause” is defined as (i) the
willful and continued failure of Mr. Hertel to perform substantially his
duties and obligations under the Transition Agreement (for reasons other than
injury, illness or incapacity) after a written demand for such performance is
provided by us; (ii) Mr. Hertel’s conviction or the entry of a plea of
guilty or nolo contendre to a misdemeanor involving moral turpitude or a felony;
(iii) fraud, theft, embezzlement or a similar misappropriation of our funds
or property or those of our affiliates; or (iv) the willful engagement in
illegal conduct or gross misconduct which is materially injurious to us or our
affiliates.
If
Mr. Hertel’s employment terminates as a result of his death, if we
terminate Mr. Hertel’s employment as a result of his disability or other
than for Cause, or if Mr. Hertel terminates his employment for “Good
Reason,” then (i) we will continue to pay his base salary through the end
of the employment period; (ii) we will pay an amount equal to any bonus
that would have been payable as a result of the initial public offering of
Compressco Partners as if his employment had not been terminated; (iii) we
will pay an amount equal to any transition bonus that would have been payable as
if Mr. Hertel’s employment had not been terminated;
(iv) Mr. Hertel or his heirs will continue to be eligible to
participate in welfare benefit plans; and (v) we will pay any business
expenses which have been incurred through the date of termination in accordance
with the our policies. If at any time following the termination of
Mr. Hertel’s employment and during the noncompetition period thereafter he
breaches any of the nondisclosure, noncompetition and nonsolicitation provisions
provided for under the Transition Agreement, we will no longer be obligated to
make the foregoing payments. If we terminate Mr. Hertel’s employment for
“Cause,” Mr. Hertel will only be entitled to receive payment of his base
salary through the date of termination and any deferred compensation or other
employee benefits which he is otherwise entitled to receive. If Mr. Hertel
terminates his employment for any reason other than “Good Reason,”
Mr. Hertel will be entitled to receive (i) his base salary through the
date of termination; (ii) the payment of any business expenses incurred but
not reimbursed through the date of termination; and (iii) the payment of
any deferred compensation or other employee benefits which he is entitled to
receive.
The Transition
Agreement includes nondisclosure, noncompetition, and nonsolicitation provisions
binding on Mr. Hertel during the employment period and for a period of three
years after his separation of service under the Transition
Agreement.
Change
in Control Agreements
Except for the provisions contained
in Mr. Hertel’s Transition Agreement, we do not have any change in control
agreements with any NEO. Our Amended and Restated 2006 Equity Incentive
Compensation Plan and Amended and Restated 2007 Equity Incentive Compensation
Plan do, however, address change in control with respect to awards under the
plans, including stock options and restricted stock agreements. In relation to
options and restricted stock, the Management and Compensation Committee, at its
sole discretion may, in the event of a change in control, accelerate vesting
and/or the time at which outstanding options may be exercised under the various
option agreements. Upon a change in control, the Management and Compensation
Committee may also eliminate restrictions relating to restricted stock.
Compensation deferred under our Executive Nonqualified Excess Plan will become
payable to plan participants if the plan is terminated within twelve months of a
change in control.
Indemnification
Agreements
Each of our current directors and
our NEOs has executed an indemnification agreement which provides that we will
indemnify these directors and officers to the fullest extent permitted by our
Restated Certificate of Incorporation, Amended and Restated Bylaws and
applicable law. The indemnification agreement also provides that our directors
and officers will be entitled to the advancement of fees as permitted by
applicable law, and sets out the procedures required for determining entitlement
to and obtaining indemnification and expense advancement. In addition, our
charter documents provide that each of our directors and officers and any person
serving at our request as a director or officer of another corporation,
partnership, joint venture, trust, or other enterprise is indemnified to the
fullest extent permitted by law in connection with any threatened, pending, or
completed action, suit, or proceeding (including civil, criminal,
administrative, or investigative proceedings) arising out of or in connection
with his services to us or to another corporation, partnership, joint venture,
trust, or other enterprise, at our request. We purchase and maintain insurance
on behalf of any person who is a director or officer of the aforementioned
corporation, partnership, joint venture, trust, or other enterprise, against any
liability asserted against him and incurred by him in any such capacity, or
arising out of his status as an officer or director.
Stock
Ownership Guidelines
Our Board of Directors has adopted
stock ownership guidelines for our directors and executive officers. The stock
ownership guidelines are intended to align the interests of our directors and
executive officers with the interests of our stockholders. Under these
guidelines, our executive officers must hold shares of our common stock equal to
a multiple, based upon position, of their base salary. The multiples are as
follows: Chief Executive Officer, three-times base salary; Chief Financial
Officer and Chief Operating Officer, two-times base salary; and, Senior Vice
Presidents and Vice Presidents, one-time base salary. Executive
officers as of February 21, 2008 have until February 21, 2013, to be
in compliance with the guidelines, and executive officers appointed after
February 21, 2008, will have five years following attainment of executive
officer status to be in compliance.
Changes
for Fiscal Year 2010
In September 2009, our Management
and Compensation Committee retained the services of Stone Partners, Inc., an
independent human resource consulting firm, to provide an analysis of our
executive compensation program, including appropriate peer comparisons, evolving
compensation trends and regulatory initiatives, and the impact of the turmoil in
the financial markets and world economy on executive compensation plan design.
Stone Partners utilized a peer group of fifteen companies, the Stone Partners
Oilfield Services and Manufacturing Industry Executive
Compensation Survey
2009, the Mercer Energy and Executive Compensation Surveys 2009, and the Watson
Wyatt Top Management Compensation Survey 2009 to benchmark base salary, annual
cash incentives, and long-term incentives paid to our Senior Management against
the 25th, 50th and 75th percentiles of the averaged peer group and survey data.
Stone Partners provided this data and their analysis to our Management and
Compensation Committee and certain members of Senior Management for their
respective review and consideration. While certain members of Senior Management
received Stone Partners’ report and data, the Management and Compensation
Committee retained and exercised control and authority over Stone Partners.
Following its review of the report and data provided by Stone Partners, the
Management and Compensation Committee further engaged Stone Partners to provide
specific recommendations related to modifying the structures of our
discretionary performance-based annual cash incentive program and our long-term
equity incentive program. The Management and Compensation Committee has
implemented certain of the recommended modifications in an effort to bring our
total compensation package into closer alignment with the market
median.
Salary.
As discussed under “Compensation Elements” above, in November 2009 our
Management and Compensation Committee, based in part upon the recommendations of
Stone Partners, restored the individual wages and salaries of our employees,
including Senior Management, to their levels prior to the reduction which was
implemented in February 2009. With the exception of proposed salary increases
related to expanded job responsibilities for two members of Senior Management
who are not NEOs, the Management and Compensation Committee did not review
prospective changes in base salaries for fiscal year 2010 at the December 2009
meeting. It is anticipated that our CEO will recommend for the Management and
Compensation Committee’s review and consideration any other changes in our
Senior Management’s base salary levels on an as-needed basis during
2010.
Cash
Incentive Compensation Plan. As part of its engagement by our Management
and Compensation Committee, Stone Partners submitted recommendations to assist
us in developing a cash incentive compensation plan that would further our
compensation philosophy, emphasize pay-for-performance, and provide competitive
compensation opportunities. As we have previously reported, in March 2010 the
Management and Compensation Committee adopted a Cash Incentive Compensation Plan
that provides for both annual and long-term cash incentive opportunities to our
officers, including Senior Management, managers, other key employees and
consultants beginning in 2010.
While the amount of each award
payment to members of Senior Management under the plan will be subject to the
discretion of the Management and Compensation Committee, the plan provides for
award opportunities based upon financial and nonfinancial performance goals as
well as personal performance goals. For each annual incentive award, a
threshold, target and stretch performance goal will be established for each
applicable performance measure and the amount of the award payment that may be
received will be based upon the level of achievement of such goals, subject to
the discretion of the Management and Compensation Committee. In addition,
recipients of annual incentive awards will have the opportunity to participate
in an over achievement bonus pool that may be established under the plan. For
each long-term incentive award, a threshold, target, stretch and over
achievement performance goal will be established for each applicable performance
measure and the amount of the award payment that may be received will be based
upon the level of achievement of such goals, subject to the discretion of the
Management and Compensation Committee.
The financial and nonfinancial
performance measures for Senior Management may be based upon the performance
criteria described in the plan or such other measures as determined by the
Management and Compensation Committee. For the 2010 plan year, the performance
measures for the annual incentive awards will be: (i) our consolidated
diluted net income per common share; (ii) health, safety and environmental
measures; (iii) divisional profit before taxes;
(iv) profit
before taxes for specified business and geographical units; (v) profit
before tax margin for Compressco, Inc.; and (vi) the net number of
compressor units placed into service by Compressco, Inc. The Management and
Compensation Committee has assigned weightings of 60% on consolidated diluted
net income per common share, 10% on health, safety and environmental measures,
and 30% on personal objectives for Messrs. Brightman, Abell, Hertel and Wallace.
For Messrs. Goldman and Longorio, the Committee assigned weightings of 10% on
the consolidated financial performance of the company, 20% on health, safety and
environmental measures, 50% on the pre-tax profitability of their respective
business operations, and 20% on personal objectives.
The following table sets forth the
2010 annual incentive award opportunities established by the Management and
Compensation Committee as a percentage of base salary for our CEO and other NEOs
under the Cash Incentive Compensation Plan:
|
|
Threshold
|
|
|
Target
|
|
|
Stretch
|
|
Stuart M.
Brightman
|
|
|
15 |
% |
|
|
75 |
% |
|
|
120 |
% |
Joseph M.
Abell III
|
|
|
11 |
% |
|
|
55 |
% |
|
|
88 |
% |
Edwin H.
Goldman
|
|
|
11 |
% |
|
|
55 |
% |
|
|
88 |
% |
Geoffrey M.
Hertel(1)
|
|
|
11 |
% |
|
|
50 |
% |
|
|
88 |
% |
Philip N.
Longorio
|
|
|
11 |
% |
|
|
55 |
% |
|
|
88 |
% |
Bass C.
Wallace, Jr.
|
|
|
11 |
% |
|
|
55 |
% |
|
|
88 |
% |
(1) |
Pursuant to the terms of
his transition agreement, Mr. Hertel’s 2010 annual incentive target will
be 50% of his annual base salary, and payment will be determined on the
same basis as other members of Senior
Management. |
As
of the date of this proxy statement, the Management and Compensation Committee
has not established the performance measures for the 2010 long-term incentive
awards or the threshold, target, stretch and over achievement opportunities
under such awards for Senior Management. It is anticipated that these
performance measures and award opportunities will be established on or before
May 31, 2010, as required by the Cash Incentive Compensation
Plan.
Equity
Incentive Awards. As part of their review and analysis of our long-term
incentive compensation programs, Stone Partners made recommendations regarding
our long-term incentive compensation, including the long-term cash incentive
awards discussed above and long-term equity incentive opportunities. The
Management and Compensation Committee considered the report and data provided by
Stone Partners including the changes in the market for long-term incentives as
well as our fiscal 2009 grant levels in terms of the number of awards as well as
the targeted and expected value of those grants. The Management and Compensation
Committee has determined that a mix of stock options, restricted stock and
long-term performance based cash awards should be made to certain of our Senior
Management. The stock options and restricted stock will vest ratably over a
three-year period. The long-term cash incentives will vest at the end of a
three-year performance period based upon the level of attainment of established
performance measures. To enable these awards, we are submitting for stockholder
approval at the Annual Meeting a proposal to amend our Amended and Restated 2007
Equity Incentive Plan to increase the number of shares of our common stock that
may be issued under the plan by one million shares and to allow performance
awards under the plan to be paid in either cash or stock. If the proposed
amendments to the Amended and Restated 2007 Equity Incentive Plan are approved,
we will be in a position to make the anticipated equity-based compensation
awards to our Senior Management.
MANAGEMENT
AND COMPENSATION COMMITTEE REPORT
The Management and Compensation
Committee met three times during the year ended December 31, 2009. The
Management and Compensation Committee has reviewed and discussed the
Compensation Discussion and Analysis with management. Based upon the review and
discussions described above, the Management and Compensation Committee has
recommended to the Board of Directors that the Compensation Discussion and
Analysis be included in this proxy statement to be delivered to
stockholders.
Submitted by the Management and
Compensation Committee
of the
Board of Directors,
Kenneth E. White, Jr.,
Chairman
Tom H.
Delimitros
Kenneth P.
Mitchell
William D.
Sullivan
This report of the Management and
Compensation Committee shall not be deemed “soliciting material” or be “filed”
with the SEC subject to Regulation 14A or 14C or to the liabilities of Section
18 of the Exchange Act, except to the extent that we specifically request that
the information be treated as soliciting material or specifically incorporate it
by reference into a document filed under the Securities Act or the Exchange Act.
Further, this report will not be deemed to be incorporated by reference into any
filing under the Securities Act or the Exchange Act, except to the extent that
we specifically incorporate this information by reference.
COMPENSATION
OF EXECUTIVE OFFICERS
Summary
Compensation
The following table sets forth the
compensation earned by (i) our Chief Executive Officer (“Principal Executive
Officer”), (ii) our Chief Financial Officer (“Principal Financial Officer”),
(iii) each of our
three most highly compensated executive officers, and (iv) our former Chief
Executive Officer who served as the Principal Executive Officer for a portion of
2009 (each a “Named Executive Officer”) for the fiscal year ended December 31,
2009.
Summary
Compensation Table
Name
and Principal
|
|
|
|
|
|
|
|
|
Stock
|
|
Option
|
|
All
Other
|
|
|
|
Position
|
|
Year
|
|
Salary(1)(2)
|
|
|
Bonus
|
|
Awards(3)
|
|
Awards(3)
|
|
Compensation(4)
|
|
Total
|
|
|
|
|
|
($)
|
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stuart M.
Brightman
|
|
2009
|
|
$ |
442,353 |
(5) |
|
$ |
240,000 |
|
$ |
- |
|
$ |
204,000 |
|
$ |
6,739 |
|
$ |
893,092 |
|
President
& CEO
|
|
2008
|
|
$ |
391,538 |
(6) |
|
$ |
- |
|
$ |
- |
|
$ |
588,280 |
|
$ |
11,727 |
|
$ |
991,545 |
|
|
|
2007
|
|
$ |
356,154 |
(7) |
|
$ |
- |
|
$ |
419,700 |
|
$ |
- |
|
$ |
11,706 |
|
$ |
787,559 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joseph M.
Abell III
|
|
2009
|
|
$ |
277,053 |
|
|
$ |
68,400 |
|
$ |
- |
|
$ |
118,320 |
|
$ |
4,742 |
|
$ |
468,515 |
|
Sr. Vice
President &
|
|
2008
|
|
$ |
267,500 |
|
|
$ |
- |
|
$ |
- |
|
$ |
412,560 |
|
$ |
10,613 |
|
$ |
690,673 |
|
CFO
|
|
2007
|
|
$ |
250,000 |
(8) |
|
$ |
- |
|
$ |
279,800 |
|
$ |
- |
|
$ |
10,476 |
|
$ |
540,277 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Edwin H.
Goldman(9)
|
|
2009
|
|
$ |
315,938 |
(10) |
|
$ |
250,000 |
|
$ |
- |
|
$ |
128,520 |
|
$ |
3,782 |
|
$ |
698,239 |
|
Sr. Vice
President
|
|
2008
|
|
$ |
112,500 |
|
|
$ |
39,000 |
|
$ |
374,996 |
|
$ |
- |
|
$ |
1,359 |
|
$ |
527,855 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Philip N.
Longorio(11)
|
|
2009
|
|
$ |
315,938 |
|
|
$ |
31,200 |
|
$ |
- |
|
$ |
128,520 |
|
$ |
4,532 |
|
$ |
480,189 |
|
Sr. Vice
President
|
|
2008
|
|
$ |
273,750 |
|
|
$ |
25,350 |
|
$ |
553,868 |
|
$ |
114,600 |
|
$ |
4,268 |
|
$ |
971,836 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bass C.
Wallace, Jr.
|
|
2009
|
|
$ |
252,750 |
|
|
$ |
62,400 |
|
$ |
- |
|
$ |
114,240 |
|
$ |
4,405 |
|
$ |
433,795 |
|
General
Counsel &
|
|
2008
|
|
$ |
236,926 |
|
|
$ |
- |
|
$ |
- |
|
$ |
382,000 |
|
$ |
9,147 |
|
$ |
628,073 |
|
Corporate
Secretary
|
|
2007
|
|
$ |
220,002 |
|
|
$ |
- |
|
$ |
195,860 |
|
$ |
- |
|
$ |
8,350 |
|
$ |
424,212 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Geoffrey M.
Hertel
|
|
2009
|
|
$ |
430,769 |
|
|
$ |
150,000 |
|
$ |
- |
|
$ |
167,280 |
|
$ |
7,426 |
|
$ |
755,475 |
|
Former
President &
|
|
2008
|
|
$ |
375,000 |
|
|
$ |
- |
|
$ |
- |
|
$ |
764,000 |
|
$ |
11,560 |
|
$ |
1,150,560 |
|
CEO
|
|
2007
|
|
$ |
459,616 |
|
|
$ |
- |
|
$ |
- |
|
$ |
- |
|
$ |
12,254 |
|
$ |
471,870 |
|
(1) |
Includes the following amounts
earned during 2009 and paid in February, 2010 under the 2009 salary
reduction claw-back program: |
|
|
|
Claw-back
Amount
|
|
|
Stuart M. Brightman
|
|
$ |
39,296 |
|
|
Joseph M. Abell III
|
|
$ |
18,909 |
|
|
Edwin H. Goldman
|
|
$ |
21,563 |
|
|
Philip N. Longorio
|
|
$ |
21,563 |
|
|
Bass C. Wallace, Jr.
|
|
$ |
17,250 |
|
|
Geoffrey M. Hertel
|
|
$ |
- |
|
(2) |
Includes amounts earned but
deferred pursuant to the Executive Nonqualified Excess Plan. |
(3) |
The amounts included in the
“Stock Awards” and “Option Awards” columns reflect the aggregate grant
date fair value of awards granted during the fiscal years ended December
31, 2009, 2008, and 2007, in accordance with FASB ASC Topic 718. A
discussion of the assumptions used in valuation of stock and option awards
may be found in “Note L – Equity-Based Compensation” in the Notes to
Consolidated Financial Statements of our Annual Report on Form 10-K for
the year ended December 31, 2009, as filed with the SEC on March 1,
2010. |
(4) |
The amounts reflected represent
the employer paid portion of life, health, and disability insurance
benefits, and matching contributions under our 401(k) Retirement Plan
during a portion of 2009, and the full years 2008 and 2007. Following the
suspension of matching contributions under our 401(k) Retirement Plan as
of February 14, 2009, no additional matching contributions were
made. |
(5) |
Mr.
Brightman elected to defer $35,069 of his 2009 salary under the Executive
Nonqualified Excess Plan. |
(6) |
Mr.
Brightman elected to defer $35,238 of his 2008 salary under the Executive
Nonqualified Excess Plan. |
(7) |
Mr.
Brightman elected to defer $32,054 of his 2007 salary under the Executive
Nonqualified Excess Plan. |
(8) |
Mr. Abell
elected to defer $60,000 of his 2007 salary under the Executive
Nonqualified Excess Plan. |
(9) |
Mr.
Goldman was first employed by us on August 18, 2008; 2007 compensation
data is not applicable. |
(10) |
Mr.
Goldman elected to defer $12,938 of his 2009 salary under the Executive
Nonqualified Excess Plan. |
(11) |
Mr.
Longorio was first employed by us on February 22, 2008; 2007 compensation
data is not applicable. |
Grants
of Plan Based Awards
The following table discloses the
actual number of stock options and restricted stock awards granted during the
fiscal year ended December 31, 2009 to each Named Executive Officer, including
the grant date fair value of these awards.
Grants
of Plan Based Awards Table
|
|
|
|
Date
of
|
|
|
|
All
Other Option
|
|
Exercise
|
|
Grant
Date
|
|
|
|
|
|
Compensation
|
|
All
Other Stock
|
|
Awards:
Number
|
|
Price
|
|
Fair
Value of
|
|
|
|
|
|
Committee
|
|
Awards:
Number of
|
|
of
Securities
|
|
of
Option
|
|
Stock
and
|
|
Name
|
|
Grant
Date
|
|
Action(1)
|
|
Shares
of Stock
|
|
Underlying
Options
|
|
Awards
|
|
Option
Awards(2)
|
|
|
|
|
|
|
|
|
(#) |
|
|
(#) |
|
($/Share)
|
|
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stuart M.
Brightman
|
|
2/12/2009
|
|
2/11/2009
|
|
|
- |
|
|
100,000 |
|
$ |
3.78 |
|
$ |
204,000 |
|
Joseph M.
Abell III
|
|
2/12/2009
|
|
2/11/2009
|
|
|
- |
|
|
58,000 |
|
$ |
3.78 |
|
$ |
118,320 |
|
Edwin H.
Goldman
|
|
2/12/2009
|
|
2/11/2009
|
|
|
- |
|
|
63,000 |
|
$ |
3.78 |
|
$ |
128,520 |
|
Philip N.
Longorio
|
|
2/12/2009
|
|
2/11/2009
|
|
|
- |
|
|
63,000 |
|
$ |
3.78 |
|
$ |
128,520 |
|
Bass C.
Wallace, Jr.
|
|
2/12/2009
|
|
2/11/2009
|
|
|
- |
|
|
56,000 |
|
$ |
3.78 |
|
$ |
114,240 |
|
Geoffrey M.
Hertel
|
|
2/12/2009
|
|
2/11/2009
|
|
|
- |
|
|
82,000 |
|
$ |
3.78 |
|
$ |
167,280 |
|
(1) |
Under our grant procedures, we
may designate effective grant dates following the date of our Management
and Compensation Committee action in the event such committee action takes
place shortly before or after an earnings announcement or the release of
material non-public information. |
(2) |
The FASB ASC Topic 718 value of
the awards granted on February 12, 2009 was $2.04 per option. A discussion
of the assumptions used in valuation of stock and option awards may be
found in “Note L – Equity-Based Compensation” in the Notes to Consolidated
Financial Statements of our Annual Report on Form 10-K for the year ended
December 31, 2009, as filed with the SEC on March 1,
2010. |
Outstanding
Equity Awards at Fiscal Year End
The following table shows
outstanding stock option awards classified as exercisable and unexercisable as
of December 31, 2009 for each Named Executive Officer. The table also discloses
the number and value of unvested restricted stock awards as of December 31,
2009, assuming a market value of $11.08 per share (the closing price of our
common stock on December 31, 2009).
Outstanding
Equity Awards at Fiscal Year End Table
|
|
Option
Awards
|
|
Stock
Awards
|
|
|
|
Number
of Securities
|
|
|
|
|
|
Number
of
|
|
|
Market
Value
|
|
|
|
Underlying
Unexercised
|
|
|
|
|
|
Shares
of
|
|
|
of
Shares of
|
|
|
|
Options
|
|
Option
|
|
Option
|
|
Stock
|
|
|
Stock
|
|
|
|
|
|
Exercise
|
|
Expiration
|
|
that
Have
|
|
|
that
Have
|
|
Name
|
|
Exercisable
|
|
Unexercisable
|
|
Price(1)
|
|
Date
|
|
Not
Vested
|
|
|
Not
Vested(2)
|
|
|
|
|
(#) |
|
(#) |
|
($/Share)
|
|
|
|
|
(#) |
|
|
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stuart M.
Brightman
|
|
|
240,000 |
|
0 |
|
$ |
9.0767 |
|
4/20/2015
|
|
|
|
|
|
|
|
Stuart M.
Brightman
|
|
|
40,132 |
|
15,868 |
(3) |
$ |
29.9950 |
|
5/8/2016
|
|
|
|
|
|
|
|
Stuart M.
Brightman
|
|
|
24,383 |
|
52,617 |
(4) |
$ |
21.1000 |
|
5/20/2018
|
|
|
|
|
|
|
|
Stuart M.
Brightman
|
|
|
0 |
|
100,000 |
(5) |
$ |
3.7800 |
|
2/12/2019
|
|
|
|
|
|
|
|
Stuart M.
Brightman
|
|
|
|
|
|
|
|
|
|
|
|
|
7,500 |
(6) |
|
$ |
83,100 |
|
Joseph M.
Abell III
|
|
|
54,664 |
|
0 |
|
$ |
4.6689 |
|
4/19/2011
|
|
|
|
|
|
|
|
|
Joseph M.
Abell III
|
|
|
32,106 |
|
0 |
|
$ |
4.3400 |
|
2/21/2013
|
|
|
|
|
|
|
|
|
Joseph M.
Abell III
|
|
|
75,000 |
|
0 |
|
$ |
9.2067 |
|
12/28/2011
|
|
|
|
|
|
|
|
|
Joseph M.
Abell III
|
|
|
25,110 |
|
9,930 |
(3) |
$ |
29.9950 |
|
5/8/2016
|
|
|
|
|
|
|
|
|
Joseph M.
Abell III
|
|
|
17,100 |
|
36,900 |
(4) |
$ |
21.1000 |
|
5/20/2018
|
|
|
|
|
|
|
|
|
Joseph M.
Abell III
|
|
|
0 |
|
58,000 |
(5) |
$ |
3.7800 |
|
2/12/2019
|
|
|
|
|
|
|
|
|
Joseph M.
Abell III
|
|
|
|
|
|
|
|
|
|
|
|
|
5,000 |
(6) |
|
$ |
55,400 |
|
Edwin H.
Goldman
|
|
|
0 |
|
63,000 |
(5) |
$ |
3.7800 |
|
2/12/2019
|
|
|
|
|
|
|
|
|
Edwin H.
Goldman
|
|
|
|
|
|
|
|
|
|
|
|
|
14,259 |
(7) |
|
$ |
157,990 |
|
Philip N.
Longorio
|
|
|
4,750 |
|
10,250 |
(4) |
$ |
21.1000 |
|
5/20/2018
|
|
|
|
|
|
|
|
|
Philip N.
Longorio
|
|
|
0 |
|
63,000 |
(5) |
$ |
3.7800 |
|
2/12/2019
|
|
|
|
|
|
|
|
|
Philip N.
Longorio
|
|
|
|
|
|
|
|
|
|
|
|
|
21,140 |
(8) |
|
$ |
234,231 |
|
Bass C.
Wallace, Jr.
|
|
|
30,000 |
|
0 |
|
$ |
9.2067 |
|
12/28/2011
|
|
|
|
|
|
|
|
|
Bass C.
Wallace, Jr.
|
|
|
15,833 |
|
34,167 |
(4) |
$ |
21.1000 |
|
5/20/2018
|
|
|
|
|
|
|
|
|
Bass C.
Wallace, Jr.
|
|
|
0 |
|
56,000 |
(5) |
$ |
3.7800 |
|
2/12/2019
|
|
|
|
|
|
|
|
|
Bass C.
Wallace, Jr.
|
|
|
|
|
|
|
|
|
|
|
|
|
2,400 |
(9) |
|
$ |
26,592 |
|
Bass C.
Wallace, Jr.
|
|
|
|
|
|
|
|
|
|
|
|
|
3,500 |
(6) |
|
$ |
38,780 |
|
Geoffrey M.
Hertel
|
|
|
240,000 |
|
0 |
|
$ |
9.2067 |
|
12/28/2011
|
|
|
|
|
|
|
|
|
Geoffrey M.
Hertel
|
|
|
52,777 |
|
47,223 |
(10) |
$ |
21.1000 |
|
5/20/2018
|
|
|
|
|
|
|
|
|
Geoffrey M.
Hertel
|
|
|
28,187 |
|
53,813 |
(11) |
$ |
3.7800 |
|
2/12/2019
|
|
|
|
|
|
|
|
|
(1) |
Under the terms of our equity
plans, the option exercise price must be greater than or equal to 100% of
the closing price of the common stock on the date of grant. A discussion
of the assumptions used in valuation of stock and option awards may be
found in “Note L – Equity-Based Compensation” in the Notes to Consolidated
Financial Statements of our Annual Report on Form 10-K for the year ended
December 31, 2009, as filed with the SEC on March 1, 2010. |
(2) |
Market Value is determined by
multiplying the number of shares of stock that have not vested by $11.08,
the closing price of our common stock on December 31, 2009. |
(3) |
The stock option award vested
20% on May 8, 2007, vests an additional 1.6667% of the award each month,
and will become fully vested on May 8, 2011. |
(4) |
The stock option award vested
20% on May 20, 2009, vests an additional 1.6667% of the award each month,
and will become fully vested on May 20, 2013. |
(5) |
The stock option award will
vest 33.33% on February 12, 2010, will vest an additional 2.7778% of the
award each month thereafter, and will become fully vested on February 12,
2012. |
(6) |
The restricted stock award
vested 20% on May 20, 2008, vests an additional 10% of the award once
every six months, and will become fully vested on May 20,
2012. |
(7) |
The restricted stock award
vested 20% on August 18, 2009, vests an additional 10% of the award once
every six months, and will become fully vested on August 18,
2013. |
(8) |
The restricted stock award
vested 20% on February 22, 2009, vests an additional 10% of the award once
every six months, and will become fully vested on February 22,
2013. |
(9) |
The restricted stock award
vested 20% on May 8, 2007, vests an additional 10% of the award once every
six months, and will become fully vested on May 8, 2012. |
(10) |
The stock option award vested
33.33% on May 20, 2009, vests an additional 2.7778% of the award each
month, and will become fully vested on May 20, 2011. |
(11) |
The stock option award vested
3.125% on February 12, 2009, vests an additional 3.125% of the award each
month, and will become fully vested on September 12,
2011. |
Option
Exercises and Stock Vested
The
following table sets forth certain information regarding options and stock
awards exercised and vested, respectively, by each of our Named Executive
Officers during the fiscal year ended December 31,
2009.
Option
Exercises and Stock Vested Table
|
|
Option
Awards
|
|
|
Stock
Awards
|
|
|
|
Number
of Shares
|
|
|
Value
|
|
|
Number
of Shares
|
|
|
Value
|
|
|
|
Acquired
on
|
|
|
Realized
on
|
|
|
Acquired
on
|
|
|
Realized
on
|
|
Name
|
|
Exercise
|
|
|
Exercise
|
|
|
Vesting
|
|
|
Vesting
|
|
|
|
|
(#) |
|
|
($)
|
|
|
|
(#) |
|
|
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stuart M.
Brightman
|
|
|
0 |
|
|
$ |
- |
|
|
|
3,000 |
|
|
$ |
19,781 |
|
Joseph M.
Abell III
|
|
|
0 |
|
|
$ |
- |
|
|
|
2,000 |
|
|
$ |
13,141 |
|
Edwin H.
Goldman
|
|
|
0 |
|
|
$ |
- |
|
|
|
2,622 |
|
|
$ |
23,330 |
|
Philip N.
Longorio
|
|
|
0 |
|
|
$ |
- |
|
|
|
9,060 |
|
|
$ |
35,474 |
|
Bass C.
Wallace, Jr.
|
|
|
0 |
|
|
$ |
- |
|
|
|
3,000 |
|
|
$ |
19,251 |
|
Geoffrey M.
Hertel
|
|
|
4,160 |
|
|
$ |
25,412 |
|
|
|
3,330 |
|
|
$ |
20,745 |
|
Nonqualified
Deferred Compensation
The following table discloses
contributions, earnings, and balances for each of the Named Executive Officers
under the TETRA Technologies, Inc. Executive Nonqualified Excess Plan, as of
December 31, 2009.
Nonqualified
Deferred Compensation Table
|
|
Executive
|
|
|
Registrant
|
|
|
Aggregate
|
|
|
|
|
|
Aggregate
|
|
|
|
Contributions
|
|
|
Contributions
|
|
|
Earnings
|
|
|
Aggregate
|
|
|
Balance
at
|
|
|
|
in
Last
|
|
|
in
Last
|
|
|
in
Last
|
|
|
Withdrawals/
|
|
|
Last
Fiscal
|
|
Name
|
|
Fiscal
Year
|
|
|
Fiscal
Year
|
|
|
Fiscal
Year
|
|
|
Distributions
|
|
|
Year
End
|
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stuart M.
Brightman
|
|
$ |
35,069 |
|
|
$ |
- |
|
|
$ |
56,489 |
|
|
$ |
- |
|
|
$ |
250,217 |
|
Joseph M.
Abell III
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
6,127 |
|
|
$ |
11,931 |
|
|
$ |
35,968 |
|
Edwin H.
Goldman
|
|
$ |
12,938 |
|
|
$ |
- |
|
|
$ |
2,992 |
|
|
$ |
- |
|
|
$ |
15,930 |
|
Philip N.
Longorio
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
Bass C.
Wallace, Jr.
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
7,123 |
|
|
$ |
- |
|
|
$ |
37,038 |
|
Geoffrey M.
Hertel
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
The Executive Nonqualified Excess
Plan is an unfunded deferred compensation plan pursuant to which the Named
Executive Officers and non-employee directors may elect to
participate. The
Named Executive Officers may elect to defer up to 100% of their base salary and
performance-based cash incentive compensation. Deferral elections as to annual
base salary are due by mid-December, and are effective as of January 1 of the
succeeding year. Deferral elections for cash incentive compensation may be made
in the December enrollment period, or in a mid-year enrollment period. Deferrals
are held for each participant in separate individual accounts in a rabbi trust.
Deferred amounts are credited with earnings or losses depending upon the
participant’s deemed investment elections from among hypothetical investment
election options which are made available. All hypothetical investments are our
unfunded obligations. Deferral contributions made by the participant and
earnings credited to such contributions are 100% vested. A deferral period and
payment date must be irrevocably specified at election for each deferral.
In-service distributions may not be withdrawn until two years following the
participant’s initial enrollment. Notwithstanding the participant’s deferral
election, the participant will receive distribution of his deferral account upon
termination of employment or service, as applicable, or upon disability or
death. Hardship withdrawals are permitted for unforeseeable emergencies. In the
event the Executive Nonqualified Excess Plan is terminated within twelve months
of a change in control, the deferred amounts will become payable to each
participant.
Potential
Payments upon Termination or Change in Control
With the exception of a transition
agreement with Mr. Hertel, we currently do not have a defined severance plan
for, or any agreement with, any other Named Executive Officer that would require
us to make any termination payments. We have previously entered into employment
agreements with each Named Executive Officer that are substantially identical to
the form of agreement executed by all of our employees. These agreements
evidence the at-will nature of employment, and do not guarantee term of
employment, salary, severance or change in control payments. Under
our Amended and Restated 2006 Equity Incentive Compensation Plan and our Amended
and Restated 2007 Equity Incentive Compensation Plan the vesting of restricted
stock and/or the time at which outstanding options may be exercised may be
accelerated, at the discretion of the Management and Compensation Committee,
upon the occurrence of a change in control. The proposed amendments to the
Amended and Restated 2007 Equity Incentive Compensation Plan, if approved, would
allow the vesting of restricted stock and/or the time at which outstanding
options may be exercised to be accelerated, at the discretion of the Management
and Compensation Committee, upon the death, disability or retirement of
participants.
Transition
Agreement with Mr. Hertel. On May 5, 2009, in connection with Mr.
Hertel’s resignation as our President and Chief Executive Officer, the Board of
Directors approved a Transition Agreement (the “Transition Agreement”) with Mr.
Hertel that, among other provisions, extends his employment with us through
January 5, 2012 and provides for the continuation of Mr. Hertel’s compensation
and certain other benefits in the event of his termination. Mr. Hertel’s
employment will automatically terminate upon his death and may be terminated by
us in the event of his “disability” (as defined in the Transition Agreement)
during the employment period. In addition, Mr. Hertel may terminate his
employment with us for “Good Reason,” as specified in the Transition Agreement,
or for any other reason upon 30 days’ advance notice. The Transition Agreement
defines “Good Reason” as (i) any failure by us to comply with the
compensation provisions of the Transition Agreement other than an isolated,
insubstantial and inadvertent failure; (ii) our requiring Mr. Hertel
to be based at any office or location other than our headquarters in The
Woodlands, Texas; (iii) any purported termination by us of
Mr. Hertel’s employment other than as expressly permitted by the Transition
Agreement; or (iv) any failure on our part to require the Transition
Agreement to be assumed by any successor entity.
The Transition Agreement also
provides that Mr. Hertel’s employment may be terminated by us for “Cause,”
as specified in the Transition Agreement. “Cause” is defined as (i) the
willful and continued failure of Mr. Hertel to perform substantially his
duties and obligations under the Transition Agreement (for reasons other than
injury, illness or incapacity) after a written demand for
such performance is
provided by us; (ii) Mr. Hertel’s conviction or the entry of a plea of
guilty or nolo contendre to a misdemeanor involving moral turpitude or a felony;
(iii) fraud, theft, embezzlement or a similar misappropriation of our funds
or property or those of our affiliates; or (iv) the willful engagement in
illegal conduct or gross misconduct which is materially injurious to us or our
affiliates.
If
Mr. Hertel’s employment terminates as a result of his death, if we
terminate Mr. Hertel’s employment as a result of his disability or other
than for Cause, or if Mr. Hertel terminates his employment for “Good
Reason,” then (i) we will continue to pay his base salary through the end
of the Employment Period; (ii) we will pay an amount equal to any bonus
that would have been payable as a result of the initial public offering of
Compressco Partners as if his employment had not been terminated; (iii) we
will pay an amount equal to any Transition Bonus that would have been payable as
if Mr. Hertel’s employment had not been terminated;
(iv) Mr. Hertel or his heirs will continue to be eligible to
participate in welfare benefit plans; and (v) we will pay any business
expenses which have been incurred through the date of termination in accordance
with the our policies. If at any time following the termination of
Mr. Hertel’s employment and during the noncompetition period thereafter he
breaches any of the nondisclosure, noncompetition and nonsolicitation provisions
provided for under the Transition Agreement, we will no longer be obligated to
make the foregoing payments.
If
we terminate Mr. Hertel’s employment for “Cause,” Mr. Hertel will only
be entitled to receive payment of his base salary through the date of
termination and any deferred compensation or other employee benefits which he is
otherwise entitled to receive. If Mr. Hertel terminates his employment for
any reason other than “Good Reason,” Mr. Hertel will be entitled to receive
(i) his base salary through the date of termination; (ii) the payment
of any business expenses incurred but not reimbursed through the date of
termination; and (iii) the payment of any deferred compensation or other
employee benefits which he is entitled to receive.
The following table quantifies the
potential payments to our Named Executive Officers under the contracts,
agreements or plans discussed above in various scenarios involving a change in
control or termination of employment, assuming a December 31, 2009 termination
date. In addition to the amounts reflected in the table, the Named Executive
Officers would receive upon termination any benefits they would otherwise be
entitled to under our 401(k) Plan and Executive Nonqualified Excess
Plan.
Name
|
|
Cash
Severance Payment(1)
|
|
|
Bonus
Payment
|
|
|
Discretionary
Accelerated Exercisability of Options(2)
|
|
|
Discretionary
Accelerated Vesting of Restricted Shares(3)
|
|
|
Continuation
of Health Benefits
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stuart M.
Brightman
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Death/disability
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
Retirement
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
Termination
for cause
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
No
cause or voluntary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
termination
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
Termination
following
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
change
in control
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
730,000 |
|
|
$ |
83,100 |
|
|
$ |
- |
|
|
$ |
813,100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joseph M.
Abell III
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Death/disability
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
Retirement
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
Termination
for cause
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
No
cause or voluntary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
termination
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
Termination
following
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
change
in control
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
423,400 |
|
|
$ |
55,400 |
|
|
$ |
- |
|
|
$ |
478,800 |
|
Name
|
|
Cash
Severance Payment(1)
|
|
|
Bonus
Payment
|
|
|
Discretionary
Accelerated Exercisability of Options(2)
|
|
|
Discretionary
Accelerated Vesting of Restricted Shares(3)
|
|
|
Continuation
of Health Benefits
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Edwin H.
Goldman
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Death/disability
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
Retirement
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
Termination
for cause
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
No
cause or voluntary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
termination
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
Termination
following
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
change
in control
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
459,900 |
|
|
$ |
157,990 |
|
|
$ |
- |
|
|
$ |
617,890 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Philip N.
Longorio
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Death/disability
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
Retirement
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
Termination
for cause
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
No
cause or voluntary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
termination
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
Termination
following
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
change
in control
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
459,900 |
|
|
$ |
234,231 |
|
|
$ |
- |
|
|
$ |
694,131 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bass C.
Wallace, Jr.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Death/disability
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
Retirement
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
Termination
for cause
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
No
cause or voluntary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
termination
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
Termination
following
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
change
in control
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
408,800 |
|
|
$ |
65,372 |
|
|
$ |
- |
|
|
$ |
474,172 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Geoffrey M.
Hertel
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Death/disability
|
|
$ |
805,471 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
1,744 |
|
|
$ |
807,215 |
|
Retirement
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
Termination
for cause
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
No
cause or voluntary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
termination
|
|
$ |
805,471 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
1,744 |
|
|
$ |
807,215 |
|
Termination
following
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
change
in control
|
|
$ |
805,471 |
|
|
$ |
400,000 |
(4) |
|
$ |
392,835 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
1,598,306 |
|
(1) |
Cash severance includes the
continuation of Mr. Hertel’s salary under the terms of his transition
agreement; however, the obligation to continue Mr. Hertel’s salary is
subject to his compliance with the non-compete provisions of the
transition agreement. |
(2) |
Our Amended and Restated 2007
Equity Incentive Compensation Plan does not currently allow acceleration
upon death, disability or retirement. We are proposing amendments to the
plan that would permit acceleration of exercisability in such events. The
value of accelerated options is calculated by subtracting the exercise
price of outstanding options from $11.08, the closing price of our common
stock on December 31, 2009. |
(3) |
Our Amended and Restated 2007
Equity Incentive Compensation Plan does not currently allow acceleration
upon death, disability or retirement. We are proposing amendments to the
plan that would permit acceleration of vesting in such events. The value
of accelerated vesting of restricted stock is calculated by multiplying
the number of accelerated shares by $11.08, the closing price of our
common stock on December 31, 2009. |
(4) |
The bonus payment includes
three separate bonuses payable under Mr. Hertel’s transition agreement;
however, the obligation to pay these bonuses is subject to his compliance
with the non-compete provisions of the transition
agreement. |
Compensation
Risk
The Management and Compensation
Committee of our Board of Directors reviews and evaluates potential risks
related to the design of our compensation programs. In its evaluation of our
annual and long-term incentive compensation plans that were in effect during
2009, as well as the incentive compensation arrangements proposed for 2010 as
described above, the Management and Compensation Committee determined that such
plans are designed with the appropriate
balance of risk and
reward relative to our overall business strategy. In addition, the stock
ownership guidelines for our executive officers encourage them to focus on the
creation of long-term value for stockholders rather than short-term
results.
Specifically,
under our discretionary annual cash incentive plan, the amount of each
participant’s prospective bonus is established as a percentage of annual base
salary, and is contingent on performance, including the attainment of targeted
levels of performance over multiple performance measures that included both
financial and non-financial measures. Notwithstanding the attainment of any
established performance measures, the amount of the cash incentive bonus
received by any participant is subject to the ultimate discretion of the
Management and Compensation Committee. Further, annual cash bonuses are paid
only after the Management and Compensation Committee has reviewed our audited
financial statements for the performance period. Several of our operating units
have maintained, and will continue to maintain, stand-alone incentive plans that
apply to specific groups of employees with particular job responsibilities who
are not participants in our discretionary annual cash incentive plan.
Performance measures applicable to these stand-alone plans include sales
metrics, safety metrics, and customer retention and cost-savings quotas.
Incentive payments earned during 2009 pursuant to the stand-alone plans were not
material to our consolidated results.
Long-term equity
incentive awards typically consist of stock options and/or restricted stock that
vests ratably over a three to five year period. The recipients of such awards
can realize an increase in the value of their long-term equity awards only to
the extent that our stockholders benefit from an increase in the market price
for our common stock. It is anticipated that the long-term awards for 2010 will
include stock options, restricted stock and cash incentives that vest over a
three-year performance period. The Management and Compensation Committee
believes that a variety of awards helps to minimize the risk to us and our
stockholders of excessive focus on short-term performance.
DIRECTOR
COMPENSATION
Prior to March 1, 2009, directors
who were not our employees or employees of any of our subsidiaries or affiliates
(the “Non-employee Directors”), other than Dr. Cunningham, received compensation
of $2,500 per month plus $1,500 for each board meeting attended, and were
reimbursed for out-of-pocket expenses incurred in attending meetings of the
board. In addition, Non-employee Directors traveling from out of state to board
or committee meetings received a $750 travel stipend. Non-employee Directors,
other than Dr. Cunningham, who were members of the Audit Committee, the
Management and Compensation Committee, the Nominating and Corporate Governance
Committee, or the Reserves Committee were also paid $1,500 for each meeting of
those committees attended.
In
addition to the $1,500 for each meeting attended, the chairmen of the Management
and Compensation Committee, Nominating and Corporate Governance Committee, and
Reserves Committee were paid $1,875 per calendar quarter, and the chairman of
the Audit Committee was paid $3,500 per calendar quarter. Prior to March 1,
2009, Dr. Cunningham received $8,333 per month for serving as our Chairman of
the Board of Directors, and he did not receive additional compensation for
attending meetings of the committees or the board.
On February 26, 2009, the Board of
Directors, as part of our efforts to reduce costs and expenses, approved a 20%
reduction of the monthly cash retainers and meeting fees paid to Non-employee
Directors, effective as of March 1, 2009. Following the March 1, 2009 reduction
in retainers and fees, each Non-employee Director, other than Dr. Cunningham,
received compensation of $2,000 per month plus $1,200 for each board meeting
attended, and was reimbursed for out-of-pocket expenses incurred in attending
meetings of the board. In addition, Non-employee Directors traveling from out of
state to board or committee meetings received a $750
travel stipend.
Non-employee Directors, other than Dr. Cunningham, who were members of the Audit
Committee, the Management and Compensation Committee, the Nominating and
Corporate Governance Committee, or the Reserves Committee were paid $1,200 for
each meeting of those committees attended.
In
addition to the $1,200 for each meeting attended, the chairmen of the Management
and Compensation Committee, Nominating and Corporate Governance Committee, and
Reserves Committee were paid $1,500 per calendar quarter, and the chairman of
the Audit Committee was paid $2,800 per calendar quarter. Following the March 1,
2009 fee reduction, Dr. Cunningham received $6,667 per month for serving as
Chairman of the Board of Directors, and he received no additional compensation
for attending meetings of the committees or the board.
At a meeting
of the Board of Directors held on December 17, 2009, the Nominating and
Corporate Governance Committee recommended, and the full board approved, an
increase in non-employee director compensation that would be effective as of
January 1, 2010. Following the January 1, 2010 increase, each Non-employee
Director, other than Dr. Cunningham, receives compensation of $3,333 per month
plus $1,500 for each board meeting attended, and is reimbursed for out-of-pocket
expenses incurred in attending meetings of the board. In addition, Non-employee
Directors traveling from out of state to board or committee meetings continue to
receive a $750 travel stipend. Non-employee Directors, other than Dr.
Cunningham, who are members of the Audit Committee, the Management and
Compensation Committee, the Nominating and Corporate Governance Committee, or
the Reserves Committee are paid $1,500 for each meeting of those committees
attended.
In
addition to the $1,500 for each meeting attended, the chairmen of the Management
and Compensation Committee, Nominating and Corporate Governance Committee, and
Reserves Committee are paid $2,500 per calendar quarter, and the chairman of the
Audit Committee is paid $3,750 per calendar quarter. Following the January 1,
2010 fee increase, Dr. Cunningham receives $9,583 per month for serving as
Chairman of the Board of Directors, and he receives no additional compensation
for attending meetings of the committees or the board.
Directors who are
also our officers or employees do not receive any compensation for duties
performed as directors.
On
May 20, 2009, each Non-employee Director, including Dr. Cunningham, received an
award of 12,579 shares of restricted stock with an aggregate grant date fair
market value of $100,003. Twenty-five percent of the shares of restricted stock
so awarded vested on the date of grant, and additional 25% portions of the award
vested on August 20 and November 20, 2009 and February 20, 2010. It is
anticipated that future compensation arrangements approved by the board will
include awards of grants of approximately $100,000 in value of restricted stock
to each Non-employee Director on an annual basis, to be awarded on or about May
20 of each year.
Our Board of Directors has adopted
stock ownership guidelines for directors and executive officers. The stock
ownership guidelines are intended to align the interests of our directors and
executive officers with the interests of our stockholders. Under these
guidelines, our Non-employee Directors, other than the Chairman of the Board of
Directors, are required to hold shares of our common stock equal to five-times
their annual cash retainer. Our Chairman is required to hold shares of our
common stock equal to one and one-half-times his annual cash retainer.
Non-employee Directors as of February 21, 2008 have until February 21, 2012, to
be in compliance with the guidelines. Non-employee Directors who are elected
after February 21, 2008 will have four years from the date of their election or
appointment to be in compliance.
Under the Executive
Nonqualified Excess Plan, each director may elect to defer the receipt of up to
100% of the cash compensation paid to such director by making an irrevocable
deferral election. Deferred amounts are credited with earnings or losses
depending on the participant’s deemed investment elections from among
hypothetical investment election options which are made available. All
hypothetical investments are our unfunded obligations. Deferral contributions
made by the participant and earnings credited to such contributions are 100%
vested. Dr. McInnes, as a former employee, maintains a participant balance in
our 401(k) Plan. This balance accrues interest based on Dr. McInnes’ enrollment
elections. We do not contribute matching funds to Dr. McInnes’ 401(k)
account.
The following table
discloses the cash, equity awards, and other compensation earned, paid, or
awarded, as the case may be, to each of our Non-employee Directors during the
fiscal year ended December 31, 2009.
Director
Compensation Table
|
|
Fees
Earned or
|
|
|
Stock
|
|
|
Option
|
|
|
All
Other
|
|
|
|
|
Name
|
|
Paid
in Cash
|
|
|
Awards(1)
|
|
|
Awards(2)
|
|
|
Compensation
|
|
|
Total
|
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
Paul D.
Coombs
|
|
$ |
35,200 |
|
|
$ |
100,003 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
135,203 |
|
Ralph S.
Cunningham
|
|
$ |
83,336 |
|
|
$ |
100,003 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
183,339 |
|
Tom H.
Delimitros
|
|
$ |
57,300 |
|
|
$ |
100,003 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
157,303 |
|
Allen T.
McInnes
|
|
$ |
43,900 |
|
|
$ |
100,003 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
143,903 |
|
Kenneth P.
Mitchell
|
|
$ |
51,625 |
|
|
$ |
100,003 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
151,628 |
|
William D.
Sullivan
|
|
$ |
43,000 |
|
|
$ |
100,003 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
143,003 |
|
Kenneth E.
White, Jr.
|
|
$ |
58,150 |
|
|
$ |
100,003 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
158,153 |
|
(1) |
On May 20, 2009, each
Non-employee Director was awarded 12,579 shares of restricted stock with a
FASB ASC Topic 718 value of $7.95 per share. Twenty-five percent of such
shares vested on the date of grant, and additional 25% portions of the
award vested on August 20 and November 20, 2009, and on February 20, 2010.
A discussion of the assumptions used in valuation of stock and option
awards may be found in “Note L – Equity-Based Compensation” in the Notes
to Consolidated Financial Statements of our Annual Report on Form 10-K for
the year ended December 31, 2009, as filed with the SEC on March 1,
2010. |
(2) |
The following table shows the
aggregate number of options outstanding for each Non-employee Director as
of December 31, 2009. Mr. Coombs’ outstanding option awards consist of
options earned in the course of his prior employment with
us: |
|
|
|
Aggregate
Option Awards
|
|
|
Name
|
|
Outstanding as
of 12/31/2009
|
|
|
Paul D.
Coombs
|
|
|
300,000 |
|
|
Ralph S.
Cunningham
|
|
|
39,000 |
|
|
Tom H.
Delimitros
|
|
|
39,000 |
|
|
Allen T.
McInnes
|
|
|
39,000 |
|
|
Kenneth P.
Mitchell
|
|
|
39,000 |
|
|
William D.
Sullivan
|
|
|
5,625 |
|
|
Kenneth E.
White, Jr.
|
|
|
39,000 |
|
BENEFICIAL
STOCK OWNERSHIP OF CERTAIN STOCKHOLDERS AND MANAGEMENT
The following table sets forth
certain information with respect to the beneficial ownership of our common stock
as of December 31, 2009, with respect to each person that beneficially owns five
percent (5%) or more of our common stock, and as of March 8, 2010 with respect
to (i) our directors and nominees for director; (ii) our Named Executive
Officers; and (iii) our directors and executive officers as a
group.
Name
and Business Address
|
|
Amount
and Nature of
|
|
Percentage
|
of
Beneficial Owner
|
|
Beneficial
Ownership
|
|
of
Class
|
|
|
|
|
|
FMR
LLC
|
|
11,156,298
|
(1)
|
14.8%
|
82
Devonshire Street
|
|
|
|
|
Boston,
Massachusetts 02109
|
|
|
|
|
|
|
|
|
|
Columbia
Wanger Asset Management, L.P.
|
|
6,284,100
|
(2)
|
8.3%
|
227
West Monroe Street, Suite 3000
|
|
|
|
|
Chicago,
Illinois 60606
|
|
|
|
|
|
|
|
|
|
BlackRock,
Inc.
|
|
5,771,747
|
(3)
|
7.7%
|
40
East 52nd Street
|
|
|
|
|
New
York, New York 10022
|
|
|
|
|
|
|
|
|
|
T. Rowe Price
Associates, Inc.
|
|
5,744,524
|
(4)
|
7.6%
|
100
E. Pratt Street
|
|
|
|
|
Baltimore,
Maryland 21202
|
|
|
|
|
|
|
|
|
|
The Vanguard
Group, Inc.
|
|
3,975,466
|
(5)
|
5.3%
|
100
Vanguard Blvd.
|
|
|
|
|
Malvern,
Pennsylvania 19355
|
|
|
|
|
|
|
|
|
|
Stuart M.
Brightman
|
|
513,271
|
(6)
|
*
|
Paul D.
Coombs
|
|
839,871
|
(7)
|
1.1%
|
Ralph S.
Cunningham
|
|
56,319
|
(8)
|
*
|
Tom H.
Delimitros
|
|
57,319
|
(9)
|
*
|
Geoffrey M.
Hertel
|
|
819,336
|
(10)
|
1.1%
|
Allen T.
McInnes
|
|
122,132
|
(11)
|
*
|
Kenneth P.
Mitchell
|
|
118,493
|
(12)
|
*
|
William D.
Sullivan
|
|
41,944
|
(13)
|
*
|
Kenneth E.
White, Jr.
|
|
71,319
|
(14)
|
*
|
Joseph M.
Abell III
|
|
370,949
|
(15)
|
*
|
Edwin H.
Goldman
|
|
40,939
|
(16)
|
*
|
Philip N.
Longorio
|
|
60,450
|
(17)
|
*
|
Bass C.
Wallace, Jr.
|
|
126,752
|
(18)
|
*
|
Directors and
executive officers as a group (19 persons)
|
3,959,519
|
(19)
|
5.2%
|
* |
Less than
1% |
(1) |
Pursuant to a Schedule 13G/A
dated February 12, 2010, FMR LLC has sole dispositive power with respect
to 11,156,298 shares of our common stock but has neither shared nor sole
voting power with respect to any of such shares. Various persons have the
right to receive or the power to direct the receipt of dividends from, or
proceeds from the sale of our common stock, including shares held by
Fidelity Advisor Small Cap Fund, a registered investment company holding
9.951% of our outstanding shares. |
(2) |
Pursuant to a Schedule 13G/A
dated January 27, 2010, Columbia Wanger Asset Management, L.P. has sole
dispositive power with respect to 6,284,100 shares of our common stock and
sole voting power with respect to 6,284,100 shares of our common stock.
The shares reported include shares held by Columbia Acorn Trust, a
business trust holding 7.42% of our outstanding shares that is advised by
Columbia Wanger Asset Management,
L.P. |
(3) |
Pursuant to a Schedule 13G
dated January 20, 2010, BlackRock Inc. has sole dispositive power with
respect to 5,771,747 shares of our common stock and sole voting power with
respect to 5,771,747 shares of our common stock. Various persons have the
right to receive or the power to direct the receipt of dividends from, or
proceeds from the sale of our common stock held by BlackRock Inc., and no
one person’s interest in such shares of common stock is more than 5% of
our outstanding shares. |
(4) |
Pursuant to a Schedule 13G/A
dated February 12, 2010, T. Rowe Price Associates, Inc. has sole
dispositive power with respect to 5,744,524 shares of our common stock and
sole voting power with respect to 1,491,500 of such shares and T. Rowe
Price Small-Cap Value Fund, Inc. has sole voting power with respect to
4,000,000 shares of our common stock. T. Rowe Price Associates is a
registered investment advisor and a registered investment company and does
not serve as custodian of shares of our common stock held by any of its
clients; accordingly, only the client or the client’s custodian or trustee
bank has the right to receive dividends paid with respect to, and proceeds
from the sale of, such shares of our common stock, and not more than 5% of
our outstanding shares of common stock is owned by any one client subject
to the investment advice of T. Rowe Price Associates. |
(5) |
Pursuant to a Schedule 13G
dated February 1, 2010, The Vanguard Group, Inc. has sole dispositive
power with respect to 3,862,549 shares of our common stock, shared
dispositive power with respect to 112,917 shares of our common stock and
sole voting power with respect to 112,917 shares of our common stock. The
shares reported include shares held by Vanguard Fiduciary Trust Company, a
wholly-owned subsidiary of The Vanguard Group, Inc. that is the beneficial
owner of 112,917 shares of our common stock. |
(6) |
Includes
352,271 shares subject to options exercisable within 60 days of the record
date. |
(7) |
Includes
300,000 shares subject to options exercisable within 60 days of the record
date. |
(8) |
Includes
39,000 shares subject to options exercisable within 60 days of the record
date. |
(9) |
Includes
39,000 shares subject to options exercisable within 60 days of the record
date. |
(10) |
Includes
342,326 shares subject to options exercisable within 60 days of the record
date. |
(11) |
Includes
39,000 shares subject to options exercisable within 60 days of the record
date. |
(12) |
Includes
39,000 shares subject to options exercisable within 60 days of the record
date. |
(13) |
Includes
5,625 shares subject to options exercisable within 60 days of the record
date. |
(14) |
Includes
39,000 shares subject to options exercisable within 60 days of the record
date. |
(15) |
Includes
232,471 shares subject to options exercisable within 60 days of the record
date. |
(16) |
Includes
24,500 shares subject to options exercisable within 60 days of the record
date. |
(17) |
Includes
30,250 shares subject to options exercisable within 60 days of the record
date. |
(18) |
Includes
70,943 shares subject to options exercisable within 60 days of the record
date. |
(19) |
Includes
2,027,584 shares subject to options exercisable within 60 days of the
record date. |
SECTION
16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act
requires our directors, executive officers, and persons who own more than 10% of
our common stock to file initial reports of ownership and reports of changes in
ownership of common stock (Forms 3, 4, and 5) with the SEC and the NYSE.
Executive officers, directors, and greater than 10% stockholders are required by
SEC regulations to furnish us with copies of all such forms they
file.
To
our knowledge, and based solely on our review of the copies of such reports, we
have received written representations by certain reporting persons that no
reports on Form 5 were required, and we believe that during the fiscal year
ended December 31, 2009, all Section 16(a) filing requirements applicable to our
executive officers, directors, and 10% stockholders were complied with in a
timely manner.
PROPOSALS
OF STOCKHOLDERS
We must receive a stockholder
proposal intended to be considered for inclusion in our proxy materials relating
to our 2011 Annual Meeting of Stockholders at our principal executive offices no
later than November 6, 2010. To be considered for inclusion in our proxy
statement, such proposal must also comply with the other requirements of Rule
14a-8 of the Exchange Act as well as the procedures set forth in our bylaws,
which are separate and distinct from, and in addition to, SEC
requirements.
For proposals not intended to be
submitted in next year’s proxy statement, but sought to be presented at our 2010
Annual Meeting of Stockholders, our bylaws provide that stockholder proposals,
including director nominations, must be received at our principal executive
offices no later than eighty (80) days prior to the date of our annual meeting,
provided, that if the date of the annual meeting was not publicly announced more
than ninety (90) days prior to the date of the
annual meeting, the
notice by the stockholder will be timely if delivered to our principal executive
offices no later than the close of business on the tenth (10th) day
following the day on which such notice of the date of the meeting was
communicated to the stockholders. In addition, proxies to be solicited by the
board for the 2010 Annual Meeting of Stockholders will confer discretionary
authority to vote on any stockholder proposal presented at that meeting, unless
we receive notice of such proposal not later than February 14, 2010. A copy of
our bylaws may be obtained upon written request to our Corporate Secretary at
our principal executive offices, 24955 Interstate 45 North, The Woodlands, Texas
77380.
HOUSEHOLDING
OF ANNUAL MEETING MATERIALS
SEC rules regarding the delivery of
proxy statements and annual reports permit us, in specified circumstances, to
deliver a single set of these reports to any address at which two or more
stockholders reside. This method of delivery, often referred to as
“householding,” will reduce the amount of duplicative information that security
holders receive and lower printing and mailing costs for us. Each stockholder
will continue to receive a separate proxy card.
We have delivered only one proxy
statement and annual report to eligible stockholders who share an address,
unless we received contrary instructions from any such stockholder prior to the
mailing date. If a stockholder prefers to receive separate copies of our proxy
statement or annual report, either now or in the future, we will promptly
deliver, upon written or oral request, a separate copy of the proxy statement or
annual report, as requested, to that stockholder at the shared address to which
a single copy was delivered. Such requests should be communicated to our
transfer agent, Computershare Investor Services, either by sending a request in
writing to 350 Indiana Street, Suite 800, Golden, Colorado 80401, or by calling
(303) 262-0600.
If you are currently a stockholder
sharing an address with another stockholder and wish to have only one proxy
statement and annual report delivered to the household in the future, please
contact Computershare at the address or telephone number indicated
above.
ADDITIONAL
FINANCIAL INFORMATION
Stockholders may obtain additional
financial information about us for the year ended December 31, 2009 from our
Annual Report on Form 10-K filed with the SEC. A copy of the Annual Report on
Form 10-K may be obtained without charge either by sending a request in writing
to TETRA Technologies, Inc., Attn: Stockholder Relations, 24955 Interstate 45
North, The Woodlands, Texas 77380, or by calling (281)
367-1983.
OTHER
MATTERS
The Board of Directors has no
knowledge at this time of any matters to be brought before the annual meeting
other than those referred to in this document. However, if any other matters
properly come before the annual meeting, it is the intention of the persons
named in the accompanying proxy to vote said proxy in accordance with their best
judgment on such matters.
A certified copy of the list of
stockholders as of the record date of March 8, 2010 will be available for
stockholder inspection at our office ten days prior to the meeting date of May
5, 2010.
By order of the Board of
Directors,
Bass C. Wallace,
Jr.
Corporate
Secretary
March 22,
2010
The Woodlands,
Texas
APPENDIX
A
TETRA TECHNOLOGIES,
INC.
AMENDED AND
RESTATED
2007 EQUITY LONG
TERM INCENTIVE COMPENSATION PLAN
TETRA
TECHNOLOGIES, INC.
AMENDED
AND RESTATED
2007
EQUITY
LONG
TERM INCENTIVE COMPENSATION PLAN
Table
of Contents
ARTICLE
I INTRODUCTION
|
1
|
1.1
|
Purpose
|
1
|
1.2
|
Definitions
|
1
|
1.3
|
Shares
Subject to the Plan
|
45
|
1.4
|
Administration
of the Plan
|
6
|
1.5
|
Granting
of Awards to Participants
|
67
|
1.6
|
Leave
of Absence
|
67
|
1.7
|
Term of
Plan
|
7
|
1.8
|
Amendment
and Discontinuance of the Plan
|
7
|
|
|
|
ARTICLE
II NONQUALIFIED
OPTIONS
|
7
|
2.1
|
Eligibility
|
7
|
2.2
|
Exercise
Price
|
78
|
2.3
|
Terms
and Conditions of Nonqualified Options
|
78
|
2.4
|
Option
Repricing
|
89
|
2.5
|
Vesting
|
9
|
|
|
|
ARTICLE
III INCENTIVE
OPTIONS
|
9
|
3.1
|
Eligibility
|
9
|
3.2
|
Exercise
Price
|
9
|
3.3
|
Dollar
Limitation
|
910
|
3.4
|
10%
Stockholder
|
910
|
3.5
|
Incentive
Options Not Transferable
|
910
|
3.6
|
Compliance
with Code Section 422
|
10
|
3.7
|
Limitations
on Exercise
|
10
|
|
|
|
ARTICLE
IV BONUS
STOCK
|
10
|
|
|
|
ARTICLE
V STOCK
APPRECIATION RIGHTS
|
10
|
5.1
|
Eligibility
|
10
|
5.2
|
Repricing
|
1011
|
|
|
|
ARTICLE
VI RESTRICTED
STOCK
|
11
|
6.1
|
Eligibility
|
11
|
6.2
|
Restrictions,
Restricted Period and Vesting
|
11
|
6.3
|
Forfeiture
of Restricted Stock
|
1112
|
6.4
|
Delivery
of Shares of Common Stock
|
1112
|
|
|
|
ARTICLE
VII PERFORMANCE
AWARDS
|
12
|
7.1
|
Performance
Awards
|
12
|
7.2
|
Performance
Goals
|
12
|
ARTICLE
VIII CERTAIN
PROVISIONS APPLICABLE TO ALL AWARDS
|
1314
|
8.1
|
General
|
1314
|
8.2
|
Stand-Alone,
Additional and Substitute Awards
|
1415
|
8.3
|
Term of
Awards
|
15
|
8.4
|
Form
and Timing of Payment Under Awards; Deferrals
|
1516
|
8.5
|
Vested
and Unvested Awards
|
16
|
8.6
|
Exemptions
from Section 16(b) Liability
|
1617
|
8.7
|
Transferability
|
1617
|
8.8
|
Rights
as a Stockholder
|
17
|
8.9
|
Listing
and Registration of Shares of Common Stock
|
1718
|
8.10
|
Termination
of Employment, Death, Disability and Retirement
|
1718
|
8.11
|
Change
in Control
|
1819
|
|
|
|
ARTICLE
IX WITHHOLDING
FOR TAXES
|
1920
|
|
|
|
ARTICLE
X MISCELLANEOUS
|
1920
|
10.1
|
No
Rights to Awards or Uniformity Among Awards
|
1920
|
10.2
|
Conflicts
with Plan
|
1920
|
10.3
|
No
Right to Employment
|
1921
|
10.4
|
Governing
Law
|
2021
|
10.5
|
Gender,
Tense and Headings
|
2021
|
10.6
|
Severability
|
2021
|
10.7
|
Stockholder
Agreements
|
2021
|
10.8
|
Funding
|
2021
|
10.9
|
No
Guarantee of Tax Consequences
|
2021
|
TETRA
TECHNOLOGIES, INC.
AMENDED
AND RESTATED
2007
EQUITY
LONG
TERM INCENTIVE COMPENSATION PLAN
ARTICLE
I
INTRODUCTION
1.1 Purpose. This
TETRA
Technologies, Inc. 2007 Long Term Incentive Compensation Plan (the Plan) amends
and restates the TETRA Technologies, Inc. Amended and
Restated 2007 Equity Incentive Compensation Plan (the Plan)
amends and restates the TETRA Technologies, Inc. 2007 Equity Incentive
Compensation Plan, as previously amended (the Prior First
Restated
Plan) and is intended to promote the interests of TETRA Technologies,
Inc., a Delaware corporation, (the Company)
and its stockholders by encouraging Employees, Consultants and Non-Employee
Directors of the Company or its Affiliates (as defined below) to acquire or
increase their equity interests in the Company, thereby giving them an added
incentive to work toward the continued growth and success of the Company,
and to encourage them to remain with and devote their best efforts to the
business of the Company thereby advancing the interests of the Company and its
stockholders. The Board of Directors of the Company (the Board)
also contemplates that through the Plan, the Company and its Affiliates will be
better able to compete for the services of the individuals needed for the
continued growth and success of the Company. The Plan provides for payment of
various forms of incentive compensation and accordingly is not intended to be a
plan that is subject to the Employee Retirement Income Security Act of 1974, as
amended, and shall be administered
accordingly.
1.2 Definitions.
As used in the Plan,
the following terms shall have the meanings set forth
below:
Affiliate
means (i) any entity in which the Company, directly or indirectly, owns 10% or
more of the combined voting power, as determined by the Committee, (ii) any
“parent corporation” of the Company (as defined in Section 424(e) of the Code),
(iii) any “subsidiary corporation” of any such parent corporation (as defined in
Section 424(f) of the Code) of the Company and (iv) any trades or businesses,
whether or not incorporated which are members of a controlled group or are under
common control (as defined in Sections 414(b) or (c) of the Code) with the
Company; provided, that, for the purpose of issuing Options or Stock
Appreciation Rights, “Affiliate” means any corporation or other entity in a
chain of corporations and/or other entities in which the Company has a
“controlling interest” within the meaning of Treas. Reg. § 1.414(c)-2(b)(2)(i),
but using the threshold of 50% ownership wherever 80%
appears.
Awards
means, collectively, Options, Bonus Stock, Stock Appreciation Rights, Restricted
Stock or Performance Awards.
Board
means the board of directors described in Section 1.1 of the
Plan.
Bonus
Stock means Common Stock described in Article IV of the
Plan.
Change
in Control shall be deemed to have occurred upon any of the following
events:
(i) any “person” (as defined in
Section 3(a)(9) of the Exchange Act, and as modified in Section 13(d) and 14(d)
of the Exchange Act) other than (A) the Company or any of its subsidiaries, (B)
any employee benefit plan of the Company or any of its subsidiaries, (C) or any
Affiliate, (D) a company owned, directly or indirectly, by stockholders of the
Company in substantially the same proportions as their ownership of the Company,
or (E) an underwriter temporarily holding securities pursuant to an offering of
such securities ( a Person),
becomes
the “beneficial
owner” (as defined in Rule 13d-3 of the Exchange Act), directly or indirectly,
of securities of the Company representing more than 50% of the shares of voting
stock of the Company then outstanding;
(ii) the consummation of any merger,
organization, business combination or consolidation of the Company or one of its
subsidiaries with or into any other company, other than a merger,
reorganization, business combination or consolidation which would result in the
holders of the voting securities of the Company outstanding immediately prior
thereto holding securities which represent immediately after such merger,
reorganization, business combination or consolidation more than 50% of the
combined voting power of the voting securities of the Company or the surviving
company or the parent of such surviving company;
(iii) the consummation of a sale or
disposition by the Company of all or substantially all of the Company’s assets,
other than a sale or disposition if the holders of the voting securities of the
Company outstanding immediately prior thereto hold securities immediately
thereafter which represent more than 50% of the combined voting power of the
voting securities of the acquiror, or parent of the acquiror, of such
assets;
(iv) the stockholders of the Company
approve a plan of complete liquidation or dissolution of the Company;
or
(v) individuals who, as of the
Effective Date, constitute the Board (the Incumbent
Board) cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming a director subsequent to
the Effective Date whose election by the Board, was approved by a vote of at
least a majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of an election contest with respect to the election or
removal of directors or other solicitation of proxies or consents by or on
behalf of a person other than the Board.
Notwithstanding the foregoing,
however, in any circumstance or transaction in which compensation resulting from
or in respect of an Award would be subject to the income tax under Section 409A
of the Code if the foregoing definition of “Change in Control” were to apply,
but would not be so subject if the term “Change in Control” were defined herein
to mean a “change in control event” within the meaning of Treas. Reg.
§ 1.409A-3(i)(5), then “Change in Control” shall mean a “change in control
event” within the meaning of Treas. Reg. § 1.409A-3(i)(5), but only to the
extent necessary to prevent such compensation from becoming subject to the
income tax under Section 409A of the Code.
Code
means the Internal Revenue Code of 1986, as amended from time to time, and the
rules and regulations thereunder.
Committee
means the Management and Compensation Committee of the Board which shall consist
of not less than two members of the Board, each of whom shall qualify as a
“non-employee director” (as that term is defined in Rule 16b-3 of the General
Rules and Regulations under the Exchange Act) appointed by and serving at the
pleasure of the Board to administer the Plan or, if none, the Board; provided
however, that with respect to any Award granted to a Covered Employee which is
intended to be “performance-based compensation” as described in Section
162(m)(4)(C) of the Code, the Committee shall consist solely of two or more
“outside directors” as described in Section 162(m)(4)(C)(i) of the
Code.
Common
Stock means the common stock, $0.01 par value per share of the
Company.
Company
means the corporation described in Section 1.1 of the Plan or any successor
thereto which assumes and continues the Plan.
Consultant
means any individual, other than a Director or an Employee, who renders
consulting or advisory services to the Company or an Affiliate, provided such
services are not in connection with the offer or sale of securities in a capital
raising transaction.
Covered
Employee means any of the Chief Executive Officer of the Company and the
three highest paid officers of the Company other than the Chief Executive
Officer or the Chief Financial Officer as described in Section 162(m)(3) of the
Code or any individual Consultant, Director or other Employee, or class of
Consultants, Directors or Employees, who the Committee specifies in an Award
shall be treated as a Covered Employee.
Disability
means an inability to perform the Employee
or Non-Employee Director’s Participant’s
material services for the Company for a period of 90 consecutive days or a total
of 180 days, during any 365-day period, in either case as a result of incapacity
due to mental or physical illness, which is determined to be total and
permanent. A determination of Disability shall be made by a physician
satisfactory to both the Participant (or his guardian) and the Company, provided
that if the Employee
or Non-Employee Director Participant
(or his guardian) and the Company do not agree on a physician, the Employee
or Non-Employee Director Participant
and the Company shall each select a physician and these two together shall
select a third physician, whose determination as to Disability shall be final,
binding and conclusive with respect to all parties. Notwithstanding the above,
eligibility for disability benefits under any policy for long-term disability
benefits provided to the Participant by the Company shall conclusively establish
the Participant’s disability.
Effective
Date means May 4, 2007, the date on which the Prior
Plan TETRA
Technologies, Inc. 2007 Equity Incentive Compensation Plan (the Original
Plan) was initially approved by stockholders of the
Company. The
provisions of the Prior Plan, as amended from time to time including, without
limitation, the First Restated Plan and, if approved, the Plan, shall be
applicable to all Awards granted on or after the Effective
Date. This Plan shall be effective the date that it is
approved by the stockholders of the Company.
Employee
means any employee of the Company or an Affiliate.
Employment
means any period in which a Participant is an Employee of the Company or an
Affiliate.
Exchange
Act means the Securities Exchange Act of 1934, as
amended.
Fair
Market Value or FMV Per Share means, as of any given date, the closing
price per share on the principal exchange or over-the-counter market on which
such shares are trading, if any, or as reported on any composite index which
includes such principal exchange, or if no trade of the Common Stock shall have
been reported for such date, the closing price quoted on such exchange or market
for the immediately preceding date on which such shares were traded. The term
“closing price” on any given day shall mean (i) if the shares of Common Stock
are listed or admitted for trading on a national securities exchange, the last
reported sales price on such day, or (ii) if the shares of Common Stock are not
listed or admitted for trading on a national securities exchange, the last
transaction price on such day of the shares of Common Stock on the Nasdaq
Market, Inc. (“NASDAQ”). If shares of the Common Stock are not listed or
admitted to trading on any exchange, over-the-counter market or any similar
organization on any given day, the FMV Per Share shall be determined by the
Committee in good faith using any fair and reasonable means selected in its
discretion.
Incentive
Option means any option that satisfies the requirements of Code Section
422 and is granted pursuant to Article III of the Plan.
Incumbent
Board means the Board described in paragraph (v) of the definition of
Change in Control under Section 1.2 of the Plan.
Non-Employee
Director means a person who is a member of the Board but who is neither
an Employee nor a Consultant of the Company or any
Affiliate.
Nonqualified
Option means an option not intended to satisfy the requirements of Code
Section 422 and which is granted pursuant to Article II of the
Plan.
Option
means an option to acquire Common Stock granted pursuant to the provisions of
the Plan, and refers to either an Incentive Stock Option or a Nonqualified Stock
Option, or both, as applicable.
Option
Expiration Date means the date determined by the Committee which shall
not be more than ten years after the date of grant of an
Option.
Optionee
means a Participant who has received or will receive an
Option.
Original
Plan has the meaning set forth in the definition of Effective Date under
Section 1.2 of the Plan.
Participant
means any Non-Employee Director, Employee or Consultant granted an Award under
the Plan.
Performance
Award means an Award granted pursuant to Article VII of the Plan which,
if earned, will afford the Participant the right to receive shares of Common
Stock, cash or any combination thereof as determined by the
Committee.
Plan
means the plan described in Section 1.1 of the Plan and set forth in this
document, as amended from time to time.
Restricted
Period means the period established by the Committee with respect to an
Award during which the Award either remains subject to forfeiture or is not
exercisable by the Participant.
Restricted
Stock means one or more shares of Common Stock prior to the lapse of
restrictions thereon, granted under Article VI of the Plan.
Retirement
means termination of Employment of an Employee,
or if determined by the Committee or
termination of service of a Non-Employee Director or
Consultant, in
each case under circumstances as shall constitute retirement as
determined by the Committee.
Securities
Act means the Securities Act of 1933, as amended.
Spread
means the amount determined pursuant to Section 5.1(a) of the
Plan.
Stock
Appreciation Right means an Award granted pursuant to Article V of the
Plan.
1.3 Shares
Subject to the Plan. Subject to adjustment as provided in this Plan, the
maximum number of shares of Common Stock that may be covered by Awards granted
under the Plan shall be 45,590,000
shares, and of that number the maximum aggregate number of shares of Common
Stock that may be issued under the Plan through Options is 45,590,000
shares, all or any portion of which may be Incentive Options. Solely for the
purposes of implementing the limitation of the immediately preceding sentence,
an Award of an Option or a Stock Appreciation Right in respect of one share of
Common Stock shall be deemed to be an Award of one share of Common Stock on the
date of grant. An Award of a share of Bonus Stock or Restricted Stock shall be
deemed to be an Award of two1.15
shares of Common Stock for every one share granted on the date of grant. With
respect to any Performance Award to
be settled in shares of Common Stock, the value of the maximum benefit
that may be paid under the Performance Award shall be divided by the FMV Per
Share of Common Stock as of the date of grant of the Performance Award and each
share resulting from such computation shall be deemed to be an Award of two1.15
shares of Common Stock for purposes of implementing the limitation on shares set
forth in the first sentence of this Section 1.3. If the number of shares of
Common Stock issued in settlement of the Performance Award exceeds the number
determined to be issued on the date of grant in accordance with the preceding
sentence, each such additional share of Common Stock issued shall be deemed to
be an Award of two1.15
shares of Common Stock for the purposes of implementing the limitation on
shares set forth in the first sentence of this Section 1.3. In
addition, during any calendar year, the maximum
number of shares of Common Stock reserved
for issuance under the Plan which are subject to underlying
Awards that
may be (other
than Performance Awards) granted to any one Participant in
such calendar year shall not exceed 100400,000
shares
and. The maximum dollar
amount of cash
and/or compensation
(whether denominated or the
Fair Market Value of payable
in shares of Common Stock,
cash, other Awards or other property) that any one
Participant may receive in any calendar year in respect of Performance Awards
denominated
in dollars may not exceed, in the aggregate, $12,000,000.
Notwithstanding the above, in the
event that at any time after the Effective Date the outstanding shares of Common
Stock are changed into or exchanged for a different number or kind of shares or
other securities of the Company by reason of a merger, consolidation,
recapitalization, reclassification, stock split, stock dividend, combination of
shares or the like, the aggregate number and class of securities available under
the Plan shall, subject to any required action by the stockholders of the
Company, automatically be proportionately adjusted, with no action required on
the part of the Committee or otherwise. Upon the occurrence of any of the events
described in the immediately preceding sentence, in order to ensure that after
such event the shares of Common Stock subject to the Plan and each Participant’s
proportionate interest shall be maintained substantially as before the
occurrence of such event, (i) the number of shares of Common Stock with respect
to which Awards may be granted under the Plan, (ii) the maximum number of shares
of Common Stock that may be covered by Awards to any single individual during
any calendar year, (iii) the number of shares of Common Stock subject to
outstanding Awards, and (iv) the grant or exercise price with respect to an
Award shall, where applicable, automatically be proportionately adjusted. Such
adjustment in an outstanding Option shall be made (i) without change in the
total cost applicable to the Option or any unexercised portion of the Option
(except for any change in the aggregate price resulting from rounding-off of
share quantities or prices) and (ii) with any necessary corresponding adjustment
in exercise price per share; provided, however, that no such adjustment
authorized under this Section 1.3 shall occur to the extent that (i) such action
would cause (A) the application of Section 162(m) or 409A of the Code to the
Award or (B) create adverse tax consequences under Section 162(m) or 409A of the
Code should either or both of those Code sections apply to the Award or (ii)
materially reduce the benefit to the Participant without the consent of the
Participant.
In the event the number of shares to
be delivered upon the exercise or payment of any Award granted under the Plan is
reduced for any reason other than the withholding of shares for
payment of taxes or
exercise price, or in the event any Award (or portion thereof) granted under the
Plan can no longer under any circumstances be exercised or paid, the number of
shares no longer subject to such Award shall thereupon be released from such
Award and shall thereafter be available for the grant of additional Awards under
the Plan in the same amount as such shares were counted against the limit set
forth in the first paragraph of this Section 1.3. Shares
If
any Performance Award granted under this Plan may only be settled in cash, such
Award shall not be counted against the maximum number of shares that may be
covered by Awards granted under the Plan as set forth in the first paragraph of
this Section 1.3. Shares of Common Stock that cease to be
subject to an Award because of the exercise of the Award, or the vesting of a
Restricted Stock Award or similar Award, shall no longer be subject to any
further grant under the Plan. Notwithstanding anything to the contrary, (i)
shares of Common Stock that are tendered, whether by physical delivery or by
attestation, to the Company by a Participant or withheld from any Award by the
Company as full or partial payment of the exercise price or purchase price of
any Award shall not be added back to the maximum share limitations described
above or thereafter be made available under the Plan for the grant of additional
Awards; (ii) shares that are withheld from any Award by the Company in payment
of any applicable tax withholding obligation in connection with the exercise,
vesting or earning of any Award shall not be added back to the maximum share
limitations described above or thereafter made available under the Plan for the
grant of additional awards; and (iii) with respect to Stock Appreciation Rights,
when a Stock Appreciation Right is exercised, the shares of Common Stock subject
to such Stock Appreciation Right shall be counted against the shares available
for issuance under the Plan as one share of Common Stock for every share subject
thereto, regardless of the number of shares of Common Stock used to settle the
Stock Appreciation Right upon exercise. Shares issued pursuant to the Plan (i)
may be treasury shares, authorized but unissued shares or, if applicable, shares
acquired in the open market and (ii) shall be fully paid and nonassessable. No
fractional shares shall be issued under the Plan; payment for any fractional
shares shall be made in cash.
1.4 Administration
of the Plan. The Plan shall be administered by the Committee. Subject to
the provisions of the Plan, the Committee shall (i)
interpret the Plan and all Awards under the Plan, (ii) (i)
select the Employees, Consultants and Non-Employee Directors to whom Awards may
be granted hereunder, (ii) determine the type or types of Awards to be
made, (iii) determine the size or number of shares to be subject to an
Award, (iv) determine the terms and conditions of any Award, consistent
with the terms of the Plan, which terms may include the time or times when
Awards may be exercised (which may be based on performance criteria), any
provision regarding the acceleration of vesting or waiver of forfeiture
restrictions, and any other condition or limitation regarding an Award, based on
such factors as the Committee, in its sole discretion, will determine,
(v) modify or amend each Award, including the discretionary acceleration of
vesting, the waiver of forfeiture restrictions, and the authority to extend the
post-termination exercisability period of Awards under the conditions set forth
in the Plan, provided that any such extension may not exceed the expiration date
set forth in the Award, (vi) interpret the Plan and all Awards under the
Plan, (vii) make, amend and rescind such rules as it deems necessary for
the proper administration of the Plan, (iiiviii)
make all other determinations necessary or advisable for the administration of
the Plan and (ivix)
correct any defect or supply any omission or reconcile any inconsistency in the
Plan or in any Award under the Plan in the manner and to the extent that the
Committee deems desirable to effectuate the Plan. Any action taken or
determination made by the Committee pursuant to this and the other paragraphs of
the Plan shall be final, binding and conclusive on all affected persons,
including the Company; any Affiliate; any grantee, holder or beneficiary of an
Award; any stockholder and any Employee, Consultant or Non-Employee Director. No
member of the Board or of the Committee shall be liable for any action or
determination made in good faith with respect to the Plan or any Award granted
hereunder and the members of the Board and the Committee shall be entitled to
indemnification and reimbursement by the Company and its Affiliates in respect
of any claim, loss, damage or expense (including legal fees) arising therefrom
to the full extent permitted by law.
1.5 Granting
of Awards to Participants. The Committee shall have the authority to
grant, prior to the expiration date of the Plan, Awards to such Employees,
Consultants and Non-Employee Directors as may be selected by it subject to the
terms and conditions hereinafter set forth in the Plan. In selecting the persons
to receive Awards, including the type and size of the Award, the Committee may
consider the contribution the recipient has made and/or may make to the growth
of the Company or its Affiliates and any other factors that it may deem
relevant. No member of the Committee shall vote or act upon any matter relating
solely to himself. Grants of Awards to members of the Committee must be ratified
by the Board. In no event shall any Employee, Consultant or Non-Employee
Director, nor his or its legal representatives, heirs, legatees, distributees or
successors have any right to participate in the Plan except to such extent, if
any, as permitted under the Plan and as the Committee may
determine.
1.6 Leave
of Absence. If an Employee is on military, sick leave or other bona fide
leave of absence, such person shall be considered an “Employee” for purposes of
an outstanding Award during the period of such leave provided it does not exceed
90 days (or such longer period as may be determined by the Committee in its sole
discretion), or, if longer, so long as the person’s right to reemployment is
guaranteed either by statute or by contract. If the period of leave exceeds 90
days (or such longer period as may be determined by the Committee in its sole
discretion), the employment relationship shall be deemed to have terminated on
the 91st day
(or the first day immediately following any period of leave in excess of 90 days
as approved by the Committee) of such leave, unless the person’s right to
reemployment is guaranteed by statute or contract.
1.7 Term
of Plan. If not sooner terminated under the provisions of Section 1.8,
the Plan shall terminate upon, and no further Awards shall be made, after May
31, 2010
February 27, 2017; provided, however, that the termination of the Plan on such
date will not affect the validity of any Award outstanding on the date of
termination, which shall continue to be governed by the applicable terms and
conditions of the Plan.
1.8 Amendment
and Discontinuance of the Plan. The Board may amend, suspend or terminate
the Plan at any time without prior notice to or consent of any person; provided,
however, subject to Section 8.11, no amendment, suspension or termination of the
Plan may without the consent of the holder of an Award terminate such Award or
adversely affect such person’s rights with respect to such Award in any material
respect; and provided further, however, that no amendment of the Plan shall be
effective prior to its approval by the stockholders of the Company to the extent
that (i) it provides for accelerated vesting other than upon
the death, Disability or Retirement of a Participant or in connection
with a Change inof
Control
or,
(ii) it would contravene the requirements of Section 2.4 or Section
5.2 of the Plan or (iiiii) such
approval is required by (A) applicable legal requirements, (B) the requirements
of any securities exchange on which the Company’s stock may be listed or (C) the
requirements of the Nasdaq Stock Market, Inc. on which the Company’s stock may
be listed. Notwithstanding the foregoing, the Board may amend the Plan in such
manner as it deems necessary in order to permit Awards to meet the requirements
of the Code or other applicable laws, or to prevent adverse tax consequences to
the Participants.
ARTICLE
II
NONQUALIFIED
OPTIONS
2.1 Eligibility.
The Committee may grant Nonqualified Options to purchase the Common Stock to any
Employee, Consultant and Non-Employee Directors according to the terms set forth
below. Each Nonqualified Option granted under the Plan shall be evidenced by a
written agreement between the Company and the individual to whom Nonqualified
Options were granted in such form as the Committee shall
provide.
2.2 Exercise
Price. The exercise price to be paid for each share of Common Stock
deliverable upon exercise of each Nonqualified Option granted under this Article
II shall not be less than one hundred percent (100%) of the FMV Per Share as of
the date of grant of such Nonqualified Option. The exercise price for each
Nonqualified Option granted under Article II shall be subject to adjustment as
provided in Section 2.3(d) of the Plan.
2.3 Terms
and Conditions of Nonqualified Options. Nonqualified Options shall be in
such form as the Committee may from time to time approve, shall be subject to
the following terms and conditions and may contain such additional terms and
conditions, not inconsistent with this Article II, as the Committee shall deem
desirable:
(a) Option
Period and Conditions and Limitations on Exercise. No Nonqualified Option
shall be exercisable later than the Option Expiration Date. To the extent not
prohibited by other provisions of the Plan, each Nonqualified Option shall be
exercisable at such time or times as the Committee in its discretion may
determine at the time such Nonqualified Option is granted.
(b) Manner
of Exercise. In order to exercise a Nonqualified Option, the person or
persons entitled to exercise it shall deliver to the Company payment in full for
(i) the shares being purchased and (ii) unless other arrangements have been made
with the Committee, any required withholding taxes. The payment of the exercise
price for each Nonqualified Option shall either be (i) in cash or by check
payable and acceptable to the Company, (ii) with the consent of the Committee,
by tendering to the Company shares of Common Stock owned by the person for more
than six months having an aggregate Fair Market Value as of the date of exercise
that is not greater than the full exercise price for the shares with respect to
which the Nonqualified Option is being exercised and by paying any remaining
amount of the exercise price as provided in (i) above, or (iii) with the consent
of the Committee and compliance with such instructions as the Committee may
specify, by delivering to the Company and to a broker a properly executed
exercise notice and irrevocable instructions to such broker to deliver to the
Company cash or a check payable and acceptable to the Company to pay the
exercise price and any applicable withholding taxes. Upon receipt of the cash or
check from the broker, the Company will deliver to the broker the shares for
which the Nonqualified Option is exercised. In the event that the person elects
to make payment as allowed under clause (ii) above, the Committee may, upon
confirming that the Optionee owns the number of additional shares being
tendered, authorize the issuance of a new certificate for the number of shares
being acquired pursuant to the exercise of the Nonqualified Option less the
number of shares being tendered upon the exercise and return to the person (or
not require surrender of) the certificate for the shares being tendered upon the
exercise. The date of sale of the shares by the broker pursuant to a cashless
exercise under (iii) above shall be the date of exercise of the Nonqualified
Option. If the Committee so requires, such person or persons shall also deliver
a written representation that all shares being purchased are being acquired for
investment and not with a view to, or for resale in connection with, any
distribution of such shares.
(c) Nonqualified
Options not Transferable. Except as provided below, no Nonqualified
Option granted hereunder shall be transferable other than by (i) will or by the
laws of descent and distribution or (ii) pursuant to a domestic relations order
and, during the lifetime of the Participant to whom any such Nonqualified Option
is granted, it shall be exercisable only by the Participant (or his guardian).
Any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of, or
to subject to execution, attachment or similar process, any Nonqualified Option
granted hereunder, or any right thereunder, contrary to the provisions hereof,
shall be void and ineffective, shall give no right to the purported transferee,
and shall, at the sole discretion of the Committee, result in forfeiture of the
Nonqualified Option with respect to the shares involved in such attempt. With
respect to a specific Nonqualified Option, in accordance with rules and
procedures established by the Committee from time to time, the Participant (or
his guardian) may transfer, for estate planning purposes, all or part of such
Nonqualified Option to one or more immediate family members or
related family
trusts or partnerships or similar entities as determined by the Committee. Any
Nonqualified Option that is transferred in accordance with the provisions of
this Section may only be exercised by the person or persons who acquire a
proprietary interest in the Nonqualified Options pursuant to the
transfer.
(d) Adjustment
of Nonqualified Options. In the event that at any time after the
Effective Date the outstanding shares of Common Stock are changed into or
exchanged for a different number or kind of shares or other securities of the
Company by reason of merger, consolidation, recapitalization, reclassification,
stock split, stock dividend, combination of shares or the like, proportionate
adjustments shall be made as provided in Section 1.3.
(e) Listing
and Registration of Shares. Each Nonqualified Option shall be subject to
the requirement that if at any time the Committee determines, in its discretion,
that the listing, registration, or qualification of the shares subject to such
Nonqualified Option under any securities exchange or under any state or federal
law, or the consent or approval of any governmental regulatory body, is
necessary or desirable as a condition of, or in connection with, the issue or
purchase of shares thereunder, such Nonqualified Option may not be exercised in
whole or in part unless such listing, registration, qualification, consent or
approval shall have been effected or obtained and the same shall have been free
of any conditions not acceptable to the Committee.
2.4 Option
Repricing. With stockholder approval, the Committee may grant to holders
of outstanding Nonqualified Options, in exchange for the surrender and
cancellation of such Nonqualified Options, new Nonqualified Options having
exercise prices lower (or higher with any required consent) than the exercise
price provided in the Nonqualified Options so surrendered and cancelled and
containing such other terms and conditions as the Committee may deem
appropriate. Except as contemplated by Section 2.3(d), no Nonqualified Option
may be amended to reduce the exercise price of the shares subject to such
Nonqualified Option without prior stockholder approval.
2.5 Vesting.
See Section 8.10 of the Plan for provisions on vesting in connection with
termination of Employment or service. Also, see Section 8.11 of the Plan
relating to vesting in connection with a Change in Control. Except
as provided in Section 8.10(d) with respect to death, Disability and
Retirement and Section 8.11(a) with respect to a Change in Control,
no amendment of the Plan or any Award shall be effective prior to approval by
the stockholders of the Company to the extent that the amendment provides for
accelerated vesting
other than in connection with a Change in Control.
ARTICLE
III
INCENTIVE
OPTIONS
The terms specified in this Article
III shall be applicable to all Incentive Options. Except as modified by the
provisions of this Article III, all the provisions of Article II shall be
applicable to Incentive Options. Options which are specifically designated as
Nonqualified Options shall not
be subject to the terms of this Article III.
3.1 Eligibility.
Incentive Options may only be granted to Employees of the Company or its parent
or subsidiary as defined in Sections 424(e) or (f) of the Code, as applicable,
while each such entity is a “corporation” described in Section 7701(a)(3) of the
Code and Treas. Reg. Section 1.421-1(i)(1).
3.2 Exercise
Price. Subject to Section 3.4, the exercise price per share shall not be
less than one hundred percent (100%) of the FMV Per Share as of the option date
of grant.
3.3 Dollar
Limitation. The aggregate Fair Market Value (determined as of the
respective date or dates of grant) of shares of Common Stock for which one or
more options granted to any Employee under the Plan (or any other option plan of
the Company or any Affiliate which is a parent or subsidiary as defined in Code
Sections 424(e) or (f), as applicable) may for the first time become exercisable
as Incentive Options during any one (1) calendar year shall not exceed the sum
of One Hundred Thousand Dollars ($100,000). To the extent the Employee holds two
(2) or more such options which become exercisable for the first time in the same
calendar year, the foregoing limitation on the exercisability of such options as
Incentive Options shall be applied on the basis of the order in which such
options are granted.
3.4 10%
Stockholder. If any Employee to whom an Incentive Option is granted owns
stock possessing more than ten percent (10%) of the total combined voting power
of all classes of stock of the Company or any “parent corporation” of the
Company (as defined in Section 424(e) of the Code) or any “subsidiary
corporation” of the Company (as defined in Section 424(f) of the Code), then the
exercise price per share shall not be less than one hundred ten percent (110%)
of the FMV Per Share as of the date of grant and the option term shall not
exceed five (5) years measured from the date of grant. For purposes of the
immediately preceding sentence, the attribution rules under Section 424(d) of
the Code shall apply for purposes of determining an Employee’s
ownership.
3.5 Incentive
Options Not Transferable. No Incentive Option granted hereunder (i) shall
be transferable other than by will or by the laws of descent and distribution
and (ii) except as permitted in regulations or other guidance issued under
Section 422 of the Code, shall be exercisable during the Optionee’s lifetime by
any person other than the Optionee (or his guardian).
3.6 Compliance
With Code Section 422. All Options that are intended to be incentive
stock options described in Code Section 422 shall be designated as such in the
Option grant and in all respects shall be issued in compliance with Code Section
422.
3.7 Limitations
on Exercise. Except as provided in Section 8.10(d), no Incentive Option
shall be exercisable more
than after
the earlier of (i) three (3) months after the Optionee ceases to be
an Employee for any reason other than death or Disability, or more than one (1)
year after the Optionee ceases to be an Employee due to death or Disability,
and (ii) the Option Expiration Date.
ARTICLE
IV
BONUS
STOCK
The Committee may, from time to time
and subject to the provisions of the Plan, grant shares of Bonus Stock to
Employees, Consultants and Non-Employee Directors. Such grants of Bonus Stock
shall be in consideration of performance of services by the Participant without
additional consideration except as may be required by the Committee or pursuant
to Article IX. Bonus Stock shall be shares of Common Stock that are not subject
to a Restricted Period under Article VI.
ARTICLE
V
STOCK
APPRECIATION RIGHTS
5.1 Eligibility.
The Committee is authorized to grant Stock Appreciation Rights to Employees,
Consultants and Non-Employee Directors on the following terms and
conditions.
(a) Right
to Payment. A Stock Appreciation Right shall confer on the Participant to
whom it is granted, upon exercise thereof, a right to receive shares of Common
Stock, the value of which is equal to the excess of (A) the FMV Per Share on the
date of exercise over (B) the deemed exercise price which shall be one hundred
percent (100%) of the FMV Per Share as of the date of grant
(the
Spread)
with respect to a specified number of shares of Common Stock. Notwithstanding
the foregoing, the Committee may provide, in its sole discretion, that the
Spread covered by a Stock Appreciation Right may not exceed a specified amount.
The deemed exercise price for each Stock Appreciation Right granted under
Article V shall be subject to adjustment as provided in Section 1.3 in the event
that at any time after the Effective Date the outstanding shares of Common Stock
are changed into or exchanged for a different number or kind of shares or other
securities of the Company by reason of a merger, consolidation,
recapitalization, reclassification, stock split, stock dividend, or a
combination of shares or the like.
(b) Terms.
The Committee shall determine at the date of grant the time or times at which
and the circumstances under which a Stock Appreciation Right may be exercised in
whole or in part (including based on achievement of performance goals and/or
future service requirements), the method of exercise, and any other terms and
conditions of any Stock Appreciation Right; provided, however, a Stock
Appreciation Right shall not be granted in tandem or in combination with any
other Award if that would (i) cause application of Section 409A of the Code to
the Award or (ii) result in adverse tax consequences under Section 409A of the
Code should that code section apply to the Award.
5.2 Repricing.
With stockholder approval, the Committee may grant to holders of outstanding
Stock Appreciation Rights, in exchange for the surrender and cancellation of
such Stock Appreciation Rights, new Stock Appreciation Rights having deemed
exercise prices lower (or higher with any required consent) than the deemed
exercise price provided in the Stock Appreciation Rights so surrendered and
cancelled and containing such other terms and conditions as the Committee may
deem appropriate. Except as contemplated by Section 1.3, no Stock Appreciation
Right may be amended to reduce the deemed exercise price of the shares subject
to such Stock Appreciation Right without prior stockholder
approval.
ARTICLE
VI
RESTRICTED
STOCK
6.1 Eligibility.
All Employees, Consultants and Non-Employee Directors shall be eligible for
grants of Restricted Stock.
6.2 Restrictions,
Restricted Period and Vesting.
(a) The
Restricted Stock shall be subject to such forfeiture restrictions (including,
without limitation, limitations that qualify as a “substantial risk of
forfeiture” within the meaning given to that term under Section 83 of the Code)
and restrictions on transfer by the Participant and repurchase by the Company as
the Committee, in its sole discretion, shall determine. Prior to the lapse of
such restrictions the Participant shall not be permitted to transfer such
shares. The Company shall have the right to repurchase or recover such shares
for the amount of any cash paid therefor if (i) the Participant shall terminate
Employment from or services to the Company prior to the lapse of such
restrictions or (ii) the Restricted Stock is forfeited by the Participant
pursuant to the terms of the Award.
(b) Vesting.
See Section 8.10 of the Plan for provisions on vesting in connection with
termination of Employment or service. Also, see Section 8.11 of the Plan
relating to vesting in connection with a Change in Control. Except
as provided in Section 8.10(d) with respect to death, Disability and
Retirement and Section 8.11(a) with respect to a Change in Control,
no amendment of the Plan or any Award shall be effective prior to approval by
the stockholders of the Company to the extent that the amendment provides for
accelerated vesting
other than in connection with a Change in
Control.
(c) Immediate
Transfer Without Immediate Delivery of Restricted Stock. Each certificate
representing Restricted Stock awarded under the Plan shall be registered in the
name of the Participant and, during the Restricted Period shall be left on
deposit with the Company, or in trust or escrow pursuant to an agreement
satisfactory to the Committee, along with a stock power endorsed in blank until
such time as the restrictions on transfer have lapsed. The grantee of Restricted
Stock shall have all the rights of a stockholder with respect to such shares
including the right to vote and the right to receive dividends or other
distributions paid or made with respect to such shares; provided, however, the
Committee may in the Award restrict the Participant’s right to dividends until
the restrictions on the Restricted Stock lapse. Any certificate or certificates
representing shares of Restricted Stock shall bear a legend similar to the
following:
The shares
represented by this certificate have been issued pursuant to the terms of the
TETRA Technologies, Inc. Amended
and Restated 2007 Equity
Long
Term Incentive Compensation Plan (as amended and restated) and may not be
sold, pledged, transferred, assigned or otherwise encumbered in any manner
except as is set forth in the terms of the Award dated , 20_____.
6.3 Forfeiture
of Restricted Stock. If, for any reason, the restrictions imposed by the
Committee upon Restricted Stock are not satisfied at the end of the Restricted
Period, any Restricted Stock remaining subject to such restrictions shall
thereupon be forfeited by the Participant and reacquired by the
Company.
6.4 Delivery
of Shares of Common Stock. Pursuant to Section 8.5 of the Plan and
subject to withholding requirements of Article IX of the Plan, at the expiration
of the Restricted Period, a stock certificate evidencing the Restricted Stock
(to the nearest full share) with respect to which the Restricted Period has
expired shall be delivered without charge to the Participant, or his personal
representative, free of all restrictions under the Plan.
ARTICLE
VII
PERFORMANCE
AWARDS
7.1 Performance
Awards. The Committee may grant Performance Awards based on performance
goals as set forth in Section 7.2 measured over a performance
period established
pursuant to Section 7.2(c) of the Plan of
not less than three months and not more than five years. The Committee
may use any
such business criteria and other measures of performance as set
forth in Section 7.2 as it may deem appropriate in establishing any
performance conditions. A
Performance Award granted under the Plan (i) may be denominated or payable
in cash, shares of Common Stock (including, without limitation, Restricted
Stock), other Awards or other property, and (ii) shall confer on the holder
thereof the right to receive payments, in whole or in part, upon the achievement
of one or more performance goals during such performance periods as the
Committee may establish within the provisions of this Article
VII.
7.2 Performance
Goals. The grant and/or settlement of a Performance Award shall be
contingent upon terms set forth in this Section 7.2.
(a) General.
The performance goals for Performance Awards shall consist of one or more
business criteria and a targeted level or levels of performance with respect to
each of such criteria, as specified by the Committee. In the case of any Award
granted to a Covered Employee, performance goals shall be designed to be
objective and shall otherwise meet the requirements of Section 162(m) of the
Code and regulations thereunder (including Treasury Regulations sec. 1.162-27
and successor regulations thereto), including the requirement that the level or
levels of
performance
targeted by the Committee are such that the achievement of performance goals is
“substantially uncertain” at the time of grant. The Committee may determine that
such Performance Awards shall be granted and/or settled upon achievement of any
one performance goal or that two or more of the performance goals must be
achieved as a condition to the grant and/or settlement of such Performance
Awards. Performance goals may differ among Performance Awards granted to any one
Participant or for Performance Awards granted to different
Participants.
(b) Business
Criteria. One or more of the following business criteria for the Company,
on a consolidated basis, and/or for specified subsidiaries, divisions or
business or geographical units of the Company
(except with respect to the total stockholder return and earnings per share
criteria), shall be used by the Committee in establishing performance
goals for Performance Awards granted to a Participant: (A) earnings per share;
(B) increase in price per share; (C) increase in revenues; (D) increase in cash
flow; (E) return on net
assets; (F) return on assets
investments;
(G) return on investment;
(H) return on equity; (H) return
on net capital employed; (I) economic value added; (J) gross margin;
(K) net income; (L) pre-tax
earnings; (M) pretax earnings before interest, taxes,
depreciation, depletion and amortization; (N)
pre-tax operating earnings after interest expense and before incentives, service
fees, and extraordinary or special items (M) earnings
before interest and taxes, (N) profit before taxes; (O) operating
income; (P) total stockholder return; (Q) debt reduction; and
(R) health/safety/environmental
performance; and (S) any of the above goals determined on the absolute or
relative basis or as compared to the performance of a published or special index
deemed applicable by the Committee including, but not limited to, the Standard
& Poor’s 500 Stock Index, the Oil Service Index (OSX) or components thereof
or a group of comparable companies.
(c) Performance
Period; Timing for Establishing Performance Goals. Achievement of
performance goals in respect of Performance Awards shall be measured over a
performance period of not less than three months and not more than five years,
as specified by the Committee. Performance goals in the case of any Award
granted to a Participant shall be established not later than 6090
days after the beginning of any performance period applicable to such
Performance Awards, or at such other date as may be required or permitted for
“performance-based compensation” under Section 162(m) of the
Code.
(d) Settlement
of Performance Awards; Other Terms. After the end of each performance
period, the Committee shall determine the amount, if any, of Performance Awards
payable to each Participant based upon achievement of business criteria over a
performance period. Subject
to the availability of shares of Common Stock under the Plan and limitations set
forth in Section 1.3, all Performance Awards shall be payable in shares of
Common Stock as determined in this Section 7.2(d). Except as may
otherwise be required under Section 409A of the Code, payment described in the
immediately preceding sentence shall be made by the later of (i) the date that
is 2 1/2 months after the end of the Participant’s first taxable year in which
the Performance Award is earned and payable under the Plan and (ii) the date
that is 2 1/2 months after the end of the Company’s first taxable year in which
the Performance Award is earned and payable under the Plan, and such payment
shall not be subject to any election by the Participant to defer the payment to
a later period. Subject to the limitation set forth in Section 1.3, with
respect to any Performance Award payable in shares of Common Stock, the number
of shares of Common Stock deliverable shall be determined by dividing the
amount payable under a Performance Award shall
be divided by the FMV Per Share of Common Stock on the determination date
and a stock certificate evidencing the resulting shares of Common Stock (to the
nearest full share) shall be delivered to the Participant, or his personal
representative, and the value of any fractional shares will be paid in cash.
In
the event If
at the time payment is due with respect to any Performance Award payable in
shares of Common Stock there is not a sufficient number of shares of
Common Stock available under the Plan at
the time of any payment of a Performance Award to pay such Performance
Award fully in shares of Common Stock, the Performance Award shall first be paid
in shares of Common Stock if any, as provided above with the remaining portion
of such Performance Award payable in cash. The Committee may not exercise
discretion to increase any such amount payable in respect of a
Performance Award
which is intended to comply with Section 162(m) of the Code. The Committee shall
specify the circumstances in which such Performance Awards shall be paid or
forfeited in the event of termination of employment by the Participant prior to
the end of a performance period or settlement of Performance
Awards.
(e) Written
Determinations. All determinations by the Committee as to the
establishment of performance goals, the amount of any Performance Award, and the
achievement of performance goals relating to Performance Awards shall be made in
a written agreement or other document covering the Performance Award. The
Committee may not delegate any responsibility relating to such Performance
Awards.
(f) Status
of Performance Awards Under Section 162(m) of the Code. It is the intent
of the Company that Performance Awards granted to persons who are designated by
the Committee as likely to be Covered Employees within the meaning of Section
162(m) of the Code and regulations thereunder (including Treasury Regulations
sec. 1.162-27 and successor regulations thereto) shall constitute
“performance-based compensation” within the meaning of Section 162(m) of the
Code and regulations thereunder. Accordingly, the terms of this Section 7.2
shall be interpreted in a manner consistent with Section 162(m) of the Code and
regulations thereunder. The foregoing notwithstanding, because the Committee
cannot determine with certainty whether a given Participant will be a Covered
Employee with respect to a fiscal year that has not yet been completed, the term
Covered Employee as used herein shall mean any person designated by the
Committee, at the time of grant of a Performance Award, as likely to be a
Covered Employee with respect to that fiscal year. If any provision of the Plan
as in effect on the date of adoption or any agreements relating to Performance
Awards that are intended to comply with Section 162(m) of the Code does not
comply or is inconsistent with the requirements of Section 162(m) of the Code or
regulations thereunder, such provision shall be construed or deemed amended to
the extent necessary to conform to such requirements.
ARTICLE
VIII
CERTAIN
PROVISIONS APPLICABLE TO ALL AWARDS
8.1 General.
Awards shall be evidenced by a written agreement or other document and
may be granted on the terms and conditions set forth herein. In addition, the
Committee may impose on any Award or the exercise thereof, such additional terms
and conditions, not inconsistent with the provisions of the Plan, as the
Committee shall determine, including terms requiring forfeiture of Awards in the
event of termination of employment by the Participant and terms permitting a
Participant to make elections relating to his or her Award; provided, that any
such election would not (i) cause the application of Section 409A of the Code to
the Award or (ii) create adverse tax consequences under Section 409A of the Code
should Section 409A apply to the Award. The terms, conditions and/or
restrictions contained in an Award may differ from the terms, conditions and
restrictions contained in any other Award. The Committee may amend an Award;
provided, however, subject to Section 8.11, no amendment of an Award may,
without the consent of the holder of the Award, adversely affect such person’s
rights with respect to such Award in any material respect. The Committee shall
retain full power and discretion to accelerate or waive, at any time, any term
or condition of an Award
that is not mandatory under the Plan; provided, however, that, (x) subject
to Section 8.11, the Committee shall not have any discretion to accelerate or
waive any term or condition of an Award if (iA)
such discretion would cause the Award to have adverse tax consequences to the
Participant under Section 409A of the Code or (iiB)
if the Award is intended to qualify as “performance-based compensation” for
purposes of Section 162(m) of the Code and such discretion would cause the Award
not to so qualify.
In addition and
(y) no such
exercise of such
discretion shall be effective prior to approval by
of
the stockholders of the Company to the extent that
such discretion would result in the
acceleration of vesting other than upon
the death, Disability or Retirement of a Participant or in connection
with a Change in Control. Except in cases in which the Committee is authorized
to require other forms of consideration under the Plan, or to the extent
other forms of
consideration must be paid to satisfy the requirements of the Delaware
Corporation Law, no consideration other than services may be required for the
grant of any Award.
8.2 Stand-Alone,
Additional and Substitute Awards.
(a) Awards
Granted by the Company and Affiliates. Subject to the limitations on
repricing set forth below and in Sections 2.4 and 5.2 of the Plan, Awards
granted under the Plan may, in the discretion of the Committee, be granted
either alone or in addition to, or in substitution or exchange for, any other
Award or any award granted under another plan of the Company or any Affiliate,
or any other right of a Participant to receive payment from the Company or any
Affiliate; provided, however, no Award shall be issued under
the Plan if issuance of the Award in
tandem with another Award under the Plan or in tandem or in connection with any
award granted under another plan of the Company or any Affiliate, or any other
right of a Participant to receive payment from the Company or any Affiliate if
such an issuance would result in adverse tax consequences under Section
409A of the Code. Such additional, substitute or exchange Awards may be granted
at any time. If an Award is granted in substitution or exchange for another
Award, the Committee shall require the surrender of such other Award for
cancellation in consideration for the grant of the new Award. In addition,
Awards may be granted in lieu of cash compensation, including in lieu of cash
amounts payable under other plans of the Company or any Affiliate. Any such
action contemplated under this Section 8.2(a) shall be effective only to the
extent that such action will not cause (i) the holder of the Award to lose the
protection of Section 16(b) of the Exchange Act and rules and regulations
promulgated thereunder, (ii) any Award that is designed to qualify payments
thereunder as performance-based compensation as defined in Section 162(m) of the
Code to fail to qualify as such performance-based compensation, (iii) any Award
that is subject to Section 409A of the Code to result in adverse consequences
under Section 409A of the Code, or (iv) accelerated vesting of any
Award other than in connection with the
death, Disability or Retirement of the Participant or a Change in
Control, absent approval by the stockholders of the Company. In
addition, except in connection with a corporate transaction involving the
Company (including, without limitation, any stock dividend, stock split,
extraordinary cash dividend, recapitalization, reorganization, merger,
consolidation, split-up, spin-off, combination, or exchange of shares), the
terms of outstanding Awards may not be amended to reduce the exercise price of
outstanding Options or Stock Appreciation Rights or to cancel outstanding
Options or Stock Appreciation Rights in exchange for cash, other Awards or
Options or Stock Appreciation Rights with an exercise price that is less than
the exercise price of the original Options or Stock Appreciation Rights without
prior stockholder approval.
(b) Substitute
Awards for Awards Granted by Other Entities. The Committee
shall have the authority to grant substitute Awards under the Plan in assumption
of, or in substitution or exchange for, any options or awards previously granted
by another entity that are transferred to the Company or an Affiliate as a
result of the acquisition of, or merger, consolidation or other corporate
transaction with, such other entity by the Company or an
Affiliate. The number of shares of Common Stock covered by any such
substitute Awards shall not reduce, or otherwise be counted against, the
aggregate number of shares of Common Stock available for grant under the
Plan. Except as otherwise provided by applicable law and
notwithstanding anything in the Plan to the contrary, the terms, provisions and
benefits of the substitute Awards so granted, including, without limitation, the
exercise price of any such substitute Award, may vary from those set forth in or
required by the Plan to the extent the Committee at the time of grant may deem
appropriate to conform, in whole or in part, to the terms, provisions and
benefits of the options or awards being assumed or replaced. In
addition, the date of grant of any substitute Award shall relate back to the
initial option or award being assumed or replaced, and service with the acquired
entity shall constitute service with the Company or its
Affiliate.
8.3 Term
of Awards. The term or Restricted Period of each Award that is an Option,
Stock Appreciation Right or Restricted Stock shall be for such period as may be
determined by the
Committee; provided that in no event
shall the term of any such Award exceed a period of ten (10) years (or such
shorter terms as may be required in respect of an Incentive Stock Option under
Section 422 of the Code).
8.4 Form
and Timing of Payment Under Awards; Deferrals.
(a) General
Provisions. Subject to the terms of the Plan and any applicable Award
agreement, payments to be made by the Company or a subsidiary upon the exercise
of an Option or other Award or settlement of an Award may be made in such
form or forms as the Committee shall determine, including, without limitation,
cash, shares of Common Stock, other Awards or other property or any combination
thereof, and may be made as a single payment or transfer, in
installments, or on a deferred basis. The settlement of any Award may, subject
to any limitations set forth in the Plan and/or Award agreement, be accelerated,
in the discretion of the Committee or upon occurrence of one or more specified
events; provided, however, that such discretion may not be exercised by the
Committee if the exercise of such discretion would result in adverse tax
consequences to the Participant under Section 409A of the Code. Installment or
deferred payments may be required or permitted by the Committee (subject to
Section 1.8 of the Plan, including the consent provisions thereof in the case of
any deferral of an outstanding Award not provided for in the original Award
agreement); provided, however, that no deferral shall be required or permitted
by the Committee if such deferral would result in adverse tax consequences to
the Participant under Section 409A of the Code. Any deferral shall only be
allowed as is provided in a separate deferred compensation plan adopted by the
Company. The Plan shall not constitute an “employee benefit plan” for purposes
of Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended.
(b) Section
409A Limits on Payments to Specified Employees. Notwithstanding any other
provision of the Plan or an Award to the contrary, if a Participant is a “key
employee,” as defined in Section 416(i) of the Code (without regard to paragraph
5 thereof), except to the extent permitted under Section 409A of the Code, no
benefit or payment that is subject to Section 409A of the Code (after taking
into account all applicable exceptions to Section 409A of the Code, including
but not limited to the exceptions for short-term deferrals and for “separation
pay only upon an involuntary separation from service”) shall be made under this
Plan or the affected Award granted thereunder on account of the Participant’s
“separation from service,” as defined in Section 409A of the Code, with the
Company and its Affiliates until the later of the date prescribed for payment in
this Plan or the affected Award granted thereunder and the first (1st) day of
the seventh (7th) calendar month that begins after the date of the Participant’s
separation from service (or, if earlier, the date of death of the
Participant). Unless otherwise provided in the Award, any amount that
is otherwise payable within the delay period described in the immediately
preceding sentence will be aggregated and paid in a lump sum without
interest.
8.5 Vested
and Unvested Awards. After the satisfaction of all of the terms and
conditions set by the Committee with respect to an Award of (i) Restricted
Stock, a certificate, without the legend set forth in Section 6.2(c), for the
number of shares that are no longer subject to such restrictions, terms and
conditions shall be delivered to the Employee, and (ii) Stock Appreciation
Rights or Performance Awards to
be paid in shares of Common Stock, a certificate for the number of shares
equal in value to the number of Stock Appreciation Rights or amount of
Performance Awards payable under those Awards shall be delivered to the person.
The number of shares of Common Stock which shall be issuable upon exercise of a
Stock Appreciation Right or earning of a Performance Award to
be paid in shares of Common Stock shall be determined by dividing (1) by
(2) where (1) is the number of shares of Common Stock as to which the Stock
Appreciation Right is exercised multiplied by the Spread or the amount of
Performance Award that is earned and payable, as applicable, and (2) is the FMV
Per Share of Common Stock on the date of exercise of the Stock Appreciation
Right or the date the Performance Award is determined to be earned and payable,
as applicable. Upon termination, resignation or removal of a Participant
under
circumstances that
do not cause such Participant to become fully vested, any remaining unvested
Options, shares of Restricted Stock, Stock Appreciation Rights or Performance
Awards, as the case may be, shall,
unless otherwise provided in this Plan, either be forfeited back to the
Company or, if appropriate under the terms of the Award, shall continue to be
subject to the restrictions, terms and conditions set by the Committee with
respect to such Award.
8.6 Exemptions
from Section 16(b) Liability. It is the intent of the Company that the
grant of any Awards to or other transaction by a Participant who is subject to
Section 16 of the Exchange Act shall be exempt from Section 16(b) of the
Exchange Act pursuant to an applicable exemption (except for transactions
acknowledged by the Participant in writing to be non-exempt). Accordingly, if
any provision of this Plan or any Award agreement does not comply with the
requirements of Rule 16b-3 as then applicable to any such transaction, such
provision shall be construed or deemed amended to the extent necessary to
conform to the applicable requirements of Rule 16b-3 so that such Participant
shall avoid liability under Section 16(b) of the Exchange
Act.
8.7 Transferability.
(a) Non-Transferable
Awards and Options. Except as otherwise specifically provided in the
Plan, no Award and no right under the Plan, contingent or otherwise, other than
Bonus Stock or Restricted Stock as to which restrictions have lapsed, will be
(i) assignable, saleable, or otherwise transferable by a Participant except by
will or by the laws of descent and distribution or pursuant to a qualified
domestic relations order, or (ii) subject to any encumbrance, pledge or charge
of any nature. No transfer by will or by the laws of descent and distribution
shall be effective to bind the Company unless the Committee shall have been
furnished with a copy of the deceased Participant’s will or such other evidence
as the Committee may deem necessary to establish the validity of the transfer.
Any attempted transfer in violation of this Section 8.7(a) shall be void and
ineffective for all purposes.
(b) Ability
to Exercise Rights. Except as otherwise specifically provided under the
Plan, only the Participant or his guardian (if the Participant becomes
Disabled), or in the event of his death, his legal representative or
beneficiary, may exercise Options, receive cash payments and deliveries of
shares, or otherwise exercise rights under the Plan. The executor or
administrator of the Participant’s estate, or the person or persons to whom the
Participant’s rights under any Award will pass by will or the laws of descent
and distribution, shall be deemed to be the Participant’s beneficiary or
beneficiaries of the rights of the Participant hereunder and shall be entitled
to exercise such rights as are provided hereunder.
8.8 Rights
as a Stockholder.
(a) No
Stockholder Rights. Except as otherwise provided in Section 8.8(b) or
Section 6.2(c), a Participant who has received a grant of an Award or a
transferee of such Participant shall have no rights as a stockholder with
respect to any shares of Common Stock until such person becomes the holder of
record. Except as otherwise provided in Section 8.8(b) or Section 1.3, no
adjustment shall be made for dividends (ordinary or extraordinary, whether in
cash, securities, or other property) or distributions or other rights for which
the record date is prior to the date such stock certificate is
issued.
(b) Holder
of Restricted Stock. Unless otherwise approved by the Committee prior to
the grant of a Restricted Stock Award, a Participant who has received a grant of
Restricted Stock or a permitted transferee of such Participant shall not have
any rights of a stockholder until such time as a stock certificate has been
issued with respect to all, or a portion of, such Restricted Stock Award, except
as otherwise provided in Section 6.2(c).
8.9 Listing
and Registration of Shares of Common Stock. The Company, in its
discretion, may postpone the issuance and/or delivery of shares of Common Stock
upon any exercise of an Award until completion of such stock exchange listing,
registration, or other qualification of such shares under any state and/or
federal law, rule or regulation as the Company may consider appropriate, and may
require any Participant to make such representations and furnish such
information as it may consider appropriate in connection with the issuance or
delivery of the shares in compliance with applicable laws, rules and
regulations.
8.10 Termination
of Employment, Death, Disability and Retirement.
(a) Termination
of Employment
or Service.
Unless otherwise provided in the Award, if Employment of an Employee or
service of a Non-Employee Director is
terminated for any reason whatsoever other than death, Disability or Retirement,
or if service of a or
Consultant is terminated for any reason whatsoever other than death,
Disability
or Retirement, any nonvested Award granted pursuant to the Plan
outstanding at the time of such termination and all rights thereunder shall
wholly and completely terminate and no further vesting shall occur, and the
Employee, Consultant or Non-Employee Director shall be entitled to utilize his
or her exercise rights with respect to the portion of the Award vested as of the
date of termination for a period that shall end on the earlier of (i) the
expiration date set forth in the Award with respect to the vested
portion of such Award or (ii) the date that occurs three (3) months after such
termination date.
(b) Retirement.
Unless otherwise provided in the Award, upon the Retirement of an
Employee or, if applicable, Non-Employee Director a
Participant:
(i) any
nonvested portion of any outstanding Award shall immediately terminate and no
further vesting shall occur; and
(ii) any
exercise rights with respect to any vested Award shall expire on the earlier of
(A) the expiration date set forth in the Award; or (B) the expiration of twelve
(12) months after the date of Retirement.
(c) Disability
or Death. Unless otherwise provided in the Award, upon termination of
Employment or service from the Company or any Affiliate which is a parent or
subsidiary as a result of Disability of
an Employee or Non-Employee Director or death of an
Employee, Non-Employee Director or Consultant a
Participant, or with respect to a Participant who is either a retired
former Employee
or,
Non-Employee Director or
Consultant who dies during the period described in Section 8.10(b),
hereinafter the “Applicable Retirement Period,” or a disabled former
Employee
or,
Non-Employee Director or
Consultant who dies during the period that expires on the earlier of the
expiration date set forth in any applicable outstanding Award or the first
anniversary of the person’s termination of Employment or service due to
Disability, hereinafter the “Applicable Disability Period,”
(i) any
nonvested portion of any outstanding Award that has not already terminated shall
immediately terminate and no further vesting shall occur;
and
(ii) any
exercise rights with respect to any vested Award shall expire upon the earlier
of (A) the expiration date set forth in the Award or (B) the later of (1) the
first anniversary of such termination of Employment or
service as a result of Disability or death, or (2) the first anniversary
of such person’s death during the Applicable Retirement Period (except in the
case of an Incentive Option) or the Applicable Disability
Period.
(d) Acceleration
of Vesting and Lapse of Restrictions. Notwithstanding
the above provisions of this Section 8.10, upon the Retirement of a Participant,
or upon termination of Employment or service as a result of the Disability or
death of a Participant, the Committee, in its discretion and on an individual
basis, may provide (i) with respect to any Stock Option or Stock Appreciation
Right, that all or a part of the unvested portion of such Award shall become
vested and, together with the previously vested portion of the Award, shall be
exercisable for such period and upon such terms and conditions as may be
determined by the Committee, provided that such continuation may not exceed the
expiration date set forth in the Award; and, (ii) with respect to Restricted
Stock, that all or a part of the unvested portion of the Award shall become
vested; provided, however, that (A) if the Award is to a Covered Employee
and intended to qualify as “performance-based compensation” under
Section 162(m) of the Code, such acceleration of vesting and waiver of
restrictions may only occur upon a termination due to death or Disability,
(B) with respect to Awards that are subject to Section 409(A) of the
Code, the Committee shall not have the authority to accelerate the vesting or
waive any restrictions, or postpone the timing of payment or settlement of the
Award in a manner that would cause such Award to become subject to the interest
and penalty provisions under Section 409A of the Code, and (C) no
acceleration of vesting described in this Section 8.10(d) shall be effective
prior to the date of the Committee’s written
determination.
(de) Continuation.
Notwithstanding any other provision of the Plan, the Committee, in its
discretion and on an individual basis, may provide with respect to any Stock
Option or Stock Appreciation Right, that the vested portion of such Award shall
remain exercisable for such period and upon such terms and conditions as are
determined by the Committee in the event that a Participant ceases to be an
Employee, Consultant or Non-Employee Director; provided, however, that such
continuation may not exceed the expiration date set forth in the
Award.
8.11 Change
in Control
(a) Change
in Control. Unless otherwise provided in the Award, in the event of a
Change in Control described in clauses (ii), (iii) and (iv) of the definition of
Change in Control under Section 1.2 of the Plan:
(i) the
Committee may accelerate vesting and the time at which all Options and Stock
Appreciation Rights then outstanding may be exercised so that those types of
Awards may be exercised in full for a limited period of time on or before a
specified date fixed by the Committee, after which specified date all
unexercised Options and Stock Appreciation Rights and all rights of Participants
thereunder shall terminate, or the Committee may accelerate vesting and the time
at which Options and Stock Appreciation Rights may be exercised so that those
types of Awards may be exercised in full for their then remaining
term;
(ii) the
Committee may waive all restrictions and conditions of all Restricted Stock then
outstanding with the result that all restrictions shall be deemed satisfied, and
the Restriction Period shall be deemed to have expired, as of the date of the
Change in Control or such other date as may be determined by the Committee;
and
(iii) the
Committee may determine to amend Performance Awards, or substitute new
Performance Awards in consideration of cancellation of outstanding Performance
Awards, in order to ensure that such Awards shall become fully vested, deemed
earned in full and promptly paid to the Participants as of the date of the
Change in Control or such other date as may be determined by the Committee,
without regard to payment schedules and notwithstanding the applicable
performance cycle, retention cycle or other restrictions and conditions shall
not have been completed or satisfied.
Notwithstanding the
above provisions of this Section 8.11(a), the Committee shall not be required to
take any action described in the preceding provisions of this Section 8.11(a)
and any decision made by the Committee, in its sole discretion, not to take some
or all of the actions described in the preceding provisions of this Section
8.11(a) shall be final, binding and conclusive with respect to the Company and
all other interested persons.
(b) Right
of Cash-Out. If approved by the Board prior to or within thirty (30) days
after such time as a Change in Control shall be deemed to have occurred, the
Board shall have the right for a forty-five (45) day period immediately
following the date that the Change in Control is deemed to have occurred to
require all, but not less than all, Participants to transfer and deliver to the
Company all Awards previously granted to the Participants in exchange for an
amount equal to the “cash value” (defined below) of the Awards. Such right shall
be exercised by written notice to all Participants. For purposes of this Section
8.11(b), the cash value of an Award shall equal the sum of (i) the cash value of
all benefits to which the Participant would be entitled upon settlement or
exercise of any Award which is not an Option or Restricted Stock and (ii) in the
case of any Award that is an Option or Restricted Stock, the excess of the
“market value” (defined below) per share over the option price, or the market
value (defined below) per share of Restricted Stock, multiplied by the number of
shares subject to such Award. For purposes of the preceding sentence, “market
value” per share shall mean the higher of (i) the average of the Fair Market
Value Per Share of Common Stock on each of the five trading days immediately
following the date a Change in Control is deemed to have occurred or (ii) the
highest price, if any, offered in connection with the Change in Control. The
amount payable to each Participant by the Company pursuant to this Section
8.11(b) shall be in cash or by certified check and shall be reduced by any taxes
required to be withheld.
ARTICLE
IX
WITHHOLDING
FOR TAXES
Any issuance or delivery of Common
Stock pursuant to the exercise of an Option or in payment of any other Award
under the Plan shall not be made until appropriate arrangements satisfactory to
the Company have been made for the payment of any tax amounts (federal, state,
local or other) that may be required to be withheld or paid by the Company with
respect thereto at the minimum statutory rate. Such arrangements may, at the
discretion of the Committee, include allowing the person to tender to the
Company shares of Common Stock owned by the person for a period of at least
twelve months prior to the date of exercise, vesting, lapse of restriction or
payment of the Award, or to request the Company to withhold shares of Common
Stock otherwise issuable or deliverable to the Participant pursuant to the
Award, in each case which have an aggregate FMV Per Share as of the date of such
withholding that is not greater than the sum of all tax amounts to be withheld
with respect thereto at the minimum statutory rate, together with payment of any
remaining portion of such tax amounts in cash or by check payable and acceptable
to the Company.
ARTICLE
X
MISCELLANEOUS
10.1 No
Rights to Awards or Uniformity Among Awards. No Participant or other
person shall have any claim to be granted any Award, there is no obligation for
uniformity of treatment of Participants, or holders or beneficiaries of Awards
and the terms and conditions of Awards need not be the same with respect to each
recipient.
10.2 Conflicts
with Plan. In the event of any inconsistency or conflict between the
terms of the Plan and an Award, the terms of the Plan shall
govern.
10.3 No
Right to Employment. The grant of an Award shall not be construed as
giving a Participant the right to be retained in the employ of the Company or
any Affiliate. Further, the Company or any Affiliate may at any time dismiss a
Participant from employment, free from any liability or any claim under the
Plan, unless otherwise expressly provided in the Plan or in any
Award.
10.4 Governing
Law. The validity, construction, and effect of the Plan and any rules and
regulations relating to the Plan shall be determined in accordance with
applicable federal law and the laws of the State of Delaware, without regard to
any principles of conflicts of law.
10.5 Gender,
Tense and Headings. Whenever the context requires such, words of the
masculine gender used herein shall include the feminine and neuter, and words
used in the singular shall include the plural. Section headings as used herein
are inserted solely for convenience and reference and constitute no part of the
Plan.
10.6 Severability.
If any provision of the Plan or any Award is or becomes or is deemed to
be invalid, illegal, or unenforceable in any jurisdiction or as to any
Participant or Award, or would disqualify the Plan or any Award under any law
deemed applicable by the Committee, such provision shall be construed or deemed
amended to conform to the applicable laws, or if it cannot be construed or
deemed amended without, in the determination of the Committee, materially
altering the intent of the Plan or the Award, such provision shall be stricken
as to such jurisdiction, Participant or Award and the remainder of the Plan and
any such Award shall remain in full force and effect.
10.7 Stockholder
Agreements. The Committee may condition the grant, exercise or payment of
any Award upon such person entering into a stockholders’ or repurchase agreement
in such form as approved from time to time by the Board.
10.8 Funding.
Except as provided under Article VI of the Plan, no provision of the Plan shall
require or permit the Company, for the purpose of satisfying any obligations
under the Plan, to purchase assets or place any assets in a trust or other
entity to which contributions are made or otherwise to segregate any assets, nor
shall the Company maintain separate bank accounts, books, records or other
evidence of the existence of a segregated or separately maintained or
administered fund for such purposes. Participants shall have no rights under the
Plan other than as unsecured general creditors of the Company except that
insofar as they may have become entitled to payment of additional compensation
by performance of services, they shall have the same rights as other Employees,
Consultants or Non-Employee Directors under general law.
10.9 No
Guarantee of Tax Consequences. None of the Board, the Company nor the Committee makes any
commitment or guarantee that any federal, state or local tax treatment will
apply or be available to any person participating or eligible to participate
hereunder.