PROPOSAL 1
ELECTION OF DIRECTORDIRECTORS
Our board of directors currently consists of five directors. Our board of directors is divided into three separate classes (Class I, Class II and Class III) with staggered terms. The current term of office for our Class I directorsIII director will expire at the annual meeting.
Our board of directors has nominated Mr. Burkhardt,Rauh, who currently serves as a director,on the board of directors, as the sole nominee for election at the annual meeting as a Class IIII director. Mr. BurkhardtRauh has served as one of our directors since October 2001.
Mr. James M. Tidwell served as a Class I director until his resignation from the board of directors on September 28, 2007. Mr. Michael F. Harness, the remaining Class I director, has decided not to stand for re-election as a director of Pioneer when his term expires at the 2008 Annual Meeting of Shareholders, due to increased time demands related to his other business interests. In accordance with our bylaws, our board of directors has reduced the number of directors from five to four effective upon the expiration of Mr. Harness’ term at the annual meeting and, therefore, no replacement nominee has been named. Accordingly, proxies cannot be voted for nominees other than Mr. Burkhardt. The terms of the other directors will continue after the annual meeting as indicated below.
The board of directors is involved in a search for one or more additional qualified directors. While the board of directors has not selected an additional director at the time this proxy statement is being mailed, the board of directors intends to continue its search and may appoint a director prior to the annual shareholders meeting in 2009. Texas law and our bylaws require that any director elected by the board of directors in such manner serve only until the next election of directors by the shareholders.
2008.Assuming the presence of a quorum, directors shall be elected by a plurality of the votes cast by the holders of shares of capital stock of Pioneer entitled to vote on the election of directors at the annual meeting. Any abstentions or broker non-votes will not affect the vote.If you properly sign and return the enclosed proxy, unless you withhold authority to vote for the nominee, the persons named as proxies will vote FOR the election of the nominee listed below.We do not expect that the nominee will refuse or be unable to act as a director. If, however, the nominee becomes unable or unwilling to serve as a director, the persons named as proxies intend to vote the proxy shares for the election of any other person the board of directors may designate.
| | | | |
Class III Director Nominee
for Election to a Term Expiring
at the 2013 Annual Meeting | | Age | | Position Held |
John Michael Rauh | | |
Nominee Class I Director Whose
| | | | |
Term Expires
| | | | |
at the 2008 Annual Meeting
| | Age
| | Position(s) Held
|
|
Dean A. Burkhardt | | | 57 | 60 | | Director |
John Michael Rauh has served as one of our directors since October 2008. Mr. Rauh served as Vice President and Corporate Controller of Kerr-McGee Corporation from 2001 until his retirement in 2006, where he was responsible for worldwide accounting, tax and Sarbanes-Oxley 404 compliance. He also served as a Founding Director of Kerr-McGee’s chemical operations spin-off. Mr. Rauh joined Kerr-McGee in 1981 and served in varying capacities, including Vice President and Treasurer, Vice President and Controller, and Assistant Controller. Prior to joining Kerr-McGee, Mr. Rauh was an auditor with Arthur Young & Company, which merged with Ernst & Whinney in 1989 to form Ernst & Young. He received a master’s degree in accounting from Oklahoma State University and a bachelor’s degree in accounting and economics from Northwestern Oklahoma State University. Mr. Rauh served as a director of Tronox, Inc. from 2005 to 2006. Mr. Rauh, along with other former officers and directors of Kerr-McGee, and various other corporate and individual defendants, have been named as a defendant in a litigation pending in the United States District Court, Southern District of New York, captioned In Re Tronox, Inc., Securities Litigation, 1:09-cv-06220-SAS. The consolidated complaint asserts securities law claims under Sections 10(b) and 20(a) of the Securities Exchange Act. A motion to dismiss the action is pending.
Mr. Rauh’s expertise in a variety of financial and accounting matters, experience in Sarbanes-Oxley 404 compliance and service with a global oil and gas business make him a valuable member of the board of directors and enhances the value of his service as a member of the Audit Committee, where he also qualifies as an “audit committee financial expert.” Mr. Rauh’s bachelor’s and master’s degrees in accounting enable him to advise the Board on accounting-related matters. Mr. Rauh’s experience at a global oil and gas company provide him with insights relating to many of the same issues we face in our business, including markets, operational, regulatory, technological, and financial. Mr. Rauh’s significant experience in several senior financial positions at Kerr-McGee, as well as his previous service as an auditor with an accounting firm, provides a solid platform for him to advise and consult with the board of directors on financial and audit-related matters.
Our board of directors unanimously recommends a vote “FOR” the election of John Michael Rauh as a Class III Director.
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DIRECTORS WITH A TERM EXPIRING IN 2011
| | | | |
Class I Directors Whose
Term Expires
at the 2011 Annual Meeting | | Age | | Position Held |
Dean A. Burkhardt | | 59 | | Chairman |
| | |
Scott D. Urban | | 56 | | Director |
Dean A. Burkhardthas served as one of our directors since October 26, 2001.2001 and Chairman since May 2008. In addition to his role as a horse and cattle rancher, Mr. Burkhardt has been a consultant to the energy services industry since 1997 with a special emphasis in oil and gas projects in emerging markets, workover services, fuel cells and engineering and quality management services. He also served as co-founder, President and CEO(1983-1985) of Applied Petroleum Software, a provider of production engineering software for optimizing oil and gas well completions; President and CEO of Seismic Products (1982), Cliff Mock, Inc. (1982) and Tescorp Energy Services(1981-1982) as well as President and COO of Tescorp, Inc. (1982); was a co-founder (1979), Executive Vice President of Sales and Operations(1979-1981) and a director(1979-1989) of Cheyenne Services, Inc., a provider of oilfield tubular makeup, tubular inspection and third party quality assurance services.
OurAs a result of Mr. Burkhardt’s service as a director of the Company for over 8 years, he has become very familiar with our business and the important issues facing the Company. Mr. Burkhardt’s experience as a consultant in the energy services industry makes him a valuable member of the board of directors. Mr. Burkhardt serves as a member of the Audit Committee and qualifies as an “audit committee financial expert.” Mr. Burkhardt also holds a master’s degree in international management, with an emphasis in marketing and accounting from the American Graduate School of International Management and regularly attends seminars on accounting and financial matters, which enables him to provide guidance to the board of directors unanimously recommendsrelated to the Company’s international development and accounting-related matters. Mr. Burkhardt’s significant experience with several companies involved in the oil and gas industry gives him insights relating to many of the same issues we face in our business and provides a vote “FOR”solid platform for him to advise and consult with the electionboard of Dean A. Burkhardtdirectors on such issues, including oil and gas projects in emerging markets, workover services, fuel cells and engineering and quality management services.
Scott D. Urban has served as one of our directors since October 2008. Mr. Urban is a partner in Edgewater Energy Partners, a consulting firm focused on the oil and gas exploration and production industry and assisting private equity firms with upstream investments. Mr. Urban served as Group Vice President, Upstream, for BP PLC from 2004 to 2005 and served as BP’s Group Vice President, North Sea Operations, from 2000 to 2004. Prior to joining BP, Mr. Urban held a variety of management positions with Amoco Corporation, including Group Vice President, Worldwide Exploration and Upstream Business Unit Manager, China. Mr. Urban received a master’s degree in geology and a Bachelor’s Degree in earth science from Bowling Green State University. Mr. Urban currently serves on the board of directors of Noble Energy, Inc. and has served as a Class I Director.
5Mr. Urban’s expertise as a consultant in the oil and gas exploration and production industry makes him a valuable member of the board of directors. Mr. Urban’s significant experience at multiple global oil and gas companies provide him with insights relating to many of the same issues we face in our business, including markets, operational, regulatory, technological, and financial. Mr. Urban’s master’s degree in geology gives him a deep understanding of, and enables him to advise the board of directors on, many matters relating to oil and gas drilling. Mr. Urban’s service as a member of the board of directors of Noble Energy, Inc. gives him valuable experience in managing the issues that face a publicly held oil and gas company with international operations and allows him to share best practices with the board of directors.
DIRECTORS WITH TERMSA TERM EXPIRING IN 20092012
| | | | | | |
Class II Directors Whose
Term Expires
at the 2012 Annual Meeting | | Age | | Position(s) Held |
Terms Expire
Wm. Stacy Locke | | | | |
at the 2009 Annual Meeting
| | Age
| | Position(s) Held
|
|
Wm. Stacy Locke | | | 52 | 54 | | President, Chief
Executive Officer
and Director |
| | |
C. John Thompson | | | 55 | 57 | | Director |
Wm. Stacy Lockehas served as one of our directors as well as President of the company since May 1995, when he joined Pioneer. In December 2003, Mr. Locke was appointed Chief Executive Officer. In addition to his continuous role as President, Mr. Locke has also served as Chief Financial Officer and Chief Operating Officer. Prior to joining Pioneer, Mr. Locke was in investment banking with Arneson, Kercheville, Erhenberg & Associates from 1993 to 1995 and Chemical Banking Corporation from 1988 to 1992.
Mr. Locke worked for Tesoro Petroleum Corporation and Valero Energy Corporation as a geologist from 1979 to 1982. Mr. Locke received a Bachelor’s Degree in geology from the University of California Santa Barbara and a Master of Business Administration Degree from Southern Methodist University.Mr. Locke’s fifteen years of experience at Pioneer, including his service as Chief Executive Officer for seven years, gives him unique knowledge of the opportunities and challenges associated with our business. Mr. Locke’s familiarity with all aspects of Pioneer’s business and his historical understanding of its operations, combined with his understanding of the oil and gas industry, geology and investment banking makes him uniquely qualified to advise the board of directors and to lead Pioneer as Chief Executive Officer.
C. John Thompsonhas served as one of our directors since May 2001. Mr. Thompson currently serves as Chairman and Chief Executive Officer of Ventana Capital Advisors, Inc., a capital advisory company he founded in June 2004. Mr. Thompson servedhas over thirty years experience in the energy capital business. Mr. Thompson has worked as a Vice Presidentbusiness consultant, in the energy capital business with Enron, the investment banking services business with a company he co-founded, Sagestone Capital Partners, and as the manager of Constellation Energy, a position he held from August 2003 to May 2004.the energy commercial banking business with InterFirst Bank in Houston.
As one of Pioneer’s longest-serving non-executive directors, Mr. Thompson wasbrings an important institutional knowledge to the board of directors. His work as an executive in the oil and gas industry, and his experience in the energy capital business including more than ten years in energy commercial banking, provides him with insights relating to many of the same issues facing our business, including markets, operational, regulatory, technological, and financial. Mr. Thompson also serves as a member of the Audit Committee and qualifies as an “audit committee financial expert.” Mr. Thompson holds a master’s degree in business administration with an emphasis in finance and accounting from the University of Texas at Austin, which enables him to provide guidance to the Board on finance and accounting-related matters. Mr. Thompson’s experience as founder of a capital advisory company and as a consultant from December 2001 to August 2003.
DIRECTOR WITH TERM EXPIRING IN 2010
| | | | | | |
Class III Director Whose Term Expires
| | | | |
at the 2010 Annual Meeting
| | Age
| | Position Held
|
|
C. Robert Bunch | | | 53 | | | Chairman |
C. Robert Bunchhas served as one of our directors since May 2004 and as our Chairman ofprovides the board since January 2007. Mr. Bunch is currently the Chairmanof directors with a unique perspective into different industries and Chief Executive Officeran understanding of Global Tubing LLC, a private company organized to manufacture and sell coiled tubing products for various energy applications. Mr. Bunch served as Chairman and Chief Executive Officer of Maverick Tube Corporation, a leading provider of oil country tubular goods, line pipe and other tubular products, from October 2004 to October 2006. He was an independent oil service consultant and investor from June 2003 to October 2004. From November 1999 to May 2003, Mr. Bunch held various executive positions with Input / Output, Inc., a leading provider of geophysical equipment and services, including President and Chief Operating Officer from January 2003 until May 2003. In addition to Pioneer, Mr. Bunch is a director of Global Tubing, LLC, Olin Corporation (NYSE: OLN), Sub-One Technology, Inc. and Z-Seis Corporation.
capital strategies.There are no family relations of first cousin or closer among our directors or executive officers by blood, marriage or adoption. The board has determined that all of our directors are independent directors, as defined by the rules of the American Stock Exchange, or AMEX,NYSE Amex, other than Mr. Locke who, as President and Chief Executive Officer, is an employee of Pioneer.
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INFORMATION CONCERNING MEETINGS
AND COMMITTEES OF THE BOARD OF DIRECTORS
Our board of directors held teneight meetings and acted by written consent fiveseven times during the nine-month fiscal year ended December 31, 2007. It2009. The board has three standing committees: an audit committee; a compensation committee; and a nominating and corporate governance committee. During the nine-month fiscal year ended December 31, 2007, each member2009, all of the boarddirectors attended all100% of the total number of meetings of the board and any committee on which heeach served. In addition, the independent directors also held regular meetings consisting solely of independent directors during the nine-month fiscal year ended December 31, 2007.2009.
Independent Chairman of the Board
Our board of directors has separated the roles of Chairman and Chief Executive Officer. The separation of roles was implemented to allow our Chief Executive Officer, Mr. Locke, to focus on the management of the Company and our independent Chairman to focus on the continued development of a high-performing board of directors, including (i) developing board agendas, (ii) working with Company management to ensure the board of directors has timely and adequate information, (iii) coordinating board committee activities, (iv) supporting and mentoring the Chief Executive Officer and (v) ensuring effective stakeholder communications. Among the duties and responsibilities of our independent Chairman are the following:
presiding at all meetings of the board, including executive sessions of the independent directors and non-management directors;
assisting in the preparation of agendas and schedules, including agenda items and time allocations, for all meetings of the board of directors and its committees;
promoting an environment of open, transparent, two-way communications between the board and senior management;
communicating with senior management to align board of directors and management priorities;
promoting an active, on-going succession process for the board of directors and senior management positions;
promoting, with senior management, the enterprise risk management process;
supporting senior management in promoting high ethical standards in all Company and board directors dealings; and
overseeing the implementation of the strategic planning processes.
Audit Committee
Messrs. Bunch (Chairman), Burkhardt, Thompson and Tidwell served onDuring the audit committee during the nine-month fiscal year ended December 31, 2007.2009, Messrs. Burkhardt, Thompson and Rauh (chairman) served on the audit committee. Mr. TidwellBurkhardt served as the Chairmanchairman of the audit committee until his resignation from the board of directors on September 28, 2007,May 15, 2009, at which time Mr. BunchRauh was appointed aschairman of the Chairman.audit committee. The audit committee met threesix times during the nine-month fiscal year ended December 31, 2007.2009. The audit committee is governed by a charter that the board adoptedof directors amended and restated on November 29, 2004.December 11, 2008. You can obtain a copy of that charter by making a request for a copy to our Corporate Secretary or by going to our Web site atwww.pioneerdrlg.com.www.pioneerdrlg.com
.Our common stock is listed on the AMEX.NYSE Amex. As such, we have agreed to comply with the listing standards of the AMEX,NYSE Amex, which require that we have at least three members of the audit committee, each of whom is independent. Each of our audit committee members is independent, as defined by the rules of the AMEX.NYSE Amex and the rules and regulations of the SEC. In addition, the board has determined that at least one independenteach member of the audit committee Mr. Bunch, is an “audit committee financial expert.” Mr. Bunch’sexpert” as defined by the SEC. The experience of each member of the audit committee is described in his biographythe biographies under the heading “Director with Term Expiring in 2010.“Proposal 1—Election of Directors.”
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The audit committee’s role is one of financial oversight. Our management is responsible for preparing our financial statements, and our independent auditors are responsible for auditing those financial statements. The audit committee is not providing any expert or special assurance as to our financial statements or any professional certification as to the independent auditors’ work. The following functions are the key responsibilities of the audit committee in carrying out its oversight:
appointing, compensating, retaining and overseeing our independent registered public accounting firm and overseeing the qualifications and independence of such firm;
overseeing our accounting and financial reporting processes and the audits of our financial statements;
| | |
| • | selecting, evaluating and appointing our independent auditors to the board of directors; |
|
| • | reviewing the scope of the independent auditors’ examination and, at the conclusion of that examination, reviewing the results of the audit, including any comments or recommendations of the independent auditors; |
|
| • | reviewing our financial policies and accounting systems and controls and our audited and interim unaudited financial statements; |
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| • | preparing a report for inclusion in our proxy statement of its review of our audited financial statements, including a statement on whether it recommended that the board include those financial statements in our annual report onForm 10-K for that year; |
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| • | approving the duties and compensation of our independent auditors, both for audit and non-audit services; and |
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| • | reviewing and assessing, on an annual basis, the adequacy of the audit committee’s charter and recommending revisions to the board. |
overseeing the performance of our internal audit function;
overseeing our compliance with legal and regulatory requirements;
preparing a report for inclusion in our proxy statement of its review of our audited financial statements;
pre-approving audit, review or attest services and permitted non-audit services (including the terms and fees thereof) to be performed by our independent registered public accounting firm; and
reviewing and assessing, on an annual basis, the adequacy of the audit committee’s charter and recommending revisions to the board.
The audit committee meets separately from the whole board with the independent auditors to provide an open avenue of communication. The audit committee is ultimately responsible for the selection, evaluation and replacement of our independent auditors.
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Compensation Committee
Messrs. Bunch, Burkhardt (Chairman), Harness, and Thompson served onDuring the compensation committee during the nine-month fiscal year ended December 31, 2007.2009, Messrs. Burkhardt, Thompson and Urban (chairman) served on the compensation committee. Mr. Thompson served as chairman of the compensation committee until May 15, 2009, at which time Mr. Urban was appointed chairman of the compensation committee. The compensation committee met fourthree times and acted by written consent sevensix times during the nine-month fiscal year ended December 31, 2007. All members of2009. In addition, the compensation committee are deemedalso held meetings with our compensation consultant during the fiscal year ended December 31, 2009. Each of our compensation committee members is independent, as defined by our boardthe rules of directors.the NYSE Amex. The compensation committee is governed by a charter that the board adoptedamended and restated on MarchDecember 11, 2004.2008. You can obtain a copy of that charter by making a request for a copy to our Corporate Secretary or by going to our Web site at www.pioneerdrlg.com.www.pioneerdrlg.com. The compensation committee’s responsibilities include:
approving and overseeing our compensation policies, objectives and programs for our executive officers and directors;
annually reviewing and approving corporate goals, objectives and other key measures relevant to the compensation of Pioneer’s executive officers and other key employees;
| | |
| • | annually reviewing and approving corporate objectives relevant to the compensation of Pioneer’s executive officers and other key employees; |
|
| • | reviewing and approving all employment agreements, salaries, bonus payments, incentive awards and severance arrangements with Pioneer’s executive officers and key employees; |
|
| • | administering and reviewing Pioneer’s incentive-compensation plans, equity-based plans and other compensation and benefit plans, and authorizing the issuance of stock of Pioneer pursuant to such plans; and |
|
| • | retaining and terminating a compensation consultant to assist the committee and to approve such consultant’s fees and other retention terms. |
reviewing and approving all formal employment or other contracts between Pioneer and our executive officers and other key employees;
administering and reviewing Pioneer’s incentive-compensation plans, equity-based plans and other compensation and benefit plans, and authorizing the issuance of stock of Pioneer pursuant to such plans; and
retaining and terminating a compensation consultant, Stone Partners, to assist the committee and approving such consultant’s fees and other retention terms.
Except as described in the Compensation Discussion and Analysis section of this proxy statement, at this time, the Compensation Committeecompensation committee does not intend to delegate its powers and authority to any subcommittee or other persons. For additional information concerning the compensation committee, see “Compensation Discussion and Analysis” and “Report of the Compensation Committee.”
9
Nominating and Corporate Governance Committee
During the fiscal year ended December 31, 2009, Messrs. Bunch, Burkhardt, Harness, TidwellThompson (chairman) and Thompson (Chairman)Urban served on the nominating and corporate governance committee. Mr. Thompson served as chairman of the nominating and corporate governance committee during the nine-month fiscal year ended December 31, 2007. Mr. Tidwell served on the committee until August 3, 2007.2009. The nominating and corporate governance committee held fourtwo meetings and acted by written consent once during the nine-month fiscal year ended December 31, 2007. All2009. Each of the members of theour nominating and corporate governance committee are “independent directors,”members is independent, as defined by the rules of the AMEX.
NYSE Amex.The nominating and corporate governance committee is responsible for seeking, evaluating and recommending qualified individuals to become directors and serve on committees of the board of directors. The committee is also responsible for periodically reviewing and assessing the adequacy of our corporate governance policies and procedures and recommending proposed changes to the board. In addition, the committee periodically assesses the performance of the board of directors. The nominating and corporate governance committee is governed by a charter that the board adoptedamended and restated on MarchDecember 11, 2004.2008. You can obtain a copy of that charter by making a request for a copy to our Corporate Secretary or by going to our Web site atwww.pioneerdrlg.com.
The nominating and corporate governance committee considers candidates for board membership suggested by its members and other board members, as well as by management and shareholders. The committee may also retain a third-party executive search firm to identify candidates from time to time. Shareholders wishing to suggest a qualified candidate should submit the recommendation in writing to the nominating and corporate governance committee in care of our Corporate Secretary at 1250 N.E. Loop 410, Suite 1000, San Antonio, Texas 78209. AsAny shareholder wishing to each person whomsubmit a shareholder proposescandidate for consideration should send the following information to nominate for election as a director, our bylaws providethe Corporate Secretary:
the name, age and business address of that person;
the nomination notice must include the following:principal occupation or employment of that person;
| | |
| • | the name, age and business address of that person; |
|
| • | the principal occupation or employment of that person; |
|
| • | the class or series and number of shares of capital stock of Pioneer which that person owns beneficially or of record; and |
8
| | |
| • | all other information, if any, relating to that person which Section 14 of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder would require Pioneer or that shareholder to disclose in a proxy statement or in any other filing in connection with solicitations of proxies for an election of directors. |
The proposal must also be accompanied by a written consent of each person whom the shareholder proposes to nominate for election as a director to be named as such a nominee and to serve as a director if elected. As to that shareholder and the beneficial owner, if any, of capital stock of Pioneer on whose behalfwhich that person owns beneficially or of record; and
all other information, if any, relating to that person which Section 14 of the nomination is being made,Securities Exchange Act of 1934, as amended, and the nomination notice must also include the following:
| | |
| • | the name and address of that shareholder, as they appear in the stock records of Pioneer, and the name and address of that beneficial owner; |
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| • | the class or series and the number of shares of capital stock of Pioneer which that shareholder and that beneficial owner each own beneficially or of record; |
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| • | a description of all arrangements and understandings between that shareholder or that beneficial owner and each proposed nominee of that shareholder and any other person or persons (including their names) pursuant to which the nomination(s) are to be made by that shareholder; |
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| • | a representation by that shareholder that he intends to appear in person or by proxy at that meeting to nominate the person(s) named in the nomination notice; |
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| • | a representation of whether the shareholder or the beneficial owner, if any, intends or is part of a group which intends (1) to deliver a proxy statementand/or form of proxy to holders of at least the percentage of Pioneer’s outstanding capital stock required to elect the nomineeand/or (2) to otherwise solicit proxies from shareholders in support of such nomination; and |
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| • | all other information, if any, relating to that shareholder and that beneficial owner which Section 14 of the Exchange Act of 1934, as amended, and the rules and regulations thereunder would require Pioneer or that shareholder to disclose in a proxy statement or in any other filing in connection with solicitations of proxies for an election of directors. |
To be timely for consideration at our 2009 Annual Meetingan election of Shareholders, any such nomination must be submitted so that our Corporate Secretary receives the nomination at our principal executive offices, at the address set forth above, no earlier than November 17, 2008 and no later than the close of business on February 16, 2009.directors.
Once a prospective candidate has been identified, the nominating and corporate governance committee makes the initial determination as to whether to conduct a full evaluation of the candidate. This initial determination is based on the information provided to the committee with the recommendation of the prospective candidate, as well as the committee’s own knowledge of the prospective candidate, which may be supplemented by inquiries to the person making the recommendation or others. If the committee determines that additional consideration is warranted, it may ask a third-party search firm to gather additional information about the candidate’s background and experience and to report its findings to the committee. The committee then evaluates the prospective candidate by considering, in addition to the criteria set forth in our bylaws, each nominee’s personal and professional integrity, experience, skills, ability and willingness to devote the time and effort necessary to be an effective board member, and commitment to acting in our shareholders’ and our best interests. Consideration is also given to members of the board of directors having an appropriate mix of background and skills.
Although we do not have a formal diversity policy in place for the director nomination process, an important factor in our nominating and corporate governance committee’s consideration and assessment of a candidate is the diversity of the candidate’s background, viewpoints, training, professional experience, education and skill set. The nominating and corporate governance committee strives to nominate candidates with a variety of complementary skills so that, as a group, the board of directors will possess the appropriate talent, skills, and expertise to oversee the Company’s business.10
The same criteria apply with respect to the nominating and corporate governance committee’s evaluation of all candidates for membership to our board, including candidates recommended by shareholders. However, additional procedures will apply, as provided in our bylaws, if a shareholder wishes to submit at an annual meeting a director candidate who is not approved by our nominating and corporate governance committee or our board of directors.
Any shareholder desiring to nominate a director at our 2011 Annual Meeting of Shareholders without including such nomination in our proxy materials for that meeting must provide timely notice to the Company of such nomination in the form provided by our bylaws. See our bylaws for a description of the required form and content of this notice. To be timely, such notice must ordinarily be delivered to our principal executive offices (Attention: Corporate Secretary), at the address set forth above, no later than the close of business on the 90th day nor earlier than the 180th day prior to the first anniversary date of the preceding year’s annual shareholder meeting (i.e., nominations for director for inclusion in the 2011 Annual Meeting of Shareholders must be delivered to our principal executive offices no earlier than November 15, 2010, and no later than the close of business on February 14, 2011), or such proposal will be considered untimely. However, in the event that the date of the pending annual meeting of shareholders is more than 30 days before or more than 60 days after the first anniversary of the previous year’s annual meeting of shareholders, then such notice must be received not later than the later to occur of the close of business on the 90th day prior to the pending annual meeting of shareholders or the 10th day following the day on which public announcement of the date of such annual meeting of shareholders is first made by the Company. The foregoing time limits also apply in determining whether notice is timely for purposes of rules adopted by the SEC relating to the exercise of discretionary voting authority.
Any shareholder desiring a copy of our bylaws will be furnished one without charge upon written request to the Corporate Secretary at 1250 N.E. Loop 410, Suite 1000, San Antonio, Texas 78209.
Code of Conduct and Ethics
We have adopted a Code of Conduct and Ethics that satisfies the SEC’s definition of a “Code of Ethics” and applies to all employees, including our principal executive officer, principal financial officer and principal accounting officer. The Code of Conduct and Ethics is posted on our Web site atwww.pioneerdrlg.com.www.pioneerdrlg.com. We intend to disclose on our Web site any amendments to the Code of Conduct and Ethics and any waivers of the Code of Conduct and Ethics that apply to our principal executive officer, principal financial officer and principal accounting officer.
9Board’s Role in Risk Oversight
Our board of directors is responsible for the Company’s risk-oversight function. The board of directors, with the assistance of its standing committees, our Chief Executive Officer, our Chief Financial Officer, our General Counsel, and our Director of Corporate Development, identifies, evaluates and discusses the material enterprise risks that could impact the Company’s operations and tactical and strategic decisions. These enterprise risks include operational, financial, legal, regulatory, market, and reputational risks. In addition, the board of directors reviews the risks associated with the Company’s strategic plan at an annual strategic planning session and periodically throughout the year as part of its consideration of the strategic direction of the Company. Each board committees also oversees the management of the Company’s risks that fall within each committee’s areas of responsibility. In performing this function, each committee has full access to management, as well as the ability to engage advisors.
Risk—Related Compensation Policies and Practices
During early 2010, the compensation committee undertook an assessment of the risk profile of its executive and non-executive compensation programs. With the assistance of our Chief Executive Officer, our Chief Financial Officer, our General Counsel, and our Director of Corporate Development, the compensation
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committee developed a framework to assist the compensation committee in ascertaining any potential material risks associated with its executive compensation program, including: external market reference; pay mix; range and sensitivity of performance-based variable plans; selection of performance metrics; goal-setting process; and the Company’s checks and balances on the payment of compensation. This process enabled the compensation committee to consider if any of the Company’s current compensation programs, practices or procedures should be altered in order to ensure that an appropriate balance between competitive pay and prudent risk is maintained. As a result of this analysis, the compensation committee identified the following risk mitigating factors:
the pay mix including fixed and variable compensation, including the use of fixed cash and variable cash (in the annual incentive and long-term incentive plan and the use of long-term equity as variable compensation);
limits on annual cash bonus awards;
the use of varied performance goals;
after several years of use, there appears to be no evidence that the performance goals encourage unnecessary or excessive risk taking;
stockownership guidelines;
the oversight of incentive compensation plans by our compensation committee; and
the high level of board involvement in approving material investments and capital expenditures.
As a result of the above assessment, the compensation committee determined that the Company’s policies and procedures largely achieved a proper balance between prudent business risk and competitive compensation.
Director Compensation
During the nine month fiscal year ended December 31, 2007,2009, we paid to each of our non-employee directors fees for service on our board of directors or committees of our board as follows:
| | | | | |
Board Member Fees: | | | | |
| Chairman’s annual retainer | | $ | 57,000 | |
| Member’s annual retainer | | $ | 30,000 | |
| Each meeting attended in person | | $ | 1,500 | |
| Each meeting attended by telephone | | $ | 1,000 | |
Audit Committee Fees: | | | | |
| Chairman’s annual retainer | | $ | 10,000 | |
| Member’s annual retainer | | $ | 5,000 | |
| Each meeting attended in person | | $ | 1,250 | |
| Each meeting attended by telephone | | $ | 1,000 | |
Compensation Committee Fees | | | | |
| Chairman’s annual retainer | | $ | 5,000 | |
| Member’s annual retainer | | $ | 1,750 | |
| Each meeting attended in person | | $ | 1,250 | |
| Each meeting attended by telephone | | $ | 1,000 | |
Nominating and Corporate Governance Committee Fees: | | | | |
| Chairman’s annual retainer | | $ | 5,000 | |
| Member’s annual retainer | | $ | 1,750 | |
| Each meeting attended in person | | $ | 1,250 | |
| Each meeting attended by telephone | | $ | 1,000 | |
We also generally grant non-employee directors options | | | |
Board Member Fees: | | | |
Chairman’s annual retainer | | $ | 70,000 |
Member’s annual retainer | | $ | 30,000 |
Each meeting attended in person | | $ | 1,500 |
Each meeting attended by telephone | | $ | 1,000 |
| |
Audit Committee Fees: | | | |
Chairman’s annual retainer | | $ | 12,000 |
Member’s annual retainer | | $ | 5,000 |
Each meeting attended in person | | $ | 1,500 |
Each meeting attended by telephone | | $ | 1,000 |
| |
Compensation Committee Fees | | | |
Chairman’s annual retainer | | $ | 7,500 |
Member’s annual retainer | | $ | 1,750 |
Each meeting attended in person | | $ | 1,500 |
Each meeting attended by telephone | | $ | 1,000 |
| |
Nominating and Corporate Governance Committee Fees: | | | |
Chairman’s annual retainer | | $ | 7,500 |
Member’s annual retainer | | $ | 1,750 |
Each meeting attended in person | | $ | 1,500 |
Each meeting attended by telephone | | $ | 1,000 |
| |
Special Committee Fees | | | |
Each meeting attended in person | | $ | 1,500 |
Each meeting attended by telephone | | $ | 1,000 |
12
During 2009, the Compensation Committee granted a restricted stock award with a fair market value of approximately $100,000 to purchase 10,000 shares of common stock upon their appointment to the board of directors and 10,000 shares of common stock in each subsequent year that they remain a member of the board of directors. On May 24, 2007, Mr. Bunch received a special grant of nonqualified options to purchase 50,000 shares of our common stock at $14.60 per share, which will vest in one-third increments on each of the first, second and third anniversaries of the grant date. This special grant was in recognition of the substantial obligations imposed on the Chairman and the significant services Mr. Bunch had provided, and was expected to continue to provide, to the Company as Chairman of our board of directors. We alsoIn addition, we reimburse the directors for out-of-pocket expenses they incur in connection with attending meetings of the board of directors and board committees or otherwise in their capacity as directors. Our executive officers do not make recommendations regarding the non-employee directors’ compensation.
We expect each director to make every effort to attend each meeting of the board of directors, each meeting of any board committee on which he sits and the annual meeting of shareholders. Attendance in person at board and committee meetings is preferred but not required; attendance by teleconference is permitted, if necessary. All of our directors attended last year’s annual meeting.
In December 2007, our board of directors approved a change in our fiscal year end from March 31 to December 31. The fiscal year end change was effective December 31, 2007 and resulted in a nine month financial
10
reporting period from April 1, 2007 to December 31, 2007. The following table summarizes the compensation we paid each of our non-employee directors during the nine month fiscal year ended December 31, 2007:
| | | | | | | | | | | | | |
| | | Fees Earned
| | | Option
| | | | |
Name | | or Paid in Cash | | | Awards(1) | | | Total | |
| |
| C. Robert Bunch(2) | | $ | 72,624 | | | $ | 172,524 | | | $ | 245,148 | |
| Dean A. Burkhardt(3) | | $ | 52,685 | | | $ | 52,272 | | | $ | 104,957 | |
| Michael F. Harness(4) | | $ | 46,998 | | | $ | 52,272 | | | $ | 99,270 | |
| James M. Tidwell(5) | | $ | 29,624 | | | $ | 52,272 | | | $ | 81,896 | |
| C. John Thompson(6) | | $ | 50,685 | | | $ | 52,272 | | | $ | 102,957 | |
| | | | | | | | | |
Name | | Fees Earned
or Paid in Cash | | Stock
Awards (1) | | Total |
Dean A. Burkhardt | | $ | 116,504 | | $ | 100,000 | | $ | 216,504 |
C. John Thompson | | $ | 78,126 | | $ | 100,000 | | $ | 178,126 |
John Michael Rauh | | $ | 57,000 | | $ | 100,000 | | $ | 157,000 |
Scott D. Urban | | $ | 58,878 | | $ | 100,000 | | $ | 158,878 |
| | |
| (1) | | The amounts included in the “Option“Stock Awards” column represent the compensation cost recognized by usaggregate grant date fair value of the restricted stock awards granted to directors during the nine-month fiscal year ended December 31, 2007 related to stock option awards to directors,2009, computed in accordance with StatementASC Topic 718 (formerly SFAS No. 123R), except that no assumption for forfeitures was included. Pursuant to our 2007 Incentive Plan, each director was granted 17,762 shares of Financial Accounting Standards No. 123(Revised),Share-Based Payment(“SFAS 123R”).restricted stock on May 15, 2009, based on the closing price ($5.63) of our common stock on the NYSE Amex on the grant date. For a discussion of valuation assumptions, see Note 1 to our consolidated financial statements included in our annual report onForm 10-KT10-K for the nine-month fiscal year ended December 31, 2007.2009. |
Stock Ownership Guidelines
In order to encourage the acquisition and retention of our common stock by our directors and to further align their economic interests with those of our shareholders and to focus our directors on the long-term sustained appreciation of our common stock, our compensation committee and our board of directors have adopted guidelines generally requiring each of our directors to own an amount of our common stock equal to the value of three times such director’s annual cash retainer. The ownership target is to be acquired no later than the December 31 following the fifth anniversary of the director’s initial appointment or election to the board of directors, or by December 31, 2013 for any director serving on the board of directors as of May 17, 2008. For purposes of this calculation, unvested restricted stock and restricted stock units may be counted toward the applicable ownership requirement. As of March 31, 2010, all directors have fully met their stock ownership requirements.
13
The following table provides information on the outstanding equity awards for each of our non-employee directors as of December 31, 2009:
| | | | | | | | | | | | | | | | | |
| | | Option Awards | | Stock Awards |
Name | | Number of Securities
Underlying
Unexercised Options
Exercisable | | | Number of Securities
Underlying
Unexercised Options
Unexercisable | | | Option
Exercise
Price | | Option
Expiration
Date | | Shares or Units
of Stock That
Have Not
Vested | | | Market Value of
Shares or Units of
Stock That Have
Not Vested (4) |
Dean A. Burkhardt | | 5,000 | | | — | | | $ | 13.98 | | 6/14/2010 | | — | | | | — |
| | 10,000 | | | — | | | $ | 14.48 | | 6/14/2011 | | — | | | | — |
| | 10,000 | | | — | | | $ | 14.98 | | 6/14/2012 | | — | | | | — |
| | — | | | — | | | | — | | — | | 3,905 | (2) | | $ | 30,850 |
| | — | | | — | | | | — | | — | | 17,762 | (3) | | $ | 140,320 |
| | | | | | |
C. John Thompson | | 5,000 | | | — | | | $ | 13.98 | | 6/14/2010 | | — | | | | — |
| | 10,000 | | | — | | | $ | 14.48 | | 6/14/2011 | | — | | | | — |
| | 10,000 | | | — | | | $ | 14.98 | | 6/14/2012 | | — | | | | — |
| | — | | | — | | | | — | | — | | 3,905 | (2) | | $ | 30,850 |
| | — | | | — | | | | — | | — | | 17,762 | (3) | | $ | 140,320 |
| | | | | | |
John Michael Rauh | | 3,333 | (1) | | 6,667 | (1) | | $ | 10.32 | | 10/5/2018 | | — | | | | — |
| | — | | | — | | | | — | | — | | 17,762 | (3) | | $ | 140,320 |
| | | | | | |
Scott D. Urban | | 3,333 | (1) | | 6,667 | (1) | | $ | 10.32 | | 10/5/2018 | | — | | | | — |
| | — | | | — | | | | — | | — | | 17,762 | (3) | | $ | 140,320 |
| (1) | The indicated options are scheduled to vest in installments of 3,333 shares on October 6, 2010, and 3,334 shares on October 6, 2011. |
| (2) | | Mr. Bunch was granted options to purchase 60,000The indicated shares of ourrestricted stock are scheduled to vest in installments of 1,953 shares on May 16, 2010, and 1,952 shares on May 16, 2011. |
| (3) | The indicated shares of restricted stock are scheduled to vest in installments of 5,920 shares on May 15, 2010, and 5,921 shares each on May 15, 2011 and May 15, 2012. |
| (4) | The market value of the shares of restricted stock that have not vested is based on the closing price of Pioneer Drilling Company common stock during the nine-month fiscal year endedon December 31, 2007, with a grant date fair value, computed in accordance with SFAS 123R,2009, of $377,262. As of December 31, 2007, Mr. Bunch had outstanding options to acquire 75,000 shares of our common stock, of which options to acquire 25,000 shares of our common stock were exercisable. |
|
(3) | | Mr. Burkhardt was granted options to purchase 10,000 shares of our common stock during the nine-month fiscal year ended December 31, 2007, with a grant date fair value, computed in accordance with SFAS 123R, of $52,272. As of December 31, 2007, Mr. Burkhardt had outstanding options to acquire 25,000 shares of our common stock, all of which were exercisable. |
|
(4) | | Mr. Harness was granted options to purchase 10,000 shares of our common stock during the nine-month fiscal year ended December 31, 2007, with a grant date fair value, computed in accordance with SFAS 123R, of $52,272. As of March 31, 2007, Mr. Harness had outstanding options to acquire 35,000 shares of our common stock, all of which were exercisable. |
|
(5) | | Mr. Tidwell was granted options to purchase 10,000 shares of our common stock during the nine-month fiscal year ended December 31, 2007, with a grant date fair value, computed in accordance with SFAS 123R, of $52,272. As of December 31, 2007, Mr. Tidwell had outstanding options to acquire 25,000 shares of our common stock, all of which were exercisable. On September 28, 2007, Mr. Tidwell resigned as a director due to his other business commitments. |
|
(6) | | Mr.��Thompson was granted options to purchase 10,000 shares of our common stock during the nine-month fiscal year ended December 31, 2007, with a grant date fair value, computed in accordance with SFAS 123R, of $52,272. As of December 31, 2007, Mr. Thompson had outstanding options to acquire 25,000 shares of our common stock, all of which were exercisable.$7.90 per share. |
11
14
EXECUTIVE OFFICERS
The following table provides information about our current executive officers (ages are as of March 31, 2008)2010):
| | | | |
Name | | Age | | Position(s) Held |
Wm. Stacy Locke | | |
Name
| | Age
| | Position(s) Held
|
|
Wm. Stacy Locke | | | 52 | 54 | | President, Chief Executive Officer and Director |
Joyce M. Schuldt | | |
Lorne E. Phillips | | | 43 | 39 | | Executive Vice President and Chief Financial Officer |
| | |
Franklin C. West | | | 6870 | | | Executive Vice President and President of Drilling Services Division |
| | |
Joseph B. Eustace | | | 5355 | | | Executive Vice President and President of Production Services Division |
| | |
Carlos R. Peña | | 43 | | Senior Vice President, General Counsel, Secretary and Compliance Officer |
For a description of the business background of Mr. Locke, see “Directors with Terms Expiring in 2009”2012” above.
Joyce M. SchuldtLorne E. Phillipshas served as our was appointed Executive Vice President and Chief Financial Officer and Corporate Secretary since July 2007. Mosteffective February 1, 2009. Prior to joining Pioneer Drilling Company, Mr. Phillips worked the last 10 years at Cameron International Corporation, serving most recently she served as the Senior Vice President Chief Financial Officer and SecretaryTreasurer. Prior to that, he was General Manager of Maverick Tube Corporation, a leading manufacturerCameron’s Canadian valves operations, Vice President of tubular productsMarketing and M&A for the energy industryvalves division, and industrial applications, until Maverick Tube’s acquisition by Tenaris, S.A. in October 2006. From February 2002 until joining Maverick Tube in March 2003, Ms. Schuldt was Vice President — International Acquisitions and Operations and International ControllerBusiness Development Manager for CSI Leasing, Inc., an equipment financier with operations throughout North America, Central and South America and Europe.Cameron. Before joining CSI Leasing, Ms. SchuldtCameron, he was employed by Ernsta Financial Analyst for SCF Partners, a provider of equity capital to energy service and equipment companies, and for Simmons & Young for 12 years. She is a certified public accountant andCompany International, an attorney.
investment bank focused on the energy industry.Franklin C. Westcurrently serves as Executive Vice President and President of our Drilling Services Division. Prior to his appointment as President of our Drilling Services Division on March 1, 2008, Mr. West served as our Chief Operating Officer since January 2002. Prior to joining Pioneer, he was Vice President for Flournoy Drilling Company from 1967 until it was acquired by Grey Wolf, Inc. in 1997, and he continued in the same capacity for Grey Wolf, Inc., an on-shore oil and gas drilling contractor, until December 2001.
Joseph B. Eustacewas appointed as Executive Vice President and President of our Production Services Division on March 1, 2008. Prior to joining Pioneer Drilling Company, Mr. Eustace served as President of WEDGE Oil and Gas Services since 2004. Prior to 2004, Mr. Eustace served as Group Vice President for Key Energy Services from 1998 to 2004, and as Vice President of Operations for Dawson Production Services from 1982 until Key Energy Services acquired Dawson Production Services in 1998.
12Carlos R. Peña was appointed Senior Vice President, General Counsel, Secretary and Compliance Officer effective October 27, 2008. Mr. Peña has practiced law since 1992 and has experience providing both outside corporate and securities counsel and in-house M&A counsel. Prior to joining Pioneer Drilling in October 2008, he worked for AT&T, Inc. in the M&A legal group. From 1996 to 2007, he focused on securities and corporate finance, M&A, venture capital, and corporate governance at Fulbright & Jaworski L.L.P., Cox Smith Matthews Incorporated, and Vinson & Elkins L.L.P.
15
COMPENSATION DISCUSSION AND ANALYSIS
Compensation CommitteeIntroductory Note
The compensation committee of our board of directors (the “Compensation Committee”) and Company management evaluated and set 2009 executive compensation in the context of the Company’s performance and the challenging global economic environment since late 2008.
Summary of Executive Compensation Decisions Made in 2009
The following are the highlights of our executive compensation decisions made in 2009:
Base salaries remained constant, with few exceptions.
Annual cash incentive awards were limited due to the Company’s performance in fiscal 2009.
We implemented a long-term cash incentive program (with 50% based on Company performance) to better align the interests of our executives with the long-term performance of the Company and long-term shareholder value.
Long-term incentive awards were allocated at approximately 20% restricted stock, 48% stock options and 32% cash.
Compensation Committee
The Compensation Committee administers our executive compensation program. Our board of directors delegates to the Compensation Committee the board of directors’ responsibilityprogram and is responsible for establishing appropriate compensation for our named executive officers. The duties of the Compensation Committee include:
approving and overseeing our compensation policies, objectives and programs for executive officers;
reviewing and approving all formal employment or other contracts between Pioneer and our executive officers;
| | |
| • | reviewing and approving the design of executive compensation programs; |
|
| • | reviewing and approving all compensation and other agreements with executive officers; |
|
| • | reviewing and approving corporate goals and objectives relevant to compensation; |
|
| • | evaluating the performance of executive officers; and |
|
| • | assessing the effectiveness of our compensation programs. |
annually reviewing and approving corporate goals, objectives and other key measures relevant to the compensation of our executive officers; and
evaluating the performance of executive officers.
The Compensation Committee periodically reviews its own performance so that it might find ways to adapt to changes impacting compensation decisions and decision-making processes. The Compensation Committee also annually reviews the effectiveness of our compensation programs in obtaining desired results.
The Compensation Committee designs our executive compensation programs to:
provide an executive compensation structure that is consistent with competitive pay practices;
attract, motivate and retain key personnel necessary to our success;
| | |
| • | provide an executive compensation structure that is competitive with compensation available in the relevant market; |
|
| • | attract, motivate and retain management personnel necessary to our success; |
|
| • | reward senior and key employees for building long-term shareholder value; and |
|
| • | encourage attainment of strategic business objectives with pay for performance. |
reward senior and key employees for building long-term shareholder value; and
encourage attainment of strategic business objectives with pay for performance.
The Compensation Committee reviews each element of compensation annually. Variable compensation (annual cash incentives, long-term cash incentives, stock options and restricted stock options)awards) supports our pay for performance philosophy and represents approximately 50%49% to 75%71% of total direct compensation to our named executive officers. Annual cash incentive compensation is based on various performance measures intended to provide incentives for executives to make decisions that result in strong annual performance results. This is balanced by annual equitylong-term incentive compensation in the form of stock option awards, that provide executives with compensation only to the extent Pioneer’srestricted stock price increases above the closing stock price on the grant date of the stock options. The stockawards and long-term cash awards. Stock option awards generally vest over 3 years and are exercisable over a 10 year term.
16
Restricted stock awards generally vest ratably over 3 years. Long-term cash awards were allocated as 50% time-based and 50% performance-based. Under these awards, the named executive officers will receive cash payments on April 30, 2011 and April 30, 2012 depending on their continued employment with the Company and the Company’s performance relative to a peer group of companies. As a result, our compensation program provides incentives to our executives to make good business decisions that result in long-term shareholder value.
Change in Fiscal Year EndBenchmarking
In May 2007,January 2009, the Compensation Committee retained Stone Partners as an independent compensation consultant to assist in the Compensation Committee’s compensation determinations. Stone Partners reported to, and acted at the direction of, the Compensation Committee. Stone Partners was instructed to benchmark executive positions, to review general trends relating to executive compensation in the drilling and oilfield services industry, and to review the operation of our incentive plans. The Compensation Committee reviewed several sources as a reference for determining competitive total compensation packages. These sources included published data from Watson Wyatt Top Management, William M. Mercer-Energy, and Stone Partners’ Executive Oilfield Manufacturing and Services Industry compensation surveys. Both Watson Wyatt (national survey data) and Mercer-Energy (industry survey data) are nationally known, highly respected sources for data. Stone Partners’ survey (available to participants only and another industry survey) included 71 oilfield manufacturing and service companies; 2009 was the 13th year of publication for this survey. In addition, the Compensation Committee reviewed proxy statement data from a peer group of companies. In December 2008, we determined that our fiscal year 2009 industry peer group would consist of the amountsfollowing companies:
Allis-Chalmers Energy, Inc.
Basic Energy Services, Inc.
Bronco Drilling Co., Inc.
Complete Production Services, Inc.
Helix Energy Solutions Group
Key Energy Services, Inc.
Oil States International, Inc.
Superior Energy Services, Inc.
One company previously on the peer company list was dropped: Grey Wolf, Inc. because it was acquired by Precision Drilling. These companies were selected because of similarities we shared in industry (oilfield services) and similar levels of market capitalization (between $422.7 million and $4.7 billion), enterprise value (between $234.3 million and $2.8 billion, 2008 assets (between $547.7 million and $5.4 billion) and 2008 revenue (between $312.5 million and $2 billion). Companies of interest included Nabors Industries, Inc. and Patterson UTI Energy Inc. The companies of interest are not used for base salary, cash incentivebenchmarking data, but are consulted for compensation target levelstrends.
In March 2009, the compensation consultant benchmarked the 25th, 50th and equity incentive75th percentiles for the data sources mentioned above to gain an understanding of competitive pay practices. The industry peer group, industry surveys and national survey data are equally weighted, considered for each element of compensation, and collectively referred to as the “survey data” throughout this Compensation Discussion and Analysis. In evaluating and setting compensation for our named executive officers, for the twelve month period from April 1, 2007 to March 31, 2008. In December 2007, our board of directors approved a change in our fiscal year end from March 31 to December 31. The fiscal year end change was effective December 31, 2007 and resulted in a nine month financial reporting period from April 1, 2007 to December 31, 2007. Consequently, the Summary Compensation Table and related explanatory tables report executive compensation information for the nine month period commencing March 31, 2007 and ending December 31, 2007.
Despite the fiscal year end change, executive compensation amounts determined by the Compensation Committee does not target a specific percentile within the survey data, but rather uses the survey data as a guide, in May 2007 will remaincombination with the other factors discussed in effect through March 31, 2008. In May 2008, thethis Compensation Committee expectsDiscussion and Analysis, to (1) award annual cash incentivedetermine compensation relating to the twelve month period ending March 31, 2008 and (2) re-evaluate and adjust, as appropriate,levels for our named executive compensation for the nine month period from April 1,
officers.
13
17
2008 to December 31, 2008. Beginning in 2009, and for each subsequent year, we expect the Compensation Committee to re-evaluate and adjust, as appropriate, executive compensation based on a January 1 to December 31 fiscal year.
Elements of Compensation
We pay our executive officers, including the officers named in the Summary Compensation Table included in this proxy statement (who we refer to as the(the “named executive officers”) base salaries that are at levels the Compensation Committee believes are necessary to attract and retain talented officers. The Compensation Committee generally determines base salary amounts on an annual basis. Because other elements of compensation are typically expressed as a percentage of base salary, maintaining a competitive base salary for each named executive officer is a high priority in the current oilfield services industry employment market and is particularly important to us given our focus as a growth company.company within that industry. The Compensation Committee assesses performance for base salary purposes using a qualitative, rather than quantitative, performance assessment. The Compensation Committee does not use a specific performance formula or a weighting of factors in determining base salary levels. Instead, the Compensation Committee considers financial performance, execution of our business strategy, and individual contributions to the business, as well as pay levels of comparable executives at peer companies. In considering these factors, the Compensation Committee reviews executive performance with the Chief Executive Officer and generally relies on the Chief Executive Officer’s evaluation of each officer’s performance (other than his own).
The following table sets forth each named executive officer’s annualizedannual base salary as of March 31, 2007 and as of December 31, 2007.
| | | | | | | | | |
| | | Annualized Base
| | | Annualized Base
| |
| | | Salary as of
| | | Salary as of
| |
| | | March 31,
| | | December 31,
| |
Name and Position | | 2007 | | | 2007 | |
| |
| Wm. Stacy Locke, | | $ | 408,000 | | | $ | 450,000 | |
| Director, President and Chief Executive Officer | | | | | | | | |
| Joyce M. Schuldt, | | | — | | | $ | 300,000 | |
| Executive Vice President, Chief Financial Officer and Secretary | | | | | | | | |
| Franklin C. West, | | $ | 350,000 | | | $ | 370,000 | |
| Executive Vice President and President of Drilling Services Division | | | | | | | | |
| Donald G. Lacombe, | | $ | 185,000 | | | $ | 195,000 | |
| Senior Vice President of Drilling Services Division — Marketing | | | | | | | | |
| William D. Hibbetts, | | $ | 210,000 | | | $ | 210,000 | |
| Senior Vice President of Drilling Services Division — Controller | | | | | | | | |
2008 and December 31, 2009. | | | | | | | | | |
Name and Position | | Annual Base
Salary as of
December 31,
2008 | | Annual Base
Salary as of
December 31,
2009 | | % Change | |
Wm. Stacy Locke, | | | | | | | | | |
Director, President and Chief Executive Officer | | $ | 550,000 | | $ | 550,000 | | — | % |
Lorne E. Phillips, | | | | | | | | | |
Executive Vice President and Chief Financial Officer | | | N/A | | $ | 320,000 | | N/A | |
William D. Hibbetts, | | | | | | | | | |
Senior Vice President of Accounting | | $ | 210,000 | | $ | 210,000 | | — | % |
Franklin C. West, | | | | | | | | | |
Executive Vice President and President of Drilling Services Division | | $ | 395,000 | | $ | 395,000 | | — | % |
Joseph B. Eustace, | | | | | | | | | |
Executive Vice President and President of Production Services Division | | $ | 280,000 | | $ | 280,000 | | — | % |
Carlos R. Peña, | | | | | | | | | |
Senior Vice President, General Counsel and Secretary | | $ | 225,000 | | $ | 250,000 | | 11 | % |
In May 2007,2009, the Compensation Committee reviewed base salaries for the named executive officers in accordance with the factors discussed above. Based on this review,In accordance with expected competitive pay practices for fiscal 2009, the Compensation Committee increased annual base salaries offor the named executive officers an averagedid not increase except for Mr. Peña. Mr. Peña received a base salary increase to better align his base salary with that of 5%, retroactive to April 1, 2007.similarly situated officers at our peer companies. After thesethis salary increases,increase, base salaries of the named executive officers ranged between the 40th38th and 56th69th percentile of the survey data discussed under “Benchmarking” below.above. On average, base salaries for our named executive officers fall at the market median. The Compensation Committee has determined that base salaries at this level enable us to attract and retain talented officers while permitting us to pay a substantial portion of total direct compensation in the form of variable compensation (annual cash and equitylong-term incentives). Ms. Schuldt was named Chief Financial Officer effective July
18 2007, at which time
Annual Cash Incentive Compensation
At the beginning of 2009, because of the severe downturn in the oil and gas industry, management and the Compensation Committee reviewed and approved her base salary. Ms. Schuldt’s base salary was determined baseddecided to impose an additional threshhold on her previous experience, anticipated responsibilities, levelthe achievement of authority, expected performance, contributionscash incentive awards for 2009, in addition to the Company as well as the salaries of similarly positioned executives at comparable companies.
14
Annual Cash Incentive Compensation
During the fiscal year ended March 31, 2006,threshholds described below. On February 23, 2009, the Compensation Committee
implemented an annual formula-based, cash-incentive plan.determined that cash incentive awards would only be awarded for 2009 if the Company’s earnings before income tax, depreciation and amortization expense or “EBITDA” for fiscal year 2009 exceeded $90 million. The
plan rewards officersCompany’s EBITDA for
fiscal year 2009 did not exceed $90 million. As a result, cash incentive awards related to financial and safety performance
measures were not awarded for fiscal year 2009. However, due to the Company’s achievements in
each year. 2009 as described below, the Compensation Committee decided in February 2010 to award the 30% discretionary component of the 2009 cash incentive award.The named executive officers can receive up to approximately 30%19-23% of their total direct compensation (including base salary, annual cash incentive compensation and annual equitylong-term incentive compensation) in the form of annual cash incentives. Approximately 23% of Mr. Locke’s targeted total direct compensation is allocated to the annual incentive award. Approximately 19-21% of the other named executive officers’ targeted total direct compensation is allocated to the annual incentive award. The Compensation Committee allocated a higher percentage (23%) of Mr. Locke’s total direct compensation to the annual cash incentive award because the Compensation Committee believes his position uniquely allows him to influence the financial performance of the Company and, accordingly, his compensation should be more closely tied to the Company’s financial results. The Compensation Committee has determined that this level of annual cash incentive compensation appropriately motivates our executive officers to produce strong business performance each year while allowing for a competitive base salary and other forms of compensation to encourage creation of long-term shareholder value.
The current cash incentive award levels for the named executive officers for 2009, expressed as a percentage of base salary, arewere as follows:
| | | | | | | | | | | | | |
| | | | | | | | | Above
| |
Name | | Threshold | | | Target | | | Expectation | |
| |
| Wm. Stacy Locke | | | 24 | % | | | 80 | % | | | 140 | % |
| Joyce M. Schuldt | | | 15 | % | | | 50 | % | | | 100 | % |
| Franklin C. West | | | 15 | % | | | 50 | % | | | 100 | % |
| Donald G. Lacombe | | | 12 | % | | | 40 | % | | | 80 | % |
| William D. Hibbetts | | | 12 | % | | | 40 | % | | | 80 | % |
| | | | | | | | | |
Name | | Threshold | | | Target | | | Above Expectation | |
Wm. Stacy Locke | | 24 | % | | 80 | % | | 160 | % |
Lorne E. Phillips | | 15 | % | | 50 | % | | 100 | % |
William D. Hibbetts | | 12 | % | | 40 | % | | 80 | % |
Franklin C. West | | 15 | % | | 50 | % | | 100 | % |
Joseph B Eustace | | 15 | % | | 50 | % | | 100 | % |
Carlos R. Peña | | 15 | % | | 50 | % | | 100 | % |
For each performance measure, a “target” level is established annually. The “threshold” and “above expectation” levels are functions of the target level. The target level for the performance measures generally derives from our board-approved budget. The Compensation Committee strives to set performance goals that are both measurable and achievable while providing effective incentive to contribute to our growth. Cash incentive payments are prorated if performance measure results fall between threshold and target or between target and above expectation. Factors taken into account in determining each named executive officer’s annual cash incentive award target include the individual’s responsibilities, the individual’s experience, and overall fairness, as well as external marketcompetitive pay practices that are discussed under “Benchmarking” below.
Under our 2007 Incentive Plan, we baseabove.The proposed cash incentive awards for each named executive officer are based on achievement of specific performance measures and on the Compensation Committee’s subjective assessment of each named executive officer’s individual performance objectives. Theperformance. While the performance measures may change from year to year. Asyear, as further discussed below, our current annual performance measures include:for 2009 included: earnings per share; earnings before income tax, depreciation and amortization expense or “EBITDA”;EBITDA; EBITDA return on capital employed; and safety record (recordable incident rate). IndividualFor the earnings per share and return on capital employed calculations, we excluded the impact of goodwill and intangible asset impairment charges.
19
For 2009, the EBITDA objective for the corporate officers was consolidated EBITDA for the entire company and for divisional officers was that division’s EBITDA; Mr. Locke, Mr. Phillips, and Mr. Peña are the only executives with the return on capital employed as an objective; the other executives have additional weight allocated to their EBITDA objective.
For 2009, the individual performance portion of the cash incentive award to each named executive officer was determined completely at the Compensation Committee’s discretion. Historically, cash incentive awards for each named executive officer were based in part on individual performance objectives. For 2009, the Compensation Committee did not set individual performance objectives forbecause it was clear early in the year that the $90 million EBITDA threshold would not be met. As a result, the individual performance portion of the cash incentive award was not tied to achievement of any specific objectives. In reaching its subjective decision to award the discretionary individual performance portion of the cash incentive award to each named executive officers include: expand strategically, build outofficer, the management team to accommodate strategic expansion, continue to improve communications withCompensation Committee considered, among other things: (1) the boardCompany’s safety results in 2009, which were the best in its history, (2) the improvement in rig utilization in the second half of directors, optimize internal controlsthe year, (3) the Company’s success in increasing the number of rigs working in shale plays, and compliance processes, continue to improve operation performance, refine marketing processes and enhance safety program.
(4) the Company’s success in amending its secured credit facility.The weighting of the current performance measures and individual performance objectives for the named executive officers isfor 2009 was as follows:
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | EBITDA
| | | | | | | |
| | | | | | | | | Return on
| | | Safety Record
| | | Individual
| |
| | | Earnings Per
| | | | | | Capital
| | | (Recordable
| | | Performance
| |
Name | | Share | | | EBITDA | | | Employed | | | Incident Rate) | | | Objectives | |
| |
| Wm. Stacy Locke | | | 20 | % | | | 15 | % | | | 15 | % | | | 20 | % | | | 30 | % |
| Joyce M. Schuldt | | | 20 | % | | | 15 | % | | | 15 | % | | | 20 | % | | | 30 | % |
| Franklin C. West | | | 20 | % | | | 15 | % | | | 15 | % | | | 20 | % | | | 30 | % |
| Donald G. Lacombe | | | 20 | % | | | 15 | % | | | 15 | % | | | 20 | % | | | 30 | % |
| William D. Hibbetts | | | 20 | % | | | 15 | % | | | 15 | % | | | 20 | % | | | 30 | % |
| | | | | | | | | | | | | | |
Name | | Earnings per
share | | | Consolidated
or Division
Level
EBITDA | | | Consolidated
EBITDA
Return on
Capital
Employed | | Safety Record
(Recordable
Incident Rate) | | | Discretionary
Based on
Individual
Performance | |
Wm. Stacy Locke | | 20 | % | | 15 | % | | 15% | | 20 | % | | 30 | % |
Lorne E. Phillips | | 20 | % | | 15 | % | | 15% | | 20 | % | | 30 | % |
William D. Hibbetts | | 20 | % | | 30 | % | | — | | 20 | % | | 30 | % |
Franklin C. West | | 20 | % | | 30 | % | | — | | 20 | % | | 30 | % |
Joseph B. Eustace | | 20 | % | | 30 | % | | — | | 20 | % | | 30 | % |
Carlos R. Peña | | 20 | % | | 15 | % | | 15% | | 20 | % | | 30 | % |
The Compensation Committee has determined that these weighting percentages appropriately correspond to our business objectives and encourage the named executive officers to focus on those factors that the Compensation Committee feels are important for both our short-term and long-term success.
15
The Compensation Committee approved the targeted2009 performance measures and individual performance objectives in May 2007 for Messrs. Locke, West, Lacombe and Hibbetts, and in July 2007 for Ms. Schuldt, after reviewing the appropriateness of the performance measures used in the past and determining anticipated difficulties in achieving specific performance targets.
Assuming annualThe approved financial performance criteria and the actual performance achieved for 2009 were:
| | | | | | | | | | | | | | | |
| | | Performance Criteria | | | Actual | |
| | | Threshold | | | Target | | | Above Expectation | | | Result Achieved | | | % of Target | |
Loss Per Share | | ($0.16 | ) | | ($0.13 | ) | | ($0.09 | ) | | ($0.46 | ) | | (354 | %) |
Consolidated EBITDA (in thousands) | | $82,479 | | | $109,971 | | | $142,963 | | | $74,942 | | | 68.1 | % |
US Drilling Services Division EBITDA (in thousands) | | $52,353 | | | $69,803 | | | $90,744 | | | $39,100 | | | 56.0 | % |
Production Services Division EBITDA (in thousands) | | $25,863 | | | $34,484 | | | $44,830 | | | $21,887 | | | 63.5 | % |
Consolidated EBITDA Return on Capital Employed | | 12.2 | % | | 16.3 | % | | 21.2 | % | | 10.9 | % | | 66.9 | % |
20
Because the Company’s EBITDA for fiscal year 2009 did not exceed the $90 million threshold, cash incentive compensation at “target” level, total cash compensation (including baseawards related to financial and safety performance measures were not awarded for fiscal year 2009.
Base salary andplus target annual incentive compensation)compensation established for the named executive officers in May 20072009 ranged between the 34th33rd and 46th63rd percentile of the survey data discussed under “Benchmarking” below.above. On average, the base salary plus target annual incentive for our named executive officers fall slightly above the market median. The Compensation Committee has determined that this level of annual cash compensation provides for a competitive base salary and motivates management to achieve annual business objectives while allowing the Company to also provide a significant portion of the named executive officers’ total direct compensation in the form of equitylong-term incentive compensation to motivate the creation of long-term shareholder value.
As of December 31, 2007, no amounts had been paid to executives for annual cash incentive compensation for the nine-month fiscal year ended December 31, 2007. In May 2008, theLong-Term Incentive Compensation Committee expects to determine annual cash incentive compensation for the
We provide our named executive officers based on achievement of the performance measures and individual performance objectives for the twelve month period ending March 31, 2008. We intend to file such information with the SEC on a Current Report onForm 8-K when such amounts are approved by the Compensation Committee.
Annual Equity Incentive Compensation
Our 2007 Incentive Plan provides for stock option awards,
restricted stock awards and long-term cash awards pursuant to our
named executive officers.2007 Incentive Plan. The Compensation Committee believes
this equity-based elementthese elements of
long-term compensation
motivatesmotivate management to seek to maximize long-term shareholder value.
During the fiscal year ended March 31, 2007,According to guidelines adopted by the Compensation Committee
adopted guidelines for granting of
annual stock option awards. Each eligible employeeawards, each named executive officer receives
long-term incentive awards at the Compensation Committee’s discretion based on the following considerations: (1) the employee’s base salary; (2) a multiple of base salary based on the employee’s position with the
company,Company, the employee’s responsibilities, the employee’s experience, and overall fairness, as well as survey data discussed under “Benchmarking”
below;above; (3) the fair value of the stock; (4)
companyCompany performance; and (5) the individual employee’s performance. The Compensation Committee reviews prior awards to compare the multiple of base salary from the prior award to the current award. The Compensation Committee meets annually to determine
equitylong-term incentive awards, if any, for each named executive officer.
Long-term incentive awards were allocated at approximately 20% restricted stock, 48% stock options, and 32% cash.Long-Term Cash Incentive Compensation
On August 27, 2009, the Compensation Committee approved long-term cash incentive awards under our 2007 Incentive Plan. Under these awards, the named executive officers will receive cash payments on April 30, 2011 and April 30, 2012 depending on their continued employment with the Company and the Company’s performance relative to a peer group of companies. Each award agreement specifies a time-based award amount and a performance-based award amount.
In general, for the time-based component, if the participant remains employed with the Company through April 30, 2011, the participant will receive 50% of the time-based award amount on that date, and if the participant remains employed with the Company through April 30, 2012, the participant will receive the remaining 50% of the time-based award amount on that date.
For the performance-based component, the Company’s performance in three metrics (EBITDA growth, EBITDA return on capital invested, and total shareholder return growth) will be compared to a peer group for the period from January 1, 2009 to December 31, 2010. The peer group is comprised of the following: Nabors Industries, Helmerich & Payne, Patterson-UTI Energy, Bronco Drilling Company, Union Drilling, Parker Drilling Company, Superior Energy Services, Key Energy Services, Basic Energy Services, and Complete Production Services. The companies in this peer group were selected because their business correlates most directly with ours and thus these companies provide an appropriate comparison for the performance metrics (as compared with our benchmarking peer companies that were selected based on shared industry and similar levels of market capitalization, enterprise value, assets and revenue and provide a more appropriate comparison for determining executive compensation). After the performance period, the Company’s performance in each of the
21
three metrics will be compared against the peer group companies, and a percentage for each of the three metrics will be assigned based on the Company’s ranking among its peers:
| | | |
Company Ranking | | Metric Percentage | |
<25th Percentile: | | 0 | % |
25th Percentile: | | 25 | % |
50th Percentile: | | 100 | % |
90th Percentile: | | 200 | % |
The metric percentage for any ranking achieved between 25th and 50th percentiles and between 50th and 90th percentiles will be proportional to the percentile achieved. The average of the three metric percentages will then be multiplied by the performance-based award amount to determine the final amount of the performance-based award. In general, after the determination of the performance-based award amount, if the participant remains employed with the Company through April 30, 2011, the participant will receive 50% of the performance-based award amount on that date, and if the participant remains employed with the Company through April 30, 2012, the participant will receive the remaining 50% of the performance-based award amount on that date.
The target long-term cash incentive award amounts for the named executive officers for 2009 were as follows (the amounts below reflect the aggregate amount each named executive officer would receive if the average of the three metric percentages for the period from January 1, 2009 to December 31, 2010 were 100%):
| | | | | | |
Name | | Time-Based Award | | Performance-Based Award |
Wm. Stacy Locke | | $ | 234,000 | | $ | 234,000 |
Lorne E. Phillips | | $ | 89,500 | | $ | 89,500 |
William D. Hibbetts | | $ | 31,500 | | $ | 31,500 |
Franklin C. West | | $ | 121,000 | | $ | 121,000 |
Joseph B Eustace | | $ | 68,500 | | $ | 68,500 |
Carlos R. Peña | | $ | 62,000 | | $ | 62,000 |
Long-Term Equity Incentive Compensation
Long-term equity incentive compensation consists of stock option awards and restricted stock awards. As of February 2009, the Compensation Committee allocated between 23% and 32% of each named executive officer’s total direct compensation to long-term equity incentive awards. The Compensation Committee has determined that these percentages allow us to provide a competitive base salary and annual and long-term cash incentive compensation while still motivating the named executive officers to make decisions that result in long-term shareholder value. The Compensation Committee allocated a higher percentage (32%) of Mr. Locke’s total direct compensation to long-term equity awards because the Compensation Committee believes that his position uniquely allows him to influence the financial performance of the Company and, accordingly, his compensation should be more closely tied to the Company’s stock performance results. The Compensation Committee allocated approximately 23-29% of the other named executive officers’ targeted total direct compensation to long-term equity incentive awards.
The Compensation Committee approves, and recommends to the board of directors for approval, all grants of equity compensation to Company employees, including the named executive officers. During the fiscal year ended December 31, 2009, equity awards were made to approximately 111 employees, including the named executive officers, or about 6.5% of total employees. Stock options are granted with an exercise price equal to the closing price of our common stock on the date of grant. We do not have a program, plan or practice to time our long-term equity incentive awards in coordination with the release of material, non-public information. In the event that material non-public information becomes known to the Compensation Committee prior to granting long-term equity incentive awards, the Compensation Committee will take the existence of such information under advisement and make an assessment in its business judgment whether to delay the grant of the equitylong-term incentive award in order to avoid any impropriety.
As of April 1, 2007,22
After the Compensation Committee allocated approximately 65% of Mr. Locke’s total direct compensation to stock options and between 43% and 44% of each of the other2009 salary increase for one named executive officer’s (excluding Mr. West) total direct compensation to stock options. The Compensation Committee has determined that these percentages allow us to provide a competitive base salaryofficer took effect and annualthe long-term incentive cash compensation while still motivatingawards were made for the named executive officers to make decisions that result in long-term shareholder value. The Compensation Committee allocated a higher percentage of Mr. Locke’s total direct compensation to stock options because the Compensation Committee believed his position as Chief Executive Officer uniquely positioned him to influence the financial performance of the Company and, accordingly, his compensation should be more closely tied to the Company’s financial results. Mr. West was excluded from the percentage analysis above because Mr. West received a large award in fiscal year 2005 which was intended to represent three years’ worth of awards as an enticement to postpone retirement.
The Compensation Committee approves, or recommends to the board of directors for approval, all grants of equity compensation to Company employees, including the named executive officers. During the nine-month fiscal year ended December 31, 2007, stock options were awarded to approximately 59 employees, including the named executive officers, or about 3% of total employees.
16
Assuming annual cash incentive compensation at “target” level,2009, individual named executive officer total direct compensation (excluding Mr. West) ranged between the 31st21st and 51st59th percentile of the survey data referred to below under “Benchmarking,” prior todata. On average the April 1, 2007 salary increases. After the April 1, 2007 salary increases took effect and the stock option awards were made for the nine-month fiscal year ended December 31, 2007, individual named executive officer (excluding Mr. West) total direct compensation ranged betweenfor our named executive officers falls just below the 31st and 52nd percentile of the survey data.
market median.Additional Information
Health, Welfare and Retirement Benefits
Besides being a common component of compensation, health, welfare and retirement benefits are designed to provide a safety net of protection against the financial catastrophes that can result from illness, disability or death, and to provide a reasonable level of retirement income based on years of service with us. These benefits help us to be competitive in attracting and retaining employees. Benefits help to keep employees focused on job performance without major distractions related to paying for health care, adequate savings for retirement and similar issues.
We offer a standard range of health and welfare benefits to substantially all U.S. employees, including the named executive officers. These benefits include medical, prescription drug and dental coverage, and life and accidental death and dismemberment insurance. In addition, short-term disability coverage and optional long-term disability insurance benefits areand optional short-term coverage is available to all salaried employees.
We offer a defined contribution 401(k) plan to substantially all of our U.S. employees. The participants may contribute, on a pretax basis, any amount of their base salary and cash incentive compensation, up to a limit imposed under the Internal Revenue Code. We makeFrom January 2009 through March 2009, we made matching contributions, up to a limit imposed under the Internal Revenue Code, with respect to these employee pretax contributions equal to 50% of the contributions made by a participating employee of the first 6% of the employee’s compensation. EmployeesUnder this matching scheme, employees become fully vested in employer contributions after five years of employment and are ratably vested prior to that time. The Summary Compensation Table reflects our contributions to the 401(k) Plan for each named executive officer.
Although the Company does not currently provide matching contributions to the 401(k) Plan for our named executive officers, we anticipate reinstating Company matching contributions beginning on April 1, 2010.Perquisites
We provide a limited number of perquisites to certain executive officers and key employees. Those perquisites primarily consist of car allowances and club memberships that our executive officers use in performing their duties. The All Other Compensation column of the Summary Compensation Table shows the value of perquisites we provided to the named executive officers during the nine-month fiscal year ended December 31, 2007.
2009.Stock Ownership Guidelines
In order to encourage the acquisition and retention of our common stock by our named executive officers to further align their economic interests with those of our shareholders and to focus our executives on the long-term sustained appreciation of our common stock, our compensation committee and our board of directors have adopted tiered guidelines requiring our current named executive officers to own a specified amount of our common stock equal to a specified multiple of their annual base salary. The ownership target is to be acquired no later than the December 31 following the fifth anniversary of the executive’s commencement of employment with the Company, or by December 31, 2013 for any executive employed as of May 17, 2008. The ownership target for the chief executive officer equals the value of three times his or her annual base salary. The ownership target for the other named executive officers equals two times his or her annual base salary. For purposes of this calculation, unvested restricted stock and restricted stock units may be counted toward the applicable ownership requirement. As of March 31, 2010, Mr. Locke and Mr. Hibbetts had fully met their stock ownership requirements. Mr. West, Mr. Eustace and Mr. Peña have until December 31, 2013 to meet their ownership targets. Mr. Phillips has until December 31, 2014 to meet his ownership target.
23
BenchmarkingCompensation Considerations for Fiscal Year 2010
The Compensation Committee believes that stock option grants and restricted stock awards continue to constitute the best long-term award vehicles and that certain elements of compensation should be based on Company performance. In April 2007,early 2010, the Committee decided not to award performance-based long-term cash awards to the named executive officers and instead to award performance-based restricted stock units. Recognizing the need to balance retention of executive officers with the realities of the Company’s reduced financial performance, the Compensation Committee retained Stone Partners as an independentdecided to utilize a lower EBITDA threshold ($30 million) for annual incentive compensation consultant to assist inthan the Compensation Committee’s compensation determinations. Stone Partners reported to, and acted at the direction of, the Compensation Committee. Stone Partners was instructed to benchmark executive positions, to review general trends relating to executive compensation in the drilling and oilfield services industry, and to review the operation of our incentive plans.threshold established for fiscal 2009 ($90 million). The Compensation Committee reviewed several sources as a reference for determining competitive totalwill continue to review our compensation packages. These sources included published data from Watson Wyatt Top Management, William M. Mercer-Energy,programs and Stone Partner’s Executive Oilfield Manufacturingmake appropriate modifications to discourage risky short-term behavior and Services Industry compensation surveys. Watson Wyatt’s survey included 2,567 US companies, 154 of which are in the Utilitiesreward consistent and Energy industry. Mercer’s survey included 184 companies in the energy industry. Both Watson Wyatt (national survey data) and Mercer-Energy (industry survey data) are nationally known, highly respected sources for data. Stone Partner’s survey (available to participants only and another industry survey) included 57 oilfield manufacturing and service companies; 2007 was the 11th year of publication for this survey. In addition, the Compensation Committee reviewed proxy statement data from a peer group of companies. In May 2007, when compensation was determined for the year ending March 31, 2008, our industry peer group consisted of the following companies:
17
| | |
| • | Grey Wolf, Inc. |
|
| • | Helix Energy Solutions Group |
|
| • | Helmerich & Payne, Inc. |
|
| • | Parker Drilling Company |
|
| • | Petroleum Development Corp. |
|
| • | TODCO |
|
| • | Unit Corp. |
These companies were selected because of similarities we share, including a common industry (oilfield services) and similar levels of market capitalization, assets and revenue.
In April 2007, the compensation consultant benchmarked the 25th, 50th and 75th percentiles for the data sources mentioned above to gain an understanding of competitive pay practices. The industry peer group, industry surveys and national survey data are equally weighted, considered for each element of compensation, and collectively referred to as the “survey data” throughout this Compensation Discussion and Analysis.
Role of Executive Officers in Setting Compensation
The Chief Executive Officer provides input into the Compensation Committee’s meeting agendas, including background information regarding our strategic objectives, suggestions on annual performance targets and reports on his evaluations of the other officers. He makes compensation recommendations for the other officers with respect to base salary increases, annual cash incentives and annual equity incentives that are then reviewed by the Compensation Committee. The Chief Financial Officer evaluates the financial implications of any Compensation Committee action.
The Compensation Committee meetings are attended by the Compensation Committee members and, as needed, by other directors, the Chief Executive Officer, the Chief Financial Officer, and outside advisors, including our compensation consultant. The Compensation Committee regularly meets in executive session without any members of management present.
Compliance With Internal Revenue Code Section 162(m)
Section 162(m) of the Internal Revenue Code imposesof 1986, as amended, limits the tax deduction for annual compensation paid to a $1,000,000 limit onpublic company’s Chief Executive Officer and its next three most highly compensated executive officers, excluding the deductibilityChief Financial Officer, to $1 million. Qualified performance-based compensation is excluded from this deduction limitation if certain requirements are met. Stock option awards granted under our 2007 Incentive Plan and other equity compensation plans have been structured to qualify as performance-based. The Compensation Committee’s intent is to design compensation awards that will be deductible without limitation where doing so will further the purposes of our executive compensation program. The Compensation Committee will, however, take into consideration the various other factors described in this Compensation Discussion and Analysis, together with Section 162(m) considerations in making executive compensation decisions and could, in certain items ofcircumstances, approve and authorize compensation that is not fully tax deductible. All compensation paid to the Chief Executive Officer and certain other highly compensatednamed executive officers. This limitation does not apply to compensation that meets the requirements under Section 162(m) for “qualifying performance-based” compensation, including requirements that the compensation is paid only if performance meets pre-established objective goals based on performance criteria approved by shareholders. For the nine-month fiscal year ended December 31, 2007, none of our officers received compensation that would not bein 2009 was deductible under Section 162(m). The Compensation Committee reviews our compensation and the applicability of Section 162(m) and may take action as may be necessary to preserve the deductibility of compensation payments to the extent reasonably practical and consistent with our objectives.
18
24
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis included in this proxy statement with the management of Pioneer Drilling Company, and, based on such review and discussions, the Compensation Committee recommended to the board of directors of Pioneer Drilling Company that the Compensation Discussion and Analysis be included in this proxy statement.
|
| The Compensation Committee |
|
Dean A. Burkhardt C. John Thompson Scott D. Urban, Chairman |
|
The information above in the Report of the Compensation Committee
Dean A. Burkhardt, Chairman
C. Robert Bunch
Michael F. Harness
C. John Thompson
shall not be deemed to be “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, nor shall it be deemed to be incorporated by reference into any filing under the Securities Act of 1933 (the “Securities Act”) or the Exchange Act, except to the extent that the Company specifically requests that the information be treated as soliciting material or specifically incorporates the information by reference.
19
25
EXECUTIVE COMPENSATION
2009 Summary Compensation Table
The following table presents information concerning compensation for all services rendered to Pioneerus in all capacities during the fiscal yearyears ended MarchDecember 31, 20072009 and December 31, 2008, the nine month fiscal year ended December 31, 2007 and the fiscal year ended March 31, 2007, by each individual who served as our principal executive officer or principal financial officer during these fiscal years and our other executive officers (collectively, the “named executive officers”).
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | Non-Equity
| | | | |
| | | Fiscal Year
| | | | Option
| | Incentive Plan
| | All Other
| | |
Name and Principal Position | | Ended(1) | | Salary | | Awards(2) | | Compensation(3) | | Compensation(4) | | Total |
| |
| Wm. Stacy Locke | | December 31, 2007 | | $ | 344,700 | | | $ | 770,851 | | | | — | | | $ | 16,141 | | | $ | 1,131,692 | |
Director, President and
Chief Executive Officer | | March 31, 2007 | | $ | 408,000 | | | $ | 631,476 | | | $ | 273,767 | | | $ | 20,432 | | | $ | 1,333,675 | |
| Joyce M. Schuldt | | December 31, 2007 | | $ | 131,538 | | | $ | 217,694 | | | | — | | | $ | 102,228 | | | $ | 451,460 | |
Executive Vice President,
Chief Financial Officer and
Secretary(5) | | March 31, 2007 | | | — | | | | — | | | | — | | | | — | | | | — | |
| Franklin C. West | | December 31, 2007 | | $ | 283,923 | | | $ | 186,711 | | | | — | | | $ | 17,790 | | | $ | 488,424 | |
Executive Vice President and
President of Drilling Services
Division | | March 31, 2007 | | $ | 350,000 | | | $ | 519,728 | | | $ | 192,208 | | | $ | 20,328 | | | $ | 1,082,264 | |
| Donald G. Lacombe | | December 31, 2007 | | $ | 149,654 | | | $ | 222,025 | | | | — | | | $ | 21,910 | | | $ | 393,589 | |
Senior Vice President of Drilling
Services Division — Marketing | | March 31, 2007 | | $ | 185,000 | | | $ | 213,874 | | | $ | 81,007 | | | $ | 25,979 | | | $ | 505,860 | |
| William D. Hibbetts | | December 31, 2007 | | $ | 161,538 | | | $ | 166,159 | | | | — | | | $ | 18,246 | | | $ | 345,943 | |
Senior Vice President of Drilling
Services Division — Controller(6) | | March 31, 2007 | | $ | 210,000 | | | $ | 248,458 | | | $ | 83,764 | | | $ | 19,016 | | | $ | 561,238 | |
| | | | | | | | | | | | | | | | | | | | |
(1)Name and
Principal Position | | In Fiscal Year
Ended (1) | | Salary | | Option
Awards (2) | | Stock
Awards (3) | | Non-Equity
Incentive Plan
Compensation (1) | | All Other
Compensation (4) | | Total |
Wm. Stacy Locke Director, President and Chief Executive Officer | | December 2007, our board of directors approved a change in our fiscal year end from March 31, to 2009
December 31. The fiscal year end change was effective 31, 2008
December 31, 2007 and resulted in a nine month financial reporting period from April 1,
March 31, 2007 to | | $
$ $ $ | 550,000
523,077 344,700 408,000 | | $
$ $ $ | 494,680
1,246,158 1,248,920 717,216 | | $
$ | 180,864
486,495 — — | | $
$ $ | 132,000
891,519 — 273,767 | | $
$ $ $ | 25,869
22,939 16,141 20,432 | | $
$ $ $ | 1,383,413
3,170,188 1,609,761 1,419,415 |
| | | | | | | |
Lorne E. Phillips Executive Vice President, Chief Financial Officer (5) | | December 31, 2007.2009
December 31, 2008
December 31, 2007
March 31, 2007 | | $
| 284,308
— — — | | $
| 444,318
— — — | | $
| 69,120
— — — | | $
| 48,000
— — — | | $
| 225,253
— — — | | $
| 1,070,999
— — — |
| | | | | | | |
(2)William D. Hibbetts Senior Vice President of Accounting (5) | | December 31, 2009
December 31, 2008
December 31, 2007
March 31, 2007 | | $
$ $ $ | 210,000
210,000 161,538 210,000 | | $
$ $ $ | 62,883
166,155 124,892 268,956 | | $
$ | 23,040
66,573 — — | | $
$ $ | 25,200
198,899 — 83,764 | | $
$ $ $ | 21,593
21,678 18,246 19,016 | | $
$ $ $ | 342,716
663,305 304,676 581,736 |
| | | | | | | |
Franklin C. West Executive Vice President and President of Drilling Services Division | | December 31, 2009
December 31, 2008
December 31, 2007
March 31, 2007 | | $
$ $ $ | 395,000
388,269 283,923 350,000 | | $
$ | 251,532
643,848 — — | | $
$ | 92,160
256,050 — — | | $
$ $ | 59,250
432,028 — 192,208 | | $
$ $ $ | 25,869
22,939 17,790 20,328 | | $
$ $ $ | 823,811
1,743,134 301,713 562,536 |
| | | | | | | |
Joseph B. Eustace Executive Vice President and President of Production Services Division | | December 31, 2009
December 31, 2008
December 31, 2007
March 31, 2007 | | $
$ | 280,000
209,828 — — | | $
$ | 144,630
373,848 — — | | $
$ | 53,377
143,388 — — | | $
$ | 42,000
153,391 — — | | $
$ | 24,987
12,139 — — | | $
$ | 544,994
892,594 — — |
| | | | | | | |
Carlos R. Pena Senior Vice President, General Counsel and Secretary | | December 31, 2009
December 31, 2008
December 31, 2007
March 31, 2007 | | $
$ | 225,962
35,481 — — | | $
$ | 132,054
37,746 — — | | $
| 46,080
— — — | | $
$ | 33,750
35,322 — — | | $
| 14,895
— — — | | $
$ | 452,741
108,549 — — |
| (1) | Non-equity incentive plan compensation for the fiscal year ended December 31, 2008 includes annual cash incentive compensation for both Plan Year 08-A and Plan Year 08-B as summarized in the following table: |
| | | | | | | |
Wm. Stacy Locke | | Plan Year 08-A | | (April 1, 2007 to March 31, 2008) | | $ | 368,011 |
| | Plan Year 08-B | | (April 1, 2008 to December 31, 2008) | | | 523,508 |
| | | | | | | |
| | | | | | $ | 891,519 |
| | | |
William D. Hibbetts (5) | | Plan Year 08-A | | (April 1, 2007 to March 31, 2008) | | $ | 90,069 |
| | Plan Year 08-B | | (April 1, 2008 to December 31, 2008) | | | 108,830 |
| | | | | | | |
| | | | | | $ | 198,899 |
| | | |
Franklin C. West | | Plan Year 08-A | | (April 1, 2007 to March 31, 2008) | | $ | 198,367 |
| | Plan Year 08-B | | (April 1, 2008 to December 31, 2008) | | | 233,661 |
| | | | | | | |
| | | | | | $ | 432,028 |
| | | |
Joseph B. Eustace | | Plan Year 08-A | | (April 1, 2007 to March 31, 2008) | | $ | — |
| | Plan Year 08-B | | (April 1, 2008 to December 31, 2008) | | | 153,391 |
| | | | | | | |
| | | | | | $ | 153,391 |
| | | |
Carlos R. Pena | | Plan Year 08-A | | (April 1, 2007 to March 31, 2008) | | $ | — |
| | Plan Year 08-B | | (April 1, 2008 to December 31, 2008) | | | 35,322 |
| | | | | | | |
| | | | | | $ | 35,322 |
26
In December 2007, our board of directors approved a change in our fiscal year end from March 31 to December 31. The fiscal year end change was effective December 31, 2007 and resulted in a nine month financial reporting period from April 1, 2007 to December 31, 2007. However, the Compensation Committee did not change the previously determined amounts for cash incentive compensation target levels for our executive officers for the twelve month period from April 1, 2007, to March 31, 2008 (“Plan Year 08-A”). Accordingly, the relevant performance measures for determination of annual cash incentive compensation amounts for Plan Year 08-A were not satisfied during the 2007 fiscal year but rather during the fiscal year ended December 31, 2008. The Compensation Committee thus awarded annual cash incentive compensation for Plan Year 08-A to our named executive officers on August 23, 2008, and these amounts are reported as non-equity incentive plan compensation paid during the fiscal year ended December 31, 2008. The relevant performance measures for determination of annual cash incentive compensation amounts for the nine month period from April 1, 2008, to December 31, 2008 (“Plan Year 08-B”) were also satisfied during the fiscal year ended December 31, 2008, so these amounts are also reported as non-equity incentive plan compensation paid during the fiscal year ended December 31, 2008. Consequently, the Summary Compensation Table and related explanatory tables include annual cash incentive compensation for both Plan Year 08-A and Plan Year 08-B as summarized in the table above.
| (2) | The amounts included in the “Option Awards” column represent the compensation cost we recognized inaggregate grant date fair value of the fiscal year ended March 31, 2007 andrestricted stock awards granted to the nine monthnamed executive officers during the fiscal year ended December 31, 2007 related to option awards we granted during those fiscal years and prior fiscal years,2009, computed in accordance with ASC Topic 718 (formerly SFAS 123R.No. 123R), except that no assumption for forfeitures was included. For a discussion of valuation assumptions, see Note 1 to our consolidated financial statements included in our annual report onForm 10-KT10-K for the nine month fiscal year ended December 31, 2007.2009. Please see the “Grants of Plan-Based Awards Table” for information regarding the option awards we granted during the nine month fiscal year ended December 31, 2007.2009. |
|
| (3) | | The amount shown for eachamounts included in the “Stock Awards” column represent the aggregate grant date fair value of the restricted stock awards granted to the named executive officer inofficers during the “Non-Equity Incentive Plan Compensation” column is attributable to an award earned under our cash-incentive plan in fiscal year ended March 31, 2007. Cash incentive compensation for the nine month fiscal year ended December 31, 2007 has2009, computed in accordance with ASC Topic 718 (formerly SFAS No. 123R), except that no assumption for forfeitures was included. Restricted stock awards were not been awardedgranted in prior fiscal years. For a discussion of valuation assumptions, see Note 1 to the named executive officers and, consequently, such amounts are not calculable as of the date of this proxy statement. In May 2008, the Compensation Committee expects to determineour consolidated financial statements included in our annual cash incentive compensationreport on Form 10-K for the named executive officers based onfiscal year ended December 31, 2009. Please see the achievement“Grants of performance measures and individual performance objectivesPlan-Based Awards Table” for information regarding the twelve month periodrestricted stock awards we granted during the fiscal year ended MarchDecember 31, 2008. We intend to file such information with the SEC on a Current Report onForm 8-K when such amounts are approved by the Compensation Committee.2009. |
20
| | |
| (4) | | The amounts shown in the “All Other Compensation” column for the nine month fiscal year ended December 31, 20072009 are noted in the table below. Amounts shown in the “Other” column represent life insurance premiums and club dues paid by Pioneerus on behalf of the named executive officers and consulting fees paid to Ms. Schuldt as described in footnote 5 below.officers. |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | Auto
| | | 401K Matching
| | | Relocation
| | | | | | | |
Name | | Fiscal Year Ended(1) | | | Allowance | | | Contributions | | | Benefits | | | Other | | | Total | |
| |
| Wm. Stacy Locke | | | December 31, 2007 | | | $ | 10,800 | | | $ | 4,078 | | | | — | | | $ | 1,263 | | | $ | 16,141 | |
| Joyce M. Schuldt(5) | | | December 31, 2007 | | | $ | 6,560 | | | | — | | | $ | 43,748 | | | $ | 51,920 | | | $ | 102,228 | |
| Franklin C. West | | | December 31, 2007 | | | $ | 10,800 | | | $ | 5,808 | | | | — | | | $ | 1,182 | | | $ | 17,790 | |
| Donald G. Lacombe | | | December 31, 2007 | | | $ | 10,800 | | | $ | 4,526 | | | | — | | | $ | 6,584 | | | $ | 21,910 | |
| William D. Hibbetts(6) | | | December 31, 2007 | | | $ | 10,800 | | | $ | 7,233 | | | | — | | | $ | 213 | | | $ | 18,246 | |
| | | | | | | | | | | | | | | | | | |
Name | | Auto
Allowance | | 401K Matching
Contributions | | Relocation
Benefits | | Sign-on
Bonus | | Other | | Total |
Wm. Stacy Locke | | $ | 14,400 | | $ | 9,800 | | | — | | | — | | $ | 1,669 | | $ | 25,869 |
| | | | | | |
Lorne E. Phillips (5) | | $ | 13,200 | | | — | | $ | 61,558 | | $ | 150,000 | | $ | 495 | | $ | 225,253 |
| | | | | | |
William D. Hibbetts (5) | | $ | 14,400 | | $ | 6,815 | | | — | | | — | | $ | 378 | | $ | 21,593 |
| | | | | | |
Franklin C. West | | $ | 14,400 | | $ | 9,800 | | | — | | | — | | $ | 1,669 | | $ | 25,869 |
| | | | | | |
Joseph B. Eustace | | $ | 14,400 | | $ | 8,954 | | | — | | | — | | $ | 1,633 | | $ | 24,987 |
| | | | | | |
Carlos R. Pena | | $ | 14,400 | | | — | | | — | | | — | | $ | 450 | | $ | 14,850 |
| | |
| (5) | | Joyce M. Schuldt was appointed as our Executive Vice President, Chief Financial Officer and Secretary effective July 18, 2007. From January 16, 2007 until July 18, 2007, Ms. Schuldt provided consulting services to Pioneer related to its international expansion prior to her employment with the company. Consulting fees of $46,550 and out-of-pocket expense reimbursements of $5,276 paid to Ms. Schuldt are included in the “All Other Compensation” column of the Summary Compensation Table and in the “Other” column of the table in footnote 4 above. |
|
(6) | | William D. Hibbetts served as our Senior Vice President,Interim Chief Financial Officer and Secretary through July 18, 2007, at which time heuntil Lorne E. Phillips was reassigned to the position of Senior Vice President of Drilling Services Division — Controller.appointed Chief Financial Officer on February 1, 2009. |
27
2009 Grants of Plan-Based Awards
The following table summarizes information concerning plan-based awards to the named executive officers during the nine month fiscal year ended December 31, 2007:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | All Other
| | | | | | | |
| | | | | | | | | | | | | | | Option
| | | | | | | |
| | | | | | | | | | | | | | | Awards:
| | | Exercise
| | | | |
| | | | | | | | | | | | | | | Number of
| | | or Base
| | | Grant Date
| |
| | | | | | Estimated Future Payouts Under
| | | Securities
| | | Price of
| | | Fair Value of
| |
| | | Grant
| | | Non-Equity Plan Incentive Awards(1) | | | Underlying
| | | Option
| | | Option
| |
Name | | Date | | | Threshold | | | Target | | | Maximum | | | Options | | | Awards | | | Awards(2) | |
| |
| Wm. Stacy Locke | | | 5/14/2007 | | | $ | 108,000 | | | $ | 360,000 | | | $ | 630,000 | | | | 200,000 | | | $ | 14.07 | | | $ | 1,248,920 | |
| Joyce M. Schuldt | | | 7/18/2007 | | | $ | 31,685 | | | $ | 105,616 | | | $ | 211,233 | | | | 125,000 | | | $ | 14.04 | | | $ | 783,263 | |
| Franklin C. West | | | 5/14/2007 | | | $ | 55,500 | | | $ | 185,000 | | | $ | 370,000 | | | | — | | | | — | | | | — | |
| Donald G. Lacombe | | | 5/14/2007 | | | $ | 23,400 | | | $ | 78,000 | | | $ | 156,000 | | | | 50,000 | | | $ | 14.07 | | | $ | 312,230 | |
| William D. Hibbetts | | | 5/14/2007 | | | $ | 25,200 | | | $ | 84,000 | | | $ | 168,000 | | | | 20,000 | | | $ | 14.07 | | | $ | 124,892 | |
| | | | | | | | | | | | | | | | | | | | | | |
| | | Grant
Date | | | Estimated Future Payouts Under
Non-Equity Plan Incentive Awards | | All Other
Stock Awards:
Number of
Shares of
Stock or Units
(4) | | All Other
Option
Awards:
Number of
Securities
Underlying
Options
(4) | | Exercise
or Base
Price of
Option
Awards | | Grant
Date Fair
Value of
Stock and
Option
Awards
(5) |
Name | | | Threshold | | Target | | Maximum | | | | |
Wm. Stacy Locke | | 3/2/2009 | (1) | | $ | 132,000 | | $ | 440,000 | | $ | 880,000 | | 47,100 | | 236,000 | | $ | 3.84 | | $ | 675,544 |
| | 8/27/2009 | (2) | | | — | | $ | 234,000 | | $ | 468,000 | | — | | — | | | — | | | — |
| | 8/27/2009 | (3) | | | — | | $ | 234,000 | | | — | | — | | — | | | — | | | — |
| | | | | | | | |
Lorne E. Phillips | | 3/2/2009 | (1) | | $ | 48,000 | | $ | 160,000 | | $ | 320,000 | | 18,000 | | 90,000 | | $ | 3.84 | | $ | 257,769 |
| | 8/27/2009 | (2) | | | — | | $ | 89,500 | | $ | 179,000 | | — | | — | | | — | | | — |
| | 8/27/2009 | (3) | | | — | | $ | 89,500 | | | — | | — | | — | | | — | | | — |
| | 2/2/2009 | | | | — | | | — | | | — | | — | | 100,000 | | $ | 4.73 | | $ | 255,670 |
| | | | | | | | |
William D. Hibbetts | | 3/2/2009 | (1) | | $ | 25,200 | | $ | 84,000 | | $ | 168,000 | | 6,000 | | 30,000 | | $ | 3.84 | | $ | 85,923 |
| | 8/27/2009 | (2) | | | — | | $ | 31,500 | | $ | 63,000 | | — | | — | | | — | | | — |
| | 8/27/2009 | (3) | | | — | | $ | 31,500 | | | — | | — | | — | | | — | | | — |
| | | | | | | | |
Franklin C. West | | 3/2/2009 | (1) | | $ | 59,250 | | $ | 197,500 | | $ | 395,000 | | 24,000 | | 120,000 | | $ | 3.84 | | $ | 343,692 |
| | 8/27/2009 | (2) | | | — | | $ | 121,000 | | $ | 242,000 | | — | | — | | | — | | | — |
| | 8/27/2009 | (3) | | | — | | $ | 121,000 | | | — | | — | | — | | | — | | | — |
| | | | | | | | |
Joseph B. Eustace | | 3/2/2009 | (1) | | $ | 42,000 | | $ | 140,000 | | $ | 280,000 | | 13,900 | | 69,000 | | $ | 3.84 | | $ | 198,007 |
| | 8/27/2009 | (2) | | | — | | $ | 68,500 | | $ | 137,000 | | — | | — | | | — | | | — |
| | 8/27/2009 | (3) | | | — | | $ | 68,500 | | | — | | — | | — | | | — | | | — |
| | | | | | | | |
Carlos R. Pena | | 3/2/2009 | (1) | | $ | 33,750 | | $ | 112,500 | | $ | 225,000 | | 12,000 | | 63,000 | | $ | 3.84 | | $ | 178,134 |
| | 8/27/2009 | (2) | | | — | | $ | 62,000 | | $ | 124,000 | | — | | — | | | — | | | — |
| | 8/27/2009 | (3) | | | — | | $ | 62,000 | | | — | | — | | — | | | — | | | — |
| | |
| (1) | | The amounts shown reflect grants of awards under our cash-incentive plan during the nine month fiscal year ended December 31, 2007.2009. In May 2007,February 2009, our Compensation Committee establishedapproved target cash-incentive awards,award levels, expressed as a percentage of the officer’s base salary, and individual and company performance measures, and the performance measure weighting for the purpose of determining the amount to be paid under the cash-incentive plan to each officer for the twelve month periodfiscal year ended MarchDecember 31, 2008.2009. The amount shown in the “target” column represents the target percentage of each named executive officer’s base salary for such period. The target percentages were 80% for Mr. Locke, 50% for Ms. Schuldt,Mr. Phillips, 40% for Mr. Hibbetts, 50% for Mr. West, 40%50% for Mr. LacombeEustace and 40%50% for Mr. Hibbetts.Peña. The amount shown in the “maximum” column represents the maximum amount payable under the cash-incentive plan, which is 175% of the target amount shown for Mr. Locke and 200% of the target amounts shown for each of the other named executive officers. The amount shown in the “threshold” column represents the amount payable under the cash-incentivecash- incentive plan if only the minimum level of company performance is attained, which is 30% of the target amount shown for all named executive officers. Please see “Compensation Discussion and Analysis — Analysis—Annual Cash Incentive Compensation” for more information regarding our cash-incentive plan and performance measures. |
21
| | |
| (2) | The amounts shown reflect grants during the fiscal year ended December 31, 2009 of performance-based long-term cash incentive awards for the performance period covering fiscal years 2009 and 2010 made pursuant to our 2007 Incentive Plan. The awards will be payable in cash in equal installments on April 30, 2011 and April 30, 2012 based on our achievement, relative to a peer group, of specified performance metrics (EBITDA growth, EBITDA return on capital invested, and total shareholder return) corresponding to specific payment percentages ranging from 0% to 200% of the target amount shown. Please see “Compensation Discussion and Analysis—Long-Term Cash Incentive Compensation” for more information regarding the long-term cash incentive awards. |
28
| (3) | The amounts shown reflect grants during the fiscal year ended December 31, 2009 of time-based long-term cash incentive awards pursuant to our 2007 Incentive Plan. The awards will be payable in cash in equal installments on April 30, 2011 and April 30, 2012 if, subject to certain exceptions, the named executive officer remains continuously employed by the Company through such dates. Please see “Compensation Discussion and Analysis—Long-Term Cash Incentive Compensation” for more information regarding the long-term cash incentive awards. |
| (4) | All restricted stock awards and stock option awards during the year ended December 31, 2009 were granted from our 2007 Incentive Plan. |
| (5) | The amounts included in the “Grant Date Fair Value of Stock and Option Awards” column represent the full grant date fair valuesvalue of theeach restricted stock award and stock option awardsaward computed in accordance with ASC Topic 718 (formerly SFAS 123R.No. 123R). For a discussion of valuation assumptions, see Note 1 to our consolidated financial statements included in our annual report onForm 10-KT10-K for the nine-month fiscal year ended December 31, 2007.2009. |
29
2009 Outstanding Equity Awards at Fiscal Year End
The following table provides information concerning thestock options and restricted stock held by the named executive officers which were outstanding as of December 31, 2007.
| | | | | | | | | | | | | | | | | |
| | | Number of
| | | Number of
| | | | | | | |
| | | Securities
| | | Securities
| | | | | | | |
| | | Underlying
| | | Underlying
| | | | | | | |
| | | Unexercised
| | | Unexercised
| | | Option
| | | Option
| |
| | | Options
| | | Options
| | | Exercise
| | | Expiration
| |
Name | | Exercisable | | | Unexercisable | | | Price | | | Date | |
| |
| Wm. Stacy Locke | | | 100,000 | | | | — | | | $ | 3.67 | | | | 11/19/2013 | |
| | | | — | | | | 4,000 | (1) | | $ | 4.77 | | | | 1/4/2014 | |
| | | | 65,334 | | | | 32,666 | (2) | | $ | 14.58 | | | | 8/17/2015 | |
| | | | 40,000 | | | | 80,000 | (3) | | $ | 14.54 | | | | 6/4/2016 | |
| | | | — | | | | 200,000 | (4) | | $ | 14.07 | | | | 5/13/2017 | |
| Joyce M. Schuldt | | | — | | | | 125,000 | (5) | | $ | 14.04 | | | | 7/17/2017 | |
| Franklin C. West | | | 180,000 | | | | — | | | $ | 3.00 | | | | 12/19/2011 | |
| | | | 60,000 | | | | 40,000 | (6) | | $ | 4.77 | | | | 1/4/2014 | |
| | | | 200,000 | | | | 100,000 | (7) | | $ | 9.53 | | | | 1/9/2015 | |
| Donald G. Lacombe | | | 40,000 | | | | — | | | $ | 3.70 | | | | 4/20/2013 | |
| | | | 30,000 | | | | 20,000 | (8) | | $ | 4.77 | | | | 1/4/2014 | |
| | | | 18,000 | | | | 9,000 | (9) | | $ | 14.58 | | | | 8/17/2015 | |
| | | | 13,332 | | | | 26,668 | (10) | | $ | 14.54 | | | | 6/4/2016 | |
| | | | — | | | | 50,000 | (11) | | $ | 14.07 | | | | 5/13/2017 | |
| William D. Hibbetts | | | 16,667 | | | | — | | | $ | 3.70 | | | | 4/20/2013 | |
| | | | 35,000 | | | | 30,000 | (12) | | $ | 4.77 | | | | 1/4/2014 | |
| | | | 20,000 | | | | 10,000 | (13) | | $ | 14.58 | | | | 8/17/2015 | |
| | | | 15,000 | | | | 30,000 | (14) | | $ | 14.54 | | | | 6/4/2016 | |
| | | | — | | | | 20,000 | (15) | | $ | 14.07 | | | | 5/13/2017 | |
| | | | | | | | | | | | | | | | |
| | | Option Awards | | Stock Awards |
Name | | Number of
Securities
Underlying
Unexercised
Options
Exercisable | | Number of
Securities
Underlying
Unexercised
Options
Unexercisable | | | Option
Exercise
Price | | Option
Expiration
Date | | Number of
Shares or
Units Market
Value of Shares
or of Stock
That Have
Not Vested | | | Units of Stock
That Have
Not Vested
(26) |
Wm. Stacy Locke | | 85,000 | | — | | | $ | 3.67 | | 11/19/2013 | | — | | | | — |
| | 2,000 | | — | | | $ | 4.77 | | 1/4/2014 | | — | | | | — |
| | 98,000 | | — | | | $ | 14.58 | | 8/17/2015 | | — | | | | — |
| | 120,000 | | — | | | $ | 14.54 | | 6/4/2016 | | — | | | | — |
| | 133,334 | | 66,666 | (1) | | $ | 14.07 | | 5/13/2017 | | — | | | | — |
| | 60,000 | | 120,000 | (2) | | $ | 17.07 | | 8/27/2018 | | 19,000 | (16) | | $ | 150,100 |
| | — | | 236,000 | (3) | | $ | 3.84 | | 3/1/2019 | | 47,100 | (17) | | $ | 372,090 |
| | | | | | |
Lorne E. Phillips | | — | | 100,000 | (4) | | $ | 4.73 | | 2/1/2019 | | — | | | | — |
| | — | | 90,000 | (5) | | $ | 3.84 | | 3/1/2019 | | 18,000 | (18) | | $ | 142,200 |
| | | | | | |
William D. Hibbetts | | 11,613 | | — | | | $ | 3.70 | | 4/20/2013 | | — | | | | — |
| | 65,000 | | — | | | $ | 4.77 | | 1/4/2014 | | — | | | | — |
| | 30,000 | | — | | | $ | 14.58 | | 8/17/2015 | | — | | | | — |
| | 45,000 | | — | | | $ | 14.54 | | 6/4/2016 | | — | | | | — |
| | 13,334 | | 6,666 | (6) | | $ | 14.07 | | 5/13/2017 | | — | | | | — |
| | 8,000 | | 16,000 | (7) | | $ | 17.07 | | 8/27/2018 | | 2,600 | (19) | | $ | 20,540 |
| | — | | 30,000 | (8) | | $ | 3.84 | | 3/1/2019 | | 6,000 | (20) | | $ | 47,400 |
| | | | | | |
Franklin C. West | | 180,000 | | — | | | $ | 3.00 | | 12/19/2011 | | — | | | | — |
| | 100,000 | | — | | | $ | 4.77 | | 1/4/2014 | | — | | | | — |
| | 300,000 | | — | | | $ | 9.53 | | 1/9/2015 | | — | | | | — |
| | 31,000 | | 62,000 | (9) | | $ | 17.07 | | 8/27/2018 | | 10,000 | (21) | | $ | 79,000 |
| | — | | 120,000 | (10) | | $ | 3.84 | | 3/1/2019 | | 24,000 | (22) | | $ | 189,600 |
| | | | | | |
Joseph B. Eustace | | 28,333 | | 56,667 | (11) | | $ | 13.57 | | 3/2/2018 | | — | | | | — |
| | 18,000 | | 36,000 | (12) | | $ | 17.07 | | 8/27/2018 | | 5,600 | (23) | | $ | 44,240 |
| | — | | 69,000 | (13) | | $ | 3.84 | | 3/1/2019 | | 13,900 | (24) | | $ | 109,810 |
| | | | | | |
Carlos R. Pena | | 5,000 | | 10,000 | (14) | | $ | 5.51 | | 10/26/2018 | | — | | | | — |
| | — | | 63,000 | (15) | | $ | 3.84 | | 3/1/2019 | | 12,000 | (25) | | $ | 94,800 |
| | |
| (1) | | The indicated options are scheduled to vest on January 5, 2008.May 14, 2010. |
|
| (2) | | The indicated options are scheduled to vest on August 18, 2008. |
|
(3) | | The indicated options are scheduled to vest in installments of 40,00060,000 shares each on June 5, 2008August 28, 2010 and June 5, 2009.August 28, 2011. |
| (3) | Of the indicated options, 78,666 shares vested on March 2, 2010 and 78,667 shares are scheduled to vest on March 2, 2011 and March 2, 2012. |
| (4) | Of the indicated options, 33,333 shares vested on February 2, 2010, 33,333 shares are scheduled to vest on February 2, 2011, and 33,334 shares are scheduled to vest on February 2, 2012. |
| (5) | Of the indicated options, 30,000 shares vested on March 2, 2010 and installments of 30,000 shares each are scheduled to vest on March 2, 2011 and March 2, 2012. |
| (6) | The indicated options are scheduled to vest on May 14, 2010. |
| (7) | The indicated options are scheduled to vest in installments of 66,6668,000 shares each on May 14, 2008, 66,667August 28, 2010 and August 28, 2011. |
30
| (8) | Of the indicated options, 10,000 shares vested on May 14, 2009March 2, 2010 and 66,667installments of 10,000 shares each are scheduled to vest on May 14, 2010.March 2, 2011 and March 2, 2012. |
|
(5) | (9) | The indicated options are scheduled to vest in installments of 41,66631,000 shares each on July 18, 2008, 41,667August 28, 2010 and August 28, 2011. |
| (10) | Of the indicated options, 40,000 shares vested on July 18, 2009March 2, 2010 and 41,667installments of 40,000 shares each are scheduled to vest on July 17, 2010.March 2, 2011 and March 2, 2012. |
| (11) | Of the indicated options, 28,333 shares vested on March 3, 2010 and 28,334 shares are scheduled to vest on March 3, 2011. |
(6) | (12) | The indicated options are scheduled to vest in installments of 20,00018,000 shares each on January 5, 2008August 28, 2010 and January 5, 2009.August 28, 2011. |
|
(7)(13) | | TheOf the indicated options, 23,000 shares vested on March 2, 2010 and installments of 23,000 shares each are scheduled to vest on January 10, 2008. Mr. West received a large award in the fiscal year ended March 31, 2005 intended to represent three years’ worth of grants.2, 2011 and March 2, 2012. |
|
(8) | (14) | The indicated options are scheduled to vest in installments of 10,0005,000 shares each on January 5, 2008October 27, 2010 and January 5, 2009.October 27, 2011. |
|
(9)(15) | | TheOf the indicated options, 21,000 shares vested on March 2, 2010 and installments of 21,000 shares each are scheduled to vest on August 18, 2008.March 2, 2011 and March 2, 2012. |
22
| | |
(10) | (16) | The indicated optionsshares of restricted stock are scheduled to vest in installments of 13,3349,500 shares each on June 5, 2008August 28, 2010 and June 5, 2009.August 28, 2011. |
| (17) | Of the indicated shares of restricted stock, 15,700 vested on March 2, 2010 and installments of 15,700 shares each are scheduled to vest on March 2, 2011 and March 2, 2012. |
(11)(18) | Of the indicated shares of restricted stock, 6,000 shares vested on March 2, 2010 and installments of 6,000 shares each are scheduled to vest on March 2, 2011 and March 2, 2012. |
| (19) | The indicated optionsshares of restricted stock are scheduled to vest in installments of 16,6661,300 shares each on May 14, 2008, 16,667August 28, 2010 and August 28, 2011. |
| (20) | Of the indicated shares of restricted stock, 2,000 shares vested on May 14, 2009March 2, 2010 and 16,667installments of 2,000 shares each are scheduled to vest on May 14, 2010.March 2, 2011 and March 2, 2012. |
|
(12) | (21) | The indicated optionsshares of restricted stock are scheduled to vest in installments of 15,0005,000 shares each on January 5, 2008August 28, 2010 and January 5, 2009.August 28, 2011. |
|
(13)(22) | | TheOf the indicated optionsshares of restricted stock, 8,000 shares vested on March 2, 2010 and installments of 8,000 shares each are scheduled to vest on August 18, 2008.March 2, 2011 and March 2, 2012. |
|
(14) | (23) | The indicated optionsshares of restricted stock are scheduled to vest in installments of 15,0002,800 shares each on June 5, 2008August 28, 2010 and June 5, 2009.August 28, 2011. |
|
(15)(24) | | TheOf the indicated optionsshares of restricted stock, 4,633 shares vested on March 2, 2010, 4,633 shares are scheduled to vest inon March 2, 2011, and 4,634 shares are scheduled to vest on March 2, 2012. |
| (25) | Of the indicated shares of restricted stock, 4,000 shares vested on March 2, 2010 and installments of 6,6664,000 shares each are scheduled to vest on May 14, 2008, 6,667 shares on May 14, 2009March 2, 2011 and 6,667 shares on May 14, 2010.March 2, 2012. |
| (26) | The market value of the shares of restricted stock that have not vested is based on the closing price of Pioneer Drilling Company common stock on December 31, 2009 of $7.90 per share. |
Option Exercises and Stock Vested
No options were exercised byDuring the named executive officers during the nine month fiscal year ended December 31, 2007.
23
POTENTIAL PAYMENTS UNDER TERMINATION OR CHANGE OF CONTROL
The Compensation Committee views change in control and non-change in control severance protection for officers as a necessary part of compensation to remain competitive in the market. A substantial majority of oilfield service companies provide such benefits. While the Compensation Committee recognizes there are variation in types, amounts, eligibility requirements and other terms and conditions among companies, the aggregate potential value remains competitive and does not significantly vary from similar programs at peer group companies.
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In 2009, the Company adopted a new Long-Term Disability Plan. This plan is available to all U.S. salaried employees and other full-time active employees and does not discriminate in scope, terms or operation, in favor of the named executive officers. In the event an employee has been disabled for more than 180 days, the Long-Term Disability Plan generally provides for payment of 60% of an employee’s base salary up to a maximum monthly benefit of $7,000 until the earlier of the employee reaching standard retirement age as determined by the Social Security Administration or the employee’s death.
Key Executive Severance Plan
The following is a brief description of the material terms and conditions of our Key Executive Severance Plan (the “KESP”).
Participation in the KESP is limited to thoseour key executives of Pioneer who are considered to be senior management employees by the Compensation Committee and who are designated by the Compensation Committee, in its sole discretion, as participants in the KESP. The Compensation Committee, upon twelve months’ written notice, may also terminate an employee’s participation in the KESP; however, an individual participating immediately prior to a change in control may not be removed from participation in the KESP prior to the date which is two years following the date of the “change in control” of Pioneer (as defined below). Participants in the KESP will be designated by the Compensation Committee as either “Level I,” “Level II” or “Level III” participants, or as other participants. With regard to our named executive officers, Mr. Locke is designated as a Level I participant, Ms. SchuldtMr. West, Mr. Eustace, Mr. Peña and Mr. WestPhillips are designated as Level II participants, and Mr. Lacombe and Mr. Hibbetts areis designated as a Level III participants.
participant.In the event of an “involuntary termination” prior to a change in control of Pioneer and subject to certain conditions, including the requirement that a KESP participant execute an acceptable waiver and release of claims, a Level I or Level II participant will receive (1) a lump-sum cash payment equal to 200% of the participant’s annual base salary and annual target bonus, (2) accelerated vesting of stock options and other equity-based awards held on the date of termination of employment, but only to the extent such stock options or other equity-based awards would otherwise have vested within twelve months, and (3) continued life insurance and medical benefits coverage at active employee rates for twelve months. A Level III participant will receive (1) a lump-sum cash payment equal to 100% of the participant’s annual base salary, (2) accelerated vesting of stock options and other equity-based awards held on the date of termination of employment, but only to the extent such stock options or other equity-based awards would otherwise have vested within twelve months, and (3) continued life insurance and medical benefits coverage at active employee rates for twelve months. Other participants will receive (1) a lump-sum cash payment equal to 50% of the participant’s annual base salary, (2) accelerated vesting of stock options and other equity-based awards held on the date of termination of employment, but only to the extent such stock options or other equity-based awards would otherwise have vested within six months, and (3) continued life insurance and medical benefits coverage for six months. An “involuntary termination” means the termination of the participant’s employment (1) for any reason other than cause, death or disability or (2) by the participant for good reason, as defined in the KESP.
“Cause” means (1) with respect to any Level I or Level II Participant, that participant’s (A) commission of any act or omission constituting fraud under any law of the State of Texas, (B) conviction of, or a plea of nolo contendere to, a felony, (C) embezzlement or theft of property or funds of Pioneer or any of its affiliates or (D) refusal to perform his or her duties, as specified in any written agreement between the participant and Pioneer or in any specific directive adopted by a majority of the members of the board of directors at a meeting of the board of directors that is consistent with the participant’s status as an executive officer of the Company; and (2) with respect to any Level III or other participant, that participant’s (A) commission of any act or omission constituting fraud under any law of the State of Texas, (B) conviction of, or a plea of nolo contendere to, a felony, (C) embezzlement or theft of property or funds of Pioneer or any of its affiliates, (D) failure to follow the instructions of the board of directors (in either case, as approved by a majority of the members of such board of directors at a meeting of such board of directors) or any supervising or executive officer of Pioneer or any of its
32
affiliates or (E) unacceptable performance, gross negligence or willful misconduct with respect to his or her duties to Pioneer or any of its affiliates.
24
“Good reason” for the participant to terminate his or her employment means, prior to the effective date of a change in control, the occurrence (without the participant’s written consent) of any of the following: (1) a reduction in the participant’s base salary or total compensation except for an across-the-board reduction similarly affecting all senior executives of Pioneer and all senior executives of any person in control of Pioneer; (2) failure by Pioneer to pay any portion of the participant’s compensation within fourteen days of the date it is due or any other material breach of a contract with the participant by Pioneer which is not remedied by Pioneer within 5 business days after the participant’s written notice to Pioneer of such breach; or (3) Pioneer’s failure to maintain a participant’s employment without material diminution in the participant’s duties and responsibilities, and such failure is not cured by Pioneer within 5 business days after the participant’s written notice to Pioneer of such failure. After the effective date of a change in control, “good reason” shall also include any of (4)-(9) below unless, in the case of any of (5), (7), (8), or (9), such act or failure is corrected within five business days following the giving of written notice of good reason by the participant, and in the case of (6) below, such act is not objected to in writing by the participant within fourteen days after notification thereof: (4) after a change in control, the determination by the participant, in his or her sole and absolute discretion, that the business philosophy or policies of Pioneer or its successor or the implementation thereof is not compatible with those of the participant; (5) the assignment to the participant of duties inconsistent with his or her status as an executive officer of Pioneer or a meaningful alteration, adverse to the participant, in the nature or status of his or her responsibilities (other than reporting responsibilities) from those in effect immediately prior to a change in control, including, without limitation, a material reduction in the budget for which the participant is responsible; (6) failure by Pioneer to continue in effect any compensation plan in which the participant participates immediately prior to a change in control that is material to the participant’s compensation, unless an equitable arrangement has been made with the participant with respect to such plan; (7) failure by Pioneer to continue the participant’s participation in a plan described in (6) above or a substitute or alternative plan on a basis not materially less favorable to the participant than as existed at the time of a change in control; (8) failure by Pioneer to continue to provide the participant with benefits substantially similar to those enjoyed by the participant prior to a change in control; or (9) a requirement by Pioneer that the participant relocate his or her residence outside the metropolitan area in which the participant was based immediately prior to a change in control, or a move of the participant’s principal business location more than 45 miles from the participant’s previous principal business location. The participant’s continued employment shall not of itself constitute consent to, or a waiver of rights with respect to, any act or failure to act constituting good reason under the KESP.
Upon a change in control of Pioneer, all participants will be entitled to full vesting of all options, restricted stock and other equity awards. Upon an involuntary termination within two years following the effective date of a change in control, a Level I or Level II participant will receive (1) a lump-sum cash payment equal to 300% of the sum of the participant’s (A) annual base salary, (B) annual maximum bonus and (C) annual car allowance and club dues, and (2) continued life and medical benefits coverage at active employee rates for 18 months. A Level III participant will receive (1) a lump-sum cash payment equal to 200% of the sum of the participant’s (A) annual base salary, (B) annual maximum bonus and (C) annual car allowance and club dues, and (2) continued life insurance and medical benefits coverage at active employee rates for twelve months. Other participants will receive (1) a lump-sum cash payment equal to 150% of the sum of the participant’s (A) annual base salary, (B) annual maximum bonus and (C) annual car allowance and club dues, and (2) continued life insurance and medical benefits coverage at active employee rates for twelve months. Furthermore, a terminated participant who is unable to sell securities on the open market may require the surviving entity to acquire any vested equity awards or any shares acquired pursuant to equity awards at a price equal to the then fair market value for such shares; such right must be exercised prior to twelve months after the participant’s involuntary termination within two years after the change in control.
33
A “change in control” shall conclusively be deemed to have occurred if an event set forth in any one of the following paragraphs shall have occurred:
(1) any person, (other than (A) Pioneer; (B) any affiliate of Pioneer; (C) any employee benefit plan of Pioneer or of any affiliate and any person organized, appointed or established by Pioneer for or pursuant to the terms of any such plan or for the purpose of funding any such plan or funding other employee benefits for employees of Pioneer or any affiliate of Pioneer; or (D) any corporation or other entity owned, directly or indirectly, by the shareholders of Pioneer in substantially the same proportions as their ownership of capital stock of Pioneer) is or becomes the beneficial owner of voting stock of Pioneer (not including in the securities
25
beneficially owned by such person any securities acquired directly from Pioneer after the date the KESP first became effective) representing 40% or more of the combined voting power of the voting stock of Pioneer then outstanding;provided, however, that a change of control will not be deemed to occur under this paragraph (1) if a person becomes the beneficial owner of voting stock of Pioneer representing 40% or more of the combined voting power of the voting stock of Pioneer then outstanding solely as a result of a reduction in the number of shares of voting stock of Pioneer outstanding which results from Pioneer’s repurchase of voting stock of Pioneer, unless and until such time as that person or any affiliate or associate of that person purchases or otherwise becomes the beneficial owner of additional shares of voting stock of Pioneer constituting 1% or more of the combined voting power of the voting stock of Pioneer then outstanding, or any other person (or persons) who is (or collectively are) the beneficial owner of shares of voting stock of Pioneer constituting 1% or more of the combined voting power of the voting stock of Pioneer then outstanding becomes an affiliate or associate of that person, unless, in either such case, that person, together with all its affiliates and associates, is not then the beneficial owner of voting stock of Pioneer representing 40% or more of the voting stock of Pioneer then outstanding;
(2) the following individuals cease for any reason to constitute a majority of the number of directors then serving: (A) individuals who, on the date the KESP first became effective, constitute the board of directors; and (B) any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of directors of Pioneer) whose appointment or election by the board of directors of Pioneer or nomination for election by Pioneer’s shareholders was approved or recommended by a majority vote of the directors then still in office who either were directors on the date the KESP first became effective or whose appointment, election or nomination for election was previously so approved or recommended;
(3) there is consummated a merger or consolidation of Pioneer or any parent or direct or indirect subsidiary of Pioneer with or into any other corporation, other than: (A) a merger or consolidation which results in the voting stock of Pioneer outstanding immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or any parent thereof) at least 50% of the combined voting power of the securities which entitle the holder thereof to vote generally in the election of members of the board of directors or similar governing body of Pioneer or such surviving entity or any parent thereof outstanding immediately after such merger or consolidation; or (B) a merger or consolidation effected to implement a recapitalization of Pioneer (or similar transaction) in which no person (other than those persons listed in clauses (A) through (D) of paragraph (1) above) is or becomes the beneficial owner of voting stock of Pioneer (not including, for purposes of this determination, any voting stock of Pioneer acquired directly from Pioneer or its subsidiaries after the date the KESP first became effective other than in connection with the acquisition by Pioneer or one of its subsidiaries of a business) representing 40% or more of the combined voting power of the voting stock of Pioneer then outstanding; or
(4) the shareholders of Pioneer approve a plan of complete liquidation or dissolution of Pioneer, or there is consummated an agreement for the sale or disposition of all or substantially all of Pioneer’s assets unless (A) the sale is to an entity, of which at least 50% of the combined voting power of the securities which entitle the holder thereof to vote generally in the election of members of the board of directors or similar governing body of such entity are owned by shareholders of Pioneer in substantially the same proportions as their ownership of the voting stock of Pioneer immediately prior to such sale; (B) no person other than
34
Pioneer and any employee benefit plan or related trust of Pioneer or of such corporation then beneficially owns 40% or more of the voting securities of such new entity; and (C) at least a majority of the directors of such corporation were members of the incumbent Board at the time of the execution of the initial agreement or action providing for such disposition.
In addition, in the event any participant is subject to an excise tax under Section 4999 of the Internal Revenue Code, as amended, as a result of payments under the KESP or otherwise, the participant will be entitled to agross-up payment such that after payment of all taxes on thegross-up payment, the participant retains sufficient funds to pay the Section 4999 excise tax on his or her KESP and other payments (or such excise tax is paid on his or her behalf). Pioneer will be responsible for any attorneys’ fees incurred by a participant who is successful in pursuing litigation
26
for benefits under the KESP. For any participant who is a “specified employee” within the meaning of Section 409A of the Code, payments under the KESP will generally be delayed six months following termination of employment.
The KESP may not be amended in a manner adverse to the rights of a participant without his or her consent.
35
Potential Payments upon Termination or Change in Control
The tables below reflect the amount of compensation that would be payable to each of the named executive officers in various scenarios involving termination of the named executive officer’s employment, including following a change in control. The amount of compensation payable to each named executive officer upon voluntary termination, involuntary not-for-cause termination (non-change in control), voluntary termination for good cause or involuntary termination following a change in control, involuntary for cause termination, and termination in the event of death or disability of each named executive officer is shown below. The amounts shown assume that the termination was effective on December 31, 20072009 and thus includes amounts earned through that time and are estimates of the amounts which would be paid out to the officers upon their termination. The actual amounts to be paid out can only be determined at the time of the officer’s separation from us. The officer would also have available the value of exercisable options reflected in the Outstanding Equity Awards at Fiscal Year End table. In the event of retirement, death or disability before the annual cash incentive award is paid, the Compensation Committee has the discretion to authorize payment (in full or on a prorated basis) of the amount the officer would have received. We have assumed that the Compensation Committee would have authorized the payment of the full award for the cash incentive award for the twelve months ending Marchfiscal year ended December 31, 20082009 for purposes of the tables below. As of December 31, 2007,2009, only Mr. West was eligible for retirement (the table presenting potential payments to Mr. West sets forth the amount of compensation that would be payable to him upon retirement).
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | Involuntary or
| | | | | | | | | | |
| | | | | | Involuntary Not
| | | Good Reason
| | | | | | | | | | |
| | | | | | for Cause
| | | Termination
| | | | | | | | | | |
| | | | | | Termination
| | | (Following a
| | | Involuntary for
| | | | | | | |
Wm. Stacy Locke’s Benefits and Payments
| | Voluntary
| | | (Non-Change in
| | | Change in
| | | Cause
| | | | | | | |
Upon Termination as of 12/31/2007 | | Termination | | | Control) | | | Control) | | | Termination | | | Death | | | Disability(1) | |
| |
| Compensation: | | | | | | | | | | | | | | | | | | | | | | | | |
| Severance payments | | | — | | | $ | 900,000 | | | $ | 1,350,000 | | | | — | | | | — | | | | — | |
| Short-term Disability Benefits | | | — | | | | — | | | | — | | | | — | | | | — | | | $ | 108,173 | |
| Short-term Incentive | | | — | | | $ | 720,000 | | | $ | 1,890,000 | | | | — | | | $ | 360,000 | | | $ | 360,000 | |
| Intrinsic Value of Unvested and Accelerated Stock Options | | | — | | | $ | 14,220 | | | $ | 28,440 | | | | — | | | | — | | | | — | |
| Benefits and Perquisites: | | | | | | | | | | | | | | | | | | | | | | | | |
| Health Care and Life Insurance Coverage | | | — | | | $ | 4,393 | | | $ | 6,590 | | | | — | | | | — | | | | — | |
| Life Insurance Proceeds | | | — | | | | — | | | | — | | | | — | | | $ | 300,000 | | | | — | |
| Disability Benefits | | | — | | | | — | | | | — | | | | — | | | | — | | | $ | 300,000 | |
| Auto Allowance | | | — | | | | — | | | $ | 43,200 | | | | — | | | | — | | | | — | |
| Club Dues | | | — | | | | — | | | $ | 3,231 | | | | — | | | | — | | | | — | |
| Accrued Vacation Pay | | $ | 34,615 | | | $ | 34,615 | | | $ | 34,615 | | | $ | 34,615 | | | $ | 34,615 | | | $ | 34,615 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Total | | $ | 34,615 | | | $ | 1,673,228 | | | $ | 3,356,076 | | | $ | 34,615 | | | $ | 694,615 | | | $ | 802,788 | |
| 12/31/2007 stock price | | $ | 11.88 | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Wm. Stacy Locke’s Benefits and Payments
Upon Termination as of 12/31/2009 | | Voluntary
Termination | | Involuntary
Not for Cause
Termination
(Non-Change
in Control) | | Involuntary
or Good Reason
Termination
(Following
a Change
in Control) | | Involuntary
For Cause
Termination | | Death | | Disability (1) |
Compensation: | | | | | | | | | | | | | | | | | | |
Severance payments | | | — | | $ | 1,100,000 | | $ | 1,650,000 | | | — | | | — | | | — |
Short-term Incentive | | | — | | $ | 880,000 | | $ | 2,640,000 | | | — | | $ | 440,000 | | $ | 440,000 |
Intrinsic Value of Unvested and Accelerated Stock Options | | | — | | $ | 319,388 | | $ | 958,160 | | | — | | $ | 958,160 | | $ | 958,160 |
Intrinsic Value of Unvested and Accelerated Restricted Stock | | | — | | $ | 199,080 | | $ | 522,190 | | | — | | $ | 522,190 | | $ | 522,190 |
Unvested and Accelerated Restricted Cash Bonus Payment | | | — | | $ | 210,600 | | $ | 421,200 | | | — | | $ | 421,200 | | $ | 421,200 |
| | | | | | |
Benefits and Perquisites: | | | | | | | | | | | | | | | | | | |
Excise Tax Gross-up | | | — | | | — | | $ | 1,591,072 | | | — | | | — | | | — |
Health Care and Life Insurance Coverage | | | — | | $ | 14,034 | | $ | 21,051 | | | — | | | — | | | — |
Life Insurance Proceeds | | | — | | | — | | | — | | | — | | $ | 300,000 | | | — |
Auto Allowance | | | — | | | — | | $ | 43,200 | | | — | | | — | | | — |
Club Dues | | | — | | | — | | $ | 3,387 | | | — | | | — | | | — |
Accrued Vacation Pay | | $ | 31,731 | | $ | 31,731 | | $ | 31,731 | | $ | 31,731 | | $ | 31,731 | | $ | 31,731 |
| | | | | | | | | | | | | | | | | | |
| | | | | | |
Total | | $ | 31,731 | | $ | 2,754,833 | | $ | 7,881,991 | | $ | 31,731 | | $ | 2,673,281 | | $ | 2,373,281 |
12/31/2009 stock price | | $ | 7.90 | | | | | | | | | | | | | | | |
| | |
| (1) | | Long-term disability payments terminate after fiveDisability payment does not include benefits payable under the Company’s Long-Term Disability Plan (which is available to all U.S. salaried employees), the value of which would depend on the life span or years remaining prior to the named executive officer reaching the standard retirement age based on the retirement age guidelines used by Social Security Administration. |
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36
| | | | | | | | | | | | | | | | | | |
Lorne E. Phillips’ Benefits and Payments Upon
Termination as of 12/31/2009 | | Voluntary
Termination | | Involuntary
Not for Cause
Termination
(Non-Change
in Control) | | Involuntary
or Good Reason
Termination
(Following a
Change
in Control) | | Involuntary
For Cause
Termination | | Death | | Disability
(1) |
Compensation: | | | | | | | | | | | | | | | | | | |
Severance payments | | | — | | $ | 640,000 | | $ | 960,000 | | | — | | | — | | | — |
Short-term Incentive | | | — | | $ | 320,000 | | $ | 960,000 | | | — | | $ | 160,000 | | $ | 160,000 |
Intrinsic Value of Unvested and Accelerated Stock Options | | | — | | $ | 227,466 | | $ | 682,400 | | | — | | $ | 682,400 | | $ | 682,400 |
Intrinsic Value of Unvested and Accelerated Restricted Stock | | | — | | $ | 47,400 | | $ | 142,200 | | | — | | $ | 142,200 | | $ | 142,200 |
Unvested and Accelerated Restricted Cash Bonus Payment | | | — | | $ | 80,550 | | $ | 161,100 | | | — | | $ | 161,100 | | $ | 161,100 |
| | | | | | |
Benefits and Perquisites: | | | | | | | | | | | | | | | | | | |
Excise Tax Gross-up | | | — | | | — | | $ | 803,348 | | | — | | | — | | | — |
Health Care and Life Insurance Coverage | | | — | | $ | 14,658 | | $ | 21,986 | | | — | | | — | | | — |
Life Insurance Proceeds | | | — | | | — | | | — | | | — | | $ | 300,000 | | | — |
Auto Allowance | | | — | | | — | | $ | 43,200 | | | — | | | — | | | — |
Accrued Vacation Pay | | $ | 11,077 | | $ | 11,077 | | $ | 11,077 | | $ | 11,077 | | $ | 11,077 | | $ | 11,077 |
| | | | | | | | | | | | | | | | | | |
| | | | | | |
Total | | $ | 11,077 | | $ | 1,341,151 | | $ | 3,785,311 | | $ | 11,077 | | $ | 1,456,777 | | $ | 1,156,777 |
12/31/2009 stock price | | $ | 7.90 | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | Involuntary or
| | | | | | | | | | |
| | | | | | Involuntary Not
| | | Good Reason
| | | | | | | | | | |
| | | | | | for Cause
| | | Termination
| | | | | | | | | | |
| | | | | | Termination
| | | (Following a
| | | Involuntary for
| | | | | | | |
| | | Voluntary
| | | (Non-Change in
| | | Change in
| | | Cause
| | | | | | | |
Joyce M. Schuldt’s Benefits and Payments Upon Termination as of 12/31/2007 | | Termination | | | Control) | | | Control) | | | Termination | | | Death | | | Disability | |
| |
| Compensation: | | | | | | | | | | | | | | | | | | | | | | | | |
| Severance payments | | | — | | | $ | 600,000 | | | $ | 900,000 | | | | — | | | | — | | | | — | |
| Short-term Incentive | | | — | | | $ | 300,000 | | | $ | 900,000 | | | | — | | | $ | 105,616 | | | $ | 105,616 | |
| Benefits and Perquisites: | | | | | | | | | | | | | | | | | | | | | | | | |
Excise TaxGross-up | | | — | | | | — | | | $ | 692,827 | | | | — | | | | — | | | | — | |
| Health Care and Life Insurance Coverage | | | — | | | $ | 3,646 | | | $ | 5,469 | | | | — | | | | — | | | | — | |
| Life Insurance Proceeds | | | — | | | | — | | | | — | | | | — | | | $ | 300,000 | | | | — | |
| Auto Allowance | | | — | | | | — | | | $ | 43,200 | | | | — | | | | — | | | | — | |
| Accrued Vacation Pay | | $ | 23,077 | | | $ | 23,077 | | | $ | 23,077 | | | $ | 23,077 | | | $ | 23,077 | | | $ | 23,077 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Total | | $ | 23,077 | | | $ | 926,723 | | | $ | 2,564,573 | | | $ | 23,077 | | | $ | 428,693 | | | $ | 128,693 | |
| 12/31/2007 stock price | | $ | 11.88 | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | Involuntary or
| | | | | | | | | | |
| | | | | | | | | Involuntary Not
| | | Good Reason
| | | | | | | | | | |
| | | | | | | | | for Cause
| | | Termination
| | | | | | | | | | |
| | | | | | | | | Termination
| | | (Following a
| | | Involuntary for
| | | | | | | |
| | | Voluntary
| | | Normal
| | | (Non-Change in
| | | Change in
| | | Cause
| | | | | | | |
Franklin C. West’s Benefits and Payments Upon Termination as of 12/31/2007 | | Termination | | | Retirement | | | Control) | | | Control) | | | Termination | | | Death | | | Disability | |
| |
| Compensation: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Severance payments | | | — | | | | — | | | $ | 740,000 | | | $ | 1,110,000 | | | | — | | | | — | | | | — | |
| Short-term Disability Benefits | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | $ | 67,596 | |
| Short-term Incentive | | | — | | | $ | 185,000 | | | $ | 370,000 | | | $ | 1,110,000 | | | | — | | | $ | 185,000 | | | $ | 185,000 | |
| Intrinsic Value of Unvested and Accelerated Stock Options | | | — | | | | — | | | $ | 377,200 | | | $ | 519,400 | | | | — | | | | — | | | | — | |
| Benefits and Perquisites: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Health Care and Life Insurance Coverage | | | — | | | | — | | | $ | 3,307 | | | $ | 4,960 | | | | — | | | | — | | | | — | |
| Life Insurance Proceeds | | | — | | | | — | | | | — | | | | — | | | | — | | | $ | 300,000 | | | | — | |
| Auto Allowance | | | — | | | | — | | | | — | | | $ | 43,200 | | | | — | | | | — | | | | — | |
| Club Dues | | | — | | | | — | | | | — | | | $ | 3,231 | | | | — | | | | — | | | | — | |
| Accrued Vacation Pay | | $ | 28,462 | | | $ | 28,462 | | | $ | 28,462 | | | $ | 28,462 | | | $ | 28,462 | | | $ | 28,462 | | | $ | 28,462 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total | | $ | 28,462 | | | $ | 213,462 | | | $ | 1,518,969 | | | $ | 2,819,253 | | | $ | 28,462 | | | $ | 513,462 | | | $ | 281,058 | |
| 12/31/2007 stock price | | $ | 11.88 | | | | | | | | | | | | | | | | | | | | | | | | | |
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| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | Involuntary or
| | | | | | | | | | |
| | | | | | Involuntary Not
| | | Good Reason
| | | | | | | | | | |
| | | | | | for Cause
| | | Termination
| | | | | | | | | | |
| | | | | | Termination
| | | (Following a
| | | Involuntary
| | | | | | | |
Donald G. Lacombe’s Benefits and
| | Voluntary
| | | (Non-Change in
| | | Change in
| | | for Cause
| | | | | | | |
Payments Upon Termination as of 12/31/2007 | | Termination | | | Control) | | | Control) | | | Termination | | | Death | | | Disability(1) | |
| |
| Compensation: | | | | | | | | | | | | | | | | | | | | | | | | |
| Severance payments | | | — | | | $ | 195,000 | | | $ | 390,000 | | | | — | | | | — | | | | — | |
| Short-term Disability Benefits | | | — | | | | — | | | | — | | | | — | | | | — | | | $ | 37,500 | |
| Short-term Incentive | | | — | | | | — | | | $ | 312,000 | | | | — | | | $ | 78,000 | | | $ | 78,000 | |
| Intrinsic Value of Unvested and Accelerated Stock Options | | | — | | | $ | 71,100 | | | $ | 142,200 | | | | — | | | | — | | | | — | |
| Benefits and Perquisites: | | | | | | | | | | | | | | | | | | | | | | | | |
| Health Care and Life Insurance Coverage | | | — | | | $ | 4,048 | | | $ | 4,048 | | | | — | | | | — | | | | — | |
| Life Insurance Proceeds | | | — | | | | — | | | | — | | | | — | | | $ | 195,000 | | | | — | |
| Disability Benefits | | | — | | | | — | | | | — | | | | — | | | | — | | | $ | 300,000 | |
| Auto Allowance | | | — | | | | — | | | $ | 28,800 | | | | — | | | | — | | | | — | |
| Club Dues | | | — | | | | — | | | $ | 16,506 | | | | — | | | | — | | | | — | |
| Accrued Vacation Pay | | $ | 14,250 | | | $ | 14,250 | | | $ | 14,250 | | | $ | 14,250 | | | $ | 14,250 | | | $ | 14,250 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Total | | $ | 14,250 | | | $ | 284,398 | | | $ | 907,804 | | | $ | 14,250 | | | $ | 287,250 | | | $ | 429,750 | |
| 12/31/2007 stock price | | $ | 11.88 | | | | | | | | | | | | | | | | | | | | | |
| | |
| (1) | | Long-term disability payments terminate after fiveDisability payment does not include benefits payable under the Company’s Long-Term Disability Plan (which is available to all U.S. salaried employees), the value of which would depend on the life span or years remaining prior to the named executive officer reaching the standard retirement age based on the retirement age guidelines used by Social Security Administration. |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | Involuntary
| | | | | | | | | | |
| | | | | | Involuntary
| | | or Good
| | | | | | | | | | |
| | | | | | Not for
| | | Reason
| | | | | | | | | | |
| | | | | | Cause
| | | Termination
| | | | | | | | | | |
| | | | | | Termination
| | | (Following a
| | | Involuntary for
| | | | | | | |
| | | Voluntary
| | | (Non-Change
| | | Change in
| | | Cause
| | | | | | | |
William D. Hibbetts’ Benefits and Payments Upon Termination as of 12/31/2007 | | Termination | | | in Control) | | | Control) | | | Termination | | | Death | | | Disability | |
| |
| Compensation: | | | | | | | | | | | | | | | | | | | | | | | | |
| Severance payments | | | — | | | $ | 210,000 | | | $ | 420,000 | | | | — | | | | — | | | | — | |
| Short-term Disability Benefits | | | — | | | | — | | | | — | | | | — | | | | — | | | $ | 40,385 | |
| Short-term Incentive | | | — | | | | — | | | $ | 336,000 | | | | — | | | $ | 84,000 | | | $ | 84,000 | |
| Intrinsic Value of Unvested and Accelerated Stock Options | | | — | | | $ | 106,650 | | | $ | 213,300 | | | | — | | | | — | | | | — | |
| Benefits and Perquisites: | | | | | | | | | | | | | | | | | | | | | | | | |
Excise TaxGross-up | | | — | | | | — | | | $ | 272,372 | | | | — | | | | — | | | | — | |
| Health Care and Life Insurance Coverage | | | — | | | $ | 3,091 | | | $ | 3,091 | | | | — | | | | — | | | | — | |
| Life Insurance Proceeds | | | — | | | | — | | | | — | | | | — | | | $ | 210,000 | | | | — | |
| Auto Allowance | | | — | | | | — | | | $ | 28,800 | | | | — | | | | — | | | | — | |
| Accrued Vacation Pay | | $ | 15,346 | | | $ | 15,346 | | | $ | 15,346 | | | $ | 15,346 | | | $ | 15,346 | | | $ | 15,346 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Total | | $ | 15,346 | | | $ | 335,087 | | | $ | 1,288,909 | | | $ | 15,346 | | | $ | 309,346 | | | $ | 139,731 | |
| 12/31/2007 stock price | | $ | 11.88 | | | | | | | | | | | | | | | | | | | | | |
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37
| | | | | | | | | | | | | | | | | | |
William D. Hibbetts’ Benefits and Payments
Upon Termination as of 12/31/2009 | | Voluntary
Termination | | Involuntary
Not for Cause
Termination
(Non-Change
in Control) | | Involuntary
or Good Reason
Termination
(Following a
Change
in Control) | | Involuntary
For Cause
Termination | | Death | | Disability
(1) |
Compensation: | | | | | | | | | | | | | | | | | | |
Severance payments | | | — | | $ | 210,000 | | $ | 420,000 | | | — | | | — | | | — |
Short-term Incentive | | | — | | | — | | $ | 336,000 | | | — | | $ | 84,000 | | $ | 84,000 |
Intrinsic Value of Unvested and Accelerated Stock Options | | | — | | $ | 40,600 | | $ | 121,800 | | | — | | $ | 121,800 | | $ | 121,800 |
Intrinsic Value of Unvested and Accelerated Restricted Stock | | | — | | $ | 26,070 | | $ | 67,940 | | | — | | $ | 67,940 | | $ | 67,940 |
Unvested and Accelerated Restricted Cash Bonus Payment | | | — | | $ | 28,350 | | $ | 56,700 | | | — | | $ | 56,700 | | $ | 56,700 |
| | | | | | |
Benefits and Perquisites: | | | | | | | | | | | | | | | | | | |
Excise Tax Gross-up | | | — | | | — | | $ | 273,013 | | | — | | | — | | | — |
Health Care and Life Insurance Coverage | | | — | | $ | 9,189 | | $ | 9,189 | | | — | | | — | | | — |
Life Insurance Proceeds | | | — | | | — | | | — | | | — | | $ | 210,000 | | | — |
Auto Allowance | | | — | | | — | | $ | 28,800 | | | — | | | — | | | — |
Accrued Vacation Pay | | $ | 16,154 | | $ | 16,154 | | $ | 16,154 | | $ | 16,154 | | $ | 16,154 | | $ | 16,154 |
| | | | | | | | | | | | | | | | | | |
Total | | $ | 16,154 | | $ | 330,363 | | $ | 1,329,596 | | $ | 16,154 | | $ | 556,594 | | $ | 346,594 |
12/31/2009 stock price | | $ | 7.90 | | | | | | | | | | | | | | | |
| (1) | Disability payment does not include benefits payable under the Company’s Long-Term Disability Plan (which is available to all U.S. salaried employees), the value of which would depend on the life span or years remaining prior to the named executive officer reaching the standard retirement age based on the retirement age guidelines used by Social Security Administration. |
38
| | | | | | | | | | | | | | | | | | | | | |
Franklin C. West’s Benefits and
Payments Upon Termination as of
12/31/2009 | | Voluntary
Termination | | Normal
Retirement | | Involuntary
Not for Cause
Termination
(Non-Change
in Control) | | Involuntary
or Good Reason
Termination
(Following a
Change
in Control) | | Involuntary
For Cause
Termination | | Death | | Disability
(1) |
Compensation: | | | | | | | | | | | | | | | | | | | | | |
Severance payments | | | — | | | — | | $ | 790,000 | | $ | 1,185,000 | | | — | | | — | | | — |
Short-term Incentive | | | — | | $ | 197,500 | | $ | 395,000 | | $ | 1,185,000 | | | — | | $ | 197,500 | | $ | 197,500 |
Intrinsic Value of Unvested and Accelerated Stock Options | | | — | | | — | | $ | 162,400 | | $ | 487,200 | | | — | | $ | 487,200 | | $ | 487,200 |
Intrinsic Value of Unvested and Accelerated Restricted Stock | | | — | | | — | | $ | 102,700 | | $ | 268,600 | | | — | | $ | 268,600 | | $ | 268,600 |
Unvested and Accelerated Restricted Cash Bonus Payment | | | — | | | — | | $ | 108,900 | | $ | 217,800 | | | — | | $ | 217,800 | | $ | 217,800 |
| | | | | | | |
Benefits and Perquisites: | | | | | | | | | | | | | | | | | | | | | |
EExcise Tax Gross-up | | | — | | | — | | | — | | | — | | | — | | | — | | | |
Health Care and Life Insurance Coverage | | | — | | | — | | $ | 9,351 | | $ | 14,027 | | | — | | | — | | | — |
Life Insurance Proceeds | | | — | | | — | | | — | | | — | | | — | | $ | 300,000 | | | — |
Auto Allowance | | | — | | | — | | | — | | $ | 43,200 | | | — | | | — | | | — |
Club Dues | | | — | | | — | | | — | | $ | 3,387 | | | — | | | — | | | — |
Accrued Vacation Pay | | $ | 30,385 | | $ | 30,385 | | $ | 30,385 | | $ | 30,385 | | $ | 30,385 | | $ | 30,385 | | $ | 30,385 |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
Total | | $ | 30,385 | | $ | 227,885 | | $ | 1,598,736 | | $ | 3,434,600 | | $ | 30,385 | | $ | 1,501,485 | | $ | 1,201,485 |
12/31/2009 stock price | | $ | 7.90 | | | | | | | | | | | | | | | | | | |
| (1) | Disability payment does not include benefits payable under the Company’s Long-Term Disability Plan (which is available to all U.S. salaried employees). Because Mr. West has reached the standard retirement age based on the retirement age guidelines used by Social Security Administration, in the event of long-term disability, he would receive twelve monthly payments equal to 60% of his monthly base salary (not to exceed $7,000) as of the date of disability. |
39
| | | | | | | | | | | | | | | | | | |
Joseph B. Eustace’s Benefits and Payments
Upon Termination as of 12/31/2009 | | Voluntary
Termination | | Involuntary
Not for Cause
Termination
(Non-Change
in Control) | | Involuntary
or Good Reason
Termination
(Following a
Change
in Control) | | Involuntary
For Cause
Termination | | Death | | Disability
(1) |
Compensation: | | | | | | | | | | | | | | | | | | |
Severance payments | | | — | | $ | 560,000 | | $ | 840,000 | | | — | | | — | | | — |
Short-term Incentive | | | — | | $ | 280,000 | | $ | 840,000 | | | — | | $ | 140,000 | | $ | 140,000 |
Intrinsic Value of Unvested and Accelerated Stock Options | | | — | | $ | 93,380 | | $ | 280,140 | | | — | | $ | 280,140 | | $ | 280,140 |
Intrinsic Value of Unvested and Accelerated Restricted Stock | | | — | | $ | 58,721 | | $ | 154,050 | | | — | | $ | 154,050 | | $ | 154,050 |
Unvested and Accelerated Restricted Cash Bonus Payment | | | — | | $ | 61,650 | | $ | 123,300 | | | — | | $ | 123,300 | | $ | 123,300 |
| | | | | | |
Benefits and Perquisites: | | | | | | | | | | | | | | | | | | |
Excise Tax Gross-up | | | — | | | — | | $ | 776,108 | | | — | | | — | | | — |
Health Care and Life Insurance Coverage | | | — | | $ | 14,622 | | $ | 21,932 | | | — | | | — | | | — |
Life Insurance Proceeds | | | — | | | — | | | — | | | — | | $ | 280,000 | | | — |
Auto Allowance | | | — | | | — | | $ | 43,200 | | | — | | | — | | | — |
Club Dues | | | — | | | — | | $ | 3,387 | | | — | | | — | | | — |
Accrued Vacation Pay | | $ | 11,846 | | $ | 11,846 | | $ | 11,846 | | $ | 11,846 | | $ | 11,846 | | $ | 11,846 |
| | | | | | | | | | | | | | | | | | |
| | | | | | |
Total | | $ | 11,846 | | $ | 1,080,219 | | $ | 3,093,963 | | $ | 11,846 | | $ | 989,336 | | $ | 709,336 |
12/31/2009 stock price | | $ | 7.90 | | | | | | | | | | | | | | | |
| (1) | Disability payment does not include benefits payable under the Company’s Long-Term Disability Plan (which is available to all U.S. salaried employees), the value of which would depend on the life span or years remaining prior to the named executive officer reaching the standard retirement age based on the retirement age guidelines used by Social Security Administration. |
40
| | | | | | | | | | | | | | | | | | |
Carlos R. Pena’s Benefits and Payments
Upon Termination as of 12/31/2009 | | Voluntary
Termination | | Involuntary
Not for Cause
Termination
(Non-Change
in Control) | | Involuntary
or Good Reason
Termination
(Following a
Change in Control) | | Involuntary
For Cause
Termination | | Death | | Disability
(1) |
Compensation: | | | | | | | | | | | | | | | | | | |
Severance payments | | | — | | $ | 500,000 | | $ | 750,000 | | | — | | | — | | | — |
Short-term Incentive | | | — | | $ | 250,000 | | $ | 750,000 | | | — | | $ | 125,000 | | $ | 125,000 |
Intrinsic Value of Unvested and Accelerated Stock Options | | | — | | $ | 97,210 | | $ | 279,680 | | | — | | $ | 279,680 | | $ | 279,680 |
Intrinsic Value of Unvested and Accelerated Restricted Stock | | | — | | $ | 31,600 | | $ | 94,800 | | | — | | $ | 94,800 | | $ | 94,800 |
Unvested and Accelerated Restricted Cash Bonus Payment | | | — | | $ | 55,800 | | $ | 111,600 | | | — | | $ | 111,600 | | $ | 111,600 |
| | | | | | |
Benefits and Perquisites: | | | | | | | | | | | | | | | | | | |
EExcise Tax Gross-up | | | — | | | — | | $ | 701,975 | | | — | | | — | | | — |
Health Care and Life Insurance Coverage | | | — | | $ | 14,568 | | $ | 21,851 | | | — | | | — | | | — |
Life Insurance Proceeds | | | — | | | — | | | — | | | — | | $ | 250,000 | | | — |
Auto Allowance | | | — | | | — | | $ | 43,200 | | | — | | | — | | | — |
Accrued Vacation Pay | | $ | 14,423 | | $ | 14,423 | | $ | 14,423 | | $ | 14,423 | | $ | 14,423 | | $ | 14,423 |
| | | | | | | | | | | | | | | | | | |
| | | | | | |
Total | | $ | 14,423 | | $ | 963,601 | | $ | 2,767,529 | | $ | 14,423 | | $ | 875,503 | | $ | 625,503 |
12/31/2009 stock price | | $ | 7.90 | | | | | | | | | | | | | | | |
| (1) | Disability payment does not include benefits payable under the Company’s Long-Term Disability Plan (which is available to all U.S. salaried employees), the value of which would depend on the life span or years remaining prior to the named executive officer reaching the standard retirement age based on the retirement age guidelines used by Social Security Administration. |
The terms for the payments for involuntary not-for-cause termination (non-change in control) and for involuntary or good reason termination (following a change in control) are summarized under the heading “Key Executive Severance Plan” of this section. In the event of a change in control termination, if the termination qualified as (i) a change in ownership or effective control or (ii) a change in ownership of a substantial portion of our assets, in either case as defined in Section 280G of the Internal Revenue Code, then severance payments and benefits paid to our named executive officers may be subject to an excise tax under Section 4999 of the Internal Revenue Code. In the event a named executive officer is subject to such excise tax, the named executive officer will be entitled to agross-up payment, such that after payment of all taxes on thegross-up payment, the named executive officer retains sufficient funds to pay the excise taxes that result from the severance payments and benefits received. If an officer voluntarily terminated employment or was fired for cause between December 31, 20072009 and the payment of the annual cash incentive, then the officer would not receive that award. The named executive officers are entitled to accrued vacation only for voluntary terminations and terminations for cause. The short-term disability plan pays up to 90 days. The payments are 100% per week for the equivalent of each full year of the executive’s service and 50% for each subsequent week. The long-term disability plan pays 60% of an officer’s salary up to $5,000 per month for up to five years. The long-term disability plan is optional and plan premiums are paid for by the officer who chooses to participate. The life insurance plan pays the beneficiary an amount equal to the applicable officer’s annual salary up to a maximum of $300,000.
Compensation Committee Interlocks and Insider Participation
Messrs. Bunch, Burkhardt, Thompson and HarnessUrban served on our Compensation Committee during the nine-month fiscal year ended December 31, 2007.2009. No member of the Compensation Committee (1) was an officer or employee of our company or a subsidiary of our company during that period, (2) was formerly an officer of our company or a subsidiary of our company or (3) had any relationship required to be disclosed in this proxy statement pursuant to Item 404 ofRegulation S-K.
41
During the nine-month fiscal year ended December 31, 2007,2009, none of our named executive officers served as (1) a member of a compensation committee of another company, one of whose executive officers served on our Compensation Committee; (2) a director of another company, one of whose executive officers served on our Compensation Committee; or (3) a member of a compensation committee of another company, one of whose executive officers served as one of our directors.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Our audit committee reviews any transaction in which (1) we or any of our subsidiaries, on the one hand, and (2) any of our directors, nominees for director, executive officers or holders of more than 5% of our common stock or any of their immediate family members, on the other hand, is, was or is proposed to be a participant and the amount involved exceeds $120,000. Our chief financial officer is primarily responsible for the development and implementation of processes and controls to obtain information from directors and officers with respect to any such related-party transaction, including information provided to management in the annual director and officer questionnaires. Our management is responsible for determining whether a transaction contains the characteristics described above requiring review by our board of directors.
Except as set forth in this proxy statement, noneNone of our directors or executive officers and no holder of more than 5% of the outstanding shares of our common stock, and no member of the immediate family of any such director, officer or security holder, to our knowledge, had any material interest in any transaction during the nine-month fiscal year ended December 31, 2007,2009, or in any currently proposed transaction, to which we or any of our subsidiaries was or is a party in which the amount involved exceeds $120,000.
30
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our directors, executive officers and any persons beneficially owning more than 10% of our common stock to report their initial ownership of our common stock and any subsequent changes in that ownership to the Securities and Exchange Commission. Specific due dates for these reports have been established, and we are required to disclose in this proxy statement any failure to file by these dates. All required filings for the nine-month fiscal year ended December 31, 2007 were made on a timely basis.
In making these disclosures, we relied solely on written statements of directors, executive officers and shareholders, and copies of the reports that they have filed with the SEC.
31
42
REPORT OF THE AUDIT COMMITTEE
To the boardBoard of directorsDirectors of Pioneer Drilling Company:
The Audit Committee of Pioneer Drilling Company’s boardBoard of directorsDirectors is presently comprised of the three directors named below. Each member of the Audit Committee is an independent director, as defined by applicable Securities and Exchange Commission rules and American Stock ExchangeNYSE Amex listing standards. WeThe Audit Committee met threesix times during the nine-month fiscal year ended December 31, 2007. We reviewed with management and KPMG LLP, Pioneer Drilling Company’s independent registered public accounting firm, the interim financial information included in Pioneer Drilling Company’s quarterly reports onForm 10-Q for the periods ended June 30, 2007 and September 30, 2007, respectively, prior to their being filed with the Securities and Exchange Commission. In addition, we reviewed all of Pioneer Drilling Company’s earnings releases in the nine-month fiscal year ended December 31, 2007 with management and KPMG LLP prior to the public release of those earnings releases.2009. We have reviewed and discussed with management and KPMG LLP Pioneer Drilling Company’s audited financial statements as of and for the nine-month fiscal year ended December 31, 2007.
In addition, we2009.We have discussed with KPMG LLP the matters required to be discussed by Statement ofon Auditing Standards No. 61,Communication with Audit Committees as amended, (AICPA, Professional Standards, Vol. 1, AU Section 380), as amended, issuedadopted by the Auditing StandardsPublic Company Accounting Oversight Board of the American Institute of Certified Public Accountants.
We have also reviewed and discussed with management and KPMG LLP management’s report and KPMG LLP’s report and attestation on internal control over financial reporting for the nine-month fiscal year ended December 31, 2007(the “PCAOB”) in accordance with Section 404 of the Sarbanes-Oxley Act.
Rule 3200T.We have received and reviewed the written disclosures and the letter from KPMG LLP required by Independence Standards Board Standard No. 1,Independence Discussionsapplicable requirements of the PCAOB regarding KPMG’s communications with the Audit Committees, as amended,Committee concerning independence, and we have discussed with KPMG LLP its independence from Pioneer Drilling Company.
independence.Based on the reviewsreview and discussions referred to above, we recommended to the boardBoard of directorsDirectors of Pioneer Drilling Company that the audited financial statements referred to above be included in Pioneer Drilling Company’s transition report onForm 10-KT10-K for the nine-month fiscal year ended December 31, 2007 filed2009 for filing with the Securities and Exchange Commission.
|
| The Audit Committee |
|
Dean A. Burkhardt John Michael Rauh (Chairman) C. John Thompson |
The information above in the Report of the Audit Committee
C. Robert Bunch (Chairman)
Dean Burkhardt
C. John Thompson
shall not be deemed to be “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, nor shall it be deemed to be incorporated by reference into any filing under the Securities Act of 1933 (the “Securities Act”) or the Exchange Act, except to the extent that the Company specifically requests that the information be treated as soliciting material or specifically incorporates the information by reference.
32
43
PROPOSAL 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The audit committee of our boardBoard of directorsDirectors has selected KPMG LLP to serve as our independent registered public accounting firm for the fiscal year ending December 31, 2008.2010. KPMG LLP has served as our independent public accountants since 1979. Although shareholder ratification is not required, the board has directed that such appointment be submitted to the shareholders for ratification at the annual meeting. If our shareholders do not ratify the appointment of KPMG LLP at the annual meeting, the audit committee will consider such event in its selection of the Company’s independent registered public accounting firm for the 20092011 fiscal year. Additionally, even if the appointment is ratified, the audit committee, in its discretion, may direct the appointment of a different independent registered public accounting firm at any time during the 20082010 fiscal year if it determines that such a change would be in the best interests of the Company and its shareholders. Representatives of KPMG LLP will be present at the meeting, will be given an opportunity to make a statement if they so desire and will be available to respond to appropriate questions of any shareholders.
Assuming the presence of a quorum, the affirmative vote of a majority of the votes entitled to be cast by the shareholders that vote for or against or expressly abstain from voting is necessary to ratify the selection of KPMG LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2008.2010. The enclosed form of proxy provides a means for you to vote for, to vote against or to abstain from voting with respect to the ratification of selection of the independent registered public accounting firm.If you execute and return a proxy, the persons named in the accompanying proxy will vote in accordance with the choice specified thereon, or if no choice is properly indicated, will vote in favor of the ratification of the selection of KPMG LLP as our independent registered public accounting firm. In determining whether this item has received the requisite number of affirmative votes, an abstention will have the effect of a vote against the ratification of the appointment of our independent registered public accounting firm, and a broker non-vote will not have any effect on the vote.
Principal Accounting Fees and Services
The aggregate fees billed by KPMG LLP in the nine month fiscal yearyears ended December 31, 20072009 and the fiscal year ended MarchDecember 31, 20072008 for services are as follows:
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| | | Nine Month
| | | | |
| | | Fiscal Year Ended
| | | Fiscal Year Ended
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| | | December 31,
| | | March 31,
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Type of Fees | | 2007 | | | 2007 | |
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| Audit Fees(1) | | $ | 483,226 | | | $ | 370,000 | |
| Audit-Related Fees(2) | | $ | 58,461 | | | | — | |
| Tax Fees(3) | | | — | | | | — | |
| All Other Fees(4) | | | — | | | | — | |
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(1) | | Audit Fees include aggregate fees billed for professional services rendered by KPMG LLP for the audit of our annual financial statements, audit of our internal control over financial reporting and review of financial statements included in ourForm 10-Qs in the nine-month fiscal year ended December 31, 2007 and fiscal year ended March 31, 2007. |
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(2) | | Audit-Related Fees include fees billed for assurance or related services that were related to the performance of the audit or review of our financial statements, including services in connection with the change in Pioneer’s fiscal year end, acquisitions and international expansion. |
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(3) | | Tax Fees include fees billed for professional services for tax compliance, tax advice or tax planning. |
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(4) | | All Other Fees include any services not included in the first three categories. |
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Type of Fees | | Fiscal Year Ended
December 31, 2009 | | Fiscal Year Ended
December 31, 2008 |
Audit Fees | | $ | 887,658 | | $ | 1,135,000 |
Audit Fees include aggregate fees billed for professional services rendered by KPMG LLP for the audit of our annual financial statements, audit of our internal control over financial reporting and review of financial statements included in our Form 10-Qs and services that are normally provided by the principal auditor (e.g., comfort letters, statutory audits, consents and assistance with and review of documents filed with the SEC) in the fiscal years ended December 31, 2009 and December 31, 2008.
Audit Committee’s Pre-Approval Policies and Procedures. The audit committee has established a policy for the pre-approval of audit and non-audit services performed for us by the independent auditors, which also specifies the types of services that the independent auditors may and may not provide to us. The policy provides for general pre-approval of services and specificcase-by-case approval of certain services. The services that are pre-approved include audit services and audit-related services, such as due diligence services pertaining to potential business acquisitions and dispositions, and may also include other services. The audit committee approved all of the fees and services described above. At the present time, we use a third party other than KPMG LLP to prepare our tax returns and assist with tax-compliance issues. The term of any pre-approval is twelve months and is generally subject to certain specific budgeted amounts or ratios, as determined by the audit committee. The audit committee may revise the list of general pre-approved services from time to time based on44
subsequent determinations. Unless a type of service has received general pre-approval, it will require specific pre-approval by the audit committee. Any proposed services which were addressed in the pre-approval, but which exceed pre-approved cost levels or budgeted amounts, will also require specific pre-approval by the audit committee. The audit committee does not delegate its responsibilities concerning pre-approval of services to management. The independent registered public accounting firm and management are required to periodically report to the audit committee regarding the extent of services provided by the independent registered public accounting firm in accordance with this pre-approval, and the fees for services performed to date.
During the nine-month fiscal year ended December 31, 2007,2009, no pre-approval requirements were waived pursuant to the limited waiver provisions in applicable rules of the SEC.
Our boardBoard of directorsDirectors unanimously recommends a vote “FOR” the ratification of the appointment of KPMG LLP as independent auditors of Pioneer Drilling Company for the fiscal year ending December 31, 2008.
2010.EXPENSES RELATED TO THIS PROXY SOLICITATION
We will pay all expenses relating to this proxy solicitation. We retained D.F. King & Company to assist in the solicitation of proxies. D.F. King & Company will receive an aggregate fee of $7,500, plus out-of-pocket expenses. We also agreed to indemnify D.F. King & Company against certain liabilities arising out of or in connection with this engagement. In addition to this solicitation by mail, employees of D.F. King & Company, and our officers, directors and regular employees may solicit proxies by telephone or personal calls without extra compensation for that activity. We also expect to reimburse banks, brokers and other persons for reasonable out-of-pocket expenses in forwarding proxy material to beneficial owners of our common stock and obtaining the proxies of those owners.
Date for Submission of Shareholder Proposals
Under rules the SEC has established, any shareholder who wishes to have a qualified proposal considered for inclusion in our proxy statement for our 20092011 Annual Meeting of Shareholders must send notice of the proposal to our Corporate Secretary at our principal executive offices, 1250 N.E. Loop 410, Suite 1000, San Antonio, Texas 78209, so that we receive thatsuch notice by no later than December 12, 2008,10, 2010, unless the date of our 20092011 Annual Meeting of Shareholders is more than 30 days from the anniversary date of our 20082010 Annual Meeting of Shareholders, in which case the deadline is a reasonable time before we print and mail our proxy materials for the 20092011 Annual Meeting of Shareholders. If you submit a shareholder proposal, you must provide your name and address, the number of shares of common stock you hold of record or beneficially, the date or dates on which you acquired those shares and documentary support for any claim of beneficial ownership.
In addition, our bylaws establish an advance notice procedure for shareholder proposals to be brought before an annual meeting. In general, the procedure provides that shareholders must submit proposals to us in writing containing certain information specified in our bylaws not more than 180 days and not less than 90 days prior to the first anniversary of our preceding year’s annual meeting. Accordingly, in order to be brought before our 20092011 Annual Meeting of Shareholders, any such proposal must be submitted so that we receive the proposal no earlier than November 17, 200815, 2010 and no later than the close of business on February 16, 2009.14, 2011. Shareholders should submit any such proposals to our Corporate Secretary at Pioneer Drilling Company, 1250 N.E. Loop 410, Suite 1000,
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San Antonio, Texas 78209. These requirements are in addition to the SEC’s requirements that a shareholder must comply with to have a shareholder proposal included in our proxy statement.
Shareholder Communications
Our board of directors has provided for a process for shareholders to send communications to the board of directors. Any shareholder can send communications to the board of directors by mail as follows:
Board of Directors of Pioneer Drilling Company
%
c/o Corporate Secretary
1250 N.E. Loop 410, Suite 1000
San Antonio, Texas 78209
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All shareholder communications will be relayed to all board members. Communications from an officer or director of the Company will not be viewed as shareholder communications for purposes of the procedure. Communications from an employee or agent of the Company will be viewed as shareholder communications for purposes of the procedure only if those communications are made solely in such employee’s or agent’s capacity as a shareholder.
The SEC permits a single set of annual reports and proxy statements to be sent to any household at which two or more shareholders reside if they appear to be members of the same family. Each shareholder continues to receive a separate proxy card. This procedure, referred to as householding, reduces the volume of duplicate information shareholders receive and reduces mailing and printing expenses. A number of brokerage firms have instituted householding.
As a result, if you hold your shares though a broker and you reside at an address at which two or more shareholders reside, you will likely be receiving only one annual report and proxy statement unless any shareholder at that address has given the broker contrary instructions. However, if any such beneficial shareholder residing at such an address wishes to receive a separate annual report or proxy statement in the future, or if any such beneficial shareholder that elected to continue to receive separate annual reports or proxy statements wishes to receive a single annual report or proxy statement in the future, that shareholder should contact their broker or send a request to our Corporate Secretary at our principal executive offices, 1250 N.E. Loop 410, Suite 1000, San Antonio, Texas 78209, telephone number(210) 828-7689. We will deliver, promptly upon written or oral request to the Corporate Secretary, a separate copy of the 20072009 annual report and this proxy statement to a beneficial shareholder at a shared address to which a single copy of the documents was delivered.
Annual Report and Additional Materials
Our annual report for the nine-month fiscal year ended December 31, 20072009 is being distributed with this proxy statement.Copies of our annual report onForm 10-KT10-K for such period (including the financial statements and the financial statement schedules required to be filed with the Securities and Exchange Commission pursuant toRule 13a-1 for our most recent fiscal year, but excluding exhibits) may be obtained without charge upon written or oral request to our Corporate Secretary at our principal executive offices, 1250 N.E. Loop 410, Suite 1000, San Antonio, Texas 78209, telephone number(210) 828-7689.
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Other Matters
Our board of directors does not intend to bring any other matters before the annual meeting and has not been informed that any other matters are to be presented by others. If any other matters properly come before the annual meeting, the persons named in the enclosed form of proxy will have discretion to vote all proxies according to their best judgment. The form of proxy provides that the persons named as proxies have discretionary authority to vote on matters not known or determined on the date of this proxy statement.
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| By Order of the Board of Directors |
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Carlos R. Peña Vice President, General Counsel, Secretary and Compliance Officer |
By Order of the Board of Directors
Joyce M. Schuldt
Executive Vice President,
Chief Financial Officer and
Corporate Secretary
9, 2010
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(Front of Card)
Proxy for the Annual Meeting of Shareholders
to be Held on May 16, 2008
14, 2010THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Wm. Stacy Locke and Joyce M. Schuldt,Lorne E. Phillips, and each of them, with full power of substitution and resubstitution, to represent the undersigned and to vote all the shares of common stock of Pioneer Drilling Company, a Texas corporation (the “Company”), which the undersigned is entitled to vote at the Annual Meeting of Shareholders of the Company to be held on May 16, 200814, 2010 and at any adjournmentadjournments or postponementpostponements thereof (1) as hereinafter specified on the proposals listed on the reverse side hereof and as more particularly described in the Proxy Statement of the Company dated April 14, 20089, 2010 (the “Proxy Statement”) and (2) in their discretion on such other matters as may properly come before the meeting.
Every properly signed proxy that is returned prior to the meeting will be voted in accordance with the specifications made thereon.If not otherwise specified, the shares represented by this proxy will be voted (1) FOR the nominee listed in Proposal 1 and (2) FOR the ratification of KPMG LLP as our independent auditors for the fiscal year ending December 31, 2008,2010, as set forth in Proposal 2.
The undersigned hereby acknowledges receipt of the Company’s Annual Report for the nine month fiscal year ended December 31, 2007,2009, the Notice of 20082010 Annual Meeting of Shareholders and the related Proxy Statement.
(Back of Card)
Please mark, sign and date your Proxy Card
and promptly return it in the enclosed envelope.
ANNUAL MEETING OF SHAREHOLDERS
PIONEER DRILLING COMPANY
14, 2010Please fold and detach here.
þx Please mark votes in blue or black ink, as in this example.
The board of directors recommends a vote FOR each of the following proposals:
PROPOSAL 1. To elect the nominee listed below to the board of directors of Pioneer Drilling Company to serve until our 2011 Annual Meeting of Shareholders and his successor is elected and qualified.
Company. | | | | | | |
| | listed at right | | | | NOMINEE: |
| | listed at right | | AUTHORITY to vote for the | | Dean A. Burkhardt |
| | | | nominee listed at right. | | NOMINEE: John Michael Rauh |
PROPOSAL 2. To ratify the appointment of KPMG LLP as the Company’s independent auditors for the fiscal year ending December 31, 2008.
2010. | | | | | | |
¨ FOR | | o¨ FORAGAINST | | o AGAINST | | o¨ ABSTAIN |
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In their discretion, the proxies are authorized to vote on any other matter that may properly come before the meeting or any adjournment or postponement thereof.
The undersigned hereby revokes all previous proxies given by the undersigned with respect to the Company’s 20082010 Annual Meeting of Shareholders and related to the shares of common stock covered hereby.
Please mark, sign, date and return the proxy card promptly using the enclosed envelope.
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| Date: | | | | | | Signature: | | |
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| | MARK HERE FOR
ADDRESS CHANGEo AND NOTE AT LEFT
| | MARK HERE IF
YOU PLAN TO
o ATTEND THE MEETING |
| Date: | | | | | | Signature: | | |
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| | | | | | MARK HERE FOR ADDRESS CHANGE ¨ AND NOTE AT LEFT | | |
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Date: | | | | Signature: | | | | |
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Date: | | | | Signature: | | | | |
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NOTE: Please sign exactly as your name(s) appears on this card. Joint owners should each sign. When signing as attorney, executor, administrator, trustee, guardian or other similar capacity, please give full title as such. If a corporation, please print full corporation name and have authorized officer sign and indicate title. If a partnership, please print partnership name and have authorized person sign and indicate title.
