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EX-31.2 - EXHIBIT 31.2 - PRIDE INTERNATIONAL INC | c16050exv31w2.htm |
EX-32 - EXHIBIT 32 - PRIDE INTERNATIONAL INC | c16050exv32.htm |
EX-31.1 - EXHIBIT 31.1 - PRIDE INTERNATIONAL INC | c16050exv31w1.htm |
Table of Contents
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K/A
(Amendment No. 1)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2010
Commission file number: 1-13289
Pride International, Inc.
(Exact name of registrant as specified in its charter)
Delaware | 76-0069030 | |
(State or other jurisdiction of | (I.R.S. Employer | |
incorporation or organization) | Identification No.) | |
5847 San Felipe, Suite 3300 | ||
Houston, Texas | 77057 | |
(Address of principal executive offices) | (Zip Code) |
Registrants telephone number, including area code:
(713) 789-1400
(713) 789-1400
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class | Name of Each Exchange on Which Registered | |
Common Stock, $.01 par value | New York Stock Exchange | |
Rights to Purchase Preferred Stock | New York Stock Exchange |
Securities registered pursuant to Section 12(g) of the Act:
None
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule
405 of the Securities. Yes þ No o
Indicate by check mark if the registrant is not required to file reports pursuant to Section
13 of the Act. Yes o No þ
Indicate by check mark whether the registrant (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate website, if any, every Interactive Data File required to be submitted and posted pursuant
to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes þ No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation
S-K is not contained herein, and will not be contained, to the best of registrants knowledge, in
definitive proxy or information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. þ
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large
accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act. (Check one):
Large accelerated filer þ | Accelerated filer o | Non-accelerated filer o | Smaller reporting company o | |||
(Do not check if a smaller reporting company) |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Act). Yes o No þ
The aggregate market value of the registrants common stock held by non-affiliates as of June
30, 2010, based on the closing price on the New York Stock Exchange on such date, was approximately
$3.9 billion. (The current executive officers and directors of the registrant are considered
affiliates for the purposes of this calculation.)
The number of shares of the registrants common stock outstanding on April 25, 2011 was
177,961,390.
DOCUMENTS INCORPORATED BY REFERENCE
None.
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EXPLANATORY NOTE
On February 6, 2011, we entered into a merger agreement with Ensco plc and two of its
subsidiaries. Pursuant to the merger agreement and subject to the conditions provided in the
agreement, we will merge with one of the subsidiaries and become an indirect, wholly owned
subsidiary of Ensco. We have filed a joint proxy statement/prospectus in connection with a special
meeting of our stockholders to seek adoption of the merger agreement. In light of the special
meeting, we have cancelled the 2011 annual meeting of our stockholders scheduled for May 19, 2011,
and the 2011 annual meeting may not be held if the merger is completed in 2011.
This Amendment No. 1 on Form 10-K/A (the Amendment) amends our Annual Report on Form 10-K
for the fiscal year ended December 31, 2010, originally filed with the Securities and Exchange
Commission on February 18, 2011 (the Original Filing). We are filing this Amendment to amend
Part III of the Original Filing to include the information required by and not included in Part III
of the Original Filing because we no longer intend to file our definitive proxy statement within
120 days of the end of our fiscal year ended December 31, 2010. Part IV is being amended solely to
add as exhibits certain new certifications in accordance with Rule 13a-14(a) promulgated by the SEC
under the Securities Exchange Act of 1934.
Except as described above, no other changes have been made to the Original Filing. The
Original Filing continues to speak as of the date of the Original Filing, and we have not updated
the disclosures contained therein to reflect any events which occurred at a date subsequent to the
filing of the Original Filing other than as expressly indicated in this Amendment. Accordingly,
this Amendment should be read in conjunction with the Original Filing and our other filings made
with the SEC on or subsequent to February 18, 2011.
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PART III
ITEM 10. | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE |
Executive Officers and Directors
We have presented below information about our executive officers and directors as of April 25,
2011. Officers are appointed annually by the board of directors and serve until their successors
are chosen or until their resignation or removal. Directors have been elected to serve until the
annual meeting of stockholders in 2011. Each of the directors, other than Mr. Raspino, is an
independent director, as defined in the applicable rules and regulations of the New York Stock
Exchange.
Name | Age | Position | ||
Louis A. Raspino |
58 | President, Chief Executive Officer and Director | ||
Brian C. Voegele |
51 | Senior Vice President and Chief Financial Officer | ||
Lonnie D. Bane |
52 | Senior Vice President, Human Resources and Administration | ||
W. Gregory Looser |
41 | Senior Vice President and Chief Administrative Officer | ||
Kevin C. Robert |
52 | Senior Vice President, Marketing and Business Development | ||
Imran (Ron) Toufeeq |
55 | Senior Vice President, Operations, Asset Management and Engineering | ||
Brady K. Long |
38 | Vice President, General Counsel and Secretary | ||
David A. B. Brown |
67 | Chairman of the Board | ||
Kenneth M. Burke |
62 | Director | ||
Archie W. Dunham |
72 | Director | ||
David A. Hager |
54 | Director | ||
Frank S. Kalman |
63 | Director | ||
Ralph D. McBride |
65 | Director | ||
Robert G. Phillips |
56 | Director |
Louis A. Raspino was named President, Chief Executive Officer and a Director in June 2005. He
joined us in December 2003 as Executive Vice President and Chief Financial Officer. From July 2001
until December 2003, he served as Senior Vice President, Finance and Chief Financial Officer of
Grant Prideco, Inc. From February 1999 until March 2001, he held various senior financial
positions, including Vice President of Finance for Halliburton Company. From October 1997 until
July 1998, he was a Senior Vice President at Burlington Resources, Inc. From 1978 until its merger
with Burlington Resources, Inc. in 1997, he held a variety of increasingly responsible positions at
Louisiana Land and Exploration Company, most recently as Senior Vice President, Finance and
Administration and Chief Financial Officer. Mr. Raspino also is a Director of Dresser-Rand Group
Inc. The board of directors believes that Mr. Raspino should serve as a director because he is our
chief executive officer and, in addition, has:
| experience in other executive leadership roles for energy companies, including as
chief financial officer; |
| operational and financial expertise in the oil and gas business; |
| knowledge of the demands and expectations of our core customers; and |
| experience as a board member for another public company. |
Brian C. Voegele joined us in December 2005 and became our Senior Vice President and Chief
Financial Officer in January 2006. From June 2005 through November 2005, he served as Senior Vice
President, Chief Financial Officer, Treasurer and Secretary of Bristow Group (formerly Offshore
Logistics, Inc.). From July 1989 until January 2005, he held various senior management positions at
Transocean Inc., including Vice President of Corporate Planning and Development, Vice President of
Finance, and Vice President of Tax. From 1983 to 1989, Mr. Voegele worked at Arthur Young & Co.
(now Ernst & Young LLP), where he ultimately served as Tax Manager. Mr. Voegele holds a license as
a CPA.
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Lonnie D. Bane was named Senior Vice President, Human Resources and Administration in January
2005. He previously served as Vice President, Human Resources since June 2004. From July 2000 until
May 2003, he served as Senior Vice President, Human Resources of America West Airlines, Inc. From
July 1998 until July 2000, he held various senior management positions, including Senior Vice
President, Human Resources at Corporate Express, Inc. From February 1996 until July 1998, Mr. Bane
served as Senior Vice President, Human Resources for CEMEX, S.A. de C.V. From 1994 until 1996, he
was a Vice President, Human Resources at Allied Signal Corporation. From 1987 until 1994, he held
various management positions at Mobil Oil Corporation.
W. Gregory Looser became our Senior Vice President and Chief Administrative Officer in August
2009. Prior to being named Chief Administrative Officer, he was Senior Vice President Legal,
Information Strategy, General Counsel and Secretary since June 2008. He previously served as Senior
Vice President, General Counsel and Secretary from January 2005 until June 2008, as Vice President,
General Counsel and Secretary from December 2003 until January 2005 and as Assistant General
Counsel from May 1999 until December 2003. Prior to that time, Mr. Looser was with the law firm of
Bracewell & Giuliani LLP in Houston, Texas.
Kevin C. Robert was named Vice President, Marketing in March 2005 and became Senior Vice
President, Marketing and Business Development in May 2006. Prior to joining us, from June 2002 to
February 2005, Mr. Robert worked for Samsung Heavy Industries as the Vice President, EPIC
Contracts. From January 2001 through September 2001, Mr. Robert was employed by Marine Drilling
Companies, Inc. as the Vice President, Marketing. When we acquired Marine in September 2001, he
became our Director of Business Development, where he served until June 2002. From November 1997
through December 2000, Mr. Robert was Managing Member of Maverick Offshore L.L.C. From January 1981
to November 1997, Mr. Robert was employed by Conoco Inc.
Imran (Ron) Toufeeq was named Senior Vice President, Operations, Asset Management and
Engineering in August 2009. Mr. Toufeeq joined us in March 2004 as Vice President Engineering &
Technical Services and was appointed as Senior Vice President, Asset Management and Engineering in
February 2008. Previously, he was employed for 20 years by R&B Falcon, a drilling contractor,
ultimately serving as Senior Vice President of Operations.
Brady K. Long was appointed Vice President, General Counsel and Secretary in August 2009 and
was previously Vice President, Chief Compliance Officer and Deputy General Counsel. He joined Pride
in June 2005 after practicing corporate and securities law for BJ Services Company and Bracewell &
Giuliani LLP.
David A. B. Brown became Chairman of the Board in May 2005 and became a director in September
2001 in connection with our acquisition of Marine Drilling Companies, Inc. Mr. Brown was a
director of Marine from June 1995 until September 2001. Mr. Brown is currently Chairman of the
Board of Layne Christensen Company. Mr. Brown served as President of The Windsor Group, Inc., a
strategy consulting firm, from 1984 until 2005. Mr. Brown was Chairman of the Board of the
Comstock Group, Inc. from 1988 to 1990. Mr. Brown is also a director of EMCOR Group, Inc. Mr.
Brown served as a director of NS Group, Inc. from 2001 to 2006 and of Petrohawk Energy Corporation
from 2006 to 2007. The board of directors believes that Mr. Brown should serve as a director
because he has:
| experience as a board member for public companies, including experience as
the chairman of two other public companies; |
| specialized board experience within the offshore drilling industry; |
| experience as chair of audit committees for several public companies; and |
| expertise in strategic planning. |
Kenneth M. Burke became a director in December 2006. Mr. Burke retired in June 2004 after a
31-year career with Ernst & Young LLP. During his time with Ernst & Young, Mr. Burke held various
positions including the National Director of Energy Services, Managing Partner of Assurance and
Advisory Business Services for the Gulf Coast Area and Coordinating Partner for Energy and Oilfield
Service Companies. Mr. Burke is also chairman of the audit committees of Trico Marine Services,
Inc. and Valerus Compression Services Company, LLC. The board of directors believes that Mr. Burke
should serve as a director because he has:
| in-depth knowledge of the energy industry; |
| expertise in auditing and financial reporting for global organizations; |
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| a broad knowledge of effective organizational structures, processes and
strategies; |
| experience with compensation strategies and plans; and |
| experience as a board member and as chairman of audit committees for other
energy companies. |
Archie W. Dunham became a director in May 2005. Mr. Dunham was Chairman of ConocoPhillips
from August 2002, following the merger of Conoco Inc. and Phillips Petroleum Company, until his
retirement in September 2004. He was Chairman of Conoco from August 1999 to August 2002, and
President and Chief Executive Officer of Conoco from January 1996 to August 2002. He was an
Executive Vice President of E.I. du Pont de Nemours and Company, Conocos former parent, from 1995
to October 1998. Mr. Dunham is also a director of Louisiana Pacific Corporation, Union Pacific
Corporation and Memorial Hermann Healthcare System. Mr. Dunham served as a director of Phelps
Dodge Corporation from 1998 to 2007. The board of directors believes that Mr. Dunham should serve
as a director because he has:
| experience in executive leadership for international, integrated energy
companies, including experience as chief executive officer; |
| operational and financial expertise in the oil and gas business generally; |
| knowledge of the demands and expectations of our core customers; and |
| experience as a board member for public companies, including experience as
chairman of an international, integrated energy company. |
David A. Hager became a director in February 2008. Since March 2009, Mr. Hager has been
Executive Vice President, Exploration and Production at Devon Energy Corporation. Mr. Hager was
Chief Operating Officer of Kerr-McGee Corporation from July 2005 until his retirement in August
2006, following the merger of Kerr-McGee and Anadarko Petroleum Corporation. Mr. Hager held
various other positions at Kerr-McGee, including Senior Vice President (oil and gas exploration and
production) from March 2003 until July 2005, Vice President of Exploration and Production from 2002
until March 2003, Vice President of Gulf of Mexico and Worldwide Deepwater Exploration and
Production from 2001 until 2002, Vice President of Worldwide Deepwater Exploration and Production
from October 2000 until 2001, Vice President of International Operations from April 2000 until
October 2000 and Vice President of Gulf of Mexico Operations from 1999 until April 2000. Prior
thereto, he held various positions with Mobil Oil Corporation and Sun Oil Company. Mr. Hager
served as a director of Devon Energy Corporation from August 2007 to March 2009. The board of
directors believes that Mr. Hager should serve as a director because he has:
| experience in executive leadership for international, independent energy
companies; |
| knowledge of the demands and expectations of our core customers; and |
| operational and financial expertise in the oil and gas business generally. |
Francis S. Kalman became a director in October 2005. Mr. Kalman served as Executive Vice
President of McDermott International, Inc. from February 2002 until his retirement in February 2008
and as Chief Financial Officer from February 2002 until April 2007. From March 2000 to February
2002, he was Senior Vice President and Chief Financial Officer of Vector ESP, Inc. From April 1999
to March 2000, he was a principal of Pinnacle Equity Partners, LLC. From February 1998 to April
1999, he was Executive Vice President and Chief Financial Officer of Chemical Logistics
Corporation. From May 1996 to September 1997, he was Senior Vice President and Chief Financial
Officer of Keystone International, Inc. Mr. Kalman currently serves as a senior advisor to a
private investment subsidiary of Tudor, Pickering, Holt & Co., LLC, which specializes in direct
investments in upstream, oilfield service and midstream companies. Mr. Kalman is a principal of
Ancora Partners, LLC, a private equity group. The board of directors believes that Mr. Kalman
should serve as a director because he has:
| experience in executive leadership and strategic planning for international
energy service companies; |
| expertise in accounting, auditing and financial reporting for global
organizations; and |
| financial expertise in the oil and gas industry generally. |
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Ralph D. McBride became a director in September 1995. Mr. McBride has been a partner with the
law firm of Bracewell & Giuliani LLP in Houston, Texas since 1980. He has also been a partner with
Doliver Capital Advisors, a registered investment advisory firm, since 1986 and has served as
president of Doliver Capital Advisors since March 2005. Mr. McBride is a member of the Audit
Committee of the Memorial Hermann Healthcare System and a director of Health Professionals
Insurance Company. The board of directors believes that Mr. McBride should serve as a director
because he has:
| in-depth knowledge of the energy industry generally and contract drilling
specifically; |
| experience in accounting and financial matters, as president of an
investment advisory firm and as a member of an audit committee; and |
| organizational and executive experience. |
Robert G. Phillips became a director in October 2007. In October 2010, Mr. Phillips was
elected Chairman, President and Chief Executive Officer of Crestwood Gas Services GP LLC, the
general partner of Crestwood Midstream Partners LP, which owns and operates midstream energy
assets, and has served on the Management Committee of Crestwood Holdings since May 2010. Since
November 2007, he has served as Chairman, President and CEO of Crestwood Holdings Partners, LLC.
From February 2005 until June 2007, Mr. Phillips served as President, Chief Executive Officer and
Director of Enterprise Products Partners L.P., a publicly traded master limited partnership and
provider of midstream energy services, and from September 2004 until February 2005, he served as
Chief Operating Officer and Director of Enterprise. From 1999 to 2004, Mr. Phillips served as
Chairman of the Board, President and Chief Executive Officer of GulfTerra Energy Partners, L.P.
prior to its acquisition by Enterprise, and, for more than five years prior to 1999, he held
numerous senior management positions with El Paso Corporation, including President of El Paso Field
Services Company. Mr. Phillips also is a director of Triten Corp. The board of directors believes
that Mr. Phillips should serve as a director because he has:
| experience in executive leadership for public companies in the energy
industry, including as chief executive officer; |
| operational and financial expertise in the oil and gas business generally;
and |
| organizational experience having been involved in numerous mergers,
acquisitions and other business combinations during his career. |
Corporate Governance
Corporate Governance Guidelines. The board of directors has established Corporate Governance
Guidelines to assist the board in the exercise of its responsibilities under applicable law and the
listing standards of the New York Stock Exchange. The Guidelines provide a framework for our
companys governance and the boards activities, covering such matters as determining director
independence, director orientation and continuing education, director responsibilities, director
access to management, annual evaluations of the board and other corporate governance practices and
principles. The Guidelines are available on our website at www.prideinternational.com under
Corporate Governance in the Investors Relations section.
Director Independence. It is the policy of the board that a substantial majority of the
members of the board of directors, and all of the members of the Audit Committee, the Compensation
Committee and the Nominating and Corporate Governance Committee, qualify as independent directors
in accordance with the listing standards of the New York Stock Exchange. In addition, it is the
policy of the board that all the members of the Audit Committee also satisfy the criteria for
independence under applicable provisions of the Securities Exchange Act of 1934 and applicable SEC
rules. No director is considered independent unless the board affirmatively determines that he or
she has no material relationship with us, either directly or as a partner, stockholder or officer
of an organization that
has a relationship with us. The NYSE listing standards include objective tests that can
disqualify a director from being treated as independent, as well as a subjective element, under
which the board must affirmatively determine that each independent director has no material
relationship with us, either directly or as a partner, stockholder or officer of an organization
that has a relationship with us. The board considers all relevant facts and circumstances in
making independence determinations.
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As contemplated by NYSE rules then in effect, the board adopted categorical standards in 2004
to assist it in making independence determinations. Under the rules then in effect, relationships
that fell within the categorical standards were not required to be disclosed in the proxy statement
and their impact on independence was not required to be separately discussed. A relationship falls
within these categorical standards if it:
| Is a type of relationship addressed in Section 303A.02(b) of the NYSE
Listed Company Manual, but that listing standard does not preclude the board from
making a determination of independence; |
| Is a type of transaction or relationship addressed in Item 404 of
Regulation S-K, but that regulation does not require disclosure of the transaction or
relationship or permits the omission of the dollar amounts in respect of such
transaction or relationship; or |
| Consists of charitable contributions by us to an organization of which the
director is an executive officer that do not exceed the greater of $1 million or 2% of
the organizations gross revenue in any of the last 3 years. |
The board has determined that each current directors relationship with us, with the exception
of Mr. Raspino, falls within the categorical standards and that all of the current directors,
except Mr. Raspino, satisfy the independence standards of the New York Stock Exchange and our
categorical standards. Mr. Raspino, our President and Chief Executive Officer, is employed by us.
In making its subjective determination that each non-employee director is independent, the
board reviewed and discussed additional information provided by the directors and us with regard to
each directors business and personal activities as they may relate to our company and management.
The board considered the transactions in the context of the NYSEs objective listing standards, the
categorical standards noted above, the additional standards established for members of audit
committees, and the SEC and U.S. Internal Revenue Service standards for compensation committee
members. In this connection, the board considered our prior relationship with the law firm of
Bracewell & Giuliani LLP, of which Mr. McBride is a partner. We did not engage Bracewell &
Giuliani in 2010. The fees we paid to Bracewell & Giuliani in 2009 and 2008 comprised
approximately 0.3% and 0.2%, respectively, of the law firms total revenue for those years. In
addition, Messrs. Dunham, Kalman, McBride and Phillips also served as directors of other
companies with which we did business, or served as directors of or were otherwise affiliated with
non-profit organizations to which we made payments (including contributions), over the last three
fiscal years. None of the contributions to any non-profit organization exceeded $25,000, and none
of the other payments we made to any such other company or non-profit organization exceeded
$125,000, for any of 2010, 2009 or 2008. None of our directors serves as an executive officer or
employee of a non-profit organization to which we made payments or contributions over the last
three fiscal years.
Based on all of the foregoing, the board made a subjective determination as contemplated by
NYSE rules that, given the nature of the transaction, the directors relationship with the entity
and/or the amount involved, no relationships exist that, in the opinion of the board, would impair
the directors independence. Further, the board has determined that all members of the audit
committee, compensation committee and nominating and corporate governance committee are
independent.
Board Leadership Structure. The board has determined that the functions performed by the
chairman of the board and the chief executive officer should be performed by separate individuals.
This determination is reflected in our Corporate Governance Guidelines. We have had a separate,
non-executive chairman of the board since 1999, and the board believes that this structure has
served us well.
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Code of Business Conduct and Ethical Practices. We have adopted a Code of Business Conduct
and Ethical Practices, which applies to all directors and employees, including our principal
executive officer, principal financial officer, principal accounting officer and persons performing
similar functions. All of our directors and employees
must act ethically at all times and in accordance with the policies comprising our Code of
Business Conduct and Ethical Practices. The Code is a reaffirmation that we expect all directors
and employees to uphold our standards of honesty, integrity, ethical behavior and compliance with
the law and to avoid actual or apparent conflicts of interest between their personal and
professional affairs. Directors and employees are obligated to promptly report any good faith
concerns or problems or any actual or suspected violations of the Code. The Code establishes
procedures for the confidential and anonymous reporting of a violation of the Code. We prohibit
any form of retaliation against any director or employee for reporting, in good faith, suspected
violations of the Code. We have posted a copy of the code under Corporate Governance in the
Investor Relations section of our internet website at www.prideinternational.com. Copies of the
code may be obtained free of charge on our website. Any waivers of the code must be approved by our
Board of Directors or a designated board committee. Any amendments to, or waivers from, the code
that apply to our executive officers and directors will be posted under Corporate Governance in
the Investor Relations section of our internet website at www.prideinternational.com.
Accounting and Auditing Concerns. The Audit Committee has established procedures to receive,
retain and treat complaints regarding accounting, internal accounting controls or auditing matters
and to allow for the confidential and anonymous submission by employees of concerns regarding
questionable accounting or auditing matters. Details regarding these procedures can be found on
our website at www.prideinternational.com.
Boards Role in Risk Oversight. Our board of directors has oversight responsibility of the
processes established to report and monitor material risks applicable to us. The board has
delegated to management the responsibility to manage risk and bring to the attention of the board
the most material risks to our company.
We maintain an enterprise risk management program designed to identify significant risks to
us. Our risk management department is responsible for implementing the program, which involves the
identification of risks within the company, assignment of risk owners, establishment of mitigation
plans for those risks, and monitoring of the risks by those owners. The risk management department
meets with the risk owners on a quarterly basis to review the mitigation plans and risk assessment
and reports these results to the board of directors on a quarterly basis. The board reviews the
identified risks, risk owner assignments and monitoring reports. In addition, the board receives a
separate report from our chief compliance officer on a quarterly basis that addresses compliance
risks in the same manner as set forth above, including risk identification, risk owner assignment
and monitoring reports.
In accordance with the charter of the Audit Committee, the Audit Committee meets periodically
with management to review our major financial risk exposures and the steps management has taken to
monitor and control such exposures. The Audit Committee, together with the full board of
directors, also discusses our policies and guidelines concerning risk assessment and risk
management periodically.
In addition to the risk oversight exercised by the full board of directors with respect to our
enterprise risk management program and the Audit Committee with respect to our major financial risk
exposures, the Compensation Committee has reviewed the risks, if any, that could arise from our
compensation policies and practices. For additional information regarding risk management in
connection with our compensation program, please read Compensation Discussion and Analysis Risk
Management in Item 11 of this annual report.
Executive Sessions. The non-management directors meet regularly in executive session without
management participation after non-telephonic board meetings and at times meet in executive session
after telephonic board meetings. In addition, our Corporate Governance Guidelines provide that, if
the group of non-management directors includes a director who is not independent under New York
Stock Exchange listing standards, the independent directors will meet in executive session at least
once annually. Currently, the director who presides at these meetings is the Chairman of the
Board. Our Corporate Governance Guidelines provide that, if the Chairman ceases to be independent,
then the presiding director will be chosen by a vote of the non-management directors or independent
directors, as the case may be.
Communication with the Board. Stockholders and other interested parties may make their
concerns known confidentially to the board of directors or the non-management directors by
submitting a communication in an envelope addressed to the Board of Directors, a specifically
named non-management director or the Non-Management Directors as a group, in care of the
Secretary. All such communications will be conveyed, as applicable, to the full board of
directors, the specified non-management director or the non-management directors as a group.
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Stock Ownership Guidelines for Directors. Under our stock ownership guidelines for directors,
each director is expected to own not less than 12,500 shares of common stock. Fifty percent of
unvested shares of restricted stock and restricted stock units (restricted stock awards) are
included in the total, but shares that may be acquired upon exercise of unexercised stock options
are excluded. Each director is expected to attain such minimum level of stock ownership by the
sixth anniversary of the effective date of the initial election or appointment of such person as a
director. Compliance with the guidelines is measured on April 1 of each year. In the event a
director does not meet the ownership guidelines, the director will be required to retain ownership
of all shares of common stock owned directly as of such April 1 determination date, together with
75% of the after-tax shares (assuming a 25% tax rate) received from any vestings of restricted
stock awards or any option exercises after such date until the ownership guidelines are met. The
disinterested directors may approve exceptions to the ownership and retention guidelines in the
case of financial hardship. Each of our directors currently satisfies the ownership guidelines.
Organization of the Board of Directors
The board of directors is responsible for oversight of our business and affairs. To assist it
in carrying out its duties, the board has delegated certain authority to a Nominating and Corporate
Governance Committee, an Audit Committee and a Compensation Committee. The board also has
delegated, and may in the future delegate, certain authority to other committees of the board from
time to time. During 2010 the board of directors held 16 meetings. Each current director attended
at least 98% of the total number of meetings of the board of directors and of the committees of the
board on which he served that were held during the term of his service on the board and its
committees. Directors are expected to attend meetings of the board of directors and meetings of
committees on which they serve and to spend as much time and meet as frequently as necessary to
properly discharge their responsibilities. In addition, directors are expected to attend annual
meetings of our stockholders. All of our directors attended the 2010 annual meeting.
Nominating and Corporate Governance Committee. The Nominating and Corporate Governance
Committee currently consists of Messrs. Brown, Burke (Chairman) and Kalman. The board of directors
has determined that the members of the committee are independent under applicable New York Stock
Exchange listing standards. The committee is responsible for identifying and recommending
candidates to fill vacancies on the board of directors and for election by the stockholders,
recommending committee assignments for directors to the board of directors, monitoring and
assessing the performance of the board of directors and individual non-employee directors,
reviewing compensation received by non-employee directors for service on the board of directors and
its committees and developing and recommending to the board of directors appropriate corporate
governance policies, practices and procedures for us. The committee held five meetings during
2010. The charter of the committee is available on our website at www.prideinternational.com as
described above.
Although the board of directors does not have a formal diversity policy, the Nominating and
Corporate Governance Committee, when assessing the qualifications of prospective nominees to the
board of directors, takes into account the boards desire to have an appropriate mix of backgrounds
and skills. Each nominees 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 the best interests of our company and our stockholders, are also factors. The board
does not select director nominees on the basis of race, color, gender, national origin,
citizenship, marital status or religious affiliation.
The Nominating and Corporate Governance Committee will consider director candidates
recommended by stockholders. If a stockholder wishes to recommend a director for nomination by the
committee, the stockholder should submit the recommendation in writing to the Chairman, Nominating
and Corporate Governance Committee, in care of the Secretary, Pride International, Inc., 5847 San
Felipe, Suite 3300, Houston, Texas 77057. The recommendation should contain the following
information:
| the name, age, business address and residence address of the nominee and
the name and address of the stockholder making the nomination; |
| the principal occupation or employment of the nominee; |
| the number of shares of each class or series of our capital stock
beneficially owned by the nominee and the stockholder and the period for which those shares have been owned; and |
| any other information the stockholder may deem relevant to the committees
evaluation. |
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Candidates recommended by stockholders are evaluated on the same basis as candidates recommended by
our directors, executive officers, third-party search firms or other sources.
Audit Committee. The Audit Committee currently consists of Messrs. Burke, Hager, Kalman
(Chairman) and Phillips. The board of directors has determined that the members of the Audit
Committee are independent under applicable provisions of the Securities Exchange Act of 1934 and
the New York Stock Exchange listing standards. The board of directors also has determined that all
members of the Audit Committee are financial experts as defined by applicable SEC rules. Please
refer to Executive Officers and Directors above for relevant experience. The committees
purpose is to assist the board of directors in overseeing (a) the integrity of our financial
statements, (b) the compliance by us with legal and regulatory requirements, (c) the independence,
qualifications and performance of our independent auditors and (d) the performance of our internal
audit function. The committee held eight meetings during 2010. The board of directors has adopted
a written charter for the Audit Committee, which is available on our website at
www.prideinternational.com as described above.
Compensation Committee. The Compensation Committee currently consists of Messrs. Burke,
Dunham (Chairman) and Hager. The board of directors has determined that the members of the
committee are independent under applicable New York Stock Exchange listing standards. The
committees purpose is (a) to review and approve the compensation of our executive officers and
other key employees, (b) to evaluate the performance of the chief executive officer and to oversee
the performance evaluation of senior management, (c) to administer and make recommendations to the
board of directors with respect to our incentive-compensation plans, equity-based plans and other
compensation benefit plans and (d) to produce a compensation committee report and assist management
with the preparation of the compensation discussion and analysis as required by the SEC. The
committee may delegate certain authority to a subcommittee of its members. The committee held
10 meetings during 2010. The charter of the committee is available on our website at
www.prideinternational.com as described above.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires our executive officers and
directors and beneficial owners of more than ten percent of any class of equity securities to file
initial reports of ownership and reports of changes in ownership of our common stock with the SEC
and, pursuant to rules promulgated under Section 16(a), such individuals are required to furnish us
with copies of Section 16(a) reports they file. Based solely on a review of the copies of such
reports furnished to us during the year ended December 31, 2010 and written representations from
our officers and directors, all Section 16(a) reports applicable to our officers and directors and
any beneficial owners of ten percent or more of a class of equity securities were filed on a timely
basis.
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ITEM 11. | EXECUTIVE COMPENSATION |
COMPENSATION DISCUSSION AND ANALYSIS
The following Compensation Discussion and Analysis should be read in conjunction with
Executive Compensation included elsewhere in this annual report. In this Compensation Discussion
and Analysis, named executive officers refers to our executive officers named in the Summary
Compensation Table below.
Executive Summary
We design our compensation programs to attract, motivate and retain exceptional people who can
drive success for our company. Our programs provide a competitive package of annual base pay,
annual cash incentives and long-term equity-based incentives. Annual and long-term incentives are
based on a pay for performance philosophy. The following is a summary of the important aspects
of our executive compensation program:
| Our executive compensation program is designed to align the interests of our
executives with those of our stockholders, retain and motivate executives who serve our
stockholders interests and attract talented external candidates when vacancies arise. |
| The Compensation Committee makes all final compensation decisions regarding our
named executive officers. The Committee engages an independent compensation consultant
to provide expertise on program design and implementation. |
| We provide the following elements of compensation to our named executive officers:
base salary, annual cash incentives, long-term equity-based incentives, limited
perquisites, retirement benefits and severance and change in control arrangements. |
| We generally target the median with respect to base salary and target annual
incentives and the median-to-top quartile for long-term incentives, and make
adjustments taking into account each executives experience, performance,
responsibilities and contributions to the company. |
| We support our pay-for-performance philosophy with an annual cash incentive award
based on the companys achievement of certain financial goals. Awards for 2010 were
based on earnings per share (25%), cash flows (20%), operating and general and
administrative expense control (15%), operating efficiency (10%), safety performance on
a company-wide basis (10%) and personal performance goals (20%). In 2010, we
introduced the cash flow metric and added a complexity assessment as part of the
evaluation of personal performance goals. As a result of our financial performance
during 2010, payouts averaged 137% of target for the named executive officers. |
| We encourage alignment of our named executive officers interests with those of our
stockholders through the award of long-term equity-based incentive grants. In 2010, we
used a mix of equity-based compensation which consisted of 33% stock option awards
vesting ratably over three years, 33% time-based restricted stock awards with a
three-year ratable vesting period, and 34% performance-based restricted stock unit
(PRSU) awards with a three-year ratable vesting period and payout of earned shares at
the end of the three-year period. Shares are earned under PRSUs based on relative
total stockholder return (TSR) compared to a peer group of companies. As a result of
our relative TSR during 2010, one-third of the underlying shares were earned at 98% of
target amounts, which will be paid at the earlier of the end of the three-year period
or a change in control. |
| In February 2010, we awarded discretionary restricted stock awards to certain of our
employees, including certain of our named executive officers, in recognition of their
efforts in connection with the spin-off of Seahawk Drilling, Inc. (Seahawk). These
restricted stock awards will fully vest on the third anniversary of the date of grant. |
| In 2010, we took steps necessary to ensure that all annual cash incentive awards and
long-term incentive awards for 2010 are fully tax deductible under Section 162(m) of
the Internal Revenue Code. |
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| Alignment with stockholder interest is also encouraged through stock ownership
guidelines for named executive officers. In 2010, we increased significantly the
ownership guidelines and added a stock retention feature for individuals who do not
satisfy the guidelines. |
| Special retirement benefits and retiree medical benefits are provided through the
Supplemental Executive Retirement Plan to the named executive officers, and are
designed to support the recruiting and retention objectives of the executive
compensation program. |
| Our named executive officers also receive limited perquisites,
including tax return preparation,
financial planning and estate planning benefits, an annual physical examination and limited club
membership dues where there is a valid business purpose. In 2010, in response to
evolving best practices, we discontinued car allowances and added a reimbursement for
tax return preparation and financial planning. |
| Each of our named executive officers has entered into severance and change in
control arrangements that provide for certain benefits if they are terminated without
cause or they terminate for good reason. We believe that severance and change in
control arrangements are necessary to attract and retain the talent necessary for our
long-term success and allow our executives to focus on duties at hand and provide
security should their employment be terminated in specific situations. |
| We have also adopted an incentive and equity compensation recoupment policy and
implemented a policy prohibiting executives from entering into hedging transactions and
buying on margin. |
2010 Overview
Our compensation decisions for 2010 were influenced by a variety of factors with the
overarching goal of linking pay with performance. We set our compensation goals based on the
expectation that the global economy would gradually improve, the need to focus on cash generation
and preservation in a period of economic uncertainty and the desire to reinforce our long-term
strategy to be a pure offshore focused company with an increasing emphasis on deepwater drilling.
While the initial months of 2010 were characterized by a cautious pattern from many operators
toward new exploration and production spending commitments similar to what was experienced in 2009,
evidence was present that supported increased spending with a number of new drilling programs
commencing in 2011 and beyond, largely supported by operators increasing confidence in the
re-establishment of global economic growth and the sustainability of crude oil prices. However,
following the Macondo well incident in the U.S. Gulf of Mexico in April 2010 and subsequent
government actions, a new level of uncertainty among operators developed, with many choosing to
delay the commencement of certain projects in the U.S. Gulf of Mexico and other regions pending
further clarity on a number of industry issues. The timing of potentially higher spending
patterns, especially in deepwater, is expected to remain uncertain until operators have gained more
clarity concerning the long-term implications to our industry of the Macondo well incident,
including an understanding of the impact of new operating regulations and government oversight.
However, we believe that sustained oil prices above $60 per barrel since mid-2009, and oil prices
averaging approximately $80 per barrel in 2010, have contributed to increased confidence among
operators and should lead to increased exploration and production spending, especially in
international locations. Further, we believe the long-term prospects for deepwater drilling are
positive given the expected growth in oil consumption from developing nations, limited growth in
crude oil supplies and high depletion rates of mature oil fields, together with geologic successes,
improving access to promising offshore areas and new, more efficient technologies, including
enhanced reservoir recovery techniques. In addition, an increasing focus on deepwater prospects by
national oil companies, whose exploration and production spending is less sensitive to general
economic factors, serve to provide further stability in the deepwater sector.
Despite the muted economic recovery and challenges encountered, we saw strong financial and
operating performance in 2010, especially in our area of focus relating to the deepwater segment.
| Deepwater revenues for 2010 were $930.5 million compared to $823.1 million in 2009,
an increase of 13%, and total revenues for 2010 were $1,460.1 million. |
| We had an especially strong fourth quarter in our deepwater segment, with revenues
increasing by 25% from $216.2 million during the third quarter of 2010 to $270.9
million during the fourth quarter of 2010. |
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| Utilization rates of our deepwater fleet increased from 84% in 2009 to 93% in 2010. |
| We completed a $1.2 billion issuance of senior notes, allowing us to refinance a
portion of our long-term debt, extend our debt maturities and fund a portion of our
construction payments, and we amended our unsecured revolving credit facility to
increase availability under the facility to $750 million. |
| Total long-term debt as of December 31, 2010 was $1.9 billion and stockholders
equity was $4.5 billion, resulting in a debt-to-total-capital ratio of 29%. We ended
2010 with cash and cash equivalents of $485.0 million. |
| Stockholders received a total return on investment of 3.4% in 2010. For the
three-year period ending December 31, 2010, our TSR of 1.3% exceeded the S&P 500
(-2.8%), the Russell 3000 (-4.1%) and the top quartile of our peers (0.0%) (excluding
BJ Services Company and Smith International, Inc., both of which were acquired by other
companies in 2010). |
We have positioned the company to focus on deepwater drilling opportunities that we expect to
be more insulated in times of economic uncertainty. Our resilient 2010 financial and operational
performance resulted from the successful execution over a multi-year period of our long-term
strategy to become a pure offshore focused company with an increasing emphasis on deepwater
drilling, including:
| our acquisition in November 2006 of the remaining 70% interest in a joint venture
company the principal assets of which are two deepwater semi-submersible drilling rigs,
the Pride Portland and the Pride Rio de Janeiro; |
| our acquisition in December 2005 and August 2007 of the aggregate 49% interest not
owned by us in a joint venture company the principal assets of which are two
ultra-deepwater drillships, the Pride Africa and the Pride Angola, and an
independent-leg jackup rig, the Pride Cabinda; |
| the sale of our Latin America land and E&P services businesses in August 2007 for
$1.0 billion; |
| the sale of our tender-assist rig fleet, our platform rigs and our Eastern
Hemisphere land fleet in 2008 and early 2009 for a combined consideration of $374
million; |
| the distribution of Seahawk to our stockholders in August 2009; |
| the delivery of the Deep Ocean Ascension, Deep Ocean Clarion and Deep Ocean
Mendocino, the first three of our newly constructed ultra-deepwater drillships, in
February and September 2010 and January 2011, respectively; |
| our ongoing projects to construct two additional ultra-deepwater drillships, further expanding our ultra-deepwater fleet size and drilling capabilities;
and |
| our maintenance of a strong balance sheet in a difficult economic environment, with
a backlog of $6.4 billion as of December 31, 2010. |
Prides management team has performed well in executing our companys strategy. During 2010,
we took delivery of two of our new ultra-deepwater drillships and entered into an agreement for the
construction of a fifth new ultra-deepwater drillship, which includes an option for a sixth ultra-deepwater drillship at similar terms and conditions. Each of the newly delivered drillships is
contracted at favorable dayrates for five-year terms. Although their original contract start dates
have been delayed due to the Macondo well incident and subsequent government actions, we were able
to negotiate additional agreements with BP Exploration & Production
Inc. for the drillships that provide special standby dayrates, effective for certain periods
prior to commencement of the previously agreed five-year contracts.
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Competition for experienced and results-oriented managers in our industry is intense, despite
the difficult economic environment. We have adopted an executive compensation program that is
designed to incentivize management behaviors to make the company an outstanding investment for our
stockholders. In addition to holding management accountable for accomplishing financial results,
we also insist on the highest standards of ethical conduct and operational safety, which we believe
position the company for long-term success.
Our annual incentive payments for 2010, which ranged from 134.1% to 139.5% of target for our
named executive officers, reflected our 2010 financial and operational performance. To validate
our goal of linking pay with performance, we also performed a look-back analysis of our chief
executive officers realizable total direct compensation (realizable TDC) relative to TSR over a
specified time frame. Realizable TDC is defined as the sum of the following:
| base salary; |
| actual bonus payout; |
| cash long-term incentive plan payments; |
| in-the-money value of stock options granted during the period valued as of the last
day of the analysis period; |
| fair market value of all restricted stock units (not including PRSUs) granted during
the period valued as of the last day of the analysis period; and |
| fair market value of PRSUs, based on the target number of earned shares as of the
last day of the analysis period. |
Two analyses were conducted for this purpose. The first analysis involved a relative
assessment comparing our chief executive officers realizable TDC and our TSR against a peer group
for the three years ended December 31, 2009. The peer group for this analysis included Ensco plc,
National Oilwell Varco, Inc., Oceaneering International, Inc., Transocean Inc. and Weatherford
International Ltd. This peer group was selected to include members of the oilfield services
market, in which we compete for talent, which had in place the same chief executive officer
throughout the timeframe. Based on this analysis, our chief executive officers realizable TDC and
our TSR exhibited strong alignment as both were between the median and the top quartile of this
group.
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The second analysis involved an absolute (or internal) assessment of the alignment between our
chief executive officers realizable TDC and our TSR. This analysis measured the value of $100
granted to our chief executive officer in each year from 2007 through 2010 compared to the value of
$100 invested in the company in each year. Our chief executive officers realizable TDC and our
TSR exhibited strong directional alignment. As the realizable TDC increased, the value of
stockholder investment increased. Further, in each year, a $100 investment in the company was
worth more at the end of 2010 than $100 granted to our chief executive officer.
Target TDC | Total Realizable TDC at | Value of $100 | ||||||||||||||||
at Grant | December 31, 2010 | Value of $100 | Stockholder | |||||||||||||||
Year | (in thousands) | (in thousands) | Measurement Period | Granted | Investment | |||||||||||||
2007 |
$ | 6,164 | $ | 5,481 | January 1, 2007 to December 31, 2010 |
$ | 89 | $ | 117 | |||||||||
2008 |
$ | 6,757 | $ | 4,631 | January 1, 2008 to December 31, 2010 |
$ | 69 | $ | 104 | |||||||||
2009 |
$ | 6,591 | $ | 13,310 | January 1, 2009 to December 31, 2010 |
$ | 202 | $ | 220 | |||||||||
2010 |
$ | 5,900 | $ | 5,960 | January 1, 2010 to December 31, 2010 |
$ | 101 | $ | 103 |
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Executive Compensation Philosophy
Our executive compensation program is designed to align the interests of our executives with
those of our stockholders, retain and motivate executives who serve our stockholders interests and
attract talented external candidates when vacancies arise.
Alignment of Interests
We believe that the most effective way to align the interests of our executives and
stockholders is to pay a significant amount of total compensation through annual incentive awards,
which create incentives for meeting annual performance targets, and long-term stock-based incentive
compensation, which focuses executives on the longer-term performance of our company. As a result
of our focus on long-term stock-based incentive compensation, our executive compensation program
rewards performance over a sustained period of time and does not encourage management to take
unnecessary or excessive risks in the short-term.
Retention
Given their qualifications, experience and professionalism, our executives, as well as the
non-executive members of our management team who may be candidates for promotion, are highly
regarded within and outside our industry. Opportunities for alternative employment arise from time
to time, and our executive compensation program is designed to be competitive in light of these
other opportunities.
Attracting Candidates
Highly qualified candidates seek the best available opportunities, from both a professional
and a financial standpoint. Our program seeks to provide compensation that is competitive in
relation to alternatives in the markets in which we compete for executives.
Administration of Executive Compensation Program
Our executive compensation program is administered by the Compensation Committee of our board
of directors. The specific duties and responsibilities of the Compensation Committee are described
under Organization of the Board of DirectorsCompensation Committee in Item 10 of this annual
report. The Compensation Committee engages an outside consultant with respect to executive
compensation matters. The primary role of the compensation consultant is to provide the
Compensation Committee with compensation market data and information regarding compensation trends
in our industry and to make recommendations regarding the design of our program. In 2010, the
Compensation Committee retained Frederic W. Cook & Co., Inc. as its compensation consultant.
Management does not direct or oversee the retention or activities of the compensation consultant
with respect to our executive compensation program and did not engage Frederic W. Cook & Co., Inc.
in any other capacity for 2010.
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Lonnie D. Bane, our Senior Vice President Human Resources and Administration, and Brady K.
Long, our Vice President, General Counsel and Secretary, support the Compensation Committee in
performing its role with respect to administering our compensation program. The Compensation
Committee, with input from the other non-management directors, conducts performance evaluations of
Louis A. Raspino, our President and Chief Executive Officer, and Mr. Raspino conducts performance
evaluations of our other executive officers and makes recommendations to the Compensation Committee
regarding all aspects of their compensation. Messrs. Bane and Long act pursuant to delegated
authority to fulfill various administrative functions of the Compensation Committee, such as
coordinating the hiring process with respect to executives, providing legal and compensation market
updates to the Compensation Committee, and overseeing the documentation of equity plans and awards
as approved by the Compensation Committee. No executive has the authority to establish or modify
executive officer compensation, except with respect to certain perquisites as described below.
Comparator Group and Comparison Data
The Compensation Committee selected 13 companies against which to compare our executive
compensation program for use in determining compensation for 2010. The following five companies
were selected because they either directly compete with us or have operations that are comparable
to our operations: Diamond Offshore Drilling, Inc., Ensco plc, Noble Corporation, Rowan Companies,
Inc. and Transocean Inc. The remaining eight companies were selected to represent the broader
oilfield services market in which we also compete for talent: BJ Services Company, Cameron
International Corporation, FMC Technologies, Inc., Exterran Partners, L.P., National Oilwell Varco,
Inc., Oceaneering International, Inc., Smith International, Inc., and Weatherford International
Ltd. We refer to each group of companies collectively as our comparator group. The Compensation
Committee may elect to modify the group for future periods to reflect best practices in executive
compensation or changes in our business model or strategy or the business model or strategy of
other companies, in and outside the comparator group.
The compensation consultant also has used the Towers Perrin Oilfield Service Compensation
Survey, which is a nationally recognized executive compensation survey that consists of
industry-specific information on executive pay practices. This survey covers 15 companies
(including Pride) in various energy-related business segments, such as drilling, services and
equipment. Compensation data for all companies in the survey were used, which have median revenues
of $1.95 billion. This survey provides information on pay levels for individuals with similar
roles and responsibilities as our officers.
Although our revenues for 2010 were below the median of the comparator group and the survey
participants, the Compensation Committee considered a number of factors, including recent
dispositions and our newbuild drillship program, in determining to maintain the same comparator
group and survey participants as in prior years.
Over the last few years, we have transformed our company to become a pure offshore focused
company with an increasing emphasis on deepwater drilling. To achieve this long-term objective, we
have made various dispositions of assets and asset groups, including:
| the sale of our Latin America land and E&P services businesses in 2007; |
| the sale of our tender-assist rig fleet and our platform rigs in 2008; |
| the sale of our Eastern Hemisphere land fleet in late 2008 and early 2009; and |
| our distribution of Seahawk in 2009. |
These dispositions reduced our revenues in the short-term, but the sales have provided capital to
invest in our long-term strategic focus on premium floating rigs.
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During 2010, we took delivery of two new ultra-deepwater drillships, the Deep Ocean Ascension
and the Deep Ocean Clarion. In January 2011, we took delivery of our third new ultra-deepwater
drillship, the Deep Ocean Mendocino. The three new drillships account for approximately $2.8
billion of our $6.4 billion contracted backlog
as of December 31, 2010. We are currently constructing two additional deepwater drillships,
which are expected to have a significant revenue contribution going forward.
Because compensation often correlates with revenue, the Compensation Committee determined to
use the 2010 analysis reference data for companies comparable in size to our company before the
dispositions noted above and taking into account the expected revenue contribution of our newbuild
drillships.
As part of the Compensation Committees review and determination of appropriate and
competitive levels of compensation, it utilizes a summary of our competitive posture for each
component of compensation. The summary is prepared by the compensation consultant and derived from
the following two data sources:
| The compensation consultant uses the compensation information provided in the proxy
statements of the members of our comparator group to develop market compensation levels
for our most highly compensated officers. The compensation consultant then compares
the compensation of the named executive officers in our comparator group to our
executive pay levels based on position and pay rank. |
| The compensation consultant also utilizes data from the Towers Perrin compensation
survey described above to develop marketplace compensation levels for our executive
officers. |
The comparator group compensation data, together with the compensation survey data, each as
described above, are collectively referred to as the comparison data.
Compensation Elements
Our executive compensation program generally consists of six components:
| base salary; |
| annual cash incentive compensation; |
| long-term stock-based incentive compensation; |
| Supplemental Executive Retirement Plan; |
| severance and change in control arrangements; and |
| perquisites. |
Annually, on the basis of the performance evaluations discussed above, the Compensation
Committee conducts a review of base salary, annual cash incentive compensation and long-term
stock-based incentive compensation, which we refer to as total direct compensation, with respect to
each executive and makes adjustments, if any, to the preceding years levels. In determining
compensation levels, the Compensation Committee seeks to position each element of each executive
officers total direct compensation at a competitive level in relation to similar compensation paid
to the executives peers, as described below, taking into consideration the experience, potential
and performance of the executive.
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In 2010, the Compensation Committee reviewed total direct compensation for each executive,
including an evaluation of the extent to which the executive compensation programs objectives are
being met with respect to the relative weighting of each component within the executives total
direct compensation. Because each component is reviewed separately and compensation within each
component is based on the individuals experience and potential as well as individual and company
performance, the percentage of total direct compensation that each component comprises may vary by
executive and by year. The following table summarizes the relative size of the components of total
direct compensation for 2010 for each of our named executive officers:
Percentage of Total Direct Compensation for 2010 | ||||||||||||
Name | Base Salary | Annual Cash Incentive | Long-Term Stock-Based Incentive | |||||||||
Louis A. Raspino |
15 | % | 20 | % | 65 | % | ||||||
Imran (Ron) Toufeeq |
18 | % | 17 | % | 65 | % | ||||||
Brian C. Voegele |
18 | % | 16 | % | 66 | % | ||||||
W. Gregory Looser |
18 | % | 17 | % | 65 | % | ||||||
Lonnie D. Bane |
22 | % | 18 | % | 60 | % | ||||||
Kevin C. Robert |
22 | % | 18 | % | 60 | % |
We believe the compensation of our named executive officers should be most heavily
dependent upon individual and company performance. Accordingly, our named executive officers
receive a higher portion of their total direct compensation in the form of performance-based annual
cash incentives and long-term stock-based incentives as compared to other company employees.
Further, in support of pay-for-performance objectives, the portion of total direct compensation
delivered through long-term stock-based incentives increases with successively higher levels of
responsibility.
Similar to his peers in the comparator group, Mr. Raspino, our President and Chief Executive
Officer, has a significantly broader scope of responsibilities at our company than the other named
executive officers. The difference in compensation for Mr. Raspino described below primarily
reflects these differing responsibilities as valued by the companies in the comparator group and,
except as described below, does not result from the application of different policies or decisions
with respect to Mr. Raspino.
Base Salary
The Compensation Committee seeks to position each executives base salary around the 50th
percentile of the individuals peers based on the comparison data. The extent to which an
executives base salary falls short of, or exceeds, the 50th percentile is determined subjectively
by the Compensation Committee based on experience, potential, prior base salary, the results of the
annual performance evaluation and other factors. Executives, other than the chief executive
officer, are evaluated on the following criteria: leadership; initiative; relationship and team
building; business acumen; communication skills; vision and perspective; supervision;
organizational savvy; ethical practices; and fiscal responsibility. The chief executive officer is
evaluated on similar criteria, with emphasis on ethical practices, relations with our board of
directors, vision, strategy, leadership and professional skills. No single criterion is weighted
more heavily than any other in this evaluation, as the Compensation Committee evaluates the
executives overall performance and contributions to our company.
With the exception of Messrs. Looser and Toufeeq, who received base salary increases in August
2009 in connection with promotions, the base salaries of other named executive officers were not
increased in 2009 or 2010.
Annual Cash Incentive Compensation
Our annual cash incentive is based on the achievement of company-wide objectives and personal
objectives during the year, which are described in greater detail below. The Compensation
Committee establishes a target bonus for each executive around the 50th percentile of the
individuals peers based on the comparison data. The target bonus percentage is applied to the
total salary received by the executive during the year to determine the total target bonus dollar
opportunity for that executive. The bonus is paid based upon the achievement of specified
performance-based goals during the applicable year. In connection with its annual review of
executive performance evaluations and compensation, the Compensation Committee determined target
bonuses for the named executive officers for 2010 as follows:
Name | Target Bonus Percentage | |||
Mr. Raspino |
100 | % | ||
Mr. Toufeeq |
70 | % | ||
Mr. Voegele |
65 | % | ||
Mr. Looser |
65 | % | ||
Mr. Bane |
60 | % | ||
Mr. Robert |
60 | % |
Annually, the board of directors approves our corporate performance objectives and, on
that basis, the Compensation Committee determines the metrics by which the executives bonuses will
be calculated for that year. Each metric is weighted by the Compensation Committee to reflect its
relative importance for the year in question.
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The Compensation Committee seeks a balance of these metrics and relative weighting to further
our corporate objectives and to discourage undue emphasis on any one metric. The Compensation
Committee also recognizes that occasionally significant events occur that fall outside the scope of
the annual planning process and, as such, have an unintended impact on annual incentive payments.
In order to encourage actions that are in our long-term interest, but that may result in either
positive or negative consequences relative to the annual incentive calculation in any given year,
the Compensation Committee has developed guidelines for making adjustments to the incentive targets
to address such consequences. The financial cost or benefit of all significant exceptional items
for the year are collected and presented to the Compensation Committee for review. While all
adjustments are in its full discretion, the Compensation Committee has determined that certain
exceptional items are adjusted for on a standard basis (including acquisitions or divestitures;
gain or loss on sale of assets such as business segments; and capital structure changes) and that
other items (including acts of God; extraordinary, unplanned events; and retroactive changes in
law) are appropriate for adjustment, either positive or negative, depending on the circumstances.
In addition to the corporate metrics, the chief executive officer sets his personal
performance goals with the Compensation Committee, and each executive other than the chief
executive officer sets his own personal performance goals with the chief executive officer, which
are then reviewed by the Compensation Committee. The extent to which the executive achieves those
goals and the level of complexity of each of those goals is itself a metric on which part of the
bonus is based.
For 2010, the following metrics were established by the Compensation Committee:
Metric | Target | Target Weight | ||||
Earnings per share |
$1.62 | 25 | % | |||
Cash flows |
$94.2 million | 20 | % | |||
Operating and general and administrative expense control |
$1.02 billion | 15 | % | |||
Operating efficiency |
Not disclosed | 10 | % | |||
Safety performance on a company-wide basis |
0.78 | 10 | % | |||
Personal performance goals |
Individual | 20 | % | |||
Total |
100 | % |
For 2010, the Compensation Committee determined that earnings per share was the most
important financial measure upon which to evaluate executive officer performance with respect to
payment of the annual cash incentive and, therefore, assigned the metric a weight of 25%. The
Compensation Committee believes that earnings per share is a financial measure widely used by
financial analysts and investors in evaluating our performance and that tying a significant portion
of executive officer annual cash incentive compensation to this measure more closely aligns their
interests with those of our stockholders.
The Compensation Committee incorporated a cash flow metric into our annual incentive program
for 2010, reflecting our focus on cash generation and preservation. The cash flow metric is a
composite of net income, changes in working capital and capital expenditures (excluding newbuild
capital expenditures). This metric was weighted at 20%.
The Compensation Committee determined that control of operating and general and administrative
expense was important to our company in 2010, reflecting our long-term commitment to cost control.
Rig-based labor costs are also included in this metric, due to the importance of managing such
costs. This metric was weighted at 15%.
The Compensation Committee determined that, for 2010, our executives should be directly
incentivized to minimize unplanned shipyard time and other downtime and its concomitant loss of
revenue. This metric was weighted at 10%. It is expressed in terms of the total number of days
our rigs were contracted to work, not including planned downtime, planned shipyard projects, and
special periodic surveys, divided by 365, versus the total number of days those rigs actually
worked, divided by 365. We are not disclosing the target for this metric, as doing so would result
in competitive harm to our company. However, when establishing the target, the Compensation
Committee expected achievement to require significant effort due to the expected significant delays
that can result from limited shipyard availability, equipment shortages and labor constraints in
connection with these projects.
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The Compensation Committee determined that safety performance was important to our company in
2010, reflecting our long-standing commitment to protecting the welfare of our employees and the
importance of our safety performance to our customers. This metric was weighted at 10%. The
target for this metric is based on the total recordable incidence rate, or TRIR, which is the
number of recordable incidents per 200,000 man hours. TRIR is a generally accepted industry
measure for safety performance.
The Compensation Committee determined that each executives personal goals should account for
20% of the executives bonus opportunity. Each executive sets three to five important goals to
accomplish during the year. Each goal receives a complexity weight, which affects the amount of
the potential payout, to encourage executives to propose challenging goals. These personal goals
primarily relate to various organizational, operational, administrative and other matters that are
important to the functioning and efficiency of the executives area of responsibility and are
important for the accomplishment of our long-term strategic objectives. Where the goals are not
quantitative, the extent to which the executive (other than the chief executive officer)
accomplishes or exceeds the goals is determined subjectively by the chief executive officer and
reviewed with the Compensation Committee, and the extent to which the chief executive officer
accomplishes or exceeds the goals is determined subjectively by the Compensation Committee. These
judgments, considered together with the Compensation Committees judgment as to the complexity of
the goals, are reflected in the amount of the executives bonus attributable to this metric.
Each metric is assigned a minimum threshold result, below which no amount of the bonus would
be awarded with respect to that metric, a target result and a maximum result, at which the amount
of the bonus awarded with respect to that metric would be 250% of the target bonus (200% with
respect to personal performance goals). In no event will the total maximum bonus paid exceed 200%
of the target bonus. For 2010, the results relating to and the actual weight given to each metric
to calculate bonuses were as follows:
Metric | 2010 Result | 2010 Percentage (1) | ||||
Earnings per share |
$1.49(2) | 22.6 | % | |||
Cash flows |
$130.1 million(3) | 33.3 | % | |||
Operating and general and administrative expense control |
$973.6 million(4) | 27.9 | % | |||
Operating efficiency |
Not disclosed | 0.0 | % | |||
Safety performance on a company-wide basis |
0.78 TRIR | 25.0 | % | |||
Personal performance goals |
Varies by individual | See table below |
(1) | Represents the percentage of the total target bonus amount earned with respect to
this metric. For example, with respect to the earnings per share metric, the target
weight was 25% and the actual percentage used in calculating bonuses was 22.6%. |
|
(2) | For purposes of determining achievement of this metric, the Compensation
Committee made adjustments for certain non-recurring items outside the scope of the
annual incentive plan. The Compensation Committee adjusted net income by adding back
certain severance costs and certain external legal fees related to the investigation
into potential violations of the Foreign Corrupt Practices Act. As a result, the
calculation is not made in accordance with U.S. generally accepted accounting
principles and is not the same as the calculation we use for financial statement
reporting purposes. Income from continuing operations per diluted share for 2010
calculated in accordance with U.S. generally accepted accounting principles was $1.37. |
|
(3) | The cash flow metric is a composite of net income, changes in working capital
and capital expenditures (excluding newbuild capital expenditures). As a result, the
calculation is not made in accordance with U.S. generally accepted accounting
principles and is not the same as the calculation we use for financial statement
reporting purposes. |
|
(4) | For purposes of determining achievement of this metric, the Compensation
Committee made adjustments for certain non-recurring items outside the scope of the
annual incentive plan, including with respect to certain severance costs and certain
external legal fees related to the investigation into potential violations of the
Foreign Corrupt Practices Act. As a result, the calculation is not made in accordance
with U.S. generally accepted accounting principles and is not the same as the
calculation we use for financial statement reporting purposes. |
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The five metrics based on company performance described above (i.e., other than personal
performance goals) resulted in a total calculated bonus percentage for those metrics of 108.9%
compared with a target of 80%. The table below presents (a) the percentage, as compared to a
target of 100%, representing each named executive officers achievement of his personal performance
goals for 2010, (b) the total calculated bonus percentage, which is equal to the sum of the
percentages for the company performance metrics and the personal performance metric, and (c) the
bonuses actually paid to the named executive officers for 2010.
2010 Personal Goal | 2010 Total Bonus | |||||||||||
Name | Percentage | Percentage | Bonus | |||||||||
Mr. Raspino |
30.8 | % | 139.5 | % | $ | 1,325,000 | ||||||
Mr. Toufeeq |
30.0 | % | 138.9 | % | $ | 437,500 | ||||||
Mr. Voegele |
25.2 | % | 134.1 | % | $ | 370,500 | ||||||
Mr. Looser |
28.8 | % | 137.7 | % | $ | 380,500 | ||||||
Mr. Bane |
28.8 | % | 137.8 | % | $ | 291,000 | ||||||
Mr. Robert |
26.8 | % | 135.7 | % | $ | 289,000 |
All bonuses paid under the program, while expected to be based on the guidelines
established by the Compensation Committee, are at all times subject to the Compensation Committees
discretion. In prior years, the Compensation Committee has exercised its discretion to both
increase and decrease the bonus amounts, in some cases by significant amounts, and may decrease
such amounts in the future, or increase such amounts to the extent consistent with tax
deductibility constraints of Section 162(m) of the Internal Revenue Code.
Long-Term Stock-Based Incentive Compensation
At the end of the calendar year, the Compensation Committee determines an aggregate value of
stock-based incentive awards to grant to each executive for the following year that generally would
position the executives stock-based incentive compensation between the median and the upper
quartile of the individuals peers based on the comparison data. The Compensation Committee
believes this target percentile range for equity-based compensation ties an appropriate percentage
of the executives total compensation to the long-term performance of our company. The amount of
an executives stock-based incentive award is determined subjectively by the Compensation Committee
following a recommendation from the chief executive officer (or, with respect to the chief
executive officer, by the Compensation Committee), based in part on the executives performance.
For the 2010 grants, the Compensation Committee determined that the value of the long-term
incentive awards should be comprised roughly of one-third each of restricted stock awards, PRSUs
and stock options, as was generally consistent with equity grant practices within our comparator
group, to emphasize retention, relative total stockholder return and absolute stock price
appreciation.
Beginning in 2010, annual grants of restricted stock awards are subject to performance
criteria, such that the awards qualify as performance based compensation under Section 162(m) of
the Internal Revenue Code. The performance criteria require that we have positive EBITDA during
any quarter of 2010. If the performance criteria are satisfied, the restricted stock awards are
subject to time vesting at a rate of one-third on each of the first three anniversaries of the date
of grant. The Compensation Committee certified that the performance criteria for the restricted
stock awards were satisfied during 2010.
In 2010, we also introduced a PRSU program for our named executive officers. Our PRSU program
is based on relative total stockholder return and, therefore, reinforces our pay-for-performance
compensation philosophy. With respect to the PRSUs granted in February 2010, on each of the first
three anniversaries of the date of grant, the grant vests with respect to a number of PRSUs
determined by comparing our total stockholder return for the applicable period to the average total
stockholder return of Diamond Offshore Drilling, Inc., Ensco plc, Noble Corporation, Seadrill
Limited and Transocean Ltd. These companies were selected because they either directly compete
with us or have operations that are comparable to our operations. We selected Seadrill Limited,
rather than Rowan Companies, Inc., which is in our comparator group, because we believe that
Seadrill is a more direct competitor with operations more comparable to ours. Seadrill is not in
our comparator group, however, because we believe certain of its management positions and
responsibilities are not comparable to ours and, as a foreign issuer, it does not disclose
compensation data to the extent of the other members of the comparator group. The total number of
PRSUs earned under the award may range from 0% to 150% of the target PRSUs awarded, and, subject to
accelerated payment in the event of death, disability or change in control, the earned PRSUs will
be issued to the grantee after the third anniversary of the date of grant in the form of shares of
our common stock. Dividend equivalents will be paid to the grantee with respect to earned PRSUs.
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For the 2010 and 2011 equity-based grants, the Compensation Committee determined an aggregate
value to be awarded for each category of award and the method to fix the number of awards to be
granted. For purposes of valuing options in the determination of the number of options to be
granted, for the 2010 and 2011 grants, the Compensation Committee used the Black-Scholes-Merton
method, which is the same method we use for accounting purposes. For purposes of determining the
number of stock options and restricted stock awards granted to executive
officers in January 2010, the Compensation Committee used the closing price of our common
stock on the grant date (January 29, 2010). For purposes of determining the number of PRSUs
granted to executive officers in February 2010, the Compensation Committee used the same January
29, 2010 price and valued them using a Monte Carlo model. For purposes of determining the number
of stock options, restricted stock awards and PRSUs granted to executive officers in January 2011,
the Compensation Committee used the closing price of our common stock on the grant date (January 3,
2011). For additional information regarding stock-based incentive awards granted to the named
executive officers in 2010 and the assumptions underlying the value of those awards, see the
Summary Compensation Table and the Grants of Plan-Based Awards table under Executive
Compensation. The total grant date fair value of stock-based incentive awards granted to the
named executive officers in 2010 and 2011 was as follows:
Total Grant Date Fair Value of Stock-Based Incentive Awards | ||||||||
Name | 2010(1) | 2011 | ||||||
Mr. Raspino |
$ | 4,235,411 | $ | 4,400,025 | ||||
Mr. Toufeeq |
$ | 1,630,064 | $ | 2,000,036 | ||||
Mr. Looser |
$ | 1,492,446 | $ | 1,500,022 | ||||
Mr. Voegele |
$ | 1,542,441 | $ | 1,450,001 | ||||
Mr. Robert |
$ | 958,879 | $ | 1,200,000 | ||||
Mr. Bane |
$ | 962,978 | $ | 950,020 |
(1) | For Messrs. Raspino, Voegele, Looser and Bane, the amount in this column
includes the annual award made in January 2010 and a discretionary award made in
February 2010 to recognize their performance in connection with the divestiture of
Seahawk. For Messrs. Toufeeq and Robert, the amount in this column includes only
the annual award. |
Beginning in 2002, the Compensation Committee generally has granted long-term incentive
compensation to executives on the first trading day of each calendar year. The Compensation
Committee approves the grant of options at Committee meetings and has not in the past granted
options by written consent. With the exception of the annual grants made in 2006 (which were
approved and made in February 2006), the values to be granted to the executives are approved at the
regularly scheduled December meeting of the Compensation Committee, with the grants being made on
the first trading day of the next calendar year. The grant dates for the 2010 annual grant to
named executive officers were in late January and mid-February 2010 to allow the Compensation
Committee additional time to finalize the terms of the PRSUs and other changes to the award
agreements. Special grants may be made at other meetings to recognize the hiring or promotion of
an employee, a change in responsibility of an employee or a specific achievement. For example, in
February 2010, the Compensation Committee made a special grant to certain employees, including
certain executive officers, to recognize their performance in connection with the divestiture of
Seahawk. We do not time the release of material nonpublic information for the purpose of affecting
the value of executive compensation, and we do not grant options with a grant date prior to the
date of Compensation Committee approval of the grant. The exercise price of options is equal to
the closing market price of our common stock on the NYSE on the grant date.
Long-term incentive compensation is designed to achieve all of the objectives under our
executive compensation program. First, it is a mechanism through which executives become (or can
become) stockholders, either through the ownership of shares of restricted stock, restricted stock
units, options to purchase stock or PRSUs. Second, the vesting provisions of each award generally
require continued employment for the awards to vest, thereby incentivizing the executive to remain
in our employment. Third, we use long-term incentive compensation to attract external candidates,
who, by resigning from their prior employer to accept employment with us, may be surrendering
equity and other compensation.
Supplemental Executive Retirement Plan
Our Supplemental Executive Retirement Plan (the SERP) provides special retirement benefits
and retiree medical benefits. The chief executive officer and other executives who are proposed
for participation by the chief executive officer and approved by the Compensation Committee are
eligible to participate in the SERP. The chief executive officer and the Compensation Committee
base their proposal and approval, respectively, on a subjective assessment of the executives
contributions to our company and expected long-term value to the organization. Those contributions
and expected value also determine the terms of the executives participation, as the credited years
of service, vesting terms and change in control payments, among other things, vary from one
executive to
another. All of the named executive officers currently participate in the SERP. No other
employee currently participates in the SERP.
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Participation in the SERP is designed to achieve the recruiting and retention objectives of
the executive compensation program. Each participants vesting schedule requires continuous
employment until the participant is fully vested, and each executives participation agreement
includes a disincentive for termination before retirement eligibility.
In general, pursuant to the SERP, upon retirement the executive will be entitled to receive,
among other things, the vested portion of his SERP benefits, which includes a lump sum payment
equal to the actuarial present value of an annual benefit of 50% of his final annual pay payable
for 10 years certain and his lifetime. Mr. Raspinos benefits under the SERP vested in five equal
annual installments beginning January 2, 2004. Each of Messrs. Loosers and Banes benefits under
the SERP vested in five equal annual installments beginning on January 1, 2006. Each of Messrs.
Voegeles and Roberts benefits vest based on age and service requirements beginning on January 1,
2007, and Mr. Toufeeqs benefits vest based on age and service requirements beginning on February
20, 2008.
Additional information about the SERP, including accrued benefit information with respect to
each named executive officer and the assumptions with respect to the present value of the current
accrued benefits, are disclosed in connection with the Pension Benefits table and Potential
Payments Upon Termination or Change in Control under Executive Compensation.
Severance and Change in Control Arrangements
Each of our named executive officers has entered into an employment agreement with the
company, which provides severance and change in control protections to the executive. We believe
that severance and, in certain instances, change in control arrangements are necessary to attract
and retain the talent necessary for our long-term success. Our severance programs allow our
executives to focus on duties at hand and provide security should their employment be terminated as
a result of an involuntary termination without cause or a constructive termination for good reason.
Severance benefits generally range from one to two times salary plus bonus in the event of
qualified termination prior to a change in control, and from two to three times salary plus bonus
in the event of qualified termination following a change in control. Enhanced change in control
protections provide our named executive officers, whose jobs would generally be at the greatest
risk in a change in control, with a greater level of financial security in the event of a change in
control. We believe this additional level of security is effective and necessary to ensure that
our executives remain focused on performance and the creation of stockholder value through the
successful execution of any change in control transaction rather than on the potential
uncertainties associated with their own employment. For a more detailed description of our
severance and change in control arrangements, see Executive Compensation Potential Payments
Upon Termination or Change in Control. The consummation of the merger contemplated by our merger
agreement, dated as of February 6, 2011, as amended, with Ensco plc would constitute a change in
control under these arrangements.
Perquisites
We provide three types of perquisites. First, we provide tax return preparation, financial planning and estate planning
benefits up to a maximum of $10,000. Second, we pay for each executive to have an annual physical
examination. Third, we currently pay monthly dues, but not initiation fees, for an executives
club membership where there is a valid business purpose, including the entertainment of customers.
These perquisites are available to all executive officers, except with respect to limited club
membership dues, which are awarded when the chief executive officer (with respect to executive
officers) or the Compensation Committee (with respect to the chief executive officer) determines a
valid business purpose is involved.
The Compensation Committee has reviewed the costs to our company of these additional benefits
and does not consider them to be significant. For additional information regarding perquisites,
see Executive Compensation Summary Compensation Table.
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Other Benefits
Executives are eligible, with all employees, for various benefit plans, including the 401(k)
plan and the Employee Stock Purchase Plan, among others. The Compensation Committee exercises no
discretion over this participation.
Risk Management
Several elements of our executive compensation program are designed to promote the creation of
long-term value and thereby discourage behavior that leads to excessive or unnecessary risk:
| our program design provides a mix of cash and equity, annual and longer-term
incentives, and performance metrics (including earnings per share, expense control,
operating efficiency and total stockholder return); |
| our focus on long-term stock-based incentive compensation rewards performance over a
sustained period of time; |
| maximum bonuses paid under our annual cash incentive program are capped at 200% of
the target bonus; |
| because of our stock ownership guidelines and option grants, our executive officers
could lose significant value if our stock price were exposed to inappropriate or
unnecessary risks; |
| our recoupment policy for senior executives permits the company to recover excess
bonuses and stock-based incentive awards in the event of a negative financial
restatement, regardless of executive misconduct; |
| the personal goals for each executive officer under our annual incentive plan are
tied to our enterprise risk assessment to ensure that our executive officers are
additionally incentivized to focus on the mitigation of key risks; and |
| our annual incentive plan authorizes the Compensation Committee to exercise
discretion (upward or downward), enabling us to reflect in the incentive program an
executive officers performance with respect to risk management, among other things. |
Stock Ownership Guidelines
In 2005, we adopted a guideline that each executive own shares of our common stock with a
market value at least equal to the individuals base salary. In 2010, we revised the guideline to
require that our chief executive officer own shares of our common stock with a market value equal
to at least six times his base salary and that all other named executive officers own shares with a
value equal to at least three times the individuals base salary. Fifty percent of both unvested
restricted stock awards and earned but unvested PRSUs are included in the calculation; shares
subject to unexercised options are not included. Compliance with the guidelines is measured on
April 1 of each year using the average closing price of our common stock for the 12 months ending
on the last day of February of that year. In the event an executive does not meet the ownership
guidelines, the executive will be required to retain ownership of all shares of common stock owned
directly as of such April 1 determination date, together with 75% of the after-tax shares received
from any vestings of restricted stock awards or PRSU awards or any option exercises after such date
until the ownership guidelines are met. The board of directors may approve exceptions to the
ownership and retention guidelines in the case of
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financial hardship. All of our executives
currently exceed the ownership guidelines. In addition, our policies prohibit buying on margin,
using shares as collateral for loans and certain hedging arrangements by our executives, including
purchasing, selling or writing options on our securities or engaging in transactions in other
third-party derivative securities with respect to our securities. The total value of stock
ownership calculated in accordance with the above test as of April 1, 2011, as compared to each
individuals base salary as of that date, was as follows:
Name | Base Salary | Value of Common Stock | ||||||
Mr. Raspino |
$ | 950,000 | $ | 22,744,648 | ||||
Mr. Toufeeq |
$ | 450,000 | $ | 7,021,242 | ||||
Mr. Voegele |
$ | 425,000 | $ | 6,919,120 | ||||
Mr. Looser |
$ | 425,000 | $ | 5,701,904 | ||||
Mr. Bane |
$ | 352,000 | $ | 3,320,518 | ||||
Mr. Robert |
$ | 355,000 | $ | 3,636,651 |
Recoupment Policy
In August 2009, the Compensation Committee adopted an incentive and equity compensation
recoupment policy. The policy applies to all of our employees. With respect to our executive
officers and our chief accounting officer, the policy permits us to recoup any cash bonus or
stock-based incentive award that is awarded based upon achievement of financial or operational
performance metrics to the extent such bonus or award was incorrectly calculated because of a
negative restatement of our financial statements or the miscalculation of an applicable financial
or operational metric, without regard to personal misconduct. A negative restatement resulting
from a change in applicable law or accounting principles would not trigger the policy. With
respect to all of our employees, if the employees fraudulent or illegal conduct causes damage to
us, the policy provides for potential forfeiture of any performance-based cash bonus opportunity or
any outstanding stock-based incentive award held by the employee.
The policy applies to performance-based cash bonuses paid, and stock-based incentive awards
granted, after adoption of the policy. The Compensation Committee administers the policy and has
discretion to enforce the policy. In enforcing the policy, the Compensation Committee may take
into account such considerations as it deems appropriate, including, among other things, other
penalties imposed on the employee, the nature of the miscalculation and the conduct of the
employee. The policy will terminate upon a change in control, except with respect to any recovery
from an officer that was approved by the Compensation Committee prior to a change in control.
Accounting and Tax Matters
Section 162(m) of the Internal Revenue Code denies a compensation deduction for federal income
tax purposes for certain compensation in excess of $1 million paid to specified individuals.
Performance based compensation meeting specified standards is deductible without regard to the $1
million cap. As described above, we took steps to qualify our annual incentives and long-term
incentive awards for tax deductibility under Section 162(m) beginning in 2010. The Compensation
Committee has approved payment of compensation in 2010 in excess of what is deductible under
Section 162(m) and reserves the right to structure future compensation of our executive officers
without regard for whether such compensation is fully deductible if, in the Compensation
Committees judgment, it is in the best interests of our company and our stockholders to do so.
The 2010 compensation of all the named executive officers qualifies for deductibility, with the
exception of $6.0 million relating to a portion of base salary, bonuses, restricted stock awards
and other benefits.
Compensation Committee Report
The Compensation Committee has reviewed and discussed with our management the Compensation
Discussion and Analysis included herein. Based on that review and discussion, the Compensation
Committee has recommended to the board of directors that the Compensation Discussion and Analysis
be included herein.
Respectfully submitted, | ||
Archie W. Dunham, Chairman | ||
Kenneth M. Burke | ||
David A. Hager |
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EXECUTIVE COMPENSATION
The following tables provide information regarding the compensation awarded to or earned
during the years ended December 31, 2010, 2009 and 2008 by our chief executive officer, chief
financial officer and each of the next four most highly compensated executive officers who were
serving as executive officers on December 31, 2010 (the named executive officers). The tables
following the summary compensation table provide additional detail with respect to grants of
plan-based awards, the value of outstanding equity awards as of December 31, 2010, the value of
options exercised and stock awards that vested during 2010, pension benefits and estimates of
changes in post-employment benefits.
Summary Compensation Table
Change in | ||||||||||||||||||||||||||||||||||||
Pension Value | ||||||||||||||||||||||||||||||||||||
and | ||||||||||||||||||||||||||||||||||||
Non-Equity | Nonqualified | |||||||||||||||||||||||||||||||||||
Incentive Plan | Deferred | |||||||||||||||||||||||||||||||||||
Stock | Option | Compensation | Compensation | All Other | ||||||||||||||||||||||||||||||||
Name and Principal Position | Year | Salary(1) | Bonus(2) | Awards(3) | Awards(4) | (2) | Earnings(5) | Compensation(6) | Total | |||||||||||||||||||||||||||
Louis A. Raspino |
2010 | $ | 950,000 | $ | | $ | 2,915,769 | $ | 1,319,642 | $ | 1,325,000 | $ | 1,267,773 | $ | 21,880 | $ | 7,800,064 | |||||||||||||||||||
President and Chief |
2009 | 986,538 | | 2,420,312 | 2,197,474 | 867,500 | 1,518,730 | 48,212 | 8,038,766 | |||||||||||||||||||||||||||
Executive Officer and Director (7) |
2008 | 925,000 | | 2,799,675 | 2,107,252 | 1,028,347 | 1,593,432 | 38,160 | 8,491,866 | |||||||||||||||||||||||||||
Imran (Ron) Toufeeq |
2010 | $ | 450,000 | $ | | $ | 1,069,216 | $ | 560,848 | $ | 437,500 | $ | 562,285 | $ | 25,964 | $ | 3,105,813 | |||||||||||||||||||
Senior Vice President, |
2009 | 415,262 | | 631,384 | 286,625 | 234,214 | 893,554 | 38,037 | 2,499,076 | |||||||||||||||||||||||||||
Operations, Asset
Management and
Engineering(8) |
||||||||||||||||||||||||||||||||||||
Brian C. Voegele |
2010 | $ | 425,000 | $ | | $ | 1,080,565 | $ | 461,876 | $ | 370,500 | $ | 436,529 | $ | 1,468 | $ | 2,775,938 | |||||||||||||||||||
Senior Vice President and |
2009 | 441,346 | | 828,692 | 752,395 | 226,279 | 511,675 | 27,964 | 2,788,351 | |||||||||||||||||||||||||||
Chief Financial Officer |
2008 | 415,475 | | 915,975 | 655,690 | 311,500 | 337,310 | 10,894 | 2,646,844 | |||||||||||||||||||||||||||
W. Gregory Looser |
2010 | $ | 425,000 | $ | | $ | 1,030,570 | $ | 461,876 | $ | 380,500 | $ | 358,431 | $ | 25,994 | $ | 2,682,371 | |||||||||||||||||||
Senior Vice President and |
2009 | 426,750 | | 762,928 | 692,679 | 251,693 | 487,744 | 28,425 | 2,650,219 | |||||||||||||||||||||||||||
Chief Administrative Officer |
2008 | 392,142 | | 915,975 | 655,690 | 286,700 | 229,295 | 23,660 | 2,503,462 | |||||||||||||||||||||||||||
Lonnie D. Bane |
2010 | $ | 352,000 | $ | | $ | 666,050 | $ | 296,928 | $ | 291,000 | $ | 354,503 | $ | 26,697 | $ | 1,987,178 | |||||||||||||||||||
Senior Vice President, |
2009 | 365,538 | | 526,161 | 477,714 | 194,380 | 416,500 | 26,811 | 2,007,104 | |||||||||||||||||||||||||||
Human Resources and Administration |
2008 | 343,626 | | 596,850 | 468,350 | 237,300 | 329,301 | 25,941 | 2,001,368 | |||||||||||||||||||||||||||
Kevin C. Robert |
2010 | $ | 355,000 | $ | | $ | 628,963 | $ | 329,916 | $ | 289,000 | $ | 361,246 | $ | 25,346 | $ | 1,989,471 | |||||||||||||||||||
Senior Vice President, |
2009 | 368,654 | | 526,161 | 477,714 | 193,825 | 426,121 | 27,286 | 2,019,761 | |||||||||||||||||||||||||||
Marketing and Business Development |
2008 | 346,867 | | 458,850 | 421,838 | 237,300 | 291,335 | 28,078 | 1,784,268 |
(1) | None of the named executive officers received an increase in base salary for 2009 or 2010.
The actual salary paid in 2009 is higher than the executives base salary for 2009 only
because we pay salaries bi-weekly on the basis of 26 pay days per year and there were 27 pay
days in 2009. |
|
(2) | Cash bonuses paid pursuant to performance metrics under our annual cash incentive plan for
2010, 2009 and 2008 are listed under the column Non-Equity Incentive Plan Compensation. |
|
(3) | The amounts in this column represent the grant date fair value of restricted stock awards
granted in 2010, 2009 and 2008 and PRSUs granted in 2010, in accordance with the Financial
Accounting Standards Board Accounting Standards Codification (ASC) Topic 718. Under SEC
rules, the amounts shown exclude the impact of estimated forfeitures related to service-based
vesting conditions. The grant date fair value of equity awards is calculated using the
closing price of our common stock on the date of grant. For the annual restricted stock
awards, grant date fair values per share were $34.50, $16.40 and $29.60 for the 2008, 2009 and
2010 grants, respectively. For the February 2010 discretionary restricted stock awards, the
grant date fair value per share was $29.05. For the 2010 PRSU awards, the grant date fair
value per share was $28.14. The grant date fair value for the 2009 restricted stock awards
was modified under the anti-dilution provisions of our stock-based compensation plans at the
time of the spin-off of Seahawk, with the grant date fair value being adjusted downward from
$17.58 to $16.40 and the number of restricted stock awards adjusted upward to preserve the
relative value of the restricted stock awards after the spin-off of Seahawk. The grant date
fair value of PRSUs is calculated using the Monte Carlo method, as PRSUs include a performance
condition based on relative total shareholder return compared to a peer group of companies.
For additional information, see Note 10 to our consolidated financial statements in our annual
report on Form 10-K for the year ended December 31, 2010. These amounts do not correspond to
the actual value that will be recognized by the executive. |
|
(4) | The amounts in this column represent the grant date fair value of stock options granted in
2010, 2009 and 2008, in accordance with ASC Topic 718. Under SEC rules, the amounts shown
exclude the impact of estimated forfeitures related to service-based vesting conditions. The
option award fair value for 2009 includes the incremental fair value recognized for the 2009
awards outstanding at the time of the spin-off of Seahawk. For additional information, see
Note 10 to our consolidated financial statements in our annual report on Form 10-K for the
year ended December 31, 2010. These amounts do not correspond to the actual value that may be
recognized by the executive. |
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(5) | This column reflects the aggregate increase in actuarial present value of benefits under the
SERP accrued during 2010, 2009 and 2008. Our named executive officers did not receive any
above-market or preferential earnings on nonqualified deferred compensation during 2010, 2009
or 2008. |
|
(6) | The amounts shown in this column for 2010 reflect matching contributions under our 401(k)
plan, gas cards, fitness club membership, tax planning fees and life insurance premiums for
self and spouse. The amount of the matching contribution for 2010 under our 401(k) plan for
each of Messrs. Raspino, Toufeeq, Looser, Bane and Robert was $14,700. The amounts for 2009
exclude a cash dividend paid in connection with the spin-off of Seahawk in lieu of additional
units paid on restricted stock awards that were granted prior to 2009 and were unvested at the
time of the spin-off in the following amounts: Mr. Raspino$175,141; Mr. Toufeeq$40,027;
Mr. Voegele$52,470; Mr. Looser$52,470; Mr. Bane$37,615 and Mr. Robert$30,327. The
amounts for 2009 also exclude a stock dividend paid on unvested restricted stock awards in
connection with the spin-off in the following amounts: Mr. Raspino$35,942; Mr.
Toufeeq$7,294; Mr. Voegele$6,123; Mr. Looser$8,278; Mr. Bane$6,966 and Mr.
Robert$6,417. The dividend was paid in shares of Seahawk common stock and, for purposes of
the table, was valued on the date of the spin-off using the volume weighted average price of a
share of Seahawk common stock of $26.33. For additional information, see Note 10 to our
consolidated financial statements in our annual report on Form 10-K for the year ended
December 31, 2010. |
|
(7) | Mr. Raspino does not receive compensation for service as a director. |
|
(8) | Mr. Toufeeq became an executive officer in August 2009. |
Grants of Plan-Based Awards
The table below reports all grants of plan-based awards made during 2010.
All Other | All Other | |||||||||||||||||||||||||||||||||||||||||||
Stock | Option | |||||||||||||||||||||||||||||||||||||||||||
Awards: | Awards: | Exercise | ||||||||||||||||||||||||||||||||||||||||||
Estimated Possible Payouts | Estimated Possible Future Payouts | Number of | Number of | or Base | Grant Date | |||||||||||||||||||||||||||||||||||||||
Under Non- | Under Equity | Shares of | Securities | Price of | Fair Value of | |||||||||||||||||||||||||||||||||||||||
Equity Incentive Plan Awards(1) | Incentive Plan Awards(2)(3) | Stock or | Underlying | Option | Stock and | |||||||||||||||||||||||||||||||||||||||
Threshold | Maximum | Threshold | Maximum | Units (#) | Options | Awards | Option | |||||||||||||||||||||||||||||||||||||
Name | Grant Date | ($) | Target ($) | ($) | (#) | Target (#) | (#) | (3)(4) | (#)(3)(5) | ($)(5) | Awards ($)(6) | |||||||||||||||||||||||||||||||||
Louis A. Raspino |
$ | 237,500 | $ | 950,000 | $ | 1,900,000 | ||||||||||||||||||||||||||||||||||||||
1/29/2010 | 44,595 | 130,014 | $ | 29.60 | $ | 2,639,654 | ||||||||||||||||||||||||||||||||||||||
2/22/2010 | 13,769 | 399,989 | ||||||||||||||||||||||||||||||||||||||||||
2/24/2010 | 26,835 | 53,670 | 80,505 | 1,195,768 | ||||||||||||||||||||||||||||||||||||||||
Imran (Ron) Toufeeq |
78,750 | 315,000 | 630,000 | |||||||||||||||||||||||||||||||||||||||||
1/29/2010 | 18,953 | 55,256 | 29.60 | 1,121,857 | ||||||||||||||||||||||||||||||||||||||||
2/24/2010 | 11,405 | 22,810 | 34,215 | 508,207 | ||||||||||||||||||||||||||||||||||||||||
Brian C. Voegele |
69,063 | 276,250 | 552,500 | |||||||||||||||||||||||||||||||||||||||||
1/29/2010 | 15,609 | 45,505 | 29.60 | 923,902 | ||||||||||||||||||||||||||||||||||||||||
2/22/2010 | 6,885 | 200,009 | ||||||||||||||||||||||||||||||||||||||||||
2/24/2010 | 9,393 | 18,785 | 28,178 | 418,530 | ||||||||||||||||||||||||||||||||||||||||
W. Gregory Looser |
69,063 | 276,250 | 552,500 | |||||||||||||||||||||||||||||||||||||||||
1/29/2010 | 15,609 | 45,505 | 29.60 | 923,902 | ||||||||||||||||||||||||||||||||||||||||
2/22/2010 | 5,164 | 150,014 | ||||||||||||||||||||||||||||||||||||||||||
2/24/2010 | 9,393 | 18,785 | 28,178 | 418,530 | ||||||||||||||||||||||||||||||||||||||||
Lonnie D. Bane |
52,800 | 211,200 | 422,400 | |||||||||||||||||||||||||||||||||||||||||
1/29/2010 | 10,034 | 29,254 | 29.60 | 593,935 | ||||||||||||||||||||||||||||||||||||||||
2/22/2010 | 3,442 | 99,990 | ||||||||||||||||||||||||||||||||||||||||||
2/24/2010 | 6,038 | 12,076 | 18,114 | 269,053 | ||||||||||||||||||||||||||||||||||||||||
Kevin C. Robert |
53,250 | 213,000 | 426,000 | |||||||||||||||||||||||||||||||||||||||||
1/29/2010 | 11,149 | 32,504 | 29.60 | 659,926 | ||||||||||||||||||||||||||||||||||||||||
2/24/2010 | 6,709 | 13,418 | 20,127 | 298,953 |
(1) | These columns represent awards under our annual cash incentive plan. For additional
information about the annual cash incentive plan, please read Compensation Discussion and
AnalysisCompensation ElementsAnnual Cash Incentive Compensation above. |
|
(2) | These columns represent PRSUs granted on February 24, 2010, which vest as to one-third
annually over a three-year period in an amount ranging from 0-150% of the units awarded based
upon company total shareholder return compared with the total shareholder return of a
designated peer group over a performance period corresponding to the vesting periods. The
units provide for payment of all earned shares in common stock following the end of the
three-year period. For additional information about PRSUs, please read Compensation
Discussion and AnalysisCompensation ElementsLong-Term Stock-Based Incentive Compensation
above. |
|
(3) | All awards in these columns were made pursuant to our 2007 Long-Term Incentive Plan. |
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(4) | This column consists of restricted stock awards granted on January 29, 2010, which vest in
three equal annual installments beginning on the first anniversary of the grant date, and
discretionary restricted stock awards granted on February 22, 2010, which vest on the third
anniversary of the grant date. |
|
(5) | This column consists of options to purchase our common stock. The options granted on January
29, 2010 become exercisable in three equal annual installments beginning on January 29, 2011.
The exercise price may be paid in cash or by tendering shares of our common stock. Applicable
tax obligations may be paid in cash or by the withholding of shares of our common stock. |
|
(6) | These amounts represent the full fair value of stock options, restricted stock awards and
PRSUs granted to each executive during 2010 as calculated under ASC Topic 718. The grant date
fair value of PRSUs is calculated using the Monte Carlo method, as PRSUs include a performance
condition based on relative total shareholder return compared to a peer group of companies.
For the relevant assumptions used to determine the valuation of our awards, see Note 10 to our
consolidated financial statements in our annual report on Form 10-K for the year ended
December 31, 2010. |
Outstanding Equity Awards at Fiscal Year-End
The following table shows outstanding stock option awards classified as exercisable and
unexercisable as of December 31, 2010. The table also shows unvested stock awards assuming a
market value equal to the closing price of our common stock on December 31, 2010 of $33.00
per share.
Option Awards | Stock Awards | |||||||||||||||||||||||
Number of | ||||||||||||||||||||||||
Number of | Number of | Shares or | Market Value | |||||||||||||||||||||
Securities | Securities | Units of | of Shares or | |||||||||||||||||||||
Underlying | Underlying | Stock That | Units of Stock | |||||||||||||||||||||
Unexercised | Unexercised | Option | Option | Have Not | That Have | |||||||||||||||||||
Options (#): | Options (#): | Exercise | Expiration | Vested | Not Vested | |||||||||||||||||||
Name | Exercisable(1) | Unexercisable(1) | Price ($)(2) | Date | (#)(3) | ($)(4) | ||||||||||||||||||
Louis A. Raspino |
163,831 | | 31.36 | 2/9/2016 | ||||||||||||||||||||
155,613 | 51,871 | 26.75 | 1/3/2017 | |||||||||||||||||||||
87,443 | 87,444 | 32.18 | 1/2/2018 | |||||||||||||||||||||
| 264,480 | 16.40 | 1/2/2019 | |||||||||||||||||||||
| 130,014 | 29.60 | 1/29/2020 | |||||||||||||||||||||
270,445 | $ | 8,924,685 | ||||||||||||||||||||||
Imran (Ron) Toufeeq |
48,252 | | 16.07 | 3/15/2014 | ||||||||||||||||||||
42,890 | | 18.72 | 1/3/2015 | |||||||||||||||||||||
17,095 | | 31.36 | 2/9/2016 | |||||||||||||||||||||
18,898 | 6,300 | 26.75 | 1/3/2017 | |||||||||||||||||||||
11,553 | 11,554 | 32.18 | 1/2/2018 | |||||||||||||||||||||
17,248 | 34,497 | 16.40 | 1/2/2019 | |||||||||||||||||||||
| 55,256 | 29.60 | 1/29/2020 | |||||||||||||||||||||
81,054 | $ | 2,674,782 | ||||||||||||||||||||||
Brian C. Voegele |
40,210 | | 31.61 | 1/25/2016 | ||||||||||||||||||||
39,888 | 13,296 | 26.75 | 1/3/2017 | |||||||||||||||||||||
27,208 | 27,209 | 32.18 | 1/2/2018 | |||||||||||||||||||||
45,277 | 90,556 | 16.40 | 1/2/2019 | |||||||||||||||||||||
| 45,505 | 29.60 | 1/29/2020 | |||||||||||||||||||||
93,228 | $ | 3,076,524 | ||||||||||||||||||||||
W. Gregory Looser |
34,702 | | 31.36 | 2/9/2016 | ||||||||||||||||||||
13,296 | 13,296 | 26.75 | 1/3/2017 | |||||||||||||||||||||
27,208 | 27,209 | 32.18 | 1/2/2018 | |||||||||||||||||||||
10,421 | 83,368 | 16.40 | 1/2/2019 | |||||||||||||||||||||
| 45,505 | 29.60 | 1/29/2020 | |||||||||||||||||||||
88,833 | $ | 2,931,489 | ||||||||||||||||||||||
Lonnie D. Bane |
66,816 | | 18.72 | 1/3/2015 | ||||||||||||||||||||
29,207 | | 31.36 | 2/9/2016 | |||||||||||||||||||||
33,776 | 11,259 | 26.75 | 1/3/2017 | |||||||||||||||||||||
19,434 | 19,435 | 32.18 | 1/2/2018 | |||||||||||||||||||||
28,748 | 57,495 | 16.40 | 1/2/2019 | |||||||||||||||||||||
| 29,254 | 29.60 | 1/29/2020 | |||||||||||||||||||||
59,815 | $ | 1,973,895 | ||||||||||||||||||||||
Kevin C. Robert |
26,901 | | 31.36 | 2/9/2016 | ||||||||||||||||||||
29,151 | 9,718 | 26.75 | 1/3/2017 | |||||||||||||||||||||
17,504 | 17,505 | 32.18 | 1/2/2018 | |||||||||||||||||||||
28,748 | 57,495 | 16.40 | 1/2/2019 | |||||||||||||||||||||
| 32,504 | 29.60 | 1/29/2020 | |||||||||||||||||||||
56,255 | $ | 1,856,415 |
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(1) | The options expiring in 2014 and 2015 generally vested in five equal semi-annual
installments beginning on the six-month anniversary of the grant date. The options
expiring in 2016, 2017 and 2018 vest in four equal annual installments beginning on the
first anniversary of the grant date, except for 37,500 options granted to Mr. Voegele
expiring in 2016, which vest in four equal semi-annual installments beginning on the
six-month anniversary of the grant date. The options expiring in 2019 and 2020 vest in
three equal annual installments beginning on the first anniversary of the grant date. |
|
(2) | The exercise price for options granted through 2009 reflect an anti-dilution
adjustment made in connection with the August 24, 2009 spin-off of Seahawk. For
additional information, see Note 10 to our consolidated financial statements in our annual
report on Form 10-K for the year ended December 31, 2010. |
|
(3) | The restricted stock awards granted through 2008 vest in four equal annual
installments beginning on the first anniversary of the grant date. In general, restricted
stock awards granted after 2008 vest in three equal annual installments beginning on the
first anniversary of the grant date; however, the discretionary restricted stock awards
granted on February 22, 2010 become fully vested on the third anniversary of the grant
date. The PRSUs granted in 2010 vest as to one-third annually over a three-year period in
an amount ranging from 0-150% of the units awarded based upon company total shareholder
return compared with the total shareholder return of a designated peer group over a
performance period corresponding to the vesting periods. The PRSUs provide for payment of
all earned shares in common stock following the end of the three-year period. For
additional information about PRSUs, please read Compensation Discussion and
AnalysisCompensation ElementsLong-Term Stock-Based Incentive Compensation above. |
|
(4) | With respect to restricted stock awards, this column represents the closing price of
our common stock on December 31, 2010 multiplied by the number of shares subject to such
awards. With respect to PRSUs, this column represents the closing price of our common
stock on December 31, 2010 multiplied by the number of shares subject to such awards based
on vesting at the target level. |
Option Exercises and Stock Vested
The following table sets forth certain information regarding stock options and restricted
stock awards exercised and vested, respectively, during 2010.
Option Awards: | Stock Awards: | |||||||||||||||
Number of Shares | Number of Shares | |||||||||||||||
Acquired on Exercise | Value Realized on | Acquired on | Value Realized on | |||||||||||||
Name | (#) | Exercise ($)(1) | Vesting (#) | Vesting ($)(2) | ||||||||||||
Louis A. Raspino |
132,239 | $ | 2,195,096 | $ | 109,405 | $ | 3,447,916 | |||||||||
Imran (Ron) Toufeeq |
| | 26,163 | 826,094 | ||||||||||||
Brian C. Voegele |
| | 31,957 | 1,014,013 | ||||||||||||
W. Gregory Looser |
44,559 | 539,432 | 31,848 | 1,006,321 | ||||||||||||
Lonnie D. Bane |
200 | 2,174 | 23,214 | 732,386 | ||||||||||||
Kevin C. Robert |
| | 21,325 | 672,769 |
(1) | Represents the difference between the sale price of our common stock at exercise and the exercise price of the options. |
|
(2) | Represents the value of the shares on the vesting date based on the closing price of our common
stock on such date. |
Pension Benefits
The following table discloses, with respect to the SERP, the years of credited service and
present single-sum value of the accrued benefits as of December 31, 2010 and payments during 2010.
Number of | ||||||||||||||||
Years/Months | Present Value of | Payments During | ||||||||||||||
Credit Service | Accumulated | Last Fiscal Year | ||||||||||||||
Name | Plan Name(1) | (#)(2) | Benefit ($)(3) | ($) | ||||||||||||
Louis A. Raspino |
SERP | 6 years | $ | 10,677,772 | $ | | ||||||||||
Imran (Ron) Toufeeq |
SERP | 34 months | 3,438,869 | | ||||||||||||
Brian C. Voegele |
SERP | 48 months | 2,779,374 | | ||||||||||||
W. Gregory Looser |
SERP | 5 years | 1,823,049 | | ||||||||||||
Lonnie D. Bane |
SERP | 5 years | 2,410,237 | | ||||||||||||
Kevin C. Robert |
SERP | 48 months | 2,396,149 | |
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Table of Contents
(1) | The SERP is a non-qualified retirement plan that provides for retirement benefits, to the
extent vested, to be paid to the participating executive officer after the officers
termination or retirement. The SERP also provides a death benefit. In addition, if a
participant
terminates employment with a vested right to a retirement benefit under the SERP, the
participant, his spouse and his eligible dependents will be entitled to retiree medical and
dental benefits. No assets are currently held with respect to the SERP; benefits are funded
when paid to the participants or, upon a change in control, when funded into the rabbi trust.
We account for the SERP in accordance with ASC Topic 715 Retirement Benefits. We recognize
its estimated liability and the related compensation expense over the estimated service period
of each participant. For additional information about the SERP, see Compensation Discussion
and AnalysisOverview of CompensationSupplemental Executive Retirement Plan above and
Potential Payments Upon Termination or Change in ControlSupplemental Executive Retirement
Plan below. |
|
(2) | The number of years, or months in the cases of Messrs. Toufeeq, Voegele and Robert, of
service is as of December 31, 2010. Years or months of credited service are not considered
for purposes of benefit accrual, but are taken into account for vesting purposes. Years or
months of service also are not considered for purposes of qualifying for retiree medical and
dental benefits; rather, a participant qualifies for retiree medical and dental benefits if
the participant terminates employment with a vested right to a retirement benefit under the
SERP. Messrs. Raspino, Looser and Bane are fully vested in the SERP. Messrs. Toufeeq,
Voegele and Robert each vest on a pro-rata basis determined by a fraction, the numerator of
which is the number of full months of the individuals actual service beginning from January
1, 2007 (February 20, 2008 for Mr. Toufeeq) and the denominator of which is the earlier of the
number of months from January 1, 2007 (February 20, 2008 for Mr. Toufeeq) until (1) the
individual attains age 62 or (2) the individual attains 15 years of service and an age of 55
or older. As of December 31, 2010, Mr. Toufeeq was 27.9% vested, Mr. Voegele was 28.6% vested
and Mr. Robert was 30.4% vested.. Messrs. Voegele and Robert began vesting service on January
1, 2007, and had 48 months of vesting service as of December 31, 2010. Mr. Toufeeq began
vesting service on February 20, 2008, and had 34 months of vesting service as of December 31,
2010. Early retirement eligibility under the SERP is based on termination after attainment of
age 55 and 15 years of employment. Messrs. Raspino and Bane are deemed to meet the service
requirement for early retirement eligibility. Messrs. Looser, Voegele and Robert will not
satisfy both criteria for early retirement eligibility for 14, 10 and 9 years, respectively.
Mr. Toufeeq will not satisfy the criteria for early retirement eligibility prior to attaining
his normal retirement age of 62. Messrs. Raspino, Looser and Bane are entitled to retiree
medical benefits under the SERP, and Messrs. Toufeeq, Voegele and Robert will be entitled to
retiree medical benefits under the SERP if they are terminated with a vested right to a
benefit under the SERP, each as more fully described below under Potential Payments Upon
Termination or Change in Control. The present value of the retiree medical benefits upon a
termination of employment on December 31, 2010 are as follows: Mr. Raspino $400,530; Mr.
Looser $705,101; Mr. Bane $509,266; Mr. Toufeeq $379,033; Mr. Voegele $418,092;
and Mr. Robert $394,040. |
|
(3) | The present value has been calculated assuming the executive retires at the normal retirement
age under the SERP (age 62). In addition, the executive is eligible for retiree medical and
dental benefits. The calculation of the present value of accumulated benefits is equal to the
present value of the full benefit under the plan based on the actuarial equivalent of a
10-year certain and life annuity. Because the SERP benefit is not calculated based on
service, the full benefit, which is 50% of final pay, is considered to be the accumulated
benefit. For accounting purposes, the cost of benefits is accrued over the vesting period. |
Potential Payments Upon Termination or Change in Control
Employment Agreements, Stock Options and Restricted Stock Awards
On December 31, 2008, we entered into amended and restated employment agreements with each of
our named executive officers. The current term of each of the agreements expires as follows: Mr.
Raspino, December 3, 2012; Mr. Toufeeq, March 15, 2013; Mr. Voegele, January 25, 2013; Mr. Looser,
December 4, 2012; Mr. Bane, June 1, 2012; and Mr. Robert, February 28, 2013. Each agreement is
subject to automatic renewals for successive one-year terms until either party terminates the
contract effective upon the next scheduled expiration date, with at least one years advance
notice. Each of the agreements provides that the term of the agreement will not automatically renew
beginning with the end of the one-year term in which the executive reaches age 65 and that failure
to renew the agreement at such time will not trigger the executives constructive termination
rights under the agreement.
Our executives can be terminated by us at anytime for any reason and their rights to benefits
upon such termination are summarized below. Each of the executives agreement and equity award
agreements provide benefits to the executive upon termination or change in control as described
below. Each of the agreements provides that any cash and/or benefits payable to the executive on
account of termination of employment and otherwise subject to the provisions of Section 409A of the
Internal Revenue Code will be delayed for six months.
Mr. Raspino
Involuntary Termination. Under Mr. Raspinos employment agreement and award agreements, if he
is terminated involuntarily for reasons not associated with a change in control and not due to
cause, he will receive:
| two full years of base salary (not less than the highest annual base salary during
the preceding three years); |
| an amount equal to the pro-rata actual bonus plus two times the target award under
our annual incentive compensation plan for the year of termination; |
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| life, health and accident and disability insurance continued for two years or until
reemployment, whichever is earlier (for the executive, and for his immediate family to
the extent available); |
| immediate vesting of his equity awards other than performance shares, with the
options remaining exercisable for their original term; and |
| performance shares to the extent earned, as determined with respect to the entire
grant based on relative total stockholder return calculated as of the termination date,
with any such earned performance shares paid after the third anniversary of the date of
grant. |
The employment agreement requires that Mr. Raspino timely execute a release to receive the
above benefits. In addition, the agreement provides that Mr. Raspino will not be entitled to any
legal fee reimbursements for claims waived or released by the execution of such release.
The employment agreement treats disability, specified constructive terminations of the
executive (including, with respect to Mr. Raspinos agreement only, if Mr. Raspino is not reelected
to our board of directors) or our failure to renew an agreement at the end of its term (unless the
executive has attained age 65) as an involuntary termination of the executive.
Change in Control. The employment agreement and award agreements also provide Mr. Raspino
protection in the event of a change in control. A change in control is generally defined to
include the acquisition by a person of 20% or more of our voting power, specified changes in a
majority of the board of directors, a merger resulting in existing stockholders having less than
50% of the voting power in the surviving company and sale or liquidation of our company. In
addition, the agreement includes a merger protection change in control as a change in control. A
merger protection change in control is generally defined as a merger or consolidation involving our
company whereby our stockholders prior to the transaction continue to hold at least 50% but not
more than 66% of the voting power of the surviving entity after the transaction. The consummation
of the Ensco merger would constitute a change in control.
In the event of a change in control, the term of Mr. Raspinos employment agreement will be
extended for a period of two years from the date of a change in control that is not a merger
protection change in control, or a period of one year from the date of a merger protection change
in control. In the event of an involuntary termination or constructive termination of Mr. Raspino
during the extended term of the agreement or voluntary resignation by him within 12 months after a
change in control that is not a merger protection change in control, he will be entitled to
receive:
| three full years of base salary; |
| three times the maximum bonus award for the year of termination; |
| life, health and accident and disability insurance continued for three years or
until reemployment, whichever is earlier; |
| immediate vesting of his equity awards other than performance shares, with the
options remaining exercisable for their original term; and |
| performance shares to the extent earned, as determined with respect to the entire
grant based on relative total stockholder return calculated as of the date of the
change in control, with any such earned performance shares paid within 70 days after
the change in control or, if the change in control does not meet the requirements of
Section 409A, after the third anniversary of the date of grant. |
The agreement provides that the amounts set forth in (1) and (2) above will be deposited into
a rabbi trust prior to the change in control.
The employment agreement also provides that we will reimburse Mr. Raspino for certain taxes
incurred by him as a result of payments following a change in control. The agreement provides for a
cap on certain payments in the
event of a change in control, but that a gross-up will only apply if the cap would reduce
payments to the executive by 10% or more.
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Retirement. In the event of retirement not in connection with a change in control on or after
age 62, the award agreements provide that Mr. Raspinos equity awards (1) granted in 2008 and prior
years will vest immediately, with options remaining exercisable for one year following retirement,
and (2) granted in 2009 and thereafter will be paid or become exercisable in accordance with the
original schedule as if the executive remained employed, with options remaining exercisable for
three years after retirement. However, if equity awards are granted in the year Mr. Raspino
retires, such awards will be pro-rated for the number of days of employment between the date of
grant and the first anniversary of the date of grant.
Death. The employment agreement contains no provision regarding separation pay or benefit
continuation in the event of termination due to death. Under the terms of outstanding equity
awards other than performance shares, termination due to death results in immediate vesting, with
options remaining exercisable for one year after death. Under the terms of the performance shares
granted to the executive, relative total stockholder return will be calculated as of the date of
death, and any earned performance shares will be paid within 70 days after the date of death.
Messrs. Toufeeq, Voegele, Looser, Bane and Robert
Under the employment agreements and award agreements of Messrs. Toufeeq, Voegele, Looser, Bane
and Robert the executive generally will receive the same benefits as Mr. Raspino with the following
exceptions:
| In the event of involuntary termination or constructive termination not associated
with a change in control and not due to cause, the executive will receive (a) one full
year of base salary, (b) an amount equal to the pro-rata actual bonus plus one times
the target award under our annual incentive compensation plan for the year of
termination and (c) life, health and accident and disability insurance continued for
one year or until reemployment, whichever is earlier. In addition, under each of
Messrs. Toufeeqs, Loosers, Banes and Roberts employment agreements, the executives
equity awards other than performance shares will vest, with options remaining
exercisable for the later of (i) 120 days following the termination or (ii) the date
specified by the underlying option agreement, but in no event beyond the maximum option
term. Mr. Voegeles outstanding award agreements provide for such vesting and
exercisability. Performance shares will receive the same treatment as described above
for Mr. Raspino. |
| In the event of an involuntary termination or constructive termination within two
years, or a voluntary resignation within six months, of a change in control that is not
a merger protection change in control, or an involuntary termination or constructive
termination within 12 months of a merger protection change in control, the executive
will receive (a) two full years of base salary, (b) two times the maximum bonus award
under our annual incentive compensation plan for the year of termination and (c) life,
health and accident and disability insurance continued for two years or until
reemployment, whichever is earlier. In addition, under each of Messrs. Toufeeqs,
Loosers, Banes and Roberts employment agreements, the executives equity awards
other than performance shares will vest, with options remaining exercisable for the
later of (i) two years after the date of the change in control, (ii) 120 days after the
date of the executives termination or (iii) the date specified by the underlying
option agreement, but in no event beyond the maximum option term. Mr. Voegeles
outstanding award agreements provide for such vesting and exercisability. Performance
shares will receive the same treatment as described above for Mr. Raspino. |
Noncompete
In addition, the employment agreements provide a noncompete clause of two years for Mr.
Raspino, one year for Mr. Voegele and six months for Messrs. Toufeeq, Looser, Bane and Robert after
termination (voluntary or involuntary) assuming that it was not due to a change in control. In the
event of a change in control, the noncompete clause does not apply.
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Supplemental Executive Retirement Plan
We have implemented the SERP to provide specified benefits to certain management and highly
compensated employees. Currently, only the named executive officers participate in the SERP. The
SERP is an unfunded, deferred compensation arrangement for the Chief Executive Officer and
executives proposed for participation by the Chief Executive Officer and approved by the
Compensation Committee and who otherwise meet the other requirements of the SERP. The specific
provisions of a participants benefits are governed by his SERP participation agreement. Each of
the named executive officers currently employed by us participates in the SERP. The terms of each
executives participation agreement is described below.
If the executives employment terminates for any reason other than cause on or after his
normal retirement date, which is the date he attains age 62, then we will make a lump sum payment
to him within 60 days of his termination equal to the actuarial present value of an annual benefit
of 50% of his final annual pay payable for 10 years certain and his lifetime. This normal
retirement benefit will not be lower than the minimum normal retirement benefit amount identified
in the executives SERP participation agreement. If the executive voluntarily terminates his
employment with us prior to his normal retirement date but on or after his early retirement date,
which is the date he has attained age 55 and has completed 15 years of continuous employment with
us, then he will be entitled to an early retirement benefit in the form of a lump sum payment
within 60 days of his termination equal to the actuarial present value of an annual benefit of 50%
of his final annual pay payable for 10 years certain and his lifetime, reduced by certain early
termination factors based on the number of years from the date of that termination to his normal
retirement date. Final annual pay for purposes of the benefits calculations with respect to
Messrs. Raspino, Looser and Bane means the executives base annual salary and target bonus award
under our annual incentive compensation plan as in effect on the executives last day of active
employment. Final annual pay for purposes of the benefits calculations with respect to Messrs.
Toufeeq, Voegele and Robert means the sum of (1) the executives average base annual salary over
the five years preceding his last day of active employment and (2) the executives target bonus
percentage under our annual incentive compensation plan as in effect on the executives last day of
active employment multiplied by the amount in clause (1) above.
For Mr. Raspino, the foregoing benefits vested in five equal annual installments beginning
January 2, 2004. For Messrs. Looser and Bane, the foregoing benefits vested in five equal annual
installments beginning January 1, 2006. For Messrs. Toufeeq, Voegele and Robert, the foregoing
benefits will fully vest upon the executives normal retirement date or, if earlier, his early
retirement date and upon a termination by reason of death or disability.
If an executives service is terminated by us prior to his normal retirement date other than
for cause or by the executive due to certain events including non-renewal or breach by us of his
employment agreement or for good reason, then:
| with respect to Messrs. Raspino, Looser and Bane, (a) the executives SERP benefit
will immediately vest, (b) three years will be added to the executives age and time of
service for purposes of determining the executives eligibility for and the amount of
his early retirement benefit (as of the date hereof, Mr. Raspino is deemed to have met
the requirements for an early retirement benefit and Mr. Bane has been deemed to have
completed the time of service requirement for an early retirement benefit) and (c) the
actuarial equivalent of the normal retirement benefit or early retirement benefit, as
applicable, will be paid in a lump sum on the later of the executives attainment of
age 55 or 60 days after the executives termination; and |
| with respect to Messrs. Toufeeq, Voegele and Robert, (a) the executives SERP
benefit will vest pro rata based on the number of months of service performed between
January 1, 2007 (February 20, 2008 with respect to Mr. Toufeeq) and the earlier of the
date that would have been his normal retirement date or his early retirement date, as
applicable, and (b) we will make a lump sum payment to him equal to the actuarial
equivalent of the normal retirement benefit or early retirement benefit, as applicable,
subject to reduction for pro rata vesting, on the later of the executives attainment
of age 55 or 60 days after the executives termination. |
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In addition, with respect to Messrs. Raspino, Looser and Bane, if the executive voluntarily
resigns his employment for any other reason prior to attaining the above age and service
requirements, his vested benefit under the SERP will be paid on the later of the executives
attainment of age 55 or 60 days after the executives
termination using an actuarial equivalent calculation in lieu of early retirement factors.
Since Mr. Raspino has attained age 55 and is deemed to have met the service requirement, his vested
benefit will be paid 60 days after his termination. Benefit payments may be delayed until six
months after termination of employment if required to comply with Section 409A.
If the executives employment is terminated by reason of disability, then we will make a lump
sum payment to him within 60 days of his termination equal to the actuarial present value of an
annual benefit of 50% of his final annual pay payable for 10 years certain and his lifetime,
reduced by certain early retirement factors based on the number of years from the date of the
termination to his normal retirement date and reduced by any employer or government disability
benefits. If the executives employment is terminated by reason of death, or if the executive dies
after termination but prior to his normal retirement date and with a vested right to a benefit
under the SERP, his spouse or beneficiary, as applicable, will receive, within 60 days of the date
of the executives death, the same benefit the executive would have received had the executive
terminated his employment on the date of his death.
In addition, in connection with termination of employment with a vested right to a benefit
under the SERP, the executive is entitled to receive retiree medical and dental coverage for
himself, his spouse and his dependents who were covered under our group health plan as of the date
of termination, with such coverage beginning immediately with respect to Messrs. Raspino, Looser
and Bane and, with respect to Messrs. Toufeeq, Voegele and Robert, on his normal retirement date or
immediately if the executive is terminated after his early retirement date. The coverage will be
provided until the later of the death of the executive or his surviving spouse. These benefits will
be at least as favorable as the group medical and dental coverage offered to our executive
employees. This coverage (i) will be suspended during any period the executive has medical coverage
provided by another employer, (ii) with respect to the executive and his spouse (if applicable),
will be converted to Medicare Supplement coverage upon becoming eligible for and covered by
Medicare and (iii) with respect to his dependents, will terminate at such time as the dependents
are no longer eligible for coverage under the terms of our group health plan. Any retiree medical
and dental benefits to the executives spouse or surviving spouse are available solely to the
spouse to whom the executive was married on the date of the executives termination of employment.
The executive or, if applicable, his surviving spouse will be responsible for the applicable
premiums for coverage at the same rate paid by active executive employees but not to exceed the
cost of the most comprehensive group medical and dental coverage offered by us. We will reimburse
the executive or, if applicable, his surviving spouse for all such premiums within the time limits
specified by Section 409A.
If the executives employment is terminated within two years after a change in control or one
year following a merger protection change in control (each as defined in the executives employment
agreements), or in the event of a voluntary resignation by the executive within six months (12
months for Mr. Raspino) after a change in control that is not a merger protection change in
control, then the executives benefit under the SERP will fully vest and:
| with respect to Messrs. Looser and Bane, in lieu of the lump sum benefit described
above, the executive will receive from us a lump sum payment in an amount equal to the
greater of his final annual pay at the time of the change in control or his final
annual pay at the time of termination, multiplied by five; and |
| with respect to Messrs. Raspino, Toufeeq, Voegele and Robert, the executive will
receive from us a lump sum payment in an amount equal to the actuarial present value of
the SERP benefit that would have been paid on the first to occur of his early
retirement date (as if he remained employed until attainment of his early retirement
date, if applicable) or his normal retirement date. |
A SERP benefit payable as a result of a change in control will be paid (i) if the change in
control meets the requirements described under Section 409A, 60 days after the change in control or
(ii) if the change in control does not meet the requirements described under Section 409A, on the
later to occur of the executives attainment of age 55 or 60 days after the executives
termination. The SERP benefit payable as a result of a change in control is required to be
deposited into a rabbi trust prior to the change in control.
If we terminate the executives employment for cause (as defined in the executives employment
agreement), then he forfeits all rights to any benefits under the SERP.
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Potential Payments Table
The information below describes and quantifies certain compensation that would become payable
under existing plans and arrangements if the named executives employment had terminated on
December 31, 2010, given the named executives compensation and service levels as of such date and,
if applicable, based on the closing price of our common stock on December 31, 2010 of $33.00 per
share. In the table below, accelerated stock options, accelerated restricted stock awards,
severance payments, SERP payments and tax gross-up payments are expressed as a lump sum payment;
medical coverage is expressed as the present value of future payments expected to be made over
multiple years; and disability benefits are expressed as the first annual payment amount following
termination. These benefits are in addition to benefits available generally to salaried employees,
such as distributions under our 401(k) savings plan, subsidized retiree medical benefits,
disability benefits and accrued vacation pay. Due to the number of factors that affect the nature
and amount of any benefits provided upon the events discussed below, any actual amounts paid or
distributed may be different than the estimates presented in the table. Factors that could affect
these amounts include the timing during the year of any such event, our stock price and the
executives age. As of December 31, 2010, only Mr. Raspino had satisfied the service and age
requirements, and Mr. Bane has satisfied the service requirement, necessary to qualify for benefits
upon early retirement, and no executive has attained the age required for a normal retirement
benefit. For additional information about benefits due to executives in the event of termination
or change in control, see Compensation Discussion and Analysis Overview of Compensation
Severance and Change in Control Arrangements.
Event | Raspino | Toufeeq | Voegele | Looser | Bane | Robert | ||||||||||||||||||
Involuntary Termination Not for Cause and Constructive Termination | ||||||||||||||||||||||||
Accelerated stock
options |
$ | 5,228,313 | $ | 809,370 | $ | 1,763,358 | $ | 1,644,037 | $ | 1,140,186 | $ | 1,140,022 | ||||||||||||
Accelerated restricted
stock(1) |
8,924,685 | 2,674,782 | 3,076,524 | 2,931,489 | 1,973,895 | 1,856,415 | ||||||||||||||||||
Lump sum SERP payments |
13,552,046 | 995,521 | 824,736 | 1,893,560 | 3,159,849 | 756,218 | ||||||||||||||||||
Medical coverage |
400,530 | 379,033 | 418,092 | 705,101 | 509,266 | 394,040 | ||||||||||||||||||
Severance payments |
3,800,000 | 765,000 | 701,250 | 701,250 | 563,200 | 568,000 | ||||||||||||||||||
Voluntary Resignation | ||||||||||||||||||||||||
Accelerated stock options |
$ | | $ | | $ | | $ | | $ | | $ | | ||||||||||||
Accelerated restricted stock |
| | | | | | ||||||||||||||||||
Lump sum SERP payments(2) |
11,858,041 | | | 1,893,560 | 2,503,952 | | ||||||||||||||||||
Medical coverage |
400,530 | | | 705,101 | 509,266 | | ||||||||||||||||||
Death | ||||||||||||||||||||||||
Accelerated stock options |
$ | 5,228,313 | $ | 809,370 | $ | 1,763,358 | $ | 1,644,037 | $ | 1,140,186 | $ | 1,140,022 | ||||||||||||
Accelerated restricted stock(1) |
8,924,685 | 2,674,782 | 3,076,524 | 2,931,489 | 1,973,895 | 1,856,415 | ||||||||||||||||||
Lump sum SERP payments(3) |
11,858,041 | 3,572,006 | 2,886,723 | 1,893,560 | 2,503,952 | 2,489,195 | ||||||||||||||||||
Medical coverage |
202,442 | 222,320 | 247,140 | 349,939 | 247,807 | 223,561 | ||||||||||||||||||
Disability | ||||||||||||||||||||||||
Accelerated stock options |
$ | 5,228,313 | $ | 809,370 | $ | 1,763,358 | $ | 1,644,037 | $ | 1,140,186 | $ | 1,140,022 | ||||||||||||
Accelerated restricted stock(1) |
8,924,685 | 2,674,782 | 3,076,524 | 2,931,489 | 1,973,895 | 1,856,415 | ||||||||||||||||||
Lump sum SERP payments(4) |
11,858,041 | 3,825,567 | 2,963,276 | 3,143,826 | 2,731,678 | 2,721,967 | ||||||||||||||||||
Medical coverage |
400,530 | 379,033 | 418,092 | 705,101 | 509,266 | 394,040 | ||||||||||||||||||
Severance payments |
3,800,000 | 765,000 | 701,250 | 701,250 | 563,200 | 568,000 | ||||||||||||||||||
Disability benefits(5) |
120,000 | 120,000 | 120,000 | 120,000 | 120,000 | 120,000 | ||||||||||||||||||
Termination for Cause | ||||||||||||||||||||||||
Additional benefits |
N/A | N/A | N/A | N/A | N/A | N/A |
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Event | Raspino | Toufeeq | Voegele | Looser | Bane | Robert | ||||||||||||||||||
Change in Control | ||||||||||||||||||||||||
Accelerated stock options |
$ | 5,228,313 | $ | 809,370 | $ | 1,763,358 | $ | 1,644,037 | $ | 1,140,186 | $ | 1,140,022 | ||||||||||||
Accelerated restricted stock |
8,924,685 | 2,674,782 | 3,076,524 | 2,931,489 | 1,973,895 | 1,856,415 | ||||||||||||||||||
Change in Control with Involuntary Termination, Constructive Termination or Voluntary Resignation | ||||||||||||||||||||||||
Accelerated stock options |
$ | 5,228,313 | $ | 809,370 | $ | 1,763,358 | $ | 1,644,037 | $ | 1,140,186 | $ | 1,140,022 | ||||||||||||
Accelerated restricted stock(1) |
8,924,685 | 2,674,782 | 3,076,524 | 2,931,489 | 1,973,895 | 1,856,415 | ||||||||||||||||||
Lump sum SERP payments |
11,858,041 | 3,567,006 | 2,858,375 | 3,506,250 | 2,816,000 | 2,483,467 | ||||||||||||||||||
Medical coverage |
400,530 | 379,033 | 418,092 | 705,101 | 509,266 | 394,040 | ||||||||||||||||||
Severance payments |
8,550,000 | 2,160,000 | 1,955,000 | 1,955,000 | 1,548,800 | 1,562,000 | ||||||||||||||||||
Tax gross-up payments (280G calculation) |
| 2,914,023 | 2,539,105 | | | 2,041,990 | ||||||||||||||||||
Merger Protection Change in Control with Involuntary Termination or Constructive Termination(6) | ||||||||||||||||||||||||
Accelerated stock options |
$ | 5,228,313 | $ | 809,370 | $ | 1,763,358 | $ | 1,644,037 | $ | 1,140,186 | $ | 1,140,022 | ||||||||||||
Accelerated restricted stock(1) |
8,924,685 | 2,674,782 | 3,076,524 | 2,931,489 | 1,973,895 | 1,856,415 | ||||||||||||||||||
Lump sum SERP payments |
11,858,041 | 3,567,006 | 2,858,375 | 3,506,250 | 2,816,000 | 2,483,467 | ||||||||||||||||||
Medical coverage |
400,530 | 379,033 | 418,092 | 705,101 | 509,266 | 394,040 | ||||||||||||||||||
Severance payments |
8,550,000 | 2,160,000 | 1,955,000 | 1,955,000 | 1,548,800 | 1,562,000 |
(1) | Accelerated restricted stock assumes PRSUs are earned at the target level of 100% of the
awarded units. However, upon a termination or event that causes acceleration of the vesting
of PRSUs, the number of PRSUs earned will be based on actual achievement of the performance
goals up to the date of the termination or event, which could range from 0% to 150% of the
target level of the awarded units. |
|
(2) | These amounts represent a lump-sum SERP benefit paid at the later of age 55 or 60 days
after termination. Messrs. Toufeeq, Voegele and Robert are not entitled to a SERP benefit if
they voluntarily terminate except as described in the table above under Change in Control
with Involuntary Termination or Voluntary Resignation. |
|
(3) | These amounts represent a lump-sum SERP benefit paid to the surviving spouse or beneficiary
within 60 days of the executives death, based on the same benefit the executive would have
received had the executive terminated his employment on the date of his death. |
|
(4) | Upon disability, the SERP benefits would become fully vested, and a lump sum payment of
the SERP benefits would be paid within 60 days of termination equal to the actuarial
present value of an annual benefit of 50% of final annual pay payable for 10 years certain
and his lifetime, reduced by certain early retirement factors based on the number of years
from the date of the termination to his normal retirement date and reduced by any employer
or government disability benefits. |
|
(5) | Disability benefits consist of long-term disability coverage of 60% of monthly pay after
90 days of disability, up to $10,000 a month. |
|
(6) | Tax gross-up payments will be made only in the event that the merger protection change in
control event constitutes a change in control for purposes of the applicable tax
provision. If this were the case, the tax gross-up payments would be the amounts shown in
the table under Change in Control with Involuntary Termination or Voluntary Resignation. |
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DIRECTOR COMPENSATION
Standard Nonemployee Director Compensation
The Nominating and Corporate Governance Committee periodically reviews the compensation of the
board of directors and, from time to time, recommends changes thereto to the full board of
directors. The committee uses a combination of cash and stock-based compensation to attract and
retain qualified candidates to serve on the board of directors.
The annual retainer for the chairman of the board is $180,000 and for each other director who
is not an employee of our company is $50,000. We pay a fee of $2,000 for each board and committee
meeting attended. For committee meetings, the fee is payable to all nonemployee directors
participating, regardless of committee membership, except to a director who is not a member of the
committee that does not receive the advance materials, if any, circulated to the committee members.
In addition, the chairman of the Audit Committee receives an annual fee of $15,000; the chairman of
the Compensation Committee receives an annual fee of $15,000; and the chairman of the Nominating
and Corporate Governance Committee receives an annual fee of $10,000. Directors who are employees
receive no additional compensation for serving on the board of directors or its committees.
In addition, each nonemployee director has received stock options and restricted stock awards
under our 2007 Long-Term Incentive Plan, as determined by the Nominating and Corporate Governance
Committee. With respect to awards granted in January 2010 and January 2011, the Nominating and
Corporate Governance Committee approved grants of restricted stock awards at its regularly
scheduled December meeting, with the grants being made on the first trading day of the calendar
year. For the 2010 and 2011 annual grants, the number of restricted stock awards granted to the
chairman of the board totaled $232,000 and $270,000, respectively, divided by the closing sale
price of our common stock on the last trading day of the prior year, and the number of restricted
stock awards granted to each other nonemployee director who was a director at the time totaled
$205,000 and $230,000, respectively, divided by such closing sale price.
Restricted stock awards granted to nonemployee directors in 2008 and after vested immediately.
Stock options granted to nonemployee directors expire 10 years from the date of grant. Each
option became exercisable as to 50% of the shares on the first anniversary of the grant date and as
to the remaining 50% on the second anniversary of the grant date. Each option provides for
adjustments in cases of mergers, stock splits and similar capital reorganizations. Any unvested
restricted stock awards and options will fully vest upon a change in control of us, or upon the
recipients termination of service due to death, disability, resignation in compliance with our
corporate governance guidelines or retirement on or after age 75. Upon termination of service for
any other reason, any unvested restricted stock awards and options will be forfeited, although the
Nominating and Corporate Governance Committee may provide otherwise upon a termination other than
for cause.
Director Compensation Table
The table below summarizes the total compensation paid to or earned by each of our
non-employee directors for 2010.
Non-Equity | Nonqualified | |||||||||||||||||||||||||||
Fees Earned | Stock | Option | Incentive Plan | Deferred | All Other | |||||||||||||||||||||||
or Paid in | Awards ($) | Awards ($) | Compensation | Compensation | Compensation | |||||||||||||||||||||||
Name | Cash ($) | (1)(2) | (2) | ($) | Earnings | ($) | Total ($) | |||||||||||||||||||||
David A. B. Brown |
$ | 264,000 | $ | 270,006 | | | | | $ | 534,006 | ||||||||||||||||||
Kenneth M. Burke |
154,000 | 230,010 | | | | | 384,010 | |||||||||||||||||||||
Archie W. Dunham |
140,000 | 230,010 | | | | | 370,010 | |||||||||||||||||||||
David A. Hager |
140,000 | 230,010 | | | | | 370,010 | |||||||||||||||||||||
Francis S. Kalman |
143,000 | 230,010 | | | | | 373,010 | |||||||||||||||||||||
Ralph D. McBride |
130,000 | 230,010 | | | | | 360,010 | |||||||||||||||||||||
Robert G. Phillips |
132,000 | 230,010 | | | | | 362,010 |
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(1) | The amounts in this column represent the grant date fair value of restricted stock awards
granted for 2010 in accordance with ASC Topic 718. Under SEC rules, the amounts shown exclude
the impact of estimated forfeitures related to service-based vesting conditions. The grant
date fair value of these awards is calculated using the closing price of our common stock on
the date of grant. In January 2011, the chairman of the board was granted 8,182 restricted
stock units and each other eligible director was granted 6,970 restricted stock units, with
a grant date fair value of $32.47 per share. For additional information, see Note 10 to
our consolidated financial statements in our annual report on Form 10-K for the year ended
December 31, 2010. |
|
(2) | The aggregate number of restricted stock awards and the aggregate number of option awards
outstanding at December 31, 2010 were as follows: |
Restricted | ||||||||
Name | Stock Awards | Stock Options | ||||||
David A. B. Brown |
680 | 69,962 | ||||||
Kenneth M. Burke |
680 | 18,013 | ||||||
Archie W. Dunham |
680 | 25,304 | ||||||
David A. Hager |
| 10,722 | ||||||
Francis S. Kalman |
680 | 25,304 | ||||||
Ralph D. McBride |
680 | 51,359 | ||||||
Robert G. Phillips |
| 10,722 |
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AUDIT COMMITTEE REPORT
The Audit Committee currently consists of Messrs. Kalman (Chairman), Burke, Hager and
Phillips. The Audit Committees purpose is to assist the board in overseeing (1) the integrity of
our financial statements, (2) our compliance with legal and regulatory requirements, (3) the
independence, qualifications and performance of our independent auditors and (4) the performance of
our internal audit function. The Audit Committee is directly responsible for the appointment,
compensation, retention and oversight of the work of any registered public accounting firm engaged
for the purpose of preparing or issuing an audit report or performing other audit, review or attest
services for us. The board of directors has determined that the members of the Audit Committee are
independent under applicable provisions of the Securities Exchange Act of 1934 and New York Stock
Exchange listing standards.
Our management is responsible for preparing our financial statements, and the independent
auditors are responsible for auditing those financial statements and issuing a report thereon.
Accordingly, the Audit Committees responsibility is one of oversight. In this context, the Audit
Committee discussed with KPMG LLP, our independent registered public accounting firm, the matters
required to be discussed by Statement on Auditing Standards No. 61, as amended (AICPA, Professional
Standards, Vol. 1, AU section 380), as adopted by the Public Company Accounting Oversight Board in
Rule 3200T, Communication with Audit Committees. These communications and discussions are intended
to assist the Audit Committee in overseeing the financial reporting and disclosure process. The
Audit Committee also discussed with KPMG its independence from us and received from KPMG the
written disclosures and the letter from KPMG required by applicable requirements of the Public
Company Accounting Oversight Board regarding KPMGs communications with the Audit Committee
concerning independence. This discussion and disclosure informed the Audit Committee of the
independence of KPMG and assisted the Audit Committee in evaluating such independence. The Audit
Committee also considered whether the provision of services by KPMG not related to the audit of our
financial statements and to the review of our interim financial statements is compatible with
maintaining the independence of KPMG. Finally, the Audit Committee reviewed and discussed our
audited financial statements with our management, our internal auditors and KPMG. Our management
informed the Audit Committee that our audited financial statements had been prepared in accordance
with accounting principles generally accepted in the United States.
Based on the review and discussions referred to above, and such other matters deemed relevant
and appropriate by the Audit Committee, the Audit Committee recommended to the board of directors,
and the board has approved, that these audited financial statements be included in our Annual
Report on Form 10-K for the year ended December 31, 2010.
Respectfully submitted, | ||
Francis S. Kalman, Chairman | ||
Kenneth M. Burke | ||
David A. Hager | ||
Robert G. Phillips |
41
Table of Contents
ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS |
EQUITY COMPENSATION PLAN INFORMATION
The following table sets forth information about our common stock that may be issued under all
of our existing equity compensation plans as of December 31, 2010.
Number of Securities | Weighted Average Exercise | |||||||||||
to be Issued upon Exercise | Price of Outstanding | Number of Securities | ||||||||||
of Outstanding Options, | Options, Warrants and | Remaining Available | ||||||||||
Plan Category(1) | Warrants and Rights | Rights(2) | for Future Issuance | |||||||||
Equity compensation plans
approved by security
holders(3) |
5,550,212 | $ | 24.18 | 5,515,089 | (4) | |||||||
Equity compensation plans not
approved by security holders |
| | | |||||||||
Total |
5,550,212 | 24.18 | 5,515,089 |
(1) | Excludes options to purchase 18,761 shares of our common stock, at a weighted average
exercise price of $21.69, granted under equity compensation plans of Marine Drilling
Companies, Inc. assumed in connection with our September 2001 acquisition of Marine. Upon
consummation of the acquisition, all outstanding options to purchase Marine common stock were
converted into options to purchase our common stock. No additional awards may be granted
under these plans. |
|
(2) | Excludes the shares issuable upon the vesting of restricted stock units and PRSUs included in
the first column of this table for which there is no weighted average exercise price. |
|
(3) | Consists of the Employee Stock Purchase Plan, the 1998 Long-Term Incentive Plan, the 1993
Directors Stock Option Plan, the 2004 Directors Stock Incentive Plan and the 2007 Long-Term
Incentive Plan. |
|
(4) | As of December 31, 2010, the plans with securities remaining available for future issuance
consisted of the Employee Stock Purchase Plan and the 2007 Long-Term Incentive Plan. As of
December 31, 2010, after giving effect to the issuance in January 2011 with respect to the
2010 plan year, 752,485 shares remained available for issuance under the Employee Stock
Purchase Plan. These shares could be issued only in the form of shares of our common stock.
As of December 31, 2010, 4,762,604 shares remained available for issuance under the 2007
Long-Term Incentive Plan with respect to awards (other than outstanding awards) and could be
issued in the form of stock options, stock appreciation rights, stock awards and stock units.
In 2011, we have issued an additional 1,380,920 awards under the plan in the form of
restricted stock awards, PRSUs and stock options. As of April 1, 2011, 31,031 shares have
been cancelled and returned to the 2007 Long-Term Incentive Plan. |
SECURITY OWNERSHIP
The following table sets forth information as of April 25, 2011 with respect to the beneficial
ownership of our common stock by (1) each of our stockholders who is known by us to be a beneficial
owner of more than 5% of our common stock, (2) our directors and the persons named in the Summary
Compensation Table in Item 11 of this annual report and (3) all of our current executive officers
and directors as a group. Unless otherwise indicated, all of such stock is owned directly, and the
indicated person or entity has sole voting and investment power.
Number of Shares | Percent of | |||||||
Name and Address | Beneficially Owned(1) | Class | ||||||
Seadrill Limited(2) P.O. Box HM 1593 Par-la-Ville Place, 4th Floor 14 Par-la-Ville Road Hamilton HM 08 Bermuda |
16,500,000 | 9.3 | % | |||||
MHR Fund Management LLC(3) 40 West 57th Street, 24th Floor New York, New York 10019 |
12,149,254 | 6.8 | % | |||||
BlackRock Inc.(4) 40 East 52nd Street New York, NY 10022 |
10,245,021 | 5.8 | % |
42
Table of Contents
Number of Shares | Percent of | |||||||
Name and Address | Beneficially Owned(1) | Class | ||||||
Franklin Mutual Advisers, LLC(5) 101 John F. Kennedy Parkway Short Hills, NJ 07078-2789 |
9,069,294 | 5.1 | % | |||||
Lonnie D. Bane |
18,364 | * | ||||||
David A. B. Brown |
111,956 | * | ||||||
Kenneth M. Burke |
29,139 | * | ||||||
Archie W. Dunham |
60,650 | * | ||||||
David A. Hager |
35,338 | * | ||||||
Francis S. Kalman |
60,650 | * | ||||||
W. Gregory Looser |
81,002 | * | ||||||
Ralph D. McBride |
95,848 | * | ||||||
Robert G. Phillips |
40,797 | * | ||||||
Louis A. Raspino |
599,437 | * | ||||||
Kevin C. Robert |
162,085 | * | ||||||
Imran (Ron) Toufeeq |
153,239 | * | ||||||
Brian C. Voegele |
306,851 | * | ||||||
All current executive officers and directors as a group (14 persons) |
1,780,951 | 1.0 | % |
* | Less than 1% of issued and outstanding shares of our common stock. |
|
(1) | The number of shares beneficially owned by the directors and executive officers listed in the
table includes shares that may be acquired within 60 days of April 25, 2011 by exercise of
stock options as follows: Mr. Bane 0; Mr. Brown 69,962; Mr. Burke 18,013; Mr. Dunham
25,304; Mr. Hager 10,722; Mr. Kalman 25,304; Mr. Looser 38,296; Mr. McBride
51,359; Mr. Phillips 10,722; Mr. Raspino 338,334; Mr. Robert 135,357; Mr. Toufeeq
78,042; Mr. Voegele 239,930; and all current executive officers and directors as a group
1,045,860. |
|
(2) | Based solely on a Schedule 13D/A filed with the SEC on January 10, 2011 (as amended, the
Schedule 13D) by Seadrill Ltd. (Seadrill), Hemen Holding Limited, the principal
shareholder of Seadrill (Hemen), Greenwich Holdings Limited, the principal shareholder of
Hemen (Greenwich), John Fredriksen, who indirectly controls Hemen and Greenwich and is the
Chairman, President and a Director of Seadrill, and C.K. Limited, which also indirectly
controls Hemen and Greenwich. The Schedule 13D reports that (1) on December 28, 2010,
Seadrill entered into a forward contract with Nordea Bank Finland Plc (Nordea) whereby
Seadrill agreed to purchase 8,229,200 shares of common stock from Nordea on June 24, 2011, for
a purchase price of $272.9 million; (2) on December 27, 2010, Seadrill entered into a forward
contract with DnB Nor Markets (DnB) whereby Seadrill agreed to purchase 8,070,800 shares of
common stock from DnB on June 24, 2011, for a purchase price of $264.4 million; and (3)
Seadrill directly held 200,000 shares of common stock. In the Schedule 13D, the reporting
persons assert beneficial ownership, with shared voting and dispositive power, of 16,500,000
shares. To our knowledge, the reporting persons have not publicly updated the information
contained in the Schedule 13D since January 10, 2011. |
|
(3) | Based solely on a Schedule 13G/A filed with the SEC on February 13, 2009 by MHR Institutional
Partners III LP (Institutional Partners III), MHR Institutional Advisors III LLC
(Institutional Advisors III), MHR Fund Management LLC (Fund Management) and Mark H.
Rachesky, M.D. (Dr. Rachesky) relating to an aggregate of 12,832,000 shares held for the
accounts of MHR Capital Partners Master Account LP (Master Account), MHR Capital Partners
(100) (Capital Partners) LP and Institutional Partners III. MHR Advisors LLC (Advisors)
is the general partner of each of Master Account and Capital Partners and, in such capacity,
may be deemed to beneficially own the shares of common stock held for the accounts of each of
Master Account (609,626 shares) and Capital Partners (73,120 shares). Institutional Advisors
III is the general partner of Institutional Partners III and, in such capacity, may be deemed
to beneficially own the shares of common stock held for the account of Institutional Partners
III (12,149,254 shares). Fund Management is an affiliate of and has an investment management
agreement with Master Account, Capital Partners and Institutional Partners III and other
affiliated entities, pursuant to which it has the power to vote or direct the vote and to
dispose or to direct the disposition of the shares of common stock and, accordingly, Fund
Management may be deemed to beneficially own the shares of common stock held for the account
of each of Master Account, Capital Partners and Institutional Partners III (an aggregate of
12,832,000 shares). Dr. Rachesky is the managing member of Advisors, Institutional Advisors
III and Fund Management and, in such capacity, may be deemed to beneficially own the shares of
common stock held for the accounts of each of Master Account, Capital Partners and
Institutional Partners III (an aggregate of 12,832,000 shares). |
|
(4) | Based solely on a Schedule 13G/A filed with the SEC on February 8, 2011 by BlackRock Inc.
BlackRock reports sole voting power and sole dispositive power over 10,245,021 shares. |
|
(5) | Based solely on a Schedule 13G filed with the SEC on January 27, 2011 by Franklin Mutual
Advisers, LLC (FMA). FMA reports sole voting power and sole dispositive power over
9,069,294 shares. |
43
Table of Contents
ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE |
Conflicts of Interest and Related Person Transactions
Pursuant to our Code of Business Conduct and Ethical Practices, employees, officers and
directors must not engage, or give the appearance of engaging, in any activity involving a conflict
of interest, or a reasonably foreseeable conflict of interest, between their personal interests and
our interests. The Code requires that any employee, officer or director who is uncertain whether a
particular set of circumstances constitutes a conflict of interest seek appropriate,
before-the-fact guidance from our Chief Compliance Officer.
Further, our Corporate Governance Guidelines provide that where an actual or potential
conflict of interest involving a director develops, the director should report the matter
immediately to the chairman of the Nominating and Corporate Governance Committee for evaluation. A
significant and potentially ongoing conflict must be resolved or the director should resign. Also,
if a director has a personal or business interest in a matter that is before the board of
directors, the director must disclose the interest to the chairman of the board and, if
appropriate, recuse himself from participation in the related deliberations and abstain from voting
on the matter.
ITEM 14. | PRINCIPAL ACCOUNTING FEES AND SERVICES |
Fees Paid to Independent Registered Public Accounting Firm
The following table presents fees for professional audit services rendered by KPMG LLP for the
audit of our annual financial statements for the years ended December 31, 2010 and 2009,
respectively, and fees billed for other services rendered by KPMG LLP during those periods.
2010 | 2009 | |||||||
(In thousands) | ||||||||
Audit Fees(1) |
$ | 3,300 | $ | 3,979 | ||||
Audit-Related Fees(2) |
37 | 1,022 | ||||||
Tax Fees(3) |
17 | 302 | ||||||
All Other Fees |
| | ||||||
Total |
3,354 | $ | 5,303 |
(1) | Audit Fees consisted of fees for audit services, which related to the
consolidated audit, quarterly reviews, registration statements, comfort letters,
statutory and subsidiary audits, and services normally provided by the independent
registered public accountant in connection with statutory and regulatory filings.
Audit Fees also include the audit of our internal control over financial reporting,
as required by Section 404 of the Sarbanes-Oxley Act of 2002 and applicable SEC
rules. |
|
(2) | Audit-Related Fees consisted of fees for audit-related services, which
primarily related to audit services for agreed upon procedures in 2010 and audit
services for our divestiture transactions in 2009. |
|
(3) | Tax Fees consisted of fees for tax services, which related to services
for advise related to mergers and acquisitions in 2010 and tax compliance, tax
planning, tax advice (including tax return preparation) and refund claims,
assistance with tax audits and appeals and advice related to mergers and
acquisitions in 2009. |
The Audit Committee preapproves all audit, review or attest engagements and permissible
non-audit services to be performed by our independent registered public accounting firm, subject
to, and in compliance with, the de minimis exception for non-audit services described in applicable
provisions of the Securities Exchange Act of 1934 and applicable SEC rules. All services provided
by our independent public accounting firm in 2010 and 2009 were preapproved by the Audit Committee.
44
Table of Contents
PART IV
ITEM 15. | EXHIBITS, FINANCIAL STATEMENT SCHEDULES |
(a) | The following documents are filed as part of this annual report: |
(1) | Financial Statements |
All financial statements of the Registrant as set forth under Item 8 of this Annual
Report on Form 10-K.
(2) | Financial Statement Schedules |
All financial statement schedules have been omitted because they are not applicable or
not required, or the information required thereby is included in the consolidated
financial statements or the notes thereto included in this annual report.
(3) | Exhibits |
Each exhibit identified below is filed with this annual report. Exhibits designated with
an * are filed herewith. Exhibits designated with a are management contracts or
compensatory plans or arrangements. Exhibits designated with a # were previously filed
or furnished, as applicable, as an exhibit to the original Form 10-K filed on February
18, 2011.
Exhibit No. | Description | |||
2.1 | Agreement and Plan of Merger, dated as of February 6, 2011, by and among
Pride, Ensco plc, ENSCO International Incorporated, and ENSCO Ventures LLC
(incorporated by reference to Exhibit 2.1 to Prides Current Report on Form
8-K filed with the SEC on February 7, 2011, File No. 1-13289). |
|||
2.2 | Master Separation Agreement, dated as of August 4, 2009, between Pride
International, Inc. and Seahawk Drilling, Inc. (incorporated by reference
to Exhibit 2.1 to Prides Current Report on Form 8-K filed with the SEC on
August 7, 2009, File No. 1-13289). |
|||
3.1 | Certificate of Incorporation of Pride (incorporated by reference to Annex D
to the Joint Proxy Statement/Prospectus included in the Registration
Statement on Form S-4, Registration
Nos. 333-66644 and 333-66644-01 (the Registration Statement)). |
|||
3.2 | Bylaws of Pride, as amended on December 12, 2008 (incorporated by reference
to Exhibit 3.1 to Prides Current Report on Form 8-K filed with the SEC on
December 18, 2008, File
No. 1-13289). |
|||
4.1 | Form of Common Stock Certificate (incorporated by reference to Exhibit 4.13
to the Registration Statement). |
|||
4.2 | Rights Agreement, dated as of September 13, 2001, between Pride and
American Stock Transfer & Trust Company, as Rights Agent (incorporated by
reference to Exhibit 4.2 Prides Current Report on Form 8-K filed with the
SEC on September 28, 2001, File No. 1-13289 (the
Form 8-K)). |
|||
4.3 | Amendment No. 1 to Rights Agreement dated as of January 29, 2008 between
Pride and American Stock Transfer & Trust Company, LLC, as Rights Agent
(incorporated by reference to Exhibit 4.3 to Prides Annual Report on Form
10-K for the year ended December 31, 2007, File
No. 1-13289). |
|||
4.4 | Amendment No. 2 to Rights Agreement, dated as of February 6, 2011, between
Pride and American Stock Transfer & Trust Company, LLC, as Rights Agent
(incorporated by reference to Exhibit 4.1 to Prides Current Report on Form
8-K filed with the SEC on February 7, 2011, File No. 1-13289). |
|||
4.5 | Certificate of Designations of Series A Junior Participating Preferred
Stock of Pride (incorporated by reference to Exhibit 4.3 to the Form 8-K). |
45
Table of Contents
Exhibit No. | Description | |||
4.6 | Amended and Restated Revolving Credit Agreement dated as of July 30, 2010
among Pride, the lenders from time to time parties thereto, Citibank, N.A.,
as administrative agent for the lenders, Natixis and Wells Fargo Bank,
National Association, as syndications agent for the lenders, Bank of
America, N.A., as documentation agent for the lenders, and Citibank, N.A.,
Natixis and Wells Fargo Bank, National Association, as issuing banks of the
letters of credit thereunder (incorporated by reference to Exhibit 4.1 to
Prides Quarterly Report on Form 10-Q for the quarter ended September 30,
2010, File No. 1-13289). |
|||
4.7 | Joinder Agreement dated as of October 28, 2010 among Pride, Citibank, N.A.,
as administrative agent, and NIBC Bank N.V. (incorporated by reference to
Exhibit 4.2 to Prides Quarterly Report on Form 10-Q for the quarter ended
September 30, 2010, File No. 1-13289). |
|||
4.8 | Indenture dated as of July, 1, 2004 by and between Pride and The Bank of
New York Mellon (successor to JPMorgan Chase Bank), as Trustee
(incorporated by reference to Exhibit 4.1 to Prides Registration Statement
on Form S-4, File No. 333-118104). |
|||
4.9 | Second Supplemental Indenture dated as of June 2, 2009 by and between Pride
and The Bank of New York Mellon (successor to JPMorgan Chase Bank), as
Trustee (incorporated by reference to Exhibit 4.1 to Prides Quarterly
Report on Form 10-Q for the quarter ended June 30, 2009, File No. 1-13289). |
|||
4.10 | Third Supplemental Indenture dated as of August 6, 2010 by and between
Pride and The Bank of New York Mellon (as successor to JPMorgan Chase Bank,
N.A.), as Trustee (incorporated by reference to Exhibit 4.3 to Prides
Quarterly Report on Form 10-Q for the quarter ended September 30, 2010,
File No. 1-13289). |
|||
Pride and its subsidiaries are parties to several debt instruments that
have not been filed with the SEC under which the total amount of securities
authorized does not exceed 10% of the total assets of Pride and its
subsidiaries on a consolidated basis. Pursuant to paragraph 4(iii)(A) of
Item 601(b) of Regulation S-K, Pride agrees to furnish a copy of such
instruments to the SEC upon request. |
||||
10.1 | | Pride International, Inc. 1993 Directors Stock Option Plan (incorporated
by reference to Exhibit 10(j) to Prides Annual Report on Form 10-K for the
year ended December 31, 1992, File
No. 0-16963). |
||
10.2 | | First Amendment to Pride International, Inc. 1993 Directors Stock Option
Plan (incorporated by reference to Exhibit 4.7 to Prides Registration
Statement on Form S-8, Registration
No. 333-35093). |
||
10.3 | | Second Amendment to Pride International, Inc. 1993 Directors Stock Option
Plan (incorporated by reference to Exhibit 10.10 to Prides Annual Report
on Form 10-K for the year ended December 31, 1997, File No. 1-13289). |
||
10.4 | | Third Amendment to Pride International, Inc. 1993 Directors Stock Option
Plan (incorporated by reference to Exhibit 10.11 of Prides Annual Report
on Form 10-K for the year ended December 31, 1998, File No. 1-13289). |
||
10.5 | | Fourth Amendment to Pride International, Inc. 1993 Directors Stock Option
Plan (incorporated by reference to Exhibit 10.12 to Prides Annual Report
on Form 10-K for the year ended December 31, 2002, File No. 1-13289). |
||
10.6 | | Fifth Amendment to Pride International, Inc. 1993 Directors Stock Option
Plan (incorporated by reference to Exhibit 10.13 to Prides Annual Report
on Form 10-K for the year ended December 31, 2002, File No. 1-13289). |
||
10.7 | | Sixth Amendment to Pride International, Inc. 1993 Directors Stock Option
Plan (incorporated by reference to Exhibit 10.5 to Prides Quarterly Report
on Form 10-Q for the quarter ended June 30, 2005, File No. 1-13289). |
46
Table of Contents
Exhibit No. | Description | |||
10.8 | | Pride International, Inc. 401(k) Restoration Plan (incorporated by
reference to Exhibit 10(k) to Prides Annual Report on Form 10-K for the
year ended December 31, 1993, File No. 0-16963). |
||
10.9 | | Pride International, Inc. Supplemental Executive Retirement Plan, as
amended and restated effective January 1, 2009 (the SERP) (incorporated
by reference to Exhibit 10.1 to Prides Quarterly Report on Form 10-Q for
the quarter ended March 31, 2009, File No. 1-13289). |
||
10.10 | | Amended SERP Participation Agreement dated December 31, 2008 between Pride
and Louis A. Raspino (incorporated by reference to Exhibit 10.7 to Prides
Current Report on Form 8-K filed with the SEC on January 7, 2009, File No.
1-13289). |
||
10.11 | | Amended SERP Participation Agreement dated December 31, 2008 between Pride
and Imran Toufeeq (incorporated by reference to Exhibit 10.2 to Prides
Current Report on Form 8-K filed with the SEC on August 14, 2009, File No.
1-13289). |
||
10.12 | | Amended SERP Participation Agreement dated December 31, 2008 between Pride
and Brian C. Voegele (incorporated by reference to Exhibit 10.9 to Prides
Current Report on Form 8-K filed with the SEC on January 7, 2009, File No.
1-13289). |
||
10.13 | | Amended SERP Participation Agreement dated December 31, 2008 between Pride
and W. Gregory Looser (incorporated by reference to Exhibit 10.10 to
Prides Current Report on
Form 8-K filed with the SEC on January 7, 2009, File No. 1-13289). |
||
10.14 | | Amended SERP Participation Agreement dated December 31, 2008 between Pride
and Lonnie D. Bane (incorporated by reference to Exhibit 10.11 to Prides
Current Report on Form 8-K filed with the SEC on January 7, 2009, File No.
1-13289). |
||
10.15 | | Amended SERP Participation Agreement dated December 31, 2008 between Pride
and Kevin C. Robert (incorporated by reference to Exhibit 10.15 to Prides
Annual Report on Form 10-K for the year ended December 31, 2008, File No.
1-13289). |
||
10.16 | | Amended SERP Participation Agreement dated December 31, 2008 between Pride
and Rodney W. Eads (incorporated by reference to Exhibit 10.8 to Prides
Current Report on Form 8-K filed with the SEC on January 7, 2009, File No.
1-13289). |
||
10.17 | | Pride International, Inc. 1998 Long-Term Incentive Plan, as amended and
restated (incorporated by reference to Exhibit 10.21 to Prides Annual
Report on Form 10-K for the year ended December 31, 2004, File No.
1-13289). |
||
10.18 | | Form of 1998 Long-Term Incentive Plan Non-Qualified Stock Option Agreement
(incorporated by reference to Exhibit 10.1 to Prides Current Report on
Form 8-K filed with the SEC on December 29, 2006, File No. 1-13289). |
||
10.19 | | Form of 1998 Long-Term Incentive Plan Non-Qualified Stock Option Agreement
(with additional provisions) (incorporated by reference to Exhibit 10.4 to
the amendment to Prides Current Report on Form 8-K/A filed with the SEC on
February 16, 2007, File No. 1-13289). |
||
10.20 | | Form of 1998 Long-Term Incentive Plan Restricted Stock Agreement
(incorporated by reference to Exhibit 10.2 to Prides Current Report on
Form 8-K filed with the SEC on December 29, 2006, File No. 1-13289). |
||
10.21 | | Form of 1998 Long-Term Incentive Plan Restricted Stock Agreement (with
additional provisions) (incorporated by reference to Exhibit 10.5 to the
amendment to Prides Current Report on
Form 8-K/A filed with the SEC on February 16, 2007, File No. 1-13289). |
||
10.22 | | Form of 1998 Long-Term Incentive Plan Restricted Stock Unit Agreement
(incorporated by reference to Exhibit 10.3 to Prides Current Report on
Form 8-K filed with the SEC on December 29, 2006, File No. 1-13289). |
47
Table of Contents
Exhibit No. | Description | |||
10.23 | | Form of 1998 Long-Term Incentive Plan Restricted Stock Unit Agreement (with
additional provisions) (incorporated by reference to Exhibit 10.6 to the
amendment to Prides Current Report on Form 8-K/A filed with the SEC on
February 16, 2007, File No. 1-13289). |
||
10.24 | | Pride International, Inc. Employee Stock Purchase Plan (as amended and
restated effective January 1, 2009) (ESPP) (incorporated by reference to
Exhibit 10.3 to Prides Quarterly Report on Form 10-Q for the quarter ended
September 30, 2008, File No. 1-13289). |
||
10.25 | | First Amendment to ESPP (incorporated by reference to Exhibit 10.25 to
Prides Quarterly Report on Form 10-Q for the quarter ended March 31, 2010,
File No. 1-13289). |
||
10.26 | | Second Amendment to ESPP (incorporated by reference to Exhibit 4.10 to
Prides registration statement on Form S-8, Registration No. 333-168503). |
||
10.27 | | Pride International, Inc. Annual Incentive Plan (as amended and restated
effective January 1, 2008) (incorporated by reference to Exhibit 10.4 to
Prides Quarterly Report on Form 10-Q for the quarter ended September 30,
2008, File No. 1-13289). |
||
10.28 | | Pride International, Inc. 2004 Directors Stock Incentive Plan (as amended
and restated) (incorporated by reference to Appendix B to Prides Proxy
Statement on Schedule 14A for the 2008 Annual Meeting of Stockholders, File
No. 1-13289). |
||
10.29 | | First Amendment to 2004 Directors Stock Incentive Plan (incorporated by
reference to Exhibit 10.2 to Prides Quarterly Report on Form 10-Q for the
quarter ended September 30, 2008, File No. 1-13289). |
||
10.30 | | Form of 2004 Directors Stock Incentive Plan Non-Qualified Stock Option
Agreement (incorporated by reference to Exhibit 10.3 to Prides Current
Report on Form 8-K filed with the SEC on January 6, 2005, File No.
1-13289). |
||
10.31 | | Form of 2004 Directors Stock Incentive Plan Restricted Stock Agreement
(incorporated by reference to Exhibit 10.4 to Prides Current Report on
Form 8-K filed with the SEC on January 6, 2005, File No. 1-13289). |
||
10.32 | | Form of 2004 Directors Stock Incentive Plan Restricted Stock Unit
Agreement (incorporated by reference to Exhibit 10.1 to Prides Current
Report on Form 8-K filed with the SEC on December 31, 2008, File No.
1-13289). |
||
10.33 | | Pride International, Inc. 2007 Long-Term Incentive Plan (as amended and
restated) (incorporated by reference to Appendix A to Prides Proxy
Statement on Schedule 14A for the 2010 Annual Meeting of Stockholders, File
No. 1-13289). |
||
10.34 | | First Amendment to Pride International, Inc. 2007 Long-Term Incentive Plan
(as amended and restated) (incorporated by reference to Exhibit 10.1 to
Prides Quarterly Report on Form 10-Q for the quarter ended September 30,
2010, File No. 1-13289). |
||
10.35 | | Form of 2007 Long-Term Incentive Plan Non-Qualified Stock Option Agreement
(incorporated by reference to Exhibit 10.1 to Prides Current Report on
Form 8-K filed with the SEC on January 29, 2010, File No. 1-13289). |
||
10.36 | | Form of 2007 Long-Term Incentive Plan Restricted Stock Unit Agreement
(incorporated by reference to Exhibit 10.2 to Prides Current Report on
Form 8-K filed with the SEC on January 29, 2010, File No. 1-13289). |
||
10.37 | | Form of 2007 Long-Term Incentive Plan Performance-Based Restricted Stock
Unit Agreement (incorporated by reference to Exhibit 10.3 to Prides
Current Report on Form 8-K filed with the SEC on January 29, 2010, File No.
1-13289). |
||
10.38 | | Form of 2007 Long-Term Incentive Plan Non-Qualified Stock Option Agreement
(with additional provisions) (incorporated by reference to Exhibit 10.4 to
Prides Current Report on Form 8-K filed with the SEC on January 29, 2010,
File No. 1-13289). |
48
Table of Contents
Exhibit No. | Description | |||
10.39 | | Form of 2007 Long-Term Incentive Plan Restricted Stock Unit Agreement (with
additional provisions) (incorporated by reference to Exhibit 10.5 to
Prides Current Report on Form 8-K filed with the SEC on January 29, 2010,
File No. 1-13289). |
||
10.40 | | Form of 2007 Long-Term Incentive Plan Performance-Based Restricted Stock
Unit Agreement (with additional provisions) (incorporated by reference to
Exhibit 10.6 to Prides Current Report on Form 8-K filed with the SEC on
January 29, 2010, File No. 1-13289). |
||
10.41 | | Form of 2007 Long-Term Incentive Plan Restricted Stock Unit Agreement with
three-year cliff vesting (incorporated by reference to Exhibit 10.2 to
Prides Quarterly Report on Form 10-Q for the quarter ended March 31, 2010,
File No. 1-13289). |
||
10.42 | | Form of 2007 Long-Term Incentive Plan Restricted Stock Unit Agreement with
three-year cliff vesting (with additional provisions) (incorporated by
reference to Exhibit 10.2 to Prides Quarterly Report on Form 10-Q for the
quarter ended March 31, 2010, File No. 1-13289). |
||
10.43 | | Amended and Restated Employment/Non-Competition/Confidentiality Agreement
dated December 31, 2008 between Pride and Louis A. Raspino (incorporated by
reference to Exhibit 10.1 to Prides Current Report on Form 8-K filed with
the SEC on January 7, 2009, File No.
1-13289). |
||
10.44 | | Amended and Restated Employment/Non-Competition/Confidentiality Agreement
dated December 31, 2008 between Pride and Imran Toufeeq (incorporated by
reference to Exhibit 10.1 to Prides Current Report on Form 8-K filed with
the SEC on August 14, 2009, File No. 1-13289). |
||
10.45 | | Amended and Restated Employment/Non-Competition/Confidentiality Agreement
dated December 31, 2008 between Pride and Brian C. Voegele (incorporated by
reference to Exhibit 10.3 to Prides Current Report on Form 8-K filed with
the SEC on January 7, 2009, File No.
1-13289). |
||
10.46 | | Amended and Restated Employment/Non-Competition/Confidentiality Agreement
dated December 31, 2008 between Pride and W. Gregory Looser (incorporated
by reference to Exhibit 10.4 to Prides Current Report on Form 8-K filed
with the SEC on January 7, 2009, File No.
1-13289). |
||
10.47 | | Amended and Restated Employment/Non-Competition/Confidentiality Agreement
dated December 31, 2008 between Pride and Lonnie D. Bane (incorporated by
reference to Exhibit 10.5 to Prides Current Report on Form 8-K filed with
the SEC on January 7, 2009, File No. 1-13289). |
||
10.48 | | Amended and Restated Employment/Non- Competition/Confidentiality Agreement
dated December 31, 2008 between Pride and Kevin C. Robert (incorporated by
reference to Exhibit 10.41 to Prides Annual Report on Form 10-K for the
year ended December 31, 2008, File
No. 0-16963). |
||
10.49 | # | Amended and Restated Separation/Non-Competition/Confidentiality Agreement
dated December 31, 2008 between Pride and Brady K. Long. |
||
10.50 | | Acknowledgment and Amendment of Employment Agreement effective January 1,
2010 between Pride and Imran Toufeeq (incorporated by reference to Exhibit
10.4 to Prides Quarterly Report on Form 10-Q for the quarter ended March
31, 2010, File No. 1-13289). |
||
10.51 | | Acknowledgment and Amendment of Employment Agreement effective January 1,
2010 between Pride and Brian C. Voegele (incorporated by reference to
Exhibit 10.5 to Prides Quarterly Report on Form 10-Q for the quarter ended
March 31, 2010, File No. 1-13289). |
||
10.52 | | Acknowledgment and Amendment of Employment Agreement effective January 1,
2010 between Pride and W. Gregory Looser (incorporated by reference to
Exhibit 10.6 to Prides Quarterly Report on Form 10-Q for the quarter ended
March 31, 2010, File No. 1-13289). |
49
Table of Contents
Exhibit No. | Description | |||
10.53 | | Acknowledgment and Amendment of Employment Agreement effective January 1,
2010 between Pride and Lonnie B. Bane (incorporated by reference to Exhibit
10.7 to Prides Quarterly Report on Form 10-Q for the quarter ended March
31, 2010, File No. 1-13289). |
||
10.54 | | Acknowledgment and Amendment of Employment Agreement effective January 1,
2010 between Pride and Kevin C. Robert (incorporated by reference to
Exhibit 10.8 to Prides Quarterly Report on Form 10-Q for the quarter ended
March 31, 2010, File No. 1-13289). |
||
10.55 | # | Summary of certain executive officer and director compensation arrangements. |
||
10.56 | Tax Sharing Agreement, dated as of August 4, 2009, between Pride
International, Inc. and Seahawk Drilling, Inc. (incorporated by reference
to Exhibit 10.1 to Prides Current Report on Form 8-K filed with the SEC on
August 7, 2009, File No. 1-13289). |
|||
12 | # | Computation of ratio of earnings to fixed charges. |
||
21 | # | Subsidiaries of Pride. |
||
23.1 | # | Consent of KPMG LLP. |
||
31.1 | * | Certification of Chief Executive Officer of Pride pursuant to Section 302
of the Sarbanes-Oxley Act of 2002. |
||
31.2 | * | Certification of Chief Financial Officer of Pride pursuant to Section 302
of the Sarbanes-Oxley Act of 2002. |
||
32 | * | Certification of the Chief Executive Officer and the Chief Financial
Officer of Pride pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
||
101.INS | # | XBRL Instance Document |
||
101.SCH | # | XBRL Taxonomy Extension Schema |
||
101.LAB | # | XBRL Taxonomy Extension Label Linkbase |
||
101.PRE | # | XBRL Taxonomy Extension Presentation Linkbase |
||
101.CAL | # | XBRL Taxonomy Extension Calculation Linkbase |
||
101.DEF | # | XBRL Taxonomy Extension Definition Linkbase |
50
Table of Contents
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Houston, State of Texas, on April 28, 2011.
PRIDE INTERNATIONAL, INC. | ||||
/s/ LOUIS A. RASPINO
|
||||
President and Chief Executive Officer |
51