def14a
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Schedule
14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant þ
Filed by a Party other than the Registrant o
Check the appropriate box:
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Preliminary Proxy Statement |
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Confidential, for Use of the Commission only (as permitted by Rule 14a-6(e)(2)) |
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Definitive Proxy Statement |
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Definitive Additional Materials |
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Soliciting Material Pursuant to §240.14a-12 |
ULTRA PETROLEUM CORP.
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other
than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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No fee required. |
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
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Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and
state how it was determined): |
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Total fee paid: |
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Fee paid previously with preliminary materials. |
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Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by
registration statement number, or the Form or Schedule and the date
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Form, Schedule or Registration Statement No.: |
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ULTRA
PETROLEUM CORP.
363 North Sam Houston Parkway
East, Suite 1200
Houston, Texas 77060
NOTICE OF ANNUAL MEETING OF
SHAREHOLDERS
To Be Held on May 21, 2009
To the Shareholders of Ultra Petroleum Corp:
You are cordially invited to attend the Annual Meeting of
Shareholders of Ultra Petroleum Corp. which will be held at the
Crowne Plaza Hotel, 425 N. Sam Houston Parkway E.,
Houston Texas, on Thursday, May 21, 2009 at
10:00 a.m. CDT, for the following purposes:
1. To elect the Board of Directors to serve until their
successors are duly elected and qualified;
2. To appoint Ernst & Young LLP as the
independent auditor of the Company for the fiscal year ending
December 31, 2009;
3. To receive the financial statements of the Company for
the fiscal year ended December 31, 2008 together with the
auditors report thereon;
4. If presented, to consider and vote upon a shareholder
proposal regarding climate change which is opposed by the Board
of Directors; and
5. To transact such other business as may properly be
brought before the Annual Meeting or any adjournments or
postponements thereof.
The specific details of the matters proposed to be put before
the Annual Meeting are set forth in the proxy statement
accompanying and forming part of this notice.
Only shareholders of record at the close of business on
March 23, 2009, the Record Date, are
entitled to notice of and to vote at the Annual Meeting and any
adjournments or postponements thereof. Each common share is
entitled to one vote per share. Whether or not you plan to
attend the Annual Meeting, we request that you sign and date the
enclosed proxy card and mail it in the stamped, pre-addressed
envelope provided or deposit it with the transfer agent,
Computershare Investor Services Inc., Proxy Dept., 100
University Avenue, 9th Floor, Toronto, Ontario, M5J 2Y1. In
order to be valid and acted upon at the Annual Meeting, forms of
proxy must be received at the aforesaid address by
9:00 a.m. EDT on May 19, 2009. As an alternative,
you can vote your shares by telephone or over the Internet
according to the instructions on the proxy card.
Sincerely,
MICHAEL D. WATFORD
Chairman, President and
Chief Executive Officer
April 9, 2009
IMPORTANT
NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE
2009 ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 21,
2009
The Companys Proxy Statement for the 2009 Annual Meeting
of Shareholders and Annual Report on
Form 10-K
for the fiscal year ended December 31, 2008 are available
at www.ultrapetroleum.com.
Proxy
Statement Questions
WHO IS
ENTITLED TO VOTE AT THE ANNUAL MEETING?
Shareholders who own shares of common stock as of March 23,
2009, may vote at the meeting.
WHEN WERE
THE ENCLOSED SOLICITATION MATERIALS FIRST GIVEN TO
SHAREHOLDERS?
This Proxy Statement and accompanying proxy are first being
sent, or given, to shareholders on or about April 20, 2009.
WHAT AM I
VOTING ON, AND WHAT ARE THE BOARDS
RECOMMENDATIONS?
You are voting on the following:
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The election of five directors;
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The appointment of Ernst & Young LLP as the
independent auditor of the Company for the fiscal year ending
December 31, 2009;
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If presented, a shareholder proposal which is opposed by the
Board of Directors; and
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Such other business as may properly be brought before the Annual
Meeting or any adjournments or postponements thereof.
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The Board recommends a vote FOR the election
of the five directors, FOR the appointment of
Ernst & Young LLP as the Companys independent
registered public accounting firm for 2009, and, if presented,
AGAINST the shareholder proposal.
WHAT
CONSTITUTES A QUORUM OF SHAREHOLDERS?
We must have a quorum to conduct the meeting. A quorum is the
presence at the Annual Meeting in person or by proxy of one or
more shareholders holding 5% of the total common shares issued
and outstanding on the Record Date. For purposes of determining
whether a quorum is present under Yukon Territory law, broker
non-votes and abstentions count towards the establishment of a
quorum.
HOW DO I
VOTE?
You may vote your shares in person at the Annual Meeting or by
proxy. Since many of our shareholders are unable to attend the
meeting in person, we send forms of proxies and offer electronic
and telephone voting to all of our shareholders to enable them
to direct the voting of their shares. If your shares are held by
your broker in street name, your broker will provide
you with materials and instructions for voting your shares.
IF MY
SHARES ARE HELD IN STREET NAME BY MY BROKER, WILL MY
BROKER VOTE FOR ME?
Under New York Stock Exchange rules, if your shares are held by
your broker in street name and you do not vote your
shares by following the instructions provided by your broker,
your broker can vote your shares on certain routine
matters, including the election of directors and the appointment
of Ernst & Young LLP as the independent registered
public accounting firm for fiscal year 2009. However, on
non-routine matters, including shareholder proposals, if you do
not provide instructions to you broker on how to vote your
shares, and your broker is not permitted to vote on the
proposals without instructions from you, then your shares will
be counted as broker non-votes for those proposals.
WHAT IS A
PROXY?
A proxy is a person you appoint to vote on your behalf. When you
vote by completing and returning the enclosed proxy card, you
will be designating Michael D. Watford and Kelly L. Whitley as
your proxies.
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Management of the Company is soliciting the proxies so that
all common shares may be voted at the Annual Meeting. You
must complete and return the enclosed form of proxy or vote by
phone or Internet.
CAN I
APPOINT SOMEONE OTHER THAN THE INDIVIDUALS NAMED IN THE ENCLOSED
PROXY CARD TO VOTE MY SHARES?
Yes, you have the right to appoint another person of your
choice, who need not be a shareholder, to attend and act on your
behalf at the Annual Meeting. If you wish to appoint a person
other than those named in the enclosed proxy card, then draw a
line through the printed names appearing on the proxy card and
insert the name of your chosen proxyholder in the space
provided. This can also be accomplished via the Internet.
It is important for you to ensure that any other person you
appoint as your proxyholder will attend the Annual Meeting and
is aware that his or her appointment has been made to vote your
shares. Proxyholders should, on arrival, present themselves to a
representative of the inspector of election.
WHO MAY
SIGN THE PROXY CARD?
For a shareholder who is an individual, the form of proxy may be
signed either by the individual or by his or her authorized
attorney if accompanied by the original power of attorney or a
notarially certified copy. In the case of a shareholder which is
a corporation or an association, the form of proxy must be
signed by a duly authorized officer or by an authorized
attorney. Persons signing as officers, executors, administrators
or trustees should so indicate and must provide a true copy of
the document establishing their authority. An authorized person
of a partnership should sign in the partnership name. The
Chairman of the Annual Meeting has discretionary authority to
accept or reject proxies which do not strictly conform to the
foregoing requirements.
HOW WILL
MY PROXY VOTE MY SHARES?
Your proxies will vote in accordance with your instructions if
duly completed and deposited. If you complete and return your
proxy card but do not provide instructions on how to vote, your
proxies will vote FOR the five director nominees,
FOR the appointment of Ernst & Young LLP
as the independent registered public accounting firm for fiscal
year 2009 and AGAINST the shareholder proposal
described in this proxy statement. Also, your proxy card or
a vote by you via phone or the Internet will give your proxies
authority to vote, using their best judgment, on any other
business that properly comes before the meeting.
The accompanying form of proxy also confers discretionary
authority on the persons named therein to vote shares and
otherwise act in the proxyholders discretion with respect
to any amendments or variations to matters identified in the
Notice of Meeting and with respect to any other matters that may
properly come before the Annual Meeting or any adjournment
thereof.
HOW DO I
VOTE USING MY PROXY CARD?
There are three steps:
Step
1
Election of a board of five directors to serve until the next
Annual Meeting or until their successors are duly elected and
qualified.
To vote for a director, you check the box marked FOR
opposite the name of the director. To withhold a vote from a
director, mark the box WITHHELD opposite the name of
the director.
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To appoint Ernst & Young LLP as the independent
auditor of the Company for the fiscal year ended
December 31, 2009.
To vote for Proposal No. 2, you check the box marked
FOR. To withhold your vote, mark the box
WITHHELD opposite the proposal.
To be considered and voted upon at the meeting, a representative
of the shareholder submitting the shareholder proposal must be
present at the meeting. To vote for Proposal No. 3,
you check the box marked FOR. If you are opposed to
the proposal, check the box marked, AGAINST. If you
are unsure how to vote, check the box marked
ABSTAIN. If the shareholder representative is not
present at the meeting, all votes relating to the proposal will
be discarded.
Step
2
Sign and date your proxy card. IF YOU DO NOT SIGN AND DATE YOUR
PROXY CARD, YOUR VOTES CANNOT BE COUNTED. EACH PROPERLY EXECUTED
PROXY WILL BE VOTED IN THE MANNER DIRECTED. IF NO DIRECTION IS
MADE, EACH SUCH PROXY WILL BE VOTED AS FOR
PROPOSAL NO. 1 AND NO. 2 AND AGAINST
PROPOSAL NO. 3.
Step
3
Mail your proxy card in the pre-addressed, postage-paid envelope.
WHERE DO
I SEND MY PROXY CARD?
Please return your properly completed proxy card to our transfer
agent in the postage paid envelope provided or mail it to
Computershare Investor Services Inc., Proxy Dept., 100
University Avenue, 9th Floor, Toronto, Ontario, M5J 2Y1. If
you vote by telephone or the Internet as described below, please
do not send a proxy card to our transfer agent.
WHAT IS
THE DEADLINE FOR SUMBITTING MY PROXY CARD?
To be effective, your proxy card must be received by
Computershare Investor Services Inc. at the above address before
9:00 a.m., Eastern Daylight Time, on May 19, 2009.
CAN I
CHANGE MY MIND ONCE I HAVE SUBMITTED MY PROXY CARD TO THE
COMPANY?
Yes, if you complete another proxy card prior to the submission
deadline, the later-dated proxy card will replace the one
submitted earlier. If you are a registered shareholder,
you can revoke your proxy by stating clearly, in writing, that
you want to revoke your proxy. This statement should be
delivered:
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To the Companys Secretary by mail at 363 North Sam Houston
Parkway East, Suite 1200, Houston, Texas 77060, or by fax
at
(281) 876-2831
at any time up to and including the last business day preceding
the day of the Annual Meeting or any adjournment thereof,
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To the Chairman of the Annual Meeting prior to the commencement
of the meeting on the day of the meeting or any adjournment
thereof,
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In any other manner permitted by law.
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If you are a non-registered shareholder, you should
contact your nominee for instructions to revoke your proxy.
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HOW DO I
VOTE BY TELEPHONE?
Record holders may submit proxies by following the To Vote
Using the Telephone instructions on their proxy cards.
Call toll-free at 1-866-732-VOTE (8683). To vote your shares,
you must use the control number printed on your proxy/voting
instruction card. Telephone voting is accessible 24 hours a
day, seven days a week until 9:00 a.m. Eastern
Daylight Time on May 19, 2009. If you vote by telephone,
please do not return your
proxy/voting
instruction card to our transfer agent.
Shareholders who hold shares beneficially in street
name may vote by telephone by calling the number specified
on the voting instruction card provided by their brokers,
trustee or nominees. Please check the voting instruction card
for telephone voting availability.
HOW DO I
VOTE ON THE INTERNET?
Record holders with Internet access may submit proxies by
following the To Vote Using the Internet
instructions on their proxy cards.
Visit the website at
http://www.investorvote.com
and follow the on-screen instructions. To vote your shares, use
the control number printed on your proxy/voting instruction
card. Website voting is available 24 hours a day, seven
days a week, and will be accessible until
9:00 a.m. Eastern Daylight Time on May 19, 2009.
If you vote by website, please do not return your proxy/voting
instruction card to our transfer agent.
Shareholders who hold shares beneficially in street
name may vote by accessing the website specified on the
voting instruction cards provided by their brokers, trustees or
nominees. Please check the voting instruction card for Internet
voting availability.
CAN I
VOTE BY PROXY EVEN IF I PLAN TO ATTEND THE ANNUAL
MEETING?
Yes. If you vote by proxy, you do not need to fill out a ballot
at the Annual Meeting unless you want to change your vote.
WHO IS
SOLICITING MY PROXY, HOW IS IT BEING SOLICITED, AND WHO PAYS THE
COSTS?
Ultra Petroleum Corp., on behalf of the Board of Directors,
through its officers and employees, is soliciting proxies
primarily by mail. Solicitations may be supplemented by
telephone or other personal contact without special compensation
by regular officers and employees of the Company. No
solicitation will be made by specifically engaged employees or
soliciting agents.
BENEFICIAL
OWNERSHIP OF SECURITIES
Security
Ownership of Certain Beneficial Owners and Management
The following table sets forth, as of March 23, 2009,
certain information with respect to ownership of the
Companys common shares as to (a) all persons known to
the Company to be the beneficial owners of more than five
percent of the Companys outstanding common shares,
(b) each director (including the nominees), (c) each
of the executive officers named in the Summary Compensation
Table, and (d) all executive officers and directors of the
Company as a group. Unless otherwise indicated, all common
shares are owned directly
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and each owner has sole voting and investment power with respect
to such shares listed next to their names in the following table.
The information as to shares beneficially owned has been
obtained from filings made by the named beneficial owners with
the Securities and Exchange Commission and Canadian regulatory
authorities as of March 23, 2009, or, in the case of
executive officers and directors of the Company information that
has been furnished by such individuals.
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Number of
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Percent of
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Name of Beneficial Owner
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Common Shares
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Class(a)
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Directors and Executive Officers:
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Michael D. Watford(b)
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4,493,596
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3.0
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%
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W. Charles Helton(c)
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783,208
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*
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Robert E. Rigney(d)
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1,317,143
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1.0
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%
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Stephen J. McDaniel
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3,453
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Roger A. Brown
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3,404
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*
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William R. Picquet(e)
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208,920
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*
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Marshall D. Smith(f)
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234,434
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*
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Stuart E. Nance(g)
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72,537
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Common shares all directors and executive officers own as a
group (8 persons)(h)
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7,116,695
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4.7
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%
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Fidelity Management & Research Company(i)
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12,808,300
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8.5
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%
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82 Devonshire Street
Boston, MA 02109
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Morgan Stanley(j)
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17,725,370
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11.7
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%
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1585 Broadway
New York, NY 10036
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Wellington Management Company, LLP(k)
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11,972,908
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7.9
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%
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75 State Street
Boston, MA 02109
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Less than 1% |
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As of March 23, 2009 there were 151,232,545 common shares
outstanding. |
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Includes 126,118 common shares issuable upon exercise of vested
options; 1,780,312 common shares issuable upon exercise of
vested options owned by Watford Interests Ltd.; and
1,683,980 shares owned by Watford Interests, Ltd. directly.
Watford Interests Ltd. is a family partnership in which
Mr. Watford has a beneficial interest. |
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Includes 103,220 shares owned by the Helton Family
Foundation in which Mr. Helton has shared voting power. |
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Includes 160,000 common shares issuable upon exercise of vested
options; 300,000 shares owned by Mr. Rigneys
family limited partnership and 100,000 shares owned by
Mr. Rigneys Grantor Retained Annuity Trust. |
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Includes 207,052 common shares issuable upon exercise of vested
options. |
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Includes 231,895 common shares issuable upon exercise of vested
options owned by VMS Interests, Ltd. VMS Interests, Ltd. is a
family partnership in which Mr. Smith has a beneficial
interest. |
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Includes 67,224 common shares are issuable upon exercise of
vested options. |
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Includes 2,572,691 common shares issuable upon exercise of
vested options. |
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Information is based upon a Schedule 13G filed with the
Commission on February 17, 2009 by FMR LLC. FMR LLC
represents that it has sole voting power over 160 shares
and sole dispositive power over 12,808,300 shares of Ultra
common stock. |
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Information is based upon a Schedule 13G filed with the
Commission on February 16, 2009 by Morgan Stanley as a
parent company. Morgan Stanley represents that it has sole
voting power over 17,021,166 shares and sole dispositive
power over 17,725,370 shares of Ultra common stock and
shared voting power over 106,039 shares of Ultra common
stock. |
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(k) |
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Information is based upon a Schedule 13G filed with the
Commission on February 17, 2009 by Wellington Management
Company, LLP. Wellington Management Company, LLP represents that
it has shared voting power over 9,204,243 shares and shared
dispositive power over 11,972,908 shares of Ultra common
stock. |
SECTION 16(A)
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as
amended, requires the Companys directors and executive
officers, and persons who own more than ten percent of a
registered class of the Companys equity securities, to
file with the Securities and Exchange Commission and any
exchange or other system on which such securities are traded or
quoted, initial reports of ownership and reports of changes in
ownership of common shares and other equity securities of the
Company.
To the Companys knowledge, based solely on a review of the
copies of such Section 16(a) reports furnished to the
Company and written representations that no other reports were
required, the Company believes that all reporting obligations of
the Companys officers, directors and greater than ten
percent shareholders under Section 16(a) were satisfied
during the year ended December 31, 2008, except with
respect to Mr. Nance, a Form 3 was filed late and a
report on Form 4 reporting five delinquent Form 4
filings involving a total of nine transactions for 2007 and 2008
was filed on April 9, 2009.
EXECUTIVE
COMPENSATION
Compensation Discussion and Analysis
In this compensation discussion and analysis, we discuss our
compensation objectives, our decisions and the rationale behind
those decisions relating to 2008 compensation for our named
executive officers.
Objectives
of our compensation program
Our business strategy is to enhance shareholder value through
sustained growth in our reserve base, production levels and
resulting cash flows from operations. Our compensation program
is designed to attract, retain, and motivate employees in order
to effectively execute our business strategy.
What our
compensation program is designed to reward
Our compensation program is designed to reward performance that
contributes to the achievement of our business strategy on both
a short-term and long-term basis. We believe that compensation
should:
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relate to the value created for shareholders by being directly
tied to the financial performance and condition of the Company
and the particular executive officers contribution thereto,
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reward individuals who help the Company achieve its short-term
and long-term objectives and thereby contribute significantly to
the Companys success,
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help to attract and retain the most qualified individuals in the
oil and gas industry by being competitive with compensation paid
to persons having similar responsibilities and duties in other
companies in the same and closely related industries, and
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reflect the qualifications, skills, experience and
responsibilities of the particular executive officer.
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Elements
of our compensation program and why we pay each
element
Our compensation program is comprised of four elements: base
salary, cash bonus, long-term equity-based compensation and
benefits.
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We pay base salary:
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in order to recognize each executive officers unique value
and historical contributions to the Companys success in
light of salary norms in the industry and the general
marketplace,
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to match competitors for executive talent,
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to provide executives with sufficient, regularly-paid
income, and
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to reflect position and level of responsibility.
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We include an annual bonus as part of our compensation program
because we believe this element of compensation helps to
motivate management to achieve key shorter-term corporate
objectives and aligns executives interests with
shareholder interests.
Long-term equity-based incentive compensation is an element of
our compensation policy because we believe it:
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aligns executives interests with the interests of the
Companys shareholders,
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rewards long-term performance,
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is required in order for the Company to be competitive from a
total remuneration standpoint,
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encourages executive retention, and
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gives executives the opportunity to share in the long-term
performance of the Company.
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We offer benefits such as matching 401(k) contributions and
payment of insurance premiums in order to provide a competitive
remuneration package.
How we
determine each element of compensation
The Compensation Committee of our Board of Directors oversees
our compensation programs. The Committees primary purpose
is to assist the Board of Directors in the discharge of its
fiduciary responsibilities relating to the fair and competitive
compensation of the Companys executive officers.
Consistent with the listing requirements of the New York Stock
Exchange, the Compensation Committee is composed entirely of
independent members of our Board of Directors.
To assist us in evaluating our compensation for 2008, the
Compensation Committee retained Stone Partners to advise it as
to the market and appropriate benchmarks for companies of our
size and industry. The Committee considered the advice of the
consultant as only one factor among the other items discussed in
this compensation discussion and analysis. Stone Partners
prepared an analysis for us of the compensation paid by a peer
group composed of the following companies: Quicksilver
Resources, Cabot Oil, Range Resources, Denbury Resources,
St. Mary Land & Exploration, Forest Oil Corp.,
Southwestern Energy, Energen Corp., XTO Energy Inc., Plains
Exploration, Cimarex Energy, Newfield Exploration, Pioneer
Natural Resources, Noble Energy, EOG Resources, and Chesapeake
Energy Corp. These companies were chosen because they generally
reflect companies Ultra competes with for executive talent.
Stone Partners is independent and, other than its engagement to
review our compensation practices, has no other business
relationship with us.
Generally, we target the 50th percentile for base salary
and a higher 75th percentile for total compensation based
on performance metrics being satisfied. Although we review
survey information as a frame of reference, ultimately our
compensation decisions are qualitative, not quantitative, and
take into consideration in material part the factors such as the
age of the data in the survey, the particular officers
contribution to the financial performance and condition of the
Company, as well as such officers qualifications, skills,
experience and responsibilities. Outside factors are considered
as well, such as industry shortages of qualified employees for
such positions, recent experience in the marketplace, as well as
time lapse between the surveys used and the time our
compensation decisions are being made. Therefore, the final base
salary of a particular officer may be greater or less than the
50th percentile and targeted total compensation may be
greater or less than the 75th percentile.
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Role of CEO. Through an iterative process,
Mr. Watford along with other members of executive
management develops preliminary recommendations for compensation
actions, including recommendations for performance targets to be
used to determine compensation for the named executive officers,
including Mr. Watford. The Compensation Committee reviews
these preliminary recommendations, accepts or modifies them, and
makes final recommendations for Board approval.
With respect to Mr. Watfords compensation,
historically this has been based on an employment agreement
between the Company and Mr. Watford approved by the
Compensation Committee and the Board of Directors. Under the
Employment Agreement, Mr. Watfords base salary is set
at $600,000, and is to be reviewed by the Compensation Committee
annually for appropriate increases based on
Mr. Watfords performance and the then current market
conditions for comparable positions. While he has input into his
base salary while negotiating the employment agreement, during
2008, Mr. Watford did not make any recommendation for an
increase to his base salary.
The members of the Compensation Committee consider the
recommendations of Mr. Watford and the management team as
well as the other information described in the proxy, and apply
their respective independent business judgments to these
recommendations in arriving at a final decision.
Base salary. With respect to base salary, we
target by position the 50th percentile of the peer
companies named above. Based on survey data and the report of
our compensation consultant, our base salary levels were
approximately 88% of the median salary or below the
50th percentile. Accordingly, at the recommendation of our
compensation consultant, in 2008 the base salaries of all of the
named executive officers were increased in order to align them
with the 50th percentile.
Bonus Compensation. Our bonus compensation is
divided into two parts: cash bonus under an Annual Incentive
Plan (AIP) and long-term incentives under the Long
Term Incentive Plan (LTIP) and Best in Class
programs described below.
AIP. In 2005, we adopted the AIP whereby
executive officers, senior management and other non-management
personnel have the potential to receive a meaningful cash bonus
based on annual performance metrics pre-established by the
Compensation Committee as well as discretionary factors. At a
regularly scheduled February meeting, the Compensation Committee
establishes threshold, target and maximum performance measures
such as net income, cash flow, and production for the ensuing
year as well as funding for each performance level matched to
employee specific targets. Threshold levels are set below those
expected to be achieved, target levels are set at levels that
are reasonably possible to be achieved, and maximum levels are
set at levels that are considered difficult to be achieved.
Because unanticipated events, some of which are beyond our
control, may affect our attainment of the goals established by
the Committee, the final determination of actual awards under
the AIP is discretionary so that at the end of the performance
period, the compensation committee adjusts the targets, taking
into account factors such as commodity prices and significant
corporate transactions, to determine the actual amount of bonus
compensation, if any. For instance, a large acquisition or
divestiture may substantially change our budget and forecast,
thereby affecting the performance metrics. Also, our
Compensation Committee encourages our executives to pursue
long-term goals, even if these long-term goals may result in a
reduction in our near-term performance. There is no maximum
incentive award amount that may be recommended for any
individual; the total of all individual incentive awards,
however, may not exceed the funded and approved incentive pool.
The Compensation Committee may adjust the initial incentive pool
by 20% to reflect their overall assessment of Company results at
the end of the year. Awards under the AIP are payable in cash,
provided that we reserve the right to pay amounts in our common
shares.
In 2008, based on the recommendation of our compensation
consultant, we increased target levels under the AIP for
employee levels as follows: Level I: from 75% to 100% of
base salary; Level II: from 50% to 60% of base salary; and
Level III: from 40% to 50% of base salary. These increases
are expected to contribute to aligning the Companys total
compensation level at the 75th percentile when performance
metrics are satisfied.
9
In February 2008, the Compensation Committee established net
income, cash flow from operations and production metrics,
weighted approximately equal, for the ensuing year and the
associated funding. All performance measures were met at the
maximum level. The Compensation Committee awarded a bonus to
Mr. Watford for 2008 of $1.75 million, representing
292% of his 2008 base salary. Mr. Smith was awarded a bonus
for 2008 of $350,000, representing 152% of his 2008 base salary,
Mr. Picquet was awarded a bonus for 2008 of $400,000,
representing 150% of his 2008 base salary, and Mr. Nance
was awarded a bonus for 2008 of $144,000 representing 80% of his
2008 base salary.
Long-Term Equity-Based Incentives. Each year,
beginning in 2005, we adopt an LTIP in order to further align
the interests of key employees with shareholders and give key
employees the opportunity to share in the long-term performance
of the Company by achieving specific corporate financial and
operational goals. Each LTIP covers a period of three years. For
example, the 2005 LTIP covers the period between
January 2005 December 2007, and the 2006
LTIP covers the period between January 2006
December 2008.
Officers, managers, and other key employees of the Company who
are recommended by the CEO and approved by the Committee are
eligible to participate in the LTIPs. To date, each LTIP has two
components: an LTIP Stock Option Award and an
LTIP Common Stock Award. Under each LTIP, the
Committee establishes a percentage of base salary for each
participant which is multiplied by the participants base
salary to derive a Long Term Incentive Value (LTI
Value). With respect to the LTIP Stock Option Award
portion of the LTIP, participants are awarded options to
purchase shares of common stock of the Company in an amount
equal to one half of the LTI Value based on the fair value of
the options on the date of grant (using Black-Scholes
methodology). The options vest and become exercisable after a
period of three years. The options are not performance based.
The LTIP Common Stock Award is based on the other half of the
LTI Value, which is the target value amount that may
be awarded to the participant in the form of shares of the
Companys common stock at the end of the three year
performance period if the performance measures are met. The LTIP
Common Stock Award is performance based and is measured over a
three year performance period. For each LTIP Common Stock Award,
the Committee establishes performance measures at the beginning
of each performance period, and each participant is assigned
threshold and maximum award levels in the event that actual
performance is below or above target levels. For all LTIP Common
Stock Awards to date, the Committee used the following
performance measures: return on equity, reserve replacement
ratio, and production growth. As with the AIP, threshold levels
are set below those expected to be achieved, target levels are
set at levels that are reasonably possible to be achieved, and
maximum levels are set at levels that are considered difficult
to be achieved.
The value of the award for the 2006 and 2007 LTIP Common Stock
Awards are expressed as dollar targets and become payable in
common shares equal to a percentage of the dollar target at the
end of each performance period based on the Companys
overall performance during such period. During the third quarter
of 2008, the Board of Directors modified the 2008 LTIP Common
Stock Award such that the dollar target is converted to a target
number of shares on the date the Board approved the
modification. Thus, with respect to the 2008 LTIP Common Stock
Award, the participants are able to participate in the movement
of the Companys stock price during the performance period,
similar to the Best in Class Program (described
below). Participants must be employed by the Company when the
common stock payment for the LTIP Common Stock Award is
distributed in order to receive the award. If the participant is
not employed on the distribution date, then
he/she will
not receive the award.
In February 2008, the Compensation Committee approved the award
of an aggregate of 107,714 options to purchase common stock to
the Companys officers and employees, representing 0.07% of
the outstanding common shares on the date of grant. A total of
60 employees and no non-employee directors received stock
option awards, including all four of the named executive
officers, who received an aggregate of 44,483 stock options or
15% of the total stock options granted in fiscal 2008. All LTIP
Stock Options granted to the named executive officers in 2008
vest in three years.
Based on the recommendation of our compensation consultant, in
2008 we increased the LTIP multiplier for employee Levels I
and II from three times base salary to four times base
salary and from two times base
10
salary to two and a half times base salary, respectively. These
increases are expected to contribute to aligning the
Companys total compensation level at the
75th percentile when performance metrics are satisfied.
Best in Class Program. In 2005 and in
2008, the Company established the Best in
Class Program for all permanent full time employees.
Under the Best in Class Programs, participants are eligible
to receive a number of shares of the Companys common stock
based on the performance of the Company. As with the LTIP, the
Best in Class Program is measured over a three year
performance period. The performance period related to the 2005
Best in Class Program ended on December 31, 2007, with
the resulting payout in the second quarter of 2008.
The Best in Class program recognizes and financially rewards the
collective efforts of all of our employees in achieving
sustained industry leading performance and the enhancement of
shareholder value. Under the 2008 Best in Class program, on
January 1, 2008 or the employment date if subsequent to
January 1, 2008, eligible employees received a contingent
award of stock units equal to $60,000 worth of our common stock
based on the average high and low share price on the first day
of the performance period. Employees joining the Company after
January 1, 2008 participate on a pro rata basis based on
their length of employment during the performance period.
The number of contingent units that will vest and become payable
under the 2008 Best in Class program is based on our performance
relative to the industry during a three-year performance period
beginning January 1, 2008, and ending December 31,
2010, and are set at threshold (50%), target (100%) and maximum
(150%) levels. For each vested unit, the participant will
receive one share of common stock. The participant must be
employed on the date the awards are distributed in order to
receive the award. For example, at a conversion price of $71.61
per share (average high and low stock price per share on the
first day of the performance period), the $60,000 award is equal
to 838 contingent units. At the end of the performance period,
if the maximum level for all performance measures is
met and the participant was employed from the beginning of the
performance period and the participant is employed on the date
the award is distributed, then 1,257 (150% of 838) units
will vest and the participant will receive 1,257 shares of
the Companys common stock on such date. If the participant
is not employed on the distribution date, then
he/she will
not receive the award.
The performance measures are all sources finding and development
cost and full cycle economics. Performance results are
determined after the end of the performance period and
publication of the applicable industry reports. In 2008, the
compensation committee analyzed the performance results, and
based on this analysis the 2005 Best in Class program was paid
out at the maximum level to all employees, including the named
executive officers.
Benefits. We provide Company benefits, or
perquisites, that we believe are standard in the industry to all
of our employees. These benefits consist of a group medical and
dental insurance program for employees and their qualified
dependents, group life insurance for employees and their
spouses, accidental death and dismemberment coverage for
employees, a Company sponsored cafeteria plan and a
401-K
employee savings and protection plan. The costs of these
benefits are paid for largely by the Company. The Company also
matches employee deferral amounts up to a total of 5% of
eligible compensation. The Companys discretionary
401-K
contribution to each qualified participant was calculated based
on 8% of the employees eligible salary during 2008. The
Company pays all administrative costs to maintain the plan.
How
elements of our compensation program are related to each
other
We view the various components of compensation as related but
distinct and emphasize pay for performance with a
significant portion of total compensation reflecting a risk
aspect tied to long- and short-term financial and strategic
goals. Our compensation philosophy is to foster entrepreneurship
at all levels of the organization by making long-term
equity-based incentives, in particular stock option grants, a
significant component of executive compensation. We determine
the appropriate level for each compensation component based in
part, but not exclusively, on our view of internal equity and
consistency, and other considerations we deem relevant, such as
rewarding extraordinary performance. Our Compensation Committee
has not adopted any formal or informal policies or guidelines
for allocating compensation between long-term and currently
11
paid out compensation, between cash and non-cash compensation,
or among different forms of non-cash compensation.
Accounting
and tax considerations
We have structured our compensation program to comply with
Internal Revenue Code Sections 162(m) and 409A. Under
Section 162(m) of the Internal Revenue Code, a limitation
was placed on tax deductions of any publicly-held corporation
for individual compensation to certain executives of such
corporation exceeding $1,000,000 in any taxable year, unless the
compensation is performance-based. If an executive is entitled
to nonqualified deferred compensation benefits that are subject
to Section 409A, and such benefits do not comply with
Section 409A, then the benefits are taxable in the first
year they are not subject to a substantial risk of forfeiture.
In such case, the service provider is subject to regular federal
income tax, interest and an additional federal income tax of 20%
of the benefit includible in income.
In connection with Mr. Watfords 2004 employment
agreement, he was awarded shares of the Companys stock
over a three year period with the final period being 2007. This
award was non-performance based compensation paid in excess of
the Internal Revenue Code Section 162(m) tax deduction
limit due to significant share price appreciation over the three
year period. We currently have no other employees with
non-performance based compensation paid in excess of the
Internal Revenue Code Section 162(m) tax deduction limit;
however, we reserve the right to use our judgment to authorize
compensation payments that do not comply with the exemptions in
Section 162(m) when we believe that such payments are
appropriate and in the best interest of the shareholders, after
taking into consideration changing business conditions or the
executives individual performance
and/or
changes in specific job duties and responsibilities.
All equity awards to our employees, including executive
officers, and to our directors have been granted and reflected
in our consolidated financial statements, based upon the
applicable accounting guidance, at fair market value on the
grant date in accordance with Statement of Financial Accounting
Standards No. 123R (revised 2004), Share-Based
Payment (SFAS 123R).
Stock
Ownership Policy
Currently we do not have a stock ownership policy that applies
to our employees.
Compensation
Committee Report
We have reviewed and discussed with management certain
compensation discussion and analysis provisions to be included
in the Companys 2009 proxy statement filed pursuant to
Section 14(a) of the Securities Exchange Act of 1934. Based
on the reviews and discussions referred to above, we recommend
to the Board of Directors that the compensation discussion and
analysis referred to above be included in the Companys
proxy statement.
Compensation Committee:
Mr. W. Charles Helton (Chairman)
Mr. Robert E. Rigney
Mr. Stephen J. McDaniel
12
Summary
Compensation Table
The following table shows compensation information for the
fiscal years ended December 31, 2008, 2007 and 2006, for
our principal executive officer, our principal financial
officer, and two additional executive officers. We refer to
these persons as named executive officers.
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Change in
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Pension
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Non-
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Value and
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Equity
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Nonqualified
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Incentive
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Deferred
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All
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Stock
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Option
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Plan
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Compensation
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Other
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Salary
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Bonus
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Awards
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Awards
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Compensation
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Earnings
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Compensation
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Total
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Name and Principal Position
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Year
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($)
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(1)($)
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(2)($)
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(3)($)
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($)
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(4)($)
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(5)($)
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($)
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Michael D. Watford,
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2008
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$
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600,000
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$
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1,750,000
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$
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1,212,500
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$
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560,681
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$
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29,670
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$
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4,152,851
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Chairman, Chief Executive
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2007
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$
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587,500
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$
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1,500,000
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$
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1,028,125
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$
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417,608
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$
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29,420
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$
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3,562,653
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Officer and President
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2006
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$
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493,750
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$
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500,000
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$
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3,554,900
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$
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468,677
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$
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28,770
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$
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5,046,097
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Marshall D. Smith,
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2008
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$
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230,000
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$
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350,000
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$
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312,500
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$
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143,292
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$
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29,670
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$
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1,065,462
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Chief Financial Officer
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2007
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$
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230,000
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$
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300,000
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$
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235,124
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$
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108,044
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$
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29,870
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$
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903,038
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2006
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$
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222,500
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$
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260,000
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$
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82,500
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$
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123,728
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$
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28,770
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$
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717,498
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William R. Picquet,
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2008
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$
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265,000
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$
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400,000
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$
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334,375
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$
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155,085
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$
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30,070
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$
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1,184,530
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Vice President Operations
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2007
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$
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235,000
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$
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325,000
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$
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233,632
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$
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110,434
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$
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28,770
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$
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932,836
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2006
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$
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227,500
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$
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235,000
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$
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84,375
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$
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126,545
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$
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28,770
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$
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702,190
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Stuart E. Nance,
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2008
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$
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180,000
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$
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144,000
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$
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148,775
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$
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65,922
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$
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23,570
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$
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562,267
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Vice President Marketing
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2007
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$
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160,000
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$
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128,000
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$
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126,275
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$
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29,042
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$
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20,970
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$
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464,287
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2006
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$
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135,000
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$
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128,000
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$
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45,525
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$
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24,213
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$
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17,720
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$
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350,458
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(1) |
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The amounts in this column represent bonuses earned in 2008,
2007 and 2006, respectively, under our AIP. The Compensation
Committee awarded a bonus to Mr. Watford of $1,000,000 in
2006, of which $500,000 was paid in cash and $500,000 was paid
in shares of our common stock. |
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(2) |
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The amounts in this column relate to total estimated payouts
earned during 2008, 2007 and 2006, respectively, under our LTIP
described in Compensation Discussion and Analysis.
Actual awards under the LTIP are not payable to the named
executive officers until after the end of the three-year
performance cycle and adequate time has elapsed to allow for
performance measurement. The dollar amounts stated for stock
awards reflect the expense recognized for financial statement
reporting purposes for the years ended December 31, 2008,
2007 and 2006, respectively, in accordance with SFAS 123R.
The assumptions utilized in the calculation of these amounts are
set forth in Footnote 6 to the Companys consolidated
financial statements included in the Annual Report on
Form 10-K
for the year-ended December 31, 2008.
Mr. Watfords 2006 stock awards also include
$2,742,400 associated with the award of 40,000 shares in
conjunction with his employment agreement as well as $500,000 of
his 2006 bonus paid in Company stock. |
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(3) |
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Represents LTIP stock options granted to the named executive
officers in 2006, 2007 and 2008. The dollar amounts stated for
option awards reflect the expense recognized for financial
statement reporting purposes for the years ended
December 31, 2008, 2007 and 2006, respectively, in
accordance with SFAS 123R. The fair value of each share
option award is estimated on the date of grant using a Black
Scholes pricing model based on assumptions set forth in
Note 6 to the Companys consolidated financial
statements included in the Annual Report on
Form 10-K
for the year-ended December 31, 2008. The grant date fair
value of the share option awards is $33.90, $24.60 and $23.93
per share for options granted on February 18, 2008,
February 16, 2007 and March 30, 2006, respectively. |
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(4) |
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The named executive officers receive no benefits from the
Company under defined pension or defined contribution plans. |
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(5) |
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Unless otherwise indicated, the amounts in this column consist
of matching and profit sharing contributions under the
Companys 401(k) plan and the value of certain other
benefits received by the named executive officer. These other
benefits include life insurance premiums paid on behalf of the
named executive officers. |
13
Grants of
Plan-Based Awards
The following table sets forth specific information with respect
to each equity grant made under any Company plan to a named
executive officer in 2008.
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All Other
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All Other
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Stock
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Option
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Awards:
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Awards:
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Exercise or
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Grant
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Estimated Future Payouts
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Number of
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Number of
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Base
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Date Fair
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Estimated Future Payouts
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Under Equity Incentive
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Shares of
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Securities
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Price of
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Value of
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Under Non-Equity Incentive Plan Awards
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|
|
Plan Awards
|
|
|
Stock or
|
|
|
Underlying
|
|
|
Option
|
|
|
Stock and
|
|
|
|
|
|
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
|
Threshold
|
|
|
Target
|
|
|
|
Maximum
|
|
|
Units
|
|
|
Options
|
|
|
Awards(1)
|
|
|
Option
|
|
Name
|
|
Grant Date
|
|
|
|
(#)
|
|
|
(#)
|
|
|
(#)
|
|
|
(#)
|
|
|
(#)
|
|
|
|
(#)
|
|
|
(#)
|
|
|
(#)
|
|
|
($/Sh)
|
|
|
Awards(2)
|
|
|
Michael D. Watford
|
|
|
02-18-2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26,557
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
75.18
|
|
|
$
|
900,413
|
|
|
|
|
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,911
|
|
|
|
13,038
|
|
|
|
|
19,557
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
900,000
|
|
|
|
|
|
(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
419
|
|
|
|
838
|
|
|
|
|
1,257
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
60,000
|
|
Marshall D. Smith
|
|
|
02-18-2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,787
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
75.18
|
|
|
$
|
230,113
|
|
|
|
|
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,000
|
|
|
|
3,332
|
|
|
|
|
4,998
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
230,000
|
|
|
|
|
|
(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
419
|
|
|
|
838
|
|
|
|
|
1,257
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
60,000
|
|
William R. Picquet
|
|
|
02-18-2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,819
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
75.18
|
|
|
$
|
265,102
|
|
|
|
|
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,152
|
|
|
|
3,839
|
|
|
|
|
5,758
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
265,000
|
|
|
|
|
|
(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
419
|
|
|
|
838
|
|
|
|
|
1,257
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
60,000
|
|
Stuart E. Nance
|
|
|
02-18-2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,320
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
75.18
|
|
|
$
|
112,564
|
|
|
|
|
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
489
|
|
|
|
1,630
|
|
|
|
|
2,445
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
112,500
|
|
|
|
|
|
(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
419
|
|
|
|
838
|
|
|
|
|
1,257
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
60,000
|
|
|
|
|
(1) |
|
All stock options granted to the named executive officers in
2008 were awarded under the 2005 Stock Incentive Plan and have
an exercise price based on the fair market value of the
Companys common stock on the date of grant. The fair
market value, as described in the 2005 Stock Incentive Plan, is
the average high and low price of the Companys stock on
the date of grant. |
|
(2) |
|
The dollar value stated for options reflect the number of shares
granted in 2008 multiplied by the fair value ($33.90 per share
option) in accordance with SFAS 123R. The assumptions
utilized in the calculation of these amounts are set forth in
Footnote 6 to the Companys consolidated financial
statements included in the Annual Report on
Form 10-K
for the year ended December 31, 2008. |
|
(3) |
|
Represents LTIP stock options granted to the named executive
officers in 2008, all of which vest on February 18, 2011. |
|
(4) |
|
Represents potential payouts under our 2008 LTIP common stock
awards for the three-year period ending December 2010. Pursuant
to the LTIP, the Compensation Committee determined target payout
amounts for each named executive officer in February 2008.
Awards are paid after the end of the three-year period based on
the attainment of pre-established performance measures. The LTIP
is discussed in further detail under the heading
Compensation Discussion and Analysis. |
|
(5) |
|
Represents potential payouts under the Best in Class program. On
January 1, 2008 or the employment date if subsequent to
January 1, 2008, all employees received a contingent award
of stock units equal to $60,000 worth of our common stock based
on the average high and low share price on the date of grant.
The number of units that will vest and become payable is based
on our performance relative to the industry during a three-year
performance period beginning January 1, 2008, and ending
December 31, 2010, and are set at threshold (50%), target
(100%) and maximum (150%) levels. For each vested unit, the
participant will receive one share of common stock. The Best in
Class program is discussed in further detail under the heading
Compensation Discussion and Analysis. |
14
Employment
Agreements
We are party to an employment agreement with Mr. Watford,
our Chairman, President and Chief Executive Officer, which
became effective February 1, 2007. The agreement has an
initial term of three years, which we may elect to renew for
successive one year terms. The terms of any extension must be
agreed to by us and Mr. Watford. If the agreement is not
extended, Mr. Watford will be entitled to the payments
described below.
Under the agreement, Mr. Watfords base salary is
$600,000, which shall be reviewed by the compensation committee
annually for appropriate increases based on
Mr. Watfords performance and the then current market
conditions for comparable positions. In addition,
Mr. Watford is entitled to participate in our long-term
incentive compensation plans. We have agreed that any plans we
adopt in the future will be at least as favorable to
Mr. Watford as plans currently in effect. Mr. Watford
prepares the applicable performance targets, goals and rewards
under such plans, for review and approval by our compensation
committee. We provide Mr. Watford an automobile, and reimburse
him for reasonable business expenses. He also is entitled to
participate in any life insurance, disability and health
insurance plans we maintain during the term of the agreement.
We may terminate the agreement at any time for any reason or for
cause. Cause is generally defined as a breach of the agreement
by Mr. Watford, or the commission by him of illegal acts.
Additionally, Mr. Watford may terminate the agreement
within two years following any of the following:
(i) assignment to Mr. Watford of duties inconsistent
with his position with us as of the date of the agreement;
(ii) a change of control of the Company; (iii) our
failure to continue to provide Mr. Watford the level of
compensation to which he is entitled as of the date of the
agreement; (iv) our requirements that Mr. Watford
relocate outside of Houston, Texas; or (v) our breach of
the agreement.
If the agreement is terminated other than for just cause or we
fail to renew it following the end of the three year term of the
agreement, we are required to pay Mr. Watford a lump sum
equal to his most recent salary plus his most recent bonus. In
addition, all of his unvested equity awards will immediately
vest upon such termination, and be exercisable for one year. We
have also agreed to indemnify Mr. Watford for liabilities
he may be subject to as a result of acting as an officer of our
Company or a subsidiary, and to maintain director and officer
liability insurance coverage.
Equity
Incentive Plan Awards
Terms
of Stock Option Grants
The Companys Stock Incentive Plans are administered by the
Compensation Committee of the Board of Directors as the
Plan Administrator. The Plan Administrator may make
awards of stock to employees, directors, officers and
consultants of the Company as long as the aggregate number of
common shares issuable to any one person pursuant to incentives
does not exceed 5% of the number of common shares outstanding at
the time of the award. In addition, no participant may receive
during any fiscal year awards of incentives covering an
aggregate of more than 500,000 common shares. The Plan
Administrator determines the vesting requirements and any
vesting restrictions or forfeitures that occur in certain
circumstances. Incentives may not have an exercise period longer
than 10 years. The exercise price of the stock may not be
less than the fair market value of the common shares at the time
of award, where fair market value means the average
high and low trading price of the common shares on the date of
the award. In the event of a change of control or termination
upon change of control of the Company, all outstanding awards
are paid at maximum levels in cash.
15
Outstanding
Equity Awards at Fiscal Year-End
The following table sets forth specific information with respect
to unexercised options, unvested stock and equity incentive plan
awards for each named executive officer outstanding as of
December 31, 2008.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
Awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
Market or
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan
|
|
|
Payout
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
|
Value of
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Unearned
|
|
|
|
|
|
|
|
|
|
Plan
|
|
|
|
|
|
|
|
|
|
|
|
Market
|
|
|
Unearned
|
|
|
Shares,
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Value of
|
|
|
Shares,
|
|
|
Units or
|
|
|
|
Number of
|
|
|
Number of
|
|
|
Number of
|
|
|
|
|
|
|
|
|
Shares or
|
|
|
Shares or
|
|
|
Units or
|
|
|
Other
|
|
|
|
Securities
|
|
|
Securities
|
|
|
Securities
|
|
|
|
|
|
|
|
|
Units of
|
|
|
Units of
|
|
|
Other
|
|
|
Rights
|
|
|
|
Underlying
|
|
|
Underlying
|
|
|
Underlying
|
|
|
Option
|
|
|
|
|
|
Stock That
|
|
|
Stock That
|
|
|
Rights
|
|
|
That
|
|
|
|
Unexercised
|
|
|
Unexercised
|
|
|
Unexercised
|
|
|
Exercise
|
|
|
Option
|
|
|
Have Not
|
|
|
Have Not
|
|
|
That
|
|
|
Have Not
|
|
|
|
Options (#)
|
|
|
Options (#)
|
|
|
Unearned
|
|
|
Price
|
|
|
Expiration
|
|
|
Vested
|
|
|
Vested
|
|
|
Have Not
|
|
|
Vested
|
|
Name
|
|
Exercisable
|
|
|
Unexercisable(1)
|
|
|
Options (#)
|
|
|
($)
|
|
|
Date
|
|
|
(#)
|
|
|
($)
|
|
|
Vested (#)
|
|
|
($)
|
|
|
Michael D. Watford
|
|
|
500,000
|
|
|
|
|
|
|
|
|
|
|
$
|
0.25
|
|
|
|
03-24-10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
500,000
|
|
|
|
|
|
|
|
|
|
|
$
|
1.49
|
|
|
|
01-16-11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
200,000
|
|
|
|
|
|
|
|
|
|
|
$
|
4.43
|
|
|
|
05-07-12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
200,000
|
|
|
|
|
|
|
|
|
|
|
$
|
4.83
|
|
|
|
04-25-13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
400,000
|
|
|
|
|
|
|
|
|
|
|
$
|
11.68
|
|
|
|
02-06-14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000
|
|
|
|
|
|
|
|
|
|
|
$
|
25.68
|
|
|
|
02-07-15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26,118
|
|
|
|
|
|
|
|
|
|
|
$
|
63.05
|
|
|
|
03-30-16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36,585
|
|
|
|
|
|
|
$
|
51.60
|
|
|
|
02-16-17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26,557
|
|
|
|
|
|
|
$
|
75.18
|
|
|
|
02-18-18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
838
|
(2)
|
|
$
|
60,000
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27,456
|
(3)
|
|
$
|
937,500
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
39,537
|
(4)
|
|
$
|
1,350,000
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,557
|
(5)
|
|
$
|
1,350,000
|
(5)
|
Marshall D. Smith
|
|
|
225,000
|
|
|
|
|
|
|
|
|
|
|
$
|
33.57
|
|
|
|
07-18-15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,895
|
|
|
|
|
|
|
|
|
|
|
$
|
63.05
|
|
|
|
03-30-16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,350
|
|
|
|
|
|
|
$
|
51.60
|
|
|
|
02-16-17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,787
|
|
|
|
|
|
|
$
|
75.18
|
|
|
|
02-18-18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
838
|
(2)
|
|
$
|
60,000
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,248
|
(3)
|
|
$
|
247,500
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,104
|
(4)
|
|
$
|
345,000
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,998
|
(5)
|
|
$
|
345,000
|
(5)
|
William R. Picquet
|
|
|
200,000
|
|
|
|
|
|
|
|
|
|
|
$
|
40.34
|
|
|
|
08-16-15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,052
|
|
|
|
|
|
|
|
|
|
|
$
|
63.05
|
|
|
|
03-30-16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,553
|
|
|
|
|
|
|
$
|
51.60
|
|
|
|
02-16-17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,819
|
|
|
|
|
|
|
$
|
75.18
|
|
|
|
02-18-18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
838
|
(2)
|
|
$
|
60,000
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,413
|
(3)
|
|
$
|
253,125
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,324
|
(4)
|
|
$
|
352,500
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,758
|
(5)
|
|
$
|
397,500
|
(5)
|
Stuart E. Nance
|
|
|
10,000
|
|
|
|
|
|
|
|
|
|
|
$
|
3.91
|
|
|
|
07-01-12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24,000
|
|
|
|
|
|
|
|
|
|
|
$
|
4.83
|
|
|
|
04-25-13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24,000
|
|
|
|
|
|
|
|
|
|
|
$
|
16.97
|
|
|
|
04-26-14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,200
|
|
|
|
|
|
|
|
|
|
|
$
|
25.68
|
|
|
|
02-07-15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,024
|
|
|
|
|
|
|
|
|
|
|
$
|
63.05
|
|
|
|
03-30-16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,065
|
|
|
|
|
|
|
$
|
51.60
|
|
|
|
02-16-17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,320
|
|
|
|
|
|
|
$
|
75.18
|
|
|
|
02-18-18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
838
|
(2)
|
|
$
|
60,000
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,736
|
(3)
|
|
$
|
127,575
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,393
|
(4)
|
|
$
|
150,000
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,445
|
(5)
|
|
$
|
168,750
|
(5)
|
|
|
|
(1) |
|
LTIP options granted on February 16, 2007 will vest on
February 16, 2010 and LTIP options granted on
February 18, 2008 will vest on February 18, 2011. |
|
(2) |
|
Under the Best in Class program, on January 1, 2008 or the
employment date if subsequent to January 1, 2008, all
employees received a contingent award of stock units equal to
$60,000 worth of our common stock based on the average high and
low share price on the date of grant. Employees joining the
Company after January 1, 2008 participate on a pro rata
basis based on their length of employment during the performance
period. The number of units that will vest and become payable is
based on our performance |
16
|
|
|
|
|
relative to the industry during a three-year performance period
beginning January 1, 2008, and ending December 31,
2010, and are set at threshold (50%), target (100%) and maximum
(150%) levels. For each vested unit, the participant will
receive one share of common stock. Currently, the Company
anticipates that results will be paid at the target level. |
|
(3) |
|
Represents potential payouts under our 2006 LTIP for the
three-year period ending December 2008. Pursuant to the 2006
LTIP, the Compensation Committee determined target payout
amounts for each named executive officer in March 2006. Awards
are paid after the end of the three-year period based on the
attainment of pre-established performance measures. The LTIP is
discussed in further detail under the heading Compensation
Discussion and Analysis. Currently, we anticipate that
awards will be paid at the maximum level. |
|
(4) |
|
Represents potential payouts under our 2007 LTIP for the
three-year period ending December 2009. Pursuant to the 2007
LTIP, the Compensation Committee determined target payout
amounts for each named executive officer in February 2007.
Awards are paid after the end of the three-year period based on
the attainment of pre-established performance measures. The LTIP
is discussed in further detail under the heading
Compensation Discussion and Analysis. Currently, we
anticipate that awards will be paid at the maximum level. |
|
(5) |
|
Represents potential payouts under our 2008 LTIP for the
three-year period ending December 2010. Pursuant to the 2008
LTIP, the Compensation Committee determined target payout
amounts for each named executive officer in February 2008.
Awards are paid after the end of the three-year period based on
the attainment of pre-established performance measures. The LTIP
is discussed in further detail under the heading
Compensation Discussion and Analysis. Currently, we
anticipate that awards will be paid at the maximum level. |
Option
Exercises and Stock Vested
The following table sets forth specific information with respect
to each exercise of stock options and each vesting of stock
during 2008 for each named executive officer on an aggregated
basis.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards(2)
|
|
|
|
Number of
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
Shares
|
|
|
Value Realized
|
|
|
Shares
|
|
|
Value Realized
|
|
|
|
Acquired
|
|
|
on Exercise
|
|
|
Acquired
|
|
|
on Vesting
|
|
Name
|
|
on Exercise
|
|
|
($)(1)
|
|
|
on Vesting
|
|
|
($)
|
|
|
Michael D. Watford
|
|
|
2,019,870
|
|
|
$
|
113,484,262
|
|
|
|
13,812
|
|
|
$
|
1,065,460
|
|
Marshall D. Smith
|
|
|
|
|
|
$
|
|
|
|
|
3,331
|
|
|
$
|
265,822
|
|
William R. Picquet
|
|
|
50,000
|
|
|
$
|
2,471,364
|
|
|
|
2,740
|
|
|
$
|
218,387
|
|
Stuart E. Nance
|
|
|
|
|
|
$
|
|
|
|
|
4,559
|
|
|
$
|
369,774
|
|
|
|
|
(1) |
|
Reflects the difference between the market value of the shares
at the exercise date and the option exercise price multiplied by
the number of shares acquired on exercise, regardless of whether
the shares were held. |
|
(2) |
|
Relates to the payout of the 2005 LTIP and the 2005 Best in
Class program in shares of the Companys stock during the
first half of 2008. |
17
Potential
Payouts Upon Change of Control and Termination
Our named executive officers are entitled to severance benefits
in the event their employment with the Company is involuntarily
terminated other than for cause or is voluntarily terminated for
good reason within two years of a change of control. Based on a
hypothetical termination date of December 31, 2008, the
change of control payments to our named executive officers would
have been as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Watford(2)
|
|
|
Mr. Smith
|
|
|
Mr. Picquet
|
|
|
Mr. Nance
|
|
|
Base Salary
|
|
$
|
1,500,000
|
|
|
$
|
460,000
|
|
|
$
|
530,000
|
|
|
$
|
360,000
|
|
Bonus
|
|
|
4,375,000
|
|
|
|
700,000
|
|
|
|
800,000
|
|
|
|
288,000
|
|
Health & Welfare Benefits
|
|
|
3,584
|
|
|
|
2,977
|
|
|
|
2,977
|
|
|
|
2,977
|
|
Additional Retirement Benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Perquisites
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal
|
|
$
|
5,878,584
|
|
|
$
|
1,162,977
|
|
|
$
|
1,332,977
|
|
|
$
|
650,977
|
|
Fair market value of accelerated equity compensation(1)
|
|
|
3,727,500
|
|
|
|
1,027,500
|
|
|
|
1,093,125
|
|
|
|
536,325
|
|
Tax gross-up
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
$
|
9,606,084
|
|
|
$
|
2,190,477
|
|
|
$
|
2,426,102
|
|
|
$
|
1,187,302
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes the 2006, 2007 and 2008 LTIP amounts and the 2008 Best
in Class estimated at maximum levels. |
|
(2) |
|
The base salary and bonus are calculated based on
Mr. Watfords employment agreement which was in effect
on December 31, 2008. See Employment
Agreements. The health and welfare benefits are assumed to
continue for three years as provided in the employment agreement
and are calculated using 2008 amounts. |
For our executive officers (other than our CEO whose severance
benefits were set forth in his employment agreement) we provide
for: (i) a lump sum severance payment equal to two times
the executives base salary plus the maximum bonus
opportunity under the AIP; (ii) continuation of life and
health insurance benefits for two years at existing group rates;
(iii) immediate vesting of all stock options awards which
are exercisable for one year following termination; and
(iv) immediate vesting of all LTIP and Best in Class awards
at maximum levels.
A change of control is generally defined as:
|
|
|
|
|
The acquisition by an individual, entity or group of beneficial
ownership of 35% or more of either (x) the then outstanding
shares of common stock of the Company, or (y) the combined
voting power of the then outstanding voting securities of the
Company. An acquisition directly from the Company, by the
Company or by an employee benefit plan sponsored by the Company
would not constitute a change of control.
|
|
|
|
Where individuals who constitute the Board of Directors of the
Company, including new board members approved by the incumbent
Board, cease for any reason to constitute at least a majority of
the Board.
|
|
|
|
The consummation by the Company of a reorganization, merger or
consolidation or sale or other disposition of all or
substantially all of the assets of the Company or the
acquisition of assets of another corporation, unless following
such business combination current beneficial owners own at least
50.1% of the combined voting power of the combined company.
|
|
|
|
Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
|
Good reason includes a reduction in the officers base
salary, diminution of duties or relocation greater than
50 miles without consent.
18
Director
Compensation
Non-employee directors were paid an annual retainer of $50,000
and received common shares equivalent to $100,000 granted under
the 2005 Stock Incentive Plan. Directors who are also officers
or employees of the Company do not receive any compensation for
duties performed as directors. The following table shows
compensation paid to each of our directors during the fiscal
year ended December 31, 2008.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension
|
|
|
|
|
|
|
|
|
|
Fees
|
|
|
|
|
|
|
|
|
|
|
|
Value and
|
|
|
|
|
|
|
|
|
|
Earned or
|
|
|
|
|
|
|
|
|
Non-Equity
|
|
|
Nonqualified
|
|
|
|
|
|
|
|
|
|
Paid in
|
|
|
Stock
|
|
|
Option
|
|
|
Incentive Plan
|
|
|
Deferred
|
|
|
All Other
|
|
|
|
|
|
|
Cash
|
|
|
Awards
|
|
|
Awards
|
|
|
Compensation
|
|
|
Compensation
|
|
|
Compensation
|
|
|
Total
|
|
Name
|
|
($)
|
|
|
($)(1)
|
|
|
($)
|
|
|
($)
|
|
|
Earnings
|
|
|
($)
|
|
|
($)
|
|
|
W. Charles Helton
|
|
$
|
50,000
|
|
|
$
|
100,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
150,000
|
|
Robert E. Rigney
|
|
$
|
50,000
|
|
|
$
|
100,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
150,000
|
|
Roger A. Brown
|
|
$
|
50,000
|
|
|
$
|
100,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
150,000
|
|
Stephen J. McDaniel
|
|
$
|
50,000
|
|
|
$
|
100,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
150,000
|
|
|
|
|
(1) |
|
Represents the grant date fair value of 1,146 shares of
common stock on the grant date of June 3, 2008. |
CORPORATE
GOVERNANCE
Statement
of Corporate Governance Practices
We have long believed that good corporate governance is
important to ensure that our Company is managed for the
long-term benefit of our shareholders. We periodically review
our corporate governance policies and practices and compare them
to those suggested by various authorities in corporate
governance and to the practices of other public companies. We
also continuously review the rules and regulations promulgated
under the Sarbanes-Oxley Act of 2002, all new and proposed rules
of the Securities and Exchange Commission and all new and
proposed listing and compliance standards of the New York Stock
Exchange.
Corporate Governance Guidelines. Our Board
adopted the Corporate Governance Guidelines to assist the Board
of Directors in the exercise of its responsibilities. These
Guidelines are interpreted in the context of all applicable laws
and our Certificate of Incorporation, By-laws and other
corporate governance documents. The Guidelines are intended to
serve as a flexible framework within which the Board may conduct
its business and not as a set of legally binding obligations.
The Guidelines are available free of charge to the public on our
website at http//www.ultrapetroleum.com. You may also request a
copy of these Guidelines at no cost by making a written or
telephone request for copies to Ultra Petroleum Corp., Corporate
Secretary, 363 N. Sam Houston Pkwy E.,
Suite 1200, Houston, TX 77060,
(281) 876-0120.
Code of Business Conduct and Ethics. In
February 2003, our Board adopted a Code of Business Conduct and
Ethics which applies to all of our directors, officers and
employees. In connection with the listing of our shares on the
New York Stock Exchange, the Code of Business Conduct and Ethics
was amended by the Board in August 2008 to comply with the
requirements of the New York Stock Exchange. The Board has not
granted any waivers to the Code of Business Conduct and Ethics.
The Code of Business Conduct and Ethics is available free of
charge on our website at
http://www.ultrapetroleum.com.
You may also request a copy of the Code of Business Conduct and
Ethics at no cost by making a written or telephone request for
copies to Ultra Petroleum Corp., Corporate Secretary,
363 N. Sam Houston Pkwy E., Suite 1200, Houston,
TX 77060,
(281) 876-0120.
Any amendments to or waivers of the Code of Conduct and Business
Ethics will also be posted on our website.
19
Mandate
of the Board
Our Board of Directors has explicitly acknowledged
responsibility for the management of the business and affairs
of, and to act with a view to the best interests of, the
Company. The mandate of the Board includes, among other matters:
(a) the adoption of a strategic planning process;
(b) the identification on a regular basis of the principal
risks of our business and the establishment of appropriate
systems to manage these risks;
(c) the assessment of management performance, considering
succession planning, and taking responsibility for appointing,
training and monitoring senior management;
(d) establishing a policy to facilitate communications with
shareholders and others involved with the Company; and
(e) addressing the integrity of our internal control and
management information systems.
Our Board of Directors met formally four times during the last
fiscal year. During the last fiscal year, all directors attended
100% of the total number of meetings of the Board of Directors,
and each committee member attended 100% of the total number of
meetings held by all committees on which he served.
Board
Composition and Independence from Management
The Board has determined that four of the five current
directors, Mr. Helton, Mr. Rigney, Mr. McDaniel
and Mr. Brown, and four of the five nominated directors,
Mr. Helton, Mr. Rigney, Mr. McDaniel and
Mr. Brown, are independent directors pursuant
to the rules adopted by the Securities and Exchange Commission
applicable to the corporate governance standards for companies
listed on the New York Stock Exchange. It is a policy of the
Board of Directors that a majority of the members of the Board
be independent of the Companys management. For a director
to be independent, the Board affirmatively
determines that the director has no material relationship with
the Company that would interfere with the exercise of
independent judgment. The director may not be an officer or
other employee of the Company or any parent or subsidiary and
has not served in such capacity during the past three years. In
addition, a director will not be deemed independent if he or she:
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Has accepted or has an immediate family member who has accepted
any payments from the Company or any parent or subsidiary of the
Company in excess of $120,000 during the current or any of the
past three years. Compensation for board service, payments
arising solely from investments in the Companys
securities, compensation paid to an immediate family member who
is a non-executive employee of the Company or of a parent or
subsidiary of the Company, compensation received for former
service as an interim Chairman or CEO, or benefits under a
tax-qualified retirement plan or non-discretionary compensation
are not included in the $120,000.
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Has an immediate family member who is a partner in, or a
controlling shareholder or an executive officer of, any
organization to which the Company made, or from which the
Company received, payments (other than those arising solely from
investments in the Companys securities or payments under
non-discretionary charitable contribution matching programs)
that exceed 2% of the organizations consolidated gross
revenues for that year, or $1,000,000, whichever is more, in any
of the most recent three fiscal years.
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Is an immediate family member of an individual who is or has
been employed by the Company or any parent or subsidiary of the
Company as an executive officer during any of the past three
years.
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Is an executive officer of another entity where any of the
Companys executive officers serve on the compensation
committee.
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20
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Is or has an immediate family member who is a current partner of
the Companys outside auditor, or was a partner or employee
of the Companys outside auditor who worked on the
Companys audit at any time during any of the past three
years.
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Consistent with NYSE requirements and to promote open discussion
among our non-management directors, our non-management directors
meet in separate executive (private) sessions following each
regularly scheduled meeting of the Board. The Chairman of such
executive sessions, as elected by the independent directors, is
Mr. Helton, and he presides at executive sessions of our
Board.
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Communication
with the Board of Directors.
In order to provide our shareholders and other interested
parties with a direct and open line of communication to the
Board of Directors, the Board of Directors has adopted the
following procedures for communications to directors.
Shareholders and other interested persons may communicate with
the Chairman of our Audit Committee or with the non-management
directors of the Company as a group by written communications
addressed in care of Kelly L. Whitley, Ultra Petroleum Corp.,
363 North Sam Houston Parkway East, Suite 1200, Houston,
Texas 77060.
All communications received in accordance with these procedures
will be reviewed initially by senior management of the Company.
Senior management will relay all such communications to the
appropriate director or directors unless it is determined that
the communication (a) does not relate to the business or
affairs of the Company or the functioning or constitution of the
Board of Directors or any of its committees; (b) relates to
routine or insignificant matters that do not warrant the
attention of the Board of Directors; (c) is an
advertisement or other commercial solicitation or communication;
(d) is frivolous or offensive; or (e) is otherwise not
appropriate for delivery to directors.
The director or directors who receive any such communication
will have discretion to determine whether the subject matter of
the communication should be brought to the attention of the full
Board of Directors or one or more of its committees and whether
any response to the person sending the communication is
appropriate. Any such response will be made only in accordance
with applicable law and regulations relating to the disclosure
of information.
The Corporate Secretary will retain copies of all communications
received pursuant to these procedures for a period of at least
one year. The Board of Directors will review the effectiveness
of these procedures from time to time and, if appropriate,
recommend changes.
Board
Committees
Our Board of Directors has three committees: the Audit
Committee, the Compensation Committee, and the Nominating and
Corporate Governance Committee. The Board may add new committees
or remove existing committees as it deems advisable for purposes
of fulfilling its primary responsibilities. Each committee will
perform its duties as assigned by the Board of Directors in
compliance with the Companys by-laws. The committees and
their mandates are outlined below.
Audit Committee. The purpose of the Audit
Committee is to oversee (i) the integrity of the
Companys financial statements and disclosures,
(ii) the Companys compliance with legal and
regulatory requirements, (iii) the qualifications,
independence and performance of the Companys independent
auditors, (iv) the performance of the Companys
internal audit function and independent auditors, (v) the
Companys internal control systems, and (vi) the
Companys procedures for monitoring compliance with the
Companys Code of Business Conduct and Ethics.
The principal function of the Audit Committee is to assist the
Board of Directors in the areas of financial reporting and
accounting integrity. As such, it meets periodically with the
independent auditors and management, including each in executive
session. Management is solely responsible for the financial
statements and the financial reporting process, including the
system of internal controls. The Companys independent
auditors are responsible for expressing an opinion on the
conformity of these financial statements, in all material
respects, with accounting principles generally accepted in the
United States of America.
21
The Audit Committee has sole responsibility for retaining,
dismissing and compensating the Companys independent
auditors. The Audit Committee annually reviews and pre-approves
the audit, review, attest and permitted non-audit services to be
provided during the next audit cycle by the independent auditor.
To the extent practicable, at the same meeting the Audit
Committee also reviews and approves a budget for each of such
services. Services proposed to be provided by the independent
auditor that have not been pre-approved during the annual review
and the fees for such proposed services must be pre-approved by
the Audit Committee.
All requests or applications for the independent auditor to
provide services to the Company must be submitted to the Audit
Committee by the independent auditor and management and state as
to whether, in their view, the request or application is
consistent with applicable laws, rules and regulations relating
to auditor independence. In the event that any member of
management or the independent auditor becomes aware that any
services are being, or have been, provided by the independent
auditor to the Company without the requisite pre-approval, such
individual must immediately notify the Chief Financial Officer,
who must promptly notify the Chairman of the Audit Committee and
appropriate management so that prompt action may be taken to the
extent deemed necessary or advisable.
This Committee is comprised of Messrs. McDaniel, Helton and
Brown. The Board of Directors has affirmatively determined that
each of the members is financially literate and is an
independent director for purposes of New York Stock Exchange
rules applicable to members of the audit committee, meaning that
the director has no relationship to the Company that may
interfere with the exercise of their independence from
management and the Company. Additionally, the Board of Directors
has determined that Mr. McDaniel is a financial
expert and is independent under the Securities Exchange
Act of 1934, as amended.
The Audit Committee held four meetings during 2008. All members
of the Audit Committee attended the meetings. The Board of
Directors adopted an Audit Committee Charter in 2001 and revised
the Charter in 2004 to meet the updated requirements of the
Securities and Exchange Commission and the American Stock
Exchange. In connection with the listing of our shares on the
New York Stock Exchange, in August 2008, the Company amended the
Audit Committee Charter to comply with the requirements of the
New York Stock Exchange. The Audit Committee Charter is
available free of charge on the Companys website at
http//www.ultrapetroleum.com.
You may also request a copy of the Audit Committee Charter at no
cost by making a written or telephone request for copies to
Ultra Petroleum Corp., Corporate Secretary, 363 N. Sam
Houston Pkwy E., Suite 1200, Houston, TX 77060,
(281) 876-0120.
Compensation Committee. The purpose of the
Compensation Committee is to (i) assist the Board of
Directors in the discharge of its fiduciary responsibilities
relating to the fair and competitive compensation of the
Companys Chief Executive Officer and other executives,
(ii) approve the Companys long-term incentive
compensation plans, (iii) establish targets and measure
performance against those targets, and (iv) prepare an
annual report on executive compensation. Members are
Messrs. Helton, McDaniel and Rigney. The Board of Directors
has determined that each of the members is independent for
purposes of New York Stock Exchange rules. The Compensation
Committee held four meetings during 2008. All members of the
Compensation Committee attended the meetings. The Compensation
Committee Charter is available free of charge to the public on
our website at http//www.ultrapetroleum.com. You may also
request a copy of the Compensation Committee Charter at no cost
by making a written or telephone request for copies to Ultra
Petroleum Corp., Corporate Secretary, 363 N. Sam
Houston Pkwy E., Suite 1200, Houston, TX 77060,
(281) 876-0120.
In connection with the listing of our shares on the New York
Stock Exchange, in August 2008, the Company amended the
Compensation Committee Charter to comply with the requirements
of the New York Stock Exchange.
Nominating and Corporate Governance
Committee. The purpose of the Nominating and
Corporate Governance Committee is to (i) identify and
recommend to the Board individuals qualified to be nominated for
election to the Board, (ii) recommend to the Board the
members and Chairperson for each Board committee,
(iii) periodically review and assess our Corporate
Governance Principles and our Code of Business Conduct and
Ethics and make recommendations for changes thereto to the
Board. The Board of Directors has determined that each of the
members is independent for purposes of New York Stock Exchange
rules. This
22
Committee is comprised of Messrs. Brown, McDaniel and
Helton. The Nominating and Corporate Governance Committee met
one time during the last year and all members of the committee
attended the meeting. The Nominating and Corporate Governance
Committee Charter is available free of charge to the public in
print or on the Companys website at
http://www.ultrapetroleum.com.
The Nominating and Corporate Governance Committee Charter is
available free of charge to the public on our website at
http//www.ultrapetroleum.com. You may also request a copy of the
Nominating and Corporate Governance Committee Charter at no cost
by making a written or telephone request for copies to Ultra
Petroleum Corp., Corporate Secretary, 363 N. Sam
Houston Pkwy E., Suite 1200, Houston, TX 77060,
(281) 876-0120.
In connection with the listing of our shares on the New York
Stock Exchange, in August 2008, the Company amended the
Nominating and Corporate Governance Committee Charter to comply
with the requirements of the New York Stock Exchange.
Identifying
and Evaluating Nominees for Directors.
The Board of Directors has established certain criteria it and
the Nominating and Corporate Governance Committee consider as
guidelines in considering nominations to our Board of Directors.
The criteria include: (i) personal characteristics,
including such matters as integrity, age, education, diversity
of background and experience, absence of potential conflicts of
interest with the Company or its operations, and the
availability and willingness to devote sufficient time to the
duties of a director of the Company; (ii) experience in
corporate management; (iii) experience as a board member of
another Company; and (iv) practical and mature business
judgment. The criteria are not exhaustive and the Board of
Directors and the Nominating and Corporate Governance Committee
may consider other qualifications and attributes which they
believe are appropriate in evaluating the ability of an
individual to serve as a member of the Board of Directors. Our
goal is to assemble a Board of Directors that brings to the
Company a variety of perspectives and skills derived from high
quality business and professional experience. In doing so, the
Board of Directors and the Nominating and Corporate Governance
Committee also consider candidates with appropriate non-business
backgrounds.
The Board of Directors and the Nominating and Corporate
Governance Committee believe that, based on their knowledge of
the Companys corporate governance principles and the needs
and qualifications of the Board at any given time, the Board,
with the help of the Nominating and Corporate Governance
Committee, is best equipped to select nominees that will result
in a well-qualified and well-rounded board of directors.
Accordingly, it is the policy of the Board not to accept
unsolicited nominations from shareholders. In making its
nominations, the Board and the Nominating and Corporate
Governance Committee identify nominees by first evaluating the
current members of the Board willing to continue their service.
Current members with qualifications and skills that are
consistent with the criteria for Board service are re-nominated.
As to new candidates, the Board and the Nominating and Corporate
Governance Committee members discuss among themselves and
members of management their respective recommendations. The
Board and the Nominating and Corporate Governance Committee may
also review the composition and qualification of the boards of
directors of the Companys competitors, and may seek input
from industry experts or analysts. The Board and the Nominating
and Corporate Governance Committee review the qualifications,
experience and background of the candidates. Final candidates
are interviewed by the independent directors and executive
management. In making its determinations, the Board and the
Nominating and Corporate Governance Committee evaluate each
individual in the context of the Board as a whole, with the
objective of assembling a group that can best represent
shareholder interests through the exercise of sound judgment.
After review and deliberation of all feedback and data, the
Board of Directors slates the nominees.
Compensation
Committee Interlocks and Insider Participation
There were no Compensation Committee interlocks nor insider
(employee) participation during 2008.
Certain
Transactions
In the ordinary course of our business, we purchase products or
services from, or engage in other transactions with, various
third parties. Occasionally, these transactions may involve
entities that are affiliated with one or more members of our
Board. When they occur, these transactions are conducted in the
ordinary course and on an arms-length basis.
23
Review
and Approval of Related Party Transactions.
We review all relationships and transactions in which the
Company and our directors and executive officers or their
immediate family members are participants to determine whether
such persons have a direct or indirect material interest. We
have developed and implemented processes and controls to obtain
information from our directors and executive officers with
respect to related person transactions and for then determining,
based on the facts and circumstances, whether the Company or a
related person has a direct or indirect material interest in the
transaction. As required under SEC rules, transactions that are
determined to be directly or indirectly material to the Company
or a related person are disclosed in our annual proxy statement.
In addition, our Nominating and Corporate Governance Committee
or Board (if appropriate) reviews and approves or ratifies any
related person transaction that is required to be disclosed. In
the course of its review and approval or ratification of a
disclosable related person transaction, consideration is given
to:
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the nature of the related persons interest in the
transaction;
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the material terms of the transaction, including, without
limitation, the amount and type of transaction;
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the importance of the transaction to the related person;
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the importance of the transaction to the Company;
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whether the transaction would impair the judgment of a director
or executive officer to act in the best interest of the
Company; and
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any other matters deemed appropriate.
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Any director who is a related person with respect to a
transaction under review may not participate in the
deliberations or vote respecting approval or ratification of the
transaction; provided, however, that such director may be
counted in determining the presence of a quorum at the meeting
where the transaction is considered.
Related
Party Transactions.
Other than as described below, since the beginning of fiscal
year 2008, there have been no transactions in excess of $120,000
between the Company and a related person in which the related
person had a direct or indirect material interest.
Because of the remoteness of our properties and the lack of
timely commercial air flights, in December 2008, our
wholly-owned subsidiary, Ultra Resources, Inc., joined a limited
liability company, Falcon Point Aviation, LLC, formed by one of
our directors, Robert E. Rigney and a third unrelated party, for
the purpose of purchasing an aircraft. We purchased a 33.33%
interest in Falcon Point for $1.9 million and
Mr. Rigney purchased a 33.34% interest in Falcon Point for
$1.9 million. Under the terms of the limited liability
company agreement, each member is responsible for a usage fee
based on the members actual airtime. The usage fee
comprises the cost of fuel consumed for the members usage,
state use tax, pilot expenses, landing fees and any other
miscellaneous expenses incurred by the member incident to its
use of the aircraft. During 2008, the Companys total usage
fee was $28,829.
PROPOSAL I
ELECTION
OF DIRECTORS
Each director of the Company is elected annually and holds
office until the next annual meeting of the shareholders unless
that person ceases to be a director before then. In the
absence of instructions to the contrary, the shares represented
by a properly completed and deposited proxy will be voted for
the nominees herein listed. Each incumbent director
identified in the table below was nominated by the Nominating
and Corporate Governance Committee of our Board of Directors as
a nominee for election as director of the Company. Each of the
nominees has consented to be nominated and have expressed their
intention to serve if elected. Management does not contemplate
that any of the nominees set out below will be unable to serve
as a director.
24
Directors
and Executive Officers
The following table provides information with respect to the
directors and nominees for director and present executive
officers of the Company. Please refer to the table under the
heading Beneficial Ownership of Securities
Security Ownership of Certain Beneficial Owners and
Management for a summary of the number of common shares
owned by each of the Companys directors and executive
officers. Each executive officer has been elected to serve until
his successor is duly appointed or elected by the Board of
Directors or his earlier removal or resignation from office.
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Position
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Name
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Age
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Position with the Company
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Since
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Michael D. Watford
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55
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Chairman of the Board, CEO, President and Director (Nominee)
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1999
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W. Charles Helton
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67
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Director (Nominee)
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1994
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Robert E. Rigney
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77
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Director (Nominee)
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2001
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Stephen J. McDaniel
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47
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Director (Nominee)
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2006
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Roger A. Brown
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64
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Director (Nominee)
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2007
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Marshall D. Smith
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49
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Chief Financial Officer
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2005
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William R. Picquet
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57
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VP Operations
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2005
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Stuart E. Nance
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49
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VP Marketing
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2002
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Mr. Michael D. Watford was appointed Chairman,
President and Chief Executive Officer of Ultra Petroleum Corp.
in January 1999. Mr. Watford has enjoyed a full range of
industry experiences while working over his 35 year career
for a number of energy companies including Shell Oil, Superior
Oil, Meridian Oil (Burlington Resources), Torch Energy and Nuevo
Energy Company. Prior to joining Ultra Petroleum,
Mr. Watford was Chief Executive Officer of Nuevo Energy
Company for three and one-half years where he led the
companys growth in market value from $200 million to
over $1 billion. Mr. Watford attended the University
of Florida where he earned his undergraduate degree in finance
in 1975. While working for Shell Oil, he attended night school
at the University of New Orleans where he earned his MBA in 1978.
Mr. W. Charles Helton has been a director of the
Company since August 1994. Mr. Helton is a medical doctor
and has been the President, Chief Financial Officer and a
director of Enterprise Exploration & Production Inc.,
a private oil and gas exploration and development company, for
more than 5 years.
Mr. Stephen J. McDaniel has been a director of the
Company since July 2006. For the past seven years,
Mr. McDaniel has been the President and a director of
Midstates Petroleum, a privately held exploration and production
company, after spending seven years with Merrill Lynch in the
oil and gas investment banking group in Houston, Texas. He began
his investment banking career with Gordon Capital Corporation
and Midland Walwyn Capital, Inc. both Canadian firms.
Mr. McDaniel started his career with Conoco, Inc. in 1983
in various engineering, operations and business development
positions in domestic and international operations.
Mr. Robert E. Rigney has been a director of the
Company since June 2001, and was a consultant to the Company
from January 2001 to December 2003. Mr. Rigney is currently
retired. Prior to 2003, Mr. Rigney was the Chief Executive
Officer and Chairman of Pendaries Petroleum Ltd. since its
inception in 1996. Mr. Rigney has been a diplomat, an oil
company executive and a consultant in Asia for over
22 years.
Mr. Roger A. Brown has been a director of the
Company since October 2007. Until his retirement in 2007,
Mr. Brown was Vice President Strategic
Initiatives for Smith International, Inc. from 2005 to 2007 and
President of Smith Technologies, a division of Smith
International, Inc., from 1998 to 2005 and. Prior to his
30 year career in oilfield services, Mr. Brown was a
practicing attorney for eight years. He holds a Bachelor of
Science, Economics, History and Political Science and a Juris
Doctorate all from the University of Oklahoma.
Mr. Marshall D. Smith has been Chief Financial
Officer since July 2005. Mr. Smith has over 25 years
of progressive experience in a multitude of disciplines within
the energy industry including operations, strategic
25
planning, corporate finance and business development. Early in
his career, Mr. Smith was a practicing Petroleum Engineer
for both major and independent oil companies and later focused
his career on mergers, acquisitions and corporate finance
advisory assignments in the energy sector. From 2001 to 2002,
Mr. Smith served as the Chief Financial Officer at Gulf
Liquids, Inc. Mr. Smith was the Vice President of Business
Development at J.M. Huber Energy from 2002 to 2004. From 2004
until joining us in July 2005, Mr. Smith served as the Vice
President of Upstream Business Development at Constellation
Energy.
Mr. William R. Picquet has been Vice
President Operations since August 2005.
Mr. Picquet has over 30 years of industry experience
in all aspects of operations and engineering in major North
American producing basins. He has worked for various exploration
and production companies serving in engineering and management
capacities. Mr. Picquet served as the President and Chief
Executive Officer of Advantage Energy Services Ltd. from 1997 to
2001 and as the Managing Director of Waterous & Co.
from 2002 to 2003. From 2003 to March 2005, Mr. Picquet
served as the Chief Executive Officer and on the Board of
Governors of M3 Energy, LLC. Just prior to joining us,
Mr. Picquet was the Senior Vice President of Operations and
Engineering at Mission Resources Company, serving in that role
from March 2005 to August 2005.
Mr. Stuart E. Nance has been employed by Ultra since
July 2002 and has been Vice President Marketing
since 2006. Mr. Nance has over 25 years of experience
in product marketing and land management. His prior experience
includes positions with MCN Energy Group, Torch Energy Advisors,
Inc., American Oil & Gas Corp., Meridian Oil, Inc. and
Texas Oil & Gas Corp.
All officers and directors of the Company, including the
nominees, are United States citizens.
The Companys Board recommends that shareholders vote
FOR the five nominees for director herein listed. In the absence
of instructions to the contrary, the shares represented by a
properly completed and deposited proxy will be voted for the
nominees herein listed at the Annual Meeting.
PROPOSAL II
APPOINTMENT
OF INDEPENDENT AUDITORS
On February 16, 2009, the Audit Committee of the Board of
Directors voted to appoint Ernst & Young LLP to serve
as the Companys independent auditor for the fiscal year
ending December 31, 2009. Under Yukon Territory law, the
appointment of the independent auditor is subject to shareholder
approval and, accordingly, the Audit Committees
appointment is subject to the receipt of such approval at the
Annual Meeting.
Representatives of Ernst & Young LLP are expected to
attend the Annual Meeting. The representatives will have the
opportunity to make a statement if they so desire and will be
available to respond to appropriate questions of the
shareholders.
The Companys Board recommends that shareholders vote
FOR the appointment of Ernst & Young LLP as the
Companys independent auditor for the fiscal year ending
December 31, 2009. In the absence of instructions to the
contrary, the shares represented by a properly completed and
deposited proxy will be voted for the appointment of
Ernst & Young LLP as the auditors of the Company at
the Annual Meeting.
26
Principal
Accountants Fees and Services.
The following table presents aggregate fees for professional
audit services rendered by Ernst & Young LLP for the
audit of the Companys annual financial statements for each
of the years ended December 31, 2008 and 2007, and fees
billed for other services rendered by Ernst & Young
LLP during those years.
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2008
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2007
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Audit Fees
|
|
$
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1,186,130
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$
|
1,320,928
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Audit-Related Fees
|
|
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Tax Fees
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All Other Fees
|
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72,993
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Total
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$
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1,186,130
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$
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1,393,921
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Audit Fees. Fees paid for professional
services rendered by Ernst & Young LLP related to the
audit of the Companys annual financial statements and
review of the quarterly financial statements, including
out-of-pocket expenses, as well as the related attestation of
internal controls as required by the Sarbanes-Oxley Act of 2002,
Section 404.
Audit Related Fees. There were no audit
related fees paid to Ernst & Young LLP in 2008 or 2007.
Tax Fees. The Company has elected not to use
its current principal accountant for tax services.
All Other Fees. The fees for products and
services provided by Ernst & Young LLP, other than
those reported above.
All of the services provided by the Companys independent
auditors during 2008 and 2007 were pre-approved by the Audit
Committee. The Audit Committee has adopted a policy that
requires advance approval of all audit, audit-related, tax, and
other services performed by the Companys independent
registered public accounting firm. The policy provides for
pre-approval by the Audit Committee of specifically defined
audit and permitted non-audit services. Unless the specific
service has been previously pre-approved with respect to that
year, the Audit Committee must approve the permitted service
before the Companys independent registered public
accounting firm is engaged to perform it. The Audit Committee
has delegated to the Chair of the Audit Committee authority to
approve permitted services provided that the Chair reports any
decisions to the Committee at its next scheduled meeting.
Audit
Committee Report
Acting pursuant to its Charter, the Audit Committee reviewed and
discussed the Companys audited financial statements at,
and for the year ended, December 31, 2008 with management
and the Companys independent auditors and recommended to
the Companys Board of Directors that the financial
statements be included in the Companys Annual Report on
Form 10-K
for 2008. This recommendation was based on: the Audit
Committees review of the audited financial statements;
discussion of the financial statements with management;
discussion with the Companys independent auditors,
Ernst & Young LLP, of the matters required to be
discussed by auditing standards generally accepted in the United
States of America, including the matters required to be
discussed by SAS 61; receipt from Ernst & Young LLP of
the written disclosures and letter required by Independence
Standards Board Standard No. 1 (Independence Discussions
with Audit Committees); discussions with Ernst & Young
LLP regarding its independence from the Company and its
management; and Ernst & Young LLPs confirmation
that it would issue its opinion that the consolidated financial
statements present fairly, in all material respects, the
financial position of the Company and its consolidated
subsidiaries and the results of their operations and cash flows
for the periods presented in conformity with accounting
principles generally accepted in the United States of America.
Mr. Stephen J. McDaniel, Chairman
Mr. W. Charles Helton
Mr. Roger A. Brown
27
PROPOSAL III
SHAREHOLDER
PROPOSAL ON CLIMATE CHANGE REPORT
The proponents of the following shareholder proposal have stated
that they intend to present the proposal at the Annual Meeting.
In accordance with applicable proxy regulations, the following
proposal and supporting statement, as submitted by the
proponents, are set forth below verbatim. The Company is not
responsible for the content of the proposal or supporting
statement. The Board of Directors has recommended a vote
AGAINST the proposal for the reasons set forth
below. In the absence of instructions to the contrary, if the
shareholder proposal is presented, the shares represented by a
properly completed and delivered proxy will be voted against the
shareholder proposal at the Annual Meeting.
CLIMATE
CHANGE REPORT
Shareholder
Proposal
The following proposal has been submitted by the Nathan Cummings
Foundation, California State Teachers Retirement System
Investments and Miller/Howard Investment, Inc. The address of
the proponents and the number of voting common shares they hold
will be promptly provided upon oral or written request to the
Companys Secretary.
WHEREAS:
The Intergovernmental Panel on Climate Change (IPCC) recently
concluded that warming of the climate system is unequivocal and
that human activity is the main cause. Debate surrounding
climate change now focuses not on whether a problem exists but
rather on the best means for abatement and adaptation.
The rise in average global temperatures resulting from climate
change is expected to have significant adverse impacts.
According to Business Week, many scientists agree that
the warmer temperatures resulting from climate change are
causing more powerful storms and perhaps intensifying extreme
weather events including droughts and wild fires. Thermal
expansion and melting ice sheets are expected to lead to rising
sea levels, with significant implications for coastal
communities.
Climate change also has important economic implications. The
Stern Review, often cited as the most comprehensive
overview of the economics of climate change, estimated that the
cumulative economic impacts of climate change could be
equivalent to a loss of up to 20% of average world-wide
consumption if action is not taken quickly. A more general
pronouncement in the IPCCs report, Climate Change 2007:
Impacts, Adaptation and Vulnerability, observed that
Taken as a whole, the range of published evidence
indicates that the net damage costs of climate change are likely
to be significant and to increase over time.
Data from the Energy Information Administration indicates that
over half of domestic GHG emissions result from the combustion
of oil and gas. The Financial Times has asserted that,
Perhaps more than any other industry, oil companies are
having to get to grips with the issue of climate change.
Industry leaders such as BP, Chevron, Statoil, XTO Energy and
Apache are already taking action to address climate change,
including assuming a cost for carbon in their strategic
planning, reporting on and reducing their GHG emissions,
engaging in emissions trading and investing in renewable energy.
All have reported on their plans for addressing the issue.
According to the Conference Board, climate change is a
fact of life for business in the 21st century...businesses
that ignore the debate over climate change do so at their
peril. Shareholder resolutions requiring information on
Ultras approach to climate change and backed by
approximately 22%, 31% and 37% of the vote in 2006, 2007 and
2008, respectively, have thus far been ignored. Ultra also
declined to participate in the 2006, 2007 and 2008 iterations of
the Carbon Disclosure Project, an investor coalition seeking
information on corporate greenhouse gas emissions and backed by
approximately $57 trillion.
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RESOLVED:
The shareholders request that a committee of independent
directors of the Board prepare a report, at reasonable cost and
omitting proprietary information, on our companys plans to
address climate change by December 31, 2009.
SUPPORTING
STATEMENT:
We believe that management best serves shareholders by carefully
assessing and disclosing all pertinent information on its
response to climate change, including the development of
policies that will minimize Ultras impacts on climate
change.
END OF
SHAREHOLDER PROPOSAL
*****
29
Board of
Directors Statement in Opposition
THE
COMPANYS BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS A VOTE AGAINST THIS
PROPOSAL
FOR THE FOLLOWING REASONS
Ultra recognizes that environmental concerns are timely and
important issues and strives to conduct its operations in a
manner that prevents pollution, conserves resources and energy,
minimizes the use of hazardous materials and reduces waste. As
part of this policy, Ultra monitors regulatory and scientific
developments regarding the environment with the objective of
meeting or exceeding all of its obligations. Ultra continually
evaluates and implements initiatives aimed at environmental
concerns, including the use of new technologies to meet or
exceed current practices and regulatory requirements.
Ultras primary area of operations in the Pinedale
Anticline Producing Area is one of the most highly-regulated oil
and gas project areas in the United States. The project has
some of the most stringent air quality emissions control
requirements in the oil and gas industry upstream operating
arena.
In this regard:
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Ultra seeks out opportunities to contract for rigs built to
conform with the highest air quality standards as defined under
the Clean Air Act. As these rigs become available, Ultra lets
contracts for rigs with lower ratings expire. As a result of
these practices, Ultra has voluntarily improved its rig fleet
emissions performance to exceed regulatory emissions performance
standards by a wide margin. Currently, Ultra has commitments on
7 rigs which all have advanced engine emissions controls,
producing enhanced engine emission performance. In addition,
Ultra has initiated a policy to voluntarily convert its rig
fleet to use self-sustaining natural gas boilers rather than
diesel. A substantial number of the rigs have been converted and
the remainder will be converted as soon as practical.
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Ultra also requires its completion contractors to provide
equipment that utilizes the best available emissions control
technology in our operations. The use of this equipment
voluntarily exceeds regulatory emissions standards for this type
of operation.
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Ultra has provided funds to the state of Wyoming for air quality
monitoring equipment and for personnel to conduct such
monitoring.
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Ultras operating philosophy incorporates principles that
promote a framework that maximizes efficiency and minimizes the
Companys impact on the environment through such
initiatives as the installation of Computer Assisted Operations
which give Ultra the ability to remotely monitor field
operations, reducing truck trips, emissions, associated dust and
particulate matter introduced into the air; routing emissions
sources in Ultras production operations to closed systems
or emission control systems to reduce emissions; and monitoring
Ultras production facilities with the most technologically
advanced tools available in order to better detect leaks and
fugitive emissions. Ultra includes the use of FLIR technology to
certify performance of new equipment installations and to
monitor performance of existing operations on a
regularly-scheduled basis.
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Because Ultras operations are on or near federal lands,
they are scrutinized heavily by state, local and federal
authorities, including the U.S. Bureau of Land Management
and the Wyoming Department of Environmental Quality, with whom
Ultra maintains an ongoing dialogue regarding how best to
conduct operations with minimal impacts on the environment.
Unlike oil and gas companies operating in other parts of the
country, Ultra is required to conduct operations under
Environmental Impact Statements and other environmental studies
issued by the U.S. Bureau of Land Management which dictate
how Ultra can conduct its operations. Components of these
studies have included reports and regulations including drilling
rig forecasts, emission reduction reports, water well monitoring
reports, operations forecasts and the use of
flareless-completion technology to reduce noise, visual impacts
and air emissions, including greenhouse gases, as well as other
monitoring and mitigation measures.
30
For instance, in connection with a Record of Decision issued in
September 2008 for the Pinedale Anticline Project Area, Ultra
has committed to :
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reduce rig emissions to 80% of 2005 levels no later than
42 months after the date the Record of Decision is issued
(Ultra forecasts that by the one-year anniversary of the ROD, it
will have achieved an estimated 50% of the required
42 month emissions reduction goal a significant
acceleration of the required timetable for the improvement);
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fund additional air quality monitoring equipment and provide
additional financial offsets of personnel costs for the state of
Wyoming; and
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install a liquids gathering system which is estimated to
eliminate a substantial number of truck trips per year for
condensate and water hauling and reduce the amount of associated
tank and fugitive emissions as well as dust and particulate
matter introduced into the air.
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Ultra includes a more detailed description of its environmental
activities in its annual reports on
Form 10-K.
It is clear that Ultra already addresses the climate change
issues identified in the shareholder proposal. Accordingly, the
Board does not believe that creating the type of report
requested by the proponents would help in the reduction of
emissions or in the environmental performance of the Company but
rather would serve only to increase administrative burdens and
costs. Accordingly, the Companys Board of Directors
unanimously recommends that you vote AGAINST the
proposal.
SHAREHOLDER
PROPOSALS FOR 2010 ANNUAL MEETING
Any shareholder who intends to present a proposal at the 2010
Annual Meeting of Shareholders for inclusion in the proxy
statement and proxy card relating to that meeting is advised
that the proposal must be received by the Company at our
principal executive offices not later than December 6,
2009. The Company will not be required to include in its proxy
statement or proxy card a shareholder proposal which is received
after that date or which otherwise fails to meet requirements
for shareholder proposals established by regulations of the
Securities and Exchange Commission. If the date of the 2010
Annual Meeting is changed by more than 30 days from the
date of the 2010 Annual Meeting, the deadline for submitting
proposals to be included in managements 2010 proxy
statement is a reasonable time before the Company begins to
print and mail its proxy materials for its 2010 Annual Meeting.
The persons named in the Companys proxy card for the 2009
Annual Meeting of Shareholders will have discretionary authority
to vote any proxies they hold at such meeting on any matter for
which the Company does not receive notice by February 19,
2010. If the Company changes the date of its 2010 Annual Meeting
by more than 30 days from the date of the 2009 Annual
Meeting, the persons named in the Companys 2010 proxy
statement will be able to exercise discretionary authority if
notice of the matter has not been received in a reasonable time
before the Company mails its proxy materials for the 2010 Annual
Meeting of Shareholders.
If the date of the 2010 Annual Meeting is advanced or delayed by
more than 30 calendar days from the date of the 2009 Annual
Meeting, the Company shall, in a timely manner, inform
shareholders of such change, by including a notice, under
Item 5, in its earliest possible quarterly report on
Form 10-Q.
The notice will include the new deadline for submitting
proposals to be included in the Companys 2010 proxy
statement and the new date for determining whether the Company
may exercise discretionary voting authority because it has not
received timely notice of a matter.
In order to avoid controversy as to the date on which the
Company receives any such proposal, it is suggested that
shareholders submit their proposals by certified mail, return
receipt requested, or other means that permit them to prove the
date of delivery.
31
DELIVERY
OF DOCUMENTS TO SHAREHOLDERS SHARING AN ADDRESS
In some cases, only one copy of this proxy statement or annual
report is being delivered to multiple shareholders sharing an
address unless we have received contrary instructions from one
or more of the shareholders. We will deliver promptly, upon
written or oral request, a separate copy of this proxy statement
or annual report to a shareholder at a shared address to which a
single copy of the document was delivered. To request separate
or multiple delivery of these materials now or in the future, a
shareholder may submit a written request to the Corporate
Secretary, Ultra Petroleum Corp., 363 North Sam Houston Parkway
East, Suite 1200, Houston, Texas 77060 or an oral request
by calling the Corporate Secretary at
(281) 876-0120.
OTHER
MATTERS
At the Annual Meeting, shareholders will receive and consider
the consolidated financial statements of the Company for the
year ended December 31, 2008 and the auditors report
thereon, but no vote by the shareholders with respect thereto is
required or proposed to be taken.
Management knows of no amendment or other matters to come before
the Annual Meeting other than the matters referred to in the
Notice of Annual Meeting. However, if any other matter properly
comes before the Annual Meeting, the accompanying proxy will be
voted on such matter at the discretion of the person or persons
voting the proxy.
All information contained in this proxy statement relating to
the occupations, affiliations and securities holdings of
directors and officers of the Company and their relationship and
transactions with the Company is based upon information received
from the individual directors and officers.
By Order of the Board of Directors
Chairman, President and Chief Executive Officer
Houston, Texas
April 9, 2009
32
0-curity ClassHolder Account NumberForm of Proxy Annual General Meeting to be held on May 21,
2009 at 10:00 a.m. CDTThis Form of Proxy is solicited by and on behalf of Management.Notes to
proxy1.Every holder has the right to appoint some other person or company of their choice, who need
not be a holder, to attend and act on their behalf at the meeting or any adjournment or
postponement thereof. If you wish to appoint a person or company other than the persons whose names
are printed herein, please insert the name of your chosen proxyholder in the space provided (see
reverse).2.If the securities are registered in the name of more than one owner (for example, joint
ownership, trustees, executors, etc.), then all those registered should sign this proxy. If you are
voting on behalf of a corporation or another individual you must sign this proxy with signing
capacity stated, and you may be required to provide documentation evidencing your power to sign
this proxy.3.This proxy should be signed in the exact manner as the name(s) appear(s) on the
proxy.4.If this proxy is not dated, it will be deemed to bear the date on which it is mailed by
Management to the holder.5.The securities represented by this proxy will be voted as directed by
the holder, however, if such a direction is not made in respect of any matter, this proxy will be
voted as recommended by Management.6.The securities represented by this proxy will be voted in
favour or withheld from voting or voted against each of the matters described herein, as
applicable, in accordance with the instructions of the holder, on any ballot that may be called for
and, if the holder has specified a choice with respect to any matter to be acted on, the securities
will be voted accordingly.7.This proxy confers discretionary authority in respect of amendments or
variations to matters identified in the Notice of Meeting or other matters that may properly come
before the meeting or any adjournment or postponement thereof.8.This proxy should be read in
conjunction with the accompanying documentation provided by Management.Proxies submitted must be
received by 10:00 a.m., CDT, on Tuesday, May 19, 2009.VOTE USING THE TELEPHONE OR INTERNET 24 HOURS
A DAY 7 DAYS A WEEK!
Call the number listed BELOW from a touch tone Go to the following web site: You can enroll to receive future securityholder
telephone. www.investorvote.com communications electronically, by visiting
www.computershare.com click Enroll for e-delivery
1-866-732-VOTE (8683) Toll Free under the Shareholder Services menu.
If you vote by telephone or the Internet, DO NOT mail back this proxy.Voting by mail may be the
only method for securities held in the name of a corporation or securities being voted on behalf of
another individual.Voting by mail or by Internet are the only methods by which a holder may appoint
a person as proxyholder other than the Management nominees named on the reverse of this proxy.
Instead of mailing this proxy, you may choose one of the two voting methods outlined above to vote
this proxy.To vote by telephone or the Internet, you will need to provide your CONTROL NUMBER,
HOLDER ACCOUNT NUMBER and ACCESS NUMBER listed below.
CONTROL NUMBER HOLDER ACCOUNT NUMBER ACCESS NUMBER |
Appointment of ProxyholderI/We, being holder(s) of Ultra Petroleum Corp. hereby appoint: Michael
D.Print the name of the person you are Watford, or failing him Kelly L. Whitley,appointing if this
person is someone OR other than the Chairman of the Meeting.as my/our proxyholder with full power
of substitution and to attend, act and to vote for and on behalf of the shareholder in accordance
with the following direction (or if no directions have been given, as the proxyholder sees fit) and
all other matters that may properly come before the Annual General Meeting of shareholders of Ultra
Petroleum Corp. to be held at the Crowne Plaza Hotel, 425 N. Sam Houston Pky E. Houston, Texas,
77060 on May 21, 2009 at 10:00 a.m., CDT and at any adjournment or postponement thereof.VOTING
RECOMMENDATIONS ARE INDICATED BY HIGHLIGHTED TEXT OVER THE BOXES.1.Election of
DirectorsForWithholdForWithholdForWithhold01. Michael D. Watford02. Roger A. Brown03. W. Charles
Helton04. Stephen J. McDaniel05. Robert E. RigneyFoldForWithhold2.Appointment of
AuditorsAppointment of Ernst & Young LLP as Auditors of the Corporation for the ensuing year and
authorizing the Directors to fix their remuneration.ForAgainst3.Shareholder ProposalIf presented,
to consider and vote upon a shareholder proposal regarding climate change which is opposed by the
Board of Directors.ForAgainstFold4.Other BusinessTo transact such other business as may
properly be brought before the Annual Meeting or any adjournments or postponements
thereof.Authorized Signature(s) This section must be completed for yourSignature(s)Date
instructions to be executed.I/We authorize you to act in accordance with my/our instructions set
out above. I/We hereby revoke any proxy previously given with respect to the Meeting. If no voting
instructions are indicated above, this Proxy will be voted as recommended by Management.Interim
Financial Statements You can access quarterly financial statements andAnnual Financial Statements
- You can access Annual Reports managements discussion and analysis (10-Q) on our website at
www.ultrapetroleum.com,on our website at www.ultrapetroleum.com, or by registering at or by
registering at www.computershare.com/mailinglist. If you would like to receive them
bywww.computershare.com/mailinglist. If you would like to receive mail, mark this box.them by mail,
mark this box.If you are not mailing back your proxy, you may register online to receive the above
financial report(s) by mail at www.computershare.com/mailinglist.05 9 2 3 4A R 1U P Q Q |