defr14a
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. 1)
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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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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previous filing by registration statement number, or the Form or Schedule and the date of its
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SEC 1913 (02-02)
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Persons who are to respond to the collection of information contained in this form are not required to respond unless
the form displays a currently valid OMB control number. |
TABLE OF CONTENTS
ULTRA
PETROLEUM CORP.
363 North Sam Houston Parkway East, Suite 1200
Houston, Texas 77060
NOTICE OF ANNUAL MEETING OF
SHAREHOLDERS
To Be Held on June 14,
2007
To the Shareholders of Ultra Petroleum Corp:
You are cordially invited to attend the Annual Meeting of
Shareholders (the Annual Meeting) of Ultra Petroleum
Corp. which will be held at the Crowne Plaza Hotel,
425 N. Sam Houston Parkway E., Houston Texas, on
Thursday, June 14, 2007 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, 2007;
3. To receive the financial statements of the Company for
the fiscal year ended December 31, 2006 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
May 7, 2007, 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 June 12, 2007. As an
alternative, you can vote your shares by telephone or over the
Internet.
Sincerely,
MICHAEL D. WATFORD
Chairman, President and
Chief Executive Officer
April 30, 2007
Proxy
Statement Questions
WHO IS
ENTITLED TO VOTE AT THE ANNUAL MEETING?
Shareholders who own shares of common stock as of May 7,
2007, 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 May 17, 2007.
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, 2007; and
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If presented, a shareholder proposal which is opposed by the
Board of Directors.
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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 2007, 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 A STREET NAME BY MY BROKER,
WILL MY BROKER VOTE FOR ME?
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 in the election of directors and the appointment of
Ernst & Young LLP as the independent registered public
accounting firm for fiscal year 2007. 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 Whitley as your
proxies. 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 to have your shares voted by
proxy.
2
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 be voted 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 2007 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
a. Proposal No. 1
Election
of a board of five directors to serve until the next Annual
Meeting or until their successors are duly elected and
qualify.
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.
b. Proposal No. 2
To
appoint Ernst & Young LLP as the independent auditor of
the Company for the fiscal year ended December 31,
2007.
To vote for Proposal No. 2, you check the box marked
FOR. To withhold your vote, mark the box
WITHHELD opposite the proposal.
3
c. Proposal No. 3
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, AGAINST. If you are
unsure how to vote, mark the box 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.
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 June 12, 2007.
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.
HOW DO I
VOTE BY TELEPHONE?
Record holders may submit proxies by following the To Vote
Using the Telephone instructions on their proxy cards.
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.
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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. 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 April 18, 2007,
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 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 April 18, 2007, or, in the case of
executive officers and directors of the Company 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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6,390,788
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4.2
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%
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W. Charles Helton(c)
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1,577,774
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1.0
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%
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Robert E. Rigney(d)
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1,615,535
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1.1
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%
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James C. Roe(e)
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539,876
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Stephen J. McDaniel
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754
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Stephen R. Kneller(f)
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741,646
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George M. Patterson
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286,000
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William R. Picquet(g)
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258,072
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Marshall D. Smith(h)
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231,895
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Common shares all directors and
executive officers own as a group (9 persons)(i)
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11,642,320
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7.7
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%
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Fidelity Management &
Research Company(j)
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22,828,047
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15.0
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82 Devonshire Street
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Boston, MA 02109
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Morgan Stanley(k)
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16,179,630
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10.6
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1585 Broadway
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New York, NY 10036
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As of April 18, 2007 there were 152,003,394 common shares
outstanding. |
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Includes 126,118 common shares issuable upon exercise of vested
options; 4,355,312 common shares issuable upon exercise of
vested options owned by Watford Interests Ltd.; and
1,683,462 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 160,000 common shares issuable upon exercise of vested
options and 98,000 shares owned by the Helton Family
Foundation in which Mr. Helton has shared voting power. |
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Includes 260,000 common shares issuable upon exercise of vested
options. |
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Includes 100,000 common shares issuable upon exercise of vested
options. |
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Includes 677,052 common shares issuable upon exercise of vested
options. |
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Includes 257,072 common shares issuable upon exercise of vested
options. |
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All 231,895 common shares are issuable upon exercise of vested
options. |
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Includes 6,167,449 common shares issuable upon exercise of
vested options. |
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Information is based upon a report filed with Canadian
regulatory authorities on November 10, 2006 by Fidelity
Management & Research Company, Fidelity Management
Trust Company and Fidelity International Limited. |
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Information is based upon a Schedule 13G filed with the
Commission on February 15, 2007 by Morgan Stanley as a
parent company. Morgan Stanley represents that it has sole
voting power over 15,906,584 shares and sole dispositive
power over 16,179,630 shares of Ultra common stock and
shared voting power over 10,535 shares of Ultra common
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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, 2006.
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 2006 compensation for our named
executive officers.
Objectives
of our compensation program
Our business strategy is to enhance stockholder 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.
6
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.
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 American Stock
Exchange, the Compensation Committee is composed entirely of
non-management members of our Board of Directors. The
Compensation Committee annually reviews and establishes the base
salary, incentive compensation, and other equity based awards
for the CEO and makes recommendations to the CEO with respect to
the compensation of the Companys other executive officers.
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Our strategy is to pay total direct compensation (the sum of
total annual cash and the expected value of long-term
incentives) at the market 75th percentile if target
performance levels are achieved. During 2006, we used the ECI
Oil & Gas E&P 2005 Compensation Survey and the
Mercer Energy 2005 Survey to assess our competitive position.
From time to time, we use outside consultants to help us assess
competitive pay levels and to make recommendations regarding our
overall compensation program. In 2004, we engaged Longnecker and
Associates. Based upon their recommendations, in 2005 we adopted
and implemented an incentive compensation plan consisting of a
short-term, cash based annual plan, the Annual Incentive Plan
(AIP) and a long-term equity based Long-Term
Incentive Plan (LTIP). Additionally, the
Compensation Committee created a one-time, three year,
performance based Best in Class program primarily targeting
non-officer employees.
Base salary. With respect to base salary, we
target by position the market 50th percentile. Based on
survey data, in 2006 the base salaries of all of the named
executive officers were increased in order to align them with
the 50th percentile.
Bonus. 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.
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. For instance, a large acquisition or
divestiture may substantially change our budget and forecast,
thereby affecting the performance metrics. Also, our 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 February 2006, 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
Above Expectations level. The Compensation Committee awarded a
bonus to Mr. Watford for 2006 of $1 million (50% in
cash and 50% in Company stock), representing 200% of his 2006
base salary. Mr. Smith was awarded a bonus for 2006 of
$260,000, representing 117% of his 2006 base salary,
Mr. Picquet was awarded a bonus for 2006 of $235,000,
representing 103% of his 2006 base salary, Mr. Kneller was
awarded a bonus for 2006 of $260,000, representing 114% of his
2006 base salary, and Mr. Patterson did not receive a bonus
for 2006 as he has adjusted his work schedule to part-time in
anticipation of retirement.
Long-Term Equity-Based Incentives. In 2005, we
adopted the 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.
Participants are recommended by the CEO and approved by the
Compensation Committee. Selected officers, managers and other
key employees are eligible to participate in the LTIP which has
two components, an LTIP Stock Option Award and an LTIP Common
Stock Award.
Under the LTIP, each year the Compensation Committee establishes
a percentage of base salary for each participant which is
multiplied by the participants base salary to derive an
LTI Value. With respect to LTIP Stock Option Awards,
options are awarded equal to one half of the LTI Value based on
the fair value on the date of grant (using Black-Scholes
methodology). In March 2006, the Compensation Committee approved
the award of an aggregate of 109,966 options to purchase common
stock to the Companys officers and employees, representing
less than one one-tenth of one percent of the outstanding common
shares on the date
8
of grant. A total of 45 employees and no non-employee directors
received stock option awards, including four of the five named
executive officers, who received an aggregate of 47,117 stock
options or 12% of the total stock options granted in fiscal
2006. Mr. Patterson did not receive any stock option awards
in 2006 as he has adjusted his work schedule to part-time in
anticipation of retirement. All LTIP Stock Options granted to
the named executive officers in 2006 vested in one year.
The other half of the LTI Value is the target amount
that may be awarded to the participant as an LTIP Common Stock
Award at the end of a three-year performance period. The
Compensation Committee establishes performance measures at the
beginning of each three-year overlapping performance period.
Each participant is also assigned threshold and maximum award
levels in the event that performance is below or above target
levels. Awards are expressed as dollar targets and become
payable in common shares at the end of each performance period
based on the Companys overall performance during such
period. A new three-year period begins each January.
Participants must be employed by the Company at the end of a
performance period in order to receive an award.
For the first (January 2005 December 2007) and
second (January 2006 December 2008) performance
periods, the Compensation Committee established the following
performance measures: return on equity, reserve replacement
ratio, and production growth. No LTIP Common Stock Awards will
be made until the first performance period ends in December 2007
and adequate time has elapsed to allow for performance
measurement.
Also in 2005, we established a Best in Class program
for all employees. 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 Best in
Class program, on January 1, 2005 or the employment date if
subsequent to January 1, 2005, all employees received a
contingent award of stock units equal to $50,000 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, 2005 will 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 relative to the industry during a three-year
performance period beginning January 1, 2005, and ending
December 31, 2007, 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
performance measures are all sources finding and development
cost and full cycle economics. Performance results will be
determined after the end of the performance period and
publication of the applicable industry reports. A participant
must be employed when payments are made in order to receive an
award.
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 2006. 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
9
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. The Company has no
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
stockholders, 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 2007 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
10
Summary
Compensation Table
The following table shows compensation information for the
fiscal year ended December 31, 2006, for our principal
executive officer, our principal financial officer, and three
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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|
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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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($)
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Michael D. Watford,
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2006
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$
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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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$
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468,677
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|
|
|
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|
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|
|
|
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$
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28,770
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|
|
$
|
5,046,097
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Chairman of the Board, President
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and Chief Executive Officer
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|
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|
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Marshall D. Smith,
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2006
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|
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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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|
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|
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$
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28,770
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|
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$
|
717,498
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|
Chief Financial Officer
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Stephen R. Kneller,
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2006
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$
|
227,500
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$
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260,000
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|
$
|
84,375
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|
|
$
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126,545
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|
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$
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28,770
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$
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727,190
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Vice President
Exploration,
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Domestic
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William R. Picquet,
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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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$
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28,770
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$
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702,190
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Vice President
Operations
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George M. Patterson,
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2006
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$
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112,000
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|
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$
|
35,280
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|
|
|
|
|
|
|
|
|
|
|
|
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$
|
14,730
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$
|
162,010
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|
Vice President
International
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(1) |
|
The amounts in this column represent bonuses earned in 2006
under our AIP. The Compensation Committee awarded a bonus to
Mr. Watford of $1,000,000 of which $500,000 was paid in
cash and $500,000 was paid in shares of our common stock. |
|
(2) |
|
The amounts in this column relate to total estimated payout
earned during 2006 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 first three-year performance cycle in
December 2007. The dollar amounts stated for stock awards
reflect the expense recognized for financial statement reporting
purposes for the year ended December 31, 2006, 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, 2006. |
|
|
|
Mr. Watfords stock awards 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. |
|
(3) |
|
The dollar amounts stated for option awards reflect the expense
recognized for financial statement reporting purposes for the
year ended December 31, 2006, in accordance with
SFAS 123R. The assumptions utilized in the calculation of
these amounts are 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, 2006. |
|
(4) |
|
The named executive officers receive no benefits from the
Company under defined pension or defined contribution plans. |
|
(5) |
|
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. |
11
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 2006.
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All Other
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All Other
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Stock
|
|
Option
|
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|
|
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|
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|
|
|
|
|
|
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|
|
|
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Awards:
|
|
Awards:
|
|
Exercise or
|
|
Grant
|
|
|
|
|
Estimated Future Payouts
|
|
Estimated Future Payouts
|
|
Number of
|
|
Number of
|
|
Base
|
|
Date Fair
|
|
|
|
|
Under Non-Equity Incentive
|
|
Under Equity Incentive
|
|
Shares of
|
|
Securities
|
|
Price of
|
|
Value of
|
|
|
|
|
Plan Awards
|
|
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
|
|
|
03-30-2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26,118(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
63.05
|
|
|
$
|
624,902
|
|
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,928
|
|
|
|
13,092
|
|
|
|
19,638
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marshall D. Smith
|
|
|
03-30-2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,895(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
63.05
|
|
|
$
|
164,970
|
|
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,037
|
|
|
|
3,456
|
|
|
|
5,184
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stephen R. Kneller
|
|
|
03-30-2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,052(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
63.05
|
|
|
$
|
168,727
|
|
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,060
|
|
|
|
3,535
|
|
|
|
5,302
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William R. Picquet
|
|
|
03-30-2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,052(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
63.05
|
|
|
$
|
168,727
|
|
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,060
|
|
|
|
3,535
|
|
|
|
5,302
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
George M. Patterson
|
|
|
03-30-2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
443
|
|
|
|
1,478
|
|
|
|
2,217
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
All stock options granted to the named executive officers in
2006 were awarded under the 2000 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 2000 Stock Incentive Plan, is
the closing price of the Companys stock on the date of
grant. |
|
(2) |
|
The dollar value stated for options reflect the number of shares
granted in 2006 multiplied by the fair market value 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 From
10-K for the
year ended December 31, 2006. |
|
(3) |
|
Represents LTIP Stock Options granted to the named executive
officers in 2006, all of which vested on March 30, 2007. |
|
(4) |
|
Represents potential payouts under our 2006 LTIP for the
three-year period ending December 2008. Pursuant to the LTIP,
the Compensation Committee determined target payout amounts for
each named executive officer in March 2006. Awards are paid at
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. |
Employment
Agreements
We were party to an employment contract with Michael D. Watford,
our Chairman, President and Chief Executive Officer that expired
on February 1, 2007. The contract, which had an initial
term of three years commencing February 1, 2004, provided
for a base salary of $425,000, subject to an annual adjustment
based upon a review of Mr. Watfords compensation by
our Compensation Committee. The contract also provided for an
annual incentive compensation award ranging between 50% and 100%
of Mr. Watfords salary as recommended by the
Compensation Committee to the board for approval. The contract
also provided for a retention bonus consisting of an aggregate
of 120,000 common shares which vested in three equal parts over
a three year period. In addition, the board considered the grant
of options on an annual basis based upon performance.
In connection with the execution of his employment agreement,
Mr. Watford received a one-time award of options to
purchase 400,000 of the Companys common shares, with an
expiration period of ten years. In the event Mr. Watford
was terminated prior to the end of his contract, other than for
just cause, Mr. Watford would have been paid a severance of
his salary and bonus for the 12 months immediately
preceding the termination and all previously awarded stock
options which had not previously vested would vest immediately
in full. If Mr. Watfords employment with the Company
was terminated upon a change in control, Mr. Watford
12
would receive
21/2
times his salary and bonus for the 12 months preceding the
termination. See Potential Payouts Upon Change In Control
and Termination.
We are currently negotiating a new employment agreement with
Mr. Watford which we expect will have similar terms and
which will be subject to the approval of our Compensation
Committee.
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 of the Companys 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.
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, 2006.
|
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|
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|
|
|
|
|
|
|
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|
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|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
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|
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|
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|
|
|
|
|
|
|
|
|
|
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|
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|
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|
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Equity
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
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|
|
Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
Plan
|
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|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
Awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
Market or
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
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|
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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
|
|
|
Option
|
|
|
Stock That
|
|
|
Stock That
|
|
|
Rights
|
|
|
That
|
|
|
|
Unexercised
|
|
|
Unexercised
|
|
|
Unexercised
|
|
|
Exercise
|
|
|
Expira-
|
|
|
Have Not
|
|
|
Have Not
|
|
|
That
|
|
|
Have Not
|
|
|
|
Options (#)
|
|
|
Options (#)
|
|
|
Unearned
|
|
|
Price
|
|
|
tion
|
|
|
Vested
|
|
|
Vested
|
|
|
Have Not
|
|
|
Vested
|
|
Name
|
|
Exercisable
|
|
|
Unexercisable(1)
|
|
|
Options (#)
|
|
|
($)
|
|
|
Date
|
|
|
(#)
|
|
|
($)
|
|
|
Vested (#)
|
|
|
($)
|
|
|
Michael D. Watford
|
|
|
2,575,000
|
|
|
|
|
|
|
|
|
|
|
$
|
0.46
|
|
|
|
01-28-09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,142(2
|
)
|
|
$
|
50,000(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,692(3
|
)
|
|
$
|
796,875(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,638(4
|
)
|
|
$
|
937,500(4
|
)
|
Marshall D. Smith
|
|
|
225,000
|
|
|
|
|
|
|
|
|
|
|
$
|
33.57
|
|
|
|
07-18-15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,895
|
|
|
|
|
|
|
$
|
63.05
|
|
|
|
03-30-16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,220(2
|
)
|
|
$
|
40,951(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,364(3
|
)
|
|
$
|
112,871(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,184(4
|
)
|
|
$
|
247,500(4
|
)
|
13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
Option
|
|
|
Stock That
|
|
|
Stock That
|
|
|
Rights
|
|
|
That
|
|
|
|
Unexercised
|
|
|
Unexercised
|
|
|
Unexercised
|
|
|
Exercise
|
|
|
Expira-
|
|
|
Have Not
|
|
|
Have Not
|
|
|
That
|
|
|
Have Not
|
|
|
|
Options (#)
|
|
|
Options (#)
|
|
|
Unearned
|
|
|
Price
|
|
|
tion
|
|
|
Vested
|
|
|
Vested
|
|
|
Have Not
|
|
|
Vested
|
|
Name
|
|
Exercisable
|
|
|
Unexercisable(1)
|
|
|
Options (#)
|
|
|
($)
|
|
|
Date
|
|
|
(#)
|
|
|
($)
|
|
|
Vested (#)
|
|
|
($)
|
|
|
Stephen R. Kneller
|
|
|
180,000
|
|
|
|
|
|
|
|
|
|
|
$
|
0.57
|
|
|
|
06-05-10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
150,000
|
|
|
|
|
|
|
|
|
|
|
$
|
2.61
|
|
|
|
04-27-11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000
|
|
|
|
|
|
|
|
|
|
|
$
|
4.43
|
|
|
|
05-07-12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000
|
|
|
|
|
|
|
|
|
|
|
$
|
4.83
|
|
|
|
04-25-13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
120,000
|
|
|
|
|
|
|
|
|
|
|
$
|
16.97
|
|
|
|
04-26-14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40,000
|
|
|
|
|
|
|
|
|
|
|
$
|
25.68
|
|
|
|
02-07-15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,052
|
|
|
|
|
|
|
$
|
63.05
|
|
|
|
03-30-16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,142(2
|
)
|
|
$
|
50,000(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,302(3
|
)
|
|
$
|
253,125(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,302(4
|
)
|
|
$
|
253,125(4
|
)
|
William R. Picquet
|
|
|
250,000
|
|
|
|
|
|
|
|
|
|
|
$
|
40.34
|
|
|
|
08-16-15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,052
|
|
|
|
|
|
|
$
|
63.05
|
|
|
|
03-30-16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
982(2
|
)
|
|
$
|
39,625(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,996(3
|
)
|
|
$
|
95,270(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,302(4
|
)
|
|
$
|
253,125(4
|
)
|
George M. Patterson
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,142(2
|
)
|
|
$
|
50,000(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,969(3
|
)
|
|
$
|
141,750(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,302(4
|
)
|
|
$
|
141,750(4
|
)
|
|
|
|
(1) |
|
All of the options vested on March 30, 2007. |
|
(2) |
|
Under the Best in Class program, on January 1, 2005 or the
employment date if subsequent to January 1, 2005, all
employees received a contingent award of stock units equal to
$50,000 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, 2005 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 relative to the industry during a
three-year performance period beginning January 1, 2005,
and ending December 31, 2007, 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 2005 LTIP for the
three-year period ending December 2007. Pursuant to the 2005
LTIP, the Compensation Committee determined target payout
amounts for each named executive officer in February 2005 or at
the Board of Directors meeting immediately following the
named executive officers hire date. Awards are paid at 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 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 at 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. |
14
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 2006 for each named executive officer on an aggregated
basis.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
|
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
|
|
|
50,000
|
|
|
$
|
3,125,478
|
|
|
|
40,000
|
(2)
|
|
$
|
2,742,400
|
(3)
|
Marshall D. Smith
|
|
|
25,000
|
|
|
$
|
721,455
|
|
|
|
|
|
|
|
|
|
Stephen R. Kneller
|
|
|
20,000
|
|
|
$
|
1,291,816
|
|
|
|
|
|
|
|
|
|
William R. Picquet
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
George M. Patterson
|
|
|
105,000
|
|
|
$
|
4,075,150
|
|
|
|
|
|
|
|
|
|
|
|
|
(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) |
|
Represents the second grant of 40,000 shares of the total
120,000 restricted share retention bonus awarded to
Mr. Watford in connection with his employment agreement
which vested in three equal parts from the date of the
employment agreement, which was February 1, 2004. The
employment agreement expired on February 1, 2007. |
|
(3) |
|
The aggregate dollar value realized upon vesting of restricted
stock is based upon the average of the high and low stock price
of our common stock on the vesting date. On February 1,
2006, the average of the high and low stock price of our common
stock on the American Stock Exchange was $68.56 per share. |
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, 2006, the
change of control payments to our named executive officers would
have been as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Potential
Change-of-Control
Payments
|
|
|
|
Mr. Watford(2)
|
|
|
Mr. Smith
|
|
|
Mr. Kneller
|
|
|
Mr. Picquet
|
|
|
Mr. Patterson
|
|
|
Base Salary
|
|
$
|
1,250,000
|
|
|
$
|
460,000
|
|
|
$
|
470,000
|
|
|
$
|
470,000
|
|
|
$
|
224,000
|
|
Bonus
|
|
|
2,500,000
|
|
|
|
520,000
|
|
|
|
520,000
|
|
|
|
470,000
|
|
|
|
|
|
Health & Welfare Benefits
|
|
|
6,367
|
|
|
|
4,832
|
|
|
|
4,832
|
|
|
|
4,832
|
|
|
|
4,832
|
|
Additional Retirement Benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Perquisites
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal
|
|
$
|
3,756,367
|
|
|
$
|
984,832
|
|
|
$
|
994,832
|
|
|
$
|
944,832
|
|
|
$
|
228,832
|
|
Fair market value of accelerated
equity compensation(1)
|
|
|
1,809,375
|
|
|
|
421,797
|
|
|
|
581,250
|
|
|
|
407,833
|
|
|
|
286,680
|
|
Tax
gross-up
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
$
|
5,565,742
|
|
|
$
|
1,406,629
|
|
|
$
|
1,576,082
|
|
|
$
|
1,352,665
|
|
|
$
|
515,512
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes the 2005 and 2006 LTIP amounts and the 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, 2006. See Employment
Agreements. The agreement expired on February 1,
2007; however, we expect to enter into a similar agreement with
Mr. Watford in the near-term. The health and welfare
benefits are assumed to continue for three years as provided in
the employment agreement and are calculated using 2006 amounts. |
15
For our executive officers (other than our CEO whose severance
benefits were set forth in his employment agreement) we provide
for:
|
|
|
|
|
a lump sum severance payment equal to two times the
executives base salary plus the maximum bonus opportunity
under the AIP,
|
|
|
|
continuation of life and health insurance benefits for two years
at existing group rates,
|
|
|
|
immediate vesting of all stock options awards which are
exercisable for one year following termination, and
|
|
|
|
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 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.
Director
Compensation
Non-employee directors were paid an annual retainer of $50,000
and received common shares equivalent to $100,000 granted under
the 2005 Stock Incentive Plan. Directors who are also officers
or employees of the Company do not receive any compensation for
duties performed as directors. The following table shows
compensation paid to each of our directors during the fiscal
year ended December 31, 2006.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension
|
|
|
|
|
|
|
|
|
|
Fees
|
|
|
|
|
|
|
|
|
|
|
|
Value and
|
|
|
|
|
|
|
|
|
|
Earned or
|
|
|
|
|
|
|
|
|
Non-Equity
|
|
|
Nonqualified
|
|
|
|
|
|
|
|
|
|
Paid in
|
|
|
Stock
|
|
|
Option
|
|
|
Incentive Plan
|
|
|
Deferred
|
|
|
All Other
|
|
|
|
|
|
|
Cash
|
|
|
Awards
|
|
|
Awards
|
|
|
Compensation
|
|
|
Compensation
|
|
|
Compensation
|
|
|
Total
|
|
Name
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
Earnings
|
|
|
($)
|
|
|
($)
|
|
|
W. Charles Helton
|
|
$
|
50,000
|
|
|
$
|
100,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
150,000
|
|
Robert E. Rigney
|
|
$
|
50,000
|
|
|
$
|
100,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
150,000
|
|
James E. Nielson(1)
|
|
$
|
29,167
|
|
|
$
|
58,333
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
87,500
|
|
Stephen J. McDaniel(2)
|
|
$
|
20,833
|
|
|
$
|
41,667
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
62,500
|
|
James C. Roe
|
|
$
|
50,000
|
|
|
$
|
100,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
150,000
|
|
|
|
|
(1) |
|
On July 31, 2006, Mr. Nielson submitted his
resignation to the Board of Directors. Mr. Nielson also
resigned from the Companys Audit Committee, Compensation
Committee and Nominating and Corporate Governance Committee.
Mr. Nielsons departure was not related to any
disagreement with the Company or with the Companys
operations, policies or practices. |
16
|
|
|
(2) |
|
On July 31, 2006, the Companys Board of Directors
elected Mr. McDaniel to fill the vacancy and to serve until
the next annual meeting of shareholders. On August 2, 2006,
the Board of Directors appointed Mr. McDaniel to serve on
the Companys Audit Committee, Compensation Committee and
Nominating and Corporate Governance Committee. Mr. McDaniel
is an independent director pursuant to the rules
adopted by the Securities and Exchange Commission applicable to
the corporate governance standards for companies listed on the
American Stock Exchange. |
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 American 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 on our website at
http//www.ultrapetroleum.com.
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. The Board has not granted any waivers to the Code of
Business Conduct and Ethics. The Code of Business Conduct and
Ethics is accessible on our website
http://www.ultrapetroleum.com. Any amendments to or waivers of
the Code of Conduct and Business Ethics will also be posted on
our website.
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;
(e) addressing the integrity of our internal control and
management information systems; and
(f) considering, from time to time, matters that pertain to
our operations in foreign countries.
Our Board of Directors met formally four times during the last
fiscal year. During the last fiscal year, all directors attended
at least 75% of the total number of meetings of the Board of
Directors, and each committee member attended at least 75% of
the total number of meetings held by all committees on which he
served.
17
Board
Composition and Independence from Management
The Board believes that four of the five current directors and
four of the five nominated directors 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 American 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:
|
|
|
|
|
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 $60,000 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 $60,000.
|
|
|
|
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 5% of the organizations consolidated gross revenues
for that year, or $200,000, whichever is more, in any of the
most recent three fiscal years.
|
|
|
|
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.
|
|
|
|
Is an executive officer of another entity where any of the
Companys executive officers serve on the compensation
committee.
|
|
|
|
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.
|
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 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
18
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.
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
Roe. Mr. McDaniel was appointed to the Audit Committee on
August 2, 2006. James E. Nielson served on the Audit
Committee until his resignation from the Board of Directors on
July 31, 2006. The Board of Directors has affirmatively
determined that each of the members is financially literate and
is an independent director for purposes of American 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 six meetings during 2006. 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
19
to meet the updated requirements of the Securities and Exchange
Commission and the American Stock Exchange. The Audit Committee
Charter is available on the Companys website at
http//www.ultrapetroleum.com and attached hereto as
Exhibit A.
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. Mr. McDaniel was
appointed to the Compensation Committee on August 2, 2006.
James E. Nielson served on the Compensation Committee until his
resignation from the Board of Directors on July 31, 2006.
The Compensation Committee held four meetings during 2006. All
members of the Compensation Committee attended 75% of the
meetings. The Compensation Committee Charter is available on our
website at http//www.ultrapetroleum.com.
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 Nominating and Corporate Governance Committee Charter
is available on our website at http//www.ultrapetroleum.com.
This Committee is comprised of Messrs. Roe, McDaniel and
Helton. Mr. McDaniel was appointed to the Nominating and
Corporate Governance Committee on August 2, 2006. James E.
Nielson served on the Nominating and Corporate Governance
Committee until his resignation from the Board of Directors on
July 31, 2006. 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 on the Companys
website at http://www.ultrapetroleum.com.
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
20
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.
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 is 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.
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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53
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Chairman of the Board, CEO,
President
and Director
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1999
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W. Charles Helton
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65
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Director
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1994
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Stephen J. McDaniel
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45
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Director
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2006
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Robert E. Rigney
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75
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Director
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2001
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James C. Roe
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78
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Director
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2001
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Marshall D. Smith
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47
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Chief Financial Officer
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2005
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Stephen R. Kneller
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52
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VP Exploration,
Domestic
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1998
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William R. Picquet
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55
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VP Operations
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2005
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George M. Patterson
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61
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VP International
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2001
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Mr. Michael D. Watford has been the Companys
Chairman of the Board, Chief Executive Officer, President and a
Director since January 1999. From August 1997 until February
1999, Mr. Watford was a consultant in private practice.
Prior to consulting, Mr. Watford was the President, Chief
Executive Officer and a director of Nuevo Energy Company, a
public energy company from 1994 until 1997. Mr. Watford has
been in the energy business for 30 years and has become
familiar with virtually every aspect of the industry, holding
senior management positions in marketing, exploration and
production, and corporate finance.
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. Currently, Mr. McDaniel is the
President and a director of Midstates Petroleum, after spending
seven years with Merrill Lynch in the oil
21
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. Prior to that,
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 21 years.
Mr. James C. Roe has been a director of the Company
since January 2001. From 1996 until January 2001, Mr. Roe
was a board member of Pendaries Petroleum Ltd. Prior to that,
Mr. Roe was Vice President and Owner of Delta-X Corp., a
high technology automation system used in oil producing
operations until the sale of Delta-X Corp. in 1997. Mr. Roe
has been retired since 1997.
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 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. Stephen R. Kneller has been Vice
President Exploration, Domestic since September
1998. Mr. Kneller joined the Company in 1997 as a
geologist. Prior to that, Mr. Kneller worked in the
exploration department for CNG Producing Co. and CNG Development
Co. for 17 years. Mr. Kneller has worked the Green
River Basin of Wyoming actively since 1992.
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. George M. Patterson has been Vice
President International since July 2001.
Mr. Patterson has over 30 years experience as an
exploration geologist and senior executive in international
major exploration and production companies such as Mobil Oil,
Cities Service and Kerr-McGee. Mr. Patterson served as Vice
President International Exploration for Kerr-McGee from 1996 to
1999. Mr. Patterson was a consultant for various companies
on international exploration and production projects between
1999 and 2001.
All officers and directors of the Company, including the
nominees, are United States citizens.
PROPOSAL II
APPOINTMENT
OF INDEPENDENT AUDITORS
On February 16, 2007, 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, 2007. 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.
22
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, 2007. 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.
Change in
Accountants
At the 2006 Annual Meeting, the shareholders approved the
appointment of Ernst & Young LLP. Prior to the
appointment of Ernst & Young LLP, KPMG served as the
Companys independent auditor.
The audit reports of KPMG on the consolidated financial
statements of the Company and its subsidiaries for the past two
years preceding the appointment of Ernst & Young LLP
did not contain an adverse opinion or a disclaimer of opinion,
and were not qualified or modified as to uncertainty, audit
scope or accounting principles. During the two most recent
fiscal years and the interim period preceding the effective date
of Ernst & Young LLPs appointment, there were no
disagreements with KPMG on any matter of accounting principles
or practices, financial statement disclosure, or auditing scope
or procedure, which disagreements, if not resolved to the
satisfaction of KPMG would have caused that firm to make
reference thereto in connection with its reports on our
consolidated financial statements as and for the years then
ended.
As previously disclosed by us, in connection with the
preparation of the Companys Annual Report on
Form 10-K
for the year ended December 31, 2005, the Company concluded
that control deficiencies in its internal control over financial
reporting as of December 31, 2005, constituted material
weaknesses within the meaning of the Public Company Accounting
Oversight Boards Auditing Standard No. 2. The Audit
Committee discussed the subject matter of the material
weaknesses with KPMG, and the Company authorized KPMG to respond
fully to the inquiries of Ernst & Young LLP concerning
the material weaknesses. Remediation steps were designed and in
place by the end of the third quarter of 2006 and at year-end
2006 it was concluded that the Companys internal control
over financial reporting was sufficiently mature to support an
assessment that the controls were effective. For additional
information, please see the discussion under Item 9A.
Controls and Procedures Managements Report on
Internal Control Over Financial Reporting contained in our
Report on
Form 10-K
for the year ended December 31, 2006.
Other than the material weaknesses described above, during the
two most recent fiscal years and the interim period preceding
the effective date of Ernst & Young LLPs
appointment, there were no reportable events as that
term is defined in Item 304(a)(1)(v) of
Regulation S-K.
Prior to the selection of Ernst & Young LLP to provide
the audit of the Companys financial statements and the
review of interim filings, the Company did not consult
Ernst & Young LLP regarding any matter requiring
disclosure under Item 304(a)(2) of
Regulation S-K.
Specifically, during the two most recent fiscal years and the
interim period preceding the effective date of Ernst &
Young LLPs appointment, we did not consult with
Ernst & Young LLP regarding either (i) the
application of accounting principles to a specified transaction,
either competed or proposed, or the type of audit opinion that
might be rendered on our financial statements, and neither a
written report nor oral advice was provided to the Company that
Ernst & Young LLP concluded was an important factor
considered by us in reaching a decision as to the accounting,
auditing, or financial reporting issue; or (ii) any matter
that was either the subject of a disagreement or a reportable
event as described in Item 304(a) of
Regulation S-K.
Principal
Accountants Fees and Services.
Audit Fees Paid to Independent Auditors. Fees
paid for professional services rendered related to the audit of
the Companys annual financial statements and review of the
quarterly financial statements, including
23
out-of-pocket
expenses, were $430,748 paid to Ernst & Young LLP in
2006, and $787,002 and $906,176 paid to KPMG LLP in 2006 and
2005, respectively.
Audit-related Fees. There were no
audit-related fees paid in 2005 or 2006.
Tax Fees. Tax fees are for services rendered
by Grant Thornton LLP related to advice and tax planning. The
Company has elected not to use its current principal accountant
for tax services. Fees paid to Grant Thornton LLP for tax
related services were $129,106 in 2006 and $135,207 in 2005.
All Other Fees. There were no other fees paid
to Ernst & Young LLP, KPMG LLP in 2006 or 2005. Grant
Thornton LLP was paid $172,780 in relation to an engagement
related to Sarbanes-Oxley compliance in 2006. Grant Thornton LLP
was not paid any other fees in 2005.
All of the services provided by the Companys independent
auditors during 2005 and 2006 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, 2006 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 2006. 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
Mr. W. Charles Helton
Mr. James C. Roe
PROPOSAL III
SHAREHOLDER
PROPOSAL ON CLIMATE CHANGE REPORT
The proponent of the following shareholder proposal has stated
that it intends to present the proposal at the Annual Meeting.
In accordance with applicable proxy regulations, the following
proposal and supporting statement, as submitted by the
proponent, are set forth below. 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.
24
Shareholder
Proposal
The following proposal has been submitted by the Nathan Cummings
Foundation, owner of 6,705 shares of the Companys
stock. The address of the Nathan Cummings Foundation will be
provided upon oral or written request to the Companys
Secretary.
CLIMATE
CHANGE REPORT
WHEREAS:
The Intergovernmental Panel on Climate Change recently concluded
that warming of the climate system is unequivocal and that human
activity is the main cause. In January, chief executives of 10
major US corporations called on Congress to pass a
mandatory program for the reduction of greenhouse gas (GHG)
emissions. Regulations addressing GHG emissions already exist in
28 states and Congress is now debating the best way to
address the problem.
Analysts at firms such as Goldman Sachs, McKinsey and JPMorgan
Chase have publicly recognized the possible financial
implications of climate change and have raised concerns about
companies that do not adequately disclose them. 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.
We believe the oil and gas industry is highly vulnerable to
climate change. 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 taking actions to reduce their exposure to possible
adverse impacts associated with 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.
Despite receipt of a similar resolution last year, Ultra
Petroleum has yet to provide investors with a report outlining
its plans for addressing climate change. According to a senior
economic adviser at Lehman Brothers, Companies that see
climate change coming, recognize it for what it is, do the
relevant R&D and inculcate a positive attitude to change on
the part of their management stand to do very well. A company
that doesnt ... is going to get rolled over. As
investors, we want to be sure that our company does not fall
into the latter group.
RESOLVED:
The shareholders request that a committee of independent
directors of the Board assess how the company is responding to
rising regulatory, competitive, and public pressure to
significantly reduce carbon dioxide and other greenhouse gas
emissions and report to shareholders (at reasonable cost and
omitting proprietary information) by December 1, 2007.
SUPPORTING
STATEMENT:
We believe that management best serves shareholders by carefully
assessing and disclosing all pertinent information on its
response to climate change. We believe taking early action to
reduce emissions and prepare for standards could provide
competitive advantages, while inaction and opposition to climate
change mitigation efforts could leave companies unprepared to
deal with the realities of a carbon constrained economy.
END OF SHAREHOLDER PROPOSAL
*****
25
Board of
Directors Statement in Opposition
ALTHOUGH
THE COMPANY SUPPORTS AND IMPLEMENTS EFFORTS TO
REDUCE GHG EMISSIONS, THE COMPANYS BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS A VOTE AGAINST THIS
PROPOSAL
FOR THE FOLLOWING REASONS
The Board of Directors and management of the Company regularly
review the risks facing Ultras business, including the
environmental and regulatory matters associated with our
operations. The Company monitors compliance with applicable
environmental regulations as a normal part of its operations.
Ultra has deliberately implemented a multi-pronged approach to
being a good steward of the environment while developing the
natural gas resource which is critical to our countrys
economic growth and national security. For instance, in 1998
Ultra entered into an agreement with PacificCorp to assist in
reducing the nitrogen oxide emissions from the Naughton power
plant located in South West Wyoming. Ultra agreed to pay
$2.5 million of costs incurred to install low nitrogen
oxide burners at the coal fired power plant. By voluntarily
installing the burners, over 1,000 tons per year of nitrogen
oxide were removed from the atmosphere.
Over the winter of 2005 2006, Ultra had two
demonstration projects underway in Wyoming in concert with the
Bureau of Land Management and the Wyoming Department of
Environmental Quality to study drilling rig engine emissions
when using catalytic converters and bi-fuels on older drilling
rigs. On all new drilling rigs, Ultra has committed to include
upgraded emission performance. Furthermore, in conjunction with
the Companys ongoing commitment to reduce noise, air and
visual pollution during well-completion operations, the Company
is using flareless completion technology. To minimize surface
disturbances to the land where the Companys drilling
activity occurs, we drill our wells directionally from pads.
This is a significant cost increase to the Company but ensures a
small footprint to minimize wildlife impact. In addition, the
Company has been involved in a number of projects in Wyoming
involving wildlife. Two have involved the tagging and monitoring
of mule deer to measure the impact of drilling operations on
their activities. Current studies are underway on tracking
pronghorn antelope and sage grouse populations.
Ensuring continued growth of shareholder value in a socially
responsible manner requires a balanced assessment of all risks
and rewards that the Company faces, which necessarily includes
those risks relating to environmental challenges. The Board of
Directors is also mindful that the Company is already obligated
to discuss with its shareholders the Companys costs of
compliance with and risks posed by environmental laws. The Board
of Directors believes that the Companys public disclosures
and reports already adequately discuss its response to the
numerous regulatory issues that it faces, including
environmental issues.
Ultra is very much aware of the increasing focus of local,
national and international regulatory bodies on gaseous
emissions and climate change, and firmly views these as
important matters. In fact, over the years the Company has been
the recipient of several environmental awards from the
Environmental Protection Agency, the Wyoming Fish and Wildlife
Department and the Wyoming Wildlife Federation. In September
2002, the Company received the Oil & Gas Wildlife
Stewardship award from the Wyoming Game and Fish
Department in recognition of its contribution to wildlife
management in the Pinedale area. During 2001, the Company
received the Agency/Corporation of the Year award
from the Wyoming Wildlife Federation and the Regional
Administrators Award for Environmental Achievement
from the U.S. Environmental Protection Agency. The Company
will continue to review scientific, technical, and economic
research on climate change and will continue to take meaningful
steps based on sound science to reduce greenhouse gases and
develop effective long-term solutions.
Because the Company is actively addressing the issues raised in
this proposal, 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. Neither Ultra nor any of its peers yet know the
regulatory obligations that may be imposed with regard to GHG
emissions. At this time, attempts to assess impacts on
shareholder value can only be speculative. Since the Company is
already addressing the issues raised in this proposal, the Board
of Directors believes that preparing the requested report will
not create added value to the
26
shareholders and will serve only to increase administrative
burdens and costs. Accordingly, the Companys Board of
Directors recommends that you vote AGAINST the
proposal.
The affirmative vote of the holders of a majority of the shares
present in person or by proxy at the Annual Meeting and entitled
to vote is required for the adoption of this proposal.
SHAREHOLDER
PROPOSALS FOR 2008 ANNUAL MEETING
Any shareholder who intends to present a proposal at the 2008
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 January 2, 2008.
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 2008
Annual Meeting is changed by more than 30 days from the
date of the 2007 Annual Meeting, the deadline for submitting
proposals to be included in managements 2008 proxy
statement is a reasonable time before the Company begins to
print and mail its proxy materials for its 2008 Annual Meeting.
The persons named in the Companys proxy card for the 2008
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 March 17,
2008. If the Company changes the date of its 2008 Annual Meeting
by more than 30 days from the date of the 2007 Annual
Meeting, the persons named in the Companys 2008 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 2008 Annual
Meeting of Shareholders.
If the date of the 2008 Annual Meeting is advanced or delayed by
more than 30 calendar days from the date of the 2007 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 2008 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.
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, 2006 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
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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 30, 2007
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Exhibit A:
Audit Committee Charter
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ULTRA PETROLEUM CORP.
Audit Committee Charter
This Audit Committee Charter (Charter) sets forth the purpose and membership requirements of the
Audit Committee (the Committee) of the Board of Directors (the Board) and establishes the
authority and responsibilities delegated to it by the Board.
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Purpose. The purpose of the 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 auditing firm (the External Auditor), (iv) the performance of the Companys
internal audit function and External Auditors, (v) the Companys internal control systems, and
(vi) the Companys procedures for monitoring compliance with the Companys Code of Business
Conduct and Ethics. |
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Committee Members. |
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2.1 |
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Composition. The Audit Committee shall consist of three or more directors as
determined by the Board, each of whom shall be independent directors, and free from any
relationship that, in the opinion of the Board, would interfere with the exercise of his or
her independent judgment as a member of the Committee. In determining whether any director
is independent, each member of the Committee must meet the independence requirements of the
American Stock Exchange (AMEX) and applicable state and federal law including the rules and
regulations of the Securities and Exchange Commission (SEC). |
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Financial Literacy. All members of the Committee must be able to read and understand
fundamental financial statements, including the Companys balance sheet, income statement,
and cash flow statement or become able to do so within a reasonable period of time after
his or her appointment to the Committee, and at least one member of the Committee is to
have past experience in finance or accounting, or any other comparable experience or
background which results in the members financial sophistication, including being or
having been a chief executive officer, chief financial officer or other senior officer with
financial oversight responsibilities. |
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Appointment. The members of the Committee are to be elected by the Board and shall
serve until their successors are duly elected and qualified. Unless a Chair is elected by
the full Board, the members of the Committee may designate a Chair by majority vote of the
full Committee membership. The Board shall fill vacancies on the Committee and may remove a
Committee member from the membership of the Committee at any time without cause. |
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3.1. |
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Advisors. The Committee shall have the authority to retain, at the Companys expense,
independent legal, financial and other advisors (Advisors) it deems necessary to fulfill
its responsibilities. |
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Investigations. The Committee shall have the authority to conduct investigations that
it deems necessary to fulfill its responsibilities. |
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Information. The Committee shall have the authority to require any officer, director
or employee of the Company, the Companys outside legal counsel and the External Auditor to
meet with the Committee and any of its Advisors and to respond to the Committees
inquiries. The Committee shall have full access to the books, records and facilities of
the Company in carrying out its responsibilities. |
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Funding. The Committee shall have the authority to determine, on behalf of the
Company, the compensation of (i) the External Auditor for its services in rendering an
audit report and (ii) any Advisors employed by the Company pursuant to Section 3.2. |
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4.1. |
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Frequency of Meetings. The Committee shall meet at least once per fiscal quarter in
connection with its review of the Companys financial statements and the disclosures that
are to be included in the Companys Form 10-Q and Form 10-K filings with the SEC, including
the disclosures under Managements Discussion and Analysis of Financial Condition and
Results of Operations and the preparation of the Committees report to be included in the
Companys proxy statement in connection with the Companys annual meeting of stockholders.
The Chairperson may call a special meeting at any time he or she deems advisable. |
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Executive Sessions. The Committee shall maintain free and open communication with (i)
the Companys chief executive officer (CEO), (ii) the Companys chief financial officer
(CFO), (iii) the Companys officers responsible for overseeing internal auditing
(Internal Auditor), (iv) the External Auditor, and (v) the Companys general counsel, or
outside legal counsel retained for general corporate purposes, (General Counsel). Also
any one or all of the members of the Committee shall have direct access to the Chief
Financial Officer and such person and other members of the Companys management at anytime
he or she or they deem necessary to discuss any matters that the Committee or any such
person believes should be discussed privately with the Committee. |
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Minutes. Minutes of each meeting of the Committee shall be kept to document the
discharge by the Committee of its responsibilities and a copy thereof shall be sent to the
members of the Board. |
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Quorum. A quorum shall consist of the greater of one-half of the Committees
membership or two persons. The act of a majority of the Committee members present at a
meeting at which a quorum is present shall be the act of the Committee. |
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Agenda. The Chairperson of the Committee shall prepare an agenda for each meeting of
the Committee, in consultation with Committee members and any appropriate member of the
Companys management or staff, as necessary. As requested by the Chairperson, members of
the Companys management and staff shall assist the Chairperson with the preparation of any
background materials necessary for any Committee meeting. |
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Presiding Officer. The Chairperson of the Committee shall preside at all Committee
meetings. If the Chairperson is absent at a meeting, a majority of the Committee members
present at a meeting shall appoint a different presiding officer for that meeting. |
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External Auditor Oversight. |
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Selection and Evaluation. Subject to shareholder ratification, if such ratification is
required by applicable law or the certificate of incorporation or the bylaws of the
Company, the
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Committee shall have sole responsibility for the appointment, retention, oversight,
termination and replacement of the External Auditor and for the approval of all audit and
engagement fees. The Committee shall annually, following the completion of the audit
reports and at such other times as it deems appropriate, evaluate the performance of the
External Auditor. |
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Independence. The Committee shall periodically meet with management, the Internal
Auditor and the External Auditor to assess and satisfy itself that the External Auditor is
independent in accordance with the rules and regulations of the AMEX and the SEC. The
Committee shall annually obtain from the External Auditor a written statement delineating
(i) all relationships between the External Auditor and the Company that may impact the
External Auditors objectivity and independence, (ii) confirmation that none of the
Companys CEO, controller, CFO, chief accounting officer, Internal Auditor, or any person
serving in an equivalent position to any of the foregoing for the Company, was employed by
such External Auditor and participated in any capacity in the audit of the Company during
the one (1) year period preceding the date of the initiation of the audit for which the
External Auditor is engaged, and (iii) all the disclosures required by Independence
Standards Board Standard No. 1. |
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Quality Control. The Committee shall annually obtain from the External Auditor a
written report describing (i) the External Auditors internal quality-control procedures;
and (ii) any material issues raised by (a) the External Auditors most recent internal
quality-control review or peer review, or (b) any inquiry or investigation by governmental
or accounting profession authorities, in each case, within the preceding five years,
respecting one or more independent audits carried out by the External Auditor, and any
steps taken to deal with any such issues. |
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Audit Partner Rotation. The Committee shall annually obtain from the External Auditor
a written statement confirming that neither the lead (or coordinating) audit partner having
primary responsibility for the Companys audit nor the audit partner responsible for
reviewing the Companys audit has performed audit services for the Company in each of the
Companys five (5) previous fiscal years. |
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External Auditor Reports Review. The Committee shall review with management, the
Internal Auditor and the External Auditor (i) the reports required to be prepared by the
External Auditor under Section 10A(k) of the Securities Exchange Act of 1934 regarding (a)
all critical accounting policies and practices used by the Company and (b) all alternative
treatments of the Companys financial information within GAAP that have been discussed with
management, the ramifications of the use of such alternative disclosures and treatments and
the treatment preferred by the External Auditor; and (ii) all other material written
communications between the External Auditor, management and the Internal Auditor, such as
any management letter or schedule of unadjusted differences. |
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Internal Control Assessment. The Committee shall annually obtain from the External
Auditor a written report in which the External Auditor attests to and reports on the
assessment of the Companys internal controls made by the Companys management. |
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5.7. |
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Accountability of External Auditor. The External Auditor shall report directly to the
Committee and shall be ultimately accountable to the Committee. The Committee shall obtain
an annual written statement from the External Auditor confirming its accountability to the
Committee. |
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5.8. |
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Audit Assessment. The Committee shall annually assess with management, the Internal
Auditor and the External Auditor any problems or difficulties encountered in connection
with the audit process and managements response, including any restrictions on the scope
of the |
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External Auditors activities or on access to requested information, any accounting
adjustments that were noted or proposed by the External Auditor but were passed (as
immaterial or otherwise), any communications between the External Auditors team assigned
to the Companys audit and the External Auditors national office respecting auditing or
accounting issues presented by the Companys audit, and any management or internal
control letter issued, or proposed to be issued, by the External Auditor to the Company. |
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5.9. |
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SAS 61 Communications. The Committee shall discuss with the External Auditor the
matters required to be discussed under Statement on Auditing Standards No. 61. |
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Audit Disagreement Inquiry. The Committee shall periodically inquire of management
and the External Auditor as to any disagreements that may have occurred between them
relating to the Companys financial statements or disclosures. The Committee shall have
sole responsibility for the resolution of any disagreements between management and the
External Auditor regarding financial reporting. |
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Internal Auditing Oversight. |
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6.1. |
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Internal Auditing Staff. The Committee shall annually evaluate the performance of the
Internal Auditor or the entity retained to provide internal audit services, with management
and the External Auditor. |
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Internal Audit Process. The Committee shall oversee the Companys internal audit
function and any other appropriate control process in place for reviewing and approving the
Companys internal transactions and accounting; provided, that (i) this Section 6.2
shall not be construed to require the Company to establish a separate internal audit
department or dedicate employees to the task on a full-time basis and (ii) the Company may
choose to outsource this function to a firm other than the External Auditor. The Committee
shall meet periodically, at its discretion, with the Internal Auditor, the External Auditor
and management to review (i) plans for the internal audit program (including scope,
responsibilities, budget and staffing) for the coming year, (ii) the coordination of such
plans with the work of the External Auditor, and (iii) the progress and results of the
internal auditing process. |
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Internal Audit Reports. The Committee shall meet periodically, at its discretion, with
the Internal Auditor to review any significant reports to management prepared by the
internal auditing staff together with managements response and follow-up to these reports.
The Internal Auditor shall provide a summary of all significant internal audit reports to
the Committee each quarter. |
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Financial Statements And Disclosure Oversight. |
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SEC Filings and Earnings Releases and Guidance. Prior to the filing by the Company
with the SEC of any annual report on Form 10-K or any quarterly report on Form 10-Q, the
Committee shall review with management and the External Auditor the financial statements
and the disclosure under Managements Discussion and Analysis of Financial Condition and
Results of Operations contained therein. |
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Accounting Changes. The Committee shall, before their implementation, review with
management and the External Auditor and approve all significant changes proposed to be made
in the Companys accounting principles and practices. |
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Adequate Disclosure. The Committee shall periodically, at its discretion, inquire of
management, the External Auditor, the General Counsel and, if the Committee deems it
appropriate, outside legal counsel as to whether the Companys financial statements comport
with the disclosure requirements of federal securities laws, notwithstanding their
conformity to accounting principles and practices. |
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7.4. |
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Criticisms. The Committee shall periodically, at its discretion, inquire of
management, the General Counsel and the External Auditor as to their knowledge of any
criticism of the Companys financial statements or disclosures by any financial analysts,
rating agencies, media sources or other reliable third-party sources. The Committee shall
establish procedures for (i) the receipt, retention, investigation and resolution of
complaints received by the Company regarding accounting, internal accounting controls or
auditing matters; and (ii) the confidential anonymous submission by the Companys employees
of concerns regarding questionable accounting or auditing matters. |
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Internal Controls and Compliance with Laws and Regulations and Code of Business Conduct and
Ethics Oversight. |
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8.1. |
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Internal Controls and Compliance Policies. For the purpose of assessing their adequacy
and effectiveness, the Committee (i) shall periodically, at its discretion, review and
assess with management, the Internal Auditor, the General Counsel and the External Auditor
(a) the internal control systems of the Company, including whether such controls are
reasonably designed to ensure that appropriate information comes to the attention of the
Committee in a timely manner, prevent violations of law and corporate policy and permit the
Company to prepare accurate and informative financial reports, (b) the Companys policies
on compliance with laws and regulations, (c) the Companys Code of Business Conduct and
Ethics, and (d) the methods and procedures for monitoring compliance with such policies;
and (ii) shall elicit any recommendations for the improvement of the Code of Business
Conduct and Ethics and such controls, policies, methods and procedures. The Committee
shall review with management and the External Auditor, prior to its annual filing, the
internal control report (containing the annual assessment of the effectiveness of the
internal control structure and procedures of the Company for ensuring the accuracy of
public disclosures) that is required to be filed by the Company with the SEC on Form 10-K. |
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Information Security. The Committee shall periodically, at its discretion, review and
assess with management and the External Auditor the adequacy of the security for the
Companys information systems and the Companys contingency plans in the event of a systems
breakdown or security breach. |
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8.3. |
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Code of Business Conduct and Ethics Violations and Waivers. The Committee shall
periodically, at its discretion, inquire of management, the Internal Auditor and the
External Auditor as to their knowledge of (i) any violation of the Code of Business Conduct
and Ethics, (ii) any waiver of compliance with the Code of Business Conduct and Ethics, and
(iii) any investigations undertaken with regard to compliance with the Code of Business
Conduct and Ethics. Any waiver of the Code of Business Conduct and Ethics with respect to
a director or executive officer may only be granted by the Committee. All waivers granted
by the Committee shall be promptly reported to the entire Board and be publicly disclosed
as required by the rules and regulations of the SEC and AMEX. |
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8.4. |
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Misconduct Allegations. The Committee shall periodically, at its discretion, inquire
of management and the General Counsel of their knowledge of any allegations of director or
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officer misconduct or misconduct by the Company (whether made by employees or third
parties). |
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8.5. |
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Disagreements with Legal Counsel. The Committee shall periodically, in its discretion,
inquire of management, the General Counsel and, if appropriate, outside legal counsel of
any disagreements that may have occurred between management and legal counsel regarding any
public disclosures or any other legal compliance issue. |
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8.6. |
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Related Party Transactions Oversight. The Company shall not enter into a related party
transaction unless such transaction is approved by the Committee after a review of the
transaction by the Committee for potential conflicts of interest. A transaction will be
considered a related party transaction if the transaction would be required to be
disclosed under Item 404 of Regulation S-K. |
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Reports and Assessments. |
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Board Reports. The Chairperson of the Committee shall, periodically, at his or her
discretion, report to the Board on Committee actions and on the fulfillment of the
Committees responsibilities under this Charter. Such reports shall include any issues
that arise with respect to the quality or integrity of the Companys financial statements,
the Companys compliance with legal or regulatory requirements, the performance and
independence of the Companys External Auditors and the performance of the Companys
internal audit function. |
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9.2. |
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Charter Assessment. The Committee shall annually assess the adequacy of this Charter
and advise the Board of its assessment and of its recommendation for any changes to the
Charter. |
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9.3. |
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Proxy Statement Report. The Committee shall prepare an annual report as required by
the rules and regulations of the SEC and submit it to the Board for inclusion in the
Companys proxy statement prepared in connection with its annual meeting of stockholders. |
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9.4. |
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Recommend Action. The Committee shall annually make a determination as to whether to
recommend to the Board that the audited financials (certified by the External Auditor) be
included in the Companys annual report on Form 10-K for filing with the SEC. |
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9.5. |
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Board Access to External Auditor. The Committee shall, whenever the Board of Directors
or the Committee deems it appropriate, have the External Auditor attend a meeting of the
Board to discuss specific issues and to answer questions from the directors. |
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10.1. |
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Financial Statement Responsibility. The Companys management is responsible for the
preparation, presentation and integrity of the Companys financial statements and
disclosures, and the External Auditor is responsible for auditing year-end financial
statements and reviewing quarterly financial statements and conducting other procedures.
It is not the duty of the Committee to certify the Companys financial statements, to
guarantee the External Auditors report or to plan or conduct audits. Since the primary
function of the Committee is oversight, the Committee shall be entitled to rely on the
expertise, skills and knowledge of management, the Internal Auditor and the External
Auditor and the accuracy of information provided to the Committee by such persons in
carrying out its oversight responsibilities. Nothing in this Charter is intended to change
the responsibilities of management and the External Auditor. |
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10.2. |
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Charter Guidelines. While the responsibilities of the Committee set forth in this
Charter are contemplated to be the principal recurring activities of the Committee in
carrying out its oversight function, these responsibilities are to serve as a guide with
the understanding that the Committee may diverge from them as it deems appropriate given
the circumstances. |
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Qualified Legal Compliance Committee Duties. |
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11.1. |
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Written Procedures. The Committee shall have the authority and responsibility to
establish written procedures to confidentially receive, consider and retain reports of
evidence of a material violation by the Company, its officers, directors, employees or
agents of federal or state securities laws, material breach of fiduciary duty, or a similar
material violation of any federal or state law. |
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Report Submission. The Committee shall have the authority and responsibility to
inform the Companys General Counsel and CEO (or the equivalents thereof) of any report of
evidence of a material violation (except in case of futility). |
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11.3. |
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Investigation Determination. The Committee shall determine whether an investigation
is necessary regarding any report of evidence of a material violation by the Company, its
officers, directors, employees or agents. If the Committee determines an investigation is
necessary or appropriate, the Committee shall (i) notify the Board of its determination to
investigate, (ii) initiate an investigation, which may be conducted either by the General
Counsel (or the equivalent thereof) or by outside counsel, and (iii) retain such additional
Advisors to assist in such investigation as the Committee deems necessary or appropriate. |
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11.4. |
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Conclusion of Investigation. At the conclusion of any investigation the Committee
shall (i) have the authority and responsibility to recommend, by majority vote, that the
Company implement an appropriate response to evidence of a material violation, and (ii)
inform the Companys General Counsel and CEO (or the equivalents thereof) and the Board of
the results of any such investigation and the appropriate remedial measures to be adopted,
if any. |
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Notification of SEC. The Committee shall have the authority to take all other
appropriate action, including the authority to notify the SEC in the event that the Company
fails in any material respect to implement an appropriate response that the Committee has
recommended the Company to take; provided, that the Committee determines, by
majority vote and after consultation with counsel, that such notification would be required
by law or in the best interest of the Company. |
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ULTRA PETROLEUM CORP. |
9th Floor, 100 University Avenue
Toronto, Ontario M5J 2Y1
www.computershare.com
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MR SAM SAMPLE 123 SAMPLES STREET SAMPLETOWN SS X9X 9X9 |
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Security Class
Holder Account Number
C1234567890 |
COMMON
XXX |
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Form
of Proxy Annual Meeting to be held on June 14, 2007 |
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This Form of Proxy is solicited by and on behalf of Management.
Notes to proxy
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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. 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). |
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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 may be required to provide documentation evidencing your power to sign this proxy with signing capacity stated. |
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This proxy should be signed in the exact manner as the name appears on the proxy. |
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If this proxy is not dated, it will be deemed to bear the date on which it is mailed by Management to the holder. |
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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. |
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The securities represented by this proxy will be voted or withheld from voting, 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. |
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This proxy confers discretionary authority in respect of amendments to matters identified in the Notice of Meeting or other matters that may properly come before the meeting. |
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This proxy should be read in conjunction with the accompanying documentation provided by Management. |
Proxies submitted must be received by 10:00 am, Central Time, on June 12, 2007.
VOTE USING THE TELEPHONE OR INTERNET 24 HOURS A DAY 7 DAYS A WEEK!
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Call the number listed BELOW from a touch tone telephone.
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Go to the following web site: www.investorvote.com |
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1-866- 732- VOTE (8683) Toll Free |
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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 123456 HOLDER ACCOUNT NUMBER C1234567890 ACCESS NUMBER 12345
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MR SAM SAMPLE
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C1234567890
XXX 123
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Appointment of Proxyholder |
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The undersigned (Registered Shareholder) of Ultra Petroleum Corp.
(the Company) hereby appoints: Michael Watford, or
failing this person, Kelly Whitley
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OR
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Print the name of the person you are
appointing if this person is someone other than the
Management Nominees listed herein.
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as my/our proxyholder with full power of substitution and to vote 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 Meeting of Ultra Petroleum Corp. to be held at Houston, Texas U.S.A. on June 14, 2007 at 10:00 a.m. CDT and at any adjournment thereof.
VOTING RECOMMENDATIONS ARE INDICATED BY HIGHLIGHTED TEXT OVER THE BOXES.
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01. Michael D. Watford
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02. Dr. W. Charles Helton |
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03. Stephen J. McDaniel |
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04. Robert E. Rigney
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05. James C. Roe |
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2. Appointment of Auditors |
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Appointment of Ernst & Young LLP |
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3. Stockholder Proposal |
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Stockholder Proposal Climate Change |
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4. Attendance of Meeting |
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Please check this box if you plan to attend the Annual Meeting on June 14, 2007 |
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Authorized Signature(s) This section must be
completed for your instructions to be executed. |
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Signature(s)
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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. |
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MM / DD / YY |
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Interim Financial Statements |
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Annual Report |
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Mark this box if you would like to receive interim financial statements and accompanying Managements Discussion and Analysis by mail.
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Mark this box if you would NOT like to receive the Annual Report and accompanying Managements Discussion and Analysis by mail.
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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.
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g |
999999999999 |
0 0 1 1 1 1 |
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1 P I Z A R 2
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U P Q Q |
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