def14a
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
Filed by the Registrant þ
Filed by a Party other than the Registrant o
Check the appropriate box:
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Preliminary Proxy Statement |
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Confidential, for use of the Commission only (as permitted by Rule 14a-6(e)(2)) |
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Definitive Proxy Statement |
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Definitive Additional Materials |
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Soliciting Material Pursuant to Rule 14a-12 |
ALLIS-CHALMERS ENERGY INC.
(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
þ No fee required.
o Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
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identify the filing for which the offsetting fee was paid previously. Identify the previous filing
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ALLIS-CHALMERS
ENERGY INC.
5075 Westheimer Road, Suite 890
Houston, Texas 77056
September 24,
2009
Dear Stockholders:
On behalf of our Board of Directors, we are pleased to invite
you to attend the Annual Meeting of Stockholders of
Allis-Chalmers Energy Inc. to be held on Friday,
November 6, 2009 at 9:00 a.m. local time at our
offices located in the Galleria Financial Center,
5075 Westheimer Road, Suite 890, Houston, Texas 77056.
I am pleased to tell you that we are taking advantage of the
U.S. Securities and Exchange Commission rule allowing
companies to furnish proxy materials to stockholders via the
Internet. We believe that this
e-proxy
process will expedite stockholders receipt of proxy
materials and lower the costs and reduce the environmental
impact of our annual meeting of stockholders.
On or about September 24, 2009, we mailed to our
stockholders a Notice containing instructions on how to access
and review our 2009 Proxy Statement and Annual Report and to
vote online. If you would like to receive a paper copy of our
proxy materials, follow the instructions for requesting these
materials in the Notice.
It is important that your shares be represented whether or not
you plan to attend the meeting. Your shares may be voted
electronically on the Internet or by using a toll-free number.
You may also request a proxy card be mailed to you. If you do
attend the annual meeting, you may, of course, withdraw your
proxy should you wish and vote in person.
We hope to see you at the annual meeting.
Sincerely,
Munawar H. Hidayatallah
Chairman of the Board and Chief Executive Officer
Important Notice Regarding the Availability of Proxy
Materials for the Annual Meeting of Stockholders to be Held on
November 6, 2009: The Annual Report to Stockholders for
the fiscal year ended December 31, 2008 and proxy statement
of Allis-Chalmers Energy Inc. are available at
www.voteproxy.com.
ALLIS-CHALMERS
ENERGY INC.
5075 Westheimer Road, Suite 890
Houston, Texas 77056
NOTICE OF THE 2009
ANNUAL MEETING OF
STOCKHOLDERS
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Date and Time: |
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Friday, November 6, 2009 at 9:00 a.m. (Houston time) |
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Place: |
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Our offices located at 5075 Westheimer Rd., Suite 890,
Houston, TX 77056 |
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Items of Business: |
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(1) To elect nine (9) directors to serve a one-year
term.
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(2) To approve an amendment to our Amended and Restated
Certificate of Incorporation to increase the number of shares of
authorized common stock from 100,000,000 to 200,000,000.
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(3) To approve our Second Amended and Restated 2006
Incentive Plan.
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(4) To ratify the appointment of UHY LLP as our independent
auditor for the fiscal year ending December 31, 2009.
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(5) To transact such other business as may properly come
before the meeting, or any adjournment thereof.
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Who Can Vote: |
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You can vote if you owned shares of our common stock or 7%
convertible perpetual preferred stock as of the close of
business on September 14, 2009. A list of such stockholders
will be open to examination during regular business hours by any
stockholder for at least ten days prior to the annual meeting,
at our offices located in the Galleria Financial Center,
5075 Westheimer Road, Suite 890, Houston, Texas 77056. |
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Registration: |
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Registration will begin at 8:30 a.m. Each stockholder
may be asked to present valid picture identification, such as a
drivers license or passport. Stockholders holding stock in
brokerage accounts must bring a copy of a brokerage statement
reflecting stock ownership as of the record date. Cameras,
recording devices and other electronic devices will not be
permitted at the meeting. |
By Order of the Board of Directors,
Munawar H. Hidayatallah
Chairman of the Board and Chief Executive Officer
Houston, Texas
September 24, 2009
YOUR VOTE IS IMPORTANT
We request that you vote your shares as promptly as possible. If
you have shares registered in your own name, you may vote your
shares in a number of ways:
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electronically via the Internet at www.voteproxy.com,
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by telephone, if you are in the U.S. and Canada, by calling
1-800-776-9437, or
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by requesting a proxy card be mailed to you.
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If you hold shares in street name and, therefore, are not a
stockholder of record, you will need to follow the specific
voting instructions of your broker, bank or other similar
institution to vote your shares.
TABLE
OF CONTENTS
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A-1
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ii
ALLIS-CHALMERS
ENERGY INC.
5075 Westheimer Road, Suite 890
Houston, Texas 77056
PROXY STATEMENT
FOR THE 2009 ANNUAL MEETING OF
STOCKHOLDERS
TO BE HELD ON NOVEMBER 6,
2009
QUESTIONS
AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING
This question and answer section summarizes selected information
regarding the annual meeting and voting, but does not contain
all of the information that may be important to you. We urge you
to read the entire proxy statement carefully.
When and
where is the annual meeting?
The 2009 annual meeting of the stockholders of Allis-Chalmers
Energy Inc. will be held on Friday, November 6, 2009, at
9:00 a.m., local time, at our offices located in the
Galleria Financial Center, 5075 Westheimer Road,
Suite 890, Houston, Texas 77056.
Why are
these proxy materials being made available to me?
Our Board of Directors is soliciting your proxy to be used at
the 2009 annual meeting of stockholders. This proxy statement
describes matters on which we would like you, as a stockholder,
to vote at our annual meeting. It also gives you information on
these matters so that you can make informed decisions. You are
receiving notice of our annual meeting because our records
indicate that you owned shares of our common stock, par value
$0.01 per share (Common Stock), or shares of our 7%
convertible perpetual preferred stock, par value $0.01 per share
(Preferred Stock), at the close of business on
September 14, 2009. Our Board of Directors has chosen
September 14, 2009 as the record date for the
meeting, which is the date used to determine which stockholders
will be able to attend and vote at the meeting.
Why did I
receive a Notice of Internet Availability of Proxy Materials
instead of a paper copy of proxy materials?
The Securities and Exchange Commission has adopted a
Notice and Access model which permits us to provide
proxy materials to our stockholders electronically by posting
the proxy materials on a publicly accessible website. We believe
that this
e-proxy
process will expedite stockholders receipt of proxy
materials and lower the costs and reduce the environmental
impact of our annual meeting of stockholders. Accordingly, on or
about September 24, 2009, we mailed to our stockholders of
record and beneficial owners a Notice of Internet Availability
of Proxy Materials containing instructions on how to access this
proxy statement and our Annual Report to Stockholders for the
fiscal year ended December 31, 2008 via the Internet and
how to vote online. The Notice of Internet Availability of Proxy
Materials also contains instructions on how you can receive a
paper copy of the proxy materials.
Who may
vote at the meeting?
The Board of Directors has determined that those stockholders
who are recorded in our record books as owning our shares as of
the close of business on September 14, 2009, are entitled
to receive notice of and to vote at the annual meeting of
stockholders. As of the record date, there were
71,364,926 shares of our Common Stock issued and
outstanding and 36,393 shares of our Preferred Stock issued
and outstanding. Subject to certain limitations, our Preferred
Stock is convertible into an aggregate of 14,202,146 shares
of Common Stock. As described in this proxy
statement, our Preferred Stock will vote on an as converted
basis together with the Common Stock as a single class, subject
to certain limitations.
What am I
being asked to vote upon?
You are being asked to approve (i) the election of nine
directors to serve until the next annual meeting of the
stockholders (ii) a proposal to amend our Amended and
Restated Certificate of Incorporation to increase the number of
authorized shares of Common Stock (iii) a proposal to
approve the Second Amended and Restated Allis-Chalmers Energy
Inc. 2006 Incentive Plan (the Restated Incentive
Plan) and (iv) the ratification of our appointment of
independent auditors for the fiscal year ending
December 31, 2009.
How many
votes do I have?
Each holder of Common Stock on the record date has one vote per
share. On each proposal, the shares of Preferred Stock will vote
on an as converted basis together with the Common Stock and not
as a separate class. However, for purposes of the voting on each
proposal, the voting rights in respect of Preferred Stock held
by Lime Rock Partners V, L.P., or Lime Rock, the owner of
100% of our Preferred Stock, will be limited such that the votes
attributable to Lime Rocks Preferred Stock will not, when
aggregated with the votes attributable to the Common Stock held
by Lime Rock and its affiliates, exceed 35% of the total voting
power of our stockholders. As a result of this limitation, the
Preferred Stock currently has a number of votes equivalent to
7,828,738 shares of Common Stock.
How do I
vote in person?
If you plan to attend the annual meeting and vote in person, we
will give you a ballot when you arrive. However, if your shares
are held in the name of your broker, bank or other nominee, you
must bring an account statement or letter from the nominee
indicating that you were the beneficial owner of the shares on
the record date.
How do I
vote by proxy?
Whether or not you intend to attend the meeting, if you are a
stockholder of record, you can vote by proxy in three ways:
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electronically via the Internet at www.voteproxy.com,
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by telephone, if you are in the U.S. and Canada, by calling
1-800-776-9437, or
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by requesting a proxy card be mailed to you.
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If you hold shares in street name and, therefore, are not a
stockholder of record, you will need to follow the specific
voting instructions of your broker, bank or other similar
institution to vote your shares.
How many
votes are needed to hold the meeting?
At least a majority of our outstanding capital shares eligible
to vote (counting our Preferred Stock on an as converted basis,
representing an aggregate of 14,202,146 shares of Common
Stock for such purposes) must be represented at the annual
meeting, either in person or by proxy, in order to transact
business. This is called a quorum. Abstentions and broker
non-votes will be counted for purposes of
determining the presence or absence of a quorum.
How many
votes will be required to approve each of the
proposals?
Provided that a quorum is present at the meeting:
PROPOSAL 1: The nine director nominees who receive the
greatest number of votes cast will be elected directors. The
Preferred Stock is entitled to vote on Proposal 1 on an as
converted basis (subject to the limitation set forth below) with
the Common Stock as a single class. Abstentions and broker
non-votes will have no effect on the election of directors.
2
PROPOSAL 2: Approval of the amendment to our Amended and
Restated Certificate of Incorporation will require the
affirmative vote of at least a majority of the outstanding stock
entitled to vote thereon. The Preferred Stock is entitled to
vote on Proposal 2 on an as converted basis (subject to the
limitation set forth below) with the Common Stock as a single
class. Because approval of Proposal 2 requires the
affirmative vote of at least a majority of the outstanding stock
entitled to vote thereon, abstentions and broker non-votes will
have the same effect as a vote against this proposal.
PROPOSAL 3: Approval of the Restated Incentive Plan will
require the affirmative vote of the holders of at least a
majority of the stock present or represented by proxy at the
annual meeting and entitled to vote thereon, provided that the
total votes cast on this proposal represent over 50% of the
votes entitled to be cast on this proposal. The Preferred Stock
is entitled to vote on Proposal 3 on an as converted basis
(subject to the limitation set forth below) with the Common
Stock as a single class. Abstentions are considered to be votes
cast and will have the same effect as a vote against this
proposal, but because broker non-votes are not considered to be
votes cast, broker non-votes will not have an effect on approval
of this proposal.
PROPOSAL 4: The ratification of the appointment of UHY LLP
as independent accountants will require the affirmative vote of
the holders of at least a majority of the stock present or
represented by proxy at the annual meeting and entitled to vote
thereon. The Preferred Stock is entitled to vote on
Proposal 4 on an as converted basis (subject to the
limitation set forth below) with the Common Stock as a single
class. Abstentions are considered to be votes cast and will have
the same effect as a vote against this proposal, but because
broker non-votes are not considered to be votes cast, broker
non-votes will not have an effect on approval of this proposal.
For purposes of the voting on each proposal, the voting rights
in respect of Preferred Stock held by Lime Rock will be limited
such that the votes attributable to Lime Rocks Preferred
Stock will not, when aggregated with the votes attributable to
the Common Stock held by Lime Rock and its affiliates, exceed
35% of the total voting power of our stockholders. As a result
of this limitation, the Preferred Stock currently has a number
of votes equivalent to 7,828,738 shares of Common Stock.
What are
the Boards voting recommendations?
Unless you give other instructions on your proxy, the persons
named as proxy holders on the proxy will vote in accordance with
the recommendations of our Board of Directors. Our Board of
Directors recommends a vote:
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FOR the election of the nine nominees;
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FOR the proposal to amend our Amended and Restated Certificate
of Incorporation;
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FOR the proposal to adopt the Restated Incentive Plan; and
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FOR the ratification of the appointment of UHY LLP as our
independent registered public accounting firm for the fiscal
year ending December 31, 2009.
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Can I
change my mind after I vote?
You may change your vote at any time prior to the voting at the
meeting by submitting a later dated proxy (including a proxy via
the Internet or telephone) or by giving written notice to our
Corporate Secretary. You may also attend the annual meeting and
vote in person. Your attendance at the annual meeting alone will
not revoke your proxy, and in order to do so, you must vote at
the meeting.
If you hold shares in street name and, therefore, are not a
stockholder of record, you will need to follow the specific
voting instructions of your broker, bank or other similar
institution to change your vote.
Who will
count the votes?
Our transfer agent, American Stock Transfer &
Trust Company, will tally the votes, which will be
certified by an Inspector of Election.
3
Who is
soliciting my proxy?
Our Board of Directors is soliciting proxies to be voted at the
annual meeting.
Who will
pay the expenses incurred in connection with the solicitation of
my vote?
We pay all costs and expenses related to preparation of these
proxy materials and solicitation of your vote. We also pay all
annual meeting expenses. In addition to soliciting proxies by
mail, we may solicit proxies by telephone, personal contact, and
electronic means. None of our directors, officers, or employees
will be specially compensated for these activities.
Who can
help answer any additional questions?
If you have any questions, including questions regarding the
procedures for voting your shares, you should contact:
Allis-Chalmers Energy Inc.
5075 Westheimer Road, Suite 890
Houston, Texas 77056
(713) 369-0550
Attention: Theodore F. Pound III,
General Counsel and Secretary
PROPOSAL 1:
ELECTION OF DIRECTORS
Board of Directors. Our Bylaws provide that
our Board of Directors shall consist of not less than three nor
more than 15 directors, as determined by our Board of
Directors. Currently, our Board of Directors has nine directors.
Each of the nominees for election to the Board of Directors is
currently a member of our Board of Directors. If elected at the
annual meeting, each of the nominees will hold office until the
next annual meeting of the stockholders and until his successor
has been elected and takes office. Vacancies existing in our
Board of Directors may be filled by a majority vote of the
remaining directors.
Upon the closing of our acquisition of DLS Drilling,
Logistics & Services Corporation, or DLS, in August
2006, we entered into an investors rights agreement which
provides, among other things, that the sellers of DLS have the
right to designate two nominees for election to our Board of
Directors. Pursuant to their rights as set forth in the
investors rights agreement, the sellers of DLS have designated
Alejandro P. Bulgheroni and Giovanni Dell Orto as their
nominees to the Board. In accordance with the provisions of the
investors rights agreement, the Board appointed Alejandro P.
Bulgheroni and Giovanni Dell Orto to the Board upon
receipt of the nominations.
In May 2009 we entered into an Investment Agreement with Lime
Rock which provides, among other things, that Lime Rock has the
right to designate nominees for election to our Board of
Directors based upon the amount of our Common Stock that Lime
Rock and its affiliates beneficially own (counting the Preferred
Stock on an as converted basis). In June 2009, we entered into a
First Amendment to Investment Agreement. Pursuant to the First
Amendment, Lime Rock currently has the right to designate four
nominees to our Board of Directors. Pursuant to such right, Lime
Rock designated Saad Bargach and John T. Reynolds as nominees to
the Board and the Board appointed Messrs. Bargach and
Reynolds to the Board upon receipt of the nominations. In
September 2009, we entered into a Second Amendment to
Investment Agreement whereby Lime Rock agreed to designate their
other two nominees to the Board by January 15, 2010.
Voting. Directors are elected by a plurality
of the votes present in person or represented by proxy and
entitled to vote at the annual meeting. The nine persons
receiving the highest number of votes will be elected as
directors. The Preferred Stock is entitled to vote for directors
on an as converted basis (subject to the limitation described
elsewhere in this proxy statement) with the Common Stock as a
single class. Shares represented by executed proxies will be
voted, if authority to do so is not withheld, for the election
of the nominees named below. In the event that any nominee
should be unavailable for election as a result of an unexpected
occurrence, such shares will be voted
4
for the election of such substitute nominee as may be nominated
by our Board of Directors. Each person nominated for election
has agreed to serve if elected, and we have no reason to believe
that any nominee will be unable to serve.
Recommendation; Proxies. The Board of
Directors unanimously recommends that you vote FOR each of the
nominees named below. The persons named in the proxy card
will vote all shares over which they have discretionary
authority FOR the election of the nominees named below. Although
our Board of Directors does not anticipate that any of the
nominees will be unable to serve, if such a situation should
arise prior to the meeting, the appointed persons will use their
discretionary authority pursuant to the proxy and vote in
accordance with their best judgment.
Nominees
for Election for a One-Year Term Expiring at the 2010 Annual
Meeting
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Name
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Age
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Director Since
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Saad Bargach
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51
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June 2009
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Alejandro P. Bulgheroni
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65
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August 2006
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Giovanni Dell Orto
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June 2009
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Victor F. Germack
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January 2005
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James M. Hennessy
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April 2007
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Munawar H. Hidayatallah
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May 2001
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Robert E. Nederlander
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76
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May 1989
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John T. Reynolds
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June 2009
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Zane Tankel
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February 2007
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Set forth below is biographical information for each person
nominated.
Saad Bargach was appointed to our Board of Directors in
June 2009. Saad Bargach is a Managing Director at Lime Rock.
Prior to joining the firm, Mr. Bargach worked for more than
25 years at Schlumberger. Most recently, he served as the
companys Chief Information Officer and, from July 2004 to
March 2006, as President, Well Completions &
Productivity Group which included Artificial Lift (REDA),
Completions (CAMCO), Testing (FLOPETROL), Subsea and Sand
Management Services. During his long career at Schlumberger,
Mr. Bargach also served as President of
Consulting & Systems Integration for SchlumbergerSema
in several European locations; the President of the
Drilling & Measurements division with worldwide
responsibility for drill bits, directional drilling,
measurements-while-drilling, and logging-while-drilling
services; and the Cairo-based President, Oilfield Services for
Africa and Near East. He joined the company in 1983 as a field
engineer in South America. Fluent in four languages,
Mr. Bargach has degrees in both electrical engineering
(B.S.) and control systems (M.S.). He is also a member of the
Board of the American Productivity and Quality Center and
currently serves on the board of directors of Gas2 Limited, an
Aberdeen-based oil service technology company, and Tiway Oil, a
Dubai based oil and gas producing company.
Alejandro P. Bulgheroni was appointed to our Board of
Directors in August 2006. Mr. Bulgheroni has served as the
Chairman of the Management Committee of Pan American Energy LLC,
an oil and gas company, since November 1997. He also served as
the Chairman of Bridas SAPIC from 1988 until 1997. He has served
as Vice-Chairman and Executive Vice-President of Bridas
Corporation since 1993. He also serves as Chairman, President
and CEO of Associated Petroleum Investors Ltd., an international
oil and gas holding company, as Chairman and President of Global
Oilfield Holdings Ltd., as Chairman of Beusa Energy, Inc. and as
President and CEO of Nuevo Manantial S.A and Agroland S.A..
Mr. Bulgheroni is a member of the Petroleum and Gas
Argentine Institute and of the Society of Petroleum Engineers
(USA), Vice-President of the Argentine Chamber of Hydrocarbons
Producers (CEPH), Vice-President of the Argentine-Uruguayan
Chamber of Commerce, Counselor of the Argentine Business Council
for Sustainable Development (CEADS) and Vice-President of the
Educando Foundation (Argentina). Mr. Bulgheroni is a
graduate of the University of Buenos Aires with a degree in
Industrial Engineering.
Giovanni Dell Orto was appointed to our Board of
Directors in June 2009. Mr. DellOrto was Chairman and
Chief Executive Officer of DLS Corporation (then a
subsidiary of Bridas Corporation) from 1994 to August 2006.
Following Allis-Chalmers purchase of DLS, he served as
Vice Chairman of DLS Argentina Limited. He is a member of the
board of directors of Energy Developments and Investments
Corporation (EDIC), supervising EDICs gas marketing
activities in Europe and other upstream projects in North
Africa. He is also a non-executive
5
member of the board of directors of Gas Plus Spa. Prior to
joining Bridas and DLS in 1994, he worked for 23 years with
ENI in Italy, holding different positions (including being a
member of ENIs Board and Executive Committee, the Chairman
and CEO of Saipem, and a Board member of Agip and Snam). During
his 38 years of experience in the oil services industry, he
has developed extensive contacts in the Middle East, North and
West Africa, Russia and the Former Soviet Union Republics,
China, India, Argentina, Brazil, Bolivia and the U.S., for the
negotiation, implementation and commissioning of major oil and
gas upstream, petrochemical and infrastructure projects.
Victor F. Germack was appointed to our Board of Directors
in January 2005. Mr. Germack founded, and since 2002, has
been the President of RateFinancials Inc., a company that
analyzes and rates the quality of earnings, accounting and
financial reporting of U.S. and foreign public companies.
In addition, Mr. Germack has served since 1980 as President
of Heritage Capital Corp., a middle market investment bank
focused on technology oriented public and private companies.
Prior to founding Heritage Capital, Mr. Germack had
operating management positions with the Hertz Corporation and
the Allen Group. Mr. Germack started his career with Price
Waterhouse as a management consultant. Mr. Germack is a
graduate of Fordham University and the Harvard Business School.
James M. Hennessy was appointed to our Board of Directors
in April 2007. Mr. Hennessy served as President and Chief
Executive Officer of ING Funds, a United States mutual fund
business of ING Group, from 2001 through 2006. While with ING
Funds, Mr. Hennessy oversaw approximately 216 mutual funds
with an aggregate of approximately $92 billion in assets
under management. From 2003 through 2007, Mr. Hennessy also
served on the board of governors of the Investment Company
Institute, which is the national trade association for the
mutual fund industry, representing most of the industrys
assets. Mr. Hennessy is currently on the board of directors
of Natural Lighting Company and Munder Capital Holdings, LLC and
is a member of the advisory board of the law, science and
technology LLM program of Arizona State University Law School.
In addition, Mr. Hennessy has a law degree from New York
University.
Munawar H. Hidayatallah has served as our Chairman of the
Board and Chief Executive Officer since May 2001, and was
President from May 2001 through February 2003.
Mr. Hidayatallah was Chief Executive Officer of OilQuip
Rentals, Inc., from its formation in February 2000 until it
merged with us in May 2001. From December 1994 until August
1999, Mr. Hidayatallah was the Chief Financial Officer and
a director of IRI International, Inc., which was acquired by
National Oilwell, Inc. in early 2000. IRI International, Inc.
manufactured, sold and rented oilfield equipment to the oilfield
and natural gas exploration and production sectors. From August
1999 until February 2001, Mr. Hidayatallah worked as a
consultant to IRI International, Inc. and Riddell Sports Inc.
Robert E. Nederlander has served on our Board of
Directors since May 1989. Mr. Nederlander served as our
Chairman of the Board of Directors from May 1989 to 1993, and as
our Vice Chairman of the Board of Directors from 1993 to 1996.
Mr. Nederlander was a Director of Cendant Corp. from
December 1997 and Chairman of the Corporate Governance Committee
of Cendant Corp. from 2002 until he resigned in 2006 when he
became a director of Realogy Corporation, a public company which
was a spinoff from Cendant Corp. Mr. Nederlander resigned
as a director of Realogy Corporation on April 10, 2007,
when the company was sold. Mr. Nederlander was a director
of HFS, Inc. from July 1995 to December 1997. Since November
1981, Mr. Nederlander has been President
and/or
Director of the Nederlander Organization, Inc., owner and
operator of legitimate theaters in New York City. Since December
1998, Mr. Nederlander has been a managing partner of the
Nederlander Company, LLC, operator of legitimate theaters
outside New York City. Mr. Nederlander was Chairman of the
board of directors of Varsity Brands, Inc. (formerly Riddell
Sports Inc.) from April 1988 to September 2003 and was the Chief
Executive Officer of such corporation from 1988 through
April 1, 1993. Mr. Nederlander has been a limited
partner and a director of the New York Yankees since 1973.
Mr. Nederlander has been President of Nederlander
Television and Film Productions, Inc. since October 1985. In
addition, Mr. Nederlander was Chairman of the Board and
Chief Executive Officer of Mego Financial Corp. from January
1988 to January 2002, when he sold his stock interest and
resigned. Mego Financial Corp. filed a voluntary petition under
Chapter 11 of the U.S. federal bankruptcy code in July
2003. The voluntary petition was dismissed by the bankruptcy
court in 2006.
John T. Reynolds was appointed to our Board of Directors
in June 2009. Mr. Reynolds co-founded Lime Rock in 1998 and
is currently a Managing Director of Lime Rock. Mr. Reynolds
remains an active member of the Lime Rock investment team,
investigating and executing primarily energy service investment
opportunities worldwide. Prior to co-founding Lime Rock,
Mr. Reynolds worked at Goldman Sachs where he spent six
years in the Investment Research Department and had senior
analyst responsibility for global oil service sector research
and was one of the top-rated
6
analysts in the sector. He currently serves on the Board of
Directors of EnerMech, Ltd., Hercules Offshore, Inc., Revelation
Energy Holdings, LLC and VEDCO Holdings, Inc.. He previously
served on the Board of Directors of Eastern Drilling ASA, IPEC,
Ltd., Noble Rochford Drilling, Ltd., Patriot Drilling, Roxar
ASA, Sensa, Ltd., and Torch Offshore Inc. Mr. Reynolds is a
graduate of Bucknell University where he received his B.A.
Zane Tankel was appointed to our Board of Directors in
February 2007. Mr. Tankel is currently Chief Executive
Officer of Apple-Metro, Inc., the New York Metropolitan Area
franchisee for Applebees Neighborhood Grill &
Bar, and has been the Chairman of the Board of Apple-Metro, Inc.
and Chevys Fresh Mex Restaurants since 1994. Mr. Tankel
also serves as a member of the Board of Directors of Mortons
Restaurant Group, Inc. and Caribbean Restaurant LLC.
Mr. Tankel has also served as Chairman of the Board of the
Metro Chapter of the Young Presidents Organization and was a
founder of the advisory board for the Boys and Girls Choir of
Harlem. Mr. Tankel is a graduate of the University of
Pennsylvanias Wharton School of Business.
BOARD OF
DIRECTORS AND COMMITTEES OF THE BOARD OF DIRECTORS
Meeting
Attendance
During the fiscal year ended December 31, 2008, our Board
of Directors held 16 meetings. Our Board of Directors currently
has four standing committees: the Audit Committee, the Corporate
Governance and Nominating Committee, the Compensation Committee
and the Finance Committee. Each committee has a written charter.
All such charters are available on our website
(www.alchenergy.com) and we will provide a copy free of
charge to any stockholder who requests it.
The Audit Committee met 13 times, the Compensation Committee met
six times and the Corporate Governance and Nominating Committee
met twice during 2008. The Finance Committee did not meet in
2008 as it was not established until June 2009. Each incumbent
director attended at least 75% of the aggregate number of
meetings of the Board of Directors and committees of the Board
of Directors on which he served during 2008.
Although we do not have a formal policy regarding director
attendance at the annual stockholders meeting, they are
encouraged to attend such meetings. All of our directors
attended the 2008 annual meeting except for Carlos Bulgheroni,
who resigned from our Board of Directors in April 2009, and
Alejandro Bulgheroni.
Audit
Committee
The Audit Committee currently consists of four directors,
Mr. Germack, who serves as Chairman, and
Messrs. Hennessy, Nederlander and Reynolds. All of our
Audit Committee members are independent under the
applicable New York Stock Exchange, or NYSE, and Securities and
Exchange Commission, or SEC, rules regarding audit committee
membership. Our Board of Directors has determined that
Mr. Germack qualifies as an audit committee financial
expert under applicable SEC rules and regulations
governing the composition of the Audit Committee.
The Audit Committee assists our Board of Directors in fulfilling
its oversight responsibility by overseeing and evaluating
(i) the conduct of our accounting and financial reporting
process and the integrity of our financial statements;
(ii) the functioning of our systems of internal accounting
and financial controls; (iii) the performance and
independence of our internal audit function and (iv) the
engagement, compensation, performance, qualifications and
independence of our independent auditors.
The independent auditors have unrestricted access and report
directly to the Audit Committee. The Audit Committee meets
privately with, and has unrestricted access to, the independent
auditors and all of our personnel.
Compensation
Committee
The Compensation Committee currently consists of
Mr. Tankel, who serves as Chairman, and
Messrs. Bargach and Germack, all of whom are independent
under the applicable NYSE and SEC rules. The Compensation
Committee formulates and oversees the execution of our
compensation strategies, including making recommendations to our
Board of Directors with respect to compensation arrangements for
senior management, directors and
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other key employees. The Compensation Committee also administers
our 2003 Incentive Stock Plan and our 2006 Incentive Plan.
Corporate
Governance and Nominating Committee
The Corporate Governance and Nominating Committee currently
consists of Mr. Nederlander, as Chairman, and
Messrs. Tankel and Hennessy, all of whom are independent
under the applicable NYSE and SEC rules. The Corporate
Governance and Nominating Committee identifies and evaluates
candidates for election as directors, nominates the slate of
directors for election by the Companys stockholders and
develops and recommends the Companys corporate governance
principles to the full Board.
The Corporate Governance and Nominating Committee utilizes a
variety of methods for identifying and evaluating nominees for
directors. Candidates may come to the attention of the Corporate
Governance and Nominating Committee through current Board
members, stockholders and other persons. Our Corporate
Governance and Nominating Committee has not adopted any specific
minimum qualifications for director candidates. The Corporate
Governance and Nominating Committee will consider, among other
things, a potential director nominees ability to satisfy
the need, if any, for any required expertise on the board of
directors or one of its committees. Historically, our chief
executive officer has recommended director nominees.
Finance
Committee
In June 2009, in connection with the closing of our transactions
with Lime Rock, we established the Finance Committee. The
Finance Committee currently consists of Mr. Bulgheroni, as
Chairman, and Messrs. Bargach, Hennessy, Hidayatallah and
Reynolds. The Finance Committee reviews and makes non-binding
recommendations to the Board of Directors regarding:
(1) acquisitions of assets or voting securities for
consideration in excess of $20,000,000; (2) mergers or
change of control transactions; (3) our liquidation,
dissolution or reorganization; (4) the sale or other
disposition of all or substantially all of our assets;
(5) offerings or sales of voting equity securities for cash
in an aggregate amount in excess of $20,000,000, other than
issuances of securities upon conversion of convertible
securities then outstanding or pursuant to option and other
incentive compensation plans; and (6) material capital
expenditures in excess of our capital expenditure budget.
Director
Nominations
We do not have a formal procedure pursuant to which stockholders
may recommend nominees to our Board of Directors or Corporate
Governance and Nominating Committee, and the Board of Directors
believes that the lack of a formal procedure will not hinder the
consideration of qualified nominees. Nominations made by a
stockholder must be made by giving notice in writing to our
Secretary on or before March 1, 2010. Any such stockholder
nominations must be accompanied by all information relating to
such person that is required under the federal securities laws,
including such persons written consent to be named in the
proxy statement as a nominee and to serving as a director on our
Board of Directors if elected. The nominating stockholder must
also submit the name, age, business address and residence of the
person the stockholder wishes to nominate; the principal
occupation or employment of the person; the relevant
biographical information of the person; and the number of shares
of our Common Stock beneficially owned by the person. The
nominating stockholder must also submit such stockholders
name and address and the number of shares beneficially owned by
such stockholder.
Each of the nine director nominees set forth in this proxy
statement are current directors standing for
re-election.
8
CORPORATE
GOVERNANCE
Corporate
Governance Principles
We are committed to adhering to sound principles of corporate
governance. A copy of our Corporate Governance Principles is
available on our website (www.alchenergy.com) and we will
also provide a copy free of charge to any stockholder who
requests it.
Director
Independence
Under rules adopted by the New York Stock Exchange, no member of
the Board of Directors qualifies as independent unless the Board
of Directors affirmatively determines that the director has no
material relationship with us. The Board considers all relevant
facts and circumstances in making a determination of
independence. In its determination of independence, the Board of
Directors reviews and considers all relationships and
transactions between each director, his or her family members or
any business, charity or other entity in which the director has
an interest, on the one hand, and us, our affiliates or entities
in which a member of our senior management has an interest, on
the other. As a result of its independence reviews, the Board of
Directors has affirmatively determined that
Messrs. Bargach, Hennessy, Germack, Nederlander, Reynolds
and Tankel are independent as that term is defined
under the corporate governance rules of the New York Stock
Exchange and applicable rules of the Securities and Exchange
Commission.
Executive
Sessions
Our Board of Directors hold regular executive sessions in which
non-management Board members meet without any members of
management present. Currently, James M. Hennessy acts as our
lead director and presides over executive sessions of the Board.
Additionally, our independent directors meet at least once a
year without members of management or non-independent directors
present.
Communications
with the Board of Directors
Stockholders and other interested parties wishing to communicate
with the Board of Directors, the non-management directors or any
individual director should send any communication to Corporate
Secretary,
Allis-Chalmers
Energy Inc., 5075 Westheimer, Suite 890, Houston,
Texas 77056. Any such communication must state the number of
shares beneficially owned by the stockholder making the
communication. The Corporate Secretary will forward such
communication to the director or directors to whom the
communication is directed, unless the Corporate Secretary
determines that the communication 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,
relates to routine or insignificant matters that do not warrant
the attention of the Board of Directors, is an advertisement or
other commercial solicitation or communication, is frivolous or
offensive, or is otherwise not appropriate for delivery to
directors.
PROPOSAL 2:
APPROVAL OF THE AMENDMENT TO OUR AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
Our Amended and Restated Certificate of Incorporation currently
authorizes us to issue up to 100,000,000 shares of common
stock, $.01 par value, and 25,000,000 shares of
preferred stock, $.01 par value. The Board of Directors has
adopted, subject to stockholder approval, an amendment to our
Amended and Restated Certificate of Incorporation to increase
the authorized number of shares of our Common Stock from
100,000,000 shares to 200,000,000 shares.
As of September 14, 2009, of the 100,000,000 shares of
Common Stock presently authorized, 71,364,926 shares were
issued and outstanding, 1,653,787 shares were reserved for
issuance under our stock plans and 14,202,146 shares were
reserved for issuance upon conversion of our Preferred Stock.
The Board of Directors believes that the shares of Common Stock
that are not reserved for any specific use and which currently
are available for issuance do not provide the Company with
sufficient flexibility to act in a timely
9
manner in meeting future stock needs. We anticipate that the
Company may in the future need to issue additional shares in
connection with one or more of the following:
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incentive and employee benefit plans,
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strategic investments,
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financing transactions, such as offerings of Common Stock or
convertible securities, and
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otherwise for corporate purposes that have not yet been
identified.
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In order to provide the Board of Directors with certainty and
flexibility to undertake such transactions and issue additional
shares of Common Stock, the Board of Directors believes that it
is in the best interests of the Company at this time to increase
the number of authorized shares of our Common Stock. If this
Proposal 2 is adopted, the additional authorized shares of
Common Stock may be issued upon the approval of the Board of
Directors at such times, in such amounts, and upon such terms as
the Board of Directors may determine, without further approval
of the stockholders, unless such approval is expressly required
by applicable law, regulatory agencies or any exchange or
quotation service on which our Common Stock may then be listed.
Currently, other than the issuance of shares upon the exercise
of outstanding options, restricted stock or other awards under
our current stock plans and upon the conversion of our Preferred
Stock, we have no agreement, arrangement or intention to issue
any of the shares for which approval is sought.
Our stockholders do not have preemptive rights with respect to
future issuances of additional shares of Common Stock, which
means that current stockholders do not have a prior right to
purchase any new issue of Common Stock of the Company in order
to maintain their proportionate ownership interest. As a result,
the issuance of a significant amount of additional authorized
Common Stock (other than as the result of a stock split or other
pro rata distribution to stockholders) would result in a
significant dilution of the beneficial ownership interests
and/or
voting power of each stockholder who does not, or who does not
have an opportunity to, purchase additional shares to maintain
his or her pro rata interest. As additional shares are issued,
the shares owned by our existing stockholders will represent a
smaller percentage ownership interest in the Company. In
addition, the issuance of additional shares of, or securities
convertible into, our Common Stock could result in a decrease in
the trading price of our Common Stock, depending on the price at
which such shares are issued.
If approved by the stockholders at the annual meeting, the
amendment to our Amended and Restated Certificate of
Incorporation will become effective upon the filing of a
certificate of amendment with the Secretary of State of the
State of Delaware. We intend to file the certificate of
amendment as soon as practicable after approval of this
Proposal 2 by our stockholders. However, our Board may
abandon the proposed amendment, either before or after approval
and authorization thereof by the stockholders, at any time prior
to the effectiveness of the filing of the certificate of
amendment
Voting. Approval of the proposal to amend our
Amended and Restated Certificate of Incorporation will require
the affirmative vote of at least a majority of the outstanding
stock entitled to vote thereon. The Preferred Stock is entitled
to vote on this proposal on an as converted basis (subject to
the limitation set forth elsewhere in this proxy statement) with
the Common Stock as a single class. Because approval of this
proposal requires the affirmative vote of at least a majority of
the outstanding stock entitled to vote thereon, abstentions and
broker non-votes will have the same effect as a vote against
this proposal.
Recommendation; Proxies. The Board of
Directors unanimously recommends that you vote FOR approval of
the amendment to our Amended and Restated Certificate of
Incorporation to increase the number of authorized shares of
Common Stock to 200,000,000 shares. The persons named
in the proxy card will vote all shares over which they have
discretionary authority FOR the approval of the amendment to our
Amended and Restated Certificate of Incorporation.
10
PROPOSAL 3:
APPROVAL OF THE SECOND AMENDED AND RESTATED
ALLIS-CHALMERS ENERGY INC. 2006 INCENTIVE PLAN
On September 18, 2009, the Board of Directors approved,
subject to stockholder approval, the Second Amended and Restated
Allis-Chalmers Energy Inc. 2006 Incentive Plan (the
Restated Incentive Plan). The Restated Incentive
Plan will become effective upon stockholder approval. The
amendments in the Restated Incentive Plan consist of:
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increasing the number of shares of Common Stock available for
issuance under the plan from 1,500,000 shares to
8,500,000 shares;
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increasing the annual limit on options that may be granted to
any single participant from 200,000 shares to
3,000,000 shares;
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establishing a limit on the aggregate maximum number of
incentive stock options that may be granted under the Restated
Incentive Plan of 8,500,000 shares; and
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establishing annual limits on the number of stock appreciation
rights and share-based awards (other than options and stock
appreciation rights) that may be granted to any single
participant of 3,000,000 shares for each type of award.
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With respect to the amendment described in the first bullet
point above, the Board and Compensation Committee have
determined that the number of shares remaining available for
issuance under the existing 2006 Incentive Plan is insufficient
to continue to meet the Companys need to attract, retain
and incentivize employees, officers, non-employee directors and
consultants. The Board of Directors adopted the Restated
Incentive Plan to ensure that there will be a sufficient reserve
of shares to permit further award grants under the plan at
levels that will help further the success of the Company by
aligning the interests of employees, officers, nonemployee
directors and consultants with those of the Company through
ownership of the Companys stock. With respect to the
amendment described in the second bullet point above, the Board
believes that increasing the annual limit on options that may be
granted to any single participant will provide the Company with
greater flexibility when making awards under the Restated
Incentive Plan. The amendments described in the third and fourth
bullet points above were adopted in order to make certain
provisions of the Restated Incentive Plan conform more closely
with the requirements of certain provisions of the Internal
Revenue Code applicable to the Restated Incentive Plan.
The Allis-Chalmers Energy Inc. 2006 Incentive Plan was
originally approved by stockholders on November 28, 2006.
The purposes of the plan are to (i) promote our interests
and the interests of our stockholders by granting the
participants equity interests in us or increasing their equity
interests in us, thereby giving them an added incentive to work
toward our continued growth and success and (ii) enable us
to retain as well as compete for the services of the individuals
needed for our continued growth and success. To accomplish this
purpose, the plan provides for the grant to eligible persons of
stock options, bonus stock, restricted stock, performance
awards, and other stock-based awards consistent with the
purposes of the plan.
Voting. Approval of the Restated Incentive
Plan will require the affirmative vote of the holders of at
least a majority of the stock present or represented by proxy at
the annual meeting and entitled to vote thereon, provided that
the total votes cast on this proposal represent over 50% of the
votes entitled to be cast on this proposal. The Preferred Stock
is entitled to vote on this proposal on an as converted basis
(subject to the limitation set forth elsewhere in this proxy
statement) with the Common Stock as a single class. Abstentions
are considered to be votes cast and will have the same effect as
a vote against this proposal, but because broker non-votes are
not considered to be votes cast, broker non-votes will not have
an effect on approval of this proposal.
Recommendation; Proxies. The Board of
Directors unanimously recommends that you vote FOR approval of
the Restated Incentive Plan. The persons named in
the proxy card will vote all shares over which they have
discretionary authority FOR the approval of the Restated
Incentive Plan.
Description
of the Restated Plan
The principle features of the plan are summarized below. This
summary is not complete, however, and is limited in its entirety
by express reference to the Second Amended and Restated 2006
Incentive Plan, for which we
11
are seeking stockholder approval at the annual meeting. The
Second Amended and Restated 2006 Incentive Plan is attached as
Appendix A to this Proxy Statement.
Available
Shares
At September 14, 2009, there were 212,394 shares
remaining and available for issuance under the existing 2006
Incentive Plan. In addition to the existing 2006 Incentive Plan,
at September 14, 2009, there were 239,995 shares
available for issuance under our 2003 Incentive Stock Plan. At
September 14, 2009, there were a total of 723,732 options
outstanding under both plans, and they had a weighted average
price of $6.21. As of the same date, there were a total of
418,463 shares of non-performance based restricted stock
and 481,666 shares of performance-based restricted stock
outstanding under both plans. The maximum number of shares of
Common Stock that may be issued under the plan is
8,500,000 shares, all of which may be granted as incentive
stock options, subject to adjustment in the event of stock
splits and certain other corporate events. In addition, the
number of shares of Common Stock reserved for issuance under the
plan that may be granted during any calendar year to any one
participant as to options, stock appreciation rights or any
other share-based award shall not exceed 3,000,000 as to each
type of award. To the extent shares cease to be issuable under
an award made under the plan, they will be available under the
plan for the grant of additional awards unless such shares cease
to be subject to an award because of the exercise of the award,
the vesting of a restricted stock award or similar award or
withholding of shares for payment of taxes or exercise price.
Shares issued under the plan may be authorized and unissued
Common Stock, Common Stock held in or acquired for our treasury
or, if applicable, shares acquired in the open market, and such
shares issued under the plan will be fully paid and
nonassessable. No fractional shares will be issued under the
plan. Payment for any fractional shares shall be made in cash.
Persons
Eligible to Participate
Except with respect to awards of incentive stock options, all
employees, consultants and non-employee directors of
Allis-Chalmers Energy Inc. and its affiliates are eligible to
participate in the plan. Incentive stock options may be awarded
only to employees. In selecting employees, consultants and
non-employee directors to receive awards, and determining the
type and size of the award, the Compensation Committee of the
board of directors may consider any factors that it deems
relevant. As of September 1, 2009, there were approximately
3,121 employees, 5 consultants and 8 non-employee directors
who were eligible to participate in the plan.
Administration
The plan is administered by the Compensation Committee, which
consists of two or more directors appointed by the Board of
Directors. No person is eligible to serve on the Compensation
Committee unless such person is a non-employee
director as defined in
Rule 16b-3
promulgated under the Securities Exchange Act of 1934, as then
in effect (the Exchange Act), and also an
outside director within the meaning of
Section 162(m) of the Internal Revenue Code (the
Code), and the rules and regulations thereunder.
Subject to the provisions of the plan, the Compensation
Committee has the authority to (i) interpret the plan and
all awards under the plan, (ii) make rules as it deems
necessary for the proper administration of the plan,
(iii) make all other determinations necessary or advisable
for the administration of the plan and (iv) correct any
defect, supply any omission or reconcile any inconsistency in
the plan or in any award under the plan in the manner and to the
extent that it deems desirable to effectuate the plan. Any
action taken or determination made by the Compensation Committee
pursuant to the plan is binding on all parties. No member of the
Board of Directors or the Compensation Committee will be liable
for any action or determination made in good faith with respect
to the plan or an award granted thereunder.
Types of
Awards
The plan provides for the grant of any or all of the following
types of awards: (i) stock options, including incentive
stock options and non-qualified stock options; (ii) bonus
stock; (iii) restricted stock awards; (iv) performance
awards; and (v) other stock-based awards. All awards are
evidenced by a written agreement and the terms, conditions
and/or
restrictions contained in an award may differ from the terms,
conditions
and/or
restrictions contained in any other award. We do not receive any
compensation for the granting of awards under the plan, except
any such amount necessary to satisfy all federal, state and
other governmental tax withholding requirements related
12
to an award. Each type of award, including any required payments
upon exercise of awards, is discussed in more detail below.
Stock Options. The Compensation Committee has
the authority to grant options, in such form as the Compensation
Committee may from time to time approve, subject to the terms of
the plan. The Compensation Committee also has the authority to
determine whether options granted to employees will be incentive
stock options or non-qualified options.
To exercise an option granted under the plan, the person
entitled to exercise the option must deliver to us payment in
full of the exercise price for the shares being purchased,
together with any required withholding tax. The payment must be
(i) in cash or check; (ii) with the consent of the
Compensation Committee, in shares of Common Stock already owned
by the person for more than six months; or (iii) with the
consent of the Compensation Committee, by sale through a broker.
The fair market value (the Fair Market Value) of
each share of Common Stock delivered will be deemed to be equal
to the closing sales price (or, if applicable, the highest
reported bid price) on the principal exchange or
over-the-counter
market on which such shares are trading on the date of the
determination, or if no trade of the Common Stock has been
reported for such date, on the most recent trade prior to the
determination date.
Except as described below, no option may be exercised later than
the date which is ten years after the date of grant. The
exercise price at which shares of Common Stock may be purchased
upon the exercise of an option shall not be less than the Fair
Market Value of a share of Common Stock on the date of grant. In
the case of incentive stock options granted to employees owning
more than ten percent (10%) of the total combined voting power
of
Allis-Chalmers
Energy Inc. and its affiliates, then the exercise price at which
shares of Common Stock may be purchased upon the exercise of
such incentive option shall be not less than one hundred ten
percent (110%) of the Fair Market Value of a share of Common
Stock on the date of grant and such incentive option may not be
exercised later than five years after the date of grant. No
incentive stock option will be exercisable more than three
months after the holder thereof ceases to be an employee for any
reason other than death or disability, or more than one year
after the holder thereof ceases to be an employee due to death
or disability. The aggregate Fair Market Value (determined as of
the respective date or dates of grant) of shares of Common Stock
for which one or more incentive stock options granted to any
employee under the plan (or any other option plan of ours or our
affiliates) may for the first time become exercisable during any
one calendar year cannot exceed $100,000.
The exercise price for and the number of shares of Common Stock
subject to existing options is subject to appropriate
adjustments in the event that the outstanding shares of our
Common Stock are changed into or exchanged for a different
number or kind of shares or other securities by reason of
merger, consolidation, recapitalization, reclassification, stock
split, stock dividend, combination of shares or the like. The
plan also permits the Compensation Committee to reprice options,
but only with stockholder approval. The Compensation Committee
provides, in the option grant, the time or times at which the
options will be exercisable.
Bonus Stock. The Compensation Committee has
the authority to grant shares of bonus stock to employees,
consultants and non-employee directors of Allis-Chalmers Energy
Inc. or its affiliates for the performance of services by such
individuals without additional consideration except as may be
required by the Compensation Committee.
Restricted Stock Awards. The plan authorizes
the Compensation Committee to grant awards in the form of
restricted shares of Common Stock. These awards are subject to
such restrictions as the Compensation Committee may impose
including forfeiture, transfer and repurchase restrictions, and
in no event will the term of any such award exceed ten years.
Prior to the lapse of such restrictions, the holder of shares of
restricted stock will not be permitted to transfer such shares.
We have the right to repurchase restricted shares for the amount
of cash paid for such shares, if any, if the participant
terminates employment with or services to us prior to the lapse
of such restrictions or the restricted stock is forfeited by the
participant in accordance with the award thereof. A person to
whom a restricted stock award is made has all the rights of our
stockholders with respect to such shares including the rights to
vote and receive dividends or other distributions; however, the
Compensation Committee may restrict the participants right
to dividends until the restrictions on the restricted stock
lapse.
13
Performance Awards. The plan authorizes the
Compensation Committee to grant shares of Common Stock, cash or
a combination thereof to participants upon the attainment of
certain performance goals measured over a period of not less
than six months nor more than ten years. After the end of each
performance period, the Compensation Committee will determine
the amount, if any, of performance awards payable to each
participant based upon the achievement of the established
performance criteria. In the case of any award granted to our
chief executive officer or any of our four highest paid officers
(other than the chief executive officer), the performance goals
will be objective and meet the requirements of
Section 162(m) of the Code, and the regulations thereunder,
including the requirement that achievement of performance goals
be substantially uncertain at the time of grant. It is our
intent that performance awards granted to covered employees will
constitute performance-based compensation within the meaning of
Section 162(m) of the Code and the regulations thereunder.
The performance goals may differ among awards or participants;
however, the Compensation Committee may not exercise discretion
to increase any amount payable under a performance award
intended to comply with Section 162(m) of the Code. In
establishing performance goals, the Compensation Committee may
use one or more of the following business criteria on a
consolidated basis or for our specified subsidiaries,
departments or divisions or business or units: (i) earnings
per share; (ii) increase in price per share;
(iii) increase in revenues; (iv) increase in cash
flow; (v) return on net assets; (vi) return on assets;
(vii) return on investment; (viii) return on equity;
(ix) economic value added; (x) gross margin;
(xi) net income; (xii) pretax earnings;
(xiii) pretax earnings before interest, depreciation and
amortization; (xiv) pretax operating earnings after
interest expense and before incentives, service fees, and
extraordinary or special items; (xv) operating income;
(xvi) total stockholder return; (xvii) debt reduction;
and (xviii) any of the above goals determined on the
absolute or relative basis or as compared to the performance of
a published or special index deemed applicable by the
Compensation Committee including, but not limited to, a market
index or a group of comparable companies.
The Compensation Committee determines the circumstances in which
performance awards will be paid or forfeited in the event of
termination of a participant prior to the end of a performance
period or settlement of a performance award.
Other Stock-Based Awards. The plan also
permits other stock-based awards that are denominated or payable
in, valued in whole or in part by reference to, or otherwise
based on or related to our Common Stock (including units or
securities convertible into shares of our Common Stock) or cash.
The terms and conditions of any such awards will be determined
by the Compensation Committee.
Transferability
Except as otherwise provided in the plan, no award and no right
under the plan, other than bonus stock or restricted stock as to
which restrictions have lapsed, is (i) assignable, saleable
or transferable by a participant except by will or by the laws
of descent and distribution or, except for incentive stock
options, pursuant to a qualified domestic relations order, or
(ii) permitted to be encumbured or pledged. Any attempted
transfer in violation of the plan will be void and ineffective
for all purposes. The Compensation Committee may, however,
establish rules and procedures to allow the transfer of specific
non-qualified stock options for estate planning purposes to one
or more immediate family members or related family trusts or
partnerships or similar entities.
Change in
Control
Unless otherwise provided in the award, in the event of a change
in control described in clauses (b), (c) or (d) of the
definition of change in control under Section 2 of the
plan, (i) if Allis-Chalmers Energy Inc. does not survive as
an independent corporation (excluding as a subsidiary), and
(ii) any surviving corporation and its affiliates refuse to
assume or continue the awards outstanding under the plan, or to
substitute similar awards for those outstanding under such plan,
then:
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All options then outstanding shall become immediately vested and
fully exercisable immediately prior to the change in control,
notwithstanding any provision therein for exercise in
installments;
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14
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All restrictions and conditions of all restricted stock then
outstanding shall be deemed satisfied, and the restricted period
or other limitations on payment in full with respect thereto
shall be deemed to have expired immediately prior to the date of
the change in control; and
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All outstanding performance awards and any other stock or
performance-based awards shall become fully vested, deemed
earned in full immediately prior to the date of the change in
control and promptly paid to the participants as of the date of
the change of control, without regard to payment schedules and
notwithstanding that the applicable performance cycle, retention
cycle or other restrictions and conditions shall not have been
completed or satisfied.
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If approved by the Board of Directors prior to or within
30 days after a change in control, the Board of Directors
will have the right for the
45-day
period following the change in control to require all
participants to transfer to us all awards previously granted to
the participants in exchange for an amount equal to the cash
value of the awards. The cash value of an award will equal the
sum of (i) all cash to which the participant would be
entitled upon settlement or exercise of any award which is not
an option and (ii) in the case of an option, the excess of
the market value per share over the option price, if any,
multiplied by the number of shares subject to such award.
Termination,
Death, Disability and Retirement
Unless otherwise provided for in an award, if the employment of
an employee or service of a non-employee director is terminated
for any reason other than death, disability or retirement, or if
service of a consultant is terminated for any reason other than
death, any nonvested award outstanding at the time of such
termination will terminate, no further vesting will occur and
the participant will be entitled to exercise his or her rights
with respect to any portion of the award which is vested until
the earlier of (i) the expiration date set forth in the
award or (ii) six months after the termination date (three
months after termination in the case of an incentive stock
option).
Unless otherwise provided for in an award, upon the retirement
of an employee or non-employee director, any nonvested portion
of an outstanding award will terminate and no further vesting
will occur. Any vested award will expire on the earlier of
(i) the expiration date set forth in the award or
(ii) 12 months after the date of retirement (three
months after the date of retirement in the case of an incentive
stock option).
Unless otherwise provided for in an award, (a) upon the
termination due to the disability of an employee or non-employee
director, (b) upon the death of a participant,
(c) with respect to a participant who is either a retired
former employee or non-employee director who dies during the
period in which he or she can exercise any vested award (the
applicable retirement period) or (d) with
respect to a disabled former employee or non-employee director
who dies during the period that expires on the earlier of the
expiration date set forth in any applicable outstanding award or
the first anniversary of the persons termination due to
disability (the applicable disability period), any
nonvested portion of an outstanding award that has not already
terminated will terminate and no further vesting will occur. In
addition, any vested award will expire on the earlier of
(i) the expiration date set forth in the award or
(ii) the later of (x) the first anniversary of such
termination due to death or disability or (y) the first
anniversary of such persons death during the applicable
retirement period or the applicable disability period.
The Compensation Committee may provide for the continuation of
any award for such period and upon such terms as it determines
in the event the participant ceases to be an employee,
consultant or non-employee director.
Adjustments
Upon Changes in Capitalization or Reorganization
The type or number of a class of shares authorized under the
plan or subject to an award,
and/or the
exercise or purchase price applicable to an award, will be
appropriately adjusted in the event of a subdivision or
consolidation of shares, payment of stock dividend or any other
increase or decrease in the number of shares effected without
receipt of consideration by us, or in the event of a
reorganization, merger, consolidation or recapitalization. Such
adjustments shall be made by the Compensation Committee, whose
determination shall be final and binding.
Amendment
or Termination of the Restated Incentive Plan and Amendment of
Awards
Except with respect to awards then outstanding, if not sooner
terminated by the Board of Directors, the plan will terminate
on, and no further awards shall be made after,
September 12, 2016, which is the tenth anniversary of
15
the date the plan was initially adopted by the Board of
Directors. The Board of Directors may amend, suspend or
terminate the plan; provided, however, that no amendment,
suspension or termination of the plan may, without the consent
of the holder of an award, terminate such award or adversely
affect such persons rights in any material respect.
Moreover, no amendment to the plan will be effective prior to
its approval by the stockholders to extent such approval is
required by applicable law or the requirements of any securities
exchange on which our stock may be listed. The Board of
Directors may, however, amend the plan as necessary to permit
awards to meet the requirements of the Code or other applicable
laws.
Subject to the restrictions set forth in the plan, the
Compensation Committee may amend any outstanding award and may
waive or accelerate any requirement or condition that is not
mandatory under the plan. However, the Compensation Committee
may not waive or accelerate any term or condition of an award
that is intended to qualify as performance-based compensation
for purposes of Section 162(m) of the Code if such
discretion would cause the award not to so qualify. Similarly,
the Compensation Committee may not waive any term or condition
of an award if such discretion should cause the award to violate
Section 409A of the Code. The Compensation Committee may
not amend any outstanding award in a manner that would adversely
affect in any material respect the rights of a plan participant
without such participants consent
Federal
Income Tax Consequences of the Restated Incentive Plan
In General. The plan is not intended to be
subject to any provision of the Employee Retirement Income
Security Act of 1974, as amended, and is not qualified under
Section 401(a) of the Code. The following summary is based
on the applicable provisions of the Code, as currently in
effect, and the income tax regulations and proposed income tax
regulations issued thereunder.
Status of Options. Options granted under the
plan may be either incentive stock options or non-qualified
stock options. Under certain circumstances, an incentive stock
option may be treated as a non-qualified stock option. The tax
consequences both to the option holder and to us differ
depending on whether an option is an incentive stock option or a
non-qualified stock option.
Nonqualified Options. No federal income tax is
imposed on the option holder upon the grant of a non-qualified
stock option. Upon the exercise of a non-qualified stock option,
the option holder will be treated as receiving compensation,
taxable as ordinary income and subject to employment taxes in
the year of exercise. The amount recognized as ordinary income
and subject to employment taxes upon exercise is the excess of
the fair market value of the shares of Common Stock at the time
of exercise over the exercise price paid for such Common Stock.
At the time Common Stock received upon exercise of a
non-qualified stock option is disposed of, any difference
between the fair market value of the shares of Common Stock at
the time of exercise and the amount realized on the disposition
would be treated as capital gain or loss. The gain, if any,
realized upon such a disposition will be treated as long-term or
short-term capital gain, depending on the holding period of the
shares of Common Stock. Any loss realized upon such a
disposition will be treated as a long-term or short-term capital
loss, depending on the holding period of the shares of Common
Stock.
Upon an option holders exercise of a non-qualified stock
option, and subject to the application of Section 162(m) of
the Code, as discussed below, we may claim a deduction for the
compensation paid at the same time and in the same amount as
compensation is treated as being received by the option holder,
assuming we satisfy the federal income tax reporting
requirements with respect to such compensation. We are not
entitled to any tax deduction in connection with a subsequent
disposition by the option holder of the shares of Common Stock.
If the shares of Common Stock received upon the exercise of a
non-qualified stock option are transferred to the option holder
subject to certain restrictions, then the taxable income
realized by the option holder, unless the option holder elects
otherwise, and our tax deduction (assuming any federal income
tax reporting requirements are satisfied) should be deferred and
should be measured with reference to the fair market value of
the shares at the time the restrictions lapse. The restrictions
imposed on officers, directors and 10% stockholders by
Section 16(b) of the Exchange Act is such a restriction
during the period prescribed thereby if other shares have been
purchased by such an individual within six months of the
exercise of a non-qualified stock option.
16
Incentive Stock Options. No federal income tax
is imposed on the option holder upon the grant of an incentive
stock option. The option holder would recognize no taxable
income upon exercise of an incentive stock option if the option
holder (a) does not dispose of the shares of Common Stock
acquired pursuant to the exercise of an incentive stock option
within two years from the date the option was granted or within
one year after the shares of Common Stock were transferred to
the option holder (the Holding Period) and
(b) is an employee of either (i) the company granting
the option, (ii) the parent company or a subsidiary of such
corporation or (iii) a corporation which has assumed such
option of another corporation as a result of a corporate
reorganization, merger or similar transaction. Such employment
must continue for the entire time from the date the option was
granted until three months before the date of exercise, or
12 months before the date of exercise if employment ceases
due to permanent and total disability. If Common Stock received
upon exercise of an incentive stock option is disposed of after
completion of the Holding Period, any difference between the
exercise price paid for such Common Stock and the amount
realized on the disposition would be treated as a capital gain
or loss. The gain, if any, realized upon such a disposition will
be treated as long-term capital gain. Any loss realized upon
such a disposition will be treated as a long-term capital loss.
We would not be entitled to any deduction in connection with the
grant or exercise of the option or the disposition of the shares
of Common Stock so acquired.
If, however, an option holder disposes of shares of Common Stock
acquired pursuant to exercise of an incentive stock option
before the Holding Period has expired (a Disqualifying
Disposition), the option holder would be treated as having
received, at the time of disposition, compensation taxable as
ordinary income. In such event, subject to the application of
Section 162(m) of the Code, as discussed below, we may
claim a deduction for compensation paid at the same time and in
the same amount as compensation is treated as being received by
the option holder. The amount treated as compensation is the
lesser of (i) the excess of the fair market value of the
Common Stock at the time of exercise over the exercise price or
(ii) the excess of the amount realized on disposition over
the exercise price. The balance of the gain, if any, realized
upon such a disposition will be treated as long-term or
short-term capital gain depending on the holding period. If the
amount realized at the time of the disposition is less than the
exercise price, the option holder will not be required to treat
any amount as ordinary income, provided that the disposition is
of a type that would give rise to a recognizable loss. In such
event, the loss will be treated as a long-term or short-term
capital loss depending upon the holding period. A disposition
generally includes a sale, exchange or gift, but does not
include certain other transfers, such as by reason of death or a
pledge or exchange of shares described in Section 424(c) of
the Code.
Alternative Minimum Tax. Although the exercise
of an incentive stock option does not result in current taxable
income, there are implications with regard to the Alternative
Minimum Tax (AMT). The excess of the fair market
value of shares of Common Stock acquired upon exercise of an
incentive stock option over the exercise price paid for such
shares of Common Stock is an adjustment to AMT income for the
option holders taxable year in which such exercise occurs
(unless the shares of Common Stock are disposed of in the same
taxable year and the amount realized is less than the fair
market value of the shares on the date of exercise, in which
event the amount included in AMT income will not exceed the
amount realized on the disposition over the adjusted basis of
the shares).
Payment of Option Price in Shares. In the case
of a non-qualified option, if the option price is paid by the
delivery of shares of Common Stock previously acquired by the
option holder having a fair market value equal to the option
price (Previously Acquired Shares), no gain or loss
would be recognized on the exchange of the Previously Acquired
Shares for a like number of shares of Common Stock. The option
holders basis and holding period in the number of shares
of Common Stock received (to the extent equal to the number of
Previously Acquired Shares used) would be the same as his or her
basis and holding period in the Previously Acquired Shares used.
The option holder would treat the fair market value of the
number of shares of Common Stock received in excess of the
number of Previously Acquired Shares used as ordinary
compensation income. The option holders basis in such
excess shares of Common Stock would be equal to their fair
market value at the time of exercise. The option holders
holding period in such excess shares of Common Stock begins on
the date the option holder acquires those shares of Common Stock.
In the case of an incentive stock option, the federal income tax
consequences to the option holder of the payment of the option
price with Previously Acquired Shares depends on the nature of
the Previously Acquired Shares. If the Previously Acquired
Shares were acquired through the exercise of a qualified stock
option, an
17
incentive stock option or an option granted under an employee
stock purchase plan (Statutory Option) and if such
Previously Acquired Shares are being transferred prior to
expiration of the applicable Holding Period, the transfer would
be treated as a Disqualifying Disposition of the Previously
Acquired Shares. If the Previously Acquired Shares were acquired
other than pursuant to the exercise of a Statutory Option, or
were acquired pursuant to the exercise of a Statutory Option but
have been held for the applicable Holding Period, no gain or
loss should be recognized on the exchange of the Previously
Acquired Shares. In either case, (i) the option
holders basis and holding period in the number of shares
of Common Stock received (to the extent equal to the number of
Previously Acquired Shares used) would be the same as his or her
basis and holding period in the Previously Acquired Shares used,
increased by any income recognized to the option holder upon the
Disqualifying Disposition of the Previously Acquired Shares;
(ii) the option holders basis in the number of shares
of Common Stock received in excess of the number of Previously
Acquired Shares used would be zero; (iii) the option
holders holding period in such excess shares of Common
Stock begins on the date the option holder acquires those shares
of Common Stock; and (iv) the other incentive stock option
rules would apply. Upon a subsequent Disqualifying Disposition
of the shares of Common Stock so received, the shares with the
lowest basis would be treated as disposed of first.
Bonus Stock. In general, a person will treat
the fair market value of bonus stock awards on the date such
amount is received as compensation, taxable as ordinary income
and subject to employment taxes. Subject to the application of
Section 162(m) of the Code, as discussed below, we will be
entitled to a deduction for the corresponding amount assuming
any federal income tax reporting requirements are satisfied.
Restricted Stock. A participant who has been
granted an award of restricted stock will not realize taxable
income at the time of the award, and we will not be entitled to
a tax deduction at the time of the award, unless the participant
makes an election to be taxed at the time of the award. When the
restrictions lapse without an election by the participant to be
taxed at the time of the award, the participant will receive
taxable income in an amount equal to the excess of the market
value of the shares at such time over the amount, if any, paid
for such shares. We will be entitled to a corresponding tax
deduction assuming any federal income tax reporting requirements
are satisfied. A grantee of a restricted stock may elect to
recognize ordinary income at the time the stock is received by
making an election, under Section 83(b) of the Code, with
the Internal Revenue Service within 30 days of the transfer
of such shares. If such election is filed, the grantee will not
recognize income when the restrictions lapse, and any subsequent
disposition of the shares will result in a capital gain or loss.
If, upon a taxable disposition of the shares of Common Stock,
the grantee receives proceeds more or less than his or her basis
in the shares of Common Stock, any gain will be long-term or
short-term capital gain, and any loss will be long-term or
short-term capital loss, depending on the holding period of the
shares of Common Stock, measured from the date that the shares
of Common Stock were received, if receipt was a taxable event to
such participant or from the date the restrictions on the shares
lapsed if such lapse was a taxable event to the participant.
Performance Awards. In general, a participant
who receives a performance award will not be taxed on receipt of
the award, but instead the fair market value of the Common Stock
or the cash received will be taxable as ordinary compensation
income with respect to a performance award, on the date that the
shares of Common Stock cease to be subject to forfeiture.
Subject to the application of Section 162(m) of the Code,
as discussed below, we will be entitled to a deduction for a
corresponding amount.
Other Stock-based Awards. The tax consequences
of other stock-based awards will depend upon the nature and
terms of the awards.
Withholding
for Taxes
No Common Stock shall be issued under the plan until
arrangements satisfactory to us have been made for the payment
of any tax amounts that may be required to be withheld or paid
by us with respect thereto. At the discretion of the
Compensation Committee, such arrangements may include allowing
the participant to tender to us shares of Common Stock already
owned by the participant or to request us to withhold shares of
Common Stock being acquired pursuant to the award which have an
aggregate fair market value equal to the amount of any tax
required to be withheld with respect to such award.
18
Additional
Tax Consequences
Section 162(m) of the Code places a $1 million cap on
the deductible compensation that may be paid to certain
executives of publicly-traded corporations. Amounts that qualify
as performance based compensation under
Section 162(m)(4)I of the Code are exempt from the cap and
do not count toward the $1 million limit. Generally,
options granted with an exercise price at least equal to the
fair market value of the stock on the date of grant will qualify
as performance-based compensation. Other awards may or may not
so qualify, depending on their terms.
In addition, some awards may be covered by Section 409A of
the Code. In such event, we normally would expect to design and
administer any such award in a manner that ordinarily should
avoid adverse federal income tax consequences under
Section 409A of the Code to any affected participant.
Notwithstanding the foregoing, the plan expressly provides that
there is no commitment or guarantee that any federal, state or
local tax treatment will apply or be available to any person who
participates or is eligible to participate in the plan.
PROPOSAL 4:
RATIFICATION OF UHY LLP AS INDEPENDENT AUDITORS
The Audit Committee has selected UHY LLP as our independent
auditors for the fiscal year ended December 31, 2009 and is
requesting ratification of such appointment by the stockholders.
UHY LLP has acted as our independent public accountants and
audited our financial statements since 2006.
The Audit Committee chose UHY LLP to act as our independent
public accountants because the Audit Committee believes that UHY
LLP has significant resources and significant expertise in the
oil and gas service industry. Representatives of UHY LLP are
expected to be present at the annual meeting and will have the
opportunity to make a statement if they desire to do so. They
will also be available to respond to appropriate questions. UHY
LLP has represented to us that it is independent with respect to
the Company within the meaning of the published rules and
regulations of the SEC.
Voting. The ratification of the appointment of
UHY LLP as independent accountants will require the affirmative
vote of the holders of at least a majority of the stock present
or represented by proxy at the annual meeting and entitled to
vote thereon. The Preferred Stock is entitled to vote on this
proposal on an as converted basis (subject to the limitation set
forth elsewhere in this proxy statement) with the Common Stock
as a single class. Abstentions are considered to be votes cast
and will have the same effect as a vote against this proposal,
but because broker non-votes are not considered to be votes
cast, broker non-votes will not have an effect on approval of
this proposal.
Recommendation; Proxies. The Board of
Directors unanimously recommends that you vote FOR the
ratification of UHY LLP as our independent auditors. The
persons named in the proxy card will vote all shares over which
they have discretionary authority FOR the ratification of UHY
LLP as independent auditors.
Principal
Accountant Fees and Services
The following table shows the aggregate fees for professional
services rendered by UHY LLP during the years ended
December 31, 2008 and 2007.
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Fiscal Year
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Fee Category
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2008
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2007
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Audit Fees(1)
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$
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1,038,459
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$
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1,111,415
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Audit Related Fees(2)
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189,621
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88,435
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Tax Fees
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All Other Fees
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$
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1,228,080
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$
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1,199,850
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(1) |
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Includes fees and
out-of-pocket
charges paid for audit of our annual financial statements and
reviews of the related quarterly financial statements. |
19
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(2) |
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Includes fees paid for assurance and related services that are
reasonably related to the performance of the audit or review of
our financial statements and are not reported under Audit
Fees. These services include accounting and reporting
consultations. |
Pre-Approval
Policies and Procedures
We have adopted a policy that the Audit Committee must approve
in advance all audit and non-audit services provided by our
independent accountants. All of the audit and audit-related
services, and the fees therefor, provided by UHY LLP in 2008 and
2007 were pre-approved by the Audit Committee.
Principal
Accountant and Auditing Staff
The firm of UHY LLP acts as our principal independent registered
public accounting firm. Through March 15, 2007, UHY LLP had
a continuing relationship with UHY Advisors, Inc.
(Advisors) from which it leased auditing staff who
were full time, permanent employees of Advisors and through
which UHY LLPs partners provide non-audit services. UHY
LLP has only a few full time employees. Therefore, few, if any,
of the audit services performed were provided by permanent
full-time employees of UHY LLP. UHY LLP manages and supervises
the audit services and audit staff, and is exclusively
responsible for the opinion rendered in connection with its
examination.
Report of
the Audit Committee of the Board of Directors
The Audit Committee is responsible for overseeing our financial
reporting process, reviewing the financial information that will
be provided to stockholders and others, monitoring internal
accounting controls, selecting our independent auditors and
providing to our Board of Directors such additional information
and materials as we may deem necessary to make our Board of
Directors aware of significant financial matters. We operate
under a written Audit Committee charter.
We have reviewed and discussed our audited financial statements
for the fiscal year ended December 31, 2008 with management
and UHY LLP, our independent auditor for the fiscal year ended
December 31, 2008. In addition, we have discussed with UHY
LLP the matters required to be discussed by Statement on
Auditing Standards No. 61 (Communications with Audit
Committee). We also have received the written disclosures and
the letter from UHY LLP, as required by the Independence
Standards Board Standard No. 1 (Independence Discussions
with Audit Committees), and we have discussed the independence
of UHY LLP with that firm.
We, the members of the Audit Committee, are not professionally
engaged in the practice of auditing or accounting nor are we
experts in the fields of accounting or auditing, including
determination of auditor independence. We rely, without
independent verification, on the information provided to us and
on the representations made by management and the independent
auditors. Accordingly, our oversight does not provide an
independent basis to determine whether management has maintained
appropriate accounting and financial reporting principles or
appropriate internal controls and procedures designed to assure
compliance with accounting standards and applicable laws and
regulations. Furthermore, our considerations and discussions
referred to above do not assure that the audit of our financial
statements has been carried out in accordance with auditing
standards generally accepted in the United States of America, or
that the financial statements are presented in accordance with
accounting principles generally accepted in the United States of
America.
Based upon the discussions referred to above, the Audit
Committee recommended to the Board of Directors that our audited
financial statements be included in our Annual Report on
Form 10-K
for the year ended December 31, 2008.
Audit Committee of the Board of Directors
Victor F. Germack, Chairman
James M. Hennessy
Robert E. Nederlander
20
EXECUTIVE
OFFICERS
The following table sets forth the names, ages and positions of
each of our executive officers, all of whom serve at the request
of our Board of Directors and are subject to annual appointment
by the Board of Directors:
|
|
|
|
|
|
|
Name
|
|
Age
|
|
Position
|
|
Munawar H. Hidayatallah
|
|
|
65
|
|
|
Chairman and Chief Executive Officer
|
Victor M. Perez
|
|
|
56
|
|
|
Chief Financial Officer
|
Terrence P. Keane
|
|
|
57
|
|
|
Senior Vice President Oilfield Services
|
Mark C. Patterson
|
|
|
51
|
|
|
Senior Vice President Rental Services
|
Theodore F. Pound III
|
|
|
55
|
|
|
General Counsel and Secretary
|
Bruce Sauers
|
|
|
45
|
|
|
Vice President and Corporate Controller
|
Martin Zoldi
|
|
|
65
|
|
|
President of DLS Argentina Limited
|
Munawar H. Hidayatallah has served as our Chairman of the
Board and Chief Executive Officer since May 2001, and was
President from May 2001 through February 2003.
Mr. Hidayatallah was Chief Executive Officer of OilQuip
Rentals, Inc. from its formation in February 2000 until it
merged with us in May 2001. From December 1994 until August
1999, Mr. Hidayatallah was the Chief Financial Officer and
a director of IRI International, Inc., which was acquired by
National Oilwell, Inc. in early 2000. IRI International, Inc.
manufactured, sold and rented oilfield equipment to the oilfield
and natural gas exploration and production sectors. From August
1999 until February 2001, Mr. Hidayatallah worked as a
consultant to IRI International, Inc. and Riddell Sports Inc.
Victor M. Perez became our Chief Financial Officer in
August 2004. From July 2003 to July 2004, Mr. Perez was a
private consultant engaged in corporate and international
finance advisory. From February 1995 to June 2003,
Mr. Perez was Vice President and Chief Financial Officer of
Trico Marine Services, Inc., a marine transportation company
serving the offshore energy industry. Trico Marine Services,
Inc. filed a petition under the federal bankruptcy laws in
December 2004. Mr. Perez was Vice President of Corporate
Finance with Offshore Pipelines, Inc., an oilfield marine
construction company, from October 1990 to January 1995, when
that company merged with a subsidiary of McDermott
International. Mr. Perez also has 15 years of
experience in international energy banking.
Terrence P. Keane became Senior Vice
President Oilfield Services in January 2008. Prior
to his promotion, Mr. Keane served as President and Chief
Executive Officer of AirComp LLC since its formation on
July 1, 2003. In addition, Mr. Keane served as a
consultant to M-I in the area of compressed air drilling from
July 2002 until June 2003. From March 1999 until June 2002,
Mr. Keane served as Vice President and General
Manager Exploration, Production and Processing
Services for Gas Technology Institute where Mr. Keane was
responsible for all sales, marketing, operations and research
and development in the exploration, production and processing
business unit. For 15 years prior to joining the Gas
Technology Institute, Mr. Keane held various positions with
Smith International, Inc., Houston, Texas, most recently in the
position of Vice President Worldwide Operations and Sales for
Smith Tool.
Mark C. Patterson is Senior Vice President
Rental Services and President of Allis-Chalmers Rental Services
LLC. Prior to such time Mr. Patterson served as Executive
Vice President of Sales and Business Development for
Allis-Chalmers Rental Services LLC, organizing, managing and
coordinating the sales effort for the company.
Mr. Patterson also previously worked with Oil &
Gas Rental Services, Inc. since August 1989 and has over
18 years experience in the rental service business and over
27 years experience in the oil and gas service sector of
the oil and gas industry. While with Oil & Gas Rental
Services, Inc., Mr. Patterson served as Vice President of
Sales in Houston, managing the Houston sales and marketing
effort until Dec. 18, 2006.
Theodore F. Pound III has served as our General
Counsel since October 2004 and was elected Secretary in January
2005. For ten years prior to joining us, he practiced law with
the law firm of Wilson, Cribbs & Goren, P.C.,
Houston, Texas. Mr. Pound has practiced law for more than
27 years. Mr. Pound has represented us and managed
each of our acquisitions beginning in 2001.
21
Bruce Sauers has served as our Vice President and
Corporate Controller since July 2005. From January 2005 until
July 2005, Mr. Sauers was Controller of Blast Energy Inc.,
an oilfield services company. From June 2004 until January 2005,
Mr. Sauers worked as a financial consultant. From July 2003
until June 2004, Mr. Sauers served as controller for HMT,
Inc., an above ground storage tank company. From February 2003
until July 2003, Mr. Sauers served as assistant controller
at Todco, an offshore drilling contractor. Mr. Sauers has
served in a financial management role for approximately
20 years.
Martin Zoldi has served as President and Chief Executive
Officer of DLS Argentina Limited, an oilfield drilling and
services company operating mainly in Argentina and Bolivia,
since February 2007. Mr. Zoldi previously served as chief
engineer of DLS Argentina Limited and later as Vice President
and COO in several areas, including Turkmenistan, Azerbajyan and
Latin America. Mr. Zoldi is also President of Tanus, a
chemical specialties manufacturing company based in Argentina,
which is owned by DLS Argentina Limited. Mr. Zoldi has a
mechanical engineering degree from Argentine State University.
22
EXECUTIVE
COMPENSATION
Compensation
Discussion and Analysis
The following section is intended to help our stockholders
understand our executive compensation philosophy, objectives and
policies and it is also intended to provide context for the
compensation information (set forth in detail in the
compensation tables and narrative discussion below) for the
following persons, who are our named executive
officers as defined by the SEC, for the fiscal year ended
December 31, 2008:
|
|
|
|
|
Munawar H. Hidayatallah Chairman and Chief
Executive Officer
|
|
|
|
Victor M. Perez Chief Financial Officer
|
|
|
|
David K. Bryan President and CEO of
Allis-Chalmers Directional Drilling Services LLC
|
|
|
|
Terrence P. Keane Senior Vice
President Oilfield Services
|
|
|
|
Mark C. Patterson Senior Vice
President Rental Services
|
Executive
Compensation Philosophy
It is critical to our long-term success and growth that our
business is managed by highly capable leaders with the
experience and dedication to oversee a growing and changing
organization. To achieve this objective, our compensation
philosophy is to recruit, retain and motivate talented and
effective employees. We focus on traditional compensation
principles that are geared to both our short-term and long-term
performance. We adhere to the following compensation principles
which influence the design and administration of our executive
compensation program:
|
|
|
|
|
Compensation decisions should reflect our
strategy We have experienced rapid growth in
recent years. As we have grown, we have made compensation
decisions that reflect our size and growth.
|
|
|
|
Total compensation should reflect
performance Our compensation program
provides incentives that reward executives for achieving
short-term as well as long-term financial and operational goals.
Our total compensation program is managed so that a significant
amount of executive compensation is considered at risk, and
conditioned on performance.
|
|
|
|
Compensation levels must be
competitive Demand for qualified executive
talent in our industry is high, while the supply for this talent
is limited. The level of base salaries, short-term incentive
opportunities, and long-term incentive opportunities established
for our named executive officers are intended to provide a total
target compensation opportunity in the range of the market
median for executives in comparable positions and markets in
which we compete for talent.
|
|
|
|
Executive interests should be aligned with those of our
stockholders The value of our executive
compensation programs should generally vary as our stockholders
interests increase or decrease in value. Through the use of
performance related annual incentives, stock option grants, and
restricted stock grants, we attempt to align the long-term
interests of our executives with those of our stockholders by
linking a portion of executive compensation to our long-term
financial performance.
|
|
|
|
Compensation programs should motivate executives to stay with
us over the long-term In addition to
providing compensation that is competitive with the market, we
attempt to provide incentive for our executives to stay with the
company. We use time vested option and restricted stock awards
in our compensation program, providing retention incentives for
our executives to stay with us.
|
23
Compensation
Program Objectives
The following chart shows each element of our compensation
program, the form in which the element is delivered to the
executive, its objective, and any performance metric tied to
each element.
|
|
|
|
|
Element
|
|
Form of Compensation
|
|
Objectives
|
|
Base Pay
|
|
Fixed Cash
|
|
Recognize role, responsibilities and experience consistent with
market for comparable positions
|
Annual Bonus
|
|
Variable Cash
|
|
Reward operating results and to provide a strong motivational
tool to achieve earnings guidance and other related
pre-established objectives
|
Long-Term Incentive
|
|
Stock Options and Restricted Stock
Awards Outcomes at vesting are variable as well
as grant levels
|
|
Create strong financial incentive for achieving long-term
performance and encourage a significant equity stake in our
company
|
Health, Life,
Retirement Savings
and Other Benefits
|
|
Eligibility to participate in benefit plans generally available
to our employees, including retirement, health, life insurance
and disability plans
|
|
Plans are part of the broad-based benefits program offered to
our employees
|
Executive Benefits and
Perquisites
|
|
Auto allowance for our named executive officers and furnished
apartment in Houston for our CEO
|
|
Provide competitive benefits to round out a complete
compensation package
|
Additional discussion of each element of our compensation is
provided below along with specific 2008 decisions made by the
Compensation Committee regarding each element.
Pay
for Performance Strategy
Each element of our compensation program described above, in
both their fixed and variable nature, are intended to make up
our total pay for performance strategy.
|
|
|
|
|
The fixed elements are intended to provide the foundation of
compensation paid to our executives. Such elements recognize the
individuals role in the company and are reflective of
experience level.
|
|
|
|
The variable compensation elements of the annual bonus focus on
our earnings per share or earnings before interest, tax,
depreciation and amortization (EBITDA) as well as the
executives individual responsibilities and performance
outcomes.
|
|
|
|
Long-term compensation creates a direct link between the
executives potential for capital accumulation and
stockholder return.
|
Role
of Compensation Committee
Executive officer compensation is administered by the
Compensation Committee of our Board of Directors, which is
composed of three non-employee directors who satisfy the
independence requirements of the New York Stock Exchange. Our
board of directors appoints the members of the Compensation
Committee, and delegates to the Compensation Committee the
responsibility for, among other matters:
|
|
|
|
|
evaluating and approving our overall compensation programs;
|
|
|
|
annually reviewing the performance of and setting the
compensation (i.e., salary, incentive awards, and all other
elements) for our chief executive officer;
|
|
|
|
annually reviewing the performance of and recommending the
compensation for the other executive officers; and
|
|
|
|
reviewing and approving annual goals and mechanics along with
administering our annual incentive and equity compensation plans
and programs.
|
24
Compensation
Governance
Each year the compensation paid to our chief executive officer
is reviewed and recommended by the Compensation Committee and
approved by the board of directors. The compensation awarded to
our other named executive officers is proposed by the CEO,
reviewed by the Compensation Committee and then recommended to
the board of directors for final approval.
Our Board of Directors approves the compensation plans which
govern our various direct compensation programs and elements.
The table below outlines the governance of those programs.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reviewed and
|
|
|
|
|
Compensation
|
|
|
|
Recommended
|
|
|
|
|
Element
|
|
Plan/Governance
|
|
By:
|
|
Approved By:
|
|
|
|
|
|
|
|
|
|
|
CEO
|
|
Base Salary
Annual Bonus
Long-Term Incentives
|
|
Employment
Agreement
Employment
Agreement
2003 Incentive Stock Plan
2006 Incentive Plan
|
|
Compensation Committee
|
|
Board of
Directors
|
|
|
|
|
|
|
|
|
|
Named
Executive
Officers
|
|
Base Salary
Annual Bonus
Long-Term Incentives
|
|
Employment
Agreements
Employment
Agreements
2003 Incentive Stock Plan
2006 Incentive Plan
|
|
CEO & Compensation Committee
|
|
Board of
Directors
|
Role
of Compensation Consultants
Pursuant to its charter, the Compensation Committee is
authorized to retain any compensation consultants or other
advisors as it deems appropriate to assist in compensation
matters. The Compensation Committee has the sole authority to
hire and fire our compensation consultant. Since 2007, the
Compensation Committee periodically engaged Cogent Compensation
Partners, Inc., or Cogent, to serve as an independent
compensation consultant to the Compensation Committee on
executive compensation matters. Cogent performed work at the
direction and under the supervision of the Compensation
Committee throughout 2008. Beginning 2009, the Compensation
Committee has engaged Pearl Meyer & Partners to serve
as its independent advisor going forward. Pearl Meyer was
retained to provide advice, research and analytical services on
a variety of compensation related subjects.
Role
of Our Executive Officers in Establishing
Compensation
Mr. Hidayatallah, our chief executive officer, is actively
involved in the compensation process and works closely with the
Compensation Committee providing his assessment and
recommendations on the competitiveness of our programs, any
performance issues and challenges, and makes recommendations for
consideration pertaining to the management team, which includes
their individual compensation levels. The Committee takes these
recommendations into consideration and either approves them or
works with the chief executive officer to develop suitable
solutions. In developing compensation recommendations,
Mr. Hidayatallah has relied on his many years of experience
serving as an executive officer in the oilfield service industry
as well as publicly available information for comparable
compensation guidance. No other executive officer assumes an
active role in the evaluation, design or administration of our
executive officer compensation programs. Mr. Hidayatallah
participates in Committee meetings relating to the compensation
of our other executive officers. Mr. Hidayatallah does not
attend Compensation Committee meetings that pertain to himself.
The Committee also meets in executive session, independently of
the chief executive officer and other members of senior
management to review not only the CEOs compensation but
those of all named executive officers and other key employees.
Benchmarking
The Compensation Committee analyzes the compensation practices
of a group of our peer companies, consisting of other
publicly-traded energy services companies within a range of
market cap and revenue size.
25
Additionally, the Compensation Committee considers the best
practices in compensation policies from other companies and does
not structure our compensation on market data alone. The
Committee, historically, has used peer group information and
other market data only as a general guideline for its
deliberations.
Our current peer group of companies was established in 2006. The
Compensation Committee did not conduct a formal review of the
compensation practices or levels of our peer group in 2008.
However, the Committee plans to use this type of benchmarking in
the future as needed to complement its own analysis, and not as
an independent source for making compensation related decisions.
Composition of the peer group is based upon a combination of the
following factors: (1) companies that are competitors;
(2) companies that compete for our specialized talent;
(3) companies that may experience similar market cycles;
(4) companies that may be tracked similarly by analysts;
and (5) companies that have generally comparable market cap
and/or
revenue. These factors as well as the individual peer group
companies are periodically reviewed and may change over time as
needed. Our current peer group consists of the following
companies:
|
|
|
|
|
Core Laboratories
|
|
|
|
Gulfmark Offshore Inc.
|
|
|
|
NATCO Group Inc.
|
|
|
|
Newpark Resources
|
|
|
|
Oil States Intl. Inc.
|
|
|
|
RPC Inc.
|
|
|
|
Superior Energy Services Inc.
|
|
|
|
Superior Well Services Inc.
|
|
|
|
Tesco Corp.
|
|
|
|
Tetra Technologies Inc.
|
Components
of Executive Compensation
Our executive compensation program consists of the following
components: base salary, annual bonus, long-term incentives,
perquisites and benefits.
Base
Salary
Competitive base salaries are designed to attract and retain
employees by providing them with a stable source of income. In
addition, base salaries for our executive officers are designed
to compensate the executive for the experience, education,
personal qualities and other qualifications of that individual
that are essential for the specific role of such executive,
while remaining competitive with the market. This market
consists of both the oilfield services industry and other
service-based industries. We have historically set pay at levels
that reflect the qualifications of the individuals and their
competing opportunities in the market. Our annual incentive
compensation is expressed as a percentage of base salaries.
Base salaries are generally reviewed on an annual basis. In
addition to benchmarking, as noted above, the Compensation
Committee and our chief executive officer consider various
factors when recommending base salaries, including:
|
|
|
|
|
the executives individual performance;
|
|
|
|
the performance of the executives business unit within
Allis-Chalmers;
|
|
|
|
company-wide performance;
|
|
|
|
the executives experience and expertise;
|
26
|
|
|
|
|
the executives position and job responsibility;
|
|
|
|
the executives years of service with us; and
|
|
|
|
the competitive pay levels for similar positions.
|
No specific weight is assigned to any of these factors and our
chief executive officer exercises subjective judgment when
making salary recommendations with respect to our executive
officers. The only increases in base salary to our named
executive officers in 2008 were to Terry Keane and Mark
Patterson. Both were promoted to Senior Vice President of their
respective divisions and received salary increases in connection
with such promotions. The Compensation Committee agreed to
gradually increase Mr. Keanes salary from $225,000 to
$300,000 by increasing his base salary by $50,000 in February
2008 with another $25,000 increase effective January 2009. The
Compensation Committee also agreed to gradually increase
Mr. Pattersons salary from $190,000 to $250,000 by
increasing his salary by $35,000 in January 2008 with another
$25,000 increase in May 2008. None of our other named executive
officers received salary increases in 2008. Each other named
executive officer received salary increases in connection with
their new employment agreements entered into in 2007.
Annual
Incentive Compensation
A significant portion of each executives total
compensation is variable and dependent upon the achievement of
one or more goals. Annual incentive compensation primarily
consists of cash bonuses. When determining these bonuses, we
rely on performance criteria such as the achievement of certain
earnings per share or earnings before interest, taxes,
depreciation and amortization, or EBITDA, the successful
completion of specific job responsibilities or the achievement
of other items integral to our success. For 2008, the primary
performance criteria used for our corporate executives was
meeting specified earnings guidance and successfully completing
individual goals pertaining to specified job responsibilities.
For our chief financial officer, these goals included managing
our financial reporting function, maintaining Sarbanes-Oxley
compliance, obtaining financing for acquisitions and receiving
an unqualified audit opinion. For our division heads, their
performance goals are generally tied to the achievement of
established EBITDA goals for each such division. Our chief
executive officer, in conjunction with the Compensation
Committee, evaluates performance in light of the specified
performance criteria for each executive and recommends to the
Committee the amount of the annual incentive payment to be
awarded. An annual cash bonus may be more than, less than or
equal to the target cash bonus amount set for each executive.
Due to the operating challenges in the energy services industry
presented by the current condition of the economy, each of our
executives have signed a letter of agreement to waive any right
to any bonuses set forth in their respective employment
agreements for the 2009 calendar year.
Annual Incentive Bonus Payouts for 2008
As detailed in the table below, two of our named executive
officers received an annual incentive bonus for 2008. David
Bryan received 100% of his annual incentive bonus, which was
based on Allis-Chalmers Directional Drilling Services LLC
(formerly Strata Directional Technology LLC) meeting
financial goals of EBITDA of at least $29,037,462 for the year.
Terry Keane received 50% of his annual incentive bonus. Half of
his target bonus was based on AirComp LLC meeting financial
goals of EBITDA of at least $9,179,890 for the first half of
2008 and he met this target. The other half of
Mr. Keanes bonus was based on the Oilfield Services
segment meeting financial goals of EBITDA of at least
$43,627,024 for the last half of 2008, which was not met.
The following table shows the annual incentive bonus target and
the actual amount of the annual incentive bonus paid for each
named executive officer for 2008.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Target
|
|
2008 Target
|
|
Actual 2008
|
|
|
Payout % of
|
|
Bonus
|
|
Target
|
Name
|
|
Base
|
|
Award
|
|
Bonus Paid
|
|
Munawar H. Hidayatallah
|
|
|
100
|
%
|
|
$
|
500,000
|
|
|
|
|
|
Victor M. Perez
|
|
|
50
|
%
|
|
$
|
143,000
|
|
|
|
|
|
David K. Bryan
|
|
|
100
|
%
|
|
$
|
250,000
|
|
|
$
|
250,000
|
|
Terrence P. Keane
|
|
|
100
|
%
|
|
$
|
275,000
|
|
|
$
|
137,500
|
|
Mark C. Patterson
|
|
|
100
|
%
|
|
$
|
250,000
|
|
|
|
|
|
27
Discretionary Bonus Payouts for 2008
In the third quarter of 2008, the Compensation Committee
approved discretionary bonuses to each of
Messrs. Hidayatallah and Perez equal to 50% of their target
bonus for meeting certain performance goals as well as meeting
their earnings per share target through the third quarter.
Mr. Hidayatallah received a bonus in the amount of $250,000
and Mr. Perez received a bonus in the amount of $71,500.
The Compensation Committee did not award the remainder of their
respective bonuses because their earnings per share target was
not met for fiscal year 2008. Specifically,
Messrs. Hidayatallah and Perez did not meet their financial
goal of earnings per share of at least $1.35 per share for 2008.
In addition, the Compensation Committee approved a discretionary
bonus to Mr. Patterson equal to 100% of his target bonus,
or $250,000, although Mr. Patterson did not meet his
performance criteria, which was the Rental Services segment
meeting financial goals of EBITDA of at least $61,270,000 for
the year. The Committee decided to award Mr. Patterson a
discretionary bonus equal to the full amount of his target bonus
because the Committee determined that Mr. Patterson
substantially met his target financial goal and took into
consideration factors that were outside his control, including
challenges imposed by the transition to his new position in
connection with his promotion to Senior Vice President of Rental
Services in January 2008. The Compensation Committee also
approved a discretionary bonus of $60,000 to Mr. Patterson
in 2008. This discretionary bonus was intended to act as an
inducement for Mr. Patterson to accept his new position,
with increased responsibility, within the Company.
In December 2008, on the recommendation of the Compensation
Committee, our Board of Directors approved a discretionary cash
bonus of $1,430,000 to our chief executive officer,
Mr. Hidayatallah. The intent behind awarding this
discretionary bonus was to (a) promote the retention of
Mr. Hidayatallah, (b) facilitate leadership and
management continuity, and (c) better focus
Mr. Hidayatallah on Allis-Chalmers long term
strategic success. The Compensation Committee had previously
granted Mr. Hidayatallah a performance award in the amount
of 685,000 shares of restricted shares in connection with
his employment agreement entered into in 2007. The shares were
to vest in three annual installments upon achieving 12% growth
in total stockholder return. The sudden downturn in the economy
and across the energy services industry which occurred in 2008
played a significant role in making the achievability of the
performance hurdles virtually impossible. Thus, the award lost
its intended purpose of motivating high performance. This bonus,
as previously stated, was intended to renew that objective. In
connection with this bonus, Mr. Hidayatallah agreed to
(x) extend the term of his employment agreement for an
additional year, ending March 31, 2011, (y) forgo any
additional cash bonus for 2008, and (z) forgo any salary
increase in 2009. Mr. Hidayatallahs employment
agreement was also amended to require Mr. Hidayatallah to
repay $1,180,000 of the bonus if Mr. Hidayatallah
terminates his employment before the end of the term.
Long-Term
Incentive Compensation
We award long-term incentive compensation to focus our
executives on our long-term growth and stockholder return, as
well as to encourage our executives to remain with us for the
long-term. Prior to 2006, we primarily granted long-term
incentives in the form of stock options pursuant to our Amended
and Restated 2003 Stock Option Plan. We selected this form
because of the favorable accounting and tax treatment and the
expectation of key employees in our industry that they would
receive stock options. In 2006, we reassessed our form of award
and the Committee adopted the 2006 Incentive Plan, or the 2006
Plan, in order to provide us with a mix of long-term incentive
vehicles to complement our stock option awards, namely
restricted stock. We do not have pre-established target award
amounts for long-term incentive grants. Instead, our chief
executive officer recommends the number of awards to grant to
each executive and the Compensation Committee considers the
chief executive officers recommendations in making such
awards.
Stock Options. Stock options are an important
aspect of our long-term compensation program. Stock options are
granted with an exercise price equal to the fair market value of
the option on the date of grant. However, we did not grant
options to any of our named executive officers in 2008.
Restricted Stock. Our use of restricted stock
is intended to maintain consistency in management by encouraging
our executives to stay with us for the long-term. Restricted
stock awards provide some value to an employee during periods of
stock market volatility, whereas stock options may have limited
perceived value and may do little to retain and motivate
employees when the current value of our stock is less than the
option price. Further, restricted stock is a meaningful
mechanism to align the interests of executives with those of our
stockholders, without fostering an environment of undue risks.
28
In determining long-term incentive awards for the executives,
the Compensation Committee relies on recommendations from our
chief executive officer. Our chief executive officer considers
several factors, including our performance, the individual
performance of the executives, the retentive and motivational
value of the proposed grant, and the share usage and associated
accounting expense when determining restricted stock awards. In
2008, Mr. Perez was granted 50,000 shares of
restricted stock and Mr. Keane was granted
90,000 shares of restricted stock. These grants are
intended to further retain and motivate these executives. In
addition, Mr. Patterson received a grant of
10,000 shares of restricted stock in connection with his
promotion in January 2008. Each of these grants vest over three
years with 20% vesting on each of the first and second
anniversaries of the grant date and the remaining 60% vesting on
the third anniversary of the grant date. No other named
executive officer received any equity awards in 2008.
Perquisites
Our named executive officers received certain perquisites in
2008 which consisted of health benefits paid for by us, payment
of life insurance premiums and a monthly car allowance. We
provide these benefits to our named executive officers as part
of a competitive compensation package. In addition, during 2008
we provided Mr. Hidayatallah with access to a company car
and driver because we believe that this allows him to devote
optimal time to our business and increases his efficiency.
In addition to the benefits named above, we reimburse
Mr. Hidayatallah for maintaining an apartment in Houston,
Texas in close proximity to our corporate office because
Mr. Hidayatallah resides in California. We also reimburse
Mr. Hidayatallah for expenses for traveling between Texas
and California. Mr. Hidayatallahs reimbursements for
his travel expenses and his apartment in Houston are provided
for in his employment agreement.
We did not provide tax
gross-ups
related to these perquisites in 2008.
Employee
Benefits
We offer our named executive officers standard employee benefits
to provide for them in time of disability and to allow us to
remain competitive in the market in order to attract and retain
key employees. Our primary benefits, which are available to all
employees, include participation in our employee health, dental
and vision plans, disability and life insurance plans and our
401(k) savings plan. We currently match 5% of the
employees pre-tax contributions up to 3% of the
employees salary (including bonus), subject to
contribution limits. We also pay the cost of health insurance
premiums for each of our named executive officers.
Executive
Compensation Policies and Processes
Equity
Award Grant Practices
We award all stock options to purchase our common stock to
executive officers and all other employees at the market price
of our common stock on the grant date. Employees are not allowed
to select the effective date of stock option grants and neither
we nor the Compensation Committee has ever back-dated any option
awards. Although the Compensation Committee does not set
specific dates in which it makes equity awards, the Compensation
Committee does not time its approval of equity awards around the
release of any material non-public information.
Policy
Regarding Section 162(m) of the Internal Revenue
Code
Section 162(m) of the Internal Revenue Code generally
limits our ability to take a federal income tax deduction for
compensation paid to our named executive officers in excess of
$1 million. The stock options we grant have been structured
to qualify as performance-based so they are not subject to this
deduction limitation. Although the Compensation Committee will
seek to utilize deductible forms of compensation to the extent
practicable, it believes it is important to preserve flexibility
in administering compensation programs. Accordingly, we have not
adopted a policy that all compensation must qualify as
deductible under Section 162(m).
The restricted shares granted to our CEO in connection with his
2007 employment agreement were granted under the stockholder
approved 2006 Incentive Plan and are deductible as
performance-based compensation because they vest only upon the
achievement of certain performance goals.
29
Executive
Stock Ownership Guidelines
We do not, at this time, have any formal stock ownership and
retention guidelines but recognizes the importance of retention
of shares by executives as opposed to cashing them out routinely
at maturity. The board and the Compensation Committee feel that
retention of equity and attaining a significant investment
position is important for true stockholder linkage. While we
feel that our current long term incentive grants do provide a
significant linkage to stockholder value we will continue to
monitor and assess the need associated with instituting more
formal guidelines.
Compensation
Committee Report
The Compensation Committee has reviewed and discussed the
Compensation Discussion and Analysis required by
Item 402(b) of
Regulation S-K
with management and, based on such review and discussions, the
Compensation Committee recommended to the Board of Directors
that the Compensation Discussion and Analysis be included in
this proxy statement.
The Compensation Committee of the Board of Directors
Zane Tankel, Chairman
Saad Bargach
Victor F. Germack
Summary
Compensation Table
The following table provides a summary of the cash and non-cash
compensation for the year ended December 31, 2008, 2007 and
2006 for each of (1) the Chief Executive Officer and the
Chief Financial Officer and (2) each of our three most
highly compensated executive officers during 2008 other than the
Chief Executive Officer or Chief Financial Officer. We refer to
these executives collectively as the named executive officers.
|
|
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|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
|
Option
|
|
|
Incentive Plan
|
|
|
All Other
|
|
|
|
|
|
|
|
|
|
Salary
|
|
|
Bonus
|
|
|
Awards
|
|
|
Awards
|
|
|
Compensation
|
|
|
Compensation
|
|
|
Total
|
|
Name and Principal Position
|
|
Year
|
|
|
($)
|
|
|
($)
|
|
|
($)(1)
|
|
|
($)(2)
|
|
|
($)(3)
|
|
|
($)(6)
|
|
|
($)
|
|
|
Munawar H. Hidayatallah
|
|
|
2008
|
|
|
|
500,000
|
|
|
|
1,680,000
|
|
|
|
4,608,455
|
|
|
|
868,914
|
|
|
|
|
|
|
|
148,354
|
|
|
|
7,805,723
|
|
Chairman & Chief
|
|
|
2007
|
|
|
|
475,000
|
|
|
|
100,000
|
|
|
|
2,013,444
|
|
|
|
547,115
|
|
|
|
|
|
|
|
139,034
|
|
|
|
3,274,593
|
|
Executive Officer
|
|
|
2006
|
|
|
|
400,000
|
|
|
|
|
|
|
|
|
|
|
|
845,694
|
|
|
|
400,000
|
|
|
|
88,240
|
|
|
|
1,733,934
|
|
Victor M. Perez
|
|
|
2008
|
|
|
|
286,000
|
|
|
|
71,500
|
|
|
|
230,233
|
|
|
|
54,924
|
|
|
|
|
|
|
|
63,334
|
|
|
|
705,991
|
|
Chief Financial Officer
|
|
|
2007
|
|
|
|
270,833
|
|
|
|
|
|
|
|
63,608
|
|
|
|
81,912
|
|
|
|
|
|
|
|
43,001
|
|
|
|
459,354
|
|
|
|
|
2006
|
|
|
|
248,833
|
|
|
|
100,000
|
|
|
|
|
|
|
|
212,551
|
|
|
|
120,000
|
|
|
|
21,801
|
|
|
|
703,185
|
|
David K. Bryan
|
|
|
2008
|
|
|
|
250,000
|
|
|
|
|
|
|
|
605,809
|
|
|
|
|
|
|
|
250,000
|
|
|
|
44,084
|
|
|
|
1,149,893
|
|
President and CEO
|
|
|
2007
|
|
|
|
250,000
|
|
|
|
|
|
|
|
309,877
|
|
|
|
5,284
|
|
|
|
231,250
|
|
|
|
21,148
|
|
|
|
817,559
|
|
of Allis-Chalmers
|
|
|
2006
|
|
|
|
187,000
|
|
|
|
|
|
|
|
|
|
|
|
33,038
|
|
|
|
174,996
|
|
|
|
12,941
|
|
|
|
407,975
|
|
Directional Drilling
Services LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Terrence P. Keane(4)
|
|
|
2008
|
|
|
|
272,385
|
|
|
|
|
|
|
|
518,622
|
|
|
|
|
|
|
|
137,500
|
|
|
|
62,269
|
|
|
|
990,776
|
|
Senior Vice President
|
|
|
2007
|
|
|
|
202,404
|
|
|
|
|
|
|
|
287,653
|
|
|
|
38,399
|
|
|
|
156,250
|
|
|
|
40,393
|
|
|
|
725,099
|
|
Oilfield Services
|
|
|
2006
|
|
|
|
172,038
|
|
|
|
|
|
|
|
|
|
|
|
128,957
|
|
|
|
87,500
|
|
|
|
16,062
|
|
|
|
404,557
|
|
Mark C. Patterson(5)
|
|
|
2008
|
|
|
|
241,403
|
|
|
|
310,000
|
|
|
|
38,975
|
|
|
|
|
|
|
|
|
|
|
|
26,939
|
|
|
|
617,317
|
|
Senior Vice President
|
|
|
2007
|
|
|
|
146,655
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,215
|
|
|
|
151,870
|
|
Rental Services LLC
|
|
|
2006
|
|
|
|
4,747
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,747
|
|
|
|
|
(1) |
|
The amounts indicated represent the aggregate dollar amount of
compensation expense, excluding the reduction for risk of
forfeiture, related to restricted stock awards recognized in our
financial statements during fiscal year 2008. The expense was
determined in accordance with FAS 123(R) as disclosed in
Notes 1 and 10 to our financial statements included in our
annual report on
Form 10-K
for the year ended December 31, 2008. |
30
|
|
|
(2) |
|
The amounts indicated represent the aggregate dollar amount of
compensation expense, excluding the reduction for risk of
forfeiture, related to stock option awards recognized in our
financial statements during fiscal year 2008 and includes
amounts from awards granted prior to 2007. The expense was
determined in accordance with FAS 123(R) as disclosed in
Notes 1 and 10 to our financial statements included in our
annual report on
Form 10-K
for the year ended December 31, 2008. |
|
(3) |
|
The amounts indicated represent annual incentive compensation
paid pursuant to each executives employment agreement. |
|
(4) |
|
Mr. Keane was promoted to Senior Vice President
Oilfield Services in January 2008. Prior to his promotion,
Mr. Keane served as President and Chief Executive Officer
of AirComp LLC. |
|
(5) |
|
Mr. Patterson was promoted to Senior Vice
President Rental Services in January 2008. Prior to
his promotion, Mr. Patterson served as Vice President of
Sales and Business Development for Allis-Chalmers Rental
Services LLC. Mr. Patterson joined our company in December
2006. |
|
(6) |
|
The following table provides a summary of the All Other
Compensation column and includes all perquisites: |
Summary
of All Other Compensation
|
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|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
401(k) plan
|
|
|
|
|
|
Allis-Chalmers
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
Health
|
|
|
Matching
|
|
|
Car
|
|
|
Provided
|
|
|
Personal
|
|
|
|
|
|
|
|
|
|
Benefits
|
|
|
Contributions
|
|
|
Allowance
|
|
|
Car
|
|
|
Benefits
|
|
|
Total
|
|
Name
|
|
Year
|
|
|
($)(1)
|
|
|
($)
|
|
|
($)
|
|
|
($)(2)
|
|
|
($)(3)
|
|
|
($)
|
|
|
Munawar H. Hidayatallah
|
|
|
2008
|
|
|
|
72,721
|
|
|
|
4,375
|
|
|
|
|
|
|
|
14,543
|
|
|
|
56,715
|
|
|
|
148,354
|
|
|
|
|
2007
|
|
|
|
62,788
|
|
|
|
7,500
|
|
|
|
|
|
|
|
12,302
|
|
|
|
56,444
|
|
|
|
139,034
|
|
|
|
|
2006
|
|
|
|
27,832
|
|
|
|
3,750
|
|
|
|
|
|
|
|
7,023
|
|
|
|
49,635
|
|
|
|
88,240
|
|
Victor M. Perez
|
|
|
2008
|
|
|
|
42,647
|
|
|
|
8,687
|
|
|
|
12,000
|
|
|
|
|
|
|
|
|
|
|
|
63,334
|
|
|
|
|
2007
|
|
|
|
23,513
|
|
|
|
7,488
|
|
|
|
12,000
|
|
|
|
|
|
|
|
|
|
|
|
43,001
|
|
|
|
|
2006
|
|
|
|
10,723
|
|
|
|
4,578
|
|
|
|
6,500
|
|
|
|
|
|
|
|
|
|
|
|
21,801
|
|
David K. Bryan
|
|
|
2008
|
|
|
|
27,714
|
|
|
|
4,370
|
|
|
|
12,000
|
|
|
|
|
|
|
|
|
|
|
|
44,084
|
|
|
|
|
2007
|
|
|
|
10,801
|
|
|
|
4,347
|
|
|
|
6,000
|
|
|
|
|
|
|
|
|
|
|
|
21,148
|
|
|
|
|
2006
|
|
|
|
6,941
|
|
|
|
|
|
|
|
6,000
|
|
|
|
|
|
|
|
|
|
|
|
12,941
|
|
Terrence P. Keane
|
|
|
2008
|
|
|
|
42,294
|
|
|
|
7,975
|
|
|
|
12,000
|
|
|
|
|
|
|
|
|
|
|
|
62,269
|
|
|
|
|
2007
|
|
|
|
22,418
|
|
|
|
5,975
|
|
|
|
12,000
|
|
|
|
|
|
|
|
|
|
|
|
40,393
|
|
|
|
|
2006
|
|
|
|
5,751
|
|
|
|
2,311
|
|
|
|
8,000
|
|
|
|
|
|
|
|
|
|
|
|
16,062
|
|
Mark C. Patterson
|
|
|
2008
|
|
|
|
7,944
|
|
|
|
6,995
|
|
|
|
12,000
|
|
|
|
|
|
|
|
|
|
|
|
26,939
|
|
|
|
|
2007
|
|
|
|
815
|
|
|
|
4,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,215
|
|
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The amounts indicated represent actual health benefit premiums
and expenses paid by Allis-Chalmers. |
|
(2) |
|
We provide a company car and driver to Mr. Hidayatallah for
business reasons and for commuting to and from the office. The
cost of the driver was determined by allocating a portion of the
total actual employment costs of the administrative employee
based on amount of driving time per employee. The cost of the
company car was determined by allocating a portion of the car
purchase price (total cost divided by three for the expected
usage of the car in years), annual cost of insurance,
maintenance and other costs based on mileage incurred for
commuting and personal use by each employee. |
|
(3) |
|
Other personal benefits for Mr. Hidayatallah include
$24,916 in Allis-Chalmers paid airline flights and $31,799 in
apartment and utility costs for the corporate apartment in
Houston, Texas for the fiscal year 2008. |
31
Grant of
Plan-Based Awards
The following table sets forth the grants of plan-based awards
for 2008 as a dollar amount for each of the named executive
officers. All equity-based awards were granted under our 2006
Incentive Plan.
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All
|
|
All
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
Other
|
|
|
|
Grant
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
Option
|
|
|
|
Date
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
Awards:
|
|
Exercise
|
|
Fair
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
|
|
Number
|
|
or
|
|
Value
|
|
|
|
|
|
|
Estimated Future Payouts
|
|
Estimated Future Payouts
|
|
of
|
|
of
|
|
Base
|
|
of
|
|
|
|
|
|
|
Under Non-Equity Incentive
|
|
Under Equity Incentive
|
|
Shares
|
|
Securities
|
|
Price of
|
|
Stock and
|
|
|
|
|
|
|
Plan Awards(1)
|
|
Plan Awards
|
|
of Stock
|
|
Underlying
|
|
Option
|
|
Option
|
|
|
|
|
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
or Units
|
|
Options
|
|
Awards
|
|
Awards
|
Name
|
|
Grant Date
|
|
Approval Date
|
|
$
|
|
$
|
|
$
|
|
#
|
|
#
|
|
#
|
|
#(2)
|
|
#
|
|
$/sh
|
|
$(3)
|
|
Munawar H. Hidayatallah
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
500,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Victor M. Perez
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
143,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7/1/2008
|
|
|
|
5/2/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,000
|
|
|
|
|
|
|
|
|
|
|
|
436,000
|
|
|
|
|
12/10/2008
|
|
|
|
12/10/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,000
|
|
|
|
|
|
|
|
|
|
|
|
122,250
|
|
David K. Bryan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
250,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Terrence P. Keane
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
275,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7/1/2008
|
|
|
|
5/2/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45,000
|
|
|
|
|
|
|
|
|
|
|
|
784,800
|
|
|
|
|
12/10/2008
|
|
|
|
12/10/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45,000
|
|
|
|
|
|
|
|
|
|
|
|
220,050
|
|
Mark C. Patterson
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
250,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1/29/2008
|
|
|
|
1/29/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
|
|
|
|
|
|
|
|
|
|
117,300
|
|
|
|
|
(1) |
|
Reflects each named executive officers target amount of
the annual cash incentive bonus under our non-equity incentive
compensation plan for 2008. The amounts of the performance bonus
awards made to the named executive officers pursuant to the
incentive compensation plan for 2008 are set forth in the
Non-Equity Incentive Plan Compensation column of the Summary
Compensation Table above. |
|
(2) |
|
The amounts indicated represent restricted stock awards granted
during fiscal year 2008. The vesting schedules for restricted
stock awards granted during the fiscal year 2008 are disclosed
in the footnotes in the following Outstanding Equity Awards
table. |
|
(3) |
|
The valuation of restricted stock awards were determined in
accordance with FAS 123(R) as disclosed in Notes 1 and
10 to our financial statements included in our annual report on
Form 10-K
for the year ended December 31, 2008. |
32
Outstanding
Equity Awards at Fiscal Year-End 2008
The following table sets forth information regarding outstanding
equity awards for each of our named executive officers for 2008.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Awards
|
|
Stock Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
Incentive
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
Plan Awards:
|
|
|
|
|
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
Plan Awards:
|
|
Market or
|
|
|
|
|
|
|
Plan Awards:
|
|
|
|
|
|
|
|
Market
|
|
Number
|
|
Payout Value
|
|
|
Number of
|
|
Number of
|
|
Number of
|
|
|
|
|
|
Number of
|
|
Value of
|
|
of Unearned
|
|
of Unearned
|
|
|
Securities
|
|
Securities
|
|
Securities
|
|
|
|
|
|
Shares or
|
|
Shares or
|
|
Shares, Units
|
|
Shares, Units
|
|
|
Underlying
|
|
Underlying
|
|
Underlying
|
|
|
|
|
|
Units of
|
|
Units of
|
|
or Other
|
|
or Other
|
|
|
Unexercised
|
|
Unexercised
|
|
Unexercised
|
|
Option
|
|
|
|
Stock
|
|
Stock
|
|
Rights
|
|
Rights
|
|
|
Options
|
|
Options
|
|
Unearned
|
|
Exercise
|
|
Option
|
|
That Have
|
|
That Have
|
|
That Have
|
|
That Have
|
|
|
#
|
|
#
|
|
Options
|
|
Price
|
|
Expiration
|
|
Not Vested
|
|
Not Vested
|
|
Not Vested
|
|
Not Vested
|
Name
|
|
Exercisable
|
|
Unexercisable
|
|
#
|
|
$
|
|
Date
|
|
#
|
|
$(1)
|
|
#
|
|
$(1)
|
|
Munawar H. Hidayatallah
|
|
|
200,000
|
|
|
|
|
|
|
|
|
|
|
|
3.86
|
|
|
|
2/2/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
83,333
|
|
|
|
|
|
|
|
|
|
|
|
10.85
|
|
|
|
12/15/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40,000
|
(2)
|
|
|
160,000
|
(2)
|
|
|
|
|
|
|
21.95
|
|
|
|
8/3/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
456,666
|
(9)
|
|
|
2,511,663
|
|
Victor M. Perez
|
|
|
25,000
|
|
|
|
|
|
|
|
|
|
|
|
4.85
|
|
|
|
10/11/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45,000
|
|
|
|
|
|
|
|
|
|
|
|
10.85
|
|
|
|
12/15/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,000
|
(3)
|
|
|
21.95
|
|
|
|
8/3/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,000
|
(10)
|
|
|
137,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,000
|
(4)
|
|
|
137,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,000
|
(5)
|
|
|
137,500
|
|
|
|
|
|
|
|
|
|
David K. Bryan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.87
|
|
|
|
5/24/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,000
|
(6)
|
|
|
165,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
75,000
|
(7)
|
|
|
412,500
|
|
|
|
|
|
|
|
|
|
Terrence P. Keane
|
|
|
15,000
|
|
|
|
|
|
|
|
|
|
|
|
4.87
|
|
|
|
5/24/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,000
|
|
|
|
|
|
|
|
|
|
|
|
10.85
|
|
|
|
12/15/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36,000
|
(6)
|
|
|
198,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45,000
|
(4)
|
|
|
247,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45,000
|
(5)
|
|
|
247,500
|
|
|
|
|
|
|
|
|
|
Mark C. Patterson
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000
|
(8)
|
|
|
55,000
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The values represented have been calculated by multiplying
$5.50, the closing price of our common stock on
December 31, 2008, by the number of shares of restricted
stock. |
|
(2) |
|
The stock options were granted on August 3, 2007 and vest
20% on August 3, 2008, 20% on August 3, 2009 and 60%
on August 3, 2010. On March 11, 2009,
Mr. Hidayatallah surrendered these options. |
|
(3) |
|
The performance-based stock options were granted on
August 3, 2007 and vest 20% on August 3, 2008, 20% on
August 3, 2009 and 60% on August 3, 2010.
Alternatively, the award vests 100% on August 3, 2010 if
certain performance goals are met. On August 5, 2009, Mr.
Perez surrendered these options. |
|
(4) |
|
The restricted stock awards were granted on July 1, 2008
and vest 20% on July 1, 2009, 20% on July 1, 2010 and
60% on July 1, 2011. |
|
(5) |
|
The restricted stock awards were granted on December 10,
2008 and vest 20% on December 10, 2009, 20% on
December 10, 2010 and 60% on December 10, 2011. |
|
(6) |
|
The restricted stock awards were granted on June 14, 2007
and vest 20% on June 14, 2008, 20% on June 14, 2009
and 60% on June 14, 2010. |
|
(7) |
|
The restricted stock awards were granted on October 4, 2007
and vest 10% on October 4, 2009, 20% on October 4,
2010, 40% on October 4, 2011 and 30% on October 4,
2012. |
|
(8) |
|
The restricted stock awards were granted on January 29,
2008 and vest 20% on January 29, 2009, 20% on
January 29, 2010 and 60% on January 29, 2011. |
|
(9) |
|
The performance-based restricted stock awards were granted on
September 17, 2007 to vest one-third each on April 1,
2008, 2009 and 2010 if certain performance goals are met.
Alternatively, the award would vest 100% on April 1, 2010
if certain performance goals are met. On March 11, 2009, we
amended these shares to, among other things, extend the
cumulative vesting of such restricted stock for an additional
year. |
|
|
|
(10) |
|
The performance-based restricted stock awards were granted on
August 3, 2007 and vest 20% on August 3, 2008, 20% on
August 3, 2009 and 60% on August 3, 2010.
Alternatively, the award vests 100% on the third |
33
|
|
|
|
|
anniversary date if certain performance goals are met. On
August 5, 2009, we amended these shares to, among other
things extend the cumulative vesting of such restricted stock
for an additional year. |
Option
Exercises and Stock Vested During Fiscal Year 2008
The following table sets forth information concerning each
exercise of stock options and each vesting of stock, including
restricted stock and similar instruments, during 2008 for each
of our named executive officers on an aggregated basis.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock
|
|
|
|
Number of Shares
|
|
|
Value Realized
|
|
|
Number of Shares
|
|
|
Value Realized
|
|
|
|
Acquired on Exercise
|
|
|
on Exercise
|
|
|
Vested
|
|
|
at Vesting
|
|
Name
|
|
(#)
|
|
|
($)
|
|
|
(#)
|
|
|
($)
|
|
|
Munawar H. Hidayatallah
|
|
|
|
|
|
|
|
|
|
|
228,334
|
|
|
$
|
3,970,728
|
|
Victor M. Perez
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David K. Bryan
|
|
|
20,000
|
|
|
$
|
262,610
|
|
|
|
7,500
|
|
|
$
|
128,400
|
|
Terrence P. Keane
|
|
|
|
|
|
|
|
|
|
|
9,000
|
|
|
$
|
154,080
|
|
Mark C. Patterson
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Director
Compensation for Fiscal Year 2008
We use a combination of cash and share-based incentive
compensation to attract and retain qualified candidates to serve
on our Board of Directors. In setting director compensation, we
consider the significant amount of time that directors expend in
fulfilling their duties to Allis-Chalmers, as well as the level
of knowledge and experience that we require of members of our
Board of Directors. Our Compensation Committee is responsible
for reviewing and recommending our compensation policy regarding
fees and equity compensation paid and granted to our directors.
Our Board of Directors approves all director compensation based
on the Compensation Committees recommendations. Directors
who are also our employees do not receive cash or equity
compensation for service on the Board in addition to
compensation payable for their service as employees of
Allis-Chalmers.
Mr. Hidayatallah, our chief executive officer, is actively
involved in the compensation process of our Board of Directors
and provides recommendations to the Compensation Committee in
its evaluation and setting of director compensation.
Historically, we have not engaged a compensation consultant to
assist in setting director compensation.
Our current policy is to pay each of our non-management
directors (currently all directors other than
Mr. Hidayatallah) a retainer of $10,000 each quarter. Each
non-management director serving on a committee of the Board of
Directors (other than the Finance Committee) will receive an
additional $1,500 each quarter for service on such committee,
and each non-management director serving as chairman or
co-chairman of a committee of the Board of Directors will
receive an additional $1,500 each quarter for acting as chairman
or co-chairman of such committee. Our audit committee
financial expert will receive an additional $12,500 on a
quarterly basis. In addition, effective August 4, 2009, our
lead director will receive an additional $2,500 per quarter.
Directors are also compensated for
out-of-pocket
travel expenses.
34
The following table sets forth information concerning the
compensation of each of our directors during 2008.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fees Earned
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
or
|
|
|
Stock
|
|
|
Option
|
|
|
All Other
|
|
|
|
|
|
|
Paid in Cash
|
|
|
Awards(2)
|
|
|
Awards
|
|
|
Compensation
|
|
|
Total
|
|
Name(1)
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
Ali H.M. Afdhal(3)
|
|
|
52,000
|
|
|
|
59,378
|
|
|
|
|
|
|
|
|
|
|
|
111,378
|
|
Munir Akram(4)
|
|
|
10,000
|
|
|
|
1,735
|
|
|
|
|
|
|
|
|
|
|
|
11,735
|
|
Alejandro Bulgheroni
|
|
|
40,000
|
|
|
|
59,378
|
|
|
|
|
|
|
|
|
|
|
|
99,378
|
|
Carlos Bulgheroni(5)
|
|
|
40,000
|
|
|
|
59,378
|
|
|
|
|
|
|
|
|
|
|
|
99,378
|
|
Victor F. Germack
|
|
|
102,000
|
|
|
|
59,378
|
|
|
|
|
|
|
|
|
|
|
|
161,378
|
|
James M. Hennessy
|
|
|
47,500
|
|
|
|
59,378
|
|
|
|
|
|
|
|
|
|
|
|
106,878
|
|
John E. McConnaughy Jr.(3)
|
|
|
52,000
|
|
|
|
59,378
|
|
|
|
|
|
|
|
|
|
|
|
111,378
|
|
Robert E. Nederlander
|
|
|
58,000
|
|
|
|
59,378
|
|
|
|
|
|
|
|
|
|
|
|
117,378
|
|
Zane Tankel
|
|
|
52,000
|
|
|
|
59,378
|
|
|
|
|
|
|
|
|
|
|
|
111,378
|
|
Leonard Toboroff(3)
|
|
|
180,000
|
(6)
|
|
|
59,378
|
|
|
|
|
|
|
|
15,547
|
(7)
|
|
|
254,925
|
|
|
|
|
(1) |
|
Mr. Hidayatallah was a member of our Board of Directors and
an executive officer during 2008 and has been omitted from the
table because he did not receive any additional compensation for
serving on our Board. Information regarding
Mr. Hidayatallahs compensation is listed in the
Summary Compensation Table in this proxy statement. In addition,
Messrs. Bargach, Dell Orto and Reynolds joined our
Board of Directors in June 2009 and therefore are not
included in this table. |
|
(2) |
|
The amounts indicated represent the aggregate dollar amount of
compensation expense, excluding the reduction for risk of
forfeiture, related to restricted stock awards recognized in our
financial statements during fiscal year 2008 and includes
amounts from awards granted prior to 2008. Directors were
granted 4,000 restricted shares on December 4, 2008 with a
grant date fair value of $20,840. The valuation of restricted
stock awards and associated expense were determined in
accordance with FAS 123(R) as disclosed in Notes 1 and
10 to our financial statements included in our annual report on
Form 10-K
for the year ended December 31, 2008. As of
December 31, 2008, each of our directors, except for
Mr. Hidayatallah, owned 4,000 shares of restricted
stock that vests on December 4, 2009. |
|
(3) |
|
Messrs Afdhal, McConnaughy and Toboroff resigned from our Board
of Directors effective June 26, 2009. |
|
(4) |
|
Munir Akram was appointed to our Board of Directors on
September 19, 2008 and resigned effective June 26,
2009. |
|
(5) |
|
Mr. Bulgheroni resigned from our Board of Directors
effective April 7, 2009. |
|
(6) |
|
This amount includes consulting fees paid to Mr. Toboroff
of $15,000 per month, pursuant to an oral consulting agreement. |
|
(7) |
|
This amount includes actual health benefit premiums paid by
Allis-Chalmers. |
Employment
Agreements and
Change-in-Control
Arrangements with Management
The following is a description of the employment agreements and
change-in-control
arrangements that are currently in effect with respect to each
named executive officer. The amount of compensation payable to
each named executive officer upon termination with or without
cause, termination due to death or disability, termination for
good reason and various
change-in-control
scenarios is shown below. The amounts shown assume that such
termination was effective as of December 28, 2008, and thus
includes amounts earned through such time and are estimates of
the amounts which would be paid out to the executives upon their
termination. The actual amounts to be paid out can only be
determined at the time of such executives separation from
us.
Employment
Agreements
Munawar H. Hidayatallah, Chairman and Chief Executive
Officer, entered into a three-year employment agreement with
Allis-Chalmers effective April 1, 2007. On
December 31, 2008, we entered into an amendment to
35
the employment agreement with Mr. Hidayatallah whereby he
agreed to extend the term of his employment agreement for an
additional year, ending March 31, 2011, in consideration of
receiving a cash bonus from the company intending to
(a) promote his retention, (b) facilitate leadership
and management continuity and (c) better focus
Mr. Hidayatallah on the companys long term strategic
success. In addition, pursuant to the amendment, if
Mr. Hidayatallah terminates his employment before the end
of the term, he must reimburse Allis-Chalmers for a portion of
the cash bonus previously received from the company. Pursuant to
his original agreement, Mr. Hidayatallah receives an annual
base salary of $500,000 subject to an annual increase and is
entitled to receive a bonus in an amount equal to 100% of his
base salary if he meets certain strategic objectives specified
in the agreement. Mr. Hidayatallah is entitled to four
weeks vacation per year and is eligible to participate in all
employee incentive compensation plans and to receive all of the
fringe benefits provided to all employees. Pursuant to the
original agreement, Mr. Hidayatallah was also permitted to
assume ownership on his life insurance policy that was held by
Allis-Chalmers. The agreement also provides for (a) tax
gross-up
payments for taxes incurred under Section 4999 of the
Internal Revenue Code, (b) reimbursement of legal fees
incurred in connection with the negotiation of his employment
agreement and (c) reimbursements for travel and lodging
related to Mr. Hidayatallahs travel from his
principal residence to our headquarters in Houston, Texas.
Mr. Hidayatallah is also subject to customary non-compete
and non-solicitation provisions for the term of his agreement.
Information with respect to compensation upon termination with
or without cause, termination due to death or disability, and
various
change-in-control
scenarios is set forth below under Severance and Change in
Control Arrangements.
Victor M. Perez serves as our Chief Financial Officer
pursuant to the terms of a three-year employment agreement
effective as of August 3, 2007. On August 5, 2009, we
entered into an amendment to the agreement with Mr. Perez
whereby we agreed to extend the term of his employment for an
additional year to end on August 3, 2011. Under the terms
of the employment agreement, Mr. Perez receives an annual
base salary of $286,000 subject to an annual increase in the
discretion of the Board of Directors. In addition,
Mr. Perez is entitled to receive a bonus in an amount equal
to up to 50% of his base salary if he meets certain strategic
objectives specified in his employment agreement. Mr. Perez
is also entitled to four weeks vacation per year and is eligible
to participate in all employee incentive compensation plans and
to receive all of the fringe benefits provided to all employees.
Mr. Perez is subject to customary non-compete and
non-solicitation provisions for the term of his agreement.
Information with respect to compensation upon termination with
or without cause, termination due to death or disability, and
various
change-in-control
scenarios is set forth below under Severance and Change in
Control Arrangements.
David Bryan, President and Chief Executive Officer of our
subsidiary Allis-Chalmers Directional Drilling Services LLC, or
Directional Drilling, is employed pursuant to a three-year
employment agreement effective July 1, 2007. Under the
terms of the employment agreement, Mr. Bryan receives an
annual base salary of $250,000 subject to an annual increase in
the discretion of the Board of Directors. In addition,
Mr. Bryan is entitled to receive a bonus based on budgeted
EBITDA provided that Directional Drilling meets designated
minimum earnings targets and provided further that such bonus
shall not exceed 100% of Mr. Bryans base salary. The
bonus calculation is subject to adjustment in subsequent years.
Mr. Bryan is also entitled to four weeks vacation per year,
a $1,000 monthly car allowance, and is eligible to
participate in all employee incentive compensation plans and to
receive all of the fringe benefits provided to all employees.
Mr. Bryan is also subject to customary non-compete and
non-solicitation provisions for the term of his agreement.
Information with respect to compensation upon termination with
or without cause, termination due to death or disability, and
various
change-in-control
scenarios is set forth below under Severance and Change in
Control Arrangements.
Terrence P. Keane was promoted to Senior Vice
President Oilfield Services in January 2008. Prior
to his promotion, Mr. Keane served as President of Aircomp
LLC. In connection with such promotion, we amended
Mr. Keanes previous employment agreement in April
2008. Pursuant to the amended agreement, Mr. Keane is
entitled to a base salary of $275,000, subject to an annual
increase in the discretion of the board of directors. For 2008,
Mr. Keane was entitled to receive (1) a bonus of up to
50% of his base salary based upon AirComp LLC meeting budgeted
EBITDA targets established by management for the first six
months of 2008 and (2) a bonus of up to 50% based upon our
Oilfield Services segment meeting budgeted EBITDA targets
established by our management for the last six months of 2008.
For the remaining term of his agreement, Mr. Keane is
entitled to receive a bonus of up to 100% of his base salary
based upon our Oilfield Services segment meeting budgeted
earnings before taxes, interest and depreciation targets
established by management. Mr. Keane is also entitled to
six weeks vacation
36
per year and is eligible to participate in all employee
incentive compensation plans and to receive all of the fringe
benefits provided to all employees. In addition, Mr. Keane
is entitled to a $1,000 monthly car allowance. The
employment agreement also contains customary non-compete and
non-solicitation provisions. Information with respect to
compensation upon termination with or without cause, termination
due to death or disability, and various
change-in-control
scenarios is set forth below under Severance and Change in
Control Arrangements.
Mark Patterson was promoted to Senior Vice
President Rental Services in January 2008. Prior to
such appointment, Mr. Patterson served as Executive Vice
President of Sales and Business Development for Allis-Chalmers
Rental Services LLC. Mr. Patterson is employed pursuant to
a three-year contract, and is currently entitled to a base
salary of $250,000, subject to an annual increase in the
discretion of the Board of Directors. Mr. Patterson is also
entitled to receive a bonus of up to 100% of his base salary
based upon the Rental Services segment meeting budgeted earnings
before taxes, interest and depreciation targets established by
management. Mr. Patterson is also entitled to three weeks
vacation per year and is eligible to participate in all employee
incentive compensation plans and to receive all of the fringe
benefits provided to all employees. In addition,
Mr. Patterson is entitled to a $1,000 monthly car
allowance. The employment agreement also contains customary
non-compete and non-solicitation provisions. Information with
respect to compensation upon termination with or without cause,
termination due to death or disability, and various
change-in-control
scenarios is set forth below under Severance and Change in
Control Arrangements
Severance
and Change in Control Arrangements
The following severance and change in control arrangements apply
to each of the named executive officers, who are referred to as
an executive for purposes of this discussion.
Each executives employment agreement provides that if his
employment is terminated by us upon his death, disability or for
cause, we will pay him his earned but unpaid salary as of the
date of termination, any unpaid expense reimbursements,
compensation for accrued, unused vacation as of the date of
termination and any further compensation that may be provided by
the terms of any benefit plans in which he participates and the
terms of any outstanding equity grants. Termination for
Cause for Messrs. Hidayatallah, Perez and
Patterson shall occur immediately if the executive commits
(1) a criminal act involving dishonesty or moral turpitude
or (2) a material breach of any of the terms and provisions
of his employment agreement or fails to obey written directions
by our President or Chief Executive Officer (or, in the case of
Mr. Hidayatallah, our board of directors) which are not
inconsistent with his employment agreement. Messrs. Bryan
and Keanes employment agreements defines Cause
to mean:
|
|
|
|
|
the commission of any act of dishonesty, fraud,
misrepresentation, misappropriation, or embezzlement involving
Allis-Chalmers;
|
|
|
|
the unauthorized use or disclosure of any confidential
information or trade secrets of Allis-Chalmers;
|
|
|
|
any violation of a law or regulation applicable to our business,
which violation does or is reasonably like to cause material
injury to Allis-Chalmers;
|
|
|
|
executives conviction of, or plea of nolo contendere
or guilty to (a) a felony or (b) any other crime
which involves moral turpitude;
|
|
|
|
executives continued failure, in the sole discretion of
the Board, to perform the principal duties, functions and
responsibilities of his position (other than any such failure
resulting from executives disability) or to follow the
directives of the Board after written notice from Allis-Chalmers
identifying the deficiencies in performance and a reasonable
cure period of not less than thirty (30) days of any breach
capable of cure;
|
|
|
|
gross negligence or willful misconduct in the performance of
executives duties; or
|
|
|
|
a material and willful breach of executives fiduciary
duties to Allis-Chalmers.
|
Each executives employment agreement provides that if his
employment is terminated by us without cause or if the executive
resigns within a six month period of being constructively
terminated (as defined below), we will pay him his earned but
unpaid salary, unearned salary for the lesser of one year
following termination of employment or
37
the remainder of the employment agreement (except for
Messrs. Bryan and Keane who will receive payments through
the end of their employment agreement and Mr. Hidayatallah
who will receive payments equal to three times his then current
annual salary) in semi-monthly payments, any unpaid expense
reimbursements, compensation for accrued, unused vacation as of
the date of termination and any further compensation that may be
provided by the terms of any benefit plans in which he
participates and the terms of any outstanding equity grants. In
general, a constructive termination would occur if
we:
|
|
|
|
|
demote the executive to a lesser position, either in title or
responsibility;
|
|
|
|
decrease the executives salary or benefits below the
highest level in effect at anytime during his employment;
|
|
|
|
require the executive to relocate to a principal place of
business more than 50 miles from our current principal
place of business, with certain exceptions;
|
|
|
|
are subject to a change in control (as defined below), unless
executive accepts employment with the successor; or
|
|
|
|
breach any other material term of the employment agreement which
is not cured within 30 days after receiving notice of such
breach.
|
A change in control as defined in the employment
agreements includes:
|
|
|
|
|
the acquisition by any individual, entity or group, or person of
ownership of more than 50% of either (1) the then
outstanding shares of common stock or (2) the combined
voting power of our then outstanding voting securities entitled
to vote, with certain exceptions;
|
|
|
|
individuals who currently constitute the board of directors
cease for any reason to constitute at least a majority of the
Board, with several exceptions;
|
|
|
|
a complete liquidation or dissolution of Allis-Chalmers; or
|
|
|
|
(a) the consummation of a reorganization, merger or
consolidation or (b) the sale or other disposition of all
or substantially all of our assets unless, in each case,
immediately following the event
|
|
|
|
|
Ø
|
Our stockholders immediately before the event own, directly or
indirectly, at least 50% of the combined voting power of our
then outstanding voting securities in substantially the same
proportion as their ownership of us, or
|
|
|
Ø
|
At least a majority of the members of the Board of Directors of
the entity resulting from the transaction were members of the
incumbent Board at the time of the execution of the agreement
providing for the transaction.
|
38
The following table sets forth the estimated payments and
benefits that would be provided to each named executive officer,
other than Mr. Hidayatallah, if such officers
employment had been terminated on December 31, 2008 by us
without cause or upon a change of control:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value of Unvested
|
|
|
Value of Unvested
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Awards if
|
|
|
Equity Awards if
|
|
|
Total if
|
|
|
Total if
|
|
|
|
Salary
|
|
|
Change of
|
|
|
Terminated
|
|
|
Change of
|
|
|
Terminated
|
|
Name
|
|
Continuation
|
|
|
Control(1)
|
|
|
Without Cause
|
|
|
Control
|
|
|
Without Cause
|
|
|
Victor M. Perez,
|
|
$
|
286,000
|
|
|
$
|
412,500
|
(2)
|
|
|
|
|
|
$
|
698,500
|
|
|
$
|
286,000
|
|
Chief Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David Bryan,
|
|
$
|
375,000
|
|
|
$
|
577,500
|
(3)
|
|
|
|
|
|
$
|
952,500
|
|
|
$
|
375,000
|
|
President and Chief Executive
Officer of Allis-Chalmers Directional Drilling Services LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Terrence P. Keane,
|
|
$
|
412,500
|
|
|
$
|
693,000
|
(3)
|
|
|
|
|
|
$
|
1,105,500
|
|
|
$
|
412,500
|
|
Senior Vice President Oilfield Services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark Patterson,
|
|
$
|
250,000
|
|
|
$
|
44,000
|
(3)
|
|
|
|
|
|
$
|
294,000
|
|
|
$
|
250,000
|
|
Senior Vice President Rental Services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The value of accelerated stock options have been calculated as
the difference between the strike price and the market price of
$5.50 per share of our common stock as of December 31,
2008, multiplied by the number of options vesting as a result of
the change of control. The value of restricted stock has been
calculated by multiplying $5.50, the closing price of a share of
our common stock on December 31, 2008, by the number of
shares of restricted stock held by each named executive officer
that would vest. |
|
(2) |
|
This amount includes 25,000 performance awards in the form of
restricted stock that would automatically vest upon a change in
control of Allis-Chalmers and 50,000 shares of restricted
stock that would vest only if there was a change of control of
Allis-Chalmers and the successor company refused to assume or
continue the agreement covering these shares. |
|
(3) |
|
The equity awards represented by this column would vest only if
there was a change of control of
Allis-Chalmers
and the successor company refused to assume or continue the
agreement covering these shares. |
The following table sets for the estimated payments and benefits
that would be provided to Mr. Hidayatallah if his
employment had been terminated on December 31, 2008 by us
due to his death or disability, with or without cause or upon a
change of control:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salary
|
|
|
Value of Unvested
|
|
|
|
|
Event
|
|
Continuation
|
|
|
Equity Awards(1)
|
|
|
Total
|
|
|
Death
|
|
|
|
|
|
$
|
2,511,633
|
|
|
$
|
2,511,633
|
|
Disability
|
|
|
|
|
|
$
|
2,511,633
|
|
|
$
|
2,511,633
|
|
For Cause
|
|
|
|
|
|
|
|
|
|
|
|
|
Without Cause
|
|
$
|
1,500,000
|
|
|
$
|
2,511,633
|
|
|
$
|
4,011,663
|
|
Change of Control
|
|
$
|
1,500,000
|
|
|
$
|
2,511,633
|
|
|
$
|
4,011,663
|
|
|
|
|
(1) |
|
This amount represents 456,666 shares of performance-based
restricted stock multiplied by $5.50, the closing price of a
share of our common stock on December 31, 2008. |
Liability
and Indemnification of Officers and Directors
Our certificate of incorporation provides that our directors
will not be personally liable to us or our stockholders for
monetary damages for breach of fiduciary duty as a director,
except for liability (1) for any breach of a
directors duty of loyalty to us or our stockholders,
(2) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law,
(3) under Section 174 of the Delaware General
Corporation Law, or (4) for any transaction from which the
director derives an improper personal benefit. If the Delaware
General Corporation Law is amended to authorize the further
elimination or limitation of directors
39
liability, then the liability of our directors will
automatically be limited to the fullest extent provided by law.
Our certificate of incorporation and by-laws also contain
provisions to indemnify our directors and officers to the
fullest extent permitted by the Delaware General Corporation
Law. We also maintain indemnification insurance on behalf of our
directors. In addition, our board of directors has approved and
we are in the process of entering into indemnification
agreements with all of our directors and executive officers.
These provisions and agreements may have the practical effect in
certain cases of eliminating the ability of stockholders to
collect monetary damages from our directors and officers. We
believe that these contractual agreements and the provisions in
our certificate of incorporation and by-laws are necessary to
attract and retain qualified persons as directors and officers.
Securities
Authorized for Issuance Under Equity Compensation
Plans
The following table provides information as of December 31,
2008 with respect to the shares of our Common Stock that may be
issued under our existing equity compensation plans.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
|
|
|
Securities to be
|
|
|
Weighted
|
|
|
|
|
|
|
Issued upon
|
|
|
Average Exercise
|
|
|
Number of Securities
|
|
|
|
Exercise of
|
|
|
Price of
|
|
|
Remaining Available
|
|
|
|
Outstanding
|
|
|
Outstanding
|
|
|
for Future Issuance
|
|
|
|
Options, Warrants
|
|
|
Options, Warrants
|
|
|
Under Equity
|
|
Plan Category
|
|
and Rights
|
|
|
and Rights
|
|
|
Compensation Plans
|
|
|
Equity compensation plans approved by security holders
|
|
|
1,379,398
|
|
|
$
|
10.94
|
|
|
|
281,789
|
|
Equity compensation plans not approved by security holders
|
|
|
4,000
|
|
|
$
|
13.75
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,383,398
|
|
|
$
|
10.95
|
|
|
|
281,789
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
Compensation Plans Not Approved By Security Holders
These plans comprise the following:
In 1999 and 2000, the Board of Directors compensated Board
members who had served from 1989 to March 31, 1999 without
compensation by issuing promissory notes totaling $325,000 and
by granting stock options to these same individuals. Options to
purchase 4,800 shares of Common Stock were granted with an
exercise price of $13.75. These options vested immediately and
expire in March 2010. As of December 31, 2008, 4,000 of
these options remain outstanding.
40
SECURITY
OWNERSHIP OF MANAGEMENT AND
CERTAIN BENEFICIAL OWNERS
The following table sets forth, as of September 14, 2009,
beneficial ownership of our Common Stock and Preferred Stock
(which votes on an as converted basis with our Common Stock,
subject to certain limitations) for:
|
|
|
|
|
each of our named executive officers;
|
|
|
|
each of our directors;
|
|
|
|
all of our directors and executive officers as a group; and
|
|
|
|
each other person known by us to be a beneficial owner of more
than 5% of any class of our voting securities.
|
Beneficial ownership is determined in accordance with the rules
of the SEC. Under the rules of the SEC, a person is deemed to be
a beneficial owner of a security if that person has
or shares voting power, which includes the power to
vote or to direct the voting of such security, or
investment power, which includes the power to
dispose of or to direct the disposition of such security. A
person is also deemed to be a beneficial owner of any securities
of which that person has a right to acquire beneficial ownership
within 60 days. Under these rules, more than one person may
be deemed a beneficial owner of the same securities and a person
may be deemed a beneficial owner of securities as to which he
has no economic interest. Except as indicated by footnote, the
persons named in the table below have sole voting and investment
power with respect to all shares shown as beneficially owned by
them, subject to community property laws where applicable.
The address of each director and executive officer is
c/o Allis-Chalmers
Energy Inc., 5075 Westheimer, Suite 890, Houston,
Texas 77056.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
Preferred Stock
|
Name and Address
|
|
Number
|
|
Percentage(1)
|
|
Number
|
|
Percentage
|
|
Named Executive Officers:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Munawar H. Hidayatallah(2)
|
|
|
351,559
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
Victor M. Perez(3)
|
|
|
143,678
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
David Bryan(4)
|
|
|
122,500
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
Terrence P. Keane(5)
|
|
|
175,000
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
Mark Patterson(6)
|
|
|
12,000
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
Directors:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Saad Bargach(7)(8)
|
|
|
19,889,044
|
|
|
|
27.9
|
|
|
|
36,393
|
|
|
|
100
|
|
Alejandro P. Bulgheroni(9)
|
|
|
10,781,186
|
|
|
|
15.1
|
|
|
|
|
|
|
|
|
|
Giovanni Dell Orto(10)
|
|
|
2,500
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
Victor F. Germack(11)
|
|
|
24,000
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
James M. Hennessy(12)
|
|
|
24,200
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
Robert E. Nederlander(13)
|
|
|
558,732
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
John T. Reynolds(7)(14)
|
|
|
19,889,044
|
|
|
|
27.9
|
|
|
|
36,393
|
|
|
|
100
|
|
Zane Tankel(15)
|
|
|
183,280
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
All directors and executive officers as a group
(15 persons)(7)
|
|
|
32,466,719
|
|
|
|
45.2
|
|
|
|
36,393
|
|
|
|
100
|
|
Other 5% Holders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lime Rock Partners V, L.P.(7)(16)
|
|
|
19,889,044
|
|
|
|
27.9
|
|
|
|
36,393
|
|
|
|
100
|
|
|
|
|
* |
|
Less than one percent. |
|
(1) |
|
Percentage ownership based on an aggregate of
71,364,926 shares of Common Stock issued and outstanding as
of September 14, 2009. |
|
(2) |
|
Includes 60,226 shares of Common Stock owned of record by
the Hidayatallah Family Trust, of which Mr. Hidayatallah is
the trustee, and 8,000 shares of Common Stock owned of
record by Munawar Hidayatallah |
41
|
|
|
|
|
SEP IRA. These shares also include options to purchase
283,333 shares of Common Stock, which are exercisable
within 60 days. |
|
(3) |
|
Includes (i) 20,000 shares of restricted stock of
which 5,000 shares vest on July 1, 2010 and
15,000 shares vest on July 1, 2011;
(ii) 25,000 shares of restricted stock of which
5,000 shares vest on December 10, 2009,
5,000 shares vest on December 10, 2010 and
15,000 shares vest on December 10, 2011. Also includes
options to purchase 70,000 shares of Common Stock, which
are exercisable within 60 days. |
|
(4) |
|
Includes restricted stock awards in the amount of
(i) 22,500 shares which vest on June 14, 2010 and
(ii) 75,000 shares, of which 7,500 shares vests
on October 4, 2009, 15,000 shares vests on
October 4, 2010, 30,000 shares vests on
October 4, 2011, and 22,500 shares vests on
October 4, 2012. |
|
(5) |
|
Includes restricted stock awards in the amount of
(i) 27,000 shares which vest on June 14, 2010;
(ii) 36,000 shares, of which 9,000 shares vest on
July 1, 2010 and 27,000 shares vest on July 1,
2011 and (iii) 45,000 shares, of which
9,000 shares vest on December 10, 2009,
9,000 shares vest on December 10, 2010 and
27,000 shares vest on December 10, 2011. Also includes
options to purchase 40,000 shares of Common Stock, which
are exercisable within 60 days. |
|
(6) |
|
Includes restricted stock awards in the amount of
8,000 shares, of which 2,000 shares vest on January,
29, 2010 and 6,000 shares vest on January 29, 2011. |
|
(7) |
|
The reported shares of Common Stock do not include shares of
Common Stock issuable upon conversion of the Preferred Stock.
Subject to certain limitations, the Preferred Stock is
convertible into an aggregate of 14,202,146 shares of
Common Stock. Subject to certain exceptions, Lime Rock may not
convert shares of Preferred Stock to the extent that such
conversion would result in Lime Rocks ownership of more
than 35% of the outstanding shares of Common Stock after giving
effect to such conversion. Currently, Lime Rock may convert, at
its option, up to approximately 20,061 shares of Preferred
Stock into 7,828,738 shares of Common Stock. Lime Rock
currently has the right to vote such 7,828,738 shares of Common
Stock. |
|
(8) |
|
The reported securities are directly owned by Lime Rock.
Mr. Bargach serves as a member of the Investment Committee
of Lime Rock Partners GP V, L.P., which controls the
investment decisions of Lime Rock. Mr. Bargach disclaims
beneficial ownership of the reported securities except to the
extent of his pecuniary interest therein, and this report shall
not be deemed an admission that Mr. Bargach is the
beneficial owner of the reported securities for purposes of
Section 16 or for any other purpose. |
|
(9) |
|
Includes (i) 2,320,000 shares held of record by Global
Oilfield Holdings Ltd. and (ii) 8,435,666 shares held
of record by Associated Petroleum Investors Ltd. Each such
entity is indirectly beneficially owned by Mr. Bulgheroni.
Mr. Bulgheroni disclaims beneficial ownership of these
securities except to the extent of his pecuniary interest
therein. Includes restricted stock awards in the amount of
4,000 shares that vest on December 4, 2010. |
|
(10) |
|
Includes restricted stock awards in the amount of
2,000 shares, of which 500 shares vest on
August 3, 2009 and 1,500 shares vest on August 3,
2010. |
|
(11) |
|
Includes restricted stock awards in the amount of
4,000 shares that vest on December 4, 2010. |
|
(12) |
|
Includes restricted stock awards in the amount of
4,000 shares that vest on December 4, 2010. |
|
(13) |
|
206,666 of these shares are owned by RER Corp., a corporation
controlled by Mr. Nederlander. Includes restricted stock
awards in the amount of 4,000 shares that vest on
December 4, 2010. |
|
(14) |
|
The reported securities are directly owned by Lime Rock.
Mr. Reynolds serves as a Director of LRP GP V, Inc.,
which controls the investment decisions of Lime Rock.
Mr. Reynolds disclaims beneficial ownership of the reported
securities except to the extent of his pecuniary interest
therein, and this report shall not be deemed an admission that
Mr. Reynolds is the beneficial owner of the reported
securities for purposes of Section 16 or for any other
purpose. |
|
(15) |
|
Includes restricted stock awards in the amount of
4,000 shares that vest on December 4, 2010. |
|
(16) |
|
Lime Rock is a private equity fund and its principal business is
investing in securities. Lime Rock is the sole record owner of
the reported shares of Common Stock and Preferred Stock. Lime
Rock Partners GP V, L.P. (GP LP) is the general
partner of Lime Rock and LRP GP V, Inc. (GP Inc.) is
the general partner of GP LP. Each of Lime Rock, GP LP and GP
Inc. shares voting and dispositive power over all of the
reported shares of |
42
|
|
|
|
|
Common Stock and Preferred Stock. The principal business address
of each of Lime Rock, GP LP and GP Inc. is
c/o Lime
Rock Management, L.P., 274 Riverside Avenue, Westport,
Connecticut 06680. The information regarding Lime Rock is based
upon information contained in a Schedule 13D filed on
July 6, 2009, by Lime Rock, GP LP and GP Inc. |
COMPENSATION
COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of our Board currently consists of
Messrs. Bargach, Germack and Tankel. No current executive
officer has ever served as a member of the Board of Directors or
compensation committee of any other entity (other than our
subsidiaries) that has or has had one or more executive officers
serving as a member of our Board or our Compensation Committee.
RELATED
PARTY TRANSACTION APPROVAL POLICY
In May 2008, our Board of Directors adopted a written policy
relating to the approval of transactions with related persons.
For purposes of this policy, a related person transaction is one
in which the Company was, is or will be a participant and the
amount involved exceeds $120,000, and in which any related
person had, has or will have a direct or indirect material
interest. Pursuant to the policy, all related party transactions
must be reviewed and approved by the Audit Committee of our
Board of Directors.
CERTAIN
RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
A majority of DLS revenues are currently received pursuant
to a strategic agreement with Pan American Energy, LLC, or Pan
American Energy, which is a joint venture owned 60% by British
Petroleum and 40% by Bridas Corporation. Alejandro P. Bulgheroni
and Carlos A. Bulgheroni, a current and former member of our
Board of Directors, respectively, may be deemed to indirectly
beneficially own all of the outstanding capital stock of Bridas
Corporation and are members of the Management Committee of Pan
American Energy, and, as a result, have a material interest in
the transactions contemplated by the strategic agreement between
DLS and Pan American Energy. During 2008, DLS received
approximately $121 million in revenues from services
performed for Pan American Energy.
During 2008, we provided services to Beusa Energy, Inc., in an
aggregate amount of approximately $1 million. Alejandro P.
Bulgheroni, one of our directors, serves as Chairman of Beusa
Energy, Inc.
We purchase general oilfield supplies and materials from Ralow
Services, Inc., or Ralow. Ralow is owned by Brad A. Adams and
Bruce A. Adams, who are brothers of Burt A. Adams, a former
member of our Board of Directors and our former President and
Chief Operating Officer. During 2008, we purchased supplies and
materials from Ralow in an aggregate amount of approximately
$747,000.
We have a consulting agreement with Giovanni Dell Orto,
one of our directors, pursuant to which he is employed as a
consultant with our subsidiary, DLS Drilling, Logistics and
Services Corporation. During 2008, Mr. Dell Orto
received an annual consulting fee of $221,000.
OTHER
MATTERS
Section 16(a)
Beneficial Ownership Reporting Compliance
Under Section 16(a) of the Exchange Act, directors, certain
officers, and beneficial owners of 10% or more of any class of
our stock (Reporting Persons) are required from time
to time to file with the SEC and the New York Stock Exchange
reports of ownership and changes of ownership. Reporting Persons
are required to furnish us with copies of all Section 16(a)
reports they file. Based solely on our review of forms and
written representations received from Reporting Persons by with
respect to the fiscal year ended December 31, 2008, we
believe that all filing requirements applicable to our officers,
directors and greater than 10% stockholders have been met,
except for a late Form 4 filing by Bruce Sauers in
connection with the grant of restricted stock in December 2008,
a late Form 4
43
filing by Zane Tankel in connection with the purchase of stock
in February 2008, May 2008 and June 2008, a late Form 4 by
Munawar H. Hidayatallah in connection with the vesting of
performance shares in May 2008, a late Form 3 filing by
Munir Akram in connection with being elected a director in
September 2008, and a late Form 4 by Carlos A. Bulgheroni
in connection with the grant of restricted stock in December
2008. In addition, John A. Meyers inadvertently omitted one
transaction on his Form 3 for February 2008, which was
reported on an amended Form 3 filed in March 2008.
Code of
Business Conduct and Ethics
We have adopted a Code of Business Conduct and Ethics applicable
to all employees and directors of the Company and each of its
subsidiaries, including our principal executive officer,
principal financial officer, principal accounting officer and
controller, and persons performing similar functions. The
purpose of the Code of Business Conduct and Ethics is:
(i) to deter wrongdoing; (ii) to promote honest and
ethical conduct, including the ethical handling of actual or
apparent conflicts of interest between personal and professional
relationships; (iii) to promote full, fair, accurate,
timely, and understandable disclosure in reports and documents
that we file with the SEC or otherwise communicate to the
public; (iv) to promote compliance with applicable
governmental laws, rules and regulations; (v) to promote
prompt internal reporting of violations of the code to an
appropriate person; and (vi) to promote accountability for
adherence to the code.
We will provide a copy of the Code of Business Conduct and
Ethics without charge to any person upon request by contacting
our Corporate Secretary at our executive office. The Code of
Business Conduct and Ethics is available on our website at
www.alchenergy.com.
Stockholder
Proposals
Any stockholder who wishes to submit a proposal to be included
in our proxy statement and form of proxy relating to the 2010
annual stockholders meeting must submit the proposal to us no
later than May 1, 2010. If the date of next years
annual meeting is moved more than 30 days before or after
the anniversary date of this years annual meeting, then
the deadline for inclusion of a stockholder proposal in our
proxy statement is instead a reasonable time before we begin to
print and mail proxy materials. The proposal must comply with
the requirements of Exchange Act
Rule 14a-8
regarding the inclusion of stockholder proposals in
company-sponsored proxy materials. Any such proposals should be
timely sent to our Secretary at 5075 Westheimer,
Suite 890, Houston, Texas 77056.
Availability
of Annual Report
Our Annual Report to Stockholders for the year ended
December 31, 2008, including audited financial statements,
is enclosed with this proxy statement but does not constitute a
part of the proxy soliciting material.
Allis-Chalmers
Energy Inc. will furnish a copy of its Annual Report for the
year ended December 31, 2008, without exhibits, free of
charge to each person who forwards a written request to Investor
Relations, Allis-Chalmers Energy Inc., 5075 Westheimer,
Suite 890, Houston, Texas 77056.
44
Appendix
A
SECOND
AMENDED AND RESTATED
ALLIS-CHALMERS ENERGY INC.
2006 INCENTIVE PLAN
Section 1. Purpose
of the Plan.
This Second Amended and Restated Allis-Chalmers Energy Inc. 2006
Incentive Plan (the Plan) is intended to promote the
interests of Allis-Chalmers Energy Inc., a Delaware corporation
(the Company), and its stockholders by encouraging
officers, employees, non-employee directors and consultants of
the Company and its Affiliates to acquire or increase their
equity interests in the Company and to provide a means whereby
they may develop a sense of proprietorship and personal
involvement in the development and financial success of the
Company, and to encourage them to remain with and devote their
best efforts to the business of the Company thereby advancing
the interests of the Company and its stockholders. The Board of
Directors of the Company also contemplates that through the
Plan, the Company and its Affiliates will be better able to
attract and retain the services of individuals who are essential
for the growth and profitability of the Company. The Plan
provides for payment of various forms of incentive compensation
and accordingly is not intended to be a plan that is subject to
the Employee Retirement Income Security Act of 1974, as amended,
and shall be administered accordingly.
Section 2. Definitions.
As used in the Plan, the following terms shall have the meanings
set forth below:
Affiliate shall mean (i) any
parent corporation of the Company (as defined in
Section 424(e) of the Code), (ii) any subsidiary
corporation of any such parent corporation (as defined in
Section 424(f) of the Code) of the Company and
(iii) any trades or businesses, whether or not
incorporated, which are members of a controlled group or are
under common control (as defined in Sections 414(b) or
(c) of the Code) with the Company; provided, that, for the
purpose of issuing Options or Stock Appreciation Rights,
Affiliate means any corporation or other entity in a
chain of corporations
and/or other
entities in which the Company has a controlling
interest within the meaning of Treas. Reg.
§ 1.414(c)-2(b)(2)(i), but using the threshold of 50%
ownership wherever 80% appears.
Award shall mean any Option, Restricted
Stock, Performance Award, Bonus Shares or Other Stock-Based
Award.
Award Agreement shall mean any written
agreement, contract, or other instrument or document evidencing
any Award, which may, but need not, be executed or acknowledged
by a Participant.
Board shall mean the Board of Directors of
the Company.
Bonus Shares shall mean an award of Shares
granted pursuant to Section 6(d) of the Plan.
Change in Control shall mean, subject to the
last paragraph of this definition, the occurrence of any one
(1) of the following events:
(a) any person (as defined in
Section 3(a)(9) of the Exchange Act, and as modified in
Section 13(d) and 14(d) of the Exchange Act) other than
(i) the Company or any of its subsidiaries; (ii) any
employee benefit plan of the Company or any of its subsidiaries;
(iii) or any Affiliate; (iv) a company owned, directly
or indirectly, by stockholders of the Company in substantially
the same proportions as their ownership of the Company; or
(v) an underwriter temporarily holding securities pursuant
to an offering of such securities (a Person),
becomes the beneficial owner (as defined in
Rule 13d-3
of the Exchange Act), directly or indirectly, of securities of
the Company representing more than fifty percent (50%) of the
shares of voting stock of the Company then outstanding;
(b) the consummation of any merger, organization, business
combination or consolidation of the Company or one (1) of
its subsidiaries with or into any other company, other than a
merger, reorganization, business combination or consolidation
which would result in the holders of the voting securities of
the Company outstanding immediately prior thereto holding
securities which represent immediately after such merger,
reorganization, business combination or consolidation more than
fifty percent (50%) of the combined voting power of the voting
securities of the Company or the surviving company or the parent
of such surviving company;
A-1
(c) the consummation of a sale, lease, transfer, conveyance
or other disposition (including by merger or consolidation) by
the Company in one (1) or a series of related transactions,
of all or substantially all of the Companys assets, other
than any such transaction if the holders of the voting
securities of the Company outstanding immediately prior thereto
hold securities immediately thereafter which represent more than
fifty percent (50%) of the combined voting power of the voting
securities of the acquiror, or parent of the acquiror, of such
assets;
(d) the stockholders of the Company approve a plan of
complete liquidation or dissolution of the Company; or
(e) individuals who, as of the Effective Date, constitute
the Board (the Incumbent Board) cease for any reason
to constitute at least a majority of the Board; provided,
however, that any individual becoming a director subsequent to
the Effective Date whose election by the Board, was approved by
a vote of at least a majority of the directors then comprising
the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding,
for this purpose, any such individual whose initial assumption
of office occurs as a result of either (i) an actual or
threatened election contest (as such terms are used in
Rule 14A-11
of Regulation 14A promulgated under the Exchange Act) with
respect to the election or removal of directors or an actual or
threatened solicitation of proxies or consents by or on behalf
of a Person other than the Board or (ii) a plan or
agreement to replace a majority of the members of the Board then
comprising the Incumbent Board.
Except as otherwise expressly provided in an Award, solely with
respect to any Award that constitutes deferred compensation that
is subject to Section 409A of the Code and payment of such
Award is contingent upon the occurrence of a Change in Control,
the above definition of Change in Control shall be inoperative
with respect to such Award and is hereby replaced by the
definition of such term set forth in Treas. Reg.
§ 1.409A-3(i)(5) or any successor thereto, but using
50% wherever 30% appears in Treas. Reg.
§ 1.409A-3(i)(5)(vi) or any successor thereto and 50%
wherever 40% appears in Treas. Reg.
§ 1.409A-3(i)(5)(vii) or any successor thereto, which
regulation, as modified herein, is hereby incorporated by
reference into and shall form part of this Plan solely for the
limited purpose of this sentence, and the Plan, solely as it
relates to such Award, and such Award shall be operated in
accordance with such modified definition of Change in Control.
Code shall mean the Internal Revenue Code of
1986, as amended from time to time, and the rules and
regulations thereunder.
Committee shall mean the compensation
committee of the Board which, for any period in which the
Company is subject to the reporting requirements of the Exchange
Act, shall consist of not less than two (2) members of the
Board, each of whom shall qualify as a non-employee
director (as that term is defined in
Rule 16b-3
of the General Rules and Regulations under the Exchange Act)
appointed by and serving at the pleasure of the Board to
administer the Plan or, if none, the Board; provided however,
that with respect to any Award granted to a Covered Employee
which is intended to be performance-based
compensation as described in Section 162(m)(4)(C) of
the Code, the Committee shall consist solely of two (2) or
more outside directors as described in
Section 162(m)(4)(C)(i) of the Code.
Company shall mean the corporation described
in Section 1 of the Plan or any successor thereto that
assumes and continues the Plan.
Consultant shall mean any individual, other
than a Director or an Employee, who renders consulting services
to the Company or an Affiliate for a fee.
Covered Employee shall mean for fiscal years
ending on or after December 15, 2006, any of the Chief
Executive Officer of the Company and each other officer of the
Company other than the Chief Executive Officer who is treated as
a covered employee for purposes of applying
Section 162(m) of the Code to Awards or any individual
Consultant, Director or other Employee, or class of Consultants,
Directors or Employees, who the Committee specifies in an Award
shall be treated as a Covered Employee.
Director shall mean a member of the Board who
is not an Employee of the Company.
A-2
Effective Date means the date that the
Allis-Chalmers Energy Inc. 2006 Incentive Plan (the Prior
Plan) was initially (i) adopted by the Board; and
(ii) approved by stockholders of the Company not more than
one (1) year prior to or after the date of such adoption.
The provisions of the Prior Plan, as amended and restated from
time to time, are applicable to all Awards granted on or after
the Effective Date. The Plan, as adopted by the Board, shall be
effective as of December 31, 2008.
Employee shall mean any employee of the
Company or an Affiliate.
Exchange Act shall mean the Securities
Exchange Act of 1934, as amended.
Fair Market Value shall mean, with respect to
Shares, the closing sales price of a Share on the applicable
date (or if there is no trading in the Shares on such date, on
the next preceding date on which there was trading) as reported
in The Wall Street Journal (or other reporting service approved
by the Committee). In the event the Shares are not publicly
traded at the time a determination of its fair market value is
required to be made hereunder, the determination of fair market
value shall be made in good faith by the Committee.
Option shall mean an option granted under
Section 6(a) of the Plan. Options granted under the Plan
may constitute incentive stock options for purposes
of Section 422 of the Code or nonqualified stock options.
Other Stock-Based Award shall mean an award
granted pursuant to Section 6(e) of the Plan that is not
otherwise specifically provided for, the value of which is based
in whole or in part upon the value of a Share.
Participant shall mean any Director, Employee
or Consultant granted an Award under the Plan.
Performance Award shall mean any right
granted under Section 6(c) of the Plan.
Performance Objectives means the objectives,
if any, established by the Committee that are to be achieved
with respect to an Award granted under this Plan, which may be
described in terms of Company-wide objectives, in terms of
objectives that are related to performance of a business,
division, subsidiary, department, unit or function within the
Company or an Affiliate in which the Participant receiving the
Award is employed or in individual or other terms, and which
will relate to the period of time determined by the Committee.
Which objectives to use with respect to an Award, the weighting
of the objectives if more than one (1) is used, and whether
the objective is to be measured against a Company-established
budget or target, an index or a peer group of companies, shall
be determined by the Committee in its discretion at the time of
grant of the Award. One or more of the following business
criteria for the Company shall be used by the Committee in
establishing Performance Objectives for Performance Awards
granted to a Participant: (i) earnings per share;
(ii) increase in price per share, (iii) increase in
revenues; (iv) increase in cash flow; (v) return on
net assets; (vi) return on assets; (vii) return on
investment; (viii) return on equity; (ix) economic
value added; (x) gross margin; (xi) net income;
(xii) pretax earnings; (xiii) pretax earnings before
interest, depreciation, depletion and amortization;
(xiv) pretax operating earnings after interest expense and
before incentives, service fees, and extraordinary or special
items; (xv) operating income; (xvi) total stockholder
return; (xvii) debt reduction; and (xviii) any of the
above goals determined on the absolute or relative basis or as
compared to the performance of a published or special index
deemed applicable by the Committee including, but not limited
to, the Standard & Poors 500 Stock Index or
components thereof or a group of comparable companies. A
Performance Objective need not be based on an increase or a
positive result and may include, for example, maintaining the
status quo or limiting economic losses.
Person shall mean an individual or a
corporation, limited liability company, partnership,
association, joint-stock company, trust, unincorporated
organization, government or political subdivision thereof or
other entity.
Plan means the plan described in
Section 1 of the Plan and set forth in this document, as
amended from time to time.
Restricted Period shall mean the period
established by the Committee with respect to an Award during
which the Award remains subject to forfeiture
and/or is
not exercisable by the Participant.
Restricted Stock shall mean any Share, prior
to the lapse of restrictions thereon, granted under
Sections 6(b) of the Plan.
A-3
Rule 16b-3
shall mean
Rule 16b-3
promulgated by the SEC under the Exchange Act, or any successor
rule or regulation thereto as in effect from time to time.
SEC shall mean the Securities and Exchange
Commission, or any successor thereto.
Shares or Common Shares or
Common Stock shall mean the common stock of
the Company, $0.01 par value, and such other securities or
property as may become the subject of Awards under the Plan.
Section 3. Administration.
The Plan shall be administered by the Committee. A majority of
the Committee shall constitute a quorum, and the acts of the
members of the Committee who are present at any meeting thereof
at which a quorum is present, or acts unanimously approved by
the members of the Committee in writing, shall be the acts of
the Committee. No member of the Committee shall vote or act upon
any matter relating solely to himself. Grants of Awards to
members of the Committee must be ratified by the Board. Subject
to the terms of the Plan and applicable law, and in addition to
other express powers and authorizations conferred on the
Committee by the Plan, the Committee shall have full power and
authority to: (i) designate Participants;
(ii) determine the type or types of Awards to be granted to
a Participant; (iii) determine the number of Shares to be
covered by, or with respect to which payments, rights, or other
matters are to be calculated in connection with, Awards;
(iv) determine the terms and conditions of any Award;
(v) determine whether, to what extent, and under what
circumstances Awards may be settled or exercised in cash,
Shares, other securities, other Awards or other property, or
canceled, forfeited, or suspended and the method or methods by
which Awards may be settled, exercised, canceled, forfeited, or
suspended; (vi) determine whether, to what extent, and
under what circumstances cash, Shares, other securities, other
Awards, other property, and other amounts payable with respect
to an Award shall be deferred either automatically or at the
election of the holder thereof or of the Committee;
(vii) interpret and administer the Plan and any instrument
or agreement relating to an Award made under the Plan;
(viii) establish, amend, suspend, or waive such rules and
regulations and appoint such agents as it shall deem appropriate
for the proper administration of the Plan; and (ix) make
any other determination and take any other action that the
Committee deems necessary or desirable for the administration of
the Plan. Unless otherwise expressly provided in the Plan, all
designations, determinations, interpretations, and other
decisions under or with respect to the Plan or any Award shall
be within the sole discretion of the Committee, may be made at
any time and shall be final, conclusive, and binding upon all
Persons, including the Company, any Affiliate, any Participant,
any holder or beneficiary of any Award, any stockholder and any
Employee, Consultant or Director. No member of the Board or the
Committee shall be liable for any action or determination made
in good faith with respect to the Plan or any Award granted
hereunder and the members of the Board and the Committee shall
be entitled to indemnification and reimbursement by the Company
and its Affiliates in respect of any claim, loss, damage or
expense (including legal fees) arising therefrom to the full
extent permitted by law.
Section 4. Shares Available
for Awards.
(a) Shares Available. Subject
to adjustment as provided in Section 4(c), the number of
Shares with respect to which Awards may be granted under the
Plan shall be 8,500,000 Shares, all of which may be granted
as incentive stock options. In addition, during any calendar
year in which Section 162(m) of the Code shall apply to the
Company, the maximum number of Shares reserved for issuance
under the Plan that may be granted to any one
(1) Participant as to Options, stock appreciation rights,
or any other Share-based award shall not exceed
3,000,000 as to each type of award. If any Award is
exercised, paid, forfeited, terminated or canceled without the
delivery of Shares, then the Shares covered by such Award, to
the extent of such exercise, payment, forfeiture, termination or
cancellation, shall again be Shares with respect to which Awards
may be granted; provided, however, that Shares not delivered due
to withholding or payment of taxes or payment of exercise price
shall not again be Shares with respect to which Awards may be
granted.
(b) Sources of Shares Deliverable Under
Awards. Any Shares delivered pursuant to an
Award may consist, in whole or in part, of authorized and
unissued Shares or of treasury Shares. No fractional Shares
shall be issued under the Plan; payment for any fractional
Shares shall be made in cash.
(c) Adjustments. In the event that
any dividend or other distribution (whether in the form of cash,
Shares, other securities, or other property), recapitalization,
stock split, reverse stock split, reorganization, merger,
consolidation,
split-up,
spin-off, combination, repurchase, or exchange of Shares or
other securities of the
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Company, issuance of warrants or other rights to purchase Shares
or other securities of the Company, or other similar corporate
transaction or event affects the Shares such that an adjustment
is determined by the Committee to be appropriate in order to
prevent dilution or enlargement of the benefits or potential
benefits intended to be made available under the Plan, then the
Committee shall, in such manner as it may deem equitable, adjust
any or all of (i) the number and type of Shares (or other
securities or property) with respect to which Awards may be
granted; (ii) the number and type of Shares (or other
securities or property) subject to outstanding Awards; and
(iii) the grant or exercise price with respect to any Award
or, if deemed appropriate, make provision for a cash payment to
the holder of an outstanding Award.
Section 5. Eligibility.
Any Employee, Director or Consultant shall be eligible to be
designated a Participant and receive an Award under the Plan.
Section 6. Awards.
(a) Options. Subject to the
provisions of the Plan, the Committee shall have the authority
to determine the Participants to whom Options shall be granted,
the number of Shares to be covered by each Option, the purchase
price therefor and the conditions and limitations applicable to
the exercise of the Option, including the following terms and
conditions and such additional terms and conditions, as the
Committee shall determine, that are not inconsistent with the
provisions of the Plan.
(i) Exercise Price. The purchase
price per Share purchasable under an Option shall be determined
by the Committee at the time the Option is granted, but shall
not be less than one hundred percent (100%) of the Fair Market
Value per Share on such grant date if the Option is not an
incentive stock option, and not less than one hundred percent
(100%) of the Fair Market Value per Share on such date if the
Option is an incentive stock option. If any Employee to whom an
Option that is an incentive stock option is granted owns stock
possessing more than ten percent (10%) of the total combined
voting power of all classes of stock of the Company or any
parent corporation, within the meaning of Section 424(e) of
the Code, or any subsidiary corporation of the Company, within
the meaning of Section 424(f) of the Code, then the
exercise price per share shall not be less than one hundred ten
percent (110%) of the Fair Market Value per Share on the date of
grant and the option term shall not exceed five (5) years
measured from the date of grant. For purposes of the immediately
preceding sentence, the attribution rules under Section 424(d)
of the Code shall apply for purposes of determining an
Employees ownership.
(ii) Time and Method of
Exercise. The Committee shall determine the
time or times at which an Option may be exercised in whole or in
part (which may include the achievement of one (1) or more
Performance Objectives), and the method or methods by which, and
the form or forms in which payment of the exercise price with
respect thereto may be made. In that connection, in order to
exercise an Option, the person or persons entitled to exercise
it shall deliver to the Company payment in full for (i) the
shares being purchased and (ii) unless other arrangements
have been made with the Committee, any required withholding
taxes. The payment of the exercise price for each Option shall
either be (i) in cash or by check payable and acceptable to
the Company (ii) with the consent of the Committee, by
tendering to the Company shares of Common Stock owned by the
person for more than six (6) months having an aggregate
Fair Market Value as of the date of exercise that is not greater
than the full exercise price for the shares with respect to
which the Option is being exercised and by paying any remaining
amount of the exercise price as provided in (i) above, or
(iii) with the consent of the Committee and compliance with
such instructions as the Committee may specify, by delivering to
the Company and to a broker a properly executed exercise notice
and irrevocable instructions to such broker to deliver to the
Company cash or a check payable and acceptable to the Company to
pay the exercise price and any applicable withholding taxes.
Upon receipt of the cash or check from the broker, the Company
will deliver to the broker the shares for which the Option is
exercised. In the event that the person elects to make payment
as allowed under clause (ii) above, the Committee may, upon
confirming that the optionee owns the number of additional
shares being tendered, authorize the issuance of a new
certificate for the number of shares being acquired pursuant to
the exercise of the Option less the number of shares being
tendered upon the exercise and return to the person (or not
require surrender of) the certificate for the shares being
tendered upon the exercise. The date of sale of the shares by
the broker pursuant to a cashless exercise under
(iii) above shall be the date of exercise of the Option.
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(iii) Option Repricing. With
stockholder approval, the Committee, in its absolute discretion,
may grant to holders of outstanding Options that are not
incentive stock options, in exchange for the surrender and
cancellation of such Options that are not incentive stock
options, new Options that are not incentive stock options having
exercise prices lower (or higher with any required consent) than
the exercise price provided in the Options so surrendered and
canceled and containing such other terms and conditions as the
Committee may deem appropriate.
(iv) Incentive Stock Options. The
terms of any Option granted under the Plan intended to be an
incentive stock option shall comply in all respects with the
provisions of Section 422 of the Code, or any successor
provision, and any regulations promulgated thereunder. Incentive
stock options may be granted only to employees of the Company,
while it is a corporation described in
Section 7701(a)(3) of the Code and Treas. Reg. Section
1.421-1(i)(l), and its parent corporation and subsidiary
corporations, within the meaning of Section 424 of the
Code. To the extent the aggregate Fair Market Value of the
Shares (determined as of the date of grant) of an Option to the
extent exercisable for the first time during any calendar year
(under all plans of the Company and its parent and subsidiary
corporations) exceeds $100,000, such Option Shares in excess of
$100,000 shall not be incentive stock options. No Option that is
an incentive stock option shall be issued under the Plan after
the date that occurs one (1) day before the tenth (10th)
anniversary of the date the Prior Plan was adopted by the Board
or approved by the stockholders of the Company, whichever was
earlier. No Option that is an incentive stock option shall be
exercisable more than ten (10) years measured from the date
of grant (five (5) years in the case of an Employee
described in Section 6(a)(i) hereof) or three (3) months
after the Participant ceases to be an Employee for any reason
other than death or disability, or more than one (1) year
after the Participant ceases to be an Employee due to death or
disability.
(b) Restricted Stock. Subject to
the provisions of the Plan, the Committee shall have the
authority to determine the Participants to whom Restricted Stock
shall be granted, the number of Shares of Restricted Stock to be
granted to each such Participant, the duration of the Restricted
Period during which, and the conditions, including Performance
Objectives, if any, under which if not achieved, the Restricted
Stock may be forfeited to the Company, and the other terms and
conditions of such Awards.
(i) Dividends. Dividends paid on
Restricted Stock may be paid directly to the Participant or may
be subject to risk of forfeiture
and/or
transfer restrictions during any period established by the
Committee in its discretion.
(ii) Registration. Any Restricted
Stock may be evidenced in such manner as the Committee shall
deem appropriate, including, without limitation, book-entry
registration or issuance of a stock certificate or certificates.
In the event any stock certificate is issued in respect of
Restricted Stock granted under the Plan, such certificate shall
be registered in the name of the Participant and shall bear an
appropriate legend referring to the terms, conditions, and
restrictions applicable to such Restricted Stock.
(iii) Forfeiture and Restrictions
Lapse. Except as otherwise determined by the
Committee or the terms of the Award that granted the Restricted
Stock, upon termination of a Participants employment (as
determined under criteria established by the Committee) for any
reason during the applicable Restricted Period, all Restricted
Stock shall be forfeited by the Participant and reacquired by
the Company. Unrestricted Shares, evidenced in such manner as
the Committee shall deem appropriate, shall be issued to the
holder of Restricted Stock promptly after the applicable
restrictions have lapsed or otherwise been satisfied.
(iv) Transfer Restrictions. During
the Restricted Period, Restricted Stock will be subject to the
limitations on transfer as provided in Section 6(f)(iii).
(c) Performance Awards. The
Committee shall have the authority to determine the Participants
who shall receive a Performance Award, which shall confer on the
Participant the right to receive payment of such Award, in whole
or in part, upon the achievement of such Performance Objectives
during such performance periods as the Committee shall establish
with respect to the Award.
(i) Terms and Conditions. Subject
to the terms of the Plan and any applicable Award Agreement, the
Committee shall determine the Performance Objectives to be
achieved during any performance period, the length of any
performance period, the amount of any Performance Award and the
amount of any payment or transfer to be made pursuant to any
Performance Award.
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(ii) General. In the case of any
Award granted to a Covered Employee, Performance Objectives
shall be designed to be objective and shall otherwise meet the
requirements of Section 162(m) of the Code and regulations
thereunder (including Treasury Regulations sec. 1.162-27 and
successor regulations thereto), including the requirement that
the level or levels of performance targeted by the Committee are
such that the achievement of performance goals is
substantially uncertain at the time of grant. The
Committee may determine that such Performance Awards shall be
granted
and/or
settled upon achievement of any one (1) performance goal or
that two (2) or more of the performance goals must be
achieved as a condition to the grant
and/or
settlement of such Performance Awards. Performance Objectives
may differ among Performance Awards granted to any one
(1) Participant or for Performance Awards granted to
different Participants.
(iii) Performance Period; Timing for Establishing
Performance Goals. Achievement of Performance
Objectives in respect of Performance Awards that are granted to
a Covered Employee and intended to meet the requirements of
Section 162(m) of the Code shall be measured over a
performance period of not less than six (6) months and not
more than ten (10) years, as specified by the Committee.
Performance Objectives in the case of any Award granted to a
Participant shall be established not later than ninety
(90) days after the beginning of any performance period
applicable to such Performance Awards, or at such other date as
may be required or permitted for performance-based
compensation under Section 162(m) of the Code.
(iv) Settlement of Performance Awards; Other
Terms. After the end of each performance
period, the Committee shall determine the amount, if any, of
Performance Awards payable to each Participant based upon
achievement of business criteria over a performance period.
Except as may otherwise be required under Section 409A of
the Code, payment described in the immediately preceding
sentence shall be made by the later of (i) the date that is
21/2
months after the end of the Participants first taxable
year in which the Performance Award is earned and payable under
the Plan and (ii) the date that is
21/2
months after the end of the Companys first taxable year in
which the Performance Award is earned and payable under the
Plan, and such payment shall not be subject to any election by
the Participant to defer the payment to a later period. The
Committee may not exercise discretion to increase any such
amount payable in respect of a Performance Award which is
intended to comply with Section 162(m) of the Code. The
Committee shall specify the circumstances in which such
Performance Awards shall be paid or forfeited in the event of
termination of employment by the Participant prior to the end of
a performance period or settlement of Performance Awards.
(v) Written Determinations. All
determinations by the Committee as to the establishment of
Performance Objectives, the amount of any Performance Award, and
the achievement of Performance Objectives relating to
Performance Awards shall be made in a written agreement or other
document covering the Performance Award. The Committee may not
delegate any responsibility relating to such Performance Awards
that are granted to a Covered Employee and intended to meet the
requirements of Section 162(m) of the Code.
(vi) Status of Performance Awards under
Section 162(m) of the Code. It is the
intent of the Company that Performance Awards granted to persons
who are designated by the Committee as likely to be Covered
Employees within the meaning of Section 162(m) of the Code
and regulations thereunder (including Treasury Regulations sec.
1.162-27 and successor regulations thereto) shall constitute
performance-based compensation within the meaning of
Section 162(m) of the Code and regulations thereunder.
Accordingly, the terms of this Section shall be interpreted in a
manner consistent with Section 162(m) of the Code and
regulations thereunder. Notwithstanding the foregoing, because
the Committee cannot determine with certainty whether a given
Participant will be a Covered Employee with respect to a fiscal
year that has not yet been completed, the term Covered Employee
as used herein shall mean any person designated by the
Committee, at the time of grant of a Performance Award, as
likely to be a Covered Employee with respect to that fiscal
year. If any provision of the Plan as in effect on the date of
adoption or any agreements relating to Performance Awards that
are intended to comply with Section 162(m) of the Code does
not comply or is inconsistent with the requirements of
Section 162(m) of the Code or regulations thereunder, such
provision shall be construed or deemed amended to the extent
necessary to conform to such requirements.
(d) Bonus Shares. The Committee
shall have the authority, in its discretion, to grant Bonus
Shares to Participants. Each Bonus Share shall constitute a
transfer of an unrestricted Share to the Participant, without
other payment therefor, as additional compensation for the
Participants services to the Company.
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(e) Other Stock-Based Awards. The
Committee may also grant to Participants an Other Stock-Based
Award, which shall consist of a right which is an Award
denominated or payable in, valued in whole or in part by
reference to, or otherwise based on or related to, Shares as is
deemed by the Committee to be consistent with the purposes of
the Plan. Subject to the terms of the Plan, including the
Performance Objectives, if any, applicable to such Award, the
Committee shall determine the terms and conditions of any such
Other Stock-Based Award. Notwithstanding any other provision of
the Plan to the contrary, any Other Stock-Based Award shall
contain terms that (i) are designed to avoid application of
Section 409A of the Code or (ii) are designed to avoid
adverse tax consequences under Section 409A should that
Code section apply to such Award.
(f) General Provisions Applicable to all
Awards.
(i) Awards May Be Granted Separately or
Together. Awards may, in the discretion of
the Committee, be granted either alone or in addition to, in
tandem with, or in substitution for any other Award granted
under the Plan or any award granted under any other plan of the
Company or any Affiliate. No Award shall be issued in tandem
with another Award if the tandem Awards would result in adverse
tax consequences under Section 409A of the Code. Awards
granted in addition to or in tandem with other Awards or awards
granted under any other plan of the Company or any Affiliate may
be granted either at the same time as or at a different time
from the grant of such other Awards or awards.
(ii) Forms of Payment by Company Under
Awards. Subject to the terms of the Plan and
of any applicable Award Agreement, payments or transfers to be
made by the Company or an Affiliate upon the grant, exercise or
payment of an Award may be made in such form or forms as the
Committee shall determine, including, without limitation, cash,
Shares, other securities, other Awards or other property, or any
combination thereof, and may be made in a single payment or
transfer, in installments, or on a deferred basis, in each case
in accordance with rules and procedures established by the
Committee. Such rules and procedures may include, without
limitation, provisions for the payment or crediting of
reasonable interest on installment or deferred payments.
(iii) Limits on Transfer of Awards.
A. Except as provided in (C) below, each Award, and
each right under any Award, shall be exercisable only by the
Participant during the Participants lifetime, or by the
person to whom the Participants rights shall pass by will
or the laws of descent and distribution. Notwithstanding
anything in the Plan to the contrary, a nonqualified stock
option shall be transferable pursuant to a domestic relations
order.
B. Except as provided in (C) below, no Award and no
right under any such Award may be assigned, alienated, pledged,
attached, sold or otherwise transferred or encumbered by a
Participant and any such purported assignment, alienation,
pledge, attachment, sale, transfer or encumbrance shall be void
and unenforceable against the Company or any Affiliate.
C. Notwithstanding anything in the Plan to the contrary, to
the extent specifically provided by the Committee with respect
to a grant, a nonqualified stock option may be transferred to
immediate family members or related family trusts, or similar
entities on such terms and conditions as the Committee may
establish. In addition, Awards may be transferred by will or the
laws of descent and distribution.
(iv) Term of Awards. The term of
each Award shall be for such period as may be determined by the
Committee; provided, that in no event shall the term of any
Award exceed a period of ten (10) years from the date of
its grant (or such shorter term as may be required in respect of
an Option that is an incentive stock option under
Section 422 of the Code).
(v) Share Certificates. All
certificates for Shares or other securities of the Company or
any Affiliate delivered under the Plan pursuant to any Award or
the exercise thereof shall be subject to such stop transfer
orders and other restrictions as the Committee may deem
advisable under the Plan or the rules, regulations, and other
requirements of the SEC, any stock exchange upon which such
Shares or other securities are then listed, and any applicable
federal or state laws, and the Committee may cause a legend or
legends to be put on any such certificates to make appropriate
reference to such restrictions.
(vi) Delivery of Shares or other Securities and
Payment by Participant of Consideration. No
Shares or other securities shall be delivered pursuant to any
Award until payment in full of any amount required to be paid
pursuant
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to the Plan or the applicable Award Agreement (including,
without limitation, any exercise price, tax payment or tax
withholding) is received by the Company. Such payment may be
made by such method or methods and in such form or forms as the
Committee shall determine, including, without limitation, cash,
Shares, other securities, other Awards or other property,
withholding of Shares, cashless exercise with simultaneous sale,
or any combination thereof; provided that the combined value, as
determined by the Committee, of all cash and cash equivalents
and the Fair Market Value of any such Shares or other property
so tendered to the Company, as of the date of such tender, is at
least equal to the full amount required to be paid pursuant to
the Plan or the applicable Award Agreement to the Company.
(vii) Code
Section 409A. Notwithstanding any other
provision of the Plan to the contrary, any Award granted after
December 31, 2004 shall contain terms that (i) are
designed to avoid application of Section 409A of the Code to the
Award or (ii) are designed to avoid adverse tax
consequences under Section 409A of the Code should that
Code Section apply to the Award.
(viii) Section 409A Limits on Payments to
Specified Employees. Notwith-standing any
other provision of the Plan or an Award to the contrary, if a
Participant is a key employee, as defined in
Section 416(i) of the Code (without regard to
paragraph 5 thereof), except to the extent permitted under
Section 409A of the Code, no benefit or payment that is
subject to Section 409A of the Code (after taking into
account all applicable exceptions to Section 409A of the
Code, including but not limited to the exceptions for short-term
deferrals and for separation pay only upon an involuntary
separation from service) shall be made under this Plan or
the affected Award granted thereunder on account of the
Participants separation from service, as
defined in Section 409A of the Code, with the Company and
its Affiliates until the later of the date prescribed for
payment in this Plan or the affected Award granted thereunder
and the first (1st) day of the seventh (7th) calendar month that
begins after the date of the Participants separation from
service (or, if earlier, the date of death of the Participant).
Unless otherwise provided in the Award, any amount that is
otherwise payable within the delay period described in the
immediately preceding sentence will be aggregated and paid in a
lump sum without interest.
Section 7. Amendment
and Termination.
Except to the extent prohibited by applicable law and unless
otherwise expressly provided in an Award Agreement or in the
Plan:
(a) Amendments to the Plan. The
Board or the Committee may amend, alter, suspend, discontinue,
or terminate the Plan without the consent of any stockholder,
Participant, other holder or beneficiary of an Award, or other
Person; provided, however, no such amendment may be made without
stockholder approval to the extent that such approval is
required by (i) applicable legal requirements or
(ii) the requirements of any securities exchange or market
on which the Shares are listed. Notwithstanding the foregoing,
the Board or the Committee may amend the Plan in such manner as
it deems necessary in order to permit Awards to meet the
requirements of the Code or other applicable laws, or to prevent
adverse tax consequences.
(b) Amendments to Awards. The
Committee may waive any conditions or rights under, amend any
terms of, or alter any Award theretofore granted, provided no
change, other than pursuant to Section 7(c), in any Award
shall materially reduce the benefit to Participant without the
consent of such Participant.
(c) Adjustment of Awards Upon the Occurrence of
Certain Unusual or Nonrecurring Events. The
Committee is hereby authorized to make adjustments in the terms
and conditions of, and the criteria included in, Awards in
recognition of unusual or nonrecurring events (including,
without limitation, the events described in Section 4(c) of the
Plan) affecting the Company, any Affiliate, or the financial
statements of the Company or any Affiliate, or of changes in
applicable laws, regulations, or accounting principles, whenever
the Committee determines that such adjustments are appropriate
in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan.
Section 8. Adjustments
Upon Changes in Stock/Change in Control.
(a) Adjustments Upon Changes in
Stock. If any change is made in the Shares
subject to the Plan, or subject to any Award, without the
receipt of consideration by the Company through merger,
consolidation, reorganization, recapitalization,
reincorporation, stock dividend, dividend in property other than
cash, stock split, liquidating
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dividend, combination of shares, exchange of shares, change in
corporate structure or other transaction not involving the
receipt of consideration by the Company), the Plan will be
appropriately adjusted in the class(es) and maximum number of
shares subject to the Plan pursuant to Section 4(c) and the
outstanding Awards will be appropriately adjusted in the
class(es) and number of shares and exercise price per share of
stock subject to such outstanding Awards. Such adjustments shall
be made by the Board or the Committee, the determination of
which shall be final, binding and conclusive. (The conversion of
any convertible securities of the Company shall not be treated
as a transaction not involving the receipt of
consideration by the Company.)
(b) Change in Control. Unless
otherwise provided in the Award, in the event of a Change in
Control described in clauses (b), (c) or (d) of the
definition of Change in Control under Section 2 of the
Plan, (i) if the Company does not survive as an independent
corporation (excluding as a subsidiary), the surviving
corporation or an affiliate of such surviving corporation shall
assume the Awards outstanding under the Plan or substitute
similar awards (including an award to acquire the same
consideration paid to the stockholders of the Company in the
transaction effecting the Change in Control) for those
outstanding under the Plan, or (ii) if the Company
continues as an independent corporation (excluding as a
subsidiary), such Awards shall continue in full force and
effect. In the event of a Change in Control in which the Company
does not survive as an independent corporation (excluding as a
subsidiary), if any surviving corporation and its affiliates
refuse to assume or continue the Awards, or to substitute
similar awards for those outstanding under the Plan, then unless
otherwise provided in the Award:
(i) All Options then outstanding shall become immediately
vested and fully exercisable immediately prior to the Change in
Control, notwithstanding any provision therein for exercise in
installments;
(ii) All restrictions and conditions of all Restricted
Stock then outstanding shall be deemed satisfied, and the
Restricted Period or other limitations on payment in full with
respect thereto shall be deemed to have expired immediately
prior to the date of the Change in Control; and
(iii) All outstanding Performance Awards and any Other
Stock or Performance-Based Awards shall become fully vested,
deemed earned in full immediately prior to the date of the
Change in Control and promptly paid to the Participants as of
the date of the Change of Control, without regard to payment
schedules and notwithstanding that the applicable performance
cycle, retention cycle or other restrictions and conditions
shall not have been completed or satisfied.
Notwithstanding the foregoing, the preceding provisions shall
not apply to any Award to the extent that such provisions would
result in any impermissible acceleration or substitution under
Section 409A of the Code or any other violation of
Section 409A of the Code that would result in adverse tax
consequences to the Participant under Section 409A of the
Code
(c) Right of Cash-Out. If approved
by the Board prior to or within thirty (30) days after such
time as a Change in Control shall be deemed to have occurred,
the Board shall have the right for a forty-five (45) day
period immediately following the date that the Change in Control
is deemed to have occurred to require all, but not less than
all, Participants to transfer and deliver to the Company all
Awards previously granted to the Participants in exchange for an
amount equal to the cash value (defined below) of
the Awards. Such right shall be exercised by written notice to
all Participants. For purposes of this Section, the cash value
of an Award shall equal the sum of (i) all cash to which
the Participant would be entitled upon settlement or exercise of
any Award which is not an Option and (ii) in the case of
any Award that is an Option, the excess of the market
value (defined below) per share over the option price, if
any, multiplied by the number of shares subject to such Award.
For purposes of the preceding sentence, market value
per share shall mean the higher of (i) the average of the
Fair Market Value per share of Common Stock on each of the five
(5) trading days immediately following the date a Change in
Control is deemed to have occurred or (ii) the highest
price, if any, offered in connection with the Change in Control.
The amount payable to each Participant by the Company pursuant
to this Section shall be in cash or by certified check and shall
be reduced by any taxes required to be withheld. Notwithstanding
the foregoing, neither the Board, the Company nor the Committee
shall have the right to cash-out any Award, if the existence or
exercise of such right would result in any impermissible
acceleration or substitution under Section 409A of the Code
or any other violation of Section 409A of the Code that
would result in adverse tax consequences to the Participant
pursuant to Section 409A of the Code.
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Section 9. General
Provisions.
(a) No Rights to Awards. No
Director, Employee, Consultant or other Person shall have any
claim to be granted any Award, and there is no obligation for
uniformity of treatment of Employees, Consultants, or holders or
beneficiaries of Awards. The terms and conditions of Awards need
not be the same with respect to each recipient.
(b) Withholding. The Company or
any Affiliate is authorized to withhold at the minimum statutory
rate from any Award, from any payment due or transfer made under
any Award or under the Plan or from any compensation or other
amount owing to a Participant the amount (in cash, Shares, other
securities, Shares that would otherwise be issued pursuant to
such Award, other Awards or other property) of any applicable
taxes payable in respect of an Award, its exercise, the lapse of
restrictions thereon, or any payment or transfer under an Award
or under the Plan and to take such other action as may be
necessary in the opinion of the Company to satisfy all
obligations for the payment of such taxes. In addition, the
Committee may provide, in an Award Agreement, that the
Participant may direct the Company to satisfy such
Participants tax obligation through the
constructive tender of already-owned Shares or the
withholding of Shares otherwise to be acquired upon the exercise
or payment of such Award.
(c) No Right to Employment. The
grant of an Award shall not be construed as giving a Participant
the right to be retained in the employ of the Company or any
Affiliate. Further, the Company or an Affiliate may at any time
dismiss a Participant from employment, free from any liability
or any claim under the Plan, unless otherwise expressly provided
in the Plan or in any Award Agreement.
(d) Governing Law. The validity,
construction, and effect of the Plan and any rules and
regulations relating to the Plan shall be determined in
accordance with the laws of the State of Delaware and applicable
federal law.
(e) Severability. If any provision
of the Plan or any Award is or becomes or is deemed to be
invalid, illegal, or unenforceable in any jurisdiction or as to
any Person or Award, or would disqualify the Plan or any Award
under any law deemed applicable by the Committee, such provision
shall be construed or deemed amended to conform to the
applicable laws, or if it cannot be construed or deemed amended
without, in the determination of the Committee, materially
altering the intent of the Plan or the Award, such provision
shall be stricken as to such jurisdiction, Person or Award and
the remainder of the Plan and any such Award shall remain in
full force and effect.
(f) Other Laws. The Committee may
refuse to issue or transfer any Shares or other consideration
under an Award if, acting in its sole discretion, it determines
that the issuance of transfer or such Shares or such other
consideration might violate any applicable law or regulation or
entitle the Company to recover the same under Section 16(b)
of the Exchange Act, and any payment tendered to the Company by
a Participant, other holder or beneficiary in connection with
the exercise of such Award shall be promptly refunded to the
relevant Participant, holder or beneficiary.
(g) No Trust or
Fund Created. Neither the Plan nor the
Award shall create or be construed to create a trust or separate
fund of any kind or a fiduciary relationship between the Company
or any Affiliate and a Participant or any other Person. To the
extent that any Person acquires a right to receive payments from
the Company or any Affiliate pursuant to an Award, such right
shall be no greater than the right of any general unsecured
creditor of the Company or any Affiliate.
(h) No Fractional Shares. No
fractional Shares shall be issued or delivered pursuant to the
Plan or any Award, and the Committee shall determine whether
cash, other securities, or other property shall be paid or
transferred in lieu of any fractional Shares or whether such
fractional Shares or any rights thereto shall be canceled,
terminated, or otherwise eliminated.
(i) Securities Laws
Compliance. Unless the Shares have been
registered under the Securities Act of 1933 (and, in the case of
any Participant who may be deemed an affiliate of the Company
for securities law purposes, such Shares have been registered
under such Act for resale by such Participant), or the Company
has determined that an exemption from registration is available,
the Company may require prior to and as a condition of the
exercise or payment of any Award that (i) the Participant
desiring to exercise or receive payment such Award give the
Company written notice thereof and that such notice may not be
given by the Participant until forty-five (45) days
thereafter (which time period may be waived by the Committee in
its sole discretion) in order to allow the Company the
opportunity to provide to such Participant any disclosure
materials, or to make such filings, as may be required
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under federal and state securities laws and (ii) the
Participant desiring to exercise or be paid such Award furnish
the Company with a written representation in a form prescribed
by the Committee to the effect that such person is acquiring
said Shares solely with a view to investment for his or her own
account and not with a view to the resale or distribution of all
or any part thereof, and that such person will not dispose of
any of such Shares otherwise than in accordance with the
provisions of Rule 144 under the Act unless and until
either the Shares are registered under the Act or the Company is
satisfied that an exemption from such registration is available.
(j) Headings. Headings are given
to the Sections and subsections of the Plan solely as a
convenience to facilitate reference. Such headings shall not be
deemed in any way material or relevant to the construction or
interpretation of the Plan or any provision thereof.
(k) Code
Section 409A. Notwithstanding anything
in this Plan to the contrary, if any Plan provision or Award
under the Plan would result in the imposition of an applicable
tax under Code Section 409A and related regulations and
Treasury pronouncements (Section 409A), that
Plan provision or Award may be reformed to avoid imposition of
the applicable tax and no action taken to comply with
Section 409A shall be deemed to adversely affect the
Participants rights to an Award.
(l) No Guarantee of Tax
Consequences. None of the Board, the Company
nor the Committee makes any commitment or guarantee that any
federal, state or local tax treatment will apply or be available
to any person participating or eligible to participate hereunder.
Section 10. Term
of the Plan.
No Award shall be granted under the Plan after the tenth (10th)
anniversary of the date the Prior Plan was initially adopted by
the Board, as the Plan shall expire on that date unless earlier
terminated pursuant to Section 7. However, unless otherwise
expressly provided in the Plan or in an applicable Award
Agreement, any Award granted prior to such expiration or
termination, and the authority of the Board or the Committee to
amend, alter, adjust, suspend, discontinue, or terminate any
such Award or to waive any conditions or rights under such
Award, shall extend beyond such expiration or termination date.
A-12
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ALLIS-CHALMERS ENERGY INC.
5075 Westheimer, Suite 890
Houston, Texas 77056
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE ANNUAL
MEETING OF STOCKHOLDERS TO BE HELD ON NOVEMBER 6, 2009.
The undersigned hereby appoints Victor M. Perez and Theodore F. Pound III, and each of them,
either one of whom may act without joinder of the other, as proxies, with full power of
substitution and revocation to represent the undersigned and to vote all shares of Allis-Chalmers
Energy Inc. which the undersigned is entitled to vote at the annual meeting of stockholders to be
held at Allis-Chalmers Energy Inc., 5075 Westheimer, Suite 890, Houston, Texas 77056 on November 6,
2009 at 9:00 a.m., and at any adjourment or postponement thereof.
In their discretion, the proxies are entitled to vote in the manner shown on this form as to
the following matters and in their discretion on any other business or matters as may properly come
before the meeting or any adjourment or postponement thereof.
(Continued and to be Signed on the Reverse Side)
ANNUAL MEETING OF STOCKHOLDERS OF
ALLIS-CHALMERS ENERGY INC.
November 6, 2009
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PROXY VOTING INSTRUCTIONS
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INTERNET - Access www.voteproxy.com and
follow the on-screen instructions. Have your proxy card available
when you access the web page, and use the Company Number and Account Number shown on your proxy card.
TELEPHONE -
Call toll-free 1-800-PROXIES (1-800-776-9437) in
the United States or 1-718-921-8500 from foreign countries
from any touch-tone telephone and follow the instructions.
Have your proxy card available when you call and use the
Company Number and Account Number shown on your proxy card.
Vote online/phone until 11:59 PM EST the day before the meeting.
MAIL - Sign, date and mail your proxy card in the envelope
provided as soon as possible.
IN PERSON - You may vote your shares in person by attending
the Annual Meeting.
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COMPANY NUMBER
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ACCOUNT NUMBER
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NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIAL: The Notice of Meeting, Proxy Statement and
Proxy Card are available at
http://www.amstock.com/proxyservices/viewmaterial.asp?CoNumber=15258
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â Please
detach along perforated line and mail in the envelope provided
IF you are not voting via telephone or the
Internet. â
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20930330000000000000 4
110609
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF DIRECTORS AND FOR
PROPOSALS 2, 3 AND 4. PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE
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FOR
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AGAINST
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ABSTAIN |
1. The
Election of Directors: |
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To approve an amendment to the Companys Amended
and Restated Certificate of Incorporation to
increase the number of shares of authorized Common
Stock from 100,000,000 to 200,000,000.
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NOMINEES: |
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FOR ALL NOMINEES
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Saad Bargach
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Alejandro P. Bulgheroni
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WITHHOLD AUTHORITY FOR
ALL NOMINEES
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Giovanni DellOrto
Victor F. Germack
James M. Hennessy
Munawar H. Hidayatallah
Robert E. Nederlander
John T. Reynolds
Zane Tankel
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To approve the Companys Second Amended and Restated 2006 Incentive Plan.
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FOR ALL EXCEPT (See instructions below)
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To ratify the appointment of UHY LLP as the
Companys independent auditors.
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To transact any other business as may properly be presented at
the Annual Meeting or any adjournment or postponement thereof.
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These items of business are more fully described in the proxy
statement. The record date for the Annual Meeting is September 14,
2009. Only stockholders of record at the close of business on that
date may vote at the meeting or any adjournment thereof.
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INSTRUCTIONS:
To withhold authority to vote for any individual nominee(s),
mark FOR ALL EXCEPT and fill in the circle next to each
nominee
you wish to
withhold, as shown here: = |
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To change the address on your account, please check the box
at right and indicate your new address in the address space
above. Please note that changes to the registered name(s)
on the account may not be submitted
via this method. |
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Signature
of Shareholder
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Date:
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Signature
of Shareholder
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Date:
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Note:
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Please sign exactly as your name or names appear on this Proxy.
When shares are held jointly, each holder should sign. When signing
as executor, administrator, attorney, trustee or guardian, please give full
title as such. If the signer is a corporation, please sign full corporate name
by duly authorized officer, giving full title as such. If signer is a partnership,
please sign in partnership name by authorized person. |
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