SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
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14a-6(e)(2))
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[ ] Soliciting Material Pursuant toss.240.14(a)-11(c) orss.240.14a-12
PATTERSON-UTI ENERGY, INC.
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[LOGO]
April 26, 2002
Dear Stockholder:
We cordially invite you to attend Patterson-UTI Energy, Inc.'s annual
stockholders' meeting. The annual meeting will be held Thursday, May 30, 2002,
at 10:00 a.m., local time, at the Wyndham Greenspoint Hotel, 12400 Greenspoint
Drive, Houston, Texas 77060.
At the annual meeting, stockholders will vote on a number of important matters.
Please take the time to carefully read each of the proposals described in the
attached proxy statement.
Thank you for your support.
Sincerely,
/s/ MARK S. SIEGEL /s/ CLOYCE A. TALBOTT
Mark S. Siegel Cloyce A. Talbott
Chairman of the Board Chief Executive Officer
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This proxy statement and the accompanying proxy card are being mailed to
Patterson-UTI Energy, Inc. stockholders beginning on or about April 26, 2002
PATTERSON-UTI ENERGY, INC.
P. O. Box 1416
Snyder, Texas 79550
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NOTICE OF 2002 ANNUAL MEETING
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The 2002 annual meeting of the stockholders of Patterson-UTI Energy,
Inc. ("Patterson-UTI"), a Delaware corporation, will be held Thursday, May 30,
2002, at 10:00 a.m., local time, at the Wyndham Greenspoint Hotel, 12400
Greenspoint Drive, Houston, Texas 77060 (the "Meeting"). At the Meeting, the
stockholders will be asked to:
o elect the Board of Directors of Patterson-UTI to serve until the
next annual meeting of the stockholders or until their respective
successors are elected and qualified;
o approve an amendment to Patterson-UTI's Amended and Restated 1997
Long-Term Incentive Plan increasing the number of shares
available for issuance under the plan;
o ratify the selection of PricewaterhouseCoopers LLP as independent
accountants of Patterson-UTI for the fiscal year ending December
31, 2002; and
o take action upon any other matters which may properly come before
the Meeting.
Stockholders of record at the close of business on April 24, 2002, are
entitled to vote at the Meeting and any adjournment thereof.
It is important that your shares be represented at the Meeting. I urge
you to sign, date and promptly return the enclosed proxy card in the enclosed
postage paid envelope or vote by following the Internet or telephone
instructions included on the proxy card.
By order of the Board of Directors
/s/ JONATHAN D. NELSON
Jonathan D. Nelson
Vice President, Chief Financial Officer,
Secretary and Treasurer
April 26, 2002
PATTERSON-UTI ENERGY, INC.
P. O. Box 1416
Snyder, Texas 79550
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PROXY STATEMENT
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ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 30, 2002
The Board of Directors of Patterson-UTI Energy, Inc. ("Patterson-UTI"),
a Delaware corporation, prepared this proxy statement for the purpose of
soliciting proxies for Patterson-UTI's 2002 annual meeting of stockholders (the
"Meeting") to be held Thursday, May 30, 2002, at 10:00 a.m., local time, at the
Wyndham Greenspoint Hotel, 12400 Greenspoint Drive, Houston, Texas 77060, and at
any adjournment thereof. This proxy statement and the accompanying proxy are
being mailed to stockholders on or about April 26, 2002. The Board of Directors
is making this solicitation by mail, and Patterson-UTI will pay all the costs
associated with this solicitation.
Properly submitted proxies received either by mail, Internet, telephone
or in person, in time for the Meeting will be voted as you have directed in your
proxy, unless you revoke your proxy in the manner provided below. As to any
matter for which you give no direction in your proxy, your shares will be voted
as follows:
o "FOR" the election of all of the nominees to the Board of
Directors;
o "FOR" the approval of the amendment to Patterson-UTI's Amended
and Restated 1997 Long-Term Incentive Plan increasing the number
of shares authorized for issuance under the plan;
o "FOR" the ratification of PricewaterhouseCoopers LLP as
independent accountants of Patterson-UTI for the fiscal year
ending December 31, 2002; and
o "FOR" or "AGAINST" any other proposals which may be submitted at
the Meeting at the discretion of the persons named in the proxy.
You may revoke your proxy at any time before the proxy is voted by
either:
o submitting a new proxy with a later date, including a proxy
submitted by the Internet or by telephone;
o notifying the Secretary of Patterson-UTI in writing before the
Meeting that you have revoked your proxy; or
o attending the Meeting and voting in person.
SHARES OUTSTANDING AND VOTING RIGHTS
Only stockholders of record of Patterson-UTI's common stock $.01 par
value, at the close of business on April 24, 2002 are entitled to notice of and
to vote at the Meeting or any adjournment thereof. At the close of business on
April 24, 2002, there were 78,463,178 shares of common stock issued and
outstanding. Holders of record of common stock on April 24, 2002 will be
entitled to one vote per share on all matters to come before the Meeting. A list
of stockholders entitled to notice of and to vote at the Meeting will be made
available during regular business hours at the offices of Patterson-UTI Energy,
Inc., 4510 Lamesa Highway, Snyder, Texas 79549, from May 15, 2002 through May
28, 2002 and at the Meeting for inspection by any stockholder for any purpose
regarding the Meeting.
A quorum is necessary to transact business at the Meeting. A majority
of the shares of common stock outstanding on April 24, 2002 will constitute a
quorum. The shares held by each stockholder who signs and returns the enclosed
form of proxy or properly votes using the Internet or telephone will be counted
for purposes of determining the presence of a quorum at the Meeting.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Patterson-UTI's bylaws provide that the number of members of the Board
of Directors of Patterson-UTI shall be fixed either by amendment to the bylaws
or by resolution of the Board of Directors. Pursuant to Board resolution, the
size of the Board has been reduced from eleven members to nine. Spencer D.
Armour III and Vaughn E. Drum, both current members of the Board will not stand
for election at the Meeting. Directors are elected to serve until the next
annual meeting of stockholders or until their successors are elected and
qualified. Patterson-UTI's bylaws provide that the affirmative vote of a
plurality of the votes cast at the meeting at which a quorum is present is
required for the election of directors.
The enclosed form of proxy provides a means for you to either:
o vote "FOR" the election of the nominees to the Board of Directors
listed below,
o withhold authority to vote for one or more of the nominees, or
o withhold authority to vote for all of the nominees.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" ALL OF THE
NOMINEES, EACH OF WHOM CURRENTLY SERVES AS A DIRECTOR OF PATTERSON-UTI. Unless
you give contrary instructions in your proxy, your proxy will be voted "FOR" the
election of all of the nominees to the Board of Directors. If any nominee should
become unable or unwilling to accept nomination or election, the person acting
under the proxy will vote for the election of such other person as the Board of
Directors may recommend. However, the Board has no reason to believe that any of
the nominees will be unable or unwilling to serve if elected.
Four of the nominees were elected to Patterson-UTI's Board of Directors
on May 8, 2001 as a part of the merger on that date of UTI Energy Corp. ("UTI")
into Patterson-UTI (formerly "Patterson Energy, Inc."). These nominees are Mark
S. Siegel, Kenneth N. Berns, Curtis W. Huff and Nadine C. Smith. There are no
arrangements or understandings between any person and any of these four
directors or any of the other directors pursuant to which such director was
selected as a nominee for election at the Meeting. There are no family
relationships among any of the directors or executive officers of Patterson-UTI,
other than between Messrs. Talbott and Patterson, who are brothers-in-law.
2
Set forth below is the name, age and position followed by a brief
description of the business experience during at least the past five years of
each of the current directors and the nine nominees for election to the Board of
Directors.
NAME AGE POSITION
---- --- --------
Mark S. Siegel* 51 Chairman of the Board and Director
Cloyce A. Talbott* 66 Chief Executive Officer and Director
A. Glenn Patterson* 55 President, Chief Operating Officer and Director
Spencer D. Armour III 48 Vice President Corporate Sales, Contract
Drilling and Fluids Divisions and Director
Kenneth N. Berns* 42 Director
Stephen J. DeGroat* 53 Director
Vaughn E. Drum 56 Director
Robert C. Gist* 61 Director
Curtis W. Huff* 44 Director
Kenneth R. Peak* 56 Director
Nadine C. Smith* 44 Director
*Nominees for election to the Board of Directors.
Mark S. Siegel - Mr. Siegel has served as Chairman of the Board and as
a director of Patterson-UTI since May 8, 2001. Mr. Siegel served as Chairman of
the Board and as a director of UTI from 1995 to May 8, 2001. Mr. Siegel has been
President of REMY Investors & Consultants, Incorporated ("REMY Investors") since
1993. From 1992 to 1993, Mr. Siegel was President, Music Division, Blockbuster
Entertainment Corp. From 1988 through 1992, Mr. Siegel was an Executive Vice
President of Shamrock Holdings, Inc. and Managing Director of Shamrock Capital
Advisors, Incorporated. Mr. Siegel is also Chairman of the Board and a director
of Variflex Inc. and serves as a director of Discovery Laboratories, Inc. Mr.
Siegel holds a Bachelor of Arts from Colgate University and a J.D. from Boalt
Hall School of Law.
Cloyce A. Talbott - Mr. Talbott has served as a director of
Patterson-UTI since its incorporation in 1978 and as its Chief Executive Officer
since 1983. Mr. Talbott co-founded Patterson-UTI, served as Vice President from
1978 to 1983, and served as Chairman of the Board from 1983 to May 8, 2001. Mr.
Talbott received a Bachelor of Science degree in Petroleum Engineering in 1958
from Texas Tech University, Lubbock, Texas.
A. Glenn Patterson - Mr. Patterson has served as a director of
Patterson-UTI since its incorporation in 1978. Mr. Patterson co-founded
Patterson-UTI and has served as its President since 1978 and also as Chief
Operating Officer since 1983. Mr. Patterson received his Bachelor of Science
degree in Business in 1970 from Angelo State University, San Angelo, Texas.
Spencer D. Armour III - Mr. Armour has served as a director of
Patterson-UTI since July 1999 and as Vice President of Corporate Sales of
Patterson-UTI's contract drilling and fluids divisions since January 2002. Mr.
Armour founded Lone Star Mud, Inc. in 1986 and served as its President until its
acquisition by Patterson-UTI in January 1998. Mr. Armour served as the President
of Patterson-UTI's fluids division from January 1998 to January 2002. Mr. Armour
received a Bachelor of Science degree in Economics from the University of
Houston in 1977. Mr. Armour has 20 years experience in the oilfield service
business.
3
Kenneth N. Berns - Mr. Berns has served as a director of Patterson-UTI
since May 8, 2001 and served as a director of UTI from 1995 to May 8, 2001. Mr.
Berns has been an executive with REMY Investors since 1994. Prior to that time,
Mr. Berns was an executive at a real estate development company and at an
investment banking firm, and a senior manager in the financial advisory services
practice area of a national accounting firm. Mr. Berns is also a director of
Variflex Inc. Mr. Berns is a Certified Public Accountant and holds a Bachelors
Degree in Business Administration from San Diego State University and a Masters
Degree in Taxation from Golden Gate University.
Stephen J. DeGroat - Mr. DeGroat has served as a director of
Patterson-UTI since November 6, 2000. Mr. DeGroat has served as Chairman of
Jesup & Lamont, a privately held brokerage and investment banking firm based in
New York City since the merger in early 2002 of Broadmark Asset Management, a
registered investment advisor, into Jesup & Lamont. Prior to the merger with
Jesup & Lamont and for a period of more than five years, Mr. DeGroat served in
various capacities with Broadmark Asset Management, including President, Chief
Executive Officer and as a member of the management committee. Mr. DeGroat began
his career with Drexel Burnham Lambert in sales and, prior to forming Broadmark
Capital Corporation, Mr. DeGroat was a Principal and Manager of the New York
office of Gilford Securities, a regional investment bank. Throughout his career
in finance, Mr. DeGroat has managed public underwritings, private equity
placements, and merger and acquisition transactions. Mr. DeGroat is a graduate
of Fordham University where he received a Bachelor of Arts in Economics.
Vaughn E. Drum - Mr. Drum has served as a director of Patterson-UTI
since May 8, 2001 and served as President, Chief Executive Officer and as a
director of UTI from 1986 to May 8, 2001. From 1980 through November 1986, Mr.
Drum served in various capacities for UGI Development Company, a subsidiary of
UGI Corporation. Mr. Drum holds a Bachelor of Science in Petroleum Engineering
from Marietta College.
Robert C. Gist - Mr. Gist has served as a director of Patterson-UTI
since 1985. He was general legal counsel and advisor to Patterson-UTI from 1987
to May 8, 2001. Mr. Gist received a Bachelor of Science degree in Economics in
1962 and a law degree in 1965 from Southern Methodist University. He has been
self-employed as an attorney for more than five years and has over 20 years
experience in the oil and gas industry.
Curtis W. Huff - Mr. Huff has served as a director of Patterson-UTI
since May 8, 2001 and served as a director of UTI from 1997 to May 8, 2001. Mr.
Huff is the President and Chief Executive Officer of Grant Prideco, Inc., a
manufacturer of engineered oilfield tubular products, and has served in that
capacity since February 2001. From January 2000 to February 2001, Mr. Huff
served as Executive Vice President, Chief Financial Officer and General Counsel
of Weatherford International, Inc., a global oilfield service company. He served
as Senior Vice President and General Counsel of Weatherford from May 1998 to
January 2000. Prior to that time, Mr. Huff was a partner with the law firm of
Fulbright & Jaworski L.L.P., and held that position for more than five years.
Kenneth R. Peak - Mr. Peak has served as a director of Patterson-UTI
since November 6, 2000. Mr. Peak is Chairman, President, Chief Executive Officer
and Chief Financial Officer of Contango Oil & Gas Company. Contango explores for
and acquires oil and gas properties primarily in the onshore Gulf Coast and
offshore Gulf of Mexico regions. Prior to becoming President of Contango in
1999, Mr. Peak was the President of Peak Enernomics, Incorporated, a company
formed in 1990 and engaged in consulting activities to the oil and gas industry.
His energy career began in 1973 as a commercial banker in First Chicago's energy
group. In 1980, Mr. Peak became Treasurer of Tosco Corporation, and in 1982 he
became Chief Financial Officer of Texas International Company. His tenure at
Texas International Company included serving as President of TIPCO, the domestic
operating subsidiary of Texas International's oil and gas operations. Mr. Peak
received a Bachelor of Science in physics from Ohio University and a Masters of
Business Administration from Columbia University. He currently serves as a
director of NL Industries, Inc. and Cellxion, Inc.
4
Nadine C. Smith - Ms. Smith has served as a director of Patterson-UTI
since May 8, 2001 and served as a director of UTI from 1995 to May 8, 2001. Ms.
Smith is a private investor and business consultant. From August 2000 to
December 2001, Ms. Smith was President of Final Arrangements, LLC and CEO of
Arrange OnLine.com internet service providers. From April 2000 to August 2000,
Ms. Smith served as the President of Aegis Asset Management, Inc. Prior to April
2000, Ms. Smith was President and Chief Executive Officer of Enidan Capital
Corp., an investment company that makes equity investments in public and
privately held companies. Previously, Ms. Smith was an investment banker and
principal with NC Smith & Co. and The First Boston Corporation and a management
consultant with McKinsey & Co. Ms. Smith is a director of American Retirement
Corporation and American Southwest Holdings. Ms. Smith earned a bachelors degree
in economics from Smith College and a masters degree in business from Yale
University.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors met five times during the year ended December
31, 2001. Each director attended, in person or by telephone, at least 75% of all
meetings held by the Board for which such director was eligible and all meetings
of each committee for which such director was eligible.
The Board of Directors has an executive committee, an audit committee
and a compensation committee. The Board does not have a nominating or other
similar committee.
The executive committee, which currently is composed of Messrs. Siegel,
Talbott, Patterson and Berns, has the authority to act for the Board in all
matters arising between regular or special meetings of the Board of Directors.
The executive committee met informally on numerous occasions during the year
ended December 31, 2001.
The audit committee, which currently is composed of Messrs. Peak and
Gist, and Ms. Smith, selects, subject to Board of Directors approval, the
independent accountants to audit Patterson-UTI's books and records and considers
and acts upon accounting matters as they arise. The Board of Directors has
adopted a written charter for the audit committee, a copy of which is attached
to this proxy statement as Annex A. The audit committee met four times during
the year ended December 31, 2001. All members of the audit committee are
independent as that term is defined by the National Association of Securities
Dealers' listing standards.
The compensation committee, which currently is composed of Messrs. Huff
and DeGroat, and Ms. Smith, administers the employee stock option plan and
similar plans of Patterson-UTI and determines the annual compensation of the
executive officers and directors of Patterson-UTI. The compensation committee
met twice during the year ended December 31, 2001.
COMPENSATION OF DIRECTORS
Directors who are also employees of Patterson-UTI do not receive any
additional compensation for serving as a director or as a member of a committee
of the Board of Directors. All directors are reimbursed for reasonable
out-of-pocket expenses incurred in connection with attendance at Board of
Directors meetings and committee meetings.
Effective May 8, 2001, the compensation committee increased the
compensation that each non-employee director receives for serving on the Board
of Directors and the various committees to $24,000 annually. Previously, each
non-employee director received $12,000 annually as compensation as a director
and committee member.
5
Patterson-UTI maintains a Non-Employee Director Stock Option Plan (the
"Director Plan"). Under the Director Plan:
o each non-employee director receives options to purchase 15,000
shares upon becoming a director of Patterson-UTI, and options to
purchase 7,500 shares are automatically granted on the last
business day of each subsequent year in which such director
serves on the Board of Patterson-UTI;
o the exercise price of the options is the fair market value of
Patterson-UTI's common stock on the date of the grant;
o all options vest on the first anniversary of the option grant;
and
o all options expire five years from the date of grant.
On July 24, 2001, the compensation committee granted to each of Messrs.
Peak and DeGroat an option to purchase 12,000 shares of Patterson-UTI's common
stock. These options vested on November 6, 2001 and expire on November 5, 2005.
The exercise price of each of the options was $28.625 which was in excess of the
fair market value of Patterson-UTI's common stock on the date of grant. These
options were granted separately from the Director Plan.
PROPOSAL NO. 2
AMENDMENT TO 1997 LONG-TERM INCENTIVE PLAN
At the Meeting, the stockholders of Patterson-UTI will be asked to vote
on a proposal to approve an amendment to Patterson-UTI's Amended and Restated
1997 Long-Term Incentive Plan (the "1997 Plan") to increase the number of shares
of common stock authorized for issuance under the 1997 Plan. Approval of such
amendment requires the affirmative vote of the holders of a majority of the
shares of common stock that are present in person or by proxy and entitled to
vote at the Meeting. The amendment to the 1997 Plan increases the aggregate
number of shares of common stock available for grant under the 1997 Plan from
3,800,000 to 6,000,000.
The 1997 Plan was initially approved by the stockholders of UTI in
August 1997 and was assumed by Patterson-UTI as a part of its merger with UTI on
May 8, 2001. Options outstanding under the 1997 Plan at the time of the merger
became options to acquire Patterson-UTI common stock.
REASONS FOR THE AMENDMENT TO THE 1997 PLAN
The Board of Directors believes that the ability to grant stock-based
compensation to its employees is crucial to its continuing ability to attract
and retain qualified employees. Historically, the Board of Directors has relied
on stock option incentives as part of its compensation philosophy and structure
to recruit and retain certain key employees.
The Board of Directors believes that the 1997 Plan advances the best
interests of Patterson-UTI and its stockholders by attracting, retaining and
motivating key employees. The 1997 Plan provides for the grant of awards to
certain key employees including executive officers and employee directors,
thereby increasing the personal stake of such key employees in the continued
success and growth of Patterson-UTI. At present, there are approximately 130 key
employees eligible for grants under the 1997 Plan.
As of April 24, 2002, only 134,368 shares of common stock remained
available for grant under the 1997 Plan. The Board of Directors has determined
that an increase in the number of shares available for grant under the 1997 Plan
is necessary in order to continue to provide an adequate level of
performance-based incentives to Patterson-UTI's executive management and other
key employees and to
6
continue the Board of Directors' ongoing philosophy of utilizing stock-based
awards as part of Patterson-UTI's overall compensation structure. Therefore, the
Board of Directors has approved an amendment to the 1997 Plan to increase the
number of shares available for grant under the 1997 Plan by 2,200,000.
MATERIAL FEATURES OF THE 1997 PLAN
The material features of the 1997 Plan are as follows:
o It is administered by the compensation committee of the Board of
Directors.
o All employees, including officers and employee directors, are
eligible for awards.
o Although in addition to non-qualified stock options, the plan
allows for awards of Incentive Stock Options ("ISOs"), tandem and
independent stock appreciation rights, restricted stock and
performance awards, no such awards have been granted.
o The vesting schedule is set by the compensation committee,
however, typically 20% of the options vest after one year and the
remaining 80% vest in equal monthly installments over the next
four years.
o Options typically have a term of 10 years.
o Unless otherwise stated in the grant thereof, options will vest
upon a change in control as that term is defined in the 1997
Plan. Options granted to non-executive employees typically do not
vest upon a change in control.
o All options granted under the plan are granted with an exercise
price equal to or greater than the fair market value of
Patterson-UTI's common stock at the time the option is granted.
o The Board of Directors, at any time, may amend the terms of the
1997 Plan, subject to the stockholder approval requirements of
the National Association of Securities Dealers listing
requirements.
FEDERAL INCOME TAX CONSEQUENCES UPON ISSUANCE AND EXERCISE OF OPTIONS
Neither Patterson-UTI nor the optionee will recognize taxable income or
deduction for federal income tax purposes upon the award of a stock option.
The exercise of a non-ISO results in immediately taxable income to the
optionee under the Internal Revenue Code in an amount equal to the difference
between the option price and the market price on the date of exercise. For
employee optionees, this same amount is deductible by Patterson-UTI as
compensation.
The exercise of an ISO results in no tax consequences to Patterson-UTI.
Although the difference between the option price and the market price on the
date of exercise is not taxable to the optionee upon exercise, it is a "tax
preference item," which, under certain circumstances, may give rise to an
alternative minimum tax liability on the part of the optionee.
The sale by an employee, within one year, of stock acquired by the
exercise of an ISO will be deductible by Patterson-UTI as compensation in an
amount equal to the difference between the option price and the lesser of the
market price on the date of exercise or the net proceeds of the sale. The sale
of stock acquired through the exercise of an ISO held for more than one year
after exercise does not result in a deduction for Patterson-UTI.
7
SUMMARY INFORMATION PERTAINING TO ALL STOCK OPTION AND RELATED PLANS OF
PATTERSON-UTI
The following information is being provided to present a current status
of all Patterson-UTI's stock option plans and options granted thereunder as of
April 24, 2002 and December 31, 2001. For a more detailed description of the
stock option plans, see Note 10 of Patterson-UTI's audited financial statements
contained in its Annual Report on Form 10-K for the year ended December 31,
2001.
April 24, 2002 December 31, 2001
-------------- -----------------
Number of shares issuable upon exercise of outstanding
options(1) ...................................................... 5,793,342 6,596,292
Weighted-average exercise price of outstanding options .......... $ 11.29 $ 10.40
Number of shares remaining available for future issuances
under stock option
plans(2) ........................................................ 635,868 692,001
Weighted average remaining contracted life of outstanding
options (years) ................................................. 6.46 6.35
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(1) There have been no restricted stock awards, stock appreciation rights or
performance awards granted. There are no other stock options, warrants, or
convertible securities outstanding other than 452,000 warrants issued in
connection with acquisitions completed during 2000 and 2001.
(2) Includes 360,000 options issuable under the Non-Employee Director Plan,
134,368 options issuable under the 1997 Plan, and 141,500 options issuable under
the 2001 Plan at April 24, 2002.
ADDITIONAL INFORMATION REGARDING THE 1997 PLAN
As of April 17, 2002, the closing price of Patterson-UTI's common stock
on the NASDAQ National Market was $31.55 per share. Patterson-UTI receives no
additional consideration for granting the options under the 1997 Plan.
Patterson-UTI has not determined the number of options under the 1997 Plan that
will be granted in the future to eligible directors and nominees, executive
officers, officers as a group, or non-officer employees as a group as that
determination is subject to the discretion of the compensation committee of the
Board of Directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE
AMENDMENT TO THE 1997 PLAN. Approval of the amendment requires the affirmative
vote of the holders of a majority of the shares of common stock present in
person or by proxy and entitled to vote at the Meeting. If you do not vote
against or abstain from voting on the amendment to the 1997 Plan, your proxy
will be voted "FOR" approval of the amendment to the 1997 Plan. Abstentions will
be counted as shares entitled to vote on the proposal and will have the same
effect as a vote "AGAINST" the proposal. A broker non-vote will be counted for
purposes of establishing a quorum, but will not be treated as a share entitled
to vote on the proposal. This will have the effect of reducing the absolute
number of shares necessary to approve the proposal.
8
EXECUTIVE OFFICERS
Set forth below is the name, age and position followed by a brief
description of the business experience during at least the past five years for
each of the executive officers of Patterson-UTI who is not also a current
director.
NAME AGE POSITION
---- --- --------
Jonathan D. Nelson 33 Vice President, Chief Financial Officer, Secretary and
Treasurer
John E. Vollmer III 46 Senior Vice President - Corporate Development
Jonathan D. Nelson - Mr. Nelson has served as Vice President, Chief
Financial Officer, Secretary and Treasurer of Patterson-UTI since July 1999. Mr.
Nelson served as Controller of Patterson-UTI from May 1996 until July 1999.
Prior to his employment with Patterson-UTI, Mr. Nelson was a Senior Associate in
public accounting, of which approximately four years were spent with
PricewaterhouseCoopers LLP. Mr. Nelson received a Bachelor of Science degree in
Accounting in 1991 from Texas Tech University, Lubbock, Texas.
John E. Vollmer III - Mr. Vollmer has served as Senior Vice
President-Corporate Development since May 8, 2001. Mr. Vollmer served as Senior
Vice President, Chief Financial Officer, Secretary and Treasurer of UTI from
1998 to May 8, 2001. Mr. Vollmer was a financial consultant from October 1997
until joining UTI in 1998. From 1992 until October 1997, Mr. Vollmer served in a
variety of capacities at Blockbuster Entertainment, including Senior Vice
President-Finance and Chief Financial Officer of Blockbuster Entertainment's
Music Division. Mr. Vollmer holds a Bachelor of Arts in Accounting from Michigan
State University.
SUMMARY COMPENSATION TABLE
The following table sets forth information concerning compensation for
2001, 2000 and 1999 earned by or paid to the executive officers of Patterson-UTI
listed below:
o Patterson-UTI's Chief Executive Officer; and
o Patterson-UTI's four most highly compensated other executive
officers whose total annual salary and bonus exceeded $100,000 in
2001.
9
Annual Compensation
-----------------------------------------
Securities
Other Annual Underlying All Other
Compensation Compensation(1) Options Compensation(4)
Name and Principal Position Year Salary ($) Bonus ($) ($) Granted(#) ($)
--------------------------- ---- ---------- ------------ --------------- ---------- ---------------
Mark S. Siegel(2) 2001 160,577 300,000 -- 250,000 --
Chairman of the Board 2000 121,254 -- -- -- --
1999 100,000 -- -- 180,000 --
Cloyce A. Talbott(3) 2001 317,500 375,000 -- 250,000 5,250
Chief Executive Officer 2000 290,900 75,000 -- -- 5,250
1999 247,265 -- -- 100,000 --
A. Glenn Patterson 2001 317,500 375,000 -- 250,000 5,250
President and Chief 2000 290,900 75,000 -- -- 5,250
Operating Officer 1999 247,265 -- -- 135,000 --
Jonathan D. Nelson 2001 157,833 150,000 -- 125,000 5,250
Vice President, 2000 125,000 35,000 -- -- 5,100
Chief Financial Officer, 1999 99,170 -- -- 60,000 --
Secretary and Treasurer
John E. Vollmer III(2) 2001 204,558 150,000 -- 125,000 1,574
Senior Vice President - 2000 180,077 35,000 -- -- 3,762
Corporate Development 1999 150,000 25,000 -- 200,000 2,140
----------
(1) The aggregate amounts of perquisites and other personal benefits,
securities or property received by each of the executive officers does not
exceed either $50,000 or ten percent of that executive officer's combined
annual salary and bonus during the applicable year.
(2) These individuals were previously employed by UTI, which merged with and
into Patterson-UTI on May 8, 2001. Prior to the merger, Mr. Siegel served
as the Chairman of the Board of UTI, and Mr. Vollmer served as Senior
Vice-President, Chief Financial Officer, Secretary and Treasurer of UTI.
Mr. Siegel assumed the position of Chairman of the Board of Patterson-UTI
and Mr. Vollmer was named Senior Vice President - Corporate Development
upon the effective date of the merger. Amounts presented herein include
compensation received from UTI prior to the merger.
(3) Mr. Talbott resigned from the position of Chairman of the Board of
Patterson-UTI on May 8, 2001.
(4) Amounts set forth for 2001, 2000 and 1999 reflect Patterson-UTI's
contributions or other allocations to defined contribution plans.
The following table sets forth information regarding grants of stock
options to the executive officers listed in the Summary Compensation Table
during 2001:
OPTIONS GRANTED DURING FISCAL YEAR 2001
Potential Realizable Value at
Number of % of Total Exercise Assumed Annual Rates of
Securities Options Or Stock Price Appreciation for
Underlying Granted to Base Option Term
Options Employees in Price Expiration -----------------------------
Name Granted Fiscal Year ($/Sh) Date 5%($) 10% ($)
---- ---------- ------------ ---------- ---------- ---------- ----------
Mark S. Siegel 250,000(1) 11.89% $ 15.85 7/19/11 $2,491,995 $6,315,205
Cloyce A. Talbott 250,000(1) 11.89% $ 15.85 7/19/11 $2,491,995 $6,315,205
A. Glenn Patterson 250,000(1) 11.89% $ 15.85 7/19/11 $2,491,995 $6,315,205
Jonathan D. Nelson 125,000(1) 5.94% $ 15.85 7/19/11 $1,245,997 $3,157,602
John E. Vollmer III 20,000(2) 0.94% $ 15.85 7/19/11 $ 199,360 $ 505,216
105,000(3) 5.00% $ 16.12 10/22/11 $1,013,778 $2,569,113
----------
(1) These options were granted pursuant to the terms and conditions of the 1997
Plan. These options vest over a five (5) year period as follows: 20% on
July 20, 2002, and then in equal monthly installments through July 20,
2006.
(2) These options were granted pursuant to the terms and conditions of the 1997
Plan. These options are fully vested.
(3) These options were granted pursuant to the terms and conditions of the 1997
Plan. These options vest over a five (5) year period as follows: 20% on
October 23, 2002, and then in equal monthly installments through October
23, 2006.
10
The following table sets forth information concerning stock options
exercised in 2001 and stock options unexercised at December 31, 2001 for the
executive officers listed in the Summary Compensation Table:
AGGREGATED OPTION EXERCISES IN 2001
AND VALUE TABLE AT DECEMBER 31, 2001
Number of Unexercised Value of Unexercised
Shares Options at In-the-Money Options
Acquired December 31, 2001(2) at December 31, 2001(3)
on Value --------------------------- ------------------------------
Name Exercise Realized (1) Exercisable Unexercisable Exercisable Unexercisable
---- --------- ----------- ----------- ------------- ----------- -------------
Mark S. Siegel -- $ -- 1,280,000 250,000 $25,308,766 $ 2,157,500
Cloyce A. Talbott 60,000 $ 1,735,428 100,000 250,000 $ 1,460,500 $ 2,157,500
A. Glenn Patterson 174,240 $ 4,903,992 175,000 250,000 $ 1,815,250 $ 2,157,500
Jonathan D. Nelson 26,405 $ 744,982 43,595 125,000 $ 532,705 $ 1,078,750
John E. Vollmer III -- $ -- 348,400 105,000 $ 6,596,313 $ 863,000
----------
(1) Calculated by subtracting actual option price from market price at
respective dates of exercise and multiplying the difference by the number
of shares in each category.
(2) The total number of unexercised options held as of December 31, 2001,
separated between those options that were exercisable and those options
that were not exercisable.
(3) Calculated by subtracting the actual option exercise price from the market
price at December 28, 2001 ($24.48 per share) and multiplying the
difference by the number of shares in each category.
EMPLOYMENT CONTRACTS AND CHANGE-IN-CONTROL ARRANGEMENTS
Messrs. Siegel, Berns and Vollmer have employment arrangements which
entitle them to one year's salary upon termination of employment with
Patterson-UTI.
All unvested stock options granted to executive officers under the 1997
Plan vest upon a change in control as defined in the plan.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Curtis W. Huff, Stephen J. DeGroat and Nadine C. Smith serve as the
members of the compensation committee. Messrs. Huff and DeGroat, and Ms. Smith
have not served as officers or employees of Patterson-UTI or any of its
subsidiaries.
Prior to May 8, 2001, Robert C. Gist, Stephen J. DeGroat, Kenneth R.
Peak and Vincent A. Rossi, Jr. served as members of the compensation committee.
Except in his capacity as a manager of a subsidiary limited liability company of
Patterson-UTI for which he receives no compensation, Mr. Gist has not served as
an officer of Patterson-UTI or any of its subsidiaries, but was paid a monthly
retainer for legal and consulting services of $1,000 from 1993 until May 8,
2001. Patterson-UTI also paid premiums for Mr. Gist's family health insurance
coverage during the same period. Messrs. DeGroat, Peak and Rossi have not served
as officers or employees of Patterson-UTI or any of its subsidiaries. Mr. Rossi
ceased being a director of Patterson-UTI upon its merger with UTI.
CERTAIN TRANSACTIONS
In connection with the acquisition by REMY Capital Partners III, L.P.
("REMY Capital") of an ownership interest in UTI in March 1995, REMY Capital
succeeded to a registration rights agreement with UTI. As the successor in
interest to UTI, Patterson-UTI assumed this registration rights agreement
11
pursuant to which REMY Capital has the right to require Patterson-UTI to use its
best efforts to register shares held by REMY Capital under the Securities Act.
In the event that such rights are exercised in connection with a primary
offering proposed by Patterson-UTI (or a secondary offering with which
Patterson-UTI agrees to participate), REMY Capital would bear its pro rata share
of the costs of the offering, other than legal, accounting and printing costs,
all of which Patterson-UTI shall bear. In the event that REMY Capital elected to
exercise such rights other than in connection with an offering in which
Patterson-UTI participates, REMY Capital would bear all costs of the offering.
These rights continue so long as REMY Capital continues to own the common stock
that it acquired.
Mr. Siegel, Chairman of the Board of Patterson-UTI, is President and
sole stockholder of REMY Investors, which is the general partner of REMY
Capital. Mr. Berns, a director and employee of Patterson-UTI, is an employee of
REMY Investors.
As a part of the merger of Patterson-UTI and UTI, UTI's Board of
Directors agreed to reimburse REMY Capital for all filing fees and related
charges incurred by it in conjunction with its Hart Scott Rodino filing with the
Federal Trade Commission and the United States Justice Department which was
required by law and without which the merger could not be completed. As
successor in interest to UTI, Patterson-UTI reimbursed REMY Capital for $125,000
in Hart Scott Rodino filing fees and related charges.
During 2001, Patterson-UTI paid approximately $387,000 to an entity
owned by Thomas M. Patterson, a son of A. Glenn Patterson, the President and
Chief Operating Officer of Patterson-UTI for certain equipment and metal
fabrication services. He continues to be a vendor to Patterson-UTI in 2002.
Through October of 2001, Patterson-UTI leased a 1981 Beech King-Air 90
airplane owned by a company affiliated with Patterson-UTI's Chief Executive
Officer and President/Chief Operating Officer. Under the terms of the lease,
Patterson-UTI paid a monthly rental of $9,200 and its proportionate share of the
costs of fuel, insurance, taxes and maintenance of the aircraft. Patterson-UTI
paid approximately $212,583, $193,769 and $222,583 for the lease of the airplane
during 2001, 2000 and 1999, respectively. The airplane lease was terminated in
October 2001 when Patterson-UTI purchased its own airplane. Patterson-UTI
maintains a policy whereby Patterson-UTI is reimbursed for any personal use of
the airplane.
Certain of Patterson-UTI's affiliated persons have participated, either
individually or through entities they control, in oil and gas prospects or
properties in which Patterson-UTI has an interest. Affiliated persons are
directors, executive officers and key employees of Patterson-UTI and their
family members. These participations, which have been on a working interest
basis, have been in prospects or properties originated or acquired by
Patterson-UTI. At December 31, 2001, affiliated persons were working interest
owners in 132 of the 167 wells then being operated by Patterson-UTI. Sales of
working interests are made to reduce Patterson-UTI's economic risk in the
properties.
The following table sets forth production revenues received and joint
production costs paid by each of the affiliated persons during 2001 for all
wells operated by Patterson-UTI in which they have working interests. These
numbers do not necessarily represent their profits or losses from these
interests because the joint production costs do not include the parties' related
drilling and leasehold acquisition costs incurred prior to January 1, 2001.
12
YEAR ENDED DECEMBER 31,
2001
-----------------------------
PRODUCTION JOINT
REVENUES INTEREST
NAME RECEIVED(1) BILLINGS(2)
---- ----------- -----------
Cloyce A. Talbott ............................................... $ 198,087 $ 615,425
Anita Talbott(3) ................................................ 152,021 89,992
Jana Talbott, Executrix to the Estate of Steve Talbott(3) ....... 21,381 6,733
Stan Talbott(3) ................................................. 35,040 29,772
Lisa Beck and Stacy Talbott(3) .................................. 621,455 234,040
SSI Oil & Gas, Inc.(4) .......................................... 402,693 311,769
IDC Enterprises, Ltd.(5) ........................................ 6,330,781 2,728,884
SSSL, Ltd.(6)(9) ................................................ -- 554,516
T & H Exploration(7) ............................................ 327,234 69,463
---------- ----------
Subtotal ............................................... 8,088,692 4,640,594
---------- ----------
A. Glenn Patterson .............................................. 113,643 590,126
Glenn Patterson Family Limited Partnership(8)(9) ................ -- 554,510
Robert Patterson(8) ............................................. 32,716 16,974
Thomas M. Patterson(8) .......................................... 32,716 16,974
---------- ----------
Subtotal ............................................... 179,075 1,178,584
---------- ----------
Jonathan D. Nelson .............................................. 2,582 51,649
---------- ----------
Total .................................................. $8,270,349 $5,819,178
========== ==========
----------
(1) Revenues received for production of oil and natural gas, net of state
severance taxes.
(2) Includes leasehold costs, tangible equipment costs, intangible drilling
costs and lease operating expense billed during that period. All joint
interest billings have been paid on a timely basis.
(3) Anita Talbott is the wife of Cloyce A. Talbott. Stan Talbott, Lisa Beck and
Stacy Talbott are Mr. Talbott's adult children. Steve Talbott is the
deceased son of Mr. Talbott.
(4) SSI Oil & Gas, Inc. is beneficially owned 50% by Cloyce A. Talbott and
directly owned 50% by A. Glenn Patterson.
(5) IDC Enterprises, Ltd. is 50% owned by Cloyce A. Talbott and 50% owned by A.
Glenn Patterson.
(6) SSSL, Ltd. is a limited partnership whereby Cloyce A. Talbott is the
general partner.
(7) T & H Exploration is a company owned in part by Jana Talbott, Executrix to
the Estate of Steve Talbott.
(8) Robert and Thomas M. Patterson are A. Glenn Patterson's adult children. The
Glenn Patterson Family Limited Partnership is a partnership in which each
of Mr. Patterson's children shares equally and Mr. Patterson is the
manager.
(9) Revenues included in IDC Enterprises, Ltd. revenues.
COMPENSATION COMMITTEE REPORT
The compensation committee sets and administers the policies that
govern the annual compensation and long-term compensation of executive officers
and directors of Patterson-UTI. The compensation committee consists of Messrs.
Huff and DeGroat, and Ms. Smith, none of whom are employees of Patterson-UTI.
The compensation committee makes all decisions concerning compensation of
executive officers, determines the total amount of bonuses to be paid annually
and grants all awards of stock options under Patterson-UTI's incentive stock
option plans.
The compensation committee's policy is to offer executive officers
competitive compensation packages that will permit Patterson-UTI to attract and
retain highly qualified individuals and to motivate and reward such individuals
on the basis of Patterson-UTI's performance. At present, Patterson-UTI's
executive compensation package consists of base salary, cash bonus awards and
long-term incentive opportunities in the form of stock options and a 401(k)
plan. Executive salaries are reviewed by the compensation committee on an annual
basis and are set for individual executive officers based on subjective
evaluations of each individual's performance, Patterson-UTI's performance and a
comparison to salary ranges for executives of other companies in the oil and
natural gas industry with characteristics similar to those of Patterson-UTI.
This allows the compensation committee to set salaries in a manner that is both
competitive and reasonable within Patterson-UTI's industry.
Cash performance bonuses may be awarded on an annual basis by the
compensation committee. The use of a specific formula to evaluate management
performance is not employed because it is difficult
13
to define an appropriate formula and it restricts the flexibility of the
compensation committee. The compensation committee considers the achievements of
Patterson-UTI, specifically including earnings for the year and return on
stockholders' equity in determining appropriate levels for bonus awards.
The compensation of the Chief Executive Officer of Patterson-UTI is
determined in the same manner as the compensation for other executive officers
as described above. As a result, the compensation of the Chief Executive Officer
is largely dependent upon the overall performance of Patterson-UTI as well as a
comparison to compensation being paid by other comparable peer companies to
their chief executive officers. Mr. Talbott's base annual salary was increased
to $350,000 in July 2001. The salary increase is responsive to the greater
responsibilities of Mr. Talbott resulting from the doubling in size of
Patterson-UTI through its merger with UTI in May 2001. Mr. Talbott was also paid
a $375,000 bonus for 2001 in recognition of his efforts in connection with the
merger and as compensation for Patterson-UTI's outstanding performance in 2001.
In January 2002, along with other management and operational employees,
Mr. Talbott's salary was reduced 10% to $315,000 as a part of Patterson-UTI's
efforts to reduce its overall costs in response to the weakened industry
conditions.
It is the general policy of Patterson-UTI to review stock-based
compensation on an annual basis. Awards of stock-based compensation reflect the
Board's and compensation committee's desire to provide Patterson-UTI's employees
who have substantial responsibility for Patterson-UTI's management and growth
with additional incentives by increasing their proprietary interest in the
success of Patterson-UTI. The decision whether to grant stock options to any
particular employee is based upon a variety of factors, including position,
performance, current share and stock option ownership and the need to insure the
continued employment of the employee with Patterson-UTI. Grants of options to
purchase 2,103,500 shares of common stock were made to Patterson-UTI's employees
during 2001.
Section 162(m) of the Code imposes a limitation on deductions that can
be taken by a publicly held corporation for compensation paid to certain of its
executive officers. Under Section 162(m), a deduction is denied for compensation
paid in a tax year beginning on or after January 1, 1994, to the executive
officers listed in the Summary Compensation Table to the extent that such
compensation exceeds $1 million per individual. Stock option grants pursuant to
Patterson-UTI's employee benefit plans may be exempt from the deduction limit if
certain requirements are met. The Board of Directors and the compensation
committee has considered the effect of Section 162(m) on Patterson-UTI's
existing compensation program.
COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS:
Curtis W. Huff*
Stephen J. DeGroat
Nadine C. Smith
*Chairman
14
PERFORMANCE GRAPH
The following graph compares the cumulative stockholder return on the
common stock of Patterson-UTI, for the period from December 31, 1996 through
December 31, 2001, with the cumulative total return of the NASDAQ Market Index,
the Standard and Poors 500 Stock Index, the Oilfield Service Index and a
Patterson-UTI determined peer group. Patterson-UTI's peer group consists of Grey
Wolf, Inc., Helmerich & Payne, Inc., Key Energy Services, Inc., Nabors
Industries, Inc., Pioneer Drilling Co., Precision Drilling Corp., TMBR/SHARP
Drilling Inc., and Unit Corp. All of the companies in Patterson-UTI's peer group
are providers of land-based drilling services. The graph assumes investment of
$100 on December 31, 1996 and reinvestment of all dividends.
COMPARISON OF CUMULATIVE TOTAL RETURNS*
[GRAPH]
Basis
Description 1996 1997 1998 1999 2000 2001
----------- ----- ---- ---- ---- ---- ----
($) ($) ($) ($) ($) ($)
Patterson-UTI Energy, Inc. 100.00 300.49 63.11 201.94 578.64 362.10
NASDAQ Market Index 100.00 122.32 172.52 304.29 191.25 152.46
Peer Group Index 100.00 150.94 64.78 122.44 234.36 149.80
S&P 500 Index 100.00 133.36 171.47 207.56 188.66 166.24
Oilfield Service Index (OSX) 100.00 156.96 80.30 115.38 156.44 110.34
The foregoing graph is based on historical data and is not necessarily
indicative of future performance. This graph shall not be deemed to be
"soliciting material" or to be "filed" with the Securities and Exchange
Commission or subject to the Regulations of 14A or 14C under the Exchange Act or
to the liabilities of Section 18 under such act.
15
SECURITY OWNERSHIP OF PRINCIPAL
STOCKHOLDERS AND MANAGEMENT
The following table sets forth, as of April 24, 2002, the stock
ownership of the executive officers, directors and Board nominees individually,
all directors, Board nominees and executive officers as a group and each person
known by Patterson-UTI to be the beneficial owner of more than 5% of common
stock.
AMOUNT AND
NATURE OF
NAME OF BENEFICIAL PERCENT
BENEFICIAL OWNER OWNERSHIP OF CLASS
---------------- ----------- --------
Other Beneficial Owners:
REMY Capital Partners III, L.P
1801 Century Park East, Suite 1111
Los Angeles, CA 90067 ........................................................... 4,729,524(1) 6.0%
REMY Investors & Consultants, Incorporated
1801 Century Park East, Suite 1111
Los Angeles, CA 90067 ........................................................... 4,729,524(1) 6.0%
Directors, Board nominees and Executive Officers Listed in Summary
Compensation Table:
Mark S. Siegel .................................................................... 6,009,524(1) 7.7%
Cloyce A. Talbott ................................................................. 618,566(2) *
A. Glenn Patterson ................................................................ 476,600(2) *
Vaughn E. Drum .................................................................... 442,400(3) *
Kenneth N. Berns .................................................................. 290,000(4) *
Curtis W. Huff .................................................................... 37,500(3) *
Nadine C. Smith ................................................................... 41,500(3) *
Robert C. Gist .................................................................... 35,386(3) *
Spencer D. Armour III ............................................................. 33,400(5) *
Stephen J. DeGroat ................................................................ 24,100(3) *
Kenneth R. Peak ................................................................... 20,000(3) *
Jonathan D. Nelson ................................................................ 93,500(5) *
John E. Vollmer III ............................................................... 348,400(5) *
--------- *
All directors, Board nominees and executive officers as a group (13 persons) 8,470,876(6) 10.8%
=========
----------
* indicates less than 1.0%
(1) The common stock beneficially owned by REMY Investors, which is the general
partner of REMY Capital, includes the 4,729,524 shares of common stock
owned by REMY Capital. The common stock beneficially owned by Mr. Siegel,
who is the President and sole stockholder of REMY Investors, includes the
4,729,524 shares of common stock beneficially owned by REMY Investors as
well as presently exercisable stock options held by Mr. Siegel to purchase
950,000 shares of common stock, but does not include 250,000 shares
underlying stock options held by Mr. Siegel, which options are not
presently exercisable and will not become exercisable within sixty days.
(2) Includes shares underlying presently exercisable stock options held by Mr.
Talbott to purchase 100,000 shares and presently exercisable stock options
held by Mr. Patterson to purchase 175,000 shares. Does not include shares
underlying stock options held by Messrs. Talbott and Patterson to purchase
250,000 shares each that are not presently exercisable and will not become
exercisable within sixty days.
(3) Includes presently exercisable stock options owned by Mr. Drum to purchase
70,000 shares; by Mr. Huff to purchase 37,500 shares; by Mr. Gist to
purchase 16,000 shares; by Messrs. DeGroat and Peak to purchase 20,000
shares each; and by Ms. Smith to purchase 22,500 shares. Does not include
7,500 shares underlying stock options held by Messrs. Drum, Huff, Gist,
DeGroat, Peak and Ms. Smith that are not presently exercisable and will not
become exercisable within sixty days. Mr. Drum shares voting and investment
power with respect to 297,000 of the shares he beneficially owns.
(4) Includes presently exercisable stock options owned by Mr. Berns to purchase
260,000 shares. Does not include 125,000 shares underlying options that are
not presently exercisable and will not become exercisable within sixty days
and does not
16
include shares of common stock beneficially owned by REMY Investors by whom
Mr. Berns is employed. Mr. Berns disclaims beneficial ownership of such
shares beneficially owned by REMY Investors.
(5) Includes presently exercisable stock options owned by Mr. Armour to
purchase 32,400 shares, by Mr. Nelson to purchase 43,595 shares and by Mr.
Vollmer to purchase 348,400 shares. Does not include 20,000 shares
underlying stock options held by Mr. Armour, 125,000 shares underlying
stock options held by Mr. Nelson and 105,000 shares underlying stock
options held by Mr. Vollmer that are not presently exercisable and will not
become exercisable within sixty days.
(6) Includes presently exercisable options to purchase 2,095,395 shares of
common stock. Does not include options to purchase 1,170,000 shares owned
by such individuals that are not exercisable within sixty days.
Except as stated herein, each stockholder has sole voting and investment power
with respect to common stock included in the above table. There are no
arrangements known to Patterson-UTI which may result in a change in control.
AUDIT COMMITTEE REPORT AND FEES PAID TO
INDEPENDENT ACCOUNTANTS
AUDIT COMMITTEE REPORT
Patterson-UTI's audit committee has reviewed and discussed with
management Patterson-UTI's audited financial statements as of and for the year
ended December 31, 2001.
The audit committee has discussed with the independent auditors the
matters required to be discussed by Statement on Auditing Standards No. 61,
Communication with Audit Committees, as amended, by the Auditing Standards Board
of the American Institute of Certified Public Accountants.
The audit committee has received and reviewed the written disclosures
and the letter from the independent auditors required by Independence Standard
No. 1, Independence Discussions with Audit Committees, as amended, by the
Independence Standards Board, and has discussed with the auditors the auditors'
independence.
Based on the reviews and discussions referred to above, the audit
committee recommended to the Board of Directors that the financial statements
referred to above be included in Patterson-UTI's Annual Report on Form 10-K for
the year ended December 31, 2001.
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS:
Kenneth R. Peak*
Robert C. Gist
Nadine C. Smith
*Chairman
AUDIT FEES; FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES; AND
ALL OTHER FEES
During 2001, Patterson-UTI paid to PricewaterhouseCoopers LLP $194,046
in fees relating to the audit of its 2001 financial statements and reviews of
its Form 10-Qs for fiscal year 2001, no fees for financial information systems
design and implementation, and $529,282 in non-audit related fees.
17
Fees paid during the year for non-audit related services included the
following:
o $228,000 for Federal and state income tax filings compliance and
related matters,
o $124,000 related to the merger with UTI,
o $115,000 associated with the restructuring of Patterson-UTI's
corporate structure, and
o $62,000 for other services.
The audit committee considered whether the provision of non-audit
services is compatible with maintaining the independence of Patterson-UTI's
outside auditors PricewaterhouseCoopers LLP.
PROPOSAL NO. 3
RATIFICATION OF INDEPENDENT ACCOUNTANTS
The Board of Directors voted to engage PricewaterhouseCoopers LLP as
independent accountants to audit the financial statements of Patterson-UTI for
the fiscal year ending December 31, 2002, and directed that such engagement be
submitted to the stockholders of Patterson-UTI for ratification. In recommending
ratification by the stockholders of such engagement, the Board of Directors is
acting upon the recommendation of the audit committee, which has satisfied
itself as to the firm's professional competence and standing. Although
ratification by stockholders of the engagement of PricewaterhouseCoopers LLP is
not required by Delaware corporate law or Patterson-UTI's Restated Certificate
of Incorporation or bylaws, management feels a decision of this nature should be
made with the consideration of Patterson-UTI's stockholders. If stockholder
ratification is not received, management will reconsider the engagement.
It is expected that one or more representatives of
PricewaterhouseCoopers LLP will be present at the Meeting and will be given the
opportunity to make a statement if they so desire. It also is expected that the
representatives will be available to respond to appropriate questions from the
stockholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF
PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT ACCOUNTANTS. Ratification of the
selection of PricewaterhouseCoopers LLP requires the affirmative vote of the
holders of a majority of the shares of common stock present in person or by
proxy, and entitled to vote at the Meeting. If you do not vote against or
abstain from voting on the ratification of the selection of
PricewaterhouseCoopers LLP, your proxy will be voted "FOR" such ratification.
Abstentions will be counted as shares entitled to vote on the proposal and will
have the same effect as a vote "AGAINST" the proposal. A broker non-vote will be
counted for purposes of establishing a quorum, but will not be treated as a
share entitled to vote on the proposal. This will have the effect of reducing
the absolute number of shares necessary to approve the proposal.
18
OTHER MATTERS
SECTION 16(a) BENEFICIAL OWNERSHIP OF REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires Patterson-UTI's officers and directors, and persons who own more than
10% of a registered class of Patterson-UTI's equity securities, to file reports
of ownership and changes in ownership with the SEC. Each of these persons is
required by SEC regulation to furnish Patterson-UTI with copies of Section 16(a)
filings.
Based solely on its review of copies of such forms received by it,
Patterson-UTI believes that, during the year ended December 31, 2001, its
officers, directors, and greater than 10% beneficial owners other than Messrs.
Talbott, Patterson, Drum, Nelson, Peak and DeGroat complied with all applicable
filing requirements. Messrs. Peak and DeGroat failed to file initial statements
of ownership of Patterson-UTI on a timely basis. Messrs. Nelson and Talbott each
failed to report on a timely basis one transaction both of which were exempt
from liability under Section 16; and Messrs. Patterson and Drum each failed to
report on a timely basis two transactions all of which were exempt from
liability under Section 16.
OTHER BUSINESS
As of the date of this Proxy Statement, management of Patterson-UTI was
not aware of any matter to be presented at the Meeting other than as set forth
herein. If any other matters are properly brought before the Meeting, however,
the shares represented by valid proxies will be voted with respect to such
matters in accordance with the judgment of the persons voting them.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS FOR NEXT ANNUAL MEETING
Any proposal by a stockholder to be presented at Patterson-UTI's 2003
annual meeting of stockholders must be received by Patterson-UTI no later than
December 26, 2002, in order to be eligible for inclusion in Patterson-UTI's
proxy statement and proxy used in connection with the 2003 annual meeting.
ANNUAL REPORT
You are referred to Patterson-UTI's annual report to stockholders with
a copy of its Annual Report on Form 10-K for the year ended December 31, 2001,
filed with the Securities and Exchange Commission, enclosed herewith for your
information. The annual report to stockholders is not incorporated in this proxy
statement and is not to be considered part of the soliciting material.
19
ANNEX A
PATTERSON-UTI ENERGY, INC.
AUDIT COMMITTEE
OF THE
BOARD OF DIRECTORS
CHARTER*
PURPOSE
The Audit Committee shall provide assistance to the corporate directors
in fulfilling their responsibility to oversee management's conduct of the
Corporation's financial reporting progress including review of the financial
reports and other financial information provided by the Corporation to the
public and governmental and regulatory bodies, the Corporation's system of
internal accounting, the Corporation's financial controls, and the annual
independent audit of the Corporation's financial statements.
In discharging its role, the Audit Committee is empowered to
investigate any matter brought to its attention, with full access to all books,
records, facilities and personnel to the Corporation and the power to retain
outside counsel, auditors or other experts for this purpose. The Board and the
Audit Committee are in place to represent the Corporation's stockholders; and,
accordingly, the independent accountants are ultimately accountable to the Board
through the Audit Committee.
COMPOSITION
The Audit Committee shall be comprised of three or more directors as
determined by the Board, each of whom shall be independent directors, and free
from any relationship that, in the opinion of the Board, would interfere with
the exercise of his or her independent judgment as a member of the Audit
Committee. All members of the Audit Committee shall have a working familiarity
with basic finance and accounting practices, and at least one member of the
Audit Committee shall have accounting or related financial management expertise.
Audit Committee members may enhance their familiarity with finance and
accounting by participating in educational programs conducted by the Corporation
or an outside consultant.
The members of the Audit Committee shall be elected by the Board at the
annual organizational meeting of the Board or until their successors shall be
duly elected and qualified. Unless a Chairperson is elected by the full Board,
the members of the Audit Committee may designate a Chairperson by majority vote
of the full Audit Committee membership.
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* As amended and restated effective February 8, 2002
A-1
MEETINGS
The Audit Committee shall meet at least four times annually, or more
frequently as circumstances dictate. As part of its job to foster open
communication, the Audit Committee should meet at least annually with
management, including the Chief Financial Officer, and the independent
accountants separately to discuss any matters that the Audit Committee or each
of these groups believes should be discussed privately. In addition, the Audit
Committee or at least its Chairperson should meet with the independent
accountants and management quarterly to review the Corporation's financials
consistent with Paragraph number 4 below.
RESPONSIBILITIES AND DUTIES
The Audit Committee's job is one of review and it recognizes that the
Corporation's management is responsible for preparing the Corporation's
financial statements and that the independent accountants are responsible for
auditing those financial statements. Additionally, the Audit Committee
recognizes that financial management and the independent auditors have more
time, knowledge, and detailed information concerning the Corporation than do
Audit Committee members. Consequently, in performing its functions, the Audit
Committee is not providing any expert or special assurance as to the
Corporation's financial statements or any professional certification as to the
independent accountants' work.
The following functions will be the common recurring activities of the
Audit Committee. These functions are set forth as a guide with the understanding
that the Audit Committee may diverge from this guide as appropriate given the
circumstances.
DOCUMENTS/REPORTS REVIEW
1. Review and reassess, at least annually, the adequacy of this
Charter. Make recommendations to the Board, as conditions
dictate, to update this Charter.
2. Review with management and the independent accountants the
Corporation's audited financial statements, including a
discussion with the independent accountants of the matters
required to be discussed by Statement of Auditing Standards No.
61 ("SAS No. 61").
3. Review with management and the independent accountants the
interim financial results prior to the release of earnings and
filing of the Quarterly Report on Form 10-Q, and including a
discussion with the independent accountants of the matters to be
discussed by SAS No. 61. The Chairperson of the Audit Committee
may represent the entire Audit Committee for purposes of this
review.
4. Review with management and independent accountants, the quality
and adequacy of the Corporation's internal controls.
A-2
INDEPENDENT ACCOUNTANTS
5. Review the performance of the independent accountants and make
recommendations to the Board regarding the appointment or
termination of the independent accountants. The Audit Committee
and the Board have the ultimate authority and responsibility to
select, evaluate and, where appropriate, replace the outside
auditor.
6. Oversee independence of the accountants by:
o receiving from the independent accountants, on an annual
basis, a formal written statement delineating all
relationships between the accountants and the Corporation
consistent with Independence Standards Board Standard 1 ("ISB
No. 1");
o reviewing, and actively discussing with the Board, if
necessary, and the independent accountants, on a periodic
basis, any disclosed relationships or services between the
independent accountants and the Corporation or any other
disclosed relationships or services that may impact the
objectivity and independence of the independent accountants;
and
o recommending, if necessary, that the Board take appropriate
action in response to the independent accountant's report to
satisfy itself of the accountant's independence.
7. Based on the review and discussions referred to in Paragraphs
numbered 2 and 6 above, the Audit Committee shall determine
whether to recommend to the Board that the Corporation's audited
financial statements be included in the Corporation's Annual
Report on Form 10-K for the last fiscal year for filing with the
Securities and Exchange Commission.
FINANCIAL REPORTING PROCESS
8. In conjunction with the independent accountants and the Chief
Financial Officer, review the integrity of the Corporation's
financial reporting processes, both internal and external.
9. Consider and approve, if appropriate, major changes to the
Corporation's auditing and accounting principles and practices as
suggested by the independent accountants, management, or the
internal auditing department.
10. Establish regular systems of reporting to the Audit Committee by
each of management, the independent accountants and the internal
auditors regarding any significant judgments made in management's
preparation of the financial statements and any significant
difficulties encountered during the course of the review or
audit, including any restrictions on the scope of the work or
access to required information.
11. Review any significant disagreement among management and the
independent accountants or the internal auditing department in
connection with the preparation of the financial statements.
A-3
LEGAL COMPLIANCE/GENERAL
12. Review with the Corporation's counsel, any legal matter than
could have a significant impact on the Corporation's financial
statements.
13. Report through its Chairperson to the Board following meetings of
the Audit Committee.
14. Maintain minutes or other records of meetings and activities of
the Audit Committee.
While the Audit Committee has the responsibilities and powers set forth
in this Charter, it is not the duty of the Audit Committee to plan or conduct
audits or to determine that the Company's financial statements are complete and
accurate and are in accordance with generally accepted accounting principles.
This is the responsibility of management and the independent accountants. Nor is
it the duty of the Audit Committee to conduct investigations, to resolve
disagreements, if any, between management and the independent accountants.
A-4
This appendix is filed with the Securities and Exchange Commission
pursuant to Instruction 3 to Item 10 of Schedule 14a. It was not part of the
Patterson-UTI Energy, Inc. Proxy Statement and was not otherwise provided to the
stockholders of Patterson-UTI Energy, Inc. as a part thereof.
PATTERSON-UTI ENERGY, INC.
AMENDED AND RESTATED
1997 LONG-TERM INCENTIVE PLAN
ARTICLE I: GENERAL
SECTION 1.1 Purpose of the Plan. This Amended and Restated Long-Term
Incentive Plan (the "Plan") of Patterson-UTI Energy, Inc. (the "Company") amends
and restates in its entirety the Company's 1997 Long-Term Incentive Plan to
reflect the three-for-one stock dividend paid to stockholders of UTI Energy
Corp., a predecessor of the Company, on September 5, 1997. The Plan is intended
to advance the best interests of the Company, its subsidiaries and its
stockholders in order to attract, retain and motivate key employees by providing
them with additional incentives through (i) the grant of options ("Options") to
purchase shares of Common Stock, par value $.01 per share, of the Company
("Common Stock"), (ii) the grant of stock appreciation rights ("Stock
Appreciation Rights"), (iii) the award of shares of restricted Common Stock
("Restricted Stock") and (iv) the award of units payable in cash or shares of
Common Stock based on performance ("Performance Awards"), thereby increasing the
personal stake of such key employees in the continued success and growth of the
Company.
SECTION 1.2 Administration of the Plan. (a) The Plan shall be
administered either by the full Board of Directors of the Company (the "Board of
Directors") or by the Compensation Committee or other designated committee of
the Board of Directors. The Board of Directors or such committee is referred to
herein as the "Committee". The Committee shall have authority to interpret
conclusively the provisions of the Plan, to adopt such rules and regulations for
carrying out the Plan as it may deem advisable, to decide conclusively all
questions of fact arising in the application of the Plan, to establish
performance criteria in respect of Awards (as defined herein) under the Plan, to
certify that Plan requirements have been met for any participant in the Plan, to
submit such matters as it may deem advisable to the Company's stockholders for
their approval, and to make all other determinations and take all other actions
necessary or desirable for the administration of the Plan. The Committee is
expressly authorized to adopt rules and regulations limiting or eliminating its
discretion in respect of certain matters as it may deem advisable to comply with
or obtain preferential treatment under any applicable tax or other law rule, or
regulation. All decisions and acts of the Committee shall be final and binding
upon all affected Plan participants.
(b) The Committee shall designate the eligible employees, if any, to be
granted Awards and the type and amount of such Awards and the time when Awards
will be granted. All Awards granted under the Plan shall be on the terms and
subject to the conditions determined by the Committee consistent with the Plan.
1
SECTION 1.3 Eligible Participants. Key employees, including officers
and directors, of the Company and its subsidiaries (all such subsidiaries being
referred to as "Subsidiaries") shall be eligible for Awards under the Plan.
SECTION 1.4 Awards Under the Plan. Awards to key employees may be in
the form of (i) Options, (ii) Stock Appreciation Rights, which may be issued
independent of or in tandem with Options, (iii) shares of Restricted Stock, (iv)
Performance Awards, or (v) any combination of the foregoing (collectively,
"Awards").
SECTION 1.5 Shares Subject to the Plan. Initially, the aggregate number
of shares of Common Stock that may be issued under the Plan shall be 600,000,
subject to adjustment as provided in Section 5.2 of the Plan. Shares distributed
pursuant to the Plan may consist of authorized but unissued shares or treasury
shares of the Company, as shall be determined from time to time by the Board of
Directors.
If any Award under the Plan shall expire, terminate or be canceled
(including cancellation upon an Option holder's exercise of a related Stock
Appreciation Right) for any reason without having been exercised in full, or if
any Award shall be forfeited to the Company, the unexercised or forfeited Award
shall not count against the above limits and shall again become available for
Awards under the Plan (unless the holder of such Award received dividends or
other economic benefits with respect to such Award, which dividends or other
economic benefits are not forfeited, in which case the Award shall count against
the above limits). Shares of Common Stock equal in number to the shares
surrendered in payment of the option price, and shares of Common Stock which are
withheld in order to satisfy Federal, state or local tax liability, shall count
against the above limits. Only the number of shares of Common Stock actually
issued upon exercise of a Stock Appreciation Right shall count against the above
limits, and any shares which were estimated to be used for such purposes and
were not in fact so used shall again become available for Awards under the Plan.
Cash exercises of Stock Appreciation Rights and cash settlement of other Awards
will not count against the above limits.
The aggregate number of shares of Common Stock subject to Options or
Stock Appreciation Rights that may be granted to any one participant in any one
year under the Plan shall be 300,000, subject to adjustment as provided in
Section 5.2 of the Plan. The aggregate number of shares of Common Stock that may
be granted to any one participant in any one year in respect of Restricted Stock
shall be 300,000, subject to adjustment as provided in Section 5.2 of the Plan.
The aggregate number of shares of Common Stock that may be received by any one
participant in any one year in respect of a Performance Award shall be 300,000,
subject to adjustment as provided in Section 5.2 of the Plan, and the aggregate
amount of cash that may be received by any one participant in any one year in
respect to a Performance Award shall be $500,000.
The total number of Awards (or portions thereof) settled in cash under
the Plan, based on the number of shares covered by such Awards (e.g., 100 shares
for a Stock Appreciation Right with respect to 100 shares), shall not exceed a
number equal to (i) the number of shares initially available for issuance under
the Plan plus (ii) the number of shares that have become available for issuance
under the Plan pursuant to the first paragraph of this Section 1.5.
2
The aggregate number of shares of Common Stock that are available under
the Plan for Options granted in accordance with Section 2.4(i) ("ISOs") is
600,000, subject to adjustment as provided in Section 5.2 of the Plan.
SECTION 1.6 Other Compensation Programs. Nothing contained in the Plan
shall be construed to preempt or limit the authority of the Board of Directors
to exercise its corporate rights and powers, including, but not by way of
limitation, the right of the Board of Directors (i) to grant incentive awards
for proper corporate purposes otherwise than under the Plan to any employee,
officer, director or other person or entity or (ii) to grant incentive awards
to, or assume incentive awards of, any person or entity in connection with the
acquisition (whether by purchase, lease, merger, consolidation or otherwise) of
the business or assets (in whole or in part) of any person or entity.
ARTICLE II: STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
SECTION 2.1 Terms and Conditions of Options. Subject to the following
provisions, all Options granted under the Plan to employees of the Company and
its Subsidiaries shall be in such form and shall have such terms and conditions
as the Committee, in its discretion, may from time to time determine consistent
with the Plan.
(a) Option Price. The option price per share shall be determined by the
Committee, except that in the case of an Option granted in accordance with
Section 2.4(i) the option price per share shall not be less than the fair market
value of a share of Common Stock (as determined by the Committee) on the date
the Option is granted (other than in the case of substitute or assumed Options
to the extent required to qualify such Options for preferential tax treatment
under the Code as in effect at the time of such grant).
(b) Term of Option. The term of an Option shall be determined by the
Committee, except that in the case of an ISO the term of the Option shall not
exceed ten years from the date of grant, and, notwithstanding any other
provision of this Plan, no Option shall be exercised after the expiration of its
term.
(c) Exercise of Options. Options shall be exercisable at such time or
times and subject to such terms and conditions as the Committee shall specify in
the Option grant. Unless the Option grant specifies otherwise, the Committee
shall have discretion at any time to accelerate such time or times and otherwise
waive or amend any conditions in respect of all or any portion of the Options
held by any optionee. An Option may be exercised in accordance with its terms as
to any or all shares purchasable thereunder.
(d) Payment for Shares. The Committee may authorize payment for shares
as to which an Option is exercised to be made in cash, shares of Common Stock, a
combination thereof, by "cashless exercise" or in such other manner as the
Committee in its discretion may provide.
(e) Stockholder Rights. The holder of an Option shall, as such, have
none of the rights of a stockholder.
3
(f) Termination of Employment. The Committee shall have discretion to
specify in the Option grant, or, with the consent of the optionee, an amendment
thereof, provisions with respect to the period, not extending beyond the term of
the Option, during which the Option may be exercised following the optionee's
termination of employment.
SECTION 2.2 Stock Appreciation Rights in Tandem with Options. (a) The
Committee may, either at the time of grant of an Option or at any time during
the term of the Option, grant Stock Appreciation Rights ("Tandem SARs") with
respect to all or any portion of the shares of Common Stock covered by such
Option. A Tandem SAR may be exercised at any time the Option to which it relates
is then exercisable, but only to the extent the Option to which it relates is
exercisable, and shall be subject to the conditions applicable to such Option.
When a Tandem SAR is exercised, the Option to which it relates shall cease to be
exercisable to the extent of the number of shares with respect to which the
Tandem SAR is exercised. Similarly, when an Option is exercised, the Tandem SARs
relating to the shares covered by such Option exercise shall terminate. Any
Tandem SAR which is outstanding on the last day of the term of the related
Option (as determined pursuant to Section 2.1(b)) shall be automatically
exercised on such date for cash without any action by the optionee.
(b) Upon exercise of a Tandem SAR, the holder shall receive, for each
share with respect to which the Tandem SAR is exercised, an amount (the
"Appreciation") equal to the difference between the option price per share of
the Option to which the Tandem SAR relates and the fair market value (as
determined by the Committee) of a share of Common Stock on the date of exercise
of the Tandem SAR. The Appreciation shall be payable in cash, Common Stock, or a
combination of both, at the option of the Committee, and shall be paid within 30
days of the exercise of the Tandem SAR.
SECTION 2.3 Stock Appreciation Rights Independent of Options. Subject
to the following provisions, all Stock Appreciation Rights granted independent
of Options ("Independent SARs") under the Plan to employees of the Company and
its Subsidiaries shall be in such form and shall have such terms and conditions
as the Committee, in its discretion, may from time to time determine consistent
with the Plan.
(a) Exercise Price. The exercise price per share shall be determined by
the Committee on the date the Independent SAR is granted.
(b) Term of Independent SAR. The term of an Independent SAR shall be
determined by the Committee, and, notwithstanding any other provision of this
Plan, no Independent SAR shall be exercised after the expiration of its term.
(c) Exercise of Independent SARs. Independent SARs shall be exercisable
at such time or times and subject to such terms and conditions as the Committee
shall specify in the Independent SAR grant. Unless the Independent SAR grant
specifies otherwise, the Committee shall have discretion at any time to
accelerate such time or times and otherwise waive or amend any conditions in
respect of all or any portion of the Independent SARs held by any participant.
Upon exercise of an Independent SAR, the holder shall receive, for each share
specified in the Independent SAR grant, an amount (the "Appreciation") equal to
the difference between the
4
exercise price per share specified in the Independent SAR grant and the fair
market value (as determined by the Committee) of a share of Common Stock on the
date of exercise of the Independent SAR. The Appreciation shall be payable in
cash, Common Stock, or a combination of both, at the option of the Committee,
and shall be paid within 30 days of the exercise of the Independent SAR.
(d) Stockholder Rights. The holder of an Independent SAR shall, as
such, have none of the rights of a stockholder.
(e) Termination of Employment. The Committee shall have discretion to
specify in the Independent SAR grant, or, with the consent of the holder, an
amendment thereof, provisions with respect to the period, not extending beyond
the term of the Independent SAR, during which the Independent SAR may be
exercised following the holder's termination of employment.
SECTION 2.4 Statutory Options. Subject to the limitations on Option
terms set forth in Section 2.1, the Committee shall have the authority to grant
(i) ISOs within the meaning of Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code"), and (ii) Options containing such terms and conditions
as shall be required to qualify such Options for preferential tax treatment
under the Code as in effect at the time of such grant, including, if then
applicable, limits with respect to minimum exercise price, duration and amounts
and special limitations applicable to any individual who, at the time the Option
is granted, owns stock possessing more than 10% of the total combined voting
power of all classes of stock of the Company or any affiliate. Options granted
pursuant to this Section 2.4 may contain such other terms and conditions
permitted by Article II of this Plan as the Committee, in its discretion, may
from time to time determine (including, without limitation, provision for Stock
Appreciation Rights), to the extent that such terms and conditions do not cause
the Options to lose their preferential tax treatment. If an Option intended to
be an ISO ceases or is otherwise not eligible to be an ISO, such Option (or
portion thereof necessary to maintain the status of the remaining portion of the
Option as an ISO) shall remain valid but be treated as an Option other than an
ISO.
SECTION 2.5 Change of Control. Notwithstanding the exercisability
schedule governing any Option or Stock Appreciation Right, upon the occurrence
of a Change of Control (as defined in Section 5.9) all Options and Stock
Appreciation Rights outstanding at the time of such Change of Control and held
by participants who are employees of the Company or its subsidiaries at the time
of such Change of Control shall (unless specifically provided otherwise in the
grant thereof) become immediately exercisable and, unless the participant agrees
otherwise in writing, remain exercisable for three years (but not beyond the
term of the Option or Stock Appreciation Right) after the employee's termination
of employment for any reason other than termination by the Company or a
subsidiary of the Company for dishonesty, conviction of a felony, willful
unauthorized disclosure of confidential information or willful refusal to
perform the duties of such employee's position or positions with the Company or
such subsidiary (termination for "cause"); provided that this Section 2.5 shall
not apply to Awards granted to a participant if, in connection with a Change of
Control pursuant to clause (1) of Section 5.9, such participant is the Person or
forms part of the Person specified in such clause (1).
5
ARTICLE III: RESTRICTED STOCK
SECTION 3.1 Terms and Conditions of Restricted Stock Awards. Subject to the
following provisions, all Awards of Restricted Stock under the Plan to employees
of the Company and its Subsidiaries shall be in such form and shall have such
terms and conditions as the Committee, in its discretion, may from time to time
determine consistent with the Plan.
(a) Restricted Stock Award. The Restricted Stock Award shall specify
the number of shares of Restricted Stock to be awarded, the price, if any, to be
paid by the recipient of the Restricted Stock, and the date or dates on which
the Restricted Stock will vest. The vesting and number of shares of Restricted
Stock may be conditioned upon the completion of a specified period of service
with the Company or its Subsidiaries, upon the attainment of specified
performance objectives, or upon such other criteria as the Committee may
determine in accordance with the provisions hereof. Performance objectives will
be based on increases in share prices, operating income, net income or cash flow
thresholds on a company wide, subsidiary or division or group basis, rig
utilization, safety records, return on common equity or any combination of the
foregoing.
(b) Restrictions on Transfer. Stock certificates representing the
Restricted Stock granted to an employee shall be registered in the employee's
name. Such certificates shall either be held by the Company on behalf of the
employee, or delivered to the employee bearing a legend to restrict transfer of
the certificate until the Restricted Stock has vested, as determined by the
Committee. The Committee shall determine whether the employee shall have the
right to vote and/or receive dividends on the Restricted Stock before it has
vested. No share of Restricted Stock may be sold, transferred, assigned, or
pledged by the employee until such share has vested in accordance with the terms
of the Restricted Stock Award. Unless the grant of a Restricted Stock Award
specifies otherwise, in the event of an employee's termination of employment
before all the employee's Restricted Stock has vested, or in the event other
conditions to the vesting of Restricted Stock have not been satisfied prior to
any deadline for the satisfaction of such conditions set forth in the Award, the
shares of Restricted Stock that have not vested shall be forfeited and any
purchase price paid by the employee shall be returned to the employee. At the
time Restricted Stock vests (and, if the employee has been issued legended
certificates of Restricted Stock, upon the return of such certificates to the
Company), a certificate for such vested shares shall be delivered to the
employee or the employee's estate, free of all restrictions.
(c) Accelerated Vesting. Notwithstanding the vesting conditions set
forth in the Restricted Stock Award, (i) unless the Restricted Stock grant
specifies otherwise, the Committee may in its discretion at any time accelerate
the vesting of Restricted Stock or otherwise waive or amend any conditions of a
grant of Restricted Stock, and (ii) all shares of Restricted Stock shall vest
upon a Change of Control of the Company; provided that clause (ii) above shall
not apply to Awards granted to a participant if, in connection with a Change of
Control pursuant to clause (1) of Section 5.9, such participant is the Person or
forms part of the Person specified in such clause (1).
ARTICLE IV: PERFORMANCE AWARDS
SECTION 4.1 Terms and Conditions of Performance Awards. The Committee
shall be authorized to grant Performance Awards, which are payable in stock,
cash or a combination thereof, at the discretion of the Committee.
6
(a) Performance Period. The Committee shall establish with respect to
each Performance Award a performance period over which the performance goal of
such Performance Award shall be measured. The performance period for a
Performance Award shall be established prior to the time such Performance Award
is granted and may overlap with performance periods relating to other
Performance Awards granted hereunder to the same employee.
(b) Performance Objectives. The Committee shall establish a minimum
level of acceptable achievement for the holder at the time of each Award. Each
Performance Award shall be contingent upon future performances and achievement
of objectives described either in terms of Company-wide performance or in terms
that are related to performance of the employee or of the division, subsidiary,
department or function within the Company in which the employee is employed. The
Committee shall have the authority to establish the specific performance
objectives and measures applicable to such objectives. Such objectives, however,
shall be based on increases in share prices, operating income, net income or
cash flow thresholds on a company wide, subsidiary or division or group, rig
utilization, safety records, return on common equity or any combination of the
foregoing.
(c) Size, Frequency and Vesting. The Committee shall have the authority
to determine at the time of the Award the maximum value of a Performance Award,
the frequency of Awards and the date or dates when Awards vest.
(d) Payment. Following the end of each performance period, the holder
of each Performance Award will be entitled to receive payment of an amount, not
exceeding the maximum value of the Performance Award, based on the achievement
of the performance measures for such performance period, as determined by the
Committee. If at the end of the performance period the specified objectives have
been attained, the employee shall be deemed to have fully earned the Performance
Award. If the employee exceeds the specified minimum level of acceptable
achievement but does not fully attain such objectives, the employee shall be
deemed to have partly earned the Performance Award, and shall become entitled to
receive a portion of the total Award, as determined by the Committee. If a
Performance Award is granted after the start of a performance period, the Award
shall be reduced to reflect the portion of the performance period during which
the Award was in effect. Unless the Award specifies otherwise, including
restrictions in order to satisfy the conditions under Section 162(m) of the
Code, the Committee may adjust the payment of Awards or the performance
objectives if events occur or circumstances arise which would cause a particular
payment or set of performance objectives to be inappropriate, as determined by
the Committee.
(e) Termination of Employment. A recipient of a Performance Award who,
by reason of death, disability or retirement, terminates employment before the
end of the applicable performance period shall be entitled to receive, to the
extent earned, a portion of the Award which is proportional to the portion of
the performance period during which the employee was employed. A recipient of a
Performance Award who terminates employment for any other reason shall not be
entitled to any part of the Award unless the Committee determines otherwise;
7
however, the Committee may in no event pay the employee more than that portion
of the Award which is proportional to his or her period of actual service.
(f) Accelerated Vesting. Notwithstanding the vesting conditions set
forth in a Performance Award, (i) unless the Award specifies otherwise, the
Committee may in its discretion at any time accelerate vesting of the Award or
otherwise waive or amend any conditions (including but not limited to
performance objectives) in respect of a Performance Award, and (ii) all
Performance Awards shall vest upon a Change of Control of the Company. In
addition, each participant in the Plan shall receive the maximum Performance
Award he or she could have earned for the proportionate part of the performance
period prior to the Change of Control, and shall retain the right to earn any
additional portion of his or her Award if he or she remains in the Company's
employ. However, clause (ii) above shall not apply to Awards granted to a
participant if, in connection with a Change of Control pursuant to clause (1) of
Section 5.9, such participant is the Person or forms part of the Person
specified in such clause (1).
(g) Stockholder Rights. The holder of a Performance Award shall, as
such, have none of the rights of a stockholder.
ARTICLE V: ADDITIONAL PROVISIONS
SECTION 5.1 General Restrictions. Each Award under the Plan shall be
subject to the requirement that, if at any time the Committee shall determine
that (i) the listing, registration or qualification of the shares of Common
Stock subject or related thereto upon any securities exchange or under any state
or Federal law, or (ii) the consent or approval of any government regulatory
body, or (iii) an agreement by the recipient of an Award with respect to the
disposition of shares of Common Stock, is necessary or desirable (in connection
with any requirement or interpretation of any Federal or state securities law,
rule or regulation) as a condition of, or in connection with, the granting of
such Award or the issuance, purchase or delivery of shares of Common Stock
thereunder, such Award may not be consummated in whole or in part unless such
listing, registration, qualification, consent, approval or agreement shall have
been effected or obtained free of any conditions not acceptable to the
Committee.
SECTION 5.2 Adjustments for Changes in Capitalization. In the event of
any stock dividends, stock splits, recapitalizations, combinations, exchanges of
shares, mergers, consolidation, liquidations, split-ups, split-offs, spin- offs,
or other similar changes in capitalization, or any distribution to stockholders,
including a rights offering, other than regular cash dividends, changes in the
outstanding stock of the Company by reason of any increase or decrease in the
number of issued shares of Common Stock resulting from a split-up or
consolidation of shares or any similar capital adjustment or the payment of any
stock dividend, any share repurchase at a price in excess of the market price of
the Common Stock at the time such repurchase is announced or other increase or
decrease in the number of such shares, the Committee shall make appropriate
adjustment in the number and kind of shares authorized by the Plan (including
shares available for ISOs), in the number, price or kind of shares covered by
the Awards and in any outstanding Awards under the Plan; provided, however, that
no such adjustment shall increase the aggregate value of any outstanding Award.
8
In the event of any adjustment in the number of shares covered by any
Award, any fractional shares resulting from such adjustment shall be disregarded
and each such Award shall cover only the number of full shares resulting from
such adjustment.
SECTION 5.3 Amendments. (a) The Board of Directors may at any time and
from time to time and in any respect amend or modify the Plan.
(b) The Committee shall have the authority to amend any Award to
include any provision which, at the time of such amendment, is authorized under
the terms of the Plan; however, no outstanding Award may be revoked or altered
in a manner unfavorable to the holder without the written consent of the holder.
SECTION 5.4 Cancellation of Awards. Any Award granted under the Plan
may be cancelled at any time with the consent of the holder and a new Award may
be granted to such holder in lieu thereof, which Award may, in the discretion of
the Committee, be on more favorable terms and conditions than the canceled
Award.
SECTION 5.5 Withholding. Whenever the Company proposes or is required
to issue or transfer shares of Common Stock under the Plan, the Company shall
have the right to require the holder to pay an amount in cash or to retain or
sell without notice, or demand surrender of, shares of Common Stock in value
sufficient to satisfy any Federal, state or local withholding tax liability
("Withholding Tax") prior to the delivery of any certificate for such shares (or
remainder of shares if Common Stock is retained to satisfy such tax liability).
Whenever under the Plan payments are to be made in cash, such payments shall be
net of an amount sufficient to satisfy any Federal, state or local withholding
tax liability. An Award may also provide the holder with the right to satisfy
the Withholding Tax with previously owned shares of Common Stock or shares of
Common Stock otherwise issuable to the holder.
Whenever Common Stock is so retained or surrendered to satisfy
Withholding Tax, the value of shares of Common Stock so retained or surrendered
shall be determined by the Committee, and the value of shares of Common Stock so
sold shall be the net proceeds (after deduction of commissions) received by the
Company from such sale, as determined by the Committee.
SECTION 5.6 Non-assignability. Except as expressly provided in the Plan
or in any agreements, no Award under the Plan shall be assignable or
transferable by the holder thereof except by will or by the laws of descent and
distribution. During the life of the holder, Awards under the Plan shall be
exercisable only by such holder or by the guardian or legal representative of
such holder.
SECTION 5.7 Non-uniform Determinations. Determinations by the Committee
under the Plan (including, without limitation, determinations of the persons to
receive Awards; the form, amount and timing of such Awards; the terms and
provisions of such Awards and the agreements evidencing same; and provisions
with respect to termination of employment) need not be uniform and may be made
by it selectively among persons who receive, or are eligible to receive, Awards
under the Plan, whether or not such persons are similarly situated.
9
SECTION 5.8 No Guarantee of Employment. The grant of an Award under the
Plan shall not constitute an assurance of continued employment for any period or
any obligation of the Board of Directors to nominate any director for reelection
by the Company's stockholders.
SECTION 5.9 Change of Control. A "Change of Control" shall be deemed to
have occurred if:
(1) any Person (as defined below), other than a Designated Person, is
or becomes the Beneficial Owner (as defined below) of securities of the Company
representing 35% or more of the Voting Power (as defined below);
(2) there shall occur a change in the composition of a majority of the
Board of Directors within any period of four consecutive years which change
shall not have been approved by a majority of the Board of Directors as
constituted immediately prior to the commencement of such period;
(3) at any meeting of the stockholders of the Company called for the
purpose of electing directors, more than one of the persons nominated by the
Board of Directors for election as directors shall fail to be elected; or
(4) the stockholders of the Company approve a merger, consolidation,
sale of substantially all assets or other reorganization of the Company, other
than a reincorporation, in which the Company does not survive.
For purposes of this Section 5.9, (i) "Person" shall have the meaning
set forth in Sections 3(a)(9) and 13(d)(3) of the Securities Exchange Act of
1934 (the "Exchange Act"), as in effect on May 1, 1997, (ii) "Beneficial Owner"
shall have the meaning set forth in Rules 13d-3 and 13d-5 promulgated under the
Exchange Act on May 1, 1997; (iii) "Voting Power" shall mean the voting power of
the outstanding securities of the Company having the right under ordinary
circumstances to vote at an election of the Board of Directors; and (iv)
"Designated Person" shall mean any Person whose Beneficial Ownership of
securities is solely the result of such Person acquiring securities as an
underwriter in an underwritten public offering of such securities.
Notwithstanding anything contained herein to the contrary, a Change in Control
shall not be deemed to have occurred due to the Voting Power of Remy Capital
Partners III, L.P. or any of its affiliates (collectively "Remy") falling below
35% or subsequently increasing over 35%.
SECTION 5.10 Duration and Termination. (a) The Plan shall be of
unlimited duration. Notwithstanding the foregoing, no ISO (within the meaning of
Section 422 of the Code) shall be granted under the Plan ten (10) years after
the effective date of the Plan, but Awards granted prior to such date may extend
beyond such date, and the terms of this Plan shall continue to apply to all
Awards granted hereunder.
(b) The Board of Directors may suspend, discontinue or terminate the
Plan at any time. Such action shall not impair any of the rights of any holder
of any Award outstanding on the date of the Plan's suspension, discontinuance or
termination without the holder's written consent.
10
SECTION 5.11 Deferred Compensation and Trust Agreements. The Committee
may authorize and establish deferred compensation agreements and arrangements in
connection with Awards under the Plan and may establish trusts and other
arrangements including "rabbi trusts", with respect to such agreements and
appoint one or more trustees for such trusts. Shares of Common Stock under the
Plan may also be acquired by one or more trustees from the Company, in the open
market or otherwise.
SECTION 5.12 Effective Date. The Plan is effective as of July 23, 1997,
the effective date of the Long-Term Incentive Plan prior to amendment.
11
AMENDMENT NO. 1 TO THE PATTERSON-UTI ENERGY, INC.
AMENDED AND RESTATED 1997 LONG-TERM INCENTIVE PLAN
ADOPTED BY THE BOARD OF DIRECTORS ON APRIL 26, 1999
RESOLVED, than an amendment (the "1997 Amendment") to the Company's
Amended and Restated 1997 Long-Term Incentive Plan (the "1997 Plan"), to
increase the number of shares authorized for issuance under the 1997 Plan by
900,000 is hereby authorized, ratified and approved.
12
AMENDMENT NO. 2 TO THE PATTERSON-UTI ENERGY, INC.
AMENDED AND RESTATED 1997 LONG-TERM INCENTIVE PLAN
ADOPTED BY THE BOARD OF DIRECTORS ON APRIL 27, 2000
RESOLVED, that an amendment to the UTI Energy Corp. Amended and Restated 1997
Long-Term Incentive Plan (the "1997 Plan"), to increase the number of shares
authorized for issuance under the 1997 Plan by 400,000 is hereby authorized,
ratified and approved.
13
Please mark
your votes [X]
like this
PROXY BY MAIL
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" PROPOSALS 1, 2 AND 3.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED BY THE PROXIES IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THE
PROXIES WILL VOTE "FOR" PROPOSALS 1, 2 AND 3.
FOR all nominees WITHHOLD
listed below AUTHORITY to vote FOR AGAINST ABSTAIN
1. ELECTION OF BOARD for all nominees listed 2. Approve an amendment to the Company's [ ] [ ] [ ]
OF DIRECTORS. below Amended and Restated 1997 Long-Term
[ ] [ ] Incentive Plan increasing the number
of shares available for issuance under
Nominees for election to the Board of Directors: 01 Mark S. Siegel, the plan.
02 Cloyce A. Talbott, 03 A. Glenn Patterson, 04 Kenneth N. Berns,
05 Stephen J. DeGroat, 06 Robert C. Gist, 07 Curtis W. Huff, 3. Ratify the selection of [ ] [ ] [ ]
08 Kenneth R. Peak, and 09 Nadine C. Smith. PricewaterhouseCoopers LLP as
independent accountants of the
(INSTRUCTION: To withhold authority to vote for any one or more Company for the fiscal year ending
individual nominees, write the name of each such nominee in the December 31, 2002.
space provided below.)
4. In their discretion, the Proxies are authorized to vote
------------------------------------------------------------------- upon such other business as may properly come before the
Meeting or any adjournment or adjournments thereof.
IF YOU WISH TO VOTE ELECTRONICALLY, PLEASE READ THE
INSTRUCTIONS BELOW.
------------------------------------------- ====================================
COMPANY NUMBER:
PROXY NUMBER:
ACCOUNT NUMBER:
------------------------------------------- ====================================
SIGNATURE SIGNATURE DATE
-------------------------- --------------------- ---------
NOTE: Please sign exactly as your name or names appear on this card. Joint
owners should each sign personally. When signing as attorney, executor,
administrator, personal representative, trustee or guardian, please give your
full title as such. For a corporation or a partnership, please sign in the full
corporate name by the President or other authorized officer or the full
partnership name by an authorized person, as the case may be. (Please mark,
sign, date, and return this proxy in the enclosed envelope.)
--------------------------------------------------------------------------------
o FOLD AND DETACH HERE AND READ THE REVERSE SIDE o
VOTE BY TELEPHONE OR INTERNET
QUICK *** EASY *** IMMEDIATE
PATTERSON-UTI ENERGY, INC.
o You can now vote your shares electronically through the Internet or the
telephone.
o This eliminates the need to return the proxy card.
o Your electronic vote authorizes the named proxies to vote your shares in the
same manner as if you marked, signed, dated and returned the proxy card.
TO VOTE YOUR PROXY BY INTERNET
WWW.CONTINENTALSTOCK.COM
Have your proxy card in hand when you access the above website. You will be
prompted to enter the company number, proxy number and account number to create
an electronic ballot. Follow the prompts to vote your shares.
TO VOTE YOUR PROXY BY MAIL
Mark, sign and date your proxy card above, detach it and return it in the
postage-paid envelope provided.
TO VOTE YOUR PROXY BY PHONE
1-800-293-8533
Use any touch-tone telephone to vote your proxy. Have your proxy card in hand
when you call. You will be prompted to enter the company number, proxy number
and account number. Follow the voting instructions to vote your shares.
PLEASE DO NOT RETURN THE ABOVE CARD IF YOU VOTED
ELECTRONICALLY
PROXY PROXY
PATTERSON-UTI ENERGY, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 30, 2002
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned stockholder of Patterson-UTI Energy, Inc. (the "Company") hereby
constitutes and appoints Cloyce A. Talbott and A. Glenn Patterson, or either of
them, each with the power of substitution as attorneys and proxies to vote all
of the shares which the undersigned is entitled to vote at the annual meeting
of stockholders of the Company (the "Meeting") to be held Thursday, May 30,
2002, at 10:00 a.m., local time, at the Wyndham Greenspoint Hotel, 12400
Greenspoint Drive, Houston, Texas 77060, and at any and all adjournments
thereof, with the same force and effect as if the undersigned were personally
present. The undersigned hereby instructs the above-named Attorneys and Proxies
to vote the shares represented by this proxy in the manner as directed by the
undersigned on the reverse side of this proxy card. If no directions are made,
the Proxies will vote "FOR" proposals 1, 2 and 3.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
POSTAGE-PAID ENVELOPE, OR FOLLOW THE INSTRUCTIONS ON THE REVERSE SIDE TO VOTE
YOUR SHARES BY INTERNET OR BY TELEPHONE.
(CONTINUED ON THE REVERSE SIDE)
--------------------------------------------------------------------------------
o FOLD AND DETACH HERE o
YOUR VOTE IS IMPORTANT!
FOLLOW INSTRUCTIONS ON THE REVERSE SIDE.
PLEASE VOTE