DEF 14A 1 d284681ddef14a.htm DEFINITIVE NOTICE & PROXY STATEMENT <![CDATA[Definitive Notice & Proxy Statement]]>
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a)

of the Securities Exchange Act of 1934

(Amendment No.     )

Filed by the Registrant  x

Filed by a Party other than the Registrant  ¨

Check the appropriate box:

 

¨

   Preliminary Proxy Statement    ¨    Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

x

   Definitive Proxy Statement      

¨

   Definitive Additional Materials      

¨

   Soliciting Material Pursuant to §240.14a-12      

Unit Corporation

(Name of Registrant as Specified In Its Charter)

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

 

x No fee required.

 

¨ Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

 

  (1) Title of each class of securities to which the transaction applies:

 

  

 

  (2) Aggregate number of securities to which the transaction applies:

 

  

 

  (3) Per unit price or other underlying value of the transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

 

  

 

  (4) Proposed maximum aggregate value of the transaction:

 

  

 

  (5) Total fee paid:

 

  

 

 

¨ Fee paid previously with preliminary materials.

 

¨ Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 

  (1) Amount Previously Paid:

 

  

 

  (2) Form, Schedule or Registration Statement No.:

 

  

 

  (3) Filing Party:

 

  

 

  (4) Date Filed:

 

  

 


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LOGO

 

UNIT CORPORATION

NOTICE OF THE ANNUAL MEETING OF OUR STOCKHOLDERS

AND

PROXY STATEMENT

 

  Meeting Date   Wednesday, May 2, 2012   
  Meeting Time   11:00 a.m., Central Time   
  Meeting Place   Tulsa Room - Ninth Floor   
    Bank of Oklahoma Tower   
    One Williams Center   
    Tulsa, Oklahoma   


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LOGO

Dear Stockholder:

On behalf of the board of directors and management, it is my pleasure to invite you to our Annual Meeting of Stockholders to be held on Wednesday, May 2, 2012 at 11:00 a.m., Central Time. The meeting will be held in the Tulsa Room on the ninth floor of the Bank of Oklahoma Tower, One Williams Center, Tulsa, Oklahoma.

By attending the meeting you will have an opportunity to hear a report on our operations and to meet our directors and officers. There will also be time for questions.

Information about the meeting, including the various matters on which you will act, may be found in the attached Notice of Annual Meeting of Stockholders and Proxy Statement.

We hope that you will be able to attend the annual meeting. However, whether or not you plan to attend the meeting in person, it is important that your shares be represented. Please vote your shares using one of the methods available to you.

If you have any questions concerning the annual meeting or any of the proposals, please contact our investor relations department at (918) 493-7700. If you are a registered stockholder and have questions regarding your stock ownership, you may contact our transfer agent, American Stock Transfer & Trust Company (AST) at:

Toll Free Number: (800) 710-0929

Foreign Stockholders: (718) 921-8283

Web Site Address: www.amstock.com

AST Customer Service Representatives are also available through AST’s “Live Help” Internet service weekdays from 9:00 a.m. - 5:00 p.m., Eastern Time.

I look forward to your participation and thank you for your continued support.

Dated this 16th day of March 2012.

 

    Sincerely,
    LOGO
    John G. Nikkel
    Chairman of the Board

 

7130 S. Lewis Ave., Suite 1000, Tulsa, OK 74136    PO Box 702500, Tulsa, OK 74170-2500

Phone: (918) 493-7700      Fax: (918) 493-7711

 


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UNIT CORPORATION

7130 South Lewis Avenue, Suite 1000

Tulsa, Oklahoma 74136

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

 

 

Time and Date      11:00 a.m., Central Time, on Wednesday, May 2, 2012
Place      Tulsa Room on the ninth floor of the Bank of Oklahoma Tower, One Williams Center, Tulsa, Oklahoma
Items of Business     

•     elect John G. Nikkel, Robert J. Sullivan Jr., and Gary R. Christopher to our board of directors for a three-year term expiring in 2015 (Item No. 1 on the proxy card);

    

•     cast a non-binding advisory vote on executive compensation (“say-on-pay vote”) (Item No. 2 on the proxy card);

    

•     re-approve the material terms of the performance goals for qualified performance-based compensation under the Unit Corporation Stock and Incentive Compensation Plan (Item No. 3 on the proxy card);

    

•     approve the Amended and Restated Unit Corporation Stock and Incentive Compensation Plan (Item No. 4 on the proxy card);

    

•     ratify the selection of PricewaterhouseCoopers LLP, Tulsa, Oklahoma, as our independent registered public accounting firm for our fiscal year 2012 (Item No. 5 on the proxy card); and

    

•     transact any other business that properly comes before the meeting or any adjournment(s) of the meeting.

Record Date      March 5, 2012
Voting Options      Most stockholders have four options for submitting their vote:
    

•     via the Internet (please see your proxy card for instructions),

    

•     by phone (please see your proxy card for instructions),

    

•     by mail, using the paper proxy card, and

    

•     in person at the meeting.

Date of this Notice      March 16, 2012

 

  By Order of the Board of Directors,
  LOGO
 

Mark E. Schell

Senior Vice President,

Secretary and General Counsel

YOUR VOTE IS IMPORTANT

Whether or not you plan to attend the meeting, we urge you to vote.


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PROXY STATEMENT

ANNUAL MEETING OF STOCKHOLDERS

May 2, 2012

 

 

This proxy statement and the accompanying proxy card are being mailed to our stockholders in connection with the solicitation of proxies by the board of directors for the 2012 Annual Meeting of Stockholders. Mailing of this proxy statement will commence on or about March 16, 2012.

 

Table of Contents   
     Page

Questions and Answers

   1

Corporate Governance and Board Matters

   5

General governance information

   5

Director independence criteria

   5

Director independence determinations

   6

Role of the board in our risk management process

   6

Board structure and committees

   6

Consideration of nominees for director

   8

Director qualifications

   8

Executive sessions

   11

Contacting our board

   11

Board and committee evaluations

   11

Directors’ Compensation and Benefits

   11

Cash compensation

   11

Equity Awards

   12

Director compensation table

   13

Ownership of Our Common Stock by Beneficial Owners and Management

   14

Directors and executive officers

   14

Stockholders owning more than 5% of our common stock

   15

Executive Compensation

   15

Overview of NEOs’ 2011 compensation

   15

Highlights of 2011 Financial Performance

   15

Protecting the integrity of our compensation practices

   16

Compensation committee report

   16

Compensation discussion and analysis

   16

Summary compensation table

   28

Grant of plan-based awards for 2011

   29

Outstanding equity awards at end of 2011

   30

Option exercises and stock vested table for 2011

   31

Non-qualified deferred compensation for 2011

   31

 

(i)


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Potential Payments on Termination or Change in Control

   33

Separation benefit plan

   33

Change-in-control arrangements

   34

Payments on termination or change-in-control table

   36

Retirement or consulting agreements

   38

Related Person Transactions

   38

Our related person transaction policy

   38

Certain transactions between the company and its officers, directors, nominees for director and their associates

   39

Report of the Audit Committee

   39

Principal Accountant Fees and Services

   40

Fees incurred for PricewaterhouseCoopers LLP

   40

Policy on audit committee pre-approval of audit and permissible non-audit services of independent auditor

   40

Compensation Committee Interlocks And Insider Participation

   41

Items to be Voted on

   41

Item 1: Election of directors

   41

Item 2: Advisory vote on executive compensation (“say on pay”)

   44

Item  3: Re-approval of performance goals included in the Unit Corporation Stock and Incentive Compensation Plan, as currently in effect, for the purposes of section 162(m) of the Code

   45

Item  4: Approval of the Amended and Restated Unit Corporation Stock and Incentive Compensation Planto increase number of shares subject to the plan, permit grants of awards to non-employee directors, approve section 162(m) performance goals, and increase annual maximum award limits

   47

Item 5: Ratification of appointment of independent registered public accounting firm

   55

Other Matters

   55

Section 16(a) beneficial ownership reporting compliance

   55

Matters which may come before the meeting

   55

2013 stockholder proposals or nominations

   56

Contacting us

   56

Availability of our Form 10-K, annual report and proxy statement

   57

Incorporation by reference

   57

Addendum:

A – Copy of the Amended and Restated Unit Corporation Stock and Incentive Compensation Plan

 

(ii)


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QUESTIONS AND ANSWERS

 

 

 

 

Q: Why am I receiving these materials?

 

A: The board of directors of Unit Corporation, a Delaware corporation, is providing these proxy materials to you in connection with our annual meeting of stockholders. The meeting will take place on May 2, 2012. As a stockholder, you are invited to attend the meeting and are entitled to and requested to vote on the items of business described in this proxy statement.

 

Q: What is included in these materials?

 

A: These materials include:

 

   

this Notice of the Annual Meeting of our Stockholders and Proxy Statement (the “proxy statement”); and

   

our Annual Report for the year ended December 31, 2011 (the “annual report”).

If you requested printed versions of these materials by mail, they also include the proxy card or vote instruction form for the annual meeting.

 

Q: Who can vote?

 

A: You can vote if you were a stockholder at the close of business on the record date, March 5, 2012. On that date, there were 48,614,976 shares outstanding and entitled to vote at the meeting.

 

Q: What information is contained in this proxy statement?

 

A: The information included relates to the proposals to be voted on at the meeting, the voting process, the compensation of our directors and certain executive officers, and certain other required information.

 

Q: What is an “NEO?”

 

A: An NEO is one of the “named executive officers” for whom we provide compensation information in this proxy statement. For purposes of this proxy statement, our NEOs are:

 

   

Larry D. Pinkston, our CEO and President;

   

Mark E. Schell, our Senior Vice President, General Counsel and Secretary;

   

David T. Merrill, our Chief Financial Officer and Treasurer;

   

John Cromling, the Executive Vice President of Unit Drilling Company; and

   

Bradford J. Guidry, the Executive Vice President of Unit Petroleum Company.

 

Q: Can I access the proxy material on the Internet?

 

A: Yes. We place the proxy material on our web site at www.unitcorp.com.

 

Q: How may I obtain the company’s latest 10-K?
A: You may go to our website, www.unitcorp.com, and download and print a copy of our Form 10-K or you can have one mailed to you at no charge by submitting a request to:

Unit Corporation

Attn: Investor Relations

7130 South Lewis Avenue, Suite 1000

Tulsa, Oklahoma 74136

(918) 493-7700

www.unitcorp.com

We will also furnish any exhibit to the Form 10-K if you ask for it.

 

Q: Who can attend the meeting?

 

A: All stockholders can attend.

 

Q: What am I voting on?

 

A: You are voting on:

 

   

the election of John G. Nikkel, Robert J. Sullivan Jr., and Gary R. Christopher to the board of directors for terms that expire in 2015;

   

a non-binding advisory resolution to approve executive compensation as disclosed in this proxy statement;

   

the re-approval, for purposes of continuing to elect to deduct compensation under Section 162(m) of the Internal Revenue Code, as amended, and regulations under it (the “Code”), the performance goals applicable to awards intended to constitute qualified performance-based compensation under the existing Unit Corporation Stock and Incentive Compensation Plan;

   

the approval of the Amended and Restated Unit Corporation Stock and Incentive Compensation Plan to, among other things, increase the number of shares of stock authorized for issuance from 2,500,000 to 3,300,000, to permit grants of awards to non-employee directors, to approve for purposes of Section 162(m) of the Code performance goals for performance-based compensation, and to increase the maximum annual award limits applicable to awards under that plan; and

   

the ratification of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2012.

 

Q: How do I cast my vote?

 

A: If you hold your shares as a stockholder of record, you can vote in person at the meeting or you can vote by mail, telephone, or the Internet. If you are a street-name stockholder, you will receive instructions from your bank, broker, or other nominee describing how to vote your shares.
 

 

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The enclosed proxy card contains instructions for voting by mail, by telephone, or over the Internet. The proxies identified on the proxy card will vote the shares of which you are the stockholder of record in accordance with your instructions. If you submit a proxy card without giving specific voting instructions, the proxies will vote those shares as recommended by the board.

 

Q: How does the board recommend I vote on the proposals?

 

A: The board recommends you vote “FOR” each of Items No. 1, 2, 3, 4, and 5.

 

Q: Can I revoke my proxy?

 

A: Yes. You can revoke your proxy by:

 

   

submitting a new proxy;

   

giving written notice before the meeting to our corporate secretary stating that you are revoking your proxy; or

   

attending the meeting and voting your shares in person.

 

Q: Who will count the vote?

 

A: American Stock Transfer & Trust Company, our transfer agent, will count the vote. A representative of American Stock Transfer & Trust Company will also act as the inspector of election.

 

Q: How many votes must be present to hold the annual meeting?

 

A: In order to conduct business and have a valid vote at the meeting a quorum must be present in person or represented by proxies. A quorum is defined as at least a majority of the shares outstanding on the record date and entitled to vote. In accordance with our amended and restated bylaws and Delaware law, broker “non-votes” and proxies reflecting abstentions will be considered present and entitled to vote for purposes of determining whether a quorum is present.

 

Q: What are broker “non-votes?”

 

A: Broker “non-votes” occur when a broker is not permitted to vote shares it holds for a beneficial owner and the beneficial owner does not provide voting instructions. Shares held in a broker’s name may be voted by the broker, but only in accordance with the rules of various national and regional securities exchanges. Under those rules, the broker must follow the instructions of the beneficial owner. If instructions are not provided, the broker may generally vote on routine matters but cannot vote on non-routine matters. This means that if you do not provide voting instructions to your broker for the non-routine items on our agenda, your broker will inform the inspector of elections that it does not have the authority to vote your shares with respect to those matters. This is referred to as a “broker non-vote.”
Q: Which ballot measures are considered “routine” or “non-routine?”

 

A: The ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2012 (Item No. 5) is a matter considered routine under applicable rules. A broker or other nominee may generally vote on routine matters, and therefore no broker non-votes are expected to exist in connection with Item No. 5.

The election of directors (Item No. 1), the advisory vote on executive compensation (Item No. 2), the approval of performance metrics included in the Unit Corporation Stock and Incentive Compensation Plan for purposes of Section 162(m) of the tax code (Item No. 3), and the approval of the Amended and Restated Unit Corporation Stock and Incentive Compensation Plan (Item No. 4) are matters considered non-routine under applicable rules. A broker or other nominee cannot vote without instructions on non-routine matters, and therefore there may be broker non-votes on Item Nos. 1, 2, 3, and 4.

 

Q: How many votes are required to approve the proposals?

 

A: Directors will be elected by a plurality of the votes cast. This means that the three nominees with the greatest number of “FOR” votes will be elected as directors. Votes withheld will have no effect on the election of directors. Broker “non-votes” will be treated as though they are not entitled to vote and will not affect the outcome of the director elections.

Approval of Items No. 2 through Item No. 5 require the affirmative vote of a majority of the shares represented in person or by proxy at the meeting and entitled to vote on the proposal. Abstentions on these matters will be treated as votes against the proposal. Broker “non-votes” will be treated as though they are not entitled to vote and will not affect the outcome of the proposals.

 

Q: What is the difference between holding shares as a stockholder of record and as a beneficial owner?

 

A: Most of our stockholders hold their shares through a broker or other nominee rather than directly in their own name. As summarized below, there are some distinctions between shares held of record and those owned beneficially.

Stockholder of Record. If your shares are registered directly in your name with the transfer agent, you are considered, with respect to those shares, the stockholder of record, and these proxy materials are being sent directly to you. As the stockholder of record, you have the right to grant your voting proxy directly to the company or to vote in person at the meeting. We have enclosed or sent a proxy card for you to use.

 

 

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Beneficial Owner. If your shares are held in a brokerage account or by another nominee, you are considered the beneficial owner of shares held in street name, and these proxy materials are being forwarded to you together with a voting instruction card. As the beneficial owner, you have the right to direct your broker, trustee or nominee how to vote and are also invited to attend the meeting.

Since a beneficial owner is not the stockholder of record, you may not vote these shares in person at the meeting unless you obtain a “legal proxy” from the broker, trustee or nominee that holds your shares, giving you the right to vote the shares at the meeting. Your broker, trustee or nominee has enclosed or provided voting instructions for you to use in directing the broker, trustee or nominee how to vote your shares.

 

Q: What shares are included on my proxy card?

 

A: Your proxy card represents all shares registered to your account in the same social security number and address. However, the proxy card does not include shares held for participants in our 401(k) plan. Instead, those participants will receive from the plan trustee separate voting instruction cards covering these shares. If voting instructions are not received from participants in the plan, the plan trustee will vote the shares in the same proportion as the votes that were cast by participants.

 

Q: What does it mean if I get more than one proxy card?

 

A: Your shares are probably registered in more than one account. You should vote each proxy card you receive according to the instructions on that specific card. We encourage you to consolidate all your accounts by registering them in the same name, social security number and address.

 

Q: How many votes can I cast?

 

A: On each matter, including each director position, you are entitled to one vote per share.

 

Q: What happens if additional matters are presented at the meeting?

 

A: Other than the five items of business described in this proxy statement, we are not aware of any other business to be acted on at the meeting. If you grant a proxy, the persons named as proxyholders, Larry D. Pinkston and Mark E. Schell, will have the discretion to vote your shares on any additional matters properly presented for a vote at the meeting. If, for any unforeseen reason, one or more of the board’s nominees are not available as a candidate for director, the persons named as proxy holders will vote your proxy for that candidate or candidates as may be nominated by the board on the recommendation of the nominating and governance committee.
Q: Where can I find the voting results of the annual meeting?

 

A: The preliminary voting results will be announced at the annual meeting. The final voting results will be tallied by the inspector of election and published in a current report on Form 8-K, which we are required to file with the SEC within four business days following the annual meeting.

 

Q: What is the deadline to propose actions for consideration at next year’s annual meeting of stockholders or to nominate individuals to serve as directors?

 

A: Stockholder proposals. For a stockholder proposal to be considered for inclusion in our proxy statement for next year’s annual meeting, the written proposal must be received by our corporate secretary at our principal executive offices no later than November 16, 2012. If the date of next year’s annual meeting is moved more than 30 days before or after the anniversary date of this year’s meeting, the deadline for inclusion of proposals in our proxy statement is instead a reasonable time before we begin to print and mail our proxy materials. Proposals will also need to comply with SEC regulations under Rule 14a-8 regarding the inclusion of stockholder proposals in company-sponsored proxy materials. Proposals should be addressed to:

Corporate Secretary

Unit Corporation

7130 South Lewis Avenue, Suite 1000

Tulsa, Oklahoma 74136

Fax: (918) 496-6302

For a stockholder proposal that is not intended to be included in our proxy statement under Rule 14a-8, the stockholder must deliver a proxy statement and form of proxy to holders of a sufficient number of shares of our common stock to approve that proposal, provide the information required by our bylaws, and give timely notice to our corporate secretary in accordance with our bylaws, which, in general, require that the notice be received by the corporate secretary:

 

   

not earlier than the close of business on January 2, 2013; and

   

not later than the close of business on February 1, 2013.

If the date of the stockholder meeting is moved more than 30 days before or 70 days after the anniversary of our annual meeting for the previous year, then notice of a stockholder proposal that is not intended to be included in our proxy statement under Rule 14a-8 must be received no earlier than the close of business 120 days before the meeting and no later than the close of business on the later of the following two dates:

 

 

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90 days before the meeting; and

   

10 days after public announcement of the meeting date.

Nomination of director candidates. You may propose director candidates for consideration by the board’s nominating and governance committee. Any recommendations should include the nominee’s name and qualifications for board membership and should be directed to our corporate secretary at the address of our principal executive offices set forth above. In addition, our bylaws permit a stockholder to nominate directors for election at an annual stockholder meeting. To nominate a director, a stockholder must deliver a proxy statement and form of proxy to holders of a sufficient number of shares of our common stock to elect the nominee and provide the information required by our bylaws, including a statement by the stockholder identifying (i) the name and address of the stockholder, as they appear on the company’s books, and of the beneficial owner, if any, on behalf of who the nomination or proposal is made, (ii) the class and number of shares of our capital stock which are owned beneficially and of record by the stockholder (and such beneficial owner, if any), (iii) whether and the extent to which any hedging or other transaction or series of transactions has been entered into by or on behalf of, or any other agreement, arrangement or understanding (including any short positions or any borrowing or lending of shares of stock) has been made, the effect or intent of which is to mitigate loss or manage risk of a stock price change for or to increase the voting power of such stockholder or beneficial owner with respect to any shares of stock of the corporation, (iv) a representation that the stockholder is a holder of record of our stock entitled to vote at the meeting and intends to appear in person or by proxy at the meeting to propose the nomination, and (v) a representation whether the stockholder or the beneficial owner, if any, intends or is part of a group which intends (A) to deliver a proxy statement and/or form of proxy to holders of at least the percentage of our outstanding capital stock required to elect the nominee and/or (B) otherwise to solicit proxies from stockholders in support of the nomination. In addition, the stockholder must give timely notice to our corporate secretary in accordance with our bylaws, which, in general, require that the notice be received by the corporate secretary within the January 2, 2013 through February 1, 2013 time period described above.

Copy of bylaw provisions. You may contact our corporate secretary at our principal executive offices for a copy of the relevant bylaw provisions regarding the requirements for making stockholder proposals and nominating director candidates. Our bylaws are also available on our website at http://www.unitcorp.com.

 

Q: How is this proxy solicitation being conducted?

 

A: We have hired Alliance Advisors, LLC, Bloomfield, New Jersey, as proxy solicitor to assist in the distribution of proxy materials and solicitation of votes. We will pay Alliance Advisors a fee of $6,500, plus reasonable out-of-pocket expenses incurred in connection with their proxy solicitation activities on our behalf. We will reimburse brokerage houses and other custodians, nominees and fiduciaries for their reasonable out-of-pocket expenses for forwarding proxy and solicitation materials to stockholders. Some of our employees may also solicit proxies. Alliance Advisors or our employees may solicit proxies in person, by telephone and by mail. None of our employees will receive special compensation for these services, which the employees will perform as part of their regular duties.

 

Q: What is the company’s fiscal year?

 

A:

The company’s fiscal year is the calendar year period that ends on the 31st of December. Unless otherwise stated, all information presented in this proxy statement is based on the company’s fiscal year.

 

Q: How can I obtain the company’s corporate governance information?

 

A: Our Internet website is located at www.unitcorp.com. You may also enter www.unitcorp.com/corpgov.html for a direct link to the following information:

 

   

Our bylaws;

   

Audit Committee Charter;

   

Compensation Committee Charter;

   

Nominating and Governance Committee Charter;

   

Corporate Governance Guidelines;

   

Code of Business Conduct and Ethics;

   

Accounting and Auditing Complaint Procedures;

   

Policy and Procedures with respect to Related Person Transactions; and

   

Director Independence guidelines.

Our corporate governance webpage also has a link for reporting on any accounting, internal controls, or auditing matters that pertain to us.

 

 

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CORPORATE GOVERNANCE AND BOARD MATTERS

 

 

 

GENERAL GOVERNANCE INFORMATION

We are committed to having sound corporate governance principles. Our Corporate Governance Guidelines and Code of Business Conduct and Ethics are available on our website at http://www.unitcorp.com/corpgov.html and copies of these documents may also be obtained from our corporate secretary. These provisions apply to our directors, employees, and officers, including our principal executive officer, principal financial officer, and principal accounting officer. We will post any amendments or waivers to our Code of Business Conduct and Ethics that are required to be disclosed by the rules of either the SEC or the NYSE on our website.

Each year, our directors and executive officers are asked to complete a director and officer questionnaire which requires disclosure of any transactions with us in which the director or executive officer, or any member of his or her immediate family, have a direct or indirect material interest. Our CEO and general counsel are charged with resolving any conflict of interests not otherwise resolved under one of our other policies.

DIRECTOR INDEPENDENCE CRITERIA

Our board has defined an independent director as a director who the board has determined has no material relationship with the company, either directly, or as a partner, stockholder, or executive officer of an organization that has a relationship with the company. A relationship is “material” if, in the judgment of the board, the relationship would interfere with the director’s independent judgment. Based on the materiality guidelines adopted by the board, a director is not independent if:

 

   

the director, or the director’s immediate family member received as direct compensation any payment from the company in excess of $120,000 during any twelve-month period within the last three years, other than compensation for board service and pension or other forms of deferred compensation for prior service with the company, except that compensation received by an immediate family member for service as an employee of the company (other than as an executive officer) need not be considered in determining independence;

   

the director is an executive officer or employee of, or his or her immediate family member, is an executive officer of, a company, or other for profit entity, to which the company made, or from which the company received for property or services (other than those arising solely from investments in the company’s securities), payments in excess of the greater of $1 million or

   

2% of that company’s consolidated gross revenues in any of the last three fiscal years; or

   

the director serves as an executive officer of any tax exempt organization which received contributions from the company in any of the preceding three fiscal years in an aggregate amount that exceeded the greater of $1 million or 2% of that tax exempt organization’s consolidated gross revenues.

Any person who, or whose immediate family member(s), has within the last three years had any of the following relationships with the company does not qualify as an independent director.

 

   

Former employees. No director will be independent if he or she is currently, or was at any time within the last three years, an employee of the company.

   

Interlocking directorships. No director, and no immediate family member of a director, may currently be, or have been within the last three years, employed as an executive officer of another company where any of our present executive officers at the same time serves or served on that company’s compensation committee.

   

Former executive officers of company. No director will be independent if he or she has any immediate family member that is currently, or was at any time within the last three years, an executive officer of the company.

   

Former auditor. No director will be independent if (i) he or she or an immediate family member is a current partner of a firm that is the company’s internal or external auditor; (ii) the director is a current employee of such a firm; (iii) the director has an immediate family member who is a current employee of such a firm; and who participates in the firm’s audit, assurance or tax compliance (but not tax planning) practice; or (iv) the director or an immediate family member was at any time within the last three years but is no longer a partner or employee of such a firm and personally worked on the company’s audit within that time.

Additional requirements for audit committee members.

A director is not considered independent for purposes of serving on the audit committee, and may not serve on the audit committee, if the director:

 

   

receives directly or indirectly any consulting, advisory, or compensatory fee from the company, other than fees for service as a director or fixed amounts of compensation under a retirement plan (including deferred compensation) for prior service with the company (provided that such

 

 

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compensation is not contingent in any way on continued service); or

   

is an affiliated person of the company or its subsidiaries, as determined in accordance with SEC regulations. In this regard, audit committee members are prohibited from owning or controlling more than 10% of any class of the company’s voting securities or such lower amount as may be established by the SEC.

Additional requirements for compensation committee members. A director is not considered independent for purposes of serving on the compensation committee, and may not serve on the compensation committee, if the director:

 

   

receives directly or indirectly any remuneration as specified for purposes of Section 162(m) of the Code;

   

has ever been an officer of the company; or

   

has a direct or indirect material interest in any transaction, arrangement or relationship or any series of similar transactions, arrangements or relationships required to be disclosed under SEC Regulation S-K Item 404(a) and involving, generally, amounts in excess of $120,000.

DIRECTOR INDEPENDENCE DETERMINATIONS

The board has determined that at the present time William B. Morgan, John H. Williams, J. Michael Adcock, Gary R. Christopher, Robert J. Sullivan Jr., Steven B. Hildebrand, Larry C. Payne, and G. Bailey Peyton IV have no material relationship with the company (either directly or as a partner, stockholder or officer of an organization that has a relationship with the company) and is independent within the meaning of both our director independence standards and those of the NYSE, as currently in effect. The board has also determined that each of the current members of its three standing committees has no material relationship with the company (either directly or as a partner, stockholder or officer of an organization that has a relationship with the company) and is “independent” within the meaning of our director independence standards.

ROLE OF THE BOARD IN OUR RISK MANAGEMENT PROCESS

Oversight of risk management committee. Our board’s oversight of our risk management activities is delegated to our audit committee. The audit committee manages this responsibility by maintaining regular contact with our vice president of corporate planning, who oversees our risk management committee. The risk management committee was established in April of 2009, and is staffed by employees of our executive and operations management. The objective of this committee is to identify and analyze factors that might pose a significant risk to our company as a whole. In the fall of 2009, the committee began the

process of conducting in-depth risk analyses of the most significant potential risks initially identified. As necessary and feasible, remediation plans have been developed for the highest-priority risks. In April 2010, the committee completed its first full report and presented its findings to the audit committee. The committee has continued its annual risk analysis since that time. The vice president of corporate planning provides periodic progress reports directly to the audit committee, which provides input and direction that is communicated back to the risk management committee. The audit committee keeps the full board updated on the ongoing risk management activities of the company and reports any significant findings to the board. In addition, management discusses its highest priority risks and remediation plans with the full board.

Oversight of hedging activities. We hedge some of our oil, natural gas, and natural gas liquids production. The objective of our hedging program is to manage, to a degree, our exposure to changes in commodity prices. Any risk to our company from our hedging activities is overseen by our board. The board defines the scope of our permissible hedging or derivatives activities. The audit committee (and, ultimately, the board) monitors our hedging activities on an ongoing basis.

BOARD STRUCTURE AND COMMITTEES

Our board is currently structured so that the principal executive officer (our CEO) and board chair positions are separate. Our Corporate Governance Guidelines provide that the board has no policy with respect to separation of these positions. Our board believes that the decision to combine or separate those positions should be an ad hoc decision based on the qualities of the individuals being considered to fill them at a given point in time. Our board’s oversight of risk management has had no effect on our leadership structure.

The current structure is a result of specific facts and circumstances and not a specific governance policy. When Mr. Nikkel chose to step down as CEO and retain only his Chairman position in 2005, both he and Mr. Pinkston had many years of leadership experience with the company, along with the valuable insights that such experience provides. Separating the Chairman and CEO positions at that time was part of the succession plan for Mr. Nikkel, and the board felt that his ongoing service as Chairman would be a continuing benefit to the company. Accordingly, the board chose to have Mr. Nikkel continue in his role as Chairman, and elected Mr. Pinkston to succeed him as CEO. Our board believes that the combined experience and knowledge of Messrs. Pinkston and Nikkel, strengthened further by several years of successful leadership and collaboration under the current structure, continues to benefit the company. At this time and in view of the individuals involved, maintaining the separation of the CEO and Chairman positions is the most appropriate leadership structure.

 

 

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Our board does not have a “lead independent director.” However, Mr. Michael Adcock, an independent directors, presides over the executive sessions of the board.

As of the date of this proxy statement, our board has ten directors and the following three standing committees:

 

   

audit;

   

compensation; and

   

nominating and governance.

The board is divided into three classes. Classes I and II each consist of three directors and Class III consists of four directors. Directors serve for a three year term.

Each of the board’s three standing committees operates under a written charter adopted by the committee. Each committee’s charter is available at our website at http://www.unitcorp.com/corpgov.html. In addition, copies of these charters may also be obtained from our corporate secretary.

During 2011, the board and its committees held a total of 25 meetings. Our board met eight times, seven of those meetings were regularly scheduled and one was a special telephone meeting. The committees met in the aggregate 17 times. All directors attended 100% of the board meetings except one director missed the special telephonic meeting of the board. Each committee member attended 100% of his respective committee meetings. Directors are encouraged to attend our annual meeting of stockholders. All directors attended our last annual meeting of stockholders. In addition to meetings, the board and the various committees may act, from time to time, by unanimous consent.

The following table identifies the current membership of each of the three standing committees, and the number of meetings each committee held during 2011. A summary of each committee’s responsibilities follows the table.

 

DIRECTOR    COMMITTEE MEMBERSHIP
      Audit       Compensation     

Nominating

and

Governance

J. Michael Adcock

   x       x*     x   

Gary R. Christopher

   x             

Steven B. Hildebrand

   x*     x        

William B. Morgan

   x       x       x* 

Larry C. Payne

   x            x   

G. Bailey Peyton IV

        x        

John H. Williams

        x       x   

Number of meetings

   10        4        3   
    * Designates the chairman of the committee.

Audit Committee. The responsibilities of our audit committee include:

 

   

selecting our independent registered public accounting firm;

   

approving all audit engagement fees and terms;

   

to pre-approve all audit and non-audit services to be rendered by our independent registered public accounting firm;

   

reviewing and approving our annual and quarterly financial statements;

   

to consult with our employees and our independent registered public accounting firm to determine the adequacy of our internal accounting controls over financial reporting;

   

overseeing our relationship with our independent registered public accounting firm;

   

overseeing our internal audit functions;

   

reviewing with our independent registered public accounting firm and our internal audit department and management any significant matters regarding internal controls over financial reporting that may come to their attention during the conduct of their audit;

   

recommending to our board whether the financial statements should be included in our annual report on Form 10-K;

   

reviewing our earnings press releases, as well as our policies with respect to the publication of our earnings and other financial information; and

   

monitoring our ongoing risk assessment and management activities.

The committee has the authority to form and delegate authority to subcommittees and to delegate authority to one or more of its members.

The committee has the authority to obtain advice and assistance and receive appropriate funding from the company for outside legal, accounting, or other advisors, as the committee deems necessary or appropriate to carry out its duties.

The committee has established procedures for the receipt, retention, and treatment (on a confidential basis) of complaints received by the company, the board, or the audit committee, regarding accounting, internal accounting controls or auditing matters, and the confidential, anonymous submissions by employees of concerns regarding questionable accounting or auditing matters. These procedures are described in the Accounting and Auditing Complaint Procedures posted on our website.

The report of the audit committee is included at page 39.

Compensation Committee. Our compensation committee has overall responsibility for approving and evaluating director and executive officer compensation plans, policies and programs. In carrying out these responsibilities the committee:

 

   

annually reviews and approves any corporate goals and objectives relevant to our CEO’s compensation, and makes recommendations to the board as to our CEO’s compensation;

   

recommends to our board the compensation of our other executive officers and certain key employees;

   

reviews the severance arrangements, change-in-control agreements, and any special or

 

 

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supplemental benefits or plans (if any) applicable to our NEOs;

   

administers any director and employee compensation plans, policies and programs, and discharges its duties under those plans;

   

recommends director compensation;

   

reviews and approves the “compensation discussion and analysis” for inclusion in our proxy statement; and

   

has the authority to retain compensation consultants or other advisors to assist the committee in its evaluation of director, CEO, or executive officer compensation.

The committee has the authority to form and delegate authority to subcommittees and to delegate authority to one or more of its members. For additional information on the operations of the committee, see “Compensation Discussion and Analysis – Administration of our executive compensation program – overview of the process.”

The compensation committee report is included at page 16.

Nominating and Governance Committee. The responsibilities of this committee include:

 

   

advising the board as a whole on corporate governance matters;

   

advising the board on the size and composition of the board;

   

recommending a slate of nominees for election to the board;

   

identifying those individuals qualified to become board members, consistent with any criteria approved by the board;

   

identifying best practices and recommending corporate governance principles, including giving proper attention and making effective responses to stockholder concerns regarding corporate governance;

   

recommending membership to each board committee; and

   

defining specific criteria for director independence.

CONSIDERATION OF NOMINEES FOR DIRECTOR

Stockholder nominees. The nominating and governance committee is charged with evaluating any properly submitted stockholder nominations for candidates for membership on our board as more fully described below under “Identifying and evaluating nominees for directors; diversity policy.” In evaluating nominations, the committee seeks (but is not obligated) to achieve a balance of diversity, age, knowledge, skills, experience, and expertise on the board. Any stockholder nominations submitted for consideration by the committee should include the nominee’s name and qualifications for board membership and should be addressed to:

Corporate Secretary

Unit Corporation

7130 South Lewis Avenue, Suite 1000

Tulsa, Oklahoma 74136

Our bylaws also permit stockholders to nominate directors for consideration at an annual stockholders meeting. For a description of the process for nominating directors under our bylaws, see “QUESTIONS AND ANSWERS - What is the deadline to propose actions for consideration at next year’s annual meeting of stockholders or to nominate individuals to serve as directors?”

DIRECTOR QUALIFICATIONS

General director qualifications. Our Corporate Governance Guidelines contain certain criteria that our nominating and governance committee uses in evaluating nominees that it may recommend for a position on our board. Under these criteria, nominees should meet the board’s qualifications as independent (as applicable) and should have sufficient time to carry out their duties as well as being able to provide services beneficial to the company’s success. Their service on other boards of public companies should be limited to a number that permits them, given their individual circumstances, to perform responsibly all director duties. Each director must represent the interests of the company and its stockholders.

Current director specific qualifications. Each of our current directors possesses a combination of attributes that qualifies him for service on our board. These attributes can include (but are not limited) to: business experience (in general or specific to our industry), knowledge based on specialized education (such as technical industry training or legal or accounting), and leadership abilities (civic, work-related or both). We believe the qualifications of our directors, individually and collectively, have made our board an effective and productive one.

The following is a non-exhaustive description of the attributes of each of the three nominees standing for election or re-election at the 2012 Annual Meeting of Stockholders, followed by that of the other members of the board:

Nominees:

 

   

John G. Nikkel – Mr. Nikkel is a geologist and mathematician with over 54 years of experience in the energy industry, 45 years of which were spent in management positions. Mr. Nikkel retired from the company in 2005, after a 21-year tenure as its president and chief operating officer and then CEO. He has served the company as a director for 28 years, serving as the board’s chairman for the last seven years. His years of insight into the operations of the company and the industry, along with his years of successful leadership of the company, make him an invaluable member of the board, and more than

 

 

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qualify him to serve in his current position as chairman.

   

Gary R. Christopher – Mr. Christopher has a petroleum engineering degree, and over 38 years of experience in the energy industry. Mr. Christopher’s industry experience has been diverse: he has experience as a drilling engineer, production engineer, reservoir engineer, an acquisitions advisor, and an energy lending professional. Mr. Christopher has also served as President and CEO of a publicly traded oil and natural gas company. He currently consults on financial and engineering matters in the oil and natural gas business. Accordingly, Mr. Christopher has operations expertise, financial expertise, and leadership expertise, all of which have enabled him to serve as a productive board member, including in his role as an SEC audit committee financial expert. Mr. Christopher’s knowledge of lending practices and his ability to identify and analyze potential business acquisitions for the company are of significant value to the board.

   

Robert J. Sullivan Jr. – Mr. Sullivan has both undergraduate and master’s degrees in business administration, and he has over 41 years of experience in the energy business. Mr. Sullivan founded and operated both a 3D seismic company and a mid-stream natural gas transportation company, and he has been involved in a family-owned independent oil and natural gas company since 1975. He has also served the State of Oklahoma as its Energy Secretary under former Governor Frank Keating’s administration. Mr. Sullivan’s unique energy industry background serves as a complement to the backgrounds of the other industry-side directors.

Continuing directors:

 

   

J. Michael Adcock – Mr. Adcock is a licensed attorney with over 26 years of experience in tax, banking and SEC/regulatory compliance law, working both as in-house counsel and in private practice. He has served as CEO of two different companies, one a community bank and one a publicly-traded international energy company with exploration and production, pipeline, trading and co-generation subsidiaries. In his capacity as CEO he was responsible for all operations, financial statements, and SEC and other regulatory-agency reporting. He currently serves as Co-Trustee of a private business trust responsible for investments in real estate, oil and gas, and other equity investments. In addition, Mr. Adcock serves as chairman of the board of a privately held bank, where he is a member of the loan committee, responsible for reviewing and approving business loans. He is also a current

director of a non-profit community health organization, where he serves on the compensation committee and as its finance chairman. He has 14 years of experience as a director for the company. Mr. Adcock’s legal background, his executive experience in energy operations and lending, and his familiarity with the company’s business practices and history all serve to qualify him for service on our board as well as the three committees on which he serves.

   

Steven B. Hildebrand – Mr. Hildebrand brings to the board 32 years of experience in the accounting and finance field, more than 10 years of which was as the chief financial officer for a public company. While serving as a public company executive, Mr. Hildebrand was involved in an initial public stock offering, strategic planning, SEC reporting, Sarbanes-Oxley compliance, investor relations, enterprise risk management, executive compensation, establishing and monitoring corporate compliance programs, internal audit, bank facilities, private placement debt transactions and working with ratings agencies. All of these areas of expertise are valuable to his service on the board and its audit and compensation committees. A CPA with both public and private experience, he is qualified for board service as well as serving as the chairman and SEC audit committee financial expert for our audit committee.

   

Larry C. Payne – Mr. Payne brings to the board over 36 years of experience in the energy industry, six years of which was in the capacity of president and COO of a midstream energy company engaged in natural gas liquids supply and marketing. He has an extensive background in commodity risk management, serving for six years as vice president of commodity management for another midstream energy operation. Mr. Payne is familiar with requirements for marketing various oil and natural gas components. In addition to executive and strategic experience in the industry, Mr. Payne also has extensive operational experience that includes management of assets such as product terminals, pipelines, fractionators, storage facilities, and transportation equipment. Mr. Payne’s expertise in the energy industry based on his many years of executive and operational experience is of significant value to our company, and qualifies him to serve as a board member as well as on the audit committee and the nominating and governance committee.

   

G. Bailey Peyton IV – Mr. Peyton has 23 years of energy industry operations experience. He founded an oil and natural gas exploration company in 1984 and operated it as its president until he sold the company in 2007. At the time of

 

 

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sale, the company operated over 120 wells with a daily production of 12,000 MCF of natural gas and 200 bbls of oil per day. Mr. Peyton currently operates a company he founded in 1985 to purchase land, minerals, and royalty interests. His company currently owns over 50,000 acres, with holdings in Texas, Oklahoma and Nebraska. The board feels that Mr. Peyton’s longtime familiarity and hands-on experience with the operations side of our exploration and production business brings experience and practical guidance to the company that qualifies him to serve as a board member as well as on the compensation committee.

   

Larry D. Pinkston – Mr. Pinkston is an accounting professional who has served the company for 30 years, 26 of which have been in the following leadership positions (some of these positions he has held concurrently):

   

Treasurer – 17 years

   

Vice President – 14 years

   

Chief Financial Officer – 14 years

   

President – 8 years

   

Director – 8 years

   

Chief Operating Officer – 7 years

   

CEO – 6 years

Mr. Pinkston’s extensive knowledge of the company (both as a whole as well as that of each of its three business segments), along with his accounting and finance expertise and his many years of experience provides significant and continuing value to our board.

   

William B. Morgan – Mr. Morgan is a licensed attorney with over 35 years of experience, both as an attorney in private practice and as vice president and general counsel of a large healthcare organization. He has also served as President of that healthcare organization’s principal for-profit subsidiary, which employed 1,500 persons. Over the course of his career, Mr. Morgan has advised clients with respect to a broad range of matters, including domestic and foreign loan syndications, project financing, leveraged sale and leasebacks, receivable and depreciation monetization, private and public placement of debt and equity securities, and entity formation. He also served as an adjunct professor of law for over 15 years, teaching securities law and appellate advocacy. Mr. Morgan has served on our board for 23 years. His experience inside and outside of the energy industry, along with his leadership and analytical skills, working knowledge of securities and compliance laws, financial and business expertise, and his extensive history with our company all qualify him for service on our board as well as the three committees on which he serves.

   

John H. Williams – Mr. Williams is a degreed engineer by training, with over 61 years of experience in the energy industry, almost thirty of which was as the President and CEO of The Williams Companies, Inc., a multi-billion dollar public energy company. During the course of his long business career, Mr. Williams has gained industry, financial, corporate governance, operating, and international business experience, all of which are of value to our board. Additionally, Mr. Williams has long been an active civic leader in his community, serving as a trustee of the Tulsa Performing Arts Center Trust since 1977, as well as serving as a director for the Philbrook Museum of Art and the Gilcrease Museum, both in Tulsa, Oklahoma, for a combined total of 12 years. Like Mr. Morgan, Mr. Williams has served the company as a director for 23 years. Mr. Williams’ lifetime knowledge of the energy industry, along with his many years as a corporate and civic leader along with his lengthy history with and knowledge of our company make him a valuable and contributing member of our board.

Our board is a mix of personalities, backgrounds and experiences that continually proves that the sum is greater than the individual parts. The current directors have a proven track record of working well together to ably guide the company.

For additional information on the background and experience of each of our directors, including their other board memberships, please refer to individual director biographical summaries starting on page 42 of this proxy statement.

Identifying and evaluating nominees for directors; diversity policy. The nominating and governance committee uses a variety of means to identify and evaluate individuals being considered for a position on our board. The committee assesses the appropriate size of the board (within the size limits contained in our corporate charter), and whether any vacancies on the board are expected due to retirement or otherwise. In the event that vacancies are anticipated (or otherwise arise), the committee undertakes to identify those potential candidates that it believes will make good decisions and be able to contribute to the company in a meaningful way. Candidates may come to the attention of the committee through current board members, professional search firms, stockholders, or other persons. Candidates are evaluated at regular or special meetings of the committee and may be considered at any point during the year. As described above, it is the committee’s responsibility to consider any properly-submitted stockholder nominations for candidates for the board, verify the stockholder status of persons proposing candidates, and then submit its recommendations to the full board.

 

 

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Our Corporate Governance Guidelines set forth our position with respect to diversity. Our board is committed to inclusiveness in selecting candidates for board membership. Within the context of our fiduciary duties, applicable law and regulations, and the membership of the board at the applicable time, our nominating and governance committee will take reasonable steps to include women, minority candidates, and candidates from non-traditional environments (such as government, academia, and non-profit organizations) in the pool from which board nominees are chosen. Although there is no specific implementation plan, achievement of our diversity goals is evaluated annually as part of our board self-evaluations.

EXECUTIVE SESSIONS

Executive sessions of non-management directors are held from time to time following regularly-scheduled board meetings. The sessions are scheduled and presided over by Mr. J. Michael Adcock, who was elected by the board to chair its executive sessions. Any non-management director can request that an executive session be scheduled.

Any interested party may communicate directly with the presiding director by writing to the following:

Mr. J. Michael Adcock

c/o Corporate Secretary

Unit Corporation

7130 South Lewis Avenue, Suite 1000

Tulsa, Oklahoma 74136

CONTACTING OUR BOARD

Individuals may communicate with our board by submitting an e-mail to the board in care of the company’s

corporate secretary at mark.schell@unitcorp.com or sending a letter to: Board of Directors, c/o Corporate Secretary, Unit Corporation, 7130 South Lewis Avenue, Suite 1000, Tulsa, Oklahoma 74136.

The chair of the nominating and governance committee has been designated as the person to receive communications directed to non-management directors. Our stockholders may write to the chairman of this or any other board committee or to the outside directors as a group c/o Mark E. Schell, Senior Vice President and General Counsel, Unit Corporation, 7130 South Lewis Avenue, Suite 1000, Tulsa, Oklahoma 74136.

Stockholder communications are distributed to the board, or to the appropriate individual director or directors, depending on the facts and circumstances of the communication. However, at the request of the board, certain items that are not related to the duty and responsibilities of the board are excluded, such as advertisements, junk mail, mass mailings, spam, and surveys.

BOARD AND COMMITTEE EVALUATIONS

Each year the board evaluates its performance and effectiveness. Each director completes a board evaluation form to solicit feedback on specific aspects of the board’s role, organization, and meetings. The collective ratings and comments are compiled by or for the chairman of the nominating and governance committee, and presented by him to the full board. Additionally, each of the three

standing board committees conducts an annual self-evaluation of its performance through a committee evaluation form.

 

 

DIRECTORS’ COMPENSATION AND BENEFITS

 

 

 

CASH COMPENSATION

Only non-employee directors receive compensation for serving as a director. The various components of the 2011 cash compensation paid to our non-employee directors are as follows:

 

Annual retainer (payable quarterly)

      $60,000

Annual retainer for each committee a board member serves on (payable quarterly)

      $3,500

Each board meeting attended*

      $1,500

Each committee meeting attended*

      $1,500

Additional compensation for service as chairman of the audit committee**

      $7,500

Additional compensation for service as chairman for each of the compensation committee and nominating and governance committee**

      $3,500

Reimbursement for expenses incurred attending stockholder, board and committee meetings

      Yes

Range of total cash compensation (excluding expense reimbursement and retirement/consulting fees) earned by directors for the year 2011

         $52,500  – $104,000 

 

*    No fees were paid for the special telephonic meeting of the board held April 5, 2011. Additionally, the audit committee conducts quarterly telephone meetings expressly for purposes of finalizing its review and approval of financial reports and earnings press releases. No meeting fees are paid for these quarterly telephone meetings.

 

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  ** Effective January 1, 2012, the audit committee chairman will receive $15,000 annually, payable quarterly, for serving in that capacity, and both the compensation committee chairman and the nominating and governance committee chairman will receive $6,000 annually, payable quarterly, for their services as committee chairs. Additionally, the chairman of the board will be paid a retainer of $25,000 per year, payable quarterly, for services in that capacity during 2012.

EQUITY AWARDS

 

If, at the 2012 annual meeting, our stockholders approve the Amended and Restated Unit Corporation Stock and Incentive Compensation Plan (the “amended stock plan”), voting Item No. 4 in this proxy statement, we will make annual awards to our non-employee directors under the amended stock plan and we will no longer grant new awards under the Unit Corporation 2000 Non-Employee Directors’ Stock Option Plan (the “option plan”). The option plan is the plan under which we have in years past granted annual stock option awards to our non-employee directors.

If our stockholders do not approve the amended stock plan, we will continue to make grants to our non-employee directors under the option plan. Under that plan, each non-employee director automatically receives an option to purchase 3,500 shares of our common stock on the first business day following each annual meeting of our

stockholders. The option exercise price is the NYSE closing price of our common stock on that date. Payment of the exercise price can be made in cash or in shares of common stock that have been held by the director for at least one year. No stock option can be exercised during the first six months of its term except in the case of death. Each option has a ten-year term. Shares that are issued under either the stock plan or the directors’ option plan can be clawed back in the event of certain specified instances of director misconduct.

As of March 5, 2012, 175,000 shares were subject to outstanding options held by current non-employee directors and there were 230,000 shares remaining for use in connection with any future awards.

The following table shows the outstanding options held by our non-employee directors as of March 5, 2012:

 

 

Director

  

Date of

Option

  

Shares Subject

to Option(#)

  

Exercise Price($)

     05/05/05          3,500            39.50
     05/04/06          3,500            62.40
     05/03/07          3,500            57.63
     05/08/08          3,500            73.26

J. Michael Adcock

   05/07/09             437            31.30
     05/29/09          3,063            33.51
     05/06/10          3,500            41.21
     05/05/11          3,500            53.81
     05/04/06          3,500            62.40
     05/03/07          3,500            57.63
     05/08/08          3,500            73.26

Gary R. Christopher

   05/07/09             437            31.30
     05/29/09          3,063            33.51
     05/06/10          3,500            41.21
     05/05/11          3,500            53.81
     05/07/09             437            31.30

Steven B. Hildebrand

   05/29/09          3,063            33.51
     05/06/10          3,500            41.21
     05/05/11          3,500            53.81
     05/08/03          3,500            20.46
     05/06/04          3,500            28.23
     05/05/05          3,500            39.50
     05/04/06          3,500            62.40

William B. Morgan

   05/03/07          3,500            57.63
     05/08/08          3,500            73.26
     05/07/09             437            31.30
     05/29/09          3,063            33.51
     05/06/10          3,500            41.21
     05/05/11          3,500            53.81
     05/05/05          3,500            39.50
     05/04/06          3,500            62.40
     05/03/07          3,500            57.63

John G. Nikkel

   05/08/08          3,500            73.26
     05/07/09             437            31.30
     05/29/09          3,063            33.51
     05/06/10          3,500            41.21
     05/05/11          3,500            53.81

Larry C. Payne

   05/05/11          3,500            53.81

 

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Director   

Date of

Option

  

Shares Subject

to Option(#)

     Exercise Price($)          

G. Bailey Peyton IV

   05/05/11      3,500               53.81                 
     05/04/06      3,500               62.40                 
     05/03/07      3,500               57.63                 
     05/08/08      3,500               73.26                 

Robert J. Sullivan Jr.

   05/07/09      437               31.30                 
     05/29/09      3,063               33.51                 
     05/06/10      3,500               41.21                 
     05/05/11      3,500               53.81                 
     05/02/02      3,500               20.10                 
     05/08/03      3,500               20.46                 
     05/06/04      3,500               28.23                 
     05/05/05      3,500               39.50                 
     05/04/06      3,500               62.40                 

John H. Williams

   05/03/07      3,500               57.63                 
     05/08/08      3,500               73.26                 
     05/07/09      437               31.30                 
     05/29/09      3,063               33.51                 
     05/06/10      3,500               41.21                 
     05/05/11      3,500               53.81                 

DIRECTOR COMPENSATION TABLE

The following table shows the total compensation received in 2011 by each of our non-employee directors:

 

DIRECTOR COMPENSATION FOR 2011
Name   

Fees Earned
or

Paid in

Cash

($)(1)

  

Stock

Awards

($)

  

Option
Awards

($)(2)

  

Non-Equity  
Incentive  

Plan  
Compensation  
($)  

  

Change in  
Pension  

Value and  
Nonqualified  
Deferred  
Compensation  
Earnings  

($)   

   All Other
Compensation  
($)
  

Total

($)

(a)    (b)    (c)    (d)    (e)    (f)       (g)    (h)

J. Michael Adcock

   104,000    n/a    82,460    n/a    n/a    -    186,460

Gary R. Christopher

     83,000    n/a    82,460    n/a    n/a    -    165,460

Steven B. Hildebrand

   100,000    n/a    82,460    n/a    n/a    -    182,460

King P. Kirchner*

     70,500    n/a    n/a    n/a    n/a    -      70,500

William B. Morgan

   104,000    n/a    82,460    n/a    n/a    -    186,460

John G. Nikkel

     70,500    n/a    82,460    n/a    n/a    35,004(3)    187,964

Larry C. Payne

     52,500    n/a    82,460    n/a    n/a    -    134,960

G. Bailey Peyton IV**

     52,500    n/a    82,460    n/a    n/a    -    134,960

Robert J. Sullivan Jr.**

     78,500    n/a    82,460    n/a    n/a    -    160,960

John H. Williams

     88,000    n/a    82,460    n/a    n/a    -    170,460
  * Mr. Kirchner served as a director from January 1, 2011 until May 2011 when he retired to the position of a director emeritus. The amount shown as Mr. Kirchner’s Total compensation reflects all fees paid for service from January 1, 2011, through December 31, 2011.
  ** Messrs. Payne and Peyton were elected to the board on May 4, 2011. The amounts shown for each of them as Total Compensation reflects all fees paid for services from May 4, 2011, through December 31, 2011.

   Notes to table:

 

  (1) Represents cash compensation for board and committee meeting attendance, retainers, and service as a committee chairman.
  (2) The amounts included in the “Option Awards” column are calculated under FASB ASC Topic 718 using an exercise price of $53.81 reflecting the fair market value on the date of grant. For a discussion of the valuation assumptions used in calculating these values, see Notes 2 and 12 to our 2011 Consolidated Financial Statements included in our annual report on Form 10-K for the year ended December 31, 2011. Our current non-employee directors had the following aggregate number of stock options outstanding at the end of 2011:

 

    Name    Number of  Options
as of December 31, 2011    
 

J. Michael Adcock

   24,500    
 

Gary R. Christopher

   21,000    
 

Steven B. Hildebrand

   10,500    
 

William B. Morgan

   31,500    
 

John G. Nikkel

   24,500    
 

Larry C. Payne

     3,500    
 

G. Bailey Peyton IV

     3,500    
 

Robert J. Sullivan Jr.

   21,000    
 

John H. Williams

   35,000    

 

  (3) Represents amounts paid under certain of our plans or retirement or consulting agreements as more fully discussed under, “Potential payments on termination or change in control - Retirement or consulting agreements.”

 

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OWNERSHIP OF OUR COMMON STOCK BY BENEFICIAL OWNERS AND MANAGEMENT

 

 

 

DIRECTORS AND EXECUTIVE OFFICERS

The following table shows the number of shares of our common stock beneficially owned by each of our current directors, each NEO and by all current directors and executive officers as a group as of March 5, 2012. Except as otherwise noted, all shares are directly owned.

 

STOCK OWNED BY OUR DIRECTORS, NOMINEES AND EXECUTIVE OFFICERS AS OF MARCH 5, 2012  

Name of Beneficial

Owner

     Common
Stock(1)
      

    Stock Appreciation Rights    
and

Options Exercisable

within 60 days(3)

(b)

   Unvested
    Common    
Stock(4)
   Total  
        (a)            (c)        

J. Michael Adcock

        17,891(2)        24,500    -      42,391      

Gary R. Christopher

        12,000            21,000    -      33,000   

Steven B. Hildebrand

         3,000(2)        10,500    -      13,500   

William B. Morgan

        7,500           31,500    -      39,000   

John G. Nikkel

     122,989(2)        24,500    -      147,489   

Larry C. Payne

            0          3,500    -      3,500   

G. Bailey Peyton IV

      3,550          3,500    -      7,050   

Robert J. Sullivan Jr.

            0        21,000    -      21,000   

John H. Williams

      1,000        35,000    -      36,000   

Larry D. Pinkston

     55,491         98,745      90,504      244,740   

Mark E. Schell

     63,100         47,449      37,284      147,833   

David T. Merrill

     13,794         34,772      35,772      84,338   

John Cromling

     16,888         26,504      35,772      79,164   

Bradford J. Guidry

      6,274        28,631      38,931      73,836   

All directors and executive officers as a group*

     323,477           411,101      238,263          972,841   
  * Each named director and officer individually owns less than one percent of our outstanding shares of common stock and collectively the directors and officers own 1.9% . For purposes of calculating this percentage ownership, the total number of shares outstanding includes the shares previously issued and outstanding (which includes all of the “Unvested” restricted stock identified in column (c)) plus the number of shares that any named owner has the right to acquire within 60 days.

 Notes to table:

  (1) Includes the following shares of common stock held under our 401(k) thrift plan as of March 5, 2012: Mr. Pinkston, 6,876 shares; Mr. Schell 36,518 shares; Mr. Merrill, 5,000 shares; Mr. Cromling, 2,645 shares; Mr. Guidry, 822 shares; and directors and executive officers as a group, 51,861 shares. Excludes unvested common stock, which is set forth separately in column (c), and explained at footnote (4) below.
  (2) Of the shares listed as being beneficially owned, the following individuals disclaim any beneficial interest in shares held by spouses, trusts or for the benefit of family members: Mr. Adcock, 17,891 shares; Mr. Nikkel, 35,000 shares; and Mr. Hildebrand, 3,000 shares.
  (3) The stock appreciation rights (all settled in stock) and options have all vested but have not been exercised.
  (4) These unvested shares of restricted stock over which the executive officer has voting power but not investment power were awarded as follows:
  (a) On March 9, 2010, the following restricted stock awards were granted. The total amount of the awards and the vesting schedule is shown below. The unvested part of these awards is subject to the recipient’s continued employment with the company on the vesting date:

 

Name

  

Shares

subject to award

   Vesting schedule (#)
      4/1/10    4/1/11    4/1/12    4/1/13

Larry D. Pinkston

   37,018    (9,255)    (9,255)    9,254    9,254

Mark E. Schell

   10,334    (2,584)    (2,584)    2,583    2,583

David T. Merrill

     9,985    (2,497)    (2,496)    2,496    2,496

John Cromling

     9,985    (2,497)    (2,496)    2,496    2,496

Bradford J. Guidry

     9,985    (2,497)    (2,496)    2,496    2,496

 

  (b) On February 15, 2011, the following restricted stock awards were granted. Seventy percent of the total amount of the awards is time vested and will vest as shown in the first three columns of the vesting schedule below. The remaining thirty percent, shown in the fourth column of the vesting schedule shown below, is performance-based and will vest, subject to adjustment based on achievement of certain performance criteria, on March 9, 2014. The unvested part of these awards is subject to the recipient’s continued employment with the company on the vesting date:

 

Name

  

Shares

subject to award

   Vesting schedule (#)
      70%    30%
      3/9/12    3/9/13    3/9/14    3/9/14

Larry D. Pinkston

   25,661    5,988    5,988    5,987    7,698

Mark E. Schell

    8,950    2,089    2,088    2,088    2,685

David T. Merrill

    8,665    2,022    2,022    2,021    2,600

John Cromling

    8,665    2,022    2,022    2,021    2,600

Bradford J. Guidry

    8,665    2,022    2,022    2,021    2,600

 

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  (c) On February 14, 2012, the following restricted stock awards were granted. Seventy percent of the total amount of the awards is time vested and will vest as shown in the first three columns of the vesting schedule below. The remaining thirty percent, shown in the fourth column of the vesting schedule shown below, is performance-based and will vest, subject to adjustment based on achievement of certain performance criteria, on March 9, 2015. The unvested part of these awards is subject to the recipient’s continued employment with the company on the vesting date:

 

Name

  

Shares

subject to award

   Vesting schedule (#)
      70%    30%
      3/9/13    3/9/14    3/9/15    3/9/15

Larry D. Pinkston

   46,335    10,812    10,812    10,811    13,900

Mark E. Schell

   23,168     5,406     5,406     5,406     6,950

David T. Merrill

   22,115     5,160     5,160     5,160     6,635

John Cromling

   22,115     5,160     5,160     5,160     6,635

Bradford J. Guidry

   25,274     5,897     5,897     5,897     7,583

STOCKHOLDERS OWNING MORE THAN 5% OF OUR COMMON STOCK

The following table sets forth information concerning the beneficial ownership of our common stock by stockholders who own more than five percent of our common stock.

 

STOCKHOLDERS WHO OWN MORE THAN 5% OF OUR COMMON STOCK
Name and Address               Amount and Nature of             
Beneficial Ownership(1)
   Percent of Class(2)      

George Kaiser Family Foundation

      

7030 S Yale, Suite 600

  4,770,271      9.81%      

Tulsa, Oklahoma 74136

        

Royce & Associates, LLC

      

1414 Avenue of the Americas

  7,222,650    14.86%      

New York, New York 10019

        

FMR LLC

      

82 Devonshire Street

  6,285,446    12.92%      

Boston, MA 02109

        

Black Rock, Inc.

 

 

2,468,680

    

40 East 52nd Street

     5.07%      

New York, NY 10022

        

Notes to table:

 

  (1) Beneficial ownership is based on the Schedule 13G or 13G/A most recently filed by the stockholder or other information provided to us. Beneficial ownership may under certain circumstances include both voting power and investment power. Information is provided for reporting purposes only and should not be construed as an admission of actual beneficial ownership.
  (2) Based on the issued and outstanding shares of our common stock as of March 5, 2012.

EXECUTIVE COMPENSATION

 

 

 

 

OVERVIEW OF NEOS’ 2011 COMPENSATION

 

   

Salary:

   

Larry D. Pinkston – $684,000

   

Mark E. Schell – $342,600

   

David T. Merrill – $331,000

   

John Cromling – $331,000

   

Bradford J. Guidry – $331,000

   

Cash bonuses (50% performance-based, 50% discretionary) awarded in 2012 as annual or short-term incentive compensation for 2011:

   

Larry D. Pinkston – $540,702

   

Mark E. Schell – $175,000

   

David T. Merrill – $170,000

   

John Cromling – $170,000

   

Bradford J. Guidry – $180,000

   

Number of shares of restricted common stock (30% performance-based, 70% time vested) subject to awards made in 2011:

   

Larry D. Pinkston – 25,661

   

Mark E. Schell – 8,950

   

David T. Merrill – 8,665

   

John Cromling – 8,665

   

Bradford J. Guidry – 8,665

HIGHLIGHTS OF 2011 FINANCIAL PERFORMANCE

 

   

exceeded originally budgeted cash flow per share by 18%;

   

exceeded originally budgeted net income by 16%;

   

commodity hedging program provided $4 million of cash flow;

   

successfully completed our first public debt offering of $250 million of Senior Subordinated Notes;

   

net income increased 34% over 2010;

   

net income per diluted share increased 32% over 2010; and

   

invested over $832 million in capital expenditures and maintained a conservative debt to capitalization ratio of 13%.

 

 

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Unit Corporation

Financial Performance Markers

Fiscal Years 2010 and 2011

($ in millions)

 

LOGO

* Represents net cash provided by operating activities.

As the chart shows, our 2011 annual revenues, net income, and cash flow were all up compared to 2010.

The compensation committee considered various aspects of our 2011 performance in connection with making its compensation decisions. We believe those decisions resulted in a well-balanced compensation package that met our goals of competitively compensating our executives for performance while at the same time managing the resources of the company, all of which serve to build stockholder value.

PROTECTING THE INTEGRITY OF OUR COMPENSATION PRACTICES

Compensation practices supporting our efforts to make sound executive compensation decisions and deliver stockholder value include:

 

   

Clawback rights – We have the right to “claw back” our long-term incentive compensation paid to any executive who commits specific acts of fraud or dishonesty;

   

Performance metrics – Since 2011, we have awarded a portion of our short- and long-term incentive awards subject to certain performance metrics.

   

Ongoing compensation risk assessment – As described in “Our compensation policies and program as they relate to risk management” on page 18, our compensation committee continually evaluates the risk associated with the compensation decisions it makes, and our risk management plan has identified compensation risk as one of the risks to be analyzed; and

   

Trend toward longer-term and at-risk compensation for executives – Our practices with respect to the mix between long-term and short-term compensation, and between time-vested, and performance-vested (“at risk”) compensation have shifted over the last several years. As recently as 2006, 82% of our executives’ compensation was in salary and short-term incentives, and only 18%

was awarded as long-term incentives and none of it was subject to performance conditions. In 2011, the ratio was 49% salary and short-term incentives and 51% long-term (equity) incentives and performance-based (at risk) short-term cash incentives.

COMPENSATION COMMITTEE REPORT

The compensation committee has reviewed and discussed with our management the following compensation discussion and analysis. Based on that review and discussion, the compensation committee recommended to the board that the compensation discussion and analysis be included in this proxy statement and incorporated into our annual report on Form 10-K for fiscal year 2011 by reference to this proxy statement.

The members of the Compensation Committee are:

J. Michael Adcock - Chairman

William B. Morgan

John H. Williams

Steven B. Hildebrand

G. Bailey Peyton IV

COMPENSATION DISCUSSION AND ANALYSIS

To assist you in reviewing our compensation discussion and analysis, we have broken our discussion into the following sections, each of which may have its own subsections:

 

   

Our general compensation objectives

   

Elements of our compensation program

   

Our compensation policies and program as they relate to risk management

   

Effect of stockholder say-on-pay vote on compensation decisions

   

Administration of our executive compensation program – overview of the process

   

Role of compensation consultant

   

Role of our CEO

   

2011 Salaries

   

2011 long-term incentive awards

   

2011 annual cash bonus awards paid in 2012

   

2012 compensation decisions

   

Executive stock ownership policy

   

No backdating, springloading or repricing of options

   

Non-employee director compensation

   

Accounting and tax considerations

   

No employment agreements

Our general compensation objectives. Our primary goal, both for executives and non-executives, is to attract, motivate, reward, and retain competent employees. We try to set our goals in a way that joins our employees’ interests with our business and financial objectives, as well as the interests of our stockholders. To do that we:

 

 

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offer a competitive compensation mix consisting of reasonable salaries, short-term and long-term incentives, as well as certain additional benefits;

   

reward performance that achieves our business objectives and enhances the performance of our common stock; and

   

link executive compensation to our stockholders’ interests by using equity awards based on the value of our common stock.

Elements of our compensation program. As a general rule, our executive compensation program consists of salary, annual cash bonus (also referred to as “short-term incentive awards”), and certain forms of equity awards (also referred to as “long-term incentive awards”). We also make available health, disability and life insurance, certain indemnification protection, retirement i.e., 401(k), separation benefits, and certain limited perquisites. We use each of these elements because we believe they provide the mix required to attract and retain talented executives, reward them for quality performance, and

motivate them to focus on both the short-term and long-term performance of the company. Specifically, we believe a competitive salary is required to attract and retain qualified executives. When authorized, annual cash bonuses provide executives with potential earnings based on annual financial and operating results and reward them for short-term successes. Long-term incentive awards are used to motivate both long-term and short-term results and aid in the retention of our executives. Compensating our executives for company performance in both the short term and the long term serves our goal of aligning our executives’ compensation with the interests of our stockholders. Indemnification protections, retirement and separation benefits and general perquisites are commonly included in executive compensation packages offered by our competitors, and we believe that providing them helps achieve our compensation goals.

The following chart provides further details about what we pay (or offer) our executives and why we do so:

 

 

Form of compensation

or benefit

  Description       

Purpose and

what it rewards

   Interaction with other  elements of
compensation or benefits
Base Salary   Regular cash income, paid semi-monthly.       Provides competitive and predictable regular compensation and rewards core competence and experience.    Is a fundamental or foundation component of our overall competitive pay mix; serves as a short-term feature to balance long-term incentives.

Cash Bonus

(or
“short-term incentive
compensation”)

  Discretionary cash awards.       Provides annual incentive in the form of cash compensation and rewards short-term corporate and individual performance.    Serves as a short-term incentive to balance long-term incentives; rewards short-term performance, aligning executives’ interests with those of the stockholders in the short term.
  Performance-based cash awards that may be made under the Unit Corporation Annual Performance Bonus Plan.       Provides an annual incentive award based on the attainment of previously designated performance measures.    Serves as a short-term incentive to balance long-term incentives; rewards short-term performance, aligning executive interests with those of the stockholders in the short term.
Long-term Incentives   Before 2005, we used stock options as our long-term equity incentive. Starting in 2005, we awarded shares of restricted stock and in 2006 and 2007 we awarded a combination of shares of restricted stock and stock appreciation rights. Since 2009, we have awarded restricted common stock exclusively as long-term incentive compensation. Pay-out is generally staggered over a vesting period, although we have also awarded retention shares structured to have a one-time “cliff” vesting feature. Since 2011, we have also tied a part of this award to attainment of certain performance criteria.       Provides long-term incentive to contribute to company performance and rewards corporate performance as well as continued service with company.    Balances the short-term features of our mix and motivates our executives to enhance corporate performance, further aligning executive interest with stockholder interests.
Indemnification   We indemnify our officers and directors to the fullest extent permitted by law. This is required by our charter, bylaws, and certain contracts.       We include this as a compensation element because it is commonly provided by peer organizations and is valued by our executives. We believe it allows our executives to be free from undue concern about personal liability in connection with their service to the company and it rewards willingness to serve in positions that carry exposure to liability.    Represents a significant component of a competitive executive compensation package.

 

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Form of compensation

or benefit

  Description  

Purpose and

what it rewards

  Interaction with other elements of
compensation or benefits

Medical, Dental, Life and

Disability

  Available to full-time company employees through our benefit plans. The value of these is not included in the Summary Compensation Table, since they are available on a company-wide basis.   We include this as a compensation element as it is commonly provided by our competitors and it encourages the health of our employees, and adds to employee productivity and loyalty.   Represents a significant component of a competitive executive compensation package.
Other Paid Time-off Benefits   We provide vacation and other paid holidays to full-time employees, including the NEOs.   Rewards continuity of service and is a standard benefit comparable to the vacation benefits provided by competitors.   Works together with other elements to create a competitive compensation package.

Unit Corporation Employees’

Thrift Plan [401(k) plan]

  Tax-qualified retirement savings plan under which participating employees can contribute up to 99% of their pre-tax compensation, a portion of which the company can match. Our match for 2011 was 117% of the first 6% of the participant’s salary. The company match is paid in stock.   A 401(k) plan is a standard corporate benefit and our match to the participants is a competitive feature of our plan. This type of benefit rewards continuity of service.   Works in combination with our other executive pay components to create a competitive overall executive compensation package.

Unit Corporation Salary

Deferral Plan

[Non-qualified plan]

  Our non-qualified plan allows designated participants to defer salary and cash bonus for tax purposes until actual distribution at termination, death, in service, or under defined hardship. We do not make a matching contribution to this plan.   This element of compensation is a standard benefit at executive levels, and is a component of our program that contributes to our competitiveness. This rewards continuity of service.   Works in combination with our other executive pay components to create a competitive overall executive compensation package.
Separation Benefits   We provide payments to salaried full-time employees in cases of involuntary termination, change-in-control, or on retirement after 20 years of service with the company. For specifics, see the narrative discussion at “Potential payments on termination or change in control.”   This element of compensation is a standard benefit at executive levels. It is a component of our program that contributes to our competitiveness, and helps retain our employees. This benefit rewards length and continuity of service.   Works in combination with our other executive pay components to create a competitive overall executive compensation package.
Perquisites   We provide a car allowance to our NEOs and pay for certain club memberships.   We believe that compensating with certain perquisites adds to the general attractiveness and competitiveness of our compensation mix, and helps attract and retain the executive talent we value.   Works in combination with our other executive pay components to create a competitive executive compensation program.

 

Our compensation policies and program as they relate to risk management. We have reviewed our compensation policies and program for both executives and non-executives as they relate to risk and determined that at the present time they are not reasonably likely to have a material adverse effect on the company. Historically, we have not had any measurable risk exposure linked to our compensation program because our compensation decisions were made on a discretionary basis. Salaries and bonuses were not based on formulas with unknown variables that could result in future valuations or results that were unrestricted in either amount or scope. Starting in 2011 we have added performance metrics to a portion of our NEOs’ incentive compensation thus reducing to a degree the discretionary aspect of our compensation program. We have analyzed those performance metrics and their potential impact in the context of our overall general compensation practices and determined that they are not reasonably likely to have a material adverse effect on the company for the following reasons:

   

the performance metrics component of our annual cash awards is limited to determining 50% of that award. The committee retains the discretion with right to awarding part or all of the other 50%. This discretionary 50% gives the committee the ability to adjust for any unanticipated results that could arise with regard to the 50% that is performance based;

   

the metrics we use were carefully evaluated, and are believed to be appropriate for our particular business model; the metrics are diversified, with performance goals focused on varying measures of growth, performance, and cost control across the different segments of our company;

   

our equity awards generally have either long-range performance conditions attached to them or vest equally over several periods of time, so that they do not encourage short-term business decisions and instead encourage consistency and long-term performance; and

   

since 2006, we have added clawback provisions in our long-term equity awards that allow us to

 

 

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reclaim any of that compensation paid or payable to our key employees and executives in the event of certain wrongful activity.

Our compensation committee addresses compensation risk each time it makes a decision about executive compensation or issuances under our compensation plans.

Effect of stockholder say-on-pay vote on compensation decisions.

The committee reviewed the voting results from the say-on-pay vote conducted at our 2011 annual meeting of stockholders. Approximately 95% of the shares voting on that item approved our 2010 executive compensation as set forth in our 2011 proxy statement. The remaining 5% voting “no” were believed to be held by stockholders holding their shares through a brokerage account and not subject to identification and engagement. It was the committee’s assessment that it should continue to make its executive compensation decisions as it had in years past, attempting to gauge competitive practices and authorizing compensation that is within the range of what is deemed to be competitive and appropriate in our industry.

Administration of our executive compensation program – overview of the process. Our executive compensation program is administered by our compensation committee. Additional details about that committee are located in the corporate governance provisions of this proxy statement, under “Compensation Committee.”

Each year the chairman of the compensation committee, our CEO, the director of human resources, and any compensation consultant the committee may have retained, meet during the fourth quarter of the year to analyze the current compensation package of our executive and non-executive employees. (See “Role of CEO,” and “Role of compensation consultant,” for greater detail on this process.) Our CEO ultimately makes recommendations salaries, any annual bonus awards, and any long-term incentive compensation awards for our non-executive employees and for all executives besides himself. None of our NEOs has a role in recommending their own compensation.

The CEO’s salary recommendations for the other NEOs are presented to the committee, and then the board, at the December committee and board meetings. Salaries, as may be adjusted over the year then ending, are effective starting January 1st of the new year.

No action is taken regarding annual bonus awards until sometime after the first of the new year. This allows time for the complete financial and operating performance results for the prior year to become known and then taken into account when determining those awards. Once that information is available the annual bonus award for the prior year will be determined. Long-term awards are considered to be made prospectively, and are usually made in the first quarter of the year to which they relate. Consequently, salary determinations for 2011 were made

in December 2010 effective January 1, 2011, annual bonus incentive awards based on 2011 results were made in 2012, and 2011 long-term awards were granted in the first quarter of 2011.

Equity awards, if any, are effective as of the date of the committee’s approval of the award.

Generally, once the committee has approved the NEOs’ compensation, the only adjustments that might be made before the committee’s next annual review would be those deemed necessary or useful due to a change in circumstances (e.g., in the event of a promotion or material increase in responsibility, or in the event of a severe downturn in our industry). Under those changed circumstances, the decision to make any adjustments would be made on an ad hoc basis, and any or all elements of compensation could be adjusted based on the actual circumstances involved.

In selecting the overall compensation package for our NEOs the committee considers the financial and operating results of the company generally taking into account:

 

   

the growth in each segment of the company;

   

net income, cash flow, and asset base growth;

   

long-term debt levels;

   

any acquisitions made during the year;

   

the attainment of any designated business objectives; and

   

our compensation practices compared to those of other companies.

In addition, the committee may also take into account any significant changes in or to the industry in which we operate and general economic conditions.

Other than its view of future industry and economic conditions, the committee’s compensation decisions generally entail a retrospective review of past performance or results. However, beginning in 2011, the committee adopted certain future performance metrics for our NEOs.

In addition to any performance metrics, individual performance is taken into account in making executive compensation decisions for the NEOs (other than our CEO) but only in the context of assessing corporate or segment performance, with any individual contributions noted in the context of the committee’s evaluation of the overall operational and financial results of the company. For the CEO, performance is measured by the overall operational and financial results of the company.

Decisions not tied to performance-based incentive awards are made at the committee’s discretion. In those cases there is no weighting of assessed factors, no formulaic modeling of how to tie company or individual achievement to awards, no fixed position on whether prior compensation should be considered in making compensation decisions, or whether or how to incorporate any other criteria-based measures into the compensation-setting process.

 

 

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Role of compensation consultant.

The committee used the services of Villareal and Associates (“Villareal”), a Tulsa, Oklahoma-based compensation consultant, to assist it in determining the types and amounts of the compensation paid to our executives for 2011. Villareal provided peer and survey information used in determining all components of our NEOs’ reported compensation. Villareal also worked with our management and our human resources director to create the metrics used in our performance-based incentive awards.

Villareal’s 2010 consulting fees were $64,060, of which $37,040 was for executive compensation services and $27,020 was for other services (mainly employee recruiting services). In 2011, we paid Villareal a total of $72,781, of which $47,870 was for executive compensation services and $24,911 was for other services. For the services Villareal performed for the committee, it was the committee’s decision to engage those services. Villareal’s engagement by the committee was not based on any recommendation by our management.

Role of CEO. Before those meetings at which it makes decisions concerning our NEOs’ compensation, committee members receive and review the recommendations (and any information on which they are based) made by our CEO regarding the salary and incentive-based compensation for the other NEOs. The CEO does not evaluate or make a recommendation regarding his salary or incentive compensation. Additionally, our CEO meets with the committee and discusses his recommendations. The executives who are subject to the CEO’s

recommendations are not present at the time of these deliberations. The compensation committee has the authority to accept, reject, or adjust the CEO’s recommendations or those made by any other person. After the committee has reached its decisions regarding the NEOs’ compensation, its determinations are then submitted to the full board. The full board then ratifies (and approves, if required) the committee’s determinations. The full board does have the authority to make any changes it feels are appropriate to the recommendations of the committee.

2011 Salaries. Salaries for 2011 were recommended by the committee and approved by the board in early December 2010, and were effective January 1, 2011. Due to practices in the industry and ongoing competitive pressures being exerted on many of our employees, the committee felt it was important to continue its historic practice of setting salary increases before but effective as of the first day of the new fiscal year. Mr. Pinkston had recommended raises for the company’s employees that would place them on average at the median of the market (and at approximately 90% of the 75th percentile of the market). His recommendation was based on his review of comparable jobs in the industry as reflected primarily in the Mercer 2010 US MTCS Compensation Survey for the Energy Sector. He recommended that the committee provide comparable increases to the other NEOs as well. Mr. Pinkston made no recommendation as to his 2011 salary. The committee considered survey information provided by Villareal pertaining to median and 75th percentile salary levels for the NEOs, which reflected the following:

 

 

SURVEY  DATA - NEOS
            Mercer(1)    ERI(2)/Towers Watson(3)
Executive
Officer
   2010
Salary
($)
   Average/
Median
Peer
Salary
   75th
Percentile
Peer Salary
   Average/
Median
Peer
Salary
   75th
Percentile
Peer Salary

Larry Pinkston

   637,000    654,359    845,424    665,010    892,812

Mark E. Schell

   318,600    326,304    389,649    318,296    388,368

David T. Merrill

   308,000    339,900    427,450    356,181    466,121

Bradford Guidry

   308,000    301,275    376,774    339,635    456,445

John Cromling

   308,000    283,250    334,544    325,369    437,314

   Notes to table:

     (1) 2010 Mercer Total Compensation Study for the Energy Sector, aged 4% to bring April 2010 figures current to December 2010 levels.
     (2) Salary Assessor – Economic Research Institute – Survey data covering 2,000 industries, 300 cities and over 6,200 position titles, including 500 top management/executive positions.
     (3) ECS Industry Report on Top Management Compensation, Towers Watson Data Services - 2010/2011.

 

The committee determined that a salary increase of 7.5% (on average) would place the NEOs (including the CEO) between the median and the 75th percentile of the market, as reflected in the surveys. The committee approved salary increases for all the NEOs at that level.

Accordingly, the salaries for our NEOs for 2011 were:

 

   

Mr. Pinkston – $684,000

   

Mr. Schell – $342,600

   

Mr. Merrill – $331,000

   

Mr. Cromling – $331,000

   

Mr. Guidry – $331,000

2011 long-term incentive awards. The committee addressed 2011 long-term incentive awards during February of 2011. The committee reviewed the total

 

 

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compensation paid to our NEOs as compared to similarly-situated executives at peer companies, along with the information prepared by Villareal comparing the NEOs’ long- and short-term incentives to those paid to similar executives at the peer companies for the three previously completed fiscal years. The following energy companies made up the “peer group” as that term is used in this proxy statement:

 

   

Cabot Oil & Gas Corporation

   

Cimarex Energy Company

   

Continental Resources, Inc.

   

Denbury Resources, Inc.

   

Forrest Oil Corporation

   

Helmerich & Payne, Inc.

   

Newfield Exploration Company

   

Parker Drilling Company

   

Patterson – UTI Energy, Inc.

   

Petrohawk Energy Corporation*

   

Pioneer Drilling Company

   

SandRidge Energy, Inc.

   

SM Energy Company

   

Whiting Petroleum

  * Petrohawk was acquired and was not used for 2010, only for prior years.

The Villareal materials showed that the dollar value of our incentives program was low relative to the peer group based on an analysis of comparative cash flows.

The committee also reviewed the following financial and operational results by the company for 2010:

Corporate

 

   

total annual revenues reached $881.8 million, up from $709.9 million in 2009;

   

net income of $146.5 million, compared to 2009 net loss of $55.5 million;

   

hedging program provided $53 million of cash;

   

ended year with only $163 million of long-term debt (debt to capital ratio of 9%);

   

EPS was $3.09 per share compared to ($1.18) per share for 2009; and

   

on December 31, 2010, the price of the company’s common stock closed at $46.48 per share, up $4.00 from the same date in 2009.

Drilling segment

 

   

sold 11 650-1000 hp mechanical rigs that had limited current market ability in order to refurbish other rigs;

   

increased operating rigs for horizontal drilling from 38 on January 1, 2010 to 72 on December 31, 2010;

   

built a new 1500 hp rig that began operating in 1st quarter 2010;

   

acquired one 1200 hp electric rig;

   

added 23 top drives to the fleet enhancing marketability of the fleet;

   

increased cash flow margin per rig per day from $4,200/day in January to $7,400/day in December; and

   

daily revenue increased from $657,000/day in January to $1,221,000/day in December.

Exploration and production segment

 

   

replaced 176% of its 2010 oil and natural gas production;

   

finished the year with 622 BCFE of oil and natural gas reserves;

   

annual production was 59 BCFE;

   

completed 167 gross wells with a 90% success rate; and

   

oil and natural gas reserves grew 8% during 2010, with a 50% increase in oil reserves and a 10% increase in NGL reserves.

Mid-stream segment

 

   

began construction of a 16-mile, 16-inch pipeline in Preston County, West Virginia;

   

increased processing volumes per day and liquids sold volume per day by 8% and 11%, respectively;

   

completed construction of a processing plant in Hemphill County, Texas with capacity to process 50 MMCF/day; and

   

obtained contract to enable our processing plants in Texas Panhandle to be operating at 70–80% of capacity by mid-year 2011.

In addition to considering the above financial and operational results, the committee reviewed the CEO Assessment Survey for 2010 performance completed by the non-CEO directors. That survey indicated that on the whole the directors felt that the CEO was performing at a skilled or highly-skilled level.

Our CEO recommended that the committee grant long-term incentive restricted stock awards to the other NEOs at 100% of the market-based target. That target was based on a percentage-of-salary multiplier that is deemed to be representative of market pay practices as reflected in the data presented by Villareal and reviewed by our CEO and our director of human resources. For non-CEO NEO’s, that data reflected that market pay practices are to grant long-term incentive compensation at 158% of salary. The committee agreed with the CEO’s recommendations, and granted awards at 100% of target. The data reflected that for the CEO, the target for long-term incentives was 283% of salary. The committee determined that the CEO’s long-term incentive award should be at 80% of that 283%-of-salary target. Accordingly, the long-term incentives, granted in shares of restricted common stock of the company, were as follows:

 

 

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Mr. Pinkston – 25,661 shares

   

Mr. Schell – 8,950 shares

   

Mr. Merrill – 8,665 shares

   

Mr. Cromling – 8,665 shares

   

Mr. Guidry – 8,665 shares

The committee further determined that 30% of the long-term incentives set forth above should vest subject to performance conditions, and that 70% should be time vested. The committee determined that the 30%:70% allocation reflects a reasonable allocation of at-risk compensation to time-based compensation. For the 70% that was to vest over time, the committee determined that it would vest in three equal annual installments commencing March 9, 2012. The performance-based shares will vest in an amount that will be determined based on application of the following formula, which measures total stockholder return as compared to peer companies:

Total Stockholder Return (“TSR”) =

Ending stock price – Beginning stock price + Dividends

beginning stock price

For purposes of the formula, the ending and beginning common stock price used will be calculated using the average of the closing price of our common stock on the NYSE for the fifteen day period ending on the start and end of the designated performance period (the cliff vesting date for this part of the award) and the peer company stock prices will be determined in the same manner.

The number of performance-based shares that ultimately vest for the NEOs will be determined by the TSR of the company relative to the TSR of the peer companies at the end of the performance period, as follows:

 

Company’s Performance

Percentile Rank

(Unit TSR vs. peer TSR)

  

Vesting

(% that will vest)

90

   150%

75

   125%

60

   100%

50

     75%

40

     50%

If the company’s TSR is less than the 40th percentile of peer TSR levels at the end of the performance period, the shares will not vest and will be void.

2011 annual cash bonus awards paid in 2012.

The committee made its 2011 short-term incentive cash bonus award determination in February of 2012. Fifty percent of that bonus was performance-based, and 50% was discretionary. The 50:50 allocation reflects the committee’s recognition of the value of formula-based, objective performance measures to be used in making bonus decisions, balanced by its desire to retain a discretionary component in order to provide the committee with the ability necessary to respond to any unforeseen circumstances that might arise both favorable or not, such as in the latter case unintended consequences arising from the application of the performance metrics.

Performance-based Component of Short-term

Incentive Cash Bonus Awards.

The Performance-based short-term incentives comprised two separate awards, a “financial performance award,” and a “scorecard award.” The financial performance award was computed in the same manner for all segments of the company, but weighted more heavily for the corporate NEOs (60% of the total performance-based bonus amount), and less heavily for the NEOs who head our business operating segments (20% of total performance-based bonus amount).

The total performance-based incentives available to the NEOs for 2011 were multipliers of their salaries that were based on the level of performance achieved, as follows:

 

Incentive range for performance-based total of

short-term incentives

(Financial Performance Award + Scorecard Award)

(% of salary)

Name    Threshold    Target    Outstanding

Mr. Pinkston

    18.75%    37.5%    75.0%

Mr. Schell

   12.5%    25.0%    50.0%

Mr. Merrill

   12.5%    25.0%    50.0%

Mr. Cromling

   12.5%    25.0%    50.0%

Mr. Guidry

   12.5%    25.0%    50.0%

The percentage of salary multipliers chosen for the CEO and other NEOs reflect 50% of the standard multiplier range for executives in similar positions as reflected in market-based survey data.

Financial performance award. For purposes of the 2011 financial performance award, NEO performance was measured in terms of the ratio of the company’s consolidated annual cash flow to its average total annual assets, as compared to the same ratio for our peer group. Peer group performance was determined based on analyst’s published projected financial performance levels for the performance year (i.e., 2011). Performance on this ratio at the 25th percentile of the peer group constituted “threshold” performance, at 50th percentile performance constituted “target” performance, and at 75th percentile performance constituted “outstanding” performance. Depending on the performance level achieved, the incentive opportunity ranges for the NEOs were as follows for the financial performance award:

 

Name    Threshold    Target    Outstanding

Mr. Pinkston

   11.25%    22.5%    45.0%

Mr. Schell

   7.5%    15.0%    30.0%

Mr. Merrill

   7.5%    15.0%    30.0%

Mr. Cromling

   2.5%     5.0%    10.0%

Mr. Guidry

   2.5%     5.0%    10.0%

The incentive ranges reflected for Messrs. Pinkston, Schell, and Merrill for 2011 were 60% of the total ranges available for the performance-based total short-term incentive, reflecting the 60% weighting of this factor for the corporate NEOs. For Messrs. Cromling and Guidry, it was 20% of the total available incentive, reflecting the established weighting for the business segments. If the threshold level of performance had not been achieved,

 

 

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there would have been no payout on the financial performance award.

Scorecard Award. The scorecard component of the 2011 short-term incentive award was based on the performance of the individual business units, and the performance metrics differed for each segment.

Corporate scorecard. The scorecard for Messrs. Pinkston, Schell, and Merrill was a composite of the scorecards of the three business segments. For 2011, the segments were weighted 60% for the petroleum segment, 30% for the drilling segment, and 10% for the mid-stream segment.

Depending on the performance level achieved, the incentive opportunity for the corporate NEOs was as follows, expressed as a percentage of their annual salaries:

 

Name    Threshold    Target    Outstanding

Mr. Pinkston

   7.5%    15.0%    30.0%

Mr. Schell

   5.0%    10.0%    20.0%

Mr. Merrill

   5.0%    10.0%    20.0%

The incentive range for these awards is 40% of the performance based incentive opportunity range for the corporate NEOs, reflecting the weighting of the corporate scorecard award relative to the financial performance award for those NEOs.

Drilling segment scorecard. For 2011, the drilling segment’s scorecard award was determined based on the segment’s performance on four factors:

 

   

accident rates;

   

total rig costs;

   

number of rigs operating; and

   

rig downtime.

For the head of our drilling segment, the incentive range for the scorecard award as a whole was 80% of the total

incentive opportunity range for this performance-based incentive award.

Exploration and production segment scorecard. For 2011, this segment’s scorecard performance was determined based on the segment’s performance on the following four factors:

 

   

net reserve increase;

   

capital cost;

   

production growth; and

   

operating costs.

The incentive range for the scorecard award as a whole was 80% of the total incentive opportunity range for this performance-based incentive award.

Mid-stream segment scorecard. For 2011, this segment’s scorecard performance was determined based on the segment’s performance on these three factors:

 

   

growth in invested capital;

   

return on invested capital; and

   

operating cost.

The incentive range for the scorecard award as a whole was 80% of the incentive opportunity range for this performance-based incentive award for the segment head.

Based on the scorecard performance set forth below, the following amounts were paid to the NEOs for the performance-based component of the bonus:

 

   

Mr. Pinkston – $395,262

   

Mr. Schell – $131,985

   

Mr. Merrill – $127,516

   

Mr. Cromling – $63,684

   

Mr. Guidry – $115,816

The individual scorecards on which these amounts are based are set forth below.

 

 

Business Segment NEOs. The performance-based cash bonus awards for Mr. Guidry (head of our exploration and production segment), and Mr. Cromling (head of our drilling segment), were weighted at 80% for their respective operating segment scorecard award, and 20% for the corporate-level financial performance award.

Mr. Guidry’s scorecard is as follows:

 

A.    Unit Petroleum Company Scorecard Award
     

Threshold  

(pays 10% of  
salary/2.5% per  
factor)  

  

Target  

(pays 20% of  
salary/5% per  
factor)  

   Outstanding  
(pays 40% of  
salary/10% per  
factor)  
   Actual      % Salary  
Payable  
   Bonus Payable

Reserves Replacement(1)

   120.00%      150.00%      180.00%      201.97%      10.00%      $33,100

Capital Cost Control(2)

   $294,231,688      $267,505,353      $243,453,610      $368,003,616      0.0%       

Production Growth(3)

       8.00%      10.00%      15.00%        22.69%      10.00%      $33,100

Operating Costs(4)

   $1.60      $1.50        $1.10        $1.44        5.75%      $19,033
                         25.75%      $85,233
B.     Financial Performance Award

Threshold

(2.5% of salary)(5)

  

Target

(5% of salary)(6)  

   Outstanding  
(10% of salary)
(7)  
   Actual      % Salary  
Payable  
   Bonus Payable

12.18%

   15.88%      21.80%      20.90%              9.24%*       $30,583

Total Payable for A. Scorecard Award + B. Financial Performance Award

        34.99%      $115,816

 

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Table of Contents
  * Decimals truncated for purposes of table. Calculations based in truncated values in table will be slightly off due to rounding.

Notes to table:

  (1) Defined as percentage of 2010 reserves replaced through 2011 drilling activity.
  (2) Defined as total costs incurred on new wells completed during 2011.
  (3) Defined as percentage by which 2011 production increased over 2010 production.
  (4) Defined as total operating costs divided by total production in terms of MCF-equivalent amounts.
  (5)

Represents cashflow-to-assets ratio at 25th percentile of peer companies.

  (6)

Represents cashflow-to-assets ratio at 50th percentile of peer companies.

  (7)

Represents cashflow-to-assets ratio at 75th percentile of peer companies.

Mr. Cromling’s scorecard is as follows:

 

A.    Unit Drilling Company Scorecard Award
     

Threshold

(pays 10% of
salary/2.5% per
factor)

  

Target

(pays 20% of
salary/5% per

factor)

  

Outstanding  
(pays 40% of  

salary/10% per  
factor)  

   Actual    % Salary
Payable
   Bonus Payable

Accidents(1)

   3.5    3.0    2.5      3.93      0.0%     

Total Daily Rig Cost(2)

   $9,000    $8,750    $8,500      $9,683      0.0%     

No. of Rigs Operating(3)

   70    73    76      76.10    10.0%    $33,100

Rig Downtime(4)

   1.00%    0.80%    0.70%      1.22%      0.0%     
     10.0%    $33,100
B.     Financial Performance Award

Threshold

(2.5% of salary)(5)

  

Target

(5% of salary)(6)

  

Outstanding

(10% of salary)(7)

   Actual    % Salary  
Payable  
   Bonus Payable

12.18%

   15.88%    21.80%    20.90%          9.24%*      $30,584

Total Payable for A. Scorecard Award + B. Financial Performance Award

       19.24%        $63,684
  * Decimals truncated for purposes of table. Calculations based in truncated issues in table will be slightly off due to rounding.

Notes to table:

  (1) Defined as number of recordable accidents per 200,000 man-hours worked.
  (2) Defined as average total rig costs incurred per rig per day in 2011.
  (3) Defined as average number of rigs operating per day in 2011.
  (4) Defined as total rig hours available but not billed as a ratio of total rig hours available.
  (5)

Represents cashflow-to-assets ratio at 25th percentile of peer companies.

  (6)

Represents cashflow-to-assets ratio at 50th percentile of peer companies.

  (7)

Represents cashflow-to-assets ratio at 75th percentile of peer companies.

Corporate NEOs. The performance-based cash bonus awards for the three corporate NEOs, Messrs. Pinkston, Schell, and Merrill, were weighted at 40% based on the composite score on the three operating segment scorecards, and at 60% based on corporate financial performance.

Mr. Pinkston’s scorecard is as follows:

 

A.     Corporate Scorecard Award

(a)

Segment

  

(b)

Scorecard(1)

   (c) 75% of Col. (b)     (d) Segment Weight      (e)  
Col. (c) x Col.  (d)  
   % Salary
Payable
(2)
   Bonus Payable

UPC(3)

   25.75%    19.31%     60.00%      11.59%            

UDC(4)

   10.00%       7.5%     30.00%       2.25%            

SPC(5)

   31.60%     23.7%     10.00%       2.37%            
     16.21%*    $110,859
B.      Financial Performance Award
     

Threshold  

(25th %tile of Peers)  

  

Target  

(50th %tile of Peers)  

  

Outstanding  

(75th %tile of Peers)  

   Actual      % Salary  
Payable  
   Bonus Payable
     12.18%      15.88%      21.80%      20.90%      41.58%*      $284,403

Total Payable for A. Scorecard Award + B. Financial Performance Award

   57.79%      $395,262
  * Decimals truncated for purposes of table. Calculations based on truncated values in table will be slightly off due to rounding.

Notes to table:

  (1) Expressed as a percentage of salary payable to each division head for the Scorecard Award.
  (2) Calculated by totaling all entries in column (e).
  (3) UPC = Unit Petroleum Company; for UPC Scorecard, see Part A. of table for Mr. Guidry, above.
  (4) UDC = Unit Drilling Company; for UDC Scorecard, see Part A. of table for Mr. Cromling, above.
  (5) SPC = Superior Pipeline Company; see SPC Scorecard, as follows:

 

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Superior Pipeline Company Scorecard
      Threshold      Target      Outstanding      Actual    % Salary  Payable

Growth in Invested Capital(a)

  

15.00%  

(3% of salary)  

  

20.00%  

(6% of salary)  

  

25.00%  

(12% of salary)  

   36.48%    12.00%

Return on Invested Capital(b)

  

12.00%  

(3.5% of salary)  

  

15.00%  

(7% of salary)  

  

18.00%  

(14% of salary)  

   13.87%      5.6%  
Operating Costs and G&A/Gathered MMBTU(c)   

$0.38  

(3.5% of salary)  

  

$0.35  

(7% of salary)  

  

$0.32  

(14% of salary)  

   $0.27    14.0%  

Superior Pipeline Company Scorecard Award

 

  

31.6%  

 

Notes to table:

  (a) Defined as the percentage increase in the total capital invested by this business unit in 2011 as compared to 2010.
  (b) Defined as business unit EBITDA divided by the average invested capital for 2011.
  (c) Defined as total operating costs and general and administrative expense in 2011 divided by total gas gathered, as expressed in MMBTU, during this same period.

Mr. Schell’s scorecard is as follows:

 

A.     Corporate Scorecard Award

(a)

Segment

  

(b)

Scorecard(1)

  

(c)  

50% of Col. (b)  

  

(d)  

Segment Weight  

  

(e)  

Col. (c) x Col. (d)  

   % Salary  
Payable
(2)  
   Bonus Payable

UPC(3)

   25.75%    12.88%      60.00%      7.73%            

UDC(4)

   10.00%      5.00%      30.00%      1.5%              

SPC(5)

   31.60%    15.80%      10.00%      1.58%            
     10.81%*      $37,018
B.     Financial Performance Award(6)
     

Threshold  

(25th %tile of Peers)  

  

Target  

(50th %tile of Peers)  

  

Outstanding  

(75th %tile of Peers)  

   Actual      % Salary  
Payable  
   Bonus Payable
     12.18%      15.88%      21.80%      20.90%      27.72%*      $94,967

Total Payable for A. Scorecard Award + B. Financial Performance Award

   38.52%      $131,985
  * Decimals truncated for purposes of table. Calculations based on truncated values in table will be slightly off due to rounding.

Notes to table:

  (1) Expressed as a percentage of salary payable to each division head for the Scorecard Award.
  (2) Calculated by totaling all entries in column (e).
  (3) UPC = Unit Petroleum Company; for UPC Scorecard, see Part A. of table for Mr. Guidry, above.
  (4) UDC = Unit Drilling Company; for UDC Scorecard, see Part A. of table for Mr. Cromling, above.
  (5) SPC = Superior Pipeline Company; for SPC Scorecard, see footnote 3 to Scorecard for Mr. Pinkston, above.
  (6) Based on company’s relative cashflow-to-assets ratio compared to its peers.

Mr. Merrill’s scorecard is as follows:

 

A.     Corporate Scorecard Award (6)

(a)

Segment

  

(b)

Scorecard(1)

  

(c)

50% of Col. (b)

  

(d)

Segment Weight

   (e)  
Col. (c) x  Col. (d)  
   % Salary
Payable
(2)
   Bonus Payable

UPC(3)

   25.75%    12.88%    60.00%    7.73%          

UDC(4)

   10.00%      5.00%    30.00%    1.5%              

SPC(5)

   31.60%    15.80%    10.00%    1.58%            
     10.81%*    $35,765
B.     Financial Performance Award(6)
     

Threshold  

(25th %tile of Peers)  

   Target  
(50th %tile of Peers)  
   Outstanding  
(75th %tile of Peers)  
   Actual      % Salary  
Payable  
   Bonus Payable
     12.18%      15.88%      21.80%      20.90%      27.72%*    $91,751

Total Payable for A. Scorecard Award + B. Financial Performance Award

   38.52%      $127,516
  * Decimals truncated for purposes of table. Calculations based on truncated values in table will be slightly off due to rounding.

Notes to table:

  (1) Expressed as a percentage of salary payable to each division head for the Scorecard Award.
  (2) Calculated by totaling all entries in column (e).
  (3) UPC = Unit Petroleum Company; for UPC Scorecard, see Part A. of table for Mr. Guidry, above.
  (4) UDC = Unit Drilling Company; for UDC Scorecard, see Part A. of table for Mr. Cromling, above.
  (5) SPC = Superior Pipeline Company; for SPC Scorecard, see footnote 3 to Scorecard for Mr. Pinkston, above.
  (6) Based on company’s relative cashflow-to-assets ratio compared to its peers.

 

Discretionary Component of Short-term Incentive

Cash Bonus Awards.

In deciding the discretionary component of the bonus award, the committee reviewed competitive market data. Data from the Mercer US MTCS Compensation Survey for

the Energy Sector for 2008 through 2011 reflected that the market targets for total short-term incentives relevant to our NEOs, expressed as a percentage of salary, were as follows:

 

 

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Mercer Survey Data – Percentage of Salary Market Targets for

Total Short-term Incentives 2008-2011

Position    % of salary paid   
as cash bonus  

CEO – Non-Chairman

   95.0%

Top Legal Executive - Corporate

   57.5%

Chief Financial Officer - Corporate

   62.5%

Top Drilling Operations Executive

   48.3%

Top Exploration & Production Executive

   57.6%

The percentage-of-salary incentive award levels used as targets by the committee in calculating the NEOs’ bonuses in recent years are as follows:

 

Current Targets for NEOs’

Total Short-term Incentives

Position

  

% of salary  

target  

CEO (Mr. Pinkston)

   75.0%

Sr. VP, General Counsel (Mr. Schell)

   50.0%

CFO/Treasurer (Mr. Merrill)

   50.0%

Executive VP, Drilling (Mr. Cromling)

   50.0%

Executive VP, E&P (Mr. Guidry)

   50.0%

Although the percentage-of-salary award levels the committee used for the total annual targets for the NEOs were lower than the percentage-of-salary levels used to calculate total cash bonuses for similarly-situated executives in the survey reports, Mr. Pinkston recommended that the combined performance-based and discretionary component of the bonuses not be paid at higher percentages of salary than previously used. He did however recommend that they be paid at a higher percentage of target than paid in years past. His recommendation, with respect to the Non-CEO NEOs, was that the discretionary component of the cash bonus be paid at the level which would, when combined with the non-discretionary performance-based component of the cash bonus award, pay at 104.1% of the target for the Non-CEO NEOs as a group. Within that group, he recommended that Mr. Guidry receive a bonus at 108.8% of the target, and the remaining NEOs receive bonuses at 102.2% to 102.7% of their targets. The higher percentage of target recommended for Mr. Guidry was in recognition of the 2011 performance of the company’s exploration and production segment. The recommendation that the total cash bonus award for the non CEO-NEOs as a group be paid at 104.1% of the target was deemed to be in parity with Mr. Pinkston’s recommendation for the non-NEO employees, whose short-term awards equaled 104% of their target award levels. The committee agreed with Mr. Pinkston’s recommendations and approved discretionary cash bonus amounts that, when combined with the performance-based components of the awards, resulted in a total cash bonus payout for the Non-CEO NEOs (as a group) at 104.1% of their respective target award levels. The committee determined that Mr. Pinkston’s bonus should be paid at 105.4% of his target award level, which is the average percentage of all the bonuses for the NEOs and the President of Superior Pipeline. Accordingly, the following amounts were approved as the discretionary cash bonus amounts for the NEO’s:

   

Mr. Pinkston – $145,440

   

Mr. Schell – $43,015

   

Mr. Merrill – $42,484

   

Mr. Cromling – $106,316

   

Mr. Guidry – $64,184

2012 compensation decisions. The following is provided as supplemental information beneficial to our stockholders. It provides additional context to our fiscal year 2011 compensation decisions. This information will be analyzed in detail in the proxy statement for our 2013 annual meeting because the decisions detailed in this section involve compensation decisions for 2012 and are not considered to have been earned in 2011. These amounts do not appear in the summary compensation or other tables set forth in this proxy statement.

In December 2011 the compensation committee approved the following 2012 salaries for our NEOs:

 

   

Mr. Pinkston – $760,000

   

Mr. Schell – $400,000

   

Mr. Merrill – $400,000

   

Mr. Cromling – $400,000

   

Mr. Guidry – $400,000

These salaries were effective January 1, 2012.

In February 2012 the compensation committee approved the following restricted stock awards for our NEOs for 2012 long-term incentive awards:

 

   

Mr. Pinkston – 46,335 shares

   

Mr. Schell – 23,168 shares

   

Mr. Merrill – 22,115 shares

   

Mr. Cromling – 22,115 shares

   

Mr. Guidry – 25,274 shares

Seventy percent of the shares awarded will vest in equal one-third annual increments beginning March 9, 2013. The remaining 30% will cliff vest on March 9, 2015 assuming, in addition to the other possible requirements, that the applicable targeted performance is met. If performance is above or below target, the number of shares vesting will also be higher or lower than the 30% of the total shares set forth above.

Executive stock ownership policy.  Although we encourage our NEOs to own company stock, we do not require them to do so. During the course of their employment, all NEOs have received compensation in the form of stock or other equity interests, and all executive officers currently own company stock. We have a policy of prohibiting our executive officers (and directors) from engaging in short-term or speculative transactions in our securities, including hedging activities.

No backdating, springloading, or repricing of options.  We do not backdate options, grant options retroactively, or reprice existing options. In addition, we do not coordinate grants of options so that they are made before announcement of favorable information, or after

 

 

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announcement of unfavorable information. Option and stock awards are granted at fair market value on the date the award is approved. Our general practice is to grant awards only on an annual grant basis, although there are occasions when grants have been made on other dates, such as in connection with a newly-hired employee or special employee retention restricted stock awards that are granted from time to time.

Non-employee director compensation. The compensation committee recommends the form and amount of compensation for our non-employee directors to the board and the board makes the final determination. In making its decisions, the compensation committee considers such factors as it deems appropriate, including historical compensation information, level of compensation necessary to attract and retain non-employee directors meeting our desired qualifications and market data.

Accounting and tax considerations. Before 2006, the primary form of equity compensation that we awarded to our NEOs consisted of stock options. We selected this form of award because of the then favorable accounting and tax treatment and the expectation of employees in our industry. However, beginning in 2006, the accounting treatment of stock options changed as a result of Statement of Financial Accounting Standards No. 123(R) (now replaced by FASB Accounting Standards Codification Topic 718), making the accounting treatment of stock options less attractive as a form of employee compensation. As a result, since 2006 we have used stock appreciation rights, restricted stock or a mix of the two for our NEOs.

Section 162(m). The committee considers the potential effects of Section 162(m) of the Code on the compensation paid to our NEOs (excluding our Chief Financial Officer).

Section 162(m) disallows a tax deduction for any publicly held corporation for individual compensation exceeding $1.0 million in any taxable year for our named executive officers (excluding our Chief Financial Officer), unless the compensation is performance-based.

The committee has examined our current executive compensation program and understands that occasionally some of the compensation paid to our NEOs (excluding our Chief Financial Officer) may not be deductible under Section 162(m) of the Code. However, the committee does not believe that the loss of any deductions will be likely to have a material negative financial impact on the company. The net impact on the company for 2011 was approximately $309,417 – the amount of the taxes on compensation that was not deductible under Section 162(m) of the Code. The committee also believes that it is important to retain the flexibility to motivate performance through awards or programs that do not meet all of the requirements of Section 162(m). The committee will continue to monitor the issue of deductibility, and make adjustments to our executive compensation programs as it feels appropriate and warranted.

Non-qualified deferred compensation. On October 22, 2004, the American Jobs Creation Act of 2004 was signed into law changing the tax rules applicable to non-qualified deferred compensation arrangements. A more detailed discussion of our non-qualified deferred compensation program is provided on page 31 under the heading “Non-qualified deferred compensation for 2011.”

No employment agreements. We currently do not have employment contracts with our NEOs. But we have entered into key employee contracts with three of our NEOs. Additional information regarding those agreements is contained in the discussion under “Potential payments on termination or change in control” below.

 

 

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SUMMARY COMPENSATION TABLE

The following table sets forth information regarding the compensation paid, distributed, or earned by or for our NEOs for fiscal years 2009 through 2011.

 

SUMMARY COMPENSATION TABLE  

Name and Principal

Position

   Year      Salary  
($)(1)  
     Bonus
($)(1)(2)
    Stock  
Awards  
($)(3)  
     Option  
Awards  
($)  
  

Non-  

Equity  
Incentive  

Plan  
Compensation  
($)(4)   

  

Change in  
Pension  

Value and  

Nonqualified  

Deferred  
Compensation  
Earnings  

($)(5)  

   All Other  
Compensation  
($)(6)  
    

Total

($)

 
(a)    (b)      (c)        (d)     (e)        (f)      (g)      (h)      (i)        (j)  

Larry D. Pinkston,

   2011        684,000           145,440 (7)       1,442,148         -      395,262      -        24,699                2,691,549   

President and CEO

   2010        637,000           425,000        1,698,016         -      -      -        24,699                2,784,715   
     2009        600,000           450,000        -         -      -      -        24,699                1,074,699   

Mark E. Schell, Sr. V.P.,

Secretary and General Counsel

   2011        342,600           43,015 (7)       502,990         -      131,985      -        25,545                1,046,135   
   2010        318,600           143,000        474,021         -      -      -        25,545                961,166   
   2009        300,000           150,000        -         -      -      -        25,545                475,545   

David T. Merrill, CFO

   2011        331,000           42,484 (7)       486,973         -      127,516      -        31,289                1,019,262   

and Treasurer

   2010        308,000           138,000        458,012         -      -      -        31,302                935,314   
     2009        290,000           145,000        -         -      -      -        30,593                465,593   

John Cromling, Executive

   2011        331,000           106,316 (7)       486,973         -      63,684      -        27,163                1,015,136   

V.P. - Drilling

   2010        308,000           138,000        458,012         -      -      -        29,744                933,756   
     2009        290,000           145,000        -         -      -      -        27,499                462,499   

Bradford J. Guidry,

Executive V.P. - Exploration

   2011        331,000           64,184 (7)       486,973         -      115,816      -        23,199                1,021,172   
   2010        308,000           138,000        458,012         -      -      -        23,199                927,211   
   2009        290,000           145,000        -         -      -      -        23,502                458,502   

Notes to table:

(1) Compensation deferred at the election of an executive is included in the year earned. During 2009, 2010, and 2011, the NEOs deferred, on a discretionary basis, the following amounts of salary or bonus into our compensation deferral plans:

 

          Amounts Deferred  
    Name          Year               Salary($)              Bonus($)  
       2011      5,000             17,000   
 

Larry D. Pinkston

   2010      4,247             17,753   
       2009      22,000              -   
       2011      10,560             11,440   
 

Mark E. Schell

   2010      10,715             20,280   
       2009      22,000              -   
       2011      12,340             9,660   
 

David T. Merrill

   2010      4,980             11,600   
       2009      68,700              -   
       2011      10,960             11,040   
 

John Cromling

   2010      10,400             11,600   
       2009      22,000              -   
       2011      8,275             13,725   
 

Bradford J. Guidry

   2010      10,267             11,733   
       2009      22,000              -   
(2) The amounts in column (d) reflect the bonus amount earned in the year without regard to the year(s) those amounts were actually paid, and do not include amounts, if any, earned in prior years but paid in the stated year. The amount for 2011 was both awarded and paid in 2012, but is included as 2011 income because it was deemed to be earned in 2011.
(3) The amounts included in the “Stock Awards” column are the aggregate grant date fair value of these awards computed in accordance with FASB ASC Topic 718 “Stock Compensation,” which excludes the effect of estimated forfeitures. For a discussion of the valuation assumptions used in calculating these values for year 2011, see Notes 2 and 12 to our 2011 Consolidated Financial Statements included in our annual report on Form 10-K for the year ended December 31, 2011. The amount shown does not represent amounts paid to the NEOs.
(4) Reflects performance-based component of 2011 cash bonus paid under the Annual Performance Bonus Plan.
(5) We do not provide for preferential or above-market earnings on deferred compensation.

 

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(6) The table below shows the components of this column:

 

     Name    Year      401(k) Match  
for stated  
Plan year  
($)*  
   Personal Car  
Allowance  
($)  
   Club  
Membership   
($)  
   Total “All  
Other  
Compensation”  
($)  
            2011            17,199            7,500                -               24,699    
  

Larry D. Pinkston

       2010            17,199            7,500                -               24,699    
            2009            17,199            7,500                -               24,699    
            2011            17,199            7,500                846          25,545    
  

Mark E. Schell

       2010            17,199            7,500                846          25,545    
            2009            17,199            7,500                846          25,545    
            2011            17,199            6,000                8,090          31,289    
  

David T. Merrill

       2010            17,199            6,000                8,103          31,302    
            2009            16,694            6,000                7,899          30,593    
            2011            17,199            2,788                7,176          27,163    
  

John Cromling

       2010            17,199            5,498**            7,047          29,744    
            2009            17,199            4,184**            6,116          27,499    
            2011            17,199            6,000                -               23,199    
  

Bradford J. Guidry

       2010            17,199            6,000                -               23,199    
            2009            17,199            6,000                303          23,502    

*    Our matching contribution is made in shares of our common stock.

**  This amount represents the imputed income attributable to Mr. Cromling’s use of a company vehicle.

(7) Reflects discretionary portion of 2011 cash bonus, paid under the Annual Performance Bonus Plan.

GRANT OF PLAN-BASED AWARDS FOR 2011

In 2011, the NEOs received the following plan-based awards:

 

GRANTS OF PLAN-BASED AWARDS FOR 2011

 

Name

  

 

Grant  
Date  

  

 

Estimated Possible Payouts  

Under Non-Equity Incentive  

Plan Awards(1)   

  

 

Estimated Future Payouts  

Under Equity Incentive Plan  

Awards(2)   

  

 

All Other  
Stock  
Awards:  
Number of  
Shares of  
Stock or  
Units  
(#)(3)  

  

 

All Other  
Option  
Awards:  
Number of  
Securities  
Underlying  
Options  
(#)  

  

 

Exercise or  
Base Price  
of Option  
Awards  

($/sh)  

  

 

Grant Date
Fair Value
of Stock and
Option
Awards

($)(4)

           

 

Thresh-  

old  

($)  

  

 

Target  

($)  

  

 

Maxi-  

mum  

($)  

  

 

Thresh-  

old  

(#  

shares)  

  

 

Target  

(#  

shares)  

  

 

Maxi-  

mum   

(# shares)  

           
(a)    (b)      (c)      (d)      (e)      (f)      (g)      (h)     

 

(i)  

   (j)      (k)      (l)

Larry D. Pinkston

   2/15/11                     3,849      7,698      11,547                     432,628(4)  
   2/15/11                                    17,963                1,009,520        
        128,250      256,500      513,000                                     

Mark E. Schell

   2/15/11                     1,343      2,685      4,028                     150,897(4)  
   2/15/11                                    6,265                352,093     
        42,825      85,650      171,300                                     

David T. Merrill

   2/15/11                     1,300      2,600      3,900                     146,120(4)  
   2/15/11                                    6,065                340,853     
        41,375      82,750      165,500                                     

John Cromling

   2/15/11                     1,300      2,600      3,900                     146,120(4)  
   2/15/11                                    6,065                340,853     
        41,375      82,750      165,500                                     

Bradford J. Guidry

   2/15/11                     1,300      2,600      3,900                     146,120(4)  
   2/15/11                                    6,065                340,853     
        41,375      82,750      165,500                                     

Notes to table:

(1) These columns show the threshold, target, and maximum potential value of the payment for each NEO under our Annual Performance Bonus Plan if certain performance objectives were achieved between January 1, 2011 and December 31, 2011. Actual payouts were made in February 2012 according to the performance levels reflected in the scorecards starting on page 23 of this proxy. Based on scorecard performance, actual payouts were as follows: Mr. Pinkston, $395,267; Mr. Schell, $131,985; Mr. Merrill, $127,516; Mr. Cromling, $63,684; Mr. Guidry, $115,816.
(2)

Reflects threshold, target and maximum vesting levels for performance-based restricted stock granted under the Unit Corporation Stock and Incentive Compensation Plan. Actual vesting amounts will be determined based on performance outcomes during the three-year performance period that ends February 15, 2014. Threshold payout requires the company’s 3-year TSR to be at the 40th percentile of the three-year TSR performance levels of its peer group. Target payout requires TSR performance at the 60th percentile of the peer group, and Maximum payout requires TSR performance at the 90th percentile of the peer group. For details on how TSR is calculated for these purposes, see “2011 long-term incentive awards,” page 20.

(3)

Represents shares of restricted stock granted under the Unit Corporation Stock and Incentive Compensation Plan. Shares are time-vested and will vest in three equal annual installments on March 9th of each of the years 2012 through 2014.

(4) Grant date fair value of performance-based restricted stock if vesting occurs at Target level.

 

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For 2011, 49% of our NEO’s total compensation consisted of salaries and annual bonuses and 51% consisted of restricted stock awards. For 2010, 45.8% of our NEOs’ total compensation consisted of salaries and annual bonuses, and 54.2% consisted of restricted stock awards. No plan-based grants were made to the NEOs during 2009, so for 2009 100% of our NEOs’ total compensation consisted of salaries and annual bonuses.

Of the restricted stock granted to our NEOs in 2011, there are performance-based conditions that affect the vesting of 18,183 shares (calculated assuming that vesting occurs at the Target level). For the remaining 42,423 shares of restricted stock granted to our NEOs in 2011, the only condition to vesting is that the recipient must be in the employ of the company on the vesting date in order to receive the stock. In the event of a change-in-control of the company, any unvested shares immediately vest in the recipient. The recipient of each restricted stock award has

all of the rights of a holder of shares of the company’s common stock, including the right to vote those shares and to receive any cash dividends paid on them. The compensation committee may however determine that cash dividends be automatically reinvested in additional shares which become shares of restricted stock and are subject to the same restrictions and other terms of the award. To date, the company has not issued dividends with respect to its common stock.

Amounts realizable from prior compensation did not affect the awards set forth above. There was no repricing involved with respect to any outstanding equity-based award or option.

OUTSTANDING EQUITY AWARDS AT END OF 2011

The following table shows outstanding equity awards at December 31, 2011 for each of the NEOs:

 

 

              OUTSTANDING EQUITY AWARDS AT END OF 2011                  
              Option Awards                      Stock Awards      
Name   

Number

of
Securities
Underlying
Unexercised
Options
Exercisable
(#)(1)

     Number of
Securities
Underlying
Unexercised
Options
Unexercisable
(#)
  

Equity
Incentive Plan
Awards:
Number of
Securities

Underlying
Unexercised
Unearned
Options

(#)

  

Option

Exercise
Price
($)

   Option  
Expiration  
Date  
   Number of
Shares or
Units of
Stock That
Have Not
Vested
(#)(2)
   Market
Value of
Shares or
Units of
Stock That
Have Not
Vested
($)(3)
  

Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares, Units
or Other
Rights That
Have Not
Vested

(#)(2)

  

Equity
Incentive
Plan Awards:
Market or
Payout Value
of Unearned

Shares, Units
or Other
Rights That
Have Not
Vested

($)(3)

(a)    (b)      (c)    (d)    (e)    (f)      (g)    (h)    (i)    (j)

Larry D. Pinkston

     7,500                  19.04    12/17/12                
     10,000                  22.95    12/17/13                
     10,000                  37.83    12/14/14                
     23,716                  51.76    12/12/16                
     47,529                  44.31    12/19/17                
                                36,471    1,692,254    5,774    267,914

Mark E. Schell

     7,500                  19.04    12/17/12                
     7,500                  22.95    12/17/13                
     8,500                  37.83    12/14/14                
     6,522                  51.76    12/12/16                
     17,427                  44.31    12/19/17                
                                11,431       530,398    2,014      93,450

David T. Merrill

     5,000                  21.50    08/25/13                
     3,000                  22.95    12/17/13                
     5,000                  37.83    12/14/14                
     5,929                  51.76    12/12/16                
     15,843                  44.31    12/19/17                
                                11,057       513,045    1,950      90,480

John Cromling

     700                  22.95    12/17/13                
     3,500                  37.83    12/14/14                
     7,500                  37.69    05/25/15                
     4,348                  51.76    12/12/16                
     10,456                  44.31    12/19/17                
                                11,057       513,045    1,950      90,480

Bradford J. Guidry

     3,500                  22.95    12/17/13                
     3,500                  37.83    12/14/14                
     7,500                  37.69    05/25/15                
     4,150                  51.76    12/12/16                
     9,981                  44.31    12/19/17                
                                11,057       513,045    1,950      90,480

 

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Notes to table:

(1) Each option grant has a ten-year term. Exercise prices are determined using the closing market price of our common stock on the date of grant.
(2)

Vesting dates for unvested time-vesting restricted stock and unvested and unearned performance-based restricted stock are shown in the table below. The number of shares of performance-based restricted stock shown to vest on March 9, 2014 reflects a projected payout for performance at the 50th percentile of the peer group, based on our performance as of December 30, 2011, the last trading day of the year.

 

000,000,000,000 000,000,000,000 000,000,000,000 000,000,000,000
      Unvested Restricted Stock        Unvested and  Unearned    
Performance-based    
Restricted Stock    
Name    # Shares        Vesting Date        # Shares        Vesting Date    
     5,988        3/9/12        5,774        3/9/14    
     9,254        4/1/12              

Larry Pinkston

   5,988        3/9/13              
     9,254        4/1/13              
     5,987        3/9/14              
     2,089        3/9/12        2,014        3/9/14    
     2,583        4/1/12              

Mark Schell

   2,088        3/9/13              
     2,583        4/1/13              
     2,088        3/9/14              
     2,022        3/9/12        1,950        3/9/14&n