ATWOOD OCEANICS, INC.
15835 PARK TEN PLACE DRIVE
HOUSTON, TEXAS 77084
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
Houston, Texas
January__, 2006
To the Shareholders of
ATWOOD OCEANICS, INC.:
Notice is hereby given that, pursuant to the provisions of the Amended and
Restated Bylaws of Atwood Oceanics, Inc., the Annual Meeting of the Shareholders
of Atwood Oceanics, Inc. will be held at the principal executive offices of
Atwood Oceanics, Inc., 15835 Park Ten Place Drive, in the City of Houston, Texas
77084, at 10:00 o'clock A.M., Houston Time, on Thursday, February 9, 2006, for
the following purposes:
1. To elect six (6) members of the Board of Directors for the term of
office specified in the accompanying Proxy Statement.
2. To approve the proposed adoption of the Amended and Restated Certificate
of Formation to reflect changes in Texas law as described in the
accompanying Proxy Statement.
3. To approve the proposed increase in authorized shares of Common Stock of
the Company from 20,000,000 shares to 50,000,000 shares as
described in the accompanying Proxy Statement.
4. To approve the proposed adoption of the Amended and Restated 2001 Stock
Incentive Plan as described in the accompanying Proxy Statement.
5. To transact such other business as may properly come before the meeting
or any adjournments thereof.
Shareholders of record at the close of business on December 30, 2005 will
be entitled to notice of and to vote at the Annual Meeting.
Shareholders are cordially invited to attend the meeting in person. Those
who will not attend are requested to sign and promptly mail the enclosed proxy
for which a stamped return envelope is provided.
By Order of the Board of Directors
/s/ James M. Holland
JAMES M. HOLLAND, Secretary
1
ANNUAL MEETING OF SHAREHOLDERS
ATWOOD OCEANICS, INC.
---------------
PROXY STATEMENT
---------------
January__, 2006
SECURITY HOLDERS ENTITLED TO VOTE
Holders of shares of common stock, par value $1.00 per share ("Common
Stock") of Atwood Oceanics, Inc., (hereinafter sometimes referred to as "we",
"us", "our" or the "Company") of record at the close of business on December 30,
2005 will be entitled to vote at the Annual Meeting of Shareholders to be held
February 9, 2006 at 10:00 o'clock A.M., Houston Time, at our principal executive
offices, 15835 Park Ten Place Drive, Houston, Texas, 77084 and at any and all
adjournments thereof.
Shareholders who execute proxies retain the right to revoke them at any
time before they are voted. A proxy, when executed and not so revoked, will be
voted in accordance therewith. This proxy material is first being mailed to
shareholders on or about January__, 2006.
PERSONS MAKING THE SOLICITATION
This proxy is solicited on behalf of the Board of Directors of the Company.
In addition to solicitation by mail for which we will bear the cost, we may
request banks, brokers and other custodians, nominees and fiduciaries who hold
our Common Stock in street name to send proxy material to the beneficial owners
of stock and to secure their voting instructions, if necessary. Further
solicitation of proxies may be made by telephone, mail, facsimile, or oral
communication with some of our shareholders, following the original
solicitation. All such further solicitation will be made by our regular
employees and we will bear the cost for such solicitation.
VOTING SECURITIES
At the close of business on December 30, 2005, the time which has been
fixed by the Board of Directors as the record date for determination of
shareholders entitled to notice of and to vote at the meeting, we had 15,401,926
shares of Common Stock outstanding.
The election as directors of the persons nominated in this proxy statement
and approval of adoption of the Amended and Restated 2001 Stock Incentive Plan
will require the vote of the holders of a majority of the shares entitled to
vote and represented in person or by proxy at a meeting at which a quorum is
present. Approval of the Amended and Restated Certificate of Formation and the
increase of the authorized shares of Common Stock of the Company from 20,000,000
share to 50,000,000 shares will require the vote of the holders of two-thirds
(2/3) of the shares entitled to vote and represented in person or by proxy at a
meeting at which a quorum is present. Abstentions and broker non-votes (which
result when a broker holding shares for a beneficial owner has not received
timely voting instructions on certain matters from such beneficial owner) are
counted for purposes of determining the presence or absence of a quorum for the
transaction of business, but will operate to prevent the election of the
directors nominated in this Proxy Statement or the approval of such other
matters as may properly come before the meeting to the same extent as a vote
withholding authority to vote for the election of directors so nominated or a
vote against such other matters.
Each share of Common Stock entitles its owner to one vote except with
respect to the election of directors. With respect to the election of directors,
each shareholder has the right to vote in person or by proxy the number of
shares registered in his name for as many persons as there are directors to be
elected, or to cumulate such votes and give one candidate as many votes as shall
equal the number of directors to be elected multiplied by the number of his
shares, or to distribute the votes so cumulated among as many candidates as he
may desire. In the event of cumulative voting, the candidates for directors
receiving the highest number of votes, up to the number of directors to be
elected, shall be elected.
2
If a shareholder desires to exercise his right to cumulate votes for
directors, the laws of the State of Texas, the State in which we are
incorporated, require the shareholder to give our Secretary written notice of
such intention on or before the day preceding the meeting. Such notice should be
sent to: Atwood Oceanics, Inc., P. O. Box 218350, Houston, Texas 77218, Attn:
James M. Holland. If any shareholder gives such notice, all shareholders have
the right to use cumulative voting at the meeting. The persons appointed by the
enclosed form of proxy are not expected to exercise the right to cumulate votes
for election of the directors named elsewhere in this Proxy Statement, although
such persons shall have discretionary authority to do so.
PRINCIPAL SHAREHOLDERS
The following table reflects certain information known to us concerning
persons beneficially owning more than 5% of our outstanding Common Stock as of
close of business on December 30, 2005 based on information provided by a third
party service provider in reports prepared for us.
Name and Address Shares of Common Stock Percent
Beneficially Owned of Class
----------------- ---------------------- --------
H&PIDC (1) 2,000,000 12.99%
1437 South Boulder Avenue
Tulsa, Oklahoma 74119
-------------------
(1) Mr. Helmerich, a current Director of the Company and Director nominee,
is President, Chief Executive Officer and a director, of Helmerich &
Payne, Inc. ("H&P"). Mr. Helmerich, together with other family members
and the estate of W.H. Helmerich, deceased, are controlling
shareholders of H&P, which has one hundred percent (100%) ownership of
H&PIDC, which currently owns of record and beneficially 2,000,000
shares of our Common Stock. Mr. Helmerich has disclaimed beneficial
ownership of the Common Stock owned by H&PIDC.
3
COMMON STOCK OWNED BY DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the amount of Common Stock beneficially
owned as of the close of business on December 30, 2005 by each of the directors,
by each of the executive officers, and by all directors and executive officers
as a group. Unless otherwise indicated below, each of the named persons and
members of the group has sole voting and investment power with respect to the
shares shown.
Name of Director, Shares of Common Stock Percent
Executive Officer or Group Beneficially Owned of Class
--------------------------- ---------------------- --------
Deborah A. Beck 1,800 (2) (1)
Robert W. Burgess 6,000 (3) (1)
George S. Dotson 4,000 (3) (1)
Hans Helmerich 4,000 (3)(4) (1)
William J. Morrissey 4,400 (3) (1)
John R. Irwin 135,200 (5) (1)
James M. Holland 55,284 (6) (1)
Glen P. Kelley 69,550 (7) (1)
All directors and executive officers as a group (8 persons) 268,234 (8) 1.74%
------------
(1) Less than 1%.
(2) Includes 1,500 shares which may be acquired upon exercise of options.
(3) Includes 4,000 shares which may be acquired upon the exercise of options.
(4) See Note (1) on page 3 for more information.
(5) Includes 135,000 shares which may be acquired upon the exercise of options.
(6) Includes 53,150 shares which may be acquired upon the exercise of options.
(7) Includes 69,250 shares which may be acquired upon the exercise of options.
(8) Includes 263,200 shares which may be acquired upon the exercise of options.
EXECUTIVE OFFICERS
The persons indicated below are our executive officers. The office
held, date of first election to that office and the age of each officer as of
the close of business on December 30, 2005 are indicated opposite his name.
Date of
First
Name Offices Held Election Age
---- ------------ -------- ---
John R. Irwin President and Chief March 60
Executive Officer 1993
James M. Holland Senior Vice President October 60
and Secretary 1988
Glen P. Kelley Senior Vice President - December 57
Marketing and 2004
Administration
No family relationship exists between any of the above executive officers.
All of our officers serve at the pleasure of the Board of Directors and may be
removed at any time with or without cause. Each of our executive officers has
served as our executive officer during the past five (5) years.
4
Mr. Irwin joined us in July 1979, serving as Operations Manager - Technical
Services. He was elected Vice President - Operations in November 1980, Executive
Vice President in October 1988, President and Chief Operating Officer in
November 1992, and President and Chief Executive Officer in March 1993.
Mr. Holland joined us as Accounting Manager in April 1977. He was elected
Vice President - Finance in May 1981 and Senior Vice President and Secretary in
October 1988.
Mr. Kelley rejoined us in January 1983 as Manager of Operations
Administration. He was elected Vice President - Contracts and Administration in
October 1988 and Senior Vice President - Marketing and Administration in
December 2004.
ITEM 1 - ELECTION OF DIRECTORS
At the meeting, six (6) directors (leaving one position vacant) are to be
elected for terms of one year each. Although our Amended and Restated Bylaws
provide that the Board of Directors consists of seven (7) persons, we have not
yet identified a suitable nominee to fill the vacancy. Accordingly, only six (6)
persons are nominated for election as directors, and shares may not be voted for
a greater number of persons than the number of nominees named. All six (6)
director nominees are currently serving as directors and are standing for
re-election.
The persons named in the enclosed form of proxy (James M. Holland and Glen
P. Kelley) have advised that they will vote all shares represented by proxies
for the election of the six (6) nominees for director listed below, unless
authority to so vote is withheld by the shareholder. Such persons will have the
discretion to cumulate the votes of the shares represented by proxy, although
the exercise of such discretion is not expected. If any of the nominees listed
below becomes unavailable for any reason, the shares represented by the proxies
will be voted for the election of such person, if any, as may be designated by
the Board of Directors.
Present Served as
Position a Director
with the Continuously Term to
Nominees Company Since Extend to Age
-------- --------- ------------- --------- ---
Deborah A. Beck Director February February 58
2003 2007
Robert W. Burgess Director September February 64
1990 2007
George S. Dotson Director February February 65
1988 2007
Hans Helmerich Director February February 47
1989 2007
John R. Irwin Director, November February 60
President 1992 2007
and Chief
Executive
Officer
William J. Morrissey Director November February 78
1969 2007
At all times during the previous five (5) years, Ms. Beck has been employed
by the Northwestern Mutual Life Insurance Company in various executive
capacities including Executive Vice President - Planning and Technology, Senior
Vice President - Insurance Operations, Vice President - New Business, and Vice
President of Policy Benefits. Ms. Beck served in the legal department for six
5
(6) years, three (3) of which she served as Assistant General Counsel.
Northwestern Mutual is a leading direct provider of individual life insurance
and offers insurance products, investment products and advisory services. Ms.
Beck's current role as Executive Vice President - Planning and Technology of
Northwestern Mutual entails responsibility for strategic planning, merger and
acquisition activity, information technology and project management. Ms. Beck's
division has a budget of $290 million per year and she oversees the direction of
750 employees.
Until his retirement in 1999, Mr. Burgess served for over five (5) years as
Chief Financial Officer (Senior Vice President) for CIGNA Investment Division,
CIGNA Companies. CIGNA is a diversified financial services company with major
businesses in insurance, health care, pensions and investments.
At all times during the previous five (5) years, Mr. Dotson has served as
Vice President - Drilling of H&P and President of H&PIDC. H&P is an
energy-oriented company engaged in contract drilling. He serves as a director of
H&P.
At all times during the previous five (5) years, Mr. Helmerich has served
as the Chief Executive Officer as well as a director of H&P.
Mr. Irwin has been employed by us in various executive capacities for the
last twenty-seven (27) years; of which, the last thirteen years he has been
President and Chief Executive Officer.
Mr. Morrissey served as director and Vice Chairman of the Board of
Directors of Marine Corporation until the end of 1987 when Marine Corporation
was acquired by Banc One Corporation, Columbus, Ohio. Mr. Morrissey is currently
retired.
Board of Director Meetings and Committees
The Company has standing Audit, Compensation, Executive and Nominating &
Corporate Governance Committees. The following chart shows the Committee
membership and positions of each director:
Nominating and
Corporate
Compensation Executive Governance
Director Audit Committee Committee Committee Committee
-------- --------------- ------------ --------- --------------
Deborah A. Beck X X X
X (Financial
Robert W. Burgess Expert) X X
George S. Dotson X X (Chairperson) X X
Hans Helmerich X X (Chairperson)
John R. Irwin X
William J. Morrissey X (Chairperson) X
The Audit Committee members are Ms. Beck and Messrs. Burgess, Dotson and
Morrissey. The Board of Directors has determined that Mr. Burgess is our "Audit
Committee Financial Expert" as that term is defined under the relevant federal
securities laws and regulations. The Audit Committee functions to review in
general terms the Company's accounting policies and audit procedures and to
supervise internal accounting controls. Our Board of Directors has adopted a
written charter for the Audit Committee, a copy of which is attached hereto as
Appendix A and which is also accessible on our website, www.atwd.com. The Audit
Committee held six (6) meetings during fiscal year 2005, of which four (4) were
telephone conferences.
The Executive Committee, composed of Messrs. Dotson, Helmerich and Irwin,
meets frequently, generally by telephone conference, for review of major
decisions and to act as delegated by the Board of Directors. Our Board of
Directors has adopted a written charter for the Executive Committee, a copy of
which is accessible on our website, www.atwd.com.
6
The Compensation Committee members, Ms. Beck, Messrs. Burgess and Dotson,
are responsible for administration of the Company's stock incentive plans, and
for review and approval of all salary and bonus arrangements. During fiscal year
2005, there were four (4) meetings of the Compensation Committee, of which one
(1) was a telephone conference. Our Board of Directors has adopted a written
charter for the Compensation Committee, a copy of which is accessible on our
website, www.atwd.com.
The Nominating & Corporate Governance Committee composed of Ms. Beck and
Messrs. Burgess, Dotson, Helmerich and Morrissey is to assist the Board of
Directors ("Board") regarding the appropriate size and composition of the Board,
as well as monitoring and making recommendations regarding the Board's
performance. The Nominating & Corporate Governance Committee held two (2)
meetings during fiscal year 2005. The Nominating & Corporate Governance
Committee will consider all director nominees recommended to it, including those
recommended by third parties such as shareholders. Such nominations should be
directed to any member of the Nominating & Corporate Governance Committee. A
specific process for communication between shareholders and the Nominating &
Corporate Governance Committee is accessible on our website, www.atwd.com, under
"Investor Information" - "Corporate Governance" - "Contact the Atwood Oceanics,
Inc. Board of Directors". The Nominating & Corporate Governance Committee will
evaluate all nominees, including those recommended by third parties such as
shareholders, for the following: personal qualities such as leadership,
statesmanship and responsiveness; general management qualities such as a global
perspective on the business, short term results, strategic thinking and
planning, knowledge of the business and preparedness; financial expertise such
as value creation, capital planning, and communications with the financial
investment communities; and qualities relating to the use of human resources
such as developing management talent and creating an effective organization. Our
Board of Directors has adopted a written charter for the Nominating & Corporate
Governance Committee, a copy of which is accessible on our website,
www.atwd.com.
Each of the Audit Committee charter, the Compensation Committee charter and
the Nominating & Corporate Governance Committee charter state that each member
must be independent as required by the New York Stock Exchange Listing Standards
and as determined by the Board of Directors in its business judgment. No member
of the Audit Committee, the Compensation Committee or the Nominating & Corporate
Governance Committee shall have a relationship to the Company that may interfere
with the exercise of his or her independent judgment and all members of such
committees shall be non-employee directors. The Board of Directors has made a
determination that each member of the Audit Committee, Compensation Committee
and the Nominating & Corporate Governance Committee is independent and meets the
requirements of the committee on which he or she serves. The Board of Directors
specifically considered the relationship of H&P and H&PIDC to the Company and
determined that they are not our affiliates, and, based on that fact and other
considerations, Messrs. Dotson and Helmerich are also not our affiliates.
Five (5) meetings of the Board of Directors were held during fiscal year
2005, four of which were regularly scheduled meetings, with one (1) being a
conference call. Each director attended, during the time of his or her
membership, at least seventy-five (75%) percent of Board of Director and
Committee meetings to which he or she was assigned. Additionally, the
non-management members of the Board of Directors held four (4) meetings, of
which all were in person. Mr. Helmerich presided over the meetings of the
non-employee members of the Board of Directors as our "Lead Independent
Director." The Company does not have a policy with regard to Board of Directors'
attendance at the annual meeting. Last year, one member of the Board of
Directors, Mr. Irwin, attended the annual meeting. We have a specific process at
the election of the communicating shareholder, for communications between
shareholders and either the Board of Directors as a whole or the non-management
members of the Board of Directors as detailed on our website, www.atwd.com,
along with other of our corporate governance guidelines.
Code of Ethics
Included in our corporate governance guidelines detailed on our website,
www.atwd.com, is the code of ethics we have adopted and which is applicable to
our chief executive officer and our senior financial officer, Mr. Irwin and Mr.
Holland, respectively We intend to satisfy the disclosure requirement regarding
any changes in our code of ethics we have adopted and or any waiver therefrom by
posting such information on our website or by filing a Form 8-K for such event.
Required Vote for Election of Directors
Election as directors of the persons nominated in this Proxy Statement will
require the vote of the holders of a majority of the shares of Common Stock
present or represented by proxy and entitled to vote at a meeting at which a
quorum is present. THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ELECTION AS
DIRECTORS OF THE PERSONS NOMINATED HEREIN.
7
ITEM 2 PROPOSAL TO ADOPT AN AMENDED AND RESTATED CERTIFICATE OF FORMATION TO
REFLECT CHANGES IN TEXAS LAW
General
On December 1, 2005, our Board of Directors approved the Amended and
Restated Certificate of Formation in the form attached hereto as Appendix B,
subject to shareholder approval. The current Restated Articles of Incorporation
were filed with the Texas Secretary of State on January 25, 1972 and have been
amended or supplemented by designation with filings made on March 28, 1975,
March 20, 1992, November 7, 1997, and October 17, 2002. The Restated Articles of
Incorporation and all amendments or supplements thereto are referred to in this
Proxy Statement as the "Current Articles." Since the original date of adoption
of the Current Articles, the laws of Texas governing corporations have been
amended numerous times, most recently by the adoption of the new Texas Business
Organizations Code, or TBOC.
The TBOC will become effective on January 1, 2006 for entities formed in
Texas on or after that date. Unless existing entities elect early adoption to be
governed by the TBOC, the TBOC will not apply to them until January 1, 2010.
After January 1, 2010, all entities formed in Texas will be governed by the
TBOC. The TBOC was promulgated to modernize the provisions governing Texas
entities and to consolidate existing provisions governing Texas entities into
one set of statutory provisions. The Board of Directors believes it to be in our
best interest to elect early adoption of the TBOC to take advantage of these
changes in Texas law. Additionally, the Board of Directors believes it to be an
opportune time to consolidate the provisions of the Current Articles into one
document for easier reference of our governing documents.
Purpose
This proposal is primarily intended to modernize the Current Articles by
conforming them to reflect the TBOC and by deleting provisions that are
unnecessary, ineffective or otherwise inappropriate as a result of the adoption
of the TBOC. Further, as the ability of shareholders to cumulate their votes for
directors will no longer be the default rule for Texas corporations under the
TBOC, our Board of Directors believes it to be in our best interest to
specifically provide for cumulative voting for directors in the Amended and
Restated Certificate of Formation, so as to ensure that there will be no change
in the substantive rights of our shareholders. Therefore, this proposal is
additionally intended to protect the current rights of our shareholders once we
are governed by the TBOC. If this proposal is approved, the Amended and Restated
Certificate of Formation will become effective upon filing with the Texas
Secretary of State. If this proposal is not approved the TBOC will apply to us
on January 1, 2010 at the latest.
Description of Amended and Restated Certificate of Formation
The following table sets forth a general description of the changes to our
Current Articles effected by the proposed Amended and Restated Certificate of
Formation. The full text of the proposed Amended and Restated Certificate of
Formation is set forth in Appendix B.
Current Articles Change Effected by
Amended and Restated Certificate of Formation
ARTICLE I: None.
Name.
ARTICLE II. The TBOC provides that perpetual existence is the default rule for Texas
Duration. corporations. Therefore, under the TBOC the current language is redundant and
has been deleted.
ARTICLE III. Current drafting practice is to provide that a corporation may engage "in any
Purpose. lawful activity for which a corporation may be incorporated" rather than to
enumerate permitted activities, and the language has been modified
appropriately.
ARTICLE IV. The language has been revised to consolidate the terms of the various
Capital Stock. amendments and certificate of designations comprising our Current Articles.
The draft proposed Amended and Restated Certificate of Formation included as
8
Appendix B assumes the approval of the proposal in Item 3 to increase the
total number of authorized shares of Common Stock. If the proposal in Item 3 is
not approved, then the draft language will be amended to reflect the
current total number of authorized shares of Common Stock.
ARTICLE V. The TBOC does not require this language to be included and it has been deleted.
Minimum Capital.
ARTICLE VI. (New Article V) This language has been updated to reflect our current
Registered Agent. registered agent.
ARTICLE VII. (New Article VI) This language has been updated to reflect our current
Board of Directors. members of the Board of Directors.
ARTICLE VIII. The TBOC does not require this language to be included and it has been deleted.
Names and
Addresses of
Incorporators.
ARTICLE IX. The TBOC changes current law so that preemptive rights are no longer the
Preemptive Rights default rule. As we do not have preemptive rights and would no longer
required to specifically deny them if governed by
the TBOC, that language has been deleted.
ARTICLE X. (New Article VI) This language has been modified to incorporate references to
Director's Liability. the TBOC.
N/A CUMULATIVE VOTING (New Article VIII). Under the TBOC, corporations must include
a statement in their Certificate of Formation authorizing the right of
shareholders to cumulate their votes in the election of directors. As our
shareholders currently have this right, we want to ensure that there is no
change to the rights of our shareholders once we are governed by the TBOC.
Impact of Item 3 Proposal
The proposal set forth in Item 3 relates to the increase in the number of
authorized shares of our Common Stock. If the proposal set forth in Item 3 is
not approved, and this Item 2 proposal is, then the Amended and Restated
Certificate of Formation will be adopted in the form set forth in Appendix B,
except that the total number of authorized shares of Common Stock will be twenty
million (20,000,000) as authorized by our Current Articles.
Required Vote for Approval of the Amended and Restated Certificate of Formation
Approval of the Amended and Restated Certificate of Formation requires the
affirmative vote of the holders of two-thirds (2/3) of the shares of Common
Stock present or represented by proxy and entitled to vote at a meeting at which
a quorum is present.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE AMENDED AND
RESTATED CERTIFICATE OF FORMATION.
ITEM 3 PROPOSAL TO INCREASE THE AUTHORIZED SHARES OF COMMON STOCK OF
THE COMPANY
General
Our Current Articles authorize the issuance of a total of twenty-one
million (21,000,000) shares of capital stock, consisting of twenty million
(20,000,000) shares of Common Stock, each with a par value of $1.00 per share,
and one million (1,000,000) shares of Preferred Stock, each with no par value.
As of the close of business on December 30, 2005, 15,401,926 shares of Common
Stock were outstanding and no shares of Preferred Stock were outstanding. In
9
addition, as of the close of business on December 30, 2005, we had 888,075
shares of Common Stock subject to outstanding stock options and 444,250 shares
of Common Stock reserved for issuance pursuant to future grants under the
Company's current stock incentive plans. Our total Common Stock share
requirement as of the close of business on December 30, 2005, was approximately
1,329,000 shares, or the Share Requirement.
General
On December 1, 2005, our Board of Directors approved, subject to approval
of our shareholders, the increase in the total number of authorized shares of
Common Stock from twenty million (20,000,000) to fifty million (50,000,000). The
Board of Directors proposes to effect the increase in the total number of
authorized shares of Common Stock either through the adoption of the proposed
Amended and Restated Certificate of Formation as discussed Item 2 or through the
adoption of an amendment to the Current Articles. The proposed Amended and
Restated Certificate of Formation is set forth in full in Appendix B and the
proposed Amendment to the Current Articles is set forth in Appendix C.
The proposed Amended and Restated Certificate of Formation or the Amendment
to the Current Articles, whichever is appropriate, will become effective upon
the filing of with the Texas Secretary of State. The authorized but unissued
shares of Common Stock would be available for issuance from time to time for
such purposes and for such consideration as our Board of Directors may determine
to be appropriate without further action by the shareholders, except for those
instances in which approval is required by Texas law or the rules of any
national securities exchange or automated quotation system on which shares of
our Common Stock are then listed or traded. Our shares of Common Stock are
currently listed on the New York Stock Exchange.
Purpose
The Board of Directors believes that it is in our best interest to increase
the total number of authorized shares of Common Stock so that it may have
greater flexibility in issuance of shares of Common Stock. In particular, the
Board of Directors would like to have sufficient number of shares of Common
Stock available to effect a two-for-one stock split in the form of a stock
dividend of one share of Common Stock for each share of Common Stock outstanding
on the record date for such stock split, which has not yet been determined. The
Board of Directors believes that a stock split would be in our best interest and
that of our shareholders because it would be expected to place the market price
of our Common Stock in a range that is more attractive to investors and may
result in improved liquidity and enhanced trading volume for our Common Stock.
The record date of any future stock split would be based in part on market
factors, and therefore, no definite record date has been determined and no stock
split declared.
Based on our Share Requirement, we do not have a sufficient number of
authorized shares of Common Stock to effect a two-for-one stock split.
Therefore, the Board of Directors approved, subject to shareholder approval, the
increase of the total number of authorized shares of Common Stock from twenty
million (20,000,000) to fifty million (50,000,000). The Board of Directors
believes that a total of fifty million (50,000,000) authorized shares of Common
Stock would be sufficient to effect a two-for-one stock split and to meet our
business needs as they arise without the expense or delay of a special meeting
of shareholders to approve additional increases in authorized shares of Common
Stock at such time. Such business needs may include other future stock dividends
or splits, equity financings, acquisitions, new or current stock incentive plans
and other proper corporate purposes identified by the Board of Directors in the
future. No increase in the total number of authorized shares of Preferred Stock
is proposed.
The overall effect of an issuance of additional shares of Common Stock and
the existence of the Rights Agreement between the Company and Continental Stock
Transfer and Trust Company dated October 18, 2002, or Rights Plan, may be to
render more difficult the accomplishment of any attempted merger, takeover or
other change in control affecting the Company and/or the removal of our
incumbent Board of Directors and management. However, this proposal is not made
in response to any effort of which we are aware to accumulate our Common Stock
or to obtain control of the Company, nor do we intend to use the additional
authorized shares of Common Stock to oppose a hostile takeover attempt or to
delay or prevent changes in control of management.
Effect on Rights of Shareholders
The additional shares of authorized Common Stock, when issued, would have
the same rights and privileges as the shares of Common Stock currently issued
10
and outstanding. Any future issuance of Common Stock would remain subject to
shareholder approval if required by Texas law or the rules of any national
securities exchange or automated quotation system on which shares of our Common
Stock are then listed or traded. Our shares of Common Stock are currently listed
on the New York Stock Exchange.
Other than as permitted or required under the Company's existing stock
incentive plans and outstanding securities, the Board of Directors has no
immediate plans, understandings, agreements or commitments to issue additional
shares of Common Stock for any purposes other than the two-for-one stock split
discussed above. The Company reserves the right to seek a further increase in
the total number of authorized shares of Common Stock from time to time in the
future as considered appropriate by the Board of Directors.
Impact of Item 2 Proposal
The proposal set forth in Item 2 relates to the approval of an Amended and
Restated Certificate of Formation. If the Amended and Restated Certificate of
Formation is approved pursuant to the proposal set forth in Item 2 and this Item
3 proposal is also approved, then the increase in the total number of authorized
shares of Common Stock will be effected by adoption of the Amended and Restated
Certificate of Formation. If the Amended and Restated Certificate of Formation
is not approved pursuant to the proposal set forth in Item 2, but this Item 3
proposal is approved, then the increase in the total number of authorized shares
of Common Stock will be effected by adoption of an Amendment to the Current
Articles. A draft of the proposed Amendment to the Current Articles is set forth
in Appendix C.
Required Vote for Approval of the Increase in the Total Number of Authorized
Shares of Common Stock
Approval of the increase in the total number of authorized shares of Common
Stock from twenty million (20,000,000) to fifty million (50,000,000) requires
the affirmative vote of the holders of a two-thirds (2/3) of the shares of
Common Stock present or represented by proxy and entitled to vote at a meeting
at which a quorum is present.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE INCREASE IN THE
TOTAL NUMBER OF AUTHORIZED SHARES OF COMMON STOCK FROM TWENTY MILLION
(20,000,000) TO FIFTY MILLION (50,000,000)
ITEM 4 PROPOSAL TO ADOPT THE AMENDED AND RESTATED ATWOOD OCEANICS, INC. 2001
STOCK INCENTIVE PLAN
General
On December 1, 2005, our Board of Directors adopted, subject to approval of
our shareholders, the Atwood Oceanics, Inc. Amended and Restated 2001 Stock
Incentive Plan which amends and restates in its entirety the Atwood Oceanics,
Inc. 2001 Stock Incentive Plan. The Atwood Oceanics, Inc. 2001 Stock Incentive
Plan as originally adopted is referred to herein as the "Original Plan" or the
"2001 Stock Incentive Plan." The Atwood Oceanics, Inc. 2001 Stock Incentive Plan
as amended and restated is referred to herein as the "Amended Plan." The
Original Plan became effective on September 6, 2001, subject to shareholder
approval, which was subsequently obtained. The Amended Plan will become
effective on March 1, 2006 if approved by the shareholders. Awards may be made
under the Amended Plan through September 5, 2011, which is 10 years from the
effective date of the Original Plan.
The principal features of the Amended Plan are summarized below. The
summary does not purport to be a complete statement of the Amended Plan and is
qualified in its entirety by reference to the Amended Plan, a copy of which is
attached as Appendix D to this Proxy Statement. Defined terms not defined herein
have the meaning set forth in the Amended Plan.
Purpose
The Amended Plan is designed to create incentives to motivate participants
to put forth maximum effort toward our success and growth and to enable us to
attract and retain experienced individuals who by their position, ability and
diligence are able to make important contributions to our success. Participants
include our non-employee directors, our officers and employees as well as those
of our subsidiaries and affiliates. There are currently approximately 1,100
11
potential participants in the Amended Plan. The Amended Plan would amend
and restate the Original Plan in its entirety. The principal purpose in amending
and restating the Original Plan is to change the form of stock incentive
automatically granted to non-employee directors and to conform the language in
the Amended Plan accordingly. Upon shareholder approval, the Amended Plan will
automatically award to non-employee directors restricted stock awards of Common
Stock valued at $40,000 once per fiscal year and eliminate the automatic grant
of 2,000 stock options to non-employee directors once per fiscal year provided
for under the Original Plan. With recent changes in accounting pronouncements
relating to stock incentives, the Board of Directors believe it to be in our
best interest to make restricted stock awards to our non-employee directors
rather than grant stock options. Additionally, the Amended Plan includes
amendments to reflect changes in law and the existence of our Rights Plan,
entered into subsequent to the approval of the Original Plan.
Shares Available
The total number of shares of stock reserved and available for distribution
pursuant to stock options or restricted stock is unchanged under the Amended
Plan at 1,000,000 shares (approximately 6.5% of our outstanding Common Stock as
of the close of business on December 30, 2005), subject to adjustment in the
event of a future stock dividend, stock split, merger, consolidation,
recapitalization, reclassification, spin off, combination of shares or other
similar events. As of the close of business on December 30, 2005, there were
444,250 shares remaining for distribution under the Original Plan. As of
December 30, 2005, the closing price on the New York Stock Exchange of our
Common Stock was $78.03 per share. Pursuant to the Amended Plan, shares
underlying the unexercised portion of any terminated or lapsed stock option and
shares of restricted stock which have been forfeited pursuant to applicable
restrictions shall no longer be available for distribution in connection with
future awards pursuant to the Amended Plan. Under the Original Plan, such shares
were available for reissuance. The Board of Directors believes this amendment to
be in our best interest as it will be easier to ensure proper valuation of such
stock incentives consistent with recent accounting pronouncements.
Administration
There is no change in the administration of the Amended Plan. The Amended
Plan will continue to be administered by the Compensation Committee of the Board
of Directors, which consists solely of two or more non-employee directors who
are appointed by, and serve at the pleasure of, the Board of Directors. The
Compensation Committee has the power and authority to grant to Eligible
Employees stock options and restricted stock as provided in the Amended Plan,
and to determine the terms and conditions, not inconsistent with the terms of
the Amended Plan, of any award granted, based on such factors and criteria as
the Compensation Committee shall determine, in its sole discretion. The
Compensation Committee has the authority to establish, adopt or revise such
administrative rules, guidelines and practices governing the Amended Plan as it
shall, from time to time, deem advisable; to interpret the terms and provisions
of the Amended Plan and any award granted and any agreements relating thereto;
and to otherwise supervise the administration of the Amended Plan.
Eligibility
There is no change to the eligibility of our officers and key employees and
those of our subsidiaries and affiliates who are responsible for or contribute
to our management, growth and/or profitability of our business, subsidiaries or
affiliates and who are eligible to be granted stock options and/or restricted
stock awards. The Amended Plan makes each of our non-employee directors eligible
to be automatically awarded shares of our Common Stock in the form of restricted
stock awards valued at $40,000 based on the fair market value of our Common
Stock on the date of grant and eliminates their automatic grant of stock options
provided for in the Original Plan. Non-employee directors will be ineligible for
discretionary grants of stock options under the Amended Plan.
Stock Options
There is no change to the types of stock options granted under the Amended
Plan. The Amended Plan permits the granting of two types of options: (i) those
that qualify as incentive stock options, or ISOs, under Section 422 of the
Internal Revenue Code of 1986, as amended, or the Code, or (ii) those that do
not so qualify, or Nonqualified Stock Options. Stock options granted under the
Amended Plan shall be subject to the terms and conditions set forth in the
Amended Plan and may contain such additional terms and conditions not
inconsistent with the terms of the Amended Plan as the Compensation Committee
deems appropriate. The option exercise price for each share of Common Stock
covered by an option shall be determined by the Compensation Committee, but
shall be not less than the fair market value of a share of Common Stock on the
date of grant.
12
The term of each stock option will be fixed by the Compensation Committee,
but may not exceed 10 years from the date of grant in the case of an ISO or 10
years and one day after the date of grant in the case of a Nonqualified Stock
Option. Stock options shall become exercisable at such time or times and subject
to such terms and conditions (including, without limitation, installment
exercise provisions) as shall be determined by the Compensation Committee.
Vesting provisions limiting the exercisability of stock options may be waived or
accelerated at any time in whole or in part based on such factors as the
Compensation Committee may determine.
The option exercise may be paid (i) in cash or by check, bank draft or
money order payable to the order of the Company, (ii) with certain requirements,
by delivering shares of Common Stock having a fair market value on the date of
payment equal to the amount of the exercise price, or (iii) by a combination of
the foregoing. Additionally, payment of the exercise price may be made by
delivery to us of an executed irrevocable option exercise form together with
irrevocable instructions to a broker-dealer to sell a sufficient portion of the
shares and deliver the sale proceeds directly to us in satisfaction of the
exercise price.
The Compensation Committee may, in its discretion, authorize all or a
portion of any Nonqualified Stock Options to be granted on terms which permit
transfer by the Eligible Employee to (i) the ex-spouse of the Eligible Employee
pursuant to the terms of a domestic relations order, (ii) the spouse, children
or grandchildren of the Eligible Employee, (iii) a trust or trusts for the
exclusive benefit of the spouse, children or grandchildren of the Eligible
Employee, or (iv) a partnership in which the spouse, children or grandchildren
of the Eligible Employee are the only partners; provided in each case that (x)
there may be no consideration for any such transfer, (y) the stock option
agreement pursuant to which such stock options are granted must be approved by
the Compensation Committee, and must expressly provide for transferability in a
manner consistent with the foregoing, and (z) subsequent transfers of
transferred stock options shall be prohibited except those made in accordance
with the transferability provisions of the Amended Plan or by will or by the
laws of descent and distribution. Following transfer, any such stock options
shall continue to be subject to the same terms and conditions as were applicable
immediately prior to transfer. Except as set forth in the Amended Plan and in
the applicable stock option agreement, no stock option shall be transferable by
the Eligible Employee otherwise than by will or by laws of descent and
distribution, and all stock options shall be exercisable, during the Eligible
Employee's lifetime, only by the Eligible Employee.
If an Eligible Employee's employment by the Company or any subsidiary or
affiliate terminates by reason of retirement, death or disability, the Eligible
Employee (or his personal representative in the case of death) shall be entitled
to purchase all or any part of the shares subject to any (i) vested ISO for a
period of up to three months from such date of termination (one year in the case
of death or disability in lieu of the three month period), and (ii) vested
Nonqualified Stock Option during the remaining term of such option. If an
Eligible Employee's employment terminates for any reason, the Eligible Employee
shall be entitled to purchase all of any part of the shares subject to any
vested stock option for a period of up to three months from such date of
termination. In no event shall any stock option be exercisable past the term of
the stock option. The Compensation Committee may, in its sole discretion,
accelerate the vesting of unvested stock options in the event of termination of
employment of any Eligible Employee.
Restricted Stock
Under the Amended Plan, there is no substantive change from the Original
Plan in the terms of restricted stock which may be issued to Eligible Employees
except that the restriction period is established as a minimum of six months and
a maximum of ten years. Shares of restricted stock may be issued to Eligible
Employees either alone or in addition to other awards granted under the Amended
Plan. The Compensation Committee shall determine Eligible Employees to whom, and
the time or times at which, such grants will be made, the number of shares to be
awarded, the price (if any) to be paid by the recipient of an award, the time or
times within which such awards may be subject to forfeiture, and all other
conditions of the awards. The Compensation Committee may condition grants of
restricted stock upon the attainment of specified performance goals or such
other factors or criteria as the Compensation Committee may determine.
The Amended Plan adds an automatic restricted stock award to each
non-employee director during each fiscal year of the Company. Non-employee
directors were ineligible to receive restricted stock awards under the Original
Plan. The number of shares of Common Stock included in the automatic restricted
stock award shall be the number of shares of Common Stock equivalent to $40,000
based on the fair market value of a share of Common Stock on the date of grant.
13
The automatic restricted stock award to non-employee directors vests 100% upon
grant, but has a three year restriction period. During the first fiscal year in
which the Amended Plan is effective, the date of grant will be the date of the
first meeting of the Board of Directors following the later of (i) shareholder
approval of the Amended Plan and (ii) each such director's election,
re-election, appointment or re-appointment. In subsequent fiscal years, the
award of restricted stock to non-employee directors shall be the earlier of the
date of the first meeting of the Board of Directors (a) during any such fiscal
year and (b) each such director's election, re-election, appointment or
re-appointment. No award of restricted stock shall be made to a non-employee
director more than once per fiscal year.
During the restriction period, (three years for non-employee directors and
a minimum of six months for Eligible Employees) the recipient shall have, with
respect to the shares of restricted stock covered by any award, all of the
rights of a shareholder of the Company, including the right to vote the shares,
the right to receive any dividends, and the right to purchase securities
pursuant to the Rights Plan. Other restrictions on restricted stock awards
granted to non-employee directors shall be determined by the Compensation
Committee, subject to the terms of the Amended Plan. There is no change to the
restrictions on Eligible Employees under the Amended Plan. Except as otherwise
provided in the Amended Plan and the applicable award agreement, during the
restriction period established by the Compensation Committee, the Eligible
Employee shall not be permitted to sell, transfer, pledge, exchange, hypothecate
or otherwise dispose of the shares of restricted stock awarded under the Amended
Plan. Based on service, performance and/or such other factors or criteria as the
Compensation Committee may determine, the Compensation Committee may, however,
at or after grant provide for the lapse of such restrictions in installments
and/or may accelerate or waive such restrictions in whole or in part. In
addition, certain restrictions or restricted stock lapse upon death, disability
of the Participant, retirement of the Participant, or Change of Control (as
discussed below).
Change in Control Provisions
The Amended Plan makes no change in the Change of Control provisions set
forth in the Original Plan and provides that in the event of a Change in
Control, (i) any or all stock options awarded under the Amended Plan not
previously exercisable and vested shall become fully exercisable and vested;
(ii) the restrictions applicable to any or all restricted stock awards shall
lapse and such shares and awards shall be fully vested. In addition, at any time
prior to or after a Change in Control, the Compensation Committee may accelerate
awards and waive conditions and restrictions on awards to the extent it may
determine to be appropriate.
Amendments and Termination
Under the Amended Plan, there is no change in the authority of the Board of
Directors or Compensation Committee to amend the Amended Plan or award
agreements or to terminate the Amended Plan. With the exception of repricing
Options or canceling and reissuing Options at a lower exercise price, the Board
of Directors may amend, suspend or terminate the Amended Plan at any time, but
no amendment, suspension, or termination shall affect any restriction on or
terms of any previously granted award granted under the Amended Plan, increase
the total number of shares reserved for purposes of the Amended Plan except as
specifically provided for in the Amended Plan, or modify any provision of the
Amended Plan which would materially increase the benefit or rights of any
Participant. With the exception of repricing Options or canceling and reissuing
Options at a lower exercise price, the Compensation Committee may amend the
terms of any stock option or other award theretofore granted, prospectively or
retroactively, but no such amendment shall impair the rights of any Participant
without his or her consent.
Federal Income Tax Consequences
The following summary is a description of the federal income tax
consequences to the Participant and to us of the issuance and exercise of stock
options and restricted stock granted pursuant to the Amended Plan. The summary
does not purport to be complete, does not attempt to be a comprehensive
description of all possible tax effects, and does not discuss state, local or
non-U.S. tax consequences except as set forth below.
ISO's. The grant of an ISO will not be treated as taxable income to the
Eligible Employee for federal tax purposes, and will not result in a deduction
for us for tax purposes, provided that no disposition is made by the Eligible
Employee of the shares acquired pursuant to the ISO within two years after the
date of grant of the ISO nor within one year after the date of issuance of
shares to the Eligible Employee pursuant to the ISO. In general, on exercise of
an ISO, the Eligible Employee will not recognize any taxable income, and we will
not be entitled to a deduction for tax purposes, although exercise of an ISO may
14
give rise to liability under the alternative minimum tax provisions of the Code.
Upon the sale or exchange of the shares at least two years after the grant date
of the ISO and one year after the exercise date of the ISO, the Eligible
Employee will recognize long-term capital gain or loss based on the difference
between (i) the amount realized upon the sale or other disposition of the
purchased shares and (ii) the exercise price paid for such shares. If these
holding periods are not satisfied, the Eligible Employee will recognize ordinary
income (and we will be entitled to a deduction for tax purposes) in an amount
equal to the difference between the exercise price and the lower of (i) the fair
market value of the shares on the date the ISO was exercised or (ii) the sale
price of such shares. A different rule for measuring ordinary income upon such a
premature disposition may apply if the Eligible Employee is also our officer,
director or 10% shareholder. Any gain recognized by the Eligible Employee on
such a premature disposition of the shares in excess of the amount treated as
ordinary income will be characterized as capital gain.
Nonqualified Stock Options. No taxable income is reportable by the Eligible
Employee at the time a Nonqualified Stock Option is granted. Upon exercise, the
amount by which the fair market value of the purchased shares on the exercise
date exceeds the exercise price of the option will generally be taxable to the
Eligible Employee as ordinary income and deductible by us for tax purposes. Upon
disposition of the shares, appreciation or depreciation after the exercise date
is treated as a short-term or long-term capital gain or loss to the Eligible
Employee and will not result in any deduction by us.
Restricted Stock. In general, a Participant who receives a restricted stock
award will recognize ordinary compensation income on the difference between the
fair market value of the shares on the date when the shares are no longer
subject to a substantial risk of forfeiture (as such term is defined in the
Code) and any amount paid for the shares, and the Company will be entitled to a
deduction for tax purposes in the same amount. Any gain or loss on the
Participant's subsequent disposition of the shares will receive long or
short-term capital gain or loss treatment depending on how long the stock has
been held since the restrictions lapsed.
If a Participant receiving a stock award makes a timely election under
Section 83(b) of the Code to have the tax liability determined at the date of
grant rather than when the restrictions lapse, the Participant will recognize
ordinary compensation income in an amount equal to the difference between the
fair market value of the stock on the date of issuance of the stock and any
amount paid for such stock, and we shall be entitled to a deduction at that time
of the same amount treated as ordinary compensation income to the Participant.
If such an election is made, the Participant recognizes no further amounts of
compensation income upon the lapse of any restrictions, and any gain or loss on
subsequent disposition will be long or short-term capital gain or loss to the
Participant. The Section 83(b) election must be made within thirty days from the
time the restricted stock is issued to a Participant.
Deductibility of Compensation. The Amended Plan has been designed to permit
the Compensation Committee to grant awards that qualify as performance-based for
purposes of satisfying the conditions of Section 162(m) of the Code, and
accordingly, we anticipate that any compensation deemed paid by us to our
executive officers as a result of stock options or restricted stock will remain
deductible by us unless exercises of awards by any of our executive officers
result in total compensation exceeding $1,000,000 in any one year, which will
result in the excess amount not being deductible for income tax purposes.
Withholding. No later than the date as of which an amount first becomes
includible in the gross income of the Participant for federal income tax
purposes with respect to any stock option or other award under the Amended Plan,
the Participant shall pay to us, or make any arrangements satisfactory to the
Compensation Committee regarding the payment of, any federal, state or local
taxes of any kind required by law to be withheld with respect to such amount.
Unless otherwise determined by us, withholding obligations may be settled with
Common Stock, including Common Stock that is part of the award that gives rise
to the withholding requirement. Generally, we will not withhold any amount from
awards made to directors in such capacity, as those awards are treated as
self-employment income, and, as such, are not subject to withholding.
Awards Pursuant to the Amended Plan
If (i) the Amended Plan receives shareholder approval, (ii) the nominees
proposed for the Board of Directors are elected at the annual shareholders
meeting, and (iii) each nominee who is not currently our employee does not
become our employee by the time of award, the following awards to the persons
indicated below would be made at the first meeting of the Board of Directors
following each such person's election or re-election to the Board of Directors:
15
Name* Value Number of Units
--------- ------- ----------------
Non-employee Directors
Deborah A. Beck $____________ Undetermined**
Robert W. Burgess $____________ Undetermined**
George S. Dotson $____________ Undetermined**
Hans Helmerich $____________ Undetermined**
William J. Morrissey $____________ Undetermined**
============
Non-employee Director Group Total $____________ Undetermined**
* See the chart on p. 6 for the position and Committee memberships held by
each person indicated above.
** The number of shares included in the restricted stock award will be
dependent on the fair market value of our Common Stock on the date of grant, and
therefore cannot be determined until that date. Based on $78.03, the closing
price of our Common Stock on December 30, 2005, each of the above persons would
receive restricted stock awards in the amount of 513 shares of our Common Stock,
for a total automatic grant of 2,565 shares of our Common Stock if made on that
date.
As non-employee directors are not executive officers of the Company, no
executive officer would be guaranteed an award pursuant to the Amended Plan,
should it receive shareholder approval. As provided for under the Original Plan,
awards except those made to non-employee directors under the Amended Plan are at
the discretion of the Compensation Committee, and are, therefore, undeterminable
at this time.
Required Vote to Adopt the Amended and Restated Atwood Oceanics, Inc. 2001
Stock Incentive Plan
Approval to adopt the Amended and Restated Atwood Oceanics, Inc. 2001 Stock
Incentive Plan requires the affirmative vote of the holders of a majority of the
shares of Common Stock present or represented by proxy and entitled to vote at a
meeting at which a quorum is present.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ADOPTION OF THE AMENDED AND
RESTATED ATWOOD OCEANICS, INC. 2001 STOCK INCENTIVE PLAN.
EXECUTIVE COMPENSATION
In accordance with the SEC executive compensation disclosure requirements
under Item 402 of Regulation S-K, the compensation tables and other compensation
information included in this Proxy Statement are presented to enable
shareholders to better understand the compensation of our executive officers.
The Compensation Committee is composed of three (3) non-employee directors.
Our compensation program is administrated by the Compensation Committee of the
Board of Directors. The members of the Compensation Committee are governed by a
Charter duly adopted by the Board of Directors, which require that each member
be independent as required by the New York Stock Exchange Listing Standards and
as determined by the Board of Directors in its business judgment. No member of
the Compensation Committee may have a relationship to the Company that would
interfere with the exercise of his or her independent judgment. The Board of
Directors has made a determination that each member of the Compensation
Committee is independent. The Board of Directors specifically considered the
relationship of H&P and H&PIDC to the Company and determined that they are not
our affiliates, and, based on that fact and other considerations, Messrs. Dotson
and Helmerich are also not our affiliates. Following review and approval by the
Compensation Committee, all issues pertaining to executive compensation are
submitted to the full Board of Directors for approval. Our Board of Directors
has adopted a written charter for the Compensation Committee, a copy of which is
accessible on our website, www.atwd.com.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS OF
ATWOOD OCEANICS, INC.
TO: The Board of Directors
16
As members of the Compensation Committee, it is our duty to review
compensation levels of our executive officers and to administer our stock
incentive plans.
Compensation Policies for Executive Officers
Our executive compensation policies are designed to provide competitive
levels of compensation that integrate pay with performance, recognize individual
initiative and achievements, and assist us in attracting and retaining qualified
executives. The Compensation Committee relies in large part on compensation
studies for the determination of competitive compensation. These studies include
salary and bonus compensation data from several competitor companies. Also, when
the Compensation Committee contemplates the awarding of stock incentives to our
executives, we consider the nature and amount of stock awards made by competitor
companies to their executive officers. In order to implement these objectives,
we have developed a straightforward compensation package consisting of salary,
discretionary annual bonus, and periodic grants of stock options or awards of
restricted stock pursuant to shareholder-approved stock incentive plans. Each
element of the compensation package serves a particular purpose. Salary and
bonus are primarily designed to reward current and past performance. Base
salaries are conservatively set to recognize individual performance while
attempting to be appropriate based upon peer group reviews. Annual bonuses to
executive officers are awarded based upon corporate performance criteria,
competitive considerations, and our determination of individual performance.
Grants of stock options or awards of restricted stock are primarily designed to
tie a portion of each executive's compensation to long-term future performance.
We believe that stock ownership by management through stock-based compensation
arrangements is beneficial in aligning management's and shareholders' interest.
The value of these awards will increase or decrease based upon the future price
of our Common Stock.
In determining executive compensation for fiscal year 2005, we considered
our overall historical performance and future objectives. With an improvement in
the our operating performance in fiscal year 2004 coupled with an improving
market environment supporting continuing improvements in cash flows and
earnings, bonuses were awarded to our executive officers in December 2004
ranging from $60,000 to $125,000. We also granted salary increases effective on
January 1, 2005 to the officers of approximately 5% and awarded stock options.
Section 162(m) of the Internal Revenue Code provides that certain
compensation to certain executive officers in excess of $1 million annually will
not be deductible for federal income purposes. Except for Mr. Irwin, the
compensation levels of our executive officers are below the $1 million
threshold. Due to exercising stock options during fiscal year 2005, Mr. Irwin's
total compensation, for fiscal year 2005, exceeded $1 million by approximately
$200,000.
Compensation Paid to the Chief Executive Officer
Mr. Irwin's compensation is determined in the same manner as described for
the other executive officers. Based on the Company's performance in fiscal year
2004 coupled with an improving market environment supporting continuing
improvements in cash flows and earnings, Mr. Irwin was awarded a bonus of
$125,000 in December 2004. He was also granted a salary increase effective on
January 1, 2005 of approximately 5%.
In addition, the Compensation Committee in December 2004 awarded Mr. Irwin
stock options to purchase 40,000 shares of Common Stock. The Committee based
this award on its subjective assessment of Mr. Irwin's performance as Chief
Executive Officer and President.
SUBMITTED BY THE COMPENSATION COMMITTEE
George S. Dotson, Chairman Deborah A. Beck, Member Robert W. Burgess, Member
December 30, 2005
Notwithstanding SEC filings by the Company that have incorporated or may
incorporate by reference other SEC filings (including this proxy statement) in
their entirety, the Report of the Compensation Committee shall not be
incorporated by reference into such filings and shall not be deemed to be
"filed" with the SEC except as specifically provided otherwise or to the extent
required by Item 402 of Regulation S-K.
17
EXECUTIVE AGREEMENTS
The Company entered into Executive Agreements, on September 18, 2002, with
Messrs. Irwin, Holland and Kelley. The Executive Agreements address the terms of
executive employment and compensation in the event of a termination of
employment due to a change of control in our ownership. The Executive Agreements
state that a change in control occurs (a) in the event of an acquisition or
formal tender offer by any individual, entity or group of beneficial ownership
of twenty percent (20%) of (i) the then outstanding shares of our Common Stock
or (ii) the combined voting power of our then outstanding voting securities
entitled to vote generally in the election of directors (certain exceptions
apply); b) sale of substantially all of our assets; or (c) a change of the
majority of the members of our Board of Directors. In the event of a change of
control, Messrs. Holland and Kelley shall remain in the employ of the Company
following such change of control for one year and six months and Mr. Irwin shall
remain in the employ of the Company for two years and six months following such
change in control. During such employment terms, the executive shall receive
base salary, annual bonus; incentive, savings and retirement plan benefits,
welfare plan benefits; executive life insurance benefits; indemnification'
expenses and vacation commensurate with those benefits that the executives
enjoyed prior to the change in control. The Executive Agreements each have three
(3) year "evergreen" terms in that they automatically extend so as to cover a
three (3) year period from any date then in effect unless we give notice to the
executive that the term will no longer be so extended.
Compensation Committee Interlocks and Insider Participation
Ms. Beck and Messrs. Burgess and Dotson, the current members of the
Compensation Committee, were the only persons who served on the Compensation
Committee during the 2005 fiscal year.
No member of our Compensation Committee of the Board of Directors was,
during the 2005 fiscal year, an officer or employee of the Company or any of its
subsidiaries, or was formerly an officer of the Company or any of its
subsidiaries or had any relationships requiring disclosure by us under Item 404
of Regulation S-K, except for the relationships of Messrs. Dotson and Helmerich
with H&P and H&PIDC discussed above. We jointly conducted a public offering with
H&PIDC for shares of our Common Stock as more fully described in "Related
Transaction" on page 14.
During the Company's 2005 fiscal year, no executive officer of the Company
served as (i) a member of the compensation committee (or other board committee
performing equivalent functions) of another entity, one of whose executive
officers served on our Compensation Committee, (ii) a director of another
entity, one of whose executive officers served on our Compensation Committee,
and (iii) a member of the compensation committee (or other board committee
performing equivalent functions) of another entity, one of whose executive
officers served as our director.
COMPENSATION TABLES
The SEC compensation disclosure rules require that various compensation
information be presented in various tables as set forth below.
SUMMARY COMPENSATION TABLE
Annual Compensation Long Term
Compensation
Shares of Common
Stock
Fiscal Other Annual Underlying All Other
Name and Principal Position Year Salary Bonus Compensation Options (A) Compensation (B)
--------------------------- ----- ------ ----- ------------ -------- ------------
(#) ($)
John R. Irwin 2005 $396,753 $125,000 $--- 40,000 67,295
President and Chief 2004 372,150 --- --- 40,000 50,791
Executive Officer 2003 355,251 140,000 --- 10,000 57,083
James M. Holland 2005 230,358 60,000 --- 15,000 33,553
Senior Vice President 2004 214,008 --- --- 20,000 25,918
and Secretary 2003 203,508 60,000 --- --- 29,988
18
Glen P. Kelley 2005 224,874 60,000 --- 15,000 33,765
Senior Vice President - 2004 208,418 --- --- 20,000 26,777
Marketing and Administration 2003 196,068 60,000 --- --- 28,473
(A) The exercise price of each option is equal to the fair market value of
a share of Common Stock on the date of grant, or $49.23, $27.00, and $30.06 on
such dates in fiscal years 2005, 2004, and 2003, respectively.
(B) The amounts shown in the "All Other Compensation" columns are derived
from the following:
Annual Company Contribution
to the defined Company paid term life Total
contribution plan and insurance premiums
----------------------------- ----------------------- --------
Mr. Irwin 2005 $52,175 $15,120 $67,295
2004 37,215 13,576 50,791
2003 49,525 7,558 57,083
Mr. Holland 2005 29,036 4,517 $33,553
2004 21,401 4,517 25,918
2003 26,351 3,637 29,988
Mr. Kelley 2005 28,487 5,278 $33,765
2004 20,841 5,936 26,777
2003 25,607 2,866 28,473
OPTION GRANTS TABLE
Individual Grants Made in Fiscal Year 2005
----------------------------------------------------------------------- --------------------------------------------
Number of Potential Realizable Value
Shares of Percentage of at Assumed Annual
Common Stock Total Options Rates of Common Stock Price
Underlying Granted To Appreciation for Option Term
Options Employees in Exercise Price Expiration
Name Granted Fiscal Year 2005 ($/Share) Date 5% ($) 10% ($)
------ ------------- ----------------- --------------- ----------- --------- -----------
(A)(#)
Irwin 40,000(B) 25% 49.23 12/01/2014 1,238,400 3,138,400
Holland 15,000(B) 10% 49.23 12/01/2014 464,400 1,176,900
Kelley 15,000(B) 10% 49.23 12/01/2014 464,400 1,176,900
__________ - (A) The options were granted for a term of ten (10) years,
subject to earlier termination in certain events related to termination of
employment. Each option entitles the option holder to purchase one share of
Common Stock at an exercise price equal to the fair market value of a share of
Common Stock on the date of grant. Twenty-five percent (25%) of such options
become exercisable at each of one (1) year, two (2) years, three (3) years and
four (4) years, respectively, from the date of grant. Subject to certain
conditions, the exercise price may be paid by delivery of shares of Common Stock
owned by the option holder prior to the option exercise, and tax withholding
obligations related to exercise may be paid by offset of underlying shares of
Common Stock.
19
(B) These options were granted on December 4, 2003 pursuant to our 2001 Stock
Incentive Plan. See Item 4 for a discussion of the proposal to adopt and Amended
and Restated 2001 Stock Incentive Plan.
OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION VALUE TABLE
Number of
Shares of
Common Stock
Shares of Common Underlying Value of Unexercised
Stock Acquired Value Unexercised In-the-Money Options
Name on Exercise during Realized Options at at Sept. 30, 2005 (A)
Fiscal 2005 ($) Sept. 30, 2005 ($)
-------- ------------------ ------------- --------------- ----------------------
(#) (#)
Exercisable/ Exercisable/
Unexercisable Unexercisable
------------- --------------------
Irwin 12,500 636,215 120,750/91,250 6,326,934/4,246,289
Holland 11,500 529,766 62,150/39,750 3,203,703/2,404,074
Kelley 13,000 662,601 66,250/39,750 3,472,839/2,690,124
-------------
(A) Calculated based upon the September 30, 2005 fair market value of $84.21 per
share of Common Stock, less the exercise price of each option. There is no
guarantee that options will have the indicated value if and when exercised.
SECURITIES AUTHORIZED FOR ISSUANCE UNDER OUR EQUITY COMPENSATION PLANS
The following table provides information regarding the status of securities
authorized for issuance under our stock incentive plans as of September 30,
2005. All of our stock incentive plans were approved by our shareholders and
provide for the issuance of shares of our Common Stock in the form of restricted
stock awards or upon the exercise of stock options granted under the plans. Our
stock incentive plans do not provide for the issuance of warrants or rights.
Number of shares of Common Weighted-average exercise Number of shares of Common
Stock to be issued upon price of outstanding options Stock available for future
exercise of outstanding options issuance under equity
compensation plans
(excluding securities to be
issued upon exercise of
outstanding options)
851,650 $35.28 538,250
AUDIT COMMITTEE CHARTER
The Audit Committee is composed of four (4) non-employee Directors. The
members of the Audit Committee are governed by a Charter duly adopted by the
Board of Directors, which requires their independence from management of the
Company or their freedom from any other relationship, which would interfere with
their independent judgment. Mr. Dotson, an Audit Committee member, has key
employment positions with H&P and its wholly-owned subsidiary, H&PIDC; however,
the Board has made a determination that under Rule 10A-3 of the Exchange Act and
the New York Stock Exchange listing standards, H&P and H&PIDC do not meet the
definition of affiliates, and accordingly, Mr. Dotson is not our affiliate.
Further, under the current New York Stock Exchange listing standards, the Board
of Directors has made a determination that all members of the Audit Committee
meet the Audit Committee Charter independence requirements. The Audit Committee
Charter is accessible on our website, www.atwd.com.
20
Report of the Audit Committee of the Board of Directors of Atwood Oceanics, Inc.
The Board of Directors
Management is primarily responsible for our financial statements and the
reporting process, including the systems of internal controls.
PricewaterhouseCoopers ("PWC"), the Company's independent registered public
accounting firm, is responsible for performing an independent audit of the
Company's consolidated financial statements in accordance with generally
accepted audit standards (GAAS) and for issuing a report on those statements. As
the Audit Committee, we oversee the financial reporting process and internal
control system on behalf of the Board of Directors. The Audit Committee met in
person two (2) times, with an additional four (4) conference call meetings,
during fiscal year 2005. At various times during the fiscal year, the Audit
Committee met with PWC and the internal auditors, with and without management
present.
In the course of fulfilling our oversight responsibilities, we reviewed and
discussed the audited financial statements, as well as Management's Discussion
and Analysis, included in the Company's Annual Report on Form 10-K for the
fiscal year ended September 30, 2005, with management and PWC.
This review included a discussion of, among others:
o All critical accounting policies followed by the Company;
o The reasonableness of significant financial reporting issues and
judgments made in connection with the preparation of the Company's
financial statements, including the quality of the Company's
accounting principles;
o The clarity and completeness of financial disclosures;
o The adequacy of internal controls that could significantly affect the
Company's financial statements;
o Items that could be accounted for using alternative treatments within
GAAP and the treatment preferred by PWC;
o Any internal control points raised by PWC and any unadjusted differences
noted by PWC during its audit of the Company's financial statements; and
o The potential effects of regulatory and accounting initiatives, as
well as any off balance sheet structures, on the Company's
financial statements.
We have discussed with PWC the matters required to be discussed by
Statement on Auditing Standards No. 61, Communications With Audit Committees, as
modified or supplemented, by the Auditing Standards Board of the American
Institute of Certified Public Accountants.
We have received and reviewed the written disclosures and the letter from
PWC required by Independence Standard No. 1, Independence Discussions with Audit
Committees, as modified or supplemented, by the Independence Standards Board,
and have discussed with PWC its independence. We reviewed the independence of
PWC from the Company and its management and reviewed and approved the Company's
policies regarding the provision of non-audit services by PWC to the Company and
the hiring of employees of PWC by the Company.
As the Audit Committee, we recommended to the Board of Directors the
selection of PWC as the Company's independent registered public accounting firm.
Additionally, we
o Reviewed the scope of an overall plan for the annual audit and the
internal audit program;
o Reviewed fees for all services provided by PWC;
o Consulted with management and PWC regarding risk management;
o Reviewed the adequacy of certain financial policies;
o Considered PWC's quality control procedures;
o On a quarterly basis, reviewed the Company's financial results prior
to their public issuance; and
o Reviewed significant legal developments.
21
Based on the review and discussions referred to above, we recommend to the
Board of Directors that the audited financial statements referred to above be
included in the Company's Annual Report on Form 10-K for the fiscal year ended
September 30, 2005 to be filed with the Securities and Exchange Commission.
Audit Committee
William J. Morrissey, Chairman
Robert W. Burgess, Member (Financial Expert)
Deborah A. Beck, Member
George S. Dotson, Member
December 13, 2005
FISCAL YEAR 2005 AUDIT FIRM FEE SUMMARY
During fiscal years 2005 and 2004, PWC was our independent registered
public accounting firm, and it provided services in the following categories and
amounts.
Fiscal Year
------------------------------------
2005 2004
---------------- ---------------
Audit Fees $ 1,378,000 $ 325,000
Audit-Related Fees (A) $ 63,000 265,000
Tax Fees $ --- ---
All Other Fees $ 2,000 ---
The Audit Committee approves the engagement of an independent registered
public accounting firm to render audit or non-audit services prior to the
engagement based upon a proposal by such firm and an estimate of fees and
expected scope of engagement. The Audit Committee has not adopted a pre-approval
policy at this time, and to date, no services have been provided under a
pre-approval policy.
-----------
(A) These fees related to the audit of our employee benefit plan,
consultation concerning internal controls and internal audit procedures, and a
transfer pricing study.
22
ATWOOD OCEANICS, INC. COMMON STOCK PRICE PERFORMANCE GRAPH
COMPARISON OF FIVE (5) YEAR CUMULATIVE TOTAL RETURNS* AMONG ATWOOD
OCEANICS, INC., AND THE CENTER FOR RESEARCH IN SECURITY PRICES ("CRSP") INDEX
FOR THE NYSE/AMEX/NASDAQ STOCK MARKETS, AND OUR SELF-DETERMINED PEER GROUP OF
DRILLING COMPANIES.
GRAPH
Index Description 9/29/00 9/28/01 09/30/02 09/30/03 09/30/04 09/30/05
------- ------- -------- -------- -------- --------
ATWOOD OCEANICS, INC. 100.0 62.4 70.2 57.5 144.0 202.0
CRSP Index for
NYSE/AMEX/NASDAQ
Stock Markets 100.0 71.0 58.8 74.4 85.1 97.5
(U.S. Companies) 100.0 46.6 48.9 52.5 74.2 117.5
Self-Determined Peer Group
Constituents of the Self-Determined Peer Group (weighted according to market
capitalization):
Diamond Offshore Drilling, Inc. GlobalSanteFe Corporation Rowan Companies, Inc. Transocean, Inc
ENSCO International, Inc. Noble Corporation Pride International, Inc.
* Assumptions: (1) $100 invested on September 30, 2000; (2) dividends, if any,
were reinvested; and (3) a September 30 fiscal year end.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires our officers
and directors, and persons who own more than ten percent (10%) of a registered
class of our equity securities, to file reports of ownership and changes in
ownership with the SEC. Officers, directors and greater than ten-percent (10%)
shareholders are required to furnish us with copies of all Section 16(a) reports
or forms they file.
Based solely on our review of the copies of such forms we have received,
and written representations from certain reporting persons that no reports on
Form 5 were required for those persons, we believe that, during the period from
October 1, 2004 through September 30, 2005, all filing requirements applicable
to our officers, directors and greater than ten-percent (10%) beneficial owners
were complied with.
RELATED TRANSACTION
We entered into a registration rights agreement with H&PIDC as of July 19,
2004, pursuant to which we registered 1,000,000 shares of our Common Stock owned
by H&PIDC on Form S-3 (File No. 333-117534) with the SEC. In October of 2004,
H&PIDC and we jointly conducted a public offering of a total of 2,175,000 shares
of Common Stock of which 1,000,000 shares were sold by H&PIDC and 1,175,000
shares were sold by us. H&PIDC and we shared offering expenses pro rata, based
on the number of shares sold by each of us. Proceeds to us, net of offering
expenses, were approximately $53.7 million. We used the net proceeds to pay off
a portion of the revolving portion of our credit facility outstanding at the
time of the completion of the public offering. Proceeds to H&PIDC, before
offering expenses, were approximately $45.8 million. Mr. Helmerich, together
with other family members and the estate of W.H. Helmerich, deceased, are
controlling shareholders of H&P which has one hundred percent (100%) ownership
of H&PIDC.
23
DIRECTORS' COMPENSATION
As compensation for services as a director of the Company, each director
who is not an officer and full time employee of the Company or any of its
subsidiaries, or non-employee director, was paid in fiscal year 2005 an annual
retainer fee of $25,000, plus $2,500 per meeting for attendance in person at
regular Board of Directors meetings, and $1,000 per meeting for attendance in
person at meetings of the Audit, Compensation and Nominating & Governance
Committees. The chairman of the Audit Committee received an additional $10,000
annual retainer fee; while the Chairman of the compensation Committee will
receive an additional $5,000 annual retainer fee commencing in 2006. Each
director receives $500 for each conference call meeting of any committee. Each
of our non-employee directors was also automatically granted 2,000 nonqualified
stock options in March 2005 pursuant to our 2001 Stock Incentive Plan. These
options have an exercise price of $67.51, with a term of ten years. Twenty-five
percent (25%) of such options become exercisable at the end of one (1) year, two
(2) years, three (3) years, and four (4) years, respectively, from the date of
grant. See the proposal in Item 4 relating to the adoption of the Amended and
Restated 2001 Stock Incentive Plan for a discussion of the proposed deletion of
the automatic grant of 2,000 nonqualified stock options to non-employee
directors and the proposed addition of an automatic award of restricted stock
equivalent to the number of shares of Common Stock valued at $40,000 on the date
of grant.
RELATIONSHIP WITH INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
PWC audited our financial statements for the years ended September 30,
2005, 2004 and 2003. PWC will have representatives present at the shareholders'
meeting who will have the opportunity to make a statement if they so desire and
will be available to respond to appropriate questions.
SHAREHOLDER PROPOSALS
Proposals of our shareholders intended to be presented for consideration at
the Annual Meeting of our Shareholders to be held in February 2007 must be
received by us no later than September 15, 2006 and must comply with the
requirements of the proxy rules promulgated by the SEC in order to be included
in the proxy statement and form of proxy related to that meeting. If notice of
any shareholder proposal not eligible for inclusion in our proxy statement and
form of proxy is given to us after November 29, 2006, then proxy holders will be
allowed to use their discretionary voting authority on such shareholder proposal
when the matter is raised at such meeting.
OTHER MATTERS
Management does not intend to bring any other matters before the meeting
and has not been informed that any matters are to be presented by others. In the
event any other matters properly come before the meeting, the persons named in
the enclosed form of proxy will vote the proxies under discretionary authority
therein in accordance with their judgment on such matters.
If you do not contemplate attending the meeting in person, you are
respectfully requested to sign, date and return the accompanying proxy in the
enclosed, stamped envelope at your earliest convenience.
We will provide, without charge, upon written request of any shareholder, a
copy of our Annual Report on Form 10-K including financial statements and
financial statement schedules for the fiscal year ended September 30, 2005 as
filed with the SEC. Please direct such request to James M. Holland, Secretary,
Atwood Oceanics, Inc., P. O. Box 218350, Houston, Texas 77218, 281-749-7800.
24
Only one proxy statement and annual report are being delivered to multiple
shareholders sharing an address who have previously consented to such delivery
unless we have received contrary instructions from one or more such
shareholders. If a shareholder desires to receive a separate copy of the proxy
statement or annual report, the shareholder should provide oral or written
notification to James M. Holland, our Secretary, at the above address and
provide instructions for delivery of the separate copy. If shareholders who
share an address and are receiving multiple copies of the proxy statement or
annual report desire to receive only one copy of the proxy statement or annual
report they should also notify Mr. Holland at the above address and provide
delivery instructions.
By order of the Board of Directors
/s/ John R. Irwin
John R. Irwin, President
Houston, Texas
January__, 2006
25
PROXY ATWOOD OCEANICS, INC.
ANNUAL MEETING OF SHAREHOLDERS
FEBRUARY 9, 2006
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints James M. Holland and Glen P. Kelley, or
either of them as Proxies, each with the power to appoint a substitute, and
hereby authorizes them to represent and to vote, as designated below, all the
shares of common stock, par value $1.00 per share, held of record by the
undersigned as of the close of business on December 30, 2005, at the Annual
Meeting of Shareholders to be held on February 9, 2006 or any adjournment
thereof:
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY IN THE ENVELOPE
PROVIDED
1. ELECTION OF DIRECTORS:
FOR all nominees listed
except as marked to the contrary) WITHHOLD authority to vote for
all nominees listed
Nominees:
DEBORAH A. BECK GEORGE S. DOTSON JOHN R. IRWIN
ROBERT W. BURGESS HANS HELMERICH WILLIAM J. MORRISSEY
(INSTRUCTION: To withhold authority to vote for one or more individual
nominees, write the nominee's name(s) in the line provided below or strike
through their name above.)
--------------------------------------------------------------------------------
2. To approve the adoption of the Amended and Restated Certificate of Formation
as described in the accompanying Proxy Statement and which is related to
proposal in Item 3.
FOR AGAINST ABSTAIN
-------------------------------------------------------------------------------
3. To approve the increase in the total number of authorized shares of Common
Stock of the Company from 20,000,000 shares to 50,000,000 shares as described in
the accompanying Proxy Statement and which is related to proposal in Item 2:
FOR AGAINST ABSTAIN
-------------------------------------------------------------------------------
4. To approve the adoption of the Atwood Oceanics, Inc. Amended and Restated
2001 Stock Incentive Plan as described in the accompanying Proxy Statement:
FOR AGAINST ABSTAIN
-------------------------------------------------------------------------------
5. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
(see reverse side)
26
This Proxy, when properly executed, will be voted in the manner directed
herein by the undersigned shareholder. If no direction is made, the Proxy will
be voted FOR the election of all Directors, FOR the adoption of the Company's
Amended and Restated Certificate of Formation, FOR the increase in the total
number of authorized shares of Common Stock of the Company from 20,000,000
shares to 50,000,000 shares and FOR adoption of the Atwood Oceanics, Inc.
Amended and Restated 2001 Stock Incentive Plan.
Please sign exactly as name appears hereon.
________________________, 2006 _________________________________________
DATED SIGNATURE
-----------------------------------------
SIGNATURE IF JOINTLY HELD
NOTE: When shares are held by joint tenants,
both should sign. When signing
as attorney, as executor, administrator,
trustee, or guardian, please give full
title as such. If a corporation, please
sign in full corporate name by President
or other authorized officer. If a partnership,
please sign in partnership name
by authorized person. Please note any
change in your address alongside the
address as it appears in the proxy.
PLEASE MARK IN BLUE OR BLACK INK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
27
Appendix A
AUDIT COMMITTEE CHARTER
1. Purpose and General Responsibilities
The function of the Audit Committee ("Committee") is to assist the Board of
Directors ("Board") in fulfilling its oversight responsibilities regarding the
(i) reporting practices of Atwood Oceanics, Inc and its subsidiaries
(collectively, ("the Company") and the quality and integrity of financial
reports of the Company; (ii) the Company's compliance with legal and regulatory
requirements; (iii) review of the independent auditor's qualifications and
independence and (iv) review of the performance of the internal audit function
and the independent registered public accounting firm. Further, the Committee
shall assist the Board regarding its duty to accurately, completely and fairly
present the Company's financial condition and operations to its shareholders and
the investment community. In so doing, it is the responsibility of the Committee
to maintain free and open means of communication between the directors, the
independent registered public accounting firm, and the financial management of
the Company.
The policies and procedures of the Committee in carrying out its
responsibilities should remain flexible, in order to best react to changing
conditions and to ensure to the directors and shareholders that the accounting
and reporting practices of the Company are in accordance with all requirements
and are of the highest quality.
To perform this function, the Committee shall have the authority to perform
the specific duties enumerated in this Charter and, upon the direction or
approval of the Board, to undertake other activities on behalf of the Board. The
Committee is authorized to request reports on matters related to its authority,
its duties as described in this Charter and on any subject that it deems related
to its responsibilities. All employees of the Company shall cooperate as
requested by the Chairman of the Committee. The Committee shall recommend to the
Board any extensions or changes in the authority or duties of the Committee that
it deems appropriate.
The Committee's primary responsibilities include:
o Selection and oversight of independent registered public accounting firm;
o Meeting with the independent registered public accounting firm and
financial management of the Company to review the scope of the audit for
the current year and the audit procedures to be utilized, and at the
conclusion thereof, reviewing the results of such audit, including any
comments or recommendations of the independent registered public accounting
firm;
o Reviewing with the independent registered public accounting firm and
financial and accounting personnel, the adequacy and effectiveness of the
accounting and financial controls of the Company;
o Reviewing reports from the independent registered public accounting firm
regarding its' independence and any disagreements with management on
financial, accounting, or reporting matters;
o Monitoring the integrity and effectiveness of the Company's disclosure
controls (as defined herein);
o Discussing with the officers of the Company all relevant information with
respect to the Committee's preparation of disclosure statements
(as defined herein) and the Committee's evaluation of
the effectiveness of the Company's disclosure controls and preparing the
Audit Committee report related thereto which is required to be included in
the Company's annual proxy statement;
o Monitoring the filing of periodic reports; and
o Investigating any matter brought to its attention within the scope of its
duties.
The Committee has no authority with respect to the granting of stock
incentives to directors eligible to receive stock incentives under already
existing stock incentive plans. The authority of the Committee with respect to
any future stock incentive plans of the Company may be limited by the provisions
of such plans as adopted by the Board and approved by the shareholders of the
Company.
2. Membership and Organization
The Committee shall have a Chairman appointed by the Board. The members of
the Committee shall be financially literate, as that term is defined from time
to time by the New York Stock Exchange Listing Standards and as determined by
the Board in its business judgment. If a member is not financially literate, he
or she must become financially literate within a reasonable period of time after
his or her appointment to the Committee. At least one member of the Committee
28
must have accounting or related financial management expertise, as the Board
interprets such qualification in its business judgment so as to qualify as the
Audit Committee Financial Expert as defined by the SEC. The Committee shall
consist of that number of directors as the Board shall determine from time to
time, such number not to be less than three members. All members of the
Committee shall be independent as required by the New York Stock Exchange
Listing Standards and determined by the Board in its business judgment. No
members of the Committee shall have a relationship to the Company that may
interfere with the exercise of their independent judgment, as such independence
is defined by New York Stock Exchange Listing Standards. The members of the
Committee shall be "non-employee directors" as that term is defined under the
Securities and Exchange Commission ("SEC") Rule 16b-3.
The Committee may delegate its authority to a subcommittee or subcommittees.
The Committee shall promptly inform the Board of the actions taken or
issues discussed at its meetings. This will generally take place at the Board
meeting following a Committee meeting.
3. Meeting Attendance and Minutes
The Committee shall meet at such times (not less than four per year) as the
Chairman of the Committee shall designate and notice of such meetings shall be
given to Committee members in accordance with the manner set forth in the
Amended and Restated By-laws the "bylaws" of Atwood Oceanics, Inc. which notices
of meetings of the Board are given. One-third of the Committee, but not less
than two members, shall constitute a quorum for the transaction of business.
Unless the Committee by resolution determines otherwise, any action required or
permitted to be taken by the Committee may be taken without a meeting if all
members of the Committee consent thereto in writing and the writing or writings
are filed with the minutes of the proceedings of the Committee. As necessary or
desirable, the Chairman of the Committee may require that any members of
management be present at meetings of the Committee. Members of the Committee may
participate in a meeting through the use of conference telephone or similar
communications equipment, so long as all members participating in such meeting
can hear one another, and such participation shall constitute presence in person
at such meeting.
The Committee shall report to the Board periodically or as required by the
nature of its duties on all of its activities and shall make such
recommendations to the Board as the Committee decides are appropriate.
4. Responsibilities and Duties
Charter
The Committee shall review this Charter periodically for adequacy and recommend
to the Board any necessary changes.
Selection of an Independent Registered Public Accounting Firm
The Committee shall be solely responsible for the selection of an
independent registered public accounting firm to audit the financial statements
of the Company. The Committee has the sole authority to approve all audit
engagement agreements and terms.
In connection with its continual assessment of the independence of the
independent registered public accounting firm, the Committee shall pre-approve
the retention of the independent registered public accounting firm for any
significant non-audit service and any fee for such service.
Review of Financial Controls
The Committee shall review with the independent registered public
accounting firm and financial and accounting personnel the adequacy and
effectiveness of the accounting and financial controls of the Company, and
elicit any recommendations for the improvement of such internal control
procedures or particular areas where new or more detailed controls or procedures
are desirable. The Committee shall receive and review reports from financial
management on the status of implementation of recommendations to improve
internal controls. The review should include a discussion of the
responsibilities, budget and staffing of the Company's internal audit function.
Particular emphasis should be given to the adequacy of such internal controls to
expose any payments, transactions, or procedures that might be deemed illegal or
otherwise improper.
29
Review of Financial Statements and Accounting Principles
The Committee shall review with management and the independent registered public
accounting firm at the completion of the annual examination:
o the Company's annual financial statements and related footnotes;
o review the Company's disclosures in "Management's Discussion and Analysis
of Financial Condition and Results of Operations" in the Company's
periodic reports;
o the independent registered public accounting firm audit of the financial
statements and report thereon;
o any major issues regarding, or significant changes in, accounting
principles or financial statement presentations;
o any special audit steps adopted in light of material control deficiencies;
o significant financial reporting issues and judgments made in connection with
the preparation of the financial statements, including analyses of the
effects of alternative GAAP methods on the financial statements;
o the effect of regulatory and accounting initiatives, as well as off-balance
sheet structures, on the financial statements;
o any serious difficulties or disputes with management encountered during
the course of the audit;
o discuss policies with respect to risk assessment and risk management; and
o discuss earnings press releases, as well as financial information and
earnings guidance provided to analysts and rating agencies.
The Committee shall inquire as to whether the independent registered public
accounting firm issatisfied with the disclosure and content of the financial
statements to be presented to the shareholders. The Committee shall also inquire
as to the independent registered public accounting firm view of the quality of
the Company's accounting principles employed, including any principles employed
which are deemed minority practices.
Disclosure and Periodic Reports
The Committee shall review reports (made at least annually) from the
independent registered public accounting firm regarding the (i) the firm's
internal quality-control procedures; (ii) independent registered public
accounting firm independence (setting forth all relationships between the
independent registered public accounting firm and the Company); and (iii) any
material issues raised by the most recent internal quality control review, or
peer review, of the firm, or by any inquiry or investigation by governmental or
professional authorities, within the preceding five years, respecting one or
more independent audits carried out by such firm, and any steps taken to deal
with any such issues.
The Committee shall also review any disagreements with management on
financial, accounting or reporting matters, and discuss such reports with the
auditor, and if so determined by the Committee, recommend that the Board take
appropriate action to satisfy itself of the independence of the independent
registered public accounting firm or satisfactory resolution of any
disagreements on financial, accounting, or reporting matters
The Committee shall report, including any recommendations of the Committee,
required by the rules of the SEC to be included in the Company's annual proxy
statement.
Independence from Management
The Committee shall ensure that the independent registered public
accounting firm has sufficient opportunity to meet with the members of the
Committee without the members of management present. Among the items to be
discussed in these meetings are the independent registered public accounting
firm evaluation of the Company's financial and accounting personnel and the
cooperation that the independent registered public accounting firm received
during the course of the audit.
The Committee shall also separately, periodically meet with management and
internal auditors or other personnel responsible for internal audit functions.
Interim Financial Report
The Committee shall review interim financial reports before they are filed
with the SEC or other regulators.
30
No Duty to Conduct Audits
While the Committee has the responsibilities and powers set forth in this
Charter, it is not the duty of the Committee to plan or conduct audits or to
determine that the Company's financial statements are complete and accurate and
are in accordance with generally accepted accounting principles. This is the
responsibility of management and the independent registered public accounting
firm. Nor is it the duty of the Committee to conduct investigations or to
resolve disagreements, if any, between management and the independent registered
public accounting firm.
Financial Human Resources
The Committee shall review accounting and financial human resources and
succession planning with the Company and shall report its findings to the
Nominating and Corporate Governance Committee for its review.
The Committee shall set clear hiring policies for employees or former
employees of the independent registered public accounting firm.
Code of Ethics for the Chief Executive Officer and Senior Financial Officers
The Committee shall review and revise, as necessary, the Company's Code of
Ethics for the Chief Executive Officer and Senior Financial Officers.
Disclosure Controls
The Committee shall design and establish controls and other procedures
(which may include procedures currently used by the Company) that are designed
to ensure that (i) information required by the Company to be disclosed to the
SEC and other written information that the Company will disclose to the
investment community is recorded, processed, summarized and reported accurately
and on a timely basis and (ii) information is accumulated and communicated to
management as appropriate to allow timely decisions regarding such required
disclosure ("disclosure controls").
Disclosure Statements
The Committee shall review and supervise the preparation of the Company's
(i) periodic and current reports, proxy statements, information statements,
registration statements and any other information filed with the SEC, (ii) press
releases containing financial information, earnings information, information
about material acquisitions or dispositions and other information material to
the Company's shareholders, and (iii) correspondence containing financial
information broadly disseminated to shareholders (collectively, the "disclosure
statements") and disclosure policies for financial information displayed on the
Company's corporate/investor relations Web site.
Annual and Quarterly Reports
The Committee shall evaluate the effectiveness of the Company's disclosure
controls within 90 days prior to the filing of the Company's Annual Report on
Form 10-K and as reasonably practical prior to each Quarterly Report on Form
10-Q (collectively, the "periodic reports"). The Committee shall provide a
certification to the appropriate officers prior to filing with the SEC of each
periodic report as to (i) the Committee's compliance with its policies and
procedures and proper performance of the responsibilities which have been
assigned to it and (ii) the Committee's conclusions resulting from its
evaluation of the effectiveness of the disclosure controls.
Additional Areas of Review
The Committee may participate in other areas of review as designated by the
Board, including, but not limited to, the following:
Senior Officer Expenses - At least annually (or more frequently as
circumstances require), the Committee shall review the expenses of the senior
officers of the Company.
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Transactions with Management - The Committee shall review past or proposed
transactions between the Company, members of management, directors and
associates of directors.
Information Technology - The Committee shall receive an annual report on
the adequacy of the Company's computerized information system controls and
related security.
Income Tax Matters - At least annually (or more frequently as circumstances
require), the Committee shall receive a report from the Company's Chief
Financial Officer regarding certain income tax matters, including the status of
income tax reserves and governmental tax audits.
Derivative Securities - At least annually (or more frequently as
circumstances require), the Committee shall receive a report from the Company's
Chief Financial Officer on the Company's use of derivative securities, if any.
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Whistleblower Program
The Committee shall review all complaints made in accordance with the Company's
Policy on Reporting and Investigating Known or Suspected Improper Activities
(the "Whistleblower Policy") and Policy for Protection of Whistleblowers from
Retaliation and Guidelines for Reviewing Retaliation Complaints (the
"Whistleblower Protection Policy"). The Committee will comply and carry out all
duties assigned to it pursuant to the Whistleblower Policy and Whistleblower
Protection Policy.
5. Advisors
The Committee shall have the authority, at the expense of the Company, to
retain such independent consulting, legal and other advisors as it shall deem
appropriate, without management approval.
6. Performance Review
The performance of the Committee shall be evaluated annually by the Board.
The Committee's responsibilities and powers as delegated by the Board of
Directors are set forth in this Charter. The Committee relies to a significant
extent on information and advice provided by management and independent
advisors. Whenever the Committee takes an action, it exercises its independent
judgment on an informed basis that the action is in the best interests of the
Company and its shareholders.
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Appendix B
AMENDED AND RESTATED CERTIFICATE OF FORMATION
OF
ATWOOD OCEANICS, INC.
ARTICLE I.
The name of the corporation is Atwood Oceanics, Inc. (the "Corporation").
ARTICLE II.
The Corporation is a for-profit corporation.
ARTICLE III.
The purpose or purposes for which the Corporation is organized are:
The transaction of any or all lawful business for which for-profit
corporations may be incorporated under the Texas Business Organizations Code
(the "TBOC").
To do everything necessary, proper, advisable or convenient for the
accomplishment or furtherance of such purposes, provided the same not be
prohibited by the laws of the State of Texas.
ARTICLE IV.
A. AUTHORIZED AMOUNT OF CAPITAL STOCK
The aggregate number of shares which the Corporation shall have authority
to issue is fifty-one million (51,000,000) shares of capital stock, of which
fifty million (50,000,000) shares shall be common stock (the "Common Shares")
each with a par value of $1.00 per share, and of which one million (1,000,000)
shares, each without par value, shall be preferred stock (the "Preferred
Shares").
B. SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
Section 1. Designation and Amount. The Corporation has designated five hundred
thousand (500,000) shares of preferred stock as the "Series A Junior
Participating Preferred Stock" (the "Series A Preferred Stock"). The number of
shares initially constituting the Series A Preferred Stock shall be 500,000;
provided, however, that if more than a total of 500,000 shares of Series A
Preferred Stock shall be issuable upon the exercise of Rights (the "Right")
issued pursuant to the Rights Agreement dated October 18, 2002 between the
Corporation and Continental Stock Transfer & Trust Company, as Rights Agent (the
"Rights Agreement"), the Board of Directors of the Corporation, pursuant to
Sections 21.155 and 21.156 of the TBOC, shall direct by resolution or
resolutions that a statement be properly executed, acknowledged, filed and
recorded, in accordance with the provisions of Sections 21.155 and 21.156,
providing for the total number of shares of Series A Preferred Stock authorized
to be issued to be increased (to the extent that the Amended and Restated
Certificate of Formation then permits) to the largest number of whole shares
(rounded up to the nearest whole share) issuable upon exercise of such Rights.
Section 2. Dividends and Distributions.
(a) Subject to the prior and superior rights of the holders of shares of
any other series of Preferred Stock or other class of stock of the Corporation
ranking prior and superior to the Series A Preferred Stock with respect to
dividends, the holders of shares of Series A Preferred Stock shall be entitled
to receive, when, as and if declared by the Board of Directors, out of the
assets of the Corporation legally available therefor,
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(i) quarterly dividends payable in cash on the last day of each fiscal
quarter in each year, or such other dates as the Board of Directors of the
Corporation shall approve (each such date being referred to herein as a
"Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend
Payment Date after the first issuance of a share or a fraction of a share of
Series A Preferred Stock, in the amount of $.01 per whole share (rounded to the
nearest cent) less the amount of all cash dividends declared on the Series A
Preferred Stock pursuant to the following clause (ii) since the immediately
preceding Quarterly Dividend Payment Date or, with respect to the first
Quarterly Dividend Payment Date, since the first issuance of any share or
fraction of a share of Series A Preferred Stock (the total of which shall not,
in any event, be less than zero) and
(ii) Dividends payable in cash on the payment date for each cash dividend
declared on the Common Stock in an amount per whole share (rounded to the
nearest cent) equal to the Formula Number (as hereinafter defined) then in
effect multiplied times the cash dividends then to be paid on each share of
Common Stock. In addition, if the Corporation shall pay any dividend or make any
distribution on the Common Stock payable in assets, securities or other forms of
noncash consideration (other than dividends or distributions solely in shares of
Common Stock), then, in each such case, the Corporation shall simultaneously pay
or make on each outstanding whole share of Series A Preferred Stock a dividend
or distribution in like kind equal to the Formula Number then in effect
multiplied times such dividend or distribution on each share of the Common
Stock. As used herein, the "Formula Number" shall be 1000; provided, however,
that, if at any time after November 5, 2002, the Corporation shall (x) declare
or pay any dividend on the Common Stock payable in shares of Common Stock or
make any distribution on the Common Stock in shares of Common Stock, (y)
subdivide (by a stock split or otherwise) the outstanding shares of Common Stock
into a larger number of shares of Common Stock or (z) combine (by a reverse
stock split or otherwise) the outstanding shares of Common Stock into a smaller
number of shares of Common Stock, then in each such event the Formula Number
shall be adjusted to a number determined by multiplying the Formula Number in
effect immediately prior to such event by a fraction, the numerator of which is
the number of shares of Common Stock that are outstanding immediately after such
event and the denominator of which is the number of shares of Common Stock that
are outstanding immediately prior to such event (and rounding the result to the
nearest whole number); and provided further, that, if at any time after November
5, 2002, the Corporation shall issue any shares of its stock in a merger,
reclassification, or change of the outstanding shares of Common Stock, then in
each such event the Board of Directors (or, if the Corporation is not the
surviving corporation in any such transaction, the board of directors of the
surviving corporation) shall make adjustments, determined by the Board of
Directors in its discretion to be appropriate, to the Formula Number to reflect
such merger, reclassification or change.
(b) The Corporation shall declare a dividend or distribution on the Series
A Preferred Stock as provided in paragraph (a) of this Section 2 immediately
prior to or at the same time it declares a dividend or distribution on the
Common Stock (other than a dividend or distribution solely in shares of Common
Stock); provided, however, that, in the event no dividend or distribution (other
than a dividend or distribution solely in shares of Common Stock) shall have
been declared on the Common Stock during the period between any Quarterly
Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a
dividend of $.01 per share on the Series A Preferred Stock shall nevertheless be
payable on such subsequent Quarterly Dividend Payment Date. The Board of
Directors may fix a record date for the determination of holders of shares of
Series A Preferred Stock entitled to receive a dividend or distribution declared
thereon, which record date shall be not more than 60 days prior to the date
fixed for the payment thereof.
(c) Dividends shall begin to accrue and be cumulative on outstanding shares
of Series A Preferred Stock from and after the Quarterly Dividend Payment Date
next preceding the date of original issue of such shares of Series A Preferred
Stock; provided, however, that dividends on such shares which are originally
issued after the record date for the determination of holders of shares of
Series A Preferred Stock entitled to receive a quarterly dividend and on or
prior to the next succeeding Quarterly Dividend Payment Date shall begin to
accrue and be cumulative from and after such Quarterly Dividend Payment Date.
Notwithstanding the foregoing, dividends on shares of Series A Preferred Stock
which are originally issued prior to the record date for the determination of
holders of shares of Series A Preferred Stock entitled to receive a quarterly
dividend on the first Quarterly Dividend Payment Date shall be calculated as if
cumulative from and after the last day of the fiscal quarter next preceding the
date of original issuance of such shares. Accrued but unpaid dividends shall not
bear interest. Dividends paid on the shares of Series A Preferred Stock in an
amount less than the total amount of such dividends at the time accrued and
payable on such shares shall be allocated pro rata on a share-by-share basis
among all such shares at the time outstanding.
(d) So long as any shares of the Series A Preferred Stock are outstanding,
no dividends or other distributions shall be declared, paid or distributed, or
set aside for payment or distribution, on the Common Stock unless, in each case,
35
the dividend required by this Section 2 to be declared on the Series A Preferred
Stock shall have been declared and the Corporation shall have paid such dividend
or shall have set apart a sum sufficient for the payment thereof.
(e) The holders of the shares of Series A Preferred Stock shall not be
entitled to receive any dividends or other distributions except as provided
herein.
Section 3. Voting Rights. The holders of shares of Series A
Preferred Stock shall have the following voting rights:
(a) Each holder of Series A Preferred Stock shall be entitled to a number
of votes equal to the Formula Number then in effect, for each share of Series A
Preferred Stock held of record on each matter on which holders of the Common
Stock or shareholders generally are entitled to vote, multiplied times the
maximum number of votes per share which any holder of the Common Stock or
shareholders generally then have with respect to such matter (assuming any
holding period or other requirement to vote a greater number of shares is
satisfied).
(b) Except as otherwise provided herein or by applicable law, the holders
of shares of Series A Preferred Stock and the holders of shares of Common Stock
shall vote together as one class for the election of directors of the
Corporation and on all other matters submitted to a vote of shareholders of the
Corporation.
(c) If, at the time of any annual meeting of shareholders for the election
of directors, the equivalent of six quarterly dividends (whether or not
consecutive) payable on any share or shares of Series A Preferred Stock are in
default, the number of directors constituting the Board of Directors of the
Corporation shall be increased by two. In addition to voting together with the
holders of Common Stock for the election of other directors of the Corporation,
the holders of record of the Series A Preferred Stock, voting separately as a
class to the exclusion of the holders of Common Stock, shall be entitled at said
meeting of shareholders (and at any subsequent annual meeting of shareholders),
unless all dividends in arrears have been paid or declared and set apart for
payment prior thereto, to vote for the election of two directors of the
Corporation, the holders of any Series A Preferred Stock being entitled to cast
a number of votes per share of Series A Preferred Stock equal to the Formula
Number. Until the default in payments of all dividends which permitted the
election of said directors shall cease to exist, any director who shall have
been so elected pursuant to the next preceding sentence may be removed at any
time, either with or without cause, only by the affirmative vote of the holders
of the shares of Series A Preferred Stock at the time entitled to cast a
majority of the votes entitled to be cast for the election of any such director
at a special meeting of such holders called for that purpose, and any vacancy
thereby created may be filled by the vote of such holders. If and when such
default shall cease to exist, the holders of the Series A Preferred Stock shall
be divested of the foregoing special voting rights, subject to revesting in the
event of each and every subsequent like default in payments of dividends. Upon
the termination of the foregoing special voting rights, the terms of office of
all persons who have been elected directors pursuant to said special voting
rights shall forthwith terminate, and the number of directors constituting the
Board of Directors shall be reduced by two. The voting rights granted by this
Section 3(c) shall be in addition to any other voting rights granted to the
holders of the Series A Preferred Stock in this Section 3.
(d) Except as provided herein, in Section 11 of Article IV, Part B or by
applicable law, holders of Series A Preferred Stock shall have no special voting
rights and their consent shall not be required (except to the extent they are
entitled to vote with holders of Common Stock as set forth herein) for
authorizing or taking any corporate action.
Section 4. Certain Restrictions.
(a) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Preferred Stock as provided in Section 2 of Article IV,
Part B are in arrears, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on shares of Series A Preferred Stock
outstanding shall have been paid in full, the Corporation shall not:
(i) declare or pay dividends on, make any other distributions on, or redeem
or purchase or otherwise acquire for consideration any shares of stock ranking
junior (either as to dividends or upon liquidation, dissolution or winding up)
to the Series A Preferred Stock;
(ii) declare or pay dividends, or make any other distributions, on any
shares of stock ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series A Preferred Stock, except dividends
36
paid ratably on the Series A Preferred Stock and all such parity stock on which
dividends are payable or in arrears in proportion to the total amounts to which
the holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration shares of
any stock ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series A Preferred Stock; provided that the
Corporation may at any time redeem, purchase or otherwise acquire shares of any
such parity stock in exchange for shares of any stock of the Corporation ranking
junior (either as to dividends or upon dissolution, liquidation or winding up)
to the Series A Preferred Stock; or
(iv) purchase or otherwise acquire for consideration any shares of Series A
Preferred Stock, or any shares of stock ranking on a parity with the Series A
Preferred Stock, except in accordance with a purchase offer made in writing or
by publication (as determined by the Board of Directors) to all holders of such
shares upon such terms as the Board of Directors, after consideration of the
respective annual dividend rates and other relative rights and preferences of
the respective series and classes, shall determine in good faith will result in
fair and equitable treatment among the respective series or classes.
(b) The Corporation shall not permit any subsidiary of the Corporation to
purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under paragraph (a) of this Section 4,
purchase or otherwise acquire such shares at such time and in such manner.
Section 5. Reacquired Shares. Any shares of Series A Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and canceled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but unissued shares of
Preferred Stock, without designation as to series, and may thereafter be issued
as part of a new series of Preferred Stock subject to the conditions and
restrictions on issuance set forth herein, or in any other Certificate of
Designations creating a series of Preferred Stock or any similar stock of the
Corporation or as otherwise required by law.
Section 6. Liquidation, Dissolution or Winding Up. Upon the liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
no distribution shall be made (i) to the holders of shares of stock ranking
junior (either as to dividends or upon liquidation, dissolution or winding up)
to the Series A Preferred Stock unless, prior thereto, the holders of shares of
Series A Preferred Stock shall have received an amount equal to accrued and
unpaid dividends and distributions thereon, whether or not declared, to the date
of such payment, plus an amount equal to the greater of (x) $1.00 per whole
share and (y) an aggregate amount per share equal to the Formula Number then in
effect multiplied times the aggregate amount to be distributed per share to
holders of Common Stock, or (ii) to the holders of stock ranking on a parity
(either as to dividends or upon liquidation, dissolution or winding up) with the
Series A Preferred Stock, except distributions made ratably on the Series A
Preferred Stock and all such parity stock in proportion to the total amounts to
which the holders of all such shares are entitled upon such liquidation,
dissolution or winding up.
Section 7. Consolidation, Merger, etc. In case the Corporation shall enter
into any consolidation, merger, combination or other transaction in which the
shares of Common Stock are exchanged for or changed into other stock or
securities, cash or any other property, or any combination thereof, then in any
such case the then outstanding shares of Series A Preferred Stock shall at the
same time be similarly exchanged for or changed into an amount per share equal
to the Formula Number then in effect multiplied times the aggregate amount of
stock, securities, cash or any other property (payable in kind), as the case may
be, into which or for which each share of Common Stock is exchanged or changed.
In the event both this Section 7 and Section 2 of Article IV, Part B appear to
apply to a transaction, this Section 7 shall control.
Section 8. No Redemption; No Sinking Fund.
(a) The shares of Series A Preferred Stock shall not be subject to
redemption by the Corporation; provided, however, that the Corporation may
purchase or otherwise acquire outstanding shares of Series A Preferred Stock in
the open market or by offer to any holder or holders of shares of Series A
Preferred Stock.
(b) The shares of Series A Preferred Stock shall not be subject to or
entitled to the operation of a retirement or sinking fund.
37
Section 9. Ranking. The Series A Preferred Stock shall rank, with respect
to the payment of dividends and as to distributions of assets upon liquidation,
dissolution or winding up of the Corporation, junior to all other series of
Preferred Stock of the Corporation, if any, unless the Board of Directors shall
specifically determine otherwise in fixing the powers, preferences and relative,
participating, optional and other special rights of the shares of any such other
series and the qualifications, limitations and restrictions thereof.
Section 10. Fractional Shares. The Series A Preferred Stock shall be
issuable upon exercise of the Rights issued pursuant to the Rights Agreement in
whole shares or in any fraction of a share that is one one-thousandth of a share
or any integral multiple of such fraction which shall entitle the holder, in
proportion to such holder's fractional shares, to receive dividends, exercise
voting rights, participate in distributions and to have the benefit of all other
rights of holders of Series A Preferred Stock. In lieu of fractional shares, the
Corporation, prior to the first issuance of a share or a fraction of a share of
Series A Preferred Stock, may elect (i) to make a cash payment as provided in
the Rights Agreement for fractions of a share other than one one-thousandth of a
share or any integral multiple thereof or (ii) to issue depository receipts
evidencing such authorized fraction of a share of Series A Preferred Stock
pursuant to an appropriate agreement between the Corporation and a depository
selected by the Corporation; provided that such agreement shall provide that the
holders of such depository receipts shall have all the rights, privileges and
preferences to which they are entitled as holders of the Series A Preferred
Stock.
Section 11. Amendment. None of the powers, preferences or relative,
participating, optional or other special rights of the Series A Preferred Stock
as provided in this Amended and Restated Certificate of Formation of the
Corporation shall be amended in any manner that would alter or change the
powers, preferences, rights or privileges of the holders of Series A Preferred
Stock so as to affect them adversely without the affirmative vote of the holders
of at least 66-2/3 percent of the outstanding shares of Series A Preferred
Stock, voting as a separate class.
C. OTHER PREFERRED SHARES
Section 1. General. Other Preferred Shares authorized by this Amended and
Restated Certificate of Formation may be issued from time to time in one or more
series. The Board of Directors is hereby expressly authorized from time to time
to divide all or any part of the Preferred Shares, other than any already
designated series of Preferred Shares, in series thereof and to fix and
determine variations, if any, between any series so established as to dividend
rates, conversion rights, rights and terms of redemption including sinking fund
provisions, the redemption price or prices, the liquidation preferences, the
conversion privileges, and the voting rights of any wholly unissued series of
preferred shares, and the number of shares constituting any such series and the
designation thereof, or any of them. The provisions of Sections 2 to 6 of this
Article IV, Part C shall apply to all Preferred Shares except to the extent any
designation shall otherwise provide, and in such event, the designation shall
govern to the extent of any inconsistency.
Section 2. Preferred Dividends. The holders of all Preferred Shares,
regardless of series, at the time outstanding shall be entitled to receive, when
and as declared to be payable by the Board of Directors, out of any funds
legally available for the payment thereof, dividends at the rate theretofore
fixed by the Board of Directors for each series of such Preferred Shares that
have theretofore been established, and no more, payable on dates theretofore
fixed by the Board of Directors for each series of such Preferred Shares.
Section 3. Dividends Other Than Preferred Dividends. After adequate
provision has been made for payment of full dividends on all Preferred Shares
then outstanding for all past dividend periods and for the current dividend
period, the Board of Directors may declare such further dividends as are
permitted by law, and the Board of Directors shall have the absolute discretion
in fixing the fashion in which holders of Preferred Shares and holders of Common
Shares shall participate in such further dividends, with provision being made
for one class participating more fully than the other or to the total exclusion
of the other.
Section 4. Cumulativeness of Preferred Dividends. Dividends on all
Preferred Shares, regardless of series, shall be cumulative. No dividends shall
be declared on any shares of any series of Preferred Shares for any dividend
period unless all dividends accumulated for all prior dividend periods shall
have been declared or shall then be declared at the same time upon all Preferred
Shares then outstanding. No dividends shall be declared on any shares of any
series of Preferred Shares unless a dividend for the same period shall be
declared at the same time upon all Preferred Shares outstanding at the time of
such declaration in like proportion to the dividend rate then declared. No
dividends shall be declared or paid on the Common Shares unless full dividends
on all the Preferred Shares then outstanding for all past dividend periods and
38
for the current dividend period shall have been declared and the Corporation
shall have paid such dividends or shall have set apart a sum sufficient for the
payment thereof.
Section 5. Preference on Liquidation. In the event of any dissolution,
liquidation or winding up of the Corporation, whether voluntary or involuntary,
the holders of each series of the then outstanding Preferred Shares shall be
entitled to receive the amount fixed for such purpose in the resolution or
resolutions of the Board of Directors establishing the respective series of
Preferred Shares that might then be outstanding, together with a sum equal to
the amount of all accumulated and unpaid dividends thereon at the dividend rate
fixed therefore in the aforesaid resolution or resolutions. After such payment
to such holders of Preferred Shares, the remaining assets and funds of the
Corporation shall be distributed pro rata among the holders of the Common
Shares. A consolidation, merger or other reorganization of the Corporation with
any other corporation or corporations or a sale of all or substantially all of
the assets of the Corporation shall not be considered a dissolution,
liquidation, or winding up of the Corporation within the meaning of these
provisions.
Section 6. Redemption Privileges of the Corporation. The whole or any part
of the outstanding Preferred shares or the whole or any part of any series
thereof may be called for redemption and redeemed at any time at the option of
the Corporation, exercisable by the Board of Directors upon thirty (30) days'
notice by mail to the holders of such shares as are to be redeemed, by paying
therefore in cash the redemption price fixed for such shares in the resolution
or resolutions of the Board of Directors establishing the respective series of
which the shares to be redeemed are a part, together with a sum equal to the
amount of all accumulated and unpaid dividends thereon at the dividend rate
fixed therefore in the aforesaid resolution or resolutions to the date fixed for
such redemption. The Corporation may redeem the whole or any part of the shares
of any series, or of several series, without redeeming the whole or any part of
the shares of any other series; provided, however, that if at any time less than
the whole of the Preferred Shares of any particular series then outstanding
shall be called for redemption, the Preferred Shares to be redeemed shall be
determined by lot or by such other equitable method as may be determined by the
Board of Directors. If on the redemption date specified in any such notice funds
necessary for such redemption shall have been set aside by the Corporation,
separate and apart of its other funds, in trust for the pro rata benefit of the
holders of the Preferred Shares so called for redemption, then, notwithstanding
that any certificate for shares so called for redemption shall not have been
surrendered for cancellation, the shares so called for redemption shall no
longer be deemed to be outstanding, the right to receive dividends thereon shall
cease to accrue from and after the date so fixed, and all rights of shareholders
of Preferred Shares so called for redemption shall, after such redemption date,
cease and terminate, excepting only the right of the holders thereof to receive
the redemption price thereof, but without interest; and if, before the
redemption date specified in any notice of the redemption of any Preferred
Shares the Corporation shall deposit with a bank or trust company in the City of
Houston, Texas, having a capital and surplus of at least $10,000,000 according
to its last published statement of condition, in trust to be applied to the
redemption of the Preferred Shares so called for redemption, the funds necessary
for such redemption, then, from and after the date of such deposit, the shares
so called for redemption shall no longer be deemed to be outstanding and all
rights of the holders of the shares so called for redemption shall cease and
terminate, excepting only the right of holders thereof to receive the redemption
price thereof, without interest. Any interest accrued on funds so deposited
shall be paid to the Corporation from time to time. In case the holder of shares
which shall have been called for redemption shall not, within five years after
the making of such deposit, claim the amount deposited with respect to the
redemption of such shares, the bank or trust company in which such deposit was
made shall be relieved of all responsibility in respect thereof to such holder.
Preferred Shares which are redeemed shall be cancelled and shall not be
reissued.
ARTICLE V.
The street address of the registered office of the Corporation is 15835
Park Ten Place, Houston, Texas 77084, and the name of its registered agent at
such address is James M. Holland.
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ARTICLE VI.
The number of directors constituting the board of directors is seven
(7), but there is currently a vacancy. The names and addresses of the persons
who are to serve as directors until the next annual meeting of the shareholders,
or until their successors are duly elected and qualified are:
NAME ADDRESS
Deborah A. Beck 15835 Park Ten Place Drive
Houston, Texas 77084
Robert W. Burgess 15835 Park Ten Place Drive
Houston, Texas 77084
George S. Dotson 15835 Park Ten Place Drive
Houston, Texas 77084
Hans Helmerich 15835 Park Ten Place Drive
Houston, Texas 77084
John R. Irwin 15835 Park Ten Place Drive
Houston, Texas 77084
William J. Morrissey 15835 Park Ten Place Drive
Houston, Texas 77084
ARTICLE VII.
A director of the Corporation shall not be liable to the Corporation or its
shareholders for monetary damages for an act or omission in the director's
capacity as a director, except for liability for (i) a breach of the director's
duty of loyalty to the Corporation or its shareholders, (ii) an act or omission
not in good faith or that involves intentional misconduct or a knowing violation
of the law, (iii) a transaction from which the director received an improper
benefit, whether or not the benefit resulted from an action taken within the
scope of the director's office, or (iv) an act or omission for which the
liability of a director is expressly provided for by statute.
If the TBOC is amended after approval by the shareholders of this Article
VII to authorize corporate action further eliminating or limiting the personal
liability of directors, then the liability of a director of the Corporation
shall be eliminated or limited to the fullest extent permitted by the TBOC, as
so amended.
Any repeal or modification of the foregoing paragraph by the shareholders
of the Corporation shall not adversely affect any right or protection of a
director of the Corporation existing at the time of such repeal or modification.
ARTICLE VIII.
The right to cumulate votes in the election of directors by any shareholder
of the Corporation is hereby expressly authorized.
[Signature page follows]
40
DATED: February ____, 2006
ATWOOD OCEANICS, INC.
By:
James M. Holland
Secretary
41
APPENDIX C
ARTICLES OF AMENDMENT
TO THE
RESTATED ARTICLES OF INCORPORATION
OF
ATWOOD OCEANICS, INC.
Pursuant to Article 4.04 of the Texas Business Corporation Act, as
amended, or any successor statute thereto, including the Texas Business
Organizations Code, Atwood Oceanics, Inc., a Texas corporation (the
"Corporation"), hereby adopts the following Articles of Amendment to its
Restated Articles of Incorporation:
ARTICLE 1
The name of the Corporation is Atwood Oceanics, Inc.
ARTICLE 2
The first paragraph of Article IV of the Restated Articles of
Incorporation, as amended, of the Corporation is hereby deleted in its entirety
and replaced with the following:
"The aggregate number of shares which the Corporation shall
have authority to issue is fifty-one million (51,000,000)
shares of capital stock, of which fifty million (50,000,000)
shares shall be common stock (the "Common Shares") each with a
par value of $1.00 per share, and of which one million
(1,000,000) shares, each without par value, shall be preferred
stock (the "Preferred Shares").
ARTICLE 3
The foregoing amendment was adopted by the shareholders of the
Corporation on February 9, 2006.
ARTICLE 4
The foregoing amendment has been approved in the manner required by the
Texas Business Corporation Act, as amended, or any successor statute thereto,
including the Texas Business Organizations Code, and the constituent documents
of the Corporation.
DATED: February __, 2006.
ATWOOD OCEANICS, INC.
By:
------------------------
James M. Holland
Secretary
42
13
APPENDIX D
ATWOOD OCEANICS, INC.
AMENDED AND RESTATED 2001 STOCK INCENTIVE PLAN
TABLE OF CONTENTS
PAGE
ARTICLE I PURPOSE..........................................................3
Section 1.1. Purpose...............................................3
Section 1.2. Establishment.........................................3
Section 1.3. Shares Subject to the Plan............................3
ARTICLE II DEFINITIONS.....................................................3
Section 2.1. Affiliated Entity.....................................3
Section 2.2. Award.................................................3
Section 2.3. Award Agreement.......................................3
Section 2.4. Board.................................................3
Section 2.5. Change of Control Event...............................3
Section 2.6. Code..................................................4
Section 2.7. Committee.............................................5
Section 2.8. Common Stock..........................................5
Section 2.9. Company...............................................5
Section 2.10.Date of Grant.........................................5
Section 2.11.Director..............................................5
Section 2.12.Eligible Employee.....................................5
Section 2.13.Exchange Act..........................................5
Section 2.14.Fair Market Value.....................................5
Section 2.15.Incentive Stock Option................................5
Section 2.16.Nonqualified Stock Option.............................5
Section 2.17.Non-Employee Director.................................5
Section 2.18.Option................................................5
Section 2.19.Participant...........................................5
Section 2.20.Plan..................................................5
Section 2.21.Restricted Stock Award................................5
Section 2.22.Securities Act........................................5
Section 2.23.Subsidiary............................................5
ARTICLE III ADMINISTRATION.................................................6
Section 3.1. Administration of the Plan; the Committee.............6
Section 3.2. Committee to Make Rules and Interpret Plan............6
ARTICLE IV GRANT OF AWARDS.................................................7
Section 4.1. Committee to Grant Awards to Eligible Employees.......7
Section 4.2. Grant of Awards to Non-Employee Directors.............7
ARTICLE V ELIGIBILITY......................................................7
ARTICLE VI STOCK OPTIONS...................................................7
Section 6.1. Grant of Options......................................7
Section 6.2. Conditions of Options.................................8
ARTICLE VII RESTRICTED STOCK AWARDS.......................................10
Section 7.1. Grant of Restricted Stock Awards.....................10
Section 7.2. Conditions of Restricted Stock Awards................10
ARTICLE VIII STOCK ADJUSTMENTS............................................11
ARTICLE IX GENERAL........................................................12
Section 9.1. Amendment or Termination of Plan.....................12
Section 9.2. Withholding Taxes....................................12
Section 9.3. Change of Control....................................12
1
Section 9.4. Amendments to Awards.................................12
Section 9.5. Regulatory Approval and Listings.....................12
Section 9.6. Right to Continued Employment or Service.............13
Section 9.7. Compliance with Section 16(b)........................13
Section 9.8. Reliance on Reports..................................13
Section 9.9. Construction.........................................13
Section 9.10.Severability.........................................13
Section 9.11.Governing Law........................................13
2
ARTICLE I
PURPOSE
Section 1.1. Purpose. This Amended and Restated 2001 Stock Incentive Plan
amends and restates in its entirety the 2001 Stock Incentive Plan (as so amended
and restated, the "Plan"). The Plan was established by the Company to create
incentives which are designed to motivate Participants to put forth maximum
effort toward the success and growth of the Company and to enable the Company to
attract and retain experienced individuals who by their position, ability and
diligence are able to make important contributions to the Company's success.
Toward these objectives, the Plan provides for the granting of Options to
Eligible Employees and awarding Restricted Stock to Eligible Employees and
Non-Employee Directors subject to the conditions set forth in the Plan.
Section 1.2. Establishment. The Plan originally became effective September
6, 2001, subject to shareholder approval which was subsequently obtained and
will continue for a period of ten years thereafter, unless earlier terminated,
at which time no further Awards shall be made hereunder. The amendments included
in this restatement of the Plan will be effective March 1, 2006, subject to
shareholder approval. The Plan shall continue in effect until all matters
relating to the payment of Awards and administration of the Plan have been
settled.
Section 1.3. Shares Subject to the Plan. Subject to the limitations set
forth in the Plan, Awards may be made under this Plan for a total of 1,000,000
shares of Common Stock.
ARTICLE II
DEFINITIONS
Section 2.1. Affiliated Entity. Affiliated Entity means any partnership or
limited liability company in which a majority of the partnership or other
similar interest thereof is owned or controlled, directly or indirectly, by the
Company or one or more of its Subsidiaries or Affiliated Entities or a
combination thereof. For purposes hereof, the Company, a Subsidiary or an
Affiliated Entity shall be deemed to have a majority ownership interest in a
partnership or limited liability company if the Company, such Subsidiary or
Affiliated Entity shall be allocated a majority of partnership or limited
liability company gains or losses or shall be or control a managing director or
a general partner of such partnership or limited liability company.
Section 2.2. Award. Award means, individually or collectively, any Option
or Restricted Stock Award granted under the Plan to an Eligible Employee or
Non-Employee Director by the Committee pursuant to such terms, conditions,
restrictions, and/or limitations, if any, as the Committee may establish by the
Award Agreement or otherwise.
Section 2.3. Award Agreement. Award Agreement means any written instrument
that establishes the terms, conditions, restrictions, and/or limitations
applicable to an Award in addition to those established by this Plan and by the
Committee's exercise of its administrative powers.
Section 2.4. Board. Board means the board of directors of the Company.
Section 2.5. Change of Control Event. Change of Control Event means
each of the following:
(a) The acquisition after the Effective Date of this Plan by any individual, entity or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Exchange Act) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 15% or more of either (1) the then outstanding shares of Common Stock (the
"Outstanding Company Common Stock") or (2) the combined voting power of the then outstanding voting securities of
the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities");
provided, however, that the following acquisitions shall not constitute a Change of Control: (A) any acquisition
directly from the Company, (B) any acquisition by the Company, (C) any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by the Company or any corporation controlled by the Company, (D) any
acquisition previously approved by at least a majority of the members of the Incumbent Board, (E) any acquisition
approved by at least a majority of the members of the Incumbent Board within five business days after the Company
3
has notice of such acquisition, or (F) any acquisition by any corporation pursuant to a transaction which complies
with clauses (1), (2), and (3) of subsection (c) of this Section 2.5; or
(b) Individuals who, as of the date hereof, constitute the Board (the "Incumbent Board")cease for any reason to constitute at
least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date
hereof whose election, appointment or nomination for election by the Company's shareholders, was approved by a vote
of at least a majority of then Incumbent Board shall be considered as though such individual were a member of the
Incumbent Board, but excluding, for purposes of this definition, any such individual whose initial assumption of
office occurs as a result of an actual or threatened election contest with respect to the election or removal of
directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than
the Board; or
(c) Approval by the shareholders of the Company of a reorganization, share exchange, merger(a "Business Combination"), in each
case, unless, following such Business Combination, (1) all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting
Securities immediately prior to such Business Combination will beneficially own, directly or indirectly, more than
70% of, respectively, the then outstanding shares of common stock and the combined voting power of the then
outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the
corporation resulting from such Business Combination (including, without limitation, a corporation which as a result
of such transaction will own the Company through one or more subsidiaries) in substantially the same proportions as
their ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be, (2) no Person (excluding any employee benefit plan (or
related trust) of the Company or such corporation resulting from such Business Combination) will beneficially own,
directly or indirectly, 15% or more of, respectively, the then outstanding shares of common stock of the corporation
resulting from such Business Combination or the combined voting power of the then outstanding voting securities of
such corporation except to the extent that such ownership existed prior to the Business Combination, and (3) at
least a majority of the members of the board of directors of the corporation resulting from such Business
Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the
action of the Board, providing for such Business Combination or were elected, appointed or nominated by the Board; or
(d) Approval by the shareholders of the Company of (1) a complete liquidation or dissolution of the Company or,(2) the sale or
other disposition of all or substantially all of the assets of the Company, other than to a corporation, with
respect to which following such sale or other disposition, (A) more than 70% of, respectively, the then outstanding
shares of common stock of such corporation and the combined voting power of the then outstanding voting securities
of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or
indirectly, by all or substantially all of the individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to
such sale or other disposition in substantially the same proportion as their ownership, immediately prior to such
sale or other disposition, of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the
case may be, (B) less than 15% of, respectively, the then outstanding shares of common stock of such corporation and
the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally
in the election of directors will be beneficially owned, directly or indirectly, by any Person (excluding any
employee benefit plan (or related trust) of the Company or such corporation), except to the extent that such Person
owned 15% or more of the Outstanding Company Common Stock or Outstanding Company Voting Securities prior to the sale
or disposition, and (C) at least a majority of the members of the board of directors of such corporation were
members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board,
providing for such sale or other disposition of assets of the Company or were elected, appointed or nominated by the
Board.
Section 2.6. Code. Code means the Internal Revenue Code of 1986, as
amended. References in the Plan to any section of the Code shall be deemed to
include any amendments or successor provisions to such section and any
regulations under such section.
4
Section 2.7. Committee. Committee means the Compensation Committee of the
Board.
Section 2.8. Common Stock. Common Stock means the common stock, par value
$1.00 per share, of the Company, and after substitution, such
other stock as shall be substituted therefor as provided in Article VIII.
Section 2.9. Company. Company means Atwood Oceanics, Inc., a Texas
corporation.
Section 2.10. Date of Grant. Date of Grant means the date on which the
granting of an Award to a Participant is authorized by this Plan or the
Committee, or such later date as may be specified by the Committee in its
authorization.
Section 2.11. Director. Director means any individual who is a member of
the Board.
Section 2.12. Eligible Employee. Eligible Employee means any key employee
of the Company, a Subsidiary, or an Affiliated Entity, specifically including
officers and Directors (other than Non-Employee Directors), who are from time to
time responsible for the management, growth and protection of the business of
the Company.
Section 2.13. Exchange Act. Exchange Act means the Securities Exchange Act
of 1934, as amended. References in the Plan to any section, rule or regulation
of the Exchange Act shall be deemed to include any amendments or successors to
such section, rule, or regulation.
Section 2.14. Fair Market Value. Fair Market Value means (i) during such
time as the Common Stock is listed upon the New York Stock Exchange, other
exchanges or the Nasdaq/National Market System, the average of the highest and
lowest sales prices of the Common Stock as reported by such stock exchange or
the Nasdaq/National Market System on the day for which such value is to be
determined, or if no sale of the Common Stock shall have been made on any such
stock exchange or the Nasdaq/National Market System that day, on the next
preceding day on which there was a sale of such Common Stock or (ii) during any
such time as the Common Stock is not listed upon an established stock exchange
or the Nasdaq/National Market System, the mean between dealer "bid" and "ask"
prices of the Common Stock in the over-the-counter market on the day for which
such value is to be determined, as reported by the National Association of
Securities Dealers, Inc.
Section 2.15. Incentive Stock Option. Incentive Stock Option means an
Option within the meaning of Section 422 of the Code.
Section 2.16. Nonqualified Stock Option. Nonqualified Stock Option means an
Option which is not an Incentive Stock Option.
Section 2.17. Non-Employee Director. Non-Employee Director means "non-employee
director" as defined in Rule 16b-3 of the General Rules and Regulations under
the Exchange Act.
Section 2.18. Option. Option means an Award of an option to purchase shares of
Common Stock granted to an Eligible Employee under Article VI of the Plan and
includes both Nonqualified Stock Options and Incentive Stock Options.
Section 2.19. Participant. Participant means an Eligible Employee or
Non-Employee Director to whom an Award has been granted.
Section 2.20. Plan. Plan means the Atwood Oceanics, Inc. 2006 Stock
Incentive Plan.
Section 2.21. Restricted Stock Award. Restricted Stock Award means an Award
of shares of Common Stock granted to an Eligible Employee under Article VII of
the Plan or a Non-Employee Director under Articles IV and VII of the Plan.
Section 2.22. Securities Act. Securities Act shall mean the Securities Act
of 1933, as amended. References in the Plan to any section, rule or regulation
of the Securities Act shall be deemed to include any amendments or successors to
such section, rule, or regulation.
Section 2.23. Subsidiary. Subsidiary shall have the same meaning as
"subsidiary corporation" is defined in Section 424 of the Code.
5
ARTICLE III
ADMINISTRATION
Section 3.1. Administration of the Plan; the Committee.
-----------------------------------------
(a) The Committee shall administer the Plan. The Committee shall consist solely of two or more Non-Employee Directors who are
appointed by, and serve at the pleasure of the Board. Unless otherwise provided in the by-laws, as amended or
restated from time to time, of the Company or the resolutions adopted from time to time by the Board establishing
the Committee, the Board may from time to time remove members from, or add members to, the Committee. Vacancies on
the Committee, however caused, shall be filled by the Board. The Committee shall hold meetings at such times and
places as it may determine. A majority of the members of the Committee shall constitute a quorum, and the acts of a
majority of the members present at any meeting at which a quorum is present or acts reduced to or approved in
writing by a majority of the members of the Committee shall be the valid acts of the Committee.
(b) Subject to the provisions of the Plan, specifically the provisions of Section 4.2, the Committee shall have exclusive
power to:
(i) Select the Eligible Employees to whom Awards shall be granted.
(ii) Determine the time or times when Awards will be made to Eligible Employees.
(iii) Determine the form of an Award granted to an Eligible Employee, whether an Option or a
Restricted Stock Award, the number of shares of Common Stock subject to the Award, all
the terms, conditions (including performance requirements), restrictions and/or
limitations, if any, of an Award, including the time and conditions of exercise or
vesting, and the terms of any Award Agreement, which may include the waiver or
amendment of prior terms and conditions or acceleration or early vesting or payment of
an Award under certain circumstances determined by the Committee.
(iv) Determine the terms, conditions (including performance requirements), restrictions
and/or limitations, if any, of a Restricted Stock Award granted to a Non-Employee
Director, including the time of vesting, and the terms of any Award Agreement, which may
include the waiver or amendment of prior terms and conditions or acceleration or
early vesting under certain circumstances determined by the Committee.
(v) Determine whether Awards granted to Eligible Employees will be granted singly or in combination.
(vi) Accelerate the vesting, exercise or payment of an Award or the performance period of an Award.
(vii) Take any and all other action it deems necessary or advisable for the proper operation or administration of the Plan.
Section 3.2. Committee to Make Rules and Interpret Plan. The Committee in
its sole discretion shall have the authority, subject to the provisions of the
Plan, to establish, adopt, or revise such rules and regulations and to make all
such determinations relating to the Plan as it may deem necessary or advisable
for the administration of the Plan. The Committee's interpretation of the Plan
or any Awards and all decisions and determinations by the Committee with respect
to the Plan shall be final, binding, and conclusive on all parties.
6
ARTICLE IV
GRANT OF AWARDS
Section 4.1. Committee to Grant Awards to Eligible Employees. The Committee
may, from time to time, grant Awards to one or more Eligible Employees,
provided, however, that:
(a) Subject to Article VIII, the aggregate number of shares of
Common Stock made subject to the Award of Options to any
single Eligible Employee in any fiscal year may not exceed
50,000.
(b) Subject to Article VIII, in no event shall more than 150,000
shares of Common Stock subject to the Plan be awarded to
Participants as Restricted Stock Awards, excluding those made
to Non-Employee Directors pursuant to Section 4.2.
(c) No shares of Common Stock related to Awards which terminate by
expiration, forfeiture, cancellation or otherwise without the
issuance of shares of Common Stock, or which are exchanged in
the Committee's discretion for Awards not involving Common
Stock, or which are withheld to satisfy applicable tax
requirements, shall be available again for grant under the
Plan.
(d) Common Stock delivered by the Company in payment of any Award
under the Plan may be authorized and unissued Common Stock or
Common Stock held in the treasury of the Company.
(e) Except as specifically provided for herein, the Committee
shall, in its sole discretion, determine the manner in which
fractional shares arising under this Plan shall be treated.
Section 4.2. Grant of Awards to Non-Employee Directors. During each fiscal
year of the Company, the Committee shall grant a Restricted Stock Award to each
Non-Employee Director. The number of shares of Common Stock included in such
Restricted Stock Award shall be the number of shares of Common Stock equivalent
to $40,000, adjusted for inflation, based on the Fair Market Value of a share of
Common Stock on the Date of Grant. During the first fiscal year in which the
Plan is effective, the Date of Grant shall be the date of the first meeting of
the Board following the later of (a) shareholder approval of the Plan and (b)
each such Director's election, re-election, appointment, or re-appointment, but
no more than once in such fiscal year. In subsequent fiscal years, the Date of
Grant shall be the earlier of the date of the first meeting of the Board (x)
during any such fiscal year and (y) each such Director's election, re-election,
appointment, or re-appointment, but no more than once in any such fiscal year.
Restrictions on such Restricted Stock Awards granted to Non-Employee Directors
shall be determined by the Committee, subject to the provisions of the Plan.
ARTICLE V
ELIGIBILITY
Subject to the provisions of the Plan, the Committee shall, from time to
time, select from the Eligible Employees those to whom Awards shall be granted
and shall determine the type or types of Awards to be made. Each Non-Employee
Director of the Company is eligible to be a granted a Restricted Stock Award
each fiscal year as set forth in Section 4.2. For all Awards, the Committee
shall establish in the related Award Agreements the terms, conditions,
restrictions and/or limitations, if any, applicable to the Awards in addition to
those set forth in the Plan and the administrative rules and regulations issued
by the Committee.
ARTICLE VI
STOCK OPTIONS
Section 6.1. Grant of Options. The Committee may, from time to time,
subject to the provisions of the Plan and such other terms and conditions as it
may determine, grant Options to Eligible Employees. These Options may be
Incentive Stock Options or Nonqualified Stock Options, or a combination of both.
7
Each grant of an Option shall be evidenced by an Award Agreement executed by the
Company and the Eligible Employee, and shall contain such terms and conditions
and be in such form as the Committee may from time to time approve, subject to
the requirements of Section 6.2.
Section 6.2. Conditions of Options. Each Option so granted shall be subject
to the following conditions:
(a) Exercise Price. As limited by Section 6.2(f) below, each Award
Agreement shall state the exercise price of the Option which shall be set by the
Committee at the Date of Grant; provided, however, no Option shall be granted at
an exercise price which is less than the Fair Market Value of the Common Stock
on the Date of Grant.
(b) Form of Payment. The exercise price of an Option may be paid (1) in
cash or by check, bank draft or money order payable to the order of the Company;
(2) by delivering shares of Common Stock having a Fair Market Value on the date
of payment equal to the amount of the exercise price, but only to the extent
such exercise of an Option would not result in an accounting compensation charge
with respect to the shares used to pay the exercise price unless otherwise
determined by the Committee; or (3) a combination of the foregoing. In addition
to the foregoing, any Option granted under the Plan may be exercised by a
broker-dealer acting on behalf of an Eligible Employee if (A) the broker-dealer
has received from the Eligible Employee or the Company a notice evidencing the
exercise of such Option and instructions signed by the Eligible Employee
requesting the Company to deliver the shares of Common Stock subject to such
Option to the broker-dealer on behalf of the Eligible Employee and specifying
the account into which such shares should be deposited, (B) adequate provision
has been made with respect to the payment of any withholding taxes due upon such
exercise or, in the case of an Incentive Stock Option, upon the disposition of
such shares and (C) the broker-dealer and the Eligible Employee have otherwise
complied with Section 220.3(e)(4) of Regulation T, 12 CFR, Part 220 and any
successor rules and regulations applicable to such exercise.
(c) Exercise of Options.
(i) Generally. Options granted under the Plan shall be exercisable, in
whole or in such installments and at such times, and shall expire at
such time, as shall be provided by the Committee in the Award Agreement,
however, no Incentive Stock Option shall be exercisable more than ten years
after its Date of Grant and no Nonqualified Stock Option shall be exercisable
more than ten years and one day after its Date of Grant. Exercise of an Option
shall be by written notice to the Secretary at least two business days in
advance of such exercise stating the election to exercise in the form and manner
determined by the Committee. Every share of Common Stock acquired through the
exercise of an Option shall be deemed to be fully paid at the time of exercise
and payment of the exercise price and applicable withholding taxes. Separate
certificates representing Common Stock to be delivered to an Eligible Employee
upon the exercise of any Option will be issued to such Eligible Employee.
(ii) Termination of Employment. If an Eligible Employee's employment with
the Company, a Subsidiary or an Affiliated Entity terminates on or after his
"Retirement Date" as such term is defined in the Atwood Oceanics, Inc.
Employees' Retirement Plan (or its successor), or an Eligible Employee suffers
death or a permanent or total disability (as defined in Section 22(e) of the
Code), the Eligible Employee (or his personal representative in the case of
death) shall be entitled to purchase all or any part of the shares subject to
any (i) vested Incentive Stock Option for a period of up to three months from
such date of termination (one year in the case of death or disability (as
defined above) in lieu of the 3 month period), and (ii) vested Nonqualified
Stock Option during the remaining term of the Option. If an Eligible Employee's
employment terminates for any other reason, the Eligible Employee shall be
entitled to purchase all or any part of the shares subject to any vested Option
for a period of up to three months from such date of termination. In no event
shall any Option be exercisable past the term of the Option. The Committee may,
in its sole discretion, accelerate the vesting of unvested Options in the event
of termination of employment of any Eligible Employee.
8
(d) Limited Transferability. The Committee may, in its discretion,
authorize all or a portion of the Nonqualified Stock Options granted under this
Plan to be on terms which permit transfer by the Eligible Employee to (i) the
ex-spouse of the Eligible Employee pursuant to the terms of a domestic relations
order, (ii) the spouse, children or grandchildren of the Eligible Employee
("Immediate Family Members"), (iii) a trust or trusts for the exclusive benefit
of such Immediate Family Members, or (iv) a partnership in which such Immediate
Family Members are the only partners. In addition (1) unless the Committee
otherwise permits, there may be no consideration for any such transfer, (2) the
Award Agreement pursuant to which such Nonqualified Stock Options are granted
must be approved by the Committee, and must expressly provide for
transferability in a manner consistent with this paragraph, and (3) subsequent
transfers of transferred Nonqualified Stock Options shall be prohibited except
as set forth below in this Section 6.2(d). Following transfer, any such
Nonqualified Stock Options shall continue to be subject to the same terms and
conditions as were applicable immediately prior to transfer, provided that for
purposes of Section 6.2(c)(ii) hereof, the term "Eligible Employee" shall be
deemed to refer to the transferee. The events of termination of employment of
Section 6.2(c)(ii) hereof shall continue to be applied with respect to the
original Eligible Employee, following which the Nonqualified Stock Options shall
be exercisable by the transferee only to the extent, and for the periods
specified in Section 6.2(c)(ii) hereof. No transfer pursuant to this Section
6.2(d) shall be effective to bind the Company unless the Company shall have been
furnished with written notice of such transfer together with such other
documents regarding the transfer as the Committee shall request. Except as
otherwise specifically provided for herein, Options shall be transferable only
by will or the laws of descent and distribution; however, no such transfer of
Options by the Eligible Employee shall be effective to bind the Company unless
the Company shall have been furnished with written notice of such transfer and
an authenticated copy of the will and/or such other evidence as the Committee
may deem necessary to establish the validity of the transfer and the acceptance
by the transferee of the terms and conditions of such Options. Any Options
transferred by will or the laws of descent and distribution shall continue to be
subject to the same terms and conditions as were applicable immediately prior to
transfer.
(e) Other Terms and Conditions. Among other conditions that may be imposed
by the Committee, if deemed appropriate, are those relating to (1) the period or
periods and the conditions of exercisability of any Option; (2) the minimum
periods during which Eligible Employees must be employed by the Company, its
Subsidiaries, or an Affiliated Entity, or must hold Options before they may be
exercised; (3) the minimum periods during which shares acquired upon exercise
must be held before sale or transfer shall be permitted; (4) conditions under
which such Options or shares may be subject to forfeiture; (5) the frequency of
exercise or the minimum or maximum number of shares that may be acquired at any
one time; (6) the achievement by the Company of specified performance criteria;
and (7) non-compete and protection of business matters.
(f) Special Restrictions Relating to Incentive Stock Options. Options
issued in the form of Incentive Stock Options shall be granted only to
individuals who are Eligible Employees of the Company or a Subsidiary.
Furthermore, Incentive Stock Options shall, in addition to being subject to all
applicable terms, conditions, restrictions and/or limitations established by the
Committee, comply with the requirements of Section 422 of the Code, including,
without limitation, the requirement that the exercise price of an Incentive
Stock Option not be less than 100% of the Fair Market Value of the Common Stock
on its Date of Grant, the requirement that each Incentive Stock Option, unless
sooner exercised, terminated or cancelled, expire no later than 10 years from
its Date of Grant, and the requirement that the aggregate Fair Market Value
(determined on the Date of Grant) of the Common Stock with respect to which
Incentive Stock Options are exercisable for the first time by a Eligible
Employee during any fiscal year (under this Plan or any other plan of the
Company or any Subsidiary) not exceed $100,000.
(g) Application of Funds. The proceeds received by the Company from the
sale of Common Stock pursuant to exercise of Options will be used for general
corporate purposes.
(h) Shareholder Rights. No Eligible Employee shall have a right as a
shareholder with respect to any share of Common Stock subject to an Option prior
to purchase of such shares of Common Stock by exercise of the Option.
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ARTICLE VII
RESTRICTED STOCK AWARDS
Section 7.1. Grant of Restricted Stock Awards. The Committee may, from time
to time, subject to the provisions of the Plan and such other terms and
conditions as it may determine, grant a Restricted Stock Award to any Eligible
Employee. All Restricted Stock Awards made to Eligible Employees shall be
awarded in such number and at such times during the term of the Plan as the
Committee shall determine. The Committee shall grant Restricted Stock Awards to
Non-Employee Directors as set forth in Section 4.2. As a condition to the grant
of a Restricted Stock Award under the Plan, each Participant so granted a
Restricted Stock Award shall execute and deliver to the Company an Award
Agreement.
Section 7.2. Conditions of Restricted Stock Awards. The grant of a
Restricted Stock Award shall be subject to the following:
-------------------------------------
(a) Restriction Period.
(i) Generally. The period in which restrictions
apply to Restricted Stock Awards is a
"Restriction Period." The Award Agreement
will set forth, among other things, any
vesting requirements and Restriction
Periods.
(ii) Eligible Employees. As to Eligible
Employees, vesting conditions may include,
but are not limited to, the achievement by
the Company of specified performance
criteria, and the requirement to remain in
the employment of the Company, a Subsidiary,
or an Affiliated Entity for a prescribed
period of time. The Committee shall
determine the Restriction Period which shall
apply to the shares of Common Stock included
in a Restricted Stock Award, or portion
thereof, granted to an Eligible Employee;
provided, however, the Restriction Period
related to a Restricted Stock Award granted
to an Eligible Employee shall be no less
than six months nor more than ten years.
(iii) Non-Employee Directors. The Restriction
Period for shares of Common Stock included
in a Restricted Stock Award granted to a
Non-Employee Director shall be three years,
with 100% of the shares included in the
Restricted Stock Award vesting on the Date
of Grant.
(b) Restrictions. Except as specifically
provided for in the Plan or an Award
Agreement, the holder of a Restricted Stock
Award may not sell, transfer, pledge,
exchange, hypothecate, or otherwise dispose
of the shares of Common Stock represented by
the Restricted Stock Award during the
applicable Restriction Period. The Committee
shall impose such other restrictions and
conditions on any shares of Common Stock
related to a Restricted Stock Award as it
may deem advisable including, without
limitation, restrictions under applicable
federal or state securities laws, and may
legend the certificates representing shares
of Common Stock related to Restricted Stock
Awards to give appropriate notice of such
restrictions.
(c) Lapse of Restrictions. The restrictions set
forth in the paragraph (b) above shall
terminate with respect to the shares of
Common Stock to which they apply upon the
earliest to occur of the following, except
that no restrictions shall lapse less than
six months from the Date of Grant of a
Restricted Stock Award in the event of (i),
(ii), (iii) and (iv) below, unless otherwise
specified by the Committee:
(i) Upon the expiration of the applicable
Restriction Period;
(ii) Upon the termination of an Eligible
Employee's employment with the Company, a
Subsidiary or an Affiliated Entity, if
occurring on or after his "Retirement Date"
as such term is defined in the Atwood
Oceanics, Inc. Employees' Retirement Plan
(or its successor);
(iii) The Participant's total and permanent
disability (as defined in Section 22(e) of
the Code);
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(iv) The Participant's death;
(v) The occurrence of a Change of Control Event;or
(vi) The acceleration of the termination of such
restrictions on such terms and conditions as
the Committee may establish in its sole
discretion.
To the extent a Restricted Stock Award is not vested at the time of the
occurrence of one of the events specified in (i), (ii), (iii), (iv), or (vi)
above, any Restricted Stock Award transferred subsequent to the occurrence of
such event shall continue to be subject to the same terms and conditions as were
applicable immediately prior to transfer. Such transfer shall not be effective
to bind the Company unless the Company shall have been furnished with written
notice of such transfer and an authenticated copy of the will (in the case of
death of the Participant) and/or such other evidence as the Committee may deem
necessary to establish the validity of the transfer and the acceptance by the
transferee of the terms and conditions of such Restricted Stock Award.
(d) Delivery of Share Certificates; Legending. Each Restricted Stock Award
may be evidenced in such manner as the Committee deems appropriate, including,
without limitation, a book-entry registration or issuance of a stock certificate
or certificates. Until the applicable Restriction Period has expired, the
Company or its designee shall hold in escrow any certificate or certificates
representing shares of Common Stock issued to a Participant pursuant to a
Restricted Stock Award. Certificates for shares of Common Stock delivered
pursuant to a Restricted Stock Award may, if the Committee so determines, bear a
legend referring to the restrictions and the instruments to which such shares
are subject.
(e) Rights as Shareholders. During any Restriction Period, the Committee
may, in its discretion, grant to the holder of a Restricted Stock Award all or
any of the rights of a shareholder with respect to the shares, including, but
not by way of limitation, the right to vote such shares and to receive dividends
and to purchase securities pursuant to that certain Rights Agreement by and
between the Company and Continental Stock Transfer & Trust Company (as Rights
Agent) dated October 18, 2002, as the same may be amended, modified or
supplement from time to time. If any dividends or other distributions are paid
in shares of Common Stock, all such shares shall be subject to the same
restrictions on transferability as the shares included in the Restricted Stock
Award with respect to which they were paid.
ARTICLE VIII
STOCK ADJUSTMENTS
In the event that the shares of Common Stock, as presently constituted,
shall be changed into or exchanged for a different number or kind of shares of
stock or other securities of the Company or of another corporation (whether by
reason of merger, consolidation, recapitalization, reclassification, stock
split, spinoff, combination of shares or otherwise), or if the number of such
shares of Common Stock shall be increased through the payment of a stock
dividend, or a dividend on the shares of Common Stock or rights or warrants to
purchase securities of the Company shall be issued to holders of all outstanding
Common Stock, then there shall be substituted for or added to each share
available under and subject to the Plan, and each share theretofore appropriated
under the Plan, the number and kind of shares of stock or other securities into
which each outstanding share of Common Stock shall be so changed or for which
each such share shall be exchanged or to which each such share shall be
entitled, as the case may be, on a fair and equivalent basis in accordance with
the applicable provisions of Section 424 of the Code; provided, however, with
respect to Options, in no such event will such adjustment result in a
modification of any Option as defined in Section 424(h) of the Code. In the
event there shall be any other change in the number or kind of the outstanding
shares of Common Stock, or any stock or other securities into which the Common
Stock shall have been changed or for which it shall have been exchanged, then if
the Committee shall, in its sole discretion, determine that such change
equitably requires an adjustment in the shares available under and subject to
the Plan, or in any Award, theretofore granted, such adjustments shall be made
in accordance with such determination, except that no adjustment of the number
of shares of Common Stock available under the Plan or to which any Award relates
that would otherwise be required shall be made unless and until such adjustment
either by itself or with other adjustments not previously made would require an
increase or decrease of at least 1% in the number of shares of Common Stock
available under the Plan or to which any Award relates immediately prior to the
making of such adjustment (the "Minimum Adjustment"). Any adjustment
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representing a change of less than such minimum amount shall be carried forward
and made as soon as such adjustment together with other adjustments required by
this Article VIII and not previously made would result in a Minimum Adjustment.
Notwithstanding the foregoing, any adjustment required by this Article VIII
which otherwise would not result in a Minimum Adjustment shall be made with
respect to shares of Common Stock relating to any Award immediately prior to
exercise, payment or settlement of such Award.
No fractional shares of Common Stock or units of other securities shall be
issued pursuant to any adjustment pursuant to this Article VIII, and any
fractions resulting from any such adjustment shall be eliminated in each case by
rounding downward to the nearest whole share of Common Stock or unit of other
securities.
ARTICLE IX
GENERAL
Section 9.1. Amendment or Termination of Plan. The Board may amend, suspend
or terminate the Plan at any time, but except as specifically provided in
writing, no amendments, suspension or termination of this Plan shall affect any
restriction on or terms of any previously granted Award made pursuant to the
Plan. In addition, the Board may, from time to time, amend the Plan in any
manner, but may not without shareholder approval adopt any amendment which would
(i) reprice previously granted Options or cancel and reissue Options at a lower
exercise price, (ii) increase the aggregate number of shares of Common Stock
available under the Plan (except by operation of Article VIII) or (iii) modify
any provision of the Plan which would materially increase the benefit or rights
of any Participant in the Plan. Amendments to the Plan may be subject to
approval by the shareholders of the Company pursuant to applicable federal or
state law or rules adopted by the New York Stock Exchange or any other stock
exchange or the Nasdaq/National Market System on which the shares of the
Company's Common Stock may be listed from time to time.
Section 9.2. Withholding Taxes. An Eligible Employee shall pay the amount
of taxes required by law upon the exercise of an Option in cash or as otherwise
permitted in this Section 9.2. Unless otherwise paid by the Participant, the
Company shall be entitled to deduct from any payment under the Plan, regardless
of the form of such payment, the amount of all applicable income and employment
taxes required by law to be withheld with respect to such payment or may require
the Participant to pay to it such tax prior to and as a condition of the making
of such payment. In accordance with any applicable administrative guidelines it
establishes, the Committee may allow a Participant to pay the amount of taxes
required by law to be withheld from an Award by (i) directing the Company to
withhold from any payment of the Award a number of shares of Common Stock having
a Fair Market Value on the date of payment equal to the amount of the required
withholding taxes or (ii) delivering to the Company previously owned shares of
Common Stock having a Fair Market Value on the date of payment equal to the
amount of the required withholding taxes; provided, the foregoing
notwithstanding, any payment made by the Participant pursuant to either of the
foregoing clauses (i) or (ii) shall not be permitted if it would result in an
accounting charge with respect to such shares used to pay such taxes unless
otherwise approved by the Committee.
Section 9.3. Change of Control. Awards granted under the Plan to any Participant
shall be immediately and automatically vested, fully earned and exercisable, if
an Option, upon the occurrence of a Change of Control Event.
Section 9.4. Amendments to Awards. With the exception of repricing Options
or canceling and re-issuing Options at a lower exercise price, the Committee may
at any time unilaterally amend the terms of any Award Agreement, whether or not
presently exercisable or vested, to the extent it deems appropriate; provided,
however, that any such amendment which is adverse to the Participant shall
require the Participant's consent. An Option can be repriced or cancelled and
reissued at a lower exercise price only upon approval by the shareholders of the
Company.
Section 9.5. Regulatory Approval and Listings. The Company shall use its
best efforts to file with the Securities and Exchange Commission as soon as
practicable following approval by the shareholders of the Company of the Plan as
provided in Section 1.2 of the Plan, and keep continuously effective, a
registration statement on Form S-8 with respect to shares of Common Stock
subject to Awards hereunder. Notwithstanding anything contained in this Plan to
the contrary, the Company shall have no obligation to issue shares of Common
Stock under this Plan prior to:
(a) the obtaining of any approval from, or satisfaction of any
waiting period or other condition imposed by, any governmental
agency which the Committee shall, in its sole discretion,
determine to be necessary or advisable;
12
(b) the admission of such shares to listing on the stock exchange
on which the Common Stock may be listed; and
(c) the completion of any registration or other qualification of
such shares under any state or federal law or ruling of any
governmental body which the Committee shall, in its sole
discretion, determine to be necessary or advisable.
If the shares of Common Stock that have been awarded to a Participant
pursuant to the provisions of the Plan are not registered under the Securities
Act, pursuant to an effective registration statement on Form S-8, such
Participant, if the Committee shall deem it advisable, may be required to
represent and agree in writing (y) that any shares of Common Stock acquired by
the Participant pursuant to the Plan will not be sold except pursuant to an
effective registration statement under the Securities Act, or pursuant to an
exemption from registration under the Securities Act, and (z) that such
Participant has acquired such shares of Common Stock for the Participant's own
account and not with a view to the distribution thereof.
Section 9.6. Right to Continued Employment or Service. Nothing in the Plan
or in the instruments evidencing the grant of an Award under the Plan shall in
any manner be construed to limit in any way the right of the Company, any
Subsidiary, or any Affiliated Entity to terminate an Eligible Employee's
employment or the right of the shareholders of the Company to remove any
Director at any time, or give any right to any person, including an Eligible
Employee, to be or to remain employed by, or to serve as a Director of, the
Company, a Subsidiary or any Affiliated Entity. Further, the adoption of this
Plan shall not be deemed to give any Eligible Employee or any other individual,
other than a Non-Employee Director, any right to be selected as a Participant or
to be granted an Award.
Section 9.7. Compliance with Section 16(b). The Plan is intended to comply
with all applicable conditions of Rule 16b-3 of the General Rules and
Regulations under the Exchange Act. All transactions involving the Company's
executive officers and Directors are subject to such conditions, regardless of
whether the conditions are expressly set forth in the Plan. Any provision of the
Plan that is contrary to a condition of Rule 16b-3 shall not apply to executive
officers and Directors of the Company.
Section 9.8. Reliance on Reports. Each member of the Committee and each
member of the Board shall be fully justified in relying or acting in good faith
upon any report made by the independent public accountants of the Company and
its Subsidiaries and upon any other information furnished in connection with the
Plan by any person or persons other than himself or herself. In no event shall
any person who is or shall have been a member of the Committee or of the Board
be liable for any determination made or other action taken or any omission to
act in reliance upon any such report or information or for any action taken,
including the furnishing of information, or failure to act, if in good faith.
Section 9.9. Construction. Masculine pronouns and other words of masculine
gender shall refer to both men and women. The titles and headings of the
sections in the Plan are for the convenience of reference only, and in the event
of any conflict, the text of the Plan, rather than such titles or headings,
shall control.
Section 9.10. Severability. The invalidity or unenforceability of any
provision of the Plan or an Award granted pursuant hereto shall not affect the
validity and enforceability of the remaining provisions of the Plan and or such
Award. The invalid or unenforceable provision shall be stricken to the extent
necessary to preserve the validity and enforceability of the Plan and the Award
granted pursuant hereto.
Section 9.11. Governing Law. The Plan shall be governed by and construed in
accordance with the laws of the State of Texas, without regard to conflicts of
laws, except as superseded by applicable federal law.
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