SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Under Rule 14a-12
WEATHERFORD INTERNATIONAL LTD.
(Name of Registrant as Specified in its Charter)
N/A
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1. Title of each class of securities to which transaction applies: N/A
2. Aggregate number of securities to which transaction applies: N/A
3. Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11: N/A
4. Proposed maximum aggregate value of transaction: N/A
5. Total fee paid: N/A
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1. Amount Previously Paid: N/A
2. Form, Schedule or Registration Statement No.: N/A
3. Filing Party: N/A
4. Date Filed: N/A
(WEATHERFORD LOGO)
April 2, 2003
Dear Weatherford Shareholder:
You are cordially invited to join us at the 2003 Annual General Meeting of
Shareholders of Weatherford International Ltd. to be held at 9:00 a.m. on
Thursday, May 8th, in Houston, Texas. The Annual General Meeting will be held at
The St. Regis Hotel located at 1919 Briar Oaks Lane.
This year you will be asked to vote in favor of two proposals. The first
proposal is for the election of eight directors. The second proposal is for the
appointment of Ernst & Young LLP as our independent auditors and the
authorization of the Audit Committee of the Board of Directors to set Ernst &
Young's remuneration. The proposals are more fully explained in the attached
proxy statement, which we encourage you to read.
Your vote is important. Whether or not you plan to attend the Annual
General Meeting, we strongly encourage you to provide your proxy by telephone,
the Internet or on the enclosed proxy card at your earliest convenience.
Thank you for your cooperation.
Sincerely,
/s/ Bernard J. Duroc-Danner
Bernard J. Duroc-Danner
Chairman of the Board, President and
Chief Executive Officer
(WEATHERFORD LOGO)
WEATHERFORD INTERNATIONAL LTD.
NOTICE OF ANNUAL GENERAL MEETING OF SHAREHOLDERS
DATE: Thursday, May 8, 2003
TIME: 9:00 a.m. (Houston time)
PLACE: The St. Regis Hotel
1919 Briar Oaks Lane
Houston, Texas 77027
MATTERS TO BE VOTED ON:
1. Election of eight directors to hold office for a one-year term;
2. Appointment of Ernst & Young LLP as our independent auditors for the
year ending December 31, 2003, and authorization of the Audit Committee of the
Board of Directors to set Ernst & Young's remuneration; and
3. Any other matters that may properly come before the meeting.
YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE IN FAVOR OF THE ELECTION
OF THE EIGHT NOMINEES FOR DIRECTOR AND IN FAVOR OF THE APPOINTMENT OF ERNST &
YOUNG LLP AND THE AUTHORIZATION OF THE AUDIT COMMITTEE TO SET ERNST & YOUNG'S
REMUNERATION.
At the Annual General Meeting, the audited consolidated financial
statements of the Company for the year ended December 31, 2002 and accompanying
auditors' report will be presented.
Your Board of Directors has set April 1, 2003, as the record date for the
Annual General Meeting. Only those shareholders who are holders of record of our
common shares at the close of business on April 1, 2003, will be entitled to
vote at the Annual General Meeting.
You are cordially invited to join us at the Annual General Meeting.
However, to ensure your representation at the Annual General Meeting, we request
that you provide your proxy by telephone, the Internet or by signing and
returning your proxy card in the enclosed postage-paid envelope at your earliest
convenience, whether or not you plan to attend. If you are present at the Annual
General Meeting, you may revoke your proxy and vote in person.
By Order of the Board of Directors
/s/ BURT M. MARTIN
Burt M. Martin
Secretary
Houston, Texas
April 2, 2003
WEATHERFORD INTERNATIONAL LTD.
PROXY STATEMENT
ANNUAL MEETING: Date: Thursday, May 8, 2003
Time: 9:00 a.m. (Houston time)
Place: The St. Regis Hotel
1919 Briar Oaks Lane
Houston, Texas 77027
GENERAL INFORMATION:In this proxy statement, "Weatherford", the "Company", "we",
"us" and "our" refer to Weatherford International Ltd. or,
prior to June 26, 2002, to Weatherford International, Inc.,
which, as of that date, became an indirect, wholly owned
subsidiary of Weatherford International Ltd.
Our principal executive offices are located at 515 Post Oak
Boulevard, Suite 600, Houston, Texas 77027. Our telephone
number is (713) 693-4000.
AGENDA: Two proposals:
- Proposal 1 -- The election of eight nominees as directors
of the Company; and
- Proposal 2 -- The appointment of Ernst & Young LLP as the
Company's independent auditors for the year ending
December 31, 2003 and the authorization of the Audit
Committee of the Board of Directors to set Ernst & Young's
remuneration.
At the Annual General Meeting, we will present Weatherford's
audited consolidated financial statements for the year ended
December 31, 2002. Copies of the financial statements are
contained in our 2002 Annual Report which is being mailed to
shareholders together with this Proxy Statement.
WHO CAN VOTE: All holders of record of our common shares at the close of
business on April 1, 2003, are entitled to vote. Holders of
the common shares are entitled to one vote per share at the
Annual General Meeting.
PROXIES SOLICITED BY:
Your vote and proxy are being solicited by our Board of
Directors for use at the Annual General Meeting. This Proxy
Statement and enclosed proxy card are being sent on behalf
of our Board of Directors to all shareholders beginning on
or about April 7, 2003. By completing, signing and returning
your proxy card, you will authorize the persons named on the
proxy card to vote your shares according to your
instructions. You may also authorize the persons named on
the proxy card to vote your shares via the Internet at the
Internet address of www.voteproxy.com, or telephonically by
calling 1-800-PROXIES. Please have your proxy card available
if you decide to appoint a proxy by the Internet or by
telephone because the proxy card contains more detailed
instructions. Proxies submitted by Internet or telephone
must be received by 5:00 p.m. New York time (or 4:00 p.m.
Houston time) on May 6, 2003. If you give your proxy by the
Internet or telephone, please do not mail your proxy card.
Shareholders who hold their shares through a broker or other
nominee (in "street name") must vote their shares in the
manner prescribed by their broker or other nominee.
PROXIES: If you properly give a proxy but do not indicate how you
wish to vote your shares, the persons named on the proxy
card will vote FOR election of all the nominees for director
(Proposal 1), FOR Proposal 2 and, with respect to any other
matter that
may properly come before the Annual General Meeting, in the
proxy holder's discretion.
REVOKING YOUR PROXY:You can revoke your proxy by:
- writing to the Secretary at 515 Post Oak Blvd., Suite 600,
Houston, Texas 77027 before the Annual General Meeting;
- submitting a later-dated proxy via mail, the Internet or
telephone; or
- casting your vote in person at the Annual General Meeting.
You may not revoke a proxy simply by attending the Annual
General Meeting. To revoke a proxy, you must take one of the
actions described above.
QUORUM: As of April 1, 2003 there were 131,066,589 common shares
issued and entitled to vote. The presence of two or more
persons in person at the start of the meeting and
representing in person or by proxy of in excess of 50% of
the total issued voting shares throughout the meeting will
form a quorum. If you have properly given a proxy by mail,
Internet or telephone, your shares will count toward the
quorum, and the persons named on the proxy card will vote
your shares as you have instructed. Pursuant to Bermuda law,
(i) common shares represented at the Annual General Meeting
whose votes are withheld on any matter, (ii) common shares
that are represented by "broker non-votes" (i.e., common
shares held by brokers that are represented at the Annual
General Meeting but with respect to which the broker is not
empowered to vote on a particular proposal) and (iii) common
shares that abstain from voting on any matter are not
included in the determination of the common shares voting on
a matter but are counted for quorum purposes.
MULTIPLE PROXY CARDS:
If you receive multiple proxy cards, this indicates that
your shares are held in more than one account, such as two
brokerage accounts, and are registered in different names.
You should complete and return each of the proxy cards to
ensure that all of your shares are voted.
COST OF PROXY
SOLICITATION: Some of our directors, officers and employees may also
solicit proxies personally, without any additional
compensation, by telephone or mail. Proxy materials also
will be furnished without cost to brokers and other nominees
to forward to the beneficial owners of shares held in their
names.
QUESTIONS: You may call our Investor Relations department at (713)
693-4000 or email us at investor.relations@weatherford.com
if you have any questions.
PLEASE VOTE -- YOUR VOTE IS IMPORTANT
2
BOARD OF DIRECTORS
PROPOSAL NO. 1 -- ELECTION OF DIRECTORS
Eight directors are to be elected at the Annual General Meeting. Each
director elected will hold office until the 2004 Annual General Meeting. All of
the nominees for director are now serving as directors. The nominees for
election as director are:
NAME AGE DIRECTOR SINCE
---- --- --------------
Bernard J. Duroc-Danner........................... 49 1988
Philip Burguieres................................. 59 1998
David J. Butters.................................. 62 1984
Sheldon B. Lubar.................................. 73 1995
William E. Macaulay............................... 57 1998
Robert B. Millard................................. 52 1989
Robert K. Moses, Jr. ............................. 62 1998
Robert A. Rayne................................... 54 1987
The persons named on the proxy card will vote for all of the nominees for
director listed unless you withhold authority to vote for one or more of the
nominees. The nominees receiving a majority of votes cast at the Annual General
Meeting will be elected as directors. Abstentions, broker non-votes and withheld
votes will not be treated as a vote for or against any particular nominee.
All of our nominees have consented to serve as directors. Our Board of
Directors has no reason to believe that any of the nominees will be unable to
act as a director. However, if any director is unable to stand for re-election,
the Board will designate a substitute. If a substitute nominee is named, the
persons named on the proxy card will vote for the election of the substitute
nominee.
DIRECTOR BIOGRAPHIES
BERNARD J. DUROC-DANNER joined the Company in May 1987 to initiate the
start-up of EVI, Inc.'s oilfield service and equipment business. He was elected
EVI's President in January 1990 and Chief Executive Officer in May 1990. In
connection with the merger of EVI, Inc. with Weatherford Enterra, Inc.
("Weatherford Enterra") on May 27, 1998, Mr. Duroc-Danner was elected as our
Chairman of the Board, President and Chief Executive Officer. Mr. Duroc-Danner
holds a Ph.D. in economics from Wharton (University of Pennsylvania). In prior
years, Mr. Duroc-Danner held positions at Arthur D. Little and Mobil Oil Inc.
Mr. Duroc-Danner is a director of Parker Drilling Company (an oil and gas
drilling company), Cal Dive International, Inc. (a company engaged in subsea
services in the Gulf of Mexico), Universal Compression Holdings, Inc. (a natural
gas compression service company), Dresser, Inc. (a provider of highly engineered
equipment and services primarily for the energy industry) and Peabody Energy
Corporation (a coal production, transportation and trading company). Mr.
Duroc-Danner is also Chairman of the Board of Directors of Grant Prideco, Inc.
(a provider of drill pipe and other drill stem products). Grant Prideco was our
wholly owned subsidiary until April 14, 2000, when we distributed all of the
outstanding shares of Grant Prideco to our shareholders.
PHILIP BURGUIERES has been Vice Chairman and part owner of The Houston
Texans, a National Football League team, since 2000. He also has been Chief
Executive Officer of EMC Holdings, LLC, a private energy investment firm, since
2000. He was elected to the Board in May 1998 and has been employed as our
Chairman Emeritus since that time. Mr. Burguieres served as a director of
Weatherford Enterra from April 1991 until May 1998, and as Chairman of the Board
of Weatherford Enterra from December 1992 until May 1998. From April 1991 to
October 1996, he also served as President and Chief Executive Officer of
Weatherford Enterra. Mr. Burguieres serves as a director of McDermott
International, Inc. (a company engaged in the fabrication of oilfield
equipment), JP Morgan Chase Bank (formerly Chase Bank of Texas,
3
N.A., a national banking organization) and Newfield Exploration Company (an
independent oil and gas producer).
DAVID J. BUTTERS is a Managing Director of Lehman Brothers Inc., an
investment banking company, where he has been employed for more than the past
five years. Mr. Butters is currently Chairman of the Board of Directors of
GulfMark Offshore, Inc. (a provider of marine support and transportation
services to companies involved in the exploration and production of oil and
natural gas), a director of ACOL Tankers Ltd. (an oil tanker company) and a
director of Grant Prideco.
SHELDON B. LUBAR has been the Chairman of Lubar & Co., a private investment
and management company, for more than the past five years. Until February 1999,
Mr. Lubar served as Chairman and Chief Executive Officer of Christiana
Companies, Inc., a diversified holding company that held our common shares and
owned a company that was engaged in refrigerated and dry warehousing,
transportation and logistic services. We acquired Christiana in February 1999.
In our acquisition of Christiana, we acquired a one-third interest in Total
Logistic Control, LLC. We sold our one-third interest to C2, Inc. in September
2000. Mr. Lubar is a director of C2, Inc., MGIC Investment Corporation (a
mortgage insurance company), Crosstex Energy Services, L.P. (a gas gathering and
processing company) and Grant Prideco.
WILLIAM E. MACAULAY is the Chairman and Chief Executive Officer of First
Reserve Corporation, a Connecticut-based private equity investment firm, and has
been the Chief Executive Officer of the firm since 1983. Mr. Macaulay served as
a director of Weatherford Enterra from October 1995 to May 1998. He is Chairman
of the Board of Dresser, Inc. (a provider of highly engineered equipment and
services primarily for the energy industry), and a director of National Oilwell,
Inc. (a leading international provider of drilling systems and associated
services to the oil and gas exploration and production industry), Pride
International, Inc. (a contract drilling and related services company) and
Maverick Tube Corporation (a producer of tubular steel products for the energy
industry).
ROBERT B. MILLARD is a Managing Director of Lehman Brothers Inc., where he
has been employed for more than the past five years. Mr. Millard is also a
director of GulfMark Offshore, Inc. and L-3 Communications Corporation (a
manufacturer of electronic communications equipment principally for the defense
industry).
ROBERT K. MOSES, JR. has been a private investor, principally in the oil
and gas exploration and oilfield services business in Houston, Texas, for more
than the past five years. He served as Chairman of the Board of Directors of
Weatherford Enterra from May 1989 to December 1992 and as a director of
Weatherford Enterra from December 1992 to May 1998. Mr. Moses is also a director
of Grant Prideco.
ROBERT A. RAYNE is Chief Executive Director of London Merchant Securities
plc (property investment and development with major investments in leisure
enterprises), a United Kingdom-listed public limited company, and has been a
Director of that company for more than the past five years. Mr. Rayne is also a
director of Grant Prideco.
4
COMMITTEES AND MEETINGS OF THE BOARD
COMMITTEES
The Board of Directors has created the following committees:
- Audit
- Compensation
- Corporate Governance and Nominating
The Corporate Governance and Nominating Committee was formed in February
2003. The Board of Directors did not have a standing Nominating Committee in
2002. Based upon the recommendation of the Corporate Governance and Nominating
Committee, the Board of Directors dissolved the Executive Committee in February
2003. It was determined that an Executive Committee was not needed at this time
because any material decisions could be acted upon by the full Board of
Directors.
The New York Stock Exchange has submitted to the Securities and Exchange
Commission revised standards and changes in the corporate governance practices
of NYSE-listed companies, including, among other things, new requirements
regarding the independence of the Board and qualifications of Audit Committee
members. We will evaluate our Board and committees when the new rules become
final and intend to fully and timely comply with them.
NUMBER OF MEETINGS
During 2002, the Board of Directors met five times, the Compensation
Committee met once and the Audit Committee met eleven times. The Executive
Committee did not meet. All of the directors attended at least 75% of all Board
of Directors and respective committee meetings.
AUDIT COMMITTEE
Messrs. Butters (Chair), Lubar and Rayne are the current members of the
Audit Committee. The Board of Directors has adopted a written charter for the
Audit Committee, a copy of which is attached to this proxy statement as Appendix
A. The primary functions of the Audit Committee are:
- recommending to the shareholders the selection and discharge of our
independent auditors;
- reviewing the professional services performed by the auditors, the plan
and results of their auditing engagement;
- reviewing the amount of fees charged for audit services by the auditors;
and
- evaluating our system of internal accounting controls.
All members of the Audit Committee are currently independent as defined by
the existing rules of the New York Stock Exchange. Prior to February 8, 2002,
the Board determined to appoint Mr. Lubar to the Audit Committee pursuant to the
independence override procedures set forth in the New York Stock Exchange rules
because of his knowledge of the Company and his financial background and
experience and because the Board did not believe he had any relationship with us
that would interfere with exercise of his independent judgment while serving on
the Audit Committee.
5
COMPENSATION COMMITTEE
Messrs. Lubar, Moses (Chair) and Rayne are the current members of the
Compensation Committee. The primary functions of the Compensation Committee are:
- recommending to the Board the compensation to be paid to the directors
and our chief executive officer;
- subject to review and approval of certain matters by the full Board of
Directors, administering the compensation plans for the executive
officers; and
- subject to the approval of the full Board of Directors, administering our
stock option plans.
CORPORATE GOVERNANCE AND NOMINATING COMMITTEE
Messrs. Butters (Chair), Lubar and Macaulay are the current members of the
Corporate Governance and Nominating Committee. The Board of Directors has
adopted a written charter for the Corporate Governance and Nominating Committee,
a copy of which is attached to this proxy statement as Appendix B. The primary
functions of the Corporate Governance and Nominating Committee are:
- identifying individuals qualified to become Board members;
- recommending to the Board the director nominees for the next Annual
General Meeting of Shareholders;
- developing and recommending to the Board the Corporate Governance
Guidelines for the Company;
- overseeing the Board in its annual review of the Board's and management's
performance; and
- recommending to the Board director nominees for each committee.
In order for the Corporate Governance and Nominating Committee to consider
any director nominees recommended by shareholders, shareholders must follow the
guidelines described under "Proposals by Shareholders" in this Proxy Statement.
BOARD COMPENSATION
DIRECTORS' FEES
The directors who are not employees of the Company are paid the following
fees:
- $1,000 for each Board and Committee meeting attended;
- $1,500 for the Committee Chairman for each Committee meeting attended;
and
- $7,000 for each quarter of the year in which the person serves as a
director.
DEFERRAL PLAN FOR OUTSIDE DIRECTORS
Under our Non-Employee Director Deferred Compensation Plan, each
non-employee director may elect to defer up to 7.5% of any fees paid by us. The
deferred fees are converted on a monthly basis into non-monetary units
representing common shares that could have been purchased with the deferred fees
based on the average of the high and low price of the common shares on the last
day of the month in which the fees were deferred. If a non-employee director
elects to defer at least 5% of his fees, we will make an additional contribution
to the director's account equal to the sum of (1) 7.5% of the director's fees
plus (2) the amount of fees deferred by the director. Our directors may
generally determine when distributions will be made from the plan. The amount of
the distribution will be a number of common shares equal to the number of units
in the director's account at the time of the distribution. During 2002, we
contributed $7,200, $6,450, $4,950, $4,950, $5,325 and $6,450 to the accounts of
Messrs. Butters, Lubar, Macaulay, Millard, Moses and Rayne, respectively, which
represented 172, 155, 119, 119, 128 and 155 units allocated to their respective
accounts.
6
BURGUIERES EMPLOYMENT AGREEMENT
In June 1998, we entered into an employment agreement with Mr. Burguieres,
which has a term of fifteen years and provides for an annual salary of $120,000.
Under the terms of his employment agreement, Mr. Burguieres is employed as
Chairman Emeritus of the Board of Directors. However, the Board of Directors is
not required by his employment agreement to nominate Mr. Burguieres for
re-election as a director. If we terminate Mr. Burguieres' employment for any
reason other than for "cause" or if Mr. Burguieres' employment is terminated as
a result of his death or disability, Mr. Burguieres or his estate will be
entitled to receive annual salary payments through the term of the agreement and
Mr. Burguieres and his eligible dependents will continue to receive health and
medical benefits. If we terminate his employment for "cause", Mr. Burguieres
will not be entitled to any further salary payments or health and medical
benefits. Under Mr. Burguieres' employment agreement, "cause" is generally
defined as (i) an act of dishonesty which constitutes a felony or results in
personal gain or enrichment at our expense, (ii) willful and continued failure
to substantially perform his duties after written demand is made by the Board or
(iii) Mr. Burguieres' ownership, management or employment by any business which
competes, in our reasonable judgment, with any business conducted by us.
Mr. Burguieres also participates in our Executive Deferred Compensation
Stock Ownership Plan, described in footnote 2 to the Summary Compensation Table
that appears under "Executive Compensation" in this Proxy Statement. During
2002, we contributed $18,000 to the account of Mr. Burguieres, which represented
427 units allocated to his account.
STOCK OPTIONS AND WARRANTS
On September 8, 1998, July 5, 2000 and September 26, 2001, we granted to
each of the non-employee directors and Mr. Burguieres an option or warrant to
purchase 93,632; 60,000; and 60,000 common shares, respectively, at a purchase
price per share equal to $11.615, $36.75 and $23.77, respectively, which was the
fair market value of our common shares as of the day we granted the options or
warrants. The options and warrants were issued under agreements between us and
the non-employee directors and Mr. Burguieres. Each option or warrant is
exercisable for a period of ten years from the date that it becomes fully
exercisable. The options and warrants granted on September 8, 1998 and July 5,
2000 become fully exercisable three years from the date of grant, and the
options and warrant granted on September 26, 2001 become fully exercisable four
years from the date of grant, in each case subject to earlier vesting in the
event of the death, disability or retirement of the optionee or warrant holder
or a change of control of Weatherford.
7
AUDIT COMMITTEE REPORT
April 2, 2003
To the Board of Directors of Weatherford International Ltd.:
We have reviewed and discussed with management the Company's audited
financial statements as of and for the year ended December 31, 2002.
We have discussed with the independent auditors the matters required to be
discussed by Statement on Auditing Standards No. 61, Communications with Audit
Committees, as amended, 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
the independent auditors required by Independence Standard No. 1, Independence
Discussions with Audit Committees, as amended, by the Independence Standards
Board, and have discussed with the auditors the auditors' independence.
Based on the reviews and discussions referred to above, we recommended to
the Board of Directors that the financial statements referred to above be
included in the Company's Annual Report on Form 10-K for the year ended December
31, 2002.
We also have considered whether the services provided by the independent
auditors for non-audit services are compatible with maintaining the auditors'
independence.
David J. Butters, Chairman
Sheldon B. Lubar
Robert A. Rayne
8
INDEPENDENT AUDITORS
PROPOSAL 2 -- APPOINTMENT OF INDEPENDENT AUDITORS AND AUTHORIZATION OF
THE AUDIT COMMITTEE TO SET THE AUDITORS' REMUNERATION
In accordance with Bermuda law and the Company's Bye-laws, our shareholders
have the authority to appoint our independent auditors and to authorize the
Audit Committee to set the remuneration of the independent auditors. At the
Annual General Meeting, our shareholders will be asked to appoint Ernst & Young
LLP as Weatherford's independent auditors for the year ending December 31, 2003,
and to authorize the Audit Committee of our Board of Directors to set Ernst &
Young's remuneration. The affirmative vote of a majority of the votes cast at
the Annual General Meeting is required to approve the proposal to appoint Ernst
& Young as the Company's independent auditors and to authorize the Audit
Committee to set Ernst & Young's remuneration.
Ernst & Young served as our auditors for the fiscal years ended December
31, 2001 and 2002. Ernst & Young replaced Arthur Andersen LLP who had served as
our auditors from 1972 to 2000.
On August 13, 2001, we dismissed Arthur Andersen as our independent
auditors and engaged Ernst & Young as our new independent auditors. The decision
to change our auditors was recommended by the Company's Audit Committee.
Arthur Andersen's report on the Company's consolidated financial statements
for the two years ended December 31, 2000 did not contain an adverse opinion or
disclaimer of opinion, nor were such reports qualified or modified as to
uncertainty, audit scope, or accounting principles.
During the two years ended December 31, 2000, and the subsequent interim
period preceding the decision to change independent auditors, there were no
disagreements with Arthur Andersen on any matters of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure, which
disagreements, if not resolved to the satisfaction of Arthur Andersen, would
have caused the former accountant to make a reference to the subject matter of
the disagreements in connection with its reports covering such periods.
During the two years ended December 31, 2000, and the subsequent interim
period preceding the decision to change independent public accountants, there
were no "reportable events" requiring disclosure pursuant to Item
304(a)(1)(v)(A)-(D) of Item 304 of Regulation S-K.
During the two years ended December 31, 2000, and the subsequent interim
period preceding the decision to change independent auditors, neither the
Company nor anyone on its behalf consulted Ernst & Young regarding either the
application of accounting principles to a specified transaction, completed or
proposed, or the type of audit opinion that might be rendered on the Company's
financial statements, nor has Ernst & Young provided to the Company a written
report or oral advice regarding such principles or audit opinion.
In addition to audit services, Ernst & Young also provided certain
non-audit services to the Company in 2002. The Audit Committee has considered
whether the provision of these additional services is compatible with
maintaining the independence of Ernst & Young.
9
The following table presents fees for professional audit services rendered
by Ernst & Young for the audit of the Company's annual financial statements for
the years ended December 31, 2002 and 2001, and fees billed for other services
rendered by Ernst & Young during those periods.
2001 2002
---------- ----------
Audit fees(1)............................................... $1,107,000 $1,678,000
Audit-related fees(2)....................................... 66,000 73,000
Tax fees(3)................................................. 90,000 178,000
All other fees(4)........................................... 180,000 170,000
---------- ----------
TOTAL....................................................... $1,443,000 $2,099,000
========== ==========
---------------
(1) Audit fees consist of professional services rendered for the audit of the
Company's annual financial statements and the reviews of the quarterly
financial statements. This category also includes fees for issuance of
comfort letters, consents, assistance with and review of documents filed
with the SEC, statutory audit fees, work done by tax professionals in
connection with the audit and quarterly reviews, and accounting
consultations and research work necessary to comply with generally accepted
auditing standards.
(2) Audit-related fees include consultations concerning financial accounting and
reporting matters not required by statute or regulation.
(3) Tax fees consist principally of non-U.S. tax compliance and planning.
(4) Other services performed include certain advisory services and do not
include any fees for financial information systems design and
implementation.
Consistent with Securities and Exchange Commission policies regarding
auditor independence, the Audit Committee has responsibility for recommending to
the shareholders the appointment of the Company's independent auditors, setting
remuneration and overseeing the work of the independent auditor. In recognition
of this responsibility, the Audit Committee has established a policy effective
September 5, 2002 to pre-approve all audit and permissible non-audit services
provided by the independent auditor.
Prior to engagement, the Audit Committee pre-approves the audit fees.
During the year, circumstances may arise when it may become necessary to engage
the independent auditor for additional services not contemplated in the original
pre-approval. In those instances, the Audit Committee requires specific pre-
approval by the full Audit Committee, one or more of its members, or, if the
engagement is for a de minimus fee, by the Chief Financial Officer before
engaging the independent auditor.
The Audit Committee has delegated pre-approval authority to one or more of
its members. The member to whom such authority is delegated must report any
pre-approval decisions to the Audit Committee at its next scheduled meeting.
For engagements concerning a de minimus fee, the Audit Committee has
delegated pre-approval authority to the Company's Chief Financial Officer. The
Chief Financial Officer must report any pre-approval decisions to the Audit
Committee at its next scheduled meeting.
Representatives of Ernst & Young will be present at the Annual General
Meeting to respond to any appropriate shareholder questions and will be given an
opportunity to make a statement if they so desire.
10
SHARE OWNERSHIP
SHARES OWNED BY DIRECTORS AND EXECUTIVE OFFICERS
This table shows the number and percentage of common shares beneficially
owned as of April 1, 2003 by each of our directors, each of the executive
officers named in the Summary Compensation Table that appears under "Executive
Compensation" in this Proxy Statement and all of our directors and executive
officers as a group. Each person has sole voting and investment power for the
shares shown below, unless otherwise noted.
AMOUNT AND NATURE OF SHARES
BENEFICIALLY OWNED AS OF APRIL 1, 2003
----------------------------------------------
NUMBER OF RIGHT TO PERCENT OF
NAME SHARES OWNED ACQUIRE(1) OUTSTANDING SHARES
---- ------------ ---------- ------------------
Bernard J. Duroc-Danner(2).......................... 48,364 637,827 *
Philip Burguieres(3)................................ 117,865 93,632 *
David J. Butters(4)................................. 34,247 103,632 *
Sheldon B. Lubar(5)................................. 1,480,377 123,632 1.2
William E. Macaulay(6).............................. 17,933 103,632 *
Robert B. Millard(7)................................ 108,960 103,632 *
Robert K. Moses, Jr. ............................... 260,000 103,632 *
Robert A. Rayne(8).................................. 279 93,632 *
E. Lee Colley, III(9)............................... 645 156,054 *
Donald R. Galletly(10).............................. 5,000 156,054 *
Jon R. Nicholson(11)................................ 15,125 161,754 *
Gary L. Warren(12).................................. 5,838 159,379 *
All officers and directors as a group (17
persons).......................................... 2,095,695 2,199,805 3.3
---------------
* Less than 1%.
(1) Common shares that can be acquired through stock options exercisable
through June 9, 2003.
(2) Includes 3,158 shares held under our 401(k) Savings Plan.
(3) Includes (i) 421 shares held under our 401(k) Savings Plan, as to which Mr.
Burguieres has sole voting and no dispositive power, (ii) 950 shares held
by his wife, over which Mr. Burguieres has no voting or dispositive power,
and (iii) 475 shares held by his adult son supported by him, over which Mr.
Burguieres has sole voting and dispositive power. Mr. Burguieres disclaims
beneficial ownership of the shares held by his wife and son.
(4) Includes 13,772 shares held by Mr. Butters' wife, over which he has no
voting or dispositive power and as to which he disclaims beneficial
ownership.
(5) Includes 1,474,571 shares held by a limited partnership, the sole general
partner of which is a limited liability company of which Mr. Lubar is a
manager, and the limited partners of which include trusts of which Mr.
Lubar is trustee. Mr. Lubar disclaims beneficial ownership of the shares
held by the limited partnership except to the extent of his pecuniary
interest in those shares.
(6) Includes 6,618 shares held by Mr. Macaulay's wife and 3,876 shares held in
the name of or in trust for Mr. Macaulay's adult daughters, over which he
has no voting or dispositive power and as to which he disclaims beneficial
ownership.
(7) Includes 26,772 shares held by a charitable foundation controlled by Mr.
Millard and his wife.
(8) Excludes 420,500 shares beneficially owned by London Merchant Securities
plc, of which Mr. Rayne serves as Chief Executive Director. Mr. Rayne
disclaims beneficial ownership of all of these shares.
(9) Shares are held under our 401(k) Savings Plan.
11
(10) Includes 1,000 shares held by Mr. Galletly's wife and 1,000 shares held
jointly with his wife, over which he has shared voting and dispositive
power.
(11) Includes 1,222 shares held under our 401(k) Savings Plan. 13,903 of such
shares are held jointly with Mr. Nicholson's wife, and voting and
dispositive power over such shares is shared.
(12) Includes 962 shares held under our 401(k) Savings Plan.
SHARES OWNED BY "BENEFICIAL HOLDERS"
This table shows information for each person known by us to beneficially
own 5% or more of the outstanding common shares as of April 1, 2003.
NAME AND ADDRESS OF PERCENT OF
BENEFICIAL OWNER NUMBER OF SHARES(1) OUTSTANDING SHARES
------------------- ------------------- ------------------
Citigroup Inc.(2)......................................... 18,632,027 14.2
399 Park Avenue
New York, New York 10043
FMR Corp.(3).............................................. 18,271,007 13.9
82 Devonshire Street
Boston, Massachusetts 02109
---------------
(1) This information is based on information as of December 31, 2002 furnished
by each shareholder or contained in filings made by the shareholder with the
Securities and Exchange Commission. The person listed has sole voting and
dispositive power for its common shares, unless otherwise noted.
(2) Salomon Smith Barney Holdings Inc. ("SSB Holdings") is a beneficial owner of
18,291,100 of such shares. Smith Barney Fund Management LLC ("SB Fund") is a
beneficial owner of 8,356,262 of such shares. Salomon Brothers Holding
Company Inc. ("Salomon Brothers Holding") is a beneficial owner of 9,879,646
of such shares. Salomon Smith Barney Inc. ("SSB") is a beneficial owner of
9,879,526 of such shares. Salomon Brothers Holding is sole stockholder of
SSB. SSB Holdings is sole stockholder of Salomon Brothers Holding and SB
Fund. Citigroup is the sole stockholder of SSB Holdings. Voting and
dispositive power over all shares is shared.
(3) Fidelity Management & Research Company ("Fidelity"), a wholly owned
subsidiary of FMR Corp. ("FMR") and an investment adviser, is the beneficial
owner of 17,680,907 shares as a result of acting as investment adviser to
various registered investment companies (the "Funds"). Fidelity Management
Trust Company ("FMTC"), a wholly owned subsidiary of FMR, is the beneficial
owner of 400,923 shares as a result of serving as investment manager of
various institutional accounts. Edward C. Johnson 3d, FMR's Chairman and
principal stockholder, FMR, through its control of Fidelity, and the Funds
each has sole power to dispose of the 17,680,907 shares owned by the Funds,
and Mr. Johnson and FMR, through its control of FMTC, each has sole power to
dispose of 400,293 shares and sole power to vote or direct the voting of
317,623 shares and no power to vote or direct the voting of 83,300 shares
owned by the institutional accounts. The Funds' Board of Trustees has sole
power to vote all shares owned by the Funds. Fidelity carries out the voting
of the Funds' shares under written guidelines established by the Funds'
Board of Trustees. Geode Capital Management, LLC ("Geode"), an investment
adviser, beneficially owns 447 shares. Geode is wholly owned by Fidelity
Investors III Limited Partnership ("FILP III"), of which Fidelity Investors
Management, LLC ("FIML") is the general partner. The managers of Geode, the
members of FIML and the limited partners of FILP III are certain
shareholders and employees of FMR. Members of the Edward C. Johnson 3d
family are the predominant owners of Class B shares of common stock of FMR,
representing approximately 49% of the voting power of FMR. Mr. Johnson owns
12.0% and Abigail P. Johnson, Mr. Johnson's wife and a Director of FMR, owns
24.5% of the voting stock of FMR. The Johnson family group and all other
Class B shareholders have entered into a shareholders' voting agreement
under which all Class B shares will be voted in accordance with the majority
vote of Class B shares. Through their ownership of voting common stock and
the shareholders' voting agreement, members of the Johnson family may be
deemed, under the
12
Investment Company Act of 1940, to form a controlling group with respect to
FMR. Fidelity International Limited beneficially owns 188,730 shares and has
sole power to vote and to dispose of such shares.
EXECUTIVE OFFICERS
In addition to Mr. Duroc-Danner, whose biography is shown on page 3, the
following persons are our executive officers. None of the executive officers or
directors have any family relationships with each other, other than E. Lee
Colley III and M. David Colley, who are brothers.
NAME AGE POSITION
---- --- --------
Bernard J. Duroc-Danner.............. 49 Chairman of the Board, President and Chief Executive
Officer
E. Lee Colley, III................... 46 Senior Vice President and President -- Artificial Lift
Systems
Stuart E. Ferguson................... 36 Senior Vice President and President -- Completion
Systems
Gary L. Warren....................... 53 Senior Vice President and President -- Drilling &
Intervention Services
Donald R. Galletly................... 51 Senior Vice President -- Corporate Marketing
Burt M. Martin....................... 39 Senior Vice President, General Counsel and Secretary
Jon R. Nicholson..................... 60 Senior Vice President -- Human Resources
Lisa W. Rodriguez.................... 42 Senior Vice President and Chief Financial Officer
M. David Colley...................... 42 Vice President -- Global Manufacturing and Information
Technology
James N. Parmigiano.................. 45 Vice President -- Operational Controller
E. LEE COLLEY, III was elected Senior Vice President and
President -- Artificial Lift Systems in November 1998. Mr. Colley joined us in
March 1996 and has served in several positions including Vice President/General
Manager of the Artificial Lift Group. Prior to that time, Mr. Colley worked for
over 20 years for another oilfield service company in various manufacturing,
sales and marketing managerial positions.
STUART E. FERGUSON was elected Senior Vice President and
President -- Completion Systems in September 2002. Mr. Ferguson joined the
Company in April 2001, and from then until September 2002, he served in several
positions, including Director of Reservoir Optimization and Vice President of
Intelligent Wells for our Completion Systems Division. From May 2000 until
February 2001, Mr. Ferguson was Group Marketing Director of Expro International
Group PLC, an oilfield services company. From August 1994 until February 2000,
Mr. Ferguson worked for Petroline Wellsystems Ltd., a provider of specialist
oilfield products, in various positions, including Technical Services Director.
Petroline was acquired by the Company in September 1999.
GARY L. WARREN was elected Senior Vice President and President -- Drilling
and Intervention Services in October 2000. Mr. Warren has been employed by the
Company since 1992 and has served in several positions, including Vice
President -- Europe, West Africa and CIS. Mr. Warren worked for Petco Fishing
and Rental Tool from 1980 to 1992, when it was acquired by Weatherford Enterra.
DONALD R. GALLETLY was elected Senior Vice President -- Corporate Marketing
in June 2002 and served as Senior Vice President -- Communications and Investor
Relations from January 2000 to June 2002 and as Vice President -- Communications
and Investor Relations from June 1998 to January 2000. Prior to that time, he
worked for Dresser Industries, Inc., an oilfield products and services company,
as Vice President of Communications and Investor Relations from October 1997 to
May 1998 and as Vice President of Investor and Public Relations from February
1993 to October 1997.
BURT M. MARTIN was elected Senior Vice President, General Counsel and
Secretary in April 2002. He joined the Company in June 1998 and served as
Associate General Counsel from June 1998 until June 2000
13
and as Vice-President Law and Secretary from June 2000 until April 2002. From
1993 to 1998, Mr. Martin was an associate attorney with the law firm of
Fulbright & Jaworski L.L.P.
JON R. NICHOLSON was elected Senior Vice President -- Human Resources in
January 2000 and served as Vice President -- Human Resources from May 1998 to
January 2000. Mr. Nicholson also was in charge of Information Technology from
March 2001 to December 2002. Prior to May 1998, Mr. Nicholson worked for
Weatherford Enterra as Vice President -- Human Resources from October 1995 to
May 1998 and as Director of Human Resources from February 1993 to October 1995.
LISA W. RODRIGUEZ was elected Senior Vice President and Chief Financial
Officer in June 2002. Ms. Rodriguez joined the Company in 1996 and has served in
several positions, including Vice President -- Accounting and Finance from
February 2001 to June 2002, Vice President -- Accounting from June 2000 to
February 2001 and Controller from 1999 to February 2001. Prior to joining the
Company, Ms. Rodriguez worked for Landmark Graphics from 1993 to 1996.
M. DAVID COLLEY joined the Company in 1996 and was elected Vice President
-- Global Manufacturing in September 2002 and Vice President -- Global
Manufacturing and Information Technology in December 2002. Prior to joining the
Company, Mr. Colley worked for 17 years for another oilfield service company in
various positions, with a focus on the supply of oilfield products.
JAMES N. PARMIGIANO joined the Company in May 1998 and was elected Vice
President -- Operational Controller in June 2000. From February 1983 to May
1998, Mr. Parmigiano worked for Dresser Industries, Inc. in various capacities,
including Financial Controller of Dresser's Sperry-Sun Drilling Services
Division.
EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Board of Directors and the Compensation Committee of the Board of
Directors are pleased to present this report on the compensation policies for
our executive officers for 2002. This report sets forth the major components of
executive compensation and the basis by which 2002 compensation determinations
were made by the Board of Directors and the Compensation Committee for the
executive officers.
COMPENSATION POLICY AND GUIDELINES
The goal of our compensation policy and practices is to provide a
competitive compensation package designed to attract and retain key executive
officers and to offer compensation programs that align executive remuneration
levels with the interests of shareholders and with the Company's overall
performance. Our compensation programs have historically stressed share-based
compensation as a means of providing incentives to executive officers to achieve
growth in the value of the common shares. With this objective in mind, our
executive compensation program has included a combination of reasonable base
salaries and various long and short-term incentive programs linked to the
Company's financial and share performance. In making compensation decisions, the
Compensation Committee's decisions have typically also taken into account the
cyclical nature of the industry and the Company's progress toward achieving
strategic objectives.
COMPENSATION PROGRAM COMPONENTS
Our compensation programs are generally administered by or under the
direction of the Compensation Committee and are reviewed on an annual basis to
ensure that remuneration levels and benefits are competitive and reasonable in
light of the Company's overall performance. Our share-based compensation
decisions for the executive officers are approved by our full Board of Directors
following recommendations by the Compensation Committee.
The Compensation Committee was charged with reviewing and recommending the
specific base and bonus compensation of Mr. Duroc-Danner, our President and
Chief Executive Officer. The Board of Directors and Compensation Committee have
delegated to Mr. Duroc-Danner, as our Chief Executive Officer, the authority to
review and adjust the base and cash bonus compensation for the other executive
officers.
14
Decisions on stock options and other long-term incentive plans are made by
the Board after consideration of the Company's results and discussion with and
recommendations from Mr. Duroc-Danner as to the executive officers under his
supervision.
The particular elements of the compensation programs for Mr. Duroc-Danner
and other executive officers are explained in more detail below.
Base Salary -- Base salary levels have primarily been determined based on
market factors, including the market for similar executives and the desire by us
to recruit and retain key executive officers. Our analysis has also included
comparisons with companies in the same industry and of similar size and
complexity as the Company, including a number of companies in the Dow Jones U.S.
Oil Drilling, Equipment and Services Index in the performance graph set forth
herein. Salary levels are based on individual skills and performance and market
comparisons. Adjustments made during 2002 to the compensation of various
officers were based on various factors, including their individual scope of
responsibility, tenure, and overall performance.
Annual Performance Compensation -- Annual performance compensation has
historically been provided to the executive officers in the form of cash bonuses
relating to financial and operational achievements. The decision to award an
annual bonus is based upon both an objective analysis of our financial
performance and a subjective analysis of the executive officer's job performance
and the specific accomplishments of the executive officer during the preceding
twelve-month period after giving consideration to other compensation received by
the officer.
The granting of bonuses has typically occurred in February or March of each
year. Various bonuses were paid to the executive officers in the first quarter
of 2002 in recognition of those officers' assistance in achieving the Company's
growth in 2001. No bonuses were granted to any of our executive officers in the
first quarter of 2003.
Deferred Compensation Plan -- We maintain an executive deferred
compensation plan that provides our key employees with long-term incentive
compensation through benefits that are directly linked to future increases in
the value of the common shares and that may only be realized upon the employee's
retirement, termination or death. Under this plan, eligible employees receive a
tax deferred contribution under the plan equal to 7.5% of their annual
compensation through a credit to an account that is converted into non-monetary
units representing the number of common shares that the contributed funds could
purchase in the market at the time of the contribution. In addition, in an
effort to provide incentive to the participants to invest in the Company's
common shares a portion of the compensation that they would otherwise receive
from the Company, the participating employees are offered the opportunity to
defer up to 7.5% of their compensation to their account under this plan, in
which case we will make a matching contribution equal to the amount of the
deferral by the employee. Mr. Duroc-Danner and our other executive officers have
all elected to defer 7.5% of their compensation under this plan. This plan
provides for a five-year vesting period with respect to the Company's
contributions and the ultimate value of benefits under the plan to the
participant are wholly dependent upon the price of the common shares at the time
the employee retires or dies or his employment terminates. We believe that this
plan is an important component of the share-based compensation program and
serves the purpose of aligning management's interests with those of the
Company's shareholders.
Stock Option Program -- The use of stock options is considered to be an
important incentive to our executive officers for working toward the Company's
long-term growth. We believe that options provide our officers with a benefit
that will increase only to the extent that the value of the common shares
increases. Accordingly, we have from time to time granted to the executive
officers options to purchase common shares. The number of shares granted is
determined based on the level and contribution of the officer and has generally
taken into account share ownership and other options held by the officer. Stock
options are generally subject to vesting over a number of years and have
exercise prices equal to the market price of the common shares at the date of
grant.
In 2002, options to purchase a total of 75,000 common shares were granted
to two of our executive officers in connection with their appointment as
officers. These options are subject to three-year cliff-vesting so that an
officer will not be entitled to the options if he elects to leave our employment
during the three-year
15
period. We believe that this type of vesting provides strong incentives for
creating long-term value for the Company.
DISCUSSION OF 2002 COMPENSATION FOR THE PRESIDENT AND CHIEF EXECUTIVE OFFICER
In establishing the compensation of Mr. Duroc-Danner for 2002, the
Compensation Committee determined that it would be appropriate to increase Mr.
Duroc-Danner's base compensation from $825,000 to $995,000 and award him a bonus
of $1,468,715 in the first quarter of 2002 in recognition of his services to and
accomplishments for the Company in 2001. The increase in Mr. Duroc-Danner's base
salary was intended to make his compensation more competitive with those of his
peers at competing companies, including a number of companies included in the
Dow Jones U.S. Oil Drilling, Equipment and Services Index in the performance
graph set forth herein. In reviewing Mr. Duroc-Danner's compensation for 2002,
the Compensation Committee also sought to reward Mr. Duroc-Danner for his
efforts to expand and grow the Company's businesses and his general
accomplishments in increasing shareholder value through revenue and income
growth. No single factor was considered determinative in this decision.
COMPENSATION DEDUCTION LIMITATIONS
Section 162(m) of the Internal Revenue Code of 1986, as amended, currently
imposes a $1 million limitation on the deductibility of certain compensation
paid to five highest paid executives. Excluded from the limitation is
compensation that is "performance based". For compensation to be performance
based, it must meet certain criteria, including being based on predetermined
objective standards approved by the Company's shareholders. We believe that
maintaining the discretion to evaluate the performance of our management is an
important part of our responsibilities and benefits the Company's shareholders.
We intend to take into account the potential application of Section 162(m) on
incentive compensation awards and other compensation decisions.
SUMMARY
We believe that the executive compensation program followed by us in 2002
was consistent with the compensation programs provided by other companies that
are comparable in size and complexity to the Company and with which the Company
competes, including many of the companies in the Dow Jones U.S. Oil Drilling,
Equipment and Services Index. We further believe that the compensation program
is necessary to retain the services of officers and employees who are essential
to the continued success and development of the Company and to compensate those
officers and employees for their efforts and achievements. The Board and
Compensation Committee intend to review the compensation policies on an ongoing
basis to assure that compensation paid appropriately reflects corporate and
individual performance, yielding awards that are reflective of the annual
financial and operational results of the Company. Finally, we believe that the
deferred compensation plan and stock option program provide significant
incentives to our key employees to enhance shareholder value by providing
financial opportunities to them that are consistent with and dependent upon the
returns that are generated on behalf of the Company's shareholders.
Philip Burguieres
David J. Butters
Bernard J. Duroc-Danner
Sheldon B. Lubar*
William E. Macaulay
Robert B. Millard
Robert K. Moses, Jr.*
Robert A. Rayne*
* Members of the Compensation Committee
16
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
COMPENSATION DETERMINATIONS
The full Board of Directors currently approves all share grants, with
Messrs. Duroc-Danner and Burguieres, both employee directors of the Company,
abstaining from voting with respect to these matters. Mr. Duroc-Danner does make
recommendations to the Compensation Committee and the full Board of Directors
for compensation and share grants to our employees.
OTHER AFFILIATIONS
On September 9, 2002, we acquired the specialty fiber and glass
micro-structure of CiDRA Corporation's Industrial Sensing Systems business unit
for approximately $2.8 million in cash. Additionally, in November 2001, we
acquired the assets of CiDRA Corporation's Optical Sensing Systems business
unit. First Reserve Corporation beneficially owns certain convertible preferred
securities of CiDRA Corporation, which are convertible into less than 10% of the
common stock of CiDRA Corporation, on a fully diluted and converted basis.
William E. Macaulay, a member of our Board of Directors, is the Chief Executive
Officer of First Reserve Corporation. Mr. Macaulay expressly disclaims
beneficial ownership of any shares of securities of CiDRA Corporation
beneficially held by First Reserve Corporation. Additionally, Mr. Macaulay did
not participate or vote during any meetings of our Board of Directors in which
the CiDRA transactions were discussed or approved.
17
SUMMARY COMPENSATION TABLE
This table shows the total compensation paid for the years ended December
31, 2002, 2001 and 2000, to Mr. Duroc-Danner and our four most highly
compensated executive officers during 2002:
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
---------------------------------- ------------
OTHER ANNUAL SHARES ALL OTHER
NAME AND SALARY BONUS COMPENSATION UNDERLYING COMPENSATION
PRINCIPAL POSITION YEAR ($)(1) ($)(1) ($)(2)(3) OPTIONS ($)(4)
------------------ ---- ------- --------- ------------ ------------ ------------
Bernard J. Duroc-Danner.... 2002 979,312 -- 367,204 -- 14,404
Chairman of the Board, 2001 781,251 1,468,715 270,985 350,000 16,795
President and Chief 2000 625,003 1,025,316 150,000 350,000 10,443
Executive Officer
E. Lee Colley, III......... 2002 336,315 -- 105,017 -- 5,332
Senior Vice President and 2001 288,463 363,801 83,109 100,000 3,387
President -- Artificial
Lift 2000 244,237 265,600 59,136 100,000 2,769
Systems
Donald R. Galletly......... 2002 282,694 -- 98,317 -- 1,931
Senior Vice President -- 2001 251,262 372,746 64,293 100,000 1,566
Corporate Marketing 2000 218,750 284,513 27,104 139,013 608
Jon R. Nicholson........... 2002 302,236 -- 104,473 -- 15,255
Senior Vice President -- 2001 266,262 394,249 68,369 100,000 11,321
Human Resources 2000 232,500 303,480 30,645 139,013 11,209
Gary L. Warren............. 2002 350,004 -- 124,102 -- 7,997
Senior Vice President and 2001 300,000 477,341 83,546 100,000 5,456
President -- Drilling and 2000 225,000 396,220 27,000 100,000 4,275
Intervention Services
---------------
(1) Salary and bonus compensation include amounts deferred by each executive
officer under our Executive Deferred Compensation Stock Ownership Plan (the
"Executive Deferred Plan") described in Note 2 below. The bonus amounts were
earned in the year in which they are shown in the table but were paid in the
first half of the following year.
(2) Other Annual Compensation includes (i) the vested portion of the amount
contributed by us under the Executive Deferred Plan equal to 7.5% of each
annual officer's compensation for each year, plus (ii) the vested portion of
our matching contribution under the Executive Deferred Plan equal to 100% of
the amount deferred by the officer. Each officer can defer up to 7.5% of his
total salary and bonus compensation each year. Our contributions vest over a
five-year period on the basis of 20% per year for each year of service.
Under the Executive Deferred Plan, the compensation deferred by each officer
and our contributions are converted into non-monetary units equal to the
number of common shares that could have been purchased with the amounts
deferred and contributed at a market-based price. Distributions are made
under the Executive Deferred Plan after an officer retires, terminates his
employment or dies. The value of the distribution under the Executive
Deferred Plan is based on the number of vested units in the officer's
account multiplied by the market price of the common shares at that time.
Distributions under the Executive Deferred Plan are made in common shares.
Our obligations with respect to the Executive Deferred Plan are unfunded.
However, we have established a grantor trust, which is subject to the claims
of our creditors, into which funds are deposited with an independent trustee
that purchases common shares for the Executive Deferred Plan. As of December
31, 2002, Messrs. Duroc-Danner, Colley, Galletly, Nicholson and Warren had
44,790, 13,650, 10,937, 11,641 and 11,259 units allocated to their
respective accounts, including units purchased with their own deferrals.
(3) Excludes the total amount of all perquisites and other benefits that were
less than the lesser of $50,000 or 10% of the total of annual salary and
bonus of each executive officer.
18
(4) Represents matching contributions of $5,374, $3,889, $5,298 and $4,109 made
by us in 2002 under our 401(k) Savings Plan for each of Messrs.
Duroc-Danner, Colley, Nicholson and Warren respectively, and life insurance
premiums of $9,031, $1,443, $1,931, $9,957 and $3,887 paid by us in 2002 for
each of Messrs. Duroc-Danner, Colley, Galletly, Nicholson and Warren,
respectively.
AGGREGATED OPTION EXERCISES IN 2002
AND DECEMBER 31, 2002 OPTION VALUES
NUMBER OF SHARES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AT IN-THE-MONEY OPTIONS AT
ACQUIRED DECEMBER 31, 2002 DECEMBER 31, 2002($)(1)
ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- -------- ----------- ----------- ------------- ----------- -------------
Bernard J.
Duroc-Danner.......... -- -- 637,827 503,142 17,805,025 5,446,459
E. Lee Colley, III...... -- -- 156,054 200,000 4,418,669 1,934,000
Donald R. Galletly...... -- -- 117,041 239,013 3,314,016 2,574,593
Jon R. Nicholson........ -- -- 122,741 239,013 3,392,750 2,574,593
Gary L. Warren.......... -- -- 159,379 200,000 3,583,396 1,934,000
---------------
(1) The value is based on the difference in the closing market price of the
common shares on December 31, 2002 ($39.93), and the exercise price of the
options. The actual value, if any, of the unexercised options will depend on
the market price of the common shares at the time of exercise of the
options.
EMPLOYMENT CONTRACTS
We have entered into employment agreements with each of the officers named
in the Summary Compensation Table and all other executive officers. The
employment agreements with Messrs. Duroc-Danner, E. Lee Colley, Galletly and
Nicholson provide for a term of three years and are renewable annually. Under
the terms of the employment agreements, if we terminate an executive's
employment for any reason other than "cause," if the executive terminates his
employment for "good reason" or if the employment is terminated as a result of
the executive's death or "disability", as defined in the employment agreements,
the executive will be entitled to receive (1) an amount equal to three times the
sum of the executive's current base compensation plus the highest bonus paid to
the executive during the three years prior to the year of termination, (2) any
accrued salary or bonus (pro-rated to the date of termination), (3) an amount
payable if all retirement plans were vested, (4) the amount that would have been
contributed as our match under the 401(k) Savings Plan and the Executive
Deferred Plan for three years and (5) the executive's car allowance for three
years. Under the employment agreements, "cause" is defined as the willful and
continued failure to perform the executive's job, after written demand is made
by the Chief Executive Officer or the Board, or the willful engagement in
illegal conduct or gross misconduct. Termination by the executive for "good
reason" is generally defined as (1) a material reduction in title and/or
responsibilities of the executive, (2) certain relocations of the executive or
(3) any material reduction in the executive's benefits. In addition, under such
circumstances, all stock options granted to the executive will automatically
vest. All health and medical benefits would also be maintained after termination
for a period of three years provided the executive makes his required
contribution.
The employment agreements with Mr. Warren and the other executive officers
provide for a term of three years and are renewable annually. Under the terms of
the employment agreements, if, in the absence of a change of control of the
Company, we terminate the executive's employment for any reason other than
"cause," if the executive terminates his or her employment for "good reason" or
if the employment is terminated as a result of the executive's death or
"disability", as defined in the employment agreements, the executive will be
entitled to receive (1) an amount equal to two times the sum of the executive's
current base compensation plus the highest bonus paid to the executive during
the three years prior to the year of termination, (2) any accrued salary and
bonus (pro-rated to the date of termination), (3) the amount that
19
would have been contributed as our match under the 401(k) Savings Plan and the
Executive Deferred Plan for the year in which employment was terminated
(pro-rated to the date of termination) and (4) an amount equal to two times all
fringe benefits. In addition, under such circumstances, all stock options and
benefits under the 401(k) Savings Plan and Executive Deferred Plan would
automatically vest, and all health and medical benefits would be maintained
after termination through the expiration of the then scheduled expiration of the
employment term provided the executive makes his required contribution.
Under the Deficit Reduction Act of 1984, certain severance payments that
exceed a certain amount could subject both us and the executive to adverse U.S.
federal income tax consequences. Each of the employment agreements provides that
we would be required to pay the executive a "gross up payment" to ensure that
the executive receives the total benefit intended by his agreement with us.
20
FIVE-YEAR PERFORMANCE GRAPH
This graph compares the yearly cumulative return on the common shares with
the cumulative return on the Dow Jones U.S. Oil Drilling, Equipment and Services
Index and the Dow Jones U.S. Total Market Index for the last five years. The
graph assumes the value of the investment in the Company's common shares and
each index was $100 on December 31, 1997, and that all dividends are reinvested,
including the Company's April 2000 distribution to its shareholders of its
Drilling Products Division through a special stock dividend in shares of Grant
Prideco, Inc. For purposes of this graph, this dividend is treated as a
non-taxable cash dividend that was reinvested in additional Weatherford common
shares.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
(PERFORMANCE GRAPH)
--------------------------------------------------------------------------------------
12/31/97 12/31/98 12/31/99 12/31/00 12/31/01 12/31/02
--------------------------------------------------------------------------------------
Weatherford
International...... 100 37 77 137 108 116
Dow Jones U.S. Oil
Drilling, Equipment
and Services
Index(1)........... 100 48 74 109 75 69
Dow Jones U.S.
Total Market
Index.............. 100 125 153 139 122 95
(1) In connection with a restructuring of the Dow Jones U.S. Oilfield Equipment
and Services Index, Dow Jones renamed it the Dow Jones U.S. Oil Drilling,
Equipment and Services Index.
OTHER INFORMATION
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
All of our executive officers and directors are required to file initial
reports of share ownership and reports of changes in ownership with the
Securities and Exchange Commission and the New York Stock Exchange pursuant to
Section 16(a) of the Securities Exchange Act of 1934.
We have reviewed these reports, including any amendments, and written
representations from the current executive officers and directors of the
Company. Based on this review, we believe that, except as set forth below, all
filing requirements were met for the executive officers subject to Section 16(a)
and our directors during 2002. Mr. Lubar inadvertently omitted one transaction
on his Form 4 for June 2002. This transaction was reported on an amended Form 5
filed on March 20, 2003.
21
PROPOSALS BY SHAREHOLDERS
Shareholder proposals to be included in the proxy materials for our Annual
General Meeting to be held in 2004 must be received by us by December 4, 2003,
and must otherwise comply with the rules promulgated by the Securities and
Exchange Commission to be considered for inclusion in our proxy statement for
that year.
The Company's Bye-laws set forth procedures to be followed by shareholders
who wish to nominate candidates for election to the Board of Directors or bring
other business before an annual or special general meeting of shareholders. If a
shareholder desires to nominate candidates for the election to the Board of
Directors or bring other business before the 2004 Annual General Meeting, we
must receive notice from the shareholder not less than 60 days nor more than 90
days prior to May 8, 2004. However, if our 2004 Annual General Meeting is called
for a date that is not within 60 days before or after May 8, 2004, we must
receive such notice not later than the 7th day following the day on which notice
of the date of the 2004 Annual General Meeting was mailed or public disclosure
of the date of the 2004 Annual General Meeting was made, whichever occurs first.
Any such notice from a shareholder also must contain the information specified
in our Bye-laws, including, in the case of a nomination, certain background
information, and in the case of other business, a description of such business
and reasons for conducting such business before the Annual General Meeting.
Additionally, under Bermuda law, shareholders holding not less than 5% of the
total voting rights or 100 or more record shareholders together may require a
proposal to be submitted at an Annual General Meeting. Generally, notice of such
a proposal must be received by us not less than six weeks before the date of the
meeting and must otherwise comply with the requirements of Bermuda law. These
requirements are separate from and in addition to the other requirements a
shareholder must meet to have a proposal included in our proxy materials.
Any shareholder proposal, whether or not to be included in our proxy
materials, must be sent to our Secretary at 515 Post Oak Boulevard, Suite 600,
Houston, Texas 77027.
OTHER BUSINESS
We know of no other business that will be brought before the Annual General
Meeting. Under the Company's Bye-laws, shareholders may only bring business
before the Annual General Meeting if it is submitted to our secretary within the
time limits described above in the section entitled "Proposals by Shareholders".
If any other matters are properly presented, the persons named on the enclosed
proxy card will vote the shares represented by proxies as they deem advisable.
ADDITIONAL INFORMATION AVAILABLE
We have filed an Annual Report on Form 10-K for 2002 with the Securities
and Exchange Commission. A complete copy of our Annual Report on Form 10-K is
available on our website at www.weatherford.com. We also will provide to any
shareholder without charge upon written request a copy of our Annual Report on
Form 10-K. Copies of any exhibits to our Annual Report on Form 10-K also are
available upon written request subject to a charge for copying and mailing. If
you wish to obtain a paper copy of our Annual Report on Form 10-K or have any
other questions about us, please contact our Investor Relations Department in
writing (515 Post Oak Blvd., Suite 600, Houston, Texas 77027), by telephone
((713) 693-4000) or visit our website.
By Order of the Board of Directors
/s/ Burt M. Martin
Burt M. Martin
Secretary
Houston, Texas
April 2, 2003
22
APPENDIX A
WEATHERFORD INTERNATIONAL LTD.
CHARTER OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
AUDIT COMMITTEE PURPOSE:
The Audit Committee (the "Committee") of the Board of Directors (the
"Board") of Weatherford International Ltd. (the "Company"), has been established
by the Board. The Committee's primary purposes are to:
- Monitor the integrity of the Company's financial reporting process and
systems of internal controls regarding finance, accounting, and legal
compliance.
- Monitor the independence and performance of the Company's independent
auditors and internal auditing department.
- Provide an open avenue of communication among the independent auditors,
management, the internal auditing department and the Board.
The Committee has the authority to conduct any investigation appropriate to
fulfilling its responsibilities, and it has direct access to the independent
auditors as well as anyone in the Company. The Committee has the ability to
retain, at the Company's expense, such special legal, accounting or other
consultants or experts as it deems necessary in the performance of its duties.
The independent auditors of the Company shall be ultimately accountable to the
Committee and the Board.
AUDIT COMMITTEE COMPOSITION AND MEETINGS:
The Committee shall consist of at least three directors, as determined by
the Board. Committee members shall meet the requirements established by the New
York Stock Exchange. The Committee shall be composed of directors who are
independent of the Company's management and free of any relationship that, in
the opinion of the Board, would interfere with their exercise of independent
judgment as a Committee member. Each Committee member must be financially
literate, and at least one member must have accounting or related financial
management expertise. The qualifications of financial literacy and expertise
shall be determined and confirmed by the Board.
Committee members shall be appointed by the Board. If a Committee Chair is
not designated or present at any meeting of the Committee, the members of the
Committee may designate a Chair by majority vote of the Committee members.
The Committee shall meet at least two times annually, or more frequently as
circumstances require.
AUDIT COMMITTEE RESPONSIBILITIES:
In carrying out its responsibilities, the Committee believes its policies
and procedures should remain flexible in order to effectively react to changing
conditions and to ensure to the Board and the stockholders that the corporate
accounting and reporting practices of the Company are in accordance with all
requirements and are of the highest quality.
The Committee shall:
1. Review and update this Charter annually and submit this Charter to the
Board for approval upon its initial adoption and upon adoption of any
amendments hereto.
2. Recommend to the Board the selection, evaluation and, when appropriate,
replacement of the independent auditors.
3. Ensure that the independent auditors submit on a periodic basis to the
Committee a formal written statement delineating all relationships
between the auditors and the Company, actively engage in a
A-1
dialogue with the independent auditors with respect to any relationships
disclosed in the report that may impact the objectivity and independence
of the independent auditors, and recommend that the Board take
appropriate action in response to the independent auditors' report to
satisfy itself of the independence of the auditors.
4. Provide in the Company's annual proxy statement a report of the
Committee's findings that result from its financial reporting oversight
responsibilities.
5. Conduct discussions and consultations with the independent auditors on
an annual basis, or more frequently as the Committee deems appropriate.
6. Perform any other activities consistent with this Charter, the Company's
by-laws and governing law, as the Committee or the Board deems
appropriate.
A-2
APPENDIX B
WEATHERFORD INTERNATIONAL LTD.
CHARTER OF THE CORPORATE GOVERNANCE & NOMINATING COMMITTEE
OF THE BOARD OF DIRECTORS
PURPOSE
The goal of the Corporate Governance & Nominating Committee is to take the
leadership role in shaping the corporate governance and business standards of
the Board and the Company. In furtherance of this goal, the Corporate Governance
& Nominating Committee is appointed by the Board to: (1) assist the Board by
identifying individuals qualified to become Board members; (2) recommend to the
Board the director nominees for the next annual meeting of the shareholders; (3)
develop and recommend to the Board the Corporate Governance Guidelines for the
Company; (4) oversee the Board in its annual review of the Board's and
management's performance; and (5) recommend to the Board director nominees for
each committee.
COMMITTEE MEMBERSHIP
The Corporate Governance & Nominating Committee shall consist of no fewer
than three members. The members of the Corporate Governance & Nominating
Committee shall meet the independence requirements of the New York Stock
Exchange. The members of the Corporate Governance & Nominating Committee shall
be appointed and replaced by the Board.
COMMITTEE RESPONSIBILITIES
The Corporate Governance & Nominating Committee shall have the following
responsibilities:
1. Establish the criteria for selecting new directors.
2. Identify individuals qualified to become Board members.
3. Select or recommend to the Board the director nominees on an annual
basis.
4. Recommend to the Board the number and term of members of the Board.
5. Recommend the members for each of the committees of the Board.
6. Recommend the number and term of members for each committee of the
Board.
7. Monitor and recommend the functions of the committees of the Board.
8. Develop and recommend to the Board the corporate governance principles
for the Company.
9. Periodically review and revise the corporate governance principles of
the Company.
10. Recommend matters for consideration by the Board at its meetings.
11. Make regular reports to the Board.
12. Review and reassess the adequacy of this Charter annually and recommend
any proposed changes to the Board for approval.
13. Oversee and review the annual evaluation of the Board and the
management of the Company.
14. Evaluate and review with the Board the annual performance of the Board
committees, including the performance of the Corporate Governance & Nominating
Committee.
B-1
COMMITTEE AUTHORITY
The Corporate Governance & Nominating Committee is authorized as follows:
1. Retain and terminate any search firm to be used to identify director
candidates and approve the search firm's fees and other retention terms.
2. Obtain advice and assistance from internal or external legal, accounting
or other advisors.
3. Form and delegate authority to subcommittees when appropriate.
B-2
(Weatherford Logo)
WEATHERFORD INTERNATIONAL LTD.
NOTICE OF 2003 ANNUAL GENERAL MEETING OF SHAREHOLDERS
AND PROXY STATEMENT
MAY 8, 2003
9:00 A.M. (HOUSTON TIME)
THE ST. REGIS HOTEL
1919 BRIAR OAKS LANE
HOUSTON, TEXAS 77027
================================================================================
WEATHERFORD INTERNATIONAL LTD.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned shareholder of Weatherford International Ltd. ("Weatherford")
hereby appoints Burt M. Martin, or, failing him, Bernard J. Duroc-Danner, as
proxy, each with full power of substitution, for the undersigned to vote the
number of common shares of Weatherford that the undersigned would be entitled to
vote if personally present at the Annual General Meeting of Shareholders of
Weatherford to be held on May 8, 2003, at 9:00 a.m., Houston time, at The St.
Regis Hotel, 1919 Briar Oaks Lane, Houston, Texas, and at any adjournment or
postponement thereof, on the following matters that are more particularly
described in the Proxy Statement dated April 2, 2003:
(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE)
================================================================================
================================================================================
ANNUAL GENERAL MEETING OF SHAREHOLDERS OF
WEATHERFORD INTERNATIONAL LTD.
MAY 8, 2003
PROXY VOTING INSTRUCTIONS
MAIL
DATE, SIGN AND MAIL YOUR PROXY CARD TO AMERICAN STOCK TRANSFER & TRUST COMPANY,
59 MAIDEN LANE, PLAZA LEVEL, NEW YORK, NY 10273-0923, IN THE ENVELOPE PROVIDED
AS SOON AS POSSIBLE.
-- OR --
TELEPHONE
CALL TOLL-FREE 1-800-PROXIES FROM ANY TOUCH-TONE TELEPHONE AND FOLLOW THE
INSTRUCTIONS. HAVE YOUR CONTROL NUMBER AND PROXY CARD AVAILABLE WHEN YOU CALL.
-- OR --
INTERNET
ACCESS "WWW.VOTEPROXY.COM" AND FOLLOW THE ON-SCREEN INSTRUCTIONS. HAVE YOUR
CONTROL NUMBER AVAILABLE WHEN YOU ACCESS THE WEB PAGE.
COMPANY NUMBER ______________
ACCOUNT NUMBER ______________
CONTROL NUMBER ______________
Please detach and mail in the envelope provided if you are not
voting via telephone or the Internet.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE
EIGHT NOMINEES FOR DIRECTOR AND "FOR" PROPOSAL 2.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE [X}
(1) Election of the following Nominees as Directors, as set forth in the Proxy
Statement:
NOMINEES
o Phillip Burguieres
o David J. Butlers
o Bernard J. Duroc-Danner
o Sheldon B. Lubar
o William E. Macaulay
o Robert B. Millard
o Robert K. Moses, Jr.
o Robert A. Rayne
FOR WITHHOLD AUTHORITY FOR FOR All except
All Nominees All Nominees (See instruction below)
[ ] [ ] [ ]
INSTRUCTION: To withhold authority to vote for any individual nominee(s),
mark "FOR All EXCEPT" and fill in the circle next to each nominee with
respect to whom you wish to withhold authority, as shown here:
----------------------------------------------------------------------------
To change the address on your account, please check the box at right [ ]
and indicate your new address in the address space above. Please
note that changes to the registered name(s) on the account may not
be submitted via this method.
(2) Appointment of Ernst & Young LLP as independent auditors for the year
ending December 31, 2003, and authorization of the Audit Committee of
the Board of Directors to set Ernst & Young LLP's remuneration.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
(3) To consider and vote upon any other matter which may properly come
before the meeting or any adjournment(s) or postponement(s) thereof in
the proxy's discretion.
This proxy, when properly executed, will be voted in the manner directed herein
by the undersigned shareholder. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED "FOR" ALL OF THE NOMINEES FOR DIRECTOR LISTED AT LEFT UNDER PROPOSAL 1
AND "FOR" PROPOSAL 2.
Receipt of the Proxy Statement dated April 2, 2003, and the Annual Report of
Weatherford for the year ended December 31, 2002, is hereby acknowledged.
--------------------------------------------------------------------------------
-------------------------------------------
Signature of Shareholder
Date:
--------------------------------------
-------------------------------------------
Signature of Shareholder
Date:
--------------------------------------
Note: This proxy must be signed exactly as the name appears hereon. When shares
are held jointly, each holder should sign. When signing as executor,
administrator, attorney, trustee or guardian, please give full title as such. If
the signer is a corporation, please sign full corporate name by duly authorized
officer, giving full title as such. If signer is a partnership, please sign in
partnership name by authorized person.