FMC Technologies DEF 14A 2007
Documents found in this filing:
NOTICE & PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant x
Filed by a Party other than the Registrant ¨
Check the appropriate box:
x Definitive Proxy Statement
¨ Definitive Additional Materials
¨ Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
FMC TECHNOLOGIES, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
Friday, May 4, 2007
The Woodlands Waterway Marriott Hotel & Convention Center
1601 Lake Robbins Drive
The Woodlands, Texas 77380
April 2, 2007
It is my pleasure to invite you to attend the 2007 Annual Meeting of Stockholders of FMC Technologies, Inc., which will be held at the time and place noted above. At the meeting, we will ask our stockholders to:
Please refer to the accompanying Proxy Statement for additional information about the matters to be considered at the meeting.
You may vote at the meeting if you were a stockholder of record on March 5, 2007.
MANAGEMENT RECOMMENDS A VOTE FOR THE RE-ELECTION OF EACH OF THE NOMINEES FOR DIRECTOR.
Your vote is important. To be sure that your vote counts and to assure a quorum, please submit your vote promptly whether or not you plan to attend the meeting. You can revoke a proxy prior to its exercise at the meeting by following the instructions in the accompanying Proxy Statement.
Our stockholders have a choice of voting on the Internet, by telephone or by mailing a traditional proxy card. If you are a stockholder of record and you plan to attend the meeting, please mark the appropriate box on your proxy card or use the alternative Internet or telephone voting options in accordance with the voting instructions you have received. If you vote by telephone or on the Internet, you do not need to return your proxy card. If your shares are held by a bank, broker or other intermediary and you plan to attend, please send written notification to our Investor Relations Department, 1803 Gears Road, Houston, Texas 77067, and enclose evidence of your ownership (such as a letter from the bank, broker or intermediary confirming your ownership or a bank or brokerage firm account statement). The names of all those indicating they plan to attend the Annual Meeting of Stockholders will be placed on an admission list held at the registration desk at the entrance to the meeting.
Stockholders may help us reduce printing and mailing costs by opting to receive future proxy materials by e-mail. Information about how to do this is included in the accompanying Proxy Statement.
By order of the Board of Directors,
Jeffrey W. Carr
Vice President, General Counsel and Secretary
Table of Contents
I. Information About Voting
Why Am I Receiving This Proxy Statement? The Board of Directors of FMC Technologies, Inc. (FMC Technologies or the Company, we, us or our) is soliciting proxies for use at our 2007 Annual Meeting of Stockholders and any adjournments of that meeting. We first mailed this Proxy Statement, the accompanying form of proxy and our Annual Report for 2006 on April 2, 2007. It was also made available on our website, www.fmctechnologies.com, on that date.
What Will Occur at the Annual Meeting? The agenda for the Annual Meeting is to:
Who Can Vote? You can vote at the Annual Meeting if you were a holder of our Common Stock, par value of $0.01 per share (Common Stock), as of the close of business on the record date. The record date is March 5, 2007. As of that date, there were 67,112,281 shares of Common Stock outstanding and entitled to vote. You will have one vote for each share of Common Stock that you own. The shares you may vote include those held directly in your name as a stockholder of record, shares you hold through our benefit plans and shares held for you as a beneficial owner through a broker, bank or other nominee.
Many of our stockholders hold their shares through a stockbroker, bank or other nominee rather than directly in their name. If your shares are registered directly in your name with our transfer agent, National City Bank, you are considered the stockholder of record with respect to those shares, and we are sending these proxy materials directly to you. As the stockholder of record, you have the right to grant your voting proxy to the persons appointed by us or to vote in person at the Annual Meeting. If your shares are held in a stock brokerage account or by a bank or other nominee, you are considered the beneficial owner of shares held in street name, and these proxy materials are being forwarded to you by your broker or nominee who is considered the stockholder of record with respect to those shares. As the beneficial owner, you have the right to direct your broker or nominee on how to vote your shares, and you are also invited to attend the Annual Meeting. However, since you are not a stockholder of record, you may not vote these shares in person at the Annual Meeting unless you bring with you a proxy, executed in your favor, from the stockholder of record. Your broker or nominee is obligated to provide you with a voting instruction card for you to use.
How Do I Vote My Shares? You may vote your shares in one of the following ways:
Telephone and Internet voting for stockholders of record will be available 24 hours a day, seven days a week, and will close at 11:59 p.m. Eastern Daylight Time on May 3, 2007. If you vote by telephone or through the Internet, you do not have to return your proxy card.
Who Counts the Votes? Our Board of Directors will designate individuals to serve as inspectors of election for the Annual Meeting. The inspectors will determine the number of shares outstanding and the number of shares represented at the Annual Meeting. They will also determine the validity of proxies and ballots, count all of the votes and determine the results of the actions taken at the Annual Meeting.
What Are the Voting Requirements for the Matters Submitted to a Stockholder Vote? The presence of the holders of a majority of the outstanding shares of Common Stock entitled to vote at the Annual Meeting, present in person or represented by proxy, is necessary to constitute a quorum. A quorum is required to hold the meeting. Abstentions and broker non-votes are counted as present and entitled to vote for purposes of determining a quorum. A broker non-vote occurs when a bank, broker or other holder of record holding shares for a beneficial owner does not vote on a particular proposal because that holder does not have discretionary voting power for that particular item and has not received instructions from the beneficial owner.
If you are a beneficial owner, your bank, broker or other holder of record is permitted to vote your shares on the election of directors even if the broker does not receive voting instructions from you.
A plurality of the votes cast is required for the election of directors. This means that the three director nominees with the most votes will be elected to the Board of Directors. Only votes for or withheld affect the outcome. Abstentions are not counted for purposes of the election of directors.
Could Other Matters Be Decided at the Annual Meeting? At the date this Proxy Statement went to press, we did not know of any matters to be raised at the Annual Meeting other than those referred to in this Proxy Statement.
If other matters are properly presented at the Annual Meeting for consideration, the proxy holders designated on the proxy cards or designated in the other voting instructions you have submitted will have the discretion to vote on those matters for you.
Can I Access the Notice of Annual Meeting, Proxy Statement and 2006 Annual Report on the Internet? The Notice of Annual Meeting, Proxy Statement and 2006 Annual Report may be viewed and downloaded from our website at www.fmctechnologies.com/2007Proxy and www.fmctechnologies.com/2006AnnualReport. Instead of receiving future copies of our Proxy Statement and Annual Report by mail, most stockholders can elect to receive an e-mail that will provide electronic links to the materials. Opting to receive your proxy materials online will save the cost of producing and mailing documents to your home or business, and also will give you an electronic link to the proxy voting site.
Can I Revoke a Proxy After I Submit It? You may revoke your proxy at any time before it is exercised. You can revoke a proxy by:
Election of Directors
We have three classes of directors. The term for each class is three years. Class terms expire on a rolling basis, so that one class of directors is elected each year. The term for the nominees for director at the 2007 Annual Meeting will expire at the 2010 Annual Meeting.
Nominees for Director
The nominees for director this year are Asbjørn Larsen, Joseph H. Netherland and James R. Thompson. Information about the nominees, the continuing directors and the Board of Directors as a whole is contained in the section of this Proxy Statement entitled Board of Directors.
The Board of Directors expects that all of the nominees will be able and willing to serve as directors. If any nominee is not available:
The Board of Directors recommends a vote FOR the re-election of Asbjørn Larsen, Joseph H. Netherland and James R. Thompson.
Class IIITerm Expiring in 2007
Mr. Larsen served as President and Chief Executive Officer of Saga Petroleum ASA from January 1979 until his retirement in May 1998. He served as President of Sagapart a.s. (limited) in 1973 and from 1976 as Vice President (Economy and Finance) of Saga Petroleum. From 1966 to 1973, Mr. Larsen was a manager of the Norwegian Shipowners Association. Mr. Larsen is currently Chairman of the Board of Belships ASA and Vice Chairman of the Board of Saga Fjordbase AS. Mr. Larsen is also a member of the Board of Selvaag Gruppen AS and of the Board of DONG Energy AS (Copenhagen) and a member of its Audit Committee.
Mr. Netherland currently serves as Chairman of the Board of FMC Technologies. Mr. Netherland served as Chief Executive Officer of FMC Technologies from 2001 to March 2007. Mr. Netherland was President of FMC Technologies from 2001 to February 2006. Previously, Mr. Netherland served as a director of FMC Corporation from 1998 to 2001 and as Executive Vice President of FMC Corporation from 1998 until his appointment as President. Mr. Netherland was the General Manager of FMC Corporations Energy and Transportation Group from 1992 to 2001. Mr. Netherland became General Manager of FMC Corporations former Petroleum Equipment Group and General Manager of its former Specialized Machinery Group in 1985 and 1989, respectively. He serves on the Boards of Directors of the American Petroleum Institute, the Petroleum Equipment Suppliers Association, Newfield Exploration Company and the National Association of Manufacturers. Mr. Netherland is also a member of the Advisory Board of the Department of Engineering at Texas A&M University.
Governor Thompson served as the Chairman of the Chicago law firm of Winston & Strawn LLP from January 1993 to September 2006. He joined the firm in January 1991 after serving four terms as Governor of the State of Illinois. Prior to his terms as Governor, he served as U.S. Attorney for the Northern District of Illinois from 1971-1975. Governor Thompson served as the Chief of the Department of Law Enforcement and Public Protection in the Office of the Attorney General of Illinois, as an Associate Professor at Northwestern University School of Law and as an Assistant States Attorney of Cook County. Governor Thompson was a member of the National Commission on Terrorist Attacks Upon the United States (also known as the 9/11 Commission). He is the Chairman of the United HEREIU Public Review Board and serves on the Boards of Directors of FMC Corporation, Navigant Consulting Group, Inc. and Maximus, Inc.
Class IITerm Expiring in 2009
Mr. Kinnear has served as President and Chief Executive Officer of FMC Technologies since March 2007. Mr. Kinnear served as President and Chief Operating Officer of FMC Technologies from February 2006 to March 2007. Mr. Kinnear served as Executive Vice President of Energy Systems from 2004 to February 2006. Prior to Mr. Kinnears appointment as Executive Vice President in 2004, Mr. Kinnear served as Vice President of Energy Systems for FMC Technologies. Previously, Mr. Kinnear served as Vice President of Energy Systems of FMC Corporation from 2000 until he became a Vice President of FMC Technologies. Mr. Kinnear served in a variety of marketing and operating roles within FMC Corporation since 1971, prior to serving as Vice President of Energy Systems. He serves on the Boards of Directors of Tronox Incorporated, the Petroleum Equipment Suppliers Association and the Offshore Energy Center.
Mr. Bowlin served as Chairman of Atlantic Richfield Company (ARCO) from 1995 until his retirement in April 2000 and as its Chief Executive Officer from July 1994 until his retirement. From 1992 until his election to Chief Executive Officer of ARCO in 1994, Mr. Bowlin served as Executive Vice President and then as President and Chief Operating Officer of ARCO. Mr. Bowlin joined ARCO in 1969 and became President of ARCO Coal Company in 1985. Mr. Bowlin served as Senior Vice President, from 1987 to 1992, and President, from 1992 to 1993, of ARCO International Oil and Gas Company. Mr. Bowlin serves on the Board of Directors of Edwards Lifesciences Corporation and Horizon Health Company. Mr. Bowlin is a former Chairman of the Board of the American Petroleum Institute.
Mr. Burguieres has been Chairman and Chief Executive Officer of EMC Holdings, LLC since 2000. Mr. Burguieres is Vice Chairman of the Houston Texans, and is Chairman Emeritus of Weatherford International. From 1981 to 1989, Mr. Burguieres served as Chairman and Chief Executive Officer of Cameron Iron Works, Inc. Mr. Burguieres served as Chairman, President and Chief Executive Officer of Weatherford International from 1991 to 1997. Mr. Burguieres currently serves as a director of Newfield Exploration Company and JP Morgan Chase Texas.
Mr. Mooney served as Délégué GénéralNorth America, Suez Lyonnaise des Eaux from March 2000 until his retirement in March 2001. From 1994 to 2000, Mr. Mooney was Chairman and Chief Executive Officer of Nalco Chemical Company. He serves on the Boards of Directors of FMC Corporation, The Northern Trust Company, Cabot Microelectronics Corporation and PolyOne Corporation.
Mr. Ringler currently serves as Chairman of the Board of NCR Corporation. Mr. Ringler served as Vice Chairman of Illinois Tool Works Inc. until his retirement in 2004. Prior to joining Illinois Tool Works, he was Chairman, President and Chief Executive Officer of Premark International, Inc. from October 1996 until Premark merged with Illinois Tool Works in November 1999. Mr. Ringler joined Premark in 1990 and served as Executive Vice President and Chief Operating Officer until 1996. From 1986 to 1990, he was President of White Consolidated Industries Major Appliance Group, and from 1982 to 1986, he was President and Chief Operating Officer of The Tappan Company. Prior to joining The Tappan Company in 1976, Mr. Ringler was a consulting manager with Arthur Andersen & Co. Mr. Ringler serves on the Boards of Directors of The Dow Chemical Company, Corn Products International, Inc. and Autoliv Inc.
Class ITerm Expiring in 2008
Mr. Hamilton served as the Chairman, President and Chief Executive Officer of EEX Corporation from January 1997 until his retirement in November 2002. From 1992 to 1997, Mr. Hamilton served as Executive Vice President of Pennzoil Company and as President of Pennzoil Exploration and Production Company. Mr. Hamilton was a director of BP Exploration, where he served as Chief Executive Officer of the Frontier and International Operating Company of BP Exploration from 1989 to 1991 and as the General Manager for East Asia/Australia/Latin America from 1988 to 1989. From 1985 to 1988, he held the position of Senior Vice President of Exploration at Standard Oil Company, prior to its merger with BP. Mr. Hamilton serves on the Board of Directors of TODCO.
Ms. Devine served as President and Managing Director of ExxonMobil Corporations Norwegian affiliate, ExxonMobil Norway, Inc., from 1996 to 2000. Prior to the merger of ExxonMobil, she served as Secretary of Mobil Corporation from 1994 to 1996. From 1990 to 1994, Ms. Devine managed Mobils international government relations. From 2000 to 2003, Ms. Devine was a Fellow at Harvard Universitys Belfer Center for Science and International Affairs. Prior to joining Mobil, Ms. Devine served 15 years in the United States government in positions at the White House, the American Embassy in Paris, France, and the U.S. Department of Justice. Ms. Devine serves on the Board of Directors of Det Norske Veritas (DNV), the Washington Jesuit Academy, and the National Foreign Language Center. She is also a member of the Council on Foreign Relations.
Mr. Pattarozzi served as Vice President of Shell Oil Company from March 1999 until his retirement in January 2000. He previously served as President and Chief Executive Officer for both Shell Deepwater Development, Inc. and Shell Deepwater Production, Inc. from 1995 until 1999. Mr. Pattarozzi serves on the Boards of Directors of Global Industries, Ltd., Stone Energy Corporation, Tidewater, Inc. and Superior Energy Services, Inc.
Our Board of Directors believes that the purpose of corporate governance is to ensure that we maximize stockholder value in a manner that is consistent with both the legal requirements applicable to us and a business model that requires our employees to conduct business with the highest standards of integrity. The Board has adopted and adheres to corporate governance principles which the Board and senior management believe promote this purpose, are sound and represent best practices. The Board reviews these governance practices, the corporate laws of the State of Delaware under which we were incorporated, the rules and listing standards of the New York Stock Exchange and the regulations of the Securities and Exchange Commission, as well as best practices recognized by governance authorities to benchmark the standards under which it operates. The corporate governance principles adopted by the Board of Directors may be viewed on the Corporate Governance section of our website under Corporate Overview at www.fmctechnologies.com and are also available in print to any stockholder upon request. A request should be directed to our principal executive offices at 1803 Gears Road, Houston, Texas 77067, Attention: Vice President, General Counsel and Secretary.
During 2006, the Board of Directors held five regular meetings and one special meeting. A special meeting was held to discuss Board and executive appointments. All incumbent directors attended all meetings of the Board and all meetings of Board committees on which they served. The Board of Directors has scheduled a meeting in the morning prior to the 2007 Annual Meeting of Stockholders, and the Board encourages its members to attend the Annual Meeting of Stockholders. In May 2006, eight of the nine then serving members of the Board of Directors attended the Annual Meeting of Stockholders.
Committees of the Board of Directors
During 2006, the Board of Directors had three standing committees: an Audit Committee, a Compensation Committee, and a Nominating and Governance Committee.
Each of these committees operates pursuant to a written charter setting out the functions and responsibilities of the committee, each of which may be reviewed on the Corporate Governance section of our website at www.fmctechnologies.com and is also available in print to stockholders upon request submitted to our principal executive offices.
The table below provides 2006 meeting and membership information for each of the committees of the Board of Directors:
The Audit Committee charter gives the Audit Committee the authority and responsibility for the engagement, compensation and oversight of our independent public accountants and the review and approval in advance of the scope of audit and non-audit assignments and the related fees of the independent public accountants. The Audit Committee charter also gives this committee authority to fulfill its obligations under Securities and Exchange Commission and New York Stock Exchange requirements, which include:
Audit Committee members meet privately in separate sessions with representatives of our senior management, our independent public accountants and our Director of Internal Audit after selected Audit Committee meetings (four such sessions were held in 2006).
The Board of Directors has determined that all of the members of the Audit Committee (C. Maury Devine, Thomas M. Hamilton, Asbjørn Larsen, Edward J. Mooney and James M. Ringler) meet the New York Stock Exchange standard of having accounting or related financial management expertise and meet the Securities and Exchange Commission criteria for an audit committee financial expert.
The principal duties of the Compensation Committee under its charter are:
The Compensation Committee annually reviews executive pay, peer group practices and performance to help ensure that our total compensation program is consistent with our compensation philosophies. In determining compensation levels for executive officers, the Compensation Committee reviews compensation survey data supplied by Hewitt Associates, an independent consultant retained by the Compensation Committee. Hewitt Associates is a nationally recognized executive compensation consulting firm which has served as a compensation consultant for us for the past five years. Beginning in
2006, Hewitt Associates was retained directly by the Compensation Committee. A group of peer companies is selected by our management and approved by the Compensation Committee. The list is reviewed on an annual basis by the Compensation Committee to ensure continuing relevancy. In approving the companies to be included in the peer group, the Compensation Committee reviews the size and financial performance of the proposed companies to determine whether the group is appropriate. Hewitt Associates collects, analyzes and reports back to the Compensation Committee on the amounts and components of compensation paid by the peer group. Since the companies surveyed by Hewitt Associates are of varying revenue size and market capitalization, its survey utilizes regression analysis to develop size-adjusted values to provide relevant comparisons for each component of compensation. For 2006, the Compensation Committees engagement agreement with Hewitt Associates provides for a scope of work that includes ensuring that the Compensation Committees compensation recommendations are consistent with our business strategy, pay philosophy, prevailing market practices and relevant regulatory mandates and assisting the Committees efforts to make compensation decisions that are representative of the interests of our stockholders.
Based on the survey market data provided by Hewitt Associates, the Compensation Committee reviews the appropriateness of managements recommendations for each executives base pay, annual non-equity incentive bonus, and annual equity award. The Committee allocates total annual compensation to our executive officers among the various elements of short term cash (base pay and non-equity incentive bonus) and long term (equity awards) compensation to approximate the market allocation identified in Hewitts survey results.
The Compensation Committee also annually reviews director compensation to ensure that the amount of compensation provided to directors is within appropriate parameters. The Compensation Committee reviews director compensation survey data supplied by Hewitt Associates. The companies included within the survey are selected by our management and approved by the Compensation Committee for peer group comparison.
The scope of authority delegated to the Compensation Committee by the Board of Directors is to decide whether or not to accept, reject or modify our managements proposals for annual compensation awards to our executive officers. The Compensation Committee also has the authority to recommend the amount of compensation to be paid to our non-management directors. Joseph H. Netherland, our Chairman and Chief Executive Officer in 2006, and Peter D. Kinnear, our President and Chief Operating Officer in 2006, were the only executive officers whose compensation is disclosed in the Summary Compensation Table in this Proxy Statement (named executive officers) who participated in the compensation decisions for other named executive officers. Mr. Kinnear was involved in compensation recommendations for John T. Gremp, Vice President Energy Systems, and Charles H. Cannon, Jr., Senior Vice President FoodTech and Airport Systems, who reported to Mr. Kinnear during 2006. Mr. Netherland was involved in compensation recommendations for Mr. Kinnear and William H. Schumann III, our Chief Financial Officer. Neither Mr. Netherland nor Mr. Kinnear has a role in setting his own base pay, annual non-equity incentive bonus amount or the size of his annual equity compensation award. Our Vice President of Human Resources, working with Hewitt Associates, provided compensation recommendations for the Compensation Committees review. These recommendations were also provided to Mr. Netherland prior to the Compensation Committee meeting when the recommendations were discussed. Mr. Schumann and our Chief Accounting Officer also provide the Compensation Committee with information related to our financial performance against our objectives and our peer companies financial performance. This information is used by the Compensation Committee to help set targets and ratings associated with incentive compensation awards and select appropriate structures for performance-based restricted stock awards.
Nominating and Governance Committee
The principal duties of the Nominating and Governance Committee under its charter are:
Stockholders may submit recommendations for future candidates for election to the Board of Directors for consideration by the Nominating and Governance Committee by writing to Jeffrey W. Carr, our Vice President, General Counsel and Secretary, 1803 Gears Road, Houston, Texas 77067. A letter making a director candidate recommendation must include the candidates name, biographical information and a summary of the candidates qualifications. In addition, the letter should be accompanied by a signed statement from the nominee indicating that the nominee is willing to serve as a member of the Board. To make a recommendation for the 2008 Annual Meeting, please refer to the timing requirements specified in the section of this Proxy Statement entitled Proposals for the 2008 Annual Meeting of Stockholders. All submissions from stockholders meeting these requirements will be reviewed by the Nominating and Governance Committee.
In connection with its role in recommending candidates for the Board, the Nominating and Governance Committee advises the Board with respect to the combination of skills, experience, perspective and background that its members believe are required for the effective functioning of the Board considering our current business strategies and the regulatory, geographic and market environment. The Committee has not established specific, minimum qualifications for director nominees. Our corporate governance principles provide that directors should be selected based on integrity, successful business experience, stature in their own fields of endeavor and the diversity of perspectives they bring to the Board. Our corporate governance principles also require that a majority of our non-management directors should be active or retired senior executives, preferably Chief Executive or Chief Operating Officers of publicly-held companies. In addition, the corporate governance principles provide that our non-management directors should also be chosen based on recognized experience in our lines of business and leadership in areas of government service, academia, finance and international trade. Nominees to be evaluated by the Nominating and Governance Committee for future vacancies on the Board will be selected by the Committee from candidates recommended by multiple sources, including business and personal contacts of the members of the Nominating and Governance Committee, recommendations by our senior management and candidates identified by independent search firms, stockholders and other sources, all of whom will be evaluated based on the same criteria. All of the current nominees for the Board are standing members of the Board that are proposed by the entire Board for re-election. We did not pay any fees to a third party to identify or evaluate or assist in identifying or evaluating potential board candidates in 2006.
The Nominating and Governance Committee conducted a review of the independence of the members of the Board of Directors and its committees and reported its findings to the full Board at its February 21, 2007 meeting. Nine of our eleven directors (including two of the three nominees presently standing for re-election) are non-management directors. The Nominating and Governance Committee reviewed all of the commercial transactions, relationships and arrangements between us and our subsidiaries, affiliates and executive officers with companies with whom the eight non-management directors serving in 2006 are affiliated or employed. The transactions, relationships and arrangements reviewed by the Committee consisted of the following:
Although the Board has not adopted categorical standards of materiality, none of these relationships was deemed to be material or as impacting the independence of our non-management directors. Each of our directors completes an annual questionnaire requiring disclosure of any relationships (including industrial, banking, consulting, legal, accounting, charitable or familial relationships) which could impair the independence of such director.
Based on the report and recommendation of the Nominating and Governance Committee, the Board has determined that each of its non-management members serving in 2006, Mike R. Bowlin, C. Maury Devine, Thomas M. Hamilton, Asbjørn Larsen, Edward J. Mooney, Richard A. Pattarozzi, James M. Ringler and James R. Thompson, satisfies the independence criteria set forth in the corporate governance listing standards of the New York Stock Exchange. Joseph H. Netherland, as the former Chief Executive Officer and President of FMC Technologies, may not be considered independent under the New York Stock Exchange corporate governance listing standards until three years after his retirement as an executive officer of the Company. In addition, all of the members of the Audit Committee satisfy the enhanced independence criteria required for members of audit committees under regulations adopted by the Securities and Exchange Commission and the New York Stock Exchange corporate governance listing standards. The Board did not make an independence assessment of Philip J. Burguieres since his appointment did not occur until the Board of Directors meeting in February 2007 following the Nominating and Governance Committees assessment. We are not aware of any existing relationships which would impact Mr. Burguieres independence.
Executive Sessions of Independent Directors
The Board of Directors holds executive sessions of only its non-management directors after regularly scheduled Board of Directors meetings. Mr. Bowlin, the Chair of the Compensation Committee, has been selected by the Board of Directors to continue to serve as the presiding chairperson, or presiding non-management director, for these executive sessions during 2007.
Stockholders and other interested parties may communicate directly with the Board of Directors, with the presiding non-management director for an upcoming meeting or the non-management directors as a group by submitting written correspondence c/o Presiding Non-Management Director, FMC Technologies, Inc., 1803 Gears Road, Houston, Texas 77067. The presiding non-management director will review any such communication at the next regularly scheduled Board meeting unless, in his or her judgment, earlier communication to the full Board is warranted.
Our compensation plan for non-management members of our Board of Directors is included in the FMC Technologies, Inc. Incentive Compensation and Stock Plan (the Incentive Compensation Plan). The Incentive Compensation Plan grants the Board of Directors the authority to modify the terms of the Board of Directors compensation plan pursuant to a resolution of the Board of Directors.
For 2006, each non-management director received an annual retainer of $45,000. Each director received at least $25,000 of this annual retainer in the form of restricted stock units and was able to elect to receive the remainder in cash, payable in quarterly installments. Each director also had the option of deferring the cash portion of the annual retainer and receiving it in the form of restricted stock units. These restricted stock units had a fair market value equal to the deferred amount of the annual retainer on the date of the grant and vest on the date of the 2007 Annual Meeting. The amount of this annual retainer is allocated among fees earned or paid in cash (column (b)) and stock awards (column (c)) in the table below based upon the election made by each director.
We also make an annual non-retainer equity grant to our non-management directors of restricted stock or restricted stock units of equivalent value. For 2006, we awarded each of our non-management directors restricted stock units on May 1, 2006 with a value of $85,000, which is included in the amount contained in column (c) of the table below. These awards will not vest until May 4, 2007, the date of the 2007 Annual Meeting.
We have ownership requirements for our non-management directors that are based on a multiple of five times the amount of each directors annual retainer. Our non-management directors are also required to hold the restricted stock units they elect to receive from the annual retainer and the annual non-retainer equity grants they are awarded until after they complete their service on our Board. Restricted stock units granted to a director are settled in Common Stock upon completion of the directors service on our Board. These restricted stock units are also forfeited if a director ceases service on the Board of Directors prior to the vesting date of the restricted stock units, except in the event of death or disability. Unvested restricted stock units will be settled and are payable in Common Stock upon the death or disability of a director or in the event of a change in control of FMC Technologies. The term change in control under the Incentive Compensation Plan has the same definition as is detailed under Potential Payments upon Termination or Change in Control below.
Fees earned or paid (column (b)) in the table below also includes cash remuneration in the amount of $1,750 for each Board of Directors meeting attended and $2,000 for each Board of Directors committee meeting attended. The chairs of the Compensation Committee and the Nominating and Governance Committee received an additional fee of $8,000, and the chair of the Audit Committee
received an additional fee of $12,000 during 2006, which are also included in column (b). Each non-management director also receives reimbursement for reasonable incidental expenses incurred in connection with the attendance of meetings of the Board and Board committees.
The following table shows all compensation awarded, paid to or earned by the non-management members of our Board of Directors from all sources for services rendered in all of their capacities to us during 2006. Mr. Netherland and Mr. Kinnear, our employees who served on the Board of Directors during 2006, did not receive additional compensation for their service as directors.
Director Compensation Table
Based upon an analysis of market compensation for directors with peer companies in the oilfield services industry by Hewitt Associates, our Board of Directors approved the recommendation of our Compensation Committee to adjust non-management director compensation for 2007. Effective January 1, 2007, the annual retainer was increased to $50,000 ($25,000 of which must be taken in restricted stock units) from $45,000, the fee paid to the chairman of the Compensation Committee was increased to $10,000 from $8,000 annually and the targeted value of the non-retainer equity grants for our non-management directors was increased to $120,000 from the 2006 level of $85,000.
Each director will continue to be able to receive at least $25,000 of the annual retainer in restricted stock units and may elect to receive the remainder in cash, payable in quarterly installments. Each director will continue to have the option of deferring the cash portion of the annual retainer and receiving it in the form of restricted stock units.
Directors who are not our employees do not participate in our employee benefit plans other than our matching program for charitable contributions.
Compensation Committee Interlocks and Insider Participation in Compensation Decisions
In 2006, the members of the Compensation Committee of the Board were Messrs. Bowlin, Hamilton, Pattarozzi, Ringler and Thompson, none of whom has ever been an officer or employee of FMC Technologies or any of its subsidiaries. None of our executive officers has ever served on the board of directors or on the compensation committee of any other entity that has had any executive officer serving as a member of our Board of Directors.
V. Transactions with Related Persons
During 2006, we were not a participant in any transaction or series of related transactions in which any related person had or will have a material interest and in which the amount involved exceeded $120,000. A related person is any person who was in any of the following categories during 2006:
Our Code of Business Conduct and Ethics provides that each employee and director of ours is expected to avoid engaging in activities that conflict with, or have the appearance of conflicting with, the best interests of us and our stockholders. These requirements also extend to immediate family members of employees and directors, any trust in which any employee or a director has a beneficial interest and over which such employee or director can exercise or influence decision making, and any person with whom one of our employees or directors has a substantial business relationship. For
purposes of this policy, an immediate family member includes an employees or directors spouse, parents, children, siblings, parents-in-law, children-in-law, siblings-in-law and anyone who shares an employees or directors home.
Under the Code of Business Conduct and Ethics, any personal activities or interests of one of our employees or directors, or of any immediate family member, trust or other person with which such person may have a substantial business relationship (each, an interested person), that could negatively influence, or which could have the appearance of negatively influencing, the judgment of such employee or director, or the decisions or action of such employee or director, must be disclosed to an employees manager, supervisor, local human resources director, the lawyer responsible for their business unit, the General Counsel, a member of the Board of Directors or reported to our ethics hotline. Reports made to an ethics reporting resource other than a member of the Board of Directors will be reported to the Board of Directors, or a Committee of the Board of Directors, which will have the responsibility for determining if there is a conflict of interest and, if so, how to resolve it without compromising the best interests of us and our stockholders.
In certain limited cases, activities giving rise to a potential conflict of interest may be permitted if the Board of Directors or a Committee of the Board determines, in its reasonable judgment, that such potential conflict of interest is not likely to be harmful to the best interests of us and our stockholders. No such activities were approved by the Board of Directors or a Committee of the Board during 2006.
Our Code of Business Conduct and Ethics also prohibits any employee or director from taking for themselves personally (including for the benefit of family members or friends) business opportunities that are discovered through the use of our property, information or position without the consent of the Board of Directors or a Committee of the Board. No employee or director may use corporate property, information or position for improper personal gain, or compete with us, directly or indirectly. If such an opportunity is offered to the Board of Directors, and the Board rejects the opportunity, then the employee or director is no longer prohibited by us from taking advantage of the opportunity.
Our Code of Business Conduct and Ethics may be reviewed on the Corporate Governance section of our website at www.fmctechnologies.com. A waiver may only be made by the Board of Directors, or a committee appointed by the Board, and will be promptly disclosed to the extent required by law, including the rules and regulations of the Securities and Exchange Commission and the New York Stock Exchange.
In addition to the foregoing ethics policy, the Nominating and Governance Committee periodically reviews all commercial business relationships that exist between us and companies with which are our directors are affiliated in order to determine if non-management members of the Board are independent under the rules of the New York Stock Exchange.
The following table shows, as of February 1, 2007, the number of shares of Common Stock beneficially owned by each of our directors, each of our named executive officers whose compensation is reported in the Summary Compensation Table below, and all directors and executive officers as a group. No director or executive officer named in the Summary Compensation Table beneficially owns more than one percent of the Common Stock, as designated by including an asterisk in the Percent of Class column in the table below.
Other Security Ownership
The table below lists the persons known by us to beneficially own more than five percent of the Common Stock as of December 31, 2006:
Compensation Discussion and Analysis
This section provides information regarding the compensation program in place for our principal executive officer, our principal financial officer and our other three most highly compensated executive officers for 2006. It includes information regarding, among other things, the overall objectives of our executive compensation program and each element of compensation we provide.
We design, manufacture and service technologically sophisticated machinery and systems for international markets in the energy, food processing and air transportation industries. We believe the compensation programs we use for our executive management must be tailored to attract, motivate and retain executives who possess the talent and drive to generate superior operational performance in our businesses and create an environment that fosters the technological innovation we believe is necessary for continued growth in our revenue, earnings and shareholder returns. As a result, our compensation philosophy links an executives total earnings opportunity with our short term and long term performance, based on the achievement of financial targets established by the Compensation Committee of our Board of Directors, as well as the executives performance against specific individual objectives. Our ability to develop and retain successful executive managers for long periods of
employment has helped us avoid the compensation costs often associated with recruiting experienced management talent outside of our company. Our executive officers do not have employment contracts and serve at the discretion of the Board of Directors.
The core principles underlying our executive compensation philosophy are:
Long Tenured Management Team and Internal Development
Our named executive officers are individuals who have devoted the bulk of their professional careers to FMC Technologies and our predecessor. With tenure averaging 27 years, our executive management team has a long-term, personal and financial interest in our success. We are strong advocates of promoting from within and developing our own talent. We believe our ability to develop and retain executive management talent is a strong component of our business success.
Our Energy Systems business, participating in the oilfield equipment and services industry, has generated the largest component of our consolidated revenue growth since our formation. This industry has experienced dramatic growth within the past few years primarily as a result of increasing oil and gas exploration and production. The success of the businesses that we operate in these markets make our executive managers attractive to our competitors, and we believe our compensation and benefit programs must remain competitive to ensure retention of our executive talent. The following table shows the revenue growth of our business segments since our inception.
Glossary of Terms
In order to facilitate reading of our Compensation Discussion and Analysis, certain terms used frequently in this discussion are defined below.
Annual Non-Equity Incentive Bonuscash compensation paid to bonus-eligible employees in February of each year that is contingent upon performance with respect to predetermined corporate financial targets and achievement by individual employees of their objectives established at the beginning of the prior year.
Base Salary or Base Paythe compensation paid on a monthly, bi-weekly or weekly basis to our salaried employees, the amount of which is fixed on an annual basis and depends upon the job grade and performance of the employee.
EBITDAIncome from continuing operations as defined by U.S. GAAP (Generally Accepted Accounting Principles) before interest, taxes, depreciation and amortization.
Equity Compensation Awardsrestricted stock, stock options, and other forms of our equity securities that may be issued under the Incentive Compensation Plan.
Incentive Compensation Planthe FMC Technologies, Inc. Incentive Compensation and Stock Plan adopted in 1999, as amended to date, pursuant to which we grant equity compensation and non-equity incentive bonus awards to our employees.
IRSthe United States Internal Revenue Service.
Named Executive Officersour Chief Executive Officer, Chief Financial Officer and three other most highly compensated Executive Officers during the most recently completed fiscal year.
Net Contributionthe amount by which after tax operating income of a business exceeds a return on capital employed in the business.
Non-Qualified Pension Planthe FMC Technologies, Inc. Salaried Employees Equivalent Retirement Plan, which provides the same defined benefit to all of our U.S. based non-union employees with minimum service of five years for compensation in excess of IRS limits on the amount of compensation eligible for benefits under our tax-qualified Pension Plan.
Non-Qualified Savings Planthe FMC Technologies, Inc. Non-Qualified Savings and Investment Plan, which allows employees to continue to participate in a savings plan on a pre-tax basis and receive the same match by us after they have met the IRS limits for qualified savings plans (including the Qualified Savings Plan). The portfolio of investment choices is similar to those for the Qualified Savings Plan. We match employee contributions up to 5% of base pay and non-equity incentive bonus.
Pension Planthe FMC Technologies, Inc. Employees Retirement Program, which is an IRS qualified non-contributory defined benefit retirement benefit program offered to all of our U.S. based non-union employees once they have met the minimum service requirement of five years. Benefit payments for our executive officers vary depending on years of employment, age at retirement and base pay and non-equity incentive bonus compensation received prior to retirement.
Qualified Savings Planthe FMC Technologies, Inc. Savings and Investment Plan, which is an IRS qualified retirement savings and investment plan offered to all our employees allowing them to contribute a portion (up to the appropriate IRS limit) of their base pay and annual non-equity incentive bonus on a pre-tax basis across a portfolio of investment choices. We match employee contributions up to 5% of base pay and non-equity incentive bonus up to IRS limitations.
Restricted Stock Grantsequity awards in the form of shares of our Common Stock, which are subject to time-based and/or performance-based vesting requirements before full ownership rights may be exercised by the recipient.
Stock Optionsequity awards in the form of rights to acquire shares of our Common Stock upon payment of an exercise price established on the date of grant which are subject to time-based vesting requirements before full ownership rights may be exercised by the recipient.
Total Compensationthe entire compensation package provided to an employee which, for named executive officers, includes base salary, annual non-equity incentive bonus, equity compensation and perquisites.
Allocation of Pay Between Short and Long Term
We believe our compensation programs are designed in a manner that provides incentives to our executive officers to achieve short- and long-term operating and strategic objectives. To foster a longer term view (i.e., longer than twelve months), our compensation programs are weighted toward longer term incentives in the form of equity incentive compensation with a three- or four-year vesting requirement and a variable performance-based component. Although these equity compensation incentives deliver a competitive economic value on the date of grant, their ultimate value to an executive will depend upon the market value of the equity after the end of the vesting period. That value will be largely dependent upon our performance and market dynamics.
Establishing Competitive Pay Levels
The Compensation Committee annually reviews executive pay, peer group practices and our performance to ensure our total compensation program design is consistent with our compensation philosophies and that overall compensation is within appropriate parameters. Based on this review, the Compensation Committee concluded the total compensation paid to our named executive officers for 2006 is appropriate and reasonable.
In determining compensation levels for our executive officers, the Compensation Committee reviews compensation survey data supplied by Hewitt Associates, the independent consultant retained by the Compensation Committee. The companies in the Hewitt survey are selected by our management and approved by the Compensation Committee for peer group comparison. This peer group consists of 24 industrial companies listed below and includes a subset of eight oilfield services companies with which our energy businesses directly compete for talent. The list is reviewed on an annual basis by the Compensation Committee to ensure continuing relevancy. In approving the companies to be included in the peer group, the Compensation Committee reviews revenues and market capitalization of each company, as well as products and markets served, to determine whether it is appropriate to include the company in the peer group.
Although the companies included in the survey may vary in revenue size and market capitalization, the survey utilizes regression analysis to develop size-adjusted values for each element of compensation. Additionally, for equity based compensation, Hewitt Associates uses Black-Scholes based options models to value stock options and other equity-based compensation.
Based on the survey market data provided by Hewitt, the Compensation Committee reviews the appropriateness of each executive officers base pay, annual non-equity incentive bonus, and annual equity award. The Compensation Committee allocates total annual compensation to our executives among the various elements of short term cash (base pay and annual non-equity incentive bonus) and long term (equity awards) compensation to approximate the market allocation identified in the consultants survey results.
For 2006, Hewitts compensation survey indicated that 27% of target annual compensation was base pay, 18% was annual non-equity incentive bonus, and 55% was allocated to long-term incentives (both cash and equity incentives) among the surveyed companies. The target compensation of our named executive officers in 2006 was 28% base pay, 18% annual non-equity incentive bonus and 54% equity compensation. The actual compensation for our named executive officers in 2006 was influenced by our financial results, which resulted in significantly higher annual non-equity incentive bonuses than target. Consistent with our compensation philosophy, most of the compensation paid to the named executive officers in 2006 was variable or at risk (82%).
When making compensation comparisons between our executive officers and the market data, we use either the 24 industrial companies or the eight oilfield services companies as the appropriate reference point depending on the responsibilities of the particular executive officer. Messrs. Netherland, Kinnear, Gremp and Schumann are compared against the oilfield services group. Mr. Cannon is compared to the larger group of 24 industrial companies.
Cash Pay ElementsBase Pay
The cash pay elements our executives receive include a base salary and an opportunity to earn an annual non-equity incentive bonus. We target our executive base pay and annual non-equity incentive bonus opportunities at the 50th percentile of our comparison group of peer companies.
For base salary, the surveys median base pay value for comparable employees is used to set the midpoint for each salary grade within our compensation program. Each salary grade range sets minimum pay at 75% of the midpoint and maximum pay at 125% of the midpoint. The range is delineated into performance sections such that an individuals base pay should be at the point in the range corresponding to his or her current level of performance. There are four levels of performance in our pay for performance system: Needs Improvement, Good, Outstanding and Exceptional.
Annually, each executive officers performance is evaluated by the executives immediate supervisor against objectives. These performance objectives may, in part, be subjective and include acquisitions or divestitures, safety performance, achieving recruiting targets, building management depth, technology innovations and improving market positions through profitable growth and new product introductions. A performance rating is established based on performance against the objectives and a merit base salary increase is planned based on the executives current position in the performance range. Merit increase guidelines are established annually for all employees, including the executive officers, based on annual market surveys.
Cash Pay ElementsAnnual Non-Equity Incentive Bonus
The annual non-equity incentive bonus plan is a variable cash-based incentive plan designed to focus management on performance factors important to the continued success of their business unit and our
overall performance. Annual non-equity incentive bonus percentages range from 24% to 110%, which are generally a function of salary grade. The annual non-equity incentive bonus opportunity is weighted primarily toward business performance (70%), which we call BPI, and individual performance (30%), which we call API. The annual non-equity incentive bonuses paid to our named executive officers in 2006 appear in column (g), Non-Equity Incentive Plan Compensation, in the Summary Compensation Table.
The Compensation Committee establishes BPI targets on measures we believe correlate highly to shareholder returns. A range of realistic results for these measures are established along a 0.0 to 3.0 continuum. This decision is made annually by the Compensation Committee at the February meeting. In 2006, these measures were EBITDA growth and Net Contribution. For instance, we established one value for a targeted EBITDA growth at 1.0. If actual EBITDA growth results are less than the target, the BPI multiple will be between 0.0 and 1.0. If our results exceed the target, the BPI multiple will be between 1.0 and 3.0. The resulting BPI multiple is multiplied by the non-equity incentive bonus percentage to determine non-equity incentive bonus payout.
We conducted an internal study in 2002 using data obtained from Standard & Poors Compustat Data Services that identified these two financial performance measures as highly correlated to enterprise value growth and total shareholder return. As shown in the chart below, net contribution (estimated by ROI growth and capital employed growth), and EBITDA growth account for the highest percentage of growth in overall enterprise value in both the S&P MIDCAP 400 and in the PHLX Oil Service SectorSM Index (OSX).
Based on five rolling periods of ten year data ending between 1997 and 2001
We measure EBITDA growth as the annual growth in earnings before interest, taxes, depreciation and amortization. Our measurement of Net Contribution for performance purposes is net income plus after tax-interest expense minus a 10.5% charge for average capital employed (debt plus equity). Both of these measures are adjusted for the cumulative effect of changes in accounting principles, significant acquisitions and divestitures and foreign exchanges movements. In 2006, our 1.0 BPI target for annual
EBITDA growth was 28% above 2005 and our net contribution target was $52.9M, an increase of 114% over 2005. Our actual performance in 2006, driven by high levels of oilfield activity, was EBITDA growth of 102.4% or 54% over target and net contribution of $125.1M, or 136% above target. This performance was rated a 3.0 based on the scale established at the beginning of the year.
A similar exercise is performed for the API. The API rating is based on the achievement by an executive officer of both quantifiable performance objectives as well as other, less quantifiable, objectives. The API ratings range from 0.0 to 2.0.
For our named executive officers, their performance against API objectives in 2006 is highlighted in the following table.
Equity Compensation Practices
The long-term element of executive compensation is equity stock awards, which provide our executive officers the opportunity to realize financial rewards if our stock price appreciates over the long term. We use the Hewitt Associates survey data noted previously to establish a value for the equity compensation granted to each of our executive officers. To determine the appropriate amount of equity based compensation awards for our executive officers we determine the size-adjusted median value of comparable equity compensation awards issued by the peer group of companies surveyed by Hewitt Associates. The grant size of restricted stock or stock options is based on the economic value of the equity being granted using the prior years closing stock price. Although our incentive compensation program permits the Compensation Committee the flexibility to approve equity compensation awards to our executive officers in a variety of forms, these awards have consisted only of stock options and restricted stock grants since our formation. We believe the combination of time-based and performance-based incentives provides performance incentives consistent with our shareholders interests and serves as an effective retention vehicle for our named executive officers.
Equity awards have vesting periods of three or four years. The grant date of the annual equity awards is the date of the annual Compensation Committee meeting in February. Key manager restricted stock awards have been granted on the first day of the month following the month in which the Compensation Committee met and granted the award. As long as an executive remains employed through the normal retirement age of 62, any unvested equity awards remain outstanding after retirement and vest on the scheduled vesting date. Retirements prior to age 62 result in the forfeiture of unvested awards.
By providing our executive officers with compensation in the form of equity awards, we ensure that a significant portion of total compensation remains at risk and is tied to the creation of stockholder value. Since the end of 2001, our share price growth has averaged 30% annually. We believe that the stock valuations shown in the Outstanding Equity Awards at Fiscal Year-End Table below and in the tables included under Potential Payments Upon Termination or Change in Control demonstrate that our equity compensation practices effectively align our stockholder and management interests.
Non-Qualified Stock Options
With the exception of stock options issued in connection with our initial public offering in June 2001, our stock options have been issued only in February of each year, following review and approval of the grants by our Compensation Committee during the regular committee meeting established to review compensation. The exercise price for these stock options in each case was the closing price of our Common Stock on the date of the Compensation Committee meeting at which the awards were approved. The date for this committee meeting is established more than a year in advance when all Board of Director and committee meetings are scheduled. We have not issued stock options to our executive officers since 2004. The stock options issued in connection with our initial public offering were issued at the public offering price. At the time of our separation from our former parent, FMC Corporation, existing FMC Corporation stock options held by employees of FMC Corporation who became employees of FMC Technologies were converted to FMC Technologies stock options, and the number of shares exercisable under each such converted option and exercise price were adjusted to provide the holder with an equivalent market value before and after the conversion.
Time Based Restricted Stock Grants
For executive officers, all restricted stock awards are subject to vesting requirements requiring an additional three or four years of service by the executive before they may vest and the executive receives ownership and voting rights. Vesting periods are utilized as a retention incentive.
Performance Based Restricted Stock Awards
Beginning in 2006, the Compensation Committee required that one-third of the amount of the restricted stock awards for our executive officers be based on meeting certain performance criteria. Our performance-based awards link the award of restricted stock to performance targets compared to the performance of ten competitor companies in the oilfield services industries. This link puts a meaningful portion of an executives targeted equity award at risk. The percentage of the total performance-based restricted share award an executive officer will ultimately receive will be determined at the end of the one-year measurement period and will be dependent upon our performance relative to a peer group of companies in the OSX with respect to EBITDA growth, return on investment (ROI) and total shareholder return (TSR) for that period. Effective in 2007, the Compensation Committee increased the portion of the restricted stock awards for our executive officers that are subject to performance criteria to one-half of the awards.
The amount of the performance-based restricted stock award earned can vary between 0-200% of the target award amount granted to the executive officer depending on whether our full year performance against the three measures was determined to be above average, average or below average relative to the peer group of OSX companies, with one-third of the total grant being tied to each of the three performance measures. We determine our performance for each of the three performance measures as above average if our performance exceeds the performance of the midpoint between the third and fourth ranked peer companies; average if our performance is between the midpoint of the third and fourth ranked peer companies and the midpoint between the sixth and seventh ranked peer companies; and below average if our performance is below the midpoint between the sixth and seventh ranked peer companies. For below-average performance against any of the three performance measures, an executive officer receives 0% of the one-third portion of the grant tied to such performance measures, for average performance, 100% of one-third of the grant, and for above-average performance, an executive would receive 200% of one-third of the grant. The vesting period for performance-based restricted stock awards is the same as the vesting period for time based restricted stock awards, which is three years from the grant date, meaning that although the performance period considered is one year, the awards do not vest for three years from the date of grant.
None of our executive officers have the ability to adjust the performance measures approved by the Compensation Committee or to waive any conditions established for the performance based awards once established by the Compensation Committee.
For 2006, the following table shows the measures used for our performance based restricted stock grants and our performance against each of the three performance measures. The numbers in bold type in this table designate the level of our performance for each of the three measures.
As a result of our strong financial results for 2006 summarized above, our executive officers will receive 167% of the performance-based portion of the restricted stock grants awarded on February 21, 2006. The award vests on January 2, 2009. The final performance-based restricted stock award each executive officer received for 2006 are included in columns (g) and (h) of the Outstanding Equity Awards at Fiscal Year-End Table below.
Impact of Section 162(m) of the Internal Revenue Code on Executive Compensation
Section 162(m) of the Internal Revenue Code generally disallows a tax deduction to public corporations for non-performance based compensation in excess of $1 million paid for any fiscal year to each of the named executive officers. The Compensation Committee of our Board of Directors designs certain components of executive compensation to preserve income tax deductibility; however, it has concluded that it is not in the stockholders best interests to restrict the Compensation Committees discretion and flexibility in developing appropriate and competitive compensation and retention programs and, consequently, the Compensation Committee may approve compensation for our named executive officers that is not fully deductible for federal income tax purposes.
A longer term element of compensation for our executive officers is an IRS qualified defined benefit pension plan (the Pension Plan) that provides income replacement retirement benefits. We believe our pension plan design is a powerful retention vehicle and that it has been a significant factor in the long tenure of our executive management team and, consequently, the depth of our management teams experience with our businesses. The same benefit calculation formula is used for our executive officers as is used for our non-bargaining unit production personnel and administrative and technical staff. The Pension Plan is designed to provide income replacement in retirement to all of our current employees who meet the minimum service requirement of five years. The pension payment is based on final average pay, which is calculated for the period that includes the employees highest 60 consecutive months of pay in the final 120 months of service, and includes base pay and annual non-equity incentive bonus in the calculation. Eligible earnings under the provisions of the Pension Plan do not include the value of the equity grants (stock options or restricted stock awards), matching contributions to our Qualified Savings Plan, our Non-Qualified Savings Plan or perquisites.
The Pension Plan is qualified under the United States Employment Retirement Income Security Act (ERISA). The Internal Revenue Service limits the amount of compensation on which retirement benefits can be earned and the amounts payable by a tax qualified defined benefit pension plan.
We also have a non-qualified defined benefit pension plan (the Non-Qualified Pension Plan) to provide the same level of benefits for earnings above the IRS limits. The Non-Qualified Pension Plan uses the same pension calculation formula as the tax qualified Pension Plan. The benefits under this plan are our general obligations and are not protected by ERISA.
All of the members of our executive management team have significant accrued pension benefits under the pension plans as a result of their long tenure. We believe that these pension benefits are a significant reason for the long-term retention of our management team. Our executive officers as well as all other employees have been credited under our Pension Plan for their years of service with FMC Corporation, our former parent company, prior to our spin-off as a separate company in 2001.
All non-union U.S. based employees, including our executives, are eligible to participate in our tax-qualified savings and investment plan (the Qualified Savings Plan). This plan provides an
opportunity for employees to save for retirement on both a pre-tax and after-tax basis. Employees can contribute between 2% and 20% of base pay and eligible incentives through pre-tax and after-tax contributions up to the maximum amount prescribed by law and our plan limits. We match up to the first 5% of each employees contributions.
Our executives are also eligible to participate in a pre-tax non-qualified defined contribution plan (the Non-Qualified Savings Plan), which provides our executives and employees who reach contribution limits imposed by the Internal Revenue Service for the Qualified Savings Plan with the opportunity to participate in a tax advantaged savings plan comparable to the Qualified Savings Plan. The investment options offered to participants in the Non-Qualified Savings Plan are similar to those offered in our Qualified Savings Plan. Participants may elect to defer up to 100% of their base pay or annual non-equity incentive bonus into the Non-Qualified Savings Plan. We match up to the first 5% of the employees contributions to the Non-Qualified Savings Plan.
Change in Control Agreements
We have entered into agreements with each of our executive officers that will provide them with compensation under certain circumstances in the event of a change in control in our ownership or management. See Potential Payments upon Termination or Change in Control for a further description of the terms and potential amounts payable under these agreements.
The benefits payable under the change in control agreements are comparable to benefits executives in similar positions at peer companies are eligible for under their change in control agreements. The competitive nature of these benefits is annually reviewed and analyzed by the Compensation Committee with the assistance of the Committees compensation consultant, Hewitt Associates.
Based on competitive data provided by Hewitt, the Compensation Committee made the decision in 2006 to terminate all single trigger change in control agreements entered into with executive officers and replaced them with double trigger agreements. The benefits payable under a single trigger agreement are conditioned only upon a qualifying change in control. In a double trigger agreement, the benefits are only payable if, in addition to the qualifying change in control, the executive officers position is terminated or the executives responsibilities are significantly changed. The decision to modify these agreements was based on the Compensation Committees assessment that the single trigger provisions were no longer a majority market place component of change in control agreements and potentially not in the best interests of our stockholders. None of our executive officers received compensation for surrendering the benefits under the single trigger agreements.
Under our executive severance plan, executive officers who lose their job through no fault of their own are entitled to receive 15 months of severance pay (limited to base pay and the executives target annual non-equity incentive bonus), their pro-rated target annual non-equity incentive bonus through the date of termination, the continuation of medical and dental benefits for the same severance period at the employee premium rate, outplacement services, and tax preparation and financial planning assistance for the last calendar year of employment. See Potential Payments upon Termination or Change in Control for a further description of the terms and potential amounts payable under the executive severance plan. The availability of these severance benefits is conditioned on the executives compliance with non-disclosure, non-compete and non-solicitation covenants. In its approval of the executive severance plan, the Board granted management with the authority to exercise its discretion with respect to the treatment of unvested options and restricted stock grants of terminated executive officers. The terms of our executive severance plan are based on the results of a
survey conducted by Hewitt Associates of 214 publicly traded companies. All of our named executive officers whose compensation is set forth in the Summary Compensation Table in this Proxy Statement are covered under this plan. Change in control agreements and severance benefits are exclusive of one another, and in no circumstances would any named executive officer receive benefits under both a change in control agreement and the executive severance plan.
We provide limited perquisites to our executive officers in order to facilitate the performance of their managerial and external marketing roles and to ensure a competitive total compensation package. The perquisites we provide to our executives include financial counseling, tax preparation, parking fees, personal use of company vehicles, dining club memberships and country club memberships and other minor expenses associated with their business responsibilities. Our executives use of company vehicles and dining and country club membership benefits is primarily for business related travel and entertainment. We require our executives to report personal use of company vehicles and club memberships. We also pay certain travel expenses such as air fare and meals for spouses of our executive officers when they accompany their spouses and when such expenses are considered to be related to the business purpose for the travel. During 2006, we reimbursed named executive officers for expenses associated with spouses attendance at a Board of Directors meeting held outside the United States. We do not have a company aircraft. If a named executive officers perquisites exceed $10,000 in cost to us, the total amount of the perquisites provided by us to that named executive officer is included in the All Other Compensation column of the Summary Compensation Table in this Proxy Statement and the nature of those perquisites are described in a footnote to the table. Tax gross ups are provided on spousal travel to the Board of Directors meeting outside the United States because attendance by the executives spouses is considered beneficial. We gross up for the taxes due on the club memberships because personal use of these clubs is generally minimal and is generally related to the business use of these facilities.
Stock Ownership and Retention Requirements
The Compensation Committee established executive officer stock ownership guidelines when we were formed in order to ensure a continuing alignment of executive and shareholder interests. Under these guidelines, an executive officer is expected to retain ownership of shares (including restricted stock awards, 50% of the shares underlying options and shares held in the Qualified Savings Plan and the Non-Qualified Savings Plan) in an amount equal in value to a multiple of the individuals base salary and target annual non-equity incentive bonus. Upon becoming named an executive officer, an executive has five years to satisfy an increased or new retention multiple, pro-rated 20% each year. The multiple for each of the named executive officers is provided in the following table. Each named executive officer satisfies the ownership guidelines applicable to him.
In 2006, our Compensation Committee adopted new stock retention guidelines requiring our executive officers to retain at least one-half of the net after-tax shares for restricted stock and stock option awards vesting after January 1, 2007 for a period of at least one year after the vesting date. The purpose of this additional policy is to impose a holding period during which our executives must retain ownership of a significant portion of vested equity compensation awards. We believe that the combination of the stock ownership guidelines and the stock retention rules focus our executives on our long term value by aligning their interests with the long-term interest of other stockholders.
Summary Compensation Table
The following table summarizes the compensation earned by each of our named executive officers from all sources for services rendered in all of their capacities to us during the fiscal year ended December 31, 2006. Mr. Kinnear, whose title in the table reflects the executive offices he assumed on February 27, 2006, became our Chief Executive Officer and President on March 15, 2007.
None of the named executive officers are parties to written or oral employment contracts with us. Accordingly, they remain employed at our will. For a description of the material terms of their compensation arrangements, which include base salary, annual non-equity incentive bonus, equity compensation awards, matching contributions to retirement savings plans, pension benefits and perquisites, and severance and change in control benefits, see Compensation Discussion and Analysis above. Performance targets for performance-based equity awards considered by the Compensation Committee are also quantified in Compensation Discussion and Analysis. Based on the fair value of equity awards granted to the named executive officers in 2006 and the base salary and annual non-equity incentive bonuses of the named executive officers for 2006, base salary and annual non-equity incentive bonuses together accounted for approximately 54% of the total base pay, annual non-equity incentive and equity compensation paid to named executive officers for 2006. Because the Grants of Plan Based Awards Table below reflects the value of certain equity awards based on SFAS 123(R) value rather than the grant date fair value, these percentages may not be able to be derived using the amounts reflected in the table.
Grants of Plan-Based Awards Table
Shown below is information with respect to plan-based awards made in 2006 to each named executive officer.
We did not make any grants of stock options or stock appreciation rights in 2006 under the Incentive Compensation Plan for services rendered during 2006 to any of the named executive officers. For a description of the material terms of the restricted stock awards, including the vesting schedules and a description of the performance targets and potential award amounts for those restricted shares subject to performance-based conditions, see the descriptions set forth in Compensation Discussion and Analysis. We do not currently pay dividends on restricted stock awards or shares obtainable upon exercise of outstanding options. Dividends would be payable on equity compensation awards that we issued only if and when dividends are declared and paid on our Common Stock.
Outstanding Equity Awards at Fiscal Year-End Table
Option Exercises and Stock Vested Table
Shown below is information for each of the named executive officers with respect to options to purchase Common Stock exercised in 2006 and restricted stock awards vested in 2006.
Pension Benefits Table
The table below shows the present value of accumulated benefits payable to each of the named executive officers, including the number of years of service credited to each such named executive officer, under each of our pension plans determined using interest rate and mortality rate assumptions consistent with those used in our financial statements. Credited years of service for each of the named executive officers under the Pension Plan includes years of service with our predecessor. The Pension Plan value is the present value of accrued benefits at the first retirement date for unreduced benefits. The Non-Qualified Pension Plan value is the present value at December 31, 2006 of the lump sum payable at the first retirement date for unreduced benefits.
Pension Benefit Formula
Our Pension Plan is a defined benefit plan that provides eligible employees with five or more years of service a pension benefit for retirement. Once eligible, the employees years of service, 60 month final average earnings and social security offset are used to calculate the pension benefit. The normal annual retirement benefit is the product of (a) and (b) below:
Normal retirement age is 65. The first unreduced benefit retirement age is 62. All of the named executive officers are currently eligible for benefits under the Companys Pension Plan. Eligibility under the Pension Plan terminates upon death or upon payment of the participants entire vested benefit. Additionally, each of the named executive officers was an employee of our former parent and predecessor, FMC Corporation. When we were established as a separate company in 2001, our employees who were formerly employed by our predecessor received the benefit for the years of credited service under our predecessors defined benefit pension plan.
The Pension Plans early retirement date is the participants 55th birthday in the case of a participant who became a participant in our predecessors pension plan before January 1, 1984. All named executive officers were participants in the predecessors pension plan before January 1, 1984. All of the named executive officers, except Mr. Cannon, are age 55 or older and are eligible to receive early retirement benefits under the Pension Plan.
A participant in the Pension Plan who retires on or after the plans early retirement date is entitled to receive the early retirement benefit, which is equal to the normal retirement benefit reduced by 1/3 of 1% for each month by which the commencement of the participants early retirement benefit precedes the participants 62nd birthday. A participant in the Pension Plan whose employment terminates before reaching the plans early retirement date or retires without the early retirement service requirement is entitled to receive an early retirement benefit, which is equal to the normal retirement benefit reduced by 1/2 of 1% for each month by which the commencement of the participants early retirement benefit precedes the participants 65th birthday.
Payment of Pension Benefit
The normal retirement benefit is an individual life annuity for single retirees and 50% joint and survivor annuity for married retirees. The Pension Plan also provides for a variety of other methods for receiving pension benefits such as 100% joint and survivor annuities, level income and lump sum for benefits of $1,000 or less. The levels of annuities are actuarially determined based on the age of the participant and the age of the participants spouse for joint and survivor annuities. For a 62-year old participant in
the Pension Plan who is married to a 62-year old spouse, the 50% joint and survivor annuity is a 7.9% reduction from the normal retirement benefit and the 100% joint and survivor annuity is a 14.7% reduction from the normal retirement benefit. A level income annuity pays increased benefits to the retiree until Social Security benefits begin at age 62 and reduces the benefit after age 62 so that the total of the retirement benefit and social security is level before and after age 62.
Eligible earnings under the Pension Plan for the named executive officers include the base salary and annual non-equity incentive bonus paid by us to the executives for each plan year. Equity compensation, such as restricted stock and stock option awards, is not included. The Internal Revenue Service limits the annual amount of earnings that may be taken into account for the Pension Plan to remain qualified under the Internal Revenue Code. Since all of the named executive officers eligible earnings exceed that limitation, the eligible earnings for each of the named executive officers under the Pension Plan is the same amount, $220,000 in 2006.
The Pension Plan limits annual pension benefits to Internal Revenue Service requirements for tax-qualified retirement savings plans. This amount was $175,000 in 2006.
Non-Qualified Pension Plan
We have also established a Non-Qualified Pension Plan that permits employees whose earnings exceed the Internal Revenue Service limitations on earnings eligible for the tax-qualified Pension Plan in order to obtain a mirror pension benefit under a non-qualified retirement plan. For amounts accrued under the Non-Qualified Pension Plan through December 31, 2004, benefit payments will be made at the same time and in the same manner as payments under the Pension Plan or in a lump sum. For amounts accrued under the Non-Qualified Pension Plan after January 1, 2005, only a lump sum distribution is permitted. In addition, a participant may elect to transfer the entire balance in the Non-Qualified Pension Plan into the Non-Qualified Savings Plan. Lump sum distributions will be paid no sooner than six months after termination of employment for key employees. The distribution election may not be changed within 12 months of termination or retirement. Changes made prior to the 12 month requirement can result in deferral of participants distribution for an additional five years.
Non-Qualified Deferred Compensation Table
Pursuant to our Non-Qualified Savings Plan, certain of our employees, including our named executive officers, may defer 100% of base salary and annual non-equity incentive bonuses after exceeding IRS limits on contributions to the Qualified Savings Plan. Deferral elections are made by eligible employees in November or December of each year for amounts earned (or granted with regard to incentive compensation awards) in the following year. The investment options are publicly available mutual funds and our Common Stock. Our matching contribution will be made in the same investment allocations that the participant selects for his contributions to the plan. In addition, the named executive officers may elect to defer all or any portion of their base pay and annual non-equity incentive bonus payments for the current year under the Non-Qualified Savings Plan, and the deferred amounts will be deemed as being invested in any funds available under the Non-Qualified Savings Plan.
Potential Payments Upon Termination or Change in Control
The compensation benefits payable to each of the named executive officers in the event of a voluntary termination are the same as those available to all other salaried employees in those situations. Our named executive officers receive additional compensation benefits in the event of their death or disability, retirement or involuntary not-for-cause termination or in the event of a change in control.
Payments in the Event of Death, Disability or Retirement
In the event of the death or disability of a named executive officer during active employment with us, all outstanding equity awards vest on the first business day following death or disability. This same death or disability benefit exists for any of our employees who hold an unvested equity award at the time of their death or disability. In the event of the normal retirement of a named executive officer after reaching the age of 62, all outstanding equity awards are retained and vest in accordance with their pre-retirement normal vesting schedule. The following table shows the value to each of the named executive officers should any of these events occur on December 31, 2006.
Executive Benefits and Payments in the Event of Death, Disability or Retirement on December 31, 2006
Payments Made in an Involuntary Termination
Named executive officers will receive payments pursuant to our executive severance plan described in Compensation Discussion and AnalysisSeverance Benefits above in the event their employment is terminated by us for reasons other than cause or a change in control. This plan provides certain enhanced benefits in addition to those provided under our general severance plan for all non-union employees. These include:
Benefits under the executive severance plan are contingent upon continuing compliance by the terminated executive with non-disclosure, non-compete and non-solicitation covenants.
The amounts shown in the table below are calculated using the assumption that an involuntary not for cause termination was effective as of December 31, 2006, and as a result are based on amounts earned through such time and are only estimates of amounts which would be paid out to the named executive officers in the event of such a termination. The actual amounts that would be paid out if such a termination were to occur can only be determined at the time of such executive officers actual termination.
Executive Benefits and Payments for Involuntary Termination Occurring on December 31, 2006
In the event of an involuntary termination, the treatment of an executive officers outstanding equity awards is at the discretion of our Chief Executive Officer and the Compensation Committee. An executive officer may be permitted to retain all or a portion of these awards subject to their existing vesting schedule. For the valuation of these awards at December 31, 2006, see the Outstanding Equity Awards at Fiscal Year-End Table in this Proxy Statement.
Payments in the Event of a Change in Control
It is our policy to offer a change in control benefit to our executive officers to ensure that they have an incentive to continue to work in our best interests during the period of time when a change of control transaction is taking place and in order to ensure we have the ability to maintain continuity of management. It is also our policy to grant this benefit to provide our executives with the assurance they will not be adversely affected by a change in control transaction without fair compensation, provided their termination is not required for cause. Finally, we believe a change in control agreement is necessary to remain competitive in the market for skilled and experienced executive talent.
We have entered into Executive Severance Agreements with each of our named executive officers. Pursuant to these agreements, in the event of a qualifying change in control and a qualifying adverse change in employment circumstances, each of our named executive officers will be entitled to the following benefits:
The severance payment is required to be paid in a single lump sum payment no later than 30 days after the date of termination.
If a named executive officers employment is terminated due to a disability subsequent to a change in control, the executive will receive base salary through the effective date of termination and any disability benefits payable to the executive under our short and long term disability programs, but will not be entitled to the severance benefits under the Executive Severance Agreement. The named executive officers disability benefits will be the same as are available to all other employees under our disability benefit plans.
If a named executive officers employment is terminated due to death subsequent to a change in control, the benefits paid to the executives estate will be determined under our retirement, survivors benefits, insurance and other programs, but the executive officers estate will not be entitled to severance benefits under the Executive Severance Agreement.
Executive officers are not obligated to seek other employment in mitigation of amounts payable under the Executive Severance Agreements, and their subsequent re-employment will not impact our obligation to make the severance payments provided for under the Executive Severance Agreements.
Executive officers receiving severance benefits under the Executive Severance Agreements are not entitled to receive additional severance benefits under our general executive severance plan described above under Payments Made in an Involuntary Termination and in Compensation Discussion and AnalysisSeverance Benefits.
Under our Executive Severance Agreements, our named executive officers would be entitled to payments and other benefits upon the occurrence of any of the following change in control events, provided a qualifying termination occurs:
A qualifying termination includes (a) an involuntary termination of the named executive officers employment by us for reasons other than cause, disability or death; within 24 months of the change in control, (b) a voluntary termination by the named executive officer for good reason within 24 months of the change in control or (c) we breach or any successor breaches any of the provisions of the Executive Severance Agreement.
Under the Executive Severance Agreements, a named executive officer will be considered terminated for cause for:
A named executive officers voluntary termination will be considered to be for good reason for purposes of the Executive Severance Agreements if, without the executives express written consent, any one or more of the following events occurs:
The existence of good reason for a voluntary termination is not affected by an executive officers temporary incapacity due to physical or mental illness not constituting a disability. The executive officers continued employment does not constitute a waiver of the executives rights with respect to any circumstance constituting good reason.
Following a change in control, if a named executive officer is terminated either: (a) by us for cause or (b) by the executive officer (other than for retirement, good reason or other circumstances that constitute a qualifying termination) we will pay the executive an amount equal to the executives accrued and unpaid base salary, accrued and unused vacation and any other amounts the executive is entitled to receive under pension and other benefit plans.
The amounts shown in the table below are calculated using the assumption that a change in control and qualifying termination was effective under the Executive Severance Agreements as of December 31, 2006, and as a result are based on amounts earned through such time and are only estimates of the amounts which would be paid out to the named executive officers in the event of such a termination. The actual amounts that would be paid out if such a termination were to occur can only be determined at the time of such executive officers actual termination.
Executive Benefits and Payments for Change in Control Termination Occurring on December 31, 2006
Compensation Committee Report
The Compensation Committee Report that follows shall not be deemed to be incorporated by reference into any filing made by us under the Securities Act of 1933 or the Securities Exchange Act of 1934, notwithstanding any general statement contained in any such filing incorporating this Proxy Statement by reference, except to the extent we incorporate this Report by specific reference.
The Compensation Committee of the Board of Directors has reviewed and discussed the Compensation Discussion and Analysis included in this Proxy Statement with management.
In reliance upon the review and discussions referred to above, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement.
The preceding report has been furnished by the following members of the Compensation Committee:
Mike R. Bowlin, Chairman
Thomas M. Hamilton
Richard A. Pattarozzi
James M. Ringler
James R. Thompson
Section 16(a) Beneficial Ownership Reporting Compliance
We have undertaken responsibility for preparing and filing the stock ownership forms required under Section 16(a) of the Securities Exchange Act of 1934 on behalf of its officers and directors. Based on a review of forms filed and information provided by officers and directors to us, we believe that all Section 16(a) reporting requirements were fully met during 2006, with the exception of late Form 4 filings made by each of our executive officers, each to report the sale of 7 shares of our Common Stock due to an administrative error in the calculation of the market price of our shares by a broker in connection with the reporting of the vesting of restricted stock held by each such executive officer and associated sales to pay federal income tax liabilities, a late Form 4 filing made by Tore Halvorsen to report the sale of 2,000 shares on December 12, 2006, and a late Form 4 filing made by Mike R. Bowlin to report the purchase of 4,250 shares on November 14, 2006.
Audit Committee Report
The Audit Committee Report that follows shall not be deemed to be incorporated by reference into any filing made by us under the Securities Act of 1933 or the Securities Exchange Act of 1934, notwithstanding any general statement contained in any such filing incorporating this Proxy Statement by reference, except to the extent we incorporate this Report by specific reference.
The Audit Committee of the Board of Directors has:
In reliance upon the review and discussions referred to above, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in our Annual Report on Form 10-K for the year ended December 31, 2006.
The preceding report has been furnished by the following members of the Audit Committee:
Edward J. Mooney (Chair)
C. Maury Devine
Thomas M. Hamilton
James M. Ringler
Relationship with Independent Public Accountants
The Audit Committee of the Board of Directors has reappointed KPMG LLP as our independent public accountants for 2007. KPMG LLP has served as our independent public accountants since our inception. During 2005 and 2006, the Audit Committee pre-approved all audit and non-audit services provided by KPMG LLP. During 2005 and 2006, KPMG LLPs fees were as follows:
The Audit Committee of the Board of Directors considered the effect of KPMG LLPs non-audit services in assessing the independence of such accountants and concluded that the provision of such services by KPMG LLP was compatible with the maintenance of that firms independence in the conduct of its auditing functions.
The Audit Committee of the Board of Directors reviews all relationships between KPMG LLP and us, including the provision of non-audit services, which may relate to the auditors independence. The Audit Committees approval is required prior to retaining KPMG LLP for any permitted non-audit services and for the fees payable for such services. The fees for all of the services summarized in the table above not constituting Audit Fees were pre-approved by the Audit Committee of the Board of Directors in 2006.
We have been advised by KPMG LLP that it will have a representative in attendance at the Annual Meeting. The representative will have an opportunity to make a statement if he or she desires and also will be available to respond to appropriate questions.
Code of Ethics
Our Code of Business Conduct and Ethics, which is applicable to all of our employees, officers and directors, may be found in the Corporate Governance section of our website under Corporate Overview at www.fmctechnologies.com and is also available without charge in print to our stockholders upon request. A request should be directed to our principal executive offices at 1803 Gears Road, Houston, Texas 77067, Attention: Vice President, General Counsel and Secretary. We have established a hotline for employees to report violations of the ethics policy or complaints regarding accounting and auditing practices on an anonymous basis. Reports of possible violations of financial or accounting policies made to the hotline are directed to our Director of Internal Audit and the chair of the Audit Committee.
Proposals for the 2008 Annual Meeting of Stockholders
Stockholders may make proposals to be considered at the 2008 Annual Meeting. To be included in the proxy statement and form of proxy for the 2008 Annual Meeting, stockholder proposals must be received not later than December 4, 2007, at our principal executive offices, 1803 Gears Road, Houston, Texas 77067, Attention: Vice President, General Counsel and Secretary.
To properly bring other business before the Annual Meeting, a stockholder must deliver written notice thereof, setting forth the information specified in our By-laws, to the Secretary at our principal executive offices not later than the 90th day nor earlier than the 120th day prior to the first anniversary of the preceding years Annual Meeting; provided, however, that such other business must otherwise be a proper matter for stockholder action. In the event that the date of the Annual Meeting is more than 30 days before or more than 60 days after such anniversary date, however, a stockholder must deliver notice not earlier than the 120th day prior to such Annual Meeting and not later than the later of (a) the 90th day prior to such Annual Meeting and (b) the 10th day following the day on which we first make public announcement of the date of such meeting. To properly bring business before the 2008 Annual Meeting, we must receive notice at our principal executive offices no later than February 4, 2008. A copy of the full text of the By-Law provisions discussed above may be obtained by writing to the Vice President, General Counsel and Secretary, FMC Technologies, Inc., 1803 Gears Road, Houston, Texas 77067.
Stockholders Sharing an Address
In accordance with notices sent to beneficial owners of our Common Stock sharing a single address, we are sending only one FMC Technologies Annual Report and Proxy Statement to that address unless we receive contrary instructions from any beneficial owner at that address. This householding practice reduces our printing and postage costs. However, if a beneficial owner at such an address wishes to receive separate Annual Reports or Proxy Statements this year or in the future, he or she may contact the bank, broker or other nominee that is the holder of record of that beneficial owners shares of Common Stock. If you and other stockholders of record with whom you share an address and last name are receiving multiple copies, you may also request householding by contacting ADP, by mail at Householding Department, 51 Mercedes Way, Edgewood, New York 11717, or by telephone at (800) 542-1061.
Expenses Relating to this Proxy Solicitation
We will pay all expenses relating to this proxy solicitation. In addition to this solicitation by mail, our officers, directors, and employees may solicit proxies by telephone or personal call without extra compensation for that activity. In accordance with the rules of the Securities and Exchange Commission and the New York Stock Exchange, we will also reimburse banks, brokers and other custodians, nominees and fiduciaries for reasonable out-of-pocket expenses in forwarding proxy material to beneficial owners of Common Stock and obtaining the proxies of those owners. We have retained Morrow & Co., Inc. of Stamford, Connecticut to assist in the solicitation of proxies. We will pay the cost of such assistance, which is estimated to be $6,500, plus reimbursement for out-of-pocket fees and expenses.
FMC Technologies, Inc.
The undersigned hereby appoints Peter D. Kinnear, William H. Schumann, III and Jeffrey W. Carr, and each of them, proxy for the undersigned, with full power of substitution, to vote in the manner indicated on the reverse side, and with discretionary authority as to any other matters that may properly come before the meeting, all shares of common stock of FMC Technologies, Inc. which the undersigned is entitled to vote at the Annual Meeting of Stockholders of FMC Technologies, Inc. to be held on May 4, 2007, at The Woodlands Waterway Marriott Hotel & Convention Center, 1601 Lake Robbins Drive, The Woodlands, Texas 77380, at 11:00 a.m. and any adjournment or postponement thereof. The matters to be voted upon are set forth in the Notice of Annual Meeting of Stockholders and Proxy Statement.
THE UNDERSIGNED HEREBY REVOKES ANY PROXY HERETOFORE GIVEN AND ACKNOWLEDGES RECEIPT OF THE NOTICE AND PROXY STATEMENT FOR THE ANNUAL MEETING.
If no direction is made, this proxy will be voted FOR Proposal 1.
FIDELITY MANAGEMENT TRUST COMPANY, Trustee
You are instructed to vote in the manner indicated on the reverse side, and with discretionary authority as to any other matters that may come before the meeting, all shares of common stock represented by participants interest in the FMC Technologies, Inc. Stock Fund of the FMC Technologies, Inc. Savings and Investment Plan.
Unless otherwise instructed prior to May 1, 2007, the Trustee WILL VOTE these shares in the same manner and proportion as the number of shares for which the Trustee received instruction.
BANCO POPULAR DE PUERTO RICO, Trustee
You are instructed to vote in the manner indicated on the reverse side, and with discretionary authority as to any other matters that may properly come before the meeting, all shares of common stock represented by participant's interest in the FMC Technologies, Inc. Stock Fund of the FMC Puerto Rico Savings and Investment Plan.
Unless otherwise instructed prior to May 1, 2007, the Trustee WILL VOTE these shares FOR Proposal 1.
NOT VALID UNLESS DATED AND SIGNED ON REVERSE SIDE
This proxy when properly executed will be voted in the manner directed herein by the undersigned stockholder. If no direction is made, this proxy will be voted FOR Proposal 1.